<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration File No.: 333-22133
Information contained herein is subject to completion. These securities
may not be sold nor may offers to buy be accepted prior to the time a final
prospectus is delivered. This prospectus supplement shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such State.
SUBJECT TO COMPLETION, DATED MARCH 12, 1998
PROSPECTUS SUPPLEMENT DATED MARCH , 1998
(TO PROSPECTUS DATED MARCH 12, 1998)
[NOMURA LOGO]
$ (APPROXIMATE)
NOMURA ASSET SECURITIES CORPORATION, DEPOSITOR
NOMURA ASSET CAPITAL CORPORATION, MORTGAGE LOAN SELLER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-D6
The Commercial Mortgage Pass-Through Certificates, Series 1998-D6 (the
"Certificates") will represent beneficial ownership interests in a trust fund
(the "Trust Fund") to be created by Nomura Asset Securities Corporation (the
"Depositor"). The Trust Fund will consist primarily of a pool (the "Mortgage
Pool") of 328 fixed-rate mortgage loans with original terms to maturity of
generally not more than thirty years (the "Mortgage Loans") secured by first
liens on 437 commercial and multifamily residential properties (the
"Mortgaged Properties"). The Mortgaged Properties consist of anchored and
unanchored retail properties, office buildings, full and limited service
hotels, multifamily residential housing, factory outlet center properties,
industrial properties, mobile home parks and healthcare facilities. The
characteristics of the Mortgage Loans and the Mortgaged Properties are more
fully described herein under "Description of the Mortgage Pool." The Mortgage
Loans were either purchased or originated by Nomura Asset Capital Corporation
("NACC") and will be sold to the Depositor on or prior to the date of initial
issuance of the Certificates.
(cover page continued)
INITIAL
CERTIFICATE PASS-THROUGH
BALANCE (1) RATE DESCRIPTION
---------------- ---------------- --------------------
Class A-1A(2)...... $ % Fixed Rate
Class A-1B(2)...... % Fixed Rate
Class A-1C(2)...... % Fixed Rate
Class A-CS1(2)..... (3) %(4) Variable Rate IO
Class PS-1(2)...... (3) %(4) Variable Rate IO
Class A-1D......... % Fixed Rate
Class A-2.......... %(4) Variable Rate
Class A-3.......... %(4) Variable Rate
Class A-4.......... %(4) Variable Rate
Class A-5.......... %(4) Variable Rate
Class A-6.......... %(4) Variable Rate
- ------------
(Footnotes to table on page S-2)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTIONS "RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS" HEREIN COMMENCING ON
PAGE S-34 AND "SPECIAL CONSIDERATIONS" IN THE PROSPECTUS COMMENCING ON PAGE
13.
---------
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
DEPOSITOR, THE MORTGAGE LOAN SELLERS, THE ORIGINATORS, THE SERVICER, THE
SPECIAL SERVICER, THE TRUSTEE, THE FISCAL AGENT OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
---------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Offered Certificates will be purchased by Nomura Securities
International, Inc., Morgan Stanley & Co. Incorporated and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Underwriters," with Nomura
Securities International, Inc. and Morgan Stanley & Co. Incorporated as
co-bookrunners and co-lead managers) from the Depositor and will be offered
by the Underwriters from time to time in negotiated transactions or otherwise
at varying prices to be determined at the time of sale. Proceeds to the
Depositor from the sale of the Offered Certificates will be approximately
[ ]% of the initial aggregate principal balance thereof as of the date on
which the Certificates are issued, plus accrued interest from such date as
described herein before deducting expenses payable by the Depositor.
There is currently no secondary market for the Offered Certificates. As
described herein, the Underwriters currently expect to make a secondary
market in the Offered Certificates, but have 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 "Method of Distribution" herein.
The Offered Certificates are offered by the Underwriters subject to prior
sale, when, as and if issued, delivered to and accepted by the Underwriters.
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, societe anonyme ("Cedel") and The Euroclear System
("Euroclear") in Europe, on or about March 27, 1998.
NOMURA SECURITIES INTERNATIONAL, INC. MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
<PAGE>
(continuation of cover page)
- ------------
(1) Approximate, subject to adjustment as described herein.
(2) In addition to distributions of principal and interest, holders of
certain Classes of the Offered Certificates will be entitled to
receive a portion of the Prepayment Premiums received from the
borrowers. See "Description of the Offered Certificates --
Distributions" herein.
(3) The Class A-CS1 and Class PS-1 Certificates will not have a
Certificate Balance 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 Balances thereof
(sucject to adjustment in certain limited circumstances described
herein with respect to the Class PS-1 Certificates). The Notional
Balance of the Clas PS-1 Certificates is initially $ , which is
equal to the aggregate principal balance of the Mortgage Loans as of
the Cut-off Date. The Notional Balance of the Class A-CS1
Certificates is initially $ , which is equal to the initial
Certificate Balance of the Class A-1A Certificates minus $ . See
"Description of the Offered Certificates" herein.
(4) The Pass-Through Rates shown on the table above for the Class A-2,
A-3, A-4, A-5 and A-6 Certificates are the rates for the Distribution
Date occurring in April 1998. The Pass-Through Rates for such Classes
for each subsequent Distribution Date will be calculated as provided
herein. See "Summary of Prospectus Supplement -- Pass-Through Rates"
herein.
The Certificates will consist of 24 classes (each, a "Class"), designated
as the Class A-1A Certificates, Class A-1B Certificates, Class A-1C
Certificates, Class A-CS1 Certificates, Class PS-1 Certificates, Class A-1D
Certificates, Class A-2 Certificates, Class A-3 Certificates, Class A-4
Certificates, Class A-5 Certificates, Class A-6 Certificates, Class A-7
Certificates, Class B-1 Certificates, Class B-2 Certificates, Class B-3
Certificates, Class B-4 Certificates, Class B-5 Certificates, Class B-6
Certificates, Class B-7 Certificates, Class B-7H Certificates, Class V-1
Certificates, Class V-2 Certificates, Class LR Certificates and Class R
Certificates. Only the Class A-1A, Class A-1B, Class A-1C, Class A-CS1, Class
PS-1, Class A-1D, Class A-2, Class A-3, Class A-4, Class A-5 and Class A-6
(collectively, the "Offered Certificates") are offered hereby; the , Class
A-7, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class
B-7, Class B-7H, Class V-1, Class V-2, Class R and Class LR Certificates
(collectively, the "Private Certificates") are not offered hereby.
Distributions on the Offered Certificates will be made, to the extent of
Available Funds, on the fourth business day following the 11th day of each
month beginning on April 17, 1998 (each, a "Distribution Date") provided,
that if the 11th day of any month is not a business day, the Distribution
Date will be the fifth business day following the 11th day of such month.
Distributions allocable to interest on the Offered Certificates on each
Distribution Date will be based on the pass-through rate for the respective
Class as described herein (the "Pass-Through Rate") and the aggregate
principal balance (the "Certificate Balance") or notional balance (the
"Notional Balance") 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 INVESTORS, IN PARTICULAR INVESTORS IN SUBORDINATE CLASSES,
WILL BE SENSITIVE TO THE TIMING OF PREPAYMENTS, REPURCHASES OR PURCHASES OF
MORTGAGE LOANS, AND THE MAGNITUDE OF LOSSES ON THE MORTGAGE LOANS DUE TO
LIQUIDATIONS. NO REPRESENTATION IS MADE AS TO THE RATE OF PREPAYMENTS ON, OR
RATE OR AMOUNT OF LIQUIDATIONS OF, THE MORTGAGE LOANS OR AS TO THE
ANTICIPATED YIELD TO MATURITY OF ANY OFFERED CERTIFICATE. THE YIELD TO
MATURITY ON EACH CLASS OF THE OFFERED CERTIFICATES WILL BE SENSITIVE TO, AND
THE YIELD TO MATURITY OF THE CLASS A-CS1 AND CLASS PS-1 CERTIFICATES WILL BE
EXTREMELY SENSITIVE TO, THE RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING
BOTH VOLUNTARY AND INVOLUNTARY PREPAYMENTS, DEFAULTS AND LIQUIDATIONS) ON THE
MORTGAGE LOANS AND PAYMENTS WITH RESPECT TO REPURCHASES THEREOF THAT ARE
APPLIED IN REDUCTION OF THE CERTIFICATE BALANCE OR NOTIONAL BALANCE OF SUCH
CLASS. A RAPID RATE OF SUCH PRINCIPAL PAYMENTS COULD RESULT IN THE FAILURE OF
INVESTORS IN THE CLASS A-CS1 OR CLASS PS-1 CERTIFICATES TO RECOVER THEIR
INITIAL INVESTMENT. SEE "PREPAYMENT AND YIELD CONSIDERATIONS" HEREIN.
AMRESCO Services, L.P. will act as servicer of the Mortgage Loans (the
"Servicer"). The obligations of the Servicer with respect to the Certificates
will be limited to its contractual servicing obligations and the obligation
under certain circumstances to make Advances in respect of the Mortgage
Loans. In certain limited circumstances, CRIIMI MAE Services Limited
Partnership, in its capacity as the initial special servicer (the "Special
Servicer"), may be required to make Property Advances. If the Servicer is not
the Special Servicer and the Special Servicer fails to make the required
Advance, the Servicer, subject to a recoverability determination, will be
required to make the Advance. The Servicer will not act as an insurer or
credit enhancer of the Mortgage Pool. If the Servicer fails to make a
required Advance, LaSalle National Bank (the "Trustee"), subject to a
recoverability determination, 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"), subject to a recoverability
determination, will be required to make the Advance. See "The Pooling and
Servicing Agreement -- Advances" herein.
It is a condition to the issuance of the Offered Certificates that (i) the
Class A-1A, Class A-1B and Class A-1C Certificates be rated " " by each of
Standard & Poor's Rating Services ("S&P"), Fitch IBCA, Inc. ("Fitch") and
Duff & Phelps Credit Rating Co. ("DCR") and " " by Moody's Investors
Service, Inc. ("Moody's," and together with S&P, Fitch and DCR, the "Rating
Agencies"), (ii) the Class A-CS1 and Class PS-1 Certificates be rated " "
by S&P, " " by Fitch, " " by DCR and " " by Moody's, (iii) the Class
A-1D Certificates be rated " " by S&P, " " by Fitch, " " by DCR and " "
by Moody's, (iv) the Class A-2 Certificates be rated " " by S&P, " " by
Fitch, " " by DCR and " " by Moody's, (v) the Class A-3 Certificates be
rated " " by S&P, " " by Fitch, " " by DCR and " " by Moody's, (vi) the
Class A-4 Certificates be rated " " by S&P, " " by Fitch, " " by DCR and
" " by Moody's, (vii) the Class A-5 Certificates be rated " " by "S&P",
" " by Fitch, " " by DCR and " " by Moodys and (viii) the Class A-6
Certificates be rated " " by S&P, " " by Fitch, " " by DCR and " " by
Moody's. For a description of the limitations of the ratings of the Offered
Certificates, see "Rating" herein. The Rated Final Distribution Date of each
Class of Offered Certificates is March 15, 2030.
Elections will be made to treat designated portions of the Trust Fund
(other than the Excess Interest and the Default Interest (each as defined
herein)) (such portions of the Trust Fund, the "Trust REMICs") as two
separate "real estate mortgage investment conduits" (each a "REMIC" or,
alternatively, the "Upper-Tier REMIC" and the "Lower-Tier REMIC,"
respectively) for federal income tax purposes. The Class A-1A, Class A-1B,
Class A-1C, Class A-CS1, Class PS-1, Class A-1D, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6, Class A-7, Class B-1, Class B-2, Class B-3, Class
B-4, Class B-5, Class B-6, Class B-7 and Class B-7H Certificates will
constitute "regular interests" in the Upper-Tier REMIC, and the Class R and
Class LR Certificates will constitute the sole Classes of "residual
interests" in the Upper-Tier REMIC and Lower-Tier REMIC, respectively. The
Offered
(cover page continued)
S-2
<PAGE>
(continuation of cover page)
Certificates, together with the Class A-7, Class B-1, Class B-2, Class B-3,
Class B-4, Class B-5, Class B-6, Class B-7 and Class B-7H Certificates, are
sometimes collectively referred to herein as the "Regular Certificates." The
Class V-1 Certificates will represent the right to receive Net Default
Interest and the Class V-2 Certificates will represent the right to receive
Excess Interest, which portions of the Trust Fund will be treated as a
grantor trust for federal income tax purposes. See "Certain Federal Income
Tax Consequences" herein and "Federal Income Tax Consequences" in the
Prospectus.
THE OFFERED CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE
PART OF A SEPARATE SERIES OF CERTIFICATES ISSUED BY THE DEPOSITOR AND ARE
BEING OFFERED PURSUANT TO ITS PROSPECTUS DATED MARCH 12, 1998, 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 NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, 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.
The distribution of this Prospectus Supplement dated March , 1998 and
the Prospectus dated March 12, 1998, and the offer or sale of the Offered
Certificates may be restricted by law in certain jurisdictions. Persons into
whose possession this Prospectus Supplement and the Prospectus or any Offered
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 the
Offered Certificates in the United Kingdom (see "Method of Distribution"
herein).
The Depositor does not intend to register the Offered Certificates under
the Securities and Exchange Law of Japan (the "SEL"). Accordingly, the
Certificates may not be offered or sold directly or indirectly in Japan, and
this Prospectus Supplement and the Prospectus may not be distributed or
circulated in Japan, except in circumstances that do not constitute an offer
to the public within the meaning of the SEL.
S-3
<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. Capitalized terms used and not
otherwise defined herein have the respective meanings assigned to them in
this Prospectus Supplement and the Prospectus. See "Index of Significant
Definitions" in this Prospectus Supplement and "Index of Principal
Definitions" in the Prospectus.
<TABLE>
<CAPTION>
APPROX. APPROX.
PERCENT OF CREDIT CERTIFICATE SUMMARY
TOTAL SUPPORT
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS PS-1 CLASS A-1A $ ( / / / ) CLASS A-CS1
$ ( / / / )
(Notional)
--------------
- ---- ---- ----------------- -------------- ------------- --------------
$ CLASS A-1B $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
(approx.) CLASS A-1C $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
(Notional) CLASS A-1D $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
(///) CLASS A-2 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS A-3 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS A-4 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS A-5 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS A-6 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS A-7 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS B-1 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS B-2 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS B-3 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS B-4 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS B-5 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS B-6 $ ( / / / )
- ---- ---- ----------------- -------------- ------------- --------------
CLASS B-7 AND $ (unrated)
- ---- ---- CLASS B-7H (approx.)
- ---- ---- ----------------- -------------- ------------- --------------
[ ] Offered Certificates Rating Agencies: (S&P, Fitch, DCR, Moody's)
[ ] Certificates Not Offered Hereby
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
WEIGHTED
INITIAL AGGREGATE APPROX. PASS-THROUGH AVG.
CERTIFICATE PRINCIPAL % OF RATE AS LIFE* PRINCIPAL
CLASS RATINGS OR NOTIONAL AMOUNT TOTAL DESCRIPTION OF CUT-OFF DATE (YRS.) WINDOW*
- ----------- ---------- --------------------- ------------ --------------- ------------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------- ---------------------------------------------------------------------------------
Offered Certificates
- --------------------------------------------------------------------------------------------------------------------------------
A-1A ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
A-1B ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
A-1C ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
A-CS1 ( / / / ) $ na % ** na
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
PS-1 ( / / / ) $ na % ** na
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
A-1D ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
A-2 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
A-3 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
A-4 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
A-5 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
A-6 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
Non-Offered Private Certificates***
- ----------------------------------------------------------------------------------------------------------------------------- ---
A-7 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
B-1 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
B-2 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
B-3 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
B-4 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
B-5 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
B-6 ( / / / ) $ % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ --------------
B-7 and $
B-7H Unrated % %
- ----------- --------------------------------- ------------ --------------- ------------------- ------------ ---------------
</TABLE>
Rating Agencies (S&P, Fitch, DCR, Moody's)
* Based on 0% CPR with all ARD Loans prepaying on the related Anticipated
Repayment Date. See "Prepayment and Yield Considerations" herein.
** Calculated on a cash flow basis. Average life data is for illustrative
purposes only, as the Class A-CS1 and Class PS-1 Certificates are not
entitled to any distributions of principal and do not have average
lives.
*** Not offered hereby.
S-5
<PAGE>
OVERVIEW OF THE OFFERED CERTIFICATES:
DISTRIBUTION DATE ............. The fourth business day following the 11th
day of each month; provided that if the 11th
day of any month is not a business day, the
Distribution Date will be the fifth business
day following the 11th day of such month.
The first Distribution Date will be April
17, 1998.
SCHEDULED FINAL DISTRIBUTION
DATE .......................... March 15, 2028.
RATED FINAL DISTRIBUTION DATE . As to each Class of Offered Certificates,
March 15, 2030.
OPTIONAL TERMINATION .......... The Trust Fund is subject to early
termination if less than 1% of the Initial
Pool Balance remains outstanding or if the
outstanding Mortgage Loans in the Mortgage
Pool consist only of the Circuit City Credit
Lease Loans, the Carmax Credit Lease Loans,
and/or the Parkview House Apartments Loan.
See "The Pooling and Servicing Agreement --
Optional Termination" herein.
FEDERAL TAX STATUS ............ Elections will be made to treat designated
portions of the Trust Fund, exclusive of the
Reserve Accounts, Lock Box Accounts, Cash
Collateral Accounts, the Excess Interest (as
defined herein) and the Default Interest (as
defined herein), as two separate "real
estate mortgage investment conduits" (each a
"REMIC"). The Offered Certificates will be
"regular interests" in the Upper-Tier REMIC
and generally will be taxed in the same
manner as debt instruments. Those portions
of the Trust Fund consisting of Excess
Interest and Default Interest will be
treated as a grantor trust for federal
income tax purposes.
ERISA ......................... The Underwriters believe that the purchase
and holding of the Class A-1A, Class A-1B,
Class A-1C, Class A-CS1 and Class PS-1
Certificates will generally meet the
applicable conditions to qualify for relief
from certain of the prohibited transaction
provisions of ERISA and the Code pursuant to
individual prohibited transaction exemptions
issued to the Underwriters. The other
Classes of Offered Certificates should not
be acquired by, or with the assets of,
employee benefit plans or other retirement
arrangements subject to Title I of ERISA,
Section 4975 of the Code or any Similar Law
(as defined herein), unless, subject to
certain conditions described herein, the
source of funds used to purchase such
Certificates is an "insurance company
general account." See "ERISA Considerations"
and "Description of the Offered Certificates
-- Transfer Restrictions" herein and "ERISA
Considerations" in the Prospectus.
SMMEA ......................... Any Class of Certificates rated in the
category of "AAA" or "AA" (or the
equivalent) by at least one Rating Agency
will constitute "mortgage related
securities" pursuant to the Secondary
Mortgage Market Enhancement Act of 1984 so
long as the Mortgage Loans are secured by
liens on real estate. See "Legal Investment"
herein.
CLOSING DATE .................. On or about March 27, 1998.
CUT-OFF DATE .................. March 27, 1998.
STRUCTURAL SUMMARY:
INTEREST PAYMENTS ............. On each Distribution Date, each Class of
Offered Certificates will be entitled to
receive the Interest Distribution Amount for
such Class and such Distribution
S-6
<PAGE>
Date, together with any unpaid Interest
Shortfalls previously allocated to such
Class, in each case to the extent of
Available Funds remaining after making
distributions of principal and interest to
each outstanding Class of Sequential
Certificates more senior to such Class. See
"Description of the Offered Certificates --
Distributions" herein.
PRINCIPAL PAYMENTS ............ The Principal Distribution Amount for each
Distribution Date will be distributed
sequentially, first, to the Class A-1A
Certificates, second, to the Class A-1B
Certificates and third, to the Class A-1C
Certificates, in each case until the
Certificate Balance thereof has been reduced
to zero, and then sequentially to the other
Classes of Offered Certificates (other than
the Class A-CS1 and Class PS-1 Certificates)
until their respective Certificate Balances
are reduced to zero, in each case to the
extent of Available Funds remaining after
making distributions to each outstanding
Class of Certificates more senior to such
Class. The Classes of Regular Certificates
are referred to herein as the "Sequential
Classes." Notwithstanding the foregoing, on
each Distribution Date occurring on or after
the Crossover Date, the Principal
Distribution Amount will be distributed to
the Class A-1A, Class A-1B and Class A-1C
Certificates pro rata, based on their
respective Certificate Balances, in
reduction of their respective Certificate
Balances, until the Certificate Balance of
each such Class is reduced to zero. The
"Crossover Date" is the Distribution Date on
which the Certificate Balance of each Class
of Certificates other than the Class A-1A,
Class A-1B and Class A-1C Certificates has
been reduced to zero. See "Description of
the Offered Certificates -- Distributions"
herein.
CREDIT ENHANCEMENT ............ The Class A-1A, Class A-1B, Class A-1C,
Class A-CS1 and Class PS-1 Certificates are
afforded credit enhancement by the Classes
of subordinate Certificates, which consist
of the Class A-1D, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6 and Class
A-7 Certificates and certain Classes of the
Private Certificates. Each other Class of
Sequential Certificates will likewise be
protected by the subordination offered by
the other Classes of Sequential Certificates
that bear a later sequential designation.
See "Description of the Offered Certificates
-- Subordination" herein.
P&I ADVANCES .................. Subject to the limitations described herein,
the Servicer is required to make advances
(each such amount, a "P&I Advance") in
respect of delinquent Monthly Payments (but
not Balloon Payments) on the Mortgage Loans.
The Servicer will make only one P&I Advance
with respect to each Mortgage Loan for the
benefit of the most subordinate Class of
Sequential Certificates then outstanding
(unless the related defaulted Monthly
Payment is received prior to the following
Due Date). If the Servicer fails to make an
Advance required to be made, the Trustee
will then be required to make such Advance.
If both the Servicer and the Trustee fail to
make such Advance, the Fiscal Agent will be
required to make such Advance. See "The
Pooling and Servicing Agreement -- Advances"
herein.
COLLATERAL OVERVIEW:
THE MORTGAGE POOL ............. The following tables set forth certain
summary information regarding the Mortgage
Loans. The Mortgage Pool described in such
tables consists of 328 Mortgage Loans
evidenced by 337 Notes. See "Description of
the Mortgage Pool" herein for certain
additional information regarding the
Mortgage Loans and the Notes. See Annex A
and Annex B hereto for certain
characteristics of
S-7
<PAGE>
Mortgage Loans, the Notes and Mortgaged
Properties on a property-by-property basis.
All percentages of Initial Pool Balances
used herein are based upon the Cut-off Date
Principal Balance of the related Mortgage
Loan or, with respect to Mortgage Loans
secured by more than one Mortgaged Property
(each, a "Pool Loan"), are based upon the
Allocated Loan Amount (as defined herein) of
the related Mortgaged Property. All weighted
average information regarding the Mortgage
Loans reflects weighting of the Mortgage
Loans by their Cut-off Date Principal
Balances or, with respect to Pool Loans,
Allocated Loan Amounts, with the exception
of Weighted Average LTV, and Weighted
Average DSCR, for which the 25 Credit Lease
Loans and the 4 Special Notes (as defined
herein) were excluded. The "Cut-off Date
Principal Balance" of each Mortgage Loan is
equal to the unpaid principal balance
thereof as of the Cut-off Date, after
application of all payments of principal due
on or before such date, whether or not
received. All numerical information provided
herein with respect to the Mortgage Loans is
provided on an approximate basis. Certain
statistical information set forth herein may
change prior to the date of issuance of the
Certificates due to changes in the
composition of the Mortgage Pool prior to
the Closing Date. No Mortgage Loan
represents more than 5% of the entire pool
of Mortgage Loans. See "Description of the
Mortgage Pool--Changes in Mortgage Pool
Characteristics" herein.
DEAL INFORMATION/ANALYTICS .... It is anticipated that certain Mortgage Loan
and Certificate information will be
available from the following services:
Bloomberg, L.P., Intex Solutions, Inc.,
Charter Research Corporation (www.cmbs.com),
Wall Street Analytics, Inc., the Trepp Group
and through the Servicer's website at
www.amresco.com and the Trustee's website at
www.lnbabs.com.
S-8
<PAGE>
GENERAL CHARACTERISTICS (1)
<TABLE>
<CAPTION>
<S> <C>
Initial Pool Balance (2) ................................................................ $3,732,820,502
Number of Mortgage Loans ................................................................ 328
Number of Mortgaged Properties .......................................................... 437
Number of Notes ......................................................................... 337
Average Mortgage Loan Balance ........................................................... $11,380,550
Weighted Average Mortgage Rate .......................................................... 7.996%
Weighted Average Remaining Term to the Earlier of Maturity or Anticipated Repayment Date 153 Mos.
Weighted Average DSCR (3) ............................................................... 1.47
Weighted Average LTV .................................................................... 65%
Weighted Average LTV on Anticipated Repayment Date ...................................... 54%
Number of ARD Loans (4) ................................................................. 301
% of ARD Loans (4) ...................................................................... 91%
Number of Fully Amortizing Loans (other than ARD Loans) ................................. 33
% of Fully Amortizing Loans (other than ARD Loans) ...................................... 9%
Number of Balloon Loans ................................................................. 3
% of Balloon Loans ...................................................................... less than 1%
</TABLE>
- ------------
(1) Based on the Cut-off Date Principal Balance of the related Mortgage
Loan or Loans.
(2) Subject to a permitted variance of plus or minus 5%.
(3) Debt Service Coverage Ratio ("DSCR") for any Mortgage Loan is equal to
the Net Cash Flow from the related Mortgaged Property divided by the
Annual Debt Service for such Mortgaged Property (as such terms are
defined under "Description of the Mortgage Pool -- Additional Mortgage
Loan Information"). Weighted Average DSCR excludes the Credit Lease
Loans.
(4) "ARD Loans" are Mortgage Loans that substantially fully amortize by
their respective maturity dates but provide for an "Anticipated
Repayment Date" on which a substantial amount of principal will be due
if the borrower elects to prepay the Mortgage Loan in full on such
date. An ARD Loan provides, after the Anticipated Repayment Date, for
the imposition of a lock box if one is not already in place, the
application of all cash flow not used to pay scheduled amounts due on
the Mortgage Loan and operating expenses to reduce the principal
balance of the Mortgage Loan and an increased interest rate. See
"Description of the Mortgage Pool -- Certain Terms and Conditions of
the Mortgage Loans" herein.
S-9
<PAGE>
CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
NUMBER OF
% OF INITIAL MORTGAGE
CUT-OFF DATE PRINCIPAL BALANCE POOL BALANCE LOANS
- ---------------------------------- ---------------- -------------
<S> <C> <C>
less than $1,000,000............... 0.2% 9
$1,000,000-4,999,999............... 12.4% 170
$5,000,000-9,999,999............... 12.3% 67
$10,000,000-14,999,999............. 9.2% 28
$15,000,000-19,999,999............. 6.6% 14
$20,000,000-24,999,999............. 4.0% 7
$25,000,000-29,999,999............. 3.9% 5
$30,000,000-34,999,999............. 0.8% 1
$35,000,000-39,999,999............. 4.0% 4
$40,000,000-44,999,999............. 4.5% 4
$45,000,000-49,000,000............. 2.5% 2
$50,000,000-54,999,999............. 6.9% 5
$55,000,000-59,999,999............. 3.0% 2
$60,000,000-64,999,999............. 1.7% 1
$65,000,000-69,999,999............. 1.8% 1
$80,000,000-84,999,999............. 2.2% 1
$90,000,000-94,999,999............. 2.4% 1
$95,000,000-99,999,999............. 2.7% 1
$100,000,000-124,999,999........... 2.8% 1
$125,000,000-149,999,999........... 11.2% 3
greater than $175,000,000.......... 4.8% 1
</TABLE>
GEOGRAPHICAL CONCENTRATION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
NUMBER OF
% OF INITIAL MORTGAGED
STATE POOL BALANCE PROPERTIES
- -------------- -------------- ------------
<S> <C> <C>
California..... 23.0% 68
Texas.......... 9.7% 53
Pennsylvania .. 7.4% 17
Virginia....... 6.7% 18
Florida........ 5.5% 27
</TABLE>
S-10
<PAGE>
RANGE OF DEBT SERVICE COVERAGE RATIOS (1)
<TABLE>
<CAPTION>
NUMBER OF
% OF INITIAL MORTGAGE
RANGE OF DEBT SERVICE COVERAGE RATIOS POOL BALANCE LOANS
- ----------------------------------------- ---------------- -------------
<S> <C> <C>
1.0-1.099................................. 7.9% 27
1.1-1.199................................. 8.3% 10
1.2-1.299................................. 19.5% 56
1.3-1.399................................. 21.2% 78
1.4-1.499................................. 19.7% 77
1.5-1.599................................. 3.1% 19
1.6-1.699................................. 4.1% 20
1.7-1.799................................. 5.0% 9
1.8-1.899................................. 3.1% 13
1.9-1.999................................. 1.0% 5
2.0-2.099................................. 0.5% 3
2.1-2.199................................. 1.2% 4
greater than 2.2 ......................... 5.4% 7
</TABLE>
- ------------
(1) Debt Service Coverage Ratio ("DSCR") for any Mortgage Loan is equal to
the Net Cash Flow from the related Mortgaged Property divided by the
Annual Debt Service for such Mortgaged Property (as such terms are
defined herein under "Description of the Mortgage Pool -- Additional
Mortgage Loan Information").
LOAN-TO-VALUE RATIOS (1)
<TABLE>
<CAPTION>
NUMBER OF
% OF INITIAL MORTGAGE
RANGE OF LOAN TO VALUE RATIOS POOL BALANCE LOANS
- --------------------------------- ---------------- -------------
<S> <C> <C>
less than 30% .................... 0.6% 5
35%-39.99%........................ 0.3% 3
40%-44.99%........................ 2.5% 6
45%-49.99%........................ 5.3% 9
50%-54.99%........................ 9.8% 16
55%-59.99%........................ 9.8% 20
60%-64.99%........................ 5.4% 29
65%-69.99%........................ 21.3% 53
70%-74.99%........................ 26.8% 89
75%-79.99%........................ 9.4% 62
80%-84.99%........................ 1.2% 12
90%-94.99%........................ 1.9% 9
greater than 95%.................. 5.8% 15
</TABLE>
- ------------
(1) Excludes Credit Lease Loans. The "Loan-to-Value Ratio" for any Mortgage
Loan is determined as set forth in "Description of the Mortgage Pool --
Additional Mortgage Loan Information" herein.
S-11
<PAGE>
LOANS BY PROPERTY TYPE
<TABLE>
<CAPTION>
NUMBER OF
% OF INITIAL MORTGAGED
PROPERTY TYPE (1) POOL BALANCE PROPERTIES
- ---------------------------- -------------- ------------
<S> <C> <C>
Retail (2)................... 38.8% 153
Office....................... 21.9% 40
Multifamily.................. 18.2% 121
Hotel........................ 15.2% 77
Industrial................... 2.8% 19
Mobile Home.................. 1.8% 22
Congregate Care Nursing
Home........................ 1.3% 5
</TABLE>
- ------------
(1) Credit Lease Loans are included within the appropriate property type.
(2) Includes movie theaters.
ANTICIPATED REPAYMENT DATE BY YEAR (1)
<TABLE>
<CAPTION>
NUMBER OF
% OF INITIAL MORTGAGE
YEAR POOL BALANCE LOANS
- -------- ---------------- -------------
<S> <C> <C>
2003..... 0.0% 1
2005..... 0.0% 1
2007..... 19.2% 43
2008..... 31.7% 151
2009..... 0.5% 3
2010..... 3.6% 3
2012..... 8.5% 19
2013..... 27.6% 83
2016..... 0.1% 1
2017..... 2.9% 17
2018..... 3.3% 4
2020..... 2.6% 11
</TABLE>
- ------------
(1) For any Mortgage Loan, the year shown is the related Maturity Date or,
if the Mortgage Loan is an ARD Loan, the year in which the related
Anticipated Repayment Date occurs.
DELINQUENCY STATUS AS OF THE CUT-OFF DATE
There have been no delinquencies of 30 days or more as of the Cut-off
Date.
S-12
<PAGE>
PROSPECTUS SUPPLEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Executive Summary.................................................................. S-4
Summary of Prospectus Supplement................................................... S-16
Risk Factors and Other Special Considerations...................................... S-34
The Mortgage Loans................................................................ S-34
The Certificates ................................................................. S-53
Description of the Mortgage Pool................................................... S-57
General........................................................................... S-57
Security for the Mortgage Loans .................................................. S-58
The Mortgage Loan Program--Underwriting Standards ................................ S-58
Credit Lease Loans ............................................................... S-60
Significant Mortgage Loans ....................................................... S-67
The Fox Plaza Loan and Property.................................................. S-67
The Bristol I Pool Loan and Properties .......................................... S-69
The Park LaBrea Loan and Property ............................................... S-71
The Burnham Pacific-Golden State Pool Loan and Properties ....................... S-73
The Cinemark Credit Lease Pool Loans and Properties ............................. S-74
The Oxford Center Loan and Property ............................................. S-76
Significant Terms Regarding Mortgage Loans Over $50,000,000...................... S-78
Certain Terms and Conditions of the Mortgage Loans................................ S-63
Additional Mortgage Loan Information ............................................. S-86
Changes in Mortgage Pool Characteristics ......................................... S-97
Description of the Offered Certificates............................................ S-98
General........................................................................... S-98
Distributions .................................................................... S-99
Realized Losses .................................................................. S-110
Delinquency Reduction Amounts and Appraisal Reduction Amounts .................... S-111
Prepayment Interest Shortfalls ................................................... S-112
Subordination .................................................................... S-112
Appraisal Reductions ............................................................. S-112
Delivery, Form and Denomination .................................................. S-113
Book-Entry Registration .......................................................... S-114
Definitive Certificates .......................................................... S-116
Transfer Restrictions ............................................................ S-116
Prepayment and Yield Considerations................................................ S-117
Yield............................................................................. S-117
Yield on the Class A-CS1 and Class PS-1 Certificates ............................. S-118
Rated Final Distribution Date .................................................... S-119
Weighted Average Life of Offered Certificates .................................... S-120
The Pooling and Servicing Agreement................................................ S-127
General .......................................................................... S-127
Assignment of the Mortgage Loans ................................................. S-127
Representations and Warranties; Repurchase ....................................... S-127
Servicing of the Mortgage Loans; Collection of Payments .......................... S-135
Advances ......................................................................... S-136
S-13
<PAGE>
PAGE
---------
Accounts ......................................................................... S-138
Withdrawals from the Collection Account .......................................... S-139
Enforcement of "Due-on-Sale" and "Due-on-Encumbrance" Clauses .................... S-140
Inspections ...................................................................... S-140
Insurance Policies ............................................................... S-141
Evidence as to Compliance ........................................................ S-142
Certain Matters Regarding the Depositor, the Servicer and the Special Servicer .. S-142
Events of Default ................................................................ S-143
Rights Upon Event of Default ..................................................... S-144
Amendment ........................................................................ S-144
Voting Rights .................................................................... S-145
Realization Upon Mortgage Loans .................................................. S-145
Modifications .................................................................... S-151
Optional Termination ............................................................. S-152
The Trustee ...................................................................... S-153
Duties of the Trustee ............................................................ S-153
The Fiscal Agent ................................................................. S-154
Duties of the Fiscal Agent ....................................................... S-154
The Servicer ..................................................................... S-154
Servicing Compensation and Payment of Expenses ................................... S-155
Special Servicing ................................................................ S-155
Servicer and Special Servicer Permitted to Buy Certificates ...................... S-156
Reports to Certificateholders; Available Information ............................. S-156
Trustee Reports.................................................................. S-156
Servicer Reports ................................................................ S-158
Other Information ............................................................... S-159
Use of Proceeds.................................................................... S-159
Certain Federal Income Tax Consequences............................................ S-160
General........................................................................... S-160
ERISA Considerations............................................................... S-161
Legal Investment................................................................... S-163
Method of Distribution............................................................. S-164
Legal Matters...................................................................... S-164
Rating............................................................................. S-164
</TABLE>
S-14
<PAGE>
INDEX OF TABLES
<TABLE>
<CAPTION>
<S> <C>
Page
---------
General Characteristics....................................................................................... S-9
Cut-off Date Principal Balances .............................................................................. S-10
Geographical Concentration of Mortgaged Properties ........................................................... S-10
Range of Debt Service Coverage Ratios ........................................................................ S-11
Loan-to-Value Ratios ......................................................................................... S-11
Loans by Property Type ....................................................................................... S-12
Anticipated Repayment by Year ................................................................................ S-12
Delinquency Status as of the Cut-off Date .................................................................... S-12
Cut-off Date Balances and Concentration of Mortgage Loans .................................................... S-42
Mortgage Loans Secured by More Than One Mortgaged Property ................................................... S-42
Mezzanine Debt ............................................................................................... S-44
Preferred Equity Investments in Borrowers and Affiliates...................................................... S-44
Common Equity Investments by Affiliates of NACC .............................................................. S-45
Weighted Average Remaining Term to Maturity for Various Property Types ....................................... S-46
Significant Geographic Concentration of Mortgaged Properties ................................................. S-47
Amortization Characteristics of the Mortgage Loans ........................................................... S-49
Overview of Lock-out Periods ................................................................................. S-53
Security for the Mortgage Loans .............................................................................. S-57
Credit Lease Loans ........................................................................................... S-60
General Mortgage Loan Characteristics (as of Cut-off Date, unless otherwise indicated) ....................... S-86
Range of Debt Service Coverage Ratios ........................................................................ S-90
Range of Loan-to-Value Ratios ................................................................................ S-91
Range of Loan-to-Value Ratios at Earlier of Anticipated Repayment Date or Maturity ........................... S-91
Mortgaged Properties By State ................................................................................ S-92
Range of Years Built ......................................................................................... S-93
Cut-off Date Principal Balance By Property Type .............................................................. S-94
Range of Cut-off Date Principal Balances ..................................................................... S-95
Range of Anticipated Remaining Terms in Months ............................................................... S-95
Range of Remaining Terms in Months ........................................................................... S-96
Anticipated Repayment By Year ................................................................................ S-96
Range of Mortgage Rates ...................................................................................... S-97
Delinquency Status as of March 1, 1998 ....................................................................... S-97
Range of Remaining Lock-Out Periods in Months ................................................................ S-97
Sensitivity to Principal Prepayments of the Pre-Tax Yield to Maturity ........................................ S-119
Percentage of Initial Certificate Balance or Notional Balance Outstanding at the Respective CPRs Set Forth
Below ....................................................................................................... S-120
Percentage of Initial Notional Balance Outstanding at the Respective CPRs Set Forth Below ................... S-121
Percentage of Initial Certificate Balance Outstanding at the Respective CPRs Set Forth Below ................ S-122
Characteristics of the Mortgage Notes......................................................................... Annex A
Characteristics of the Mortgaged Properties................................................................... Annex B
Gobal Clearance, Settlement and Tax Documentation Procedure .................................................. Annex C
Term Sheet.................................................................................................... Annex D
</TABLE>
S-15
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and in the accompanying Prospectus. The following Summary of
Prospectus Supplement 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 in the
Prospectus. Prior to making an 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 in the
Prospectus. See "Index of Significant Definitions" in this Prospectus
Supplement and in the Prospectus.
TITLE OF CERTIFICATES ......... Nomura Asset Securities Corporation,
Commercial Mortgage Pass-Through
Certificates, Series 1998-D6 (the
"Certificates").
CERTIFICATE BALANCE AND
NOTIONAL BALANCE ............. Each Class of Offered Certificates has the
approximate aggregate initial Certificate
Balance or Notional Balance set forth on the
cover page of this Prospectus Supplement,
subject to a permitted variance of plus or
minus 5%. The Offered Certificates and the
Private Certificates will be issued pursuant
to a Pooling and Servicing Agreement to be
dated as of March 27, 1998 (the "Pooling and
Servicing Agreement") among the Depositor,
the Servicer, the Special Servicer, the
Trustee and the Fiscal Agent.
DEPOSITOR ..................... Nomura Asset Securities Corporation, a
Delaware corporation and a wholly owned
subsidiary of Nomura Asset Capital
Corporation ("NACC"), one of the Mortgage
Loan Sellers, and an affiliate of Nomura
Securities International, Inc., one of the
Underwriters. See "The Depositor" in the
Prospectus. It is anticipated that during
the second quarter of 1998, NACC will
transfer substantially all of its existing
commercial real estate finance business to a
newly-formed entity. See "The Depositor" and
"The Mortgage Loan Sellers" herein.
SERVICER ...................... AMRESCO Services, L.P., a Delaware limited
partnership (the "Servicer"). See "The
Pooling and Servicing Agreement--The
Servicer" herein and "Description of the
Agreements--Subservicers" in the Prospectus.
The Servicer will be permitted to purchase
any Class of Certificates. See "Risk Factors
and Other Special Considerations--The
Certificates--Servicer or Special Servicer
May Purchase Certificates" herein. The
Servicer will be responsible for servicing
the Mortgage Loans (other than the Westin
Casuarina Resort Loan) as described under
"The Pooling and Servicing Agreement" and
will be required to make certain Advances in
accordance with the terms of the Pooling and
Servicing Agreement. See "The Pooling and
Servicing Agreement--Advances" herein. The
Pooling and Servicing Agreement will permit
the Depositor to remove the Servicer at any
time without cause in order to appoint an
affiliate of the Depositor as successor
Servicer provided that (i) each Rating
Agency has confirmed in writing that such
removal will not result in a qualification,
withdrawal or downgrade of the then-current
rating of any Class of Offered Certificates
and (ii) if such successor Servicer is the
Subservicer (as defined below) or an
affiliate of the Depositor, such successor
Servicer will not directly service and will
not specially service any Mortgage Loan as
to which an affiliate of the Depositor has a
common equity interest in the related
borrower or its affiliate. It is anticipated
that the Depositor will remove the Servicer
in order to appoint Nomura Asset Capital
Services LLC, (the "Subservicer"), as
successor Servicer.
S-16
<PAGE>
SPECIAL SERVICER ............. CRIIMI MAE Services Limited Partnership, a
Maryland limited partnership (in such
capacity, the "Special Servicer"). The
Special Servicer will be responsible for
servicing Mortgage Loans that, in general,
are in default or as to which default is
imminent and administering any REO Property
(as defined herein). The holders of greater
than 50% of the Percentage Interests of the
most subordinate Class of Sequential
Certificates then outstanding (provided,
however, that for purposes of determining
the most subordinate Sequential Class, the
Class A-1A, Class A-1B, Class A-1C, Class
A-CS1 and Class PS-1 Certificates
collectively and the Class B-7 and Class
B-7H Certificates together will, in each
case, be treated as one class) will be
entitled to remove the Special Servicer as
Special Servicer of the Mortgage Loans, and
appoint a successor Special Servicer with
respect to such Mortgage Loans, provided
that each Rating Agency confirms in writing
that such removal and appointment, in and of
itself, would not cause a downgrade,
qualification or withdrawal of the then
current ratings assigned to any Class of
Certificates. The Special Servicer will be
permitted to purchase any Class of
Certificates. See "Risk Factors and Other
Special Considerations--The
Certificates--Servicer or Special Servicer
May Purchase Certificates" herein.
SUBSERVICER ................... Nomura Asset Capital Services LLC, a
Delaware limited liability company (the
"Subservicer") will be appointed as the
initial subservicer pursuant to a servicing
agreement (the "Subservicing Agreement")
between the Servicer and the Subservicer
dated as of March 27, 1998. The Subservicer
will be required to perform substantially
all of the obligations of the Servicer under
the Pooling and Servicing Agreement, other
than making P&I Advances, with respect to
all but 6 of the Mortgage Loans. Any
Mortgage Loans as to which an affiliate of
the Subservicer holds a common equity
interest in the related borrower or its
affiliate will be directly serviced by the
Servicer. Notwithstanding the retention of
the Subservicer, the Servicer will remain
directly liable for the performance of its
obligations in accordance with the Pooling
and Servicing Agreement.
TRUSTEE ....................... LaSalle National Bank, a nationally
chartered bank (the "Trustee"). See "The
Pooling and Servicing Agreement--The
Trustee" herein.
UNDERWRITERS .................. Nomura Securities International, Inc.
("NSI"), an affiliate of the Depositor,
Morgan Stanley & Co. Incorporated ("Morgan
Stanley") and Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch" and,
collectively with NSI and Morgan Stanley,
the "Underwriters"). NSI and Morgan Stanley
will act as co-lead bookrunning managers
with respect to the Offered Certificates.
NSI, Morgan Stanley and Merrill Lynch will
act as placement agents with respect to the
Class A-CS1, Class PS-1, Class A-6 and Class
A-7 Certificates (collectively, the
"Investment Grade Private Certificates").
NSI and Morgan Stanley will act as co-lead
joint bookrunning placement agents with
respect to the Investment Grade Private
Certificates. NSI is the sole placement
agent for the Class B-1, Class B-2, Class
B-3, Class B-4, Class B-5, Class B-6 and
Class B-7 Certificates (collectively, the
"Non-Investment Grade Private
Certificates"). See "Plan of Distribution"
herein.
<PAGE>
FISCAL AGENT .................. ABN AMRO Bank N.V., a Netherlands banking
corporation (the "Fiscal Agent") and the
corporate parent of the Trustee.
REPORTS TO CERTIFICATEHOLDERS . On each Distribution Date, the Trustee will
be required to prepare and forward to each
Certificateholder, the Depositor, the
Servicer, the Special Servicer, each Rating
Agency, each Underwriter and, if requested,
any potential investors in the Certificates,
a Distribution Date Statement as described
under "The Pooling and Servicing
Agreement--Reports to Certificateholders;
Available
S-17
<PAGE>
Information--Trustee Reports." In addition,
the Servicer will be required to deliver to
the Trustee and the Trustee will be required
to deliver to each Certificateholder, the
Depositor, each Rating Agency and, if
requested, any potential investor in the
Certificates, on each Distribution Date, a
Comparative Financial Status Report, a
Delinquent Loan Status Report, an Historical
Loan Modification Report, an Historical Loss
Estimate Report, an REO Status Report and a
Watch List, each as described under "The
Pooling and Servicing Agreement--Reports to
Certificateholders; Available
Information--Servicer Reports." Subject to
the receipt of necessary information in
proper form from any subservicer (including
the Subservicer), a loan-by-loan listing
will be made available electronically in the
form of the standard CSSA loan file and CSSA
property file; provided, however, the
Trustee will provide Certificateholders with
a written copy of such report upon request.
The Trustee will also be required to make
available at its offices, during normal
business hours, for review by any Holder of
a Certificate, the Depositor, the Special
Servicer, the Servicer, any Rating Agency,
any potential investor in the Certificates
or any other Person to whom the Depositor
believes such disclosure is appropriate,
among other things, the following items:
Mortgaged Property operating statements,
rent rolls, retail sales information,
Mortgaged Property inspection reports and
all modifications, waivers and amendments of
the terms of a Mortgage Loan entered into by
the Servicer or the Special Servicer. See
"The Pooling and Servicing
Agreement--Reports to Certificateholders;
Available Information--Other Information."
A Current Report on Form 8-K (the "Form
8-K") will be filed by the Depositor,
together with the Pooling and Servicing
Agreement, with the Securities and Exchange
Commission within fifteen days after the
initial issuance of the Offered
Certificates. In the event Mortgage Loans
are removed from the Mortgage Pool, such
removal will be noted in the Form 8-K. Such
Form 8-K will be available to purchasers and
potential purchasers of the Offered
Certificates.
MORTGAGE LOAN SELLERS ......... Nomura Asset Capital Corporation, a Delaware
corporation ("NACC"), the parent of the
Depositor and an affiliate of one of the
Underwriters, and Nomura Financing Trust ST
I, a single purpose Delaware business trust
and an affiliate of NACC, the Depositor and
one of the Underwriters (the "Financing
Trust," and together with NACC, the
"Mortgage Loan Sellers"). All of the
Mortgage Loans were sold or contributed to
the Depositor as shown on the following
table:
% OF INITIAL
MORTGAGE POOL BALANCE NUMBER OF
LOAN SELLER (1) MORTGAGE LOANS
------------ -------------- --------------
NACC........ 99% 325
Financing
Trust..... less than 1% 3
(1) All statistical information set forth
in this and the following tables in
the Summary regarding the "% of
Initial Pool Balance" is based on the
Cut-off Date Principal Balance of the
related Mortgage Loan or Loans.
ORIGINATORS ................... NACC and Bloomfield Acceptance Company, LLC,
a Michigan limited liability company
("Bloomfield," and together with NACC, the
"Originators").
All of the Mortgage Loans were originated by
NACC or Bloomfield, as shown in the
following table:
S-18
<PAGE>
ORIGINATORS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF
ORIGINATOR POOL BALANCE MORTGAGE LOANS
----------------------------------- -------------- --------------
<S> <C> <C>
Nomura Asset Capital Corporation .. 97% 301
Bloomfield Acceptance Company, LLC 3% 27
</TABLE>
CUT-OFF DATE .................. March 27, 1998.
CLOSING DATE .................. On or about March 27, 1998.
DISTRIBUTION DATE ............. The fourth business day following the 11th
day of each month; provided that if the 11th
day of any month is not a business day, the
Distribution Date will be the fifth business
day following the 11th day of such month.
The first Distribution Date will be April
17, 1998. A business day is any day other
than a Saturday, a Sunday or any day on
which banking institutions in the States of
Georgia, Illinois or New York are authorized
or obligated by law, executive order or
governmental decree to close.
RECORD DATE ................... With respect to each Distribution Date, the
close of business on the 10th day of the
month in which such Distribution Date
occurs, or if such day is not a business
day, the preceding business day; the Record
Date for the Distribution Date occurring in
April 1998 for all purposes other than the
receipt of distributions is the Closing
Date.
INTEREST ACCRUAL PERIOD ....... With respect to any Distribution Date other
than the Distribution Date occurring on
April 17, 1998, the period commencing on and
including the 11th day of the month
preceding the month in which such
Distribution Date occurs and ending on and
including the 10th day of the month in which
such Distribution Date occurs; the Interest
Accrual Period with respect to the
Distribution Date occurring on April 17,
1998 is assumed to consist of 21 days. Each
Interest Accrual Period other than the
Interest Accrual Period with respect to the
Distribution Date occurring on April 17,
1998 is assumed to consist of 30 days.
SCHEDULED FINAL DISTRIBUTION
DATE ......................... As to each Class of Offered Certificates,
March 15, 2028, the next Distribution Date
occurring after the latest maturity date of
any Mortgage Loan.
RATED FINAL DISTRIBUTION DATE . As to each Class of Offered Certificates,
March 15, 2030, the Distribution Date
occurring two years after the latest Assumed
Maturity Date of any of the Mortgage Loans.
The "Assumed Maturity Date" of (a) any
Mortgage Loan that is not a Balloon Loan is
the maturity date of such Mortgage Loan and
(b) any Balloon Loan is the date on which
such Mortgage Loan would be deemed to mature
in accordance with its original amortization
schedule absent its Balloon Payment.
COLLECTION PERIOD ............. With respect to a Distribution Date, the
period beginning on the day after the
preceding Collection Period (or, with
respect to the first Distribution Date, the
day after the Cut-off Date) and ending at
the close of business on the 11th day in the
month in which such Distribution Date occurs
(or, if such day is not a Business Day, the
following Business Day).
<PAGE>
DUE DATE ...................... With respect to any Distribution Date and/or
any Mortgage Loan, as the case may be, the
11th day of the month in which such
Distribution Date occurs (or in the case of
certain of the Mortgage Loans, if such 11th
day is not a business day, either the next
business day or the first preceding business
day).
DENOMINATIONS ................. The Offered Certificates will be issuable in
registered form, in minimum denominations of
Certificate Balance or Notional Balance, as
applicable, of $50,000 and multiples of $1
in excess thereof.
S-19
<PAGE>
CLEARANCE AND SETTLEMENT ..... Holders of Offered Certificates may elect to
hold their Certificates through any of The
Depository Trust Company ("DTC") (in the
United States) or Cedel Bank, societe
anonyme ("Cedel") or 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. Crossmarket transfers between
persons holding directly or indirectly
through DTC, on the one hand, and
counterparties holding directly or
indirectly through Cedel or Euroclear, on
the other, will be effected in DTC through
the relevant Depositaries of Cedel or
Euroclear. The Depositor may elect to
terminate the book-entry system through DTC
with respect to all or any portion of any
Class of the Offered Certificates. See
"Description of the Offered
Certificates--Delivery, Form and
Denomination," "--Book-Entry Registration"
and "--Definitive Certificates" herein and
"Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in
the Prospectus.
THE MORTGAGE LOANS ............ The Mortgage Loan Sellers will sell the
Mortgage Loans to the Depositor and, in
connection therewith, will make certain
representations and warranties, as more
fully described herein. With respect to the
Mortgage Loans sold to the Depositor by the
Financing Trust, the Financing Trust will
assign the representations and warranties
made by NACC with respect to such Mortgage
Loans as of February 4, 1998 and will,
itself, make certain representations and
warranties as of the Closing Date. The
Depositor will assign the Mortgage Loans,
together with its rights and remedies in
respect of breaches of the Mortgage Loan
Seller's representations and warranties to
the Trustee for the benefit of
Certificateholders. With respect to Mortgage
Loans acquired by NACC from Bloomfield, NACC
will also assign to the Depositor and the
Depositor will assign to the Trustee for the
benefit of the Certificateholders, any
rights and remedies in respect of breaches
of representations or warranties made by
such third party. See "The Pooling and
Servicing Agreement--Representations and
Warranties; Repurchase" herein.
Security for the Mortgage Loans
Each Mortgage Loan is secured by one or more
first priority mortgages, deeds of trust, or
other similar security instruments on the
borrower's interest (as set forth below) in
certain land used for commercial or
multifamily residential purposes, all
buildings and improvements thereon and
certain personal property located thereon
(each a "Mortgaged Property").
<TABLE>
<CAPTION>
% OF INITIAL
INTEREST OF POOL BALANCE NUMBER OF
BORROWER ENCUMBERED (1) MORTGAGED PROPERTIES
-------------------- -------------- --------------------
<S> <C> <C>
Fee Simple
Estate(2)........... 91% 413
Leasehold Estate(3) . 9% 24
</TABLE>
---------------
(1) Based on the principal balance of the
Mortgage Loan or, for any Pool Loan,
the Allocated Loan Amount of the
related Mortgaged Property, each as
of the Cut-off Date.
(2) For any Mortgaged Property that is
subject to a ground lease where the
ground lessee and ground lessor are
both parties to the Mortgage, the
Mortgaged Property is categorized as
a Fee Simple Estate.
(3) Includes any Mortgaged Property where
a material portion of such property
is subject to a ground lease and the
ground lessor is not a party to the
Mortgage.
S-20
<PAGE>
Credit Lease Loans
Certain of the Mortgage Loans, as described
in the table contained in the section
entitled "Description of the Mortgage
Loans--Credit Lease Loans," representing 8%
of the Initial Pool Balance ("Credit Lease
Loans"), are secured by Mortgages on
Mortgaged Properties ("Credit Lease
Properties") that are, in each case, subject
to a net lease obligation (a "Credit Lease")
of a tenant (a "Credit Tenant") which
possesses or whose parent or affiliate that
guarantees the lease obligations (a
"Guarantor") possesses a rating or internal
classification of "B-" (or the equivalent)
or higher by one or more of the Rating
Agencies. Scheduled monthly payments under
each Credit Lease are sufficient to pay in
full, and on a timely basis, all interest
and principal and other sums scheduled to be
paid with respect to the related Credit
Lease Loan.
All of the Credit Lease Loans are secured by
assignments of the Credit Leases (the
"Credit Lease Assignments"). The Credit
Lease Loans generally provide that the
Credit Tenant is responsible for all costs
and expenses incurred in connection with the
maintenance and operation of the related
Mortgaged Property and that, in the event of
a casualty or condemnation of the related
Mortgaged Property, either (i) the Credit
Tenant is obligated to continue making
payments or must offer to purchase the
Mortgaged Property for at least the full
principal balance of the Mortgage Loan plus
accrued interest thereon, or (ii) the Credit
Tenant may terminate the lease or abate
rent. In the latter case, the Trustee on
behalf of the Certificateholders will in
each case have the benefit of certain
non-cancelable credit lease enhancement
insurance policies (the "Lease Enhancement
Policies") obtained to insure against the
effect of the exercise of any rent abatement
or termination rights that a Credit Tenant
under such Credit Lease may have as a result
of the occurrence of a casualty or
condemnation. All of the Credit Lease Loans
fully amortize within the terms of the
underlying Credit Lease with the exception
of the Best Buy Credit Lease Loan in which
case the lender has the benefit of a
residual value insurance policy. See "Risk
Factors--The Mortgage Loans--Terms of the
Credit Leases; Factors Affecting Lease
Enhancement Policy and Residual Value Policy
Proceeds" and "Description of the Mortgage
Pool--Credit Lease Loans" herein.
Payment Terms
All of the Mortgage Loans provide for
scheduled payments of principal and interest
("Monthly Payments") to be due monthly on
each Due Date. Each Mortgage Loan accrues
interest at the per annum rate set forth for
such Mortgage Loan on Annex A (the "Mortgage
Rate") that is fixed for the entire term of
such loan except for the Park LaBrea Loan
which has an interest rate that is fixed at
a lower rate through March 11, 2000, and
except that ARD Loans (as set forth on the
table below) accrue interest at a higher
rate during a specified period ending at
maturity (the beginning of such period
referred to herein as the "Anticipated
Repayment Date"). As used herein, the term
"Mortgage Rate" does not include the portion
of the interest rate of an ARD Loan that is
attributable to the rate increase; the
excess of interest at such higher rate over
interest at the Mortgage Rate (together with
interest thereon) is referred to herein as
"Excess Interest." ARD Loans permit the
related borrower to prepay the loan without
payment of a Prepayment Premium for a period
beginning on or, in the case of certain of
the ARD Loans, one to six months prior to,
the Anticipated Repayment Date and ending on
the related maturity date. ARD Loans require
that on the Anticipated Repayment Date, all
Excess Cash Flow (as defined herein) will be
applied to repay principal. The Anticipated
Repay-
S-21
<PAGE>
ment Date for each ARD Loan is set forth on
Annex A. The ARD Loans substantially fully
amortize over their stated terms, which are
longer than the term to their related
Anticipated Repayment Dates. If the related
borrower elects to prepay an ARD Loan in
full on the related Anticipated Repayment
Date, a substantial amount of principal will
be due. If the borrower does not so elect,
payment of Excess Interest will be deferred
until the principal of the ARD Loan has been
paid in full. All of the ARD Loans for which
a Lock Box is not already established
require that a Lock Box be established prior
(generally three months to one year prior)
to the applicable Anticipated Repayment
Date. See "Description of the Mortgage
Pool--Certain Terms and Conditions of the
Mortgage Loans--Excess Interest" herein.
Certain of the Mortgage Loans (as set forth
on the following table) provide for Monthly
Payments based on amortization schedules at
least 48 months longer than the remaining
stated terms of such Mortgage Loans (such
Mortgage Loans, the "Balloon Loans"), such
that substantial amounts of principal are
due and payable on the respective maturity
dates (each such amount, after application
of all constant Monthly Payments due on or
prior to the respective maturity date, a
"Balloon Payment"), unless prepaid prior
thereto.
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE
LOANS
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF
TYPE OF LOAN POOL BALANCE MORTGAGE LOANS
----------------------- -------------- --------------
<S> <C> <C>
ARD Loans .............. 91% 301
Fully Amortizing Loans
(other than ARD Loans) 9% 33
Balloon Loans........... less than 1% 3
</TABLE>
Lock-Out Characteristics of the Mortgage
Loans
All of the Mortgage Loans prohibit voluntary
prepayment during a period (each, a
"Lock-out Period") commencing on the date of
origination and ending on the date that is
on or one month to six months prior to its
Anticipated Repayment Date or maturity date,
as applicable.
OVERVIEW OF LOCK-OUT PERIODS
<TABLE>
<CAPTION>
<S> <C>
Minimum Remaining Lock-out Period.............. 56 months
Maximum Remaining Lock-out Period.............. 262 months
Weighted Average Remaining Lock-out Period .... 150 months
</TABLE>
No Mortgage Loan imposes a fee or premium
("Prepayment Premium") for voluntary
prepayments made after the expiration of the
related Lock-out Period, but Prepayment
Premiums may be due in connection with
certain involuntary prepayments as described
herein. See "Risk Factors and Other Special
Considerations--The Certificates--Special
Prepayment and Yield Considerations" and
"Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage
Loans--Prepayment Provisions" and
"--Property Releases" herein.
All of the Mortgage Loans provide that after
a specified period, which is generally two
years following the Closing Date (a
"Defeasance Lock-out Period"), the
applicable borrower will be entitled to
obtain the release of the
S-22
<PAGE>
related Mortgaged Property or, in the case
of any Pool Loan, one or more of the related
Mortgaged Properties, from the lien of the
related Mortgages (a "Defeasance Option")
upon the pledge to the Trustee of
noncallable U.S. government obligations
which provide payments on or prior to all
successive scheduled payment dates upon
which interest and principal payments are
due under the related Note (or portion
thereof in the case of a Pool Loan) and in
amounts due on such dates, and upon
satisfaction of certain other conditions.
The Servicer will purchase such U.S.
government obligations on behalf of a
borrower exercising a Defeasance Option. The
Pool Loans generally require that, prior to
a release of less than all of the Mortgaged
Properties, a specified percentage
(generally 125%) of the Allocated Loan
Amount be defeased for each Mortgaged
Property to be released and that certain
DSCR tests as to the remaining Mortgaged
Properties be satisfied. The related
borrower will be required to (or in the case
of certain of the Mortgage Loans, the
related borrowers may) transfer the pledged
U.S. government obligations together with
the borrower's obligations under the related
Note or portion thereof to a successor
limited purpose borrower and such successor
borrower will assume the obligations under
such Note or portion thereof.
The characteristics of each of the Mortgage
Loans are more particularly described in
Annex A.
None of the Mortgage Loans is insured or
guaranteed by the United States, any
governmental agency or instrumentality or
any private mortgage insurer. See
"Description of the Mortgage Pool--General"
herein.
NSI has made available an electronic version
of this Prospectus Supplement on the World
Wide Web at "HTTP://WWW.NOMURANY.COM." The
password for access to such Web site is
"cmbs." Certain statistical information
included in this Prospectus Supplement can
be downloaded from such Web site.
THE OFFERED CERTIFICATES ...... The Class A-1A Certificates will have an
initial Certificate Balance of $ .
The Class A-1B Certificates will have an
initial Certificate Balance of $ .
The Class A-1C Certificates will have an
initial Certificate Balance of $ .
The Class A-CS1 Certificates will have an
initial Notional Balance of $ .
The Notional Balance of the Class A-CS1
Certificates will at all times be equal to
the Certificate Balance of the Class A-1A
Certificates minus $ (but not less than
$0).
The Class PS-1 Certificates will have an
initial Notional Balance of $ , which is
equal to the aggregate Stated Principal
Balance of the Mortgage Loans as of the
Cut-off Date. With respect to any
Distribution Date, the Notional Balance of
the Class PS-1 Certificates will be equal to
the aggregate Stated Principal Balance of
such Mortgage Loans as of the first day of
the related Interest Accrual Period.
<PAGE>
The Class A-1D Certificates will have an
initial Certificate Balance of $ .
The Class A-2 Certificates will have an
initial Certificate Balance of $ .
The Class A-3 Certificates will have an
initial Certificate Balance of $ .
The Class A-4 Certificates will have an
initial Certificate Balance of $ .
The Class A-5 Certificates will have an
initial Certificate Balance of $ .
The Class A-6 Certificates will have an
initial Certificate Balance of $ .
S-23
<PAGE>
THE PRIVATE CERTIFICATES (NOT
OFFERED HEREBY) .............. The Class A-7 Certificates will have an
initial Certificate Balance of $ .
The Class B-1 Certificates will have an
initial Certificate Balance of $ .
The Class B-2 Certificates will have an
initial Certificate Balance of $ .
The Class B-3 Certificates will have an
initial Certificate Balance of $ .
The Class B-4 Certificates will have an
initial Certificate Balance of $ .
The Class B-5 Certificates will have an
initial Certificate Balance of $ .
The Class B-6 Certificates will have an
initial Certificate Balance of $ .
The Class B-7 and Class B-7H Certificates
will, in the aggregate, have initial
Certificate Balances of approximately $
.
The Class V-1, Class V-2, Class R and Class
LR Certificates will not have a Certificate
Balance or a Notional Balance.
The Class A-7, Class B-1, Class B-2, Class
B-3, Class B-4, Class B-5, Class B-6, Class
B-7, Class B-7H, Class V-1, Class V-2, Class
R and Class LR Certificates are not offered
hereby.
SUBORDINATION ................. Except as described below, as a means of
providing protection to the holders of the
Class A-1A, Class A-1B, Class A-1C, Class
A-CS1 and Class PS-1 Certificates against
losses associated with delinquent and
defaulted Mortgage Loans, the rights of the
holders of the Class A-1D, Class A-2, Class
A-3, Class A-4, Class A-5 and Class A-6
Certificates and certain of the Private
Certificates to receive distributions of
interest and principal with respect to the
Mortgage Loans, as applicable, will be
subordinated to such rights of the holders
of the Class A-1A, Class A-1B, Class A-1C,
Class A-CS1 and Class PS-1 Certificates
(other than with respect to Reduction
Interest Distribution Amounts and Reduction
Interest Shortfalls). The Class A-1D
Certificates will likewise be protected by
the subordination of the Class A-2, Class
A-3, Class A-4, Class A-5 and Class A-6
Certificates and certain of the Private
Certificates. The Class A-2 Certificates
will be likewise protected by the
subordination of the Class A-3, Class A-4,
Class A-5 and Class A-6 Certificates and
certain of the Private Certificates. The
Class A-3 Certificates will be likewise
protected by the subordination of the Class
A-4, Class A-5 and Class A-6 Certificates
and certain of the Private Certificates. The
Class A-4 Certificates will likewise be
protected by the subordination of the Class
A-5 and Class A-6 Certificates and certain
of the Private Certificates. The Class A-5
Certificates will likewise be protected by
the subordination of the Class A-6
Certificates and certain of the Private
Certificates. This subordination will be
effected in two ways: (i) by the
preferential right of holders of a Class of
Certificates to receive on any Distribution
Date the amounts of interest and principal
distributable in respect of such
Certificates, on such date (except as
described herein in respect of the Class
PS-1 Certificates and Reduction Interest
Distribution Amounts and Reduction Interest
Shortfalls) 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 (as defined herein), first,
to certain of the Private Certificates,
<PAGE>
second, to the Class A-6 Certificates,
third, to the Class A-5 Certificates,
fourth, to the Class A-4 Certificates,
fifth, to the Class A-3 Certificates, sixth,
to the Class A-2 Certificates, seventh, to
the Class A-1D Certificates and finally, to
the Class A-1A, Class A-1B and Class A-1C
Certificates, pro rata, based on their
respective outstanding Certificate Balances.
S-24
<PAGE>
No other form of credit enhancement 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
(other than indemnification expenses), a
reduction on the interest rate of a Mortgage
Loan by a bankruptcy court pursuant to a
plan of reorganization or pursuant to any of
its equitable powers, a reduction in
interest rate or a forgiveness of principal
of a Mortgage Loan as described under "The
Pooling and Servicing Agreement--
Modifications" or otherwise will be allocated
in the same manner as Realized Losses.
Shortfalls in Available Funds resulting from
(i) indemnification expenses of the Trust Fund
required to be paid pursuant to the Pooling
and Servicing Agreement and (ii) Prepayment
Interest Shortfalls in excess of the sum of
(x) the Servicing Fee with respect to the
Mortgage Loan being prepaid (not including the
portion of the Servicing Fee attributable to
the Trustee Fee) and (y) investment income
on the related Principal Prepayment for the
period such amount is held in the Collection
Account during the related Interest Accrual
Period, will be allocated to, and be deemed
distributed with respect to, each Class of
Certificates, pro rata, based upon amounts
distributable to each such Class and, in the
case of indemnification expenses, will be
allocated, first, in respect of interest
and, second, in respect of principal. See
"Description of the Offered Certificates--
Distributions--Payment Priorities" herein.
PASS-THROUGH RATES ............ The per annum rate at which interest accrues
(the "Pass-Through Rate") on the Class A-1A,
Class A-1B, Class A-1C and Class A-1D
Certificates during any Interest Accrual
Period will be equal to %, %, % and
%, respectively.
The Pass-Through Rate on the Class A-CS1
Certificates is a per annum rate equal to
the Weighted Average Net Mortgage
Pass-Through Rate minus %.
The Pass-Through Rate on the Class PS-1
Certificates is a per annum rate equal to
the Weighted Average Net Mortgage
Pass-Through Rate minus the Weighted Average
Pass-Through Rate.
The Pass-Through Rate on the Class A-2
Certificates is a per annum rate equal to
the Weighted Average Net Mortgage
Pass-Through Rate minus %.
The Pass-Through Rate on the Class A-3
Certificates is a per annum rate equal to
the Weighted Average Net Mortgage
Pass-Through Rate minus %.
The Pass-Through Rate on the Class A-4
Certificates is a per annum rate equal to
the Weighted Average Net Mortgage
Pass-Through Rate minus %.
The Pass-Through Rate on the Class A-5
Certificates is a per annum rate equal to
the Weighted Average Net Mortgage
Pass-Through Rate minus %.
The Pass-Through Rate on the Class A-6
Certificates is a per annum rate equal to
the Weighted Average Net Mortgage
Pass-Through Rate minus %.
The Pass-Through Rate on the Class A-7
Certificates is a per annum rate equal to
the Weighted Average Net Mortgage
Pass-Through Rate minus %.
The Pass-Through Rates on the Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5,
Class B-6, Class B-7 and Class B-7H
Certificates will be equal to %.
S-25
<PAGE>
Each of the Class V-1, Class V-2, Class R
and Class LR Certificates will not have a
Pass-Through Rate.
The "Weighted Average Pass-Through Rate" for
purposes of calculating the Pass-Through
Rate on the Class PS-1 Certificates, with
respect to any Interest Accrual Period, is
the amount (expressed as a percentage), the
numerator of which is the sum of (i) the sum
of the products of (A) the Pass-Through Rate
with respect to each class of Certificates
having a Pass-Through Rate (other than the
Coupon Strip Certificates) and (B) the
Certificate Balance of such class as of the
first day of such Interest Accrual Period
and (ii) the product of (A) the Pass-Through
Rate on the Class A-CS1 Certificates and (B)
the Notional Balance of such class as of
such date, and the denominator of which is
the sum of the Certificate Balances of each
class included in clause (i)(A) above as of
such date (provided, in each case, that any
reductions in Certificate Balance or
Notional Balance, as applicable, as a result
of distributions or allocations of Realized
Losses to such Class or the related Class,
respectively, occurring in an Interest
Accrual Period will be deemed to have been
made on the first day of such Interest
Accrual Period).
The "Weighted Average Net Mortgage
Pass-Through Rate" with respect to any
Distribution Date is the amount (expressed
as a percentage) (i) the numerator of which
is the sum for all Mortgage Loans of the
products of (a) the Net Mortgage
Pass-Through Rate of each such Mortgage Loan
and (b) the Stated Principal Balance of such
Mortgage Loan and (ii) the denominator of
which is the sum of the Stated Principal
Balances of all such Mortgage Loans as of
their respective Due Dates preceding the
prior Distribution Date.
The "Net Mortgage Pass-Through Rate" with
respect to any Mortgage Loan and any
Interest Accrual Period is a per annum rate
equal to the Mortgage Pass-Through Rate (as
such term is defined below) for such
Mortgage Loan minus the applicable Servicing
Fee Rate (as such term is defined herein).
The "Mortgage Pass-Through Rate" with
respect to the Mortgage Loans that provide
for calculations of interest based on twelve
months of 30 days each for any Interest
Accrual Period is equal to the Mortgage Rate
thereof.
The "Mortgage Pass-Through Rate" with
respect to the Mortgage Loans [other than
the loan] that provide for interest
based on a 360-day year and the actual
number of days elapsed for an Interest
Accrual Period is equal to the Mortgage Rate
thereof multiplied by a fraction, the
numerator of which is the actual number of
days in such Interest Accrual Period and the
denominator of which is 30.
[The "Mortgage Pass-Through Rate" with
respect to the Mortgage Loan known as the
[ ] Loan for (a) any Interest Accrual
Period commencing in any January, February,
April, June, September and November, and any
December occurring in a year immediately
preceding any year which is not a leap year,
is the Mortgage Rate thereof, and (b) any
Interest Accrual Period commencing in March
(other than March 1998), May, July, August
and October and any December occurring in a
year immediately preceding any year which is
a leap year, is equal to the Mortgage Rate
thereof multiplied by a fraction the
numerator of which is the actual number of
days in such Interest Accrual Period and the
denominator of which is 30.]
S-26
<PAGE>
Notwithstanding the foregoing, the Mortgage
Pass-Through Rate with respect to each
Mortgage Loan for the first Interest Accrual
Period is the Mortgage Rate thereof.
The Mortgage Rate of each Mortgage Loan for
purposes of calculating the Weighted Average
Net Mortgage Pass-Through Rate will be the
Mortgage Rate of such Mortgage Loan without
taking into account any Excess Interest, any
reduction in the interest rate by a
bankruptcy court pursuant to a plan of
reorganization or pursuant to any of its
equitable powers or any reduction in the
interest rate resulting from a work-out as
described herein under "The Pooling and
Servicing Agreement--Modifications."
DISTRIBUTIONS ................. On each Distribution Date, each Class of
Offered Certificates will be entitled to
receive interest distributions in an amount
equal to the Interest Distribution Amount
(and in the case of the Class PS-1
Certificates, the Reduction Interest
Distribution Amount, if applicable) for such
Class and Distribution Date, together with
any Interest Shortfalls (and Reduction
Interest Shortfalls, if applicable)
remaining from prior Distribution Dates, in
each case to the extent of Available Funds,
if any, remaining after (i) payment of the
Interest Distribution Amounts, Interest
Shortfalls, Reduction Interest Distribution
Amounts and Reduction Interest Shortfalls
for each outstanding class of Sequential
Certificates, if any, bearing an earlier
sequential designation than that of such
Class, and (ii) if applicable, payment of
the Principal Distribution Amount for such
Distribution Date and an amount equal to the
aggregate unreimbursed Realized Losses
previously allocated to any such outstanding
Classes of Sequential Certificates having an
earlier sequential designation. References
herein to the earlier (or later) sequential
designation of the Classes of Sequential
Certificates means such Classes in
alphabetical (and, among Classes with the
same alphabetical designation, numerical)
order (or such Classes in reverse
alphabetical and numerical order) (except in
respect of the Class A-CS1, Class PS-1
(except with respect to Reduction Interest
Distribution Amounts and Reduction Interest
Shortfalls), Class A-1A, Class A-1B and
Class A-1C Certificates which will have the
same priority under the circumstances
described herein).
The Trust Fund will include two separate
real estate mortgage investment conduits
(each, a "REMIC"). Collections on the
Mortgage Loans (other than Excess Interest,
Net Default Interest and Servicer and
Trustee Fees) will be used to make payments
of principal and interest on interests (the
"Lower-Tier Interests") in a REMIC (the
"Lower-Tier REMIC"). Those payments in turn
will be used to make distributions on the
Certificates (other than the Class LR, Class
V-1 and Class V-2 Certificates), which
represent interests in a second REMIC (the
"Upper-Tier REMIC"). The Notional Balances
of the Class A-CS1 and Class PS-1
Certificates will be equal to the principal
balance of the regular interest in the
Lower-Tier REMIC corresponding to the Class
A-1A Certificates minus $ (but not
less than $0) and the aggregate of the
principal balances of Classes of regular
interests in the Lower-Tier REMIC,
respectively. For purposes of simplicity,
distributions will generally be described
herein as if made directly from collections
on the Mortgage Loans to the holders of the
Certificates.
<PAGE>
The "Interest Distribution Amount" with
respect to any Distribution Date and any
Class of Offered Certificates is equal to
interest accrued during the related Interest
Accrual Period at the Pass-Through Rate for
such Class on the Certificate Balance or
notional balance, as applicable, of such
Class (except that, with respect to the
Class PS-1 Certificates, such amount shall
be reduced by the aggregate Reduction
Interest Distribution Amounts for such
Distribution Date).
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<PAGE>
For purposes of calculating the Interest
Distribution Amount for any class of Offered
Certificates and any Distribution Date, any
distributions in reduction of Certificate
Balance or notional balance, as applicable,
and reductions in Certificate Balance or
notional balance, as applicable, as a result
of allocations of Realized Losses, Appraisal
Reduction Amounts or Delinquency Amounts (if
applicable) 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.
The Principal Distribution Amount for each
Distribution Date (prior to the Crossover
Date) will be distributed first, to the
Class A-1A Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance of such Class is reduced
to zero, second, to the Class A-1B
Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance thereof is reduced to
zero, third, to the Class A-1C Certificates,
in reduction of the Certificate Balance
thereof, until the Certificate Balance
thereof is reduced to zero, fourth, to the
Class A-1D Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance thereof is reduced to
zero, fifth, to the Class A-2 Certificates,
in reduction of the Certificate Balance
thereof, until the Certificate Balance
thereof is reduced to zero, sixth, to the
Class A-3 Certificates, in reduction of the
Certificate Balance thereof, until the
Certificate Balance is reduced to zero,
seventh, to the Class A-4 Certificates, in
reduction of the Certificate Balance
thereof, until the Certificate Balance
thereof is reduced to zero, eighth, to the
Class A-5 Certificates in reduction of the
Certificate Balance thereof, until the
Certificate Balance thereof is reduced to
zero, ninth, to the Class A-6 Certificates,
in reduction of the Certificate Balance
thereof, until the Certificate Balance
thereof is reduced to zero and tenth, to
certain of the Private Certificates in
accordance with the Pooling and Servicing
Agreement, in each case to the extent of
Available Funds remaining after required
distributions of interest to such Class and
after making principal distributions to any
more senior Class of Certificates.
On each Distribution Date occurring on and
after the Crossover Date, an amount equal to
the Principal Distribution Amount will be
distributed to the Class A-1A, Class A-1B
and Class A-1C Certificates, pro rata, based
on their respective Certificate Balances, in
reduction of their respective Certificate
Balances, until the Certificate Balance of
each such Class is reduced to zero. The
"Crossover Date" is the Distribution Date on
which the Certificate Balance of each Class
of Certificates other than the Class A-1A,
Class A-1B and Class A-1C Certificates has
been reduced to zero.
The Class A-CS1 and Class PS-1 Certificates
will not be entitled to any distributions of
principal.
<PAGE>
The "Principal Distribution Amount" for any
Distribution Date is equal to the sum, for
all Mortgage Loans, of (i) the principal
component of all scheduled Monthly Payments
(other than Balloon Payments) due on the
Mortgage Loans on or before the related Due
Date (if received or advanced); (ii) the
principal component of all Assumed Scheduled
Payments or Minimum Defaulted Monthly
Payments, as applicable, due on or before
the related Due Date with respect to any
Mortgage Loan that is delinquent in respect
of its Balloon Payment; (iii) the Stated
Principal Balance of each Mortgage Loan that
was, during the related Collection Period,
repurchased from the Trust Fund in
connection with the breach of a
representation or warranty or purchased from
the Trust Fund as described herein under
"The Pooling and Servicing
Agreement--Optional
S-28
<PAGE>
Termination;" (iv) the portion of
Unscheduled Payments allocable to principal
of any Mortgage Loan that was liquidated
during the related Collection Period; (v)
all Balloon Payments and, to the extent not
included in the preceding clauses, any other
principal payment on any Mortgage Loan
received on or after the Maturity Date
thereof, to the extent received during the
related Collection Period; (vi) to the
extent not included in the preceding clauses
(iii) or (iv), all other Principal
Prepayments received in the related
Collection Period; and (vii) to the extent
not included in the preceding clauses, any
other full or partial recoveries in respect
of principal, including net insurance
proceeds, net liquidation proceeds and Net
REO Proceeds received in the related
Collection Period (in the case of (i)
through (vii), net of any related
outstanding P&I Advances allocable to
principal and excluding any amounts
representing recoveries of Subordinate Class
Advance Amounts).
Except as described in the next sentence,
the holders of the Class V-1, Class V-2,
Class R and Class LR Certificates will not
be entitled to distributions of interest or
principal. The Class V-1 Certificates will
be entitled to distributions of Net Default
Interest and the Class V-2 Certificates will
be entitled to distributions of Excess
Interest, in each case, to the extent set
forth in the Pooling and Servicing
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 the distribution to the holders
of the Regular Certificates of all amounts
which they are entitled to receive on such
Distribution Date. The Class LR
Certificateholders will be entitled to
receive (i) any funds remaining in the
Distribution Account on any Distribution
Date after all distributions to which the
regular interests in the Lower-Tier REMIC
are entitled on such Distribution Date have
been made and (ii) the proceeds of the
remaining assets in the Trust Fund, if any,
after the Certificate Balances 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 Trust Fund on such
date. In addition, the holders of 100% of
the Percentage Interest in the Class LR
Certificates will have the limited right to
purchase ARD Loans under the circumstances
described under "Description of the Mortgage
Pool--Certain Terms and Conditions of the
Mortgage Loans."
ADVANCES ...................... The Servicer is required to make advances
("P&I Advances") with respect to 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. If a borrower
defaults on its obligation to pay amounts
due on the maturity date of the related
Mortgage Loan, the Servicer will be required
on such date and thereafter until final
liquidation thereof, to advance only an
amount equal to the constant Monthly Payment
due immediately prior to the maturity date,
with interest adjusted to the Mortgage
Pass-Through Rate, to the extent not
<PAGE>
received. The Servicer will not be required
or permitted to advance Default Interest or
Excess Interest. The amount required to be
advanced in respect of delinquent Monthly
Payments on a Mortgage Loan that has been
subject to an Appraisal Reduction Event will
equal the product of (a) the amount required
to be advanced by the Servicer without
giving effect to the related Appraisal
Reduction Amount and (b) a fraction, the
numerator of which is (i) the Stated
Principal Balance (as of the last day of the
related Collection Period) of such Mortgage
Loan minus (ii) any Appraisal Reduction
Amount thereof and the denominator of which
is the Stated Principal Balance thereof (as
of the last day of the related Collection
S-29
<PAGE>
Period). In addition, and without
duplication, the Servicer will (i) make only
one P&I Advance with respect to each
Mortgage Loan for the benefit of the most
subordinate Class of Certificates then
outstanding (unless the related delinquent
Monthly Payment is received prior to the
following Due Date) and (ii) not make any
P&I Advance in respect of Reduction Interest
Distribution Amounts and Reduction Interest
Shortfalls. For purposes of determining the
most subordinate Class, (i) the Class A-1A,
Class A-1B, Class A-1C, Class A-CS1 and
Class PS-1 Certificates collectively and
(ii) the Class B-7 and Class B-7H
Certificates together will, in each case, be
treated as one Class. See "The Pooling and
Servicing Agreement--Advances" herein and
"Description of the Certificates--Advances
in Respect of Delinquencies" in the
Prospectus. If the Servicer fails to make a
required P&I Advance, the Trustee will be
required to make the P&I Advance, and if the
Trustee fails to make a required P&I
Advance, the Fiscal Agent will be required
to make such P&I Advance, in each case
subject to a determination of
recoverability. See "The Pooling and
Servicing Agreement--Advances" herein.
OPTIONAL TERMINATION .......... The Depositor, and if the Depositor does not
exercise the option, the Servicer and, if
neither the Servicer nor the Depositor
exercises the option, the holders of the
Class LR Certificates representing greater
than a 50% Percentage Interest of the Class
LR Certificates, and if such holders of the
Class LR Certificates fail to exercise such
option, the Special Servicer will have the
option to purchase, at the purchase price
specified herein, all of the Mortgage Loans
and all property acquired through exercise
of remedies in respect of any Mortgage Loan
remaining in the Trust Fund, and thereby
effect termination of the Trust Fund and
early retirement of the then outstanding
Certificates, on any Distribution Date on
which the aggregate Stated Principal Balance
of the Mortgage Loans remaining in the Trust
Fund is less than 1% of the Initial Pool
Balance or if the outstanding Mortgage Loans
in the Mortgage Pool consist only of the
Circuit City Credit Lease Loans, the Carmax
Credit Lease Loans and/or the Parkview House
Apartments Loan. Additionally, the holders
of the Class LR Certificates representing
100% of the Percentage Interest of the Class
LR Certificates, and if the holders of the
Class LR Certificates do not exercise the
option, the holders of the most subordinate
Class of Certificates (not including the
Class B-7H Certificates), will have the
option to purchase at the purchase price
specified herein any Mortgage Loan on its
Anticipated Repayment Date. See "The Pooling
and Servicing Agreement--Optional
Termination" herein and "Description of the
Certificates--Termination" in the
Prospectus.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES ................. Elections will be made to treat the Trust
REMICs, and the Trust REMICs will qualify,
as two separate real estate mortgage
investment conduits (each, a "REMIC" or, in
the alternative, the "Upper-Tier REMIC" and
the "Lower-Tier REMIC," respectively) for
federal income tax purposes. The Class A-1A,
Class A-1B, Class A-1C, Class A-CS1, Class
PS-1, Class A-1D, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Class A-7,
Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5, Class B-6, Class B-7 and Class
B-7H Certificates (collectively, the
"Regular Certificates") will constitute
"regular interests" in the Upper-Tier REMIC,
and the Class R and Class LR Certificates
(collectively the "Residual Certificates")
will be designated as the sole Classes of
"residual interests" in the Upper-Tier REMIC
and Lower-Tier REMIC, respectively. The
Class V-1 Certificates will represent the
right to receive Default Interest, subject
to the obligation to reimburse the Servicer,
the Trustee or the Fiscal Agent, as
applicable, for interest on Advances, and
the Class V-2 Certificates will represent
S-30
<PAGE>
the right to receive Excess Interest, which
portions of the Trust Fund will be treated
as a grantor trust for federal income tax
purposes.
The Offered Certificates 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 thereon in
accordance with the accrual method of
accounting. It is anticipated that the Class
A-CS1 and Class PS-1 Certificates will be
treated as issued with original issue
discount in an amount equal to all
distributions of interest expected to be
received thereon over their respective issue
prices (including accrued interest). It is
also anticipated that the Class A-1A, Class
A-1B, Class A-1C, Class A-1D, Class A-2,
Class A-3, Class A-4, Class A-5 and Class
A-6 Certificates will not be issued with
original issue discount for federal income
tax purposes. See "Certain Federal Income
Tax Consequences" herein and "Federal Income
Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates" in 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 "Description of the
Offered Certificates--Distributions" herein.
ERISA CONSIDERATIONS .......... The United States Department of Labor has
granted to Nomura Securities International
Inc., Morgan Stanley & Co. Incorporated and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated individual prohibited
transaction exemptions PTE 93-32, PTE 90-24
and PTE 90-29, respectively (collectively,
the "Exemptions"), each of which generally
exempts from the application of certain of
the prohibited transaction provisions of
Section 406 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
(i) the purchase, sale and holding of
pass-through certificates such as the Class
A-1A, Class A-1B, Class A-1C, Class A-CS1
and Class PS-1 Certificates (the "Senior
Offered 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 or Section
4975 of the Code (all of which are
hereinafter referred to as "Plans"),
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) to acquire such
Certificates and (ii) 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.
<PAGE>
The Underwriters believe that the conditions
to the applicability of the Exemptions will
generally be met with respect to the Senior
Offered Certificates, other than possibly
those conditions which are dependent on
facts unknown to the Underwriters or which
they 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 Exemptions or the
availability of any other exemption and
whether the conditions of any such exemption
will be applicable to the Senior Offered
Certificates.
THE CLASS A-1D, CLASS A-2, CLASS A-3, CLASS
A-4, CLASS A-5 AND CLASS A-6 CERTIFICATES
(THE "SUBORDINATED OFFERED CER-
S-31
<PAGE>
TIFICATES") ARE SUBORDINATE TO ONE OR MORE
OTHER CLASSES OF CERTIFICATES AND,
ACCORDINGLY, NO TRANSFER OF A SUBORDINATED
OFFERED CERTIFICATE THAT IS A DEFINITIVE
CERTIFICATE MAY BE MADE UNLESS THE
PROSPECTIVE TRANSFEREE HAS (A) DELIVERED TO
THE DEPOSITOR, THE CERTIFICATE REGISTRAR AND
THE TRUSTEE A REPRESENTATION LETTER STATING
THAT THE TRANSFEREE IS NOT A PLAN (INCLUDING
FOR PURPOSES OF THIS PARAGRAPH, A
GOVERNMENTAL PLAN SUBJECT TO ANY SIMILAR
LAW) OR A PERSON ACTING ON BEHALF OF OR
INVESTING THE ASSETS OF A PLAN, OTHER THAN
AN INSURANCE COMPANY INVESTING THE ASSETS OF
ITS GENERAL ACCOUNT UNDER CIRCUMSTANCES
WHEREBY THE PURCHASE AND SUBSEQUENT HOLDING
OF THE OFFERED CERTIFICATE WOULD BE EXEMPT
FROM THE PROHIBITED TRANSACTION RESTRICTIONS
OF ERISA AND THE CODE UNDER SECTIONS I AND
III OF PROHIBITED TRANSACTION CLASS
EXEMPTION ("PTE") 95-60 OR (B) PROVIDED AN
OPINION OF COUNSEL AND SUCH OTHER
DOCUMENTATION AS DESCRIBED UNDER "ERISA
CONSIDERATIONS." THE TRANSFEREE OF A
BENEFICIAL INTEREST IN A SUBORDINATED
OFFERED CERTIFICATE THAT IS NOT A DEFINITIVE
CERTIFICATE SHALL BE DEEMED TO REPRESENT
THAT IT IS NOT A PERSON DESCRIBED IN CLAUSE
(A) ABOVE. SEE "DESCRIPTION OF THE OFFERED
CERTIFICATES--TRANSFER RESTRICTIONS" AND
"ERISA CONSIDERATIONS" HEREIN AND "ERISA
CONSIDERATIONS" IN THE PROSPECTUS.
RATINGS ....................... It is a condition to the issuance of the
Offered Certificates that (i) the Class
A-1A, Class A-1B and Class A-1C Certificates
be rated " " by each of Standard & Poor's
Rating Services ("S&P") Fitch IBCA, Inc.
("Fitch") and Duff & Phelps Credit Rating
Co. ("DCR") and " " by Moody's Investors
Service, Inc. ("Moody's," and together with
S&P, Fitch and DCR, the "Rating Agencies"),
(ii) the Class A-CS1 and Class PS-1
Certificates be rated " " by S&P, " "
by Fitch, " " by DCR and " " by
Moody's, (iii) the Class A-1D Certificates
be rated " " by S&P, " " by Fitch, " " by
DCR and " " by Moody's, (iv) the Class A-2
Certificates be rated " " by S&P, " " by
Fitch, " " by DCR and " " by Moody's, (v)
the Class A-3 Certificates be rated " " by
S&P, " " by Fitch, " " by DCR and " " by
Moody's, (vi) the Class A-4 Certificates be
rated " " by S&P, " " by Fitch, " " by
DCR and " " by Moody's, (vii) the Class A-5
Certificates be rated " " by S&P, " " by
Fitch, " " by DCR and " " by Moody's and
(viii) the Class A-6 Certificates be rated
" " by S&P, " " by Fitch, " " by
DCR and " " by Moody's. For a description
of the limitations of the ratings of the
Offered Certificates, see "Rating" herein.
The Rated Final Distribution Date of each
Class of Offered Certificates is March 15,
2030. 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. Any such revision, if
negative, or withdrawal of a rating could
have a material adverse effect on the
affected Class of Certificates. The Rating
Agencies' ratings on the Offered
Certificates address the likelihood of the
timely payment of interest and the ultimate
repayment of principal by the Rated Final
Distribution Date. A security rating does
not address the frequency of prepayments
(both voluntary and involuntary) or the
possibility that Certificateholders might
suffer a lower than anticipated yield, nor
does a security rating address the
likelihood of receipt of Prepayment
Premiums,
S-32
<PAGE>
Net Default Interest or Excess Interest. 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 A-CS1 and
Class PS-1 Certificates might not fully
recover their initial investment in the
event of delinquencies or rapid prepayments
of the Mortgage Loans (including both
voluntary and involuntary prepayments). As
described herein, the amounts payable with
respect to the Class A-CS1 and Class PS-1
Certificates consist only of interest. If
the entire Mortgage Pool were to prepay in
the initial month, with the result that the
Class A-CS1 and Class PS-1
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 A-CS1 and Class PS-1
Certificates. Accordingly, the ratings of
the Class A-CS1 and Class PS-1 Certificates
should be evaluated independently from
similar ratings on other types of
securities. 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 Weighted Average Net
Mortgage Pass-Through Rate, will be affected
by changes therein. See "Risk Factors and
Other Special Considerations" and "Rating"
herein and "Yield Considerations" in the
Prospectus.
LEGAL INVESTMENT .............. 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, may be subject to significant
interpretative uncertainties. Any Class of
Certificates rated in the category of "AAA"
or "AA" (or the equivalent) by at least one
Rating Agency will constitute "mortgage
related securities" within the meaning of
the Secondary Mortgage Market Enhancement
Act of 1984, as amended, for so long as the
Mortgage Loans are secured by liens on real
property. Accordingly, investors should
consult their own legal advisors to
determine whether and to what extent the
Offered Certificates constitute legal
investments for them. See "Legal Investment"
herein and in the Prospectus.
RISK FACTORS .................. See "Risk Factors and Other Special
Considerations" immediately following this
Summary of Prospectus Supplement for a
discussion of certain factors that should be
considered in connection with the purchase
of the Offered Certificates.
S-33
<PAGE>
RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS
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
Risks Associated with Commercial and Multifamily Lending Generally. The
Mortgage Loans are secured by anchored and unanchored retail properties (as
defined below), office buildings, full and limited service hotels,
multifamily residential housing, nursing homes, industrial properties, mobile
home parks and healthcare facilities. Mortgage Loans secured by commercial
and multifamily properties are markedly different from one-to-four family
residential mortgage loans. Commercial and multifamily lending is generally
viewed as exposing a lender to a greater risk of loss than one-to-four-family
residential lending. The repayment of loans secured by commercial or
multifamily properties is typically dependent upon the successful operation
of the related real estate project, the businesses operated by the tenants
and the creditworthiness of such tenants, i.e., the ability of the applicable
property to produce cash flow. Even the liquidation value of a commercial or
multifamily residential property is determined more by capitalization of the
property's cash flow than any absolute value of buildings and improvements
thereon. Lenders typically look to the debt service coverage ratio (that is
the ratio of net cash flow to debt service) of a loan secured by
income-producing property as an important measure of the risk of default on
such a loan. Commercial and multifamily lending also typically involves
larger loans to a single obligor than one-to-four-family residential lending.
Volatility. Cash flows on commercial and multifamily properties are
subject to volatility and may be insufficient to cover debt service on the
related Mortgage Loan at any given time. The volatility of cash flows
available to cover debt service and the property values (which would affect
the ability to refinance the property and proceeds available upon
foreclosure) depend upon a number of factors, including (i) the volatility of
property revenue, and (ii) the property's "operating leverage," which
generally refers to (a) the percentage of total property operating expenses
in relation to property revenue, (b) the breakdown of property operating
expenses between those that are fixed and those that vary with revenue and
(c) the level of capital expenditures required to maintain the property and
retain or replace tenants. The net operating income and value of the
Mortgaged Properties may be adversely affected by a number of factors,
including but not limited to, national, regional and local economic
conditions (which may be adversely impacted by plant closings, industry
slowdowns and other factors); local real estate conditions (such as an
oversupply of housing, retail space, office space or hotel rooms); changes or
continued weakness in specific industry segments; changes in applicable
healthcare regulations, including reimbursement requirements; perceptions by
prospective tenants and, in the case of retail properties, retailers and
shoppers, of the safety, convenience, services and attractiveness of the
property; the willingness and ability of the property's owner to provide
capable management and adequate maintenance; demographic factors; retroactive
changes to building or similar codes; increases in operating expenses (such
as energy costs); the number of tenants or, if applicable, the diversity of
types of business operated by such tenants; and laws regulating the maximum
rental permitted to be charged to a residential tenant. Properties with
short-term, less creditworthy revenue sources and/or relatively high
operating leverage, such as health care related facilities, hotels and motels
can be expected to have more volatile cash flows than properties with medium
to long-term tenant commitments from creditworthy tenants and/or relatively
low operating leverage. A decline in the real estate market, in the financial
condition of a major tenant or a general decline in the local or national
economy will tend to have a more immediate effect on the net operating income
of such properties and may lead to higher rates of delinquency or defaults.
Historical operating results of the Mortgaged Properties may not be
comparable to future operating results. In addition, other factors may
adversely affect the Mortgaged Properties' value without affecting their
current net operating income, including changes in governmental regulations,
zoning or tax laws; potential environmental or other legal liabilities; the
availability of refinancing; and changes in interest rate levels.
The age, construction quality and design of a particular property may
affect the occupancy level as well as the rents that may be charged for
individual leases. The negative effects of poor construction quality or
design will increase over time in the form of increased maintenance and the
need for capital improvements. Even good construction will deteriorate over
time if the property managers do not schedule and perform adequate
maintenance in a timely fashion. If competing properties of a similar type
are built in the areas where the Mortgaged Properties are located or similar
properties in the vicinity of the Mortgaged Properties are substantially
updated and refurbished, the value and net operating income of such Mortgaged
Properties could be reduced. There is no assurance that the value of any
Mortgaged Property during the term of the related Mortgage Loan will equal or
exceed the appraised value determined in connection with the origination of
S-34
<PAGE>
such Mortgage Loan. However, the Mortgage Loans generally provide for
deferred maintenance reserves in an amount sufficient to remediate any
deficiencies identified in the engineering report issued at the time of
origination. In addition, most of the Mortgage Loans contain ongoing capital
expenditure reserve requirements. Such reserves will be funded by, and
therefore are dependent upon, available cash flow before any excess cash is
released to the related borrower.
Additionally, some of the Mortgaged Properties (for example, certain
Healthcare Facilities) may not readily be converted to alternative uses if
such Mortgaged Properties were to become unprofitable due to competition, age
of the improvements, decreased demand or other factors. The conversion of
healthcare facilities or hotels to alternative uses would generally require
substantial capital expenditures. Thus, if the operation of any such
Mortgaged Properties becomes unprofitable such that the borrower becomes
unable to meet its obligations on the related loan, the liquidation value of
any such property may be substantially less, relative to the amount owing on
the related loan, than would be the case if such property were readily
adaptable to other uses.
Other multifamily residences, hotels, retail properties, office buildings,
mobile home parks, healthcare facilities and industrial properties located in
the areas of the Mortgaged Properties compete with the Mortgaged Properties
of such types to attract residents, retailers, customers, patients and
tenants. Increased competition frequently leads to lowering of rents in a
market and could adversely affect income from and market value of the
Mortgaged Properties.
Borrower Default; Nonrecourse Mortgage Loans. The Mortgage Loans will not
be an obligation of, or be insured or guaranteed by, any governmental entity,
by any private mortgage insurer, or by the Depositor, the Mortgage Loan
Sellers, the Servicer, the Special Servicer, the Originators, the Trustee,
the Fiscal Agent or any of their respective affiliates.
Each Mortgage Loan is generally a nonrecourse loan as to which, in the
event of a default under such Mortgage Loan, recourse generally may be had
only against the specific properties and other assets that have been pledged
to secure the Mortgage Loan. See "Description of the Mortgage Pool" herein.
Consequently, payment on each Mortgage Loan prior to maturity is dependent
primarily on the sufficiency of the net operating income of the related
Mortgaged Property, and at maturity (whether at scheduled maturity or, in the
event of a default under the related Mortgage Loan, upon the acceleration of
such maturity), upon the then market value of the related Mortgaged Property
(taking into account any adverse effect of a foreclosure proceeding on the
market value of the Mortgaged Property) or the ability of the related
borrower to refinance the Mortgaged Property. All of the Mortgage Loans were
originated within 15 months prior to the Cut-off Date. Consequently, the
Mortgage Loans do not have as long standing a payment history as mortgage
loans originated on earlier dates.
Obligor Default. In order to maximize recoveries on defaulted Mortgage
Loans the Special Servicer may, under certain limited circumstances, extend
the maturity date of and/or otherwise modify Mortgage Loans that are in
default or as to which a payment default is reasonably foreseeable, including
in particular with respect to Balloon Payments. While the Special Servicer
will have a duty to determine that any such extension or modification is
likely to produce a greater recovery on a net present value basis than
liquidation, there can be no assurance that such flexibility with respect to
extensions or modifications will increase the net present value of receipts
from or proceeds of Mortgage Loans that are in default or as to which a
default is reasonably foreseeable.
Property Management. The successful operation of a real estate project is
also dependent on the performance and viability of the property manager of
such project. Different property types vary in the extent to which the
property manager is involved in property marketing, leasing and operations on
a daily basis. Properties deriving revenues primarily from short-term sources
(such as hotels) are generally more management intensive than properties
leased to creditworthy tenants under long-term leases. The property manager
is responsible for responding to changes in the local market, planning and
implementing the rental structure, including establishing levels of rent
payments, operating the properties and providing building services, managing
operating expenses and advising the borrowers so that maintenance and capital
improvements can be carried out in a timely fashion. There can be no
assurance that the property managers will at all times be in a financial
condition to continue to fulfill their management responsibilities under the
related management agreements throughout the terms thereof. The property
managers are operating companies and, unlike limited purpose entities, may
not be restricted from incurring debt and other liabilities in the ordinary
course of business or otherwise. Moreover, a majority of the Mortgaged
Properties are managed by affiliates of the applicable borrower. Such
relationship could raise additional difficulties in connection with a
Mortgage Loan in default or undergoing special servicing and a dispute
between the partners or members of a borrower could disrupt the management of
the underlying property which may cause an adverse effect on cash flow.
However, many of the Mortgage Loans permit the lender to remove the manager
upon the occurrence of an event of default, a decline in cash flow below
specified levels or other specified triggers.
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Retail Properties. 39% of the Mortgage Loans, based on Initial Pool
Balance, are secured by Retail Properties, including movie theater properties
and Factory Outlet Centers. See "Description of the Mortgage Pool --
Additional Mortgage Loan Information -- Cut-off Date Principal Balance by
Property Type" herein. Significant factors determining the value of Retail
Properties are the quality of the tenants, as well as fundamental aspects of
real estate such as location and market demographics. The correlation between
the success of tenant businesses and property value is more direct with
respect to retail properties than other types of commercial property because
a significant component of the total rent paid by retail tenants is often
tied to a percentage of gross sales. Whether a retail property is "anchored"
or "unanchored" is also an important distinction. Retail properties that are
anchored have traditionally been perceived to be less risky. While there is
no strict definition of an anchor, it is generally understood that a retail
anchor tenant is proportionately large in size and is vital in attracting
customers to the property. 38%, based on Initial Pool Balance, of the
Mortgage Loans secured by Retail Properties, are "anchored" and 1% are
"unanchored." Furthermore, the correlation between the success of tenant
businesses and property value is increased when the property is a single
tenant property. 19% of the Mortgage Loans secured by Retail Properties,
based on Initial Pool Balance, are secured by single tenant properties. 11%
of the single tenant retail properties, based on Initial Pool Balance, secure
Credit Lease Loans. 8% of the Retail Properties, based on Initial Pool
Balance, are movie theater properties, most of which are Credit Lease
Properties. See "Description of the Mortgage Pool -- Credit Lease Loans"
herein.
Unlike office or hotel properties, retail properties also face competition
from sources outside a given real estate market. Catalogue retailers, home
shopping networks, shopping through electronic media, telemarketing and
outlet centers all compete with more traditional retail properties for
consumer dollars. Continued growth of these alternative retail outlets (which
are often characterized by lower operating costs) could adversely affect the
rents collectible at the retail properties included in the Mortgage Pool.
1.4% of the Retail Properties, based on Initial Pool Balance, are secured
by factory outlet centers ("Factory Outlet Properties"). See "Description of
the Mortgage Pool -- Additional Mortgage Loan Information -- Cut-off Date
Principal Balance by Property Type" herein. The factory outlet center
business depends, in part, on the pricing differential between goods sold in
the factory outlet centers and similar or identical goods sold in a
traditional department or other retail store. While this pricing differential
results, in part, because of lower operating costs resulting from the
elimination of distribution layers and the reduced rent and overhead of
factory outlet centers, there can be no assurance that traditional retailers
will not compete aggressively to regain sales nor can there be any assurance
that the factory outlet center business will not be adversely affected by
other changes in the distribution and sale of retail goods.
Factory outlet centers typically are located at least 25 miles from
suburban and center city shopping areas, allowing manufacturers to avoid
direct competition with their major customers, traditionally large department
stores and specialty stores. The amount of travel time creates a disincentive
to shopping at outlet centers. Further, newer outlet centers are being
constructed closer to metropolitan and suburban areas, thereby decreasing the
economic viability of older centers that are located farther away. Numerous
factory outlet centers have been developed in recent years and are currently
being developed. As a result of this rapid growth, there is a risk of
overdevelopment and increased competition for tenants and shoppers. The terms
of store leases in factory outlet centers typically are shorter than those in
traditional malls or shopping centers, thereby increasing the risks of
tenants relocating to competing centers. Factory Outlet Properties are also
subject to the risks described above under "--Retail Properties."
Office Properties. 22% of the Mortgage Loans, based on Initial Pool
Balance, are secured by Office Properties. See "Description of the Mortgage
Pool -- Additional Mortgage Loan Information -- Cut-off Date Principal
Balance by Property Type" herein. Significant factors determining the value
of office properties are the quality of the tenants in the building, the
physical attributes of the building in relation to competing buildings and
the strength and stability of the market area as a desirable business
location. Office properties may be adversely affected if there is an economic
decline in the business operated by the tenants. The risk of such an adverse
effect is increased if revenue is dependent on a single tenant or if there is
a significant concentration of tenants in a particular business or industry.
9% of the Mortgage Loans secured by Office Properties based on Initial Pool
Balance are secured by single tenant properties. See "Description of the
Mortgage Pool -- Credit Lease Loans" herein.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g. floor sizes and layout), access to transportation and
ability or inability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiberoptic cables, satellite
communications or other base building technological features).
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The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for
example, may be affected by such factors as labor cost and quality, tax
environment and quality of life issues such as schools and cultural
amenities. A central business district may have an economy which is markedly
different from that of a suburb. The local economy will impact on an office
property's ability to attract stable tenants on a consistent basis. In
addition, the cost of refitting office space for a new tenant is often more
costly than for other property types.
Hotel Properties. 15% of the Mortgage Loans, based on Initial Pool
Balance, are secured by full service hotels or limited service hotels. These
hotels are comprised of hotels associated with national franchise chains,
hotels associated with regional franchise chains and hotels that are not
affiliated with any franchise chain but may have their own brand identity.
See "Description of the Mortgage Pool -- Additional Mortgage Loan Information
- -- Cut-off Date Principal Balance by Property Type" herein for certain
statistical information on the Hotel Properties and Hotel Loans.
Various factors, including location, quality and franchise affiliation
affect the economic performance of a hotel. Adverse economic conditions,
either local, regional or national, may limit the amount that can be charged
for a room and may result in a reduction in occupancy levels. The
construction of competing hotels can have similar effects. To meet
competition in the industry and to maintain economic values, continuing
expenditures must be made for modernizing, refurbishing, and maintaining
existing facilities prior to the expiration of their anticipated useful
lives. In connection with such concerns, in certain of the Hotel Loans, the
related borrower is required to fund FF&E reserves. Because hotel rooms
generally are rented for short periods of time, hotels tend to respond more
quickly to adverse economic conditions and competition than do other
commercial properties. Furthermore, the financial strength and capabilities
of the owner and operator of a hotel is likely to have a substantial impact
on such hotel's quality of service and economic performance. Additionally,
the hotel and lodging industry is generally seasonal in nature and this
seasonality can be expected to cause periodic fluctuations in room and other
revenues, occupancy levels, room rates and operating expenses. In connection
with such concerns, in the case of certain of Hotel Loans, the related
borrower is required to fund seasonal reserves. The demand for particular
accommodations may also be affected by changes in travel patterns caused by
changes in energy prices, strikes, relocation of highways, the construction
of additional highways and other factors.
Certain of the Hotel Properties are operated under franchise agreements
with national or regional hotel chains. The viability of any such Hotel
Property depends in large part on the continued existence and financial
strength of the franchisor, the public perception of the franchise service
mark and the duration of the franchise license agreements. The
transferability of franchise license agreements may be restricted and, in the
event of a foreclosure on any such Hotel Property, the mortgagee may not have
the right to use the franchise license without the franchisor's consent.
Conversely, a lender may be unable to remove a franchisor that it desires to
replace following a foreclosure.
Many of the Hotel Properties have liquor licenses. The liquor licenses for
some of such properties may be held by the property manager rather than by
the related borrower. In addition, some states and the Cayman Islands do not
permit liquor licenses to be held other than by a natural person and,
consequently, liquor licenses for hotel properties located in such
jurisdictions are held by an individual affiliated with the related borrower
or manager. Furthermore, the applicable laws and regulations relating to such
licenses (including Cayman Islands law) generally prohibit the transfer of
such licenses to any person without the prior approval of the relevant
licensing authority. In the event of a foreclosure of a Hotel Property, or,
in the case of the Westin Casuarina Resort Property, an exercise of a power
of sale, it is unlikely that the Trustee (or Servicer or Special Servicer) or
purchaser in any such sale would be entitled to the rights under the liquor
license for such hotel property and such party would be required to apply in
its own right for such a license. There can be no assurance that a new liquor
license could be obtained. See "Certain Considerations With Respect to the
Westin Casuarina Resort Loan" herein.
Multifamily Properties. 18% of the Mortgage Loans, based on Initial Pool
Balance, are secured by multifamily apartment buildings. See "Description of
the Mortgage Pool -- Additional Mortgage Loan Information -- Cut-off Date
Principal Balance by Property Type" herein.
Significant factors determining the value and successful operation of a
multifamily property are the location of the property, the number of
competing residential developments in the local market (such as apartment
buildings, manufactured housing communities and site-built single family
homes), the physical attributes of the multifamily apartment building (such
as its age and appearance) and state and local regulations affecting such
property. In addition, the successful operation of an apartment building will
depend upon other factors, such as its reputation, the ability of management
to provide adequate maintenance and insurance, and the types of services it
provides.
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Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection.
For example, there are provisions that limit the bases on which a landlord
may terminate a tenancy or increase its rent or that prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment
buildings. These ordinances may limit rent increases to fixed percentages, to
percentages of increases in the consumer price index, to increases set or
approved by a governmental agency, or to increases determined through
mediation or binding arbitration. In many cases, the rent control laws do not
permit vacancy decontrol. Local authority to impose rent control is
pre-empted by state law in certain states, and rent control is not imposed at
the state level in those states. In some states, however, local rent control
ordinances are not pre-empted for tenants having short-term or month-to-month
leases, and properties there may be subject to various forms of rent control
with respect to those tenants. Any limitations on a borrower's ability to
raise property rents may impair such borrower's ability to repay its Mortgage
Loan from its net operating income or the proceeds of a sale or refinancing
of the related Mortgaged Property.
Adverse economic conditions, either local or national, may limit the
amount of rent that can be charged and may result in a reduction in timely
rent payments or a reduction in occupancy levels. Occupancy and rent levels
may also be affected by construction of additional housing units, local
military base or factory closings and national and local politics, including
current or future rent stabilization and rent control laws and agreements. In
addition, the level of mortgage interest rates may encourage tenants to
purchase single-family housing. The location and construction quality of a
particular building may affect the occupancy level as well as the rents that
may be charged for individual units. The characteristics of a neighborhood
may change over time or in relation to newer developments.
Industrial Properties. 3% of the Mortgage Loans, based on Initial Pool
Balance, are secured by industrial properties. See "Description of the
Mortgage Pool -- Additional Mortgage Loan Information -- Cut-off Date
Principal Balance by Property Type" herein. Significant factors determining
the value of industrial properties are the quality of tenants, building
design and adaptability and the location of the property. Concerns about the
quality of tenants, particularly major tenants, are similar in both office
properties and industrial properties, although industrial properties are more
frequently dependent on a single tenant. 64% of the Mortgage Loans secured by
Industrial Properties are secured by single tenant properties.
Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to an industrial
property include clear heights, column spacing, number of bays and bay
depths, divisibility, truck turning radius and overall functionality and
accessibility.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
Healthcare Properties. 1% of the Mortgaged Properties, based on the
Initial Pool Balance, are operated as healthcare properties, and include one
nursing home and congregate care facilities. See "Description of the Mortgage
Pool -- Additional Mortgage Loan Information -- Cut-off Date Principal
Balance by Property Type" herein for certain statistical information on such
loans. Significant factors determining the value of nursing homes, congregate
care facility and hospital properties include federal and state laws,
competition with similar properties on a local and regional basis and the
continued availability of revenue from government reimbursement programs,
primarily Medicaid and Medicare.
Hospitals and providers of long-term nursing care and other medical
services are subject to federal and state laws that relate to the adequacy of
medical care, distribution of pharmaceuticals, rate setting, equipment,
personnel, operating policies and additions to facilities and services and,
to the extent dependent on patients whose fees are reimbursed by private
insurers, to the reimbursement policies of such insurers. In addition,
facilities where such care or other medical services are provided are subject
to periodic inspection by governmental authorities to determine compliance
with various standards necessary for continued licensing under state law and
continued participation in the Medicaid and Medicare reimbursement programs.
The failure of any of such borrowers to maintain or renew any required
license or regulatory approval could prevent it from continuing operations at
a Mortgaged Property (in which case no revenues would be received from such
property or portion thereof requiring licensing) or, if applicable, bar it
from participation in
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government reimbursement programs. Furthermore, in the event of foreclosure,
there can be no assurance that the Trustee (or Servicer or Special Servicer)
or purchaser in a foreclosure sale would be entitled to the rights under such
licenses and such party may have to apply in its own right for such a
license. There can be no assurance that a new license could be obtained.
Under applicable federal and state Medicare and Medicaid laws and
regulations, only the provider who actually furnished the related medical
goods and services generally may sue for or enforce its rights to
reimbursement. Accordingly, in the event of foreclosure, none of the Trustee,
the Servicer, the Special Servicer or a subsequent lessee or operator of the
property would generally be entitled to obtain from federal or state
governments any outstanding reimbursement payments relating to services
furnished at the respective properties prior to such foreclosure.
The operators of such hospitals, nursing homes and other healthcare
facilities are likely to compete on a local and regional basis with others
that operate similar facilities, some of which competitors may be better
capitalized, may offer services not offered by such operators or may be owned
by non-profit organizations or government agencies supported by endowments,
charitable contributions, tax revenues and other sources not available to
such operators. The successful operation of a Mortgaged Property that is a
hospital, nursing home or other healthcare facility will generally depend
upon the number of competing facilities in the local market, as well as upon
other factors such as its age, appearance, reputation and management, the
types of services it provides and the quality of care and the cost of that
care.
Hospitals, nursing home facilities and other healthcare facilities may
receive a substantial portion of their revenues from government reimbursement
programs, primarily Medicaid and Medicare. Medicaid and Medicare are subject
to statutory and regulatory changes, retroactive rate adjustments,
administrative rulings, policy interpretations, delays by fiscal
intermediaries and government funding restrictions. Moreover, governmental
payors have employed cost-containment measures that limit payments to health
care providers, and there are currently under consideration various proposals
for national health care reform that could further limit those payments.
Accordingly, there can be no assurance that payments under government
reimbursement programs will, in the future, be sufficient to fully reimburse
the cost of caring for program beneficiaries. If not, net operating income of
the Mortgaged Properties that receive revenues from those sources, and
consequently the ability of the related borrowers to meet their Mortgage Loan
obligations, could be adversely affected.
Hospitals and nursing homes also receive a substantial portion of their
revenues from other third-party payors such as private health insurance
plans. There can be no assurance that third-party reimbursement will continue
to be available for hospital and nursing home services, or at what such rate
it will be available. Congress and certain state legislatures are considering
reforms in the health care industry that may affect current reimbursement
practices. Further, the development of managed care programs in which the
providers contract to provide comprehensive health care to a patient
population at a fixed cost per person has given rise to similar pressures on
health care providers to lower costs.
Mobile Home Park Properties. 2% of the Mortgaged Properties, based on
Initial Pool Balance, are operated as mobile home parks. See "Description of
the Mortgage Pool -- Additional Mortgage Loan Information -- Cut-off Date
Principal Balance by Property Type" herein, for certain statistical
information on such loans.
Significant factors determining the value of mobile home park properties
are generally similar to the factors affecting the value of multifamily
residential properties. In addition, the mobile home park properties are
"special purpose" properties that could not be readily converted to general
residential, retail or office use. In fact, certain states also regulate
changes in mobile home park use and require that the landlord give written
notice to its tenants a substantial period of time prior to the projected
change. Consequently, if the operation of any of the mobile home park
properties becomes unprofitable due to competition, age of the improvement or
other factors such that the borrower becomes unable to meet its obligation on
the related Mortgage Loan, the liquidation value of that mobile home park
property may be substantially less, relative to the amount owing on the
Mortgage Loan, than would be the case if the mobile home park property were
readily adaptable to other uses.
Tenant Credit Risk. Income from and the market value of retail, office and
industrial Mortgaged Properties would be adversely affected if space in the
Mortgaged Properties could not be leased, if tenants were unable to meet
their lease obligations, if a significant tenant were to become a debtor in a
bankruptcy case under the United States Bankruptcy Code or if for any other
reason rental payments could not be collected. If tenant sales in the
Mortgaged Properties that contain retail space were to decline, rents based
upon such sales would decline and tenants may be unable to pay their rent or
other occupancy costs. Upon the occurrence of an event of default by a
tenant, delays and costs in enforcing the lessor's rights
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could be experienced. Repayment of the Mortgage Loans will be affected by the
expiration of space leases, tenant defaults and the ability of the respective
borrowers to renew the leases or relet the space on comparable terms. Even if
vacated space is successfully relet, the costs associated with reletting,
including tenant improvements, leasing commissions and free rent, could be
substantial and could reduce cash flow from the Mortgaged Properties.
In the case of retail properties, the failure of an anchor tenant to renew
its lease, the termination of an anchor tenant's lease, the bankruptcy or
economic decline of an anchor tenant, or the cessation of the business of an
anchor (notwithstanding its continued payment of rent) can have a
particularly negative effect on the economic performance of a shopping center
property given the importance of anchor tenants in attracting traffic to
other stores. In addition, the failure of any anchor tenant to operate from
its premises may give certain tenants the right to terminate or reduce rents
under their leases.
Credit Lease Properties. 8% of the Mortgage Loans, based on Initial Pool
Balance are Credit Lease Loans. Because of the ratings of the Credit Tenants
or Guarantors, the Credit Lease Loans were generally underwritten to lower
DSCRs and/or higher LTVs than would otherwise have been acceptable had the
related Mortgaged Properties been leased to non-credit tenants. In the event
that a Credit Tenant defaults in its obligations under a Credit Lease, there
can be no assurance that the Mortgaged Property could be relet for
sufficiently high rent to support debt service on the related Credit Lease
Loan or that Liquidation Proceeds from such Mortgaged Property would be
sufficient to satisfy the borrower's obligations under such Credit Lease
Loan. See "Description of the Mortgage Pool -- Credit Lease Loans" herein.
Any rating assigned to a Credit Tenant or Guarantor, as applicable, by a
Rating Agency will reflect only such Rating Agency's assessment of the
long-term unsecured debt obligations of such entity. Such rating does not
imply an assessment of the likelihood that the Credit Leases will not be
terminated (pursuant to their terms or otherwise), that the Credit Lease
Loans will not be prepaid, that Principal Prepayments on the Credit Lease
Loans will be made by the related borrowers, or that any Prepayment Premium
will be paid or, if paid, will be sufficient to provide the anticipated
yield. As a result, such rating will not address the possibility that a
prepayment of a Mortgage Loan may cause a Certificateholder to experience a
lower than anticipated yield. See "Prepayment and Yield considerations"
herein.
Reliance on Credit Tenants; Credit Quality of Credit Tenants and
Guarantors. With respect to each Credit Lease Loan, interest and principal
payments are dependent principally on the payment by the related Credit
Tenant or Guarantor, if any, of monthly rent and other payments due under the
related Credit Lease by or on behalf of such Credit Tenant. A downgrade in
the credit rating of any of the Credit Tenants and/or the Guarantors may have
a related adverse effect on the rating of the Offered Certificates.
If a Tenant or Guarantor defaults on its obligation to make Monthly Rental
Payments under a Credit Lease or the related guarantee, as the case may be,
the borrower under the related Credit Lease Loan may not have the ability to
make required payments on such Credit Lease Loan. If a payment default on a
Credit Lease Loan occurs, the Special Servicer may be entitled to foreclose
upon or otherwise realize upon the related Credit Lease Property to recover
amounts due under the Credit Lease Loan, and will also be entitled (as
successor to the borrower) to pursue any available remedies against the
defaulting Tenant and any Guarantor, which may include rights to all future
Monthly Rental Payments. If the default occurs before significant
amortization of a Credit Lease Loan has occurred and no recovery is available
from the related borrower or the Tenant or any Guarantor, it is unlikely in
most cases that the Special Servicer will be able to recover in full the
amounts then due under such Credit Lease Loan. See "Description of the
Mortgage Loans -- Credit Lease Pool" herein.
Terms of the Credit Leases; Factors Affecting Lease Enhancement Policy and
Residual Value Policy Proceeds. With respect to each Credit Lease Loan as to
which the related Credit Lease is not a "Bondable Lease," the Trustee, on
behalf of the Certificateholders, is the beneficiary of a non-cancelable
insurance policy (a "Lease Enhancement Policy") that was obtained to cover
certain lease termination and rent abatement events arising out of a casualty
to, or condemnation of, a Credit Lease Property. A "Bondable Lease" is
generally one under which the related Credit Tenant has no right to terminate
such Credit Lease or abate rent due thereunder, including by reason of the
occurrence of certain casualty and condemnation events or the failure of the
related borrower, as lessor, to perform required maintenance, repairs or
replacement, other than termination by the Credit Tenant in connection with
certain condemnation events so long as the notice of termination is
accompanied by an offer to purchase the related Mortgaged Property for not
less than the outstanding principal balance of the Mortgage Loan plus accrued
interest. A Lease Enhancement Policy is in place with respect to the Credit
Lease having Eckerd Corporation as the Credit Tenant (the "Eckerd Credit
Lease") and the Credit Leases having Best Buy Co. Inc. as their Credit Tenant
(the "Best Buy Credit Leases"). The Lease Enhancement Policies
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insuring the Eckerd Credit Lease and the Best Buy Credit Leases were issued
by Chubb Custom Insurance Company (the "Lease Enhancement Insurer"), which,
as of the Cut-off Date, had a claims paying rating of "AAA" by S&P. The Lease
Enhancement Policies issued with respect to the Eckerd Credit Lease and the
Best Buy Credit Leases are subject to certain limited exclusions and do not
insure interest on the related Credit Lease Loan for a period of greater than
75 days past the date of the occurrence of a casualty or condemnation event.
The Lease Enhancement Policies for the Eckerd Credit Lease and the Best Buy
Credit Leases permit payment in a lump sum and provide that in the event that
the projected monthly payments due under such Lease Enhancement Policy exceed
the limit of liability under such policy, payment will be made in a lump sum
in the amount of the present value (discounted at the Mortgage Rate) of such
projected monthly payments. The Lease Enhancement Insurer is also not
required to pay amounts due under the related Credit Lease Loans other than
principal and, subject to the limitation above, accrued interest, and
therefore is not required to pay any Prepayment Premium or yield maintenance
charge due thereunder or any amounts the related borrower is obligated to pay
thereunder to reimburse the Servicer or the Trustee for outstanding Servicing
Advances.
With respect to the Credit Lease Loan related to the Best Buy Credit
Leases (the "Best Buy Credit Lease Loan"), which does not fully amortize over
its term, the related borrower has obtained residual value insurance policies
(the "Residual Value Policies") to insure against any diminution in the value
of each related Credit Lease Property as a result of changes in market
conditions in the event that a liquidation of the related Credit Lease
Properties is required in connection with a default in the payment of the
Balloon Payment required under such Mortgage Loan. The insurer will be
required to pay the amount of any deficiency between the proceeds of the sale
of any of the related Credit Lease Properties and the indebtedness remaining
under the Best Buy Credit Lease Loan that is secured by such property at its
maturity, or if the sale of such Credit Lease Properties cannot take place,
the insurer will be required to pay the full amount of the remaining
indebtedness under the Best Buy Credit Lease Loan that is secured by such
property. The Residual Value Policies were issued by R.V.I. America Insurance
Company (the "Residual Value Insurer"), which, as of the Cut-off Date, had a
claims paying rating of "AA-" by DCR and "A" by S&P.
Certificateholders may be adversely affected by any failure by the Lease
Enhancement Insurer or the Residual Value Insurer to pay under the terms of
its Lease Enhancement Policies or Residual Value Policies, respectively, and
any downgrade of the credit rating of the Lease Enhancement Insurer and the
Residual Value Insurer may adversely affect the ratings of the Offered
Certificates. See "Description of the Mortgage Pool -- Credit Lease Loans"
herein.
Certain Considerations Relating to Cayman Islands Law. The Hotel Property
known as Westin Casuarina Resort is located in Grand Cayman, British West
Indies. Such Mortgaged Property represents security for approximately 1% of
the Initial Pool Balance. The Westin Casuarina Resort Borrower's right to
operate the Westin Casuarina Resort Property is subject to the continuing
effectiveness of a Local Companies (Control) Law license granted by the
Cayman Islands government (the "Operating License"). The current Operating
License expires in 2006 and under the Westin Casuarina Resort Loan, the
Westin Casuarina Resort Borrower is required, in good faith, to diligently
pursue obtaining a new Operating License at least one year prior to the
expiration of the existing Operating License (except that under certain
circumstances the Westin Casuarina Resort Borrower may have an additional 90
days to obtain such Operating License). No assurance can be provided that
such new or extended Operating License will be obtained. The Trustee, the
Servicer and/or the Special Servicer may, under certain circumstances, be
required to obtain an Operating License (and any costs related to obtaining
such license will be a Property Advance), register as a foreign company
and/or obtain licenses under the Banks and Trust Companies Law and the
Insurance Law of the Cayman Islands, respectively. There can be no assurance
that the Trustee, Servicer, Special Servicer or owner of the property would
be able to obtain an Operating License or such other licenses.
Sovereign Risk. The landlord under the ground lease relating to the Westin
Casuarina Resort Loan is the government of the Cayman Islands. A foreign
state has the ability to influence a transaction in many ways, including, but
not limited to, the imposition of exchange controls that limit the export of
local or foreign currency, declaration of a moratorium on payments on
external debt, diversion of debt service payments or expropriation of
property. In addition, there is the risk that a country's existing social
structure will be subject to violent upheaval or other crisis. Because the
Westin Casuarina Resort Property is in Grand Cayman, British West Indies, the
Westin Casuarina Resort Loan is subject to these risks, collectively known as
"sovereign risk."
Risks Associated with Loan Concentration. Several of the Mortgage Loans
have Cut-off Date Principal Balances that are substantially higher than the
average Cut-off Date Principal Balance. The following table sets forth
Cut-off Date Balances and concentration of Mortgage Loans.
S-41
<PAGE>
CUT-OFF DATE BALANCES AND CONCENTRATION OF MORTGAGE LOANS
CUT-OFF DATE % OF INITIAL
MORTGAGE LOAN PRINCIPAL BALANCE POOL BALANCE
- ------------------------------- ----------------- ----------------
Fox Plaza ...................... 177,424,525 5%
Bristol I ...................... 144,328,799 4%
Park LaBrea .................... 140,613,989 4%
Burnham Pacific--Golden State . 134,838,933 4%
Cinemark Credit Lease Loans ... 105,297,461 3%
Oxford Center .................. 99,464,749 3%
The 6 largest Mortgage Loans have Cut-off Date Principal Balances that
represent, in the aggregate, approximately 23% of the Initial Pool Balance.
See "Description of the Mortgage Pool -- Significant Mortgage Loans" herein
for a description of the 17 largest Mortgage Loans based on Cut-off Date
Principal Balance.
The following table sets forth Mortgage Loans secured by more than one
Mortgaged Property.
MORTGAGE LOANS SECURED BY MORE THAN ONE MORTGAGED PROPERTY
NUMBER OF % OF INITIAL
POOL LOANS PROPERTIES POOL BALANCE
- ---------- -------------- --------------
Burnham Pacific-Golden State .............. 19 4%
Bristol I ................................. 15 4%
Cinemark Credit Lease Loans* .............. 10 3%
FAC Realty ................................ 11 2%
Hudson Hotels II .......................... 9 less than 1%
Innkeepers ................................ 8 1%
Saul Centers Hotels ....................... 6 1%
RIM Corporation ........................... 6 less than 1%
Pierson Portfolio* ........................ 5 less than 1%
Bayview Plaza ............................. 4 1%
Best Western-Oregon Portfolio* ............ 4 less than 1%
Wilkow .................................... 3 1%
Burnham Pacific-Powell Portfolio* ......... 3 less than 1%
BGK-3 ..................................... 3 less than 1%
Route 70 Plaza ............................ 3 less than 1%
Cadillac Properties ....................... 3 less than 1%
Manhattan Portfolio* ...................... 3 less than 1%
Parkside/Center Park/Maple ................ 3 less than 1%
Holland House ............................. 3 less than 1%
HQ Plaza .................................. 2 1%
Hyundai Buildings ......................... 2 1%
Abilene & Sunset Malls .................... 2 1%
Sunshadow/Summerbreeze .................... 2 less than 1%
Best Buy Pool ............................. 2 less than 1%
JRK-Tampa/Orlando ......................... 2 less than 1%
Madison Circle /Normandy Court ............ 2 less than 1%
Willow and Seville Oaks Apts. ............. 2 less than 1%
Neighborhood Shoping Center/Norwest Plaza 2 less than 1%
Holiday Inn/Comfort Inn Easton ............ 2 less than 1%
Port au Prince/Preston Place .............. 2 less than 1%
- ------------
(1) For purposes of this table, Guam is considered a state.
* Loans entered into with multiple related borrowers. See "--Limitations
on the Enforceability of Cross-Collateralization" below and
"Description of the Mortgage Pool -- Certain Terms and Conditions of
the Mortgage Loans -- Cross-Collateralization and Cross-Default of
Certain Mortgage Loans" herein.
S-42
<PAGE>
In general, concentrations in a mortgage pool in which one or more loans
that have outstanding principal balances that are substantially larger than
the other mortgage loans in such pool can result in losses that are more
severe, relative to the size of the pool, than would be the case if the
aggregate balance of such pool were more evenly distributed among the
mortgage loans in such pool. Concentrations of mortgage loans with the same
borrower or related borrowers can also pose increased risks. For example, if
a person that owns or controls several Mortgaged Properties experiences
financial difficulty at one Mortgaged Property, it could defer maintenance at
one Mortgaged Property in order to satisfy current expenses with respect to
the first Mortgaged Property, or it could attempt to avert foreclosure by
filing a bankruptcy petition that might have the effect of interrupting
Monthly Payments (subject to the Servicer's obligation to make Advances) for
an indefinite period on all of the related Mortgage Loans.
Limitations on Enforceability of Cross-Collateralization. 30 of the
Mortgage Loans representing approximately 26% of the Initial Pool Balance and
having Cut-off Date Principal Balances ranging from approximately $1,597,436
million to approximately $144,328,799 million are secured by more than one
Mortgaged Property. These arrangements seek to reduce the risk that the
inability of a Mortgaged Property securing each such Mortgage Loan to
generate net operating income sufficient to pay debt service will result in
defaults and ultimate losses.
Cross-collateralization arrangements involving more than one borrower (as
indicated on the chart entitled "Mortgage Loans Secured by More Than One
Mortgaged Property" above) could be challenged as a fraudulent conveyance by
creditors of a borrower or by the representative of the bankruptcy estate of
a borrower, if a borrower were to become a debtor in a bankruptcy case.
Generally, under federal and most state fraudulent conveyance statutes, the
incurring of an obligation or the transfer of property by a person will be
subject to avoidance under certain circumstances if the person did not
receive fair consideration or reasonably equivalent value in exchange for
such obligation or transfer and (i) was insolvent or was rendered insolvent
by such obligation or transfer, (ii) was engaged in business or a
transaction, or was about to engage in business or a transaction, for which
any property remaining with the person was an unreasonably small capital or
(iii) intended to, or believed that it would, incur debts that would be
beyond the person's ability to pay as such debts matured. Accordingly, a lien
granted by a borrower to secure repayment of another borrower's Mortgage Loan
could be avoided if a court were to determine that (i) such borrower was
insolvent at the time of granting the lien, was rendered insolvent by the
granting of the lien, or was left with inadequate capital, or was not able to
pay its debts as they matured and (ii) the borrower did not, when it allowed
its Mortgaged Property to be encumbered by a lien securing the entire
indebtedness represented by the other Mortgage Loan, receive fair
consideration or reasonably equivalent value for pledging such Mortgaged
Property for the equal benefit of the other borrower.
In addition, there are 21 pairs and 11 groups of three to 12 Mortgage
Loans that were made to affiliated borrowers which are not
cross-collateralized or cross-defaulted. The largest group of affiliated
borrowers (the borrowers under the Cinemark Credit Lease Loans) collectively
represent 4% of the Initial Pool Balance. Except for the affiliated borrowers
that are the borrowers for the Burnham Pacific-Powell Portfolio and the
Burnham Pacific Golden State Loan, none of the pairs or groups of Mortgage
Loans to affiliated borrowers represents more than 3% of the Initial Pool
Balance. 11.0% of the Mortgage Loans to affiliated borrowers, based on
Cut-off Date Principal Balance, are, by Cut-off Date Principal Balance Credit
Lease Loans.
Other Financing. The Mortgage Loans generally prohibit incurring any debt
that is secured by the related Mortgaged Property. The Mortgage Loans do,
however, generally permit the related borrower to incur secured indebtedness
in limited circumstances for the purchase of certain items used in the
ordinary course of business, such as equipment and in the case of certain of
the Mortgage Loans, limited amounts of unsecured debt is permitted for other
purposes. The existence of such other indebtedness could adversely affect the
financial viability of the related borrowers or the security interest of the
lender in the equipment or other assets acquired through such financings or
could complicate bankruptcy proceedings and delay foreclosure on the
Mortgaged Property. See "Certain Legal Aspects of the Mortgage Loans --
Subordinate Financing" in the Prospectus. Additionally, NACC or other lenders
unaffiliated with NACC have made loans in connection with certain Mortgage
Loans to certain borrowers or to the direct parent of certain borrowers
(together, "Mezzanine Debt") that are subordinate to the related first
Mortgage Loans as set forth on the table below. No such Mezzanine Debt is
secured by a lien on the related Mortgaged Property. The holder of Mezzanine
Debt has rights similar to those of a Preferred Equity Holder (as defined
below).
S-43
<PAGE>
MEZZANINE DEBT
<TABLE>
<CAPTION>
DEBT FROM
MORTGAGE * DEBT IN NACC
LOAN OTHER DEBT PARENT OR AFFILIATE COMBINED*
MORTGAGE LOAN BALANCE (1) BALANCE (2) BORROWER OR OTHER SECURED(3) LTV (4)
- --------------- -------------- ------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Fox Plaza....... $177,424,525 $59,865,000 Parent Other Yes 89.5%
Park LaBrea..... $140,613,989 $33,500,000 Parent Other Yes 42.5%
Oxford Center .. $ 99,464,749 $20,170,013 Parent Other Yes 83.6%
RIM
Corporation.... $ 28,890,001 $ 2,000,000 Parent NACC Yes 65.6%
Wilkow.......... $ 41,825,816 $16,200,000 Parent Other Yes 95%
</TABLE>
- ------------
(1) As of the Cut-off Date.
(2) Initial principal balance.
(3) As used above, secured means by a pledge of a partnership or other such
interest, rather than an interest in the Mortgaged Property.
(4) "Combined LTV" means "LTV" as defined herein, but adding the original
principal balance of the Other Debt to the numerator.
In addition, certain affiliates of the borrower with respect to the
Mortgage Loan known as Potomac Promenade, which has a Cut-off Date Principal
Balance of $20,443,940, holds $3,000,000 Mezzanine Debt in such borrower.
Preferred Equity Investments by Affiliates of NACC. Certain affiliates of
NACC (each, a "Preferred Interest Holder") have acquired a preferred equity
interest in 14 borrowers or their affiliates, which are the borrowers (or
affiliates) with respect to Mortgage Loans representing approximately 5% of
the Initial Pool Balance as set forth in the following table:
PREFERRED EQUITY INVESTMENTS IN BORROWERS AND AFFILIATES(1)
<TABLE>
<CAPTION>
APPROXIMATE AMOUNT INTEREST IN
MORTGAGE LOAN PREFERRED EQUITY BORROWER
MORTGAGE LOAN BALANCE(2) INVESTMENT(3) OR ITS AFFILIATE
- ------------------------------ --------------- ------------------ ----------------
<S> <C> <C> <C>
Brandywine Square.............. $51,874,868 $5,100,000 Borrower
1040 Grant Rd. Shopping
Center........................ $13,022,192 $1,300,000 Borrower
Levitz Plaza................... $ 9,972,608 $ 750,000 Borrower
Madison Circle Normandy ...... $ 9,851,298 $ 850,000 Borrower
Grays Ferry Shopping Center ... $ 6,746,235 $ 400,000 Borrower
Big V Shopping Center.......... $ 6,532,352 $ 650,000 Borrower
Cannon West.................... $ 6,392,339 $ 525,000 Borrower
Timberwalk Apts................ $ 5,416,510 $ 285,000 Borrower
Comfort Inn-West Hazelton ..... $ 4,025,000 $ 400,000 Borrower
Bentwood Manor Apts............ $ 3,741,221 $ 275,000 Borrower
Parkside/Center Park/Maple .... $ 2,596,877 $ 240,000 Borrower
Meyer Villas................... $ 2,197,523 $ 145,000 Borrower
Hyundai Buildings.............. $47,634,000 $2,545,000 Borrower
The Reservoir ................. $10,200,000 $ 400,000 Borrower
</TABLE>
- ------------
(1) Mortgage Loans as to which NACC owns a common equity interest and a
preferred equity interest in the related Borrower are not listed as
Mortgage Loans in which NACC owns a preferred equity interest in the
related borrower.
(2) As of the Cut-off Date.
(3) Initial amount of investment.
In general, with respect to each such borrower, the Preferred Interest
Holder is entitled to receive certain preferred distributions prior to
distributions being made to the other partners or members. No monthly
distribution to the Preferred
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<PAGE>
Interest Holder is permitted to be made until all required monthly debt
service payments, reserve payments, other payments under the related Mortgage
Loan ("Monthly Mortgage Loan Payments") and any obligations to other
creditors have been made when due and all monthly operating expenses with
respect to the related Mortgaged Property ("Monthly Operating Expenses") have
been paid. After payment of such amounts, the Preferred Interest Holder is
entitled to receive a distribution of a preferred yield and a monthly return
of capital equal to either (i) a scheduled minimum payment or (ii) the
greater of a scheduled minimum payment and specified percentage of certain
remaining cash flow from the Mortgaged Property or Properties, after payment
of Monthly Mortgage Loan Payments, Monthly Operating Expenses and the monthly
preferred yield to the Preferred Interest Holder (or, in each case, if
certain breaches have occurred, 100% of such remaining cash flow).
Under the related partnership agreement, operating agreement or similar
agreement, the Preferred Interest Holder has certain specified rights,
including, in most cases, the right to terminate and replace the manager of
the related Mortgaged Property or Properties upon the occurrence of certain
specified breaches or in some cases, if the DSCR as of certain dates falls
below certain levels generally equal to the DSCR at the time of the
origination of the related Mortgage Loan. However, the right of the Preferred
Interest Holder to terminate any manager is expressly subordinate to the
right of the Servicer to terminate and replace such manager. If the Preferred
Interest Holder is entitled to terminate a manager at a time when the
Servicer does not have such a right, then prior to termination, the Preferred
Interest Holder must receive written confirmation from each of the Rating
Agencies that such termination would not cause such Rating Agency to
withdraw, qualify or downgrade any of its then-current ratings on the
Certificates. Other than the increase in the percentage of the cash flow used
to calculate the monthly return of capital and the right to terminate the
manager as described above, the Preferred Interest Holder has no further
remedies under the relevant partnership, operating or similar agreement in
the event of nonpayment of its monthly preferred yield and return of capital.
In general, the Preferred Interest Holder has the right to approve the
annual budget for the Mortgaged Properties, which right is subject to any
right that the Servicer may have to approve such budgets. The Preferred
Interest Holder also has the right to approve certain actions of the related
borrowers, including certain transactions with affiliates, prepayment or
refinancing of the related Mortgage Loan, transfer of the related Mortgaged
Property, entry into or modification of substantial leases or improvement of
the related Mortgaged Properties to a materially higher standard than
comparable properties in the vicinity of such Mortgaged Properties (unless
approved by the Servicer as described below), and the dissolution,
liquidation or the taking of certain bankruptcy actions with respect to the
borrower. With respect to the making of any capital improvements in addition
to those reserved for under the related Mortgage Loan, the Servicer alone may
approve such improvements without the consent of the Preferred Interest
Holder. In such event, the expenditure of amounts to make such additional
capital improvements, rather than to make the monthly distribution to the
Preferred Interest Holder, will not cause a breach which gives rise to a
right to terminate the related manager.
An affiliate of NACC has an obligation to make a preferred equity
contribution of up to $4,000,000 to an affiliate of the Oxford Center
Borrower (to be contributed to the Oxford Center Borrower) to the extent such
borrower needs additional funds to cover tenant rollover costs. See "The
Mortgage Loans -- Significant Mortgage Loans -- The Oxford Loan and Property"
herein.
Other Equity Investments by Affiliates of NACC. An affiliate of NACC owns
an equity ownership interest in the borrower with respect to certain of the
Mortgage Loans, as set forth below. Pursuant to the terms of the related
borrowers' limited partnership or operating agreements, as applicable,
payments to such affiliate of NACC will generally be made prior to payments
to nonaffiliated members or partners and such affiliate of NACC will have
certain other preferential rights that are substantially similar to those
described above for the Preferred Interest Holder.
COMMON EQUITY INVESTMENTS BY AFFILIATES OF NACC
CUT-OFF DATE
MORTGAGE LOAN PRINCIPAL BALANCE
- ------------------- -----------------
Cinemark ........... $105,297,461
Oxford Center ...... $ 99,464,749
Abilene & Sunset .. $ 38,900,301
Colonial Park Mall $ 35,878,883
Best Buy ........... $ 14,355,277
Pierson Portfolio .. $ 10,014,980
S-45
<PAGE>
The six Mortgage Loans described above in which an affiliate of NACC has
an equity interest in the related borrower or an affiliate of the borrower
represent approximately 8% of the Initial Pool Balance.
Tax Considerations Related to Foreclosure. If the Trust Fund were to
acquire a Mortgaged Property subsequent to a default on the related Mortgage
Loan pursuant to a foreclosure or deed in lieu of foreclosure, the Special
Servicer would be required to retain an independent contractor to operate and
manage the Mortgaged Property. Any net income from such operation and
management, other than qualifying "rents from real property," or any rental
income based on the net profits of a tenant or sub-tenant or allocable to a
service that is non-customary in the area and for the type of building
involved, will subject the 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. See "The Pooling and Servicing Agreement -- Realization
Upon Mortgage Loans -- Standards for Conduct Generally in Effecting the
Foreclosure or Sale of Defaulted Loans" herein and "Federal Income Tax
Consequences -- Federal Income Tax Consequences for REMIC Certificates --
Taxes That May Be Imposed on the REMIC Pool -- Net Income From Foreclosure
Property" in the Prospectus.
Risk of Different Timing of Mortgage Loan Amortization. As set forth on
the table below, the different types of Mortgaged Properties securing the
Mortgage Loans have varying weighted average terms to maturity. If and as
principal payments or prepayments are made on a Mortgage Loan, the remaining
Mortgage Pool will be subject to more concentrated risk with respect to the
diversity of properties, types of properties, geographic concentration (see
"--Geographic Concentration" below) and with respect to the number of
borrowers. Because principal on the Certificates is payable in sequential
order, and no Class entitled to distributions of principal receives principal
until the Certificate Balance of the preceding Class or Classes so entitled
has been reduced to zero, Classes that have a later sequential designation
are more likely to be exposed to the risk of concentration discussed in the
preceding sentence than Classes with higher sequential priority.
WEIGHTED AVERAGE REMAINING TERM TO MATURITY FOR VARIOUS PROPERTY TYPES
WEIGHTED AVERAGE
REMAINING TERM TO
EARLIER OF
MATURITY OR
ANTICIPATED
% OF REPAYMENT DATE
PROPERTY TYPE INITIAL POOL BALANCE (IF APPLICABLE)
- ----------------------- -------------------- -----------------
Retail (Anchored)....... 29% 170
Office.................. 22% 134
Multifamily............. 18% 140
Hotel (Full Service) ... 11% 145
Retail (Mall) .......... 8% 171
Hotel (Limited
Service)............... 4% 162
Industrial.............. 3% 178
Mobile Home............. 2% 140
Factory Outlet Center .. 1% 180
Healthcare Facility .... 1% 140
Retail (Unanchored) .... 1% 137
Geographic Concentration. The Mortgaged Properties are located in 44
states, the British West Indies and Guam. The tables below set forth the
states in which a significant percentage of the Mortgaged Properties are
located. See the table entitled "Geographic Distribution of the Mortgaged
Properties" for a description of geographic location of the Mortgaged
Properties. Except as set forth below, no state and neither Guam nor the
British West Indies contains more than 5% (by Cut-off Date Principal Balance
or Allocated Loan Amount) of the Mortgaged Properties.
S-46
<PAGE>
SIGNIFICANT GEOGRAPHIC CONCENTRATION OF MORTGAGED PROPERTIES
NUMBER OF
% OF INITIAL MORTGAGED
STATE POOL BALANCE (1) PROPERTIES
- --------------- ---------------- ------------
California ..... 23% 68
Texas .......... 10% 53
Pennsylvania .. 7% 17
Virginia ....... 7% 18
Florida ........ 6% 27
- ------------
(1) Based on the Cut-off Date Principal Balance or for any Pool Loan, the
Allocated Loan Amount for the related Mortgaged Property.
Repayments by borrowers and the market value of the Mortgaged Properties
could be adversely affected by economic conditions generally or in regions
where the borrowers and the Mortgaged Properties are located, conditions in
the real estate markets where the Mortgaged Properties are located, changes
in governmental rules and fiscal policies, acts of nature (which may result
in uninsured losses), and other factors which are beyond the control of the
borrowers.
The economy of any state or region in which a Mortgaged Property is
located may be adversely affected to a greater degree than that of other
areas of the country by certain developments affecting industries
concentrated in such state or region. Moreover, in recent periods, several
regions of the United States have experienced significant downturns in the
market value of real estate. To the extent that general economic or other
relevant conditions in states or regions in which concentrations of Mortgaged
Properties securing significant portions of the aggregate principal balance
of the Mortgage Loans are located decline and result in a decrease in
commercial property, housing or consumer demand in the region, the income
from and market value of the Mortgaged Properties may be adversely affected.
Exercise of Remedies. The Mortgage Loans generally contain a due-on-sale
clause, which permits the lender to accelerate the maturity of the Mortgage
Loan if the borrower sells, transfers or conveys the related Mortgaged
Property or its interest in the Mortgaged Property. All of the Mortgage Loans
also include a debt-acceleration clause, which permits the lender to
accelerate the debt upon specified monetary or non-monetary defaults of the
borrower. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a mortgage or deed of trust
or permit the acceleration of the indebtedness as a result of a default
deemed to be immaterial or if the exercise of such remedies would be
inequitable or unjust or the circumstances would render the acceleration
unconscionable.
Each of the Mortgage Loans is secured by an assignment of leases and rents
pursuant to which the related borrower assigned its right, title and interest
as landlord under the leases on the related Mortgaged Property and the income
derived therefrom to the lender as further security for the related Mortgage
Loan, while retaining a license to collect rents for so long as there is no
default. In the event the borrower defaults, the license terminates and the
lender is entitled to collect rents. In some cases, such assignments may not
be perfected as security interests prior to actual possession of the cash
flow. In some cases, state law may require that the lender take possession of
the Mortgaged Property and obtain a judicial appointment of a receiver before
becoming entitled to collect the rents. In addition, if bankruptcy or similar
proceedings are commenced by or in respect of the mortgagor, the lender's
ability to collect the rents may be adversely affected. See "Certain Legal
Aspects of Mortgage Loans -- Leases and Rents" in the Prospectus.
Environmental Law Considerations. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner
or operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under, adjacent to, or in
such property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The cost of any required remediation and the owner's
liability therefor is generally not limited under such circumstances and
could exceed the value of the property and/or the aggregate assets of the
owner. Under the laws of certain states, contamination of a property may give
rise to a lien on the property to assure the costs of cleanup. In some such
states this lien has priority over the lien of an existing mortgage against
such property. In addition, the presence of hazardous or toxic substances, or
the failure to properly remediate such property, may adversely affect the
owner's or operator's ability to refinance using such property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment facility. Certain laws
S-47
<PAGE>
impose liability for release of asbestos containing materials ("ACMs") into
the air or require the removal or containment of ACMs and third parties may
seek recovery from owners or operators of real properties for personal injury
associated with ACMs or other exposure to chemicals or other hazardous
substances. For all of these reasons, the presence of, or contamination by,
hazardous substances at, on, under, adjacent to, or in a property can
materially adversely affect the value of the property.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), as well as certain state laws, a secured lender (such as the
Trust Fund) may be liable, as an "owner" or "operator," for the costs of
responding to a release or threat of a release of hazardous substances on or
from a borrower's property regardless of whether the borrower or a previous
owner caused the environmental damage, if (i) agents or employees of a lender
are deemed to have participated in the management of the borrower or (ii) the
Trust Fund actually takes possession of a borrower's property or control of
its day-to-day operations, as for example, through the appointment of a
receiver or foreclosure. Although recently enacted legislation clarifies the
activities in which a lender may engage without becoming subject to liability
under CERCLA and similar federal laws, such legislation has no applicability
to state environmental law. See "Certain Legal Aspects of the Mortgage Loans
- -- Environmental Legislation" in the Prospectus.
All of the Mortgaged Properties have been subject to environmental site
assessments or studies within the 18 months preceding the Cut-off Date. There
can be no assurance that any such assessment or study revealed all possible
environmental hazards. No assessment or study revealed any environmental
condition or circumstance that the Depositor believes will have a material
adverse impact on the value of the related Mortgaged Property or the
borrower's ability to pay its debt. In the cases where the environmental
assessments revealed the existence of friable and non-friable ACMs and
lead-based paint, the borrowers agreed to establish and maintain operations
and maintenance or abatement programs and/or environmental reserves. The
environmental studies and assessments revealed that a large portion of the
Mortgaged Properties, based on Initial Pool Balance, contained ACMs.
Certain of the Mortgaged Properties have off-site leaking underground
storage tank sites located nearby which the environmental consultant has
advised are not likely to contaminate the related Mortgaged Properties but
will require future monitoring. The environmental assessments revealed other
adverse environmental conditions such as the existence of storage tanks
needing replacement or removal, PCBs in equipment on-site and elevated radon
levels, in connection with which environmental reserves have been established
and/or removal or monitoring programs have been implemented. There can be no
assurance that all environmental conditions and risks have been identified in
such environmental assessments or studies, as applicable, or that any such
environmental conditions will not have a material adverse effect on the value
or cash flow of the related Mortgaged Property.
Federal law requires owners of residential housing constructed prior to
1978 to disclose to potential residents or purchasers any condition on the
property that causes exposure to lead-based paint. In addition, every
contract for the purchase and sale of any interest in residential housing
constructed prior to 1978 must contain a "Lead Warning Statement" that
informs the purchaser of the potential hazards to pregnant women and young
children associated with exposure to lead-based paint. The ingestion of
lead-based paint chips and/or the inhalation of dust particles from
lead-based paint by children can cause permanent injury, even at low levels
of exposure. Property owners can be held liable for injuries to their tenants
resulting from exposure to lead-based paint under various state and local
laws and regulations that impose affirmative obligations on property owners
of residential housing containing lead-based paint. The environmental
assessments revealed the existence of lead-based paint at certain of the
multifamily residential properties. In these cases the borrowers have either
implemented operations and maintenance programs or are in the process of
removing the lead-based paint. Additionally, the environmental assessments
revealed the existence of lead in mini-blinds in certain of the multifamily
residential properties. In these cases, the borrowers have planned to replace
the blinds during normal repair and maintenance operations or at tenant
turnover. Based on information received from the environmental consultant,
the Depositor believes that the presence of lead-based paint or mini-blinds
containing lead at the Mortgaged Properties will not have a material adverse
effect on the value of the related Mortgaged Property or ability of the
related borrowers to repay their loans.
With respect to the Mortgaged Property that secures the Mortgage Loan
known as SL Hillside (the "SL Hillside Property"), under the supervision of
the New Jersey Department of Environmental Protection ("NJDEP"), the SL
Hillside Borrower, together with American Can Company and Atlantic Metals
Company (the previous owners of the SL Hillside Property), and pursuant to an
agreement (the "Three Party Agreement"), have substantially completed a
S-48
<PAGE>
remediation of the premises that commenced in 1984. NJDEP has classified, or
is in the process of classifying, all but two portions of the SL Hillside
Property as adequately remediated and not requiring further remediation. The
remaining two portions (known as Area 3 and Area 14) require further soil and
groundwater remediation. The Environmental Waste Management Association
prepared proposed clean up procedures for the remediation of such areas and
NJDEP has verbally approved the proposal. It is anticipated that the
remediation of Area 3 and Area 14 will cost $400,000. In connection with the
SL Hillside Loan, the SL Hillside Borrower escrowed $186,500 with the State
of New Jersey and $585,000 with NACC (more than 150% of the estimated costs)
to secure the borrower's obligation to remediate the property. The terms of
the Three Party Agreement require American Can, Atlantic Metals and the SL
Hillside Borrower to pay 62.5%, 12.5% and 25%, respectively, of all costs
incurred in remediation. To date, the parties have paid their share of
remediation expenses and the Depositor has no reason to believe they will not
continue to operate in this manner.
With respect to the Mortgaged Property known as Discovery Plaza that
secures the Pool Loan known as the Burnham Pacific-Golden State Loan, an
environmental assessment revealed soil contamination on such property caused
by a dry cleaning operation. The environmental consultant estimated it will
cost a maximum of $205,000 to remediate the property; the related borrower
has reserved $375,000. With respect to the Mortgaged Property known as
Colonial Park Mall, an environmental assessment revealed groundwater
contamination on such property and determined such contamination was likely
caused by an active leaking underground storage tank and/or the release of
approximately 17,000 gallons of gasoline on an adjacent property with a
Sunoco gas station. The environmental consultant estimated remediation costs
would be approximately $250,000. The borrower has reserved $400,000 to cover
any costs that may arise if the borrower were required to remediate the
property. With respect to the Mortgaged Property known as Design Center that
is part of the Burnham Pacific-Powell Portfolio, an environmental assessment
revealed soil and groundwater contamination, above state action levels. The
borrower has reserved approximately $100,000 for further testing and
remediation.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto on behalf of the Trust Fund or assuming its
operation. Such requirement may effectively preclude enforcement of the
security for the related Note until a satisfactory environmental site
assessment is obtained (or until any required remedial action is thereafter
taken), but will decrease the likelihood that the Trust Fund will become
liable under any environmental law. However, there can be no assurance that
the requirements of the Pooling and Servicing Agreement will effectively
insulate the Trust Fund from potential liability under environmental laws.
See "The Pooling and Servicing Agreement -- Realization Upon Mortgage Loans
- -- Standards for Conduct Generally in Effecting Foreclosure or the Sale of
Defaulted Loans" herein and "Certain Legal Aspects of Mortgage Loans --
Environmental Legislation" in the Prospectus.
Balloon Payments. 3 of the Mortgage Loans are Balloon Loans which will
have substantial payments of principal ("Balloon Payments") due at their
stated maturities unless previously prepaid. 301 of the Mortgage Loans have
Anticipated Repayment Dates, and have substantial scheduled principal
balances as of such date. Loans that require Balloon Payments involve a
greater risk to the lender than fully amortizing loans because the ability of
a borrower to make a Balloon Payment typically will depend upon its ability
either to refinance the loan or to sell the related Mortgaged Property at a
price sufficient to permit the borrower to make the Balloon Payment.
Similarly, the ability of a borrower to repay a loan on the Anticipated
Repayment Date will depend on its ability to either refinance the Mortgage
Loan or to sell the related Mortgaged Property. The ability of a borrower to
accomplish either of these goals will be affected by all of the factors
described above affecting property value and cash flow, as well as a number
of other factors at the time of attempted sale or refinancing, including the
level of available mortgage rates, prevailing economic conditions and the
availability of credit for multifamily or commercial properties (as the case
may be) generally.
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF
TYPE OF LOAN POOL BALANCE MORTGAGE LOANS
- -------------------------------------------------- ---------------- --------------
<S> <C> <C>
ARD Loans ......................................... 91% 301
Fully Amortizing Loans (other than the ARD Loans) 9% 33
Balloon Loans ..................................... less than 1% 3
</TABLE>
One Action Considerations. Several states (including California) have laws
that prohibit more than one "judicial action" to enforce a mortgage
obligation, and some courts have construed the term "judicial action"
broadly. Accordingly, the Pooling and Servicing Agreement will require the
Servicer to obtain advice of counsel prior to enforcing any of the Trust
Fund's rights under any of the Mortgage Loans that include properties where
the rule could be applicable. In
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addition, in the case of a Pool Loan secured by Mortgaged Properties located
in multiple states, the Servicer may be required to foreclose first on
properties located in states where such "one action" rules apply (and where
non-judicial foreclosure is permitted) before foreclosing on properties
located in states where judicial foreclosure is the only permitted method of
foreclosure. See "Certain Legal Aspects of Mortgage Loans --Foreclosure" in
the Prospectus.
Limitations of Appraisals and Market Studies. In general, appraisals
represent the analysis and opinion of the respective appraisers at or before
the time made and are not guarantees of, and may not be indicative of,
present or future value. There can be no assurance that another appraiser
would not have arrived at a different valuation, even if such appraiser used
the same general approach to and same method of appraising the property.
Moreover, appraisals seek to establish the amount a typically motivated buyer
would pay a typically motivated seller. Such amount could be significantly
higher than the amount obtained from the sale of a Mortgaged Property under a
distress or liquidation sale. Information regarding the values of the
Mortgaged Properties as of the Cut-off Date is presented under "Description
of the Mortgage Pool" herein for illustrative purposes only.
Conflicts of Interest. A substantial number of the Mortgaged Properties
are managed by property managers affiliated with the respective borrowers.
These property managers may also manage and/or franchise additional
properties, including properties that may compete with the Mortgaged
Properties. Moreover, affiliates of the managers, or the managers themselves,
may also own other properties, including competing properties. Accordingly,
the managers of the Mortgaged Properties may experience conflicts of interest
in the management of such properties.
Additionally, as described above under "The Mortgage Loans -- Other
Financing," "--Preferred Equity Investments by NACC or its Affiliates," and
"--Other Equity Investments by Affiliates of NACC," NACC or an its affiliate
has acquired a preferred equity interest in certain of the borrowers or their
affiliates, which are the borrowers (or affiliates) with respect to Mortgage
Loans representing approximately 5% of the Initial Pool Balance. In addition,
an affiliate of NACC has an equity interest in the borrower or an affiliate
of the borrower with respect to the Mortgaged Properties securing Mortgage
Loans representing approximately 8% of the Initial Pool Balance. In addition,
the Mortgage Loan Seller or an affiliate may have other financing
arrangements with affiliates of the borrowers and may enter into additional
financing relationships in the future. Certain officers and directors of the
Depositor and its affiliates may own equity interests in affiliates of the
borrowers.
Conflicts Between the Servicer and the Subservicer and the Trust Fund. The
Depositor has been advised by the 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. The properties securing these mortgage loans may be in the
same markets or have common owners, obligors and/or property managers as
certain of the Mortgage Loans and the Mortgaged Properties securing the
Mortgage Loans. Certain personnel of the Servicer and its affiliates may, on
behalf of the 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 secured by properties in the same
markets as the Mortgaged Properties securing the Mortgage Loans. In such a
case, the interests of the 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. However, the Pooling and Servicing Agreement requires the
Servicer to service the Mortgage Loans solely in the best interests of and
for the benefit of all holders of the Certificates in accordance with the
Servicing Standard (as defined herein). In addition, the Subservicer is an
affiliate of the Depositor and the Mortgage Loan Sellers.
Ground Leases. 24 of the Mortgaged Properties, representing security for
approximately 9% of the Initial Pool Balance, are leasehold interests of the
related borrower where a material portion of the Mortgaged Property contains
a ground lease and the ground lessor is not a party to the Mortgage. Any
Mortgaged Property where the ground lessee and ground lessor are both parties
to the Mortgage has been categorized as a Fee Simple Estate. Each of the
Mortgage Loans secured by mortgages on leasehold estates were underwritten
taking into account payment of the ground lease rent, except in cases where
the Mortgage is a lien on both the ground lessor's and ground lessee's
interest in the Mortgaged Property. See "The Pooling and Servicing Agreement
- -- Representations and Warranties; Repurchase" herein. Except with respect to
the Westin Casuarina Resort Loan, the following provisions generally apply:
On the bankruptcy of a lessor or a lessee under a ground lease, the debtor
entity has the right to assume (continue) or reject (terminate) the ground
lease. Pursuant to Section 365(h) of the Bankruptcy Code, as it is presently
in effect, a ground lessee whose ground lease is rejected by a debtor ground
lessor has the right to remain in possession of its leased premises under the
rent reserved in the lease for the term (including renewals) of the ground
lease, but is not entitled to enforce the obligation of the ground lessor to
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provide any services required under the ground lease. In the event a ground
lessee/borrower in bankruptcy rejects any or all of its ground leases, the
leasehold mortgagee would have the right to succeed to the ground
lessee/borrower's position under the lease only if the ground lessor had
specifically granted the mortgagee such right. In the event of concurrent
bankruptcy proceedings involving the ground lessor and the ground
lessee/borrower, the Trustee may be unable to enforce the ground
lessee/borrower's obligation to refuse to treat a ground lease rejected by a
bankrupt ground lessor as terminated. In such circumstances, a ground lease
could be terminated notwithstanding lender protection provisions contained
therein or in the Mortgage. A lender could lose its security unless the
borrower holds a fee mortgage or the bankruptcy court, as a court of equity,
allows the lender to assume the ground lessee's obligations under the ground
lease and succeed to the position of a leasehold mortgagor. Although
consistent with the Bankruptcy Code, such position may not be adopted by a
bankruptcy court. See "Certain Legal Aspects of Mortgage Loans" in the
Prospectus.
Zoning Compliance; Inspections. Due to changes in applicable building and
zoning ordinances and codes ("Zoning Laws") affecting certain of the
Mortgaged Properties which have come into effect after the construction of
improvements on such Mortgaged Properties and to other reasons, certain
improvements may not comply fully with current Zoning Laws, including
density, use, parking and set back requirements, but qualify as permitted
non-conforming uses. Such changes may limit the ability of the borrower to
rebuild the premises "as is" in the event of a substantial casualty loss with
respect thereto and may adversely affect the ability of the borrower to meet
its Mortgage Loan obligations from cash flow. While it is expected that
insurance proceeds would be available for application to the related Mortgage
Loan if a substantial casualty were to occur, no assurance can be given that
such proceeds would be sufficient to pay off such Mortgage Loan in full or
that, if the Mortgaged Property were to be repaired or restored in conformity
with current law, what its value would be relative to the remaining balance
on the related Mortgage Loan, whether the property would have a value equal
to that before the casualty, or what its revenue-producing potential would
be.
Inspections of the Mortgaged Properties were conducted in connection with
the origination of the Mortgage Loans by licensed engineers to assess the
structure, exterior walls, roofing interior construction, mechanical and
electrical systems and general condition of the site, buildings and other
improvements located on the Mortgaged Properties. There can be no assurance
that all conditions requiring repair or replacement have been identified in
such inspections.
Costs of Compliance with Americans with Disabilities Act. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. To the extent the Mortgaged Properties do
not comply with the ADA, the borrowers may 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.
Litigation. On December 31, 1997, Atlanta Marriott Marquis Limited
Partnership ("AMM I"), a publicly-traded limited partnership, with the
consent of a majority of the limited partners not affiliated with its general
partner, merged (the "Merger") with and into Atlanta Marriott Marquis II
Limited Partnership ("AMM II"), a newly-formed publicly-traded limited
partnership. (References to "AMM" will mean AMM I at all times prior to the
Merger and AMM II at all times from and after the Merger). AMM II was formed
and organized to succeed to AMM I's interest in Ivy Street Hotel Limited
Partnership ("Ivy Street"), an entity owned 80% by AMM and 20% by entities
unaffiliated with AMM. Prior to the financing for the Atlanta Marriott
Marquis Hotel Loan (the "NACC/Marriott Financing"), Ivy Street owned the
improvements that constitute the Atlanta Marriott Marquis Hotel Property and
leased the land from AMM. Contemporaneously with the NACC/Marriott Financing,
AMM II transferred the land and Ivy Street transferred the leasehold interest
in the Atlanta Marriott Marquis Hotel Property to HMA Realty Limited
Partnership (the "Atlanta Marriott Borrower"), which is owned 99% by Ivy
Street and 1% by a wholly owned subsidiary of Ivy Street and the ground lease
was terminated. Host Marriott Corporation ("Host Marriott"), a publicly
traded corporation, is the parent of Marriott Marquis Corporation ("Marquis
Corporation") which is the general partner of AMM. By way of an indirect
capital contribution from Host Marriott, the Atlanta Marriott Borrower
received from Ivy Street a capital contribution of $75,000,000. At the time
of the Merger, the Atlanta Marriott Marquis Hotel Property was encumbered by
a mortgage in the amount of $199,000,000. That mortgage was refinanced by the
proceeds of the Atlanta Marriott Marquis Hotel Loan and a portion of the
capital contribution.
Certain AMM II limited partners have filed two purported class action and
derivative lawsuits in connection with the Merger, on December 12, 1997 in
the United States District Court for the Northern District of Georgia and on
December 19, 1997 in the Court of Chancery of the State of Delaware. The
lawsuits allege, among other things, that the defendants (which do not
include the Atlanta Marriott Borrower) violated their fiduciary duties in
connection with the
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Merger and that the defendants breached the AMM I partnership agreement by
agreeing to transfer the Atlanta Marriott Marquis Hotel Property for
inadequate consideration and by agreeing to terminate the ground lease, which
action plaintiffs allege will deprive them of their sole source of
distributions. Such lawsuits seek, among other things, monetary damages,
rescission of the Merger and rescission of all transactions consummated in
connection with the Merger, including rescission of the transfer of the land
to the Atlanta Marriott Borrower and the termination of the ground lease.
Although the Complaints could be amended, there are no allegations that the
Atlanta Marriott Marquis Hotel Loan is unfair or its terms improper. If a
Court were to rescind the transfer of the land and reinstate the ground
lease, the land would be transferred to AMM II (or a recreated AMM I) and
would be subject to the reinstated ground lease to Ivy Street. If this were
to occur, the Trustee's lien on both the fee and leasehold presumably would
not be impaired.
In a filing with the Securities and Exchange Commission on Form 8-K dated
December 31, 1997 and filed on January 15, 1998, Marquis Corporation, the
general partner of AMM, stated that it believes that the allegations asserted
in the lawsuits are without merit and that Marquis Corporation intends to
defend the lawsuits vigorously. AMM II has also advised the Depositor that
the litigation is not expected to have a material adverse effect on the
business, financial condition or results of operations of itself, Ivy Street
or the Atlanta Marriott Borrower. Ivy Street has also advised the Depositor
to the same effect with respect to itself and the Atlanta Marriott Borrower
and the Atlanta Marriott Borrower has made the same statement with respect to
itself.
Host Marriott has agreed to indemnify the Atlanta Marriott Borrower and
the Trustee for any costs or expenses that either entity may incur as a
result of the litigation. Further, three title insurance policies issued by
three national title insurance companies in favor of the Trustee provide
coverage for any loss due to an impairment of the Atlanta Marriott Borrower's
title to the Atlanta Marriott Marquis Hotel Property. Additionally, AMM II
and Ivy Street have agreed to subject any interest they may acquire in the
Atlanta Marriott Marquis Hotel Property to a mortgage identical to the
Marriott Marquis Mortgage and to become special purpose entities if they
acquire any direct interest in the Atlanta Marriott Marquis Hotel Property,
as a result of the litigation. However, no assurance can be given that such
actions will or could be taken or that Certificateholders will not suffer
delays or a loss as a result of the litigation. The Atlanta Marriott Marquis
Hotel Loan is evidenced by a Note that is cross-collateralized and
cross-defaulted with another equal amount pari passu note, both secured by
the Atlanta Marriott Marquis Hotel Property. The Atlanta Marriott Marquis
Hotel Loan has a Cut-off Date Principal Balance of $81,871,306 which
represents approximately 2% of the Initial Pool Balance.
In addition, there may be legal proceedings pending and, from time to
time, threatened against the borrowers and their affiliates relating to the
business of or arising out of the ordinary course of business of the
borrowers and their affiliates. There can be no assurance that such
litigation will not have a material adverse effect on the distributions to
Certificateholders.
Westin Casuarina Resort Loan. The Mortgage Loan known as the Westin
Casuarina Resort Loan, which has a Cut-off Date Principal Balance of
$19,832,535 and represents approximately 1% of the Initial Pool Balance, is
secured by the Westin Casuarina Resort Property. The Westin Casuarina Resort
Property also serves as security for another loan made by the Mortgage Loan
Seller to the Westin Casuarina Borrower on August 7, 1997 (the "Other Westin
Casuarina Resort Loan"), which had an original principal balance of
$50,000,000. Both the Westin Casuarina Resort Loan and the Other Westin
Casuarina Resort Loan are secured by a single Mortgage on the Westin
Casuarina Resort Property. The Other Westin Casuarina Loan is included in the
trust fund created in connection with the issuance of Asset Securitization
Corporation, Commercial Mortgage Pass-Through Certificates, Series 1997-D5
("Series 1997-D5"), the depositor of which is affiliated with the Depositor.
The Westin Casuarina Resort Loan and the Other Westin Casuarina Resort Loan
are pari passu loans, entitled to payments made by the Westin Casuarina
Resort Borrower and other amounts received in respect of the Westin Casuarina
Resort Property pro rata on the basis of amounts owing under each such loan.
In connection with the origination of the Westin Casuarina Resort Loan,
the trustee (the "Other Trustee") of Series 1997-D5 (which is the same entity
that is serving as the initial Trustee) and NACC entered into a co-lender
agreement (the "Co-Lender Agreement"). The Other Trustee is the mortgagee of
record of the Westin Casuarina Resort Property. Under the terms of the
Co-Lender Agreement, the servicer of Series 1997-D5 (which is the same entity
that is serving as the initial Servicer) will service both the Westin
Casuarina Resort Loan and the Other Westin Casuarina Resort Loan and the
special servicer of Series 1997-D5 (which is AMRESCO Management, Inc.) will,
to the extent necessary, specially service both the Westin Casuarina Resort
Loan and the Other Westin Casuarina Resort Loan, in each case under the terms
of the pooling and servicing agreement related to Series 1997-D5. The
Servicer (although initially the same entity acting as servicer of 1997-D5)
will therefore not directly service the Westin Casuarina Resort Loan (except
that the Servicer will be required
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to advance delinquent payments and a pro rata portion of property protection
expenses as described herein under the heading "The Pooling and Servicing
Agreement -- Advances") and neither the Special Servicer nor the Directing
Holders will have the ability to direct any foreclosure or workout of the
Westin Casuarina Resort Loan.
THE CERTIFICATES
Limited Assets. If the Trust Fund is insufficient to make payments on the
Offered Certificates, no other assets will be available for payment of the
deficiency.
Special Prepayment and Yield Considerations. The yield to maturity on the
Offered Certificates will depend on, among other things, the rate and timing
of principal payments (including both voluntary prepayments, in the case of
the Mortgage Loans that permit voluntary prepayment, and involuntary
prepayments, such as prepayments resulting from casualty or condemnation,
defaults and liquidations) on the Mortgage Loans and the allocation thereof
to reduce the Certificate Balances of the Offered Certificates entitled to
distributions of principal. In addition, in the event of any repurchase of a
Mortgage Loan from the Trust Fund by the Mortgage Loan Seller or the
Depositor under the circumstances described under "The Pooling and Servicing
Agreement --Representations and Warranties -- Repurchase" herein or the
purchase of the Mortgage Loans by the holders of the Class LR Certificates or
the most subordinate Class of Certificates then outstanding under the
circumstances described under "The Pooling and Servicing Agreement --
Optional Termination" herein, the repurchase or purchase price paid would be
passed through to the holders of the Certificates with the same effect as if
such Mortgage Loan had been prepaid in full (except that no Prepayment
Premium would be payable with respect to any such repurchase). No
representation is made as to the anticipated rate of prepayments (voluntary
or involuntary) on the Mortgage Loans or as to the anticipated yield to
maturity of any Certificate. See "Prepayment and Yield Considerations"
herein.
In general, if an Offered Certificate is purchased 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 Prepayment Premiums are
not received, the 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 assumed at the time of purchase.
The investment performance of the Offered Certificates may vary materially
and adversely from the investment expectations of investors due to
prepayments on the Mortgage Loans that are higher or lower than anticipated
by investors. The actual yield to the holder of an Offered Certificate may
not be equal to the yield anticipated at the time of purchase of the Offered
Certificate or, notwithstanding that the actual yield is equal to the yield
anticipated at that time, the total return on investment expected by the
investor or the expected weighted average life of the Offered Certificate may
not be realized. In deciding whether to purchase any Offered Certificates, an
investor should make an independent decision as to the appropriate prepayment
assumptions to be used. See "Prepayment and Yield Considerations" herein.
All of the Mortgage Loans provide for a Lock-out Period during which
voluntary prepayments are prohibited. The table below sets forth certain
information regarding the Lock-out Periods. For further statistical
information on a loan-by-loan basis, see Annex A hereto.
OVERVIEW OF LOCK-OUT PERIODS
Minimum Remaining Lock-out Period .............. 56 months
Maximum Remaining Lock-out Period .............. 262 months
Weighted Average Remaining Lock-out Period .... 150 months
The rate at which voluntary prepayments occur on the Mortgage Pool will be
affected by a variety of factors, including, without limitation, the terms of
the Mortgage Loans, the level of prevailing interest rates as compared to the
applicable Mortgage rate, the availability of mortgage credit and economic,
demographic, tax, legal and other factors. In general, however, if prevailing
interest rates remain at or above the rates borne by such Mortgage Loans,
such Mortgage Loans may be the subject of lower principal prepayments than if
prevailing rates fall significantly below the mortgage rates of the Mortgage
Loans. The rate of principal payments on the Offered Certificates may be
affected by the rate of principal payments on the Mortgage Loans and is
likely to be affected by the Lock-out Periods applicable to the Mortgage
Loans and by the extent to which a Servicer is able to enforce such
provisions. Mortgage Loans with a Lock-out Period, to the
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extent enforceable, generally would be expected to experience a lower rate of
principal prepayments than otherwise identical mortgage loans without such
provisions, with shorter Lock-out Periods.
All of the Mortgage Loans provide that after the applicable Defeasance
Lock-out Period, the borrower may obtain the release of the related Mortgaged
Property from the lien of the related Mortgage upon the pledge to the
Trustee, for the benefit of the Certificateholders, of noncallable U.S.
Treasury or other noncallable U.S. government obligations which provide
payments on or prior to all successive payment dates through maturity (or, in
the case of the ARD Loans, through the Anticipated Repayment Date) in the
amounts due on such dates (plus, in the case of ARD Loans, the amount
outstanding on the related Anticipated Repayment Date), and upon the
satisfaction of certain other conditions. See "Description of the Mortgage
Pool -- Certain Terms and Conditions of the Mortgage Loans -- Property
Releases" herein.
See "Prepayment and Yield Considerations" and "Certain 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. Delinquencies on
the Mortgage Loans, unless advanced, may result in shortfalls in
distributions of interest and/or principal to the Offered Certificates for
the current month. See "--Limitations on Advancing" below. Any late payments
received on or in respect of the Mortgage Loans will be distributed to the
Certificates in the priorities described more fully herein, but no interest
will accrue on such shortfall during the period of time such payment is
delinquent. Thus, because the Offered Certificates will not accrue interest
on shortfalls, delinquencies may result in losses and shortfalls being
allocated to the Offered Certificates, which will reduce the amounts
distributable to the Offered Certificates and thereby adversely affect the
yield to maturity of such Certificates.
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 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. Mortgage Loans with higher interest rates may
be more likely to default or result in borrower bankruptcies. See "Prepayment
and Yield Considerations" herein.
As and to the extent described herein, the Servicer, the Special Servicer,
the Trustee or the Fiscal Agent, as applicable, will be entitled to receive
interest on unreimbursed Advances that (a) are recovered out of amounts
received on the Mortgage Loan as to which such Advances were made or such
servicing expenses were incurred, which amounts are in the form of
reimbursement from the related borrower, late payments, liquidation proceeds,
insurance proceeds, condemnation proceeds or amounts paid in connection with
the purchase of such Mortgage Loan out of the Trust Fund or (b) are
determined to be nonrecoverable Advances. Such interest will accrue from (and
including) the date on which the related Advance is made or the related
expense incurred to (but excluding) the date on which (x) in the case of
clause (a) above, such amounts are recovered and (y) in the case of clause
(b) above, a determination of non-recoverability is made to the extent that
there are funds available in the Collection Account for reimbursement of such
Advance. The Servicer's, the Special Servicer's, the Trustee's or the Fiscal
Agent's right, as applicable, to receive such payments of interest is prior
to the rights of Certificateholders to receive distributions on the 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, may result in a
Mortgage Loan being specially serviced. The Special Servicer is entitled to
additional compensation for special servicing activities which may result in
losses being allocated to the Offered Certificates that would not otherwise
have resulted absent such compensation. See "The Pooling and Servicing
Agreement -- Special Servicing" herein.
Even if losses on the Mortgage Loans are not borne by an investor in a
particular Class of Offered Certificates, such losses may affect the weighted
average life and yield to maturity of such investor's Certificates. Losses on
the Mortgage Loans, to the extent not allocated to such Class of 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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Regardless of whether losses ultimately result, 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. The Available Funds generally
consist of, as more fully described herein, principal and interest on the
Mortgage Loans actually collected or advanced.
As described under "Description of the Offered Certificates --
Distributions" herein, if the portion of Available Funds distributable in
respect of interest on the Offered Certificates on any Distribution Date is
less than the Interest Distribution Amount then payable for such class, the
shortfall will be distributable without interest on such shortfall to holders
of such Class of Certificates on subsequent Distribution Dates, to the extent
of Available Funds.
Servicer or Special Servicer May Purchase Certificates; Conflict of
Interest. The Servicer or Special Servicer or an affiliate thereof will be
permitted to purchase any Certificates of any Class. Although there can be no
assurance, it is anticipated that the Special Servicer or an affiliate of the
Special Servicer will purchase all or a majority of the Class B-7
Certificates. Following any such purchase of Certificates, the Servicer or
Special Servicer will have rights as a holder of Certificates, including
certain Voting Rights and, in the case of the Special Servicer, the rights of
the Directing Holder (if the Special Servicer is the purchaser of the Class
B-7 Certificates), which are in addition to such entity's rights as Servicer
or Special Servicer under the Pooling and Servicing Agreement. Consequently,
any purchase of Certificates by the Servicer or Special Servicer, as the case
may be, could cause a conflict between such entity's duties pursuant to the
Pooling and Servicing Agreement and its interest as a holder of a
Certificate, especially to the extent that certain actions or events have a
disproportionate effect on one or more Classes of Certificates. Following a
default on a Mortgage Loan at the maturity thereof and upon the satisfaction
of certain conditions contained in the Pooling and Servicing Agreement, the
Special Servicer may, if directed to do so by the holders (including Special
Servicer or an affiliate thereof) of greater than 50% of the Percentage
Interests of the most subordinate Class or Classes of Certificates then
outstanding (which Class will initially be certain of the Private
Certificates) having an aggregate initial Certificate Balance representing a
minimum of 1.0% of the aggregate initial Certificate Balances of all Classes
of Certificates (or if the Certificate Balance of such Class or Classes has
been reduced to less than 40% of the initial Certificate Balances thereof,
the holders of such Class or Classes together with the holders of the next
most subordinate Class), elect to extend such Mortgage Loan. See "The Pooling
and Servicing Agreement -- Realization Upon Mortgage Loans -- Defaulted
Balloon Payments; Foreclosure Proceedings; Action of Directing Holders"
herein. In addition to the foregoing, the holders of greater than 50% of the
Percentage Interests of the most subordinate Class of Certificates then
outstanding (initially certain of the Private Certificates) will be entitled,
at their option, to remove the Special Servicer with or without cause, and
appoint a successor Special Servicer, provided that each Rating Agency
confirms in writing that such removal and appointment, in and of itself,
would not cause a downgrade, qualification or withdrawal of the then current
ratings assigned to any Class of Certificates. The Pooling and Servicing
Agreement provides that the Mortgage Loans shall be administered in
accordance with the servicing standard set forth therein without regard to
ownership of any Certificate by the Servicer, Special Servicer, or any
affiliate thereof. See also "The Pooling and Servicing Agreement --
Amendment" herein.
Consents. Under certain circumstances, the consent or approval of the
holders of a specified percentage of the aggregate Certificate Balance of the
outstanding Certificates will be required to direct, and will be sufficient
to bind all Certificateholders to, certain actions, including amending the
Pooling and Servicing Agreement in certain circumstances. See "The Pooling
and Servicing Agreement -- Amendment" herein.
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 and will be able to exercise the
rights of holders of Certificates only indirectly through DTC, Cedel Bank,
societe anonyme ("Cedel") or The Euroclear System ("Euroclear") and their
participating organizations. A beneficial owner holding a certificate through
the book-entry system will be entitled to receive the reports described under
"The Pooling and Servicing Agreement -- Reports to Certificateholders;
Available Information" herein and notices only through the facilities of DTC,
Cedel and Euroclear and their respective participants or from the Trustee (if
the Depositor has provided the name of such beneficial owner to the
Certificate Registrar). For additional information on the book-entry system,
see "Description of the Offered Certificates -- Delivery, Form and
Denomination" and "--Book-Entry Registration" herein and "Description of the
Certificates -- Book-Entry Registration and Definitive Certificates" in the
Prospectus. Beneficial owners can also receive copies of information made
available on the monthly reports to Certificateholders via facsimile through
LaSalle National Bank's ASAP System by calling (312) 904-2200, and requesting
statement number 320 or by accessing the Trustee's website at www.lnbabs.com.
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Limited Liquidity and Market Value. There is currently no secondary
market for the Offered Certificates. While the Underwriters have advised that
they currently intend to make a secondary market in the Offered Certificates,
they are 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 precipitous drop in the market value of the Offered
Certificates. In addition, 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. The Pass-Through Rates on the Class
A-CS1, Class PS-1, Class A-2, Class A-3, Class A-4, Class A-5 and Class A-6
Certificates are based on the Weighted Average Net Mortgage Pass-Through
Rates of the Mortgage Loans. Because the Mortgage Loans amortize principal at
different rates and may be prepaid at the expiration of their respect
Lock-out Periods, such rate will fluctuate over the lives of the Class A-CS1,
Class PS-1, Class A-2, Class A-3, Class A-4, Class A-5 and Class A-6
Certificates. See "Prepayment and Yield Considerations -- Yield" herein.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 328 fixed-rate mortgage loans (the
"Mortgage Loans") secured by first liens on 437 multifamily and commercial
properties (the "Mortgaged Properties"). The Mortgage Pool has an aggregate
principal balance as of the Cut-off Date of approximately $3,732,820,502 (the
"Initial Pool Balance"), subject to a variance of plus or minus 5%. All
numerical information provided herein with respect to the Mortgage Loans is
provided on an approximate basis. All percentages of the Mortgage Pool, or of
any specified sub-group thereof, referred to herein without further
description are approximate percentages by aggregate Cut-off Date Principal
Balance. Descriptions of the terms and provisions of the Mortgage Loans are
generalized descriptions of the terms and provisions of the Mortgage Loans in
the aggregate. Many of the individual Mortgage Loans have specific terms and
provisions that deviate from the general description.
Each Mortgage Loan is evidenced by one or more promissory notes (each, a
"Note") and secured by one or more mortgages, deeds of trust or other similar
security instruments (a "Mortgage"). Each of the Mortgages creates a first
lien on the interests of the related borrower in the related Mortgaged
Property, as set forth on the following table:
SECURITY FOR THE MORTGAGE LOANS
% OF NUMBER OF
INITIAL POOL MORTGAGED
INTEREST OF BORROWER ENCUMBERED BALANCE (1) PROPERTIES
- ------------------------------- -------------- ------------
Fee Simple Estate (2) .......... 91% 413
Leasehold (3) .................. 9% 24
TOTAL .......................... 100% 437
- ------------
(1) Based on the Allocated Loan Amount of the related Mortgaged Property as
of the Cut-off Date.
(2) For any Mortgaged Property where the ground lessee and ground lessor
are both parties to the Mortgage, the Mortgaged Property was
categorized as a Fee Simple Estate.
(3) Includes any Mortgaged Property where a material portion of such
property is subject to a ground lease and the ground lessor is not a
party to the Mortgage.
Each Mortgaged Property consists of land improved by (i) a retail property
(a "Retail Property," and any Mortgage Loan secured thereby, a "Retail
Loan"), (ii) an office building (an "Office Property," and any Mortgage Loan
secured thereby, an "Office Loan"), (iii) a full or limited service or
extended stay hotel property (a "Hotel Property," and any Mortgage Loan
secured thereby, a "Hotel Loan"), (iv) an apartment building or complex
consisting of five or more rental units (a "Multifamily Property," and any
Mortgage Loan secured thereby, a "Multifamily Loan"), (v) a hospital, a
nursing home or a congregate care facility (each, a "Healthcare Property,"
and any Mortgage Loan secured thereby, a "Healthcare Loan"), (vi) an
industrial property (an "Industrial Property," and any Mortgage Loan secured
thereby, an "Industrial Loan"), (vii) a mobile home community (a "Mobile Home
Property," and any Mortgage Loan secured thereby, a "Mobile Home Loan") or
(viii) a warehouse property (a "Warehouse Property" and any Mortgage Loan
secured thereby, a "Warehouse Loan"). Certain statistical information
relating to the various types of Mortgaged Properties is set forth under
"--Additional Mortgage Information -- Cut-off Date Principal Balance by
Property Type" herein.
30 of the Mortgage Loans are secured by two or more Mortgaged Properties,
either pursuant to cross-collateralization with other Mortgage Loans in the
Mortgage Pool (such loans, "Pool Loans") or pursuant to a single Note by a
single borrower secured by multiple Mortgaged Properties, or both. See "Risk
Factors and Other Special Considerations -- Cut-off Date Balances and
Concentration of Mortgage Loans" and "--Mortgage Loans Secured by More than
One Mortgaged Property" herein.
None of the Mortgage Loans are insured or guaranteed by the United States,
any governmental agency or instrumentality, any private mortgage insurer or
by the Depositor, the Mortgage Loan Sellers, the Originators, the Servicer,
the Special Servicer, the Trustee or the Fiscal Agent or any of their
respective affiliates. All of the Mortgage Loans are non-recourse loans so
that, in the event of a borrower default on any Mortgage Loan, recourse may
generally be had only against the specific Mortgaged Property or Mortgaged
Properties securing such Mortgage Loan and such limited other
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assets as have been pledged to secure such Mortgage Loan, and not against the
borrower's other assets. However, generally, the Mortgage Loans may become
recourse upon the occurrence of certain events of default under the Mortgage
Loans, including, in most cases, the transfer or voluntary encumbrance of the
Mortgaged Property without the consent of the mortgagee.
The Mortgage Loans were generally underwritten in accordance with the
underwriting criteria described under "The Mortgage Loan Program --
Underwriting Standards." The Depositor will purchase the Mortgage Loans on or
before the Closing Date from the Mortgage Loan Sellers pursuant to Mortgage
Loan Purchase and Sale Agreements (each, a "Mortgage Loan Purchase and Sale
Agreement") to be dated as of the Cut-off Date. Each Mortgage Loan Seller
will be obligated under its Mortgage Loan Purchase and Sale Agreement to
repurchase a Mortgage Loan in the event of a breach of a representation or
warranty of the Mortgage Loan Seller with respect to such Mortgage Loan as
described under "The Pooling and Servicing Agreement -- Representations and
Warranties -- Repurchase" herein. The Depositor will assign the Mortgage
Loans, together with the Depositor's rights and remedies against the Mortgage
Loan Seller in respect of breaches of representations or warranties regarding
the Mortgage Loans, to LaSalle National Bank, as Trustee, for the benefit of
the Certificateholders, pursuant to the Pooling and Servicing Agreement.
AMRESCO Services, L.P., in its capacity as Servicer, will service the
Mortgage Loans pursuant to the Pooling and Servicing Agreement. The Depositor
will make no representations or warranties with respect to the Mortgage Loans
and will have no obligation to repurchase or substitute for Mortgage Loans
with deficient documentation or which are otherwise defective. Each Mortgage
Loan Seller will sell its Mortgage Loans without recourse, and, accordingly,
will have no obligations with respect to the Certificates other than pursuant
to the limited representations, warranties and covenants made by it to the
Depositor and assigned by the Depositor to the Trustee for the benefit of the
Certificateholders. See "The Pooling and Servicing Agreement -- Assignment of
the Mortgage Loans" herein and "Description of the Agreements --
Representations and Warranties; Repurchases" in the Prospectus.
An affiliate of NACC has acquired a preferred equity interest in 14
borrowers or groups of borrowers, which are the borrowers with respect to
Mortgage Loans representing approximately 5% of the Initial Pool Balance and
has committed to fund preferred equity to an affiliate of the borrower with
respect to one Mortgage Loan which represents approximately 3% of the Initial
Pool Balance. An affiliate of NACC also has equity interests in 6 borrowers
with respect to Mortgage Loans representing approximately 8% of the Initial
Pool Balance. See "Risk Factors and Other Special Considerations -- The
Mortgage Loans -- Preferred Equity Investments in Borrowers and Affiliates,"
"--Common Equity Investments by Affiliates of NACC" and "--Conflicts of
Interest" herein.
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is generally non-recourse and is secured by one or more
Mortgages encumbering the related borrower's interest in the applicable
Mortgaged Property or Properties. Each Mortgage Loan is also secured by an
assignment of the related borrower's interest in the leases, rents, issues
and profits of the related Mortgaged Properties. In certain instances,
additional collateral exists in the nature of partial indemnities or
guaranties, or the establishment and pledge of one or more reserve or escrow
accounts for, among other things, necessary repairs, replacements and
environmental remediation, real estate taxes and insurance premiums, deferred
maintenance and/or scheduled capital improvements, re-leasing reserves and
seasonal working capital reserves (such accounts, "Reserve Accounts").
Certain Credit Lease Loans have the benefit of Lease Enhancement Policies.
The Mortgage Loans generally provide for the indemnification of the mortgagee
by the borrower for the presence of any hazardous substances affecting the
Mortgaged Property. Each Mortgage constitutes a first lien on a Mortgaged
Property, subject generally only to (i) liens for real estate and other taxes
and special assessments not yet due and payable, (ii) covenants, conditions,
restrictions, rights of way, easements and other encumbrances whether or not
of public record as of the date of recording of the related Mortgage, such
exceptions having been acceptable to the Mortgage Loan Seller in connection
with the purchase or origination of the related Mortgage Loan, and (iii) such
other exceptions and encumbrances on Mortgaged Properties as are reflected in
the related title insurance policies. See "Description of the Mortgage Pool
- -- Certain Terms and Conditions of the Mortgage Loans -- Escrows," herein.
THE MORTGAGE LOAN PROGRAM -- UNDERWRITING STANDARDS
Each Mortgage Loan was originated by NACC or Bloomfield (the
"Originators"), as set forth above under "Summary of Prospectus Supplement --
Originators," and is generally consistent with the underwriting standards
applied by NACC in connection with the purchase or origination of each of the
Mortgage Loans, as described below.
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NACC purchased the Mortgage Loans that it did not originate pursuant to a
purchase and sale agreement with Bloomfield.
NACC's underwriting process involves calculations of Net Cash Flow
reflecting certain adjustments. This Net Cash Flow calculation is used to
determine DSCR. "Net Cash Flow" with respect to a given Mortgage Loan or
Mortgaged Property means cash flow available for debt service, as determined
by NACC based upon borrower supplied information for a recent period that is
generally the twelve months prior to the origination of such Mortgage Loan,
adjusted for stabilization. Net Cash Flow does not reflect debt service,
subordinated ground rent, or non-cash items such as depreciation or
amortization, and does not reflect actual capital expenditures, and may have
been adjusted by, among other things, (i) in the case of the Multifamily
Properties and Mobile Home Park Properties, rental revenue shown on a recent
rent roll was annualized before applying a vacancy factor without further
regard to the terms (including expiration dates) of the leases shown thereon,
(ii) in the case of certain Office Properties, Industrial Properties and
Retail Properties, determining current revenues from leases in place, (iii)
assuming the occupancy rate for the Mortgaged Property or pool of Mortgaged
Properties was less than the actual occupancy rate, including in the case of
certain of the Hotel Properties, to adjust an above-market occupancy rate or
to reflect new construction in the market, (iv) in the case of the Retail
Properties, excluding certain percentage rent, (v) excluding certain
non-recurring income and/or expenses, (vi) assuming that a management fee of
3% to 5% of revenue and a franchise fee of 3.5% to 6% of room revenue (for
Hotel Properties only) was payable with respect to the Mortgaged Property,
(vii) to take into account new tax assessments and utility savings from the
installation of new energy efficient equipment, (viii) in certain cases,
assuming that operating and/or capital expenses with respect to the Mortgaged
Property were greater than actual expenses, (ix) subtracting from net
operating income replacement or capital expenditure reserves and (x) in the
case of the Retail Properties and Office Properties (other than such
properties securing a Credit Lease Loan), subtracting from net operating
income an assumed allowance for tenant improvements, leasing commissions and
free rent and (xi) in the case of the Credit Lease Loans, assuming the Net
Cash Flow is equal to the rental obligations of the tenants under the Credit
Leases for the term of the Credit Lease Loan.
"Net Cash Flow" reflects the calculations and adjustments used by NACC for
its underwriting process and may or may not reflect the amounts calculated
and adjusted by the Rating Agencies for their own analysis. In addition, "Net
Cash Flow" and the DSCRs derived therefrom are not a substitute for cash flow
as determined in accordance with generally accepted accounting principles as
a measure of the results of the property's operations or a substitute for
cash flows from operating activities determined in accordance with generally
accepted accounting principles as a measure of liquidity.
Reletting costs and capital expenditures are crucial to the operation of
commercial and multifamily properties. Each investor should make its own
assessment of the level of reletting costs and capital expenditures of the
Mortgaged Properties, and the consequent effect of such costs and
expenditures on the actual net operating income, Net Cash Flow and debt
service coverage ratios of the Mortgage Loans.
"Special Notes" are Notes that evidence additional debt secured by the
related Mortgaged Property. Such additional debt fully amortizes on a
schedule that is shorter than the amortization of the related Note also
secured by such Mortgaged Property based on excess cash flow not included in
Net Cash Flow for such Mortgaged Property. Such excess cash flow is generated
by one of the following sources: (a) rental income from a dark anchor where
the tenant who has vacated is obligated to continue to pay rent for a
specified period; (b) rental income from the above-market portion of rent
under a lease to a creditworthy tenant; (c) the difference between
underwritten ground rent and actual required ground rental payments in
situations where ground rent steps up at specified dates and was underwritten
at the higher level; and (d) the difference between underwritten taxes and
actual taxes being paid pursuant to a tax abatement.
If and when the words "expects," "intends," "anticipates," "estimates,"
and analogous expressions are used herein, such statements are subject to a
variety of risks and uncertainties that could cause actual results to differ
materially from those projected. Such risks and uncertainties include, among
others, general economic and business conditions, competition, changes in
political, social and economic conditions, regulatory initiatives and
compliance with governmental regulations, and various other events,
conditions and circumstances, many of which are beyond the control of the
Depositor and the Underwriters, the Trustee, the Fiscal Agent, the Servicer,
the Special Servicer and the Originators. Any forward-looking statements
speak only as of their date. The Depositor expressly disclaims any obligation
or undertaking to release publicly any updates or revisions to any
forward-looking statement contained herein to reflect any change in events,
conditions or circumstances on which any such statement is based.
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No representation is made as to the future net cash flow of the
properties, nor is "Net Cash Flow" set forth in this Prospectus Supplement
intended to represent such future net cash flow.
In underwriting each Mortgage Loan in connection with the origination or
acquisition thereof, income information provided by the related borrower was
examined by NACC. In addition, the operating history of the property,
industry data regarding the local real estate market and the appraiser's
analysis were reviewed and, if conditions warranted, net operating income
with respect to the related Mortgaged Property was adjusted for purposes of
determining whether the Mortgaged Property satisfied the debt service
coverage ratio required by NACC's underwriting guidelines. In accordance with
the underwriting guidelines, net operating income of any Mortgaged Property
may have been adjusted by, among other things, the adjustments listed in the
definition of "Net Cash Flow" described under "--Additional Loan
Information." In connection with the underwriting, net operating income was
based upon information provided by the borrower and neither the Depositor nor
NACC makes any representation as to the accuracy of such information;
provided, however, that, with respect to certain of the Mortgage Loans, NACC
or the borrower engaged independent accountants to review or perform certain
procedures to verify such information.
Each Originator was required to cause each Mortgaged Property to be
inspected to determine whether it was in acceptable physical condition. The
inspection included a review of ongoing maintenance programs, common area
upkeep, mechanical systems and grounds maintenance. In addition, an
engineering study and an environmental review were prepared by appropriate
consultants. With respect to environmental matters, a Phase I environmental
assessment (and, where appropriate, a Phase II environmental assessment) was
conducted for each Mortgaged Property. A credit investigation was completed
for all prospective borrowers, in connection with which a credit report
generally not more than 30 days old as of the date of the loan application
and current financial statements were obtained. The borrowers with respect to
57 of the Mortgage Loans representing, in the aggregate, 59% of the Initial
Pool Balance, provided audited financial statements, agreed upon procedures
or statements certified by an independent accountant. The cash flow and NOI
information presented in Annex B may not correspond to the comparable
information included in the accountants' reports because of adjustments made
by NACC as part of its underwriting procedures.
CREDIT LEASE LOANS
8% of the Mortgage Loans based on Initial Pool Balance (the "Credit Lease
Loans") are secured by Mortgaged Properties ("Credit Lease Properties") that
are, in each case, subject to a net lease obligation (a "Credit Lease") of a
tenant (a "Credit Tenant"), or net lease obligations guaranteed by an entity
(a "Guarantor") which possesses a rating or internal classification of "B-"
(or the equivalent) or higher by one or more of the Rating Agencies.
Scheduled monthly payments under each Credit Lease are sufficient to pay in
full and on a timely basis, all interest and principal and other sums
scheduled to be paid with respect to the related Credit Lease Loan (other
than the Balloon Payment on the Best Buy Credit Lease Loan, as described
below). See "Risk Factors -- The Mortgage Loans -- Credit Lease Properties"
herein.
CREDIT LEASE LOANS
<TABLE>
<CAPTION>
TENANT/
CUT-OFF DATE LEASE
PRINCIPAL TENANT/LEASE GUARANTOR
PROPERTY NAME BALANCE (1) GUARANTOR RATING (2) LEASE TYPE
- ----------------------------------------- -------------- ------------------------- ----------- --------------
<S> <C> <C> <C> <C>
Carmax--Laurel $20,115,906 Circuit City Stores, Inc. NAIC 2 Bondable
Value City--3080/3232--Alum Creek Dr. $18,243,666 Value City NAIC 1 Bondable
Cinemark--Houston $17,999,571 Cinemark USA, Inc. BB-/Ba3 Bondable
Value City--Corporate Office/Westerville $17,278,947 Value City NAIC 1 Bondable
Cinemark--El Paso, TX $15,799,670 Cinemark USA, Inc. BB-/Ba3 Bondable
Cinemark--Pflugerville $14,099,714 Cinemark USA, Inc. BB-/Ba3 Bondable
CarMax--Irving $13,321,982 Circuit City Stores, Inc. NAIC 2 Bondable
CarMax--Davie $13,036,279 Circuit City Stores, Inc. NAIC 2 Bondable
CarMax--Houston $12,840,979 Circuit City Stores, Inc. NAIC 2 Bondable
Cinemark--Pasadena $12,099,695 Cinemark USA, Inc. BB-/Ba3 Bondable
Cinemark--Beaumont $11,299,688 Cinemark USA, Inc. BB-/Ba3 Bondable
Best Buy Pool--City of Industry $10,027,584 Best Buy B-/B2 Triple Net (3)
CarMax--Boynton Beach $ 9,520,878 Circuit City Stores, Inc. NAIC 2 Bondable
Cinemark--Pueblo $ 8,699,783 Cinemark USA, Inc. BB-/Ba3 Bondable
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TENANT/
CUT-OFF DATE LEASE
PRINCIPAL TENANT/LEASE GUARANTOR
PROPERTY NAME BALANCE (1) GUARANTOR RATING (2) LEASE TYPE
- ----------------------------------------- -------------- ------------------------- ----------- --------------
Cinemark--Redding $8,099,777 Cinemark USA, Inc. BB-/Ba3 Bondable
Cinemark--McKinney $6,799,825 Cinemark USA, Inc. BB-/Ba3 Bondable
Cinemark--Grand Prairie $6,499,881 Cinemark USA, Inc. BB-/Ba3 Bondable
Value City--2516 Sardis Rd. N. $5,765,049 Value City NAIC 1 Bondable
Circuit City--Columbus--Morse Rd. $5,466,077 Circuit City Stores, Inc. NAIC 2 Bondable
Circuit City--Columbus $5,270,860 Circuit City Stores, Inc. NAIC 2 Bondable
Value City--Melrose Park $5,085,869 Value City NAIC 1 Bondable
Value City--Cincinnati $5,031,572 Value City NAIC 1 Bondable
Value City--Parma $4,751,252 Value City NAIC 1 Bondable
Value City--Elyria $4,600,911 Value City NAIC 1 Bondable
Circuit City--Oyster Bay $4,489,992 Circuit City Stores, Inc. NAIC 2 Bondable
Best Buy Pool--Beaver Creek $4,327,693 Best Buy B-/B2 Triple Net (2)
Value City--Warrensville $4,322,577 Value City NAIC 1 Bondable
Circuit City--Spokane $4,296,602 Circuit City Stores, Inc. NAIC 2 Bondable
Circuit City--Wallkill $4,050,754 Circuit City Stores, Inc. NAIC 2 Bondable
Cinemark--Plano $3,899,857 Cinemark USA, Inc. BB-/Ba3 Bondable
Circuit City--Covington $3,172,277 Circuit City Stores, Inc. NAIC 2 Bondable
Eckerd $2,883,510 Eckerd A+/Baa1 Triple Net (2)
Value City--1 Mall Rd. $2,856,838 Value City NAIC 1 Bondable
Value City--3987 E. Main $2,759,992 Value City NAIC 1 Bondable
Value City--Columbus South $2,303,108 Value City NAIC 1 Bondable
Value City--1130 N. Coliseum Blvd. $1,855,752 Value City NAIC 1 Bondable
</TABLE>
- ------------
(1) National Association of Insurance Commissioners ("NAIC") Rating or
long-term unsecured debt rating by S&P/ Moody's.
(2) A "Triple Net" lease is one under which the tenant has the
responsibility to pay all taxes, insurance, utilities, maintenance and
repairs with respect to the related Mortgaged Property, and the tenant
may not terminate its lease or abate any rent due by reason of the
related borrower's failure to perform its obligations with respect to
any of the foregoing. However, the tenant may terminate its lease or
abate rent due in connection with a casualty or condemnation with
respect to the related Mortgaged Property. With respect to those Credit
Leases identified as Triple Net leases, the related Borrower has
obtained a Lease Enhancement Insurance Policy to cover the occurrence
of certain rent abatement or termination rights of the Tenant.
(3) Or Allocated Loan Amount, if applicable.
All of the Credit Leases, with the exception of the Credit Lease having
Eckerd Corporation as the Credit Tenant (the "Eckerd Credit Lease") and the
Credit Leases having Best Buy Co., Inc. as the Credit Tenant (the "Best Buy
Credit Leases"), are "Bondable" leases, meaning generally that the related
Credit Tenant has no rights to terminate or abate rent due under the Credit
Lease, including by reason of the occurrence of certain casualty and
condemnation events or the failure of the related borrower, as lessor, to
perform required maintenance, repairs or replacements, other than termination
by the Credit Tenant in connection with certain condemnation events so long
as the notice of termination is accompanied by an offer to purchase the
related Mortgaged Property for not less than the outstanding principal
balance of the Mortgage Loan plus accrued interest.
The Credit Tenant under the Eckerd Credit Lease and the Best Buy Credit
Leases has the right to terminate and/or abate rent if certain casualty or
condemnation events occur. With respect to such termination and abatement
rights, the related borrower has obtained an insurance policy (a "Lease
Enhancement Policy") which will make payments to the Servicer on behalf of
the Trustee in certain cases where such Credit Lease Property has been
subjected to property damage on account of a casualty or condemnation event
such that the related Credit Tenant has properly terminated its Credit Lease
or abated rent thereunder. The Lease Enhancement Insurer for the Eckerd
Credit Lease and the Best Buy Credit Leases has a claims paying ability
rating of "AAA" issued by S&P. The full premium relating to each of the Lease
Enhancement Policies was fully paid at the time of issuance of such policy,
and such policy is non-cancelable. The Trustee
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is a named insured of such Lease Enhancement Policies. See "Risk Factors --
The Mortgage Loans -- Terms of the Credit Leases; Factors Affecting Lease
Enhancement Policy and Residual Value Policy Proceeds" herein.
The Lease Enhancement Policies with respect to the Eckerd Credit Lease and
the Best Buy Credit Leases require the insurer to pay (i) in the event of
lease termination, the principal balance of the related Credit Lease Loan
plus accrued interest on the related Credit Lease Loan, subject to a limit of
75 days (measured from the date of termination), and (ii) in the event of
rent abatement, all abated rent (subject to the right to pay a lump sum in an
amount equal to the present value of such projected monthly payments in the
event that the projected monthly payments under such Lease Enhancement Policy
would exceed the limit of liability on such policy). The Lease Enhancement
Policies do not cover any amounts the borrower is obligated to pay thereunder
to reimburse the Servicer or the Trustee for outstanding Property Advances.
The Lease Enhancement Policies may also contain certain exclusions to
coverage, including loss arising from damage or destruction directly or
indirectly caused by war, insurrection, rebellion, revolution, usurped power,
pollutants or radioactive matter, or from a taking (other than by
condemnation).
Each Credit Lease has a primary lease term (the "Primary Term") that
expires on or after the scheduled final maturity date of the related Credit
Lease Loan. The Credit Lease Loans, other than the Credit Lease Loan related
to the Best Buy Credit Leases (the "Best Buy Credit Lease Loan"), are
scheduled to be fully repaid from the scheduled payment of rent under the
related Credit Leases by or on behalf of the Credit Tenant with respect to
such Credit Leases (the "Monthly Rental Payments") made during the Primary
Term of such Credit Leases.
The Best Buy Credit Lease Loan is not fully amortizing and requires the
payment of a Balloon Payment at its maturity (which coincides with the
expiration of the Primary Term of the Best Buy Credit Leases). In order to
minimize the risks associated with making such Balloon Payments, the related
borrowers have each obtained a residual value insurance policy (the "Residual
Value Policies") from R.V.I. America Insurance Company, which, as of the
Cut-off Date, had a claims paying rating of "AA-" by DCR and "A" by S&P. The
Residual Value Policies insure the borrower against any diminution in the
value of the related Credit Lease Properties as a result of changes in market
conditions. In the event that upon the maturity of the Best Buy Credit Lease
Loan the related Credit Lease Properties cannot be sold or if the proceeds
from the disposition of such properties are insufficient to repay the
indebtedness secured by such Credit Lease Properties, the insurer will be
required to pay the amount of such remaining indebtedness. The premium for
the Residual Value Policies was fully paid at the time of the issuance of
such policies and such policies are non-cancelable. The Trustee is a named
insured of each Residual Value Policy.
Generally, each Credit Lease Loan provides that if the related Credit
Tenant has defaulted in the performance of any covenant or agreement of such
Credit Lease and remains in default beyond the applicable notice and grace
periods, then the lender on behalf of the Trust may require the borrower
either (i) to exercise any of its rights under such Credit Lease or (ii)
terminate such Credit Lease. A default under a Credit Lease will constitute a
default under the related Credit Lease Loan.
Pursuant to the terms of each Credit Lease Assignment, the related
borrower has assigned to the lender of the related Credit Lease Loan, as
security for such borrower's obligations thereunder, such borrower's rights
under the related Credit Leases and its rights to all income and profits to
be derived from the operation and leasing of the related Credit Lease
Property, including, but not limited to, an assignment of its rights under
any guarantee with respect to the Credit Tenant's obligations under the
related Credit Lease and an assignment of the right to receive all Monthly
Rental Payments due under the related Credit Lease. Repayment of the Credit
Lease Loans and other obligations of the borrowers will be funded from such
Monthly Rental Payments. Notwithstanding the foregoing, the borrowers will
remain liable for all obligations under the Credit Lease Loans (subject to
the non-recourse provisions thereof).
Each Credit Lease generally provides that the related Credit Tenant must
pay all real property taxes and assessments levied or assessed against the
related Credit Lease Property, and all charges for utility services,
insurance and other operating expenses incurred in connection with the
operation of such Credit Lease Property, except in the case of the Eckerd
Credit Lease, in which the related borrower has the obligation to make all
necessary repairs to the related Credit Lease Property for the first year of
such Credit Lease (a reserve in the amount estimated by both the borrower and
the related Credit Tenant as sufficient to cover such repairs has been
established and funded prior to the closing of the related Mortgage Loan).
While each Credit Lease requires the Credit Tenant to fulfill its payment and
maintenance obligations during the term of the Credit Lease, in some cases
the Credit Tenant has not covenanted to operate the related Credit Lease
Property for the term of the Credit Lease, and the Credit Tenant may at any
time cease actual operations at the Credit Lease Property, but it remains
obligated to continue to meet all of its obligations under the Credit Lease.
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Several of the Credit Leases permit the Credit Tenant, at its own
expense, and generally with the consent of the borrower, to make such
alterations and construct additional buildings or improvements on the Credit
Lease Property as the Credit Tenant may deem necessary or desirable, or to
demolish any part of a building, provided that the Credit Tenant restores the
building to a structure whose value is equal to or greater than that of the
original building. Such actions, if undertaken by the Credit Tenant, will not
affect the Credit Tenant's obligations under the Credit Lease.
The Credit Leases having Value City Department Stores, Inc. as the Credit
Tenant (the "Value City Credit Leases") provide that at any time after the
expiration of thirty months from the commencement of such Credit Lease, if
the Credit Tenant determines in its good faith judgment that the operation of
such Credit Lease Property is economically obsolete, the Credit Tenant may
substitute the related Credit Lease Property with a new property by conveying
such new property to the related landlord and amending the Value City Credit
Lease to substitute such new property as the Credit Lease Property therein.
In order to effect such a substitution, certain terms and conditions must be
satisfied, including among other things, the consent of the Trustee, which
may not be unreasonably withheld, and confirmation from the Rating Agencies
that such substitution will not result in a qualification, downgrade or
withdrawal of the then-current rating of any Class of Certificates. The
Cinemark Credit Leases provide for a similar method of substituting the
related Credit Lease Properties. See "--Significant Mortgage Loan--The
Cinemark Credit Lease Loans and Properties." The Value City Credit Leases
also provide that in the event of a transaction or series of transactions
involving the sale of substantial assets or distributions of substantial
property of the Credit Tenant to the Credit Tenant's shareholders that has
the effect of reducing such Credit Tenant's shareholders equity below
$125,000,000, such Credit Tenant is required to purchase the related Credit
Lease Property for an amount that is not less than the outstanding principal
balance of the Value City Credit Lease Loan plus the prepayment premiums
and/or yield maintenance charges due under the terms of the Value City Credit
Lease Loan.
At the end of the term of a Credit Lease, a Credit Tenant is generally
obligated to surrender the Credit Lease Property in good order and in its
original condition received by the Credit Tenant, except for ordinary wear
and tear and repairs required to be performed by the Mortgagor.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Annex A. For a detailed presentation of the characteristics of the
Mortgage Loans, on a loan-by-loan basis, see Annex A hereto.
Due Dates. All of the Mortgage Loans provide for scheduled payments of
principal and/or interest ("Monthly Payments") to be due on the eleventh day
of each month or, if the eleventh day is not a business day, either the next
business day or the first preceding business day. None of the Mortgage Loans
has a grace period for Monthly Payments.
Mortgage Rates; Calculations of Interest. Each of the Mortgage Loans
accrues interest on the basis of a 360-day year consisting of twelve 30-day
months or on the basis of the actual number of days elapsed and a 360 day
year. Each of the Mortgage Loans accrues interest at the Mortgage Rate, which
is fixed for the entire remaining term of such Mortgage Loan; provided,
however, as described below under "--Excess Interest," certain of the
Mortgage Loans accrue interest at a higher rate (the "Excess Rate") after
their respective Anticipated Repayment Dates. As used herein, the term
"Mortgage Rate" does not include the Excess Rate.
Excess Interest. 301 of the Mortgage Loans, representing approximately 91%
of the Initial Pool Balance, are ARD Loans which bear interest at their
respective Mortgage Rates until on or within 3 months after their respective
Anticipated Repayment Date. Commencing within three months of the respective
Anticipated Repayment Date, each such Mortgage Loan generally will bear
interest at a fixed rate (the "Revised Rate") per annum equal to, for so long
as such Mortgage Loan is in the Mortgage Pool, the Mortgage Rate plus 2%.
Until the principal balance of each such ARD Loan has been reduced to zero,
the related borrower will only be required to pay interest at the Mortgage
Rate and the interest accrued at the excess of the related Revised Rate over
the related Mortgage Rate will be deferred (such accrued and deferred
interest and interest thereon, if any, is "Excess Interest"). Except where
limited by applicable law, Excess Interest so accrued will earn interest at
the Revised Rate. Prior to the Anticipated Repayment Date, borrowers under
ARD Loans will be required to enter into a Lock Box agreement pursuant to
which all revenue will be deposited directly into a Lock Box Account
controlled by the Servicer. From and after the Anticipated Repayment Date, in
addition to paying interest (at the Mortgage Rate) and principal (based on
the amortization schedule) (together, the "Monthly Debt Service Payment"),
the related borrower generally will be required to apply all monthly cash
flow from the related Mortgaged Property or Properties to pay the following
amounts in the following order of priority: (i) required payments to the tax
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and insurance escrow fund and any ground lease escrow fund, (ii) payment of
Monthly Debt Service, (iii) payments to any other required escrow funds, (iv)
payment of operating expenses pursuant to the terms of an annual budget
approved by the Servicer, (v) payment of approved extraordinary operating
expenses or capital expenses not set forth in the approved annual budget or
allotted for in any escrow fund, (vi) principal on the Mortgage Loan until
such principal is paid in full and (vii) Excess Interest. The cash flow from
the Mortgaged Property or Properties securing an ARD Loan after payments of
items (i) through (v) above is referred to herein as "Excess Cash Flow." As
described below, ARD Loans generally provide that the related borrower is
prohibited from prepaying the Mortgage Loan until the one to six months prior
to the Anticipated Repayment Date but, upon the commencement of such period,
may prepay the loan, in whole or in part, without payment of a Prepayment
Premium. The Anticipated Repayment Date for each ARD Loan is listed in Annex
A.
The holders of 100% of the Percentage Interests in the Class LR
Certificates, and if the holder of the Class LR Certificates does not
exercise its option, the holder of 100% of the Percentage Interests in the
most subordinate Class of Certificates then outstanding (not including the
Class B-7H Certificates), will have the option for up to two months after the
Anticipated Repayment Date for any ARD Loan to purchase such ARD Loan at a
price equal to its outstanding principal balance plus accrued and unpaid
interest, unreimbursed Property Advances and accrued and unpaid interest on
Advances. As a condition to such purchase, such holders will be required to
deliver an opinion of counsel to the effect that such purchase would not (i)
result in a gain which would be subject to the tax on net income derived from
prohibited transactions imposed by Code Section 860F(a)(1) or otherwise
result in the imposition of any other tax on the Lower-Tier REMIC or
Upper-Tier REMIC under the REMIC provisions of the Code or (ii) cause either
of the Lower-Tier REMIC or Upper-Tier REMIC to fail to qualify as a REMIC.
Amortization of Principal. As set forth in the following table, certain
Mortgage Loans (the "Balloon Loans") provide for monthly payments of
principal based on amortization schedules at least 48 months longer than
their original terms thereby leaving substantial principal amounts due and
payable (each such payment, a "Balloon Payment") on their respective maturity
dates, unless previously prepaid. The remaining Mortgage Loans have remaining
amortization terms that are generally the same as their respective remaining
terms to maturity.
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE LOANS
% OF
INITIAL POOL NUMBER OF
TYPE OF LOAN BALANCE MORTGAGE LOANS
- ---------------------------------------------- -------------- --------------
ARD Loans ..................................... 91% 301
Fully Amortizing Loans (other than ARD Loans) 9% 33
Balloon Mortgage Loans ........................ less than 1% 3
Prepayment Provisions. Each Mortgage Loan prohibits voluntary prepayment
during a period (a "Lock-out Period") ending on a date ranging from
approximately 56 months to 262 months after the Cut-off Date. The weighted
average Lock-out Period remaining from the Cut-off Date for the Mortgage
Loans is approximately 150 months. No Mortgage Loan imposes a fee or premium
("Prepayment Premium") for voluntary prepayments made after the expiration of
the related Lock-out Period. Generally, the Lock-out Periods for the ARD
Loans expire on or one to six months prior to their respective Anticipated
Repayment Dates and the Lock-out Periods for the Balloon and fully amortizing
Mortgage Loans (other than ARD Loans) expire on or one to six months prior to
their respective maturity dates. Certain of the prepayment terms of each of
the Mortgage Loans are more particularly described in Annex A.
The Mortgage Loans provide generally that in the event of a condemnation
or casualty, the mortgagee may apply the condemnation award or insurance
proceeds to the repayment of debt, which, in the case of some of the Mortgage
Loans, will require payment of any applicable Prepayment Premium. However, in
the case of most of the Mortgage Loans, if the award or loss is less than a
specified percentage of the original principal balance of the Mortgage Loan
and if in the reasonable judgment of the mortgagee (i) the Mortgaged Property
can be restored within six months prior to the maturity of the related Note
to a property no less valuable or useful than it was prior to the
condemnation or casualty, (ii) after a restoration the Mortgaged Property
would adequately secure the outstanding balance of the Note and (iii) no
event of default has occurred or is continuing, the proceeds or award may be
applied by the borrower to the costs of repairing or replacing the Mortgaged
Property. In general, in the event that a condemnation award or insurance
proceeds are used to prepay a Mortgage Loan, the constant monthly payment due
under the related note will be reamortized based on the remaining
amortization term and the applicable interest rate. The Pooling and Servicing
Agreement provides that if a Mortgage Loan permits the lender to apply
certain amounts to a prepayment of principal (e.g., by applying casualty or
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condemnation proceeds or funds escrowed for improvements not completed by the
required date) prior to the expiration of the related Lock-out Period, the
Special Servicer cannot apply such funds to such a prepayment unless the
Special Servicer has first received the consent of the Servicer (if the
Special Servicer is not the Servicer) or the holders of 66 2/3% of the Voting
Rights of the Certificates responding within 20 business days to a
solicitation of their consent. If such consent is not obtained, such funds
will be made available to the related borrowers to restore the related
Mortgaged Property.
Certain Mortgage Loans provide that if casualty or condemnation proceeds
are above a specified amount, the borrower will be permitted to supplement
such proceeds with an amount sufficient to prepay the entire principal
balance of the Mortgage Loan. In such event, no Prepayment Premium would be
required to be paid.
Neither the Depositor nor the Mortgage Loan Sellers make any
representation as to the enforceability of the provision of any Mortgage Loan
requiring the payment of a Prepayment Premium, or of the collectability of
any Prepayment Premium. See "Risk Factors and Other Special
Considerations--The Certificates--Special Prepayment and Yield
Considerations" herein and "Certain Legal Aspects of Mortgage Loans--Default
Interest, Prepayment Charges and Prepayments" in the Prospectus.
Property Releases. All of the Mortgage Loans permit the applicable
borrower at any time after a specified period (the "Defeasance Lock-out
Period"), which is generally the greater of approximately three years from
the date of origination and two years from the Closing Date, provided no
event of default exists, to obtain a release of a Mortgaged Property from the
lien of the related Mortgage (a "Defeasance Option"), provided that, among
other conditions, the borrower (a) pays on any Due Date (the "Release Date")
(i) all interest accrued and unpaid on the principal balance of the Note to
and including the Release Date, (ii) all other sums, excluding scheduled
interest or principal payments, due under the Mortgage Loan and all other
loan documents executed in connection therewith, (iii) an amount (the
"Collateral Substitution Deposit") that will be sufficient to (x) purchase
direct, non-callable obligations of the United States of America providing
payments (1) on or prior to, but as close as possible to, all successive
scheduled payment dates from the Release Date to the related maturity date or
in the case of an ARD Loan, the related Anticipated Repayment Date and (2) in
amounts equal to the scheduled payments due (or assumed balloon payment on
ARD Loans) on such dates under the Mortgage Loan or the defeased amount
thereof in the case of a partial defeasance, and (y) pay any costs and
expenses incurred in connection with the purchase of such U.S. government
obligations and (b) delivers a security agreement granting the Trust Fund a
first priority lien on the Collateral Substitution Deposit and the U.S.
government obligations purchased with the Collateral Substitution Deposit and
an opinion of counsel to such effect. The Pool Loans generally require that
(i) prior to the release of a related Mortgaged Property, a specified
percentage (generally 125%) of the Allocated Loan Amount for such Mortgaged
Property be defeased and (ii) that the DSCR with respect to the remaining
Mortgaged Properties after the defeasance be no less than the greater of (x)
the DSCR at origination and (y) the DSCR immediately prior to such
defeasance. The Servicer will be responsible for purchasing the U.S.
government obligations on behalf of the borrower at the borrower's expense.
Simultaneously with such actions, the related Mortgaged Property will be
released from the lien of the Mortgage Loan and the pledged U.S. government
obligations (together with any Mortgaged Property not released, in the case
of a partial defeasance) will be substituted as the collateral securing the
Mortgage Loan.
In general, a successor borrower established or designated by NACC will
assume all of the defeased obligations of a borrower exercising a Defeasance
Option under a Mortgage Loan and the borrower will be relieved of all of the
defeased obligations thereunder. If a Mortgage Loan is partially defeased,
the related Note will be split and only the defeased portion of the
borrower's obligations will be transferred to the successor borrower.
The Depositor makes no representation as to the enforceability of the
defeasance provisions of any Mortgage Loan. See "Risk Factors and Other
Special Considerations--The Certificates--Special Prepayment and Yield
Considerations" herein.
Escrows. Generally, all of the Mortgage Loans, other than the Credit Lease
Loans, provide for monthly escrows to cover property taxes and insurance
premiums on the Mortgaged Properties (except in cases where three months to
one year of insurance premiums are escrowed). The Mortgage Loans secured by
leasehold interests also provide for escrows to make ground lease payments.
Most of the Mortgage Loans, (excluding Credit Lease Loans and Mobile Home
Loans) require monthly escrows to cover ongoing replacements and capital
repairs. See Annex B for property-by-property detail.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. The Mortgage Loans
generally contain "due-on-sale" and "due-on-encumbrance" clauses that in each
case permit the holder of the Mortgage Loan to accelerate the maturity of the
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Mortgage Loan if the borrower sells or otherwise transfers or encumbers the
related Mortgaged Property without the consent of that holder. The Special
Servicer will determine, in a manner consistent with the Servicing Standard,
whether to exercise any right the mortgagee may have under any such clause to
accelerate payment of the related Mortgage Loan upon, or to withhold its
consent to, any transfer or further encumbrance of the related Mortgaged
Property. Certain of the Mortgage Loans provide that the mortgagee may
condition an assumption of the loan on the receipt of an assumption fee,
which is in some cases equal to one percent of the then unpaid principal
balance of the applicable Note, in addition to the payment of all costs and
expenses incurred in connection with such assumption. Certain of the
Mortgages provide that such consent may not be unreasonably withheld provided
that (i) no event of default has occurred, (ii) the proposed transferee is
creditworthy and has sufficient experience in the ownership and management of
properties similar to the Mortgaged Property, (iii) the Rating Agencies have
confirmed in writing that such transfer or further encumbrance will not
result in a qualification, reduction or withdrawal of the then current rating
of the Certificates, (iv) the transferee has executed and delivered an
assumption agreement evidencing its agreement to abide by the terms of the
Mortgage Loan together with legal opinions and title insurance endorsements
and (v) the assumption fee has been received (which assumption fee will be
paid to the Servicer and the Special Servicer, as provided in the Pooling and
Servicing Agreement, and will not be paid to the Certificateholders). See
"Certain Legal Aspects of Mortgage Loans--Due-on-Sale and Due-on-Encumbrance"
in the Prospectus and "Risk Factors and Other Special Considerations--The
Mortgage Loans--Exercise of Remedies" herein. The Depositor makes no
representation as to the enforceability of any due-on-sale or
due-on-encumbrance provision in any Mortgage Loan.
Mortgage Provisions Relating to Servicer's Right to Terminate Management
Agreements. Certain of the Mortgage Loans permit the mortgagee (that is, the
Special Servicer) to cause the related borrowers to terminate the related
management agreements upon the occurrence of certain events. A significant
number of Mortgage Loans where an affiliate of the borrower manages the
related Mortgaged Property or Properties, provides that if the Debt Service
Coverage Ratio for such Mortgage Loan falls below a certain level, mortgagee
will have the right to cause the termination of the related management
agreement and replace the manager with a manager acceptable to the mortgagee.
The Mortgage Loans generally allow the mortgagee to terminate the related
management agreements upon the occurrence of certain events of default under
the related loan agreements or mortgage documents. In addition, the mortgagee
is generally permitted to cause the termination of a management agreement if
the manager breaches certain provisions of the management agreement which
would permit the termination of such agreement thereunder.
Cross-Collateralization and Cross-Default of Certain Mortgage Loans. 30 of
the Mortgage Loans (the "Pool Loans"), with Cut-off Date Principal Balances
ranging from $1,597,436 to $144,328,799 representing 26% of the Mortgage Pool
by Cut-off Date Principal Balance are secured by more than one Mortgaged
Property. However, because certain states require the payment of a mortgage
recording or documentary stamp tax based upon the principal amount of debt
secured by a mortgage, the Mortgages recorded with respect to certain
Mortgaged Properties secure only 150% of the Allocated Loan Amount of such
Mortgaged Properties (rather than the entire initial principal balance of the
related Notes). See "Risk Factors and Other Special Considerations--The
Mortgage Loans--Limitations on Enforceability of Cross-Collateralization"
herein and "Loan Characteristics" in Annex A.
Hazard, Liability and Other Insurance. The Mortgage Loans generally
require that each Mortgaged Property be insured by a hazard insurance policy
in an amount equal to the greatest of (i) the full replacement cost of the
improvements and equipment without deduction for physical depreciation, (ii)
the outstanding principal balance of the Mortgage Loan (or, with respect to
certain Pool Loans, the full insurable value of the Mortgaged Property) and
(iii) such amount that the insurer would not deem the borrower a co-insurer,
or in an amount satisfying other similar standards, and by a flood insurance
policy if any part of the Mortgaged Property is located in an area identified
by the Federal Emergency Management Agency as an area having special flood
hazards and for which flood insurance has been made available under the
National Flood Insurance Program in an amount at least equal to the
outstanding principal amount of the Mortgage Loan (or with respect to certain
Pool Loans, the full insurable value of the Mortgaged Property) or the
maximum limit of coverage available, whichever is less, or in an amount
satisfying other similar standards. The hazard insurance policies are
required to cover loss or damage by fire and lightning or other risks and
hazards covered by a standard extended coverage insurance policy including,
but not limited to, riot and civil commotion, vandalism, malicious mischief,
burglary and theft. Certain of the Mortgaged Properties located in earthquake
risk areas, certain of the related Mortgaged Properties are insured by
earthquake insurance, and certain of such insured Mortgaged Properties may be
insured in amounts less than the outstanding principal balances of such
Mortgage Loans. Certain of the Mortgaged Properties located
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in areas having special hurricane hazards, are insured by hurricane insurance
in amounts less than the outstanding principal balances of such Mortgage
Loans. Mobile Home Properties located in earthquake risk areas or areas
having special hurricane hazards are not insured against earthquake or
hurricane damage.
The Mortgage Loans also generally require that the borrower obtain and
maintain during the entire term of the Mortgage Loan (i) comprehensive public
liability insurance, including broad form property damage, blanket
contractual and personal injuries coverages and containing minimum limits per
occurrence as specified in the related Mortgage, (ii) rent loss and/or
business interruption insurance in an amount equal to the greater of (x)
estimated annual (or a specified longer period) gross revenues from the
operations of the Mortgaged Property and (y) projected annual (or a specified
longer period) operating expenses (including debt service) for the
maintenance and operation of the Mortgaged Property, or in an amount
satisfying other similar standards, (iii) except with respect to certain of
the Mobile Home Loans, insurance against loss or damage from leakage of
sprinkler systems and explosion of steam boilers, air conditioning equipment,
high pressure piping, machinery and equipment, and pressure vessels, (iv) if
the Mortgaged Property is a commercial property, worker's compensation
insurance, (v) during any period of repair or restoration, builders "all
risk" insurance, and (vi) such other insurance as may from time to time be
reasonably required by the mortgagee in order to protect its interests.
SIGNIFICANT MORTGAGE LOANS
The Six Largest Mortgage Loans. In connection with the origination of each
of the six largest Mortgage Loans listed below, NACC, in addition to its
ordinary underwriting procedures, obtained audited financial statements,
reviewed financial statements or engaged independent accountants to perform
agreed upon procedures for a recent 12 month period with respect to the
related Mortgaged Properties and obtained market rental analysis for the
Office Properties.
The Fox Plaza Loan and Property
The Loan. The largest Mortgage Loan in the Mortgage Pool (the "Fox Plaza
Loan") was originated by NACC on November 10, 1997, had an original principal
balance of $178,000,000 and has a Cut-off Date Principal Balance of
$177,424,525, which represents approximately 5% of the Initial Pool Balance.
The Fox Plaza Loan is secured by a fee mortgage (the "Fox Plaza Mortgage")
encumbering an office property (the "Fox Plaza Office Property") located in
Los Angeles, California.
-------------
Cut-off Date
Principal Balance: $177,424,525.13
Origination Date: November 10, 1997
Loan Type: ARD
Monthly Payment: $1,197,417.36
Interest Rate: 7.11%
Amortization Term: 360 months
Debt Constant: 8.10%
DSCR: 1.25x
Cut-off Date LTV: 67%
Anticipated Repayment
Date: November 11, 2007
ARD Balance: $155,644,182
ARD LTV: 59%
Borrower Special
Purpose Entity: Yes, with an independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 4.74%
Maturity Date: November 11, 2027
Property Type: Office
No. of Properties: 1
Location of Property: Los Angeles, CA
Appraised Value: $265,000,000
Square Feet: 710,767
Year Built: 1987
Cut-off Date Balance/SF:
$250
Fee or Leasehold: Fee
Major Tenants: 20th Century Fox; Jeffer, Mangels, Butler &
Marmaro; Donaldson Lufkin & Jenrette
Occupancy: 90%
Lock Box: Hard
-------------
The Borrower. Fox Plaza, LLC (the "Fox Plaza Borrower") is a special
purpose Delaware limited liability company comprised of Fox Plaza II, LLC
("Fox Plaza II"), the sole member of the Fox Plaza Borrower which is not a
special purpose entity. Fox Plaza II consists of Atlantic Preferred 2 LLC, a
New York limited liability company ("Atlantic LLC")
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which is an affiliate of Lazard Freres Real Estate Fund II L.P. ("Lazard")
and MDFP LLC (the "Fox II Member"). On November 20, 1997, Lazard made a loan
to Fox Plaza II in the amount of $59,865,000 (the "Fox Plaza Mezzanine
Loan"). Lazard has entered into a subordination and standstill agreement
pursuant to which Lazard is not permitted to exercise its remedies under the
Fox Plaza Mezzanine Loan before the earlier of (i) November 11, 2007 (the
"Fox Plaza Anticipated Repayment Date") and (ii) the repayment in full of the
Fox Plaza Loan. See "Risk Factors -- The Mortgage Loans -- Other Financing"
herein.
Defeasance. Defeasance is not permitted prior to the second anniversary of
the Closing Date of the Certificates. Thereafter, prior to the Fox Plaza
Anticipated Repayment Date, all or any portion of the Fox Plaza Loan may be
defeased upon the satisfaction of certain conditions specified in the loan
documents in the manner described above. See "Certain Terms and Conditions of
the Mortgage Loans -- Property Releases" herein.
Lock Box; Reserve Accounts; Audits. The Fox Plaza Borrower has entered
into a lock box agreement pursuant to which all rent from the Fox Plaza
Office Property is required to be deposited by the tenants of the Fox Plaza
Office Property into a Lock Box Account controlled by the Servicer. See "The
Pooling and Servicing Agreement--Accounts--Lock Box Accounts" herein. The Fox
Plaza Borrower has also established Reserve Accounts, including a basic
carrying costs account, an ongoing capital reserve account, a rollover
reserve account, an immediate repairs account, and an initial leasing reserve
account. See "Description of the Mortgage Loans--Certain Terms and Conditions
of the Mortgage Loans -- Escrows" and "The Pooling and Servicing Agreement --
Accounts --Cash Collateral Accounts" herein. The Fox Plaza Borrower is
required to furnish audited financial statements within 90 days following the
end of each of its fiscal years.
The Property Manager. The Fox Plaza Office Property is managed by LSPAM,
Limited Partnership, a California limited partnership (the "Fox Plaza
Property Manager"), an entity unaffiliated with the Fox Plaza Borrower. The
Fox Plaza Property Manager is paid a management fee of 1.5% of the gross
revenue of the Fox Plaza Office Property (not to exceed $480,000 per year).
The lender may terminate the Fox Plaza Property Manager upon an event of
default under the Fox Plaza Loan or if the Net Operating Income ("NOI") for
the Fox Plaza Office Property decreases to less than 85% of the 12 months
immediately preceeding the closing of the Fox Plaza Loan.
The Property. The Fox Plaza Office Property is 35-story office property
located at 2121 Avenue of the Stars, Los Angeles, California in an area
commonly known as Century City. The Fox Plaza Office Property was constructed
in 1987 and is one of four newer Class A properties located in the West Los
Angeles office market. Tenants include premier entertainment, financial and
legal firms, including 20th Century Fox (300,529 square feet of GLA),
Donaldson, Lufkin & Jenrette (89,606 square feet of GLA), and Jeffers,
Mangels, Butler & Masmaro (71,610 square feet of GLA). As of March 1, 1997,
the Fox Plaza Property was 92% occupied and as of October 2, 1997, its
appraised value was $263,000,000. The 8% vacancy rate is higher than
historical levels at the Fox Plaza Office Property (which had not been higher
than 5% between 1990 and 1996) and is primarily due to lease expirations in
1997 that totaled approximately 237,749 square feet (33% of the total GLA of
the building), most of which has been relet.
See "Risk Factors -- The Mortgage Loans -- Risks Associated with
Commercial and Multifamily Lending Generally" and "--Office Properties"
herein, for a discussion of certain matters associated with office
properties.
S-68
<PAGE>
The Bristol I Pool Loan and Properties
The Loan. The second largest Mortgage Loan in the Mortgage Pool is a
recourse Mortgage Loan (the "Bristol I Loan") that was originated by NACC and
Bankers Trust Company ("BT") on October 10, 1997 (the "Bristol I Closing
Date"), had an original principal balance of $145,000,000 and has a Cut-off
Date Principal Balance of $144,488,536, which represents approximately 4% of
the Initial Pool Balance. The Bristol I Loan is evidenced by two Notes (the
"Bristol I Notes") (one of which was originally made to BT but has since been
transferred to NACC). The Bristol I Loan is secured by 13 fee Mortgages and 2
leasehold Mortgages encumbering 15 full-service hotel properties (the
"Bristol I Hotel Properties"), six of which are located in Texas, four of
which are located in Georgia, three of which are located in Mississippi, one
of which is located in California and one of which is located in Louisiana.
Cut-off Date
Principal Balance: $144,328,799
Origination Date: October 28, 1997
Loan Type: ARD
Monthly Payment: $1,067,579.04
Interest Rate: 7.46%
Amortization Term: 300 months
Debt Constant: 8.88%
DSCR: 2.20x
Cut-off Date LTV: 50%
Anticipated
Repayment Date: November 11, 2007
ARD Balance: $117,587,714
ARD LTV: 41%
Borrower Special
Purpose Entity: Yes, with an independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 3.85%
Maturity Date: November 11, 2022
Property Type: Hotel
No. of Properties: 15
Location of
Properties:
Texas (6), Georgia (3), Mississippi (3),
California (1), Louisiana (2)
Appraised Value
(aggregate for pool): $286,000,000
Total Rooms: 4,390
Range of Year
Built/Renovated: 1957-1989/1993-1998
Cut-off Date
Balance/Room: $32,877
Fee or Leasehold: 13 Fee, 2 Leasehold
Franchise: Crowne Plaza, Holiday Inn, Harvey Suites
Occupancy: 89%
Lock Box: Hard
--------------
The Borrower. Bristol Lodging Company (the "Bristol I Borrower") is a
special purpose Delaware corporation with an independent director, the
approval of which is required for the Bristol I Borrower to (i) file a
bankruptcy petition, (ii) dissolve, (iii) engage in any other business or
(iv) amend the provisions of the certificate of incorporation relating to the
Bristol I Borrower's status as a special purpose entity. The Bristol I Loan
is guaranteed by Bristol Lodging Holding Company ("BLHC"), a Delaware
corporation whose assets consist of the stock of the Bristol I Borrower and
the stock of the Bristol Lodging Beverage Company ("Bristol Beverage
Company"). Bristol Beverage Company holds the liquor licenses for the Bristol
I Hotel Properties. As security for the guaranty, BLHC has pledged the stock
of Bristol Beverage Company. The sponsor of the Bristol I Borrower, Bristol
Hotel Company, a publicly traded operating company, is one of the largest
owner/operators of hotels in North America, currently operating 101 hotels
containing over 28,000 rooms. The Bristol Hotel Company's properties are
predominantly full-service hotels, in the upscale and mid-priced segments of
the lodging industry, under franchise agreements primarily with Holiday Inn.
On the Bristol I Closing Date, two affiliates of the Bristol I Borrower
borrowed $455,000,000 from NACC and BT, secured by 62 hotel properties (the
"Bristol II Loan"), none of which are collateral for the Bristol I Loan. The
Bristol II Loan was transferred to an affiliate of the Depositor and included
in a mortgage securitization of such affiliate. See "Risk Factors--The
Mortgage Loans--Mortgage Loans to Affiliated Borrowers" herein.
Defeasance. Defeasance is not permitted prior to the second anniversary of
the Closing Date of the Certificates. Thereafter, prior to the Bristol I
Anticipated Repayment Date, all or any portion of the Bristol I Loan may be
defeased upon the satisfaction of certain conditions specified in the loan
documents in the manner described above. See "Certain Terms and Conditions of
the Mortgage Loans-Property Releases" herein.
Lock Box; Reserve Accounts; Audits. The Bristol I Borrower has entered
into lock box agreements pursuant to which all rent from the Bristol I Hotel
Properties is required to be deposited upon collection by the Bristol I
Borrower
S-69
<PAGE>
or the Bristol I Property Manager (as defined below) into Lock Box Accounts
controlled by the Servicer. In addition, credit card payers have been
directed to deposit all hotel receipts into Lock Box Accounts controlled by
the Servicer. See "The Pooling and Servicing Agreement--Accounts--Lock Box
Accounts" herein. The Bristol I Borrower has also established Reserve
Accounts, including a required repairs account, an ongoing tax and insurance
reserve account, an ongoing replacement reserve account and, in the event of
a Cash Trap Event (as defined below), a ground lease reserve account. A "Cash
Trap Event" is defined as the occurrence of (i) a monetary default or other
event of default under the loan documents for the Bristol I Loan or (ii) the
failure of the Bristol I Borrower or BLHC to cause at least 90% of the sum of
(x) annual gross cash flow from each Bristol I Hotel Property and (y)
security deposits in connection with any tenant leases or conference rooms,
banquet rooms or similar accommodations documents, to be timely deposited
into a Lock Box Account. See "Description of the Mortgage Loans--Certain
Terms and Conditions of the Mortgage Loans--Escrows" and "The Pooling and
Servicing Agreement--Accounts--Cash Collateral Accounts" herein. The Bristol
I Borrower is required to furnish audited financial statements within 90 days
following the end of each of its fiscal years.
The Property Manager. The Bristol I Hotel Properties are managed by
Bristol Hotel Management Corporation (the "Bristol I Property Manager"), an
entity affiliated with the Bristol I Borrower and controlled by the ultimate
parent of the Bristol I Borrower. The Bristol I Property Manager manages the
Bristol I Hotel Properties pursuant to a management agreement, and under
which the Bristol I Property Manager is paid a fee of 3.5% of the gross
revenue of the Bristol I Hotel Properties. Such management fee is subordinate
to debt service. The lender may terminate the Bristol I Property Manager upon
a monetary event of default under the Bristol I Loan.
The Ground Lease. The Bristol I Hotel Properties known as Holiday
Inn-Houston Medical Center and New Orleans-French Quarter are located on land
leased to the Bristol I Borrower pursuant to ground leases that expire on
June 30, 2061 and October 31, 2065, respectively. See "Risk Factors--The
Mortgage Loans--Ground Leases" for a discussion of certain matters associated
with ground leases.
The Properties. The Bristol I Hotel Properties consist of 15 full-service
hotel properties, located in Texas, Georgia, Mississippi, California and
Louisiana. The Bristol I Hotel Properties currently consist of seven Holiday
Inns, four Harvey Hotels, two Harvey Suites and two Holiday Inn Selects. The
Bristol I Borrower anticipates that several of the Bristol I Hotel Properties
will be reflagged and renovated (where necessary) such that the pool will
consist of seven Holiday Inns, one Crowne Plaza, three Harvey Hotels, two
Harvey Suites and two Holiday Inn Selects. Most of the Bristol I Hotel
Properties have undergone significant renovations over the past three years.
Such renovations totaled almost $80,000,000. In certain cases, the amount
spent on renovating the related property exceeds the Allocated Loan Amount
for such property.
<TABLE>
<CAPTION>
CONSTRUCTED/
# OF ALLOCATED LATEST APPRAISED
BRISTOL I HOTEL PROPERTY ROOMS LOAN AMOUNT RENOVATION VALUE(1) OCCUPANCY
- -------------------------------------- ------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Holiday Inn--Jackson Southwest 289 $ 648,244 1966/1996 $ 7,000,000 61
Holiday Inn--Jonesboro 180 $ 2,967,558 1972/1997 $ 8,000,000 55
Crown Plaza--Jackson Downtown 354 $ 5,209,581 1975/1995 $ 17,000,000 56
Harvey--Jackson North 224 $ 5,625,872 1974/1995 $ 14,300,000 66
Holiday Inn--Santa Barbara 160 $ 5,726,971 1969/1996 $ 9,100,000 75
Holiday Inn--Houston Medical Center 297 $ 6,428,718 1985/1996 $ 14,000,000 74
Holiday Inn Select--Houston Greenway 355 $ 7,183,988 1984/1995 $ 17,000,000 77
Harvey Suites--Houston Medical Center 285 $ 8,533,959 1981/NA $ 17,000,000 74
Harvey--Atlanta Powers Ferry 296 $ 10,805,717 1982/1995 $ 27,500,000 69
Holiday Inn Select--Atlanta Perimeter 250 $ 11,079,280 1985/1995 $ 26,600,000 62
Harvey Suites--Dallas DFW 164 $ 11,138,750 1989/NA $ 16,600,000 83
Harvey--Dallas Brookhollow 354 $ 13,273,727 1981/1995 $ 22,800,000 65
Holiday Inn--Houston Intercontinental 401 $ 13,541,342 1985/1996 $ 18,600,000 86
Holiday Inn--Atlanta Airport North 493 $ 17,852,924 1966/1996 $ 31,500,000 84
New Orleans--French Quarter 276 $ 24,983,389 1969/1998 $ 39,000,000 76
------- -------------- --------------
TOTAL 4,378 $145,000,000 $286,000,000
</TABLE>
- ------------
(1) Based on appraisals performed on various dates within 18 months from
the Cut-off Date.
S-70
<PAGE>
See "Risk Factors -- The Mortgage Loans -- Risks Associated with
Commercial and Multifamily Lending Generally" and "--Hotel Properties" for a
discussion of certain matters associated with hotel properties.
The Park LaBrea Loan and Property
The Loan. The third largest Mortgage Loan in the Mortgage Pool (the "Park
LaBrea Loan") was originated by NACC on January 13, 1998 (the "Park LaBrea
Closing Date"), had an original principal balance of $142,781,905 and has a
Cut-off Date Principal Balance of $140,613,989, which represents
approximately 3.8% of the Initial Pool Balance. The Park LaBrea Loan is
evidenced by a Note (the "Park LaBrea Note") that is cross-collateralized and
cross-defaulted with a pari passu note (the "Other Park LaBrea Note") in an
equal amount (the aggregate indebtedness represented by such two notes being
referred to herein as the "Total Park LaBrea Loan"). The Total Park LaBrea
Loan had an original principal balance of $285,563,810. The Total Park LaBrea
Loan is secured by a fee Mortgage encumbering a multifamily property (the
"Park LaBrea Multifamily Property") located in Los Angeles, California.
Cut-off Date
Principal Balance: $140,613,989
Origination Date: February 13, 1998
Loan Type: ARD
Monthly Payment: $1,050,047.17
Interest Rate: 8.00%
Amortization Term: 360 months
Debt Constant: 8.96%
DSCR: 1.27
Cut-off Date LTV: 69%
Anticipated
Repayment Date: March 11, 2013
ARD Balance: $113,400,999
ARD LTV: 28%
Borrower Special
Purpose Entity: Yes, with an independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 3.76%
Maturity Date: March 11, 2028
Property Type: Multifamily
No. of Properties: 1
Location of Property: Los Angeles, CA
Appraised Value: $410,000,000
Units: 4,222
Year Built/Renovated: 1944/1995
Cut-off Date
Balance/Unit: $33,305
Fee or Leasehold: Fee
Occupancy: 98%
Lock Box: Soft
--------------
The Other Park LaBrea Note was transferred to an affiliate of the
Depositor and included in a mortgage securitization of such affiliate. The
Park LaBrea Note was separated from the Other Park LaBrea Note to reduce
exposure to one borrower in a securitization. The Total Park LaBrea Loan will
be serviced by the Servicer and specially serviced by the Special Servicer
and, in the event servicing is transferred to the Subservicer or another
servicer, the servicing for the Total Park LaBrea Loan will be transferred.
The Borrower. Prime/Park LaBrea Holdings, L.P. (the "Park LaBrea
Borrower") is a special purpose California limited partnership comprised of
(i) PLBGP, L.P. (the "Park LaBrea General Partner"), a special purpose
California limited partnership, which is the sole general partner of the Park
LaBrea Borrower and (ii) Prime/Park LaBrea Investment, L.P. (the "Park LaBrea
Limited Partner") which is the sole limited partner of the Park LaBrea
Borrower. The sole general partner of the Park LaBrea General Partner is
PLBGP, Inc., a special purpose Delaware corporation, all of the stock of
which is owned by Prime/Park LaBrea, LLC, a California limited liability
company ("Park LaBrea LLC"), which is also the sole limited partner of the
Park LaBrea General Partner. Atlantic Preferred 2 LLC, a New York limited
liability company ("Atlantic LLC"), an affiliate of Lazard Freres Real Estate
Fund, L.P. ("Lazard"), holds a 25% membership interest in the Park LaBrea
LLC, and will continue to hold such interest until a mezzanine financing in
the amount of $33,500,000 (the "Park LaBrea Mezzanine Loan") made on January
12, 1998 from Lazard to the Park LaBrea Limited Partner and Park LaBrea LLC
is repaid in full and the capital contribution of Atlantic LLC has been
returned in accordance with the operating agreement for the Park LaBrea LLC.
The Park LaBrea Mezzanine Loan is secured by pledges of the partnership
interest in the Park LaBrea Limited Partner and membership interests in Park
LaBrea LLC. Lazard has entered into a subordination and standstill agreement
with NACC pursuant to which Lazard is not permitted to exercise its remedies
under the Park LaBrea Mezzanine Loan before the earlier of (i) March 11, 2013
(the "Park LaBrea Anticipated Repayment Date") and (ii) the repayment in full
of the Park LaBrea Loan. See "Risk Factors -- The Mortgage Loans -- Other
Financing" herein.
S-71
<PAGE>
Payment Terms, Prepayment Terms and Defeasance. The Park LaBrea Loan
amortizes over a 30 year period and matures on March 11, 2028 (the "Park
LaBrea Maturity Date"), except that on the Park LaBrea Closing Date, the Park
LaBrea Borrower prepaid $2,167,916, which amount equals amortization payments
due on the Park LaBrea Loan from the Park LaBrea Closing Date through and
including February 11, 2000. The Park LaBrea Borrower is required to pay
interest only at 7.739% per annum from the Park LaBrea Closing Date through
and including March 11, 2000. Commencing on April 11, 2000, Monthly Payments
on the Park LaBrea Loan will be $1,050,047.16 and interest payable under the
Park LaBrea Loan will be 8.000% per annum, which amount is based on a
360-month amortization schedule Additional payment and prepayment terms are
as set forth in Annex A hereto. Defeasance is not permitted prior to the
second anniversary of the Closing Date of the Certificates. Thereafter, prior
to the date that is six months prior to the Park LaBrea Anticipated Repayment
Date, all or any portion of the Park LaBrea Loan may be defeased upon the
satisfaction of certain conditions specified in the loan documents in the
manner described above. See "Certain Terms and Conditions of the Mortgage
Loans--Property Releases" herein.
Lock Box; Reserve Accounts; Audits. The Park LaBrea Borrower has entered
into a lock box agreement pursuant to which all rent from the Park LaBrea
Multifamily Property is required to be deposited upon collection by the Park
LaBrea Borrower or the Park LaBrea Property Manager (as defined below) into a
Lock Box Account controlled by the Servicer. See "The Pooling and Servicing
Agreement -- Accounts -- Lock Box Accounts" herein. The Park LaBrea Borrower
has also established Reserve Accounts, including an ongoing tax reserve
account, an ongoing capital reserve account and an insurance reserve account.
See "Description of the Mortgage Loans -- Certain Terms and Conditions of the
Mortgage Loans -- Escrows" and "The Pooling and Servicing Agreement --
Accounts -- Cash Collateral Accounts" herein. The Park LaBrea Borrower is
required to furnish audited financial statements within 90 days following the
end of each of its fiscal years.
The Property Manager. The Park LaBrea Multifamily Property is managed by
PLB Management, LLC (the "Park LaBrea Property Manager"), an entity
controlled by the principals of the Park LaBrea Borrower. The Park LaBrea
Property Manager is paid a management fee of 1.5% of the gross revenue of the
Park LaBrea Multifamily Property. Such management fee is subordinate to debt
service. Additionally, the Park LaBrea Borrower pays directly many of the
expenses that are typically paid by a property manager. The lender may
terminate the Park LaBrea Property Manager upon an event of default under the
Park LaBrea Loan.
The Property. The Park LaBrea Multifamily Property is a residential
development in the City of Los Angeles and is the largest apartment complex
west of the Mississippi. It consists of 4,222 apartment units, with a total
rentable area of approximately 4,166,929 square feet contained in 26
two-story garden apartment buildings (constructed between 1943 and 1951, with
one to four bedroom units ranging in size from 658 square feet to 2,184
square feet) and 18 twelve-story apartment towers (constructed between 1950
and 1951, with studio and one to four bedroom apartments, ranging in size
from 488 square feet to 2,984 square feet). There is a total of 5,100 parking
spaces, or approximately 1.2 spaces per unit. The Park LaBrea Multifamily
Property underwent an $11,000,000 renovation in 1995. The property is well
maintained, historically has been well occupied, and has been experiencing
significant increases in occupancy and income over the past two years due to
the renovations. The Park LaBrea Multifamily Property is located within Los
Angeles' Miracle Mile District, within one mile of Beverly Hills, eight miles
from the central business district and four miles from Century City. The Park
LaBrea Multifamily Property has on-site amenities including a bank, fitness
center, dry cleaners, swimming pools, tennis courts, laundry facilities,
private putting green, in-house repair service, 24-hour security and
landscaping. As of November 23, 1997, the Park LaBrea Multifamily Property
was 97% occupied and the appraised value was $410,000,000.
See "Risk Factors--The Mortgage Loans -- Risks Associated with Commercial
and Multifamily Lending Generally" and "--Multifamily Properties" for a
discussion of certain matters associated with multifamily properties.
S-72
<PAGE>
The Burnham Pacific-Golden State Pool Loan and Properties
The Loan. The fourth largest Mortgage Loan in the Mortgage Pool (the
"Golden State Loan") was originated by NACC on December 31, 1997, had an
original principal balance of $135,039,951 and has a Cut-off Date Principal
Balance of $134,838,933, which represents approximately 4% of the Initial
Pool Balance. The Golden State Loan is secured by 18 fee Mortgages and one
leasehold Mortgage (the "Golden State Mortgages") encumbering 18 anchored and
one unanchored retail properties (the "Golden State Retail Properties")
located throughout California. The Golden State Loan is cross-collateralized
and cross-defaulted.
Cut-off Date
Principal Balance: $134,838,933
Origination Date: December 31, 1997
Loan Type: ARD
Monthly Payment: $1,022,114.79
Interest Rate: 8.33%
Amortization Term: 360 months
Debt Constant: 9.10%
DSCR: 1.77x
Cut-off Date LTV: 47%
Anticipated
Repayment Date: January 11, 2008
ARD Balance: $121,657,749
ARD LTV: 42%
Borrower Special
Purpose Entity: Yes, with an independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 3.60%
Maturity Date: January 11, 2028
Property Type: Retail
No. of Properties: 19
Location of Property: Califorina; 71% San Francisco, 24% Los
Angeles and 5% San Diego
Appraised Value
(aggregate for pool): $288,800,000
Square Feet: 2,423,748
Year Built/Renovated: See chart below
Cut-off Date
Balance/SF: $56
Fee or Leasehold: 18 Fee, 2 Leasehold
Major Anchor
Tenants: Supermarket anchors: Ralphs, Safeway and
Lucky Supermarkets
Occupancy: 96.50%
Lock Box: Hard
The Borrower. BPP/Golden State Acquisitions, LLC (the "Golden State
Borrower") is a special purpose Delaware limited liability company. The
sponsor of the Golden State Borrower is Burnham Pacific Properties, Inc.
("BPP"), a fully-integrated, self-managed and publicly traded REIT which
acquires, rehabilitates, develops and manages retail properties in
California, Oregon and Washington. BPP owns an interest in over 61 commercial
properties (including the Golden State Retail Properties) totaling
approximately 8,200,000 square feet with a book value exceeding
$1,100,000,000. The Golden State Borrower is affiliated with BPP/Northwest
Acquisitions, LLC, the borrower under the Mortgage Loan known as the Burnham
Pacific-Powell Portfolio. See "Risk Factors -- The Mortgage Loans -- Mortgage
Loans to Affiliated Borrowers" herein.
Defeasance. Defeasance is not permitted prior to the second anniversary of
the Closing Date of the Certificates. Thereafter, prior to the date that is
one month prior to the Golden State Anticipated Repayment Date, all or any
portion of the Golden State Loan may be defeased upon the satisfaction of
certain conditions specified in the loan documents in the manner described
above. See "Certain Terms and Conditions of the Mortgage Loans -- Property
Releases" herein.
Lock Box; Reserve Accounts; Audits. The Golden State Borrower has entered
into a lock box agreement pursuant to which all rent from the Golden State
Retail Properties is required to be deposited by the tenants of the Golden
State Retail Properties into a Lock Box Account controlled by the Servicer.
See "The Pooling and Servicing Agreement--Accounts--Lock Box Accounts"
herein. The Golden State Borrower has also established Reserve Accounts,
including an ongoing basic carrying costs reserve account, a capital reserve
account, a deferred maintenance reserve account, a leasing reserve account,
an environmental remediation reserve account, a securitization reserve
account and an operating expense reserve account. See "Description of the
Mortgage Loans -- Certain Terms and Conditions of the Mortgage Loans --
Escrows" and "The Pooling and Servicing Agreement -- Accounts -- Cash
Collateral Accounts" herein. The Golden State Borrower is required to furnish
reviewed financial statements within 90 days following the end of each of its
fiscal years.
The Property Manager. The Golden State Retail Properties are managed by
Manco Abbott, Inc., CB Commercial Real Estate Group, Cox Real Estate
Consultants, Doerken Real Estate Services Investment Development Services and
S-73
<PAGE>
Ravel Property Services, Inc. (collectively, the "Golden State Property
Managers" and each individually, a "Golden State Property Manager"). Each
Golden State Property Manager is unaffiliated with the Golden State Borrower.
Each Golden State Property Manager is paid a management fee generally equal
to approximately 3.0% of the gross revenue of the related Golden State Retail
Property. Such management fee is subordinate to debt service. The lender may
terminate any or all of the Golden State Property Managers upon an event of
default under the Golden State Loan or if the DSCR for all of the Golden
State Retail Properties, computed on the basis of the prior 12 months, is
less than 1.15. In addition, the lender may terminate any one or more Golden
State Property Managers if the DSCR for each Golden State Retail Property
managed by such manager has a DSCR, computed on the basis of the prior 12
months, that is less than 1.15.
The Ground Lease. The Golden State Retail Property known as Discovery
Plaza is located on land leased to the Golden State Borrower pursuant to a
ground lease with that expires on July 1, 2055. See "Risk Factors -- The
Mortgage Loans -- Ground Leases" for a discussion of certain matters
associated with ground leases.
The Properties. The Golden State Retail Properties consist of 18 anchored
and one unanchored retail properties located throughout California, primarily
in the San Diego region, the Los Angeles region and the San Francisco region.
The Golden State Retail Properties are anchored community shopping centers,
ranging in size from 36,151 square feet to 365,699 square feet. Collectively,
the centers are approximately 91% leased and are anchored by supermarket and
drug store tenants. Anchor Tenants account for over 40% of the base rent for
the pool of Golden State Retail Properties.
<TABLE>
<CAPTION>
% OF
ALLOCATED INITIAL
YEAR BUILT/ LOAN POOL APPRAISED
PROPERTY NAME # OF UNITS RENOVATED AMOUNT BALANCE VALUE (2) OCCUP. (3)
- ------------------ ------------ ------------- -------------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
WESTMINSTER CENTER 365,699 1991 $25,660,534.00 19% $53,700,000 84%
GATEWAY PLAZA 195,092 1966/1993 $13,854,880.00 10% $29,000,000 94%
SOUTHHAMPTON 162,390 1983-1985 $10,323,248.60 8% $21,000,000 87%
PROSPECTOR'S PLAZA 219,112 1982 $ 9,388,297.00 7% $20,000,000 92%
SANTA ROSA CENTER 198,528 1986 $ 8,727,301.88 6% $17,200,000 95%
580 MARKETPLACE 101,153 1990 $ 8,266,254.00 6% $15,400,000 97%
SILVER CREEK PLAZA 134,018 1981 $ 7,798,989.00 6% $15,600,000 92%
SHASTA CROSSROADS 121,376 1989 $ 6,400,647.79 5% $13,300,000 89%
BUENA VISTA CENTER 90,995 1990 $ 6,181,601.00 5% $12,400,000 92%
RALPH'S 66,700 1960 $ 5,675,067.94 4% $11,000,000 100%
MENIFEE CENTER 79,128 1992 $ 5,314,081.00 4% $10,900,000 97%
SUMMER HILLS 133,614 1978 $ 4,567,004.64 3% $12,400,000 90%
CREEKSIDE CENTER 116,215 1984/1990 $ 4,048,653.00 3% $10,100,000 82%
HALLMARK CENTER 85,066 1992 $ 3,793,814.59 3% $ 9,200,000 92%
DISCOVERY PLAZA 93,398 1980 $ 3,598,114.56 3% $ 9,600,000 91%
SAN MARCOS CENTER 36,151 1991 $ 3,526,602.97 3% $ 6,900,000 88%
SUNSET CENTER 85,268 1981 $ 3,169,791.00 2% $ 7,200,000 91%
ARCADE SQUARE 76,701 1956/1990 $ 2,922,135.85 2% $ 9,100,000 87%
CENTERWOOD PLAZA 63,144 1962/1996 $ 1,822,932.00 1% $ 4,800,000 86%
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
MAJOR
TENANTS
1996
MAJOR TENANT/SF SALES PSF
- ----------------------------- -----------
<C> <C>
HOME DEPOT/ 102,220 $337
RALEYS/62,418 $343
RALEY'S/60,000 $511
KMART/86,414 $251
HOME BASE/83,800 $138
PW SUPERMARKETS/37,098 N/A
SAFEWAY FOOD & DRUG/41,493 $337
FOOD-4-LESS/54,239 $655
RALPH'S GROCERY STORE/45,000 $331
RALPH'S GROCERY STORE/66,700 $340
RALPH'S GROCERY STORE/45,842 $221
RALEY'S/55,826 $351
RALEYS/58,748 $296
FOOD-4-LESS/40,320 N/A
RALEY'S BEL AIR MARKET/40,325 $701
BLOCKBUSTER VIDEO/ 5,720 N/A
LUCKY STORE/29,072 $351
RALEYS/19,722 $567
32ND STREET MARKET/ 30,000 $669
</TABLE>
------------
(1) Cut-off Date Principal Balance.
(2) Based on appraisals performed on various dates within 18 months from
the Cut-off Date.
(3) As of December 31, 1997.
See "Risk Factors--The Mortgage Loans--Risks Associated with Commercial
and Multifamily Lending Generally" and "--Retail Properties" and for a
discussion of certain matters associated with retail properties.
The Cinemark Credit Lease Pool Loans and Properties
The Loans. Ten of the Mortgage Loans in the Mortgage Pool (each, a
"Cinemark Credit Lease Loan"), which collectively constitute the fifth
largest Mortgage Loan concentration in the Mortgage Pool, were made to ten
special purpose Delaware limited partnerships (each, a "Cinemark Borrower").
The Cinemark Credit Lease Loans were originated by NACC on February 25, 1998
(the "Cinemark Credit Lease Loans Closing Date"), have an aggregate original
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principal balance of $105,297,461 and an aggregate Cut-off Date Principal
Balance of $105,297,461, which represents approximately 3% of the Initial
Pool Balance. Each Cinemark Credit Lease Loan is secured by a fee Mortgage
encumbering a movie theater (each, a "Cinemark Credit Lease Property"), eight
of which are located in Texas, one of which is located in Colorado and one of
which is located in California.
---------------
Cut-off Date
Principal Balance: $105,297,461
Origination Date: February 25, 1998
Loan Type: Fully Amortizing
Monthly Payment: $883,963.96
Interest Rate: 8.05%
Amortization Term: 240 months
Debt Constant: 10.07%
DSCR: 1.00
Cut-off Date LTV: 100%
Borrower Special
Purpose Entity: Yes, with an independent director and a
non-consolidation opinion
% of Initial Pool
Balance 2.81%
Maturity Date: March 11, 2018
Property Type: Retail/Movie Theaters
No. of Properties: 10
Location of Property: Texas (8), California (1), Colorado (1)
Appraised Value
(aggregate for pool): $105,300,000
Square Feet: 692,458
Range of Year
Built/Renovated: 1990-1997/1992-1997
Cut-off Date
Balance/SF: $152
Fee or Leasehold: Fee
Occupancy: 100%
Lock Box: Hard
---------------
The Borrowers. The Cinemark Borrowers are each Delaware special purpose
limited partnerships, each of which has a special purpose corporation as its
general partner. The sponsor entity for each of the Cinemark Borrowers is
Primus Capital, LLC, which is a limited partner in each of the Cinemark
Borrowers. An affiliate of NACC has an equity interest in each of the
Cinemark Borrowers. See "Risk Factors and Other Special Considerations -- The
Mortgage Loans -- Other Equity Investments by Affiliates of NACC" herein. The
Cinemark Borrowers are also affiliated with two other Delaware special
purpose limited partnerships (Pricino IX, LP and Pricino XI, LP) which are
the borrowers under two credit lease loans made by NACC (the "Two Other
Cinemark Loans") that are not part of the Mortgage Pool and are not
cross-collateralized or cross-defaulted with the Cinemark Credit Lease Loans.
The properties secured by the Two Other Cinemark Loans, together with the
Cinemark Credit Lease Properties are referred to herein as the "Original
Cinemark Facility Properties." See "Risk Factors and Special Considerations
- -- The Mortgage Loans -- Mortgage Loans to Affiliated Borrowers" herein.
<TABLE>
<CAPTION>
NAME OF NAME OF CINEMARK CREDIT CUT-OFF DATE APPRAISED MONTHLY
CINEMARK BORROWER LEASE LOAN/STATE PRINCIPAL BALANCE VALUE(1) PAYMENT
- ----------------- ----------------------- ----------------- -------------- ----------
<S> <C> <C> <C> <C>
Pricino I, LP ... Grand Prairie, TX $ 6,499,881 $ 6,500,000 $ 54,566
Pricino II, LP .. Pasadena, TX $ 12,099,695 $ 12,100,000 $101,576
Pricino IV, LP .. McKinney, TX $ 6,799,825 $ 6,800,000 $ 57,084
Pricino V, LP ... Houston, TX $ 17,999,571 $ 18,000,000 $151,105
Pricino VI, LP .. Beaumont, TX $ 11,299,688 $ 11,300,000 $ 94,860
Pricino VII, LP . El Paso, TX $ 15,799,670 $ 15,800,000 $132,637
Pricino VIII, LP Pflugerville, TX $ 14,099,714 $ 14,100,000 $118,366
Pricino X, LP ... Redding, CA $ 8,099,777 $ 8,100,000 $ 67,997
Pricino XII, LP . Pueblo, CO $ 8,699,783 $ 8,700,000 $ 73,034
Pricino III, LP . Plano, TX $ 3,899,857 $ 3,900,000 $ 32,739
----------------- -------------- ----------
$105,297,461 $105,300,000 $883,964
</TABLE>
- ------------
(1) As of February 20, 1998.
Defeasance. Defeasance is not permitted until at least three years after
the Cinemark Credit Lease Loans Closing Date. Thereafter, all or any of the
Cinemark Credit Lease Loans may be defeased upon the satisfaction of certain
conditions specified in the loan documents in the manner described above. See
"Certain Terms and Conditions of the Mortgage Loans-Property Releases"
herein.
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Lock Box; Reserve Accounts; Audits. The Cinemark Borrowers have each
entered into agreements pursuant to which each Cinemark Credit Lease Tenant
is required to deposit all rent due under the related Cinemark Credit Lease
into a Lock Box Account controlled by the Servicer. See "The Pooling and
Servicing Agreement--Accounts--Lock Box Accounts" herein. The Cinemark
Borrowers have not established Reserve Accounts. See "Description of the
Mortgage Loans -- Certain Terms and Conditions of the Mortgage Loans --
Escrows" and "The Pooling and Servicing Agreement -- Accounts -- Cash
Collateral Accounts" herein. Each Cinemark Credit Lease Tenant (as defined
below) is required to furnish audited financial statements to the related
Cinemark Borrower within 90 days of the end of each fiscal year of the
Cinemark Credit Lease Tenant and the related Cinemark Borrower must provide
such financials to the lender. The Cinemark Borrower is not required to
provide financial statements to the lender.
The Property Manager. The Cinemark Credit Lease Properties do not have
property managers.
The Properties. The Cinemark Credit Lease Properties consists of ten movie
theater properties, eight of which are located in Texas, one of which is
located in Colorado and one of which is located in California. As of March 1,
1998, the Cinemark Credit Lease Properties were 100% occupied and the
combined appraised value of the Cinemark Credit Lease Properties was
$105,300,000.
The Credit Leases. The Cinemark Credit Lease Properties are leased to
Cinemark USA, Inc. (the "Cinemark Credit Lease Tenant"), under ten separate
20-year leases (each, a "Cinemark Credit Lease"), each of which expires on or
after the Cinemark Credit Lease Loans Maturity Date. The long-term unsecured
debt rating of Cinemark USA, Inc. is rated "BB-" and "Ba3" by S&P and
Moody's, respectively. The Cinemark Credit Leases are "Bondable" in that they
require the Cinemark Credit Lease Tenant to pay all rent due under the
related Cinemark Credit Lease without deduction, setoff, abatement or other
reduction, notwithstanding casualty, condemnation and prohibition of use
(except as otherwise described below). The Cinemark Credit Leases may not be
terminated for any reason other than (i) a material taking (defined in the
Cinemark Credit Leases as 35% of the land or improvements or greater), (ii)
if the Cinemark Credit Lease Tenant cannot rebuild as a result of a material
casualty, (iii) if at any time after ten years after the commencement of the
Cinemark Credit Leases, the Credit Tenant determines in its reasonable
business judgment that the operation of such Cinemark Credit Lease Property
is uneconomic, obsolete or surplus to other properties owned or operated by
the Cinemark Credit Lease Tenant or (iv) if, with respect to the Cinemark
Credit Lease Properties owned by the Cinemark Borrowers known as Pricino II,
LP, Pricino VI, LP and Pricino VIII, LP, certain zoning and replatting
matters are not resolved by a date specified in the related loan documents;
provided, however, that under such circumstances, in order to terminate the
related Cinemark Credit Lease, the Cinemark Credit Lease Tenant must purchase
the related Cinemark Credit Lease Property for an amount sufficient to
purchase US Treasuries that will provide payments which replicate the
scheduled payments of principal and interest due under the related Cinemark
Credit Lease Loan. In addition, each of the Cinemark Credit Leases provide
that at any time after the expiration of two years from the commencement of
such Credit Lease, the Cinemark Credit Tenant may purchase the related
Cinemark Borrower's interest under the related Cinemark Credit Lease Property
by conveying a new property to such Cinemark Borrower and executing a new
Cinemark Credit Lease with terms substantially similar to the original
Cinemark Credit Lease. In order to effect such a substitution, certain terms
and conditions must be satisfied, including among other things, (i) no more
than one substitution may take place in any twelve month period, (ii) no more
than five of the Original Cinemark Credit Lease Properties may be
substituted, (iii) the Trustee has received confirmation from each of the
Rating Agencies that such substitution will not result in a qualification,
downgrade or withdrawal of the then-current rating of any Class of
Certificates and (iv) the Trustee has received an opinion of counsel that
such substitution will not affect the REMIC status of the Trust Fund. In the
event the Cinemark Credit Lease Tenant subleases any of the Cinemark Credit
Lease Properties, the Cinemark Credit Lease Tenant remains fully liable for
the performance of its obligations under the related Cinemark Credit Lease.
See "Risk Factors -- The Mortgage Loans -- Credit Quality of Credit Tenants
and Guarantors" and "Description of the Mortgage Pool -- Credit Lease Loans"
herein.
See "Risk Factors -- The Mortgage Loans -- Risks Associated with
Commercial and Multifamily Lending Generally" and "--Credit Lease Properties"
for a discussion of certain matters associated with credit lease properties.
The Oxford Center Loan and Property
The Loan. The sixth largest Mortgage Loan in the Mortgage Pool (the
"Oxford Center Loan") was originated by NACC on March 10, 1998, had an
original principal balance of $99,464,749 and has a Cut-off Date Principal
Balance of $99,464,749, which represents approximately 3% of the Initial Pool
Balance. The Oxford Center Loan is secured by a fee Mortgage encumbering an
office property (the "Oxford Center Office Property") located in Pittsburgh,
Pennsylvania.
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Cut-off Date
Principal Balance: $99,464,749
Origination Date: March 10, 1998
Loan Type: ARD
Monthly Payment: $731,131.39
Interest Rate: 8.02%
Amortization Term: 360 months
Debt Constant: 8.82%
DSCR: 1.39
LTV: 70%
Anticipated
Repayment Date: March 11, 2008
ARD Balance: $89,035,616
ARD LTV: 62%
Borrower Special
Purpose Entity: Yes, with independent director and
non-consolidation opinion
% of Initial Pool
Balance: 2.66%
Maturity Date: March 11, 2028
Property Type: Office
No. of Properties: 1
Location of Property: Pittsburg, PA
Appraised Value: $143,000,000
Square Feet: 1,008,222
Year Built: 1982
Cut-off Date
Balance/SF: $99
Fee or Leasehold: Fee
Major Tenants: Dusquesne Light Company, Westinghouse
Electric Corporation
Occupancy: 91%
Lock Box: Hard
The Borrower. Oxford Development Company/Grant Street LP (the "Oxford
Center Borrower") is a special purpose Pennsylvania limited partnership
comprised of (i) OOC, Inc. (the "Oxford Center General Partner"), a special
purpose Pennsylvania corporation, which is the sole general partner of the
Oxford Center Borrower, (ii) Oxford Development Company-Pittsburgh, LP
("ODC-Pittsburgh"), a Pennsylvania limited partnership and (iii) L&M
Associates, a Pennsylvania limited partnership. The Oxford Center General
Partner is owned by ODC-Pittsburgh. The sole general partner of
ODC-Pittsburgh is OOC-Pittsburgh, LLC, a special purpose Delaware limited
liability company, all of the membership interests in which are owned by L&M
Associates. An affiliate of NACC is a special limited partner in
ODC-Pittsburgh and has a 20% interest in profits of ODC-Pittsburgh. In
addition, such affiliate of NACC has an obligation to contribute up to
$4,000,000 to ODC-Pittsburgh (for contribution to the Oxford Center Borrower)
if necessary to cover certain rollover expenses (as described below under
"--Lock Box; Reserve Accounts; Audits"). See "Risk Factors -- The Mortgage
Loans -- Common Equity Investments by Affiliates of NACC" herein. Indian
Preferred LLC, a New York limited liability company ("Indian LLC") that is an
affiliate of Lazard Freres Real Estate Fund II L.P. ("Lazard"), holds a 0.5%
general partnership interest in ODC-Pittsburgh, and will continue to hold
such interest until a mezzanine financing in the amount of approximately
$20,170,013 (the "Oxford Center Mezzanine Loan"), made on March 10, 1998 by
Lazard to ODC-Pittsburgh, is repaid in full and the capital contribution of
Indian LLC has been returned in accordance with the partnership agreement for
ODC-Pittsburgh. The Oxford Center Mezzanine Loan is secured by pledges of
certain partnership interests in ODC-Pittsburgh and L&M's limited partnership
interest in the Oxford Center Borrower. Lazard has entered into a standstill
agreement with NACC pursuant to which Lazard is not permitted to exercise its
remedies against ODC-Pittsburgh or under the pledges made to secure the
Oxford Center Mezzanine Loan before the earlier of (i) March 11, 2008 (the
"Oxford Center Anticipated Repayment Date") and (ii) the repayment in full of
the Oxford Center Loan. See "Risk Factors--The Mortgage Loans--Other
Financing" herein.
Defeasance. Defeasance is not permitted prior to the second anniversary of
the Closing Date of the Certificates. Thereafter, prior to the Oxford Center
Anticipated Repayment Date, all or any portion of the Oxford Center Loan may
be defeased upon the satisfaction of certain conditions specified in the
related loan documents in the manner described above. See "Certain Terms and
Conditions of the Mortgage Loans -- Property Releases" herein.
Lock Box; Reserve Accounts; Audits. The Oxford Center Borrower has entered
into a lock box agreement pursuant to which all rent from the Oxford Center
Office Property is required to be deposited upon collection by the Oxford
Center Borrower or the Oxford Center Property Manager (as defined below) into
a Lock Box Account controlled by the Servicer. See "The Pooling and Servicing
Agreement--Accounts--Lock Box Accounts" herein. The Oxford Center Borrower
has also established Reserve Accounts, including an ongoing tax reserve
account, an insurance reserve account, an ongoing capital reserve account, a
required repairs reserve account and a rollover reserve account.
Specifically, $3,000,000 was reserved at closing for tenant rollover. Prior
to January 2003 and January 2005, to the extent such reserve has previously
been drawn upon, it will be replenished from cash flow so that there will be
$3,000,000 available for rollover costs in each
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of 2003 and 2005. In addition, in the event certain anticipated rollover costs
are not covered by cash flow and the $3,000,000 reserve, the Oxford Center
Borrower has an obligation to fund an additional $4,000,000 for such costs.
NACC has agreed to provide preferred equity financing to ODC-Pittsburgh (which
will be contributed by ODC-Pittsburgh to the Oxford Center Borrower) at that
time, if needed. See "Risk Factors -- The Mortgage Loans -- Preferred Equity,
Equity Investments by Affiliates of NACC," "Description of the Mortgage Loans
- -- Certain Terms and Conditions of the Mortgage Loans -- Escrows" and "The
Pooling and Servicing Agreement -- Accounts -- Cash Collateral Accounts"
herein. The Oxford Center Borrower is required to furnish audited financial
statements within 90 days following the end of its fiscal year.
The Property Manager. The Oxford Center Property is managed by the Oxford
Development Company (the "Oxford Center Property Manager"), an entity
controlled by the principals of the Oxford Center Borrower. The Oxford Center
Manager is paid a management fee equal to the greater of (i) 1.35% of the
rental income of the Oxford Center Office Property and (ii) $20,000 per
month. In addition, the Oxford Center Property Manager is entitled to leasing
commissions and a 6% construction management fee when performing such
services. Such management fees and commissions are subordinate to debt
service. The lender may terminate the Oxford Center Property Manager upon an
event of default under the Oxford Center Loan or (i) prior to or on March 1,
1999, if the DSCR is less than 1.0 and (ii) after March 1, 1999, if the DSCR
is less than 1.15.
The Property. The Oxford Center Office Property is located in Pittsburgh,
Pennsylvania. It consists of a 45-story office tower, a four-level retail and
office arcade connected by a sky bridge to a ten-level, 839-car parking
garage and a two-level athletic and dining club above the parking garage. The
Oxford Center Office Property contains 1,008,222 net rentable square feet of
which 871,597 square feet is office space, 68,401 square feet is retail space
and 68,224 square feet is club space or storage for the club. Major tenants
include Duquesne Light Company and Westinghouse Electric Corporation
(together leasing approximately 48% of the property) with leases expiring in
2003 and 2000, respectively. Both tenants sublease a substantial portion of
their space and, with the exception of Duquesne Light Company's sublease to
Buchanan Ingersol (124,611 square feet), each sublease is co-terminus with
its respective master lease. The Buchanan Ingersol sublease extends until
June 2003, and upon Duquesne Light Company's lease expiring in 2003, the
Buchanan Ingersol lease will become a prime lease with the Oxford Center
Borrower that will extend until 2005. As of January 31, 1997, the Oxford
Center Office Property was 90.8% occupied and the appraised value was
$143,000,000.
See "Risk Factors -- The Mortgage Loans -- Risks Associated with
Commercial and Multifamily Lending Generally" and "--Office Properties" for a
discussion of certain matters associated with office properties.
Significant Terms Regarding Mortgage Loans Over $50,000,000. 11 Mortgage
Loans, with Cut-off Date Principal Balances ranging between $50,823,254 and
$92,308,000, which represent approximately 18% of the Initial Pool Balance
are described below.
The Springfield Mall Loan and Property
Cut-off Date
Principal Balance: $92,308,000
Origination Date: March , 1998
Loan Type: ARD
Monthly Payment: $709,768.66
Interest Rate: 8.50%
Amortization Term: 360 months
Debt Constant: 9.23%
DSCR: 1.22
LTV: 76%
Anticipated
Repayment Date: April 11, 2013
ARD Balance: $75,371,547
ARD LTV: 31%
Borrower Special
Purpose Entity: Yes, with independent director and
non-consolidation opinion
% of Initial Pool
Balance: 2.47%
Maturity Date: April 11, 2028
Property Type: Retail
No. of Properties: 1
Location of Property: Springfield, VA
Appraised Value
(aggregate for pool): $243,000,000
Square Feet: 1,418,944
Year Built/Renovated: 1973/1991
Cut-off Date
Balance/SF: $65
Fee or Leasehold: Fee
Major Tenants: Macy's, Montgomery Wards, JC Penney
Occupancy: 93%
Lock Box: Hard
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Borrower/Sponsor: Franconia Two, L.P., which is owned and controlled by
Fischer Reese Associates, Inc. Fischer Reese Associates, Inc. has developed
and managed over 8 million square feet of retail space. The Springfield Mall
was originally developed by Arthur Fischer.
The Property: The Springfield Mall is a super regional enclosed mall with
two outparcel stores, located at the intersection of I-95 and Franconia Road
in Springfield, Virginia. The center is anchored by Macy's, Montgomery Wards
and JC Penney. All of the anchors own their own stores. The Macy's store is
built on land leased from the borrower. Average in-line store sales are over
$260 per sq. ft.
Atlanta Marriott Hotel Loan and Property
Cut-off Date
Principal Balance: $81,871,306
Origination Date: January 30, 1998
Loan Type: ARD
Monthly Payment: $600,649.08
Interest Rate: 7.40%
Amortization Term: 300 months
Debt Constant: 8.80%
DSCR: 1.82x
LTV: 57%
Anticipated
Repayment Date: February 11, 2010
ARD Balance: $61,585,234
ARD LTV: 21%
Borrower Special
Purpose Entity: Yes, with independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 2.19%
Maturity Date: February 11, 2023
Property Type: Hotel
No. of Properties: 1
Location of Property: Atlanta, GA
Appraised Value: $288,000,000
Rooms: 1,671
Year Built/Renovated: 1985/1997
Cut-off Date
Balance/Room: $48,995
Fee or Leasehold: Fee
Franchise: Marriott
Occupancy: 71%
Lock Box: Hard
Borrower/Sponsor: HMA Realty Limited Partnership, the general partner of
which is indirectly owned and controlled by Host Marriott Corporation.
The Property: The Atlanta Marriott, located in Downtown Atlanta, is the
largest convention hotel in Atlanta. The hotel is an atrium-style, convention
oriented facility with 1,671 guest rooms, including 69 suites, 5 restaurants,
2 lounges, an indoor-outdoor pool, health club and full business services.
1995 1996 1997
--------- --------- --------
Occupancy .. 71.6% 68.6% 70.9%
ADR: ........ $116.02 $131.91 $127.88
Special Features: The Atlanta Marriott Loan included in this transaction
is part of a loan comprised of two notes with a total original principal
balance of $164,000,000. The two notes are pari passu and
cross-collateralized and cross-defaulted.
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The FAC Realty Pool Loan and Properties
Cut-off Date
Principal Balance: $67,174,650
Origination Date: March 11, 1998
Loan Type: ARD
Monthly Payment: $545,342.84
Interest Rate: 9.10%
Amortization Term: 360 months
Debt Constant: 9.74%
DSCR: 1.48
Cut-off Date LTV: 56%
Anticipated
Repayment Date: March 11, 2013
ARD Balance: $56,215,516
ARD LTV: 43%
Borrower Special
Purpose Entity: Yes, with an independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 1.79%
Maturity Date: March 11, 2028
Property Type: Factory Outlet and Community Shopping Centers
No. of Properties: 11
Location of Property: 1 Kentucky, 2 Missouri, 3 North Carolina,
1 Alabama, 1 Nebraska, 1 Iowa, 1 Florida,
1 Texas
Appraised Value
(aggregate for pool): $120,150,000
Square Feet: 1,638,284
Range of Year
Built/Renovated: 1960-1996/1996
Cut-off Date
Balance/SF: $41
Fee or Leasehold: Fee
Occupancy: 94%
Lock Box: Hard
Borrower/Sponsor: FAC Mortgage, LLC, a Delaware corporation, is the
borrower. FAC Mortgage is an affiliate of FAC Realty Trust, Inc., a publicly
traded, self-administered and self-managed real estate investment trust.
The Properties: The properties consist of nine factory outlet centers and
two shopping centers located in eight states. Common tenants include Bugle
Boy, C.S. Factory, Carolina Pottery and Black & Decker.
The University Mall Loan and Property
Cut-off Date
Principal Balance: $64,800,478
Origination Date: December 18, 1997
Loan Type: ARD
Monthly Payment: $486,785.71
Interest Rate: 8.23%
Amortization Term: 360 months
Debt Constant: 9.01%
DSCR: 1.47
Cut-off Date LTV: 53%
Anticipated
Repayment Date: January 11, 2013
ARD Balance: $52,357,984
ARD LTV: 43%
Borrower Special
Purpose Entity: Yes, with an independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 1.73%
Maturity Date: January 11, 2028
Property Type: Retail
No. of Properties: 1
Location of Property: Tampa, FL
Appraised Value: $122,300,000
Square Feet: 657,361
Year Built/SF: 1973/1996
Cut-off Date
Balance/SF: $99
Fee or Leasehold: Fee
Major Tenants: Sears, JC Penney, Dillards
Occupancy: 87%
Lock Box: Hard
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Borrower/Sponsor: Glimcher University Mall Limited Partnership, which is
owned and controlled by Glimcher Realty Trust, a publicly owned and traded
REIT, purchased the University Mall in 1997.
The Property: The University Mall was developed by DeBartolo and JC Penney
Company. A major renovation was completed in 1996. There are 5 anchors:
Dillards, Sears, JC Penney, Burdines and Montgomery Ward, of which only JC
Penney is owned as part of the collateral. The property also includes a
16-screen movie theater. In-line stores include The Limited, Victoria's
Secret, Sam Goody and Lerners. Anchor sales ranged from $118 per square foot
to $180 per square foot. In-line store sales are approximately $250 per
square foot.
Special Features: Various reserve funds were established in connection
with the Mortgage Loan including a rollover reserve, which will be funded to
$800,000 by 2005 for the rollover in 2006 and 2007, a capital expenditure
reserve and a roof repair reserve which will be funded to $2,700,000 out of
excess cash flow through 2005.
The Edgewater Hills Loan and Property
Cut-off Date
Principal Balance: $55,988,456
Origination Date: March 9, 1998
Loan Type: ARD
Monthly Payment: $410,823.46
Interest Rate: 8.00%
Amortization Term: 360 months
Debt Constant: 8.81%
DSCR: 1.15
Cut-off Date LTV: 75%
Anticipated
Repayment Date: March 11, 2008
ARD Balance: $50,095,220
ARD LTV: 67%
Borrower Special
Purpose Entity: Yes, with independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 1.50%
Maturity Date: March 11, 2028
Property Type: Multifamily
No. of Properties: 1
Location of Property: Framingham, MA
Appraised Value: $75,000,000
Units: 1,020
Year Built: 1974
Cut-off Date
Balance/SF: $54,891
Fee or Leasehold: Fee
Occupancy: 94%
Lock Box: Soft
Borrower/Sponsor: The Mortgaged Property is owned by Waterview Properties
LP. The borrower has owned and managed the Mortgaged Property for 14 years.
The Property: The Mortgaged Property is well located near the
Massachusetts Pike within commuting distance to Boston. The Mortgaged
Property has several amenities including a newly renovated clubhouse with a
healthclub, pool and jacuzzi, a tennis court and a basketball court.
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The Hunters Branch Loan and Property
Cut-off Date
Principal Balance: $55,278,713
Origination Date: November 13, 1997
Loan Type: ARD
Monthly Payment: $425,045.48
Interest Rate: 8.50%
Amortization Term: 360 months
Debt Constant: 9.23%
DSCR: 1.20
Cut-off Date LTV: 71%
Anticipated
Repayment Date: April 11, 2013
ARD Balance: $45,062,138
ARD LTV: 58%
Borrower Special
Purpose Entity: Yes, with an independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 1.48%
Maturity Date: April 11, 2028
Property Type: Office
No. of Properties: 1
Location of Property: 9300 Lee Highway Vienna, VA
Appraised Value
(aggregate for pool): $78,000,000
Square Feet: 402,302
Year Built: 1987
Cut-off Date
Balance/SF: $137
Fee or Leasehold: Fee
Major Tenants: ICF Kaiser, American Capital, Oden Pheldman
Occupancy: 96%
Lock Box: Hard
Borrower/Sponsor: Hunters Branch Partners L.L.C., a special purpose entity
controlled by Argo Investments, the Foulger Family, and ICF Kaiser
International, Inc. The Foulger Family is a prominent Washington, D.C. area
developer.
The Property: Hunter's Branch is a well located Class A Office property
consisting of two mirror buildings, immediately adjacent to the Vienna metro
station. The largest tenant, ICF Kaiser International, Inc., which has an
interest in the property, occupies 50% of the property. ICF Kaiser
International, Inc. is a publicly traded engineering, construction, property
management and consulting service company. Their current lease term expires
in October, 2012. The loan provides for a monthly escrow for rollover
expenses that builds to approximately $6,900,000 by October, 2012. Other
tenants include American Capital and Oden Pheldman. Amenities include health
club facilities, a deli and an auditorium.
The Mall Del Norte Loan and Property
Cut-off Date
Principal Balance: $55,000,000
Origination Date: March 13, 1998
Loan Type: ARD
Monthly Payment: $443,874.80
Interest Rate: 8.50%
Amortization Term: 300 months
Debt Constant: 9.66%
DSCR: 1.31
LTV: 69%
Anticipated
Repayment Date: April 11, 2013
ARD Balance: $37,602,715
ARD LTV: 53%
Borrower Special
Purpose Entity: Yes, with an independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 1.47%
Maturity Date: April 11, 2023
Property Type: Retail
No. of Properties: 1
Location of Property: Laredo, Texas
Appraised Value: $80,000,000
Square Feet: 1,184,137
Year Built/Renovated: 1977/1993
Cut-off Date
Balance/SF: $46
Fee or Leasehold: Fee
Major Tenants: Dillards, Sears, JC Penney
Occupancy: 93%
Lock Box: Hard
S-82
<PAGE>
Borrower/Sponsor: The borrower consists of three affiliated entities:
Lone Star Mall LP, EDA Laredo LP and Enterprise Laredo Associates. The
Enterprise Companies have developed and/or acquired over $390 million of real
estate assets which include retail centers, office buildings, apartment
buildings and land.
The Property: The Mortgaged Property is a super regional mall with three
outparcel stores which are also owned by the borrower. The Mortgaged Property
is well located at the intersection of I-35 and Hillside Road in Laredo,
Texas. The Mortgaged Property has nine anchor tenants -- Dillard's, JC
Penney, Montgomery Ward, Sears, Beall's, Foley's, Foley's Home, Joe Brand and
Mervyn's. Mall Del Norte is the only super regional mall within a 140 mile
radius.
The HQ Plaza Loan and Properties
Cut-off Date
Principal Balance: $53,132,485
Origination Date: December 4, 1997
Loan Type: ARD
Monthly Payment: $419,039.88
Interest Rate: 8.69%
Amortization Term: 336 months
Debt Constant: 9.46%
DSCR: 1.64
Cut-off Date LTV: 55%
Anticipated
Repayment Date: December 12, 2012
ARD Balance: $42,895,026
ARD LTV: 44%
Borrower Special
Purpose Entity: Yes, with independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 1.42%
Maturity Date: December 11, 2025
Property Type: Office/Hotel
No. of Properties: 2
Location of Property: Morristown, NJ
Appraised Value
(aggregate for pool): $97,000,000
Square Feet: 732,256
Year Built/Renovated: 1982/1997
Cut-off Date
Balance/SF: $59 (office portion); $38,004/room (hotel
portion)
Fee or Leasehold: 1 Fee, 1 Leasehold
Major Tenants: AT&T, Riker Danzig, Price Waterhouse
Occupancy: 94%
Lock Box: Hard
Borrower/Sponsor: Olnick-Fisher Development Associates, a real estate
development firm which developed and manages the Mortgaged Property.
The Property: The Mortgaged Property is a Class "A" office complex and
offers superior on-site amenities including a health club and various retail
services.
S-83
<PAGE>
The Brandywine Square Loan and Property
Cut-off Date
Principal Balance: $51,874,868
Origination Date: December 27, 1996
Loan Type: ARD
Monthly Payment: $402,602.24
Interest Rate: 8.58%
Amortization Term: 360 months
Debt Constant: 9.31%
DSCR: 1.17
Cut-off Date LTV: 74%
Anticipated
Repayment Date: December 11, 2007
ARD Balance: $47,044,175.94
ARD LTV: 67%
Borrower Special
Purpose Entity: Yes, with an independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 1.39%
Maturity Date: November 11, 2027
Property Type: Retail
No. of Properties: 1
Location of Property: Dowingtown, PA
Appraised Value: $70,000,000
Square Feet: 561,942
Year Built/Renovated: 1996
Cut-off Date
Balance/SF: $92
Fee or Leasehold: Fee
Major Tenants: B.J.'s Warehouse, Hechinger's, Regal Cinema
Occupancy: 85%
Lock Box: Hard
Borrower/Sponsor: Brandywine Square Associates, whose limited partners
include Exton Shopping, a corporation wholly owned by the Rouse Company.
The Property: Brandywine Square is a newly constructed power center that
is well located in a highly visible corner location. The property has diverse
tenants including BJ's, Phar-Mor, Hechinger's, Dick's & PetsMart.
Special Features: The Mortgage Loan provides for rollover reserves of
$75,000 annually and on-going capital reserves of $48,209-$54,550.
The Park Center Loan and Property
Cut-off Date
Principal Balance: $51,012,644
Origination Date: February 24, 1998
Loan Type: ARD
Monthly Payment: $392,243.09
Interest Rate: 8.50%
Amortization Term: 360 months
Debt Constant: 9.23%
DSCR: 1.25
Cut-off Date LTV: 58%
Anticipated
Repayment Date: April 11, 2008
ARD Balance: $46,124,620
ARD LTV: 53%
Borrower Special
Purpose Entity: Yes, with independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 1.36%
Maturity Date: March 11, 2028
Property Type: Office
No. of Properties: 1
Location of Property: San Jose, CA
Appraised Value: $87,400,000
Square Feet: 408,000
Year Built/Renovated: 1985
Cut-off Date
Balance/SF: $125
Fee or Leasehold: Fee
Major Tenants: Pacific Bell, Price Waterhouse, County of
Santa Clara
Occupancy: 96%
Lock Box: Hard
Borrower/Sponsor: The Borrower, SJ Plaza, LLC, is owned by Divco Park
Center Investors, LLC and Harvard Private Capital Realty, Inc. The Divco
organization is a full service real estate investment, development,
management and construction firm which has been in business for over 25 years
and currently owns and manages over ten million square feet of real estate in
the United States and Canada.
S-84
<PAGE>
The Property: The Mortgaged Property is a Class A office building located
in the central business district of San Jose, California, with good exposure
and access to the entire downtown area. A variety of conveniently accessible
services are available at the property including three restaurants, two
travel agencies, a full service Federal Express office, and a photo service.
The Atlantic Center Loan and Property
Cut-off Date
Principal Balance: $50,823,254
Origination Date: March , 1998
Loan Type: ARD
Monthly Payment: $390,785.85
Interest Rate: 8.50%
Amortization Term: 360 months
Debt Constant: 9.23%
DSCR: 1.19x
Cut-off Date LTV: 72%
Anticipated
Repayment Date: April 11, 2013
ARD Balance: $41,498,325
ARD LTV: 47%
Borrower Special
Purpose Entity: Yes, with independent director and a
non-consolidation opinion
% of Initial Pool
Balance: 1.36%
Maturity Date: April 11, 2028
Property Type: Retail
No. of Properties: 1
Location of Property: Brooklyn, NY
Appraised Value: $88,000,000
Square Feet: 393,773
Year Built/Renovated: 1996
Cut-off Date
Balance/SF: $129
Fee or Leasehold: Leasehold
Major Tenants: Caldors, Pathmark, The Sports Authority
Occupancy: 99%
Lock Box: Hard
Borrower/Sponsor: The borrower, Forest City Ratner Companies, owns and
operates office, housing, hotel and retail properties in twenty-two states
with assets in excess of $2.5 billion.
The Property: Atlantic Center is situated on a 24-acre site that will be
the centerpiece of a retail revitalization of downtown Brooklyn, NY. The
center is anchored by Caldor and Pathmark, and its tenancy includes national
concepts such as Circuit City, Kids-R-US, Office Max and Sports Authority.
Special Features: There is a 99-year ground lease on the property with the
City of New York. The servicer will escrow for ground lease payments.
S-85
<PAGE>
ADDITIONAL MORTGAGE LOAN INFORMATION
GENERAL MORTGAGE LOAN CHARACTERISTICS
(AS OF CUT-OFF DATE, UNLESS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
<S> <C>
Initial Pool Balance (1) .......................................................$3,732,820,502
Number of Mortgage Loans ........................................................ 328
Number of Notes ................................................................. 337
Number of Mortgaged Properties .................................................. 437
Average Mortgage Loan Balance ...................................................$ 11,380,550
Weighted Average Mortgage Rate .................................................. 7.996
Range of Mortgage Rates ......................................................... 6.69 to 9.50%
Weighted Average Remaining Term to the Earlier of Maturity or Anticipated
Repayment Date ................................................................. 153
Range of Remaining Term to the Earlier of Maturity or Anticipated Repayment Date 62--265
Weighted Average Original Amortization Term ..................................... 335
Range of Original Amortization Terms ............................................ 63-360
Weighted Average Net Cash Flow DSCR (2) ......................................... 1.47
Range of Net Cash Flow DSCRs (2) ................................................ 1.14-2.46
Weighted Average LTVs (3) ....................................................... 65%
Range of LTV (3) ................................................................ 28.8 to 84.6
Weighted Average LTV at Earlier of Anticipated Repayment Date or Maturity (6) .. 54%
Percentage of Initial Pool Balance made up of:
ARD Loans ...................................................................... 91%
Fully Amortizing Loans (other than ARD Loans) .................................. 9%
Balloon Loans .................................................................. less than 1%
Delinquent as of Cut-off Date ................................................... 0%
</TABLE>
- ------------
(1) Subject to a permitted variance of plus or minus 5%.
(2) "Net Cash Flow DSCR" for any Mortgage Loan is equal to the Net Cash
Flow from the related Mortgaged Property divided by the Annual Debt
Service for such Mortgage Loan (as defined below). Weighted Average Net
Cash Flow DSCR is calculated excluding the Credit Lease Loans. Unless
otherwise specified herein, "DSCR" means Net Cash Flow DSCR. "Annual
Debt Service" means the Monthly Payment (as defined herein) multiplied
by twelve.
(3) "LTV" or "Loan-to-Value Ratio" means, with respect to any Mortgage
Loan, the principal balance of such Mortgage Loan as of the Cut-off
Date divided by the appraised value of the Mortgaged Property or
Properties securing such Mortgage Loan. LTV and Weighted Average LTV
are calculated excluding the Credit Lease Loans.
(4) "LTV at Earlier of Anticipated Repayment Date or Maturity" for any
Mortgage Loan is calculated in the same manner as LTV as of the Cut-off
Date, except that the Mortgage Loan Cut-off Date Principal Balance used
to calculate the LTV as of the Cut-off Date has been adjusted to give
effect to the amortization of the applicable Mortgage Loan as of its
maturity date or, in the case of a Mortgage Loan that has an
Anticipated Repayment Date, as of its Anticipated Repayment Date. Such
calculation thus assumes that the appraised value of the Mortgaged
Property or Properties securing a Mortgage Loan on the maturity date or
Anticipated Repayment Date, as applicable, is the same as the appraised
value as of the Cut-off Date. There can be no assurance that the value
of any particular Mortgaged Property will not have declined from the
appraised value.
S-86
<PAGE>
The tables, Annex A and Annex B set forth certain information with respect
to the Mortgage Loans and Mortgaged Properties. The statistics in the
following tables, Annex A and Annex B were primarily derived from information
provided to the Depositor by Bloomfield or NACC, which information may have
been obtained from the borrowers without independent verification except as
noted. For purposes of the tables, Annex A and Annex B:
(1) "Net Cash Flow" or "NCF" is defined under "--The Mortgage Loan
Program--Underwriting Standards" above.
(2) "Underwritten NOI" means Net Cash Flow before deducting for capital
expenditures, tenant improvements and leasing commissions for non-hotel
properties and before deducting for furniture, fixtures and equipment for
hotel properties.
(3) "Net Cash Flow DSCR" for any Mortgage Loan is equal to the Net Cash
Flow from the related Mortgaged Property or Properties divided by the Annual
Debt Service for such Mortgage Loan (as defined below). Unless otherwise
specified herein, "DSCR" means Net Cash Flow DSCR.
(4) "Annual Debt Service" means the Monthly Payment as of the Cut-off Date
(as defined herein) multiplied by twelve.
(5) "NOI DSCR" for any Mortgage Loan is equal to the Underwritten NOI from
the related Mortgaged Property or Properties divided by the Annual Debt
Service for such Mortgage Loan. For purposes of determining NOI DSCR with
respect to the Park LaBrea Loan, the Springfield Mall Loan, the Atlanta
Marriott Marquis Loan and the Westin Casuarina Resort Loan, NOI DSCR includes
all other pari passu notes secured by the related Mortgaged Property.
(6) "LTV" or "Loan-to-Value Ratio" means, with respect to any Mortgage
Loan, the principal balance of such Mortgage Loan as of the Cut-off Date
divided by the Value of the Mortgaged Property or Properties securing such
Mortgage Loan. For purposes of determining LTV with respect to the Park
LaBrea Loan, the Springfield Mall Loan, the Atlanta Marriott Marquis Loan and
the Westin Casuarina Resort Loan, LTV includes all other pari passu notes
secured by the related Mortgaged Property.
(7) "Anticipated Repayment Date LTV" for any Mortgage Loan is calculated
in the same manner as LTV as of the Cut-off Date, except that the Cut-off
Date Principal Balance used to calculate the LTV as of the Cut-off Date has
been adjusted to give effect to the amortization of the applicable Mortgage
Loan to its maturity date or, in the case of an ARD Loan, to its Anticipated
Repayment Date. Such calculation thus assumes that the Value of the Mortgaged
Property or Properties securing a Mortgage Loan on the maturity date or
Anticipated Repayment Date, as applicable, is the same as the Value as of the
Cut-off Date. There can be no assurance that the value of any particular
Mortgaged Property will not have declined from the original Value.
(8) "1995 NOI," "1996 NOI" and "1997 NOI" (which is for the period ending
as of the date specified in Annex B) is the net operating income for a
Mortgaged Property as established by information provided by the borrowers,
except that in certain cases such net operating income has been adjusted by
removing certain non-recurring expenses and revenue or by certain other
normalizations. 1995 NOI, 1996 NOI and 1997 NOI do not necessarily reflect
accrual of certain costs such as taxes and capital expenditures and do not
reflect non-cash items such as depreciation or amortization. In some cases,
capital expenditures may have been treated by a borrower as an expense or
expenses treated as capital expenditures. The Depositor has not made any
attempt to verify the accuracy of any information provided by each borrower
or to reflect changes in net operating income that may have occurred since
the date of the information provided by each borrower for the related
Mortgaged Property. 1995 NOI, 1996 NOI and 1997 NOI were not necessarily
determined in accordance with generally accepted accounting principles.
Moreover, 1995 NOI, 1996 NOI and 1997 NOI are not a substitute for net income
determined in accordance with generally accepted accounting principles as a
measure of the results of a property's operations or a substitute for cash
flows from operating activities determined in accordance with generally
accepted accounting principles as a measure of liquidity and in certain cases
may reflect partial-year annualizations. In certain cases the first quarter
of 1998 were incorporated into 1997 NOI, but in no case are more than 12
months of revenues and expenses included.
For purposes of determining 1997 NOI as set forth on Annex B:
"Ann." means an annualized NOI calculated for the period indicated; and
"TTM" means NOI calculated for the trailing twelve months ending on the
date indicated.
S-87
<PAGE>
"Imp TTM" means less than 12-months operating results were available and
an imputed TTM was calculated from available information.
(9) "Allocated Loan Amount" means, for each Mortgaged Property that is
security for a Pool Loan, the portion of the principal amount of the related
Pool 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 Pool Loan was
determined generally based on the ratio of the Net Cash Flow or net operating
income or appraised value, or some combination thereof, of such Mortgaged
Property to the aggregate Net Cash Flow or appraised value, or some
combination thereof, for all the Mortgaged Properties securing such Mortgage
Loan. The Allocated Loan Amount for each Mortgaged Property may be adjusted
upon the payment of principal of the related Mortgage Loan, whether upon
amortization, prepayment, or otherwise.
(10) "Cut-off Date Allocated Loan Amount" means for each Mortgaged
Property the Allocated Loan Amount of such property as of the Cut-off Date.
In certain cases where Allocated Loan Amounts were not assigned by the loan
documentation, NACC assigned Allocated Loan Amounts based on the above
mentioned criteria.
(11) "Original Loan Balance" means the principal balance of the Mortgage
Loan as of the date of origination.
(12) "Cut-off Date Principal Balance" means the principal balance of the
Mortgage Loan as of the Cut-off Date after application of all payments of
principal thereon, whether or not received.
(13) "Cut-off Date Principal Balance/Unit" means the principal balance per
unit of measure as of the Cut-off Date.
(14) "Monthly Payment" means, for any Mortgage Loan the current monthly
debt service payable on the related Mortgage Loan.
(15) "Annual Debt Service" means, for any Mortgage Loan the current
monthly debt service payment payable on April 11, 1998 times 12. Except in
cases where loans have prepaid principal for some period ranging from 6
months to 2 years. In such cases annual debt service is the monthly debt
service after the lower payment period has ended.
(16) "Net Cash Flow DSCR" and NOI DSCR are as defined in the notes
following the table "General Mortgage Loan Characteristics."
(17) "Maturity Date" means the maturity date of the Mortgage Loan as
stated in the related Note or Loan Agreement.
(18) "Anticipated Repayment Date" or "ARD" means for ARD Mortgage Loans,
the date on which excess cash flow is retained pursuant to the related
lock-box agreements for application to payment of principal and, with respect
to most of the ARD Loans the date on which Excess Interest begins to accrue.
(19) "Anticipated Remaining Term" means the term of the Mortgage Loan from
the Cut-off Date to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
(20) "Remaining Lock-out" means the period of the term of the related
Mortgage Loan from the Cut-off Date during which the Mortgage Loan may not be
voluntarily prepaid.
(21) "Value" means, for each of the Mortgaged Properties, the appraised
value of such property as determined by an appraisal thereof prepared by an
MAI appraiser not more than 18 months prior to the origination date of the
related Mortgage Loan. See "Risk Factors--Limitations of Appraisals and
Market Studies.".
(22) "Balloon/Anticipated Repayment Date LTV" for any Mortgage Loan is
calculated in the same manner as Cut-off Date LTV, except that the Mortgage
Loan Cut-off Date Principal Balance used to calculate the Cut-off Date LTV
has been adjusted to give effect to the amortization of the applicable
Mortgage Loan as of its maturity date or, in the case of a Mortgage Loan that
has an Anticipated Repayment Date, as of its Anticipated Repayment Date. Such
calculation thus assumes that the appraised value of the Mortgaged Property
or Properties securing a Mortgage Loan on the maturity date or Anticipated
Repayment Date, as applicable, is the same as the appraised value as of the
Cut-off Date. There can be no assurance that the value of any particular
Mortgaged Property will not have declined from the appraised value.
(23) "Amortization" means, the number of months, based on the constant
Monthly Payment as stated in the related Note or Loan Agreement, that would
be necessary to reduce the principal balance of the related Note to zero if
interest on such Note was calculated based on twelve 30-day months and a
360-day year.
S-88
<PAGE>
(24) "Year Built/Renovated" means the year in which the respective
Mortgaged Property was built and/or renovated.
(25) "Units" and "Type" mean the number of units in the respective
Mortgaged Property and the type of such Units.
(26) "Occupancy" means the percentage of gross leaseable area, rooms,
units, beds or sites of the property that are leased. Occupancy rates are
calculated within a recent period and in certain cases reflect the average
occupancy rate over a period of time.
(27) "Underwritten Occupancy" or "U/W Occupancy" means the occupancy rate
used in determining Net Cash Flow.
(28) "Tenant 1" "Tenant 2" and Tenant 3" (each a "Tenant") mean, with
respect to the Office Properties and Retail Properties, the largest, second
largest and third largest tenants, respectively, if any. These Tenants may
occupy the space or sublease all or some portion thereof; provided that such
Tenant remains responsible for all obligations under the lease. With respect
to the Retail Properties such Tenants may be viewed as anchor tenants. An
asterisk next to a Tenant means that the space occupied by such tenant is not
owned by the related borrower.
(29) " % of Total SF" means the square feet leased to Tenant as a
percentage of the total square feet of the Mortgaged Property.
(30) "Lease Expiration Date" means the year in which a Tenant's lease is
schedule to expire.
(31) "Stabilized Net Cash Flow" or "Stab Net Cash Flow" is as defined
under "--The Mortgage Loan Program--Underwriting Standards" above.
(32) "Stabilized Net Cash Flow DSCR" for any Mortgage Loan is equal to the
Stabilized Net Cash Flow from the related Mortgaged Property or Properties
divided by the Cut-off Date Principal Balance multiplied by the Assumed
Constant. For purposes of determining Stabilized Net Cash Flow DSCR with
respect to the Park LaBrea Loan, the Springfield Mall Loan, the Atlanta
Marriott Marquis Loan and the Westin Casuarina Resort Loan, Stabilized Net
Cash Flow DSCR includes all other pari passu notes secured by the related
Mortgaged Property.
(33) "Audit/Agreed Upon Procedures Upfront" indicates Mortgaged Properties
for which independent accountants performed audits, reviews or specified
procedures upon financial information provided by the borrower at the request
of NACC or the borrower. The cash flow and NOI information presented in Annex
B may not correspond to the comparable information included in the
accountants' reports because of adjustments made by NACC as part of its
underwriting procedures.
(34) "Audit/Agreed Upon Procedures Forward" indicates Mortgaged Properties
for which annual independent accountant audits or specified procedures are
required throughout the term of the Mortgage Loan.
(35) "Actual On-going Capital Reserve" means the annual reserves, as
indicated, per unit of measure or as a percentage of gross revenue and
escrowed on a monthly basis.
(36) "Underwritten On-going Capital Reserves" means the annual reserve per
Unit or as a percentage of gross revenue deducted from NOI for purposes of
calculating Net Cash Flow.
(37) "GLA" means the square footage of the gross leaseable area of each
Mortgaged Property. Due to rounding, percentages in the following tables may
not add to 100% and amounts may not add to indicated total or subtotal.
Mortgaged Properties secured, or partially secured, by a leasehold estate
are indicated on Annex B under the heading "Property Name" with an asterisk.
Mortgage Loans accruing interest on the basis of the actual number of days
elapsed and a 360-day year are indicated on Annex A under the heading
"Mortgage Rate" with an asterisk.
The tables below set forth certain summary information regarding the
Mortgage Loans. See Annex A hereto for certain characteristics of Mortgage
Loans on a loan-by-loan basis. All percentages of Initial Pool Balances used
herein and in Annex A are based upon the Cut-off Date Principal Balance of
the related Mortgage Loan or, with respect to Pool Loans, are based upon the
Allocated Loan Amount of the related Mortgaged Property. All weighted average
information regarding the Mortgage Loans reflects weighting of the Mortgage
Loans by their Cut-off Date Principal Balances or, with respect to Pool
Loans, Allocated Loan Amounts. The "Cut-off Date Principal Balance" of each
Mortgage Loan is equal to the unpaid principal balance thereof as of the
Cut-off Date, after application of all payments of principal due on or before
such date, whether or not received. All numerical information provided herein
and in Annex A and Annex B with respect to the Mortgage Loans is provided on
an approximate basis. Certain statistical information set forth herein may
S-89
<PAGE>
change prior to the date of issuance of the Certificates due to changes in
the composition of the Mortgage Pool prior to the Closing Date. No Mortgage
Loan represents more than 5% of the entire pool of Mortgage Loans. See
"Description of the Mortgage Pool--Changes in Mortgage Pool Characteristics"
herein.
The information set forth in the following tables, Annex A and Annex B
with respect to: (a) Weighted Average DSCR, Weighted Average Net Cash Flow
DSCR, Weighted Average NOI DSCR or Weighted Average LTV, is calculated
excluding the Credit Lease Loans, (b) the Weighted Average Amortization is
calculated excluding the Eckerd Loan, the Forest City--Atlantic Loan and the
Forest City--Bruckner Loans, (c) the Balloon/ARD Balances with respect to the
Mortgage Loans secured by the Compton Town Center Loan, the Northwest Plaza
Loan, the Village Waterford Loan, the Neighborhood Shopping Center Loan, the
Holiday Inn Richmond Loan, the Union Cross Shopping Center Loan and the
Evergreen Business Center Loan is calculated assuming that all scheduled
prepayments are made, and (d) States, Guam and British West Indies are
included as states. An asterisk on Annex A means that interest accrues on an
actual/360 basis and an asterisk on Annex B means that the property has a
ground lease.
RANGE OF DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED
CUT-OFF DATE NUMBER OF AGGREGATE AGGREGATE AVERAGE ANTICIPATED AVERAGE WEIGHTED
DEBT SERVICE LOANS OR CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AMORTIZATION AVERAGE
COVERAGE RATIO POOL LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE RATE TERM TERM DSCR
- --------------- ------------ ----------------- ----------------- ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1.0-1.099....... 27 $ 294,473,847 7.9% 7.778% 244 249 N/A
1.1-1.199....... 10 309,378,284 8.3 8.400 156 357 1.17
1.2-1.299....... 56 729,114,597 19.5 8.246 151 355 1.25
1.3-1.399....... 78 792,433,787 21.2 7.734 132 352 1.35
1.4-1.499....... 77 734,752,836 19.7 8.148 153 343 1.45
1.5-1.599....... 19 116,017,817 3.1 8.632 158 316 1.57
1.6-1.699....... 20 154,057,035 4.1 8.089 149 331 1.65
1.7-1.799....... 9 185,893,768 5.0 8.082 128 346 1.76
1.8-1.899....... 13 116,018,925 3.1 7.394 142 302 1.83
1.9-1.999....... 5 38,958,654 1.0 7.857 198 279 1.93
2.0-2.099....... 3 16,803,414 0.5 7.579 139 310 2.03
2.1-2.199....... 4 44,341,372 1.2 7.106 126 344 2.13
GREATER THAN 2.2 7 200,576,165 5.4 7.351 125 300 2.26
------------ ----------------- ----------------- ---------- ------------- -------------- ----------
TOTAL/WTD. AVG 328 $3,732,820,502 100% 7.996% 153 335 1.47
============ ================= ================= ========== ============= ============== ==========
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE REPAYMENT
LTV DATE LTV
- ---------- -------------
<C> <C>
N/A N/A
74 61
70 59
71 61
65 53
63 48
57 46
51 42
56 41
55 21
58 43
45 36
48 38
---------- -------------
65% 54%
========== =============
</TABLE>
S-90
<PAGE>
RANGE OF LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
PERCENT BY WEIGHTED
AGGREGATE AGGREGATE WEIGHTED AVERAGE WEIGHTED
NUMBER OF CUT-OFF DATE CUT-OFF DATE AVERAGE ANTICIPATED AVERAGE WEIGHTED WEIGHTED
LOANS OR PRINCIPAL PRINCIPAL MORTGAGE REMAINING AMORTIZATION AVERAGE AVERAGE
LOAN TO VALUE RATIO POOL LOANS BALANCE BALANCE RATE TERM TERM DSCR LTV
- ------------------- ---------- -------------- ------------ -------- ----------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LESS THAN 30%....... 1 $ 3,667,246 0.1% 7.830% 180 240 2.46 29%
35%-39.99%.......... 3 11,295,040 0.3 7.332 164 241 2.07 39
40%-44.99%.......... 6 93,352,773 2.5 7.111 142 321 2.25 43
45%-49.99%.......... 9 196,099,435 5.3 8.450 128 345 1.68 47
50%-54.99%.......... 16 364,736,902 9.8 8.007 143 320 1.84 52
55%-59.99%.......... 21 367,937,093 9.9 8.294 154 321 1.57 57
60%-64.99%.......... 29 203,322,412 5.4 8.346 140 334 1.48 63
65%-69.99%.......... 54 798,125,455 21.4 7.832 144 351 1.36 68
70%-74.99%.......... 91 1,011,512,778 27.1 8.140 150 355 1.30 73
75%-79.99%.......... 62 352,331,309 9.4 7.663 138 348 1.33 77
80%-84.99%.......... 12 44,787,522 1.2 7.556 159 341 1.36 83
90%-94.99%.......... 9 69,718,597 1.9 7.649 261 262 N/A N/A
GREATER THAN 95% ... 15 215,933,941 5.8 7.827 240 246 N/A N/A
---------- -------------- ------------ -------- ----------- ------------ -------- --------
TOTAL/WTD. AVG ..... 328 $3,732,820,502 100% 7.996% 153 335 1.47 65%
========== ============== ============ ======== =========== ============ ======== ========
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
ANTICIPATED
REPAYMENT MINIMUM MAXIMUM
DATE LTV DSCR DSCR
- ----------- ------- -------
<C> <C> <C>
N/A 2.46 2.46
13 1.80 2.52
33 1.93 2.41
41 1.43 1.98
42 1.47 2.24
43 1.24 2.08
51 1.24 2.01
56 1.22 1.84
61 1.14 1.70
65 1.20 1.83
68 1.18 1.64
N/A N/A N/A
N/A N/A N/A
- ----------- ------- -------
54% 1.14 2.52
=========== ======= =======
</TABLE>
<TABLE>
<CAPTION>
RANGE OF LOAN-TO-VALUE RATIOS AT EARLIER OF ANTICIPATED REPAYMENT DATE OR MATURITY
PERCENT BY WEIGHTED
RANGE OF AGGREGATE AGGREGATE WEIGHTED AVERAGE WEIGHTED
LOAN-TO-VALUE NUMBER OF CUT-OFF DATE CUT-OFF DATE AVERAGE ANTICIPATED AVERAGE WEIGHTED WEIGHTED
RATIOS AT ARD LOANS OR PRINCIPAL PRINCIPAL MORTGAGE REMAINING AMORTIZATION AVERAGE AVERAGE
OR MATURITY POOL LOANS BALANCE BALANCE RATE TERM TERM DSCR LTV
- --------------- ---------- -------------- ------------ -------- ----------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LESS THAN 30% .. 49 $ 388,562,213 10.4% 7.751% 230 246 1.80 54%
30%-34.99%...... 13 94,361,449 2.5 7.580 173 297 2.03 50
35%-39.99%...... 6 84,086,630 2.3 7.907 150 336 1.78 49
40%-44.99%...... 27 707,945,922 19.0 8.204 144 321 1.75 54
45%-49.99%...... 23 166,633,510 4.5 8.331 161 342 1.54 60
50%-54.99%...... 25 307,822,475 8.2 8.196 148 348 1.38 64
55%-59.99%...... 53 715,211,797 19.2 7.887 148 355 1.31 68
60%-64.99%...... 72 825,812,369 22.1 8.017 141 356 1.35 72
65%-69.99%...... 50 386,809,459 10.4 7.903 125 359 1.28 76
70%-74.99%...... 10 55,574,677 1.5 7.542 118 360 1.37 80
---------- -------------- ------------ -------- ----------- ------------ -------- --------
TOTAL/WTD. AVG 328 $3,732,820,502 100% 7.996% 153 335 1.47 65%
========== ============== ============ ======== =========== ============ ======== ========
</TABLE>
<PAGE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
ANTICIPATED
REPAYMENT MINIMUM MAXIMUM
DATE LTV DSCR DSCR
- ----------- ------- -------
<C> <C> <C>
14% 1.14 2.46
32 1.23 2.52
38 1.44 2.18
43 1.23 2.24
47 1.30 2.01
53 1.18 1.96
58 1.20 1.89
62 1.17 1.83
67 1.15 1.53
71 1.27 1.64
- ----------- ------- -------
54% 1.14 2.52
=========== ======= =======
</TABLE>
S-91
<PAGE>
MORTGAGED PROPERTIES BY STATE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE WEIGHTED
CUT-OFF DATE CUT-OFF DATE WEIGHTED AVERAGE WEIGHTED
PRINCIPAL BALANCE/ PRINCIPAL BALANCE/ AVERAGE ANTICIPATED AVERAGE WEIGHTED
NUMBER OF ALLOCATED ALLOCATED MORTGAGE REMAINING AMORTIZATION AVERAGE
STATE PROPERTIES LOAN AMOUNT LOAN AMOUNT RATE TERM TERM DSCR
- ------- ------------ ------------------ ------------------ ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CA...... 68 $ 859,208,701 23.0% 7.964% 140 344 1.43
TX...... 53 362,843,323 9.7 7.850 175 308 1.65
PA...... 17 276,080,681 7.4 8.178 124 355 1.34
VA...... 18 250,683,548 6.7 8.342 172 344 1.32
FL...... 27 206,740,836 5.5 7.962 156 348 1.43
MI...... 24 182,816,816 4.9 7.934 159 343 1.38
GA...... 14 179,486,611 4.8 7.650 132 312 1.78
NY...... 25 157,351,245 4.2 7.989 176 327 1.33
MA...... 7 139,721,131 3.7 8.344 120 341 1.35
NJ...... 10 131,564,441 3.5 7.841 150 347 1.73
OH...... 23 129,314,767 3.5 7.773 208 274 1.46
MD...... 14 102,381,131 2.7 7.900 172 327 1.45
IL...... 12 87,668,939 2.3 7.882 137 351 1.47
NC...... 13 76,831,578 2.1 8.368 164 333 1.49
IN...... 8 72,365,500 1.9 8.187 158 353 1.40
MN...... 9 51,425,836 1.4 7.975 132 349 1.41
Guam.... 4 41,377,683 1.1 8.500 179 360 1.27
WA...... 8 38,501,405 1.0 7.574 173 334 1.53
LA...... 5 37,324,323 1.0 7.523 137 297 1.98
NV...... 4 32,229,572 0.9 7.731 136 360 1.38
AZ...... 8 31,119,590 0.8 7.349 123 355 1.46
CO...... 7 30,599,492 0.8 7.906 192 298 1.83
OK...... 4 28,993,680 0.8 8.162 118 355 1.34
WI...... 5 22,613,124 0.6 7.853 144 351 1.49
DC...... 2 20,089,137 0.5 8.000 133 360 1.55
BWI..... 1 19,832,535 0.5 8.250 233 232 1.92
OR...... 7 17,925,411 0.5 8.332 159 334 1.62
MO...... 3 14,573,914 0.4 8.867 169 360 1.43
SC...... 3 13,765,848 0.4 8.139 154 300 1.48
MS...... 3 11,430,841 0.3 7.458 116 300 2.20
NM...... 3 10,852,504 0.3 8.450 118 335 1.66
KS...... 2 10,571,908 0.3 7.979 134 335 1.30
CT...... 1 10,200,000 0.3 9.430 181 300 1.37
KY...... 2 10,143,844 0.3 8.693 162 349 1.41
ND...... 1 9,331,286 0.2 8.500 181 360 1.26
NH...... 5 8,622,298 0.2 7.820 118 336 1.37
WV...... 3 8,577,606 0.2 7.957 236 240 1.53
SD...... 3 8,269,311 0.2 7.374 169 329 1.45
TN...... 3 6,647,258 0.2 7.824 158 304 1.45
HI...... 1 5,554,332 0.1 8.640 113 360 1.22
DE...... 1 4,848,913 0.1 7.400 117 360 1.34
NE...... 2 3,532,646 0.1 8.258 181 328 1.32
UT...... 1 3,500,000 0.1 7.250 121 360 2.52
AL...... 1 2,951,465 0.1 9.100 180 360 1.48
IA...... 1 2,028,509 0.1 9.100 180 360 1.48
WY...... 1 326,984 0.0 7.959 179 356 1.32
------------ ------------------ ------------------ ---------- ------------- -------------- ----------
437 $3,732,820,502 100% 7.996% 153 335 1.47
============ ================== ================== ========== ============= ============== ==========
</TABLE>
<PAGE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE REPAYMENT
LTV DATE LTV
---------- -------------
<C> <C>
63% 52%
65 54
70 62
71 56
65 55
72 56
57 46
68 52
65 57
57 47
67 49
69 56
67 58
62 49
74 64
69 59
71 58
64 49
56 44
73 63
75 65
56 41
70 63
66 56
66 57
58 3
53 41
59 50
61 44
50 41
56 49
69 55
68 49
61 51
76 70
75 65
61 3
78 57
75 51
74 67
68 60
71 51
39 34
56 47
56 47
84 66
---------- -------------
65% 54%
========== =============
</TABLE>
S-92
<PAGE>
RANGE OF YEARS BUILT
<TABLE>
<CAPTION>
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED
AGGREGATE AGGREGATE AVERAGE ANTICIPATED AVERAGE WEIGHTED
RANGE OF NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AMORTIZATION AVERAGE
YEARS BUILT PROPERTIES PRINCIPAL BALANCE PRINCIPAL BALANCE RATE TERM TERM DSCR
- --------------- ------------ ----------------- ----------------- ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PRIOR TO 1900 .. 4 $ 18,163,357 0.5% 7.719% 121 325 1.68
1900-1909....... 3 11,522,789 0.3 8.354 118 351 1.39
1910-1919....... 5 29,506,497 0.8 8.044 166 307 1.52
1920-1929....... 8 25,589,891 0.7 7.764 137 324 1.35
1930-1939....... 6 28,156,501 0.8 7.357 183 330 1.41
1940-1949....... 5 166,002,382 4.4 7.909 176 359 1.31
1950-1959....... 12 69,260,614 1.9 8.066 122 351 1.46
1960-1969....... 65 365,342,505 9.8 7.815 141 326 1.58
1970-1979....... 79 646,520,238 17.3 8.060 156 346 1.41
1980-1989....... 162 1,546,205,439 41.4 7.918 137 341 1.50
1990-1997....... 88 826,550,288 22.1 8.211 183 313 1.42
------------ ----------------- ----------------- ---------- ------------- -------------- ----------
TOTAL/WTD. AVG 437 $3,732,820,502 100% 7.996% 153 335 1.47
============ ================= ================= ========== ============= ============== ==========
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE REPAYMENT
LTV DATE LTV
---------- -------------
<C> <C>
68% 57%
69 61
66 47
67 56
60 44
69 55
66 58
63 52
68 55
64 54
66 52
---------- -------------
65% 54%
========== =============
</TABLE>
S-93
<PAGE>
CUT-OFF DATE PRINCIPAL BALANCE BY PROPERTY TYPE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
CUT-OFF DATE
PRINCIPAL WEIGHTED WEIGHTED
CUT-OFF DATE BALANCE/ CUT-OFF AVERAGE AVERAGE WEIGHTED
NUMBER OF PRINCIPAL ALLOCATED NUMBER OF BALANCE/ MORTGAGE REMAINING AVERAGE MIN MAX
PROPERTY TYPE PROPERTIES BALANCE LOAN AMOUNT UNITS UNIT RATE TERM AMORTIZATION DSCR DSCR
- ---------------- ---------- -------------- ------------ ---------- -------- -------- --------- ------------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RETAIL
ANCHORED......... 126 $1,087,161,615 29.1% 14,179,799 $ 77 8.043% 170 327 1.14 2.46
MALL............. 6 282,929,313 7.6 4,390,678 64 8.311 171 360 1.18 1.47
FACTORY OUTLET .. 9 51,031,626 1.4 1,331,831 38 9.100 180 360 1.48 1.48
UNANCHORED....... 12 28,201,245 0.8 365,215 77 7.817 137 328 1.32 1.70
---------- -------------- ------------ ---------- -------- -------- --------- ------------ ---- ----
TOTAL RETAIL..... 153 1,449,323,798 38.8 20,267,523 72 8.128 170 335 1.14 2.46
OFFICE........... 40 817,090,334 21.9 9,154,737 89 7.985 134 353 1.15 2.52
MULTIFAMILY...... 121 677,727,073 18.2 82,853 8,180 7.655 140 352 1.15 2.24
HOTEL
FULL SERVICE..... 33 420,421,791 11.3 9,548 44,032 8.090 145 295 1.35 2.41
LTD. SERVICE..... 44 146,764,572 3.9 4,788 30,653 8.484 162 292 1.42 2.41
---------- -------------- ------------ ---------- -------- -------- --------- ------------ ---- ----
TOTAL HOTEL...... 77 567,186,363 15.2 14,336 39,564 8.192 149 294 1.35 2.41
INDUSTRIAL....... 19 102,738,921 2.8 3,563,540 29 7.629 178 297 1.20 1.84
MOBILE HOME
PARK............ 22 68,691,015 1.8 4,873 14,096 7.507 140 345 1.23 2.18
HEALTHCARE
CONGREGATE CARE . 4 39,862,998 1.1 698 57,110 7.846 130 348 1.26 2.25
NURSING.......... 1 10,200,000 0.3 75 136,000 9.430 181 300 1.37 1.37
---------- -------------- ------------ ---------- -------- -------- --------- ------------ ---- ----
TOTAL
HEALTHCARE...... 5 50,062,998 1.3 773 64,765 8.169 140 338 1.26 2.25
---------- -------------- ------------ ---------- -------- -------- --------- ------------ ---- ----
TOTAL/WTD. AVG. . 437 $3,732,820,502 100% 7.996% 153 335 1.14 2.52
========== ============== ============ ======== ========= ============ ==== ====
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED WEIGHTED
WEIGHTED WEIGHTED ANTICIPATED WEIGHTED AVERAGE AVERAGE AVERAGE
AVERAGE AVERAGE REPAYMENT AVERAGE NUMBER OF LOAN/ YEAR BUILT/
DSCR LTV DATE LTV OCCUPANCY UNITS UNIT RENOVATED
-------- -------- ----------- --------- --------- -------- -----------
<C> <C> <C> <C> <C> <C> <C>
1.42 66% 43% 94% 186,859 111 1985
1.37 68 56 91 925,249 71 1991
1.48 56 47 94 249,231 45 1994
1.49 66 53 98 48,320 92 1989
-------- -------- ----------- --------- --------- -------- -----------
1.41 66 46 94 330,504 100 1986
1.38 66 57 94 505,835 133 1986
1.37 72 61 96 2,151 34,681 1988
1.88 53 39 72 544 56,335 1996
1.70 56 38 69 121 33,798 1995
-------- -------- ----------- --------- --------- -------- -----------
1.83 54 39 71 434 50,503 1996
1.37 70 34 99 363,745 36 1983
1.54 69 56 95 318 16,184 1984
1.47 66 57 92 224 63,763 1992
1.37 68 49 80 75 136,000 1997
-------- -------- ----------- --------- --------- -------- -----------
1.45 67 55 90 194 78,481 1993
-------- -------- ----------- --------- --------- -------- -----------
1.47 65% 54% 91% 249,524 15,390 1988
======== ======== =========== ========= ========= ======== ===========
</TABLE>
S-94
<PAGE>
RANGE OF CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE ANTICIPATED AVERAGE WEIGHTED
RANGE OF CUT-OFF DATE LOANS OR POOL CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AMORTIZATION AVERAGE
PRINCIPAL BALANCES POOLS PRINCIPAL BALANCE PRINCIPAL BALANCE RATE TERM TERM DSCR
- ----------------------- ------------- ----------------- ----------------- -------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
LESS THAN 1,000,000 .... 9 $ 7,722,584 0.2% 7.654% 139 303 1.51
1,000,000-4,999,999 .... 170 462,288,715 12.4 7.628 150 318 1.49
5,000,000-9,999,999 .... 67 459,922,698 12.3 7.801 150 335 1.45
10,000,000-14,999,999 .. 28 344,178,338 9.2 7.892 156 336 1.36
15,000,000-19,999,999 .. 14 245,147,435 6.6 7.917 169 324 1.46
20,000,000-24,999,999 .. 7 150,219,159 4.0 8.106 164 338 1.33
25,000,000-29,999,999 .. 5 144,933,245 3.9 9.073 142 312 1.44
30,000,000-34,999,999 .. 1 31,440,036 0.8 8.500 121 360 1.33
35,000,000-39,999,999 .. 4 150,294,583 4.0 7.908 147 360 1.55
40,000,000-44,999,999 .. 4 166,162,052 4.5 7.824 156 346 1.63
45,000,000-49,999,999 .. 2 93,236,694 2.5 8.989 148 331 1.42
50,000,000-54,999,999 .. 5 259,087,723 6.9 8.555 156 355 1.34
55,000,000-59,999,999 .. 2 111,267,169 3.0 8.248 150 360 1.18
60,000,000-64,999,999 .. 1 64,800,478 1.7 8.233 178 360 1.47
65,000,000-69,999,999 .. 1 67,174,650 1.8 9.100 180 360 1.48
80,000,000-84,999,999 .. 1 81,871,306 2.2 7.400 143 300 1.82
90,000,000-94,999,999 .. 1 91,105,178 2.4 8.500 181 360 1.18
95,000,000-99,999,999 .. 1 99,464,749 2.7 8.019 120 360 1.39
100,000,000-124,999,999 1 105,297,461 2.8 8.049 240 240 N/A
125,000,000-149,999,999 3 419,781,721 11.2 7.920 138 339 1.75
GREATER THAN
175,000,000............ 1 177,424,525 4.8 7.110 116 360 1.30
TOTAL/WTD. AVG ......... 328 $3,732,820,502 100% 7.996% 153 335 1.47
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE REPAYMENT
LTV DATE LTV
-------- -----------
<C> <C>
72% 56%
69 53
69 56
70 59
67 51
73 61
56 46
59 54
66 56
64 54
65 53
65 54
73 62
53 43
56 47
57 43
75 61
70 62
N/A N/A
55 46
67 59
65% 54%
</TABLE>
<PAGE>
RANGE OF ANTICIPATED REMAINING TERMS IN MONTHS
<TABLE>
<CAPTION>
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED
RANGE OF AGGREGATE AGGREGATE AVERAGE ANTICIPATED AVERAGE WEIGHTED
ANTICIPATED NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AMORTIZATION AVERAGE
REMAINING TERMS NOTES PRINCIPAL BALANCE PRINCIPAL BALANCE RATE TERM TERM DSCR
- --------------- ----------- ----------------- ----------------- ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LESS THAN 72 ... 1 $ 1,499,481 0.0% 7.230% 62 63 N/A
84-95.9......... 1 446,200 0.0 7.670 91 92 N/A
108-119.9....... 79 1,068,656,324 28.6 7.753 117 346 1.57
120-131.9....... 115 829,359,995 22.2 7.922 121 349 1.37
132-143.9....... 5 112,451,025 3.0 7.367 141 305 1.70
144-155.9....... 1 40,000,000 1.1 7.020 145 300 2.41
168-179.9....... 35 553,234,160 14.8 8.430 177 335 1.46
180-191.9....... 67 795,027,593 21.3 8.307 181 350 1.34
204-215.9....... 1 5,494,723 0.1 7.590 214 216 1.14
228-239.9....... 19 124,772,076 3.3 7.795 234 248 1.76
240-251.9....... 2 106,296,339 2.8 8.048 240 241 1.51
252-263.9....... 10 82,260,603 2.2 7.640 263 264 N/A
264-275.9....... 1 13,321,982 0.4 7.750 265 264 N/A
----------- ----------------- ----------------- ---------- ------------- -------------- ----------
TOTAL/WTD. AVG 337 $3,732,820,502 100% 7.996% 153 335 1.47
=========== ================= ================= ========== ============= ============== ==========
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE REPAYMENT
LTV DATE LTV
- ---------- -------------
<C> <C>
N/A N/A
N/A N/A
63 55
69 60
62 47
40 31
65 49
68 53
74 2
59 10
64 41
N/A N/A
N/A N/A
- ---------- -------------
65% 54%
========== =============
</TABLE>
S-95
<PAGE>
RANGE OF REMAINING TERMS IN MONTHS
<TABLE>
<CAPTION>
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED
AGGREGATE AGGREGATE AVERAGE ANTICIPATED AVERAGE WEIGHTED
RANGE OF NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AMORTIZATION AVERAGE
REMAINING TERMS NOTES PRINCIPAL BALANCE PRINCIPAL BALANCE RATE TERM TERM DSCR
- --------------- ----------- ----------------- ----------------- ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LESS THAN 108 .. 2 $ 1,945,681 0.1% 7.331% 69 70 N/A
120-131.9....... 1 1,750,000 0 7.580 120 300 1.38
168-179.9....... 3 9,581,907 0.3 7.307 172 190 1.69
204-215.9....... 1 5,494,723 0.1 7.590 214 216 1.14
216-227.9....... 1 3,995,370 0.1 7.250 181 N/A N/A
228-239.9....... 24 148,809,213 4.0 7.743 221 243 1.85
240-251.9....... 4 111,882,461 3.0 8.028 237 240 1.60
252-263.9....... 12 94,915,206 2.5 7.593 246 263 1.25
264-275.9....... 2 16,374,812 0.4 7.677 238 266 1.45
288-299.9....... 63 586,452,853 15.7 8.155 143 300 1.72
300-311.9....... 32 146,036,399 3.9 7.606 146 300 1.76
312-323.9....... 7 27,602,842 0.7 7.468 119 324 1.47
324-335.9....... 7 66,786,811 1.8 8.447 166 335 1.58
348-359.9....... 131 1,446,062,019 38.7 7.788 135 360 1.44
360-371.9....... 47 1,065,130,204 28.5 8.316 155 360 1.31
----------- ----------------- ----------------- ---------- ------------- -------------- ----------
TOTAL/WTD. AVG 337 $3,732,820,502 100% 7.996% 153 335 1.47
=========== ================= ================= ========== ============= ============== ==========
</TABLE>
<PAGE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE REPAYMENT
LTV DATE LTV
---------- -------------
<C> <C>
N/A N/A
80 65
50 8
74 2
N/A N/A
55 12
61 26
73 48
67 51
58 44
59 44
71 60
59 48
67 58
69 58
---------- -------------
65% 54%
========== =============
</TABLE>
ANTICIPATED REPAYMENT BY YEAR
<TABLE>
<CAPTION>
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED
AGGREGATE AGGREGATE AVERAGE ANTICIPATED AVERAGE WEIGHTED
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AMORTIZATION AVERAGE
YEAR NOTES PRINCIPAL BALANCE PRINCIPAL BALANCE RATE TERM TERM DSCR
- --------------- ----------- ----------------- ----------------- ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2003............ 1 $ 1,499,481 0 7.230% 62 63 N/A
2005............ 1 446,200 0 7.670 91 92 N/A
2007............ 43 716,278,552 19.2 7.658 116 342 1.58
2008............ 151 1,181,737,767 31.7 7.929 120 351 1.42
2009............ 3 17,936,030 0.5 7.222 132 287 1.29
2010............ 3 134,514,995 3.6 7.283 144 306 1.97
2012............ 19 318,140,667 8.5 8.328 176 330 1.49
2013............ 83 1,030,121,086 27.6 8.366 180 348 1.37
2016............ 1 5,494,723 0.1 7.590 214 216 1.14
2017............ 17 107,373,718 2.9 7.751 233 242 1.81
2018............ 4 123,694,698 3.3 8.051 240 248 1.30
2020............ 11 95,582,586 2.6 7.655 263 264 N/A
----------- ----------------- ----------------- ---------- ------------- -------------- ----------
TOTAL/WTD. AVG 337 $3,732,820,502 100% 7.996% 153 335 1.47
=========== ================= ================= ========== ============= ============== ==========
</TABLE>
<PAGE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE REPAYMENT
LTV DATE LTV
---------- -------------
<C> <C>
N/A N/A
N/A N/A
63 55
67 59
76 56
54 41
66 49
67 52
74 2
58 8
70 34
N/A N/A
---------- -------------
65% 54%
========== =============
</TABLE>
S-96
<PAGE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED
AGGREGATE AGGREGATE AVERAGE ANTICIPATED AVERAGE WEIGHTED
RANGE OF NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AMORTIZATION AVERAGE
MORTGAGE RATES NOTES PRINCIPAL BALANCE PRINCIPAL BALANCE RATE TERM TERM DSCR
- --------------- ----------- ----------------- ----------------- ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
6.5-6.77499% ... 1 $ 7,439,019 0.2% 6.690% 119 324 1.48
6.775-6.9999% .. 9 30,884,465 0.8 6.918 141 320 1.73
7.0-7.24999% ... 45 506,259,995 13.6 7.126 127 349 1.56
7.25-7.4999% ... 86 596,943,330 16.0 7.392 140 317 1.71
7.5-7.7749%9 ... 54 311,680,559 8.3 7.641 170 312 1.45
7.775-7.9999% .. 34 153,429,294 4.1 7.844 168 299 1.51
8.0-8.24999% ... 33 625,872,253 16.8 8.041 166 335 1.34
8.25-8.4999% ... 12 288,188,983 7.7 8.322 140 338 1.63
8.5-8.7499%..... 44 945,179,350 25.3 8.516 158 358 1.29
8.75-8.9999% ... 5 13,357,770 0.4 8.834 143 349 1.33
9.0-9.2499%..... 1 67,174,650 1.8 9.100 180 360 1.48
9.25-9.4999% ... 3 14,169,972 0.4 9.404 181 293 1.46
9.5-9.7499%..... 10 172,240,861 4.6 9.500 163 300 1.48
----------- ----------------- ----------------- ---------- ------------- -------------- ----------
TOTAL/WTD. AVG 337 $3,732,820,502 100% 7.996% 153 335 1.47
=========== ================= ================= ========== ============= ============== ==========
</TABLE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE REPAYMENT
LTV DATE/LTV
---------- -------------
<C> <C>
60% 49%
64 49
64 54
63 51
69 54
68 52
68 57
57 45
69 58
71 60
56 47
64 44
57 43
---------- -------------
65% 54%
========== =============
</TABLE>
DELINQUENCY STATUS AS OF MARCH 1, 1998
STATUS
No Delinquencies of 30 Days or More
RANGE OF REMAINING LOCK-OUT PERIODS IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY WEIGHTED
AGGREGATE AGGREGATE WEIGHTED AVERAGE WEIGHTED WEIGHTED
NUMBER CUT-OFF DATE CUT-OFF DATE AVERAGE ANTICIPATED WEIGHTED AVERAGE AVERAGE WEIGHTED
REMAINING OF PRINCIPAL PRINCIPAL REMAINING REMAINING AVERAGE AMORTIZATION MORTGAGE AVERAGE
LOCK-OUT PERIODS NOTES BALANCE BALANCE LOCKOUT TERM AMORTIZATION TERM RATE DSCR
- ---------------- ------ -------------- ------------ --------- ----------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LESS THAN 59..... 1 $ 1,499,481 0.0 55 62 63 62 7.230% N/A
83-94.9.......... 1 446,200 0.0 84 91 92 91 7.670 N/A
95-106.9......... 4 13,157,847 0.4 106 111 349 340 8.763 1.29
107-118.9........ 178 1,566,796,029 42.0 115 118 345 342 7.742 1.52
119-130.9........ 14 324,698,472 8.7 119 120 360 360 8.185 1.30
131-142.9........ 4 145,814,995 3.9 140 143 301 300 7.273 1.91
155-166.9........ 1 5,939,289 0.2 161 168 171 168 7.250 1.80
167-178.9........ 94 1,127,514,511 30.2 175 179 342 340 8.325 1.41
179-190.9........ 7 214,807,954 5.8 180 181 356 357 8.559 1.31
203-214.9........ 1 5,494,723 0.1 207 214 216 214 7.590 1.14
215-226.9........ 1 3,483,189 0.1 223 230 360 350 8.840 1.30
227-238.9........ 19 122,287,765 3.3 233 234 246 237 7.766 1.80
239-250.9........ 1 105,297,461 2.8 240 240 240 240 8.049 N/A
251-262.9........ 11 95,582,586 2.6 259 263 264 263 7.655 N/A
------ -------------- ------------ --------- ----------- ------------ ------------ -------- --------
TOTAL/WTD. AVG . 337 $3,732,820,502 100% 149 153 337 333 7.996% 1.47
====== ============== ============ ========= =========== ============ ============ ======== ========
</TABLE>
<PAGE>
(RESTUBBED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE REPAYMENT
LTV DATE/LTV
-------- -----------
<C> <C>
N/A N/A
N/A N/A
73 65
65 56
69 62
55 42
38 1
66 50
72 59
74 2
70 49
58 7
N/A N/A
N/A N/A
-------- -----------
65% 54%
======== ===========
</TABLE>
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the close of business on the Cut-off Date, as adjusted for the
scheduled principal payments due on the Mortgage Loans on or before the
Cut-off Date. Prior to the issuance of the Offered Certificates, a Mortgage
Loan may be removed from the Mortgage Pool if the Depositor deems such
removal necessary or appropriate or if it is prepaid. This may cause the
range of Mortgage Rates and maturities as well as the other characteristics
of the Mortgage Loans to vary from those described herein.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed by the Depositor,
together with the Pooling and Servicing Agreement, with the Securities and
Exchange Commission within fifteen days after the initial issuance of the
Offered Certificates. In the event Mortgage Loans are removed from the
Mortgage Pool as set forth in the preceding paragraph, such removal will be
noted in the Form 8-K. Such Form 8-K will be available to purchasers and
potential purchasers of the Offered Certificates.
S-97
<PAGE>
DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of 24 Classes to be designated as the Class A-1A
Certificates, the Class A-1B Certificates, the Class A-1C Certificates, the
Class A-CS1 Certificates, the Class PS-1 Certificates, the Class A-1D
Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the
Class A-4 Certificates, the Class A-5 Certificates, the Class A-6
Certificates, the Class A-7 Certificates, the Class B-1 Certificates, the
Class B-2 Certificates, the Class B-3 Certificates, the Class B-4
Certificates, the Class B-5 Certificates, the Class B-6 Certificates, the
Class B-7 Certificates, the Class B-7H Certificates, the Class V-1
Certificates, the Class V-2 Certificates, the Class R Certificates and the
Class LR Certificates. Only the Class A-1A Certificates, the Class A-1B
Certificates, the Class A-1C Certificates, the Class A-CS1 Certificates, the
Class PS-1 Certificates, the Class A-1D Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the
Class A-5 Certificates and Class A-6 Certificates (the "Offered
Certificates") are offered hereby. The Class A-7, Class B-1 Certificates, the
Class B-2 Certificates, the Class B-3 Certificates, the Class B-4
Certificates, the Class B-5 Certificates, the Class B-6 Certificates, the
Class B-7 Certificates, the Class B-7H Certificates, the Class V-1
Certificates, the Class V-2 Certificates, the Class R Certificates and Class
LR Certificates (the "Private Certificates") are not offered hereby. The
Class A-CS1 and Class PS-1 Certificates are sometimes referred to herein as
the "Coupon Strip Certificates." The Classes of Certificates other than the
Class V-1, Class V-2, Class R and Class LR Certificates are sometimes
referred to herein as the "Sequential Certificates."
The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust Fund consisting of: (i) the Mortgage Loans and
all payments under and proceeds of the Mortgage Loans due after the Cut-off
Date; (ii) any Mortgaged Property acquired by the Special Servicer on behalf
of the Trust Fund through foreclosure or deed in lieu of foreclosure (upon
acquisition, an "REO Property") such funds or assets as from time to time are
deposited in the Collection Account, the Distribution Account, the Upper-Tier
Distribution Account, the Interest Reserve Account, the Excess Interest
Distribution Account, the Default Interest Distribution Account and any
account established in connection with REO Properties (an "REO Account");
(iii) the rights of the mortgagee under all insurance policies with respect
to the Mortgage Loans; (iv) the Depositor's rights and remedies under the
Mortgage Loan Purchase and Sale Agreements and the Bloomfield Purchase
Agreement; and (v) all of the mortgagee's right, title and interest in the
Reserve Accounts, the Cash Collateral Accounts and Lock Box Accounts.
The Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-2, Class A-3,
Class A-4, Class A-5 and Class A-6 Certificates will have initial Certificate
Balances of $[ ], $[ ], $[ ], $[ ], $[ ], $[ ], $[ ], $[ ], and
$[ ], respectively. The Class A-7, Class B-1, Class B-2, Class B-3, Class
B-4, Class B-5 and Class B-6 Certificates will have initial Certificate
Balances of $[ ], $[ ], $[ ], $[ ], $[ ], $[ ], and $[ ],
respectively. The Class B-7 and Class B-7H Certificates will have initial
Certificate Balances, in the aggregate, of approximately $[ ]. The Class
A-CS1 Certificates will have an initial Notional Balance equal to $[
], which is equal to the Certificate Balance of the Class A-1A Certificates
less $ . The Class PS-1 Certificates will have an initial Notional Balance
equal to $[ ], which is equal to the aggregate Stated Principal Balance of
the Mortgage Loans as of the Cut-off Date.
The initial Certificate Balance of each of the Class R, Class LR, Class
V-1 and Class V-2 Certificates will be zero. Additionally, the Class R, Class
LR, Class V-1 and Class V-2 Certificates will not have a Notional Balance.
The Certificate Balance of any Class of Certificates outstanding at any
time represents the maximum amount which the holders thereof are entitled to
receive as distributions allocable to principal from the cash flow on the
Mortgage Loans and the other assets in the Trust Fund; provided, however,
that in the event that Realized Losses previously allocated to a Class of
Certificates in reduction of the Certificate Balance thereof are recovered
subsequent to the reduction of the Certificate Balance of such Class to zero,
such Class may receive distributions in respect of such recoveries in
accordance with the priorities set forth under "--Distributions --
Priorities" herein.
The respective Certificate Balance of each Class of Certificates (other
than the Coupon Strip Certificates, the Class V-1, Class V-2, Class R and
Class LR Certificates) will in each case be reduced by amounts actually
distributed thereon that are allocable to principal and by any Realized
Losses (as defined herein) allocated to such Class of Certificates. The
Notional Balance of the Class A-CS1 Certificates will at all times equal the
Certificate Balance of the Class A-1A Certificates minus $ . The
Notional Balance of the Class PS-1 Certificates will for purposes of
S-98
<PAGE>
distributions on each Distribution Date equal the aggregate Stated Principal
Balance of the Mortgage Loans as of the first day of the related Interest
Accrual Period. The Notional Balance of the Class PS-1 Certificates will be
reduced to the extent of all reductions in the aggregate Stated Principal
Balance of such Mortgage Loans.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates will be made
on the fourth business day following the 11th day of each month beginning on
April 17, 1998 (each, a "Distribution Date"), provided that if the 11th day
of a month is not a business day, then the Distribution Date shall be the
fifth business day following such 11th day. All distributions (other than the
final distribution on any Certificate) will be made by the Trustee to the
persons in whose names the Certificates are registered at the close of
business on the 10th day of the month in which the related Distribution Date
occurs, or if such day is not a business day, the preceding business day (the
"Record Date"); the Record Date for the Distribution Date occurring on April
17, 1998 for all purposes other than the receipt of distributions is the
Closing Date. Such distributions will be made (a) by wire transfer in
immediately available funds to the account specified by the Certificateholder
at a bank or other entity having appropriate facilities therefor, if such
Certificateholder provides the Trustee with wiring instructions no less than
five business days prior to the related Record Date, 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 Balance thereof has been reduced
to zero) of such Certificate at the location specified in the notice to the
holder thereof of such final distribution. All distributions made with
respect to a Class of Certificates on each Distribution Date will be
allocated pro rata among the outstanding Certificates of such Class based on
their respective Percentage Interests. The "Percentage Interest" evidenced by
any Offered Certificate is equal to the initial denomination thereof as of
the Closing Date divided by the initial Certificate Balance or Notional
Balance, as applicable, of the related Class.
The aggregate distribution to be made with respect to the Certificates on
any Distribution Date will equal the Available Funds. The "Available Funds"
for a Distribution Date will be the sum of all previously undistributed
Monthly Payments or other receipts on account of principal and interest on or
in respect of the Mortgage Loans (including Unscheduled Payments and Net REO
Proceeds, if any) received by the Servicer in the related Collection Period,
plus (i) all P&I Advances (except Subordinate Class Advance Amounts) made by
the Servicer, the Trustee or the Fiscal Agent, as applicable, in respect of
such Distribution Date, (ii) for the Distribution Date occurring in each
March, the "Withheld Amounts" as described under "--The Pooling and Servicing
Agreement -- Accounts -- Interest Reserve Account" and required to be
deposited in the Distribution Account pursuant to the Pooling and Servicing
Agreement, (iii) all other amounts required to be deposited in the Collection
Account by the Servicer pursuant to the Pooling and Servicing Agreement
allocable to the Mortgage Loans, (iv) any late payments of Monthly Payments
received after the end of the Collection Period relating to such Distribution
Date but prior to the related Servicer Remittance Date and (v) any Servicer
Prepayment Interest Shortfalls remitted by the Servicer to the Collection
Account (as described under "--Prepayment Interest Shortfalls"), but
excluding the following:
(a) amounts permitted to be used to reimburse the Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, for previously
unreimbursed Advances and interest thereon as described herein under "The
Pooling and Servicing Agreement -- Advances;"
(b) the aggregate amount of the Servicing Fee (which includes the fees
for both the Trustee and the Servicer) and the other Servicing
Compensation (e.g., late fees, loan modification fees, extension fees,
loan service transaction fees, demand fees, beneficiary statement charges,
and similar fees) payable to the Servicer and the Special Servicing Fee
(and other amounts payable to the Special Servicer described under "The
Pooling and Servicing Agreement -- Special Servicing" herein), and
reinvestment earnings on payments received with respect to the Mortgage
Loans which the Servicer or Special Servicer is entitled to receive as
additional servicing compensation, in each case in respect of such
Distribution Date;
(c) all amounts representing scheduled Monthly Payments due after the
related Due Date;
(d) to the extent permitted by the Pooling and Servicing Agreement, that
portion of liquidation proceeds, insurance proceeds and condemnation
proceeds with respect to a Mortgage Loan which represents any unpaid
Servicing Fee and special servicing compensation together with interest
thereon as described herein, to which the Servicer, the Special Servicer
and the Trustee is entitled;
S-99
<PAGE>
(e) all amounts representing certain expenses reimbursable or payable to
the Servicer, the Special Servicer, the Trustee or the Fiscal Agent and
other amounts permitted to be retained by the Servicer or withdrawn
pursuant to the Pooling and Servicing Agreement in respect of various
items, including interest thereon as provided in the Pooling and Servicing
Agreement;
(f) Prepayment Premiums;
(g) Default Interest;
(h) Excess Interest;
(i) [with respect to the Mortgage Loan known as the [ ] Loan, and any
Distribution Date relating to each Interest Accrual Period ending in each
February or any January occurring in a year which is not a leap year, an
amount equal to one day of interest on the Stated Principal Balance of
each such Mortgage Loan as of the Due Date occurring in the month
preceding the month in which such Distribution Date occurs at the related
Mortgage Rate to the extent such amounts are to be deposited in the
Interest Reserve Account and held for future distribution];
(j) all amounts received with respect to each Mortgage Loan previously
purchased or repurchased pursuant to the Pooling and Servicing Agreement
during the related Collection Period and subsequent to the date as of
which the amount required to effect such purchase or repurchase was
determined; and
(k) the amount reasonably determined by the Trustee to be necessary to
pay any applicable federal, state or local taxes imposed on the Upper-Tier
REMIC or the Lower-Tier REMIC under the circumstances and to the extent
described in the Pooling and Servicing Agreement.
The "Monthly Payment" with respect to any Mortgage Loan (other than any
REO Mortgage Loan) and any Due Date is the scheduled monthly payment of
principal (if any) and interest at the Mortgage Rate, excluding any Balloon
Payment (but not excluding any constant Monthly Payment), which is payable by
the related borrower on the related Due Date. The Monthly Payment with
respect to an REO Mortgage Loan for any Distribution Date is the monthly
payment that would otherwise have been payable on the related Due Date had
the related Note not been discharged, determined as set forth in the Pooling
and Servicing Agreement.
"Unscheduled Payments" are all net liquidation proceeds, net insurance
proceeds and net condemnation proceeds payable under the Mortgage Loans, the
repurchase price of any Mortgage Loan repurchased by the Mortgage Loan
Sellers or Bloomfield due to a breach of a representation or warranty made by
them or the purchase price paid by the parties described under "The Pooling
and Servicing Agreement -- Optional Termination," and any other payments
under or with respect to the Mortgage Loans not scheduled to be made,
including Principal Prepayments, but excluding Prepayment Premiums.
"Net REO Proceeds" with respect to any REO Property and any related REO
Mortgage Loan (as defined herein) are all revenues received by the Special
Servicer with respect to such REO Property or REO Mortgage Loan net of any
insurance premiums, taxes, assessments and other costs and expenses permitted
to be paid therefrom pursuant to the Pooling and Servicing Agreement.
"Principal Prepayments" are payments of principal made by a borrower on a
Mortgage Loan that are received in advance of the scheduled Due Date for such
payments and are not accompanied by an amount of interest representing the
full amount of scheduled interest due on any date or dates in any month or
months subsequent to the month of prepayment, other than any amount paid in
connection with the release of the related Mortgaged Property through
defeasance.
The "Collection Period" with respect to a Distribution Date is the period
beginning on the day after the preceding Collection Period (or, with respect
to the first Distribution Date, the day after the Cut-off Date) and ending on
the 11th day in the month in which such Distribution Date occurs (or, if such
day is not a Business Day, the following Business Day).
"Net Default Interest" with respect to any Mortgage Loan is any Default
Interest accrued on such Mortgage Loan less amounts required to pay the
Servicer, the Trustee or Fiscal Agent, as applicable, interest on Advances at
the Advance Rate.
"Default Interest" with respect to any Mortgage Loan is interest accrued
on such Mortgage Loan at the excess of (i) the related Default Rate over (ii)
the sum of the related Mortgage Rate and, if applicable, the related Excess
Rate.
S-100
<PAGE>
The "Default Rate" with respect to any Mortgage Loan is the per annum
rate at which interest accrues on such Mortgage Loan following any event of
default on such Mortgage Loan including a default in the payment of a Monthly
Payment or a Balloon Payment.
"Excess Interest" with respect to each of the Mortgage Loans that has a
Revised Rate, interest accrued on such Mortgage Loan allocable to the Excess
Rate.
"Excess Rate" with respect to each of the Mortgage Loans that has a
Revised Rate, the difference between (a) the applicable Revised Rate and (b)
the applicable Mortgage Rate.
Payment Priorities. As used below in describing the priorities of
distribution of Available Funds for each Distribution Date, the terms set
forth below will have the following meanings.
The "Interest Accrual Amount" with respect to any Distribution Date and
any Class of Certificates (other than the Class A-CS1, Class PS-1, Class V-1,
Class V-2, Class R and Class LR Certificates) is equal to interest for the
related Interest Accrual Period at the Pass-Through Rate for such Class on
the related Certificate Balance (provided, that for interest accrual purposes
any distributions in reduction of Certificate Balance or reductions in
Certificate Balance as a result of allocations of Realized Losses on the
Distribution Date occurring in an Interest Accrual Period will be deemed to
have been made on the first day of such Interest Accrual Period). The
"Interest Accrual Amount" with respect to any Distribution Date and the Class
A-CS1 and Class PS-1 Certificates is equal to interest for the related
Interest Accrual Period at the Pass-Through Rate for such Class for such
Interest Accrual Period on the Notional Balance of such Class (provided with
respect to the Class A-1A Certificates, that any reductions in the Notional
Balance of such Class as a result of distributions in reduction of the
Certificate Balance of the Class A-1A Certificates or allocations of Realized
Losses to the Certificate Balance of the Class A-1A Certificates on the
Distribution Date occurring in an Interest Accrual Period, will be deemed to
have occurred on the first day of such Interest Accrual Period). Calculations
of interest (except in respect of the Interest Accrual Period beginning in
March 1998) due in respect of the Certificates will be made on the basis of a
360-day year consisting of twelve 30-day months.
The "Interest Distribution Amount" with respect to any Distribution Date
and the Class A-1A, Class A-1B, Class A-1C, Class A-CS1, Class A-1D, Class
A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class B-1, Class
B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7 and Class B-7H
Certificates will equal the Interest Accrual Amount thereof for such
Distribution Date.
The "Interest Distribution Amount" with respect to any Distribution Date
and the Class PS-1 Certificates is its Interest Accrual Amount for such
Distribution Date minus the aggregate Reduction Interest Distribution Amount
in respect of such Distribution Date.
The "Reduction Interest Distribution Amount" for the Class PS-1
Certificates with respect to any Distribution Date and each of clauses
Seventh, Eleventh, Fifteenth, Nineteenth, Twenty-third, Twenty-seventh,
Thirty-first, Thirty-fifth, Thirty-ninth, Forty-third, Forty-seventh,
Fifty-first, Fifty-fifth and Fifty-eighth under "Distribution of Available
Funds" is the amount of interest accrued for the Interest Accrual Period at
the applicable Reduction Interest Pass-Through Rate for such Interest Accrual
Period on the aggregate amount of Appraisal Reduction Amounts and Delinquency
Reduction Amounts notionally allocated to the related classes referred to in
subclause (B) of each such clause as of such Distribution Date, as described
below under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts."
The "Reduction Interest Pass-Through Rate" with respect to any
Distribution Date is (i) when the Class B-7 Certificates are the most
subordinate Class outstanding, the Weighted Average Net Mortgage Pass-Through
Rate minus [ %], (ii) when the Class B-6 Certificates are the most
subordinate Class outstanding, the Weighted Average Net Mortgage Pass-Through
Rate minus [ %], (iii) when the Class B-5 Certificates are the most
subordinate Class outstanding, the Weighted Average Net Mortgage Pass-Through
Rate minus [ %], (iv) when the Class B-4 Certificates are the most
subordinate Class outstanding, the Weighted Average Net Mortgage Pass-Through
Rate minus [ %], (v) when the Class B-3 Certificates are the most subordinate
Class outstanding, the Weighted Average Net Mortgage Pass-Through Rate minus
[ %], (vi) when the Class B-2 Certificates are the most subordinate Class
outstanding, the Weighted Average Net Mortgage Pass-Through Rate minus [ %],
(vii) when the Class B-1 Certificates are the most subordinate Class
outstanding, the Weighted Average Net Mortgage Pass-Through Rate minus [ %],
(viii) when the Class A-7 Certificates are the most subordinate Class
outstanding, [ %], (ix) when the Class A-6 Certificates are the most
subordinate Class outstanding, [ %], (x) when the Class A-5 Certificates are
the most subordinate Class outstanding, [ %], (xi) when the Class A-4
Certificates are the most subordinate Class outstanding, [ %], (xii) when the
Class A-3
S-101
<PAGE>
Certificates are the most subordinate Class outstanding, [ %], (xiii) when
the Class A-2 Certificates are the most subordinate Class outstanding, [ %]
and (xiv) when the Class A-1D Certificates are the most subordinate Class
outstanding, the Weighted Average Net Mortgage Pass-Through Rate minus [ %].
The "Reduction Interest Shortfalls" with respect to any Distribution Date
and each of the clauses Seventh, Eleventh, Fifteenth, Nineteenth,
Twenty-third, Twenty-seventh, Thirty-first, Thirty-fifth, Thirty-ninth,
Forty-third, Forty-seventh, Fifty-first, Fifty-fifth and Fifty-eighth under
"Distribution of Available Funds" is any shortfall in the Reduction Interest
Distribution Amount required to be distributed to the Class PS-1 Certificates
pursuant to such clause on such Distribution Date.
"Appraisal Reduction Amount" is the amount described under "--Appraisal
Reductions."
"Delinquency Reduction Amount" is, in connection with a Delinquency, an
amount equal to the scheduled payment due on the related Due Date (adjusted
to the applicable Net Mortgage Pass-Through Rate with respect to the interest
portion) and not received from a borrower under any Mortgage Loan.
"Delinquency" means any failure of the borrower to make a scheduled
payment on a Due Date.
The "Interest Accrual Period" with respect to any Distribution Date
commences on the eleventh day of the month preceding the month in which such
Distribution Date occurs and ends on the tenth day of the month in which such
Distribution Date occurs provided that the first Interest Accrual Period is
assumed to consist of 21 days. Except for the first Interest Accrual Period,
each Interest Accrual Period is assumed to consist of 30 days.
An "Interest Shortfall" with respect to any Distribution Date for any
Class of Offered Certificates is any shortfall in the amount of interest
required to be distributed on such Class on such Distribution Date. No
interest accrues on Interest Shortfalls.
The "Prepayment Interest Shortfall" with respect to any Distribution Date
is equal to the amount of any shortfall in collections of interest (adjusted
to the applicable Net Mortgage Pass-Through Rate) resulting from a Principal
Prepayment on such Mortgage Loan during the related Collection Period and
prior to the related Due Date. Such shortfall may result because interest on
a Principal Prepayment in full is paid by the related borrower only to the
date of prepayment.
The "Pass-Through Rate" for any Class of Offered Certificates is the per
annum rate at which interest accrues on the Certificates of such Class during
any Interest Accrual Period. The Pass-Through Rate on the Class A-1A, Class
A-1B, Class A-1C and Class A-1D Certificates is a per annum rate equal to
[ %], [ %], [ %] and [ %], respectively. The Pass-Through Rate on the Class
A-CS1 Certificates is a per annum rate equal to the Weighted Average Net
Mortgage Pass-Through Rate minus [ %]. The Pass-Through Rate on the Class
PS-1 Certificates is a per annum rate equal to the Weighted Average Net
Mortgage Pass-Through Rate minus the Weighted Average Pass-Through Rate. The
Pass-Through Rate on the Class A-2 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus [ %]. The
Pass-Through Rate on the Class A-3 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus [ %]. The
Pass-Through Rate on the Class A-4 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus [ %]. The
Pass-Through Rate on the Class A-5 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus [ %]. The
Pass-Through Rate on the Class A-6 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus [ %]. The
Pass-Through Rate on the Class A-7 Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus [ %]. The
Pass-Through Rate on the Class B-1, Class B-2, Class B-3, Class B-4, Class
B-5, Class B-6, Class B-7 and Class B-7H Certificates is a per annum rate
equal to [ %]. The Class V-1, Class V-2, Class R and Class LR Certificates do
not have a Pass-Through Rate.
The "Weighted Average Pass-Through Rate" for purposes of calculating the
Pass-Through Rate on the Class PS-1 Certificates, with respect to any
Interest Accrual Period, is the amount (expressed as a percentage), the
numerator of which is the sum of (i) the sum of the products of (A) the
Pass-Through Rate with respect to each Class of Certificates having a
Pass-Through Rate (other than the Coupon Strip Certificates) and (B) the
Certificate Balance of such class as of the first day of such Interest
Accrual Period and (ii) the product of (A) the Pass-Through Rate on the Class
A-CS1 Certificates and (B) the Notional Balance of such Class as of such date
and the denominator of which is the sum of the Certificate Balances of each
class included in clause (i)(A) above as of such date (provided in each case,
any reductions in Certificate Balance or Notional Balance, as applicable, as
a result of distributions or allocations of Realized Losses to such class or
the related Class, respectively, occurring in an Interest Accrual Period will
be deemed to have been made on the first day of such Interest Accrual
Period).
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The "Weighted Average Net Mortgage Pass-Through Rate" for any
Distribution Date is the amount (expressed as a percentage) the numerator of
which is the sum for all Mortgage Loans, of the products of (i) the Net
Mortgage Pass-Through Rate of each such Mortgage Loan and (ii) the Stated
Principal Balance of each such Mortgage Loan and the denominator of which is
the sum of the Stated Principal Balances of all such Mortgage Loans as of
their respective Due Date preceding the prior Distribution Date.
The "Net Mortgage Pass-Through Rate" with respect to any Mortgage and any
Distribution Date is the Mortgage Pass-Through Rate for such Mortgage Loan
for the related Interest Accrual Period minus the Servicing Fee Rate.
The "Mortgage Pass-Through Rate" with respect to the Mortgage Loans that
provide for calculations of interest based on twelve months of 30 days each
is equal to the Mortgage Rate thereof.
The "Mortgage Pass-Through Rate" with respect to the Mortgage Loans that
provide for interest based on a 360-day year and the actual number of days
elapsed for any Interest Accrual Period, is equal to the Mortgage Rate
thereof multiplied by a fraction the numerator of which is the actual number
of days in such Interest Accrual Period and the denominator of which is 30.
[The "Mortgage Pass-Through Rate" with respect to the [ ] Loan for any
Interest Accrual Period commencing in any (a) January, February, April, June,
September and November and any December occurring in a year immediately
preceding any year which is not a leap year, is the Mortgage Rate thereof, or
(b) March (other than March 1998), May , July, August and October and any
December occurring in a year immediately preceding a year which is a leap
year, is equal to the Mortgage Rate thereof multiplied by a fraction the
numerator of which is the actual number of days in such Interest Accrual
Period and the denominator of which is 30.]
Notwithstanding the foregoing, the Mortgage Pass-Through Rate with respect
to each Mortgage Loan for the first Interest Accrual Period is the Mortgage
Rate thereof.
The "Mortgage Rate" with respect to each Mortgage Loan and any Interest
Accrual Period is the annual rate, not including any Excess Rate, at which
interest accrues on such Mortgage Loan during such period (in the absence of
a default), as set forth in the related Note and on Annex A. The Mortgage
Rate for purposes of calculating the Weighted Average Net Mortgage
Pass-Through Rate will be the Mortgage Rate of such Mortgage Loan without
taking into account any reduction in the interest rate by a bankruptcy court
pursuant to a plan of reorganization or pursuant to any of its equitable
powers or a reduction on interest or principal due to a modification as
described under "The Pooling and Servicing Agreement -- Modifications."
The "Principal Distribution Amount" for any Distribution Date will be
equal to the sum of:
(i) the principal component of all scheduled Monthly Payments (other than
Balloon Payments) due on the Mortgage Loans on or before the related Due Date
(if received or advanced);
(ii) the principal component of all Assumed Scheduled Payments or Minimum
Defaulted Monthly Payments, as applicable, due on or before the related Due
Date (if received or advanced) with respect to any Mortgage Loan that is
delinquent in respect of its Balloon Payment;
(iii) the Stated Principal Balance of each Mortgage Loan that was, during
the related Collection Period, repurchased from the Trust Fund in connection
with the breach of a representation or warranty or purchased from the Trust
Fund as described herein under "The Pooling and Servicing Agreement --
Optional Termination;"
(iv) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan which was liquidated during the related Collection Period;
(v) all Balloon Payments and, to the extent not included in the preceding
clauses, any other principal payment on any Mortgage Loan received on or
after the Maturity Date thereof, to the extent received during the related
Collection Period;
(vi) to the extent not included in the preceding clause (iii) or (iv), all
other Principal Prepayments received in the related Collection Period; and
(vii) to the extent not included in the preceding clauses, any other full
or partial recoveries in respect of principal, including net insurance
proceeds, net liquidation proceeds and Net REO Proceeds received in the
related Collection Period (in the case of clauses (i) through (vii) net of
any related outstanding P&I Advances allocable to principal and excluding any
amounts representing recoveries of Subordinate Class Advance Amounts).
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The "Assumed Scheduled Payment" with respect to any Mortgage Loan that is
delinquent in respect of its Balloon Payment (including any REO Mortgage Loan
as to which the Balloon Payment would have been past due) is an amount equal
to the sum of (a) the principal portion of the Monthly Payment that would
have been due on such Mortgage Loan on the related Due Date based on the
constant payment required by the related Note or the original amortization
schedule thereof (as calculated with interest at the related Mortgage Rate),
if applicable, assuming such Balloon Payment has not become due after giving
effect to any modification, and (b) interest at the applicable Net Mortgage
Pass-Through Rate.
An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
Distribution of Available Funds. On each Distribution Date, prior to the
Crossover 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-1A, Class
A-1B, Class A-1C, Class A-CS1 and Class PS-1 Certificates, up to an amount
equal to the aggregate Interest Distribution Amounts of such Classes;
(ii) Second, pro rata, to the Class A-1A, Class A-1B, Class A-1C, Class
A-CS1 and Class PS-1 Certificates, in respect of interest, up to an amount
equal to the aggregate unpaid Interest Shortfalls previously allocated to
such Classes;
(iii) Third, to the Class A-1A Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount until the Certificate Balance thereof is reduced to zero;
(iv) Fourth, to the Class A-1B Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance thereof is reduced to zero;
(v) Fifth, to the Class A-1C Certificates, in reduction of the Certificate
Balance thereof, an amount equal to the Principal Distribution Amount less
amounts of Principal Distribution Amount distributed pursuant to all prior
clauses, until the Certificate Balance thereof is reduced to zero;
(vi) Sixth, to the Class A-1D Certificates in respect of interest, up to
an amount equal to the Interest Distribution Amount of such Class;
(vii) Seventh, pro rata, (A) to the Class A-1D Certificates in respect of
interest, up to an amount equal to the unpaid Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates in respect of the
Reduction Interest Distribution Amount attributable to the notional reduction
in the Certificate Balance of the Class A-1D Certificates as described under
"--Delinquency Reduction Amounts and Appraisal Reduction Amounts," up to an
amount equal to the Reduction Interest Distribution Amount so attributable
and (C) to the Class PS-1 Certificates, up to an amount equal to the unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(viii) Eighth, to the Class A-1D Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance of such Class is reduced to
zero;
(ix) Ninth, to the Class A-1D Certificates, to the extent not distributed
pursuant to all prior clauses, for the unreimbursed amounts of Realized
Losses, if any, an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such Class;
(x) Tenth, to the Class A-2 Certificates in respect of interest, up to an
amount equal to the Interest Distribution Amount of such Class;
(xi) Eleventh, pro rata, (A) to the Class A-2 Certificates in respect of
interest, up to an amount equal to the unpaid Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates in respect of the
Reduction Interest Distribution Amount attributable to the notional reduction
in the Certificate Balance of the Class A-2 Certificates as described under
"--Delinquency Reduction Amounts and Appraisal Reduction Amounts," up to an
amount equal to the Reduction Interest Distribution Amount so attributable
and (C) to the Class PS-1 Certificates, up to an amount equal to the unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(xii) Twelfth, to the Class A-2 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance of such Class is reduced to
zero;
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(xiii) Thirteenth, to the Class A-2 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xiv) Fourteenth, to the Class A-3 Certificates in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
(xv) Fifteenth, pro rata, (A) to the Class A-3 Certificates in respect of
interest, up to an amount equal to the unpaid Interest Shortfalls previously
allocated to such Class, (B) to the Class PS-1 Certificates in respect of the
Reduction Interest Distribution Amount attributable to the notional reduction
in the Certificate Balance of the Class A-3 Certificates as described under
"--Delinquency Reduction Amounts and Appraisal Reduction Amounts," up to an
amount equal to the Reduction Interest Distribution Amount so attributable
and (C) to the Class PS-1 Certificates, up to an amount equal to the unpaid
Reduction Interest Shortfalls previously allocated to the Class PS-1
Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(xvi) Sixteenth, to the Class A-3 Certificates in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount, less the amount of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xvii) Seventeenth, to the Class A-3 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, up to an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xviii) Eighteenth, to the Class A-4 Certificates in respect of interest,
up to an amount equal to the Interest Distribution Amount of such Class;
(xix) Nineteenth, pro rata, (A) to the Class A-4 Certificates in respect
of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class, (B) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class A-4 Certificates
as described under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount equal
to the unpaid Reduction Interest Shortfalls previously allocated to the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(xx) Twentieth, to the Class A-4 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance of such Class is reduced to
zero;
(xxi) Twenty-first, to the Class A-4 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xxii) Twenty-second, to the Class A-5 Certificates in respect of
interest, up to an amount equal to the Interest Distribution Amount of such
Class;
(xxiii) Twenty-third, pro rata, (A) to the Class A-5 Certificates in
respect of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class, (B) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class A-5 Certificates
as described under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount equal
to the unpaid Reduction Interest Shortfalls previously allocated to the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(xxiv) Twenty-fourth, to the Class A-5 Certificates in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount, less the amount of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxv) Twenty-fifth, to the Class A-5 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
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(xxvi) Twenty-sixth, to the Class A-6 Certificates in respect of
interest, up to an amount equal to the Interest Distribution Amount of such
Class;
(xxvii) Twenty-seventh, pro rata, (A) to the Class A-6 Certificates in
respect of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class, (B) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class A-6 Certificates
as described under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount equal
to the unpaid Reduction Interest Shortfalls previously allocated to the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(xxviii) Twenty-eighth, to the Class A-6 Certificates in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount, less the amount of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxix) Twenty-ninth, to the Class A-6 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xxx) Thirtieth, to the Class A-7 Certificates in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
(xxxi) Thirty-first, pro rata, (A) to the Class A-7 Certificates in
respect of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class, (B) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class A-7 Certificates
as described under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount equal
to the unpaid Reduction Interest Shortfalls previously allocated to the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(xxxii) Thirty-second, to the Class A-7 Certificates in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount, less the amount of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(xxxiii) Thirty-third, to the Class A-7 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xxxiv) Thirty-fourth, to the Class B-1 Certificates in respect of
interest, up to an amount equal to the Interest Distribution Amount of such
Class;
(xxxv) Thirty-fifth, pro rata, (A) to the Class B-1 Certificates in
respect of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class, (B) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class B-1 Certificates
as described under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount equal
to the unpaid Reduction Interest Shortfalls previously allocated to the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(xxxvi) Thirty-sixth, to the Class B-1 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance of such Class is reduced to
zero;
(xxxvii) Thirty-seventh, to the Class B-1 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xxxviii) Thirty-eighth, to the Class B-2 Certificates in respect of
interest, up to an amount equal to the Interest Distribution Amount of such
Class;
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<PAGE>
(xxxix) Thirty-ninth, pro rata, (A) to the Class B-2 Certificates in
respect of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class, (B) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class B-2 Certificates
as described under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount equal
to the unpaid Reduction Interest Shortfalls previously allocated to the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(xl) Fortieth, to the Class B-2 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant to
prior clauses, until the Certificate Balance of such Class is reduced to
zero;
(xli) Forty-first, to the Class B-2 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xlii) Forty-second, to the Class B-3 Certificates in respect of interest,
up to an amount equal to the Interest Distribution Amount of such Class;
(xliii) Forty-third, pro rata, (A) to the Class B-3 Certificates in
respect of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class, (B) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class B-3 Certificates
as described under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount equal
to the unpaid Reduction Interest Shortfalls previously allocated to the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(xliv) Forty-fourth, to the Class B-3 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance of such Class is reduced to
zero;
(xlv) Forty-fifth, to the Class B-3 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(xlvi) Forty-sixth, to the Class B-4 Certificates in respect of interest,
up to an amount equal to the Interest Distribution Amount of such Class;
(xlvii) Forty-seventh, pro rata, (A) to the Class B-4 Certificates in
respect of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class, (B) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class B-4 Certificates
as described under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount equal
to the unpaid Reduction Interest Shortfalls previously allocated to the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(xlviii) Forty-eighth, to the Class B-4 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance of such Class is reduced to
zero;
(xlix) Forty-ninth, to the Class B-4 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(l) Fiftieth, to the Class B-5 Certificates in respect of interest, up to
an amount equal to the Interest Distribution Amount of such Class;
(li) Fifty-first, pro rata, (A) to the Class B-5 Certificates in respect
of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class, (B) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class B-5 Certificates
as
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described under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount equal
to the unpaid Reduction Interest Shortfalls previously allocated to the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(lii) Fifty-second, to the Class B-5 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance of such Class is reduced to
zero;
(liii) Fifty-third, to the Class B-5 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(liv) Fifty-fourth, to the Class B-6 Certificates in respect of interest,
up to an amount equal to the Interest Distribution Amount of such Class;
(lv) Fifty-fifth, pro rata, (A) to the Class B-6 Certificates in respect
of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class, (B) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class B-6 Certificates
as described under "--Delinquency Reduction Amounts and Appraisal Reduction
Amounts," up to an amount equal to the Reduction Interest Distribution Amount
so attributable and (C) to the Class PS-1 Certificates, up to an amount equal
to the unpaid Reduction Interest Shortfalls previously allocated to the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts
distributable under Clause (B);
(lvi) Fifty-sixth, to the Class B-6 Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less amounts of Principal Distribution Amount distributed pursuant to
all prior clauses, until the Certificate Balance of such Class is reduced to
zero;
(lvii) Fifty-seventh, to the Class B-6 Certificates, to the extent not
distributed pursuant to all prior clauses, for the unreimbursed amounts of
Realized Losses, if any, an amount equal to the aggregate of such
unreimbursed Realized Losses previously allocated to such Class;
(lviii) Fifty-eighth, pro rata, (A) to the Class PS-1 Certificates in
respect of the Reduction Interest Distribution Amount attributable to the
notional reduction in the Certificate Balance of the Class B-7 and Class B-7H
Certificates as described under "--Delinquency Reduction Amounts and
Appraisal Reduction Amounts," up to an amount equal to the Reduction Interest
Distribution Amount so attributable and (B) to the Class PS-1 Certificates,
up to an amount equal to the unpaid Reduction Interest Shortfalls previously
allocated to the Class PS-1 Certificates in respect of Reduction Interest
Distribution Amounts distributable under Clause (A);
(lix) Fifty-ninth, pro rata, to the Class B-7 and Class B-7H Certificates
in respect of interest, up to an amount equal to the aggregate Interest
Distribution Amounts of such classes;
(lx) Sixtieth, pro rata, to the Class B-7 and Class B-7H Certificates in
respect of interest, up to an amount equal to the aggregate unpaid Interest
Shortfalls previously allocated to such classes;
(lxi) Sixty-first, pro rata, based on Certificate Balance to the Class B-7
and Class B-7H Certificates in reduction of the Certificate Balances thereof,
an amount equal to the Principal Distribution Amount less amounts of the
Principal Distribution Amount distributed pursuant to all prior clauses,
until the Certificate Balance of each such class is reduced to zero;
(lxii) Sixty-second, pro rata, to the Class B-7 and Class B-7H
Certificates, to the extent not distributed pursuant to all prior clauses,
for the unreimbursed amounts of Realized Losses, if any, an amount equal to
the aggregate of such unreimbursed Realized Losses previously allocated to
such classes; and
(lxiii) Sixty-third, to the Class R and Class LR Certificates.
All references to "pro rata" in the preceding clauses unless otherwise
specified mean pro rata based upon the amount distributable pursuant to such
clause.
Notwithstanding the foregoing, on each Distribution Date occurring on or
after the Crossover Date, the Principal Distribution Amount will be
distributed to the Class A-1A, Class A-1B and Class A-1C Certificates, pro
rata, based on
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their respective Certificate Balances, in reduction of their respective
Certificate Balances, until the Certificate Balance of each such Class is
reduced to zero, and any unreimbursed amounts of Realized Losses previously
allocated to such classes, if available, will be distributed pro rata based
on their respective Certificate Balances. The "Crossover Date" is the
Distribution Date on which the Certificate Balance of each Class of
Certificates other than the Class A-1A, Class A-1B and Class A-1C
Certificates have been reduced to zero. The Class A-CS1 and Class PS-1
Certificates will not be entitled to any distribution of principal.
Prepayment Premiums. On each Distribution Date, Prepayment Premiums with
respect to any Unscheduled Payments received in the related Collection Period
shall be distributed to the holders of the Offered Certificates outstanding
on such Distribution Date (and will not be applied to reduce the outstanding
Certificate Balance of such Class), in the following amounts and order of
priority, with respect to the Certificates of each Class in each case to the
extent remaining amounts of Prepayment Premiums are available therefor:
(i) First, to the Class A-CS1 Certificates, an amount equal to (A) the
present value (discounted at the Discount Rate (as defined below) for the
Class A-CS1 Certificates plus the Spread Rate (as defined below) for the
Class A-CS1 Certificates) of the aggregate interest that would have been paid
in respect of the Class A-CS1 Certificates from the Distribution Date
occurring in the following month until the Notional Balance of the Class
A-CS1 Certificates would have been reduced to zero had the related prepayment
not occurred, minus (B) the present value (discounted at the Discount Rate
for the Class A-CS1 Certificates plus the Spread Rate for the Class A-CS1
Certificates) of the aggregate interest that will be paid in respect of Class
A-CS1 Certificates from the Distribution Date occurring in the following
month until the Notional Balance of the Class A-CS1 Certificates is reduced
to zero following such prepayment (in each case assuming no further
prepayments are made except that all Mortgage Loans prepay on Anticipated
Repayment Dates where applicable);
(ii) Second, to the Class PS-1 Certificates, an amount equal to (A) the
present value (discounted at the Discount Rate for the Class PS-1
Certificates plus the Spread Rate for the Class PS-1 Certificates) of the
aggregate interest that would have been paid in respect of the Class PS-1
Certificates from the Distribution Date occurring in the following month
until the Notional Balance of the Class PS-1 Certificates would have been
reduced to zero had the related prepayment not occurred, minus (B) the
present value (discounted at the Discount Rate for the Class PS-1
Certificates plus the Spread Rate for the Class PS-1 Certificates) of the
aggregate interest that will be paid in respect of Class PS-1 Certificates
from the Distribution Date occurring in the following month until the
Notional Balance of the Class PS-1 Certificates is reduced to zero following
such prepayment (in each case assuming no further prepayments are made except
that all Mortgage Loans prepay on Anticipated Repayment Dates where
applicable);
(iii) Third, to the Class A-1A Certificates, an amount equal to (A) the
present value (discounted at the Discount Rate for the Class A-1A
Certificates plus the Spread Rate for the Class A-1A Certificates) of the
aggregate principal and interest that would have been paid in respect of the
Class A-1A Certificates from the Distribution Date occurring in the following
month until the Certificate Balance of the Class A-1A Certificates would have
been reduced to zero had the related prepayment not occurred, minus (B) the
sum of (i) the amount of such prepayment distributed in respect of the Class
A-1A Certificates and (ii) the present value (discounted at the Discount Rate
for the Class A-1A Certificates plus the Spread Rate for the Class A-1A
Certificates) of the aggregate principal and interest that will be paid in
respect of the Class A-1A Certificates from the Distribution Date occurring
in the following month until the Certificate Balance of the Class A-1A
Certificates is reduced to zero following such prepayment (in each case
assuming no further prepayments are made except that all Mortgage Loans
prepay on Anticipated Repayment Dates where applicable);
(iv) Fourth, to the Class A-1B Certificates, an amount equal to (A) the
present value (discounted at the Discount Rate for the Class A-1B
Certificates plus the Spread Rate for the Class A-1B Certificates) of the
aggregate principal and interest that would have been paid in respect of the
Class A-1B Certificates from the Distribution Date occurring in the following
month until the Certificate Balance of the Class A-1B Certificates would have
been reduced to zero had the related prepayment not occurred, minus (B) the
sum of (i) the amount of such prepayment distributed in respect of the Class
A-1B Certificates and (ii) the present value (discounted at the Discount Rate
for the Class A-1B Certificates plus the Spread Rate for the Class A-1B
Certificates) of the aggregate principal and interest that will be paid in
respect of the Class A-1B Certificates from the Distribution Date occurring
in the following month until the Certificate Balance of the Class A-1B
Certificates is reduced to zero following such prepayment (in each case
assuming no further prepayments are made except that all Mortgage Loans
prepay on Anticipated Repayment Dates where applicable); and
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(v) Fifth, to the Class A-1C Certificates, an amount equal to (A) the
present value (discounted at the Discount Rate for the Class A-1C
Certificates plus the Spread Rate for the Class A-1C Certificates) of the
aggregate principal and interest that would have been paid in respect of the
Class A-1C Certificates from the Distribution Date occurring in the following
month until the Certificate Balance of the Class A-1C Certificates would have
been reduced to zero had the related prepayment not occurred, minus (B) the
sum of (i) the amount of such prepayment distributed in respect of the Class
A-1C Certificates and (ii) the present value (discounted at the Discount Rate
for the Class A-1C Certificates plus the Spread Rate for the Class A-1C
Certificates) of the aggregate principal and interest that will be paid in
respect of the Class A-1C Certificates from the Distribution Date occurring
in the following month until the Certificate Balance of the Class A-1C
Certificates is reduced to zero following such prepayment (in each case
assuming no further prepayments are made except that all Mortgage Loans
prepay on Anticipated Repayment Dates where applicable).
In all clauses above, Prepayment Premiums will only be distributed on a
Distribution Date (i) if the respective Certificate Balance or Notional
Balance of the related Class is greater than zero on the last business day of
the Interest Accrual Period ending immediately prior to such Distribution
Date and (ii) if the amount computed pursuant to the related clause above is
greater than zero. Any Prepayment Premiums remaining following the
distributions described in the preceding clauses (i) through (vi) shall be
distributed to holders of the Private Certificates in accordance with the
Pooling and Servicing Agreement.
The "Discount Rate" with respect to any Class of Certificates is the rate
determined by the Trustee, in its good faith, to be the yield (interpolated
and rounded to the nearest one-thousandth of a percent, if necessary) in the
secondary market on United States Treasury securities with a maturity closest
to the then computed weighted average life (or, in the case of the Class
A-CS1 and Class PS-1 Certificates, the weighted average life of the interest
payments) of such Class (rounded to the nearest month) (without taking into
account the related prepayment).
The "Spread Rate" for the Class A-CS1 Certificates is [ %] per annum, the
Class PS-1 Certificates is [ %] per annum, the Class A-1A Certificates is
[ %] per annum, the Class A-1B Certificates is [ %] per annum and the Class
A-1C Certificates is [ %] per annum.
Default Interest and Excess Interest. On each Distribution Date, Net
Default Interest and Excess Interest received in the related Collection
Period with respect to a default on a Mortgage Loan will be distributed
solely to the Class V-1 and Class V-2 Certificates, respectively, to the
extent set forth in the Pooling and Servicing Agreement, and will not be
available for distribution to holders of the Offered Certificates. The Class
V-1 and Class V-2 Certificates are not entitled to any other distributions of
interest, principal or Prepayment Premiums.
The holders of a majority Percentage Interest of the Class LR Certificates
or the most subordinate Class of Certificates outstanding (other than the
Class B-7H Certificates) will have the limited right to purchase the ARD
Loans on their related Anticipated Repayment Dates under the circumstances
described under "The Pooling and Servicing Agreement -- Optional Termination"
herein.
REALIZED LOSSES
The Certificate Balance of the Certificates will be reduced without
distribution on any Distribution Date as a write-off to the extent of any
Realized Loss allocated to the applicable Class of Certificates with respect
to 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 Balance of the Sequential Certificates after giving
effect to distributions made on such Distribution Date exceeds the aggregate
Stated Principal Balance of the Mortgage Loans as of the Due Date occurring
in the month in which such Distribution Date occurs. Except as described in
the next sentence, any such Realized Losses will be applied to the Classes of
Certificates in the following order, until the Certificate Balance of each is
reduced to zero: first, to certain of the Private Certificates, second, to
the Class A-6 Certificates, third, to the Class A-5 Certificates, fourth, to
the Class A-4 Certificates, fifth to the Class A-3 Certificates, sixth, to
the Class A-2 Certificates, seventh, to the Class A-1D Certificates, and
finally, pro rata, to the Class A-1A, Class A-1B and Class A-1C Certificates
based on their respective outstanding balances. Any amounts recovered in
respect of any such amounts previously written-off as Realized Losses will be
distributed to the Classes of Sequential Certificates in reverse order of
allocation of such Realized Losses thereto. Shortfalls in Available Funds
resulting from Servicing Compensation (other than the Servicing Fee),
interest on Advances to the extent not covered by Default Interest,
extraordinary expenses of the Trust Fund (other than indemnification
expenses), a reduction 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, a reduction in interest rate or a forgiveness of
principal of
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a Mortgage Loan as described under "The Pooling and Servicing Agreement --
Modifications," herein or otherwise, will be allocated in the same manner as
Realized Losses. Shortfalls in Available Funds resulting from (i)
indemnification expenses of the Trust Fund required to be paid pursuant to
the Pooling and Servicing Agreement and (ii) Prepayment Interest Shortfalls
in excess of the sum of (x) the Servicing Fee attributable to the Mortgage
Loan being prepaid (not including the portion of the Servicing fee
attributable to the Trustee) and (y) investment income on the related
Principal Prepayment for the period such amount is held in the Collection
Account during the related Interest Accrual Period, will be allocated to, and
be deemed distributed to, each Class of Certificates, pro rata, based upon
amounts distributable to each such Class and, in the case of indemnification
expenses, will be allocated, first, in respect of interest and, second, in
respect of principal. The Notional Balance of the Class A-CS1 Certificates
will be reduced to reflect reductions in the related portion of the
Certificate Balance of the Class A-1A Certificates resulting from allocations
of Realized Losses; the Notional Balance of the Class PS-1 Certificates will
be reduced to reflect reductions in the Stated Principal Balances of the
Mortgage Loans as a result of write-offs in respect of final recovery
determinations in respect of liquidation of defaulted Mortgage Loans.
The "Stated Principal Balance" of any Mortgage Loan at any date of
determination will equal (a) the principal balance as of the Cut-off Date of
such Mortgage Loan, minus (b) the sum of (i) the principal portion of each
Monthly Payment, Minimum Defaulted Monthly Payment or Assumed Scheduled
Payment due on such Mortgage Loan after the Cut-off Date and prior to such
date of determination, (ii) all voluntary and involuntary principal
prepayments and other unscheduled collections of principal received with
respect to such Mortgage Loan, to the extent distributed to holders of the
Certificates or applied to other payments required under the Pooling and
Servicing Agreement before such date of determination and (iii) any principal
forgiven by the Special Servicer or Interest Shortfalls resulting from
reductions or deferrals of interest, each as described herein under "The
Pooling and Servicing Agreement -- Modifications." The Stated Principal
Balance of a Mortgage Loan with respect to which title to the related
Mortgaged Property has been acquired by the Trust Fund is equal to the
principal balance thereof outstanding on the date on which such title is
acquired less any Net REO Proceeds allocated to principal on such Mortgage
Loan. The Stated Principal Balance of a Specially Serviced Mortgage Loan with
respect to which the Servicer or Special Servicer has determined that it has
received all payments and recoveries which the Servicer or the Special
Servicer, as applicable, expects to be finally recoverable on such Mortgage
Loan is zero.
DELINQUENCY REDUCTION AMOUNTS AND APPRAISAL REDUCTION AMOUNTS
The Certificate Balances of the Class A-1D, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6, Class A-7, Class B-1, Class B-2, Class B-3, Class
B-4, Class B-5 and Class B-6 Certificates will be notionally reduced (solely
for purposes of determining the payment priority of interest on the Class
PS-1 Certificates in respect of Reduction Interest Distribution Amounts) on
any Distribution Date to the extent of any Delinquency Reduction Amounts or
Appraisal Reduction Amounts with respect to such Distribution Date; provided
that (i) if a Delinquency and an Appraisal Reduction Event occur with respect
to the same Distribution Date and the same Mortgage Loan, the reduction will
equal the Appraisal Reduction Amount, (ii) following the occurrence of an
Appraisal Reduction Event with respect to any Mortgage Loan, no further
Delinquency Reduction Amounts will be applied with respect to such Mortgage
Loan and any Delinquency Reduction Amounts previously applied will be
reversed and (iii) for any Distribution Date, the aggregate of the Appraisal
Reduction Amounts and Delinquency Reduction Amounts may not exceed the
Certificate Balance (as adjusted by any notional reductions) of the most
subordinate class of Certificates outstanding among the Class A-1D, Class
A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class B-1, Class
B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates (and to the
extent the aggregate of the Appraisal Reduction Amounts and Delinquency
Reduction Amounts exceeds such Certificate Balance, such excess will be
applied notionally to the next most subordinate Class of Certificates on the
next Distribution Date). Any such reductions will be applied notionally,
first, to the Class B-7 and Class B-7H Certificates, second to the Class B-6
Certificates, third, to the Class B-5 Certificates, fourth, to the Class B-4
Certificates, fifth, to the Class B-3 Certificates, sixth, to the Class B-2
Certificates, seventh, to the Class B-1 Certificates, eighth, to the Class
A-7 Certificates, ninth, to the Class A-6 Certificates, tenth, to the Class
A-5 Certificates, eleventh, to the Class A-4 Certificates, twelfth, to the
Class A-3 Certificates, thirteenth, to the Class A-2 Certificates and
finally, to the Class A-1D Certificates (provided in each case that no
Certificate Balance in respect of any such class may be notionally reduced
below zero). Any notional reduction of the Certificate Balance of such
Certificates as a result of any Delinquency or Appraisal Reduction Event will
be reversed to the extent there is a recovery of any or all of the
Delinquency Amounts or a Realized Loss. Additionally, a reversal or
additional reduction will occur to the extent that the Servicer's Appraisal
Estimate is less than or greater than the Appraisal Reduction as adjusted to
take into account a subsequent independent MAI appraisal. For
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purposes of calculating Interest Accrual Amounts, any such reversal or
additional reductions made on the Distribution Date occurring in an Interest
Accrual Period will be deemed to have been made on the first day of such
Interest Accrual Period. See "Description of the Offered Certificates --
Distribution --Payment Priorities" herein.
PREPAYMENT INTEREST SHORTFALLS
The Servicer will deposit from its own funds any Prepayment Interest
Shortfalls into the Collection Account on the Servicer Remittance Date to the
extent such Prepayment Interest Shortfalls do not exceed the aggregate of the
Servicing Fee attributable to the Mortgage Loan being prepaid due the
Servicer and the investment income accruing on the related Principal
Prepayment for such related Collection Period and any Prepayment Shortfall
Excess for the Collection Period. Any Prepayment Interest Shortfalls in
excess of the Servicing Fee attributable to the Mortgage Loan being prepaid
and the investment income accruing on the related Principal Prepayment due to
the Servicer for such period will be allocated to each Class of Certificates,
pro rata, based on amounts distributable to each such class. Any interest
that accrues on a prepayment on a Mortgage Loan after the Due Date and before
the following Servicer Remittance Date will be paid to the Servicer.
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
the Class A-1A, Class A-1B, Class A-1C, Class A-CS1 and Class PS-1
Certificates (except as set forth below) against losses associated with
delinquent and defaulted Mortgage Loans, the rights of the holders of the
Class A-1D, Class A-2, Class A-3, Class A-4, Class A-5 and Class A-6
Certificates and certain of the Private Certificates to receive distributions
of interest and principal with respect to the Mortgage Loans, as applicable,
will be subordinated to such rights of the holders of the Class A-1A, Class
A-1B, Class A-1C, Class A-CS1 and Class PS-1 Certificates. The Class A-1D
Certificates will be likewise protected by the subordination of the Class
A-2, Class A-3, Class A-4, Class A-5 and Class A-6 Certificates and certain
of the Private Certificates. The Class A-2 Certificates will be likewise
protected by the subordination of the Class A-3, Class A-4, Class A-5 and
Class A-6 Certificates and certain of the Private Certificates. The Class A-3
Certificates will be likewise protected by the subordination of the Class
A-4, Class A-5 and Class A-6 Certificates and certain of the Private
Certificates. The Class A-4 Certificates will be likewise protected by the
subordination of the Class A-5 and Class A-6 Certificates and certain of the
Private Certificates. The Class A-5 Certificates will be likewise protected
by the subordination of the Class A-6 Certificates and certain of the Private
Certificates. The Class A-6 Certificates will be likewise protected by the
subordination of certain of the Private Certificates. This subordination will
be effected in two ways: (i) by the preferential right of the holders of a
Class of Sequential Certificates to receive on any Distribution Date the
amounts of interest and principal, distributable in respect of such
Sequential Certificates on such date prior to any distribution being made on
such Distribution Date in respect of any Classes of Sequential Certificates
subordinate thereto, and (ii) by the allocation of Realized Losses (as
defined herein), first, to certain of the Private Certificates, second, to
the Class A-6 Certificates, third to the Class A-5 Certificates, fourth, to
the Class A-4 Certificates, fifth, to the Class A-3 Certificates, sixth to
the Class A-2 Certificates, seventh, to the Class A-1D Certificates, and
finally, pro rata, to the Class A-1A, Class A-1B and Class A-1C Certificates
based on their respective Certificate Balances.
No other form of credit enhancement 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) immediately
after the date on which a reduction in the amount of Monthly Payments on a
Mortgage Loan, or a change in any other material economic term of the
Mortgage Loan, becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, (iv) immediately after a receiver has
been appointed, (v) immediately after a borrower declares bankruptcy, (vi)
immediately after a Mortgage Loan becomes an REO Mortgage Loan, (vii) upon a
default in the payment of a Balloon Payment or (viii) any other event which,
in the discretion of the Servicer and of which the Servicer becomes aware in
performing its obligations in accordance with the Servicing Standard would
materially and adversely impair the value of the Mortgaged Property and
security for the related Mortgage Loan (any of (i), (ii), (iii), (iv), (v),
(vi), (vii) and (viii), an "Appraisal Reduction Event"), an Appraisal
Reduction Amount will be calculated. The "Appraisal Reduction Amount" for any
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Distribution Date and for any Mortgage Loan as to which any Appraisal
Reduction Event has occurred will be an amount equal to the excess of (a) the
outstanding Stated Principal Balance of such Mortgage Loan over (b) the
excess of (i) 90% of the sum of the appraised values of the related Mortgaged
Properties as determined by independent MAI appraisals (the costs of which
shall be paid by the Servicer as an Advance) over (ii) the sum of (A) all
unpaid interest on such Mortgage Loan at a per annum rate equal to the
Mortgage Rate, (B) all unreimbursed Property Advances, the principal portion
of all unreimbursed P&I Advances and all unpaid interest on Advances at the
Advance Rate in respect of such Mortgage Loan and (C) all currently due and
unpaid real estate taxes, ground rents and assessments and insurance premiums
and all other amounts due and unpaid under the Mortgage Loan (which tax,
premiums and other amounts have not been the subject of an Advance by the
Servicer). If no independent MAI appraisal has been obtained within twelve
months prior to the first Distribution Date on or after an Appraisal
Reduction Event has occurred, the Servicer will be required to estimate the
value of the related Mortgaged Properties (the "Servicer's Appraisal
Estimate") and such estimate will be used for purposes of the Appraisal
Reduction Amount. Within 60 days after the Appraisal Reduction Event, the
Servicer will be required to obtain an independent MAI appraisal. On the
first Distribution Date occurring on or after the delivery of such
independent MAI appraisal, the Servicer will be required to adjust the
Appraisal Reduction Amount to take into account such appraisal (regardless of
whether the independent MAI appraisal is higher or lower than the Servicer's
Appraisal Estimate). Appraisal Reduction Amounts will be recalculated
annually based on Updated Appraisals.
DELIVERY, FORM AND DENOMINATION
The Offered Certificates will be issued, maintained and transferred in the
book-entry form only in denominations of $50,000 initial Certificate Balance
and in multiples of $1 Certificate Balance or Notional Balance, as
applicable, 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 Depositor 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 in the Prospectus under
"Description of the Certificates -- Book Entry Registration." 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 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" under the Pooling and Servicing Agreement will be
the person in whose name a Certificate is registered in the certificate
register maintained pursuant to the Pooling and Servicing Agreement, except
that solely for the purpose of giving any consent or taking any action
pursuant to the Pooling and Servicing Agreement, any Certificate registered
in the name of the Depositor, the Servicer, the Special Servicer, the Trustee
(in its individual capacity), a manager of a Mortgaged Property, a Mortgagor
or any person affiliated with the Depositor, the Servicer, the Special
Servicer, the Trustee, such manager or a Mortgagor will be deemed not to be
outstanding and the Voting Rights to which it is entitled will not be taken
into account in determining whether the requisite percentage of Voting Rights
necessary to effect any such consent or take any such action has been
obtained; provided, however, that for purposes of obtaining the consent of
Certificateholders to an amendment to the Pooling and Servicing Agreement,
any Certificates beneficially owned by the Servicer or Special Servicer or an
affiliate will be deemed to be outstanding, provided that such amendment does
not relate to compensation of the Servicer or Special Servicer or otherwise
benefit the Servicer or the Special Servicer in any material respect; and,
provided, further, that for purposes of obtaining the consent of
Certificateholders to any action proposed to be taken by the Special Servicer
with respect to a Specially Serviced Mortgage Loan, any Certificates
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beneficially owned by the Servicer or an affiliate will be deemed to be
outstanding, provided that, the Special Servicer is not the Servicer.
Notwithstanding the foregoing, solely for purposes of providing or
distributing any reports, statements or other information pursuant to the
Pooling and Servicing Agreement, a Certificateholder will include any
beneficial owner (or prospective transferee of a beneficial owner) to the
extent that the party required or permitted to provide or distribute such
report, statement or other information has been provided with the name of
such beneficial owner (or prospective transferee). The Percentage Interest of
any Class of Offered Certificate will be equal to the percentage obtained by
dividing the denomination of such Certificate by the aggregate initial
Certificate Balance of such Class of Certificates. See "Description of the
Certificates -- Book-Entry Registration and Definitive Certificates" 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 depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of
DTC. DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for its Participants and
to facilitate the clearance and settlement of securities transactions between
Participants through electronic computerized book-entries, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants and Euroclear Participants will
occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through Cedel Participants or
Euroclear Participants, on the other, will be effected in DTC in accordance
with DTC rules on behalf of the relevant European international clearing
system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time).
The relevant European international clearing system will, if the transaction
meets its settlement requirements, deliver instructions to its Depositary to
take action to effect final settlement on its behalf by delivering or
receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions directly
to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business
day following the DTC settlement date, and such credits or any transactions
in such securities settled during such processing will be reported to the
relevant Cedel Participant or Euroclear Participant on such business day.
Cash received in Cedel or Euroclear as a result of sales of securities by or
through a Cedel Participant or a Euroclear Participant to a DTC Participant
will be received with value on the DTC settlement date but will be available
in the relevant Cedel or Euroclear cash account only as of the business day
following settlement in DTC. For additional information regarding clearance
and settlement procedures for the Offered Certificates and for information
with respect to tax documentation procedures relating to the Offered
Certificates, see Annex C hereto.
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.
Similarly, reports distributed to Certificateholders pursuant to the Pooling
and Servicing Agreement and requests for the consent of Certificateholders
will be delivered to beneficial owners only through DTC, Euroclear, Cedel and
their respective participants. Under a book-entry format, holders of Offered
Certificates may experience some delay in their receipt of payments, reports
and
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notices, since such payments, reports and notices will be forwarded by the
Trustee to Cede & Co., as nominee for DTC. DTC will forward such payments,
reports and notices to its Participants, which thereafter will forward them
to Indirect Participants, Cedel, Euroclear or holders of Offered
Certificates, as applicable.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
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.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling and Servicing
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.
Except as required by law, neither the Depositor, the Servicer, the Fiscal
Agent nor the Trustee will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Offered Certificates held by Cede & Co., as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations
("Cedel Participants") and facilitates the clearance and settlement of
securities transactions between Cedel Participants through electronic
book-entry changes in accounts of Cedel Participants, thereby eliminating the
need for physical movement of certificates. Transactions may be settled in
Cedel in any of 28 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Cedel interfaces with
domestic markets in several countries. As a professional depository, Cedel is
subject to regulation by the Luxembourg Monetary Institute. Cedel
Participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the Underwriter. Indirect access to Cedel is also available to
others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Cedel Participant, either
directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear system ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of
27 currencies, including United States dollars. The Euroclear system includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to
the arrangements for cross-market transfers with DTC described above.
Euroclear is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator"), under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear system on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial
intermediaries and may include the Underwriter. Indirect access to the
Euroclear system is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
S-115
<PAGE>
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within the Euroclear
system, withdrawal of securities and cash from the Euroclear system, and
receipts of payments with respect to securities in the Euroclear system. All
securities in the Euroclear system are held on a fungible basis without
attribution of specific certificates to specific securities clearance
accounts. The Euroclear Operator acts under the Terms and Conditions only on
behalf of Euroclear Participants and has no record of or relationship with
persons holding through Euroclear Participants.
The information herein concerning DTC, Cedel and Euroclear and their
book-entry systems has been obtained from sources believed to be reliable,
but the Depositor takes no responsibility for the accuracy or completeness
thereof.
DEFINITIVE CERTIFICATES
Definitive Certificates will be delivered to beneficial owners of the
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 Book-Entry Certificates, and the Trustee is
unable to locate a qualified successor, (ii) the Depositor or the Trustee, at
its sole option, elects to terminate the book-entry system through DTC with
respect to some or all of any Class or Classes of Certificates, or (iii)
after the occurrence of an Event of Default under the Pooling and Servicing
Agreement, Certificate Owners representing a majority in principal amount of
the Book-Entry Certificates then outstanding advise DTC through DTC
Participants in writing that the continuation of a book-entry system through
DTC (or a successor thereto) is no longer in the best interest of Certificate
Owners.
Upon the occurrence of any of the events described in clauses (i) through
(iii) in the immediately preceding paragraph, the Trustee is required to
notify all affected Certificateholders (through DTC and related DTC
Participants) of the availability through DTC of Definitive Certificates.
Upon delivery of Definitive Certificates, the Trustee, Certificate Registrar,
and Servicer will recognize the holders of such Definitive Certificates as
holders under the Pooling and Servicing Agreement ("Holders"). Distributions
of principal and interest on the Definitive Certificates will be made by the
Trustee directly to Holders of Definitive Certificates in accordance with the
procedures set forth in the Prospectus and the Pooling and Servicing
Agreement.
Upon the occurrence of any of the events described in clauses (i) through
(iii) of the second preceding paragraph, requests for transfer of Definitive
Certificates will be required to be submitted directly to the Certificate
Registrar in a form acceptable to the Certificate Registrar (such as the
forms which will appear on the back of the certificate representing a
Definitive Certificate), signed by the Holder or such Holder's legal
representative and accompanied by the Definitive Certificate or Certificates
for which transfer is being requested. The Trustee will be appointed as the
initial Certificate Registrar.
TRANSFER RESTRICTIONS
In the event that holders of the Subordinated Offered Certificates become
entitled to receive Definitive Certificates under the circumstances described
under "--Definitive Certificates," each prospective transferee of a
Subordinated Offered Certificate that is a Definitive Certificate will be
required to (i) deliver to the Depositor, the Certificate Registrar and the
Trustee a representation letter substantially in the form set forth as an
exhibit to the Pooling and Servicing Agreement stating that such transferee
is not an employee benefit plan or other retirement arrangement subject to
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code"), or a governmental plan (as defined in Section 3(32) of ERISA)
subject to any federal, state or local law which is, to a material extent,
similar to the foregoing provisions of ERISA or the Code (each, a "Plan"), or
a person acting on behalf of or investing the assets of a Plan, other than an
insurance company investing the assets of its general account under
circumstances whereby the purchase and subsequent holding of a Subordinated
Offered Certificate would be exempt from the prohibited transaction
restrictions of ERISA and the Code under Sections I and III of PTE 95-60, or
(ii) provide an opinion of counsel and such other documentation as described
under "ERISA Considerations" herein. The purchaser or transferee of any
interest in a Subordinated Offered Certificate that is not a Definitive
Certificate shall be deemed to represent that it is not a person described in
clause (i) above.
The Subordinated Offered Certificates will contain a legend describing
such restrictions on transfer and the Pooling and Servicing Agreement will
provide that any attempted or purported transfer in violation of these
transfer restrictions will be null and void.
S-116
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
YIELD
The yield to maturity on the Offered Certificates will depend upon the
price paid by the Certificateholder, the rate and timing of the distributions
in reduction of Certificate Balance or Notional Balance of such Certificates,
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 Balance of
such Certificates, and the extent to which Prepayment Premiums are received
in connection with voluntary prepayments, liquidations on default, or other
early returns of principal, as well as prevailing interest rates at the time
of prepayment or default.
The rate of distributions in reduction of the Certificate Balance 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 Balance may result from repurchases by the Mortgage
Loan Seller due to missing or defective documentation or breaches of
representations and warranties with respect to the Mortgage Loans as
described herein under "The Pooling and Servicing Agreement --
Representations and Warranties; Repurchase," purchases of the Mortgage Loans
in the manner described under "The Pooling and Servicing Agreement --
Optional Termination" or purchases of ARD Loans by Class LR
Certificateholders as described under "Description of the Mortgage Pool --
Certain Terms and Conditions of the Mortgage Loans."
Disproportionate principal payments (whether resulting from differences in
amortization terms, prepayments following expirations of the respective
Lock-out Periods or otherwise) on the Mortgage Loans having Net Mortgage
Pass-Through Rates that are higher or lower than the Weighted Average Net
Mortgage Pass-Through Rate will affect the Weighted Average Net Mortgage
Pass-Through Rate and accordingly the Pass-Through Rate of the Class A-CS1,
Class PS-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6 and Class
A-7 Certificates for future periods and therefore the yield on such Classes.
The weighted average of the Net Mortgage Pass-Through Rates for each
Distribution Date, assuming that each Mortgage Loan with an Anticipated
Repayment Date prepays on such date and that each other Mortgage Loan does
not prepay, is set forth on Annex D hereto.
The Certificate Balance of any Class of Offered Certificates may be
reduced without distributions thereon as a result of the allocation of
Realized Losses to such Class, reducing the maximum amount distributable to
such Class in respect of Certificate Balance, as well as the amount of
interest that will accrue thereon. In general, a Realized Loss occurs when
the aggregate principal balance of a Mortgage Loan is reduced without an
equal distribution to Certificateholders in reduction of the Certificate
Balances of the Certificates. Realized Losses are likely to occur only in
connection with a default on a Mortgage Loan and the liquidation of the
related Mortgaged Properties or a reduction in the principal balance of a
Mortgage Loan by a bankruptcy court.
Because the ability of a borrower to make a Balloon Payment will depend
upon its ability either to refinance the Mortgage Loan or to sell the related
Mortgaged Property, there is a risk that a borrower may default at the
maturity date. In connection with a default on the Balloon Payment, the
Special Servicer may agree to extend the maturity date thereof as described
under "The Pooling and Servicing Agreement -- Realization Upon Mortgage
Loans." In the case of any such default, recovery of proceeds may be delayed
by and until, among other things, work-outs are negotiated, foreclosures are
completed or bankruptcy proceedings are resolved. In addition, the Directing
Holders (as defined below) may instruct the Special Servicer to delay the
commencement of any foreclosure proceedings under certain conditions
described herein. Certificateholders are not entitled to receive
distributions of Monthly Payments or the Balloon Payment when due except to
the extent they are either covered by an Advance or actually received.
Consequently, any defaulted Monthly Payment for which no such Advance is made
and a defaulted Balloon Payment will tend to extend the weighted average
lives of the Certificates, whether or not a permitted extension of the due
date of the related Mortgage Loan has been effected.
The rate of payments (including voluntary and involuntary prepayments) on
pools of Mortgage Loans is influenced by a variety of economic, demographic,
geographic, social, tax, legal and other factors, including the level of
mortgage interest rates and the rate at which borrowers default on their
mortgage loans.
The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor
even if the average rate of principal payments experienced over time is
consistent with such investor's expectation. In general, the earlier a
prepayment of principal on the Mortgage Loans is applied in reduction of the
Certificate Balance of a Class of Offered Certificates, the greater the
effect on such investor's yield to maturity.
S-117
<PAGE>
All of the Mortgage Loans have Lock-out Periods ranging from 56 months to
262 months following the Cut-off Date. The weighted average Lock-out Period
for the Mortgage Loans is approximately 150 months. All Mortgage Loans are
locked out until no earlier than six months preceding their Anticipated
Repayment Date or maturity date, as applicable. See "Description of the
Mortgage Pool -- Certain Terms and Conditions of the Mortgage Loans --
Prepayment Provisions" herein. Nevertheless, any such Mortgage Loan may be
prepaid prior to the expiration of any such Lock-out Period in connection
with certain events of casualty or condemnation. In addition, investors may
receive early return of principal in connection with defaults, repurchases
for breach of representations and warranties, and optional redemption.
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 the
principal of the ARD Loans after their respective Anticipated Repayment
Dates, there can be no assurance that any of such Mortgage Loans will be
prepaid on that date or any date prior to maturity. An investor is urged to
make an investment decision with respect to any Class of 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 the 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 amounts distributed in reduction of the
principal balance of such investor's Offered Certificate may be lower than
the Pass-Through Rate. Conversely, slower rates of prepayments on the
Mortgage Loans, and therefore of amounts distributable in reduction of
principal balance of the 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 will be lower than
the yield otherwise produced by the applicable Pass-Through Rate and purchase
prices because while interest is required to be paid by the Borrower on the
eleventh day of each month, the distribution of such interest will not be
made until the Distribution Date occurring in such month, and principal paid
on any Distribution Date will not bear interest during the period after the
related Due Date and before the Distribution Date occurs. Additionally, as
described under "Description of the Offered Certificates -- Distributions"
herein, if the portion of the Available Funds distributable in respect of
interest on any Class of Offered Certificates on any Distribution Date is
less than the amount of interest required to be paid to the holders of such
Class, the shortfall will be distributable to holders of such Class of
Certificates on subsequent Distribution Dates, to the extent of Available
Funds on such Distribution Dates. Any such shortfall will not bear interest,
however, and will therefore negatively affect the yield to maturity of such
Class of Certificates for so long as it is outstanding.
YIELD ON THE CLASS A-CS1 AND CLASS PS-1 CERTIFICATES
Because distributions on the Class A-CS1 and Class PS-1 Certificates
consist only of a portion of the interest received on the Mortgage Loans, the
yield to maturity of such Certificates will be extremely sensitive to the
rate and timing of principal payments (including voluntary and involuntary
prepayments), any repurchase of a Mortgage Loan by the Mortgage Loan Seller,
delinquencies and liquidations on such Mortgage Loans. Furthermore,
delinquencies and other defaults under a Mortgage Loan could result in the
Appraisal Reduction Amounts and Delinquency Reduction Amounts, in which case
the right of the Class PS-1 Certificates to receive a portion of its interest
would be reduced in priority. Investors should fully consider the associated
risks, including the risk that a rapid rate of principal payments on and
liquidations or repurchases of the Mortgage Loans could result in the failure
of investors in the Class A-CS1 and Class PS-1 Certificates to fully recoup
their initial investments.
S-118
<PAGE>
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant
Prepayment Rate" or "CPR" model. The CPR model represents an assumed constant
annual rate of prepayment each month, expressed as a per annum percentage of
the then-scheduled principal balance of the pool of mortgage loans. As used
in the following table, the column headed "0% CPR" assumes that none of the
Mortgage Loans is prepaid before the related Anticipated Repayment Date or
maturity date, as applicable. The columns headed "10% CPR," "25% CPR" and
"50% CPR" assume that prepayments on the Mortgage Loans are made at those
levels of CPR following the expiration of any Lock-out Period until the
related Anticipated Repayment Date or maturity date, as applicable. All
columns in the following table assume that all of the ARD Loans are fully
prepaid on their related Anticipated Repayment Date and all of the other
Mortgage Loans are paid in full on their maturity date. There is no
assurance, however, that prepayments of the Mortgage Loans will conform to
any level of CPR, and no representation is made that the Mortgage Loans will
prepay at the levels of CPR shown or at any other prepayment rate. The
foregoing assumptions are referred to herein as the "Prepayment Assumptions."
The following tables indicate the assumed purchase price (including
accrued interest) and the pre-tax yield on the Class A-CS1 and Class PS-1
Certificates to maturity, stated on a corporate bond equivalent basis. For
purposes of preparing the tables, it was assumed that each of the Mortgage
Loans has the following characteristics: (i) each Mortgage Loan will pay
principal and interest in accordance with its terms and scheduled payments
will be timely received on the 11th day of each month; (ii) the Mortgage Loan
Seller does not repurchase any Mortgage Loan as described under "The Pooling
and Servicing Agreement -- Representations and Warranties -- Repurchase;"
(iii) none of the Depositor, Servicer, or the Class LR Certificateholders
exercise the right to cause early termination of the Trust Fund; (iv) the
Servicing Fee Rate and the fee payable to the Special Servicer for each
Distribution Date is an aggregate amount equal to a per annum rate of .062%
on the Stated Principal Balance of the Mortgage Loans as of the preceding Due
Date; and (v) the date of determination of weighted average life is ,
1998. These assumptions are collectively referred to as the "Mortgage Loan
Assumptions."
SENSITIVITY TO PRINCIPAL PREPAYMENTS OF THE PRE-TAX YIELD TO MATURITY
CLASS A-CS1
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE 0% CPR 10% CPR 25% CPR 50% CPR
- -------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$
$
</TABLE>
CLASS PS-1
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE 0% CPR 10% CPR 25% CPR 50% CPR
- -------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$
$
</TABLE>
The pre-tax yields to maturity set forth in the preceding tables were
calculated by determining the monthly discount rate that, when applied to the
assumed stream of cash flows to be paid on the Class A-CS1 and Class PS-1
Certificates, would cause the discounted present value of such assumed cash
flows to equal the assumed purchase price thereof, and by converting such
monthly rates to corporate bond equivalent rates. Such calculations 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 Class A-CS1 and Class PS-1 Certificates and consequently do not purport
to reflect the return on any investment in the Class A-CS1 and Class PS-1
Certificates when such reinvestment rates are considered.
There can be no assurance that the Mortgage Loans will prepay at any of
the times assumed for purposes of calculating the yields shown in the tables
or at any other particular time, that the pre-tax yields on the Class A-CS1
and Class PS-1 Certificates will correspond to any of the pre-tax yields
shown herein or that the aggregate purchase prices of either Class of the
Class A-CS1 and Class PS-1 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 Class A-CS1 and Class PS-1
Certificates.
RATED FINAL DISTRIBUTION DATE
The "Rated Final Distribution Date," March 15, 2030, is the Distribution
Date occurring two years after the latest Assumed Maturity Date of any of the
Mortgage Loans. Because certain of the Mortgage Loans have maturity dates
that
S-119
<PAGE>
occur earlier than the latest maturity date, and because certain of the
Mortgage Loans may be prepaid prior to maturity, it is possible that the
Certificate Balance of each Class of Offered Certificates will be reduced to
zero significantly earlier than the Rated Final Distribution Date.
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 Balance
that is distributed or allocated, respectively. 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, Balloon Payments, 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 Balance of such Certificates occur as a result of the repurchase
or purchase of Mortgage Loans from the Trust Fund as described under "The
Pooling and Servicing Agreement -- Representations and Warranties;
Repurchase" or "--Optional Termination" herein. Such a repurchase or purchase
from the Trust Fund will have the same effect on distributions to the holders
of Certificates as if the related Mortgage Loans had prepaid in full, except
that no Prepayment Premiums are made in respect thereof.
The tables of "Percentages of Initial Certificate Balance Outstanding for
the Offered Certificates" set forth below indicate the weighted average life
of each Class of Offered Certificates and set forth the percentage of the
initial Certificate Balance of such Offered Certificates that would be
outstanding after each of the dates shown at the various CPRs and based on
the Prepayment Assumptions. The tables have also been prepared on the basis
of the Mortgage Loan Assumptions. The Mortgage Loan Assumptions made in
preparing the previous and following tables are expected to vary from the
actual performance of the Mortgage Loans. It is highly unlikely that
principal of the Mortgage Loans will be repaid consistent with assumptions
underlying any one of the scenarios. Investors are urged to conduct their own
analysis concerning the likelihood that the Mortgage Loans may pay or prepay
on any particular date.
Based on the Mortgage Loan Assumptions, the Prepayment Assumptions and the
various CPRs, the tables indicate the weighted average life of the Offered
Certificates and set forth the percentages of the initial Certificate Balance
of the Offered Certificates that would be outstanding after the Distribution
Date in April of each of the years indicated, at the indicated CPRs.
PERCENTAGE OF INITIAL CERTIFICATE BALANCE OR NOTIONAL BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-1A
------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 15th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-1A Certificates is determined
by (i) multiplying the amount of each distribution or allocation in
reduction of Certificate Balance of such Class by the number of years
from the date of determination to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate
distributions or allocations in reduction of Certificate Balance
referred to in clause (i).
S-120
<PAGE>
PERCENTAGE OF INITIAL NOTIONAL BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-CS1
------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
March 15, 2005 .......................
March 15, 2006 .......................
March 15, 2007 .......................
March 15, 2008 .......................
March 15, 2009 .......................
March 15, 2010 .......................
March 15, 2011 .......................
March 15, 2012 .......................
March 15, 2013 .......................
March 15, 2014 .......................
March 15, 2015 .......................
March 15, 2016 .......................
March 15, 2017 .......................
March 15, 2018 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 15th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-CS1 Certificates is determined
by (i) multiplying the amount of each allocation in reduction of
Notional Balance of such Class by the number of years from the date of
determination to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate allocations in reduction of
Notional Balance referred to in clause (i). The weighted average life
data presented above for the Class A-CS1 Certificates is for
illustrative purposes only, as the Class A-CS1 Certificates are not
entitled to distributions of principal and have no weighted average
life.
S-121
<PAGE>
PERCENTAGE OF INITIAL NOTIONAL BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS PS-1
------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
March 15, 2005 .......................
March 15, 2006 .......................
March 15, 2007 .......................
March 15, 2008 .......................
March 15, 2009 .......................
March 15, 2010 .......................
March 15, 2011 .......................
March 15, 2012 .......................
March 15, 2013 .......................
March 15, 2014 .......................
March 15, 2015 .......................
March 15, 2016 .......................
March 15, 2017 .......................
March 15, 2018 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 15th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class PS-1 Certificates is determined
by (i) multiplying the amount of each allocation in reduction of
Notional Balance of such Class by the number of years from the date of
determination to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate allocations in reduction of
Notional Balance referred to in clause (i). The weighted average life
data presented above for the Class PS-1 Certificates is for
illustrative purposes only, as the Class PS-1 Certificates are not
entitled to distributions of principal and have no weighted average
life.
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-1B
------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
March 15, 2005 .......................
March 15, 2006 .......................
March 15, 2007 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 15th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-1B Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
S-122
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-1C
------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
March 15, 2005 .......................
March 15, 2006 .......................
March 15, 2007 .......................
March 15, 2008 .......................
March 15, 2009 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 14th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-1C Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-1D
------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
March 15, 2005 .......................
March 15, 2006 .......................
March 15, 2007 .......................
March 15, 2008 .......................
March 15, 2009 .......................
March 15, 2010 .......................
March 15, 2011 .......................
March 15, 2012 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 15th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-1D Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
S-123
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-2
------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
March 15, 2005 .......................
March 15, 2006 .......................
March 15, 2007 .......................
March 15, 2008 .......................
March 15, 2009 .......................
March 15, 2010 .......................
March 15, 2011 .......................
March 15, 2012 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 15th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-2 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-3
------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
March 15, 2005 .......................
March 15, 2006 .......................
March 15, 2007 .......................
March 15, 2008 .......................
March 15, 2009 .......................
March 15, 2010 .......................
March 15, 2011 .......................
March 15, 2012 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 15th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-3 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
S-124
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-4
------------------------------------------------
DISTRIBUTION DATED(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
March 15, 2005 .......................
March 15, 2006 .......................
March 15, 2007 .......................
March 15, 2008 .......................
March 15, 2009 .......................
March 15, 2010 .......................
March 15, 2011 .......................
March 15, 2012 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 15th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-4 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-5
------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
March 15, 2005 .......................
March 15, 2006 .......................
March 15, 2007 .......................
March 15, 2008 .......................
March 15, 2009 .......................
March 15, 2010 .......................
March 15, 2011 .......................
March 15, 2012 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 15th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-5 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
S-125
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-6
------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR 10% CPR 25% CPR 50% CPR
- ------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Initial Percentage ................... 100% 100% 100% 100%
March 15, 1999 .......................
March 15, 2000 .......................
March 15, 2001 .......................
March 15, 2002 .......................
March 15, 2003 .......................
March 15, 2004 .......................
March 15, 2005 .......................
March 15, 2006 .......................
March 15, 2007 .......................
March 15, 2008 .......................
March 15, 2009 .......................
March 15, 2010 .......................
March 15, 2011 .......................
March 15, 2012 .......................
Weighted Average Life (years)(2) ....
</TABLE>
- ------------
(1) Assuming that the 15th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-6 Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the date
of determination to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in
reduction of Certificate Balance referred to in clause (i).
S-126
<PAGE>
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of March 27, 1998 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Servicer, the 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 and Servicing
Agreement and terms and conditions of the Offered Certificates. The Depositor
will provide to a prospective or actual holder of an Offered Certificate
without charge, upon written request, a copy (without exhibits) of the
Pooling and Servicing Agreement. Requests should be addressed to Nomura Asset
Securities Corporation, 2 World Financial Center, Building B, New York, New
York 10281-1198.
ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the Depositor will sell, transfer or otherwise
convey, assign or cause the assignment of the Mortgage Loans, without
recourse, to the Trustee for the benefit of the holders of Certificates. On
or prior to the Closing Date, the Depositor will deliver to the Trustee, with
respect to each Mortgage Loan, certain documents and instruments including,
among other things, the following: (i) the original Mortgage Note endorsed in
blank and delivered to the Trustee; (ii) the original Mortgage or counterpart
thereof; (iii) the assignment of the Mortgage in recordable form in favor of
the Trustee; (iv) if applicable, preceding assignments of mortgages; (v) the
related security agreement, if applicable; (vi) to the extent not contained
in the Mortgages, the original assignments of leases and rents or counterpart
thereof; (vii) if applicable, the original assignments of assignments of
leases and rents to the Trustee; (viii) if applicable, preceding assignments
of assignments of leases and rents; (ix) where applicable, a certified copy
of the UCC-1 Financing Statements, if any, including UCC-3 continuation
statements and UCC-3 assignments; (x) the original loan agreements; and (xi)
the original lender's title insurance policy (or marked commitments to
insure). The Trustee will hold such documents in trust for the benefit of the
holders of Certificates. The Trustee is obligated to review such documents
for each Mortgage Loan within 45 days after the later of delivery or the
Closing Date and report any missing documents or certain types of defects
therein to the Depositor.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling and Servicing Agreement, the Depositor will assign the
representations and warranties made by the Mortgage Loan Sellers to the
Depositor in the Mortgage Loan Purchase and Sale Agreements to the Trustee
for the benefit of Certificateholders. In the Mortgage Loan Purchase and Sale
Agreement between NACC and the Depositor, NACC will make the representations
and warranties set forth below (subject to certain exceptions specified in
the Mortgage Loan Purchase and Sale Agreements), as of the Closing Date
(unless otherwise specified) with respect to each Mortgage Loan. With respect
to each Mortgage Loan, sold by the Financing Trust, the Financing Trust will
assign the representations and warranties made by NACC with respect to such
Mortgage Loans as of February 4, 1998 and will, itself, make certain of the
representations and warranties described below as of the Closing Date.
(i) immediately prior to the sale, transfer and assignment to the
Depositor, each related Note and Mortgage was not subject to an
assignment, other than to the Mortgage Loan Seller, or pledge, and the
Mortgage Loan Seller had good and marketable title to, and was the sole
owner of, the Mortgage Loan;
(ii) the Mortgage Loan Seller has full right and the authority to sell,
assign and transfer such Mortgage Loan and the assignment to the Depositor
constitutes a legal, valid and binding assignment of such Mortgage Loan;
(iii) the Mortgage Loan Seller is transferring such Mortgage Loan free
and clear of any and all liens, pledges, charges or security interests of
any nature encumbering such Mortgage Loan, subject to matters described in
clause (xi) below;
(iv) each related Note, Mortgage, Assignment of Leases and Rents (if any)
and other agreement executed in connection with such Mortgage Loan are
legal, valid and binding obligations of the related borrower, enforceable
in accordance with their terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally, or by general
principles of equity
S-127
<PAGE>
(regardless of whether such enforceability is considered in a proceeding
in equity or at law) and, to the best of the Mortgage Loan Seller's
knowledge, there is no valid defense, counterclaim, right of rescission or
right of set-off or abatement available to the related Borrower with
respect to such Note, Mortgage and other agreements;
(v) each related Assignment of Leases and Rents creates a valid,
collateral or first priority assignment of, or a valid first priority
security interest in, certain rights under the related lease, subject only
to a license granted to the related borrower to exercise certain rights
and to perform certain obligations of the lessor under such lease,
including the right to operate the related Mortgaged Property; no person
other than the related borrower owns any interest in any payments due
under such lease that is superior to or of equal priority with the
mortgagee's interest therein;
(vi) each related assignment of Mortgage from the Mortgage Loan Seller to
the Depositor, and any related Reassignment of Assignment of Leases and
Rents, if any, or assignment of any other agreement executed in connection
with such Mortgage Loan, from the Mortgage Loan Seller to the Depositor
constitutes the legal, valid and binding assignment from the Mortgage Loan
Seller to the Depositor except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, liquidation, receivership,
moratorium or other laws relating to or affecting creditor's rights
generally, or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(vii) since origination, and except as set forth in the related mortgage
file, such Mortgage Loan has not been waived, modified, altered,
satisfied, canceled, subordinated or rescinded and, each related Mortgaged
Property has not been released from the lien of the related Mortgage in
any manner which materially interferes with the security intended to be
provided by such Mortgage;
(viii) each related Mortgage is a valid and enforceable first lien on the
related Mortgaged Property and such Mortgaged Property (subject to the
matters described in clause (xi) below) is free and clear of any
mechanics' and materialmen's liens which are prior to or equal with the
lien of the related Mortgage, except those which are insured against by a
lender's title insurance policy (as set forth in the Mortgage Loan
Purchase and Sale Agreement);
(ix) the Mortgage Loan Seller has not taken any action that would cause
the representations and warranties made by each related borrower under
such Mortgage Loan not to be true;
(x) the Mortgage Loan Seller has no knowledge that the representations
and warranties made by each related borrower in such Mortgage Loan are not
true in any material respect;
(xi) except with respect to the Mortgage Loan secured by the Mortgaged
Property known as the Westin Casuarina Resort Property, which has a
Certificate of Title from the Grand Cayman Island government, the lien of
each related Mortgage is insured by an ALTA lender's title insurance
policy (or a binding commitment therefor), or its equivalent as adopted in
the applicable jurisdiction, insuring NACC, its successors and assigns, or
the holder of the related Note as to the valid and first priority lien of
the Mortgage at least in the original principal amount of such Mortgage
Loan or Allocated Loan Amount of the related Mortgaged Property (as set
forth on the Mortgage Loan Schedule which is an exhibit to the Pooling and
Servicing Agreement), subject only to (a) the lien of current real
property taxes, ground rents, water charges, sewer rents and assessments
not yet due and payable, (b) covenants, conditions and restrictions,
rights of way, easements and other matters of public record, none of
which, individually or in the aggregate, materially interferes with the
current use or operation of the Mortgaged Property or the security
intended to be provided by such Mortgage or with the borrower's ability to
pay its obligations when they become due or the value of the Mortgaged
Property and (c) the exceptions (general and specific) set forth in such
lender's title insurance policy, none of which, individually or in the
aggregate, materially interferes with the security intended to be provided
by such Mortgage or with the borrower's ability to pay its obligations
when they become due or the value of the Mortgaged Property; NACC or its
successors or assigns is the sole named insured of such policy; such
policy is assignable to the Depositor without the consent of or any
notification to the insurer, and is in full force and effect upon the
consummation of the transactions contemplated by the Mortgage Loan
Purchase and Sale Agreements; no claims have been made under such policy
and NACC has not done anything, by act or omission, and NACC has no
knowledge of any matter, which would impair or diminish the coverage of
such policy; to the extent required by applicable law the insurer issuing
such policy is qualified to do business in the jurisdiction in which the
related Mortgaged Properties are located;
(xii) the proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder and the Mortgage
Loan Seller covenants that it will not make any future advances under the
Mortgage Loan to the related borrower;
S-128
<PAGE>
(xiii) each related Mortgaged Property is free of any material damage
that would affect materially and adversely the value of such Mortgaged
Property as security for the Mortgage Loan and is in good repair and there
is no proceeding pending for the total or partial condemnation of such
Mortgaged Property;
(xiv) each of the related borrowers (and, in the event a Mortgaged
Property is secured by a senior housing or healthcare facility, each of
the operators of the senior housing/healthcare facility) is in possession
of all material licenses, permits and other authorizations necessary and
required by all applicable laws for the conduct of its business and all
such licenses, permits and authorizations are valid and in full force and
effect; and if a related Mortgaged Property is improved by a senior
housing or healthcare facility, the most recent inspection or survey by
governmental authorities having jurisdiction in connection with such
licenses, permits and authorizations did not cite such Mortgaged Property
for material violations (which shall include only "Level A" violations or
the equivalent, in the case of skilled nursing facilities, that have not
been cured); and if a related Mortgaged Property is improved by a hotel,
the most recent inspection or review by the franchisor, if any, did not
cite such Mortgaged Property for material violations of the related
franchise agreement which have not been cured;
(xv) NACC or, to the best of NACC's knowledge, Bloomfield has inspected
or caused to be inspected each related Mortgaged Property within the past
twelve months preceding the Cut-off Date or within one month of
origination of the Mortgage Loan;
(xvi) such Mortgage Loan does not have a shared appreciation feature,
other contingent interest feature or negative amortization;
(xvii) except with respect to the Park LaBrea Loan, the Springfield Mall
Loan, the Atlanta Marriott Marquis Loan and the Westin Casuarina Resort
Loan, each of which has another pari passu Loan from NACC secured by the
related Mortgaged Property (which other loan is not included in the Trust
Fund), such Mortgage Loan is a whole loan and no other party holds a
participation interest in the Mortgage Loan;
(xviii) (A) the Mortgage Rate (exclusive of any default interest or yield
maintenance charge) of such Mortgage Loan complied as of the date of
origination with, or is exempt from, applicable state or federal laws,
regulations and other requirements pertaining to usury; any and all other
requirements of any federal, state or local laws, including, without
limitation, truth-in-lending, real estate settlement procedures, equal
credit opportunity or disclosure laws, applicable to such Mortgage Loan
have been complied with as of the date of origination of such Mortgage
Loan and (B) (other than with respect to the Mortgage Loan known as Ocean
Edge) the Mortgage Loan Seller has received an opinion to such effect;
(xix) (A) with respect to each Mortgage Loan originated by NACC, no
fraudulent acts were committed by NACC during the origination process of
such Mortgage Loan and the origination, servicing and collection of each
Mortgage Loan is in all respects legal, proper and prudent in accordance
with customary industry standards and (B) with respect to each Mortgage
Loan originated by Bloomfield, to the best of NACC's knowledge, no
fraudulent acts were committed by Bloomfield during the origination
process of such Mortgage Loan and to the best of NACC's knowledge, the
origination, servicing and collection of each Mortgage Loan is in all
respects legal, proper and prudent in accordance with customary industry
standards;
(xx) all taxes and governmental assessments that prior to the Closing
Date became due and owing in respect of each related Mortgaged Property
have been paid, or an escrow of funds in an amount sufficient to cover
such payments has been established;
(xxi) all escrow deposits and payments required pursuant to the Mortgage
Loans are in the possession, or under the control, of the Mortgage Loan
Seller or its agent and there are no deficiencies in connection therewith
and all such escrows and deposits have been conveyed by the Mortgage Loan
Seller to the Depositor and identified as such with appropriate detail;
(xxii) to the extent required under applicable law, as of the Cut-off
Date, the Mortgage Loan Seller was authorized to transact and do business
in the jurisdiction in which each related Mortgaged Property is located at
all times when it held the Mortgage Loan;
(xxiii) each related Mortgaged Property is insured by a fire and extended
perils insurance policy, issued by an insurer meeting the requirements
under the related Mortgage Loans, in an amount not less than the
replacement cost and the amount necessary to avoid the operation of any
co-insurance provisions with respect to the Mortgaged
S-129
<PAGE>
Property; each related Mortgaged Property (except with respect to the
Mortgage Loans known as the Value City Credit Lease Loans) is also covered
by business interruption insurance (for at least 12 months of rent
interruptions) and comprehensive general liability insurance in amounts
generally required by institutional lenders for similar properties; all
premiums on such insurance policies required to be paid as of the date
hereof have been paid; such insurance policies require prior notice to the
insured of termination or cancellation, and no such notice has been
received; each related Mortgage obligates the related borrower to maintain
all such insurance and, at such borrower's failure to do so, authorizes
the mortgagee to maintain such insurance at the borrower's cost and
expense and to seek reimbursement therefor from such borrower;
(xxiv) except with respect to the Mortgage Loan known as SL Hillside (in
which approximately 2-3% of the related Mortgaged Property is used for a
purpose which is not a conforming use or a legal non-conforming use),
there is no default, breach, violation or event of acceleration existing
under the related Mortgage or the related Note and, to the Mortgage Loan
Seller's knowledge, no event which, with the passage of time or with
notice and the expiration of any grace or cure period, would and does
constitute a default, breach, violation or event of acceleration;
(xxv) such Mortgage Loan has not been 30 days or more delinquent since
origination and as of the Cut-off Date was not delinquent;
(xxvi) each related Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the
benefits of the security, including realization by judicial or, if
applicable, non-judicial foreclosure, and there is no exemption available
to the borrower which would interfere with such right to foreclose;
(xxvii) in each related Mortgage or Loan Agreement (except with respect
to the Mortgage Loan known as SL Hillside), the related borrower
represents and warrants that it has not used, caused or permitted to exist
and will not use, cause or permit to exist on the related Mortgaged
Property any Hazardous Materials in any manner which violates federal,
state or local laws, ordinances, regulations, orders, directives or
policies governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials; the related borrower agrees to indemnify, defend and hold the
mortgagee and its successors and assigns harmless from and against any and
all losses, liabilities, damages, injuries, penalties, fines, expenses,
and claims of any kind whatsoever (including attorneys' fees and costs)
paid, incurred or suffered by, or asserted against, any such party
resulting from a breach of certain representations, warranties or
covenants given by the borrower in such Mortgage or Loan Agreement. A
Phase I environmental report was conducted by a reputable environmental
engineer in connection with such Mortgage Loan, which report, except as
otherwise disclosed herein did not indicate any material non-compliance or
material existence of Hazardous Materials. To the best of the Mortgage
Loan Seller's knowledge, except as otherwise disclosed herein, each
related Mortgaged Property is in material compliance with all applicable
federal, state and local laws pertaining to environmental hazards, and, to
the best of Mortgage Loan Seller's knowledge, no notice of violation of
such laws has been issued by any governmental agency or authority; the
Mortgage Loan Seller has not taken any action which would cause the
related Mortgaged Property not to be in compliance with all federal, state
and local laws pertaining to environmental hazards;
(xxviii) each related Mortgage or Loan Agreement contains provisions for
the acceleration of the payment of the unpaid principal balance of such
Mortgage Loan if, without complying with the requirements of the Mortgage
or Loan Agreement or obtaining the prior written consent of the mortgagee
or the satisfaction of certain conditions, the related Mortgaged Property,
or any interest therein, is directly or indirectly transferred or sold, or
encumbered in connection with subordinate financing and each related
Mortgage prohibits the pledge or encumbrance of the Mortgaged Property
without the consent of the holder of the Mortgage Loan;
(xxix) (1) the Mortgage Loan is directly secured by a Mortgage on a
commercial property or multifamily residential property, and (2) the fair
market value of the real property securing such Mortgage Loan, as
evidenced by an MAI appraisal conducted within 12 months of the
origination of the Mortgage Loan, was at least equal to 80% of the
principal amount of the Mortgage Loan (a) at origination (or if the
Mortgage Loan has been modified in a manner that constituted a deemed
exchange under Section 1001 of the Code at a time when the Mortgage Loan
was not in default or default with respect thereto was not reasonably
foreseeable, the date of the last such modification) or (b) at the Closing
Date; provided that the fair market value of the real property interest
must first be reduced by (A) the amount of any lien on the real property
interest that is senior to the Mortgage Loan (unless such senior lien also
secures a Mortgage Loan, in which event the computation described in (a)
and (b) shall be made on an aggregated
S-130
<PAGE>
basis) and (B) a proportionate amount of any lien that is in parity with
the Mortgage Loan (unless such other lien secures a Mortgage Loan that is
cross-collateralized with such Mortgage Loan, in which event the
computation described in (a) and (b) shall be made on an aggregate basis).
All improvements included for MAI appraisals are within the boundaries of
the related Mortgaged Property;
(xxx) except with respect to the Mortgage Loans known as the Best Buy
Loan and the Pierson Portfolio Loan (in which an affiliate of NACC has an
equity interest in the related borrowers), neither the Mortgage Loan
Seller nor any affiliate thereof has any obligation or right to make any
capital contribution to any borrower under a Mortgage Loan, other than
contributions made on or prior to the Closing Date;
(xxxi) with respect to each Mortgaged Property where a material portion
of the estate of the related borrower therein is a leasehold estate and
the fee interest of the ground lessor is not subject and subordinate to
the related Mortgage, that
(A) The ground lease or a memorandum regarding it has been duly
recorded. The ground lease permits the interest of the lessee to be
encumbered by the related Mortgage and does not restrict the use of
the related Mortgaged Property by such lessee, its successors or
assigns in a manner that would adversely affect the security provided
by the related Mortgage. There has been no material change in the
terms of such ground lease since its recordation, except by written
instruments, all of which are included in the related Mortgage File;
(B) Except with respect to the ground leases for the Westin Casuarina
Resort Property, the Bristol--Holiday Inn-Houston Medical Center
Property, the Bristol-Holiday Inn-New Orleans French Quarter Property
and the Monterey Plaza Hotel Property, the lessor under such ground
lease has agreed in writing and included in the related Mortgage File
that the ground lease may not be amended, modified, canceled or
terminated without the prior written consent of the mortgagee and that
any such action without such consent is not binding on the mortgagee,
its successors or assigns;
(C) Other than with respect to the Mortgage Property securing the FAC
Realty Loan, known as Boaz, as to which the term of the related ground
lease expires four years following the maturity date of such Mortgage
Loan (on which date the related borrower has the option to purchase
such Mortgage Property and the purchase price for such purchase has
been escrowed with the Trustee), the ground lease has an original term
(or an original term plus one or more optional renewal terms, which,
under all circumstances, may be exercised, and will be enforceable, by
the mortgagee) that extends not less than 10 years beyond the stated
maturity of the related Mortgage Loan;
(D) The ground lease is prior to any mortgage or other lien upon the
related fee interest and the landlord has not entered into an
agreement to subordinate the ground lease to future mortgages or liens
on the fee interest;
(E) Except with respect to the ground lease for the Stanford Park
Hotel, the ground lease is assignable to the mortgagee under the
leasehold estate and its assigns (subject, in some cases, to a
requirement that any such assign be an institutional lender) without
the consent of the lessor thereunder;
(F) As of the date of execution and delivery, the ground lease is in
full force and effect and no default has occurred, nor is there any
existing condition which, but for the passage of time or giving of
notice, would result in a default under the terms of the ground lease;
(G) Except with respect to the Mortgaged Property known as the Westin
Casuarina Resort Property, the ground lease or ancillary agreement
between the lessor and the lessee requires the lessor to give notice
of any default by the lessee to the mortgagee;
(H) Except with respect to the Mortgaged Property known as the Westin
Casuarina Resort Property, a mortgagee is permitted a reasonable
opportunity to cure any default under the ground lease which is
curable after the receipt of notice of any default before the lessor
may terminate the ground lease. All rights of the mortgagee under the
ground lease and the related Mortgage (insofar as it relates to the
ground lease) may be exercised by or on behalf of the mortgagee;
(I) The ground lease does not impose any restrictions on subletting
that would be viewed as commercially unreasonable by an institutional
investor. The lessor is not permitted to disturb the possession,
interest or quiet enjoyment of any subtenant of the lessee in the
relevant portion of the Mortgaged Property subject to the ground lease
for any reason, or in any manner, which would adversely affect the
security provided by the related Mortgage;
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(J) Any related insurance proceeds or condemnation award (other than
in respect of a total or substantially total loss or taking) will be
applied either to the repair or restoration of all or part of the
related Mortgaged Property, (other than with respect to the grand
lease properties for the Mortgage Loans known as the Value City Credit
Lease Loans) with the mortgagee or a trustee appointed by it having
the right to hold and disburse such proceeds as repair or restoration
progresses, or, if permitted by the related ground lease, to the
payment of the outstanding principal balance of the Mortgage Loan,
together with any accrued interest, except that in the case of
condemnation awards, the ground lessor is entitled to an amount of
such award generally based on the value of the unimproved land taken;
(K) Except with respect to the ground leases for the Burnham
Pacific-Golden State Discovery Plaza Property, the Bristol I-Holiday
Inn-Houston Medical Center Property and the Bristol I-New Orleans
French Quarter Property (under which the proceeds must be used to
rebuild the related Mortgaged Property), under the terms of the ground
lease and the related Mortgage, any related insurance proceeds, or
condemnation award in respect of a total or substantially total loss
or taking of the related Mortgaged Property will be applied first to
the payment of the outstanding principal balance of the Mortgage Loan,
together with any accrued interest (except where contrary to
applicable law or in cases where a different allocation would not be
viewed as commercially unreasonable by any institutional investor,
taking into account the relative duration of the ground lease and the
related Mortgage and the ratio of the market value of the related
Mortgage property to the outstanding principal balance of such
Mortgage Loan, and except that certain ground leases may require
insurance proceeds to be applied to the restoration of the property in
respect of casualties occurring prior to a specified time before the
expiration of the ground lease). Until the principal balance and
accrued interest rate are paid in full, neither the lessee nor the
lessor under the ground lease will have the option to terminate or
modify the ground lease without prior written consent of the mortgagee
as a result of any casualty or partial condemnation, except to provide
for an abatement of the rent;
(xxxii) with respect to each Mortgage Loan originated by Bloomfield that
(A) such Mortgage Loan was underwritten in accordance with standards
established by the Mortgage Loan Seller, using application forms and
related credit documents approved by the Mortgage Loan Seller;
(B) the Mortgage Loan Seller approved each application and related
credit documents before a commitment by Bloomfield was issued, and no
such commitment was issued until the Mortgage Loan Seller agreed to
fund such loan;
(C) the closing documents for such Mortgage Loan were prepared on
forms approved by the Mortgage Loan Seller, and reflect the Mortgage
Loan Seller as the successor and assign to Bloomfield; and
(D) such loan was actually funded by the Mortgage Loan Seller, and
was assigned to the Mortgage Loan Seller at the closing;
(xxxiii) With respect to each Mortgage Loan secured by a Credit Lease:
(A) The rental payments under the Credit Lease are equal to or
greater than the payments due under the loan documents, and are
payable without notice or demand, and without setoff, counterclaim,
recoupment, abatement, reduction or defense;
(B) The obligations of the Tenant under the Credit Lease, including,
but not limited to, the obligation of Tenant to pay fixed and
additional rent, are not affected by reason of any damage to or
destruction of any portion of the leased property; any taking of the
leased property or any part thereof by condemnation or otherwise; or
any prohibition, limitation, interruption, cessation, restriction,
prevention or interference of the Tenant's use, occupancy or enjoyment
of the leased property, except that the Credit Lease may permit a
lease termination in any such event if notice by the Tenant of such
termination is accompanied by the exercise of an option to purchase
the Mortgaged Property for at least the principal balance of the
Mortgage Loan plus accrued interest and, if a Lease Enhancement Policy
is in effect, the premium for such Lease Enhancement Policy has been
paid in full;
(C) Landlord does not have any monetary obligations under the Lease,
and every monetary obligation associated with managing, owning,
developing and operating the leased property, including, but not
limited to, the costs associated with utilities, taxes, insurance,
maintenance and repairs is an obligation of the Tenant;
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(D) The Landlord does not have any continuing nonmonetary
obligations under the Credit Lease, the performance of which would
involve a material expenditure of funds;
(E) The Landlord has not made any false representation or warranty
under the Credit Lease that would impose any material monetary
obligation upon Landlord or result in the termination of the Credit
Lease;
(F) The Tenant cannot terminate the Credit Lease for any reason,
prior to the payment in full of or the payment of funds sufficient to
pay in full: (a) the principal balance of the loan; (b) all accrued
and unpaid interest on the loan; and (c) any other sums due and
payable under the loan, as of the termination date, except for a
default by Landlord under the Credit Lease;
(G) In the event the Tenant assigns or sublets the leased property,
the Tenant remains primarily obligated under the Credit Lease;
(H) The Tenant has agreed to indemnify the Landlord from any claims
of any nature arising as a result of any hazardous material affecting
the leased property caused by Tenant and arising after commencement of
the Credit Lease;
(I) To the Mortgage Loan Seller's knowledge, each Credit Lease
contains customary and enforceable provisions which render the rights
and remedies of the lessor thereunder adequate for the enforcement and
satisfaction of the lessor's rights thereunder;
(J) To the Mortgage Loan Seller's knowledge, in reliance on a tenant
estoppel certificate and representation made by the Tenant under the
Credit Lease or representations made by the related borrower under the
Mortgage Loan documents, as of the closing date of each Credit Lease
Loan
(1) each Credit Lease was in full force and effect, and no
default by the borrower or the Tenant has occurred under the
Credit Lease, nor is there any existing condition which, but for
the passage of time or the giving of notice or both, would result
in a default under the terms of the Credit Lease;
(2) none of the terms of the Credit Lease have been impaired,
waived, altered or modified in any respect (except as described in
the related tenant estoppel);
(3) no Tenant has been released in whole or in part, from its
obligations under the Credit Lease;
(4) there is no current right of rescission, offset, abatement,
diminution, defense or counterclaim to any Credit Lease, nor will
the operation of any of the terms of the Credit Leases, or the
exercise of any rights thereunder, render the Credit Lease
unenforceable, or subject to any right of rescission, nor has any
offset, abatement, diminution, defense or counterclaim been
asserted with respect thereto; and,
(5) each Credit Lease has a term ending on or after the final
maturity of the related Credit Lease Loan;
(K) To the Mortgage Loan Seller's knowledge, the Mortgaged Property
is not subject to any lease other than the related Credit Lease,
except with respect to two of the Mortgaged Properties securing
certain of the Value City Credit Lease Loans under which another
tenant occupies a portion of the Mortgaged Property but the income of
which tenant was not used in underwriting of the Credit Lease Loan, no
Person has any possessory interest in, or right to occupy, the
Mortgaged Property except under and pursuant to such Credit Lease and
the Tenant under the related Credit Lease, or its wholly-owned
subsidiary, is in occupancy of the Mortgaged Property;
(L) The Mortgage Loan Seller is entitled to notice of any event of
default from the Tenant under the Credit Lease;
(M) Each Tenant under a Credit Lease is required to make all rental
payments directly to the Mortgage Loan Seller, its successors and
assigns under the related Credit Lease Loan; and
(N) Each Credit Lease Loan provides that the related Credit Lease
cannot be modified without the consent of the Mortgage Loan Seller
thereunder.
(xxxiv) With respect to each Mortgaged Property improved by a hotel
(except with respect to the Hotel Property known as the Westin Casuarina
Resort Property) or a healthcare facility, the Seller has, filed and/or
recorded (or sent for filing and/or recording on the closing date of the
related Mortgage Loan), Uniform Commercial Code financing statements on
all furniture, fixtures, equipment and all other personal property used in
the operation of the hotel or the healthcare facility;
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(xxxv) (A) Except with respect to 11 Mortgage Loans which represent 1.2%
of the Initial Pool Balance (and as disclosed herein), each borrower of a
Mortgage Loan is an entity whose organizational documents provide that it
is, and at least so long as the Mortgage Loan is outstanding will continue
to be, a single-purpose entity. (For this purpose, "single-purpose entity"
shall mean a person, other than an individual, which is formed or
organized solely for the purpose of owning and operating a single property
(other than the borrower under the Andover Park Mortgage Loan, which owns
an underdeveloped parcel adjacent to the related Mortgage Property), does
not engage in any business unrelated to such property and its financing,
does not have any assets other than those related to its interest in the
property or its financing, or any indebtedness other than as permitted by
the related Mortgage or the other Mortgage Loan documents, has its own
books and records and accounts separate and apart from any other person,
and holds itself out as being a legal entity, separate and apart from any
other person);
(B) The Mortgage Loan documents for each Mortgage Loan having a
Cut-off Date Principal Balance in excess of $25,000,000 requires that
the Board of Directors of the borrower, its corporate general partner,
or managing member, as applicable, include an independent director;
and
(xxxvi) The rent due under the ground lease for the Westin Casuarina
Resort Property has been fully paid for the full term of the lease.
The Pooling and Servicing Agreement requires that the Servicer, the
Special Servicer or the Trustee notify the Mortgage Loan Sellers and the
Depositor upon its becoming aware of (a) any breach of any representation or
warranty contained in clauses (i), (ii), (iii), (iv), (v), (vi), (vii),
(viii), (ix), (xi), (xii), (xv), (xvi), (xvii), (xviii), (xix), (xx), (xxiv)
or (xxix) and (b) any breach of any representation or warranty contained in
clauses (x), (xiii), (xiv), (xxi), (xxii), (xxiii), (xxv), (xxvi), (xxvii),
(xxviii), (xxx), (xxxi), (xxxii), (xxxiii), (xxxiv), (xxxv) or (xxxvi) that
materially and adversely affects the value of such Mortgage Loan or the
interests of the holders of the Certificates therein. The Mortgage Loan
Purchase and Sale Agreement provides that, with respect to any such Mortgage
Loan, within 90 days after notice from the Servicer, the Special Servicer or
the Trustee, the Mortgage Loan Seller shall either (a) repurchase such
Mortgage Loan at an amount equal to (i) the outstanding principal balance of
the Mortgage Loan as of the Due Date as to which a payment was last made by
the borrower (less any P&I Advances previously made on account of principal),
(ii) accrued interest up to the Due Date in the month following the month in
which such repurchase occurs (less P&I Advances previously made on account of
interest), (iii) the amount of any unreimbursed Advances (with interest
thereon) and any unreimbursed servicing compensation relating to such
Mortgage Loan and (iv) any expenses reasonably incurred or to be incurred by
the Servicer, the Special Servicer or the Trustee in respect of the breach or
defect giving rise to the repurchase obligation, including any expenses
arising out of the enforcement of the repurchase obligation (such price the
"Repurchase Price") or (b) promptly cure such breach in all material
respects, provided, however, that in the event that such breach is capable of
being cured, as determined by the Servicer, but not within such 90-day period
and the Mortgage Loan Seller has commenced and is diligently proceeding with
the cure of such breach, the Mortgage Loan Seller will have an additional 90
days to complete such cure; provided, further, that with respect to such
additional 90-day period the Mortgage Loan Seller shall have delivered an
officer's certificate to the Trustee and the Servicer setting forth the
reason such breach is not capable of being cured within the initial 90-day
period and what actions the Mortgage Loan Seller is pursuing in connection
with the cure thereof and stating that the Mortgage Loan Seller anticipates
that such breach will be cured within the additional 90-day period; and,
provided, further, that in the event the Mortgage Loan Seller fails to cure
such breach within such additional 90-day period, the Repurchase Price shall
include interest on any Advances made in respect of the related Mortgage Loan
during such period.
Notwithstanding the foregoing, upon discovery by the Trustee, any
custodian for the Trustee, the Servicer or Special Servicer of a breach of a
representation or warranty that causes any Mortgage Loan not to be a
"qualified mortgage" within the meaning of the REMIC provisions of the Code,
such person shall give prompt notice thereof to the Depositor and within 90
days after such discovery, if such breach cannot be cured within such period,
the Depositor shall purchase, or cause the Mortgage Loan Seller to purchase,
such Mortgage Loan from the Trust Fund at the Repurchase Price.
The obligations of the Mortgage Loan Seller to repurchase or cure
constitute the sole remedies available to holders of Certificates or the
Trustee for a breach of a representation or warranty by the Mortgage Loan
Seller with respect to a Mortgage Loan. None of the Depositor (except as
described in the previous paragraph), the Servicer, the Special Servicer, the
Trustee or the Fiscal Agent will be obligated to purchase a Mortgage Loan if
the Mortgage Loan Seller defaults on its obligation to repurchase or cure,
and no assurance can be given that the Mortgage Loan Seller will fulfill such
obligations. No assurance can be given that the Depositor will perform any
obligation to cure or repurchase a Mortgage
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Loan for a breach of any representation referred to in the second preceding
paragraph. If such obligation is not met, as to a Mortgage Loan that is not a
"qualified mortgage," the Upper-Tier REMIC and Lower-Tier REMIC may be
disqualified. However, with respect to the Mortgage Loans acquired by the
Mortgage Loan Seller from Bloomfield, the Mortgage Loan Seller will also
assign to the Depositor, and the Depositor will further assign to the
Trustee, the Mortgage Loan Seller's rights and remedies against Bloomfield in
respect of the representations and warranties made by Bloomfield in its
purchase and sale agreement with the Mortgage Loan Seller (the "Bloomfield
Purchase Agreement"), except that the Trustee will be required to reassign
such rights and remedies to the Mortgage Loan Seller as to individual
Mortgage Loans repurchased by the Mortgage Loan Seller.
NACC is in the process of transferring substantially all of its existing
commercial real estate finance business to a newly formed entity. Nomura
Holding America Inc. ("NHA") currently intends to acquire 70% of the equity
of the new entity, on a fully diluted basis, and the remainder of the equity
will be held by the current senior management of NACC. The assets to be
transferred may include NACC's ownership interest in the Depositor and the
Financing Trust. In addition, the new entity will succeed to NACC's
obligations to repurchase Mortgage Loans in the event of a breach of a
representation or warranty. There can be no assurance that the transfer of
the real estate business as contemplated will be consummated. Even if such
transfer is completed, there can be no assurance that the new entity will be
able to successfully continue the mortgage finance business of NACC or to
discharge the obligations of NACC to repurchase Mortgage Loans.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling and Servicing Agreement requires the Servicer and Special
Servicer to service and administer the Mortgage Loans (other than the Westin
Casuarina Resort Loan), on behalf of the Trust Fund solely in the best
interests of and for the benefit of all of the holders of Certificates (as
determined by the Servicer or Special Servicer in the exercise of its
reasonable judgment) in accordance with applicable law, the terms of the
Pooling and Servicing Agreement and the Mortgage Loans and to the extent not
inconsistent with the foregoing, in the same manner in which, and with the
same care, skill, prudence and diligence with which, it (a) services and
administers similar mortgage loans comparable to the Mortgage Loans and held
for other similar third party portfolios or (b) administers mortgage loans
for its own account, whichever standard is higher, but without regard to (i)
any known relationship that the Servicer or Special Servicer, or an affiliate
of the Servicer or Special Servicer, may have with the borrowers or any other
party to the Pooling and Servicing Agreement; (ii) the ownership of any
Certificate by the Servicer or Special Servicer or any affiliate of the
Servicer or Special Servicer, as applicable; (iii) the Servicer's or Special
Servicer's obligation to make Advances or to incur servicing expenses with
respect to the Mortgage Loans; (iv) the Servicer's or Special Servicer's
right to receive compensation for its services under the Pooling and
Servicing Agreement or with respect to any particular transaction; (v) the
ownership, or servicing or management for others, by the Servicer or Special
Servicer of any other loans or property; or (vi) to the extent that an
affiliate of the Mortgage Loan Sellers becomes the Servicer or the Special
Servicer, any obligation of a Mortgage Loan Seller to repurchase any Mortgage
Loan (the "Servicing Standard"). The Servicer under Series 1997-D5 will
service both the Westin Casuarina Resort Loan and the Other Westin Casuarina
Resort Loan under the terms of the pooling and servicing agreement related to
Series 1997-D5, including, without limitation, performing property
inspections and maintaining insurance policies. See "Risk Factors--Westin
Casuarina Resort Loan" herein. The Servicer and the Special Servicer are
permitted, at their own expense, to employ subservicers, agents or attorneys
in performing any of their respective obligations under the Pooling and
Servicing Agreement, but will not thereby be relieved of any such obligation,
and will be responsible for the acts and omissions of any such subservicers,
agents or attorneys. The Pooling and Servicing Agreement provides, however,
that neither the Servicer, the Special Servicer nor any of their respective
directors, officers, employees or agents shall have any liability to the
Trust Fund or the Certificateholders for taking any action or refraining from
taking an action in good faith, or for errors in judgment. The foregoing
provision would not protect the Servicer or the Special Servicer for the
breach of its representations or warranties in the Pooling and Servicing
Agreement, 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
obligations or duties under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement requires the Servicer or the Special
Servicer, as applicable, to make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans. Consistent
with the above, the Servicer or Special Servicer may, in its discretion,
waive any late payment charge in connection with any delinquent Monthly
Payment or Balloon Payment with respect to any Mortgage Loan. With respect to
the ARD Loans, the Servicer and Special Servicer will be directed in the
Pooling and Servicing Agreement not to take any enforcement action with
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respect to payment of Excess Interest or principal in excess of the principal
component of the constant Monthly Payment prior to the final maturity date.
The Pooling and Servicing Agreement provides that if a Mortgage Loan provides
that the lender may in its discretion apply certain amounts to a prepayment
of principal (e.g., by applying casualty or condemnation proceeds or funds
escrowed improvements not completed by the required date) prior to the
expiration of the related Lock-out Period, the Special Servicer cannot
consent to such a prepayment unless the Special Servicer has first received
the consent of the Servicer. With respect to any Specially Serviced Mortgage
Loan, subject to the restrictions set forth below under "--Realization Upon
Mortgage Loans," the Special Servicer will be entitled to pursue any of the
remedies set forth in the related Mortgage, including the right to acquire,
through foreclosure, all or any of the Mortgaged Properties securing such
Mortgage Loan. The Servicer or Special Servicer may elect to extend a
Mortgage Loan (subject to conditions described herein) notwithstanding its
decision to foreclose on certain of the Mortgaged Properties.
ADVANCES
The Servicer will be obligated to advance, on the Business Day immediately
preceding a Distribution Date (the "Servicer Remittance Date") an amount
(each such amount, a "P&I Advance") equal to the amount not received in
respect of the Monthly Payment, Assumed Monthly Payment or Minimum Defaulted
Monthly Payment on a Mortgage Loan (with interest at the Mortgage
Pass-Through Rate) that was delinquent as of the close of business on the
immediately preceding Due Date (and which delinquent payment has not been
cured as of the Servicer Remittance Date), or, in the event of a default in
the payment of amounts due on the maturity date of a Mortgage Loan, the
amount equal to the Monthly Payment or portion thereof not received that was
due prior to the maturity date provided, however, the Servicer will not be
required to make an Advance to the extent it determines that such advance
would not be ultimately recoverable from late payments, net insurance
proceeds, net liquidation proceeds and other collections with respect to the
related Mortgage Loan. P&I Advances are intended to maintain a regular flow
of scheduled interest and principal payments to holders of the Certificates
entitled thereto, rather than to guarantee or insure against losses. The
Servicer will not be required or permitted to make a P&I Advance for Excess
Interest or Default Interest. The amount required to be advanced in respect
of delinquent Monthly Payments, Assumed Scheduled Payments or Minimum
Defaulted Monthly Payments on a Mortgage Loan that has been subject to an
Appraisal Reduction Event will equal the product of (a) the amount that would
be required to be advanced by the Servicer without giving effect to such
Appraisal Reduction Event and (b) a fraction, the numerator of which is the
Stated Principal Balance of the Mortgage Loan (as of the last day of the
related Collection Period) less any Appraisal Reduction Amounts thereof and
the denominator of which is the Stated Principal Balance (as of the last day
of the related Collection Period). In addition, and without duplication, the
Servicer will (i) make only one P&I Advance in respect of each Mortgage Loan
for the benefit of the most subordinate Sequential Class of Certificates then
outstanding unless the related defaulted Monthly Payment is cured prior to
the following Due Date on any Mortgage Loan and (ii) not make any P&I Advance
in respect of Reduction Interest Distribution Amounts or Reduction Interest
Shortfalls. The amount to be advanced by the Servicer, Trustee or Fiscal
Agent in respect of any Mortgage Loan on any Distribution Date will be
reduced by the greater of the reduction in respect of any Appraisal Reduction
Amount and the reduction described in the preceding sentence. On any Servicer
Remittance Date on which the Servicer is not required to make a P&I Advance
to the most subordinate Class of Certificates (as described in the preceding
sentence), the Servicer will initially make such P&I Advance (for accounting
purposes only) but will be required, immediately subsequent to the making of
such P&I Advance, to reimburse itself (without interest) for such P&I Advance
from and up to all amounts with respect to such Mortgage Loan that would be
distributed to the most subordinate Class on the related Distribution Date
then outstanding if such Mortgage Loan was not in default (such amount of
reimbursement, the "Subordinate Class Advance Amount"). No interest will
accrue on, or be payable with respect to, any outstanding Subordinate Class
Advance Amount.
The Trustee will provide to the Servicer written statements prior to the
Servicer Remittance Date listing (i) the aggregate Reduction Interest
Distribution Amounts and Reduction Interest Shortfalls for such Distribution
Date and (ii) the distribution due to the Holders of the most subordinate
Class of Sequential Certificates. For purposes of determining the most
subordinate Sequential Class, (i) the Class A-1A, Class A-1B, Class A-1C,
Class A-1D, Class A-CS1 and Class PS-1 Certificates collectively and (ii) the
Class B-7 and Class B-7H Certificates together will, in each case, be treated
as one Class.
In addition to P&I Advances, the Servicer (and in limited circumstances,
the Special Servicer) will also be obligated (subject to the limitations
described herein) to make cash advances ("Property Advances," and together
with P&I Advances, "Advances") to pay delinquent real estate taxes,
assessments and hazard insurance premiums and to cover other similar costs
and expenses necessary to preserve the priority of the related Mortgage,
enforce the terms of any
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Mortgage Loan or to maintain such Mortgaged Property. The servicer of Series
1997-D5 will service both the Westin Casuarina Resort Loan and the Other
Westin Casuarina Resort Loan, under the terms of the Pooling and Servicing
Agreement related to Series 1997-D5. The Servicer will be required (subject
to the limitations described herein) to make a pro rata share of any Property
Advances required in respect of the Westin Casuarina Resort Property, based
on the principal balances of the Westin Casuarina Resort Loan and the Other
Westin Casuarina Resort Loan. See "Risk Factors--The Westin Casuarina Resort
Loan" herein.
To the extent the Servicer fails to make an Advance it is required to make
under the Pooling and Servicing Agreement, the Trustee, subject to a
determination of recoverability, will make such required Advance or, in the
event the Trustee fails to make such Advance, the Fiscal Agent, subject to a
determination of recoverability, will make such Advance, in each case
pursuant to the terms of the Pooling and Servicing Agreement. To the extent
the Special Servicer fails to make an Advance it is required to make under
the Pooling and Servicing Agreement, the Servicer, subject to a determination
of recoverability, will make such an Advance. Both the Trustee and the Fiscal
Agent will be entitled to rely conclusively on any non-recoverability
determination of the Servicer or the Special Servicer, as the case may be.
See "--Trustee" and "--Fiscal Agent" below.
The Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, will be entitled to reimbursement for any Advance made by it in
an amount equal to the amount of such Advance and interest accrued thereon at
the Advance Rate (i) from late payments on the Mortgage Loan by the
Mortgagor, (ii) from insurance proceeds, condemnation proceeds, liquidation
proceeds from the sale of the Specially Serviced Mortgage Loan or the related
Mortgaged Property or other collections relating to the Mortgage Loan or
(iii) upon determining in good faith that such Advance or interest is not
recoverable in the manner described in the preceding two clauses, from any
other amounts from time to time on deposit in the Collection Account.
The Servicer, the Special Servicer, the Trustee and the Fiscal Agent will
each be entitled to receive interest on Advances at a per annum rate equal to
the sum of (i) the Prime Rate (as defined herein) plus (ii) 1% (the "Advance
Rate"), compounded monthly, as of each Servicer Remittance Date and the
Servicer will be authorized to pay itself, the Special Servicer, the Trustee
or the Fiscal Agent, as applicable, such interest monthly from general
collections with respect to all of the Mortgage Loans prior to any payment to
holders of Certificates. To the extent that the payment of such interest at
the Advance Rate results in a shortfall in amounts otherwise payable on one
or more Classes of Certificates on the next Distribution Date, the Servicer,
the Trustee or the Fiscal Agent, as applicable, will be obligated to make a
cash advance to cover such shortfall, but only to the extent the Servicer,
the Trustee or the Fiscal Agent, as applicable, concludes that, with respect
to each such Advance, such Advance can be recovered from amounts payable on
or in respect of the Mortgage Loan to which the Advance is related. If the
interest on such Advance is not recovered from Default Interest on such
Mortgage Loan, a shortfall will result which will have the same effect as a
Realized Loss. The "Prime Rate" is the rate, for any day, set forth as such
in the "Money Rates" section of The Wall Street Journal, Eastern Edition.
The obligation of the Servicer, the Special Servicer, the Trustee or the
Fiscal Agent, as applicable, to make Advances with respect to any Mortgage
Loan pursuant to the Pooling and Servicing Agreement continues through the
foreclosure of such Mortgage Loan and until the liquidation of the Mortgage
Loan or related Mortgaged Properties. P&I Advances are intended to provide a
limited amount of liquidity, not to guarantee or insure against losses. None
of the Servicer, the Special Servicer, the Trustee or the Fiscal Agent will
be required to make any Advance that it determines in its good faith business
judgment will not be recoverable by the Servicer, the Special Servicer, the
Trustee or the Fiscal Agent, as applicable, out of related late payments,
insurance proceeds, liquidation proceeds and other collections with respect
to the Mortgage Loan as to which such Advances were made. In addition, if the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, determines in its good faith business judgment that any Advance
previously made will not be recoverable from the foregoing sources, then the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, will be entitled to reimburse itself for such Advance, plus
interest thereon, out of amounts payable on or in respect of all of the
Mortgage Loans prior to distributions on the Certificates. Any such judgment
or determination with respect to the recoverability of Advances must be
evidenced by an officers' certificate delivered to the Trustee, Fiscal Agent
and Depositor in the case of the Servicer, the Servicer, in the case of the
Special Servicer, the Depositor, in the case of the Trustee or the Fiscal
Agent, and the Trustee in the case of the Fiscal Agent, setting forth such
judgment or determination of nonrecoverability and the considerations of the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
applicable, forming the basis of such determination (including but not
limited to information selected by the person making such determination in
its good faith discretion such as related income and expense statements, rent
rolls,
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occupancy status, property inspections, inquiries by the Servicer, the
Special Servicer, the Trustee or the Fiscal Agent, as applicable, and an
independent appraisal performed by an independent MAI appraiser selected by
the Servicer, and conducted within the past twelve months on the applicable
Mortgaged Property).
ACCOUNTS
Lock Box Accounts. With respect to 98 Mortgage Loans, which represent in
the aggregate 67% of the Initial Pool Balance, one or more accounts in the
name of the related borrower (the "Lock Box Accounts") have been established
into which rents or other revenues from the related Mortgaged Properties are
deposited by the related tenants. With respect to 28 Mortgage Loans, which
represent in the aggregate 12% of the Initial Pool Balance the borrower or
the related property manager is required to deposit rents and other revenues
in the related Lock Box Account. Agreements governing the Lock Box Accounts
provide that the borrower has no withdrawal or transfer rights with respect
thereto and that all funds on deposit in the Lock Box Accounts are
periodically swept into the Cash Collateral Accounts (as defined below).
Additionally, the Mortgage Loans that have Anticipated Repayment Dates
require that a Lock Box Account be established prior to their respective
Anticipated Repayment Dates. The Lock Box Accounts will not be an asset of
the Trust REMICs.
Cash Collateral Accounts. With respect to certain of the Mortgage Loans
that have a Lock Box Account, one or more accounts in the name of the
Servicer (the "Cash Collateral Accounts") have been established into which
funds in the related Lock Box Accounts will be swept on a regular basis; with
respect to certain other of the Mortgage Loans that have a Lock Box Account,
such Lock Box Account will be swept into one or more of the Cash Collateral
Accounts only in the event of a default by the related Borrower. The Reserve
Accounts generally will be sub-accounts of the Cash Collateral Accounts. Any
excess over the amount necessary to fund the Monthly Payment, the Reserve
Accounts and any other amounts due under the Mortgage Loans will be returned
to or retained by the related borrower provided no event of default of which
the Servicer is aware of has occurred and is continuing with respect to such
Mortgage Loan. However, as described under "Description of the Mortgage
Pool--Certain Terms and Conditions of the Mortgage Loans--Excess Interest,"
after the respective Anticipated Repayment Date, if applicable, all amounts
in the related Cash Collateral Account in excess of the amount necessary to
fund the Monthly Payment and Reserve Accounts will be applied to (i)
operating and capital expenses, (ii) the reduction of the principal balance
of the related Mortgage Loan until such principal is paid in full and (iii)
Excess Interest, in that order. The Cash Collateral Accounts will not be an
asset of the Trust REMICs.
Collection Account. The Servicer will establish and maintain a segregated
account (the "Collection Account") pursuant to the Pooling and Servicing
Agreement, and on each Due Date withdraw from each Cash Collateral Account an
amount equal to the Monthly Payment on the related Mortgage Loan and deposit
such amount into the Collection Account for application towards the Monthly
Payment (including Servicing Fees) due on the related Mortgage Loan. The
Servicer shall also deposit into the Collection Account within one business
day of receipt all other payments in respect of the Mortgage Loans, other
than amounts to be deposited into any Reserve Account.
Distribution Accounts. The Trustee will establish and maintain one or more
segregated accounts (the "Distribution Account") in the name of the Trustee
for the benefit of the holders of Certificates. With respect to each
Distribution Date, the Servicer will deposit in the Distribution Account, to
the extent of funds on deposit in the Collection Account, on the Servicer
Remittance Date an aggregate amount of immediately available funds equal to
the sum of (i) the Available Funds and (ii) the portion of the Servicing Fee
representing the Trustee's Fee. The Servicer will deposit all P&I Advances
into the Distribution Account on the related Servicer Remittance Date. To the
extent the Servicer fails to do so, the Trustee or the Fiscal Agent will
deposit all P&I Advances into the Distribution Account as described herein.
See "Description of the Offered Certificates--Distributions" herein.
[Interest Reserve Account. The Servicer will establish and maintain an
Interest Reserve Account ("Interest Reserve Account") in the name of the
Trustee for the benefit of the holders of the Certificates. On each Servicer
Remittance Date relating to an Interest Accrual Period ending in any February
and on any Servicer Remittance Date relating to an Interest Accrual Period
ending in any January which occurs in a year which is not a leap year, the
Servicer will be required to deposit, in respect of the Mortgage Loan known
as the [ ] Loan, into the Interest Reserve Account, an amount equal to one
day's interest collected on the Stated Principal Balance of such Mortgage
Loan as of the Due Date occurring in the month preceding the month in which
such Servicer Remittance Date occurs at the related Mortgage Rate, to the
extent a full Monthly Payment or P&I Advance is made in respect thereof (all
amounts so deposited in any consecutive January and February, "Withheld
Amounts"). On each Servicer Remittance Date occurring in March, the Servicer
will be
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required to withdraw from the Interest Reserve Account an amount equal to the
Withheld Amounts from the preceding January and February, if any, and deposit
such amount into the Distribution Account.]
The Trustee will also establish and maintain one or more segregated
accounts for each of the "Upper-Tier Distribution Account," the "Default
Interest Distribution Account" and the "Excess Interest Distribution
Account," each in the name of the Trustee for the benefit of the holders of
the Certificates.
The Cash Collateral Accounts, Collection Account, the Distribution
Account, the Upper-Tier Distribution Account, the Interest Reserve Account,
the Excess Interest Distribution Account and the Default Interest
Distribution Account will be held in the name of the Trustee (or the Servicer
on behalf of the Trustee) on behalf of the holders of Certificates and the
Servicer will be authorized to make withdrawals from the Cash Collateral
Accounts, the Collection Account and the Interest Reserve Account. Each of
the Cash Collateral Account, Collection Account, any REO Account, the
Distribution Account, the Upper-Tier Distribution Account, the Interest
Reserve Account, the Excess Interest Distribution Account and the Default
Interest Distribution Account will be either (i) (A) an account or accounts
maintained with a depository institution or trust company the short term
unsecured debt obligations or commercial paper of which are rated at least
A-1 by S&P, P-1 by Moody's and F-1+ by Fitch in the case of accounts in which
funds are held for 30 days or less (or, in the case of accounts in which
funds are held for more than 30 days, the long term unsecured debt
obligations of which are rated at least "AA" by Fitch and S&P and "Aa2" by
Moody's) or (B) as to which the Trustee has received written confirmation
from each of the Rating Agencies that holding funds in such account would not
cause any Rating Agency to qualify, withdraw or downgrade any of its ratings
on the Certificates or (ii) a segregated trust account or accounts maintained
with a federal or state chartered depository institution or trust company
acting in its fiduciary capacity which, in the case of a state chartered
depository institution, is subject to regulations substantially similar to 12
C.F.R. Section 9.10(b), having in either case a combined capital surplus of
at least $50,000,000 and subject to supervision or examination by federal and
state authority, or any other account that, as evidenced by a written
confirmation from each Rating Agency that such account would not, in and of
itself, cause a downgrade, qualification or withdrawal of the then current
ratings assigned to the Certificates, which may be an account maintained with
the Trustee or the Servicer (an "Eligible Bank"). NationsBank, NA, or any of
its subsidiaries shall be deemed to be an Eligible Bank. Amounts on deposit
in the Collection Account, Cash Collateral Account, any REO Account and the
Interest Reserve Account may be invested in certain United States government
securities and other high-quality investments specified in the Pooling and
Servicing Agreement ("Permitted Investments"). Interest or other income
earned on funds in the Collection Account and Cash Collateral Accounts will
be paid to the Servicer (except to the extent required to be paid to the
related borrower) as additional servicing compensation and interest or other
income earned on funds in any REO Account will be payable to the Special
Servicer. Interest or other income earned on funds in the Interest Reserve
Account, and interest or other income on funds in the Collection Account to
the extent not payable to the Servicer, will be paid to the Mortgage Loan
Seller as compensation for arranging for on-going monitoring and surveillance
of the Offered Certificates by the Rating Agencies.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Servicer may make withdrawals from the Collection Account for the
following purposes, to the extent permitted and in the priorities provided in
the Pooling and Servicing Agreement: (i) to remit on or before each Servicer
Remittance Date (A) to the Distribution Account an amount equal to the sum of
(I) Available Funds and any Prepayment Premiums and (II) the Trustee Fee for
such Distribution Date, (B) to the Default Interest Distribution Account an
amount equal to the Net Default Interest received in the related Collection
Period, (C) to the Excess Interest Distribution Account an amount equal to
the Excess Interest received in the related Collection Period, if any, and
(D) to the Interest Reserve Account an amount required to be withheld as
described under "--Accounts--Interest Reserve Account;" (ii) to pay or
reimburse the Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as applicable, for Advances made by any of them and, if applicable,
interest on Advances (provided, that the Trustee and Fiscal Agent will have
priority with respect to such payment or reimbursement), the Servicer's right
to reimbursement for items described in this clause (ii) being limited as
described herein under "--Advances;" (iii) to pay on or before each Servicer
Remittance Date to the Servicer and the Special Servicer as compensation, the
aggregate unpaid Servicing Compensation (not including the portion of the
Servicing Fee representing the Trustee's Fee), Special Servicing Fee,
Principal Recovery Fee, and any other servicing or special servicing
compensation in respect of the immediately preceding calendar month and to
pay to the Mortgage Loan Seller its monitoring and surveillance fee payable
from the Collection Account; (iv) to pay on or before each Distribution Date
to the Depositor, Mortgage Loan Seller or Bloomfield with respect to each
Mortgage Loan or REO Property that has previously been purchased or
repurchased by it pursuant to the Pooling and Servicing Agreement, all
amounts received thereon during the related Collection Period and subsequent
to the date as of which the amount required to effect
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such purchase or repurchase was determined; (v) to the extent not reimbursed
or paid pursuant to any of the above clauses, to reimburse or pay the
Servicer, the Special Servicer, the Trustee, the Fiscal Agent and/or the
Depositor for unpaid servicing compensation (in the case of the Servicer, the
Special Servicer or the Trustee) and certain other unreimbursed expenses
incurred by such persons pursuant to and to the extent reimbursable under the
Pooling and Servicing Agreement and to satisfy any indemnification
obligations of the Trust Fund under the Pooling and Servicing Agreement; (vi)
to pay to the Trustee amounts requested by it to pay taxes on certain net
income with respect to REO Properties; (vii) to withdraw any amount deposited
into the Collection Account that was not required to be deposited therein;
and (viii) to clear and terminate the Collection Account pursuant to a plan
for termination and liquidation of the Trust Fund.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
The Mortgage Loans contain provisions in the nature of "due-on-sale"
clauses, which by their terms (a) provide that the Mortgage Loans shall (or
may at the mortgagee's option) become due and payable upon the sale or other
transfer of an interest in the related Mortgaged Property or (b) provide that
the Mortgage Loans may not be assumed without the consent of the related
mortgagee in connection with any such sale or other transfer. The Servicer or
the Special Servicer, as applicable, will not be required to enforce such
due-on-sale clauses and in connection therewith will not be required to (i)
accelerate payments thereon or (ii) withhold its consent to such an
assumption if (x) such provision is not exercisable under applicable law or
such provision is reasonably likely to result in meritorious legal action by
the borrower or (y) the Servicer or the Special Servicer, as applicable,
determines, in accordance with the Servicing Standard, that granting such
consent would be likely to result in a greater recovery, on a present value
basis (discounting at the related Mortgage Rate), than would enforcement of
such clause. If the Servicer or the Special Servicer, as applicable,
determines that granting such consent would be likely to result in a greater
recovery, the Servicer or the Special Servicer, as applicable, is authorized
to take or enter into an assumption agreement from or with the proposed
transferee as obligor thereon provided that (a) the credit status of the
prospective transferee is in compliance with the Servicer's or Special
Servicer's, as applicable, regular commercial mortgage origination or
servicing standards and criteria and the terms of the related Mortgage and
(b) the Servicer or the Special Servicer, as applicable, has received written
confirmation from each Rating Agency that such assumption or substitution
would not, in and of itself, cause a downgrade, qualification or withdrawal
of the then current ratings assigned to the Certificates. No assumption
agreement may contain any terms that are different from any term of any
Mortgage or related Note, except pursuant to the provisions described under
"--Realization Upon Mortgage Loans" and "--Modifications," herein.
The Mortgage Loans contain provisions in the nature of a
"due-on-encumbrance" clause which by their terms (a) provide that the
Mortgage Loans shall (or may at the mortgagee's option) become due and
payable upon the creation of any lien or other encumbrance on the related
Mortgaged Property, or (b) require the consent of the related mortgagee to
the creation of any such lien or other encumbrance on the related Mortgaged
Property. The Servicer or the Special Servicer, as applicable, will not be
required to enforce such due-on-encumbrance clauses and in connection
therewith will not be required to (i) accelerate payments thereon or (ii)
withhold its consent to such lien or encumbrance if the Servicer or the
Special Servicer, as applicable, (x) determines, in accordance with the
Servicing Standard, that such enforcement would not be in the best interests
of the Trust Fund and (y) receives prior written confirmation from each
Rating Agency that granting such consent would not, in and of itself, cause a
downgrade, qualification or withdrawal of any of the then current ratings
assigned to the Certificates. See "Certain Legal Aspects of the Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance" in the Prospectus.
INSPECTIONS
The Servicer (or with respect to any Specially Serviced Mortgage Loan, the
Special Servicer) is required to inspect each Mortgaged Property at such
times and in such manner as are consistent with the Servicing Standards
described herein, but in any event (i) is required to inspect each Mortgaged
Property securing a Note, with a Stated Principal Balance (or in the case of
a Note secured by more than one Mortgaged Property, having an Allocated Loan
Amount) of (a) $2,000,000 or more at least once every twelve months and (b)
less than $2,000,000 at least once every 24 months, in each case commencing
in March 1998 (or at such lesser frequency, provided each Rating Agency has
confirmed in writing to the Servicer that such schedule will not result in
the withdrawal, downgrading or qualification of the then-current ratings
assigned to the Certificates) and (ii) if the Mortgage Loan (a) becomes a
"Specially Serviced Mortgage Loan," (b) is delinquent for 60 days or (c) has
a debt service coverage ratio of less than 1.0, the Special Servicer is
required to inspect the related Mortgaged Properties as soon as practicable
and thereafter at least every twelve months, until such condition is cured.
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INSURANCE POLICIES
The Pooling and Servicing Agreement requires the Servicer (or the Special
Servicer in the case of an REO Property) to obtain or cause the mortgagor on
each Mortgage Loan to maintain fire and hazard insurance with extended
coverage on the related Mortgaged Property in an amount which is at least
equal to the lesser of (A) one hundred percent (100%) of the then "full
replacement cost" of the improvements and equipment, without deduction for
physical depreciation, and (B) the outstanding principal balance of the
related Mortgage Loan, or such greater amount as is necessary to prevent any
reduction, by reason of the application of co-insurance and to prevent the
Trustee thereunder from being deemed a co-insurer and provided such policy
shall include a "replacement cost" rider. The Pooling and Servicing Agreement
also requires the Servicer (or the Special Servicer in the case of an REO
Property) to obtain or cause the mortgagor on each Mortgaged Property to
maintain insurance providing coverage against at least 18 months of rent
interruptions (24 months with respect to an REO Property) and any other
insurance as is required in the related Mortgage Loan. In the case of an REO
Property, if the Special Servicer fails to maintain fire and hazard insurance
as described above or flood insurance as described below, the Servicer shall
maintain such insurance, and if the Servicer does not maintain such
insurance, the Trustee shall maintain such insurance and if the Trustee does
not maintain such insurance, the Fiscal Agent shall do so, subject to the
provisions concerning nonrecoverable Advances. Any cost incurred by the
Servicer, Special Servicer, Trustee or Fiscal Agent in maintaining any such
insurance shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so
permit. Notwithstanding the foregoing insurance requirements, and in lieu
thereof, the Pooling and Servicing Agreement permits the Servicer to allow
Tenants with respect to certain of the Credit Lease Loans to self-insure with
respect to such risks in accordance with the terms of the related Credit
Lease.
In general, the standard form of fire and hazard extended coverage policy
covers physical damage to or destruction of the improvements of the property
by fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil
commotion, subject to certain conditions and exclusions in each policy.
Although the policies relating to the Mortgage Loans will be underwritten by
different insurers in different states and therefore will not contain
identical terms and conditions, most such policies will not cover any
physical damage resulting from war, revolution, governmental actions, floods
and other water-related causes, earth movement (including earthquakes,
landslides and mudflows), wet or dry rot, vermin, domestic animals and
certain other kinds of uninsured risks. Nonetheless, certain of the Mortgage
Loans require insurance coverage for floods and other water-related causes
and earth movement. When the Servicer determines that a Mortgaged Property is
located in a federally designated flood area, the Pooling and Servicing
Agreement requires the Servicer to use its best efforts to cause the related
borrower to maintain, or if not maintained, to itself obtain (subject to the
provisions concerning nonrecoverable Advances) flood insurance. Such flood
insurance shall be in an amount equal to the lesser of (i) the unpaid
principal balance of the related Mortgage Loan and (ii) the maximum amount of
such insurance required by the terms of the related Mortgage and as is
available for the related property under the national flood insurance
program, if available. If an REO Property (i) is located in a federally
designated special flood hazard area or (ii) is related to a Mortgage Loan
pursuant to which earthquake insurance was in place at the time of
origination and continues to be available at commercially reasonable rates,
the Pooling and Servicing Agreement requires that the Special Servicer obtain
(subject to the issues concerning nonrecoverable Advances) flood insurance
and/or earthquake insurance. If a recovery due to a flood or earthquake is
not available for an REO Property but would have been available if such
insurance were maintained, the Special Servicer will be required (subject to
the provisions concerning nonrecoverable Advances) to (i) immediately deposit
into the Collection Account from its own funds the amount that would have
been recovered or (ii) apply to the restoration and repair of the property
from its own funds the amount that would have been recovered, if such
application is consistent with the Servicing Standard; provided, however,
that the Special Servicer shall not be responsible for any shortfall in
insurance proceeds resulting from an insurer's refusal or inability to pay a
claim.
The Servicer or the Special Servicer may obtain and maintain a blanket
insurance policy insuring against fire and hazard losses on all of the
Mortgaged Properties (other than REO Properties) as to which the related
borrower has not maintained insurance to satisfy its obligations concerning
the maintenance of insurance coverage. Any such blanket insurance policy
shall be maintained with an insurer qualified under the terms of the Pooling
and Servicing Agreement. Additionally, the Servicer or the Special Servicer
may obtain a master force placed insurance policy, as long as such policy is
issued by an insurer qualified under the terms of the Pooling and Servicing
Agreement and provides no less coverage in scope and amount than otherwise
required to be maintained as described in the preceding paragraphs.
The ability of the Servicer to assure that fire and hazard, flood or
earthquake insurance proceeds are appropriately applied may be dependent upon
its being named as an additional insured under such policy, or upon the
extent to which information in this regard is furnished by mortgagors.
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Under the terms of the Mortgage Loans, the borrowers will be required to
present claims to insurers under hazard insurance policies maintained on the
related Mortgaged Properties. The Servicer or Special Servicer, as
applicable, on behalf of itself, the Trustee and Certificateholders, is
obligated to present or cause to be presented claims under any blanket
insurance policy insuring against hazard losses on Mortgaged Properties
securing the Mortgage Loans. However, the ability of the Servicer or Special
Servicer, as applicable, to present or cause to be presented such claims is
dependent upon the extent to which information in this regard is furnished to
the Servicer or Special Servicer, as applicable, by the borrowers.
All insurance policies required shall name the Trustee or the Servicer or
the Special Servicer, on behalf of the Trustee as the mortgagee, as loss
payee.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement requires the Servicer to cause a
nationally recognized firm of independent public accountants, which is a
member of the American Institute of Certified Public Accountants, to furnish
to the Trustee, the Depositor and the Rating Agencies on or before March 15
of each year, beginning March 15, 1999, a statement to the effect that such
firm has examined certain documents and records relating to the servicing of
similar mortgage loans for the preceding twelve months and that on the basis
of their examination, conducted substantially in compliance with generally
accepted auditing standards and the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, such
servicing has been conducted in compliance with similar agreements except for
such significant exceptions or errors in records that, in the opinion of such
firm, generally accepted auditing standards and the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC require it to report, in which case such exceptions and
errors shall be so reported.
The Pooling and Servicing Agreement also requires the Servicer to deliver
to the Trustee, the Depositor and the Rating Agencies on or before March 15
of each year, beginning March 15, 1999, an officer's certificate of the
Servicer stating that, to the best of such officer's knowledge, the Servicer
has fulfilled its obligations under the Pooling and Servicing Agreement
throughout the preceding year or, if there has been a default, specifying
each default known to such officer and the action proposed to be taken with
respect thereto.
CERTAIN MATTERS REGARDING THE DEPOSITOR, THE SERVICER AND THE SPECIAL
SERVICER
Each of the Servicer and Special Servicer may assign its rights and
delegate its duties and obligations under the Pooling and Servicing Agreement
in connection with the sale or transfer of a substantial portion of its
mortgage servicing or asset management portfolio, provided that certain
conditions are satisfied including obtaining the consent of the Trustee and
written confirmation of each Rating Agency that such assignment or delegation
will not cause a qualification, withdrawal or downgrading of the then-current
ratings assigned to the Certificates. The Pooling and Servicing Agreement
provides that the Servicer or Special Servicer may not otherwise resign from
its obligations and duties as Servicer or Special Servicer thereunder, except
upon the determination that performance of its duties is no longer
permissible under applicable law and provided that such determination is
evidenced by an opinion of counsel delivered to the Trustee. No such
resignation may become effective until the Trustee or a successor Servicer or
Special Servicer has assumed the obligations of the Servicer or Special
Servicer under the Pooling and Servicing Agreement. The Trustee or any other
successor Servicer or Special Servicer assuming the obligations of the
Servicer or Special Servicer under the Pooling and Servicing Agreement will
be entitled to the compensation to which the Servicer or Special Servicer
would have been entitled. If no successor Servicer or Special Servicer can be
obtained to perform such obligations for such compensation, additional
amounts payable to such successor Servicer or Special Servicer will be
treated as Realized Losses. In addition, the Pooling and Servicing Agreement
provides that the Depositor, upon paying the Servicer a negotiated fee, is
permitted to remove the Servicer at any time without cause provided that (i)
each Rating Agency has confirmed in writing that such removal will not result
in a downgrade, qualification or withdrawal of the then current rating of any
Class of Certificates and (ii) the successor Servicer shall be a servicing
company that is an affiliate of the Depositor, provided that such successor
Servicer will not directly service or specially service any Mortgage Loan in
which an affiliate of the Depositor has a common equity interest.
The Pooling and Servicing Agreement also provides that neither the
Depositor, the Servicer, the Special Servicer, nor any director, officer,
employee or agent of the Depositor, the Servicer or the Special Servicer will
be under any liability to the Trust Fund or the holders of Certificates for
any action taken or for refraining from the taking of any action in good
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faith pursuant to the Pooling and Servicing Agreement, or for errors in
judgment; provided, however, that neither the Depositor, the Servicer, the
Special Servicer nor any such person will be protected against any breach of
its representations and warranties made in the Pooling and Servicing
Agreement or any liability which would otherwise be imposed by reason of
willful misconduct, bad faith, fraud or negligence (or in the case of the
Servicer, by reason of any specific liability imposed for a breach of the
Servicing Standard) in the performance of duties thereunder or by reason of
reckless disregard of obligations and duties thereunder. The Pooling and
Servicing Agreement further provides that the Depositor, the Servicer, the
Special Servicer and any director, officer, employee or agent of the
Depositor, the Servicer and the Special Servicer will be entitled to
indemnification by the Trust Fund for any loss, liability or expense incurred
in connection with any legal action relating to the Pooling and Servicing
Agreement or the Certificates, other than any loss, liability or expense
incurred by reason of willful misconduct, bad faith, fraud or negligence (or
in the case of the Servicer, by reason of any specific liability imposed for
a breach of the Servicing Standard) in the performance of duties thereunder
or by reason of reckless disregard of obligations and duties thereunder.
In addition, the Pooling and Servicing Agreement provides that neither the
Depositor, the Servicer, nor the Special Servicer will be under any
obligation to appear in, prosecute or defend any legal action unless such
action is related to its duties under the Pooling and Servicing Agreement and
which in its opinion does not expose it to any expense or liability. The
Depositor, the Servicer or the Special Servicer may, however, in its
discretion undertake any such action which it may deem necessary or desirable
with respect to the Pooling and Servicing Agreement and the rights and duties
of the parties thereto and the interests of the holders of Certificates
thereunder. In such event, the legal expenses and costs of such action and
any liability resulting therefrom will be expenses, costs and liabilities of
the Trust Fund, and the Depositor, the Servicer and the Special Servicer will
be entitled to be reimbursed therefor and to charge the Collection Account.
The Depositor is not obligated to monitor or supervise the performance of
the Servicer, the Special Servicer or the Trustee under the Pooling and
Servicing Agreement. The Depositor may, but is not obligated to, enforce the
obligations of the Servicer or the Special Servicer under the Pooling and
Servicing Agreement and may, but is not obligated to, perform or cause a
designee to perform any defaulted obligation of the Servicer or the Special
Servicer or exercise any right of the Servicer or the Special Servicer under
the Pooling and Servicing Agreement. In the event the Depositor undertakes
any such action, it will be reimbursed by the Trust Fund from the Collection
Account to the extent not recoverable from the Servicer or Special Servicer
as applicable. Any such action by the Depositor will not relieve the Servicer
or the Special Servicer of its obligations under the Pooling and Servicing
Agreement.
Any person into which the Servicer may be merged or consolidated, or any
person resulting from any merger or consolidation to which the Servicer is a
party, or any person succeeding to the business of the Servicer, will be the
successor of the Servicer under the Pooling and Servicing Agreement, and
shall be deemed to have assumed all of the liabilities and obligations of the
Servicer under the Pooling and Servicing Agreement if each of the Rating
Agencies has confirmed in writing that such merger or consolidation or
transfer of assets or succession, in and of itself, will not cause a
downgrade, qualification or withdrawal of the then current ratings assigned
by such Rating Agency for any Class of Certificates.
EVENTS OF DEFAULT
Events of default of the Servicer (each, an "Event of Default") under the
Pooling and Servicing Agreement consist, among other things, of (i) any
failure by the Servicer to remit to the Collection Account or any failure by
the Servicer to remit to the Trustee for deposit into the Upper-Tier
Distribution Account, Distribution Account, Excess Interest Distribution
Account, Interest Reserve Account or Default Interest Distribution Account
any amount required to be so remitted pursuant to the Pooling and Servicing
Agreement or (ii) any failure by the Servicer duly to observe or perform in
any material respect any of its other covenants or agreements or the breach
of its representations or warranties under the Pooling and Servicing
Agreement which continues unremedied for thirty (30) days after the giving of
written notice of such failure to the Servicer by the Depositor or the
Trustee, or to the Servicer and to the Depositor and the Trustee by the
holders of Certificates evidencing Percentage Interests of at least 25% of
any affected Class; or (iii) any failure by the Servicer to make any Advances
as required pursuant to the Pooling and Servicing Agreement; or (iv)
confirmation in writing by any Rating Agency that not terminating the
Servicer would, in and of itself, cause the then-current rating assigned to
any Class of Certificates to be qualified, withdrawn or downgraded; (v)
certain events of insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings and certain actions by, on behalf of or
against the Servicer indicating its insolvency or inability to pay its
obligations or (vi) the Servicer shall no longer be an "approved" servicer by
each of the Rating Agencies for mortgage pools similar to the Trust Fund.
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Events of Default of the Special Servicer under the Pooling and Servicing
Agreement include the items specified in clauses (i) through (vi) above with
respect to, and to the extent applicable to, the Special Servicer.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default with respect to the Servicer or Special Servicer
occurs, then the Trustee may, and at the direction of the holders of
Certificates evidencing at least 25% of the aggregate Voting Rights of all
Certificateholders, the Trustee will, terminate all of the rights and
obligations of the Servicer or Special Servicer as servicer or special
servicer under the Pooling and Servicing Agreement and in and to the Trust
Fund. Notwithstanding the foregoing, upon any termination of the Servicer
under the Pooling and Servicing Agreement the Servicer will continue to be
entitled to receive all accrued and unpaid servicing compensation through the
date of termination plus all Advances and interest thereon as provided in the
Pooling and Servicing Agreement. In the event that the Servicer is also the
Special Servicer and the Servicer is terminated, the Servicer will also be
terminated as Special Servicer.
On and after the date of termination following an Event of Default by the
Servicer, the Trustee will succeed to all authority and power of the Servicer
(and the Special Servicer if the Special Servicer is also the Servicer) under
the Pooling and Servicing Agreement and will be entitled to the compensation
arrangements to which the Servicer (and the Special Servicer if the Servicer
is also the Special Servicer) would have been entitled. If the Trustee is
unwilling or unable so to act, or if the holders of Certificates evidencing
at least 25% of the aggregate Voting Rights of all Certificateholders so
request, or if the long-term unsecured debt rating of the Trustee or the
Fiscal Agent is not at least "AA" by S&P, 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 Servicer, will not cause a qualification,
withdrawal or downgrading of the then-current ratings assigned to the
Certificates, the Trustee must appoint, or petition a court of competent
jurisdiction for the appointment of, a mortgage loan servicing institution
the appointment of which will not result in the downgrading, qualification or
withdrawal of the rating or ratings then assigned to any Class of
Certificates as evidenced in writing by each Rating Agency to act as
successor to the Servicer under the Pooling and Servicing Agreement. Pending
such appointment, the Trustee is obligated to act in such capacity. The
Trustee and any such successor may agree upon the servicing compensation to
be paid in accordance with the provisions of the Pooling and Servicing
Agreement.
If the Special Servicer is not the Servicer and an Event of Default with
respect to the Special Servicer occurs, the Trustee will terminate the
Special Servicer and the Servicer will succeed to all the power and authority
of the Special Servicer under the Pooling and Servicing Agreement (provided
that such termination would not result in the downgrading, qualification or
withdrawal of the rating or ratings assigned to any Class of Certificates as
evidenced in writing by each Rating Agency) and will be entitled to the
compensation to which the Special Servicer would have been entitled.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Pooling and
Servicing Agreement or the Mortgage Loans, unless, with respect to the
Pooling and Servicing Agreement, such holder previously shall have given to
the Trustee a written notice of a default under the Pooling and Servicing
Agreement, and of the continuance thereof, and unless also the holders of
Certificates of any Class affected thereby evidencing Percentage Interests of
at least 25% of such Class shall have made written request of the Trustee to
institute such proceeding in its own name as Trustee under the Pooling and
Servicing Agreement and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for 60 days after its receipt
of such notice, request and offer of indemnity, shall have neglected or
refused to institute such proceeding.
The Trustee will have no obligation to make any investigation of matters
arising under the Pooling and Servicing Agreement or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order
or direction of any of the holders of Certificates, unless such holders of
Certificates shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
AMENDMENT
The Pooling and Servicing Agreement may be amended at any time by the
Depositor, the Servicer, the Special Servicer, the Trustee and the Fiscal
Agent without the consent of any of the holders of Certificates (i) to cure
any ambiguity; (ii) to correct or supplement any provisions therein which may
be defective or inconsistent with any other provisions therein; (iii) to
amend any provision thereof to the extent necessary or desirable to maintain
the rating or ratings assigned to each Class of Certificates; (iv) to amend
or supplement a provision which will not adversely affect in
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any material respect the interests of any Certificateholder not consenting
thereto, as evidenced in writing by an opinion of counsel or confirmation in
writing from each Rating Agency that such amendment will not result in a
qualification, withdrawal or downgrading of the then current ratings assigned
to the Certificates; and (v) to amend or supplement any provisions therein to
the extent not inconsistent with the provisions of the Pooling and Servicing
Agreement and will not result in a downgrade, qualification or withdrawal of
the then current ratings assigned to any Class of Certificates as confirmed
in writing by each Rating Agency. The Pooling Agreement requires that no such
amendment shall cause the Upper-Tier REMIC or the Lower-Tier REMIC to fail to
qualify as a REMIC.
The Pooling and Servicing Agreement may also be amended from time to time
by the Depositor, the Servicer, the Special Servicer, the Trustee and the
Fiscal Agent with the consent of the holders of Certificates evidencing at
least 66 2/3% of the Percentage Interests of each Class of Certificates
affected thereby for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or modifying in any manner the rights of the holders of
Certificates; provided, however, that no such amendment may (i) reduce in any
manner the amount of, or delay the timing of, payments received on the
Mortgage Loans which are required to be distributed on any Certificate; (ii)
alter the obligations of the Servicer, the Special Servicer, the Trustee or
the Fiscal Agent to make a P&I Advance or Property Advance or alter the
servicing standards set forth in the Pooling and Servicing Agreement; (iii)
change the percentages of Voting Rights of holders of Certificates which are
required to consent to any action or inaction under the Pooling and Servicing
Agreement; or (iv) amend the section in the Pooling and Servicing Agreement
relating to the amendment of the Pooling and Servicing Agreement, in each
case, without the consent of the holders of all Certificates representing all
the Percentage Interests of the Class or Classes affected thereby.
VOTING RIGHTS
The "Voting Rights" assigned to each Class shall be (a) 0% in the case of
the Class V-1, Class V-2, Class R and Class LR Certificates, (b) [ %] in the
case of the Class A-CS1 Certificates, [ %] in the case of the Class PS-1
Certificates (the sum of such percentages for each such Class outstanding is
the "Fixed Voting Rights Percentage"), provided that the Voting Rights of the
(i) Class A-CS1 Certificates will be reduced to zero upon the reduction of
the Notional Balance of such Class to zero and (ii) Class PS-1 Certificates
will be reduced to zero on the Distribution Date on which no Classes other
than the Class B-7 and Class B-7H Certificates are outstanding, (c) in the
case of the Class A-1A, Class A-1B, Class A-1C, Class A-1D, Class A-2, Class
A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class B-1, Class B-2, Class
B-3, Class B-4, Class B-5, Class B-6, Class B-7 and Class B-7H Certificates,
a percentage equal to the product of (x) 100% minus the Fixed Voting Rights
Percentage multiplied by (y) a fraction, the numerator of which is equal to
the aggregate outstanding Certificate Balance of any such Class and the
denominator of which is equal to the aggregate outstanding Certificate
Balances of all Classes of Certificates. The Coupon Strip Certificates will
not be entitled to vote with respect to proposed extensions of a Specially
Serviced Mortgage Loan. The Voting Rights of any Class of Certificates shall
be allocated among holders of Certificates of such Class in proportion to
their respective Percentage Interests, except that any Certificate
beneficially owned by the Depositor, the Servicer, the Special Servicer, any
mortgagor, the Trustee, a manager, or any of their respective affiliates will
be deemed not to be outstanding; provided, however, that for purposes of
obtaining the consent of Certificateholders to an amendment to the Pooling
and Servicing Agreement, any Certificates beneficially owned by the Servicer
or Special Servicer or an affiliate thereof will be deemed to be outstanding,
provided that such amendment does not relate to compensation of the Servicer,
Special Servicer or otherwise benefit such entity or an affiliate (other than
solely in its capacity as Certificateholder); and, provided, further, that
for purposes of obtaining the consent of Certificateholders to any action
proposed to be taken by the Special Servicer with respect to a Specially
Serviced Mortgage Loan, any Certificates beneficially owned by the Servicer
or an affiliate will be deemed to be outstanding if the Special Servicer is
not the Servicer or any affiliate. The Certificates beneficially owned by the
Special Servicer or an affiliate thereof shall be deemed outstanding for
purposes of determining who the Directing Holders (as defined below) are and
for purposes of issuing Instructions (as defined below). The Voting Rights of
each Class of Certificates will be deemed to be reduced on any day on which
an Appraisal Reduction Amount is allocated to such Class. The Fixed Voting
Right Percentage of the Class A-CS1 and Class PS-1 Certificates will be
proportionally reduced upon the allocation of Appraisal Reduction Amounts
with respect to any component of such Classes based on the amount of such
reduction.
REALIZATION UPON MORTGAGE LOANS
Specially Serviced Mortgage Loans; Appraisals; Extensions. Contemporaneously
with the earliest of (i) the effective date of any modification of the Mortgage
Rate, principal balance or amortization terms of any Mortgage Loan, any
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extension of the Maturity Date of a Mortgage Loan or consent to the release
of any Mortgaged Property or REO Property from the lien of the related
Mortgage, (ii) the occurrence of an Appraisal Reduction Event, (iii) a
default in the payment of a Balloon Payment, or (iv) the date on which the
Special Servicer, consistent with the Servicing Standard, requests an Updated
Appraisal (as defined below), the Servicer (after consultation with the
Special Servicer) will obtain an appraisal (or a letter update from an
existing appraisal which is less than two years old) of the Mortgaged
Property, or REO Property, as the case may be, from an independent appraiser
who is a member of the American Institute of Real Estate Appraisers (an
"Updated Appraisal") provided, that, the Servicer will not be required to
obtain an Updated Appraisal of any Mortgaged Property with respect to which
there exists an appraisal which is less than twelve months old. With respect
to the Westin Casuarina Resort Loan, the Servicer will be permitted to rely
on any Updated Appraisal obtained by the servicer of Series 1997-D5.
Following a default on a Mortgage Loan at maturity, the Special Servicer
may either foreclose or elect to grant a one-year extension of the Specially
Serviced Mortgage Loan; provided that the Special Servicer may only extend
such Mortgage Loan if (i) immediately prior to the default on the Balloon
Payment the related borrower had made twelve consecutive Monthly Payments on
or prior to their Due Dates, (ii) the Special Servicer determines in its
reasonable judgment that such borrower has attempted in good faith to
refinance such Mortgage Loan or Mortgaged Property, (iii) the Special
Servicer determines that (A) extension of such Mortgage Loan is consistent
with the Servicing Standard and (B) extension of such Mortgage Loan is likely
to result in a recovery which on a net present value basis would be greater
than the recovery that would result from a foreclosure, (iv) such extension
requires that all cash flow on all related Mortgage Properties in excess of
amounts required to operate and maintain such Mortgaged Properties be applied
to payments of principal and interest on such Mortgage Loan and (v) the
Special Servicer terminates the related Manager unless the Special Servicer
determines that retaining such Manager is conducive to maintaining the value
of such Mortgaged Properties; provided, further, that, if, after notice to
all Certificateholders, holders of Certificates evidencing at least 66 2/3%
of the Voting Rights of each Class of Certificates entitled to vote direct
the Special Servicer not to extend, the Special Servicer will not extend;
provided, further, that, if the Special Servicer is not the Servicer and the
Servicer would not elect to extend, holders of Certificates evidencing
greater than (a) 50% of the aggregate Voting Rights of all Certificateholders
entitled to vote and (b) 66 2/3% of the aggregate Voting Rights of all
Certificateholders entitled to vote who respond to such notice, may direct
the Special Servicer not to extend. Notwithstanding the foregoing, the
Special Servicer may extend pursuant to the Instructions of the Directing
Holders (as described and defined below). The holders of the Class A-CS1 and
Class PS-1 Certificates will not be entitled to vote with respect to proposed
extensions of a Specially Serviced Mortgage Loan. The special servicer of
Series 1997-D5 will, to the extent necessary, specially service both the
Westin Casuarina Resort Loan and the Other Westin Casuarina Resort Loan,
under the terms of the pooling and servicing agreement related to Series
1997-D5. See "Risk Factors-Westin Casuarina Resort Loan" herein.
The Special Servicer may, after presenting a proposal to and consulting
with the Servicer (if the Special Servicer is not the Servicer), and taking
into account the LTV of a Specially Serviced Mortgage Loan as indicated in
the Updated Appraisal, grant subsequent one-year extensions of such Specially
Serviced Mortgage Loan if (i) the related borrower has made twelve
consecutive monthly payments in an amount equal to or greater than the
Minimum Defaulted Monthly Payments and (ii) the requirements set forth in
clauses (ii)-(iv) of the preceding paragraph are satisfied; provided,
however, that, if, after notice to all Certificateholders, holders of
Certificates evidencing at least 66 2/3% of the aggregate Percentage
Interests of each Class of Certificates direct the Special Servicer not to
extend, the Special Servicer will not extend; provided, further, that, if the
Special Servicer is not the Servicer and the Servicer would not elect to
extend, holders of Certificates evidencing greater than (a) 50% of the
aggregate Voting Rights of all Certificateholders and (b) 66 2/3% of the
aggregate Voting Rights of all Certificateholders who respond to such notice,
may direct the Special Servicer not to extend. Notwithstanding the foregoing,
the Special Servicer may extend pursuant to the Instructions of the Directing
Holders. The Special Servicer will not agree to any extension of a Mortgage
Loan beyond two years prior to the Rated Final Distribution Date. If such
borrower fails to make a Minimum Defaulted Monthly Payment more than once
during an extension period, no further extensions will be granted (provided,
however, that the Special Servicer may grant such extension if the borrower
has been delinquent on no more than one such Minimum Defaulted Monthly
Payment within a 24-month period and the requirements set forth in clauses
(ii) through (iv) of the preceding paragraph are satisfied).
Any extension pursuant to the two preceding paragraphs will require
monthly payments in an amount equal to or greater than the Minimum Defaulted
Monthly Payment.
The "Minimum Defaulted Monthly Payment" with respect to any extension of a
Mortgage Loan that is delinquent in respect of its Balloon Payment is equal
to (a) the principal portion of the Monthly Payment that would have been due
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on such Mortgage Loan on the related Due Date based on the original
amortization schedule thereof (or, if there is no amortization schedule, the
principal portion of the constant Monthly Payment that would have been due),
assuming such Balloon Payment had not become due, after giving effect to any
modification, and (b) interest at the applicable Default Rate; provided,
however, that the Special Servicer may agree that the Minimum Defaulted
Monthly Payments may include interest at a rate lower than the related
Default Rate (but in no event lower than the related Mortgage Rate) (the
"Lower Rate") provided that if, after notice to all Certificateholders,
holders of Certificates evidencing at least 66 2/3% of the Voting Rights of
each Class direct (or, in the event that the Special Servicer is not the
Servicer and the Servicer would not agree to the Lower Rate,
Certificateholders representing greater than (a) 50% of the aggregate Voting
Rights of all Certificateholders and (b) 66 2/3% of the aggregate Voting
Rights of all Certificateholders who respond to such notice) the Special
Servicer not to agree to permit payments to include interest at the Lower
Rate, the Special Servicer shall not agree to payments with interest at the
Lower Rate; provided, further, that if the Minimum Defaulted Monthly Payment
is to include interest at the Lower Rate, the Special Servicer may agree that
interest on such Mortgage Loan accrues at the Lower Rate; and provided that
if, after notice to all Certificateholders, holders of Certificates
evidencing at least 66 2/3% of the Voting Rights of each Class direct the
Special Servicer that such Mortgage Loan shall accrue interest at the related
Default Rate, then such Mortgage Loan will continue to accrue interest at the
Default Rate thereof and the excess of interest accrued on such Mortgage Loan
over the amount included in the Minimum Defaulted Monthly Payments (i.e.,
interest at the Lower Rate) will be added to the outstanding principal
balance of such Mortgage Loan. Notwithstanding the foregoing, if the
Directing Holders have given Instructions to the Special Servicer to extend,
the Special Servicer will be required to follow the Directing Holders'
Instructions with respect to interest so long as the Minimum Defaulted
Monthly Payment is at least equal to the Lower Rate.
The Special Servicer will only be permitted to extend pursuant to the
preceding paragraphs or pursuant to instructions from Directing Holders.
Under certain circumstances the Special Servicer may modify the terms of
Specially Serviced Mortgage Loans as described below under "--Modifications."
Defaulted Balloon Payments; Foreclosure Proceedings; Action of Directing
Holders. Other than in respect of the Westin Casuarina Resort Loan, the
Special Servicer may be given revocable instructions ("Instructions") to
extend a Specially Serviced Mortgage Loan serviced by it that has defaulted
on the Balloon Payment (which extension will be restricted to the actions
that the Special Servicer could have otherwise taken with respect to such
Mortgage Loan except that (a) the actions of the Directing Holders will not
be subject to the rejection of the holders of the Certificates and (b) the
related borrower will not have had to make twelve consecutive Monthly
Payments on or prior to their Due Dates) by the holders of a majority in
Percentage Interest of the most subordinate Class of Sequential Certificates
then outstanding (determined as provided below) having an aggregate initial
Certificate Balance representing a minimum of 1.0% of the aggregate initial
Certificate Balances of all Classes of Certificates (or if the Certificate
Balance of such Class or Classes has been reduced to less than 40% of the
initial Certificate Balances thereof, the holders of such Class or Classes
together with the holders of the next most subordinate Sequential Class) (the
"Directing Holders") under the following circumstance: if the Special
Servicer has determined to commence foreclosure or acquisition proceedings,
the Special Servicer will notify the Trustee (who will, in turn, notify the
Directing Holders), the Servicer and the Depositor of its proposed action. If
the Special Servicer receives contrary Instructions within seven days from
the Directing Holders, the Special Servicer will delay such proceedings, and
the procedures described below shall apply to the servicing of such Mortgage
Loan. In the event that the Special Servicer does not receive such
Instructions within such seven-day period, the Special Servicer may proceed
with the foreclosure or acquisition. If the Directing Holders revoke their
Instructions to extend the Mortgage Loan, the Special Servicer will service
the Mortgage Loan without regard to such original Instructions; provided,
however, that the Directing Holders will be required to maintain the
Collateral Account (as described below) unless and until the Mortgage Loan is
no longer a Specially Serviced Mortgage Loan for nine consecutive months or
has been liquidated. For purposes of determining the Directing Holders with
respect to any Mortgage Loan, the Class A-1A, Class A-1B, and Class A-1C,
Class A-CS1 and Class PS-1 Certificates collectively, and the Class B-7 and
Class B-7H Certificates together, will, in each case, be treated as one
class. Neither the Special Servicer nor the Directing Holders will have the
ability to direct any foreclosure or workout of the Westin Casuarina Resort
Loan.
Deposits by Directing Holders. If the Special Servicer receives
Instructions and the Servicer has not otherwise been required to obtain an
Updated Appraisal as described above, the Servicer (after consultation with
the Special Servicer) will obtain an Updated Appraisal as soon as reasonably
practicable to determine the fair market value of each related Mortgaged
Property, after accounting for the estimated liquidation and carrying costs
(the "Fair Market Value" of such
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Mortgaged Property). Within two Business Days after the Special Servicer's
receipt of Instructions, the Directing Holders are required to deposit (in
proportion to their respective Percentage Interests) into a segregated
account (the "Collateral Account") established by the Servicer an amount
equal to the lesser of (a) 125% of the Fair Market Value of the related
Mortgaged Property and (b) the outstanding principal balance of the Mortgage
Loan plus unreimbursed Advances (with interest thereon) and unpaid accrued
interest (the "Deposit"). If no Updated Appraisal has yet been obtained, the
amount of the Deposit will be determined based on the Special Servicer's (or
if the Special Servicer is a Directing Holder, the Servicer's) estimate of
the Fair Market Value of the Mortgaged Property, in which case, upon the
Special Servicer's receipt of such Updated Appraisal, the Special Servicer
(or if the Special Servicer is a Directing Holder, the Servicer) will remit
any excess deposit to the Directing Holders, or the Directing Holders will
deposit in the Collateral Account any shortfall, as the case may be. In the
event that the Directing Holders do not make the required deposit within two
business days of the Special Servicer's receipt of Instructions, the Special
Servicer will disregard such Instructions. The Directing Holders will be
deemed to have granted to the Special Servicer (or the Servicer, if
applicable) for the benefit of Certificateholders a first priority security
interest in the Collateral Account, as security for the obligations of the
Directing Holders.
If the Special Servicer is acting pursuant to Instructions, the Servicer,
as applicable, shall withdraw from the Collateral Account and remit to the
Servicer for deposit into the Collection Account on or prior to the Business
Day preceding each Servicer Remittance Date a sum equal to the P&I Advances
and Property Advances for the related Mortgage Loan which in the absence of
Instructions would be made by the Servicer (and the obligation to make such
advances shall not be subject to a non-recoverability standard) and the
Directing Holders shall, upon request therefor by the Special Servicer (or if
the Special Servicer is a Directing Holder, the Servicer), deposit from their
own funds into the Collateral Account the amount of such P&I Advances or
Property Advances. If the Directing Holders fail to make such Deposit within
one Business Day after receipt of the Special Servicer's or Servicer's, as
applicable, request, the Special Servicer will no longer be required to
follow such Instructions and will specially service such Mortgage Loan as
though no Instructions had been given; provided, however, that the Directing
Holders will be required to maintain the Collateral Account unless and until
the related Mortgage Loan is no longer a Specially Serviced Mortgage Loan for
nine consecutive months or has been liquidated. The Special Servicer or
Servicer, as applicable, will invest amounts on deposit in the Collateral
Account in Permitted Investments upon direction by the Directing Holders.
Directing Holders will be entitled to reinvestment income as received, and
will reimburse the Collateral Account for any losses incurred.
Settlement. If a Balloon Loan or the related Mortgaged Property which,
subject to Instructions, is liquidated or disposed of, the Servicer will
withdraw from the Collateral Account, and deposit into the Collection Account
as additional liquidation proceeds for distribution to Certificateholders in
accordance with the priorities described herein, the lesser of (a) the amount
by which 125% of the Fair Market Value (determined at the time of the
Deposit) exceeds the net sales proceeds, and (b) the amount by which the
outstanding principal balance of the related Mortgage Loan plus unreimbursed
Advances (with interest thereon) and unpaid accrued interest exceeds the net
sales proceeds, provided that in no event may such additional liquidation
proceeds exceed the unpaid principal balance, accrued and unpaid interest
(including Default Interest), unpaid Advances made by the Servicer, Special
Servicer, Trustee or Fiscal Agent and interest thereon, and any expenses paid
by the Trust Fund with respect to such Mortgage Loan.
If the amount realized upon disposition of the Mortgage Loan or Mortgaged
Property exceeds 125% of the Fair Market Value, the Servicer shall deposit
the excess in the Collection Account to the extent not required by applicable
law to be paid to the related borrower. If the Mortgage Loan has not been
realized upon on or before the third anniversary of the Instructions (or such
earlier date so that the Trust Fund owns the Mortgaged Property for no more
than two years), the Directing Holders will be required to purchase the
Mortgage Loan for a purchase price equal to the Fair Market Value (determined
at the time of the Deposit). Amounts on deposit in the Collateral Account
will be applied toward the purchase price.
If at any time following the establishment of a Collateral Account and
prior to the disposition of a Specially Serviced Mortgage Loan or Mortgaged
Property, the Mortgaged Property suffers a hazard loss that results in the
Mortgaged Property not being rebuilt and payments to the Trustee are made
under the related hazard insurance policy, the Special Servicer or Servicer,
as applicable, will pay all amounts on deposit in the Collateral Account to
the Directing Holders. In addition, after amounts required to be deposited in
the Collection Account have been withdrawn from the Collateral Account, as
described above, following foreclosure, liquidation, disposition, purchase by
Directing Holders or, if the related Mortgage Loan is no longer a Specially
Serviced Mortgage Loan for nine consecutive months, any related remaining
amounts in the Collateral Account will be released to the Directing Holders.
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No Advances. Until the disposition of the Specially Serviced Mortgage
Loan or Mortgaged Property, as to which Directing Holders have provided
Instructions, or the cure of such default, no P&I Advances will be made in
respect of amounts distributable to the Class of the Directing Holders in
respect of such Mortgage Loan.
Material Defaults; Foreclosure. Upon the occurrence of a material default
under a Specially Serviced Mortgage Loan, the Special Servicer may,
consistent with servicing standards, accelerate such Specially Serviced
Mortgage Loan and commence a foreclosure or other acquisition with respect to
the related Mortgaged Property or Properties, provided, that the Special
Servicer determines that such acceleration and foreclosure are more likely to
produce a greater recovery to Certificateholders on a present value basis
(discounting at the related Mortgage Rate) than would a waiver of such
default or an extension or modification in accordance with the provisions
described above or under "--Modifications." In connection with any
foreclosure or other acquisition as to which the Special Servicer is not
required to act under Instructions from the Directing Holders, the Servicer
is required to pay the costs and expenses in any such proceedings as an
Advance unless the Servicer determines, in its good faith judgment, that such
Advance would constitute a Nonrecoverable Advance. The Servicer will be
entitled to reimbursement of Advances (with interest at the Advance Rate)
made as described in the preceding sentence. If the Special Servicer is
acting pursuant to Instructions, the cost and expenses in any such proceeding
will be required to be paid by the Directing Holders or the Special Servicer,
without reimbursement therefor by the Trust Fund.
Standards for Conduct Generally in Effecting Foreclosure or the Sale of
Defaulted Loans. In connection with any foreclosure or other acquisition, the
cost and expenses of any such proceeding shall be paid by the Special
Servicer as a Property Advance.
If the Special Servicer elects to proceed with a non-judicial foreclosure
in accordance with the laws of the state where the Mortgaged Property is
located, the Special Servicer shall not be required to pursue a deficiency
judgment against the related Mortgagor, if available, or any other liable
party if the laws of the state do not permit such a deficiency judgment after
a non-judicial foreclosure or if the Special Servicer determines, in its best
judgment, that the likely recovery if a deficiency judgment is obtained will
not be sufficient to warrant the cost, time, expense and/or exposure of
pursuing the deficiency judgment and such determination is evidenced by an
officers' certificate delivered to the Trustee.
Notwithstanding any provision to the contrary, the Special Servicer shall
not, on behalf of the Trust Fund, obtain title to a Mortgaged Property as a
result of or in lieu of foreclosure or otherwise, and shall not otherwise
acquire possession of, or take any other action with respect to, any
Mortgaged Property if, as a result of any such action, the Trustee, for the
Trust Fund or the holders of Certificates, would be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or "operator"
of, such Mortgaged Property within the meaning of CERCLA or any comparable
law, unless the Special Servicer has previously determined, based on an
environmental assessment report prepared by an independent person who
regularly conducts environmental audits, that: (i) such Mortgaged Property is
in compliance with applicable environmental laws or, if not, after
consultation with an environmental consultant that it would be in the best
economic interest of the Trust Fund to take such actions as are necessary to
bring such Mortgaged Property in compliance therewith and (ii) there are no
circumstances present at such Mortgaged Property relating to the use,
management or disposal of any hazardous materials for which investigation,
testing, monitoring, containment, clean-up or remediation could be required
under any currently effective federal, state or local law or regulation, or
that, if any such hazardous materials are present for which such action could
be required, after consultation with an environmental consultant it would be
in the best economic interest of the Trust Fund to take such actions with
respect to the affected Mortgaged Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of
sale shall be issued to the Trustee, or to its nominee, on behalf of holders
of Certificates. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, such Mortgage Loan shall be
considered to be an REO Mortgage Loan held in the Trust Fund until such time
as the related REO Property shall be sold by the Trust Fund and shall be
reduced only by collections net of expenses.
If the Trust Fund acquires a Mortgaged Property by foreclosure or
deed-in-lieu of foreclosure upon a default of a Mortgage Loan, the Pooling
and Servicing Agreement provides that the Trustee (or the Special Servicer,
on behalf of the Trustee), must administer such Mortgaged Property so that it
qualifies at all times as "foreclosure property" within the meaning of Code
Section 860G(a)(8). The Pooling and Servicing Agreement also requires that
any such Mortgaged Property be managed and operated by an "independent
contractor," within the meaning of applicable Treasury regulations, who
furnishes or renders services to the tenants of such Mortgaged Property.
Generally, the Trust REMICs will not be taxable on income received with
respect to the Mortgaged Property to the extent that it constitutes "rents
from
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real property," within the meaning of Code Section 856(c)(3)(A) and Treasury
regulations thereunder. "Rents from real property" do not include the portion
of any rental based on the net income or gain of any tenant or sub-tenant. No
determination has been made whether rent on any of the Mortgaged Properties
meets this requirement. "Rents from real property" include charges for
services customarily furnished or rendered in connection with the rental of
real property, whether or not the charges are separately stated. Services
furnished to the tenants of a particular building will be considered as
customary if, in the geographic market in which the building is located,
tenants in buildings which are of similar Class are customarily provided with
the service. No determination has been made whether the services furnished to
the tenants of the Mortgaged Properties are "customary" within the meaning of
applicable regulations. It is therefore possible that a portion of the rental
income with respect to a Mortgaged Property owned by the Trust Fund,
presumably allocated based on the value of any non-qualifying services, would
not constitute "rents from real property." In addition to the foregoing, any
net income from a trade or business operated or managed by an independent
contractor on a Mortgaged Property owned by the Lower-Tier REMIC, including
but not limited to a hotel or skilled nursing care business, will not
constitute "rents from real property." Any of the foregoing types of income
may instead constitute "net income from foreclosure property," which would be
taxable to the Lower-Tier REMIC at the highest marginal federal corporate
rate (currently 35%) and may also be subject to state or local taxes. Any
such taxes would be chargeable against the related income for purposes of
determining the Net REO Proceeds available for distribution to holders of
Certificates. Under the Pooling and Servicing Agreement, the Special Servicer
is required to determine whether the earning of such income taxable to the
Lower-Tier REMIC would result in a greater recovery to Certificateholders on
a net after-tax basis than a different method of operation of such property.
See "Federal Income Tax Consequences--Federal Income Tax Consequences for
REMIC Certificates" and "--Taxes That May Be Imposed on the REMIC Pool--Net
Income from Foreclosure Property" in the Prospectus.
If title to any Mortgaged Property is acquired by the Trust Fund, the
Special Servicer, pursuant to the Pooling and Servicing Agreement and on
behalf of the Trust Fund, will be required to sell the Mortgaged Property
prior to the close of the third calendar year following the year of
acquisition, unless the Trustee receives (i) an opinion of independent
counsel to the effect that the holding of the property by the Trust Fund
subsequent to the close of such period will not result in the imposition of a
tax on the Trust REMICs or cause the Trust Fund to fail to qualify as REMICs
under the Code at any time that any Certificate is outstanding or (ii) an
extension from the Internal Revenue Service.
The limitations imposed by the Pooling and Servicing Agreement and the
REMIC provisions of the Code on the operations and ownership of any Mortgaged
Property acquired on behalf of the Trust Fund may result in the recovery of
an amount less than the amount that would otherwise be recovered. See
"Certain Legal Aspects of Mortgage Loans--Foreclosure" in the Prospectus.
The Special Servicer may offer to sell to any person any Specially
Serviced Mortgage Loan other than the Westin Casuarina Resort Loan or any REO
Property, or may offer to purchase any Specially Serviced Mortgage Loan or
any REO Property (in each case at the repurchase price set forth in the
Pooling and Servicing Agreement, which includes unpaid principal and interest
thereon), if and when the Special Servicer determines, consistent with the
Servicing Standard set forth in the Pooling and Servicing Agreement, that no
satisfactory arrangements can be made for collection of delinquent payments
thereon and such a sale would be in the best economic interests of the Trust
Fund, but shall, in any event, so offer to sell any REO Property no later
than the time determined by the Special Servicer to be sufficient to result
in the sale of such REO Property within the period specified in the Pooling
and Servicing Agreement, including extensions thereof. The Special Servicer
shall give the Trustee not less than ten days' prior written notice of its
intention to sell any Specially Serviced Mortgage Loan or REO Property, in
which case the Special Servicer shall accept the highest offer received from
any person for any Specially Serviced Mortgage Loan or any REO Property in an
amount at least equal to the Repurchase Price or, at its option, if it has
received no offer at least equal to the Repurchase Price therefor, purchase
the Specially Serviced Mortgage Loan or REO Property at such Repurchase
Price.
In the absence of any such offer (or purchase by the Special Servicer),
the Special Servicer shall accept the highest offer received from any person
that is determined by the Special Servicer to be a fair price for such
Specially Serviced Mortgage Loan or REO Property, if the highest offeror is a
person not affiliated with the Special Servicer, the Servicer or the
Depositor or is determined to be a fair price by the Trustee (after
consultation with an independent appraiser if the highest offeror is an
interested party). Notwithstanding anything to the contrary herein, neither
the Trustee, in its individual capacity, nor any of its affiliates may make
an offer for or purchase any Specially Serviced Mortgage Loan or any REO
Property.
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The Special Servicer shall not be obligated by either of the foregoing
paragraphs or otherwise to accept the highest offer if the Special Servicer
determines, in accordance with the Servicing Standard, that rejection of such
offer would be in the best interests of the holders of Certificates. In
addition, the Special Servicer may accept a lower offer if it determines, in
accordance with the Servicing Standard, that acceptance of such offer would
be in the best interests of the holders of Certificates (for example, if the
prospective buyer making the lower offer is more likely to perform its
obligations, or the terms offered by the prospective buyer making the lower
offer are more favorable), provided that the offeror is not a person
affiliated with the Special Servicer. The Special Servicer is required to use
its best efforts to sell all Specially Serviced Mortgage Loans and REO
Property prior to the Rated Final Distribution Date.
MODIFICATIONS
The Special Servicer may, consistent with the Servicing Standard, agree to
any modification, waiver or amendment of any term of, forgive or defer
interest on and principal of, and/or add collateral for, any Mortgage Loan
with the consent of Certificateholders representing 100% of the Percentage
Interests of the most subordinate Class of Sequential Certificates then
outstanding determined as provided below, subject, however, to each of the
following limitations, conditions and restrictions: (i) a material default on
such Mortgage Loan has occurred or, in the Special Servicer's reasonable and
good faith judgment, a default in respect of payment on such Mortgage Loan is
reasonably foreseeable, and such modification, waiver, amendment or other
action is reasonably likely to produce a greater recovery to
Certificateholders on a present value basis (the relevant discounting of
anticipated collections that will be distributable to Certificateholders will
be done at the related Mortgage Rate), than would liquidation; (ii) the
Special Servicer may not extend the date on which any Balloon Payment is
scheduled to be due on any Specially Serviced Mortgage Loan except as
described under "Realization Upon Mortgage Loans;" (iii) no reduction of any
scheduled monthly payment of principal and/or interest on any Specially
Serviced Mortgage Loan may result in a debt service coverage ratio for such
Mortgage Loan of greater than 1.10 to 1, and the Special Servicer may only
agree to reductions lasting a period of no more than twelve months and, in
the aggregate, no more than three consecutive reductions of twelve months or
less each; (iv) the Special Servicer may not release or substitute collateral
or release mortgagors or guarantors except in accordance with the provisions
of the related Loan Documents; (v) the Special Servicer may not forgive an
aggregate amount of principal of the Mortgage Loans in excess of the
Certificate Balance of most the subordinate Class of Sequential Certificates
then outstanding minus the aggregate of the greater of (A) any Appraisal
Reduction Amounts and (B) Delinquency Reduction Amounts of each Mortgage Loan
that, in each case, have not resulted in a Realized Loss; (vi) the Special
Servicer will not permit any borrower to add any collateral unless the
Special Servicer has first determined in accordance with the Servicing
Standard, based upon an environmental assessment prepared by an independent
person who regularly conducts environmental assessments, at the expense of
the borrower, that such additional collateral is in compliance with
applicable environmental laws and regulations and that there are no
circumstances or conditions present with respect to such new collateral
relating to the use, management or disposal of any hazardous materials for
which investigation, testing, monitoring, containment, clean-up or
remediation would be required under any then applicable environmental laws
and/or regulations; and (vii) the Special Servicer may waive or reduce a
Lock-out Period or any Prepayment Premiums only if the commencement of a
foreclosure proceeding with respect to the related Mortgage Loan is imminent
and the Special Servicer first receives written notification from the
Servicer that such action in the opinion of the Servicer, consistent with the
Servicing Standard and based solely upon information furnished by the Special
Servicer without independent investigation of the Servicer thereof, is likely
to produce a greater recovery, on a present value basis, than would a
foreclosure. For purposes of obtaining the consent of the most subordinate
Class of Sequential Certificates outstanding to any modification described
above, (i) the Class A-1A, Class A-1B, Class A-1C, Class A-CS1, and Class
PS-1 Certificates collectively and (ii) the Class B-7 and Class B-7H
Certificates together, will, in each case, be treated as one class. For
purposes of determining the amount of principal which the Special Servicer
may forgive pursuant to clause (vi) above, the most subordinate Class will
include the next subordinate Class (determined as provided in the preceding
sentence) provided that Certificateholders evidencing 100% of the Percentage
Interests of such Class consent to such forgiveness. Notwithstanding the
foregoing, the Special Servicer will not be required to oppose the
confirmation of a plan in any bankruptcy or similar proceeding involving a
borrower if in its reasonable and good faith judgment such opposition would
not ultimately prevent the confirmation of such plan or one substantially
similar.
The servicer of Series 1997-D5 will service both the Westin Casuarina
Resort Loan and the Other Westin Casuarina Resort Loan, and the special
servicer of Series 1997-D5 will, to the extent necessary, specially service
both the Westin Casuarina Resort Loan and the Other Westin Casuarina Resort
Loan. None of the Servicer, Special Servicer, Trustee or any
Certificateholder shall have any ability to effect or otherwise influence any
modification of the Westin Casuarina Resort Loan.
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Any payment of interest, which is deferred as described herein will not,
for purposes, including, without limitation, calculating monthly
distributions to Certificateholders, be added to the unpaid principal balance
of the related Mortgage Loan, notwithstanding that the terms of such Mortgage
Loan so permit or that such interest may actually be capitalized.
Following the execution of any modification, waiver or amendment agreed to
by the Special Servicer pursuant to clause (i) above, the Special Servicer
must deliver to the Trustee an officer's certificate setting forth in
reasonable detail the basis of the determination made by it pursuant to
clause (i) above.
Except as otherwise provided above and under "Realization Upon Mortgage
Loans," the Special Servicer or the Servicer may not modify any term of a
Mortgage Loan (a) unless such modification (i) would not be "significant" as
such term is defined in Code Section 1001 and Treasury Regulation Sections
1.860G-2(b)(3) and (ii) would be in accordance with the servicing standard
set forth in the Pooling and Servicing Agreement or (b) as otherwise provided
in the Pooling and Servicing Agreement. The Pooling and Servicing Agreement
will require the Servicer or Special Servicer, as applicable, to provide
copies of any modifications or extensions to each Rating Agency.
In the event that the Special Servicer is unable to obtain consent from
100% of the Percentage Interests of the most subordinate Class of
Certificates, the Special Servicer will continue to retain the options
described under "Realization Upon Mortgage Loans," including foreclosure or
extension.
OPTIONAL TERMINATION
The Depositor or the Servicer and, if neither the Depositor nor the
Servicer exercises its option, the holders of the Class LR Certificates
representing greater than 50% of the Percentage Interest of the Class LR
Certificates, and if such holders of the Class LR Certificates fail to
exercise such option, the Special Servicer will have the option to purchase
all of the Mortgage Loans and all REO Property remaining in the Trust Fund,
and thereby effect termination of the Trust Fund and early retirement of the
then outstanding Certificates, on any Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans remaining in the
Trust Fund is less than 1% of the aggregate principal balance of such
Mortgage Loans as of the Cut-off Date. The purchase price payable upon the
exercise of such option on such a Distribution Date will be an amount equal
to the greater of (i) the sum of (A) 100% of the outstanding principal
balance of each Mortgage Loan included in the Trust Fund as of the last day
of the month preceding such Distribution Date (less any P&I Advances
previously made on account of principal); (B) the fair market value of all
other property included in the Trust Fund as of the last day of the month
preceding such Distribution Date, as determined by an independent appraiser
as of a date not more than 30 days prior to the last day of the month
preceding such Distribution Date; (C) all unpaid interest accrued on such
principal balance of each such Mortgage Loan (including any Mortgage Loans as
to which title to the related Mortgaged Property has been acquired) at the
Mortgage Rate (plus the Excess Rate, to the extent applicable) to the last
day of the month preceding such Distribution Date (less any P&I Advances
previously made on account of principal), and (D) unreimbursed Advances (with
interest thereon) and unpaid Trust Fund expenses and (ii) the aggregate fair
market value of the Mortgage Loans and all REO Property in the Trust Fund, on
the last day of the month preceding such Distribution Date, as determined by
an independent appraiser acceptable to the Servicer, together with one
month's interest thereon at the Mortgage Rate. The holders of 100% of the
Percentage Interest in the Class LR Certificates may purchase any Mortgage
Loan on its Anticipated Repayment Date at a price equal to the sum of the
following: (i) 100% of the outstanding principal balance of such Mortgage
Loan on such Anticipated Repayment Date (less any P&I Advances previously
made on account of principal); (ii) all unpaid interest accrued on such
principal balance of such Mortgage Loan at the Mortgage Rate thereof, to the
last day of the Interest Accrual Period preceding such Anticipated Repayment
Date (less any P&I Advances previously made on account of interest); (iii)
the aggregate amount of all unreimbursed Advances with respect to such
Mortgage Loan, with interest thereon at the Advance Rate, and all unpaid
Special Servicing Fees, Servicing Fees and any other compensation due to the
Servicer or Special Servicer, Trustee Fees and Trust Fund expenses; and (iv)
the amount of any liquidation expenses incurred by the Trust Fund in
connection with such purchase. Notwithstanding the foregoing, such Mortgage
Loan may not be purchased if the fair market value of the Mortgage Loan is
greater than 100% of the outstanding principal balance of such Mortgage Loan.
The Holder of 100% of the most subordinate Class of Sequential
Certificates (provided that the Class B-7H Certificates shall not be
considered a Class for such purposes) may purchase any Mortgage Loan on or
after its Anticipated Repayment Date under the same terms and conditions
hereunder as in the case of a purchase by the Holder of the Class LR
Certificates if the Holder of the Class LR Certificates either (i) notifies
the Holder of the most subordinate Class of Sequential Certificates that it
will not purchase such Mortgage Loan or (ii) does not, in fact, purchase such
Mortgage Loan on its Anticipated Repayment Date. See "Description of the
Certificates--Termination" in the Prospectus.
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THE TRUSTEE
LaSalle National Bank, a nationally chartered bank with its principal
offices in Chicago, Illinois, will act as Trustee pursuant to the Pooling and
Servicing Agreement. The Trustee's corporate trust office is located at 135
South LaSalle Street, Suite 1625, Chicago, Illinois 60674-4107, Attention:
Asset Backed Securities Trust Services, Nomura-D6.
The Trustee may resign at any time by giving written notice to the
Depositor, the Servicer, Special Servicer and the Rating Agencies, provided
that no such resignation shall be effective until a successor has been
appointed. Upon such notice, the Servicer will appoint a successor trustee.
If no successor trustee is appointed within one month after the giving of
such notice of resignation, the resigning Trustee may petition the court for
appointment of a successor trustee.
The Servicer or the Depositor may remove the Trustee and the Fiscal Agent
if, among other things, the Trustee ceases to be eligible to continue as such
under the Pooling and Servicing Agreement or if at any time the Trustee
becomes incapable of acting, or is adjudged bankrupt or insolvent, or a
receiver of the Trustee or its property is appointed or any public officer
takes charge or control of the Trustee or of its property. The holders of
Certificates evidencing aggregate Voting Rights of at least 50% of all
Certificateholders may remove the Trustee and the Fiscal Agent upon written
notice to the Depositor, the Servicer, the Trustee and the Fiscal Agent. Any
resignation or removal of the Trustee and the Fiscal Agent and appointment of
a successor trustee and, if such trustee is not rated at least "AA" by each
Rating Agency, fiscal agent, will not become effective until acceptance of
the appointment by the successor trustee and, if necessary, fiscal agent.
Notwithstanding the foregoing, upon any termination of the Trustee and Fiscal
Agent under the Pooling and Servicing Agreement, the Trustee and Fiscal Agent
will continue to be entitled to receive all accrued and unpaid compensation
through the date of termination plus all Advances and interest thereon as
provided in the Pooling and Servicing Agreement. Any successor trustee must
have a combined capital and surplus of at least $50,000,000 and such
appointment must not result in the downgrade, qualification or withdrawal of
the then-current ratings assigned to the Certificates, as evidenced in
writing by the Rating Agencies.
Pursuant to the Pooling and Servicing Agreement, the Trustee will be
entitled to withdraw from the Distribution Account a monthly fee (the
"Trustee Fee"), which constitutes a portion of the Servicing Fee.
The Trust Fund will indemnify the Trustee and the Fiscal Agent against any
and all losses, liabilities, damages, claims or unanticipated expenses
(including reasonable attorneys' fees) arising in respect of the Pooling and
Servicing Agreement or the Certificates other than those resulting from the
negligence, bad faith or willful misconduct of the Trustee or the Fiscal
Agent, as applicable. Neither the Trustee nor the Fiscal Agent will be
required to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties under the Pooling and
Servicing Agreement, or in the exercise of any of its rights or powers, if in
the Trustee's or the Fiscal Agent's opinion, as applicable, the repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it. Each of the Servicer, the Special Servicer, the
Depositor, the Paying Agent, the Certificate Registrar and the Custodian will
indemnify the Trustee, the Fiscal Agent, and certain related parties for
similar losses incurred related to the willful misconduct, bad faith, fraud
and/or negligence in the performance of each such party's respective duties
under the Pooling and Servicing Agreement or by reason of reckless disregard
of its obligations and duties under the Pooling and Servicing Agreement.
At any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust Fund or property securing the
same is located, the Depositor and the Trustee acting jointly will have the
power to appoint one or more persons or entities approved by the Trustee to
act (at the expense of the Trustee) as co-trustee or co-trustees, jointly
with the Trustee, or separate trustee or separate trustees, of all or any
part of the Trust Fund, and to vest in such co-trustee or separate trustee
such powers, duties, obligations, rights and trusts as the Depositor and the
Trustee may consider necessary or desirable. Except as required by applicable
law, the appointment of a co-trustee or separate trustee will not relieve the
Trustee of its responsibilities, obligations and liabilities under the
Pooling and Servicing Agreement.
DUTIES OF THE TRUSTEE
The Trustee (except for the information under the first paragraph of
"--The Trustee") and Servicer (except for the information under "--The
Servicer") will make no representation as to the validity or sufficiency of
the Pooling and Servicing Agreement, the Certificates or the Mortgage Loans,
this Prospectus Supplement or related documents. The Trustee will not be
accountable for the use or application by the Depositor, the Servicer or the
Special Servicer of any Certificates issued to it or of the proceeds of such
Certificates, or for the use of or application of any funds paid to the
Depositor, the Servicer 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,
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Collection Account, Excess Interest Distribution Account, Interest Reserve
Account and Default Interest Distribution Account or any other account
maintained by or on behalf of the Servicer or Special Servicer, nor will the
Trustee be required to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer or Special Servicer
under the Pooling and Servicing Agreement.
In the event that the Servicer fails to make a required Advance, the
Trustee will make such Advance, provided that the Trustee shall not be
obligated to make any Advance it deems to be nonrecoverable. The Trustee
shall be entitled to rely conclusively on any determination by the Servicer
or the Special Servicer that an Advance, if made, would not be recoverable.
The Trustee will be entitled to reimbursement for each Advance, with
interest, made by it in the same manner and to same extent as the Servicer or
the Special Servicer.
If no Event of Default has occurred, and after the curing of all Events of
Default which may have occurred, the Trustee is required to perform only
those duties specifically required under the Pooling and Servicing Agreement.
Upon receipt of the various certificates, reports or other instruments
required to be furnished to it, the Trustee is required to examine such
documents and to determine whether they conform on their face to the
requirements of the Pooling and Servicing Agreement.
THE FISCAL AGENT
ABN AMRO Bank N.V., a banking corporation organized under the laws of The
Netherlands, will act as Fiscal Agent pursuant to the Pooling and Servicing
Agreement. The Fiscal Agent's office is located at 135 South LaSalle Street,
Chicago, Illinois 60603. The Fiscal Agent will be deemed to have been removed
in the event of the resignation or removal of the Trustee.
DUTIES OF THE FISCAL AGENT
The Fiscal Agent will make no representation as to the validity or
sufficiency of the Pooling and Servicing Agreement, the Certificates, the
Mortgage Loan, this Prospectus Supplement (except for the information above,
see "--The Fiscal Agent") or related documents. The duties and obligations of
the Fiscal Agent consist only of making Advances as described below and in
"--Advances" above; the Fiscal Agent shall not be liable except for the
performance of such duties and obligations.
In the event that the Servicer and the Trustee fail to make a required
Advance, the Fiscal Agent will make such Advance, provided that the Fiscal
Agent will not be obligated to make any Advance that it deems to be
nonrecoverable. The Fiscal Agent shall be entitled to rely conclusively on
any determination by the Servicer or the Trustee, as applicable, that an
Advance, if made, would not be recoverable. The Fiscal Agent will be entitled
to reimbursement for each Advance made by it in the same manner and to the
same extent as the Trustee and the Servicer.
THE SERVICER
AMRESCO Services, L.P., a Delaware limited partnership, will be the
Servicer and in such capacity will be responsible for servicing the Mortgage
Loans (other than the Specially Serviced Mortgage Loans and REO Properties).
AMRESCO Services, L.P. ("ASLP") is a wholly owned subsidiary of AMRESCO, INC.
("AMRESCO"), a diversified financial services company which is publicly
traded on NASDAQ. The principal offices of ASLP are located at 235 Peachtree
Street, NE, Suite 900, Atlanta, Georgia 30303.
As of January 31, 1998, AMRESCO serviced approximately 9,929 commercial
and multifamily loans with an aggregate principal balance of approximately
$29.5 billion, including 5,892 loans representing approximately $15.6 billion
that are currently included in 52 securitized transactions. The portfolio is
significantly diversified both geographically and by product type. ASLP will
provide servicing for this portfolio as well as other securitized
transactions under full, primary, sub and master servicing contracts for both
public and private placement transactions representing both single and
multi-borrower mortgage pools.
The information concerning the Servicer set forth herein has been provided
by the Servicer, and none of the Mortgage Loan Sellers, the Special Servicer,
the Subservicer, the Depositor, the Trustee, the Fiscal Agent or the
Underwriter makes any representation or warranty as to the accuracy thereof.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Pursuant to the Pooling and Servicing Agreement, the Servicer will be
entitled to withdraw monthly from the Collection Account its portion of the
Servicing Fee. The monthly servicing fee with respect to any Mortgage Loan
(the "Servicing Fee") for any Distribution Date is an amount per Interest
Accrual Period equal to the product of (i) a per annum rate of .052% (the
"Servicing Fee Rate") and (ii) the Stated Principal Balance of such Mortgage
Loan as of the Due Date and includes the compensation payable to the Servicer
and the Trustee Fee. The Servicer's portion of the Servicing Fee relating to
each Mortgage Loan will be retained by the Servicer from payments and
collections (including insurance proceeds, condemnation proceeds and
liquidation proceeds) in respect of such Mortgage Loan. The Servicer will
also be entitled to retain as additional servicing compensation (together
with the Servicer's portion of the Servicing Fee, "Servicing Compensation")
(i) all investment income earned on amounts on deposit in the Collection
Account and certain Reserve Accounts (to the extent consistent with the
related Mortgage Loan) and (ii) to the extent permitted by applicable law and
the related Mortgage Loans, any late payment charges, one-half of any loan
modification or extension fees (payable in connection with a modification for
which review by the Servicer is required), loan service transaction fees,
beneficiary statement changes, or similar items (but not including Prepayment
Premiums). If a review by the Servicer is not required, the Special Servicer
will be entitled to the full amount of any modification or extension fees.
If the Servicer accepts a voluntary prepayment on a Mortgage Loan after
the related Lock-out Period with respect to such loan which results in a
Prepayment Interest Shortfall, the Servicer will be obligated to reduce its
Servicing Compensation as provided above under "Description of the Offered
Certificates--Distributions--Prepayment Interest Shortfalls."
The Servicer will pay all expenses incurred in connection with its
responsibilities under the Pooling and Servicing Agreement (subject to
reimbursement as described herein), including all fees of any subservicers
retained by it. The Trustee will withdraw monthly from the Distribution
Account the portion of the Servicing Fee representing the Trustee Fee.
SPECIAL SERVICING
CRIIMI MAE Services Limited Partnership will initially be appointed as
special servicer (the "Special Servicer") to, among other things, oversee the
resolution of non-performing Mortgage Loans (other than the Westin Casuarina
Resort Loan) and act as disposition manager of REO Properties. The principal
offices of the Special Servicer are located at 11200 Rockville Pike,
Rockville, Maryland 20852. As of December 31, 1997, the Special Servicer was
responsible for the servicing of approximately 3,600 commercial and
multifamily loans with an aggregate principal balance of approximately $16.5
billion, the collateral for which is located in forty-nine states, Puerto
Rico and District of Columbia. The foregoing information concerning the
Special Servicer has been provided by it. Accordingly, neither the Depositor
nor the Underwriters make any representation or warranty as to the accuracy
or completeness of such information. The Pooling and Servicing Agreement will
provide that the Special Servicer will comply with the REMIC Provisions.
The Pooling and Servicing Agreement will provide that more than one
Special Servicer may be appointed, but only one Special Servicer may
specially service any Mortgage Loan.
The Pooling and Servicing Agreement provides that holders of Certificates
evidencing greater than 50% of the Percentage Interests of the most
subordinate Class of Sequential Certificates then outstanding (provided,
however, that for purposes of determining the most subordinate Class, the
Class A-1A, Class A-1B, Class A-1C, Class A-CS1 and Class PS-1 Certificates
collectively, and the Class B-7 and Class B-7H Certificates together, will,
in each case, be treated as one Class) may replace the Special Servicer,
provided that each Rating Agency confirms to the Trustee in writing that such
replacement, in and of itself, will not cause a qualification, withdrawal or
downgrading of the then-current ratings assigned to any Class of
Certificates.
The duties of the Special Servicer relate to Specially Serviced Mortgage
Loans and to any REO Property. The Pooling and Servicing Agreement will
define a "Specially Serviced Mortgage Loan" to include any Mortgage Loan
other than the Westin Casuarina Resort Loan with respect to which: (i) the
related borrower has not made two consecutive Monthly Payments (and has not
cured at least one such delinquency by the next due date under the related
Mortgage Loan) or (ii) the Servicer, the Trustee and/or the Fiscal Agent has
made four consecutive P&I Advances (regardless of whether such P&I Advances
have been reimbursed); (iii) the borrower has expressed to the Servicer an
inability to pay or a hardship in paying the Mortgage Loan in accordance with
its terms; (iv) the Servicer has received notice that the borrower has become
the subject of any bankruptcy, insolvency or similar proceeding, admitted in
writing the inability to pay its debts
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as they come due or made an assignment for the benefit of creditors; (v) the
Servicer has received notice of a foreclosure or threatened foreclosure of
any lien on the Mortgaged Property securing the Mortgage Loan; (vi) a default
of which the Servicer has notice (other than a failure by the borrower to pay
principal or interest) and which materially and adversely affects the
interests of the Certificateholders has occurred and remained unremedied for
the applicable grace period specified in the Mortgage Loan (or, if no grace
period is specified, 60 days); provided, that a default requiring a Property
Advance will be deemed to materially and adversely affect the interests of
Certificateholders; (vii) the Special Servicer proposes to commence
foreclosure or other workout arrangements; or (viii) such borrower has failed
to make a Balloon Payment as and when due, unless the Servicer reasonably
believes that the Balloon Payment will be paid within ninety days of its Due
Date; provided, however, that a Mortgage Loan will cease to be a Specially
Serviced Mortgage Loan (i) with respect to the circumstances described in
clauses (i), (ii), and (viii) above, when the borrower thereunder has brought
the Mortgage Loan current (or, with respect to the circumstances described in
clause (viii), pursuant to a work-out implemented by the Special Servicer)
and thereafter made three consecutive full and timely monthly payments,
including pursuant to any workout of the Mortgage Loan, (ii) with respect to
the circumstances described in clause (iii), (iv), (v) and (vii) above, when
such circumstances cease to exist in the good faith judgment of the Servicer,
or (iii) with respect to the circumstances described in clause (vi) above,
when such default is cured; provided, in either case, that at that time no
circumstance exists (as described above) that would cause the Mortgage Loan
to continue to be characterized as a Specially Serviced Mortgage Loan.
Pursuant to the Pooling and Servicing Agreement, except with respect to
the Westin Casuarina Resort Loan, the Special Servicer will be entitled to
certain fees including a special servicing fee, payable with respect to each
Interest Accrual Period, equal to 1/12 of .50% of the Stated Principal
Balance of each related Specially Serviced Mortgage Loan (the "Special
Servicing Fee"). In addition, the Special Servicer will be entitled to
receive (i) any (or if the Servicer's consent is required, 50% of) assumption
fees and certain loan modification fees related to the Specially Serviced
Mortgage Loans, (ii) any income earned on deposits in the REO Accounts and
(iii) a fee equal to the product of (a) a per annum rate of 0.01% and (b) the
aggregate Stated Principal Balance of the Mortgage Loans. Notwithstanding the
foregoing, in the event that the Special Servicer is, or is an affiliate of,
the holder of Certificates representing greater than 50% of the Percentage
Interests of the most subordinate Class of Sequential Certificates then
outstanding (determined as provided below), the Special Servicer will be
entitled to receive a Special Servicing Fee for each Interest Accrual Period
equal to 1/12 of .25% of the Stated Principal Balance of each Specially
Serviced Mortgage Loan.
For purposes of determining whether the Special Servicer is entitled to
full compensation, with respect to any Mortgage Loan, the Class A-1A, Class
A-1B, Class A-1C, Class A-CS1 and Class PS-1 Certificates collectively, and
the Class B-7 and Class B-7H Certificates together, will in each case, be
treated as one class.
SERVICER AND SPECIAL SERVICER PERMITTED TO BUY CERTIFICATES
The Servicer and Special Servicer will be permitted to purchase any Class
of Certificates. Such a purchase by the Servicer or Special Servicer could
cause a conflict relating to the Servicer's or Special Servicer's duties
pursuant to the Pooling and Servicing Agreement and the Servicer's or Special
Servicer's interest as a holder of Certificates, especially to the extent
that certain actions or events have a disproportionate effect on one or more
Classes of Certificates. The Pooling and Servicing Agreement provides that
the Servicer or Special Servicer shall administer the Mortgage Loans in
accordance with the servicing standard set forth therein without regard to
ownership of any Certificate by the Servicer or Special Servicer or any
affiliate thereof.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
TRUSTEE REPORTS
Based on information provided in monthly reports prepared by the Servicer
and the Special Servicer and delivered to the Trustee, the Trustee will
prepare and forward on each Distribution Date to each Certificateholder, the
Depositor, the Servicer, the Special Servicer, each Underwriter, each Rating
Agency and, if requested, any potential investors in the Certificates:
1. A statement (a "Distribution Date Statement") setting forth, among
other things: (i) the amount of distributions, if any, made on such
Distribution Date to the Holders of each Class of Certificates applied to
reduce the respective Certificate Balances thereof; (ii) the amount of
distributions, if any, made on such Distribution Date to
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Holders of each Class of Certificates allocable to (A) the Interest
Accrual Amount less any Prepayment Interest Shortfalls (not absorbed by
the Servicer) and/or (B) Prepayment Premiums and/or Reduction Interest
Distribution Amounts; (iii) the number of outstanding Mortgage Loans, the
aggregate unpaid principal balance of the Mortgage Loans at the close of
business on the related Due Date; (iv) the number and aggregate unpaid
principal balance of Mortgage Loans (A) delinquent one Collection Period,
(B) delinquent two Collection Periods, (C) delinquent three or more
Collection Periods, (D) that are Specially Serviced Mortgage Loans that
are not delinquent, or (E) as to which foreclosure proceedings have been
commenced; (v) with respect to any Mortgage Loan as to which the related
Mortgaged Property became a REO Property during the preceding calendar
month, the Stated Principal Balance and unpaid principal balance of such
Mortgage Loan as of the date such Mortgaged Property became an REO
Property; (vi) as to any Mortgage Loan repurchased by the Mortgage Loan
Seller or otherwise liquidated or disposed of during the related
Collection Period, the loan number thereof and the amount of proceeds of
any repurchase of a Mortgage Loan, Liquidation Proceeds and/or other
amounts, if any, received thereon during the related Collection Period and
the portion thereof included in the Available Funds for such Distribution
Date; (vii) with respect to any REO Property included in the Trust Fund as
of the close of business on the related Due Date, the loan number of the
related Mortgage Loan, the value of such REO Property based on the most
recent appraisal or valuation and the amount of any other income collected
with respect to any REO Property net of related expenses and other
amounts, if any, received on such REO Property during the related
Collection Period and the portion thereof included in the Available Funds
for such Distribution Date; (viii) with respect to any REO Property sold
or otherwise disposed of during the related Collection Period, (A) the
loan number of the related Mortgage Loan and the amount of sale proceeds
and other amounts, if any, received in respect of such REO Property during
the related Collection Period and the portion thereof included in the
Available Funds for such Distribution Date and (B) the date of the related
determination by the Special Servicer that it has recovered all payments
which it expects to be finally recoverable (the "Final Recovery
Determination"); (ix) the aggregate Certificate Balance of each Class of
Certificates before and after giving effect to the distributions made on
such Distribution Date, separately identifying any reduction in the
aggregate Certificate Balance of each such Class due to Realized Losses
and/or Trust Fund expenses; (x) the aggregate amount of Principal
Prepayments made during the related Collection Period and the aggregate
amount of any Prepayment Interest Shortfalls (not absorbed by the
Servicer) for such Distribution Date; (xi) the Pass-Through Rate and the
Reduction Interest Pass-Through Rate, if any, applicable to each Class of
Certificates for such Distribution Date; (xii) the aggregate amount of the
Servicing Fee, Special Servicing Fee and any other servicing or special
servicing compensation retained by or paid to the Servicer and the Special
Servicer during the related Collection Period; (xiii) the amount of
Realized Losses, Trust Fund expenses, Interest Shortfalls and Reduction
Interest Shortfalls, if any, incurred with respect to the Mortgage Loans
during the related Collection Period and in the aggregate for all prior
Collection Periods (except to the extent reimbursed or paid); (xiv) the
aggregate amount of Property Advances and P&I Advances outstanding which
have been made by the Servicer, the Special Servicer, the Trustee and the
Fiscal Agent; (xv) the amount of any Appraisal Reduction Amounts allocated
during the related Collection Period on a loan-by-loan basis and the total
Appraisal Reduction Amounts as of such Distribution Date on a loan-by-loan
basis. In the case of information furnished pursuant to subclauses (i),
(ii) and (ix) above, the amounts shall be expressed as a dollar amount in
the aggregate for all Certificates of each applicable Class and per single
Certificate of a specified minimum denomination.
2. A report containing information regarding the Mortgage Loans as of the
end of the related Collection Period, which report shall contain
substantially the categories of information regarding the Mortgage Loans
set forth in this Prospectus Supplement in the tables under the caption
"Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans" (calculated, where applicable, on the basis of the most
recent relevant information provided by the borrowers to the Servicer or
the Special Servicer and by the Servicer or the Special Servicer, as the
case may be, to the Trustee) and such information shall be presented in a
tabular format substantially similar to the format utilized in this
Prospectus under such caption and a loan-by-loan listing (in descending
balance order) showing loan name, property type, location, unpaid
principal balance, Mortgage Rate, paid through date, maturity date, net
interest portion of the Monthly Payment, principal portion of the Monthly
Payment and any Prepayment Premiums received. Such loan-by-loan listing
will be made available electronically; provided, however, the Trustee will
provide any Certificateholder with a written copy of such report upon
request.
Certain information made available in the Distribution Date Statements
referred to in item (1) above may be obtained by calling LaSalle National
Bank's ASAP System at (312) 904-2200 and requesting statement number 320 and
certain information regarding the Mortgage Loans may be made available via
the Trustee's website at www.lnbabs.com or the Trustee's bulletin board
service at (714) 282-3990 or information may be made available by such other
mechanism as the Trustee may have in place from time-to-time.
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SERVICER REPORTS
The Servicer is required to deliver to the Trustee prior to each
Distribution Date, and the Trustee is to deliver to each Certificateholder,
the Depositor, each Underwriter, each Rating Agency and, if requested, any
potential investor in the Certificates, on each Distribution Date, the
following six reports:
(a) A "Comparative Financial Status Report" setting forth, to the extent
such information is provided by the related borrowers, among other things,
the occupancy, revenue, net operating income and DSCR for the Mortgage
Loans as of the current Due Date for each of the following three periods;
(i) the most current available year-to-date, (ii) the previous two full
fiscal years, and (iii) the "base year" (representing the original
underwriting information used as of the Cut-off Date).
(b) A "Delinquent Loan Status Report" setting forth, among other things,
those Mortgage Loans which, as of the close of business on the Due Date
immediately preceding the preparation of such report, were delinquent one
Collection Period, delinquent two Collection Periods, delinquent three or
more Collection Periods, current but specially serviced, or in foreclosure
but not REO Property.
(c) An "Historical Loan Modification Report" setting forth, among other
things, those Mortgage Loans which, as of the close of business on the Due
Date immediately preceding the preparation of such report, have been
modified pursuant to the Pooling and Servicing Agreement (i) during the
related Collection Period and (ii) since the Cut-off Date, showing the
original and the revised terms thereof.
(d) An "Historical Loss Estimate Report" setting forth, among other
things, as of the close of business on the Due Date immediately preceding
the preparation of such report, (i) the aggregate amount of liquidation
proceeds and liquidation expenses, both for the current period and
historically, and (ii) the amount of Realized Losses occurring during the
related Collection Period, set forth on a Mortgage Loan-by-Mortgage Loan
basis.
(e) An "REO Status Report" setting forth, among other things, with
respect to each REO Property that was included in the Trust Fund as of the
close of business on the Due Date immediately preceding the preparation of
such report, (i) the acquisition date of such REO Property, (ii) the
amount of income collected with respect to any REO Property net of related
expenses and other amounts, if any, received on such REO Property during
the related Collection Period and (iii) the value of the REO Property
based on the most recent appraisal or other valuation thereof available to
the Servicer as of such date of determination (including any prepared
internally by the Special Servicer).
(f) A "Watch List" setting forth, among other things, any Mortgage Loan
that is in jeopardy of becoming a Specially Serviced Mortgage Loan.
Certain information regarding the Mortgage Loans will be available on the
Servicer's website at www.amresco.com. Subject to the receipt of necessary
information from any subservicer, such loan-by-loan listing will be made
available electronically in the form of the standard CSSA loan file and CSSA
property file; provided, however, the Trustee will provide Certificateholders
with a written copy of such report upon request. The information that
pertains to Specially Serviced Mortgage Loans and REO Properties reflected in
such reports shall be based solely upon the reports delivered by the Special
Servicer to the Servicer at least one business day prior to the Servicer
Remittance Date. Absent manifest error, none of the Servicer, the Special
Servicer or the Trustee shall be responsible for the accuracy or completeness
of any information supplied to it by a borrower or third party that is
included in any reports, statements, materials or information prepared or
provided by the Servicer, the Special Servicer or the Trustee, as applicable.
The Servicer is also required to deliver to the Trustee the following
materials:
(a) Annually, on or before June 30 or each year, commencing with June 30,
1999, with respect to each Mortgaged Property and REO Property, an
"Operating Statement Analysis" together with copies of the operating
statements and rent rolls (but only to the extent the related borrower is
required by the Mortgage to deliver, or otherwise agrees to provide such
information) for such Mortgaged Property or REO Property as of the end of
the preceding calendar year. The Servicer (or the Special Servicer in the
case of Specially Serviced Mortgage Loans and REO Properties) is required
to use its best reasonable efforts to obtain said annual operating
statements and rent rolls.
(b) Within thirty days of receipt by the Servicer (or within ten days of
receipt by the Special Servicer with respect to any Specially Serviced
Mortgage Loan or REO Property) of annual operating statements, if any,
with respect to
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any Mortgaged Property or REO Property, an "NOI Adjustment Worksheet" for
such Mortgaged Property (with the annual operating statements attached
thereto as an exhibit), presenting the computations made in accordance
with the methodology described in the Pooling and Servicing Agreement to
"normalize" the full year net operating income and debt service coverage
numbers used by the Servicer in the other reports referenced above.
The Trustee is to deliver a copy of each Operating Statement Analysis
report and NOI Adjustment Worksheet that it receives from the Servicer to the
Depositor, each Underwriter and each Rating Agency promptly after its receipt
thereof. Upon request, the Trustee will make such reports available to the
Certificateholders and the Special Servicer. Any Certificateholder and any
potential investor in the Certificates may obtain a copy of any NOI
Adjustment Worksheet for a Mortgaged Property or REO Property in the
possession of the Trustee upon request.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee is required to send to each person who at any time
during the calendar year was a Certificateholder of record, a report
summarizing on an annual basis (if appropriate) the items provided to
Certificateholders in the monthly Distribution Date Statements and such other
information as may be required to enable such Certificateholders to prepare
their federal income tax returns. Such information is to include the amount
of original issue discount accrued on each Class of Certificate held by
persons other than holders exempted from the reporting requirements and
information regarding the expenses of the Trust Fund.
Other Information
The Pooling and Servicing Agreement requires that the Trustee, upon
reasonable prior notice, make available at its offices, during normal
business hours, for review by any Holder of a Certificate, the Depositor, the
Special Servicer, the Servicer, any Rating Agency, any potential investor in
the Certificates or any other Person to whom the Depositor believes such
disclosure is appropriate, originals or copies of, among other things, the
following items (except to the extent not permitted by applicable law or
under any of the Mortgage Loan documents): (i) the Pooling and Servicing
Agreement and any amendments thereto, (ii) all Distribution Date Statements
delivered to holders of the relevant Class of Offered Certificates since the
Closing Date, (iii) all annual officers' certificates and accountants'
reports delivered by the Servicer and Special Servicer to the Trustee since
the Closing Date regarding compliance with the relevant agreements, (iv) the
most recent property inspection report prepared by or on behalf of the
Servicer or the Special Servicer with respect to each Mortgaged Property, (v)
the most recent annual operating statements, rent rolls (to the extent such
rent rolls have been made available by the related borrower) and retail
"sales information," if any, collected by or on behalf of the Servicer or the
Special Servicer with respect to each Mortgaged Property, (vi) any and all
modifications, waivers and amendments of the terms of a Mortgage Loan entered
into by the Servicer and/or the Special Servicer and (vii) any and all
officers' certificates and other evidence delivered to or by the Trustee to
support the Servicer's, the Trustee's or the Fiscal Agent's, as the case may
be, determination that any Advance, if made, would not be recoverable. Copies
of any and all of the foregoing items will be available from the Trustee upon
request; however, the Trustee will be permitted to require payment of a sum
sufficient to cover the reasonable costs and expenses of providing such
copies.
USE OF PROCEEDS
The net proceeds from the sale of Offered Certificates will be used by the
Depositor to pay part of the purchase price of the Mortgage Loans.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary and the discussion in the Prospectus under the
heading "Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates" are a general discussion of the
anticipated material federal income tax consequences of the purchase,
ownership and disposition of the Offered Certificates and are based on the
advice of Cadwalader, Wickersham & Taft. The summary below and such
discussion in the Prospectus do not purport to address all federal income tax
consequences that may be applicable to particular categories of investors,
some of which may be subject to special rules. In addition, such summary and
such discussion do not address state, local or foreign tax issues with
respect to the acquisition, ownership or disposition of the Offered
Certificates. The authorities on which such summary and such discussion are
based are subject to change or differing interpretations, and any such change
or interpretation could apply retroactively. Such summary and such discussion
reflect the applicable provisions of the Code, as well as regulations (the
"REMIC Regulations") promulgated by the U.S. Department of the Treasury.
Investors should consult their own tax advisors in determining the federal,
state, local, foreign or any other tax consequences to them of the purchase,
ownership and disposition of Certificates.
Elections will be made to treat the Trust Fund, exclusive of the Reserve
Accounts, the Lock Box Accounts, the Cash Collateral Accounts, the Excess
Interest and the Default Interest in respect of the Mortgage Loans (such
portion of the Trust Fund, the "Trust REMICs"), as two separate REMICs (the
"Upper-Tier REMIC" and the "Lower-Tier REMIC," respectively) within the
meaning of Code Section 860D. The Reserve Accounts, the Lock Box Accounts and
the Cash Collateral Accounts will be treated as beneficially owned by the
respective borrowers for federal income tax purposes. The Lower-Tier REMIC
will hold the Mortgage Loans (exclusive of the Excess Interest and Default
Interest) proceeds therefrom, the Collection Account, the Distribution
Account and any REO Property, and will issue (i) certain uncertificated
classes of regular interests (the "Lower-Tier Regular Interests" ) to the
Upper-Tier REMIC and (ii) the Class LR Certificates, which will represent the
sole class of residual interests in the Lower-Tier REMIC. The Upper-Tier
REMIC will hold the Lower-Tier Regular Interests and the Upper-Tier
Distribution Account in which distributions thereon will be deposited, and
will issue the Class A-1A, Class A-1B, Class A-1C, Class A-CS1, Class PS-1,
Class A-1D, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7,
Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class B-7
and Class B-7H Certificates (the "Regular Certificates") as classes of
regular interests and the Class R Certificates as the sole class of residual
interests in the Upper-Tier REMIC. Qualification as a REMIC requires ongoing
compliance with certain conditions. Assuming (i) the making of appropriate
elections, (ii) compliance with the Pooling and Servicing Agreement and (iii)
compliance with any changes in the law, including any amendments to the Code
or applicable temporary or final regulations of the United States Department
of the Treasury ("Treasury Regulations") thereunder, in the opinion of
Cadwalader, Wickersham & Taft, the Trust Fund will qualify as two separate
REMICs. References in this discussion to the "REMIC" will, unless the context
dictates otherwise, refer to each of the Upper-Tier REMIC and the Lower-Tier
REMIC. The Class V-1 and Class V-2 Certificates will represent pro rata
undivided beneficial interests in the portion of the Trust Fund consisting of
Excess Interest and Default Interest in respect of the Mortgage Loans,
respectively, and such portions will be treated as a grantor trust for
federal income tax purposes.
The Offered Certificates will be treated as "loans . . . secured by an
interest in real property which is . . . residential real property" or "loans
secured by an interest in . . . health . . . institutions or facilities,
including structures designed or used primarily for residential purposes for
. . . persons under care" for domestic building and loan associations (but
only to the extent of the allocable portion of the Mortgage Loans secured by
multifamily properties and mobile home community properties, or nursing homes
and congregate care facilities, respectively) and "real estate assets" for
real estate investment trusts, to the extent described in the Prospectus. As
of the Cut-off Date, multifamily loans, mobile home community loans and loans
secured by nursing homes or congregate care facilities represent
approximately 18%, 2% and approximately than 1%, respectively, of the
Mortgage Loans by unpaid principal balance. Mortgage Loans which have been
defeased with U.S. Treasury obligations will not qualify for the foregoing
treatments.
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 such regular
interests in accordance with the accrual method of accounting. It is
anticipated that the Class A-1A, Class A-1B, Class A1-C, Class A-1D, Class
A-2, Class A-3, Class A-4, Class A-5 and Class A-6 Certificates will not be
issued with original issue discount for federal income tax purposes. See
"Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Premium" in the Prospectus.
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Although unclear for federal income tax purposes, it is anticipated that
the [Class A-CS1 and Class PS-1] Certificates will be considered to be issued
with original issue discount in an amount equal to the excess of all
distributions of interest expected to be received thereon (assuming the
Weighted Average Net Mortgage Pass-Through Rate changes in accordance with
the Prepayment Assumption (as described below)), over their respective issue
prices (including accrued interest, if any). Any "negative" amounts of
original issue discount on the Coupon Strip Certificates attributable to
rapid prepayments 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 Coupon Strip 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 method" of the OID Regulations, as amended on June
12, 1996, may be promulgated with respect to the Certificates. See "Federal
Income Tax Consequences--Federal Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Original Issue Discount" in
the Prospectus. 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 reduction in the income accrual for a period below zero (a
"Negative Adjustment") would be treated by a Certificateholder as ordinary
loss to the extent of prior income accruals and may 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 amount of original issue discount on an instrument such as 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.
For purposes of accruing original issue discount, determining whether such
original issue discount is de minimis and amortizing any premium, the
Prepayment Assumption will be 0% CPR, with all ARD Loans prepaying on their
related Anticipated Repayment Dates. See "Prepayment and Yield
Considerations--Yield on the Class A-CS1 and Class PS-1 Certificates" herein.
No representation is made as to the rate, if any, at which the Mortgage Loans
will prepay.
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.
For a discussion of the tax consequences of the ownership of Offered
Certificates by any person who is not a citizen or resident of the United
States, a corporation or partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof
or is a foreign estate or trust, see "Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Certain Foreign Investors--Regular Certificates" in
the Prospectus.
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 any
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 to acquire the
Subordinated Offered Certificates is restricted. See "Description of the
Offered Certificates--Transfer Restrictions" herein. Accordingly, except as
specifically referenced herein, the following discussion does not purport to
discuss the considerations under ERISA, Section 4975 of the Code or Similar
Law with respect to the purchase, holding or disposition of the Subordinated
Offered Certificates and for purposes of the following discussion all
references to the Offered Certificates are deemed to exclude the Subordinated
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 Offered Certificates. The
Department has granted to the Underwriters administrative exemptions
(Prohibited Transaction Exemption 93-32, 58 Fed. Reg. 28,623 (May 14, 1993);
to Nomura Securities International Inc. and Prohibited Transaction Exemption
90-24, 55 Fed. Reg. 20,548 (May 17, 1990); to Morgan Stanley
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& Co. Incorporated, and Prohibited Transaction Exemption 90-29, 55 Fed. Reg.
21,459 (May 24, 1990); to Merrill Lynch, Pierce, Fenner & Smith Incorporated
(collectively, the "Exemptions")), for certain mortgage-backed and asset
backed certificates underwritten in whole or in part by the Underwriters. The
Exemptions 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 Underwriters, representing interests in
pass-through trusts that consist of certain receivables, loans and other
obligations, provided that the conditions and requirements of the Exemptions
are satisfied. The loans described in the Exemptions include mortgage loans
such as the Mortgage Loans. However, it should be noted that in issuing the
Exemptions, 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 Exemptions to apply to
the acquisition, holding and resale of the Offered Certificates are the
following:
(1) The acquisition of Offered Certificates by a Plan is on terms
(including the price for the 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
the 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 one of the three highest generic
rating categories from any of S&P, Moody's, Fitch or DCR;
(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 any of the
Underwriters in connection with the distribution of Offered Certificates
represents not more than reasonable compensation for underwriting the
Certificates. The sum of all payments made to and retained by the
Depositor 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 Servicer and
any other servicer represents not more than reasonable compensation for
such person's services under the Pooling and Servicing Agreement and
reimbursement of such person's reasonable expenses in connection
therewith; and
(6) The Plan investing in the 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 in such other investment pools must have been rated in
one of the three highest rating categories of S&P, Moody's, Fitch or DCR
for at least one year prior to the Plan's acquisition of the Offered
Certificates pursuant to the Exemptions; 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 Exemptions.
If all of the conditions of the Exemptions 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 the prohibited
transaction provisions of ERISA and the Code.
Moreover, the Exemptions 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
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 (as defined below) and at least fifty percent of the aggregate interest
in the trust is acquired by persons independent of the Restricted Group (as
defined below); (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 acquisitions; 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
served by the same entity.
S-162
<PAGE>
The Exemptions do not apply to the purchasing or holding of Offered
Certificates by Plans sponsored by the Depositor, the Underwriters, the
Trustee, the 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").
The Underwriters believe that the conditions to the applicability of the
Exemptions will generally be met with respect to the Offered Certificates,
other than possibly those conditions which are dependent on facts unknown to
the Underwriters or which they cannot control, such as those relating to the
circumstances of the Plan purchaser or the Plan fiduciary making the decision
to purchase any such 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 Exemptions or the
availability of any other prohibited transaction exemptions, and whether the
conditions of any such exemption will be applicable to the Offered
Certificates. As noted above, the Department, in granting the Exemptions may
not have considered interests in pools of the exact nature as some of the
Offered Certificates. A fiduciary of a Plan that is a governmental plan
should make its own determination as to the need for and the availability of
any exemptive relief under any Similar Law. See "Description of the Offered
Certificates--Transfer Restrictions" herein.
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.
BECAUSE THE SUBORDINATED OFFERED CERTIFICATES ARE SUBORDINATE TO ONE OR
MORE CLASSES OF CERTIFICATES, THE PURCHASE AND HOLDING OF THE SUBORDINATED
OFFERED CERTIFICATES BY OR ON BEHALF OF A PLAN MAY RESULT IN "PROHIBITED
TRANSACTIONS" WITHIN THE MEANING OF ERISA, SECTION 4975 OF THE CODE OR ANY
SIMILAR LAW. ACCORDINGLY, EACH PROSPECTIVE TRANSFEREE OF A SUBORDINATED
OFFERED CERTIFICATE THAT IS A DEFINITIVE CERTIFICATE WILL BE REQUIRED TO (A)
DELIVER TO THE DEPOSITOR, THE CERTIFICATE REGISTRAR AND THE TRUSTEE A
REPRESENTATION LETTER SUBSTANTIALLY IN THE FORM SET FORTH AS AN EXHIBIT TO
THE POOLING AND SERVICING AGREEMENT STATING THAT SUCH TRANSFEREE IS NOT A
PLAN OR A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, OTHER
THAN AN INSURANCE COMPANY INVESTING THE ASSETS OF ITS GENERAL ACCOUNT UNDER
CIRCUMSTANCES WHEREBY THE PURCHASE AND SUBSEQUENT HOLDING OF THE OFFERED
CERTIFICATE WOULD BE EXEMPT FROM THE PROHIBITED TRANSACTION RESTRICTIONS OF
ERISA AND THE CODE UNDER SECTIONS I AND III OF PTE 95-60, OR (B) PROVIDE (I)
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE CERTIFICATE
REGISTRAR THAT THE PURCHASE OF THE SUBORDINATED OFFERED CERTIFICATE WILL NOT
RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" AND
SUBJECT TO THE PROHIBITED TRANSACTION RESTRICTIONS OF ERISA, THE CODE OR ANY
SIMILAR LAW AND WILL NOT SUBJECT THE DEPOSITOR, THE SERVICER, THE SPECIAL
SERVICER, THE TRUSTEE, OR THE FISCAL AGENT TO ANY OBLIGATION IN ADDITION TO
THOSE UNDERTAKEN IN THE POOLING AND SERVICING AGREEMENT AND (II) SUCH OTHER
OPINIONS OF COUNSEL, OFFICERS' CERTIFICATES AND AGREEMENTS AS THE CERTIFICATE
REGISTRAR MAY REQUIRE IN CONNECTION WITH SUCH TRANSFER. THE PURCHASER OR
TRANSFEREE OF ANY INTEREST IN A SUBORDINATED OFFERED CERTIFICATE THAT IS NOT
A DEFINITIVE CERTIFICATE SHALL BE DEEMED TO REPRESENT THAT IT IS NOT A PERSON
DESCRIBED IN CLAUSE (A) ABOVE. THE SUBORDINATED OFFERED CERTIFICATES WILL
CONTAIN A LEGEND DESCRIBING SUCH RESTRICTIONS ON TRANSFER AND THE POOLING AND
SERVICING AGREEMENT WILL PROVIDE THAT ANY ATTEMPTED OR PURPORTED TRANSFER IN
VIOLATION OF THESE TRANSFER RESTRICTIONS WILL BE NULL AND VOID AB INITIO.
The sale of Offered Certificates to a Plan is in no respect a
representation by the Depositor or the Underwriters that this investment
meets all relevant legal requirements with respect to investments by Plans
generally or any particular Plan, or that this investment is appropriate for
Plans generally or any particular Plan.
LEGAL INVESTMENT
Any Class of Certificates rated in the category of "AAA" or "AA" (or the
equivalent) by at least one Rating Agency will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended, for so long as the Mortgage Loans are secured by liens on
real estate.
S-163
<PAGE>
Except as to the status of certain Classes of Offered Certificates as
"mortgage related securities," no representation is made as to the proper
characterization of the Offered Certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase the Offered Certificates 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 a legal
investment or are subject to investment, capital or other restrictions. See
"Legal Investment" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") between Nomura Securities
International, Inc. ("NSI"), Morgan Stanley & Co. Incorporated ("Morgan
Stanley") and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch" and, collectively with NSI and Morgan Stanley, (the "Underwriters")
and the Depositor, NSI and Morgan Stanley will act as co-lead joint
bookrunning Underwriters with respect to the Offered Certificates. NSI,
Morgan Stanley and Merrill Lynch will act as Placement Agents with respect to
the Class A-7 Certificates (collectively, the "Investment Grade Private
Certificates"). NSI and Morgan Stanley will act as co-lead joint bookrunning
Placement Agents with respect to the Investment Grade Private Certificates.
NSI is the sole placement agent for the Class B-1, Class B-2, Class B-3,
Class B-4, Class B-5, Class B-6 and Class B-7 Certificates (collectively, the
"Non-Investment Grade Private Certificates") with a limited number of
institutional investors in transactions exempt from the registration
requirements of the Securities Act. The Underwriters may place Offered
Certificates through licensed dealers in Japan. See "Description of Offered
Certificates--Transfer Restrictions" herein.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to the approval of certain legal matters by counsel,
and to certain other conditions.
The Depositor will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act or will contribute to
payments that the Underwriters may be required to make in respect thereof in
accordance with the terms and provisions of the Underwriting Agreement.
There is currently no secondary market for the Offered Certificates. The
Underwriters currently expect to make a secondary market in the Offered
Certificates, but have no obligation to do so. There can be no assurance that
an active secondary market for the Offered Certificates will develop or that
any such market, if established, will continue.
This Prospectus Supplement 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 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 a kind described in section
76(2) of the FSA or as permitted by the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991.
The Offered Certificates may not be offered or sold directly or indirectly
in Japan and this Prospectus Supplement may not be distributed or circulated
in Japan except in circumstances that do not constitute an offer to the
public within the meaning of the SEL.
LEGAL MATTERS
The validity of the Certificates will be passed upon for the Depositor and
the Mortgage Loan Sellers by Cadwalader, Wickersham & Taft, New York, New
York and for the Underwriters by Sidley & Austin, New York, New York. In
addition, certain federal income tax matters will be passed upon for the
Depositor by Cadwalader, Wickersham & Taft.
RATING
It is a condition to the issuance of the Offered Certificates that (i) the
Class A-1A, Class A-1B and Class A-1C Certificates be rated " " by each of
Standard & Poor's Rating Services ("S&P"), Fitch IBCA, Inc. ("Fitch") and
Duff
S-164
<PAGE>
& Phelps Credit Rating Co. ("DCR") and " " by Moody's Investors Service,
Inc. ("Moody's," and together with S&P, Fitch and DCR, the "Rating
Agencies"), (ii) the Class A-CS1 and Class PS-1 Certificates be rated " "
by S&P, " " by Fitch, " " by DCR and " " by Moody's, (iii) the Class
A-1D Certificates be rated " " by S&P, " " by Fitch, " " by DCR and
" " by Moody's, (iv) the Class A-2 Certificates be rated " " by S&P,
" " by Fitch, " " by DCR and " " by Moody's, (v) the Class A-3
Certificates be rated " " by S&P, " " by Fitch, " " by DCR and " " by
Moody's, (vi) the Class A-4 Certificates be rated " " by S&P, " " by
Fitch, " " by DCR and " " by Moody's, (vii) the Class A-5 Certificates be
rated " " by S&P, " " by Fitch, " " by DCR and " " by Moody's and
(viii) the Class A-6 Certificates be rated " " by S&P, " " by Fitch,
" " by DCR and " " by Moody's. The Rated Final Distribution Date of each
Class of Offered Certificates is March 15, 2030.
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the timely payment of interest and the ultimate repayment
of principal by the Rated Final Distribution Date. The Rating Agencies'
ratings take into consideration the credit quality of the Mortgage Pool,
structural and legal aspects associated with the Certificates, and the extent
to which the payment stream in the Mortgage Pool is adequate to make payments
required under the Certificates. Ratings on mortgage pass-through
certificates do not, however, represent an assessment of the likelihood,
timing or frequency of principal prepayments (both voluntary and involuntary)
by mortgagors, or the degree to which such prepayments might differ from
those originally anticipated. The security ratings do not address the
possibility that Certificateholders might suffer a lower than anticipated
yield. In addition, ratings on mortgage pass-through certificates do not
address the likelihood of receipt of Prepayment Premiums, Net Default
Interest or Excess Interest or the timing or frequency of the receipt
thereof. In general, the ratings thus address credit risk and not prepayment
risk. Also, a security rating does not represent any assessment of the yield
to maturity that investors may experience or the possibility that the holders
of the Class A-CS1 or Class PS-1 Certificates might not fully recover their
initial investment in the event of delinquencies or rapid prepayments of the
Mortgage Loans (including both voluntary and involuntary prepayments). As
described herein, the amounts payable with respect to the Class A-CS1 and
Class PS-1 Certificates consist only of interest. If the entire pool were to
prepay in the initial month, with the result that the Class A-CS1 and Class
PS-1 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 ratings received on the Class A-CS1 and Class PS-1 Certificates.
Accordingly, the ratings for the Class A-CS1 and Class PS-1 Certificates
should be evaluated independently from similar ratings on other types of
securities. 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 Weighted
Average Net Mortgage Pass-Through Rate may be affected by changes thereon.
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 Depositor to do so may be
lower than the rating assigned by the Rating Agencies pursuant to the
Depositor's request.
The rating of the 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-165
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<S> <C>
A
ACMs S-48
ADA S-51
Advance Rate S-137
Advances S-136
AMM S-51
AMM I S-51
AMM II S-51
AMRESCO S-154
Anticipated Repayment Date S-21
Appraisal Reduction Event S-112
ASLP S-154
Atlanta Marriott Borrower S-51
Atlantic LLC S-67, S-71
B
Balloon Loans S-22, S-64
Balloon Payment S-22, S-64
Balloon Payments S-49
Best Buy Credit Lease Loan S-41, S-62
Best Buy Credit Leases S-41, S-61
BLHC S-69
Bloomfield S-18
Bloomfield Purchase Agreement S-135
BPP S-73
Bristol Beverage Company S-69
Bristol I Borrower S-69
Bristol I Closing Date S-69
Bristol I Hotel Properties S-69
Bristol I Loan S-69
Bristol I Notes S-69
Bristol I Property Manager S-70
Bristol II Loan S-69
BT S-69
C
Cash Collateral Accounts S-138
Cedel 1, S-20, S-55
Cedel Participants S-115
CERCLA S-48
Certificate Balance S-2
Certificate Owners S-116
Certificate Registrar S-113
Certificates 1, S-16
Cinemark Borrower S-74
Cinemark Credit Lease S-76
Cinemark Credit Lease Loan S-74
Cinemark Credit Lease Loans Closing Date S-74
Cinemark Credit Lease Property S-75
Cinemark Credit Lease Tenant S-76
Class S-2
Code S-31, S-116
Co-Lender Agreement S-52
Collateral Account S-148
Collateral Substitution Deposit S-65
S-166
<PAGE>
Collection Account S-138
Cooperative S-115
Credit Lease S-21, S-60
Credit Lease Assignments S-21
Credit Lease Loans S-21, S-60
Credit Lease Properties S-21, S-60
Credit Tenant S-21, S-60
D
DCR S-2, S-32, S-165
Defeasance Lock-out Period S-22, S-65
Defeasance Option S-23, S-65
Definitive Certificate S-113
Department S-161
Deposit S-148
Depositaries S-114
Depositor 1
Directing Holders S-147
Distribution Account S-138
Distribution Date Statement S-156
DSCR S-9, S-11
DTC 1, S-20, C-1
E
Eckerd Credit Lease S-40, S-61
Eligible Bank S-139
ERISA S-31, S-116, S-161
Euroclear 1, S-20, S-55
Euroclear Operator S-115
Euroclear Participants S-115
Event of Default S-143
Excess Cash Flow S-64
Excess Interest S-63
Excess Rate S-63
Exemptions S-31, S-162
F
Factory Outlet Properties S-36
Fair Market Value S-147
Final Recovery Determination S-157
Financing Trust S-18
Fiscal Agent S-2, S-17
Fitch S-2, S-32, S-164
Fixed Voting Rights Percentage S-145
Form 8-K S-18, S-97
Fox II Member S-68
Fox Plaza Anticipated Repayment Date S-68
Fox Plaza Borrower S-67
Fox Plaza II S-67
Fox Plaza Loan S-67
Fox Plaza Mezzanine Loan S-68
Fox Plaza Mortgage S-67
Fox Plaza Office Property S-67
Fox Plaza Property Manager S-68
FSA S-164
S-167
<PAGE>
G
Global Securities C-1
Golden State Borrower S-73
Golden State Loan S-73
Golden State Mortgages S-73
Golden State Property Manager S-74
Golden State Property Managers S-74
Golden State Retail Properties S-73
Guarantor S-21, S-60
H
Healthcare Loan S-57
Healthcare Property S-57
Holders S-116
Host Marriott S-51
Hotel Loan S-57
Hotel Property S-57
I
Indian LLC S-77
Indirect Participants S-114
Industrial Loan S-57
Industrial Property S-57
Initial Pool Balance S-57
Instructions S-147
Interest Reserve Account S-138
Ivy Street S-51
L
Lazard S-68, S-71, S-77
Lease Enhancement Insurer S-41
Lease Enhancement Policies S-21
Lease Enhancement Policy S-40, S-61
Loan-to-Value Ratio S-86
Lock Box Accounts S-138
Lock-out Period S-22, S-64
Lower Rate S-147
Lower-Tier Interests S-27
Lower-Tier Regular Interests S-160
Lower-Tier REMIC S-27, S-30, S-160
M
Marquis Corporation S-51
Merger S-51
Method of Distribution S-3
Mobile Home Loan S-57
Mobile Home Property S-57
Monthly Debt Service Payment S-63
Monthly Mortgage Loan Payments S-45
Monthly Operating Expenses S-45
Monthly Payments S-21, S-63
Monthly Rental Payments S-62
Moody's S-2
Moody's, S-32
Morgan Stanley S-17
Mortgage S-57
Mortgage Loan Purchase and Sale Agreement S-58
Mortgage Loan Sellers S-18
Mortgage Loans 1, S-57
S-168
<PAGE>
Mortgage Pool 1
Mortgage Rate S-21
Mortgaged Properties 1, S-57
Mortgaged Property S-20
Multifamily Loan S-57
Multifamily Property S-57
N
NACC 1, S-16, S-18
NACC/Marriott Financing S-51
NAIC S-61
NJDEP S-48
NOI S-68
Note S-57
Notional Balance S-2
NSI S-17
O
ODC-Pittsburgh S-77
Offered Certificates S-2, S-98
Office Loan S-57
Office Property S-57
Operating License S-41
Originators S-18, S-58
Other Park LaBrea Note S-71
Other Trustee S-52
Other Westin Casuarina Resort Loan S-52
Oxford Center Anticipated Repayment Date S-77
Oxford Center Borrower S-77
Oxford Center General Partner S-77
Oxford Center Loan S-76
Oxford Center Mezzanine Loan S-77
Oxford Center Office Property S-76
Oxford Center Property Manager S-78
P
Park LaBrea Anticipated Repayment Date S-71
Park LaBrea Borrower S-71
Park LaBrea Closing Date S-71
Park LaBrea General Partner S-71
Park LaBrea Limited Partner S-71
Park LaBrea LLC S-71
Park LaBrea Loan S-71
Park LaBrea Maturity Date S-72
Park LaBrea Mezzanine Loan S-71
Park LaBrea Multifamily Property S-71
Park LaBrea Note S-71
Park LaBrea Property Manager S-72
Participants S-113
Pass-Through Rate S-2, S-25, S-102
Permitted Investments S-139
P&I Advance S-7, S-136
P&I Advances S-29
Plan S-116, S-161
Plans S-31
Pool Loan S-8
Pool Loans S-57, S-66
Pooling and Servicing Agreement S-16, S-127
S-169
<PAGE>
Preferred Interest Holder S-44
Prepayment Premium S-22, S-64
Primary Term S-62
Private Certificates S-2, S-98
Property Advances S-136
PTE S-32
R
Rating Agencies S-2, S-32, S-165
Record Date S-99
Regular Certificates S-30, S-160
Release Date S-65
REMIC S-2, S-6, S-27, S-30
REMIC Regulations S-160
REO Account S-98
REO Property S-98
Repurchase Price S-134
Reserve Accounts S-58
Residual Certificates S-30
Residual Value Insurer S-41
Residual Value Policies S-41, S-62
Restricted Group S-163
Retail Loan S-57
Retail Property S-57
Revised Rate S-63
Rules S-115
S
SEL S-3
Senior Offered Certificates S-31
Series 1997-D5 S-52
Servicer S-2, S-16
Servicer Remittance Date S-136
Servicing Compensation S-155
Servicing Fee S-155
Servicing Fee Rate S-155
Servicing Standard S-135
Similar Law S-161
SL Hillside Property S-48
S&P S-2, S-32, S-164
Special Servicer S-2, S-17, S-155
Special Servicing Fee S-156
Subordinate Class Advance Amount S-136
Subordinated Offered Certificates S-31
Subservicer S-16, S-17
Subservicing Agreement S-17
T
Tenant S-89
Terms and Conditions S-116
Three Party Agreement S-48
Total Park LaBrea Loan S-71
Treasury Regulations S-160
Trust Fund 1
Trust REMICs S-2, S-160
Trustee S-2, S-17
Trustee Fee S-153
Two Other Cinemark Loans S-75
S-170
<PAGE>
U
Underwriters 1, S-17, S-164
Underwriting Agreement S-164
Updated Appraisal S-146
Upper-Tier REMIC S-2, S-27, S-30, S-160
W
Warehouse Loan S-57
Warehouse Property S-57
Withheld Amounts S-138
Z
Zoning Laws S-51
</TABLE>
S-171
<PAGE>
<TABLE>
<CAPTION>
ANNEX A: CHARACTERISTICS OF THE MORTGAGE NOTES IN THE POOL
CUT-OFF BALLOON/ANTICIPATED
LOAN LOAN DATE PRINCIPAL MONTHLY REPAYMENT DATE ANTICIPATED REPAYMENT MATURITY
# LOAN NAME TYPE BALANCE PAYMENT BALANCE DATE DATE
- ----- --------- ---- -------------- ------- ------------------- -------------------- ---------
<C> <S> <C> <C> <C> <C> <C> <C>
1 Fox Plaza hyper $177,424,525 $1,197,417.36 $155,644,182 11-Nov-07 11-Nov-27
2 Bristol I hyper $72,164,400 $533,789.52 $58,793,857 11-Nov-07 11-Nov-22
2 Bristol I hyper $72,164,400 $533,789.52 $58,793,857 11-Nov-07 11-Nov-22
3 Park LaBrea hyper $140,613,989 $1,050,047.17 $113,400,999 11-Mar-13 11-Mar-28
4 Burnham Pacific - Golden State hyper $134,838,933 $1,022,114.79 $121,657,749 11-Jan-08 11-Jan-28
5 Cinemark fully $105,297,461 $883,963.96 $- 11-Mar-18
6 Oxford Center hyper $99,464,749 $731,131.39 $89,035,616 11-Mar-08 11-Mar-28
7 Springfield Mall hyper $91,105,178 $700,520.00 $74,389,416 11-Apr-13 11-Apr-28
8 Atlanta Marriott hyper $81,871,306 $600,649.08 $61,585,234 11-Feb-10 11-Feb-23
9 FAC Realty II hyper $67,174,650 $545,342.84 $56,215,516 11-Mar-13 11-Mar-28
10 University Mall hyper $64,800,478 $486,785.71 $52,357,984 11-Jan-13 11-Jan-28
11 Forest City Atlantic hyper $50,823,254 $390,786.85 $41,498,325 11-Apr-13 11-Apr-28
11 Forest City Atlantic hyper $12,325,815 $ 85,184.40 $6,496,600 11-Apr-13 11-Dec-27
12 Edgewater Hills hyper $55,988,456 $410,823.46 $50,095,220 11-Mar-08 11-Mar-28
13 Hunter's Branch hyper $55,278,713 $425,045.48 $45,062,138 11-Apr-13 11-Apr-28
14 HQ Plaza hyper $53,132,485 $419,039.88 $42,895,026 11-Dec-12 11-Dec-25
15 Mall Del Norte hyper $52,244,472 $401,714.79 $42,658,780 11-Apr-13 11-Apr-28
16 Brandywine Square hyper $51,874,868 $402,602.24 $47,044,176 11-Dec-07 11-Nov-27
17 Park Center Plaza hyper $51,012,644 $392,243.09 $46,124,620 11-Apr-08 11-Mar-28
18 Hyundai Buildings hyper $47,634,000 $366,264.25 $43,120,362 11-Mar-08 11-Mar-28
19 Saul Center Hotels hyper $45,602,694 $399,417.47 $32,784,990 11-Dec-12 11-Dec-22
20 Crossings at Hobart hyper $42,958,554 $323,843.41 $37,443,630 11-Apr-13 11-Apr-28
21 Wilkow hyper $41,825,816 $285,263.68 $36,750,554 11-Jan-08 11-Jan-28
22 Bayview Plaza - Guam hyper $41,377,683 $318,501.94 $33,770,696 11-Feb-13 11-Feb-28
23 Innkeepers II hyper $40,000,000 $292,466.54 $30,300,773 11-Apr-10 11-Mar-23
24 Laurel Office hyper $39,633,636 $305,305.56 $32,401,341 11-Dec-12 11-Dec-27
25 Abilene & Sunset Malls hyper $38,900,301 $293,816.90 $31,528,287 11-Nov-12 11-Nov-27
26 Morris Corp. Center hyper $35,881,763 $240,234.66 $31,412,575 11-Nov-07 11-Nov-27
27 Colonial Park Mall hyper $35,878,883 $257,411.04 $31,981,751 11-Oct-07 11-Oct-27
28 Hallwood - Executive Park hyper $31,440,036 $241,746.68 $28,454,906 11-Apr-08 11-Apr-28
29 Hudson Hotels II hyper $29,880,327 $239,146.95 $24,985,842 11-Nov-07 11-Nov-22
30 Ocean Edge Resort hyper $29,573,052 $259,019.51 $25,445,849 11-Dec-07 11-Dec-22
31 RIM Corporation hyper $28,890,001 $252,751.71 $20,716,125 11-Feb-13 11-Feb-23
32 Brattle Square hyper $28,454,844 $218,793.13 $25,758,559 11-Mar-08 11-Mar-28
33 Monterey Plaza Hotel hyper $28,135,021 $246,146.56 $20,174,753 11-Feb-13 11-Feb-23
34 CAA - Headquarters hyper $23,480,370 $180,543.73 $21,250,985 11-Apr-08 11-Apr-28
35 Shelby Northpoint hyper $22,463,357 $173,039.58 $18,364,274 11-Dec-12 11-Dec-27
36 Central Trust Tower hyper $21,869,727 $173,459.03 $14,838,860 11-Sep-12 11-Sep-22
37 Oakton Gable Apartments hyper $21,611,974 $148,131.96 $18,918,602 11-Apr-08 11-Jan-28
38 Potomac Promenade hyper $20,443,940 $157,196.21 $16,700,464 11-Mar-13 11-Mar-28
39 Sunshadow/Summerbreeze hyper $10,206,090 $75,091.89 $9,110,778 11-Feb-08 11-Nov-27
39 Sunshadow/Summerbreeze hyper $10,027,795 $73,780.09 $8,951,615 11-Feb-08 11-Nov-27
40 CarMax - Laurel fully $20,115,906 $157,803.26 $- 11-Feb-20
41 McGraw-Hill Headquarters hyper $19,926,904 $153,443.23 $16,277,056 11-Jan-13 11-Jan-28
42 The Classic hyper $19,874,655 $151,391.76 $17,974,828 11-Dec-07 11-Jan-28
43 Westin - G.C fully $19,832,535 $171,296.40 $866,437 11-Aug-17
44 Value City - 3080/3232 Alumn Creek Drive fully $18,243,666 $151,666.67 $- 11-Aug-17
45 Commerce Point hyper $18,185,684 $139,832.18 $16,462,469 11-Mar-08 11-Mar-28
46 Coach House hyper $17,693,848 $120,725.32 $13,710,694 11-Nov-12 11-Nov-27
47 Sterling Software Building hyper $17,421,811 $134,103.22 $14,218,937 11-Feb-13 11-Feb-28
48 Value City Corporate Office - Westerville fully $17,278,947 $140,072.58 $4 11-Aug-17
49 Stanford Park Hotel hyper $16,877,327 $137,783.64 $7,284,674 11-Nov-12 11-Nov-17
50 Waterside Towers Apartments hyper $16,554,564 $121,471.53 $14,750,051 11-Jun-08 11-Mar-28
51 Piercey/Westport on the River hyper $16,191,766 $118,995.91 $14,497,930 11-Jan-08 11-Jan-28
52 Burnham Pacific - Powell Portfolio hyper $6,991,784 $48,788.49 $6,178,764 11-Dec-07 11-Dec-27
52 Burnham Pacific - Powell Portfolio hyper $6,588,699 $45,975.77 $5,822,552 11-Dec-07 11-Dec-27
52 Burnham Pacific - Powell Portfolio hyper $2,521,675 $17,596.18 $2,228,450 11-Dec-07 11-Dec-27
53 Lynnwood Center hyper $15,963,572 $110,889.94 $12,466,824 11-Dec-12 11-Dec-27
54 SL-Hillside hyper $15,000,000 $105,396.22 $11,769,315 11-Mar-13 11-Mar-28
55 Ocean Breeze Villas hyper $14,974,523 $104,779.48 $13,179,831 11-Apr-08 11-Jan-28
56 Rosedale Commons hyper $14,703,603 $108,538.91 $13,143,687 11-Jan-08 11-Oct-27
57 3712-3758 Junction Blvd hyper $7,890,616 $53,624.27 $6,041,610 11-May-13 11-Feb-28
57 3712-3758 Junction Blvd hyper $6,592,160 $44,800.02 $5,047,422 11-May-13 11-Feb-28
58 Best Buy Pool balloon $14,355,277 $112,489.66 $4,606,906 11-Feb-18
59 Forest City Bruckner hyper $10,138,836 $77,958.88 $8,278,585 11-Apr-13 11-Apr-28
59 Forest City Bruckner hyper $3,995,370 $33,094.11 $519,149 11-Apr-13 11-May-16
60 Bosc Uptown Disctrict hyper $13,969,561 $99,235.63 $12,409,291 11-Dec-07 11-Dec-27
61 Sheraton Berkshire Inn - Reading hyper $13,900,983 $121,684.67 $11,871,837 11-Apr-08 11-Jan-23
62 CarMax - Irving, TX fully $13,321,982 $105,280.00 $0 11-Apr-20
63 JRK - Tampa/Orlando hyper $13,257,759 $90,278.83 $11,656,848 11-Nov-07 11-Nov-27
64 Eastland hyper $13,241,420 $90,586.90 $12,029,752 11-Dec-07 11-Dec-27
65 CarMax - Davie fully $13,036,279 $102,265.70 $1 11-Feb-20
66 1040 Grant Road Shopping Center hyper $13,022,192 $93,401.63 $11,542,085 11-Mar-08 11-Dec-27
67 CarMax - Houston fully $12,840,979 $100,733.63 $0 11-Feb-20
68 Huron Estates MHP hyper $12,809,107 $87,137.31 $11,259,527 11-Nov-07 11-Nov-27
69 Fox Chapel Shopping Center hyper $12,643,688 $87,516.98 $10,644,918 11-Jan-10 11-Oct-27
70 West Valley Business Park hyper $12,255,800 $94,373.36 $11,055,199 11-Apr-08 11-Jan-28
A-1
<PAGE>
ANNEX A: CHARACTERISTICS OF THE MORTGAGE NOTES IN THE POOL
BALLOON/
ANTICIPATED CUT-OFF ANTICIPATED
LOAN ADDITIONAL REMAINING REMAINING DATE REPAYMENT
# LOAN NAME RATE AMORTIZATION AMORTIZATION SEASONING TERM LOCKOUT DSCR LTV DATE LTV
- ----- --------- ---- ------------- ------------ ---------- ---- ------- ---- ---- --------
1 Fox Plaza 7.110%* 360 4 116 115 1.30 67% 59%
2 Bristol I 7.458%* 300 4 116 115 2.20 50% 41%
2 Bristol I 7.458%* 300 4 116 115 2.20 50% 41%
3 Park LaBrea 8.000%* 360 1 180 173 1.27 69% 55%
4 Burnham Pacific - Golden State 8.330%* 360 2 118 117 1.77 47% 42%
5 Cinemark 8.049% 240 0 240 239 1.00 100% 0%
6 Oxford Center 8.019%* 360 0 120 119 1.39 70% 62%
7 Springfield Mall 8.500%* 360 -1 181 180 1.18 75% 61%
8 Atlanta Marriott 7.400%* 300 1 143 142 1.82 57% 43%
9 FAC Realty II 9.100%* 360 0 180 176 1.48 56% 47%
10 University Mall 8.233%* 360 2 178 177 1.47 53% 43%
11 Forest City Atlantic 8.500%* 360 -1 181 177 1.19 72% 55%
11 Forest City Atlantic 7.350%* not level -1 181 177 1.40
12 Edgewater Hills 8.000%* 360 0 120 119 1.15 75% 67%
13 Hunter's Branch 8.500%* 360 3 181 174 1.20 71% 58%
14 HQ Plaza 8.694%* 336 3 177 176 1.64 55% 44%
15 Mall Del Norte 8.500%* 360 -1 181 180 1.44 65% 53%
16 Brandywine Square 8.575%* 360 14 117 116 1.17 74% 67%
17 Park Center Plaza 8.500%* 360 0 121 117 1.25 58% 53%
18 Hyundai Buildings 8.500%* 360 0 120 119 1.26 71% 64%
19 Saul Center Hotels 9.500%* 300 3 177 170 1.58 59% 42%
20 Crossings at Hobart 8.500%* 360 -1 181 180 1.38 73% 64%
21 Wilkow 7.230%* 360 2 118 117 1.48 68% 60%
22 Bayview Plaza - Guam 8.500%* 360 1 179 175 1.27 71% 58%
23 Innkeepers II 7.020%* 300 0 145 141 2.41 40% 31%
24 Laurel Office 8.500%* 360 3 177 173 1.20 73% 60%
25 Abilene & Sunset Malls 8.280%* 360 4 176 175 1.45 75% 61%
26 Morris Corp. Center 7.030%* 360 4 116 115 2.13 45% 39%
27 Colonial Park Mall 7.730%* 360 5 115 114 1.44 70% 63%
28 Hallwood - Executive Park 8.500%* 360 -1 121 117 1.33 59% 54%
29 Hudson Hotels II 8.380%* 300 4 116 115 1.62 53% 44%
30 Ocean Edge Resort 9.500%* 300 3 117 113 1.43 49% 42%
31 RIM Corporation 9.500%* 300 1 179 172 1.44 61% 44%
32 Brattle Square 8.500%* 360 0 120 119 1.22 65% 59%
33 Monterey Plaza Hotel 9.500%* 300 1 179 178 1.49 53% 38%
34 CAA - Headquarters 8.500%* 360 -1 121 120 1.28 71% 64%
35 Shelby Northpoint 8.500%* 360 3 177 173 1.41 72% 59%
36 Central Trust Tower 8.250%* 300 6 174 173 1.49 65% 44%
37 Oakton Gable Apartments 7.280%* 360 2 121 114 1.33 79% 69%
38 Potomac Promenade 8.500%* 360 0 180 176 1.20 76% 62%
39 Sunshadow/Summerbreeze 8.000%* 360 4 119 112 1.29 73% 65%
39 Sunshadow/Summerbreeze 8.000%* 360 4 119 112 1.29 73% 65%
40 CarMax - Laurel 7.640% 264 1 263 259 1.00 94% 0%
41 McGraw-Hill Headquarters 8.500%* 360 2 178 174 1.24 80% 65%
42 The Classic 8.383%* 360 2 117 117 1.32 70% 63%
43 Westin - G.C 8.250%* 232 -1 233 232 1.92 58% 3%
44 Value City - 3080/3232 Alumn Creek Drive 7.750% 239 6 233 232 1.00 99% 0%
45 Commerce Point 8.500%* 360 0 120 119 1.26 63% 57%
46 Coach House 7.220%* 360 4 176 169 1.36 78% 60%
47 Sterling Software Building 8.500%* 360 1 179 178 1.41 69% 56%
48 Value City Corporate Office - Westerville 7.410% 239 6 233 232 1.00 96% 0%
49 Stanford Park Hotel 7.580%* 240 4 176 175 1.74 56% 24%
50 Waterside Towers Apartments 8.000%* 360 0 123 116 1.59 64% 57%
51 Piercey/Westport on the River 8.000%* 360 2 118 117 1.28 74% 66%
52 Burnham Pacific - Powell Portfolio 7.452%* 358 1 117 113 1.70 52% 46%
52 Burnham Pacific - Powell Portfolio 7.452%* 358 1 117 113 1.70 52% 46%
52 Burnham Pacific - Powell Portfolio 7.452%* 358 1 117 113 1.70 52% 46%
53 Lynnwood Center 7.410%* 360 3 177 176 1.34 74% 58%
54 SL-Hillside 7.550%* 360 0 180 176 1.39 71% 56%
55 Ocean Breeze Villas 7.490%* 360 2 121 114 1.36 76% 67%
56 Rosedale Commons 8.030%* 360 5 118 111 1.37 72% 64%
57 3712-3758 Junction Blvd 7.200%* 360 1 182 175 1.44 50% 38%
57 3712-3758 Junction Blvd 7.200%* 360 1 182 175 1.44 50% 38%
58 Best Buy Pool 8.010% 288 1 239 238 1.01 100% 32%
59 Forest City Bruckner 8.500%* 360 -1 181 177 1.23 66% 41%
59 Forest City Bruckner 7.250%* not level -1 181 177 1.24
60 Bosc Uptown Disctrict 7.640%* 360 3 117 116 1.39 76% 67%
61 Sheraton Berkshire Inn - Reading 9.500%* 300 2 121 114 1.37 62% 53%
62 CarMax - Irving, TX 7.750% 264 -1 265 261 1.00 99% 0%
63 JRK - Tampa/Orlando 7.200%* 360 4 116 115 1.70 70% 62%
64 Eastland 7.260%* 360 3 117 113 1.33 78% 71%
65 CarMax - Davie 7.640% 264 1 263 259 1.00 94% 0%
66 1040 Grant Road Shopping Center 7.740%* 360 3 120 113 1.28 72% 64%
67 CarMax - Houston 7.640% 264 1 263 259 1.00 95% 0%
68 Huron Estates MHP 7.190%* 360 4 116 109 1.49 71% 63%
69 Fox Chapel Shopping Center 7.360%* 360 5 142 135 1.48 73% 62%
70 West Valley Business Park 8.500%* 360 2 121 114 1.15 73% 66%
A-2
<PAGE>
ANNEX A: CHARACTERISTICS OF THE MORTGAGE NOTES IN THE POOL
CUT-OFF BALLOON/ ANTICIPATED
LOAN LOAN DATE PRINCIPAL MONTHLY REPAYMENT DATE ANTICIPATED REPAYMENT MATURITY
# LOAN NAME TYPE BALANCE PAYMENT BALANCE DATE DATE
- ----- --------- ---- -------------- ------- ------------------- -------------------- ---------
71 Brendenwood Business hyper $11,979,423 $83,331.30 $10,594,620 11-Dec-07 11-Jan-28
72 Forest City Gun Hill Home Depot hyper $11,647,930 $89,562.50 $9,510,797 11-Apr-13 11-Apr-28
73 Abbotts Square hyper $11,581,018 $87,959.53 $10,451,789 11-Mar-08 11-Mar-28
74 1801 Century Park West hyper $11,300,000 $86,775.54 $7,599,122 11-Mar-09 11-Mar-19
75 After Six hyper $10,820,849 $83,202.97 $8,835,464 11-Apr-13 11-Apr-28
76 Bosc - The Terraces hyper $10,706,425 $82,473.66 $9,702,599 11-Dec-07 11-Dec-27
77 Middlesex Shopping Center hyper $10,482,696 $74,716.01 $9,270,924 11-Apr-08 11-Jan-28
78 The Reservoir hyper $10,200,000 $88,621.24 $7,297,474 11-Apr-13 11-Apr-23
79 Olympic Collection hyper $10,090,000 $76,014.05 $8,184,123 11-Jul-08 11-Apr-23
80 West Allis hyper $10,074,436 $77,605.33 $9,129,865 11-Dec-07 11-Dec-27
81 Pierson Portfolio hyper $7,757,533 $57,148.85 $6,167,057 11-Feb-13 11-Feb-28
81 Pierson Portfolio hyper $1,624,388 $11,642.70 $1,284,675 11-Feb-13 11-Feb-28
81 Pierson Portfolio hyper $326,873 $2,533.15 $218,199 11-Feb-13 11-Feb-23
81 Pierson Portfolio hyper $306,186 $2,314.84 $201,434 11-Feb-13 11-Feb-23
82 Suniland Shopping Center hyper $9,982,295 $68,082.03 $8,726,797 11-Apr-08 11-Jan-28
83 Levitz Plaza hyper $9,972,608 $72,958.62 $8,889,488 11-Feb-08 11-Nov-27
84 Worcester Fair hyper $9,966,282 $71,434.03 $8,842,306 11-Jan-08 11-Oct-27
85 Madison Circle/Normandy hyper $9,851,298 $75,829.70 $8,878,820 11-May-08 11-Feb-28
86 CarMax - Boynton Beach fully $9,520,878 $74,688.43 $3 11-Feb-20
87 Springhouse I hyper $9,484,069 $66,881.33 $8,404,536 11-Jan-08 11-Jan-28
88 Comfort Inn - BWI Airport hyper $9,471,873 $82,960.67 $6,721,814 11-Mar-13 11-Dec-22
89 TJ Maxx Ctr. hyper $9,331,286 $69,202.21 $8,551,019 11-Apr-13 11-Apr-28
90 Lake Point Apts hyper $9,271,724 $64,518.26 $7,247,622 11-Nov-12 11-Nov-27
91 Lancaster Mills hyper $8,978,655 $68,690.18 $7,327,934 11-Apr-08 11-Jan-23
92 Sunrise Mountain Plaza hyper $8,931,255 $68,773.38 $7,295,392 11-Jan-13 11-Jan-28
93 Colony Woods hyper $8,336,908 $61,173.28 $7,459,381 11-Mar-08 11-Mar-28
94 Automotive Products Industrial hyper $7,848,854 $60,416.03 $7,074,047 11-May-08 11-Feb-28
94 Automotive Products Industrial fully $446,200 $6,484.74 $2,918 11-Oct-05
95 Bank of Oklahoma hyper $8,189,087 $62,966.99 $7,413,117 11-Mar-08 11-Mar-28
96 Paradise Fountain Apartments hyper $7,990,584 $54,900.05 $6,993,659 11-May-08 11-Feb-28
97 Coastal Centre hyper $7,907,072 $60,818.69 $5,187,271 11-Jun-13 11-Mar-23
98 Loma Linda Health Center hyper $7,825,572 $59,353.34 $6,361,410 11-May-08 11-Feb-23
99 Winsome West Apartments hyper $7,735,898 $51,873.61 $6,732,472 11-Apr-08 11-Jan-28
100 Willows and Seville Oaks Apartments hyper $7,491,121 $51,112.36 $6,544,446 11-May-08 11-Feb-28
101 Gaslamp Theatres hyper $7,482,522 $57,886.22 $4,919,807 11-Apr-13 11-Jan-23
102 Kings Park Apartments hyper $7,439,019 $49,746.19 $6,145,816 11-Feb-08 11-Feb-25
103 Western Plaza Shopping Center hyper $7,150,100 $54,978.08 $5,802,517 11-Jun-13 11-Mar-28
104 Neighborhood /Northwest Plaza hyper $4,180,650 $30,630.99 $1,775,265 11-Dec-12 11-Dec-22
104 Neighborhood /Northwest Plaza hyper $2,929,637 $21,465.01 $1,244,038 11-Dec-12 11-Dec-22
105 Arrowhead Marketplace hyper $7,000,000 $46,995.05 $6,091,377 11-Jun-08 11-Mar-28
106 Bryan/Dairy/Sheehan Pool hyper $6,937,483 $53,420.71 $6,283,314 11-Jan-08 11-Jan-28
107 Sterling hyper $6,895,502 $53,117.41 $5,637,209 11-Dec-12 11-Dec-27
108 Hollywood Studio Club hyper $6,892,549 $53,282.77 $6,245,821 11-Jan-08 11-Jan-28
109 BRG - Andover hyper $6,883,835 $50,118.16 $6,180,266 11-Oct-07 11-Oct-27
110 Grays Ferry Shopping Center hyper $6,746,235 $51,872.71 $6,083,857 11-Jun-08 11-Mar-28
111 Maverick Records Bldg hyper $6,669,521 $51,282.85 $6,037,539 11-Mar-08 11-Mar-28
112 Hidden Harbor hyper $6,645,000 $44,522.18 $5,807,265 11-Apr-08 11-Apr-28
113 Del Mar Apartments hyper $6,584,176 $44,576.85 $5,040,246 11-Mar-13 11-Dec-27
114 Orangewood Place II hyper $6,577,805 $50,577.63 $4,724,628 11-Apr-08 11-Apr-28
115 Preston Trail Plaza hyper $6,542,297 $44,993.96 $5,727,563 11-May-08 11-Feb-28
116 Big V Shopping Center hyper $6,532,352 $50,282.37 $5,292,307 11-May-13 11-Feb-28
117 Dutchess Center hyper $6,476,695 $48,676.66 $5,519,854 11-Feb-08 11-Nov-24
118 River Run Apartments hyper $6,434,071 $42,912.01 $4,934,209 11-Dec-12 11-Dec-27
119 Cannon West Shopping Center hyper $6,392,339 $43,053.21 $5,565,250 11-May-08 11-Feb-28
120 Harwood Hills Apartments hyper $6,292,567 $43,105.37 $5,503,155 11-May-08 11-Feb-28
121 Virginia Beach Hilton Inn hyper $6,212,000 $47,575.45 $4,064,532 11-Jun-13 11-Mar-23
122 Bryan Woods Apartments hyper $6,089,234 $41,612.75 $5,334,487 11-Mar-08 11-Jan-28
123 Oakhurst Towers hyper $5,983,920 $42,291.99 $3,725,234 11-Apr-13 11-Jan-23
124 Holiday Inn/Comfort Inn Easton hyper $5,950,000 $44,552.15 $4,815,815 11-Jul-08 11-Apr-23
125 Del Rey Shores fully $5,939,289 $56,376.45 $105,446 11-Mar-12
126 Vista Gardens Apartments hyper $5,939,243 $39,985.90 $5,174,393 11-Apr-08 11-Jan-28
127 Sunbreeze Apartments hyper $5,931,446 $43,640.95 $5,294,888 11-Feb-08 11-Nov-27
128 Pebble Point hyper $5,870,107 $43,160.02 $5,259,425 11-Dec-07 11-Dec-27
129 Shottenstein East hyper $5,813,785 $44,702.98 $4,747,084 11-Apr-13 11-Apr-28
130 Value City - 2516 Sardis Rd. North fully $5,765,049 $47,927.08 $4,631,065 11-Aug-17
131 Leisure Lanes hyper $5,710,603 $43,909.60 $4,002,841 11-Jul-13 11-Apr-28
132 Best Western - Oregon Portfolio hyper $5,657,042 $49,492.10 $4,864,754 11-May-13 11-Feb-23
133 Greystone Apartments hyper $5,589,810 $37,482.87 $3,943,464 11-Apr-08 11-Jan-28
134 Hampton Inn-Richfield hyper $5,573,129 $48,757.97 $5,059,472 11-May-13 11-Feb-23
135 Waiakea Villas hyper $5,554,332 $43,421.29 $165,724 11-Aug-07 11-Aug-27
136 Auburn John R. Shopping Center fully $5,494,723 $46,938.41 $258,111 11-Jan-16
137 Circuit City - Columbus Morse Road fully $5,466,077 $42,897.97 $4,457,536 11-Feb-20
138 Timberwalk Apts hyper $5,416,510 $39,144.61 $4,800,224 11-Feb-08 11-Nov-23
139 Fine Arts Building and Annex hyper $5,391,472 $39,435.23 $4,694,691 11-Apr-08 11-Jan-28
140 Woods Edge hyper $5,347,200 $36,274.26 $4,694,691 11-Dec-07 11-Dec-27
141 Milpitas MHP hyper $5,340,297 $35,881.59 $4,106,317 11-Jan-13 11-Jan-28
142 Circuit City - Columbus fully $5,270,860 $41,365.90 $248,892 11-Feb-20
A-3
<PAGE>
ANNEX A: CHARACTERISTICS OF THE MORTGAGE NOTES IN THE POOL
BALLOON/
ANTICIPATED CUT-OFF ANTICIPATED
LOAN ADDITIONAL REMAINING REMAINING DATE REPAYMENT
# LOAN NAME RATE AMORTIZATION AMORTIZATION SEASONING TERM LOCKOUT DSCR LTV DATE LTV
- ----- --------- ---- ------------- ------------ ---------- ---- ------- ---- ---- --------
71 Brendenwood Business 7.430%* 360 2 117 116 1.26 75% 67%
72 Forest City Gun Hill Home Depot 8.500%* 360 -1 181 177 1.20 77% 63%
73 Abbotts Square 8.367%* 360 0 120 119 1.24 64% 58%
74 1801 Century Park West 7.155%* 252 0 132 131 1.22 75% 51%
75 After Six 8.500%* 360 -1 181 177 1.26 76% 62%
76 Bosc - The Terraces 8.500%* 360 3 117 116 1.44 65% 59%
77 Middlesex Shopping Center 7.680%* 360 2 121 114 1.44 59% 52%
78 The Reservoir 9.430%* 300 -1 181 180 1.37 68% 49%
79 Olympic Collection 7.720%* 300 -1 124 117 1.44 65% 53%
80 West Allis 8.500%* 360 3 117 116 1.39 69% 62%
81 Pierson Portfolio 8.010%* 360 5 179 178 1.32 84% 66%
81 Pierson Portfolio 7.743%* 360 3 179 178 1.32 84% 66%
81 Pierson Portfolio 8.030%* 300 5 179 178 1.32 84% 66%
81 Pierson Portfolio 7.743%* 300 3 179 178 1.32 84% 66%
82 Suniland Shopping Center 7.230%* 360 2 121 114 1.42 73% 64%
83 Levitz Plaza 7.940%* 360 4 119 112 1.39 74% 66%
84 Worcester Fair 7.720%* 360 5 118 111 1.38 72% 64%
85 Madison Circle/Normandy 8.500%* 360 1 122 115 1.26 64% 58%
86 CarMax - Boynton Beach 7.640% 264 1 263 259 1.00 94% 0%
87 Springhouse I 7.570%* 360 2 118 117 1.32 69% 61%
88 Comfort Inn - BWI Airport 9.500%* 300 3 180 173 1.35 62% 44%
89 TJ Maxx Ctr. 8.500%* 360 -1 181 180 1.26 76% 70%
90 Lake Point Apts 7.420%* 360 4 176 169 1.46 70% 54%
91 Lancaster Mills 7.870%* 300 2 121 114 2.01 60% 49%
92 Sunrise Mountain Plaza 8.500%* 360 2 178 177 1.29 73% 60%
93 Colony Woods 8.000%* 360 0 120 119 1.27 71% 63%
94 Automotive Products Industrial 8.500%* 360 1 122 115 1.17 72% 62%
94 Automotive Products Industrial 7.670%* 92 1 91 84 2.52
95 Bank of Oklahoma 8.500%* 360 0 120 119 1.31 64% 58%
96 Paradise Fountain Apartments 7.310%* 360 1 122 115 1.37 85% 74%
97 Coastal Centre 7.960%* 300 0 183 176 1.37 66% 44%
98 Loma Linda Health Center 7.780%* 300 1 122 115 1.31 73% 59%
99 Winsome West Apartments 7.060%* 360 2 121 114 1.46 75% 65%
100 Willows and Seville Oaks Apartments 7.240%* 360 1 122 115 1.44 73% 63%
101 Gaslamp Theatres 8.000%* 300 2 181 174 1.43 67% 44%
102 Kings Park Apartments 6.690%* 324 1 119 112 1.48 60% 49%
103 Western Plaza Shopping Center 8.500%* 360 0 183 176 1.22 71% 58%
104 Neighborhood /Northwest Plaza 7.340%* 300 240 3 177 170 1.37 72% 31%
104 Neighborhood /Northwest Plaza 7.340%* 300 240 3 177 170 1.37 72% 31%
105 Arrowhead Marketplace 7.090%* 360 0 123 116 1.70 60% 52%
106 Bryan/Dairy/Sheehan Pool 8.500%* 360 2 118 117 1.36 65% 59%
107 Sterling 8.500%* 360 3 177 173 1.61 67% 54%
108 Hollywood Studio Club 8.540%* 359 11 118 107 1.27 79% 71%
109 BRG - Andover 7.700%* 360 5 115 111 1.41 79% 71%
110 Grays Ferry Shopping Center 8.500%* 360 1 123 116 1.29 68% 61%
111 Maverick Records Bldg 8.500%* 360 0 120 119 1.24 56% 50%
112 Hidden Harbor 7.070%* 360 -1 121 114 1.39 75% 65%
113 Del Mar Apartments 7.150%* 360 3 180 173 1.66 61% 47%
114 Orangewood Place II 7.200%* 360 -1 121 120 1.46 66% 48%
115 Preston Trail Plaza 7.320%* 360 1 122 115 1.62 60% 53%
116 Big V Shopping Center 8.500%* 360 1 182 175 1.25 73% 59%
117 Dutchess Center 7.920%* 324 4 119 112 1.53 79% 67%
118 River Run Apartments 7.000%* 360 3 177 170 1.78 68% 52%
119 Cannon West Shopping Center 7.110%* 360 1 122 115 1.39 77% 67%
120 Harwood Hills Apartments 7.280%* 360 1 122 115 1.48 77% 68%
121 Virginia Beach Hilton Inn 7.910%* 300 0 183 176 1.93 44% 29%
122 Bryan Woods Apartments 7.250%* 360 2 120 113 1.37 77% 68%
123 Oakhurst Towers 6.970%* 300 2 181 174 2.25 40% 25%
124 Holiday Inn/Comfort Inn Easton 7.650%* 300 -1 124 117 1.69 74% 60%
125 Del Rey Shores 7.250%* 171 3 168 161 1.80 38% 1%
126 Vista Gardens Apartments 7.100%* 360 2 121 114 1.96 61% 53%
127 Sunbreeze Apartments 8.000%* 360 4 119 112 1.40 77% 68%
128 Pebble Point 8.000%* 360 3 117 110 1.20 75% 67%
129 Shottenstein East 8.500%* 360 -1 181 180 1.30 74% 60%
130 Value City - 2516 Sardis Rd. North 7.750% 239 6 233 232 1.00 92% 0%
131 Leisure Lanes 8.500%* 360 -1 184 177 1.29 70% 57%
132 Best Western - Oregon Portfolio 9.500%* 300 1 182 175 1.56 47% 33%
133 Greystone Apartments 7.060%* 360 2 121 114 1.37 69% 60%
134 Hampton Inn-Richfield 9.500%* 300 1 182 175 1.45 68% 48%
135 Waiakea Villas 8.640%* 360 7 113 106 1.22 74% 67%
136 Auburn John R. Shopping Center 7.590%* 216 2 214 207 1.14 74% 2%
137 Circuit City - Columbus Morse Road 7.640% 264 1 263 259 1.00 82% 0%
138 Timberwalk Apts 7.350%* 312 4 119 112 1.25 75% 62%
139 Fine Arts Building and Annex 7.950%* 360 2 121 114 1.33 75% 67%
140 Woods Edge 7.170%* 360 3 117 110 1.44 80% 70%
141 Milpitas MHP 7.080%* 360 2 178 171 2.02 53% 41%
142 Circuit City - Columbus 7.640% 264 1 263 259 1.00 94% 0%
A-4
<PAGE>
ANNEX A: CHARACTERISTICS OF THE MORTGAGE NOTES IN THE POOL
CUT-OFF BALLOON/ ANTICIPATED
LOAN LOAN DATE PRINCIPAL MONTHLY REPAYMENT DATE ANTICIPATED REPAYMENT MATURITY
# LOAN NAME TYPE BALANCE PAYMENT BALANCE DATE DATE
- ----- --------- ---- -------------- ------- ------------------- -------------------- ---------
143 8th Avenue Shops hyper $5,240,749 $35,849.87 $4,489,382 11-Apr-09 11-Jan-28
144 Port au Prince/Preston Place hyper $5,191,750 $37,652.99 $4,155,099 11-May-08 11-Feb-23
145 Strathmore House Apartments hyper $5,190,369 $34,421.29 $4,503,754 11-Apr-08 11-Jan-28
146 Meadowdale hyper $3,674,210 $26,884.46 $2,333,378 11-May-13 11-Feb-23
146 Meadowdale fully $1,499,481 $29,066.72 $5,182 11-May-03
147 Sevilla Apartments hyper $5,104,588 $35,694.66 $4,497,505 11-Feb-08 11-Nov-27
148 Value City - Melrose Park fully $5,085,869 $41,228.83 $0 11-Aug-17
149 Value City - Cincinnati fully $5,031,572 $40,788.67 $- 11-Aug-17
150 JRK - Langtry Village hyper $4,984,585 $34,448.61 $4,399,185 11-Nov-07 11-Nov-27
151 Pavilion Estates MHP hyper $4,983,930 $33,736.56 $4,375,452 11-Nov-07 11-Nov-27
152 Stoltz - Lear hyper $4,848,913 $33,649.66 $4,281,974 11-Dec-07 11-Dec-27
153 Abington II hyper $4,757,009 $34,975.95 $4,262,126 11-Dec-07 11-Dec-27
154 Value City - Parma fully $4,751,252 $38,516.25 $- 11-Aug-17
155 Bala Apartments hyper $4,628,919 $31,401.60 $4,043,401 11-Mar-08 11-Dec-27
156 Value City - Elyria fully $4,600,911 $37,297.50 $1 11-Aug-17
157 Northpointe Medical Building hyper $4,600,000 $32,277.46 $3,639,841 11-Jun-08 11-Mar-23
158 Circuit City - Oyster Bay fully $4,489,992 $35,237.62 $212,022 11-Feb-20
159 Sedgefield MHP hyper $4,485,680 $30,515.01 $3,943,025 11-Nov-07 11-Nov-27
160 Burpee Building hyper $4,444,864 $31,267.54 $3,934,230 11-Feb-08 11-Feb-28
161 Big Valley Industrial Park hyper $4,400,000 $32,658.85 $3,480,365 11-Jul-08 11-Apr-23
162 Longridge Mobile hyper $4,389,760 $30,165.12 $3,847,561 11-Mar-08 11-Dec-27
163 Value City - Warrensville fully $4,322,577 $35,041.17 $- 11-Aug-17
164 Circuit City - Spokane fully $4,296,602 $33,705.55 $2 11-Feb-20
165 Outer Banks Mall hyper $4,260,000 $30,928.93 $3,412,044 11-Jun-08 11-Mar-23
166 Stonegate Apartments hyper $4,192,942 $30,248.28 $3,726,926 11-Dec-07 11-Sep-27
167 Trails of Walnut Creek hyper $4,192,923 $29,482.13 $3,695,121 11-Apr-08 11-Jan-28
168 Citadel hyper $4,154,260 $31,977.12 $3,760,318 11-Feb-08 11-Feb-28
169 Route 70 Plaza hyper $4,141,404 $30,104.78 $3,700,094 11-Dec-07 11-Dec-27
170 Holiday Inn Express - Shreveport hyper $4,093,936 $32,052.95 $2,708,367 11-May-13 11-Feb-23
171 Village at Waterford Shopping Center hyper $4,070,269 $30,405.39 $1,752,461 11-Nov-12 11-Nov-22
172 Circuit City - Wallkill fully $4,050,754 $31,790.46 $191,279 11-Feb-20
173 Comfort Inn - West Hazleton hyper $4,025,000 $29,901.66 $2,584,994 11-Jun-13 11-Mar-23
174 Mercantile Place Office Bldg. hyper $3,985,920 $29,170.48 $2,550,970 11-Feb-13 11-Dec-22
175 Allentowne Apartments hyper $3,899,137 $28,128.74 $3,465,776 11-Dec-07 11-Sep-27
176 Jefferson Apartments hyper $3,838,457 $26,893.40 $3,383,668 11-Feb-08 11-Nov-27
177 Hunters Ridge 3 hyper $3,818,367 $26,379.23 $2,948,179 11-Apr-13 11-Jan-28
178 Villa del Sol MHP hyper $3,750,000 $26,349.05 $2,918,241 11-Jul-13 11-Apr-28
179 Bentwood Manor Apartments hyper $3,741,221 $26,288.58 $2,866,143 11-Mar-13 11-Jun-27
180 Villa Del Mar Apartments hyper $3,693,187 $27,615.26 $3,312,518 11-Dec-07 11-Sep-27
181 Compton Town Center hyper $3,667,246 $30,557.97 $- 11-Mar-13 11-Dec-17
182 Davidson Supply Co. hyper $3,600,000 $25,352.26 $2,877,295 11-Mar-08 11-Mar-23
183 Forest City Gunhill Sneaker Stadium hyper $3,598,440 $27,668.89 $2,938,207 11-Apr-13 11-Apr-28
184 Creekside Shopping Center hyper $3,591,462 $27,476.07 $2,931,174 11-Apr-08 11-Jan-23
185 Cedarwood Apts. hyper $3,540,283 $24,879.10 $3,015,436 11-Mar-08 11-Dec-25
186 Randle Hill Apartments hyper $3,534,573 $25,976.15 $2,806,881 11-Apr-13 11-Jan-28
187 Comfort Inn - Bethlehem hyper $3,500,000 $26,344.66 $2,265,914 11-Jun-13 11-Mar-23
188 Research Park hyper $3,500,000 $23,876.17 $3,020,862 11-Apr-08 11-Apr-28
189 Clearlake Crossing Apt hyper $3,492,375 $24,784.82 $3,086,937 11-Mar-08 11-Dec-27
190 Oak Park Apartments hyper $3,483,189 $27,759.80 $2,438,260 11-May-17 11-May-27
191 Redmond Inn fully $3,481,693 $28,906.19 $143,902 11-Dec-17
192 Gateway Village Shopping Center hyper $3,459,575 $25,448.48 $2,782,555 11-May-08 11-Feb-23
193 Malibu Plaza Office Building hyper $3,380,000 $23,425.50 $2,966,551 11-Jun-08 11-Mar-28
194 Bayberry Office Park, Phase II hyper $3,369,924 $25,892.49 $2,204,196 11-May-13 11-Feb-23
195 Chowan Crossing Shopping Center hyper $3,248,886 $24,197.24 $2,629,244 11-Mar-08 11-Dec-22
196 Mayfair Manor Apartments hyper $3,244,246 $22,126.66 $2,836,209 11-Apr-08 11-Jan-28
197 Fort Myers Beach RV Resort hyper $3,241,258 $23,915.35 $2,907,659 11-Nov-07 11-Nov-27
198 Parke on Covington Apartments hyper $3,237,096 $23,079.23 $2,714,725 11-Feb-08 11-Nov-24
199 Newport Apartments hyper $3,215,331 $22,527.59 $2,834,371 11-Feb-08 11-Nov-27
200 ABQC Industrial Building hyper $3,210,750 $23,311.05 $2,592,872 11-Apr-08 11-Apr-23
201 Comfort Suites - Dalton hyper $3,187,585 $25,875.18 $2,190,592 11-Nov-12 11-Nov-22
202 Weaverville Plaza hyper $3,184,519 $22,985.70 $2,551,374 11-Feb-08 11-Nov-22
203 Comfort Inn - Beckley fully $3,183,732 $26,885.70 $140,528 11-Dec-17
204 Circuit City - Covington fully $3,172,277 $24,896.14 $149,799 11-Feb-20
205 Snowmass Motel hyper $3,154,679 $27,562.33 $2,266,152 11-Mar-13 11-Mar-23
206 Leestown Distribution Center hyper $3,150,000 $23,313.66 $2,667,527 11-Jun-08 11-Mar-25
207 Cadillac Properties hyper $3,093,849 $23,340.72 $2,652,822 11-Jan-08 11-Jan-25
208 Deer Park Gardens hyper $3,093,012 $21,590.80 $2,401,038 11-Mar-13 11-Dec-27
209 Manhattan Portfolio hyper $3,052,830 $23,042.07 $2,327,227 11-Apr-08 11-Jan-21
210 Ramon Park MHP hyper $3,043,081 $24,245.20 $1,351,331 11-Jan-18 11-Jan-23
211 Sheridan Park/Holiday Manor Apartments hyper $3,030,000 $21,901.05 $2,422,113 11-Jul-08 11-Apr-23
212 Harvey Building hyper $3,018,758 $22,226.15 $2,553,123 11-Apr-08 11-Jan-25
213 Buckingham Place hyper $2,995,244 $21,742.22 $2,397,924 11-May-08 11-Feb-23
214 Richneck Shopping Center hyper $2,995,163 $21,356.72 $1,872,685 11-May-13 11-Feb-23
215 Chalet at the River hyper $2,988,956 $20,607.92 $2,310,032 11-Jan-13 11-Oct-27
216 Eckerds hyper $2,883,510 $22,833.13 $1,034,709 11-Mar-13 11-Oct-17
217 Westbrooke Apartments hyper $2,880,276 $20,206.91 $1,783,282 11-May-13 11-Feb-23
218 Registry Apartments hyper $2,871,365 $20,117.66 $2,531,160 11-Feb-08 11-Nov-27
A-5
<PAGE>
ANNEX A: CHARACTERISTICS OF THE MORTGAGE NOTES IN THE POOL
BALLOON/
ANTICIPATED CUT-OFF ANTICIPATED
LOAN ADDITIONAL REMAINING REMAINING DATE REPAYMENT
# LOAN NAME RATE AMORTIZATION AMORTIZATION SEASONING TERM LOCKOUT DSCR LTV DATE LTV
- ----- --------- ---- ------------- ------------ ---------- ---- ------- ---- ---- --------
143 8th Avenue Shops 7.260%* 360 2 133 126 1.45 79% 68%
144 Port au Prince/Preston Place 7.270%* 300 1 122 115 1.32 77% 61%
145 Strathmore House Apartments 6.950%* 360 2 121 114 1.85 58% 50%
146 Meadowdale 7.370%* 300 1 182 175 1.40 58% 26%
146 Meadowdale 7.230%* 63 1 62 55 1.05
147 Sevilla Apartments 7.470%* 360 4 119 112 1.35 80% 70%
148 Value City - Melrose Park 7.410% 239 6 233 232 1.00 96% 0%
149 Value City - Cincinnati 7.410% 239 6 233 232 1.00 96% 0%
150 JRK - Langtry Village 7.350%* 360 4 116 115 1.39 79% 70%
151 Pavilion Estates MHP 7.140%* 360 4 116 109 1.90 56% 49%
152 Stoltz - Lear 7.400%* 360 3 117 116 1.34 68% 60%
153 Abington II 8.000%* 360 3 117 110 1.31 76% 68%
154 Value City - Parma 7.410% 239 6 233 232 1.00 96% 0%
155 Bala Apartments 7.170%* 360 3 120 113 1.42 80% 70%
156 Value City - Elyria 7.410% 239 6 233 232 1.00 96% 0%
157 Northpointe Medical Building 6.920%* 300 0 123 116 1.35 78% 62%
158 Circuit City - Oyster Bay 7.640% 264 1 263 259 1.00 94% 0%
159 Sedgefield MHP 7.190%* 360 4 116 109 1.71 67% 59%
160 Burpee Building 7.550%* 360 1 119 118 1.33 74% 66%
161 Big Valley Industrial Park 7.550%* 300 -1 124 117 1.46 64% 50%
162 Longridge Mobile 7.300%* 360 3 120 113 1.34 76% 67%
163 Value City - Warrensville 7.410% 239 6 233 232 1.00 96% 0%
164 Circuit City - Spokane 7.640% 264 1 263 259 1.00 94% 0%
165 Outer Banks Mall 7.300%* 300 0 123 116 1.27 74% 59%
166 Stonegate Apartments 7.780%* 360 6 117 110 1.29 77% 68%
167 Trails of Walnut Creek 7.540%* 360 2 121 114 1.31 72% 63%
168 Citadel 8.500%* 360 1 119 118 1.86 55% 49%
169 Route 70 Plaza 7.880%* 360 3 117 116 1.42 75% 67%
170 Holiday Inn Express - Shreveport 8.150%* 300 1 182 175 1.46 66% 44%
171 Village at Waterford Shopping Center 7.540%* 300 240 4 176 169 1.40 78% 34%
172 Circuit City - Wallkill 7.640% 264 1 263 259 1.00 94% 0%
173 Comfort Inn - West Hazleton 7.560%* 300 0 183 176 1.75 64% 41%
174 Mercantile Place Office Bldg. 7.350%* 300 3 179 172 1.98 50% 32%
175 Allentowne Apartments 7.780%* 360 6 117 110 1.57 72% 64%
176 Jefferson Apartments 7.490%* 360 4 119 112 1.41 83% 73%
177 Hunters Ridge 3 7.360%* 360 2 181 174 1.52 69% 54%
178 Villa del Sol MHP 7.550%* 360 -1 184 177 1.37 78% 60%
179 Bentwood Manor Apartments 7.480%* 354 3 180 173 1.41 82% 62%
180 Villa Del Mar Apartments 8.160%* 360 6 117 110 1.42 69% 62%
181 Compton Town Center 7.830%* 240 180 3 180 173 2.46 29% 0%
182 Davidson Supply Co. 6.960%* 300 0 120 113 1.42 77% 61%
183 Forest City Gunhill Sneaker Stadium 8.500%* 360 -1 181 177 1.21 72% 59%
184 Creekside Shopping Center 7.870%* 300 2 121 114 1.32 68% 56%
185 Cedarwood Apts. 7.320%* 336 3 120 113 1.29 74% 63%
186 Randle Hill Apartments 8.000%* 360 2 181 174 1.39 74% 59%
187 Comfort Inn - Bethlehem 7.710%* 300 0 183 176 1.69 65% 42%
188 Research Park 7.250%* 360 -1 121 120 2.52 39% 34%
189 Clearlake Crossing Apt 7.630%* 360 3 120 113 1.54 70% 62%
190 Oak Park Apartments 8.840%* 360 10 230 223 1.30 70% 49%
191 Redmond Inn 7.830%* 240 3 237 230 2.18 44% 2%
192 Gateway Village Shopping Center 7.430%* 300 1 122 115 1.55 68% 55%
193 Malibu Plaza Office Building 7.410%* 360 0 123 116 1.47 64% 57%
194 Bayberry Office Park, Phase II 7.930%* 300 1 182 175 1.30 75% 49%
195 Chowan Crossing Shopping Center 7.550%* 300 3 120 113 1.44 71% 57%
196 Mayfair Manor Apartments 7.230%* 360 2 121 114 1.54 72% 63%
197 Fort Myers Beach RV Resort 8.030%* 360 4 116 109 1.42 81% 73%
198 Parke on Covington Apartments 7.340%* 324 4 119 112 1.48 75% 63%
199 Newport Apartments 7.490%* 360 4 119 112 1.53 77% 68%
200 ABQC Industrial Building 7.300%* 300 -1 121 114 1.48 68% 55%
201 Comfort Suites - Dalton 8.550%* 300 4 176 169 1.49 68% 47%
202 Weaverville Plaza 7.180%* 300 4 119 112 2.14 53% 43%
203 Comfort Inn - Beckley 8.060%* 240 3 237 230 1.59 57% 3%
204 Circuit City - Covington 7.640% 264 1 263 259 1.00 93% 0%
205 Snowmass Motel 9.500%* 300 0 180 179 1.53 49% 35%
206 Leestown Distribution Center 7.790%* 324 0 123 116 1.25 72% 61%
207 Cadillac Properties 7.980%* 324 2 118 111 1.42 80% 69%
208 Deer Park Gardens 7.460%* 360 3 180 173 1.45 61% 47%
209 Manhattan Portfolio 7.360%* 276 2 121 114 1.45 67% 51%
210 Ramon Park MHP 8.350%* 298 2 238 231 1.23 72% 32%
211 Sheridan Park/Holiday Manor Apartments 7.250%* 300 -1 124 117 1.44 69% 55%
212 Harvey Building 7.710%* 324 2 121 114 1.56 67% 57%
213 Buckingham Place 7.280%* 300 1 122 115 1.42 70% 56%
214 Richneck Shopping Center 7.080%* 300 1 182 175 1.36 79% 49%
215 Chalet at the River 7.320%* 360 5 178 171 1.95 53% 41%
216 Eckerds 7.200%* not level 3 180 173 1.02 95% 34%
217 Westbrooke Apartments 6.900%* 300 1 182 175 1.58 76% 47%
218 Registry Apartments 7.490%* 360 4 119 112 1.47 79% 69%
A-6
<PAGE>
ANNEX A: CHARACTERISTICS OF THE MORTGAGE NOTES IN THE POOL
CUT-OFF BALLOON/ ANTICIPATED
LOAN LOAN DATE PRINCIPAL MONTHLY REPAYMENT DATE ANTICIPATED REPAYMENT MATURITY
# LOAN NAME TYPE BALANCE PAYMENT BALANCE DATE DATE
- ----- --------- ---- -------------- ------- ------------------- -------------------- ---------
219 Value City - 1 Mall Rd. fully $2,856,838 $23,750.00 $1 11-Aug-17
220 Shaw's Plaza hyper $2,838,837 $20,758.80 $2,531,590 11-Jan-08 11-Oct-27
221 Western Way MHP hyper $2,792,798 $21,035.46 $2,518,004 11-Nov-07 11-Nov-27
222 JRK - The Landing hyper $2,791,538 $19,482.23 $2,469,795 11-Nov-07 11-Nov-27
223 Concord Square hyper $2,787,531 $21,057.38 $2,268,748 11-Feb-08 11-Nov-22
224 Diamond Bar Estates -MHP hyper $2,775,000 $19,460.24 $2,454,431 11-Mar-08 11-Mar-28
225 Value City - 3987 E. Main fully $2,759,992 $22,374.00 $1 11-Aug-17
226 Tech Center of Executive Hills hyper $2,735,000 $19,802.18 $2,428,381 11-Jun-08 11-Mar-28
227 The Arbors of Bastrop hyper $2,721,724 $18,239.43 $2,366,389 11-May-08 11-Feb-28
228 74 Leonard Street hyper $2,695,773 $19,829.99 $1,717,488 11-May-13 11-Feb-23
229 Olde English hyper $2,689,612 $19,495.72 $2,267,106 11-Feb-08 11-Nov-24
230 Watermark Press Building hyper $2,650,777 $21,143.50 $2,427,235 11-Jul-07 11-Jul-27
231 Harbor Terrace Apartments hyper $2,650,000 $17,205.47 $2,285,064 11-Jun-08 11-Mar-28
232 Ivy Club Apartments hyper $2,596,940 $17,842.52 $2,272,939 11-May-08 11-Feb-28
233 Parkside/Center Park/Maple hyper $2,596,877 $17,420.27 $2,258,448 11-May-08 11-Feb-28
234 Shipyard Apartments hyper $2,596,824 $17,088.84 $2,246,781 11-May-08 11-Feb-28
235 Holiday Cove Apartments hyper $2,590,731 $18,826.49 $2,078,765 11-Mar-08 11-Dec-22
236 Sleep Inn - Beaver fully $2,537,036 $21,424.54 $111,985 11-Dec-17
237 Orange Manor East hyper $2,536,054 $20,151.99 $2,322,635 11-Apr-07 11-Apr-27
238 Hunters Ridge 2 hyper $2,520,615 $17,396.55 $1,945,301 11-Apr-13 11-Jan-28
239 Tower Center hyper $2,500,000 $18,070.17 $1,999,213 11-Jun-08 11-Mar-23
240 83 Chambers Street hyper $2,497,293 $18,998.26 $2,009,781 11-Feb-08 11-Feb-23
241 Holiday Inn - Richmond hyper $2,484,463 $20,292.97 $1,145,992 11-Apr-08 11-Jan-18
242 Santiago Creekside Estates balloon $2,446,877 $20,074.09 $1,060,763 11-Dec-12
243 Village on the Lake hyper $2,416,684 $20,284.59 $2,060,051 11-May-07 11-May-22
244 Meadows of Bloomington hyper $2,400,000 $16,453.70 $1,846,651 11-Jul-13 11-Apr-28
245 Vernier Terrace Apartments hyper $2,391,579 $17,533.34 $1,924,879 11-Mar-08 11-Dec-22
246 Quality Inn Orlando Airport hyper $2,375,000 $20,503.20 $1,692,664 11-Apr-13 11-Apr-23
247 Bandywood Fashion Square hyper $2,374,557 $18,590.50 $1,953,396 11-Apr-08 11-Jan-23
248 Petco/ Hollywood Video hyper $2,368,188 $18,606.35 $1,954,977 11-Jan-08 11-Oct-22
249 Livonia Apartments hyper $2,367,215 $15,864.79 $2,072,903 11-Nov-07 11-Nov-27
250 Value City - Columbus South fully $2,303,108 $18,670.25 $2 11-Aug-17
251 Delmere Arms Apartments hyper $2,297,273 $15,643.28 $1,760,556 11-May-13 11-Feb-28
252 The Crossing Shopping Center hyper $2,294,567 $17,599.68 $1,874,375 11-Apr-08 11-Jan-23
253 Butterfield Trails hyper $2,294,042 $16,581.74 $1,970,079 11-Mar-08 11-Dec-25
254 Econolodge Motel-Northlake hyper $2,282,388 $19,941.15 $1,948,559 11-Jun-08 11-Mar-23
255 Dublin Village Plaza hyper $2,271,065 $17,913.69 $2,061,938 11-Mar-08 11-Dec-27
256 Lapeer Meadows hyper $2,250,000 $17,728.97 $943,792 11-Mar-13 11-Mar-18
257 Hampton Inn - Topeka hyper $2,235,000 $18,555.58 $942,478 11-Jul-13 11-Apr-18
258 Abington I hyper $2,208,581 $16,238.61 $1,978,818 11-Dec-07 11-Dec-27
259 Meyer Villas hyper $2,197,523 $15,943.89 $1,950,970 11-May-08 11-Feb-28
260 Bayberry Place Apartments hyper $2,196,142 $15,067.61 $1,922,954 11-Apr-08 11-Jan-28
261 Park Crest Apartments hyper $2,187,334 $14,452.65 $1,894,563 11-May-08 11-Feb-28
262 Comfort Inn - Galax/Hillsville hyper $2,129,506 $18,368.75 $927,654 11-Mar-13 11-Dec-17
263 Days Inn Alexandria hyper $2,100,000 $17,578.31 $892,867 11-Jun-13 11-Mar-18
264 Union Cross Shopping Center hyper $2,092,892 $15,861.90 $- 11-May-13 11-Feb-23
265 Grogan's Park hyper $2,091,499 $16,613.62 $1,731,637 11-Feb-08 11-Nov-22
266 Flamingo Village hyper $2,084,446 $15,467.01 $1,664,462 11-Feb-13 11-Nov-27
267 Maple Lawn III hyper $2,075,000 $14,366.88 $1,820,028 11-Jul-08 11-Apr-28
268 Highland Hills MHC hyper $2,057,571 $14,108.76 $1,809,331 11-Feb-08 11-Feb-28
269 Bellaire Square Apts. hyper $2,045,754 $14,871.04 $1,819,502 11-Mar-08 11-Dec-27
270 Oak Grove Apartments hyper $2,025,378 $14,069.16 $1,780,268 11-Mar-08 11-Dec-27
271 Our House Congregate Care Facility hyper $2,025,000 $15,136.22 $1,305,410 11-Jun-13 11-Mar-23
272 Champaign Tower Center hyper $2,020,000 $14,262.71 $1,781,707 11-Jun-08 11-Mar-28
273 Comfort Inn - Mansfield hyper $2,000,000 $14,857.97 $1,284,468 11-Jun-13 11-Mar-23
274 916-932 Carroll Street hyper $1,992,778 $14,378.92 $1,595,020 11-Mar-08 11-Dec-22
275 Ivy Hills Apartments hyper $1,982,835 $15,503.61 $1,634,700 11-Dec-07 11-Sep-22
276 The Lofts of Lively Oaks hyper $1,960,000 $13,673.41 $1,629,219 11-Jun-08 11-Mar-25
277 Center Place Apartments hyper $1,910,000 $13,978.35 $1,534,146 11-Jun-08 11-Mar-23
278 55 East Houston Street hyper $1,900,000 $13,806.86 $1,522,283 11-Jun-08 11-Mar-23
279 Dukas Building hyper $1,895,457 $14,426.17 $1,234,032 11-Apr-13 11-Jan-23
280 Corporate Center Apartments hyper $1,895,281 $14,077.93 $1,215,891 11-Apr-13 11-Jan-23
281 Value City - 1130 N. Coliseum Blvd. fully $1,855,752 $15,427.58 $2 11-Aug-17
282 Airborne Express hyper $1,793,674 $13,138.36 $1,443,208 11-Mar-08 11-Dec-22
283 Poplar Manor hyper $1,793,397 $12,825.56 $1,443,640 11-Dec-07 11-Dec-22
284 Ardenwood Retail Center hyper $1,769,279 $13,291.49 $1,433,497 11-May-08 11-Feb-23
285 Whittier Downs MHP balloon $1,750,000 $13,023.55 $1,425,487 11-Mar-08
286 Barkwood Apartments hyper $1,725,000 $11,697.42 $1,505,156 11-Jun-08 11-Mar-28
287 Caswell Plaza Retail Center hyper $1,650,000 $11,979.52 $1,321,052 11-Jul-08 11-Apr-23
288 Saint Charles hyper $1,647,814 $12,400.97 $1,401,755 11-May-08 11-Feb-25
289 Woodfield Office hyper $1,600,000 $11,369.78 $1,248,312 11-Jul-08 11-Apr-23
290 Holland House hyper $1,597,436 $11,462.03 $1,002,564 11-May-13 11-Feb-23
291 Quality Inn-Fairlane hyper $1,594,972 $14,726.54 $736,649 11-Apr-13 11-Jan-18
292 Hulen Hills Apts. hyper $1,560,000 $11,222.72 $1,309,387 11-Jun-08 11-Mar-25
293 Village Square Apartments hyper $1,545,000 $10,592.07 $1,351,580 11-Jul-08 11-Apr-28
294 Parkside MF hyper $1,497,374 $10,283.56 $1,311,452 11-Apr-08 11-Jan-28
295 Versaplex II hyper $1,432,625 $11,085.55 $1,176,560 11-Jan-08 11-Oct-22
A-7
<PAGE>
ANNEX A: CHARACTERISTICS OF THE MORTGAGE NOTES IN THE POOL
BALLOON/
ANTICIPATED CUT-OFF ANTICIPATED
LOAN ADDITIONAL REMAINING REMAINING DATE REPAYMENT
# LOAN NAME RATE AMORTIZATION AMORTIZATION SEASONING TERM LOCKOUT DSCR LTV DATE LTV
- ----- --------- ---- ------------- ------------ ---------- ---- ------- ---- ---- --------
219 Value City - 1 Mall Rd. 7.750% 239 6 233 232 1.00 99% 0%
220 Shaw's Plaza 7.930%* 360 5 118 111 1.33 71% 63%
221 Western Way MHP 8.250%* 360 4 116 109 1.30 78% 70%
222 JRK - The Landing 7.450%* 360 4 116 115 1.22 76% 68%
223 Concord Square 7.700%* 300 4 119 112 1.34 80% 65%
224 Diamond Bar Estates -MHP 7.530%* 360 0 120 113 1.48 78% 69%
225 Value City - 3987 E. Main 7.410% 239 6 233 232 1.00 96% 0%
226 Tech Center of Executive Hills 7.860%* 360 0 123 116 1.25 74% 65%
227 The Arbors of Bastrop 7.060%* 360 1 122 115 1.31 78% 68%
228 74 Leonard Street 7.430%* 300 1 182 175 1.43 64% 41%
229 Olde English 7.520%* 324 4 119 112 1.36 73% 61%
230 Watermark Press Building 8.860%* 360 8 112 105 1.21 72% 66%
231 Harbor Terrace Apartments 6.760%* 360 0 123 116 2.24 51% 44%
232 Ivy Club Apartments 7.310%* 360 1 122 115 1.89 65% 57%
233 Parkside/Center Park/Maple 7.070%* 360 1 122 115 1.43 80% 70%
234 Shipyard Apartments 6.880%* 360 1 122 115 1.40 79% 68%
235 Holiday Cove Apartments 7.270%* 300 3 120 113 1.28 74% 59%
236 Sleep Inn - Beaver 8.060%* 240 3 237 230 1.45 66% 3%
237 Orange Manor East 8.800%* 360 11 109 105 1.39 69% 63%
238 Hunters Ridge 2 7.350%* 360 2 181 174 1.31 66% 51%
239 Tower Center 7.250%* 300 0 123 116 1.82 53% 43%
240 83 Chambers Street 7.820% 300 1 119 115 1.32 71% 57%
241 Holiday Inn - Richmond 7.600%* 240 180 2 121 114 2.08 56% 26%
242 Santiago Creekside Estates 7.670%* 240 3 177 170 1.34 71% 31%
243 Village on the Lake 8.900%* 300 10 110 106 1.43 74% 63%
244 Meadows of Bloomington 7.300%* 360 -1 184 177 1.46 72% 55%
245 Vernier Terrace Apartments 7.370%* 300 3 120 113 1.43 75% 60%
246 Quality Inn Orlando Airport 9.350%* 300 -1 181 174 1.79 57% 40%
247 Bandywood Fashion Square 8.140%* 300 2 121 114 1.43 68% 56%
248 Petco/ Hollywood Video 8.150%* 300 5 118 111 1.29 72% 60%
249 Livonia Apartments 7.040%* 360 4 116 109 1.64 67% 59%
250 Value City - Columbus South 7.410% 239 6 233 232 1.00 96% 0%
251 Delmere Arms Apartments 7.220%* 360 1 182 175 1.42 79% 61%
252 The Crossing Shopping Center 7.900%* 300 2 121 114 1.26 67% 55%
253 Butterfield Trails 7.620%* 336 3 120 113 1.23 72% 62%
254 Econolodge Motel-Northlake 9.500%* 300 0 123 116 1.55 68% 58%
255 Dublin Village Plaza 8.760%* 360 3 120 113 1.33 73% 67%
256 Lapeer Meadows 7.210%* 240 0 180 173 1.76 55% 23%
257 Hampton Inn - Topeka 7.900%* 240 -1 184 177 1.42 62% 26%
258 Abington I 8.000%* 360 3 117 110 1.37 71% 64%
259 Meyer Villas 7.870%* 360 1 122 115 1.37 72% 64%
260 Bayberry Place Apartments 7.290%* 360 2 121 114 1.84 67% 58%
261 Park Crest Apartments 6.920%* 360 1 122 115 1.28 81% 70%
262 Comfort Inn - Galax/Hillsville 8.350%* 240 3 180 173 1.58 73% 32%
263 Days Inn Alexandria 8.010%* 240 0 183 176 1.62 66% 28%
264 Union Cross Shopping Center 7.750%* 300 180 1 182 175 1.60 65% 0%
265 Grogan's Park 8.290%* 300 4 119 112 1.50 70% 58%
266 Flamingo Village 8.090%* 360 4 179 172 1.34 72% 57%
267 Maple Lawn III 7.400%* 360 -1 124 117 1.31 75% 66%
268 Highland Hills MHC 7.290%* 360 1 119 112 1.27 73% 65%
269 Bellaire Square Apts. 7.880%* 360 3 120 113 1.37 76% 68%
270 Oak Grove Apartments 7.410%* 360 3 120 113 1.70 74% 65%
271 Our House Congregate Care Facility 7.630%* 300 0 183 176 1.82 52% 33%
272 Champaign Tower Center 7.600%* 360 0 123 116 1.32 78% 69%
273 Comfort Inn - Mansfield 7.560%* 300 0 183 176 1.67 57% 37%
274 916-932 Carroll Street 7.190%* 300 3 120 113 1.33 74% 59%
275 Ivy Hills Apartments 8.080%* 300 6 117 110 1.24 78% 64%
276 The Lofts of Lively Oaks 7.150%* 324 0 123 116 1.49 73% 60%
277 Center Place Apartments 7.390%* 300 0 123 116 1.49 50% 40%
278 55 East Houston Street 7.310%* 300 0 123 116 1.39 79% 63%
279 Dukas Building 7.810%* 300 2 181 174 1.25 68% 44%
280 Corporate Center Apartments 7.530%* 300 2 181 174 1.18 84% 54%
281 Value City - 1130 N. Coliseum Blvd. 7.750% 239 6 233 232 1.00 39% 0%
282 Airborne Express 7.360%* 300 3 120 113 1.66 49% 39%
283 Poplar Manor 7.090%* 300 3 117 110 2.18 45% 36%
284 Ardenwood Retail Center 7.670%* 300 1 122 115 1.41 62% 50%
285 Whittier Downs MHP 7.580%* 300 0 120 113 1.38 80% 65%
286 Barkwood Apartments 7.190%* 360 0 123 116 1.45 72% 63%
287 Caswell Plaza Retail Center 7.300%* 300 -1 124 117 1.24 74% 59%
288 Saint Charles 7.960%* 324 1 122 115 1.29 75% 64%
289 Woodfield Office 7.060%* 300 -1 124 117 1.65 59% 46%
290 Holland House 7.150%* 300 1 182 175 1.37 78% 49%
291 Quality Inn-Fairlane 9.320%* 240 2 181 174 1.56 48% 22%
292 Hulen Hills Apts. 7.480%* 324 0 123 116 1.38 80% 67%
293 Village Square Apartments 7.300%* 360 -1 124 117 1.37 75% 66%
294 Parkside MF 7.300%* 360 2 121 114 1.31 79% 69%
295 Versaplex II 7.970%* 300 5 118 111 1.20 75% 62%
A-8
<PAGE>
ANNEX A: CHARACTERSITICS OF THE MORTGAGE NOTES IN THE POOL
CUT-OFF BALLON/ ANTICIPATED
LOAN LOAN DATE PRINCIPAL MONTHLY REPAYMENT DATE ANTICIPATED REPAYMENT MATURITY
# LOAN NAME TYPE BALANCE PAYMENT BALANCE DATE DATE
- ----- --------- ---- -------------- ------- ------------------- -------------------- ---------
296 Sixth Street Industrial Park hyper $1,420,000 $10,549.16 $1,146,615 11-Jun-08 11-Mar-23
297 Ambassador Apartments - Lancaster hyper $1,409,704 $10,343.91 $1,119,752 11-Jun-13 11-Mar-28
298 Shoppes at Tappahannock hyper $1,408,000 $10,041.45 $1,099,775 11-Jul-08 11-Apr-23
299 Duskfire Professional Center hyper $1,407,809 $10,438.13 $1,135,438 11-May-08 11-Feb-23
300 East Jackson Shopping Center hyper $1,395,597 $10,851.84 $1,146,282 11-Mar-08 11-Dec-22
301 Greenway Allen hyper $1,395,280 $10,455.40 $1,092,159 11-Mar-09 11-Dec-22
302 Microtel Inn - Cornelius hyper $1,354,603 $11,331.69 $742,479 11-Mar-13 11-Dec-19
303 Evergreen Business Center hyper $1,350,000 $9,985.16 $554,994 11-Jul-13 11-Apr-23
304 Hampden and Logan Shopping Center hyper $1,350,000 $9,163.64 $1,178,265 11-Jun-08 11-Mar-28
305 Conklin Street hyper $1,346,951 $9,393.22 $1,045,141 11-Mar-13 11-Dec-27
306 Sunland North Apartments hyper $1,197,889 $8,202.40 $1,048,328 11-Apr-08 11-Jan-28
307 Hazelton Apartments hyper $1,196,529 $8,530.70 $1,059,538 11-Feb-08 11-Nov-27
308 Portland Warehouse fully $1,195,741 $10,652.21 $30,702 11-Feb-13
309 Andrews Place Apts hyper $1,150,000 $8,273.16 $965,253 11-Jun-08 11-Mar-25
310 Myrtle Street Apt hyper $1,122,636 $8,106.33 $996,763 11-Mar-08 11-Dec-27
311 Afton Place MHP hyper $1,118,086 $7,792.89 $987,879 11-Jan-08 11-Jan-28
312 Amirah Retail Shops hyper $1,100,000 $8,121.75 $886,299 11-Jun-08 11-Mar-23
313 216 West 16th Street hyper $1,100,000 $8,000.55 $881,600 11-Jun-08 11-Mar-23
314 Timberland Heights Apartments hyper $1,096,274 $8,193.41 $888,258 11-Mar-08 11-Dec-22
315 Belland Woods hyper $1,063,135 $7,301.33 $931,130 11-Apr-08 11-Jan-28
316 Meadowview Apartments hyper $1,018,387 $7,412.10 $644,675 11-May-13 11-Feb-23
317 Parkview House Apartments hyper $998,878 $7,281.95 $643,005 11-May-18 11-Feb-28
318 Bramor MHP hyper $997,995 $7,365.55 $895,006 11-Dec-07 11-Dec-27
319 Capitol City MHP hyper $997,560 $7,494.30 $815,798 11-Jan-08 11-Jan-23
320 Elm Street Garden Apartments hyper $960,000 $6,846.44 $763,755 11-Jul-08 11-Apr-23
321 43-19/23 165th Street hyper $926,384 $7,412.61 $630,634 11-Apr-08 11-Jan-18
322 87 East 3rd Street hyper $900,000 $6,545.91 $721,308 11-Jun-08 11-Mar-23
323 Scottwood Apartments hyper $847,452 $5,937.50 $747,044 11-Feb-08 11-Nov-27
324 Disston MHP hyper $648,116 $5,255.90 $445,161 11-Dec-12 11-Dec-22
A-9
<PAGE>
ANNEX A: CHARACTERISTICS OF THE MORTGAGE NOTES IN THE POOL
BALLOON/
ANTICIPATED CUT-OFF ANTICIPATED
LOAN ADDITIONAL REMAINING REMAINING DATE REPAYMENT
# LOAN NAME RATE AMORTIZATION AMORTIZATION SEASONING TERM LOCKOUT DSCR LTV DATE LTV
- ----- --------- ---- ------------- ------------ ---------- ---- ------- ---- ---- --------
296 Sixth Street Industrial Park 7.560%* 300 0 123 116 1.43 60% 49%
297 Ambassador Apartments - Lancaster 8.000%* 360 0 183 176 1.31 74% 59%
298 Shoppes at Tappahannock 7.100%* 300 -1 124 117 1.35 80% 62%
299 Duskfire Professional Center 7.520%* 300 1 122 115 1.39 74% 60%
300 East Jackson Shopping Center 8.050%* 300 3 120 113 1.34 66% 55%
301 Greenway Allen 7.620%* 300 3 132 125 1.23 65% 51%
302 Microtel Inn - Cornelius 8.420%* 264 3 180 173 1.51 54% 30%
303 Evergreen Business Center 7.510%* 300 240 -1 184 177 1.81 64% 26%
304 Hampden and Logan Shopping Center 7.200%* 360 0 123 116 1.75 64% 56%
305 Conklin Street 7.450%* 360 3 180 173 1.63 59% 45%
306 Sunland North Apartments 7.270%* 360 2 121 114 1.44 78% 68%
307 Hazelton Apartments 7.670%* 360 4 119 112 1.63 55% 49%
308 Portland Warehouse 6.850%* 180 1 179 175 1.84 64% 2%
309 Andrews Place Apts 7.480%* 324 0 123 116 1.44 77% 64%
310 Myrtle Street Apt 7.810%* 360 3 120 113 1.35 75% 66%
311 Afton Place MHP 7.450%* 360 2 118 111 1.31 78% 69%
312 Amirah Retail Shops 7.490%* 300 0 123 116 1.60 71% 57%
313 216 West 16th Street 7.320%* 300 0 123 116 1.43 73% 59%
314 Timberland Heights Apartments 7.590%* 300 3 120 113 1.34 80% 65%
315 Belland Woods 7.300%* 360 2 121 114 1.41 71% 62%
316 Meadowview Apartments 7.310%* 300 1 182 175 1.82 46% 29%
317 Parkview House Apartments 7.920%* 360 1 242 235 1.51 64% 41%
318 Bramor MHP 8.040%* 360 3 117 110 1.44 68% 61%
319 Capitol City MHP 7.660%* 300 2 118 111 1.83 77% 63%
320 Elm Street Garden Apartments 7.100%* 300 -1 124 117 1.47 74% 59%
321 43-19/23 165th Street 7.360%* 240 2 121 114 1.49 66% 45%
322 87 East 3rd Street 7.320%* 300 0 123 116 1.36 75% 60%
323 Scottwood Apartments 7.490%* 360 4 119 112 1.64 81% 71%
324 Disston MHP 8.550%* 300 3 177 170 1.29 74% 51%
A-10
</TABLE>
<PAGE>
ANNEX B
<TABLE>
<CAPTION>
LOAN ASSET
# # PROPERTY NAME ADDRESS CITY
- - ------------- ------- ----
<S> <C> <C> <C> <C>
1 1 Fox Plaza 2121 Avenue of the Stars Los Angeles
BRISTOL I
2 1 *New Orleans - French Quarter 124 Royal Street New Orleans
2 2 Holiday Inn - Atlanta Airport North 1380 Virginia Avenue East Point
2 3 Holiday Inn - Houston Intercontinental 15222 JFK Boulevard Houston
2 4 Harvey - Dallas Brookhollow 7050 Stemmons Freeway Dallas
2 5 Harvey Suites - Dallas DFW 4550 John Carpenter Freeway Irving
2 6 Holiday Inn Select - Atlanta Perimeter 4386 Chamblee/Dunwoody Road Atlanta
2 7 Harvey - Atlanta Powers Ferry 6345 Powers Ferry Road NW Atlanta
2 8 Harvey Suites - Houston Medical Center 6800 Main Street Houston
2 9 Holiday Inn Select Houston Greenway 2712 Southwest Freeway Houston
2 10 *Holiday Inn - Houston Medical Center 6701 South Main Street Houston
2 11 Holiday Inn - Santa Barbara 5650 Calle Real Goleta
2 12 Harvey - Jackson North 5075 I-55 North Jackson
2 13 Harvey - Jackson Downtown 200 E. Amite Street Jackson
2 14 Holiday Inn - Jonesboro 6288 Old Dixie Highway Jonesboro
2 15 Holiday Inn - Jackson Southwest 2649 US 80 West Jackson
3 1 Park LaBrea 6200 West Third Street Los Angeles
BURNHAM PACIFIC - GOLDEN STATE
4 1 Westminster Center 6633-6791 Westminister Blvd. Westminster
4 2 Gateway Plaza 39138 Paseo Padre Parkway Fremont
4 3 Southhampton 800-892 Southhampton Rd. Benicia
4 4 Prospector's Plaza 3964-3974 Missouri Flat Rd. Placerville
4 5 Santa Rosa Center 711 Stoney Point Road Santa Rosa
4 6 580 Marketplace 3735-4065 E. Castro Valley Blvd Castro
4 7 Silver Creek Plaza 1705-1845 E. Capital Expressway San Jose. CA
4 8 Shasta Crossroads 1330-1385 Churn Creek Rd Redding
4 9 Buena Vista Center 1157-1245 Huntington Dr. Duarte
4 10 Ralph's 1413-1415 Hawthorne Blvd. Redondo Beach
4 11 Menifee Center 30123 Antelope Rd. Menifee
4 12 Summer Hills 6425-6435 Antelope Rd. Citrus Heights
4 13 Creekside Center 3001 Alamo Dr. Vacaville
4 14 Hallmark Center 2330-2390 West Cleveland Ave. Madera
4 15 *Discovery Plaza 1500 West El Camino Ave. Sacramento CA
4 16 San Marcos Center 1903-1921 West San Marcos Blvd San Marcos
4 17 Sunset Center 100-106 Sunset Ave. Suisun City
4 18 Arcade Square 3319-3455 Watt Avenue Sacramento
4 19 Centerwood Plaza 16000 Lakewood Blvd Bellflower
CINEMARK
5 1 Cinemark - Houston 12920 NW Freeway Houston
5 2 Cinemark - El Paso 11855 Gateway Blvd. W. El Paso
5 3 Cinemark - Pflugerville 15320 FM 1825 Pflugerville
5 4 Cinemark - Pasadena 2102 E. Beltway 8 Pasadena
5 5 Cinemark - Beaumont 3855 Interstate 10 South Beaumont
5 6 Cinemark - Pueblo 4140 North Freeway Pueblo
5 7 Cinemark - Redding 980 Old Alturas Road Redding
5 8 Cinemark - McKinney 1701 S. Central Expwy. McKinney
5 9 Cinemark - Grand Prairie 220 E. Westchester Parkway Grand Prairie
5 10 Cinemark - Plano Westpark Village, 1818 Coit Road Plano
6 1 One Oxford Center 300 Grant Street Pittsburgh
7 1 Springfield Mall 6500 Sprinfield Mall Springfield
8 1 Atlanta Marriott 265 Peachtree Center Avenue Atlanta
FAC REALTY II
9 1 Smithfield 1025 Industrial Park Drive Smithfield
9 2 Branson 4562 Gretna Road Branson
9 3 Northridge SC 6196 Falls of the Neuse Road Raleigh
9 4 MacGregor Village SC 107 Edinburgh South Cary
9 5 Georgetown 401 Outlet Center Drive Georgetown
9 6 *Boaz 200 Lackey Street Boaz
9 7 Graceville 950 Prim Avenue Graceville
9 8 Story City 324 Factory Outlet Drive Story City
9 9 Sulphur Springs 614 Radio Road Sulphur Springs
9 10 Lebanon 2020 Industrial Drive Lebanon
9 11 Nebraska City 1001 Nebraska State Hwy. Nebraska City
10 1 University Mall 2200 East Fowler Avenue Tampa
11 1 *Atlantic 625 Atlantic Avenue Brooklyn
12 1 Edgewater Hills 1610-1640 Worcester Road Framingham
13 1 Hunter's Branch 9300 Lee Hwy. Vienna
HQ PLAZA
14 1 *HQ Plaza - Office/Retail Headquarters Plaza Morristown
14 2 *HQ - Plaza Hotel Headquarters Plaza Morristown
15 1 Mall Del Norte 5300 San Dario Laredo
16 1 Brandywine Square Business Route 30 & Quarry Road Downingtown
17 1 Park Center 150 Almaden Blvd San Jose
HYUNDAI BUILDINGS
18 1 3101 - 3103 North First Street 3101 - 3103 North First Street San Jose
18 2 2001 Fortune Drive 2001 Fortune Drive San Jose
SAUL CENTER HOTELS
19 1 Holiday Inn - Crystal City 1489 Jefferson Davis Hyway Arlington
19 2 Holiday Inn Select - Auburn Hill 1500 Opdyke Rd Auburn Hill
19 3 Hampton Inn - Dulles Airport 45440 Holiday Drive Sterling
19 4 Holiday Inn - Cincinnati 3855 Hauck Rd Cincinnati
19 5 Holiday Inn Express Herndon 485 Elden Street Herndon
19 6 Holiday Inn - Pueblo 4001 N. Elizabeth Street Pueblo
20 C Crossingst at Hobart 1825 E. 80th Ave. Merryville
WILKOW
21 1 Crossroads Shopping Center 1643-1655 West County Road B-2 Reseville
21 2 Parkway Shopping Center 2103-2109 Veteran's Parkway Bloomington
21 3 Louis Joliet Pointe Shopping Center 2700-2892 Plainfield Rd. Joliet
BAYVIEW PLAZA - GUAM
22 1 Phase III 1225-1275 Pale San Vitonas Road Tumon
22 2 DFS Gound Lease 1225-1275 Pale San Vitonas Road Tumon
22 3 Phase I 1225-1275 Pale San Vitonas Road Tumon
22 4 Phase II 1225-1275 Pale San Vitonas Road Tumon
INNKEEPERS III
23 1 Summerfield Suites - El Segunda 810 South Douglas Avenue El Segundo
23 2 Summerfield Suites - Addison 4900 Arapaho Road Addison
23 3 Summerfield Suites - Mt. Laurel 3000 Crawford Pl. Mt. Laurel
23 4 Holiday Inn Express - Lexington 440 Bedford St. Lexington
23 5 Hampton Inn - Schaumburg 1300 East Higgins Rd. Schaumburg
23 6 Hampton Inn - Albany 981 New Louden Rd. Cohoes
23 7 Hampton Inn - Lombard 222 East 22nd St. Lombard
23 8 Hampton Inn - Westchester 2222 Enterprise Drive Westchester
24 1 Laurel Office 37700 Six Mile Road Livonia
ABILENE & SUNSET MALLS
25 1 Abilene Mall 4310 Buffalo Gap Road Abilene
25 2 Sunset Mall 4000 Sunset Blvd. San Angelo
26 1 Morris Corp. Center One Upper Pond Road Parsippany
27 1 Colonial Park Mall Route 22 & Colonial Road Harrisburg
28 1 Hallwood - Executive Park 6 Executive Park Drive Atlanta
HUDSON HOTELS II
29 1 Hampton Inn - Greensboro 2004 Veasly Street Greensboro
29 2 Hampton Inn - Albuquerque 51101 Ellison Street NE Albuquerque
29 3 Hampton Inn - Roswell 9995 Old Dogwood Road Roswell
29 4 Hampton Inn - Greenville 246 Congaree Road Greenville
29 5 Hampton Inn - San Antonio 4803 Manitou Avenue San Antonio
29 6 Hampton Inn - Eden Prairie 7740 Flying Cloud Drive Eden Prairie
29 7 Hampton Inn - Amarillo 1700 I-40 East Amarillo
29 8 Hampton Inn - Spartanburg 6023 Alexander Road Spartanburg
29 9 Hampton Inn - Syracuse 6605 Old Collamer Road East Syracuse
30 1 Ocean Edge Resort 832 Villages Drive Brewster
RIM CORPORATION
31 1 Marriott Courtyard - Vacaville 120 Nut Tree Pway Vacaville
31 2 Best Western - W. Sacramento 1250 Halyard Drive W. Sacramento
31 3 *Best Western - Modesto 1720 Sisk Roiad Modesto
31 4 Holiday Inn - Auburn 120 Grass Valley Hwy. Auburn
31 5 Best Western Placerville 6850 Greeleaf Drive Placerville
31 6 Best Western - Sonora Oaks 19551 Hess Avenue Sonora Oaks
32 1 *Brattle Square One Brattle Street Cambridge
33 1 *Monterey Plaza Hotel 400 Cannery Row Monterey
34 1 CAA - Headquarters 9808/9830 Wilshire Los Angeles
35 1 Schostak Northville NWC of Hall & Schoenherr Roads Utica
36 1 Central Trust Tower 1 West 4th Street Cincinnati
37 1 Oakton Gable Apartments 3223 Arrowhead Crcl Fairfax
38 1 *Potomac Promenade 9812 Falls Road Potomac
SUNSHADOW/SUMMERBREEZE
39 1 Sunshadow Apartments 1450 Sunshadow Drive Casselberry
39 2 Summerbreeze Apartments 9997 Summerbreeze Drive Sunrise
40 1 CarMax - Laurel 8800 Freestate Drive Laurel
41 1 McGraw-Hill Headquarters 1333 Burr Ridge Rd. Burr Ridge
42 1 The Classic @ W. Palm Beach 6100 Common Circle West Palm Beach
43 1 *Westin Casuarina Resort Seven Mile Beach Grand Cayman
44 1 *Value City - 3080/3232 Alum Creek Drive 3080 Alum Creek Drive Columbus
45 1 Commerce Point 3800 & 3850 Wilke Road Arlington Heights
46 1 Coach House 23600 Lamplighter Lane Southfield
47 1 Sterling Software Building 1800 Alexander Bell Drive Reston
48 1 Value City Corporate Office - Westerville 3241-3251 Westerville Rd Westerville
49 1 *Stanford Park Hotel 100 El Camino Real Menlo Park
50 1 Waterside Towers Apartments 901-947 6th St. Washington DC
51 1 Piercey/Westport on the River 1703 South Jackson Ave Tulsa
BURNHAM PACIFIC - POWELL PORTFOLIO
52 1 Village East 2235-2421 Lancaster Dr Salem
52 2 Design Market 1-14-1044 16th Avenue NE Bellevue
52 3 Fairwood Square Petrovitski Rd Renton
53 1 Lynnwood Center 19611 Highway 99 Lynnwood
54 1 Parkway Business Center 600 N. Union Avenue Hillside
55 1 Ocean Breeze Villas 6401 Warner Ave Huntington Beach
56 1 Rosedale Commons 2480 Fairview Avenue North Roseville
57 1 3712-3758 Junction Blvd 3712-3758 Junction Blvd. Corona
BEST BUY POOL
58 1 Best Buy - City of Industry 17545 East Gale Avenue City of Industry
58 2 Best Buy - Beaver Creek 2907 Centre Drive Beaver Creek
59 1 *Bruckner White Plains & Story Bronx
60 1 Uptown District Retail Center 940 Universtity Ave. San Diego
61 1 Sheraton Berkshire Inn - Reading 1741 Paper Mill Road Reading
62 1 CarMax - Irving, TX 3100-3120 Spurr 482 Irving
JRK - TAMPA/ORLANDO
63 1 The Shoals Apartments 7950 Shoals Drive Orlando
63 2 Eagles Point Apartmenst 15501 Bruce B. Downs Blvd Tampa
64 1 Eastland Village Apartments 20600 Bafour Road Harper Woods
65 1 CarMax - Davie 7420 State Route 84 Davie
66 1 1040 Grant Road Shopping Center 1040 Grant Road Mountain View
67 1 CarMax - Houston 6909 SW Freeway Houston
68 1 Huron Estates 22000 Inkster Road Romulus
69 1 Fox Chapel Shopping Center 19703-19801 Frederick Road Germantown
70 1 West Valley Business Park 900 West Valley Road King of Prussia
71 1 The Brendenwood Retirement Center One Brendenwood Drive Voorhees
72 1 Gun Hill Home Depot Gun Hill Road Bronx
73 1 Abbotts Square 530 S. 2nd St. Philadelphia
74 1 *1801 Century Park West 1801 Century Park West Los Angeles
75 1 After Six 700 E. Hunting Park Ave. Philadelphia
76 1 The Terraces Western Avenue and Caddington Drive Rancho Palos Verdes
77 1 Middlesex Shopping Center Eastern Blvd. Baltimore
78 1 The Reservoir One Emily Way West Hartford
79 1 Olympic Collection 11301 Olympic Blvd. Los Angeles
80 1 1126 West Allis 1010-1126 South 70th Street West Allis
PIERSON PORTFOLIO
81 1 Pennrose Mall 1601 South Scales Street Reidsville
81 2 Cornerstone Plaza 1616 - 1644 W. Broadway Ave Maryville
81 3 Crestview 320 Highway 90 West Crestview
81 4 Rock Springs Ford 63 Center Street Rock Springs
81 5 Grocer Supply 1200 NE 33rd Street Ft. Worth
82 1 Suniland Shopping Center U.S. 1 & SW 112th Street Miami
83 1 Levitz Plaza 1401 Mineral Avenue Las Vegas
84 1 Worcester Fair Route 20 & Greenwood Street Worcester
MADISON CIRCLE/NORMANDY
85 1 Madison Circle Office Building 3191 Coral Way Miami
85 2 Normandy Supermarket 1020 Alton Road Miami
86 1 CarMax - Boynton Beach 2000 High Ridge Road Boynton Beach
87 1 Springhouse Village 1111 North Bethlehem Pike Springhouse
88 1 Comfort Inn - BWI Airport 6921 Baltimore Annapolis Blvd Baltimore
89 1 TJ Maxx Ctr. 4340 13th Ave. Fargo
90 1 Lake Point village Apartments 1646 Maple Ridge Way Traverse City
91 1 *Lancaster Mills 1-55 Green Street Clinton
92 1 Sunrise Mountain Plaza 5000 E. Bonanza Road; Suite B-2 Las Vegas
93 1 Colony Woods 1321 West 24th Street Lawrence
94 1 Automotive Products Industrial 4000 Pinnacle Court Auburn Hills
95 1 Bank of Oklahoma 201 Robert S. Kerr Oklahoma City
96 1 Paradise Fountain Apartments 2825 E. Marconi Ave. Phoenix
97 1 Coastal Centre US Highway 501 Conway
98 1 Loma Linda Health Center Mtn. View & Barton Loma Linda
99 1 Winsome West Apartments 5050-5055 South Duneville Avenue Las Vegas
WILLOWS AND SEVILLE OAKS APARTMENTS
100 1 Willows 220 S. Semoran Blvd. Winter Park
100 2 Seville Oaks Apts 3432 Semoran Blv Orlando
101 1 Gaslamp Theatres NWC 6th Ave. & G St. San Diego
102 1 Kings Park Apartments 1315 NASA Rd.1 Houston
103 1 Western Plaza Shopping Center 833 S. Western Ave. Los Angeles
NEIGHBORHOOD/NORTHWEST PLAZA
104 1 Northwest Plaza 2030 N. Saginw Rd. Midland
104 2 Neighborhood Shopping Center 2178 Munson Ave. Traverse City
105 1 Arrowhead Marketplace NWC Bell Rd. & 83rd Ave. Glendale
BRYAN/DAIRY/SHEEHAN POOL
106 1 The Bryan Dairy Building 8145 & 8155 Bryan Dairy Rd. Largo
106 2 Sheehan Corporate Center 4500 Park Glenn Road St. Louis Park
106 3 *Plaza Maya Building 615 First Street N.W. Albuquerque
107 1 Sterling Center 44501 - 44625 Schoenherr Road Sterling Heights
108 1 Hollywood Studio Club 1745 N. Wilcox Ave. Los Angeles
109 1 Andover Park Apartments 351 Andover Drive Valparaiso
110 1 Grays Ferry Shopping Center 2815 Grays Ferry Ave Philadelphia
111 1 Maverick Records Bldg 9348 Civic Center Dr. Beverly Hills
112 1 Hidden Harbor 1032 Hidden Harbour Drive Melbourne
113 1 Del Mar Apartments 2445 East Del Mar Boulevard Pasadena
114 1 Orange Place 3960 Orangewood Place Beachwood
115 1 Preston Trail Plaza 17370-17390 Preston Rd. Dallas
116 1 Big V Shopping Center 801 Miron Lane Ulster
117 1 Dutchess Center Route 44 Poughkeepsie
118 1 River Run Apartments 41929 Dowd Junction Avon
119 1 Cannon West Shopping Center 6800 Westgate Blvd. Autin
120 1 Harwood Hills Apartments 2452 Highway 121 Bedford
121 1 Virginia Beach Hilton Inn 8th & Atlantic Ave. Virginia Beach
122 1 Bryan Woods Apartments 915 Bryan Place Garner (Raleigh)
123 1 Oakhurst Towers 8030 East Girard Ave. Denver
HOLIDAY INN/COMFORT INN EASTON
124 1 Holiday Inn - Easton 8561 Ocean Gateway Easton
124 2 Comfor Inn - Easton 8523 Ocean Gateway Easton
125 1 *Del Rey Shores 4210 & 4269 Via Marina Marina Del Rey
126 1 Vista Gardens Apartments 6008 Vista Drive Falls Church
127 1 Sunbreeze Apartments 2395 Woodwind Trail Melbourne
128 1 Pebble Point Apartments 3030 Pebble Point Apartmetns Indianapolis
129 1 Shottenstein East 5999 E. Main St. Columbus
130 1 Value City - 2516 Sardis Rd. North 2516 Sardis Rd. North Charlotte
131 1 Leisure Lanes France Avenue & 71st Street Edina
BEST WESTERN - OREGON PORTFOLIO
132 1 Best Western - Ontario 251 Goodfellow Street Ontario
132 2 Comfort Inn - Klamath 2500 South 6th Street Klamath Falls
132 3 Best Western-Klamath 4061 South Sixth Street Klamath Falls
132 4 Super 8 - Ontario 266 Goodfellow Street Ontario
133 1 Greystone Apartments 2635 Karen Court Las Vegas
134 1 Hampton Inn-Richfield I-494 & Lyndale Ave. Richfield
135 1 Waiakea Villas 400 Hualani Street Hilo
136 1 Auburn John R Shopping Center 819-965 Auburn Road Rochester Hills
137 1 Circuit City - Columbus Morse Road 4056 Morse Road Columbus
138 1 Timberwalk Apartments 5635 Timber Creek Houston
139 1 Fine Arts Building and Annex 408-422 Michigan Avenue Chicago
140 1 Woods Edge Apartments 6401 Woods Edge North Drive Indianapolis
141 1 Milpitas MHP 120 Dixon Landing Rd. Milpitas
142 1 Circuit City - Columbus 2885 Gender Road Columbus
143 1 8th Avenue Shops 810-848 S. Alma School Road Mesa
PORT AU PRINCE/PRESTON PLACE
144 1 Preston Place 414 Preston Boulevard Bossier City
144 2 Port au Prince 400 Preston Boulevard Bossier City
145 1 Strathmore House Apartments 3004 Bel Pre Road Silver Spring
146 1 Meadowdale Shopping Center Hopkins Road & Chippenham Parkway Richmond
147 1 Sevilla Apartments 2801 Kennedy Blvd. Jersey City
148 1 Value City - Melrose Park 1101 W. North Avenue Melrose Park
149 1 Value City - Cincinnati 5245 Ridge Avenue Cincinnati
150 1 JRK - Langtry Village 1565 East Highway 81 New Braunfels
151 1 Pavilion Estates MHP 6830 E. Kilgore Avenue Kalamazoo
152 1 Stoltz - Lear 1720 Elkton Road Newark
153 1 Abington II 4656 Edwardian Circle Indianapolis
154 1 Value City - Parma 10701 Brookpark Road Parma
155 1 Bala Apartments 4920 City Line Ave. Philadelphia
156 1 Value City - Elyria 430 Oberlin Road Elyria
157 1 Northpointe Medical Building 27901 Woodward Ave Berkley
158 1 Circuit City - Oyster Bay 1000 S. Oyster Road Oyster Bay
159 1 Sedgefield MHP 102 Water Oak Lane Ashland
160 1 W. Atlee Burpee Facility 300 Park Avenue Warminster
161 1 Big Valley Industrial Park 3900 W. Valley Blvd. Pomona
162 1 Longridge Mobile 2960 Silver Creek Road Bullhead City
163 1 Value City - Warrensville 18525 Miles Road Warrensville Hts.
164 1 Circuit City - Spokane 7701 N. Division Street Spokane
165 1 Outer Banks Mall US 158 Bypass Nags Head
166 1 Stonegate Apartments 6506 Doolittle Ave. Riverside
167 1 Trails of Walnut Creek 1511 Metric Blvd. Austin
168 1 The Citadel Building 6301 Indian School Road, NE Alburquerque
ROUTE 70 PLAZA
169 1 Cross-Country Shopping Center 2110 Route 70 East Cherry Hill
169 2 Kinko's Plaza Shopping Center 1160 Route 70 East Cherry Hill
169 3 Greentree Plaza Shopping Center 1892 70 East Cherry Hill
170 1 Holiday Inn Express - Shreveport 5101 Westwood Park Shreveport
171 1 Village at Waterford Shopping Center Coalfield & Genito Roads Richmond
172 1 Circuit City - Wallkill 109 Dunning Road Wallkill
173 1 Comfort Inn - West Hazleton Rt. 93 & Kiwanis Blvd. West Hazleton
174 1 Mercantile Place Office Bldg. 1300 Mercantile Lane Largo
175 1 Allentowne Apartments 5202-5223 Morris Ave. Camp Springs
176 1 Jefferson House Apartments 6200 Gulfton Houston
177 1 Hunters Ridge 3 Hunters Ridge Road Pewaukee
178 1 Villa del Sol MHP 2205 W. Acacia Ave. Hemet
179 1 Bentwood Manor Apartments 5310,5400,5500 Berskire Sioux Falls
180 1 Villa Del Mar Apartments 201 Los Arbolitos Rd. Oceanside
181 1 Compton Town Center 100-290 E. Compton Blvd Compton
182 1 Davidson Supply Co. 14851 Sweitzer Ln Laurel
183 1 Forest City - Gun Hill Sneaker Stadium Gun Hill Road Bronx
184 1 Creekside Shopping Center 6029 Greenback Lane Citrus Heights
185 1 Cedarwood Apts. 527 Richmond Hill Rd, West Augusta
186 1 Randle Hill Apartments 3300 6th Street Washington
187 1 Comfort Inn - Bethlehem US 22 & PA Rt. 191 Bethlehem
188 1 *Research Park 410 & 420 Chipeta Way Salt Lake City
189 1 Clearlake Crossing Apt 535 W. Nasa Road One Webster
190 1 Oak Park Apartments 1219 SW 26th Street Corvallis
191 1 Redmond Inn 17601 Redmond Way Redmond
192 1 Gateway Village Shopping Center 2825-2975 Johnson Drive Ventura
193 1 Malibu Plaza Office Building 22917 Pacific Cst. Hwy. Malibu
194 1 Bayberry Office Park, Phase II 4485 Danube Dr. Dahlgren
195 1 Chowan Crossing Shopping Center N. Virginia Road Edenton
196 1 Mayfair Manor Apartments 770 S.E. 2nd Avenue Deerfield Beach
197 1 Fort Myers Beach RV Resort 16299 San Carlos Blvd Fort Myers Beach
198 1 Parke on Covington Apartments 3939 Covington Highway Decautor
199 1 Newport Apartments 6400 South Gessner Houston
200 1 ABQC Industrial Building 10001 S. Howell Ave. Milwaukee
201 1 Comfort Suites - Dalton 417 Holiday Drive Dalton
202 1 Weaverville Plaza 165 Weaver Boulevard Weaverville
203 1 Comfort Inn - Beckley 1909 Harper Road Beckley
204 1 Circuit City - Covington 790 North Highway 190 Covington
205 1 Snowmass Motel 115 Daly Lane Snowmass
206 1 Leestown Distribution Center 2025 Leestown Rd. Lexington
CADILLAC PROPERTIES
207 1 17 Hudson 2-28 Dugout/1-5Tiger/Barrett Hill Rd. Hudson
207 2 Charles & Cross 25-29 Cross Street Hudson
207 3 Watergate Apartments 58-62 Elm Street Epping
208 1 Deer Park Gardens Golden Avenue Deer Park
MANHATTAN PORTFOLIO
209 1 349-351 West 46th Street 349-351 West 46th Street New York
209 2 1626 2nd Avenue 1626 2nd Avenue New York
209 3 225 East 83rd Street 225 East 83rd Street New York
210 1 *Ramon Park MHP 1441 East Ramon Road Palm Springs
211 1 Sheridan Park/Holiday Manor Apartments 15 Reed Rd./295 Hamilton Street Geneva
212 1 Harvey Building 224 Datura Street West Palm Beach
213 1 Buckingham Place 101 Doncastle Ct. Concord
214 1 Richneck Shopping Center 66 Richneck Dr. Newport News
215 1 Chalet at the River 823 North 2nd Street Milwaukee
216 1 Eckerds 5325 Memorial Drive Atlanta
217 1 Westbrooke Apartments 3200-3305 Westbrooke Lane Sioux Falls
218 1 Registry Apartments 6111 Winsome Houston
219 1 *Value City - 1 Mall Rd. 1 Mall Rd. Barboursville
220 1 Shaw's Plaza 356 Daniel Webster Hwy Merrimack
221 1 Western Way MHP 3100 South Kinney Rd. Tucson
222 1 The Landing apartments 3200 Finfeather Drive Bryan
223 1 Concord Square 3315 Concord Road Smyrna
224 1 *Diamond Bar 2127 Washington St Walnut
225 1 Value City - 3987 E. Main 3987 E. Main Columbus
226 1 Tech Center of Executive Hills 8100-8301 NW 101st Terrace Kansas City
227 1 The Arbors of Bastrop 202 Childers Drive Bastrop
228 1 74 Leonard Street 74 Leonard Street New York
229 1 Olde English 451-463 Winnacunnet Road Hampton
230 1 Watermark Press Building 3600 Crondall Lane Owings Mills
231 1 Harbor Terrace Apartments 1314 Harbor Boulevard Santa Ana
232 1 Ivy Club Apartments 10060 Old Katy Rd. Houston
PARKSIDE/CENTER PARK/MAPLE
233 1 Parkside Villa 5245-5259 Hauserman Parma
233 2 Center Park Apts 216 Center RD. Bedford
233 3 Maple Heights Apts 5201-5215 Warensville Center Rd. Maple Height
234 1 Shipyard Apartments 2639 Boston St. Baltimore
235 1 Holiday Cove Apartments 455 Holiday Circle Forsyth
236 1 Sleep Inn - Beaver 1124 Airport Road Beaver
237 1 Orange Manor East MHP 206 Orange Manor Dr Winter Haven
238 1 Hunters Ridge 2 Hunters Ridge Road Pewaukee
239 1 Tower Center 1690-96 Arden Way Sacremento
240 1 83 Chambers Street 83 Chambers Street New York
241 1 Holiday Inn - Richmond 5501 National Rd. East Richmond
242 1 *Santiago Creekside Estates 1925 E. Laveta Orange
243 1 Village on the Lake 9200 N MacArthur Bl Oklahoma City
244 1 Meadows of Bloomington 712 Meadows of Bloomington Bloomington
245 1 Vernier Terrace Apartments 891-1001 Vernier Road Gross Pointe Woods
246 1 Quality Inn Orlando Airport 2601 McCoy Road Orlando
247 1 Bandywood Fashion Square 2154-2184 Bandywood Drive Nashville
248 1 Petco/Hollywood Video 10 North Sullivan Road Veradale
249 1 Livonia Apartments 9040-29200 Dardanella Avenue Livonia
250 1 Value City - Columbus South 1887 Parsons Avenue Columbus
251 1 Delmere Arms Apartments 23629 Delmere Dr. North Olmstead
252 1 The Crossing Shopping Center 102-198 Garrett Morris Parkway Mineral Wells
253 1 Butterfield Trails 221 Butterfield Road North Aurora
254 1 Econolodge - Northlake 2080 N. Mannheim Rd Northlake
255 1 Dublin Village Plaza PA Route 313 Dublin
256 1 Lapeer Meadows 1265 Farnsworth Rd Lapeer Meadows
257 1 Hampton Inn Topeka 1401 SW Ashworth Place Topeka
258 1 Abington I 4656 Edwardian Circle Indianapolis
259 1 Meyer Villas 1025 N. Tippecanoe Avenue San Bernadino
260 1 Bayberry Place Apartments 3625 South Lakewood Tulsa
261 1 Park Crest Apartments 1700 South West Ave Jackson
262 1 Comfort Inn - Galax/Hillsville 99 Farmers Market Drive Hillsville
263 1 Days Inn Alexandria 6100 Richmond Highway Alexandria
264 1 Union Cross Shopping Center Union Cross Rd. @ I-40 Kemersville
265 1 Grogan's Park 25125 Grogan Mill Road The Woodlands
266 1 Flamingo Village 130 Diamond Drive Pasco
267 1 Maple Lawn III 232-234 E. Maple Dr. Troy
268 1 Highland Hills MHC 2425 Douglas Avenue Kalamazoo
269 1 Bellaire Square Apts. 5800 Bellaire Houston
270 1 Oak Grove Apartments 4701 Walden Circle Orlando
271 1 Our House Congregate Care Facility 27633 Basset Rd. Westlake
272 1 Champaign Tower Center 2022 N. Prospect Champaign
273 1 Comfort Inn - Mansfield 300 Gateway Dr. Mansfield
274 1 916-932 Carroll Street 916-932 Carroll Street Brooklyn
275 1 Ivy Hills Apartments Winton & Kings Run Roads Cincinnati
276 1 The Lofts of Lively Oaks 1455 Holly Heights Dr. #51 Ft. Lauderdale
277 1 Center Place Apartments 3120 Pasedena Blvd. Pasadena
278 1 55 East Houston Street 55 E. Houston St. New York
279 1 Dukas Building 527 Maple Avenue East Vienna
280 1 Corporate Center Apartments 7601-7621 Cherrywood Dr. Lincoln
281 1 Value City - 1130 N. Coliseum Blvd. 1130 N. Coliseum Blvd. Ft. Wayne
282 1 Airborne Express RIDC Park West North Fayette Twp
283 1 Poplar Manor 1440 NE 223 Street Wood Village
284 1 Ardenwood Retail Center 34743 Ardenwood Blvd. Fremont
285 1 Whittier Downs Mhp 11730 Whittier Blvd Whittier
286 1 Barkwood Apartments 1005 W. Stassney Ln. Austin
287 1 Caswell Plaza Retail Center 7207-7235 Easex Freeway Beaumont
288 1 Saint Charles 207 E. Capital Ave. Pierre
289 1 Woodfield Office 29500-29556 Southfield Southfield
HOLLAND HOUSE
290 1 Holland House 4222 Holland Ave. Dallas
290 2 Little Turtle 4300 Holland Ave. Dallas
290 3 Holland Park 4326 Holland Ave. Dallas
291 1 *Quality Inn - Fairlane 2143 Michigan Avenue Dearborn
292 1 Hulen Hills Apts. 4720 Wellesley Ave. Ft. Worth
293 1 Village Square Apartments 2890 S. 9th Street Kalamazoo
294 1 Parkside Apartments 750 99th Avenue Coon Rapids
295 1 Versaplex II 24000 Mercantile Road Beachwood
296 1 Sixth Street Industrial Park 10002-10094 6th St Rancho Cucamonga
297 1 Ambassador Apts. 420-28 Euclid Ave. Lancaster
298 1 Shoppes at Tappahannock US Rt. 17/360 Tappahannock
299 1 Duskfire Professional Center Elliot Rd. & Mill Ave. Tempe
300 1 East Jackson Shopping Center Michigan Ave & Deittman Rd. Jackson
301 1 Greenway Allen McDermott Drive Allen
302 1 Microtel Inn - Cornelius 20820 Torrence Chapel Road Cornelius
303 1 Evergreen Business Center 5702 Industrial Ln Frederick
304 1 Hampden and Logan Shopping Center 3531 S. Logan St. Englewood
305 1 Comklin Street Apartments Conklin St Farmingdale
306 1 Sunland North Apartments 4740 East Broadway Road Mesa
307 1 Hazelton Apartments 4328 7th Avenue NE Seattle
308 1 Portland Warehouse L.P. 209 Kirby Rd. Portland
309 1 Andrews Place Apts. 415 West 39th Austin
310 1 Myrtle Street Apt 921 Myrtle Street Atlanta
311 1 Afton Place MHP 6206 Wade Road Baytown
312 1 Amirah Retail Shops 7229-7233 E. Main Street Phoenix
313 1 216 West 16th Street 216 West 16th Street New York
314 1 Timberland Heights Apartments 8317 Bass Lake & 5600 Xylon Ave. New Hope
315 1 Belland Woods 581 Belland Avenue Vadnais Heights
316 1 Meadowview Apartments Meadowview Dr. Central Square
317 1 Parkview House Apartments 2900 NE 17th Avenue Pompano Beach
318 1 Bramor MHP 3500 McKinney Street Baytown
319 1 Capitol City MHP 4501 W. Ketucky Ave Denver
320 1 Elm Street Garden Apartments 365-377 Elm Street Gardner
321 1 Flushing Portfolio 43-19/23 165th Street Flushing
322 1 87 E. 3rd Street 87 E. 3rd St. New York
323 1 Scottwood Apartments 5704 Edgemoor Houston
324 1 Disston MHP 4001 49th Street N. St. Petersburg
<PAGE>
<CAPTION>
YEAR UNIT ORIGINAL CUT-OFF DATE
STATE ZIP PROPERTY TYPE BUILT/RENOVATED UNITS TYPE LOAN BALANCE PRINCIPAL BALANCE
----- --- ------------- --------------- ----- ---- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
CA 90067 Office 1987 710,767 sf $ 178,000,000 $ 177,424,525
LA 70130 Hotel-Full Service 1969/1998 276 rooms 24,982,000 24,866,359
GA 30344 Hotel-Full Service 1966/1996 493 rooms 17,853,000 17,770,359
TX 77032 Hotel-Full Service 1985/1996 413 rooms 13,541,000 13,478,319
TX 75247 Hotel-Full Service 1981/1995 354 rooms 13,274,000 13,212,555
TX 75063 Hotel-Full Service 1989/1995 164 rooms 11,139,000 11,087,438
GA 30341 Hotel-Full Service 1985/1995 250 rooms 11,079,000 11,027,716
GA 30339 Hotel-Full Service 1982/1995 296 rooms 10,806,000 10,755,979
TX 77030 Hotel-Full Service 1981/1993 285 rooms 8,534,000 8,494,496
TX 77098 Hotel-Full Service 1984/1995 355 rooms 7,184,000 7,150,745
TX 77030 Hotel-Full Service 1985/1996 297 rooms 6,429,000 6,399,240
CA 93117 Hotel-Full Service 1969/1996 160 rooms 5,727,000 5,700,490
MS 39206 Hotel-Full Service 1957/1995 224 rooms 5,626,000 5,599,957
MS 39201 Hotel-Full Service 1975/1995 354 rooms 5,210,000 5,185,883
GA 30236 Hotel-Full Service 1972/1997 180 rooms 2,968,000 2,954,261
MS 39204 Hotel-Full Service 1966/1996 289 rooms 648,000 645,000
--- ------- -------
4,390 145,000,000 144,328,799
CA 90036 Multifamily 1944/1995 4,222 units 142,781,905 140,613,989
CA 92683 Retail-Anchored 1991 365,699 sf 25,660,534 25,622,336
CA 94538 Retail-Anchored 1966/1993 195,092 sf 13,854,880 13,834,256
CA 94510 Retail-Anchored 1983/1985 162,390 sf 10,323,249 10,307,882
CA 95667 Retail-Anchored 1982 219,112 sf 9,388,297 9,374,322
CA 95401 Retail-Anchored 1985 198,528 sf 8,727,302 8,714,311
CA 94552 Retail-Anchored 1990 101,153 sf 8,266,254 8,253,949
CA 85121 Retail-Anchored 1981 134,018 sf 7,798,989 7,787,380
CA 96003 Retail-Anchored 1989 121,376 sf 6,400,648 6,391,120
CA 91010 Retail-Anchored 1990 90,995 sf 6,181,601 6,172,399
CA 90278 Retail-Anchored 1960 66,700 sf 5,675,068 5,666,620
CA 92584 Retail-Anchored 1992 79,128 sf 5,314,081 5,306,171
CA 95610 Retail-Anchored 1978 133,614 sf 4,567,005 4,560,206
CA 95687 Retail-Anchored 1984/1990 116,215 sf 4,048,653 4,042,626
CA 93637 Retail-Anchored 1992 85,066 sf 3,793,815 3,788,167
CA 95815 Retail-Anchored 1980 93,398 sf 3,598,115 3,592,758
CA 92064 Retail-Anchored 1991 36,151 sf 3,526,603 3,521,353
CA 94585 Retail-Anchored 1981/1988 85,268 sf 3,169,791 3,165,073
CA 95821 Retail-Anchored 1956/1990 76,701 sf 2,922,136 2,917,786
CA 90706 Retail-Anchored 1962/1996 63,144 sf 1,822,932 1,820,218
------ --------- ---------
2,423,748 135,039,951 134,838,933
TX 77040 Retail-Anchored 1996 100,656 sf 17,999,571 17,999,571
TX 79936 Retail-Anchored 1997 109,030 sf 15,799,670 15,799,670
TX 78660 Retail-Anchored 1997 103,250 sf 14,099,714 14,099,714
TX 77503 Retail-Anchored 1994/1997 77,324 sf 12,099,695 12,099,695
TX 77705 Retail-Anchored 1997 63,352 sf 11,299,688 11,299,688
CO 81008 Retail-Anchored 1997 55,231 sf 8,699,783 8,699,783
CA 96003 Retail-Anchored 1995 39,599 sf 8,099,777 8,099,777
TX 75069 Retail-Anchored 1994/1995 56,088 sf 6,799,825 6,799,825
TX 75052 Retail-Anchored 1990/1992 53,880 sf 6,499,881 6,499,881
TX 75075 Retail-Anchored 1994 34,046 sf 3,899,857 3,899,857
------ --------- ---------
692,456 105,297,461 105,297,461
PA 15219 Office 1982 1,008,222 sf 99,464,749 99,464,749
VA 22150 Retail-Mall 1973/1986/1991 1,418,944 sf 91,105,178 91,105,178
GA 30343 Hotel-Full Service 1985/1997 1,671 rooms 82,000,000 81,871,306
NC 27577 Retail-Factory Outlet 1988/1996/1996 354,556 sf 21,692,468 21,692,468
MO 65616 Retail-Factory Outlet 1995/1996 271,618 sf 10,091,120 10,091,120
NC 27609 Retail-Anchored 1980/1988 161,440 sf 8,876,090 8,876,090
NC 27511 Retail-Anchored 1996 145,013 sf 7,266,934 7,266,934
KY 40324 Retail-Factory Outlet 1991/1994 167,433 sf 6,993,844 6,993,844
AL 35957 Retail-Factory Outlet 1960/1982 101,701 sf 2,951,465 2,951,465
FL 32440 Retail-Factory Outlet 1970/1986 83,963 sf 2,078,990 2,078,990
IA 50248 Retail-Factory Outlet 1989/1996/1996 100,540 sf 2,028,509 2,028,509
TX 75482 Retail-Factory Outlet 1963/1986 84,918 sf 1,810,071 1,810,071
MO 65536 Retail-Factory Outlet 1987 86,714 sf 1,747,794 1,747,794
NE 68410 Retail-Factory Outlet 1989/1996/1996 80,388 sf 1,637,365 1,637,365
------ --------- ---------
1,638,284 67,174,650 67,174,650
FL 33612 Retail-Mall 1973/1996 657,361 sf 64,898,546 64,800,478
NY 11217 Retail-Anchored 1996 393,773 sf 63,149,069 63,149,069
MA 01702 Multifamily 1974 1,020 units 55,988,456 55,988,456
VA 22031 Office 1987 402,302 sf 55,278,713 55,278,713
NJ 07960 Office 1982/1997 732,000 sf 43,503,962 43,421,804
NJ 07960 Hotel-Full Service 1982/1997 256 rooms 9,729,055 9,710,681
N/A 53,233,017 53,132,485
TX 78041 Retail-Mall 1977/1993 1,184,137 sf 52,244,472 52,244,472
PA 19335 Retail-Anchored 1996 561,942 sf 52,000,000 51,874,868
CA 95113 Office 1985 408,000 sf 51,012,644 51,012,644
CA 95134 Office 1996 192,942 sf 33,693,000 33,693,000
CA 95131 Office 1975/1996 137,187 sf 13,941,000 13,941,000
------- ---------- ----------
330,129 47,634,000 47,634,000
VA 22202 Hotel-Full Service 1969/1996 308 rooms 15,282,381 15,244,577
MI 48326 Hotel-Ltd. Service 1991/1995 192 rooms 10,886,890 10,859,959
VA 20166 Hotel-Ltd. Service 1987/1996 127 rooms 5,881,092 5,866,544
OH 45241 Hotel-Full Service 1975/1997 273 rooms 5,289,401 5,276,317
VA 20170 Hotel-Full Service 1987/1997 115 rooms 4,386,669 4,375,818
CO 81008 Hotel-Full Service 1972/1994 193 rooms 3,989,347 3,979,479
---
1,208 45,715,782 45,602,694
IN 46410 Retail-Anchored 1991/1994 747,586 sf 42,958,554 42,958,554
MN 55113 Retail-Anchored 1985/1990 331,505 sf 16,800,000 16,770,255
IL 61704 Retail-Anchored 1989 213,556 sf 13,800,000 13,775,567
IL 60435 Retail-Anchored 1989 266,184 sf 11,300,000 11,279,993
------- ---------- ----------
811,245 41,900,000 41,825,816
Guam 96911 Retail-Anchored 1997 44,135 sf 16,364,680 16,347,038
Guam 96911 Retail-Anchored 1997 86,000 sf 9,973,499 9,962,747
Guam 96911 Retail-Anchored 1997 26,174 sf 7,560,291 7,552,141
Guam 96911 Retail-Anchored 1997 67,000 sf 7,523,867 7,515,756
------ --------- ---------
223,309 41,422,337 41,377,683
CA 90245 Hotel-Full Service 1995 122 rooms 8,097,074 7,841,141
TX 75248 Hotel-Full Service 1996 132 rooms 6,622,654 6,413,324
NJ 08054 Hotel-Full Service 1996 116 rooms 6,531,218 6,324,778
MA 02173 Hotel-Ltd. Service 1970/1997 204 rooms 5,989,148 5,799,842
IL 60173 Hotel-Ltd. Service 1986/1998 128 rooms 3,795,981 3,675,997
NY 12047 Hotel-Ltd. Service 1990/1997 126 rooms 3,622,526 3,508,025
IL 60148 Hotel-Ltd. Service 1987/1997 128 rooms 3,405,680 3,298,033
IL 60154 Hotel-Ltd. Service 1988/1997 112 rooms 3,241,311 3,138,859
--- --------- ---------
1,068 41,305,592 40,000,000
MI 48152 Office 1989 346,649 sf 39,706,100 39,633,636
TX 79697 Retail-Mall 1979 335,196 sf 23,500,000 23,439,925
TX 76904 Retail-Mall 1979 408,308 sf 15,500,000 15,460,376
------- ---------- ----------
743,504 39,000,000 38,900,301
NJ 07054 Office 1986 521,580 sf 36,000,000 35,881,763
PA 17109 Retail-Mall 1960/1990 386,732 sf 36,000,000 35,878,883
GA 30329 Office 1967 871,831 sf 31,440,036 31,440,036
NC 27407 Hotel-Ltd. Service 1987/1997 121 rooms 5,346,611 5,325,283
NM 87109 Hotel-Ltd. Service 1987/1997 125 rooms 4,508,151 4,490,168
GA 30076 Hotel-Ltd. Service 1987/1997 129 rooms 4,334,874 4,317,581
SC 29607 Hotel-Ltd. Service 1985/1997 123 rooms 4,143,813 4,127,283
TX 78228 Hotel-Ltd. Service 1987/1997 123 rooms 2,974,708 2,962,841
MN 55344 Hotel-Ltd. Service 1987/1997 123 rooms 2,657,360 2,646,759
TX 79103 Hotel-Ltd. Service 1985/1997 116 rooms 2,561,539 2,551,321
SC 29303 Hotel-Ltd. Service 1984/1997 112 rooms 1,738,428 1,731,493
NY 13057 Hotel-Ltd. Service 1985/1997 117 rooms 1,734,517 1,727,597
--- --------- ---------
1,089 30,000,000 29,880,327
MA 02631 Hotel-Full Service 1986/1996 298 rooms 29,646,388 29,573,052
CA 95687 Hotel-Full Service 1997 127 rooms 6,388,700 6,380,088
CA 95691 Hotel-Ltd. Service 1973/1997 138 rooms 4,904,000 4,897,389
CA 95350 Hotel-Ltd. Service 1990 126 rooms 4,688,000 4,681,680
CA 95603 Hotel-Full Service 1994/1994 191 rooms 4,679,000 4,672,692
CA 95667 Hotel-Ltd. Service 1988/1997 105 rooms 4,184,100 4,178,460
CA 95370 Hotel-Ltd. Service 1984/1995 101 rooms 4,085,200 4,079,693
--- --------- ---------
788 28,929,000 28,890,001
MA 02138 Retail-Anchored 1991 97,949 sf 28,454,844 28,454,844
CA 93940 Hotel-Full Service 1985/1994 285 rooms 28,173,000 28,135,021
CA 90212 Office 1956/1989 103,968 sf 23,480,370 23,480,370
MI 48315 Retail-Anchored 1987 318,390 sf 22,504,428 22,463,357
OH 45202 Office 1913/1995 601,948 sf 22,000,000 21,869,727
VA 22030 Multifamily 1987 313 units 21,650,000 21,611,974
MD 20854 Retail-Anchored 1978/1988/1988 85,011 sf 20,443,940 20,443,940
FL 32707 Multifamily 1988/1989 384 units 10,233,784 10,206,090
FL 33322 Multifamily 1988 240 units 10,055,005 10,027,795
--- ---------- ----------
624 20,288,789 20,233,885
MD 20723 Retail-Anchored 1997 199,840 sf 20,145,450 20,115,906
IL 60521 Office 1993 149,312 sf 19,955,843 19,926,904
FL 33417 Congregate Care 1989/1994 300 beds 19,904,044 19,874,655
BWI n/a Hotel-Full Service 1995 341 rooms 19,832,535 19,832,535
OH 43207 Industrial 1991 628,439 sf 18,442,212 18,243,666
IL 60004 Office 1985/1989/1987 236,789 sf 18,185,684 18,185,684
MI 48075 Multifamily 1972 500 units 17,750,000 17,693,848
VA 20191 Office 1986 138,450 sf 17,440,612 17,421,811
OH 43224 Industrial 1966/1996/1989 486,531 sf 17,474,940 17,278,947
CA 94025 Hotel-Full Service 1984/1996 163 rooms 17,000,000 16,877,327
DC 20024 Multifamily 1969/1996 414 units 16,554,564 16,554,564
OK 74107 Multifamily 1982 682 units 16,217,178 16,191,766
OR 97305 Retail-Anchored 1982 135,926 sf 7,000,000 6,991,784
WA 98004 Retail-Unanchored 1987 88,158 sf 6,596,442 6,588,699
WA 98058 Retail-Anchored 1987 32,808 sf 2,524,638 2,521,675
------ --------- ---------
256,892 16,121,080 16,102,157
WA 98036 Retail-Anchored 1971/1990 164,724 sf 16,000,000 15,963,572
NJ 07205 Industrial 1948/1957 765,320 sf 15,000,000 15,000,000
CA 92647 Multifamily 1971/1994 288 units 15,000,000 14,974,523
MN 55113 Retail-Anchored 1986/1995 176,553 sf 14,750,000 14,703,603
NY 11368 Retail-Anchored 1931/1936 46,000 sf 14,500,000 14,482,776
CA 91744 Retail-Anchored 1994 55,925 sf 10,039,150 10,027,584
OH 45324 Retail-Anchored 1994 45,000 sf 4,332,685 4,327,693
------ --------- ---------
100,925 14,371,835 14,355,277
NY 10473 Retail-Anchored 1996 112,969 sf 14,134,206 14,134,206
CA 92103 Retail-Anchored 1988/1996 142,379 sf 14,000,000 13,969,561
PA 19610 Hotel-Full Service 1974/1997 255 rooms 13,927,565 13,900,983
TX 75062 Retail-Anchored 1997 82,187 sf 13,321,982 13,321,982
FL 32817 Multifamily 1974/1997 346 units 7,300,000 7,276,815
FL 33647 Multifamily 1988 192 units 6,000,000 5,980,944
--- --------- ---------
538 13,300,000 13,257,759
MI 48225 Multifamily 1962/1969/1994 408 units 13,241,420 13,241,420
FL 33317 Retail-Anchored 1997 76,547 sf 13,055,425 13,036,279
CA 94040 Retail-Anchored 1968/1987 112,451 sf 13,050,000 13,022,192
TX 77074 Retail-Anchored 1997 82,187 sf 12,859,838 12,840,979
MI 48174 Mobile Home Park 1974 699 pads 12,850,000 12,809,107
MD 20874 Retail-Anchored 1987 115,230 sf 12,690,000 12,643,688
PA 19087 Office 1984 161,525 sf 12,273,599 12,255,800
NJ 08043 Congregate Care 1987 149 beds 12,000,000 11,979,423
NY 10469 Retail-Anchored 1997 132,000 sf 11,647,930 11,647,930
PA 19147 Multifamily 1985 60,000 sf 11,581,018 11,581,018
CA 90067 Office 1971/1996 48,107 sf 11,300,000 11,300,000
PA 19124 Retail-Anchored 1996 128,700 sf 10,820,849 10,820,849
CA 90732 Retail-Anchored 1957/1989 172,820 sf 10,726,000 10,706,425
MD 21221 Retail-Anchored 1956/1997 210,432 sf 10,500,000 10,482,696
CT 06107 Nursing 1995/1997/1997 75 beds 10,200,000 10,200,000
CA 90064 Retail-Anchored 1988 64,538 sf 10,090,000 10,090,000
WI 53214 Office 1905/1985 347,138 sf 10,092,856 10,074,436
NC 27320 Retail-Anchored 1968/1995 188,265 sf 4,685,784 4,680,376
TN 37801 Retail-Anchored 1980/1984 58,317 sf 3,080,514 3,076,959
FL 32536 Retail-Anchored 1979/1989 80,600 sf 1,626,237 1,624,360
WY 82901 Retail-Unanchored 1956 19,982 sf 327,362 326,984
TX 76106 Retail-Unanchored 1965/1997 19,950 sf 306,654 306,300
------ ------- -------
367,114 10,026,551 10,014,980
FL 33156 Retail-Anchored 1955/1997 82,128 sf 10,000,000 9,982,295
NV 89102 Retail-Anchored 1993 144,581 sf 10,000,000 9,972,608
MA 01607 Retail-Anchored 1995/1997 181,772 sf 10,000,000 9,966,282
FL 33345 Office 1985 129,619 sf 8,791,344 8,781,867
FL 33139 Retail-Anchored 1961/1985 16,416 sf 1,070,585 1,069,431
------ --------- ---------
146,035 9,861,929 9,851,298
FL 33426 Retail-Anchored 1997 53,175 sf 9,534,861 9,520,878
PA 19477 Office 1970/1997 153,832 sf 9,500,000 9,484,069
MD 21225 Hotel-Full Service 1987/1995 188 rooms 9,495,362 9,471,873
ND 58103 Retail-Anchored 1987 165,511 sf 9,331,286 9,331,286
MI 49684 Multifamily 1988/1992/1997 260 units 9,300,000 9,271,724
MA 01510 Office 1844/1995 323,000 sf 9,000,000 8,978,655
NV 89110 Retail-Anchored 1982/1985 130,705 sf 8,944,226 8,931,255
KS 66049 Multifamily 1986 372 units 8,336,908 8,336,908
MI 48326 Industrial 1990 121,831 sf 8,307,324 8,295,053
OK 73102 Office 1972 239,681 sf 8,189,087 8,189,087
AZ 85032 Multifamily 1982/1996 288 units 8,000,000 7,990,584
SC 29526 Retail-Anchored 1961/1995 213,255 sf 7,907,072 7,907,072
CA 92354 Office 1986 87,082 sf 7,837,500 7,825,572
NV 89118 Multifamily 1988 228 units 7,750,000 7,735,898
FL 32789 Multifamily 1982 319 units 5,565,000 5,558,412
FL 32822 Multifamily 1981 151 units 1,935,000 1,932,709
--- --------- ---------
470 7,500,000 7,491,121
CA 92101 Retail-Unanchored 1997 57,000 sf 7,500,000 7,482,522
TX 77058 Multifamily 1967/1993 490 units 7,450,000 7,439,019
CA 90006 Retail-Anchored 1979/1993 56,068 sf 7,150,100 7,150,100
MI 48640 Retail-Anchored 1965/1991 114,243 sf 4,204,000 4,180,650
MI 49684 Retail-Anchored 1966/1994 97,378 sf 2,946,000 2,929,637
------ --------- ---------
211,621 7,150,000 7,110,287
AZ 85306 Retail-Anchored 1994 126,044 sf 7,000,000 7,000,000
FL 34647 Industrial 1975 111,464 sf 2,368,138 2,364,703
MN 55416 Office 1985/1997 48,810 sf 2,368,138 2,364,703
NM 87103 Office 1980 53,285 sf 2,211,283 2,208,076
------ --------- ---------
213,559 6,947,558 6,937,483
MI 48313 Retail-Anchored 1987 82,868 sf 6,908,109 6,895,502
CA 90028 Multifamily 1989 243 units 6,900,000 6,892,549
IN 46383 Multifamily 1973 240 units 7,015,835 6,883,835
PA 19146 Retail-Anchored 1989 82,305 sf 6,746,235 6,746,235
CA 90210 Office 1925/1994 43,649 sf 6,669,521 6,669,521
FL 32935 Multifamily 1985 216 units 6,645,000 6,645,000
CA 91107 Multifamily 1974 156 units 6,600,000 6,584,176
OH 44115 Office 1974 120,758 sf 6,577,805 6,577,805
TX 75252 Retail-Anchored 1982/1995 94,541 sf 6,550,000 6,542,297
NY 12449 Retail-Anchored 1992 67,406 sf 6,539,402 6,532,352
NY 12603 Retail-Anchored 1963/1981/1981 177,576 sf 6,500,000 6,476,695
CO 81620 Multifamily 1985 117 units 6,450,000 6,434,071
TX 78745 Retail-Anchored 1981/1990 122,961 sf 6,400,000 6,392,339
TX 76021 Multifamily 1983/1996 240 units 6,300,000 6,292,567
VA 23451 Hotel-Full Service 1970/1985 124 rooms 6,212,000 6,212,000
NC 27529 Multifamily 1986 160 units 6,100,000 6,089,234
CO 80231 Congregate Care 1977/1997 171 units 6,000,000 5,983,920
MD 21601 Hotel-Ltd. Service 1995 73 rooms 3,000,000 3,000,000
MD 21601 Hotel-Ltd. Service 1989/1996 84 rooms 2,950,000 2,950,000
-- --------- ---------
157 5,950,000 5,950,000
CA 90292 Multifamily 1968 202 units 6,000,000 5,939,289
VA 22041 Multifamily 1949 296 units 5,950,000 5,939,243
FL 32935 Multifamily 1988 208 units 5,947,541 5,931,446
IN 46214 Multifamily 1981 220 units 5,881,998 5,870,107
OH 43213 Retail-Anchored 1987 167,690 sf 5,813,785 5,813,785
NC 28227 Retail-Anchored 1988 98,664 sf 5,827,790 5,765,049
MN 55435 Retail-Anchored 1974/1996 59,272 sf 5,710,603 5,710,603
OR 97914 Hotel-Ltd. Service 1989/1996 61 rooms 1,705,228 1,702,929
OR 97601 Hotel-Ltd. Service 1990 57 rooms 1,555,899 1,553,802
OR 97601 Hotel-Ltd. Service 1982 52 rooms 1,314,049 1,312,278
OR 97914 Hotel-Ltd. Service 1991 63 rooms 1,089,502 1,088,033
-- --------- ---------
233 5,664,678 5,657,042
NV 89109 Multifamily 1965 280 units 5,600,000 5,589,810
MN 55423 Hotel-Ltd. Service 1987/1998 148 rooms 5,580,652 5,573,129
HI 96720 Multifamily 1972/1997 208 units 5,575,000 5,554,332
MI 48063 Retail-Anchored 1989 82,707 sf 5,520,000 5,494,723
OH 43230 Retail-Anchored 1997 32,722 sf 5,476,433 5,468,402
TX 77084 Multifamily 1984/1997 300 units 5,440,000 5,416,510
IL 60605 Office 1885 168,621 sf 5,400,000 5,391,472
IN 46250 Multifamily 1981 190 units 5,360,000 5,347,200
CA 95035 Mobile Home Park 1970/1995 196 pads 5,350,000 5,340,297
OH 43068 Retail-Anchored 1997 33,221 sf 5,280,846 5,273,101
AZ 85210 Retail-Anchored 1987 93,424 sf 5,250,000 5,240,749
LA 71111 Multifamily 1985/1991 148 units 3,616,149 3,610,412
LA 71111 Multifamily 1972/1985/1991 124 units 1,583,851 1,581,338
--- --------- ---------
272 5,200,000 5,191,750
MD 20906 Multifamily 1971 211 units 5,200,000 5,190,369
VA 23224 Retail-Anchored 1975/1986 176,851 sf 5,200,000 5,173,691
NJ 07302 Multifamily 1925/1992 116 units 5,120,000 5,104,588
OH 60160 Retail-Anchored 1985 85,352 sf 5,143,557 5,085,869
OH 45213 Retail-Anchored 1969 108,183 sf 5,088,644 5,031,572
TX 78130 Multifamily 1983/1992 142 units 5,000,000 4,984,585
MI 49001 Mobile Home Park 1969/1997/1997 529 units 5,000,000 4,983,930
DE 19711 Industrial 1996 106,580 sf 4,860,000 4,848,913
IN 46254 Multifamily 1981 220 units 4,766,645 4,757,009
OH 44130 Retail-Anchored 1972 89,850 sf 4,805,145 4,751,252
PA 19131 Multifamily 1930/1996 146 units 4,640,000 4,628,919
OH 44035 Retail-Anchored 1937 116,820 sf 4,653,099 4,600,911
MI 48072 Office 1990 31,724 sf 4,600,000 4,600,000
NY 11771 Industrial 1997 40,281 sf 4,498,499 4,491,902
VA 23005 Mobile Home Park 1984/1991 262 pads 4,500,000 4,485,680
PA 18974 Industrial 1968/1982 218,675 sf 4,450,000 4,444,864
CA 91789 Industrial 1968 174,600 sf 4,400,000 4,400,000
AZ 86442 Mobile Home Park 1983/1991 206 pads 4,400,000 4,389,760
OH 44128 Retail-Anchored 1967 115,032 sf 4,371,607 4,322,577
WA 99208 Retail-Anchored 1997 27,932 sf 4,302,912 4,296,602
NC 27959 Retail-Anchored 1983 144,174 sf 4,260,000 4,260,000
CA 92503 Multifamily 1987/1997 160 units 4,210,000 4,192,942
TX 78758 Multifamily 1984/1997 156 units 4,200,000 4,192,923
NM 87103 Office 1985 99,906 sf 4,158,743 4,154,260
NJ 08003 Retail-Unanchored 1979 28,115 sf 2,050,000 2,045,754
NJ 08034 Retail-Unanchored 1974 17,456 sf 1,400,000 1,397,100
NJ 08003 Retail-Unanchored 1980 8,980 sf 700,000 698,550
----- ------- -------
54,551 4,150,000 4,141,404
LA 71109 Hotel-Ltd. Service 1996 115 rooms 4,100,000 4,093,936
VA 23122 Retail-Anchored 1991 79,162 sf 4,100,000 4,070,269
NY 12589 Retail-Anchored 1997 27,723 sf 4,058,428 4,052,476
PA 18201 Hotel-Ltd. Service 1988/1994 119 rooms 4,025,000 4,025,000
MD 20774 Office 1986 97,325 sf 4,000,000 3,985,920
MD 20748 Multifamily 1964/1996 178 units 3,915,000 3,899,137
TX 77081 Multifamily 1972/1996 307 units 3,850,000 3,838,457
WI 53072 Multifamily 1993 76 units 3,825,000 3,818,367
CA 92545 Mobile Home Park 1970/1995 197 pads 3,750,000 3,750,000
SD 57106 Multifamily 1983/1990 126 units 3,750,000 3,741,221
CA 92054 Multifamily 1974/1995 184 units 3,707,000 3,693,187
CA 90220 Retail-Anchored 1983/187 132,139 sf 3,700,000 3,667,246
MD 20707 Industrial 1994 84,703 sf 3,600,000 3,600,000
NY 10469 Retail-Anchored 1997 15,000 sf 3,598,440 3,598,440
CA 95621 Retail-Anchored 1974 78,880 sf 3,600,000 3,591,462
GA 30906 Multifamily 1974 184 units 3,550,000 3,540,283
DC 20032 Multifamily 1966/1989 196 units 3,540,120 3,534,573
PA 18017 Hotel-Ltd. Service 1984/1997 116 rooms 3,500,000 3,500,000
UT 84108 Office 1976/1978 112,141 sf 3,500,000 3,500,000
TX 77598 Multifamily 1965/1993 262 units 3,500,000 3,492,375
OR 97333 Multifamily 1978/1994/1994 101 units 3,500,000 3,483,189
WA 98052 Hotel-Ltd. Service 1986/1996 137 rooms 3,500,000 3,481,693
CA 93003 Retail-Anchored 1988 40,038 sf 3,465,000 3,459,575
CA 90265 Office 1989 22,681 sf 3,380,000 3,380,000
VA 22448 Office 1979/1985/1985 56,646 sf 3,375,000 3,369,924
NC 27832 Retail-Anchored 1989 95,620 sf 3,260,000 3,248,886
FL 33441 Multifamily 1969/1997 118 units 3,250,000 3,244,246
FL 33908 Mobile Home Park 1966/1984 305 units 3,250,000 3,241,258
GA 30032 Multifamily 1965/1996 140 units 3,250,000 3,237,096
TX 77036 Multifamily 1977 224 units 3,225,000 3,215,331
WI 53154 Industrial 1967/1980 220,000 sf 3,210,750 3,210,750
GA 30720 Hotel-Ltd. Service 1994 71 rooms 3,200,000 3,187,585
NC 28787 Retail-Anchored 1987/1995 132,385 sf 3,200,000 3,184,519
WV 25801 Hotel-Ltd. Service 1977/1984/1997 130 rooms 3,200,000 3,183,732
LA 70433 Retail-Anchored 1997 19,697 sf 3,178,287 3,173,626
CO 81615 Hotel-Ltd. Service 1967/1985 64 rooms 3,154,679 3,154,679
KY 40571 Industrial 1988 99,203 sf 3,150,000 3,150,000
NH 03051 Multifamily 1988 34 units 1,438,707 1,435,852
NH 03051 Multifamily 1970 41 units 874,713 872,977
NH 03042 Multifamily 1976 32 units 786,580 785,019
-- ------- -------
107 3,100,000 3,093,849
NY 11729 Multifamily 1962 96 units 3,100,000 3,093,012
NY 10019 Multifamily 1920/1997 12 units 1,312,000 1,308,071
NY 10228 Multifamily 1890/1997 9 units 1,200,000 1,196,406
NY 10228 Multifamily 1900/1997 12 units 550,000 548,353
-- ------- -------
33 3,062,000 3,052,830
CA 92264 Mobile Home Park 1938 253 pads 3,043,081 3,043,081
NY 14456 Multifamily 1971/1973 208 units 3,030,000 3,030,000
FL 33401 Office 1926/1996 60,702 sf 3,025,000 3,018,758
NC 28025 Multifamily 1988 120 units 3,000,000 2,995,244
VA 23608 Retail-Anchored 1988/1996 63,925 sf 3,000,000 2,995,163
WI 53203 Multifamily 1912/1981 111 units 3,000,000 2,988,956
GA 30083 Retail-Anchored 1997 10,908 sf 2,900,000 2,883,510
SD 57106 Multifamily 1973 128 units 2,885,000 2,880,276
TX 77057 Multifamily 1974/1991 104 units 2,880,000 2,871,365
WV 22504 Retail-Anchored 1985/1989 64,630 sf 2,887,929 2,856,838
NH 03054 Retail-Anchored 1987 76,101 sf 2,848,000 2,838,837
AZ 85713 Mobile Home Park 1986 300 pads 2,800,000 2,792,798
TX 77801 Multifamily 1975/1995 145 units 2,800,000 2,791,538
GA 30080 Retail-Anchored 1982 62,330 sf 2,800,000 2,787,531
CA 91789 Mobile Home Park 1981/1994 146 pads 2,775,000 2,775,000
OH 43213 Industrial 1960 93,530 sf 2,791,298 2,759,992
MO 64163 Industrial 1987 90,679 sf 2,735,000 2,735,000
TX 78602 Multifamily 1986/1996 88 units 2,725,000 2,721,724
NY 10013 Multifamily 1920/1988 18 units 2,700,000 2,695,773
NH 03842 Multifamily 1973 90 units 2,700,000 2,689,612
MD 21117 Office 1996 40,521 sf 2,661,000 2,650,777
CA 92703 Multifamily 1988 100 units 2,650,000 2,650,000
TX 78070 Multifamily 1969/1994 205 units 2,600,000 2,596,940
OH 44130 Multifamily 1959 68 units 1,402,500 1,400,815
OH 44146 Multifamily 1967 37 units 722,500 721,632
OH 44137 Multifamily 1937/1992 24 units 475,000 474,429
-- ------- -------
129 2,600,000 2,596,877
MD 21224 Multifamily 1874/1988 56 units 2,600,000 2,596,824
GA 31029 Multifamily 1988 96 units 2,600,000 2,590,731
WV 25813 Hotel-Ltd. Service 1992/1994/1997 104 rooms 2,550,000 2,537,036
FL 33884 Mobile Home Park 1968 206 pads 2,550,000 2,536,054
WI 53072 Multifamily 1992 48 units 2,525,000 2,520,615
CA 95815 Retail-Anchored 1968/1981 39,900 sf 2,500,000 2,500,000
NY 10007 Multifamily 1928/1995 10 units 2,500,000 2,497,293
IN 47374 Hotel-Ltd. Service 1972/1996 132 rooms 2,500,000 2,484,463
CA 92866 Mobile Home Park 1966/1996 89 units 2,460,000 2,446,877
OK 73132 Multifamily 1972/1996 160 units 2,437,000 2,416,684
IL 61704 Mobile Home Park 1966/1996 241 pads 2,400,000 2,400,000
MI 48236 Multifamily 1949/1996 56 units 2,400,000 2,391,579
FL 32809 Hotel-Ltd. Service 1990/1995 98 rooms 2,375,000 2,375,000
TN 37215 Retail-Unanchored 1979/1987 26,146 sf 2,380,000 2,374,557
WA 99037 Retail-Anchored 1984/1996 20,200 sf 2,380,000 2,368,188
MI 48152 Multifamily 1964/1988 92 units 2,375,000 2,367,215
OH 43207 Retail-Anchored 1920/1960/1979 113,428 sf 2,329,232 2,303,108
OH 44070 Multifamily 1963/1997 104 units 2,300,000 2,297,273
TX 76067 Retail-Anchored 1985/1995 70,393 sf 2,300,000 2,294,567
IL 60542 Multifamily 1969/1989 96 units 2,300,000 2,294,042
IL 60164 Hotel-Ltd. Service 1968/1996 95 rooms 2,282,388 2,282,388
PA 18917 Retail-Anchored 1980 54,193 sf 2,275,000 2,271,065
MI 48446 Mobile Home Park 1969/1987 228 pads 2,250,000 2,250,000
KS 66604 Hotel-Ltd. Service 1994 62 rooms 2,235,000 2,235,000
IN 46254 Multifamily 1980 108 units 2,213,055 2,208,581
CA 92104 Multifamily 1988 104 units 2,200,000 2,197,523
OK 74135 Multifamily 1974 224 units 2,200,000 2,196,142
MI 49023 Multifamily 1964/1995 55 units 2,190,000 2,187,334
VA 24343 Hotel-Ltd. Service 1986/1996 65 rooms 2,140,000 2,129,506
VA 22303 Hotel-Ltd. Service 1963/1993 108 rooms 2,100,000 2,100,000
NC 28284 Retail-Anchored 1993/1995 57,894 sf 2,100,000 2,092,892
TX 77380 Retail-Unanchored 1984 47,636 sf 2,100,000 2,091,499
WA 99301 Mobile Home Park 1961 201 pads 2,090,000 2,084,446
MI 48084 Industrial 1986 37,030 sf 2,075,000 2,075,000
MI 49007 Mobile Home Park 1940/1997 169 pads 2,060,000 2,057,571
TX 77081 Multifamily 1964/1992 252 units 2,050,000 2,045,754
FL 32811 Multifamily 1989/1997 86 units 2,030,000 2,025,378
OH 44145 Congregate Care 1978/1997 78 units 2,025,000 2,025,000
IL 61821 Retail-Unanchored 1996 23,840 sf 2,020,000 2,020,000
PA 16933 Hotel-Ltd. Service 1991/1997 100 rooms 2,000,000 2,000,000
NY 11230 Multifamily 1920/1985 116 units 2,000,000 1,992,778
OH 45232 Multifamily 1967/1996 149 units 1,995,000 1,982,835
FL 33304 Multifamily 1985/1996 50 units 1,960,000 1,960,000
TX 77503 Multifamily 1971/1988 208 units 1,910,000 1,910,000
NY 10007 Multifamily 1910/1997 30 units 1,900,000 1,900,000
VA 22180 Office 1963/1980 19,586 sf 1,900,000 1,895,457
NE 68510 Multifamily 1994 54 units 1,900,000 1,895,281
IN 46805 Retail-Anchored 1965/1989 74,231 sf 1,875,948 1,855,752
PA 15275 Industrial 1997 53,176 sf 1,800,000 1,793,674
OR 97060 Mobile Home Park 1971/1997 118 pads 1,800,000 1,793,397
CA 95054 Retail-Unanchored 1991 20,752 sf 1,772,000 1,769,279
CA 90601 Mobile Home Park 1979 76 pads 1,750,000 1,750,000
TX 78745 Multifamily 1984/1993 90 units 1,725,000 1,725,000
TX 77703 Retail-Anchored 1985/1997 24,851 sf 1,650,000 1,650,000
SD 57501 Multifamily 1910/1986 35 units 1,650,000 1,647,814
MI 48076 Office 1975/1992 44,041 sf 1,600,000 1,600,000
TX 75219 Multifamily 1969/1991 33 units 800,000 798,718
TX 75219 Multifamily 1964/1989 24 units 448,000 447,282
TX 75219 Multifamily 1971/1994 20 units 352,000 351,436
-- ------- -------
77 1,600,000 1,597,436
MI 48124 Hotel-Ltd. Service 1958/1991 98 rooms 1,600,000 1,594,972
TX 76107 Multifamily 1975/1995 121 units 1,560,000 1,560,000
MI 49009 Multifamily 1972/1996 90 units 1,545,000 1,545,000
MN 55434 Multifamily 1986 36 units 1,500,000 1,497,374
OH 44122 Industrial 1978/1995 44,236 sf 1,440,000 1,432,625
CA 91730 Industrial 1979 78,800 sf 1,420,000 1,420,000
PA 17603 Multifamily 1967/1997 68 units 1,409,704 1,409,704
VA 22560 Retail-Anchored 1996 19,950 sf 1,408,000 1,408,000
AZ 85284 Office 1986 23,610 sf 1,410,000 1,407,809
MI 49202 Retail-Anchored 1977/1993 56,880 sf 1,400,000 1,395,597
TX 75013 Retail-Anchored 1997 14,654 sf 1,400,000 1,395,280
NC 28031 Hotel-Ltd. Service 1960 60 rooms 1,360,000 1,354,603
MD 21701 Office 1986 58,800 sf 1,350,000 1,350,000
CO 80110 Retail-Anchored 1987/1997 15,600 sf 1,350,000 1,350,000
NY 11735 Multifamily 1962 46 units 1,350,000 1,346,951
AZ 85206 Multifamily 1985 45 units 1,200,000 1,197,889
WA 98105 Multifamily 1989 27 units 1,200,000 1,196,529
TN 37148 Industrial 1981/1990 108,462 sf 1,200,000 1,195,741
TX 78751 Multifamily 1975/1997 51 units 1,150,000 1,150,000
GA 30309 Multifamily 1959/1996 32 units 1,125,000 1,122,636
TX 77521 Mobile Home Park 1982 142 pads 1,120,000 1,118,086
AZ 85252 Retail-Unanchored 1971/1993 7,200 sf 1,100,000 1,100,000
NY 10003 Multifamily 1910/1997 30 units 1,100,000 1,100,000
MN 55428 Multifamily 1972/1994 40 units 1,100,000 1,096,274
MN 55416 Multifamily 1986 24 units 1,065,000 1,063,135
NY 13036 Multifamily 1997 60 units 1,020,000 1,018,387
FL 33064 Multifamily 1979/1995 46 units 1,000,000 998,878
TX 77521 Mobile Home Park 1984 171 pads 1,000,000 997,995
CO 80219 Mobile Home Park 1954 80 pads 1,000,000 997,560
MA 01440 Multifamily 1974/1996 60 units 960,000 960,000
NY 11358 Multifamily 1930/1987 32 units 930,000 926,384
NY 10009 Multifamily 1900/1995 19 units 900,000 900,000
TX 77081 Multifamily 1968 76 units 850,000 847,452
FL 33709 Mobile Home Park 1954/1997 59 pads 650,000 648,116
<PAGE>
<CAPTION>
CUT-OFF DATE 1996 1996 1997 UNDERWRITTEN
PRINCIPAL BALANCE REVENUE REVENUE PERIOD REVENUE 1996 NOI
----------------- ------- ------- ----- ------- --------
<S> <C> <C> <C> <C> <C>
$ 250 $ 32,294,954 $ 29,820,382 YTD 12/31/97 $ 28,354,341 $ 22,377,070
90,096 9,480,000 10,244,000 TTM 11/30/97 10,191,844 5,756,000
36,045 9,795,000 12,494,000 TTM 11/30/97 11,514,278 2,976,175
32,635 6,920,000 10,594,000 TTM 11/30/97 10,020,853 1,504,800
37,324 8,867,000 9,326,000 TTM 11/30/97 9,121,211 2,909,655
67,606 5,192,000 5,211,000 TTM 11/30/97 5,066,005 2,552,280
44,111 8,098,000 7,300,000 TTM 11/30/97 7,300,000 2,965,570
36,338 8,881,000 9,319,000 TTM 11/30/97 8,319,000 3,370,165
29,805 6,071,000 5,853,000 TTM 11/30/97 5,853,000 2,126,515
20,143 7,752,000 9,171,000 TTM 11/30/97 8,990,894 1,675,680
21,546 5,540,000 7,241,000 TTM 11/30/97 7,241,000 974,100
35,628 2,852,000 3,735,000 TTM 11/30/97 3,735,000 729,180
25,000 5,847,000 4,832,000 TTM 11/30/97 4,832,000 1,511,355
14,649 8,501,000 7,366,000 TTM 11/30/97 7,366,000 1,619,465
16,413 3,955,000 3,002,000 TTM 11/30/97 3,440,199 1,190,575
2,232 3,090,000 3,929,000 TTM 11/30/97 3,929,000 33,850
32,877 100,841,000 109,617,000 106,920,284 31,895,365
33,305 50,436,005 52,134,561 TTM 12/31/97 52,646,857 31,363,028
70 5,808,570 6,259,701 YTD 12/31/97 5,450,638 4,886,326
71 3,185,490 3,444,761 YTD 12/31/97 3,520,447 2,190,348
63 2,178,790 2,287,139 YTD 12/31/97 2,230,660 1,722,221
43 2,006,867 2,092,983 YTD 12/31/97 1,891,095 1,673,322
44 1,848,936 1,981,222 YTD 12/31/97 2,092,298 1,359,239
82 1,822,245 1,919,972 YTD 12/31/97 1,922,748 1,384,340
58 1,597,819 1,804,485 YTD 12/31/97 1,922,199 1,134,849
53 1,496,468 1,602,529 YTD 12/31/97 1,650,702 1,132,803
68 1,332,859 1,419,195 YTD 12/31/97 1,406,337 977,098
85 1,070,213 1,051,982 YTD 12/31/97 1,092,639 1,070,213
67 1,208,986 1,300,408 YTD 12/31/97 1,379,161 794,345
34 1,274,042 1,269,965 YTD 12/31/97 1,246,682 929,705
35 963,827 1,094,307 YTD 12/31/97 1,120,275 621,196
45 883,240 923,962 YTD 12/31/97 939,053 686,058
38 1,506,347 1,557,502 YTD 12/31/97 1,468,183 885,042
97 793,700 768,289 YTD 12/31/97 728,604 635,230
37 847,370 859,163 YTD 12/31/97 827,834 607,256
38 988,927 947,456 YTD 12/31/97 769,163 733,494
29 475,687 516,362 YTD 12/31/97 474,598 354,976
56 31,290,383 33,101,383 32,133,316 23,778,061
179 4/11/98 1,813,260
145 4/11/98 1,591,644
137 4/11/98 1,420,392
156 4/11/98 1,218,912
178 4/11/98 1,138,320
158 4/11/98 876,408
205 4/11/98 815,964
121 4/11/98 685,008
121 4/11/98 654,792
115 4/11/98 392,868
152 10,607,568
99 24,172,335 24,356,395 YTD 12/31/97 24,101,955 13,941,825
64 31,211,584 31,683,698 TTM 11/30/97 31,697,674 20,067,097
48,995 88,464,549 88,621,045 TTM 11/7/97 85,465,250 32,450,071
61 3,472,478 4,379,572 YTD 12/312/97 4,296,701 2,817,167
37 1,787,488 2,648,336 YTD 12/312/97 2,608,323 1,073,617
55 1,666,711 1,794,960 YTD 12/312/97 1,774,914 1,186,715
50 1,552,660 1,680,760 YTD 12/312/97 1,640,108 1,107,927
42 1,689,324 1,606,040 YTD 12/312/97 1,470,872 1,443,543
29 1,024,779 1,072,872 YTD 12/312/97 886,858 703,179
25 679,035 643,545 YTD 12/312/97 620,161 396,616
20 798,374 851,082 YTD 12/312/97 842,571 347,189
21 664,174 708,160 YTD 12/312/97 660,951 306,262
20 705,458 623,100 YTD 12/312/97 602,621 389,250
20 610,941 714,540 YTD 12/312/97 643,810 344,933
41 14,651,422 16,722,967 16,047,890 10,116,398
99 12,850,445 16,219,924 TTM 9/30/97 15,923,376 7,165,577
160 10,885,080 TTM 1/1/98 11,296,179 0
54,891 9,121,769 9,477,084 YTD 12/31/97 9,477,084 5,611,170
137 9,730,275 9,926,195 TTM 8/31/97 9,015,674 7,380,254
59 13,210,053 13,370,278 TTM 8/31/97 13,278,271 7,835,944
37,932 11,848,105 12,918,406 TTM 8/31/97 12,463,755 2,413,113
N/A 25,058,158 26,288,684 25,742,026 10,249,057
44 9,314,714 10,698,163 YTD 12/31/97 10,770,770 6,061,258
92 6,479,032 TTM 12/31/97 7,205,214 0
125 8,888,810 10,059,859 YTD 12/31/97 10,709,886 5,479,895
175 6,224,488 YTD 12/31/97 5,920,713 0
102 n/a 4,379,578 0
144 6,224,488 10,300,291 0
49,495 7,924,166 8,474,847 TTM 9/30/97 8,474,847 2,135,714
56,562 6,871,800 6,972,826 TTM 10/31/97 6,664,360 2,228,461
46,193 2,335,788 2,715,370 TTM 10/31/97 2,647,701 851,825
19,327 4,895,052 5,279,990 TTM 10/31/97 5,134,981 526,179
38,051 1,787,841 2,184,480 TTM 10/31/97 2,172,490 597,038
20,619 4,069,347 3,944,668 TTM 10/31/97 3,679,727 1,090,737
37,751 27,883,994 29,572,181 28,774,106 7,429,954
57 6,481,825 7,073,590 YTD 12/31/97 7,888,894 4,717,294
51 4,100,295 4,095,010 YTD 12/31/97 4,105,196 2,203,876
65 2,180,323 2,280,245 YTD 12/31/97 2,435,785 1,557,670
42 2,352,998 2,562,270 YTD 12/31/97 2,530,227 1,728,669
52 8,633,616 8,937,525 9,071,208 5,490,215
370 3,526,951 Ann. 9mo. 3,754,078 0
116 n/a 840,000 0
289 1,014,247 YTD 12/31/97 970,264 0
112 n/a 634,440 0
185 4,541,198 6,198,782 0
64,272 3,821,624 4,305,378 YTD 12/31/97 4,089,721 1,882,285
48,586 2,458,232 4,207,460 YTD 12/31/97 4,041,521 864,626
54,524 1,024,862 3,756,888 YTD 12/31/97 3,564,075 313,680
28,431 2,593,578 3,279,033 TTM 11/30/97 3,459,374 1,143,503
28,719 2,342,131 2,607,570 TTM 11/30/97 2,386,399 872,426
27,841 2,128,215 2,288,644 TTM 11/30/97 2,209,632 1,002,664
25,766 2,048,907 2,217,800 TTM 11/30/97 2,064,438 821,810
28,026 2,201,837 2,455,257 TTM 11/30/97 2,320,663 835,970
37,453 18,619,386 25,118,030 24,135,823 7,736,964
114 7,837,525 8,080,833 YTD 12/31/97 7,626,680 5,105,201
70 6,027,757 5,857,650 YTD 12/31/97 5,898,791 3,423,513
38 4,685,240 4,632,019 YTD 12/31/97 4,661,185 2,532,591
52 10,712,997 10,489,669 10,559,976 5,956,104
69 13,675,006 11,289,967 YTD 12/31/97 12,876,438 8,228,854
93 6,718,384 7,212,886 TTM 8/31/97 7,133,250 4,507,585
36 10,480,502 10,755,896 YTD 12/31/97 10,178,914 5,155,558
44,011 2,338,767 2,245,575 YTD 12/31/97 2,240,418 1,081,964
35,921 1,945,757 1,877,365 YTD 12/31/97 1,883,414 783,559
33,470 2,380,139 1,859,104 YTD 12/31/97 1,769,369 1,051,483
33,555 2,158,403 1,982,503 YTD 12/31/97 1,955,144 843,515
24,088 1,711,398 1,571,220 YTD 12/31/97 1,571,220 573,477
21,518 1,970,920 1,826,580 YTD 12/31/97 1,831,844 629,635
21,994 1,549,385 1,557,197 YTD 12/31/97 1,557,087 484,198
15,460 1,458,912 1,211,512 YTD 12/31/97 1,211,512 434,194
14,766 1,507,871 1,678,996 YTD 12/31/97 1,637,999 297,656
27,438 17,021,552 15,810,052 15,658,007 6,179,681
99,238 14,950,610 16,588,812 TTM 8/31/97 16,579,274 4,455,143
50,237 1,797,182 2,396,243 9m. 9/30/97 2,406,193 619,650
35,488 2,292,238 2,258,215 YTD 9/30/97 2,248,182 813,509
37,156 2,623,976 2,681,756 YTD 9/30/97 2,583,053 903,783
24,464 1,888,160 1,959,975 YTD 9/30/97 1,803,591 744,660
39,795 1,578,338 1,646,625 YTD 9/30/97 1,589,512 687,762
40,393 1,671,073 1,780,316 YTD 9/30/97 1,756,031 680,711
36,662 11,850,967 12,723,130 12,386,562 4,450,075
291 5,268,289 5,537,340 YTD 12/31/97 5,278,364 3,671,579
98,719 20,929,126 23,348,278 YTD 12/31/97 22,472,008 5,323,702
226 3,981,470 3,985,827 YTD 12/31/97 3,992,210 3,285,342
71 3,475,466 4,407,247 TTM 12/31/97 4,547,355 2,171,935
36 4,680,613 6,075,280 YTD 12/31/97 7,476,872 1,605,791
69,048 3,478,821 3,582,219 TTM 11/30/97 3,577,148 2,308,539
240 2,936,928 2,997,444 YTD 12/31/97 3,070,674 2,160,664
26,578 2,129,176 2,236,132 YTD 12/31/97 2,336,666 1,073,283
41,782 1,985,591 1,949,574 YTD 12/31/97 2,058,117 1,234,152
32,426 4,114,767 4,185,706 4,394,783 2,307,435
101 3/11/98 1,899,320
133 3,827,921 4,010,606 YTD 12/31/97 3,883,559 2,425,217
66,249 6,578,764 7,034,815 YTD 12/31/97 7,106,261 2,377,618
58,160 29,778,000 33,232,998 TTM 6/30/97 33,260,703 14,473,800
29 10/11/97 1,820
77 4,991,015 5,197,947 YTD 12/31/97 4,850,534 2,672,497
35,388 3,697,395 3,821,272 YTD 12/31/97 3,825,383 2,007,505
126 3,779,872 3,856,352 TTM 11/30/97 3,404,521 2,978,721
36 10/11/97 1,680,871
103,542 11,788,135 13,517,704 YTD 12/31/97 12,471,497 3,801,056
39,987 3,869,871 4,632,051 YTD 12/31/97 4,501,540 1,803,946
23,742 3,339,762 3,390,744 TTM 10/27/97 3,487,649 1,855,299
51 606,960 1,111,680 YTD 12/31/97 1,506,266 256,721
75 1,215,082 1,302,826 YTD 12/31/97 1,375,126 908,271
77 586,422 529,604 YTD 12/31/97 543,622 422,391
63 2,408,464 2,944,110 3,425,014 1,587,383
97 2,205,237 2,382,384 YTD 12/31/97 2,389,584 1,804,950
20 3,131,447 3,310,709 YTD 12/31/97 3,180,254 2,097,724
51,995 2,550,822 2,733,123 YTD 12/31/97 2,790,557 1,527,036
83 2,894,897 2,995,735 TTM 8/31/97 2,964,657 2,000,768
315 2,626,260 2,518,907 YTD 12/31/97 2,480,060 2,090,290
179 2/11/98 942,928 0
96 3/11/98 406,944 0
142 1,349,872 0
125 3,011,328 TTM 1/31/98 2,911,671 0
98 2,265,113 2,456,836 TTM 9/30/97 2,569,386 1,541,275
54,514 8,298,724 8,566,407 TTM 10/31/97 8,529,051 2,555,452
162 105,280 3/11/98 105,280 0
21,031 1,896,114 Ann. 7mo. 2,016,026 0
31,151 1,342,176 Ann. 8mo. 1,418,171 0
24,643 3,238,290 3,434,197 0
32,454 3,012,686 3,058,073 TTM 10/31/97 3,083,511 1,505,567
170 3/11/98 1,230,870
116 2,014,601 2,067,987 TTM 9/30/97 1,987,597 1,532,447
156 3/11/98 1,212,430
18,325 2,669,552 2,812,911 Ann. 11mo. 2,786,034 1,549,793
110 1,952,903 2,074,636 Ann. 11mo. 2,108,267 1,490,372
76 2,612,723 YTD 12/31/97 2,664,889 0
80,399 3,806,914 3,630,565 YTD 12/31/97 3,630,565 1,377,835
88 1,351,046 Ann. 6mo. 1/98 1,350,000 0
193 2,155,814 2,690,139 YTD 12/31/97 2,562,162 1,161,587
235 1,918,411 Ann. 12/31/97 2,085,250 0
84 1,462,875 TTM 3/31/98 1,527,286 0
62 2,006,951 2,124,223 TTM 9/30/97 2,105,520 1,437,527
50 1,629,126 1,678,578 YTD 12/31/97 1,797,673 1,320,357
136,000 7,258,485 8,428,361 TTM 1/31/98 8,428,361 1,466,789
156 1,680,886 1,810,863 YTD 12/31/97 1,906,305 1,254,272
29 3,307,511 3,357,044 YTD 12/31/97 3,471,267 1,394,018
25 939,011 941,662 YTD 12/31/97 926,207 642,088
53 470,863 485,831 TTM 1/31/98 488,131 387,716
20 250,748 269,808 TTM 11/30/97 277,863 188,437
16 45,019 50,572 YTD 12/31/97 50,522 31,576
15 48,000 Ann. 2/98 50,027 0
27 1,705,641 1,795,873 1,792,750 1,249,817
122 1,608,325 1,783,795 TTM 10/31/97 1,815,779 1,151,575
69 1,567,068 1,605,501 YTD 12/31/97 1,585,631 1,378,312
55 1,266,723 1,539,234 Ann. 1,971,532 851,284
68 2,335,534 2,426,291 TTM 11/30/97 2,326,946 1,350,956
65 139,000 144,500 YTD 12/31/97 136,800 139,000
67 2,474,534 2,570,791 2,463,746 1,489,956
179 2/11/98 898,950
62 2,458,924 YTD 12/31/97 2,322,916 0
50,382 4,010,832 4,327,491 YTD 12/31/97 4,011,005 1,681,960
56 1,441,028 1,644,551 YTD 12/31/97 1,565,095 1,045,819
35,660 1,845,498 1,827,541 YTD 12/31/97 1,874,578 1,184,412
28 2,192,684 2,205,776 TTM 10/31/97 1,998,256 2,144,385
68 1,245,332 1,319,843 TTM 11/30/97 1,284,716 1,147,851
22,411 1,903,104 1,967,807 YTD 12/31/97 1,908,401 1,000,116
68 1,197,131 1,204,033 YTD 12/31/97 957,490 1,156,263
34 2,564,626 2,649,331 Ann. T-11 2,485,802 1,418,934
27,745 1,633,607 1,680,627 YTD 12/31/97 1,699,885 970,790
37 1,443,687 1,438,864 YTD 12/31/97 1,413,279 1,126,083
90 1,410,981 1,387,217 YTD 12/31/97 1,322,854 1,112,890
33,929 1,481,376 1,525,361 TTM 10/31/97 1,566,105 922,108
17,424 1,672,873 1,794,154 YTD 12/31/97 1,836,772 516,726
12,799 798,295 817,732 YTD 12/31/97 825,572 232,601
15,939 2,471,168 2,611,886 2,662,344 749,327
131 1,151,400 Pro-forma 1,093,830 0
15,182 2,422,226 2,498,452 TTM 11/30/97 2,400,535 1,038,720
128 1,292,420 1,303,521 TTM 10/31/97 1,238,824 995,952
37 755,221 882,853 Ann. 2/97-12/97 833,508 582,146
30 690,137 691,977 YTD 12/31/97 645,477 470,017
34 1,445,358 1,574,830 1,478,985 1,052,163
56 1,591,562 1,682,787 YTD 12/31/97 1,625,447 1,014,560
21 407,452 426,603 TTM 9/30/97 408,679 320,241
48 574,921 658,389 12/31/97 720,903 231,346
41 616,865 676,661 YTD 12/31/97 656,480 399,689
32 1,599,238 1,761,653 1,786,062 951,276
83 1,449,310 1,463,364 TTM 9/30/97 1,506,115 1,075,034
28,364 1,472,649 1,518,136 Ann.4/1-9/30/97 1,585,553 859,193
28,683 1,492,072 1,543,713 Ann. 7mo. 1,548,814 828,747
82 1,285,511 1,332,488 YTD 12/31/97 1,253,343 852,511
153 1,240,386 1,129,495 YTD 12/31/97 1,313,721 799,846
30,764 1,302,340 1,408,040 TTM 1/31/98 1,433,608 702,829
42,206 1,320,008 1,350,652 TTM 10/31/97 1,354,619 968,242
54 1,873,358 1,835,420 YTD 12/31/97 1,862,550 1,145,492
69 1,256,207 1,417,419 YTD 12/31/97 1,409,055 850,788
97 1,066,907 1,135,882 YTD 12/31/97 1,107,122 823,369
36 1,156,120 1,256,376 YTD 12/31/97 1,328,776 823,764
54,992 1,287,983 1,348,186 YTD 12/31/97 1,367,208 869,611
52 1,097,120 1,264,866 YTD 12/31/97 1,143,429 786,826
26,219 1,583,275 1,608,174 TTM 11/30/97 1,659,119 778,513
50,097 3,093,255 3,141,114 YTD 12/31/97 3,063,653 1,402,510
38,058 1,043,753 1,076,321 TTM 11/25/97 1,109,442 691,731
34,994 2,514,308 2,810,164 TTM 11/30/97 2,917,246 933,489
41,096 1,257,259 1,377,749 YTD 12/31/97 1,350,635 689,612
35,119 1,126,776 1,071,451 YTD 12/31/97 1,007,934 570,209
37,898 2,384,035 2,449,200 2,358,569 1,259,821
29,402 2,577,204 2,659,930 YTD 12/31/97 2,636,416 1,300,304
20,065 2,016,892 2,041,227 Ann. 11mo. 2,125,815 960,365
28,517 1,174,843 1,296,144 YTD 12/31/97 1,342,666 626,516
26,682 1,305,625 1,273,516 TTM 10/31/97 1,312,758 702,975
35 1,079,689 1,090,015 YTD 12/31/97 1,082,620 776,629
58 10/11/97 575,125
96 1,131,883 1,123,123 YTD 12/31/97 1,152,301 772,762
27,917 845,601 853,546 TTM 11/30/97 840,448 394,880
27,260 933,344 755,106 TTM 11/30/97 755,310 477,863
25,236 692,987 624,991 TTM 11/30/97 601,434 323,021
17,270 724,250 660,627 TTM 11/30/97 649,798 370,575
24,279 2,894,270 2,846,990 1,566,339
19,964 1,362,137 1,299,582 TTM 10/31/97 1,313,994 810,740
37,656 3,208,974 3,298,424 TTM 11/23/97 3,200,547 1,057,946
26,704 1,209,468 1,227,809 YTD 12/31/97 1,198,112 766,567
66 937,452 1,005,105 YTD 12/31/97 958,043 746,835
167 3/11/98 516,320
18,055 1,413,176 1,504,285 YTD 12/31/97 1,533,885 620,421
32 2,013,612 2,098,116 TTM 9/30/97 1,999,213 736,382
28,143 1,134,293 1,122,075 TTM 10/31/97 1,165,724 604,003
27,246 1,298,066 1,325,071 TTM 11/30/97 1,272,646 942,397
159 3/11/98 497,880
56 923,290 963,682 TTM 10/31/97 949,374 681,039
24,395 823,170 840,385 TTM 11/30/97 858,952 487,426
12,753 615,768 644,431 TTM 11/30/97 643,686 215,774
19,087 1,438,938 1,484,816 1,502,638 703,200
24,599 1,675,453 1,719,139 TTM 11/31/97 1,777,248 724,748
29 912,583 1,170,789 YTD 12/31/97 1,154,948 804,433
44,005 1,041,686 1,051,941 YTD 12/31/97 1,050,724 615,308
60 10/11/97 494,746
47 10/11/97 489,468
35,103 1,021,763 1,040,221 TTM 12/31/97 969,164 655,597
9,421 1,534,078 1,524,082 TTM 11/30/97 1,533,874 779,891
45 781,267 YTD 12/31/97 611,556 0
21,623 1,180,564 1,173,521 TTM 10/31/97 1,220,394 591,559
53 10/11/97 462,195
31,705 991,528 1,008,614 TTM 11/30/97 1,008,449 563,754
39 10/11/97 447,570
145 918,011 924,561 YTD 12/31/97 887,925 612,660
112 3/11/98 424,145
17,121 877,788 921,347 YTD 11/30/97 898,504 624,268
20 n/a 617,500 0
25 710,303 789,489 YTD 12/31/97 865,251 557,072
21,310 635,097 669,338 YTD 12/31/97 647,935 498,597
38 3/11/98 420,494
154 3/11/98 405,704
30 996,972 1,014,008 TTM 11/30/97 1,019,089 586,554
26,206 996,011 YTD 12/31/97 1,019,329 0
26,878 1,032,148 1,042,940 TTM 11/30/97 1,052,613 463,776
42 1,308,257 1,668,111 YTD 12/31/97 1,529,038 681,640
73 403,331 410,767 TTM 9/30/97 386,825 223,928
80 333,245 346,064 TTM 9/30/97 314,779 227,043
78 180,707 180,035 TTM 9/30/97 154,265 109,667
76 917,283 936,866 855,869 560,638
35,599 1,809,045 2,010,556 TTM 11/30/97 1,920,880 697,527
51 738,915 826,712 YTD 12/31/97 780,780 550,187
146 2/11/98 382,630
33,824 2,184,168 2,209,017 TTM 10/31/97 2,183,819 706,216
41 1,408,345 1,360,245 YTD 12/31/97 1,349,249 904,744
21,905 1,072,551 1,181,469 YTD 12/31/97 1,272,031 371,804
12,503 1,174,928 1,218,642 YTD 12/31/97 1,249,118 485,434
50,242 735,289 798,382 YTD 12/31/97 761,441 536,480
19,036 713,591 858,415 YTD 12/31/97 842,397 344,857
29,692 808,353 798,503 YTD 12/31/97 822,968 486,501
20,072 951,384 1,143,690 YTD 12/31/97 1,208,931 318,412
28 1,989,756 1,791,204 YTD 12/31/97 1,878,602 1,316,283
43 524,035 543,244 TTM 10/31/97 603,323 518,399
240 450,000 Ann. 5mo. 445,544 0
46 711,506 704,584 IMP 11/30/97 710,726 557,086
19,241 924,139 919,475 YTD 12/31/97 927,179 476,323
18,034 1,126,323 1,130,539 YTD 12/31/97 1,168,266 470,704
30,172 1,977,522 2,016,563 TTM 10/31/97 1,946,876 632,110
31 1,444,066 1,751,692 YTD 12/31/97 1,610,174 717,292
13,330 1,277,170 1,349,801 TTM 10/31/97 1,385,743 439,212
34,487 445,141 679,499 YTD 12/31/97 679,825 274,299
25,414 2,193,226 2,618,892 YTD 12/31/97 2,188,317 1,077,935
86 569,483 723,571 TTM 1/15/98 742,350 342,302
149 740,178 771,449 YTD 12/31/97 700,786 523,483
59 704,959 563,697 TTM 11/30/97 563,468 603,121
34 583,101 595,370 YTD 12/31/97 584,775 487,334
27,494 794,160 818,414 TTM 10/31/97 816,981 415,675
10,627 811,421 919,753 TTM 11/30/97 904,151 436,203
23,122 835,027 TTM 1/31/98 902,523 0
14,354 951,206 1,008,769 YTD 12/31/97 1,096,635 338,712
15 936,446 935,301 TTM 10/31/97 679,536 836,648
44,896 1,160,143 1,132,565 TTM 11/30/97 1,100,559 663,131
24 758,555 818,404 TTM 11/30/97 837,952 643,000
24,490 1,773,681 1,848,041 TTM 10/31/97 1,789,397 566,228
161 3/11/98 299,650
49,292 1,584,281 1,731,678 YTD 12/31/97 1,672,408 514,788
32 543,315 551,676 YTD 12/31/97 537,727 442,765
42,231 315,377 336,601 TTM 11/30/97 315,962 206,210
21,292 244,404 260,395 TTM 11/30/97 258,685 137,398
24,532 173,155 181,622 TTM 11/30/97 180,167 110,636
28,914 732,936 778,618 754,814 454,244
32,219 844,720 872,459 TTM 1/31/98 837,561 448,967
109,006 248,321 YTD 12/31/97 255,700 0
132,934 184,615 213,498 TTM 1/31/98 234,646 126,246
45,696 98,425 123,110 TTM 1/31/98 137,855 50,072
92,510 283,040 584,929 628,201 176,318
12,028 930,427 952,039 TTM 11/30/97 934,458 374,184
14,567 1,091,821 1,060,307 YTD 12/31/97 1,100,491 471,622
50 853,983 950,445 YTD 12/31/97 971,484 472,342
24,960 594,972 601,659 TTM 10/31/97 623,723 410,684
47 522,807 514,950 YTD 12/25/97 490,867 412,719
26,928 895,238 902,737 YTD 12/31/97 908,720 523,945
264 10/1/97 280,689
22,502 702,396 729,269 YTD 12/31/97 729,709 390,706
27,609 697,034 752,020 YTD 12/31/97 804,341 328,560
44 10/11/97 285,000
37 585,513 596,857 YTD 12/31/97 596,080 386,364
9,309 644,536 695,506 TTM 11/30/97 695,506 349,151
19,252 642,793 626,103 YTD 12/31/97 634,453 358,979
45 496,244 508,468 YTD 12/31/97 504,986 384,544
19,007 684,431 695,700 YTD 12/31/97 695,700 362,748
30 10/11/97 268,488
30 423,002 471,361 YTD 12/31/97 478,742 322,746
30,929 518,682 514,581 YTD 12/31/97 507,078 330,136
149,765 383,032 459,620 YTD 12/31/97 488,200 259,559
29,885 562,897 624,278 YTD 12/31/97 627,993 308,219
65 468,747 TTM 1/31/98 454,783 0
26,500 795,271 787,667 YTD 12/31/97 819,296 454,970
12,668 1,144,504 1,115,381 YTD 12/31/97 1,223,908 480,124
20,600 346,826 338,572 YTD 12/31/97 340,307 194,002
19,504 181,839 188,704 YTD 12/31/97 182,481 109,845
19,768 109,000 113,300 YTD 12/31/97 114,627 65,488
20,131 637,665 640,576 637,415 369,335
46,372 486,715 498,154 TTM 11/30/97 507,154 284,298
26,987 503,976 513,462 YTD 12/31/97 505,070 316,194
24,395 1,160,025 1,162,396 TTM 10/31/97 1,162,463 445,559
12,311 515,367 534,663 Ann. 11mo. 517,616 356,020
52,513 493,906 466,758 YTD 12/31/97 445,690 338,505
63 584,181 617,479 YTD 12/31/97 598,439 442,720
249,729 402,869 406,869 TTM 11/30/97 413,852 324,268
18,822 2,609,159 2,748,216 YTD 12/31/97 2,547,318 689,204
27,493 584,801 686,957 YTD 12/31/97 668,975 330,252
15,104 564,570 605,943 YTD 12/31/97 624,088 312,849
9,959 419,149 472,745 YTD 12/31/97 500,030 239,094
42,707 451,083 483,658 YTD 12/31/97 478,059 270,166
24,235 1,483,616 1,570,279 YTD 12/31/97 1,499,046 653,622
91 456,905 467,462 TTM 10/31/97 466,631 352,250
117 185,327 381,954 YTD 12/31/97 364,377 161,846
25,731 543,843 526,965 Ann. 11mo. 550,182 329,823
20 3/11/98 224,043
22,089 609,146 596,210 TTM 11/30/97 606,394 301,347
33 507,472 498,755 TTM 11/30/97 439,074 377,539
23,896 590,922 602,257 TTM 9/30/97 600,622 261,478
24,025 1,173,303 TTM 1/31/98 1,160,289 0
42 475,556 477,384 YTD 12/31/97 470,853 350,180
9,868 663,995 709,197 YTD 12/31/97 692,892 361,553
36,048 1,099,742 1,070,591 YTD 12/31/97 1,050,582 468,228
20,450 612,759 597,156 TTM 10/31/97 638,575 275,204
21,130 575,822 586,140 TTM 11/30/97 602,308 257,875
9,804 843,173 877,635 TTM 10/31/97 903,193 335,492
39,770 400,515 410,455 YTD 12/31/97 390,450 260,936
32,762 852,584 865,613 TTM 7/31/97 846,231 368,722
19,444 1,214,894 1,415,648 TTM 10/31/97 1,305,212 343,621
36 400,761 442,116 YTD 12/31/97 431,064 348,168
44 514,101 532,610 TTM 1/31/98 509,015 358,142
10,370 550,834 570,312 TTM 8/31/97 562,055 290,664
56 300,075 333,952 YTD 12/31/97 327,234 224,902
12,175 361,400 393,710 YTD 11/30/97 390,105 192,812
8,118 1,122,622 1,103,075 YTD 12/25/97 1,127,120 410,589
23,551 459,837 478,987 TTM 9/30/97 484,385 312,954
25,962 1,135,812 1,152,643 YTD 12/31/97 1,127,629 429,109
85 146,725 342,397 YTD 12/31/97 337,324 130,069
20,000 1,246,952 1,327,161 TTM 10/31/97 1,276,285 354,566
17,179 537,242 571,029 YTD 12/31/97 587,017 278,287
13,308 562,952 591,806 YTD 12/31/97 611,511 215,363
39,200 438,312 426,293 YTD 12/31/97 433,002 322,410
9,183 771,717 820,556 YTD 12/31/97 872,604 265,800
63,333 358,100 406,281 TTM 1/31/98 408,476 207,073
97 361,230 377,667 YTD 12/31/97 389,040 249,863
35,098 328,642 313,721 Ann. 11mo. 312,207 246,490
25 3/11/98 185,131
34 109,454 328,363 YTD 12/31/97 416,639 103,265
15,198 497,812 517,922 YTD 12/31/97 511,120 347,154
85 393,531 398,094 YTD 12/31/97 381,150 279,025
23,026 510,113 512,996 TTM 11/30/97 499,540 231,129
19,167 419,724 394,728 YTD 12/31/97 406,423 245,381
66 277,219 265,540 YTD 12/31/97 272,544 215,362
47,080 375,566 383,662 YTD 12/31/97 385,094 233,882
36 552,645 575,172 YTD 12/31/97 565,448 275,013
24,204 187,415 213,944 YTD 12/31/97 224,404 73,961
18,637 111,251 121,298 YTD 12/31/97 124,055 54,048
17,572 100,204 96,396 YTD 12/31/97 98,935 52,332
20,746 398,870 431,638 447,394 180,341
16,275 1,748,531 1,878,557 YTD 12/31/97 1,786,988 507,310
12,893 309,049 459,813 YTD 12/31/97 487,109 124,203
17,167 416,258 421,885 YTD 12/31/97 422,175 198,799
41,594 287,598 304,189 TTM 10/31/97 289,030 198,199
32 295,869 319,442 YTD 12/31/97 290,283 203,192
18 267,027 286,671 YTD 12/31/97 286,671 209,236
20,731 352,118 382,330 YTD 12/31/97 400,773 116,904
71 234,943 Ann. 3/97-12/97 224,160 0
60 283,871 308,338 YTD 12/31/97 328,140 189,216
25 355,118 365,204 YTD 12/31/97 352,520 221,319
95 259,249 Ann. 3/97-1/98 277,801 0
22,577 671,264 TTM 7/31/97 671,264 0
23 295,642 327,868 YTD 12/31/97 351,345 216,777
87 291,775 287,280 YTD 12/31/97 283,123 234,141
29,282 491,266 476,534 Ann. 9mo. 469,532 227,551
26,620 223,355 231,947 TTM 10/31/97 230,952 159,100
44,316 233,323 241,964 TTM 9/30/97 244,045 173,283
11 318,548 352,460 YTD 12/31/97 345,848 290,409
22,549 250,128 271,183 YTD 12/31/97 275,890 122,344
35,082 180,689 229,937 YTD 12/31/97 211,165 126,746
7,874 218,051 225,266 TTM 7/31/97 220,238 139,464
153 193,500 191,511 YTD 12/31/97 192,854 184,466
36,667 270,664 Ann. 4/97-1/98 259,935 0
27,407 267,035 275,543 YTD 12/31/97 275,967 142,847
44,297 190,438 197,247 YTD 12/31/97 212,862 119,797
16,973 395,594 402,707 TTM 11/30/97 315,393 252,366
21,715 276,959 267,603 YTD 12/31/97 276,807 157,444
5,836 265,682 288,748 TTM 6/30/97 311,363 101,467
12,469 207,860 225,505 TTM 10/31/97 238,592 142,594
16,000 295,501 324,097 YTD 12/31/97 340,629 70,944
28,949 203,390 233,301 Ann. 11mo. 240,389 125,248
47,368 168,901 183,851 YTD 12/31/97 182,384 108,099
11,151 348,065 333,443 YTD 12/31/97 357,423 130,039
10,985 164,959 171,076 YTD 12/31/97 164,137 98,102
<PAGE>
<CAPTION>
1997 UNDERWRITTEN NET CASH NOI NET CASH
NOI NOI FLOW DSCR FLOW DSCR LOCK BOX VALUE LTV
--- --- ---- ---- -------- -------- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C>
$ 20,695,362 $ 19,525,313 $ 18,708,894 1.36 1.30 Hard $ 265,000,000 67%
5,803,000 5,263,111 4,753,519 2.62 2.20 39,000,000 50%
4,620,710 3,944,787 3,369,073 2.62 2.20 31,500,000 50%
3,742,210 3,388,681 2,887,638 2.62 2.20 18,600,000 50%
3,132,590 3,052,531 2,596,470 2.62 2.20 22,800,000 50%
2,488,615 2,259,363 2,006,063 2.62 2.20 16,600,000 50%
2,246,500 2,233,475 1,868,475 2.62 2.20 26,600,000 50%
2,426,835 2,453,800 2,037,850 2.62 2.20 27,500,000 50%
2,274,145 2,056,251 1,763,601 2.62 2.20 17,000,000 50%
2,531,015 2,346,328 1,896,783 2.62 2.20 17,000,000 50%
1,806,565 1,796,598 1,434,548 2.62 2.20 14,000,000 50%
1,362,275 1,369,275 1,182,525 2.62 2.20 9,100,000 50%
1,101,880 1,105,874 864,274 2.62 2.20 14,300,000 50%
1,035,190 1,038,543 670,243 2.62 2.20 17,000,000 50%
530,930 887,102 715,092 2.62 2.20 8,000,000 50%
374,485 363,085 166,635 2.62 2.20 7,000,000 50%
------- ------- ------- ---- ---- --------- ---
35,476,945 33,558,803 28,212,789 2.62 2.20 HARD 286,000,000 50%
32,890,411 33,079,647 32,024,147 1.31 1.27 Soft 410,000,000 69%
5,133,672 4,220,828 3,999,873 1.92 1.77 53,700,000 47%
2,487,925 2,487,085 2,317,717 1.92 1.77 29,000,000 47%
1,805,168 1,681,744 1,568,179 1.92 1.77 21,000,000 47%
1,759,350 1,541,966 1,445,829 1.92 1.77 20,000,000 47%
1,503,542 1,592,756 1,455,306 1.92 1.77 17,200,000 47%
1,558,658 1,482,375 1,349,885 1.92 1.77 15,400,000 47%
1,364,849 1,470,204 1,363,279 1.92 1.77 15,600,000 47%
1,204,997 1,197,703 1,103,608 1.92 1.77 13,300,000 47%
1,072,388 1,020,865 954,725 1.92 1.77 12,400,000 47%
1,048,878 921,971 856,924 1.92 1.77 11,000,000 47%
818,320 936,887 848,712 1.92 1.77 10,900,000 47%
971,892 904,061 810,634 1.92 1.77 12,400,000 47%
746,047 756,509 698,101 1.92 1.77 10,100,000 47%
707,607 697,000 616,798 1.92 1.77 9,200,000 47%
904,266 664,543 608,497 1.92 1.77 9,600,000 47%
607,138 527,794 475,056 1.92 1.77 6,900,000 47%
623,282 576,016 513,739 1.92 1.77 7,200,000 47%
731,631 540,219 428,333 1.92 1.77 9,100,000 47%
396,914 310,345 267,634 1.92 1.77 4,800,000 47%
------- ------- ------- ---- ---- --------- ---
25,446,524 23,530,871 21,682,829 1.92 1.77 HARD 288,800,000 47%
1,813,260 1,813,260 1.00 1.00 18,000,000 100%
1,591,644 1,591,644 1.00 1.00 15,800,000 100%
1,420,392 1,420,392 1.00 1.00 14,100,000 100%
1,218,912 1,218,912 1.00 1.00 12,100,000 100%
1,138,320 1,138,320 1.00 1.00 11,300,000 100%
876,408 876,408 1.00 1.00 8,700,000 100%
815,964 815,964 1.00 1.00 8,100,000 100%
685,008 685,008 1.00 1.00 6,800,000 100%
654,792 654,792 1.00 1.00 6,500,000 100%
392,868 392,868 1.00 1.00 3,900,000 100%
------- ------- ---- ---- --------- ----
10,607,568 10,607,568 1.00 1.00 HARD 105,300,000 100%
13,751,585 14,233,843 12,196,058 1.62 1.39 Hard 143,000,000 70%
20,427,592 20,356,970 19,880,511 1.21 1.18 Hard 243,000,000 75%
32,854,036 30,571,197 26,297,934 2.12 1.82 Hard 288,000,000 57%
3,641,319 3,445,284 3,120,622 1.67 1.48 35,500,000 56%
1,730,258 1,651,813 1,451,682 1.67 1.48 24,300,000 56%
1,453,066 1,380,153 1,276,891 1.67 1.48 11,650,000 56%
1,260,451 1,197,316 1,045,402 1.67 1.48 10,750,000 56%
1,294,493 1,137,217 1,006,116 1.67 1.48 12,050,000 56%
745,391 487,839 424,590 1.67 1.48 5,800,000 56%
391,400 347,699 299,078 1.67 1.48 3,400,000 56%
392,111 355,695 291,816 1.67 1.48 5,450,000 56%
372,404 308,734 260,392 1.67 1.48 2,800,000 56%
337,747 301,506 251,433 1.67 1.48 4,250,000 56%
376,736 286,051 235,547 1.67 1.48 4,200,000 56%
------- ------- ------- ---- ---- --------- ---
11,995,376 10,899,307 9,663,569 1.67 1.48 HARD 120,150,000 56%
9,710,480 9,312,809 8,590,294 1.59 1.47 Hard 122,300,000 53%
7,434,910 5,689,650 5,577,665 1.21 1.19 Hard 88,000,000 72%
6,017,198 5,919,933 5,664,933 1.20 1.15 Soft 75,000,000 75%
7,772,819 6,753,338 6,142,349 1.32 1.20 Hard 78,000,000 71%
8,089,156 6,277,001 6,135,562 1.79 1.64 79,272,000 55%
3,271,096 2,746,390 2,123,202 1.79 1.64 17,728,000 55%
11,360,252 9,023,391 8,258,764 1.79 1.64 HARD 97,000,000 55%
7,352,911 7,418,827 6,954,214 1.54 1.44 Hard 80,000,000 65%
5,314,835 5,900,189 5,629,971 1.22 1.17 Hard 70,000,000 74%
6,241,093 6,629,940 5,865,353 1.41 1.25 Hard 87,400,000 58%
4,487,060 4,113,138 3,902,959 1.34 1.26 48,000,000 71%
0 1,770,124 1,642,639 1.34 1.26 19,500,000 71%
- --------- --------- ---- ---- ---------- ---
4,487,060 5,883,262 5,545,598 1.34 1.26 HARD 67,500,000 71%
2,495,611 2,506,966 2,083,224 1.88 1.58 27,000,000 59%
2,271,569 2,235,971 1,902,753 1.88 1.58 17,250,000 59%
966,435 1,138,021 1,005,636 1.88 1.58 9,700,000 59%
1,044,191 1,208,647 951,898 1.88 1.58 9,570,000 59%
902,154 883,263 774,638 1.88 1.58 7,700,000 59%
783,601 1,024,895 840,909 1.88 1.58 6,200,000 59%
------- --------- ------- ---- ---- --------- ---
8,463,561 8,997,763 7,559,058 1.88 1.58 HARD 77,420,000 59%
4,877,694 5,679,819 5,375,922 1.46 1.38 Hard 58,500,000 73%
2,154,092 2,097,014 1,913,236 1.63 1.48 24,700,000 68%
1,650,128 1,751,314 1,585,990 1.63 1.48 17,400,000 68%
1,819,349 1,733,657 1,558,730 1.63 1.48 19,000,000 68%
--------- --------- --------- ---------- ---
5,623,569 5,581,985 5,057,956 1.63 1.48 HARD 61,100,000 68%
2,897,668 2,875,145 2,728,651 1.33 1.27 22,914,000 71%
0 806,400 806,400 1.33 1.27 13,965,000 71%
914,941 784,244 725,491 1.33 1.27 10,586,000 71%
0 609,062 609,062 1.33 1.27 10,535,000 71%
- ------- ------- ----------
3,812,609 5,074,851 4,869,604 1.33 1.27 HARD 58,000,000 71%
2,317,993 1,955,495 1,751,009 2.76 2.41 18,100,000 40%
1,827,242 1,628,871 1,426,795 2.76 2.41 16,600,000 40%
1,642,190 1,513,940 1,335,736 2.76 2.41 15,600,000 40%
1,495,756 1,305,777 1,132,808 2.76 2.41 14,900,000 40%
1,014,782 854,349 735,029 2.76 2.41 8,500,000 40%
947,859 850,307 739,825 2.76 2.41 8,000,000 40%
762,902 735,524 632,302 2.76 2.41 8,800,000 40%
1,007,625 824,856 708,823 2.76 2.41 8,400,000 40%
--------- ------- ------- ---------
11,016,349 9,669,118 8,462,327 2.76 2.41 HARD 98,900,000 40%
5,371,130 4,933,100 4,408,033 1.35 1.20 Hard 54,000,000 73%
3,123,640 3,256,646 2,858,602 1.67 1.45 30,000,000 75%
2,438,192 2,635,880 2,259,705 1.67 1.45 22,000,000 75%
--------- --------- --------- ----------
5,561,832 5,892,526 5,118,307 1.67 1.45 HARD 52,000,000 75%
6,072,106 6,126,856 6,126,856 2.13 2.13 Soft 80,000,000 45%
4,893,349 4,769,426 4,459,099 1.54 1.44 Hard 51,000,000 70%
5,529,946 4,949,478 3,844,539 1.71 1.33 Hard 53,000,000 59%
1,049,383 1,001,580 889,559 1.90 1.62 8,900,000 53%
810,030 784,538 690,367 1.90 1.62 7,500,000 53%
656,555 596,008 507,540 1.90 1.62 8,600,000 53%
809,870 741,830 644,073 1.90 1.62 6,400,000 53%
536,799 482,502 403,941 1.90 1.62 5,900,000 53%
630,072 524,981 433,389 1.90 1.62 5,600,000 53%
581,211 525,187 447,333 1.90 1.62 5,400,000 53%
299,548 273,568 212,992 1.90 1.62 3,300,000 53%
533,962 510,051 428,151 1.90 1.62 4,600,000 53%
------- ------- ------- ---------
5,907,430 5,440,245 4,657,345 1.90 1.62 HARD 56,200,000 53%
4,966,941 5,264,472 4,435,508 1.69 1.43 Hard 60,000,000 49%
826,200 879,088 758,778 1.64 1.44 10,100,000 61%
828,224 883,113 770,704 1.64 1.44 7,500,000 61%
947,742 960,808 831,655 1.64 1.44 8,200,000 61%
849,091 792,056 701,876 1.64 1.44 7,800,000 61%
703,437 713,932 634,456 1.64 1.44 6,400,000 61%
722,785 755,078 667,276 1.64 1.44 7,100,000 61%
------- ------- ------- ---------
4,877,479 4,984,073 4,364,745 1.64 1.44 HARD 47,100,000 61%
3,944,644 3,436,504 3,213,870 1.31 1.22 Hard 43,500,000 65%
5,935,419 5,527,045 4,403,445 1.87 1.49 Hard 53,500,000 53%
3,206,322 3,030,853 2,772,151 1.40 1.28 Hard 33,000,000 71%
2,996,321 3,148,577 2,935,095 1.52 1.41 Hard 31,100,000 72%
2,783,612 4,066,917 3,105,987 1.95 1.49 Hard 33,400,000 65%
2,444,769 2,434,675 2,356,425 1.37 1.33 No 27,280,000 79%
2,307,628 2,337,303 2,258,480 1.24 1.20 Soft 27,000,000 76%
1,185,832 1,266,880 1,170,880 1.38 1.29 14,500,000 73%
1,092,130 1,189,540 1,125,877 1.38 1.29 13,330,000 73%
--------- --------- --------- ----------
2,277,962 2,456,420 2,296,757 1.38 1.29 SOFT 27,830,000 73%
1,899,320 1,899,320 1.00 1.00 Hard 21,400,000 94%
2,524,441 2,360,802 2,278,167 1.28 1.24 Hard 25,000,000 80%
2,755,644 2,476,605 2,401,605 1.36 1.32 Hard 28,500,000 70%
17,048,273 15,757,771 14,094,736 2.14 1.92 Hard 120,000,000 58%
1,820 1,820,000 1.00 1.00 Hard 18,500,000 99%
3,008,013 2,490,943 2,107,407 1.48 1.26 Hard 28,700,000 63%
2,134,479 2,100,137 1,975,137 1.45 1.36 No 22,750,000 78%
2,980,405 2,490,635 2,263,154 1.55 1.41 Hard 25,250,000 69%
1,680,871 1,680,871 1.00 1.00 Hard 18,000,000 96%
4,350,462 3,507,531 2,883,956 2.12 1.74 Hard 30,300,000 56%
2,550,978 2,414,291 2,310,791 1.66 1.59 No 26,000,000 64%
2,012,527 1,994,393 1,823,893 1.40 1.28 Soft 22,000,000 74%
810,348 1,157,967 1,049,862 1.91 1.70 14,900,000 52%
983,052 1,051,215 909,801 1.91 1.70 11,200,000 52%
358,656 370,824 327,555 1.91 1.70 4,800,000 52%
------- ------- ------- ---------
2,152,056 2,580,006 2,287,218 1.91 1.70 HARD 30,900,000 52%
1,963,263 1,878,766 1,777,506 1.41 1.34 Hard 21,600,000 74%
2,260,147 2,021,730 1,756,099 1.60 1.39 Hard 21,100,000 71%
1,693,854 1,780,972 1,708,972 1.42 1.36 No 19,800,000 76%
2,137,995 1,975,015 1,779,986 1.52 1.37 No 20,500,000 72%
1,926,597 1,806,305 1,702,705 1.53 1.44 No 29,100,000 50%
0 942,928 950,000 1.01 1.01 9,700,000 100%
0 406,944 410,000 1.01 1.01 4,600,000 100%
- ------- ------- ---------
0 1,349,872 1,360,000 1.01 1.01 HARD 14,300,000 100%
1,914,830 1,219,031 1,154,691 1.30 1.23 Hard 21,500,000 66%
1,692,111 1,745,872 1,655,267 1.47 1.39 Hard 18,500,000 76%
2,675,268 2,427,957 2,001,504 1.66 1.37 Soft 22,300,000 62%
0 105,280 1,263,360 1.00 1.00 Hard 13,400,000 99%
1,011,696 1,146,822 1,060,322 1.82 1.70 11,000,000 70%
748,196 829,944 781,944 1.82 1.70 7,820,000 70%
------- ------- ------- ---------
1,759,892 1,976,766 1,842,266 1.82 1.70 SOFT 18,820,000 70%
1,527,144 1,554,202 1,450,855 1.43 1.33 Soft 17,000,000 78%
1,230,870 1,230,870 1.00 1.00 Hard 13,900,000 94%
1,611,119 1,529,856 1,430,802 1.36 1.28 Soft 18,000,000 72%
1,212,430 1,212,430 1.00 1.00 Hard 13,500,000 95%
1,653,260 1,596,965 1,562,015 1.53 1.49 No 17,950,000 71%
1,604,310 1,643,379 1,554,884 1.56 1.48 Soft 17,300,000 73%
1,649,538 1,601,702 1,303,932 1.41 1.15 No 16,750,000 73%
1,439,526 1,296,535 1,259,285 1.30 1.26 Hard 15,900,000 75%
1,341,733 1,309,500 1,289,700 1.22 1.20 Hard 15,100,000 77%
1,536,757 1,407,476 1,306,429 1.33 1.24 Hard 18,100,000 64%
1,235,535 1,364,547 1,268,886 1.31 1.22 Hard 15,000,000 75%
1,314,128 1,315,066 1,260,310 1.32 1.26 Hard 14,300,000 76%
1,543,833 1,529,580 1,423,395 1.55 1.44 Hard 16,500,000 65%
1,357,981 1,446,740 1,290,730 1.61 1.44 No 17,700,000 59%
1,571,789 1,471,182 1,452,432 1.38 1.37 Hard 15,000,000 68%
1,403,883 1,402,586 1,311,723 1.54 1.44 No 15,500,000 65%
2,219,584 1,717,005 1,295,623 1.84 1.39 Hard 14,700,000 69%
644,050 623,344 556,530 1.47 1.32 5,600,000 84%
405,449 397,417 374,947 1.47 1.32 3,300,000 84%
189,431 193,520 162,218 1.47 1.32 2,000,000 84%
47,326 44,337 33,528 1.47 1.32 500,000 84%
43,085 42,699 34,832 1.47 1.32 500,000 84%
------ ------ ------ -------
1,329,341 1,301,317 1,162,055 1.47 1.32 HARD 11,900,000 84%
1,101,658 1,277,552 1,161,178 1.56 1.42 No 13,680,000 73%
1,422,506 1,342,789 1,219,960 1.53 1.39 Soft 13,460,000 74%
1,116,594 1,321,454 1,186,126 1.54 1.38 No 13,850,000 72%
1,418,448 1,203,788 1,029,838 1.47 1.26 12,200,000 64%
144,500 132,696 120,123 1.47 1.26 3,200,000 64%
------- ------- ------- ---------
1,562,948 1,336,484 1,149,961 1.47 1.26 HARD 15,400,000 64%
898,950 898,950 1.00 1.00 Hard 10,100,000 94%
1,400,876 1,192,981 1,056,929 1.49 1.32 Soft 13,700,000 69%
1,826,458 1,545,885 1,345,335 1.55 1.35 No 15,400,000 62%
1,220,100 1,144,785 1,043,213 1.38 1.26 Hard 12,300,000 76%
1,149,178 1,196,288 1,131,288 1.55 1.46 No 13,300,000 70%
2,159,778 1,876,686 1,657,258 2.28 2.01 No 14,900,000 60%
1,235,716 1,130,779 1,065,160 1.37 1.29 Hard 12,200,000 73%
1,064,025 1,024,106 931,106 1.40 1.27 Soft 11,800,000 71%
1,165,021 923,340 849,929 1.15 1.17 No 11,500,000 72%
1,457,359 1,240,908 989,648 1.64 1.31 Hard 12,800,000 64%
1,034,663 973,334 901,334 1.48 1.37 No 9,450,000 85%
1,134,215 1,101,987 1,000,304 1.51 1.37 No 11,900,000 66%
1,096,590 1,021,997 933,107 1.43 1.31 No 10,725,000 73%
929,168 963,071 905,806 1.55 1.46 No 10,360,000 75%
717,654 736,823 657,073 1.63 1.44 7,480,000 73%
274,213 263,593 225,843 1.63 1.44 2,850,000 73%
------- ------- ------- ---------
991,867 1,000,416 882,916 1.63 1.44 NO 10,330,000 73%
1,151,400 1,061,015 991,076 1.53 1.43 Hard 11,100,000 67%
1,120,344 1,006,260 883,760 1.69 1.48 No 12,500,000 60%
1,075,869 868,189 806,798 1.32 1.22 No 10,035,000 71%
702,418 609,861 531,459 1.62 1.37 5,450,000 72%
465,341 400,540 323,236 1.62 1.37 4,400,000 72%
------- ------- ------- ---------
1,167,759 1,010,401 854,695 1.62 1.37 NO 9,850,000 72%
1,115,271 1,056,690 958,564 1.87 1.70 No 11,650,000 60%
347,906 327,370 269,963 1.67 1.36 3,330,000 65%
279,737 365,284 290,692 1.67 1.36 4,000,000 65%
437,947 380,229 308,028 1.67 1.36 3,400,000 65%
------- ------- ------- ---------
1,065,590 1,072,883 868,683 1.67 1.36 HARD 10,730,000 65%
1,064,777 1,079,192 1,024,711 1.69 1.61 Hard 10,350,000 67%
837,027 873,760 813,010 1.37 1.27 Soft 8,750,000 79%
919,060 910,389 850,389 1.51 1.41 Soft 8,670,000 79%
927,061 826,193 801,421 1.33 1.29 No 9,900,000 68%
686,561 851,267 760,828 1.38 1.24 Hard 12,000,000 56%
796,470 798,123 744,123 1.49 1.39 No 8,900,000 75%
975,061 927,352 888,352 1.73 1.66 No 10,740,000 61%
1,052,385 1,072,829 884,621 1.77 1.46 Hard 9,900,000 66%
996,045 985,071 872,632 1.82 1.62 No 10,850,000 60%
864,987 770,642 753,578 1.28 1.25 Hard 9,000,000 73%
919,793 951,383 892,503 1.63 1.53 No 8,250,000 79%
952,751 947,069 915,128 1.84 1.78 No 9,500,000 68%
930,015 811,443 720,388 1.57 1.39 Hard 8,300,000 77%
798,795 836,050 763,941 1.62 1.48 No 8,150,000 77%
1,423,185 1,256,550 1,103,367 2.20 1.93 No 14,000,000 44%
701,192 724,900 684,900 1.45 1.37 No 7,900,000 77%
1,196,150 1,183,230 1,140,480 2.33 2.25 No 14,800,000 40%
822,673 599,525 531,993 1.91 1.69 4,800,000 74%
543,112 421,611 371,214 1.91 1.69 3,200,000 74%
------- ------- ------- ---------
1,365,785 1,021,135 903,207 1.91 1.69 NO 8,000,000 74%
1,145,683 1,277,529 1,218,490 1.89 1.80 No 15,500,000 38%
926,203 1,012,919 938,919 2.11 1.96 No 9,756,000 61%
730,759 790,511 733,483 1.51 1.40 Soft 7,750,000 77%
651,308 677,335 622,335 1.31 1.20 No 7,800,000 75%
800,178 738,971 697,386 1.38 1.30 Hard 7,900,000 74%
575,125 575,125 1.00 1.00 Hard 6,300,000 92%
762,024 743,183 678,593 1.41 1.29 No 8,150,000 70%
398,180 323,991 281,969 1.80 1.56 3,500,000 47%
315,836 277,768 240,002 1.80 1.56 3,100,000 47%
265,646 213,660 183,588 1.80 1.56 2,425,000 47%
294,841 255,030 222,540 1.80 1.56 3,075,000 47%
------- ------- ------- ---------
1,274,503 1,070,449 928,099 1.80 1.56 NO 12,100,000 47%
689,771 688,963 615,411 1.53 1.37 No 8,130,000 69%
1,139,283 1,007,449 847,422 1.72 1.45 No 8,200,000 68%
779,563 702,085 634,038 1.35 1.22 No 7,510,000 74%
777,876 717,425 643,179 1.27 1.14 No 7,400,000 74%
516,320 516,320 1.00 1.00 Hard 6,700,000 82%
619,568 663,029 588,029 1.41 1.25 Soft 7,175,000 75%
919,287 814,558 627,326 1.72 1.33 No 7,200,000 75%
639,701 675,899 628,399 1.55 1.44 No 6,700,000 80%
951,557 881,340 871,540 2.05 2.02 No 10,000,000 53%
497,880 497,880 1.00 1.00 Hard 5,600,000 94%
713,669 691,859 621,700 1.61 1.45 No 6,600,000 79%
496,405 472,793 431,634 1.48 1.32 4,475,000 77%
222,993 196,897 165,897 1.48 1.32 2,300,000 77%
------- ------- ------- ---------
719,398 669,690 597,531 1.48 1.32 NO 6,775,000 77%
793,906 816,848 764,098 1.98 1.85 No 9,000,000 58%
922,973 915,108 452,302 1.36 1.40 No 8,900,000 58%
634,081 621,724 578,973 1.45 1.35 No 6,400,000 80%
494,746 494,746 1.00 1.00 Hard 5,300,000 96%
489,468 489,464 1.00 1.00 Hard 5,240,000 96%
669,083 608,938 573,438 1.47 1.39 Soft 6,300,000 79%
806,051 793,897 767,447 1.96 1.90 No 8,950,000 56%
779,419 593,209 539,806 1.47 1.34 Soft 7,100,000 68%
556,427 604,618 549,618 1.44 1.31 No 6,300,000 76%
462,195 462,195 1.00 1.00 Hard 4,950,000 96%
586,802 572,448 535,948 1.52 1.42 No 5,800,000 80%
447,570 447,570 1.00 1.00 Hard 4,790,000 96%
643,133 588,819 521,370 1.52 1.35 No 5,900,000 78%
424,145 424,120 1.00 1.00 Hard 4,800,000 94%
665,905 639,969 626,769 1.75 1.71 No 6,700,000 67%
0 592,800 499,898 1.58 1.33 Soft 6,000,000 74%
620,853 691,815 573,851 1.77 1.46 No 6,900,000 64%
521,494 494,294 483,994 1.37 1.34 No 5,750,000 76%
420,494 420,494 1.00 1.00 Hard 4,500,000 96%
405,704 405,680 1.00 1.00 Hard 4,570,000 94%
622,497 587,612 470,064 1.58 1.27 No 5,760,000 74%
499,883 509,699 466,949 1.40 1.29 No 5,450,000 77%
505,844 501,216 462,216 1.42 1.31 No 5,850,000 72%
1,015,660 859,344 713,990 2.24 1.86 Hard 7,600,000 55%
272,605 252,248 221,454 1.59 1.42 2,650,000 75%
257,715 220,838 200,936 1.59 1.42 2,000,000 75%
125,796 100,337 90,153 1.59 1.42 900,000 75%
------- ------- ------ ---- ---- -------
656,116 573,423 512,543 1.59 1.42 HARD 5,550,000 75%
728,125 659,223 563,179 1.71 1.46 No 6,220,000 66%
660,437 577,414 512,285 1.58 1.40 No 5,200,000 78%
382,630 382,630 1.00 1.00 Hard 4,300,000 94%
745,148 737,603 628,412 2.06 1.75 Hard 6,300,000 64%
818,954 828,256 693,959 2.37 1.98 No 8,000,000 50%
452,637 573,634 529,134 1.70 1.57 No 5,400,000 72%
520,997 532,734 455,984 1.65 1.41 No 4,650,000 83%
587,242 500,895 481,895 1.58 1.52 No 5,500,000 69%
474,033 441,891 432,041 1.40 1.37 No 4,825,000 78%
465,522 479,907 445,495 1.52 1.41 Soft 4,590,000 82%
458,577 517,934 471,934 1.56 1.42 No 5,350,000 69%
1,022,672 1,085,197 902,228 2.96 2.46 No 12,750,000 29%
540,022 472,869 430,647 1.55 1.42 No 4,700,000 77%
423,996 412,882 400,942 1.24 1.21 Hard 5,000,000 72%
548,704 504,117 434,827 1.53 1.32 No 5,250,000 68%
464,713 442,591 385,669 1.48 1.29 No 4,800,000 74%
460,765 483,059 434,059 1.55 1.39 No 4,750,000 74%
698,440 632,465 535,121 2.00 1.69 No 5,400,000 65%
1,056,104 886,954 722,307 3.10 2.52 Hard 9,000,000 39%
453,868 524,856 459,356 1.76 1.54 No 5,000,000 70%
475,782 456,870 431,620 1.37 1.30 No 5,000,000 70%
1,388,448 864,939 755,523 2.49 2.18 No 7,900,000 44%
489,247 538,328 474,345 1.76 1.55 No 5,075,000 68%
573,648 479,038 413,148 1.70 1.47 No 5,250,000 64%
459,184 457,952 402,544 1.47 1.30 No 4,500,000 75%
497,491 476,168 418,320 1.64 1.44 No 4,600,000 71%
445,110 438,421 408,921 1.65 1.54 No 4,500,000 72%
423,213 421,644 406,394 1.47 1.42 No 4,000,000 81%
456,588 445,795 410,795 1.61 1.48 Soft 4,300,000 75%
421,328 469,419 413,419 1.74 1.53 No 4,175,000 77%
837,175 551,218 414,676 1.97 1.48 No 4,700,000 68%
626,760 517,100 462,072 1.67 1.49 No 4,700,000 68%
676,995 694,298 590,477 2.52 2.14 No 5,960,000 53%
674,755 603,244 513,774 1.87 1.59 No 5,590,000 57%
299,650 299,650 1.00 1.00 Hard 3,400,000 93%
625,981 590,510 506,890 1.79 1.53 Hard 6,500,000 49%
428,514 412,281 351,036 1.47 1.25 No 4,400,000 72%
205,980 201,621 193,121 1.53 1.42 1,780,000 80%
101,927 116,579 105,859 1.53 1.42 1,140,000 80%
107,537 109,623 100,023 1.53 1.42 950,000 80%
------- ------- ------- -------
415,444 427,823 399,003 1.53 1.42 NO 3,870,000 80%
467,413 400,666 376,666 1.55 1.45 No 5,100,000 61%
162,781 176,057 166,427 1.52 1.45 2,000,000 67%
169,615 160,870 155,390 1.52 1.45 1,600,000 67%
81,255 83,155 79,305 1.52 1.45 950,000 67%
------ ------ ------ -------
413,651 420,082 401,122 1.52 1.45 NO 4,550,000 67%
379,811 370,452 357,802 1.27 1.23 No 4,250,000 72%
482,443 430,912 378,912 1.64 1.44 No 4,400,000 69%
514,699 518,475 415,264 1.94 1.56 No 4,500,000 67%
403,613 401,048 369,635 1.54 1.42 No 4,275,000 70%
404,478 381,326 349,009 1.49 1.36 No 3,800,000 79%
533,530 523,618 482,822 2.12 1.95 No 5,600,000 53%
280,689 280,668 1.02 1.02 Hard 3,035,000 95%
416,891 414,768 382,768 1.71 1.58 No 3,800,000 76%
352,045 387,164 354,603 1.60 1.47 No 3,650,000 79%
285,000 285,000 1.00 1.00 Hard 2,900,000 99%
420,893 373,211 332,307 1.50 1.33 No 4,000,000 71%
385,839 343,957 328,957 1.36 1.30 No 3,600,000 78%
315,720 322,408 286,108 1.38 1.22 Soft 3,650,000 76%
390,444 390,118 338,276 1.54 1.34 No 3,500,000 80%
370,422 351,842 344,542 1.51 1.48 No 3,550,000 78%
268,488 268,488 1.00 1.00 Hard 2,870,000 96%
365,708 356,396 298,089 1.50 1.25 No 3,710,000 74%
323,954 308,761 286,761 1.41 1.31 No 3,500,000 78%
333,143 349,731 340,488 1.47 1.43 No 4,200,000 64%
338,938 339,806 317,306 1.45 1.36 No 3,690,000 73%
376,342 359,808 307,080 1.42 1.21 No 3,700,000 72%
460,769 487,739 462,739 2.36 2.24 No 5,150,000 51%
384,306 456,034 404,784 2.13 1.89 No 4,000,000 65%
187,554 168,367 151,367 1.59 1.43 1,800,000 80%
120,952 102,961 93,711 1.59 1.43 800,000 80%
64,347 60,893 54,893 1.59 1.43 630,000 80%
------ ------ ------ -------
372,853 332,221 299,971 1.59 1.43 SOFT 3,230,000 80%
329,916 301,894 287,894 1.47 1.40 Soft 3,300,000 79%
310,180 312,247 288,247 1.38 1.28 No 3,500,000 74%
444,229 431,906 373,783 1.68 1.45 No 3,860,000 66%
378,197 346,745 336,445 1.43 1.39 No 3,700,000 69%
309,878 284,668 272,668 1.36 1.31 No 3,800,000 66%
473,674 444,663 394,427 2.05 1.82 No 4,700,000 53%
333,741 311,831 301,092 1.37 1.32 No 3,500,000 71%
823,840 633,705 506,339 2.60 2.08 No 4,400,000 56%
362,889 327,147 322,697 1.36 1.34 No 3,470,000 71%
393,509 386,936 346,936 1.59 1.43 No 3,250,000 74%
290,044 300,307 288,257 1.52 1.46 No 3,350,000 72%
326,647 318,082 301,544 1.51 1.43 No 3,200,000 75%
659,799 514,912 439,960 2.09 1.79 No 4,200,000 57%
407,921 352,523 318,513 1.58 1.43 No 3,500,000 68%
346,601 309,081 288,223 1.38 1.29 No 3,270,000 72%
317,788 334,584 311,584 1.76 1.64 No 3,525,000 67%
224,043 224,043 1.00 1.00 Hard 2,400,000 96%
338,656 293,745 267,155 1.56 1.42 No 2,900,000 79%
366,256 299,015 266,335 1.42 1.26 No 3,400,000 67%
281,990 267,992 243,992 1.35 1.23 No 3,200,000 72%
557,841 428,283 370,269 1.79 1.55 No 3,350,000 68%
360,321 323,124 284,898 1.50 1.33 No 3,100,000 73%
404,519 386,505 375,105 1.82 1.76 No 4,100,000 55%
413,987 369,712 317,183 1.66 1.42 No 3,600,000 62%
255,059 294,865 267,865 1.51 1.37 No 3,100,000 71%
347,936 289,536 262,199 1.51 1.37 Soft 3,055,000 72%
383,824 388,747 332,747 2.15 1.84 No 3,300,000 67%
279,386 235,611 221,861 1.36 1.28 No 2,700,000 81%
398,222 390,474 348,162 1.77 1.58 No 2,900,000 73%
524,479 406,327 341,066 1.93 1.62 No 3,200,000 66%
380,541 344,944 305,032 1.81 1.60 No 3,200,000 65%
374,734 353,838 298,064 1.77 1.50 No 3,000,000 70%
304,705 259,316 249,266 1.40 1.34 No 2,900,000 72%
266,038 251,313 225,455 1.46 1.31 No 2,775,000 75%
225,640 223,562 215,112 1.32 1.27 No 2,800,000 73%
281,644 312,125 243,763 1.75 1.37 No 2,675,000 76%
336,009 307,806 286,306 1.82 1.70 No 2,750,000 74%
434,858 350,373 330,873 1.93 1.82 No 3,900,000 52%
290,428 252,750 226,178 1.48 1.32 No 2,600,000 78%
396,480 361,668 297,854 2.03 1.67 No 3,500,000 57%
322,112 257,779 228,779 1.49 1.33 No 2,700,000 74%
222,915 268,057 230,807 1.44 1.24 No 2,550,000 78%
316,029 256,932 244,432 1.57 1.49 No 2,700,000 73%
296,891 311,356 250,740 1.86 1.49 No 3,790,000 50%
253,962 241,254 230,354 1.46 1.39 No 2,400,000 79%
250,686 248,281 215,853 1.43 1.25 No 2,800,000 68%
235,271 212,493 198,993 1.26 1.18 No 2,250,000 84%
185,131 185,131 1.00 1.00 Hard 4,800,000 39%
309,796 307,050 262,382 1.95 1.66 No 3,675,000 49%
368,700 340,760 334,860 2.21 2.18 No 4,000,000 45%
283,776 250,256 225,494 1.57 1.41 No 2,875,000 62%
241,152 220,135 216,335 1.41 1.38 No 2,200,000 80%
223,795 226,424 203,924 1.61 1.45 No 2,400,000 72%
203,291 207,184 178,659 1.44 1.24 No 2,225,000 74%
236,773 221,303 191,770 1.49 1.29 No 2,200,000 75%
318,635 297,701 225,037 2.18 1.65 No 2,700,000 59%
110,765 103,214 94,964 1.51 1.37 1,025,000 78%
60,051 61,988 55,988 1.51 1.37 574,000 78%
49,942 42,554 37,554 1.51 1.37 451,000 78%
------ ------ ------ -------
220,758 207,756 188,506 1.51 1.37 NO 2,050,000 78%
487,109 364,544 275,195 2.06 1.56 No 3,300,000 48%
192,871 216,346 186,096 1.61 1.38 No 1,950,000 80%
220,621 196,838 173,862 1.55 1.37 No 2,050,000 75%
216,104 171,061 161,938 1.39 1.31 Soft 1,900,000 79%
211,988 185,512 160,156 1.39 1.20 No 1,900,000 75%
222,469 222,296 180,507 1.76 1.43 No 2,350,000 60%
167,149 179,715 162,715 1.45 1.31 No 1,900,000 74%
213,576 186,221 162,889 1.55 1.35 No 1,760,000 80%
207,033 210,276 174,362 1.68 1.39 No 1,900,000 74%
257,143 212,906 174,786 1.63 1.34 No 2,100,000 66%
182,861 171,807 154,648 1.37 1.23 No 2,140,000 65%
257,148 238,719 205,156 1.76 1.51 No 2,500,000 54%
253,086 269,871 216,585 2.25 1.81 No 2,100,000 64%
222,368 213,413 192,619 1.94 1.75 No 2,100,000 64%
216,640 194,990 183,490 1.73 1.63 No 2,300,000 59%
166,766 152,741 141,491 1.55 1.44 No 1,540,000 78%
177,033 173,404 166,361 1.69 1.63 No 2,175,000 55%
323,410 283,482 235,189 2.22 1.84 No 1,875,000 64%
169,533 155,820 143,070 1.57 1.44 No 1,500,000 77%
175,398 139,256 131,256 1.43 1.35 No 1,500,000 75%
152,700 129,545 122,445 1.39 1.31 No 1,425,000 78%
180,914 169,006 155,963 1.73 1.60 No 1,560,000 71%
171,320 144,437 136,937 1.50 1.43 No 1,500,000 73%
141,464 141,289 131,289 1.44 1.34 No 1,375,000 80%
130,967 132,310 123,265 1.51 1.41 No 1,500,000 71%
262,893 176,503 161,503 1.98 1.82 No 2,200,000 46%
161,895 143,132 131,632 1.64 1.51 No 1,550,000 64%
145,742 135,614 127,064 1.53 1.44 No 1,466,667 68%
155,901 169,006 164,606 1.88 1.83 No 1,300,000 77%
137,850 135,684 120,684 1.65 1.47 No 1,300,000 74%
156,400 140,466 132,466 1.58 1.49 No 1,400,000 66%
122,745 111,949 107,199 1.43 1.36 No 1,200,000 75%
125,530 135,952 116,952 1.91 1.64 No 1,050,000 81%
98,286 84,349 81,399 1.34 1.29 No 870,000 74%
<PAGE>
<CAPTION>
AUDITS/
BALLOON/ AUDIT/ AGREED U/W ACTUAL
ANTICIPATED 1997 1997 AGREED UPON ONGOING ONGOING
REPAYMENT OCCU- OCCUPANCY U/W UPON PROCEDURES CAPITAL CAPITAL RESERVE
DATE PANCY PERIOD OCCUPANCY PROCEDURES FORWARD RESERVE RESERVE UNITS
---- ----- ------ --------- ---------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
59% 92% 2/1/98 91% Yes Yes 0.20 0.20 $psf
41% 76% 11/30/97 75% Yes Yes 5% 5% % revenue
41% 84% 11/30/97 75% Yes Yes 5% 5% % revenue
41% 86% 11/30/97 80% Yes Yes 5% 5% % revenue
41% 65% 11/30/97 65% Yes Yes 5% 5% % revenue
41% 83% 11/30/97 80% Yes Yes 5% 5% % revenue
41% 62% 11/30/97 62% Yes Yes 5% 5% % revenue
41% 69% 11/30/97 69% Yes Yes 5% 5% % revenue
41% 74% 11/30/97 74% Yes Yes 5% 5% % revenue
41% 77% 11/30/97 75% Yes Yes 5% 5% % revenue
41% 74% 11/30/97 74% Yes Yes 5% 5% % revenue
41% 75% 11/30/97 75% Yes Yes 5% 5% % revenue
41% 66% 11/30/97 66% Yes Yes 5% 5% % revenue
41% 56% 11/30/97 56% Yes Yes 5% 5% % revenue
41% 55% 11/30/97 67% Yes Yes 5% 5% % revenue
41% 61% 11/30/97 61% Yes Yes 5% 5% % revenue
---
41%
55% 98% 10/31/97 95% Yes Yes 250 200 $/unit
42% 84% 12/31/97 84% Yes Yes 0.24 0.27 $psf
42% 94% 12/31/97 94% Yes Yes 0.25 0.24 $psf
42% 87% 12/31/97 87% Yes Yes 0.15 0.27 $psf
42% 93% 12/31/97 92% Yes Yes 0.15 0.27 $psf
42% 95% 12/31/97 95% Yes Yes 0.28 0.27 $psf
42% 97% 12/31/97 97% Yes Yes 0.32 0.27 $psf
42% 92% 12/31/97 92% Yes Yes 0.16 0.27 $psf
42% 88% 12/31/97 89% Yes Yes 0.34 0.27 $psf
42% 92% 12/31/97 88% Yes Yes 0.30 0.27 $psf
42% 100% 12/31/97 95% Yes Yes 0.34 0.27 $psf
42% 97% 12/31/97 97% Yes Yes 0.34 0.27 $psf
42% 90% 12/31/97 90% Yes Yes 0.24 0.27 $psf
42% 82% 12/31/97 82% Yes Yes 0.18 0.27 $psf
42% 92% 12/31/97 92% Yes Yes 0.33 0.27 $psf
42% 91% 12/31/97 91% Yes Yes 0.15 0.27 $psf
42% 74% 12/31/97 88% Yes Yes 0.56 0.27 $psf
42% 91% 12/31/97 91% Yes Yes 0.27 0.27 $psf
42% 87% 12/31/97 85% Yes Yes 0.83 0.27 $psf
42% 87% 12/31/97 87% Yes Yes 0.31 0.27 $psf
---
42%
0% 100% 3/1/98 100% Yes Yes 0 0 $psf
0% 100% 3/1/98 100% Yes Yes 0 0 $psf
0% 100% 3/1/98 100% Yes Yes 0 0 $psf
0% 100% 3/1/98 100% Yes Yes 0 0 $psf
0% 100% 3/1/98 100% Yes Yes 0 0 $psf
0% 100% 3/1/98 100% Yes Yes 0 0 $psf
0% 100% 3/1/98 100% Yes Yes 0 0 $psf
0% 100% 3/1/98 100% Yes Yes 0 0 $psf
0% 100% 3/1/98 100% Yes Yes 0 0 $psf
0% 100% 3/1/98 100% Yes Yes 0 0 $psf
--
0%
62% 91% 1/1/98 89% Yes Yes 0.2 0.2 $psf
61% 93% 12/18/97 87% Yes Yes 0.14 0.19 $psf
43% 71% 10/10/97 71% Yes Yes 5% 5% % revenue
47% 99% 2/1/98 95% No Yes 0.15 0.15 $psf
47% 85% 2/1/98 85% No Yes 0.15 0.15 $psf
47% 96% 2/1/98 95% No Yes 0.15 0.15 $psf
47% 94% 2/1/98 94% No Yes 0.15 0.15 $psf
47% 95% 2/1/98 95% No Yes 0.15 0.15 $psf
47% 88% 2/1/98 88% No Yes 0.15 0.15 $psf
47% 96% 2/1/98 96% No Yes 0.15 0.15 $psf
47% 92% 2/1/98 92% No Yes 0.15 0.15 $psf
47% 100% 2/1/98 95% No Yes 0.15 0.15 $psf
47% 93% 2/1/98 93% No Yes 0.15 0.15 $psf
47% 91% 2/1/98 91% No Yes 0.15 0.15 $psf
---
47%
43% 86% 10/27/97 86% Yes Yes 0.29 0.29 $psf
55% 99% 2/13/98 93% No Yes 0.15 0.15 $psf
67% 94% 1/31/98 95% Yes Yes 250 250 $/unit
58% 96% 8/31/97 95% Yes Yes 0.2 0.16 $psf
44% 94% 10/1/97 92% Yes Yes 0.19 0.15 $psf
44% 72% 8/31/97 71% Yes Yes 5% 4% % revenue
44%
53% 93% 12/31/97 90% Yes Yes 0.10 0.16 $psf
67% 85% 1/26/98 85% Yes Yes 0.15 0.15 $psf
53% 96% 12/31/97 95% Yes Yes 0.20 0.20 $psf
64% 100% 12/31/97 95% No Yes 0.20 0.20 $psf
64% 100% n/a 95% No Yes 0.20 0.20 $psf
---
64%
42% 60% 9/30/97 57% Yes Yes 5% 4% % revenue
42% 73% 10/31/97 70% Yes Yes 5% 4% % revenue
42% 77% 10/31/97 75% Yes Yes 5% 4% % revenue
42% 58% 10/31/97 56% Yes Yes 5% 4% % revenue
42% 75% 10/31/97 75% Yes Yes 5% 4% % revenue
42% 75% 10/31/97 70% Yes Yes 5% 4% % revenue
---
42%
64% 100% 2/3/98 95% Yes Yes 0.15 0.15 $psf
60% 99% 12/15/97 95% Yes Yes 0.15 0.15 $psf
60% 100% 95% Yes Yes 0.15 0.15 $psf
60% 100% 11/1/97 95% Yes Yes 0.15 0.15 $psf
---
60%
58% 96% 12/10/97 94% Yes Yes 0.15 0.15 $psf
58% 0% 12/10/97 100% Yes Yes 0 0 $psf
58% 96% 12/10/97 100% Yes Yes 0.15 0.15 $psf
58% 0% 12/10/97 100% Yes Yes 0.15 0.15 $psf
58%
31% 83% 12/31/97 80% Yes Yes 5% 5% % revenue
31% 78% 12/31/97 75% Yes Yes 5% 5% % revenue
31% 79% 12/31/97 75% Yes Yes 5% 5% % revenue
31% 61% 11/30/97 64% Yes Yes 5% 5% % revenue
31% 71% 11/30/97 71% Yes Yes 5% 5% % revenue
31% 69% 11/30/97 69% Yes Yes 5% 5% % revenue
31% 64% 11/30/97 64% Yes Yes 5% 5% % revenue
31% 73% 11/30/97 73% Yes Yes 5% 5% % revenue
31%
60% 98% 12/31/97 95% Yes No 0.19 0.19 $psf
61% 91% 9/23/97 91% Yes Yes 0.56 0.56 $psf
61% 87% 9/23/97 87% Yes Yes 0.54 0.54 $psf
61%
39% 92% 12/22/97 82% Yes Yes 0.21 0.21 $psf
63% 96% 8/26/97 95% No Yes 0.3 0.3 $psf
54% 88% 2/1/98 91% Yes Yes 0.21 0.21 $psf
44% 75% 12/31/97 75% Yes Yes 5% 5% % revenue
44% 70% 12/31/97 70% Yes Yes 5% 5% % revenue
44% 59% 12/31/97 57% Yes Yes 5% 5% % revenue
44% 68% 12/31/97 67% Yes Yes 5% 5% % revenue
44% 58% 12/31/97 58% Yes Yes 5% 5% % revenue
44% 65% 12/31/97 65% Yes Yes 5% 5% % revenue
44% 67% 12/31/97 67% Yes Yes 5% 5% % revenue
44% 54% 12/31/97 54% Yes Yes 5% 5% % revenue
44% 62% 12/31/97 61% Yes Yes 5% 5% % revenue
44%
42% 48% 8/31/97 47% Yes Yes 4.8% 4.8% % revenue
44% 68% 9mo.9/30/97 66% Yes Yes 5% 4% % revenue
44% 69% 9/30/97 69% Yes Yes 5% 4% % revenue
44% 78% 9/30/97 75% Yes Yes 5% 4% % revenue
44% 74% 9/30/97 71% Yes Yes 5% 4% % revenue
44% 62% 9/30/97 62% Yes Yes 5% 4% % revenue
44% 65% 9/30/97 65% Yes Yes 5% 4% % revenue
44%
59% 99% 9/30/97 95% Yes Yes 0.18 0.1794 $psf
38% 78% 12/31/97 75% Yes Yes 5.0% 4.5% % revenue
64% 94% 12/31/97 95% Yes No 0.2 0.2 $psf
59% 92% 10/8/97 92% Yes Yes 0.15 0.15 $psf
44% 88% 12/1/97 88% Yes Yes 0.25 0.25 $psf
69% 98% 11/30/97 95% No No 250 250 $/unit
62% 95% 12/31/97 95% No Yes 0.18 0.18 $psf
65% 91% 12/23/97 89% No No 250 250 $/unit
65% 97% 12/31/97 90% No No 265 265.26 $/unit
65%
0% 100% 3/1/98 100% No No 0 0 $psf
65% 97% 12/11/97 95% Yes Yes 0.2 0.2 $psf
63% 92% 8/4/97 94% No Yes 250 250 $/unit
3% 74% 11/30/97 71% Yes Yes 5% 4% % revenue
0% 100% 3/1/98 100% No No 0 0 $psf
57% 96% 2/1/98 94% No Yes 0.2 0.2 $psf
60% 98% 11/30/97 95% No No 250 250 $/unit
56% 100% 12/1/97 95% Yes Yes 0.2 0.2 $psf
0% 100% 3/1/98 100% No No 0 0 $psf
24% 87% 12/31/97 80% Yes Yes 4.5% 4.5% % revenue
57% 98% 1/1/98 93% No No 250 250 $/unit
66% 93% 1/30/98 88% No No 250 250 $/unit
46% 86% 1/1/98 90% Yes Yes 0.15 0.15 $psf
46% 100% 8/13/97 95% Yes Yes 0.6 0.6 $psf
46% 78% 9/1/97 78% Yes Yes 0.5 0.5 $psf
46%
58% 91% 10/31/97 91% Yes No 0.18 0.18 $psf
56% 100% 2/11/98 95% Yes Yes 0.15 0.15 $psf
67% 97% 12/1/97 95% No No 250 250 $/unit
64% 99% 1/12/98 95% No No 0.18 0.18 $psf
38% 84% 1/12/98 90% No No 0.2 0.2 $psf
32% 100% 3/1/98 100% Yes Yes 0.18 0.18 $psf
32% 100% 3/1/98 100% Yes Yes 0 0 $psf
32%
41% 100% 2/13/98 95% No Yes 0.15 0.15 $psf
67% 85% 10/7/97 85% Yes Yes 0.15 0.15 $psf
53% 65% 10/31/97 64% No No 5% 4% % revenue
0% 100% 3/1/98 100% No No 0 0 $psf
62% 97% 12/31/97 94% Yes Yes 250 201 $/unit
62% 93% 12/31/97 88% Yes Yes 250 217 $/unit
62%
71% 97% 10/9/97 93% Yes Yes 253 250 $/unit
0% 100% 3/1/98 100% No No 0 0 $psf
64% 100% 12/10/97 95% No No 0.15 0.15 $psf
0% 100% 3/1/98 100% No No 0 0 $psf
63% 100% 1/14/98 95% No No 50 0 $/unit
62% 97% 12/31/97 94% No No 0.19 0.1867 $psf
66% 98% 12/31/97 94% No No 0.2 0.2 $psf
67% 91% 9/10/97 95% No Yes 250 250 $/unit
63% 100% 2/1/98 100% Yes Yes 0.15 0 $psf
58% 86% 11/30/97 95% Yes Yes 250 250 $/unit
51% 100% 12/31/97 95% Yes 0.2 0.2 $psf
62% 100% 2/13/98 90% No Yes 0.15 0.15 $psf
59% 90% 9/15/97 74% Yes No 0.15 0.15 $psf
52% 86% 1/1/98 87% No No 0.16 0.15 $psf
49% 80% 1/31/98 71% No Yes 294 250 $/unit
53% 99% 1/6/98 94% No No 0.15 0.15 $psf
62% 98% 1/23/98 92% No Yes 0.2 0.2 $psf
66% 91% 2/1/98 91% No Yes 0.16 0.15 $psf
66% 100% 7/21/97 95% No Yes 0.15 0.15 $psf
66% 93% 10/1/97 93% No Yes 0.15 0.15 $psf
66% 100% 12/31/97 95% No Yes 0.35 0.35 $psf
66% 100% 11/10/97 95% No Yes 0.15 0.15 $psf
66%
64% 98% 12/1/97 95% No No 0.15 0.15 $psf
66% 100% 12/31/97 95% No No 0.15 0.15 $psf
64% 100% 12/29/97 90% No No 0.15 0.15 $psf
58% 98% 1/9/98 93% No No 0.2 0.2 $psf
58% 100% 1/9/98 95% No No 0.21 0.21 $psf
58%
0% 100% 3/1/98 100% No No 0 0 $psf
61% 100% 9/17/97 95% No No 0.15 0.11 $psf
44% 81% 12/31/97 75% No No 5% 4% % revenue
70% 95% 2/3/98 95% No Yes 0.15 0.15 $psf
54% 95% 12/1/97 94% No No 250 250 $/unit
49% 100% 12/31/97 90% No No 0.2 0.2 $psf
60% 100% 11/30/97 95% No Yes 0.15 0.15 $psf
63% 98% 11/30/97 95% No Yes 250 250 $/unit
62% 100% 12/31/97 95% No No 0.15 0.15 $psf
58% 74% 2/12/98 74% No Yes 0.22 0.22 $psf
74% 96% 12/1/97 94% No No 250 250 $/unit
44% 100% 1/6/98 95% No No 0.15 0.15 $psf
59% 79% 12/31/97 79% No No 0.2 0.2 $psf
65% 94% 10/10/97 95% No No 251.16 251.16 $/unit
63% 97% 1/15/98 93% No No 250 250 $/unit
63% 97% 1/15/98 93% No No 250 250 $/unit
63%
44% 100% 1/31/98 95% No No 0.2 0.2 $psf
49% 83% 11/27/97 78% No No 250 250 $/unit
58% 100% 12/2/97 95% No No 0.16 0.15 $psf
31% 92% 12/31/97 91% No No 0.15 0.15 $psf
31% 100% 12/31/97 91% No No 0.15 0.15 $psf
31%
52% 99% 1/31/98 94% No No 0.15 0.15 $psf
59% 100% 11/1/97 95% No Yes 0.2 0.2 $psf
59% 92% 11/1/97 92% No Yes 0.2 0.2 $psf
59% 100% 10/1/97 93% No Yes 0.2 0.2 $psf
59%
54% 100% 9/17/97 95% No No 0.15 0.15 $psf
71% 93% 1/19/98 92% No Yes 250 250 $/unit
71% 97% 12/19/97 95% No No 250 250 $/unit
61% 83% 12/31/97 83% No No 0.15 0.15 $psf
50% 100% 2/9/98 93% Yes No 0.2 0.2 $psf
65% 99% 1/25/98 95% Yes Yes 250 250 $/unit
47% 99% 10/31/97 95% No No 250 200 $/unit
48% 85% 2/12/98 86% No Yes 0.2 0.2 $psf
53% 90% 1/31/98 91% No No 0.27 0.27 $psf
59% 100% 12/1/97 95% No No 0.15 0.13 $psf
67% 99% 12/31/97 99% No No 0.17 0.17 $psf
52% 95% 12/31/97 95% No No 273 273 $/unit
67% 96% 1/15/98 96% No No 0.16 0.16 $psf
68% 95% 11/18/97 92% No No 300 300.45 $/unit
29% 76% 12/31/97 75% No No 5% 4% % revenue
68% 96% 12/5/97 94% No No 250 250 $/unit
25% 95% 11/12/97 94% No No 250 250 $/unit
60% 71% 12/31/97 70% No No 5% 4% % revenue
60% 49% 12/31/97 46% No No 5% 4% % revenue
60%
1% 98% 12/31/97 95% No No 292.27 292.27 $/unit
53% 98% 12/1/97 95% No No 250 250 $/unit
68% 100% 12/31/97 94% No No 274.17 274.17 $/unit
67% 94% 10/25/97 91% Yes Yes 250 250 $/unit
60% 98% 2/3/98 96% No Yes 0.15 0.15 $psf
0% 100% 3/1/98 100% No No 0 0 $psf
57% 97% 2/1/98 95% No No 0.15 0.15 $psf
33% 69% 11/30/97 68% No No 5% 4% % revenue
33% 64% 11/30/97 64% No No 5% 4% % revenue
33% 62% 11/30/97 62% No No 5% 4% % revenue
33% 58% 11/30/97 57% No No 5% 4% % revenue
33%
60% 98% 10/31/97 95% No No 263 220.29 $/unit
48% 77% 11/23/97 75% No No 5% 4% % revenue
67% 88% 2/1/98 83% No No 267 250 $/unit
2% 100% 1/13/98 95% No No 0.17 0.15 $psf
0% 100% 3/1/98 100% No No 0 0 $psf
62% 92% 2/9/98 91% No No 250 250 $/unit
67% 98% 10/31/97 95% No No 0.2 0.2 $psf
70% 98% 10/25/97 92% Yes Yes 250 250 $/unit
41% 100% 12/1/97 95% No No 50 0 $/unit
0% 100% 3/1/98 100% No No 0 0 $psf
68% 92% 11/30/97 92% No No 0.15 0.15 $psf
61% 90% 11/30/97 88% No No 278 278.1 $/unit
61% 92% 11/30/97 91% No No 250 227.79 $/unit
61%
50% 97% 12/1/97 93% No No 250 250 $/unit
26% 54% 1/27/98 62% No No 0.22 0.15 $psf
70% 97% 1/1/98 95% No No 260 260 $/unit
0% 100% 3/1/98 100% No No 0 0 $psf
0% 100% 3/1/98 100% No No 0 0 $psf
70% 93% 12/31/97 93% Yes Yes 250 203 $/unit
49% 91% 11/28/97 91% No No 50 0 $/unit
60% 100% 1/1/98 95% No No 0.15 0 $psf
68% 91% 10/25/97 93% Yes Yes 250 250 $/unit
0% 100% 3/1/98 100% No No 0 0 $psf
70% 96% 12/19/97 95% No No 250 250 $/unit
0% 100% 3/1/98 100% No No 0 0 $psf
62% 100% 2/6/98 94% No No 0.2 0.2 $psf
0% 100% 3/1/98 100% No No 0 0 $psf
59% 100% 11/30/97 95% No No 50 0 $/unit
66% 100% 2/1/98 95% No No 0.15 0.06 $psf
51% 97% 1/23/98 90% No No 0.2 0.2 $psf
67% 99% 12/31/97 95% No No 50 0 $/unit
0% 100% 3/1/98 100% No No 0 0 $psf
0% 100% 3/1/98 100% No No 0 0 $psf
59% 88% 2/18/98 92% No No 0.26 0.26 $psf
68% 93% 12/31/97 92% No No 267 267.19 $/unit
63% 97% 11/17/97 95% No No 250 250 $/unit
49% 100% 12/1/97 91% No Yes 0.2 0.2 $psf
67% 79% 12/1/97 79% No Yes 0.21 0.19 $psf
67% 100% 12/1/97 95% No Yes 0.15 0.19 $psf
67% 86% 12/1/97 86% No Yes 0.15 0.19 $psf
67%
44% 79% 11/30/97 75% No No 5% 4% % revenue
34% 100% 1/1/98 92% No No 0.39 0.31 $psf
0% 100% 3/1/98 100% No No 0 0 $psf
41% 77% YTD 12/31/97 76% No No 5% 4% % revenue
32% 98% 7/21/97 94% No No 0.2 0.2 $psf
64% 99% 12/23/97 95% No No 250 250 $/unit
73% 99% 12/31/97 94% No No 250 250 $/unit
54% 96% 12/31/97 95% No No 250 225 $/unit
60% 99% 1/1/98 95% No No 50 0 $/unit
62% 95% 1/19/98 95% No No 273 273.11 $/unit
62% 96% 12/31/97 95% No No 250 250 $/unit
0% 92% 12/31/97 87% No No 0.28 0.25 $psf
61% 100% 12/1/97 95% No No 0.15 0.12 $psf
59% 100% 2/1/98 95% No No 0.15 0.15 $psf
56% 98% 11/1/97 95% No No 0.15 0.15 $psf
63% 89% 12/31/97 90% No No 309 309 $/unit
59% 93% 12/1/97 91% No No 250 250 $/unit
42% 80% YTD 12/31/97 77% No No 5% 4% % revenue
34% 100% 2/12/98 90% No Yes 0.28 0.28 $psf
62% 76% 12/25/97 76% No No 250 250 $/unit
49% 100% 12/31/97 95% No No 250 250 $/unit
2% 69% 12/31/97 61% No No 5% 0% % revenue
55% 96% 1/5/98 94% No No 0.28 0.28 $psf
57% 100% 2/17/98 94% No No 0.22 0.22 $psf
49% 91% 11/30/97 90% No No 0.2 0.2 $psf
57% 100% 12/31/97 95% No No 0.19 0.19 $psf
63% 98% 12/13/97 95% No No 250 250 $/unit
73% 63% 6/30/97 55% No No 50 0 $/unit
63% 96% 1/31/98 90% No No 250 250 $/unit
68% 91% 12/31/97 90% No No 250 250 $/unit
55% 100% 3/1/98 95% No No 0.2 0.2 $psf
47% 66% 11/30/97 64% No No 5% 4% % revenue
43% 100% 11/3/97 88% No No 0.24 0.24 $psf
3% 78% 10/31/97 75% No No 5% 4% % revenue
0% 100% 3/1/98 100% No No 0 0 $psf
35% 54% 12/31/97 51% No Yes 5% 4% % revenue
61% 97% 12/31/97 95% No No 0.18 0.18 $psf
69% 100% 12/1/97 95% No No 250 250 $/unit
69% 100% 12/1/97 95% No No 261.46 250 $/unit
69% 100% 12/1/97 95% No No 300 250 $/unit
69%
47% 88% 2/1/97 94% No No 250 250 $/unit
51% 93% 12/31/97 95% No No 315 283.33 $/unit
51% 100% 1/31/98 95% No No 292 219.17 $/unit
51% 100% 1/31/98 95% No No 258.33 258.33 $/unit
51%
32% 81% 11/1/97 83% No No 50 0 $/unit
55% 83% 12/19/97 83% No No 250 250 $/unit
57% 99% 2/1/98 92% No No 0.42 0.42 $psf
56% 100% 7/31/97 95% No No 262 261.77 $/unit
49% 95% 12/18/97 94% No No 0.19 0.19 $psf
41% 95% 1/26/98 94% No No 265 250 $/unit
34% 100% 3/1/98 100% No No 0 0 $psf
47% 97% 12/30/97 94% Yes No 250 250 $/unit
69% 95% 12/31/97 95% No No 313.09 313.09 $/unit
0% 100% 3/1/98 100% No No 0 0 $psf
63% 100% 12/31/97 95% No No 0.24 0.24 $psf
70% 82% 11/30/97 82% No No 50 0 $/unit
68% 93% 12/31/97 95% Yes Yes 250 207 $/unit
65% 100% 12/31/97 95% No No 0.31 0.31 $psf
69% 100% 1/1/98 100% No No 50 0 $/unit
0% 100% 3/1/98 100% No No 0 0 $psf
65% 91% 2/1/98 91% No No 0.15 0.15 $psf
68% 100% 12/1/97 95% No No 250 250 $/unit
41% 94% 1/1/98 94% No No 250 288.89 $/unit
61% 94% 2/1/98 95% No No 250 250 $/unit
66% 100% 6/26/97 95% No No 0.22 0.22 $psf
44% 100% 2/15/98 96% No No 250 250 $/unit
57% 97% 11/25/97 85% No No 250 250 $/unit
70% 99% 1/7/98 95% No No 250 250 $/unit
70% 100% 1/7/98 95% No No 250 250 $/unit
70% 96% 1/1/98 95% No No 250 250 $/unit
70%
68% 100% 1/23/98 95% No No 250 250 $/unit
59% 98% 1/1/98 95% No No 250 250 $/unit
3% 68% 10/31/97 68% No No 5% 4% % revenue
63% 99% 12/31/97 95% No No 50 50 $/unit
51% 79% 12/31/97 80% No No 250 250 $/unit
43% 100% 1/1/98 92% No No 0.35 0.15 $psf
57% 100% 1/1/98 94% No No 275 275 $/unit
26% 80% 12/31/97 74% No No 5% 4% % revenue
31% 99% 2/1/98 95% No No 50 0 $/unit
63% 91% 12/31/97 91% No No 250 250 $/unit
55% 94% 12/31/97 93% No No 50 0 $/unit
60% 98% 1/1/98 95% No No 295 295.31 $/unit
40% 79% 12/31/97 75% No No 5% 4% % revenue
56% 100% 11/11/97 95% No No 0.25 0.2 $psf
60% 100% 1/15/98 95% No No 0.15 0.15 $psf
59% 95% 10/31/97 93% No No 250 250 $/unit
0% 100% 3/1/98 100% No No 0 0 $psf
61% 100% 12/1/97 93% No No 256 255.67 $/unit
55% 96% 12/1/97 95% No No 0.15 0.15 $psf
62% 100% 9/30/97 95% No No 250 250 $/unit
58% 60% 1/31/98 60% No No 5% 5% % revenue
67% 91% 10/1/97 90% No No 0.16 0.15 $psf
23% 100% 12/31/97 95% No No 50 0 $/unit
26% 76% 12/31/97 75% No No 5% 4% % revenue
64% 94% 10/25/97 89% Yes Yes 250 250 $/unit
64% 96% 12/11/97 92% No No 262.86 262.86 $/unit
58% 94% 11/24/97 92% No No 250 250 $/unit
70% 100% 12/31/97 95% No No 250 250 $/unit
32% 72% 7/31/97 70% Yes No 5% 4% % revenue
28% 70% 10/31/97 66% No No 5% 5% % revenue
0% 96% 12/31/97 93% No No 0.15 0.15 $psf
58% 98% 1/1/98 95% No No 0.15 0.15 $psf
57% 98% 1/14/98 95% No No 50 48.1 $/unit
66% 100% 3/1/98 95% No No 0.15 0.15 $psf
65% 98% 1/1/98 95% No No 50 0 $/unit
68% 88% 12/25/97 86% No No 271 271.28 $/unit
65% 100% 10/1/97 95% No No 250 250 $/unit
33% 87% 12/1/97 91% No No 250 250 $/unit
69% 100% 2/4/98 95% No No 0.15 0.15 $psf
37% 70% TTM 10/31/97 67% No No 5% 4% % revenue
59% 100% 1/3/98 90% No No 250 250 $/unit
64% 83% 1/31/98 84% No No 250 250 $/unit
60% 100% 1/1/98 95% No No 250 250 $/unit
40% 89% 12/4/97 88% No No 291 291.42 $/unit
63% 97% 1/31/98 93% No No 250 250 $/unit
44% 91% 12/1/97 91% No No 0.2 0.2 $psf
54% 98% 11/30/97 95% No No 250 250 $/unit
0% 100% 3/1/98 100% No No 0 0 $psf
39% 100% 9/29/97 95% No No 0.15 0.15 $psf
36% 100% 10/8/97 95% No No 50 0 $/unit
50% 100% 11/12/97 93% No No 0.15 0.15 $psf
65% 100% 12/4/97 95% No No 50 50 $/unit
63% 93% 12/1/97 94% No No 250 250 $/unit
59% 96% 12/1/98 95% No No 0.21 0.21 $psf
64% 91% 12/31/97 95% No No 355 355 $/unit
47% 100% 3/1/98 91% No No 0.4 0.4 $psf
49% 96% 12/31/97 95% No No 250 250 $/unit
49% 96% 12/31/97 95% No No 250 250 $/unit
49% 96% 12/31/97 95% No No 250 250 $/unit
49%
22% 76% 12/31/97 75% No No 5% 5% % revenue
67% 94% 2/18/97 92% No No 250 250 $/unit
66% 91% 12/31/97 91% No No 255 255.29 $/unit
69% 100% 11/21/97 95% No No 253.42 253.42 $/unit
62% 89% 5/1/97 89% No No 0.15 0.14 $psf
49% 96% 1/15/98 93% No No 0.2 0.2 $psf
59% 93% 1/15/98 93% No No 250 250 $/unit
64% 100% 12/31/97 95% No No 0.15 0.15 $psf
60% 100% 11/14/97 95% No No 0.2 0.2 $psf
55% 100% 2/19/98 95% No No 0.17 0.17 $psf
51% 100% 12/31/97 95% No No 0.2 0.2 $psf
30% 62% 7/31/97 62% No No 5% 4% % revenue
26% 97% 2/12/98 90% No No 0.15 0.15 $psf
56% 93% 2/1/98 93% No No 0.33 0.33 $psf
45% 96% 10/28/97 95% No No 250 250 $/unit
68% 100% 11/20/97 95% No No 250 226.8 $/unit
49% 100% 10/15/97 95% No No 261 260.84 $/unit
2% 100% 3/7/97 93% No No 0.16 0.16 $psf
64% 100% 12/22/97 95% No No 250 250 $/unit
66% 100% 1/1/98 95% No No 250 250 $/unit
69% 100% 8/1/97 95% No No 50 0 $/unit
57% 100% 1/16/98 95% No No 0.25 0.25 $psf
59% 100% 1/31/98 95% No No 250 250 $/unit
65% 98% 12/30/97 95% No No 250 250 $/unit
62% 96% 2/17/97 91% No No 377 376.86 $/unit
29% 100% 12/31/97 95% No No 250 250 $/unit
41% 94% 1/1/98 94% No No 250 250 $/unit
61% 91% 8/6/97 91% No No 50 0 $/unit
63% 100% 11/26/97 95% No No 55 55 $/unit
59% 98% 1/23/98 95% No No 250 250 $/unit
45% 97% 12/1/97 95% No No 250 250 $/unit
60% 90% 1/31/98 87% No No 250 250 $/unit
71% 93% 12/31/97 93% No No 250 250 $/unit
51% 100% 9/1/97 95% No No 50 0 $/unit
<PAGE>
<CAPTION>
LEASE % OF LEASE % OF
EXPIRATION TOTAL EXPIRATION TOTAL
TENANT 1 DATE SF TENANT 2 DATE SF
-------- ---- -- -------- ---- --
<S> <C> <C> <C> <C>
Christensen, White, et al. 2008 6% Marvin Davis Corporation 2002 6%
Home Depot U.S.A., Inc. 2012 28% Lucky Stores, Inc. 2017 14%
24 Hour Fitness 2013 14% Raleys 1920 32%
Raley's 2013 37% Ace Hardware 2011 9%
Kmart Corp 2006 39% Lucky Stores 2006 13%
Home Base 2008 42% Food 4 Less 2005 28%
PW Supermarkets 2005 37% 24 Hour Nautilus Fitness Centers 2002 10%
Safeway Food & Drug 1998 31% Walgreen's 2011 12%
Food-4-Less 2010 45% Home Town Buffet 2009 9%
Ralph's Grocery Store 2005 49% Clothworld 1998 9%
Ralph's Grocery Store 2012 100%
Ralphs Grocery Company 2007 58% Chief Auto Parts, Inc. 2007 7%
Raleys 2005 42% Firm Fitness for Women 2002 7%
Raleys 2013 51% Blockbuster Video 2002 4%
Food-4-Less 2006 47% George Brown Fitness 2007 12%
Raley's Bel Air Market 2014 43% Wells Fargo Bank 2007 5%
Blockbuster Video 2002 16% Kinko's of La Jolla 2002 12%
Lucky Store 2006 34% Thrifty Corp. 2005 21%
Raleys 1998 26% Hollywood Video 2005 15%
32nd Street Market 2008 48% Basically A Buck 2008 28%
Westinghouse Credit 2000 9% Westinghouse Credit 2000 7%
MACY'S 2022 18% J C PENNEY 2023 15%
Carolina Pottery 2003 29% Liz Clairborne 2005 3%
VF Factory 2005 11% U.S. Factory Outlet 2008 11%
Winn-Dixie 2016 27% Spa Health Club 2006 13%
Spa Health Club 1999 10% Eckerd Drug 2001 7%
Bugle Boy 2001 5% Carolina Pottery 2003 38%
VF Factory 2003 62% Banister Shoes 1998 6%
VF Factory 2003 51% Banister Shoes 1998 8%
VF Factory 2003 53% Dress Barn 2002 8%
VF Factory 2003 53% Easy Spirit 1998 7%
VF Factory 2003 49% Bugle Boy 2000 6%
VF Factory 2003 67% Dress Barn 2001 9%
Sears 1899 34% J.C. Penny 2004 28%
Caldor 1921 33% Pathmark 1921 15%
ICF Kaiser 2012 50% American Capital 2004 26%
AT&T 2003 25% Riker Danzig 2002 14%
Dillards 2035 13% Sears 2035 11%
BJ's (Waban) 2016 19% Hechingers 2016 18%
Pacific Bell Directory 3075 10% Price Waterhouse LLP 2989 10%
HEA 2013 100%
HEA 2013 100%
Wal-Mart Stores, Inc. 2011 15% Builder Square 2020 15%
Kohl's 2017 28% Rainbow Foods 2010 20%
Phar-mor 2004 24% Best Buy Company 2012 20%
Big Kmart 2015 32% Phar-mor 2004 19%
Foot Locker/Kinney Shoe 2007 6% Liberty House 2007 26%
Auto Club Association 1999 29% AMC Theatre 2009 12%
Sears 43% Dillard's 30%
Sears 2029 26% JCPenney 2039 23%
GPU Nuclear 2006 19% EBS Dealing Resources 2007 12%
Bon Ton 2005 36% UA Theatre 1998 5%
GSA 1999 12% Bellsouth Publishing 2001 11%
Analysis Group, Inc. 2002 29% HMV USA inc 2007 23%
Creative Artists Agency 1899 64% Creative Artists 1999 64%
Target* 1899 32% Mervyns* 1899 24%
Provident Bank 2007 44% Rendigs, Fry, Kiely 2003 6%
Giant Food Store 2014 47% Citicorp 1999 5%
McGraw-Hill Co. Inc. 2008 75% Office-lg 1899 75%
PDV Midwest Refining 2002 35% Quantum Executive Offices 2005 10%
Sterling Software 2001 99% Good News Deli 2001 1%
Ross Dress-for-Less 2002 24% Border's Books 2012 18%
Applegreen 1999 18% Schoenfeld 1999 16%
Coldwell 1998 11% Kent Video 1999 9%
Safeway, Inc. 2020 34% The Sports Authority 2010 26%
Atlantic Metal Product 1998 27% Feder Trading Co., Inc. 1998 25%
Linens N Things 2002 21% CompUSA 2003 15%
FW Woolworth 2000 16% Lucky Bargain 2006 11%
Pergament 1996 34% Seaman's 1996 20%
Ralphs Grocery Store 2010 30% The Wherehouse 2000 7%
Payless Drug 2003 37% Marshall's 2003 28%
Giant of Maryland, Inc. 2007 46% Pad/Restaurant 1899 11%
Infonautics 2000 11% Coresource Inc 2002 7%
Home Depot 2017 100%
Chefs's Market 2009 14% TGIF 2000 11%
ZBBF Realty, LLC 2008 100%
Caldor 2020 88% Spain's (Dollar Express) 2002 5%
California Do It Center 2010 28% Bally's Health Club 2013 16%
Food-A-Rama 4950 26% Fairlanes Bowling 2099 15%
Creative Kids Gym 1998 5% Olympic Collection 2005 68%
Siemens Power Corp. 1999 11% Convenant Healthcare System 1999 10%
Roses 1998 27% Winn-Dixie 2005 22%
Winn-Dixie 2004 56% Revco Drugs 2001 18%
Winn-Dixie 2004 51% Harco Drugs 2000 20%
Rock Springs Ford 1998 100%
Food City 2002 100%
Eckerd Drug 2005 11% O'CASEY'S 2011 10%
Levitz Furniture 1900 63% Furniture Expo 1900 10%
Bradlees 2016 57% Price Chopper 2021 29%
Executive Center Madison Circle 2007 9% Terrabank (Penthouse 100) 2009 7%
Cesar's Food #3, Inc. 2000 100%
Springhouse Corp. 2003 54% Clemens Market 2002 18%
Conlin Inc. dba Conlin Furniture 1999 19% T.J. Maxx, Inc. 2004 19%
Mark IV Industries, Inc. 2002 99%
K-Mart 2008 64% Marinello Beauty 2009 5%
Automotive Products 2005 100%
Bank of Oklahoma 2002 34% Linn & Neville, P.C. 2003 8%
Loma Linda University 2002 53% 1899 8%
Pacific Theaters 2017 100%
Auntie's House 1999 4% Ralph's 2004 62%
Ashcraft's 2005 44% Companion's Cuisine 1998 7%
Dunham's 2002 20% JoAnn Fabrics 2002 14%
Marshalls (Golfsmith) 2010 24% Officemax 2010 19%
Adva-Lite 1998 55% Roadway Package 1999 45%
Twin Cities Agency 2002 20% Bankers Automated 2002 9%
GSA-BIA 2002 85% State Dept. of Health (B) 1997 12%
Amer. Multicinema 1900 51% Powerhouse Gym 1900 14%
Pathmark 69% Pathmark 1917 69%
Maverick Records 2007 34% Sinclair Tenenbaum 1998 28%
Execituve Insurance Agency, Inc. 2002 7% Family Care Associates, Inc. 2002 3%
Big V (Shop Rite) 2016 86% General Mills (Red Lobster) 2008 9%
K-mart 2001 53% Big V Supermarket (ShopRite) 2020 23%
The Ohio Automobile Club 1998 3% Value City Department Store 2002 66%
Calico Corner 2000 8% Ethan allen 2001 28%
Whirlyball (Kroger sublet) 2009 49% Arbor Drugs 2009 12%
Fine Arts Theatre 2000 24% Harrington 2002 13%
ABCO Markets, Inc. 2008 38% Walgreens 2009 14%
Food Lion 2016 20% CVS 2001 7%
Lear Operations 2006 100%
Cardiology Associates 2010 45% Jeff Klein 1998 13%
Burpee 2008 100%
Hagop Trakjian 1998 3% Mohamad Tahhsin Kazah 1999 3%
Heilig Meyers 2005 19% Nash Finch (Seamark) 2003 21%
Salon Rouge 2004 10% All In One Dry Cleaner 2003 9%
Kinkos 2003 27% Potted Plant 2000 16%
Le Visage 2002 19% PIP Printing 1999 14%
Winn-Dixie 1900 58% GSA - SSA 1900 10%
ARC of PGC 2000 22% Largo Park Executive Center 2007 11%
Circuit City 2002 24% General Discounts 2000 20%
Davidson 2004 100%
Sneaker Stadium 2017 100%
Premium Pet Mart 2001 29% Thrifty Payless Drug Store 2000 27%
U of Utah-Psychology 2007 41% NPS Pharmaceuticals 1999 31%
Cycle Scene 2006 26% Spaceplay 2000 23%
Dean Witter Reynolds 1999 26% First Tuesday 1996 13%
CACI 2002 20% CACI 2002 19%
Rose's 2009 48% Winn-Dixie 2009 32%
ABCQ 2000 55% Allen Bradley Company 1999 45%
Roses Discount Store 2007 41% Food Lion Supermarket 2007 23%
Americna Yazaki 1999 45% Bearing Distributors 2003 5%
Dickstein & Reynolds 2000 9% Shelbourne Designs 1999 3%
Food Lion 2008 52% Eckerd Drug 2003 13%
Shaw's Supermarket 2012 57% CVS Headquarters 2003 12%
Kroger's 2002 68% Rent A Center 1999 6%
Broadcast Data 2002 14% K&K Jumpstart 2001 18%
Hankoff Insurance 2001 11% National Library of Poetry 2006 60%
Chuck E. Cheese 2003 33% In Cahoots 1999 26%
Shintomi 2003 16% A Child's Room 2002 12%
Petco Animal Supplies 2011 62% Hollywood Video 2006 38%
Winn-Dixie 2006 63% Outlet Plus 2006 12%
IGA 2011 41% Video 2000 6%
Food Lion 2014 50% Revco 2006 15%
Woodlands Nursery School 1997 19% Amerigo's Grill 1994 12%
Ameritech 2001 55% Panasonic 1996 45%
Party Universe 2011 36% DOTS, Inc. 2001 16%
Horizon Bank 2015 16% Karin's Florist 2015 19%
Airborne Express 2008 100%
China Harbor 2012 23% Fast & Easy Mart 2006 12%
Eckerd Drug 2006 35% Medical Transcript 1998 13%
Childs Consulting Assoc. 1998 10% Matvest, Inc. dba Bermex 1998 9%
Incentive Merchandise, Inc. 2002 17% John Dixon 2000 21%
Judith Von Hopf 1998 7% Supreme Machine Products 1998 7%
Cato 2002 24% Dollar Tree 2001 20%
Lepin & Renehan 2001 17% Mark Weingart 2000 15%
Kroger's 2002 57% Rite Aid 2002 25%
Blockbuster Video 2007 44% Century 21 Accent 1 Realtors 2002 16%
Copy Systems 1995 2002 7% N&H Autobody 1998 14%
Commercial Federal 2001 17% Englewood Liquors 2003 12%
Garcy Corporation 2001 100%
Gilbert Ortega 2001 33% Native Traditions 1998 28%
<PAGE>
<CAPTION>
% OF
LEASE TOTAL LOAN
TENANT 3 EXPIRATION SF ID ASSET
-------- ---------- -- -- -----
<S> <C> <C> <C> <C>
Jeffer, Mangels, Butler & Marmaro 2002 6% 2292 4337
2089 4508
2089 4500
2089 4501
2089 4495
2089 4498
2089 4506
2089 4378
2089 4499
2089 4507
2089 4502
2089 4505
2089 4497
2089 4496
2089 4504
2089 4503
2520 4294
Edward Theaters 2012 10% 2546 6921
Super Savers Cinemas 2012 12% 2546 6909
Video Time 2000 4% 2546 6918
Long's Drug 2007 12% 2546 6912
Thrifty Corporation 2009 10% 2546 6915
Petco Animal Supplies 2001 9% 2546 4338
Baker's Square 2007 7% 2546 6917
Blockbuster Video 2001 6% 2546 6916
American Stores Properties 2001 8% 2546 6905
2546 6913
U. S. Family Care 1999 4% 2546 6911
ace hardware 2002 5% 2546 6919
Round Table Pizza 2002 3% 2546 6907
MK Medical 2000 7% 2546 6910
Bank of America 2005 4% 2546 6908
Taco Bell 2000 4% 2546 6914
West Wind Christian Center 1999 4% 2546 6920
Chief Auto Parts 2001 8% 2546 6904
McDonalds 2014 5% 2546 6906
4392 7237
4392 7239
4392 7240
4392 7233
4392 7238
4392 7242
4392 7243
4392 7235
4392 7232
4392 7234
Duquesne Light Company 2003 4% 3503 6922
Montgomery Ward 2023 13% 1672 3547
1164 2678
Nike 2003 3% 2530 7252
Spiegel 2006 9% 2530 7259
Ace Hardware 2003 7% 2530 7261
Tony's Oyster B 2002 5% 2530 7250
Specials 2004 7% 2530 7260
Gant 2000 5% 2530 7258
Corning Revere 1998 8% 2530 7255
Fieldcrest 2002 5% 2530 7253
Fieldcrest 2002 6% 2530 7251
Famous Brands 1998 6% 2530 7256
Bass Shoes 2001 8% 2530 7257
Dillard's 1899 27% 2757 7340
Sports Authority 2016 11% 2764 6926
4346 7152
Odin Feldman 2004 8% 2381 4280
AT&T 1998 7% 2334 4282
2334 7071
JC Penney 2035 10% 2343 4286
Regal Cinema 2018 11% 1132 2646
The County of Santa Clara 2632 7% 3494 6964
4569 7267
4569 7268
2314 4719
2314 4721
2314 4720
2314 4717
2314 4718
2314 4279
Value City Department Store 2010 14% 2678 4635
Best Buy 2006 12% 2554 7075
GKC Cinema 2010 16% 2554 7074
Cinemark 2010 11% 2554 4348
Tenekomai/Wasco 2002 4% 2615 4619
2615 4616
2615 4617
2615 4618
3495 7176
3495 6961
3495 7178
3495 7182
3495 7177
3495 7181
3495 7180
3495 7179
The Kroger Company 2006 9% 2551 4345
J.C. Penney 8449 28% 2018 3968
Dillard's 2007 17% 2018 4593
Harrison, Wilson 2007 10% 2270 4403
Rea & Derrick/CVS Store 2000 3% 2453 4130
GSA (CDC) 2003 7% 3493 6965
1750 3886
1750 3881
1750 3884
1750 3885
1750 3882
1750 3621
1750 3883
1750 3887
1750 3880
2389 4022
2536 4327
2536 7090
2536 7088
2536 7092
2536 7091
2536 7089
Tsoi/Kobus & Assoc 2002 20% 4584 7278
2287 4257
9808 Wil 1899 30% 2480 4253
Dicks Sporting Goods 2016 19% 1151 2665
Schiff Kreidler-Shell 2000 4% 1699 4025
1938 3831
Long & Foster 2002 5% 2618 4622
2564 4374
2564 4376
4497 7193
Office-Sm. 1899 20% 2359 4024
2843 4713
55 113
2411 4031
Administrative Mgmt. Group 2001 10% 4561 7265
2587 4584
2544 4335
2000 3950
231 296
4266 6952
2500 4272
Big 5 Sporting 2007 9% 2479 7185
Bellevue Art 1998 10% 2479 7183
Chiang's 1999 6% 2479 7184
PayLess Drug Stores 2010 13% 2297 4255
LMD Warehouse 1998 26% 2660 6962
2023 3982
Elements 1999 9% 1950 3842
Lincoln Comfy 2001 9% 4150 7051
4481 7165
4481 7169
Old Navy 1996 14% 4284 6927
Trader Joes 2011 6% 2357 4339
2731 6898
4571 7281
2295 4249
2295 4582
2352 4341
4305 7080
Blockbuster Video 1998 5% 2595 4597
4304 7081
2612 4613
Fitness World 2006 9% 1907 3802
Nat'l Committee For Clinical Lab Standards 2005 6% 2852 4743
2851 4740
4677 7323
Edward Anricola 1998 10% 1756 3627
2481 4380
One Price Clothing 2005 4% 2617 4621
Regal Cinemas 1999 11% 2547 4340
Veterans Thrift 2205 7% 1934 3827
4398 7244
Peppermint Cafe 1999 5% 4439 7217
Siemens Power Corp. 1998 9% 2496 4268
Belk 2000 16% 234 3650
Mr. Gatti's 1998 6% 234 3646
Prime Time Video 1999 6% 234 3640
234 3655
234 3656
Village of Pinecrest 2002 10% 4253 6895
Captiva Collection 1900 8% 2598 4600
Brooks Pharmacy 2012 5% 2462 4243
4214 7006
4214 7160
4307 7079
Abington Hosptial 2000 3% 2621 4624
2697 4647
Office Max 2007 14% 2679 4636
2095 4462
4211 7009
Everything's $.99 2001 4% 2693 6890
4280 6899
4161 7030
Hartzog, Conger and Cason 2003 7% 4350 7150
4227 6993
4175 7065
Loma Linda Community MWS Group 2002 6% 4213 7007
4273 6880
4261 6956
4261 7200
4193 7025
4210 7010
Wilshire State Bank 2000 9% 4270 6948
JoAnn Fabrics 1999 8% 2696 4645
Tom's Market 2008 44% 2696 4644
Drug Emporium 2004 17% 4159 7034
3502 6932
ENSR 1998 8% 3502 6933
Guitierrez Law Office 1998 3% 3502 7136
Pier 1 Imports 1900 11% 2553 4347
1670 4052
2456 4134
Blockbuster 1902 10% 4495 7230
Barton Myers Ass. 2000 22% 2482 4379
4357 7146
2828 4700
Allmerica Financial 2000 3% 4649 7316
4237 6984
First Hudson Valley Bank 2013 5% 4168 7041
Walgreen Drug 2029 6% 1899 3794
2603 4604
4483 7168
4203 7017
4264 6953
2849 4724
2739 6883
4596 7279
4596 7284
2097 4460
4265 6887
2567 4377
2010 3960
Value City Furniture city 2002 22% 2680 4638
2412 4032
Naional Camera Exchange 2007 10% 4448 7206
4166 7174
4166 7061
4166 7175
4166 7173
4199 6881
4201 7019
1968 3858
Murray's Discount Auto 1999 12% 4160 6930
4302 7083
2746 4681
Lee Violins 1998 7% 1904 3799
2012 3962
4275 6876
2847 6892
Chuck E. Cheese 1999 13% 2738 4741
1943 7131
1943 3835
4251 6886
Trak Auto 4% 1931 3824
2605 4606
1997 3947
1991 3941
2478 4251
2601 4603
2375 4316
2302 3955
1998 3948
2698 4648
1993 3943
Providence Hospital 2002 30% 4223 6997
4308 7085
2613 4614
2619 4623
Vefo Corporation 1998 4% 4420 7220
2793 4685
1999 3949
4303 7086
Sears 1999 7% 4226 6994
1954 3846
2099 4458
2497 4269
Zena's 2002 9% 2517 4697
Jefferson Bank 2002 15% 2517 4289
Clearview Optical 2000 14% 2517 4698
1915 3810
F.O.R. of Richmond 1900 9% 2588 4585
4301 7087
4177 7046
Largo Park Executive Suites 2007 11% 2604 4605
1871 3768
4680 4610
2100 4457
4462 7222
2797 4689
1966 3856
Kragen Auto Parts 2004 7% 2101 4485
4180 7047
4285 6928
Golds Gym 2004 21% 2728 4649
1886 3783
4277 6884
4178 7044
U of U Hosp. Homecare/Pharm 2002 10% 4281 6900
2102 4486
1169 2683
2602 4602
Bennett's 2007 14% 4194 7024
Malibu Health Insurance 2002 29% 4215 7005
United Defense, LP 2001 11% 4164 7060
Cato 1999 6% 2593 4595
4287 6929
2464 4244
2586 4583
4679 4609
4155 7056
2565 4375
Revco 2002 6% 2606 4607
2826 4695
4509 7199
2316 4284
Hayashi of America 1999 18% 4212 7008
1974 3892
1974 3893
1974 3894
2780 4673
2740 6873
2740 6871
2740 6872
2030 3989
4243 6979
Nexus Financial 1998 2% 2842 4707
2736 7062
Ju Young Ahn/Laundromat 2001 4% 4258 6968
2105 4128
2596 4598
4269 6949
4681 4611
2397 4029
Endless Video 2000 8% 1951 3843
2047 4014
2477 4250
Duron Paint & Wallcovering 1999 6% 1891 3787
4445 7223
1987 3937
Nova Care 1998 11% 4260 6966
4254 6972
4152 7053
2607 4608
Sinai Health 2002 13% 1727 3598
4635 7306
4209 7011
4231 6990
4231 7188
4231 7189
4259 6967
2845 4716
2735 4694
1069 2380
2106 4467
Q-Zar 2004 25% 4262 6955
1870 3767
4204 7016
2599 4601
274 529
4446 7224
2657 4630
1945 3837
Especially Baby 2002 11% 4162 6889
2107 4242
2614 4615
1992 3942
4181 7066
Triumph Church 1998 9% 4256 6970
1882 3779
4605 7296
Auto Parts 1999 6% 1898 3793
4444 7226
4580 7276
2303 3957
1933 3826
2745 6885
4229 6991
2594 4596
4456 7210
Action Video 1999 6% 4263 6954
National Mortgage Link 1997 8% 2036 3995
1906 3801
4581 7277
4500 7198
2024 3983
2798 4690
4225 6995
United Retail 2008 15% 4435 7218
4176 7045
2694 4646
1920 3814
4257 6969
4172 7063
4643 7052
PSRC 1999 17% 4182 6897
4283 6924
2410 4030
2825 4693
4484 7170
Freemont Family Arcade 2012 50% 4158 7059
4442 7227
4163 7035
San Antonio Shoe 2001 10% 4171 7032
2744 7068
Ari-El Enterprises (M to M) 1999 8% 4443 7225
4205 7015
4205 7295
4205 7294
172 214
4206 7014
4463 7214
4230 6891
Myron Photography 1998 7% 2454 4131
Value Merchandise 4 Less 1998 7% 4417 7213
4156 7057
Video Update 2002 20% 4244 6978
Clair Lane 1999 8% 4183 7048
Sally's Beauty Supply 2002 4% 1901 3796
General Nutrition Center 2002 9% 1913 3808
1893 3789
Tire World 2002 14% 4186 7050
Mama Mia Pizza 2000 10% 4200 7020
2026 3985
2844 4715
2589 4586
4236 6985
4579 7272
2109 4492
4274 6875
Adolfos Espoza 2002 19% 4157 7033
4644 7031
2824 4692
4165 6894
4217 7003
4232 6989
2792 4684
2028 3987
1903 3798
2741 6870
4151 7054
2608 4612
2827 4699
</TABLE>
<PAGE>
ANNEX C
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Nomura Asset
Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series
1998-D6 (the "Global Securities") will be available only in book-entry form.
Investors in the Global Securities may hold such Global Securities through
any of The Depository Trust Company ("DTC"), Cedel or Euroclear. The Global
Securities will be tradable as home market instruments in both the European
and U.S. domestic markets. Initial settlement and all secondary trades will
settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional Eurobond practice (i.e., seven calendar days settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Offered Certificates will be effected on a delivery
against payment basis through the respective Depositaries of Cedel and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations of their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, Cedel and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts
as DTC Participants.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional Eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional Eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date, calculated on the basis of a year
of 360 days consisting of twelve 30-day months. Payment will then be made by
the respective Depositary to the DTC Participant's account against delivery
of the Global Securities. After settlement has been completed, the Global
Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Cedel
Participant's or Euroclear
C-1
<PAGE>
Participant's account. The securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest
on the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day
funds settlement. The most direct means of doing so is to pre-position funds
for settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within Cedel or Euroclear. Under this
approach, they may take on credit exposure to Cedel or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants can elect not to pre-position funds and allow that
credit line to be drawn upon to finance settlement. Under this procedure,
Cedel Participants or Euroclear Participants purchasing Global Securities
would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts.
However, interest on the Global Securities would accrue from the value date.
Therefore, in many cases the investment income on the Global Securities
earned during that one day period may substantially reduce or offset the
amount of such overdraft charges, although this result will depend on each
Cedel Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participant a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will send
instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
Cedel or Euroclear will instruct the respective Depositary, as appropriate,
to deliver the bonds to the DTC Participant's account against payment.
Payment will include interest accrued on the Global Securities from and
including the last coupon payment date to and excluding the settlement date,
calculated on the basis of a year of 360 days consisting of 12 30-day months.
The payment will then be reflected in the account of the Cedel Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in
the Cedel Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the Cedel Participant or Euroclear
Participant have a line of credit with its respective clearing system and
elect to be in debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred
over the one-day period. If settlement is not completed on the intended value
date (i.e., the trade fails) receipt of the cash proceeds in the Cedel
Participant's or Euroclear Participant's account would instead be valued as
of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel
or Euroclear (or through DTC if the holder has an address outside the U.S.)
will be subject to the 30% U.S. withholding tax that generally applies to
payments of
C-2
<PAGE>
interest (including original issue discount) on registered debt issued by
U.S. Persons (as defined herein), unless (i) each clearing system, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business in the chain or intermediaries between such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (ii) such beneficial owner takes
one of the following steps to obtain an exemption or reduced tax rate.
Exceptions for non-U.S. Persons (Form W-8): Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from
the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must be
filed within 30 days of such change.
Exception for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business
in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are beneficial owners of a
Certificate and reside in a country that has a tax treaty with the United
States can obtain an exemption or reduced tax rate (depending on the treaty
terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate
Certificate). If the treaty provides only for a reduced rate, withholding tax
will be imposed at that rate unless the filer alternatively files Form W-8.
Form 1001 may be filed by the holder of a Certificate or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The holder of a Global
Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any political subdivision thereof, (iii) an estate the
income of which is includible in gross income for United States tax purposes,
regardless of its source or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of such
trust, and one or more U.S. Persons have the authority to control all
substantial decisions of such trust. This summary does not deal with all
aspects of U.S. federal income tax withholding that may be relevant to
foreign holders of the Global Securities. Investors are advised to consult
their own tax advisors for specific tax advice concerning their holding and
disposing of the Global Securities.
C-3
<PAGE>
ANNEX D
CMBS NEW ISSUE
PRELIMINARY TERM SHEET
------------------------------
EXPECTED PRICING DATE: MARCH [ ], 1998
------------------------------
$_______________
(APPROXIMATE)
NOMURA ASSET SECURITIES CORPORATION
AS DEPOSITOR
AMRESCO SERVICES, L.P.
AS SERVICER
CRIIMI MAE SERVICES LIMITED PARTNERSHIP
AS SPECIAL SERVICER
NOMURA ASSET CAPITAL CORPORATION
AS SELLER
NOMURA FINANCING TRUST SP1
AS SELLER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-D6
------------------------------
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-D6
NOMURA SECURITIES INTERNATIONAL, INC. MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY PURSUANT TO A DEFINITIVE
PROSPECTUS SUPPLEMENT AND PROSPECTUS AND PROSPECTIVE INVESTORS WHO CONSIDER
PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT DECISION BASED ONLY
UPON THE INFORMATION PROVIDED THEREIN, CAPITALIZED TERMS USED BUT NOT DEFINED
HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
$______________ (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-D6
I. ISSUE CHARACTERISTICS
Issue Type: Class A-1A, A-1B, A-1C, A-1D, A-2, A-3, A-4, A-5, A-6,
A-CS1 and PS-1 Certificates (the "Public Securities")
are offered pursuant to the Prospectus Supplement and
accompanying Prospectus dated March [ ], 1998, and the
Class A-7 Certificates (the "Investment Grade Private
Securities") and the Class B-1, B-2, B-3, B-4, B-5, B-6
and B-7 Certificates (the "Non-Investment Grade Private
Securities" and together with the Investment Grade
Private Securities, the "Private Securities") will not
be offered hereby and will be offered privately
(including pursuant to Rule 144A under the Securities
Act of 1933, as amended) pursuant to a Private
Placement Memorandum, dated March [ ], 1998.
Securities Offered: $_____________ fixed-rate, monthly pay, multi-class,
sequential pay commercial mortgage REMIC Pass-Through
Certificates.
Collateral: The collateral consists of an approximately
$3,732,820,502 pool of newly originated, fixed-rate,
call protected, balloon and fully amortizing first
lien, commercial and multifamily Mortgage Loans.
Mortgage Loan Sellers: Nomura Asset Capital Corporation ("NACC") and Nomura
Financing Trust ST I
Co-Lead Bookrunning Nomura Securities International, Inc. ("NSI") and
Managers: Morgan Stanley & Co. Incorporated
Co-Manager: Merrill Lynch, Pierce, Fenner & Smith Incorporated
NSI is the sole Placement Agent for the Non-Investment
Grade Private Securities
Servicer: AMRESCO Services, L.P.
Special Servicer: CRIIMI MAE Services Limited Partnership
Subservicer: Nomura Asset Capital Services LLC
Trustee/Fiscal Agent: LaSalle National Bank/ABN AMRO Bank N.V.
Expected Pricing Date: On or about March [ ], 1998
Expected Closing Date: On or about March [ ], 1998
Distribution Dates: In general, the 15th of each month, commencing
April 17, 1998
Minimum Denominations: $50,000 for all Certificates and multiples of $1
Settlement Terms: DTC, Euroclear and Cedel, same day funds, with accrued
interest
SMMEA: The Class A-1A, A-1B, A-1C and A-1D Certificates (the
"Senior Principal Certificates") and the Class A-CS1,
PS-1 and A-2 Certificates are SMMEA eligible
ERISA: The Senior Principal Certificates and the Class A-CS1
and Class PS-1 Certificates are expected to be eligible
for exemptive relief under ERISA. The Subordinate
Principal Certificates (as defined herein) can be
purchased by an insurance company general account under
PTE 95-60.
Risk Factors: THE CERTIFICATES INVOLVE A DEGREE OF RISK AND MAY NOT
BE SUITABLE FOR ALL INVESTORS. SEE THE "RISK FACTORS
AND OTHER SPECIAL CONSIDERATIONS" SECTION OF THE
PROSPECTUS SUPPLEMENT AND THE "RISK FACTORS" SECTION OF
THE PROSPECTUS.
<PAGE>
$______________ (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-D6
II. STRUCTURE CHARACTERISTICS
The Certificates are fixed-rate, monthly pay, multi-class, sequential pay,
commercial mortgage REMIC Pass-Through Certificates. All Classes of
Certificates, except the Class A-CS1 Certificates, derive their cash flows from
the entire pool of Mortgage Loans.
PUBLIC SECURITIES: (1)(2)
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
------------------------- -------------------------
| | | Class A-CS1 |
Class A-1A | AAA | ------------------------- $_____MM
| ___% | -------------------------
| | | Class PS-1 |
------------------------- -------------------------
---------------------------- ----------------------
Class A-1B | AAA | | | $_____MM
| ___% | | |
---------------------------- ----------------------
------------------------------- -------------------
Class A-1C | AAA | | | $_____MM
| ___% | | |
------------------------------- -------------------
---------------------------------- ----------------
Class A-1D | AA+ | | | $_____MM
| ___% | | |
---------------------------------- ----------------
------------------------------------- -------------
Class A-2 | AA | | | $_____MM
| ___% | | |
------------------------------------- -------------
---------------------------------------- ----------
Class A-3 | A+ | | | $_____MM
| ___% | | |
---------------------------------------- ----------
---------------------------------------- ----------
Class A-4 | A | | | $_____MM
| ___% | | |
---------------------------------------- ----------
------------------------- -------------------------
Class A-5 | A- | | | $_____MM
| ___% | | |
------------------------- -------------------------
------------------------- -------------------------
Class A-6 | BBB | | | $_____MM
| ___% | | |
------------------------- -------------------------
<PAGE>
PRIVATE SECURITIES: (2)
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
------------------------- -------------------------
Class A-7 | BBB- | | | $_____MM
| ___% | | |
------------------------- -------------------------
------------------------- -------------------------
Class B-1 | BB+ | | | $_____MM
| ___% | | |
------------------------- -------------------------
------------------------- -------------------------
Class B-2 | BB | | | $_____MM
| ___% | | |
------------------------- -------------------------
------------------------- -------------------------
Class B-3 | BB- | | | $_____MM
| ___% | | |
------------------------- -------------------------
------------------------- -------------------------
Class B-4 | B+ | | | $_____MM
| ___% | | |
------------------------- -------------------------
------------------------- -------------------------
Class B-5 | B | | | $_____MM
| ___% | | |
------------------------- -------------------------
------------------------- -------------------------
Class B-6 | B- | | | $_____MM
| ___% | | |
------------------------- -------------------------
------------------------- -------------------------
Class B-7 | UR | | | $_____MM
| ___% | | |
------------------------- -------------------------
(1) The Class A-CS1 and Class PS-1 Certificates are Public Securities.
(2) Ratings listed are the ratings or their equivalent expected from one or
more of Standard & Poor's Rating Services, Duff & Phelps Credit Rating
Co., Fitch IBCA, Inc. and Moody's Investors Service Inc., respectively.
<PAGE>
$______________ (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-D6
Interest Distributions: Each Class of Certificates will be entitled on each
Distribution Date to interest accrued at its
Pass-Through Rate on the outstanding Certificate
Balance or Notional Amount of such Class, as
applicable.
Pass-Through Rates: Each Class of Principal Balance Certificates will
bear interest at a fixed rate that will be
determined on the pricing date.
The Class A-CS1 Certificates will bear interest at a
rate equal to a strip of a portion of the Class A-1A
Certificates calculated on the Class A-CS1 Notional
Amount which will be equal to a portion of the Class
A-1A Certificates.
The Class PS-1 Certificates will bear interest at a
rate equal to the weighted average of the strip
rates for each Class of Principal Balance
Certificates except a portion of the Class A-1A
Certificates.
The Pass-Through Rate for each Class of Principal
Balance Certificates will not exceed the Weighted
Average Net Mortgage Rate for such Distribution
Date.
Principal Distributions: Principal will be distributed on each Distribution
Date to the most senior Class (i.e., the Class with
the earliest alphabetical/numerical Class
designation) of the Principal Balance Certificates
(as defined below) outstanding, until its
Certificate Balance is reduced to zero (sequential
order). If, due to losses, the Certificate Balances
of the Class A-2, A-3, A-4, A-5, A-6, A-7, B-1, B-2,
B-3, B-4, B-5, B-6, B-7 and B-7H Certificates (the
"Subordinate Principal Certificates" and, together
with the Senior Principal Certificates, the
"Principal Balance Certificates") are reduced to
zero or Appraisal Reductions exceed the aggregate
Certificate Balance of the Subordinate Principal
Certificates, payments of principal to the Senior
Principal Certificates will be made on a pro rata
basis.
Credit Enhancement: Each Class of Certificates (other than the Senior
Principal Certificates and Class A-CS1 and PS-1
Certificates) will be subordinate to all other
Classes with an earlier alphabetical/numerical Class
designation.
Advancing: The Servicer, the Trustee and the Fiscal Agent (in
that order) will each be obligated to make P&I
Advances and Servicing Advances, including
delinquent property taxes and insurance, but only to
the extent that such Advances are deemed
recoverable.
Realized Losses and
Expense Losses: Realized Losses and Expense Losses, if any, will be
allocated to the Class B-7 Certificates and then to
all other Classes of Subordinate Principal
Certificates in reverse order of alphabetical and
numerical designation, and then to the Senior
Principal Certificates and, with respect to losses
allocated to interest, Class A-CS1 and PS-1
Certificates, pro rata, in each case reducing
amounts payable thereto. Any interest shortfall of
any Class of Certificates will result in unpaid
interest for such Class which will be payable in
subsequent periods, subject to available funds.
Prepayment Interest
Shortfalls: For any Distribution Date, any Prepayment Interest
Shortfall not offset by the Servicing Fee
attributable to the related Mortgage Loan for such
Distribution Date and the investment income accruing
on the related principal prepayment will generally
be allocated pro rata to each Class of Certificates
in proportion to its entitlement to interest. All of
the Mortgage Loans provide that prepayments can only
be made on the due date of the related Mortgage
Loan.
<PAGE>
Appraisal Reductions: An appraisal reduction generally will be created in
the amount, if any, by which the Principal Balance
of a Specially Serviced Mortgage Loan (plus other
amounts overdue in connection with such loan)
exceeds 90% of the appraised value of the related
Mortgaged Property. The Appraisal Reduction Amount
will reduce proportionately the amount of P&I
Advances for such loan, which reduction will result,
in general, in a reduction of interest distributable
to the most subordinate Class of Principal Balance
Certificates outstanding.
An Appraisal Reduction will be reduced to zero as of
the date the related Mortgage Loan has been brought
current for at least three consecutive months, paid
in full, liquidated, repurchased or otherwise
disposed of.
<PAGE>
$______________ (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-D6
Directing Holder: The Directing Holder will generally be the holder of
the most subordinate Class of Principal Balance
Certificates outstanding at any time, having an
initial Certificate Balance of at least 1% of the
aggregate initial balance of all of the
Certificates, or, if the Certificate Balance of such
Class is less than 40% of its initial Certificate
Balance, the next most subordinate Class of
Principal Balance Certificates.
The Directing Holder will have the right to direct
the Special Servicer to extend rather than foreclose
upon a Specially Serviced Mortgage Loan. If the
Special Servicer does not agree, the Directing
Holder can require the extension if it deposits in a
collateral account the lesser of the principal
amount of the related Mortgage Loan and 125% of the
fair market value of the related Mortgaged Property.
Special Servicer: In general, the Special Servicer has the right to
modify the terms of a Specially Serviced Mortgage
Loan if it determines that such modification would
increase the net present value of the proceeds to
the Trust, provided that the Special Servicer
generally may not extend the maturity date of a
Mortgage Loan beyond two years prior to the Final
Rated Distribution Date.
Optional Termination: The Depositor, then the Servicer, then the holder of
a majority of the Class LR Certificates and then the
Special Servicer will have the option to purchase,
in whole but not in part, the remaining assets of
the Trust on or after the Distribution Date on which
either (i) the aggregate Certificate Balance of all
Classes of Certificates then outstanding is less
than or equal to 1% of the Initial Pool Balance or
(ii) the Mortgage Pool consists only of the Circuit
City Credit Lease Loans, the Carmax Credit Lease
Loans and/or the Parkview House Apartments Loan,
which are the longest mortgage loans in the Mortgage
Pool.
Additionally, the holders of 100% of the Class LR
Certificates and then the holders of the most
subordinate Class of Certificates will have the
option to purchase any Mortgage Loan for up to two
months after its Anticipated Repayment Date.
In each case, the purchase price will generally be
at a price equal to the unpaid aggregate Scheduled
Principal Balance of the Mortgage Loans, plus
accrued and unpaid interest and unreimbursed
Advances.
Reports to
Certificateholders: The Trustee will prepare and deliver monthly
Certificateholder Reports. The Special Servicer will
prepare and deliver to the Trustee a monthly Special
Servicer Report summarizing the status of each
Specially Serviced Mortgage Loan. The Servicer and
the Special Servicer will prepare and deliver to the
Trustee an annual report setting forth, among other
things, the debt service coverage ratios for each
Mortgage Loan, as available. Each of the reports
will be available to the Certificateholders. A
report containing information regarding the Mortgage
Loans will be available electronically.
<PAGE>
$______________ (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-D6
III. ORIGINATORS
The Mortgage Loans were originated or acquired by NACC, a
Delaware corporation, the parent of the Depositor and an
affiliate of NSI. NACC was incorporated in 1992 and is engaged
primarily in the business of originating commercial mortgage
loan. NACC has been involved in the origination of over $17
billion in commercial mortgage loans and other commercial real
estate investments in the past four years.
Affiliates of NACC have been involved in a total of 24 offerings
of commercial mortgage-backed securities from June 1993 through
February 1998 that total over $12 billion in initial principal
amount. The Mortgage Loans included in these offerings were
predominantly originated directly by NACC.
NACC's parent, Nomura Holding America Inc. ("NHA"), is in the
process of transferring substantially all of its existing
commercial real estate finance business to a newly formed entity.
NHA currently intends to acquire 70% of the equity of the new
entity on a fully diluted basis, and the remainder of the equity
will be held by the current senior management of NACC.
IV. COLLATERAL DESCRIPTION
The Mortgage Pool consists of a $3,732,820,502 pool of 328
fixed-rate, first lien, mortgage loans secured by liens on
commercial and multifamily properties located throughout 43
states, Washington, D.C., Guam and the British West Indies. As of
the Cut-off Date, the Mortgage Loans have a weighted average
coupon of 7.996% and a weighted average remaining term to
maturity or Anticipated Repayment Date, as applicable, of 153
months. The ten largest loans have an aggregate Cut-off Date
Principal Balance of $1,106,920,068 and represent 28% of the
Initial Pool Balance. Summary information on certain of these
Mortgage Loans is set out on the attached pages. See the
Prospectus Supplement and the Annexes thereto for more detailed
collateral information.
All except 36 of the Mortgage Loans (9% of the Initial Pool
Balance) are ARD Loans. The ARD Loans have expected maturity
dates ("Anticipated Repayment Dates") ranging from 10 to 15 years
from closing, and final maturity dates ranging from 25 to 30
years from closing. After its Anticipated Repayment Date,
interest on an ARD Loan accrues at a rate 2% higher than its
initial rate (interest is payable at the initial rate; the
additional interest is deferred with interest and is payable at
final maturity) and all excess cash flow is used to pay
principal.
Each Mortgagee Loan is locked out from origination to up to 6
months prior to its final maturity or Anticipated Repayment Date,
as applicable, thereafter each Mortgage Loan can be prepaid
without penalty. Defeasance is permitted from 2 years after the
closing of this transaction.
<PAGE>
$______________ (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-D6
GEOGRAPHIC DISTRIBUTION
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
NH NC MS SD WA
0.2% 2.1% 0.3% 0.2% 1.0%
MA SC LA NE OR
3.7% 0.4% 1.0% 0.1% 0.5%
CT FL MI KS NV
0.3% 5.5% 4.9% 0.3% 0.9%
NY BWI IN OK CA
4.2% 0.5% 1.9% 0.8% 23.0%
NJ OH WI TX HI
3.5% 3.5% 0.6% 9.7% 0.1%
MD WV IL WY GUAM
2.7% 0.2% 2.3% 0.0% 1.1%
DC KY MN CO
0.5% 0.3% 1.4% 0.8%
DE TN IA NM
0.1% 0.2% 0.1% 0.3%
PA GA MO UT
7.4% 4.8% 0.4% 0.1%
VA AL ND AZ
6.7% 0.1% 0.2% 0.8%
PROPERTY TYPE DIVERSIFICATION
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
Multifamily Health Care
18.0% 1.0%
Hotel Retail
15.0% 39.0%
Mobile Home Park Office
2.0% 22.0%
Industrial
3.0%
<PAGE>
- ------------------------------------------------------------------------------
COLLATERAL TERM SHEET:
FOX PLAZA
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LOAN INFORMATION
- ------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $178,000,000 $177,424,525
ORIGINATION DATE: November 10, 1997
INTEREST RATE: 7.11%
AMORTIZATION: 30-year
HYPERAMORTIZATION: After the Anticipated Repayment Date, interest rate
increases to 9.11%. All excess cash flow is used to
reduce outstanding principal balance; the additional 2%
deferred and accrues interest at the increased rate until
the principal balance is zero.
ANTICIPATED
REPAYMENT DATE: November 11, 2007
MATURITY DATE: November 11, 2027
BORROWER/SPONSOR: Special purpose entities controlled by
the Davis Companies.
CALL PROTECTION: Prepayment lockout up to the
Anticipated Repayment Date. U.S.
Treasury defeasance permitted from two
years after the closing date.
REMOVAL OF
PROPERTY MANAGER: The lender may terminate the property
manager upon an event of default under
the loan or if the DSCR below 1.15x.
COLLECTION ACCOUNT: Hard Lock Box
CROSS-COLLATERALIZA-
TION/DEFAULT: NA
MEZZANINE LOANS: Lazard, Freres has a $60.0 million mezzanine loan.
ROLLOVER SCHEDULE
(%NSF): 1998 1999 2000
---- ---- ----
8.0% 9.0% 9.0%
ROLLOVER RESERVES: Borrower deposited a $5MM rollover
reserve at closing. In addition,
borrower is required to deposit $1MM
per year into the rollover reserve.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
- ------------------------------------------------------------------------------
SINGLE
ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: CBD Office
LOCATION: 2121 Ave. of the Stars, Los Angeles, CA
YEAR
BUILT/RENOVATED: 1987/N/A
THE COLLATERAL: A 35 story, Class A+ office building
located in Century City, CA. A total
of 710,767 square feet. One of only
four newer office properties in
Los Angeles CBD. Tenants include
premier entertainment, legal and
financial firms, including 20th
Century Fox (300,000 square feet of
GLA). The 20th Century Fox
production lot is adjacent to the
property. Market occupancy is 93%.
PROPERTY
MANAGEMENT: LSPAM, a California limited
partnership, an affiliate of La Salle
Partners.
OCCUPANCY: 90.0%
(2/11/09)
1997 NET OPERATING
INCOME: $20,695,362
UNDERWRITABLE NET
CASH FLOW: $18,708,894
APPRAISED VALUE: $265,000,000
CUT-OFF DATE LOAN/
SQUARE FOOT: $249.62
APPRAISAL DATE: October 2, 1997
CUT-OFF DATE AT ARD(1)
LTV: 67% 59%
DSCR(2): 1.25x
SEISMIC: PML: 27% for office, 23% for
parking. Borrower obtained insurance
of $75MM with a 5% deductible.
(1) Anticipated Repayment Date.
(2) Based on Underwritable Net Cash Flow.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
COLLATERAL TERM SHEET:
BRISTOL I POOL
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LOAN INFORMATION
- ------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $145,000,000 $144,328,799
Loan was made by NACC and Bankers
Trust. 100% of the loan is being
contributed to this transaction.
ORIGINATION DATE: October 10, 1997
INTEREST RATE: 7.458%
AMORTIZATION: 25-year
HYPERAMORTIZATION: After the Anticipated Repayment Date, interest rate
increases to 9.458%. All excess cash flow is used to
reduce outstanding principal balance; the additional 2%
interest accrues interest at the increased rate and is
deferred until the principal balance is zero.
ANTICIPATED
REPAYMENT DATE: November 11, 2007
MATURITY DATE: November 11, 2022
BORROWER/SPONSOR: Bristol Lodging Company, a special
purpose corporation, indirectly owned
and controlled by Bristol Hotel
Company, a publicly traded company
operating 101 hotels containing 28,000
rooms throughout North America. An
affiliate of the borrower has borrowed
$455MM from NACC and BT, secured by
first mortgages on 62 hotels, none of
which is security for this loan.
CALL PROTECTION: Prepayment lockout up to 6 months
prior to the Anticipated Repayment
Date. U.S. Treasury defeasance
permitted from two years after the
closing date.
REMOVAL OF
PROPERTY MANAGER: The lender may terminate the property
manager upon an event of default. Any
replacement must be approved by the
lender and rating agencies and must
not be paid a management fee in excess
of the greater of (i) 5% of gross
revenue, and (ii) a market fee but not
in excess of 7% of gross revenue.
COLLECTION ACCOUNT: Hard Lock Box
CROSS-COLLATERALIZA-
TION/DEFAULT: Yes
MEZZANINE LOANS: None
RESERVES: Tax, insurance, ongoing replacement
reserve.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
- ------------------------------------------------------------------------------
SINGLE
ASSET/PORTFOLIO: Portfolio
PROPERTY TYPE: Hotels
LOCATION: Texas (6); Georgia (4);
Mississippi (3); California (2);
Louisiana (1)
YEAR
BUILT/RENOVATED: 1974-1989/1993-1998(planned)
THE COLLATERAL: 15 full-service hotels that currently
consist of 7 Holiday Inns, 4 Harvey
Hotels, 2 Harvey Suites, and 2 Holiday
Inn Selects. Most of the properties
have been substantially renovated
during the past 3 years at a cost of
$80MM. The Harvey Hotels are being
reflagged as Crowne Plazas. Certain
hotels are being renovated and
reflagged. 5 of the Harvey's Hotels
will be revealed as Crowne Plazas.
PROPERTY
MANAGEMENT: Bristol Hotel Management Corporation,
an affiliate of the borrower
OCCUPANCY: 72.4%
(DATE)
UNDERWRITABLE NET
CASH FLOW: $28,212,789
APPRAISED VALUE: $286,000,000
CUT-OFF DATE LOAN/
ROOM: $32,876
CUT-OFF DATE AT ARD(1)
LTV: 50% 41%
DSCR(2): 2.20x
(1) Anticipated Repayment Date.
(2) Based on Underwritable Net Cash Flow.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
COLLATERAL TERM SHEET:
GOLDEN STATE LOAN POOL PROPERTIES
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LOAN INFORMATION
- ------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $135,039,950 $134,838,933
ORIGINATION DATE: December 31, 1997
INTEREST RATE: 8.33%
AMORTIZATION: 30-year
HYPERAMORTIZATION: After the Anticipated Repayment Date,
interest rate increases to 10.33%.
All excess cash flow is used to reduce
outstanding principal balance.
ANTICIPATED
REPAYMENT DATE: January 11, 2008
MATURITY DATE: January 11, 2028
BORROWER/SPONSOR: BBP/Golden State Acquisitions, LLC, a special purpose
Delaware, LLC. The sponsor of the borrower is Burnham
Pacific Properties, a self-managed, publicly traded REIT.
CALL PROTECTION: Prepayment lockout up to the
Anticipated Repayment Date. U.S.
Treasury defeasance permitted from two
years after the closing date.
REMOVAL OF
PROPERTY MANAGER: The lender may terminate any or all of
the Golden State property managers
upon an event of default or if the
Aggregate DSCR drops below 1.15.
COLLECTION ACCOUNT: Hard Lock Box
CROSS-COLLATERALIZA-
TION/DEFAULT: All 19 properties are
cross-collateralized and
cross-defaulted.
MEZZANINE LOANS: None
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
- ------------------------------------------------------------------------------
SINGLE
ASSET/PORTFOLIO: Portfolio
PROPERTY TYPE: Retail
LOCATION: California
YEAR
BUILT/RENOVATED: 1956-1992/1996
THE COLLATERAL: 19 cross-collateralized
cross-defaulted neighborhood retail
centers located throughout California,
ranging in size from 36,151 square
feet to 365,699 square feet. 18
properties have supermarket anchors,
which account for over 25% of the
total base rents for the portfolio.
Major anchors include Ralphs,
Safeway, Home Depot and Lucky
Supermarkets.
PROPERTY
MANAGEMENT: Manco, Abbot, Inc., CB Commercial Real
Estate Group, Cox Real Estate
Consultants, Duerken Real Estate
Services, and Revel Property Services.
OCCUPANCY: 92%
(12/31/97)
1997 NET OPERATING
INCOME: $25,446,524
UNDERWRITABLE NET
CASH FLOW: $23,530,871
APPRAISED VALUE: $288,800,000
CUT-OFF DATE LOAN/
SQUARE FOOT: $55.63
CUT-OFF DATE AT MATURITY
LTV: 47% 42%
DSCR(1): 1.77x
SEISMIC: PML ranges from 10% to 45%. Borrower
has Earthquake insurance of $50MM with
a 5% deductible.
(1) Based on Underwritable Net Cash Flow.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
COLLATERAL TERM SHEET:
PARK LA BREA
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LOAN INFORMATION
- ------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $285,563,810 $281,227,978
AMOUNT INCLUDED: $142,781,905 $140,613,989
Balance is evidenced by a separate pari passu note that
is cross-collateralized and cross-defaulted with this
note.
ORIGINATION DATE: January 13, 1998
INTEREST RATE: 8.00%
AMORTIZATION: 30-year
HYPERAMORTIZATION: After the Anticipated Repayment Date, interest rate
increases to 10%. All excess cash flow is used to reduce
outstanding principal balance; the additional 2% interest
is deferred and accrues interest at the increased rate
until the principal balance is zero.
ANTICIPATED
REPAYMENT DATE: March 11, 2013
MATURITY DATE: March 11, 2028
BORROWER/SPONSOR: Primus/Park La Brea Holdings, L.P., a
special purposes California limited
partnership.
CALL PROTECTION: Prepayment lockout up to 6 months
prior to the Anticipated Repayment
Date. U.S. Treasury defeasance
permitted from 2 years after the
closing date.
REMOVAL OF
PROPERTY MANAGER: The lender may terminate the property
manager upon an event of default under
the loan. Any replacement must be
approved by the lender.
COLLECTION ACCOUNT: Soft Lockbox
CROSS-COLLATERALIZA-
TION/DEFAULT: NA
MEZZANINE LOANS: Yes, $40,000,000. Currently held by
Atlantic Preferred 2 LLC, an affiliate
of Lazard, Freres, Real Estate Fund,
L.P.
RESERVES: Ongoing capital reserves of $200 per
unit per year.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
- ------------------------------------------------------------------------------
SINGLE
ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Multifamily
LOCATION: 6200 West 3rd St., Los Angeles,
California
YEAR
BUILT/RENOVATED: 1944/1995
THE COLLATERAL: A residential development in
Los Angeles, CA consisting of 4,222
apartment units on 166 acres. Park
La Brea is the largest apartment
complex west of the Mississippi.
Total rentable area of 4,166,929
square feet contained in 26 two-story
garden apartment buildings, and 18
twelve-story apartment towers. On
site amenities include a bank, fitness
center, dry cleaner, swimming pool,
tennis courts and 24-hour security.
PROPERTY
MANAGEMENT: PLB Management, LLC, an affiliate of
the Borrower
OCCUPANCY: 97.8%
(10/31/97)
1997 NET OPERATING
INCOME: $32,890,411
UNDERWRITABLE NET
CASH FLOW: $32,024,147
APPRAISED VALUE: $410,000,000
CUT-OFF DATE
LOAN/UNIT: $66,610
APPRAISAL DATE: November 23, 1997
CUT-OFF DATE AT ARD(1)
LTV: 69% 55%
DSCR(2): 1.27x
SEISMIC: PML of 6% 0
(1) Anticipated Repayment Date.
(2) Based on Underwritable Net Cash Flow.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
COLLATERAL TERM SHEET:
THE CINEMARK CREDIT LEASE PROPERTIES LOANS
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LOAN INFORMATION
- ------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $105,297,461 $105,297,461
ORIGINATION DATE: February 25, 1998
INTEREST RATE: 8.05%
AMORTIZATION: 20 year
HYPERAMORTIZATION: None
ANTICIPATED
REPAYMENT DATE: March 11, 2018
MATURITY DATE: March 11, 2018
BORROWER/SPONSOR: Primus Capital LLC is the sponsor for
each of the primary borrowers.
CALL PROTECTION: Prepayment lockout to maturity. U.S.
Treasury defeasance permitted from two
years after the closing date.
COLLECTION ACCOUNT: Hard Lock Box
CROSS-COLLATERALIZA-
TION/DEFAULT: 10 mortgage loans each secured by a
separate property. All properties are
cross-collateralized and
cross-defaulted.
MEZZANINE LOANS: NA
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
- ------------------------------------------------------------------------------
SINGLE
ASSET/PORTFOLIO: Portfolio
PROPERTY TYPE: Movie theatres; Credit Tenant Leases
LOCATION: Texas (8 properties), Colorado (1
property), California (1 property)
YEAR
BUILT/RENOVATED: 1990-1997/1992-1997
THE COLLATERAL: Ten movie theatres, eight of which are
located in Texas, one of which is
located in Colorado, and one of which
is located in California. Number of
screens ranges between 10 and 16. The
properties are leased to Cinemark
Corporation under ten separate 20-year
leases, each of which expires on or
after the Loan Maturity Date. All of
the leases are bondable and are
guaranteed by Cinemark Corp., which is
rated "BB" and Baa3 by S&P and
Moody's, respectively.
PROPERTY
MANAGEMENT: None
OCCUPANCY: 100%
(3/1/98)
UNDERWRITABLE NET
CASH FLOW: $10,607,568
APPRAISED VALUE: $105,300,000
CUT-OFF DATE
LOAN/SQ. FT.: $152
CUT-OFF DATE AT MATURITY
LTV: 100% 0%
DSCR(1): 1.0x
(1) Based on Underwritable Net Cash Flow.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
COLLATERAL TERM SHEET:
ONE OXFORD CENTRE
- ------------------------------------------------------------------------------
LOAN INFORMATION
- ------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $99,464,749 $99,464,749
ORIGINATION DATE:
INTEREST RATE: 8.02%
AMORTIZATION: 30 year
HYPERAMORTIZATION: After the Anticipated Repayment Date,
interest rate increases to 10.02%.
All excess cash flow is used to close
the outstanding principal balance.
The additional 2% interest is deferred
and accrues interest at the increased
rate until the principal balance is
zero.
ANTICIPATED
REPAYMENT DATE: March 11, 2008
MATURITY DATE: March 11, 2028
BORROWER/SPONSOR: Oxford Development Company (ODC)/Grant Street, a limited
partnership directly owned and controlled by ODC Inc.
CALL PROTECTION: Prepayment lockout up to the
Anticipated Repayment Date. U.S.
Treasury defeasance permitted from two
years after the closing date.
REMOVAL OF
PROPERTY MANAGER: The lender may terminate the property
manager upon an event of default under
the loan or if the DSCR falls below
1.15x.
COLLECTION ACCOUNT: Hard Lock Box
CROSS-COLLATERALIZA-
TION/DEFAULT: N/A
MEZZANINE LOANS: Lazard Freres holds a $20,350,000
mezzanine loan.
ROLLOVER SCHEDULE:
(%NSF) 1998 1999 2000
---- ---- ----
7% 1% 21%
ROLLOVER RESERVES: $3MM at closing. NACC has an
obligation to fund up to $4MM of
preferred equity for additional
rollover expenses, which are the
responsibility of the borrower.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
- ------------------------------------------------------------------------------
SINGLE
ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Office
LOCATION: 300 Grant Street, Pittsburgh,
Pennsylvania
YEAR
BUILT/RENOVATED: 1982/N/A
THE COLLATERAL: A 45-story Class A1 office tower with
a four-level retail and office
arcade. The building contains
1,008,222 net rentable square feet
with 871,591 square feet of office
space and 68,401 in retail space. Two
of five premier Class A1 Buildings in
Pittsburgh CBD. Duquesne Light
Company (Baa2/BBB) and Westinghouse
(Ba1/BB) lease nearly 48 percent of
the building with leases expiring in
2003 and 2000.
PROPERTY
MANAGEMENT: Oxford Development Company, owned by
Edward Kemil, Mark Mason, and Myron
Mason.
OCCUPANCY: 90.8%
(1/11/98)
1997 NET OPERATING
INCOME: $13,751,585
UNDERWRITABLE NET
CASH FLOW: $12,196,058
APPRAISED VALUE: $143,000,000
CUT-OFF DATE LOAN/
UNIT: $98.65
APPRAISAL DATE: January 14, 1998
CUT-OFF DATE AT ARD(1)
LTV: 70% 62%
DSCR(2): 1.39x
(1) Anticipated Repayment Date.
(2) Based on Underwritable Net Cash Flow.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
COLLATERAL TERM SHEET:
SPRINGFIELD MALL
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LOAN INFORMATION
- ------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $182,210,356 $182,210,356
AMOUNT INCLUDED: $91,105,178 $91,105,178
Balance is evidenced by a separate pari passu note that
is cross-collateralized and cross-defaulted with this
note.
ORIGINATION DATE: March ___, 1998
INTEREST RATE: 8.50%
AMORTIZATION: 30-year
HYPERAMORTIZATION: After the Anticipated Repayment Date, interest rate
increases to 10.50%. All excess cash flow is used to
reduce outstanding principal balance; the additional 2%
interest is deferred and accrues interest at the
increased rate until the principal balance is zero.
ANTICIPATED
REPAYMENT DATE: April 11, 2013
MATURITY DATE: April 11, 2028
BORROWER/SPONSOR: Franconia Two, LP which is owned and controlled by John
Reese and his company, Fischer Reese Associates. Fischer
Reese has developed and managed over 8 million square
feet of retail shopping centers. The mall was developed
by Arthur Fischer.
CALL PROTECTION: Prepayment lockout up to the
Anticipated Repayment Date. U.S.
Treasury defeasance permitted from two
years after the closing date.
REMOVAL OF
PROPERTY MANAGER: The lender may remove the property manager
upon default under the loan or if DSCR drops
below 1.15x.
COLLECTION ACCOUNT: Hard Lockbox
CROSS-COLLATERALIZA-
TION/DEFAULT: N/A
MEZZANINE LOANS: None
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
- ------------------------------------------------------------------------------
SINGLE
ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Retail-Mall
LOCATION: 6500 Springfield Mall, Springfield, VA
YEAR
BUILT/RENOVATED: 1973/1986, 1991
THE COLLATERAL: A 1,418,944 square foot super regional
shopping center located in
Springfield, VA. The collateral
includes the enclosed mall, two out
parcel stores (a total of 776,714 sq.
ft.) and a parking garage. The
anchors are Macy's, Montgomery Wards
and JC Penny. The anchors own their
own stores except the Macy's store is
built on land leased from the
borrower. JC Penny's sales are
reported to be approx. $270/sf.
Montgomery Ward's sales are reported
to be approx. $200/st. Macy's sales
are reported to be approx. $170/sf.
Average in-line sales are approx.
$260/sf. The mall is well located in
a middle-income community in the
Northern Virginia suburbs. Disposable
income in the county and the area is
among the highest in the country.
PROPERTY
MANAGEMENT: Fischer Reese Associates, Inc.
OCCUPANCY: 93.3%
(12/18/97)
1997 NET OPERATING
INCOME: $20,427,592
UNDERWRITABLE NET
CASH FLOW: $19,850,511
APPRAISED VALUE: $243,000,000
CUT-OFF DATE LOAN/
SQUARE FOOT: $64.20
APPRAISAL DATE: January 5, 1998
CUT-OFF DATE AT ARD(1)
LTV: 75% 61%
DSCR(2): 1.1x
(1) Anticipated Repayment Date.
(2) Based on Underwritable Net Cash Flow.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
COLLATERAL TERM SHEET:
ATLANTA MARRIOTT
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LOAN INFORMATION
- ------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $164,000,000 $163,742,162
AMOUNT INCLUDED: $82,000,000 $81,871,306
Balance is held in separate pari-passu note that
is cross-collateralized & cross-defaulted with this
note.
ORIGINATION DATE:
INTEREST RATE: 7.40%
AMORTIZATION: 25-year
HYPERAMORTIZATION: After the Anticipated Repayment Date, interest rate
increases to 9.40%. All excess cash flow is used to
reduce outstanding principal balance; the additional 2%
interest is deferred and accrues interest at the
increased rate until the principal balance is zero.
ANTICIPATED
REPAYMENT DATE: February 11, 2010
MATURITY DATE: February 11, 2023
BORROWER/SPONSOR: HMA Realty, Limited Partnership,
indirectly owned and controlled by
Host Marriott.
CALL PROTECTION: Prepayment lockout to Anticipated
Repayment Date. U.S. Treasury
defeasance permitted from two years
after the closing date.
REMOVAL OF
PROPERTY MANAGER: Lender may terminate the property
manager upon an event of default under
the loan or if DSCR falls below 1.15x.
COLLECTION ACCOUNT: Lockbox in the event the credit rating
of Marriott International Inc. is
downgraded below BBB+.
CROSS-COLLATERALIZA-
TION/DEFAULT: NA
MEZZANINE LOANS: None
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
- ------------------------------------------------------------------------------
SINGLE
ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Full Service Hotel
LOCATION: Marriott Marquis, 265 Peachtree Center
Ave., Atlanta, GA
YEAR
BUILT/RENOVATED: 1985/1997
THE COLLATERAL: A 51-story full-service hotel with
1671 rooms in downtown Atlanta. It is
the largest convention hotel in
Atlanta and one of the largest
non-casino hotels in the U.S.
PROPERTY
MANAGEMENT: A subsidiary of Marriott International
OCCUPANCY: 1995 1996 TTM(1)
---- ---- ------
71.6% 68.6% 70.9%
ADR: 1995 1996 TTM(1)
---- ---- ------
$116.02 $131.91 $127.88
1997 NET OPERATING
INCOME: $32,854,036
UNDERWRITABLE NET
CASH FLOW: $26,297,934
APPRAISED VALUE: $288,000,000
CUT-OFF DATE
LOAN/ROOM: $97,990
CUT-OFF DATE AT ARD(2)
LTV: 57% 43%
DSCR(3): 1.82x
(1) Trailing 12 months from November, 1997.
(2) Anticipated Repayment Date.
(3) Based on Underwritable Net Cash Flow.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
COLLATERAL TERM SHEET:
UNIVERSITY MALL
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LOAN INFORMATION
- ------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $64,898,546 $64,800,478
ORIGINATION DATE: December 18, 1997
INTEREST RATE: 8.23%
AMORTIZATION: 30-year
HYPERAMORTIZATION: After the Anticipated Repayment Date, interest rate
increases to 10.23%. All excess cash flow is used to
reduce outstanding principal balance; the additional 2%
interest is deferred and accrues interest at the
increased rate until the principal balance is zero.
ANTICIPATED
REPAYMENT DATE: January 11, 2013
MATURITY DATE: January 11, 2028
BORROWER/SPONSOR: Glimcher University Mall Limited Partnership, indirectly
owned by Glimcher Realty Trust, a publicly owned and
traded REIT.
CALL PROTECTION: Prepayment lockout up to 6 months
prior to the Anticipated Repayment
Date. U.S. Treasury defeasance
permitted from two years after the
closing date.
REMOVAL OF
PROPERTY MANAGER: The lender may terminate the property
manager if: 1) DSCR falls below
1.10x; 2) NOI decreases by more than
85%; or, 3) upon an event of default
under the loan.
COLLECTION ACCOUNT: Hard Lockbox
CROSS-COLLATERALIZA-
TION/DEFAULT: N/A
MEZZANINE LOANS: None
- ------------------------------------------------------------------------------
PROPERTY INFORMATION
- ------------------------------------------------------------------------------
SINGLE
ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Retail-Mall
LOCATION: 2200 East Fowler Ave., Tampa, FL
YEAR
BUILT/RENOVATED: 1973/1996
THE COLLATERAL: The property is a 1,302,845 square
feet Retail Shopping Mall located in
one of Tampa's major growth areas. It
is the largest mall in the trade area,
and the only one with five anchors.
The property includes a 16 screen Cobb
Theatre. Comparable mall store sales
were $252 psf. Anchors are Dillards,
Burdines, Sears, Montgomery Ward, and
JC Penny. Only the JC Penny store
is part of the collateral for the
mortgage loan. Anchor sales for
Dillards are approx. $180/sf, for
Burdines approx. $188/sf, for Sears
approx. $141/sf, for Montgomery Ward
approx. $118/sf and for JC Penny
$124/sf.
PROPERTY
MANAGEMENT: Glimcher Properties, L.P., an
affiliate of Glimcher Realty Trust
OCCUPANCY: 86.10%
(1/11/98)
1997 NET OPERATING
INCOME: $9,710,480
UNDERWRITABLE NET
CASH FLOW: $8,590,294
APPRAISED VALUE: $122,300,000
CUT-OFF DATE LOAN/
SQUARE FOOT: $98.58
APPRAISAL DATE: December 2, 1997
CUT-OFF DATE AT ARD(1)
LTV: 52.9% 42.81%
DSCR(2): 1.47x
(1) Anticipated Repayment Date.
(2) Based on Underwritable Net Cash Flow.
- ------------------------------------------------------------------------------
<PAGE>
Annex E
A. The inside front cover contains a map of the United States showing the
concentration of the Mortgaged Properties in the pool by state or other locality
as follows:
Number of Percentage
State Properties Value of Total
- ----------------------- ---------- ------------- ----------
Alabama 1 $ 2,951,465 0.1%
Arizona 8 31,119,590 0.8%
Arkansas 1 3,865,000 0.2%
British West Indies 1 19,832,535 0.5%
California 68 859,208,701 23.0%
Colorado 7 30,599,492 0.8%
Connecticut 1 10,200,000 0.3%
Delaware 1 4,848,913 0.1%
Florida 27 206,740,836 5.5%
Georgia 14 179,486,611 4.8%
Guam 4 41,377,683 1.1%
Hawaii 1 5,554,332 0.1%
Illinois 12 87,668,939 2.3%
Indiana 8 72,365,500 1.9%
Iowa 1 2,028,509 0.1%
Kansas 2 10,571,908 0.3%
Kentucky 2 10,143,844 0.3%
Louisiana 5 37,324,323 1.0%
Maryland 14 102,381,131 2.7%
Massachusetts 7 139,721,131 3.7%
Michigan 24 182,816,816 4.9%
Minnesota 9 51,425,836 1.4%
Mississipi 3 11,430,841 0.3%
Missouri 3 14,573,914 0.4%
Nebraska 2 3,532,646 0.1%
Nevada 4 32,229,572 0.9%
New Hampshire 5 8,622,298 0.2%
New Jersey 10 131,564,441 3.5%
New Mexico 3 10,852,504 0.3%
<PAGE>
Number of Percentage
State Properties Value of Total
- ----------------------- ---------- ------------- ----------
New York 25 157,351,245 4.2%
North Carolina 13 76,831,578 2.1%
North Dakota 1 9,331,286 0.2%
Ohio 23 129,314,767 3.5%
Oklahoma 4 28,993,680 0.8%
Oregon 7 17,925,411 0.5%
Pennsylvania 17 276,080,681 7.4%
South Carolina 3 13,765,848 0.4%
South Dakota 3 8,269,311 0.2%
Tennessee 3 6,647,258 0.2%
Texas 53 362,843,323 9.7%
Virginia 18 250,683,548 6.7%
Utah 1 3,500,000 0.1%
Washington 8 38,501,405 1.0%
Washington D.C. 2 20,089,137 0.5%
West Virginia 3 8,577,606 0.2%
Wisconsin 5 22,613,124 0.6%
Wyoming 1 326,984 0.0%
B. The inside front cover contains a pie graph showing Allocated Loan
Amount by Property Type in the following amounts:
Healthcare 1%
Mobile Home Park 2%
Office 22%
Retail 39%
Multifamily 18%
Hotel 15%
Industrial 3%
C. The inside front cover of the paper version of the prospectus supplement
contains pictures of the following properties:
(clockwise from right)
Cinemark - Pueblo: Pueblo, CO. Photograph shows a frontal view of the movie
complex.
-2-
<PAGE>
University Mall: Tampa, FL. Photograph shows an entrance of the mall.
FAC Realty: Story City, IA. Photograph shows the interior portion of a
shopping complex.
Atlanta Marriott: Atlanta, GA. Photograph shows the hotel building.
Park La Brea: Los Angeles, CA. Photograph shows an aerial view of
residential buildings.
Burnham Pacific-Golden State Westminster Center: Westminster, CA.
Photograph shows the commercial center.
One Oxford Center: Pittsburgh, PA. Photograph shows the high-rise office
building.
Bristol - Holiday Inn Atlanta Airport North: East Point, GA. Photograph
shows the main entrance of the hotel.
Fox Plaza: Los Angeles, CA. Photograph shows the high-rise office building.
Springfield Mall: Springfield, VA (2 pictures). Photographs show the
interior of the mall complex.
D. The inside back cover of the paper version of the prospectus supplement
contains pictures of the following properties:
(left to right, top to bottom)
McGraw-Hill Headquarters: Burr Ridge, IL. Photograph shows a red-brick
building.
Uptown District Retail Center: San Diego, CA. Photograph shows a diagonal
view of the shopping center.
River Run Apartments: Avon, CO. Photograph shows the apartment complex.
Morris Corporate Center: Parsippany, NJ. Photograph shows the building
with a lake in the foreground.
1040 Grant Road Shopping Center: Mountain View, CA. Photograph shows a
portion of the shopping center.
Innkeepers Summerfield Suites: Mt. Laurel, NJ. Photograph shows the
entrance of the hotel complex.
-3-
<PAGE>
Mall Del Norte: Laredo, TX. Photograph shows a portion of the mall complex.
Hampton Inn: Richfield, MN. Photograph shows the hotel building.
Hunter's Branch: Vienna, VA. Photograph shows the business building.
Hyundai Buildings 3101-3103 North First St.: San Jose, CA. Photograph
shows the business buildings.
Ambassador Apartments: Lancaster, PA. Photograph shows a portion of the
apartment complex.
Santiago Creekside Estates: Orange, CA. Photograph shows a residential
house.
Northpointe Medical Building: Berkeley, MI. Photograph shows a portion of
the medical center.
The Citadel Building: Albuquerque, NM. Photograph shows the office
building.
Monetary Plaza Hotel: Monetary, CA. Photograph shows a portion of the
hotel complex.
Brattle Square: Cambridge, MA. Photograph shows a red-brick business
building.
Circuit City - Wallkill: Wallkill, NY. Photograph shows an aerial view
of the low-rise building.
The Classic at West Palm Beach: West Palm Beach, FL. Photograph shows
the hotel.
Gaslamp Theatres: San Diego, CA. Photograph shows a portion of the
theater.
Central Tower Trust: Cincinnati, OH. Photograph shows the building in an
urban setting.
CAA Headquarters: Los Angeles, CA. Photograph shows the interior of the
building.
Diamond Bar Mobile Home Park: Walnut, CA. Photograph shows residential
structures.
Edgewater Hills: Framingham, MA. Photograph shows an office building.
Park Center: San Jose, CA. Photograph shows a high-rise office building.
<PAGE>
PROSPECTUS DATED MARCH 12, 1998
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
NOMURA ASSET SECURITIES CORPORATION
DEPOSITOR
The Certificates offered hereby and by Supplements to this Prospectus (the
"Offered Certificates") will be offered from time to time in series. Each
series of Certificates will represent in the aggregate the entire beneficial
ownership interest in a trust fund (with respect to any series, the "Trust
Fund") consisting of a segregated pool of mortgage loans secured by liens on
retail, office, multifamily, hotel, mobile home park, industrial, senior
housing/healthcare and mixed retail properties (the "Mortgage Loans", or
sometimes referred to herein as the "Mortgage Assets"). The Trust Fund for a
series of Certificates may also include letters of credit, insurance
policies, guarantees, reserve funds or other types of credit support, or any
combination thereof (with respect to any series, collectively, "Credit
Support"), and currency or interest rate exchange agreements and other
financial assets, or any combination thereof (with respect to any series,
collectively, "Cash Flow Agreements"). See "Description of the Trust Funds",
"Description of the Certificates" and "Description of Credit Support".
Each series of Certificates will consist of one or more classes of
Certificates that may (i) provide for the accrual of interest thereon based
on fixed, variable or adjustable rates; (ii) be senior or subordinate to one
or more other classes of Certificates in respect of certain distributions on
the Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be
entitled to interest distributions, with disproportionately low, nominal or
no principal distributions; (v) provide for distributions of accrued interest
thereon only following the occurrence of certain events, such as the
retirement of one or more other classes of Certificates of such series; or
(vi) provide for distributions of principal sequentially, or based on
specified payment schedules, to the extent of available funds, in each case
as described in the related Prospectus Supplement. Any such classes may
include classes of Offered Certificates. See "Description of the
Certificates".
Principal and interest with respect to Certificates will be distributable
monthly, quarterly, semi-annually or at such other intervals and on the dates
specified in the related Prospectus Supplement. Distributions on the
Certificates of any series will be made only from the assets of the related
Trust Fund.
The Certificates of each series will not represent an obligation of or
interest in the Depositor, any Master Servicer, any Special Servicer or any
of their respective affiliates, except to the limited extent described herein
and in the related Prospectus Supplement. Only those Certificates and assets
in the related Trust Fund as are disclosed in the related Prospectus
Supplement will be guaranteed or insured by any governmental agency or
instrumentality or by any other person. The assets in each Trust Fund will be
held in trust for the benefit of the holders of the related series of
Certificates pursuant to a Pooling and Servicing Agreement or a Trust
Agreement, as more fully described herein.
The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including voluntary and
involuntary prepayments) on the Mortgage Assets in the related Trust Fund and
the timing of receipt of such payments as described under the caption "Yield
Considerations" herein and in the related Prospectus Supplement. A Trust Fund
may be subject to early termination under the circumstances described herein
and in the related Prospectus Supplement.
Prospective investors should review the information appearing under the
caption "Special Considerations" herein and such information as may be set
forth under the caption "Risk Factors and Other Special Considerations" in
the related Prospectus Supplement before purchasing any Offered Certificate.
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof
as one or more "real estate mortgage investment conduits" for federal income
tax purposes. See also "Federal Income Tax Consequences" herein.
PROSPECTIVE INVESTORS SHOULD REVIEW THE DISCUSSION OF MATERIAL RISKS
APPEARING UNDER THE CAPTION "SPECIAL CONSIDERATIONS" HEREIN COMMENCING ON
PAGE 13.
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.
Prior to issuance there will have been no market for the Certificates of
any series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of a series of
Offered Certificates unless accompanied by a Prospectus Supplement.
<PAGE>
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "Method of Distribution" herein and in the related Prospectus
Supplement. All Offered Certificates will be distributed by, or sold by
underwriters managed by:
NOMURA SECURITIES INTERNATIONAL, INC.
THE DATE OF THIS PROSPECTUS IS MARCH 12, 1998
<PAGE>
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is
in addition to the obligation of dealers to deliver a Prospectus and
Prospectus Supplement when acting as underwriters and with respect to their
unsold allotments or subscriptions.
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to the Offered Certificates of each series will, among other things, set
forth with respect to such Certificates, as appropriate: (i) a description of
the class or classes of Certificates, the payment provisions with respect to
each such class and the Pass-Through Rate or method of determining the
Pass-Through Rate with respect to each such class; (ii) the aggregate
principal amount and distribution dates relating to such series and, if
applicable, the initial and final scheduled distribution dates for each
class; (iii) information as to the assets comprising the Trust Fund,
including the general characteristics of the assets included therein,
including the Mortgage Assets and any Credit Support and Cash Flow Agreements
(with respect to the Certificates of any series, the "Trust Assets"); (iv)
the circumstances, if any, under which the Trust Fund may be subject to early
termination; (v) additional information with respect to the method of
distribution of such Certificates; (vi) whether one or more REMIC elections
will be made and designation of the regular interests and residual interests;
(vii) the aggregate original percentage ownership interest in the Trust Fund
to be evidenced by each class of Certificates; (viii) information as to any
Master Servicer, any Special Servicer (or provision for the appointment
thereof) and the Trustee, as applicable; (ix) information as to the nature
and extent of subordination with respect to any class of Certificates that is
subordinate in right of payment to any other class; and (x) whether such
Certificates will be initially issued in definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a
part) under the Securities Act of 1933, as amended, with respect to the
Offered Certificates. This Prospectus and the Prospectus Supplement relating
to each series of Certificates contain summaries of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
Regional Offices located as follows: Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and New
York Regional Office, Seven World Trade Center, New York, New York 10048. The
Commission also maintains a site on the World Wide Web (the "Web") at
"http://www.sec.gov" at which users can view and download copies of reports,
proxy and information statements and other information filed electronically
through the Electronic Data Gathering, Analysis and Retrieval ("EDGAR")
system.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any
Prospectus Supplement with respect hereto and, if given or made, such
information or representations must not be relied upon. This Prospectus and
any Prospectus Supplement with respect hereto do not constitute an offer to
sell or a solicitation of an offer to buy any securities other than the
Offered Certificates or an offer of the Offered Certificates to any person in
any state or other jurisdiction in which such offer would be unlawful. The
delivery of this Prospectus at any time does not imply that information
herein is correct as of any time subsequent to its date; however, if any
material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be amended or supplemented accordingly.
A 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.
("Cede"), 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
(the "Certificateholders") upon request to their respective DTC participants.
See "Description of the Certificates -- Reports to Certificateholders" and
"Description of the Agreements Evidence as to Compliance". The Depositor will
file or cause to be filed with the Commission such
2
<PAGE>
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
Depositor with the Commission pursuant to the Exchange Act will be filed by
means of the EDGAR system and therefore should be available at the
Commission's site on the Web.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the
termination of the offering of the Offered Certificates evidencing an
interest therein. The Depositor will provide or cause to be provided without
charge to each person to whom this Prospectus is delivered in connection with
the offering of one or more classes of Offered Certificates, a copy of any or
all documents or reports incorporated herein by reference, in each case to
the extent such documents or reports relate to one or more of such classes of
such Offered Certificates, other than the exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents).
Requests to the Depositor should be directed in writing to its principal
executive office at 2 World Financial Center -- Building B, New York, New
York 10281-1198, Attention: Secretary, or by telephone at (212) 667-9300. The
Depositor has determined that its financial statements are not material to
the offering of any Offered Certificates. See "Financial Information" herein.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Supplement.............................................................................. 2
Available Information.............................................................................. 2
Incorporation of Certain Information by Reference.................................................. 3
Summary of Prospectus.............................................................................. 8
Special Considerations............................................................................. 13
Limited Liquidity.................................................................................. 13
Limited Assets..................................................................................... 13
Average Life of Certificates; Prepayments; Yields.................................................. 13
Limited Nature of Ratings.......................................................................... 14
Risks Associated with Certain Mortgage Loans and Mortgaged Properties.............................. 14
Retail Properties ................................................................................. 15
Office Properties ................................................................................. 15
Multifamily Properties............................................................................. 15
Hotel Properties .................................................................................. 16
Balloon Payments................................................................................... 16
Obligor Default.................................................................................... 17
Mortgagor Type..................................................................................... 17
Junior Mortgage Loans ............................................................................. 17
Credit Support Limitations......................................................................... 17
Enforceability..................................................................................... 18
Environmental Risks................................................................................ 18
Limited Liquidity and Market Value................................................................. 18
ERISA Considerations............................................................................... 19
Certain Federal Tax Considerations Regarding Residual Certificates................................. 19
Certain Federal Tax Considerations Regarding Original Issue Discount............................... 19
Consent............................................................................................ 19
Book-Entry Registration............................................................................ 20
Description of the Trust Funds..................................................................... 21
Mortgage Assets.................................................................................... 21
Mortgage Loans..................................................................................... 21
Default and Loss Considerations with Respect to the Mortgage Loans................................. 21
Mortgage Loan Information in Prospectus Supplements................................................ 22
Mortgage Underwriting Standards and Procedures..................................................... 23
Payment Provisions of the Mortgage Loans........................................................... 23
MBS................................................................................................ 24
Collection Accounts................................................................................ 25
Credit Support..................................................................................... 25
Cash Flow Agreements............................................................................... 25
Use of Proceeds.................................................................................... 25
Yield Considerations............................................................................... 26
General............................................................................................ 26
Pass-Through Rate.................................................................................. 26
Timing of Payment of Interest and Principal........................................................ 26
Principal Prepayments.............................................................................. 26
Prepayments--Maturity and Weighted Average Life.................................................... 27
Other Factors Affecting Weighted Average Life...................................................... 28
Type of Mortgage Loan.............................................................................. 28
Foreclosures and Payment Plans..................................................................... 28
Due-on-Sale and Due-on-Encumbrance Clauses......................................................... 28
The Depositor...................................................................................... 28
4
<PAGE>
PAGE
--------
Description of the Certificates.................................................................... 29
General............................................................................................ 29
Distributions...................................................................................... 30
Available Funds.................................................................................... 31
Distributions of Interest on the Certificates...................................................... 31
Distributions of Principal of the Certificates..................................................... 32
Distributions on the Certificates of Prepayment Premiums or in Respect of Equity Participations ... 32
Allocation of Losses and Shortfalls................................................................ 32
Advances in Respect of Delinquencies............................................................... 33
Reports to Certificateholders...................................................................... 33
Termination........................................................................................ 35
Book-Entry Registration and Definitive Certificates................................................ 35
Description of the Agreements...................................................................... 36
Assignment of Mortgage Assets; Repurchases......................................................... 37
Representations and Warranties; Repurchases........................................................ 38
Payments on Mortgage Assets; Deposits to Collection Account........................................ 39
Collection and Other Servicing Procedures.......................................................... 40
Special Servicers.................................................................................. 40
Sub-Servicers...................................................................................... 41
Realization Upon Defaulted Whole Loans............................................................. 41
Hazard Insurance Policies.......................................................................... 43
Due-on-Sale and Due-on-Encumbrance Provisions...................................................... 44
Retained Interest; Servicing Compensation and Payment of Expenses.................................. 44
Evidence as to Compliance.......................................................................... 44
Certain Matters Regarding a Master Servicer, a Special Servicer and the Depositor ................. 45
Event of Default................................................................................... 45
Rights Upon Event of Default....................................................................... 46
Amendment.......................................................................................... 46
Duties of the Trustee.............................................................................. 47
The Trustee........................................................................................ 47
Description of Credit Support...................................................................... 48
General............................................................................................ 48
Subordinate Certificates........................................................................... 48
Cross-Support Provisions........................................................................... 48
Insurance or Guarantees with Respect to the Mortgage Assets........................................ 48
Letter of Credit................................................................................... 49
Insurance Policies and Surety Bonds................................................................ 49
Certificate Guarantee Insurance.................................................................... 49
Reserve Funds...................................................................................... 49
Certain Legal Aspects of Mortgage Loans............................................................ 50
General............................................................................................ 50
Types of Mortgage Instruments...................................................................... 50
Leases and Rents................................................................................... 50
Personalty......................................................................................... 51
Installment Contracts.............................................................................. 51
Junior Mortgages; Rights of Senior Mortgages or Beneficiaries...................................... 51
Subordinate Financing.............................................................................. 53
Foreclosure........................................................................................ 53
Judicial Foreclosure............................................................................... 53
Non-Judicial Foreclosure/Power of Sale............................................................. 53
Limitations on Lender's Rights..................................................................... 54
Rights of Redemption............................................................................... 55
5
<PAGE>
PAGE
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Anti-Deficiency Legislation........................................................................ 56
Leasehold Risks.................................................................................... 56
Bankruptcy Laws.................................................................................... 56
Environmental Legislation.......................................................................... 58
Due-on-Sale and Due-on-Encumbrance................................................................. 59
Acceleration on Default............................................................................ 59
Default Interest, Prepayment Charges and Prepayments............................................... 59
Applicability of Usury Laws........................................................................ 60
Alternative Mortgage Instruments................................................................... 60
Soldiers' and Sailors' Civil Relief Act of 1940.................................................... 60
Forfeitures in Drug and RICO Proceedings........................................................... 61
Certain Laws and Regulations....................................................................... 61
Type of Mortgaged Property......................................................................... 61
Americans with Disabilities Act.................................................................... 61
Federal Income Tax Consequences.................................................................... 62
Federal Income Tax Consequences for REMIC Certificates............................................. 62
General............................................................................................ 62
Status of REMIC Certificates....................................................................... 62
Qualification as a REMIC........................................................................... 63
Taxation of Regular Certificates................................................................... 64
General............................................................................................ 64
Original Issue Discount............................................................................ 65
Acquisition Premium................................................................................ 67
Variable Rate Regular Certificates................................................................. 67
Deferred Interest.................................................................................. 68
Market Discount.................................................................................... 68
Premium............................................................................................ 69
Election to Treat All Interest Under the Constant Yield Method..................................... 69
Sale or Exchange of Regular Certificates........................................................... 69
Treatment of Losses................................................................................ 70
Taxation of Residual Certificates.................................................................. 70
Taxation of REMIC Income........................................................................... 70
Basis and Losses................................................................................... 71
Treatment of Certain Items of REMIC Income and Expense............................................. 72
Limitations on Offset or Exemption of REMIC Income................................................. 73
Tax-Related Restrictions on Transfer of Residual Certificates...................................... 73
Sale or Exchange of a Residual Certificate......................................................... 75
Mark to Market Regulations......................................................................... 76
Taxes That May Be Imposed on the REMIC Pool........................................................ 76
Prohibited Transactions............................................................................ 76
Contributions to the REMIC Pool After the Startup Day.............................................. 76
Net Income from Foreclosure Property............................................................... 76
Liquidation of the REMIC Pool...................................................................... 77
Administrative Matters............................................................................. 77
Limitations on Deduction of Certain Expenses....................................................... 77
Taxation of Certain Foreign Investors.............................................................. 78
Regular Certificates............................................................................... 78
Residual Certificates.............................................................................. 78
Backup Withholding................................................................................. 78
Reporting Requirements............................................................................. 79
6
<PAGE>
PAGE
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Federal Income Tax Consequences for Certificates as to Which No REMIC
Election Is Made.................................................................................. 79
Standard Certificates.............................................................................. 79
General............................................................................................ 79
Tax Status......................................................................................... 80
Premium and Discount............................................................................... 80
Recharacterization of Servicing Fees............................................................... 81
Sale or Exchange of Standard Certificates.......................................................... 81
Stripped Certificates.............................................................................. 82
General............................................................................................ 82
Status of Stripped Certificates.................................................................... 83
Taxation of Stripped Certificates.................................................................. 83
Reporting Requirements and Backup Withholding...................................................... 84
Taxation of Certain Foreign Investors.............................................................. 84
ERISA Considerations............................................................................... 86
General............................................................................................ 86
Certain Requirements Under ERISA................................................................... 86
General............................................................................................ 86
Parties in Interest/Disqualified Persons........................................................... 86
Delegation of Fiduciary Duty....................................................................... 86
Administrative Exemptions.......................................................................... 87
Governmental Plans................................................................................. 87
Unrelated Business Taxable Income; Residual Certificates........................................... 87
Legal Investment................................................................................... 87
Method of Distribution............................................................................. 89
Legal Matters...................................................................................... 90
Financial Information.............................................................................. 90
Rating............................................................................................. 90
Index of Principal Definitions..................................................................... 91
</TABLE>
7
<PAGE>
SUMMARY OF PROSPECTUS
The following summary of material information does not contain all the
material information regarding the Certificates and is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each
series of Certificates contained in the Prospectus Supplement to be prepared
and delivered in connection with the offering of such series. An Index of
Principal Definitions is included at the end of this Prospectus.
Title of Certificates ......... Mortgage Pass-Through Certificates, issuable
in series (the "Certificates").
Depositor ..................... Nomura Asset Securities Corporation, a
wholly-owned subsidiary of Nomura Asset
Capital Corporation. See "The Depositor".
Master Servicer ............... The master servicer (the "Master Servicer"),
if any, for each series of Certificates will
be named in the related Prospectus
Supplement. See "Description of the
Agreements -- Collection and Other Servicing
Procedures".
Special Servicer .............. The special servicer (the "Special
Servicer"), if any, for each series of
Certificates will be named, or the
circumstances in accordance with which a
Special Servicer will be appointed will be
described, in the related Prospectus
Supplement. See "Description of the
Agreements -- Special Servicer".
Trustee ....................... The trustee (the "Trustee") for each series
of Certificates will be named in the related
Prospectus Supplement. See "Description of
the Agreements -- The Trustee".
Issuer ........................ The issuer of each series of Certificates
will be the related Trust Fund.
The Trust Assets .............. Each series of Certificates will represent
in the aggregate the entire beneficial
ownership interest in a Trust Fund
consisting primarily of:
(a) Mortgage Assets .......... The Mortgage Assets with respect to each
series of Certificates will consist of a
pool of multifamily and commercial mortgage
loans (the "Mortgage Loans"). Except to the
extent described in the related Prospectus
Supplement, the Mortgage Loans will not be
guaranteed or insured by the Depositor or
any of its affiliates or by any governmental
agency or instrumentality or other person.
As more specifically described herein, the
Mortgage Loans will be secured by liens on,
or security interest in, properties
consisting of (i) residential properties
consisting of five or more rental or
cooperatively-owned dwelling units (the
"Multifamily Properties") or (ii) office
buildings, shopping centers, hotels, motels,
nursing homes, hospitals or other
health-care related facilities, mobile home
parks, industrial plants, mixed use or other
types of commercial properties (the
"Commercial Properties" and together with
Multifamily Properties, the "Mortgaged
Properties"). The Mortgaged Properties may
be located in any one of the fifty states or
the District of Columbia or such other
locations as are disclosed in the related
Prospectus Supplement. All Mortgage Loans
will have individual principal balances at
origination of not less than $25,000 and
original terms to maturity of not more than
40 years. All Mortgage Loans will have been
originated by persons other than the
Depositor, and all Mortgage Assets will have
been purchased, either directly or
indirectly, by the Depositor on or before
the date of initial issuance of the related
series of Certificates. As described herein
and in the Prospectus Supplement, each
Mortgage Loan may (i) provide for no accrual
of interest or for accrual of interest
thereon at an interest rate (a
8
<PAGE>
"Mortgage Rate") that is fixed over its term
or that adjusts from time to time, or that
may be converted from an adjustable to a
fixed Mortgage Rate, or from a fixed to an
adjustable Mortgage Rate, from time to time
at the mortgagor's election; (ii) provide
for scheduled payments to maturity, payments
that adjust from time to time in accommodate
changes in the Mortgage Rate or to reflect
the occurrence of certain events, and may
provide negative amortization or accelerated
amortization; (iii) be fully amortizing or
require a balloon payment due on its stated
maturity date; (iv) contain prohibitions on
prepayment or require payment of a premium
or a yield maintenance penalty in connection
with a prepayment; and (v) provide for
payments of principal, interest or both, on
due dates that occur monthly, quarterly,
semi-annually or other interval. See
"Description of the Trust Funds -- Mortgage
Assets".
(b) Collection Account ....... Each Trust Fund will include one or more
accounts (collectively, the "Collection
Account") established and maintained on
behalf of the Certificateholders into which
the person or persons designated in the
related Prospectus Supplement will deposit
all payments and collections received or
advanced with respect to the Mortgage Assets
and other assets in the Trust Fund other
than certain fees and expenses. A Collection
Account may be maintained as an interest
bearing or a non-interest bearing account,
and funds held therein may be invested in
certain short-term, investment grade
obligations, as described in the related
Prospectus Supplement. See "Description of
the Agreements -- Payments on Mortgage
Assets; Deposits to Collection Account".
(c) Credit Support ........... If so provided in the related Prospectus
Supplement, partial or full protection
against certain defaults and losses on the
Mortgage Assets in the related Trust Fund
may be provided to one or more classes of
Certificates of the related series in the
form of subordination of one or more other
classes of Certificates of such series or by
one or more other types of credit support,
such as a letter of credit, an insurance
policy on the Mortgage Loans, guarantee,
certificate guarantee insurance policy,
reserve fund or another type of credit
support, or a combination thereof (any such
coverage with respect to the Certificates of
any series, "Credit Support"). The amount
and types of coverage, the identification of
the entity providing the coverage (if
applicable) and related information with
respect to each type of Credit Support, if
any, will be described in the Prospectus
Supplement for a series of Certificates. The
Prospectus Supplement for any series of
Certificates evidencing an interest in a
Trust Fund that includes MBS will describe
any credit support that is included as part
of the trust fund evidenced or secured by
such MBS. See "Special Considerations --
Credit Support Limitations" and "Description
of Credit Support".
(d) Cash Flow Agreements ..... If so provided in the related Prospectus
Supplement, the Trust Fund may include
guaranteed investment contracts pursuant to
which moneys held in the funds and accounts
established for the related series will be
invested at a specified rate. The Trust Fund
may also include certain other agreements,
such as interest rate exchange agreements,
interest rate cap or floor agreements,
currency exchange agreements or similar
agreements provided to reduce the effects of
interest rate or currency exchange rate
fluctuations on the Mortgage Assets on one
or more classes of Certificates. The
principal terms of any such guaranteed
investment contract or other agreement (any
such agreement, a "Cash Flow Agreement"),
including provisions relating to the timing,
manner and amount of payments thereunder and
provisions relating to the termination
thereof, will be described in the Prospectus
Supplement for the related series. In
addition, the related
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<PAGE>
Prospectus Supplement will provide certain
information with respect to the obligor
under any such Cash Flow Agreement. The
Prospectus Supplement for any series of
Certificates evidencing an interest in a
Trust Fund that includes MBS will describe
any cash flow agreements that are included
as part of the trust fund evidenced or
secured by such MBS. See "Description of the
Trust Funds -- Cash Flow Agreements".
Description of Certificates ... Each series of Certificates evidencing an
interest in a Trust Fund consisting of
Mortgage Loans will be issued pursuant to a
Pooling and Servicing Agreement and each
series of Certificates evidencing an
interest in a Trust Fund the Mortgage Assets
of which consisting of MBS will be issued
pursuant to a Trust Agreement. Pooling and
Servicing Agreements and Trust Agreements
are sometimes referred to herein as
"Agreements". Each series of Certificates
(including any class or classes of
Certificates of such series not offered
hereby) will represent in the aggregate the
entire beneficial ownership interest in the
Trust Fund. Each class of Certificates
(other than certain Stripped Interest
Certificates, as defined below) will have a
stated principal amount (a "Certificate
Balance") and (other than certain Stripped
Principal Certificates, as defined below),
will accrue interest thereon based on a
fixed, variable or adjustable interest rate
(a "Pass-Through Rate"). The related
Prospectus Supplement will specify the
Certificate Balance and the Pass-Through
Rate for each class of Certificates, as
applicable, or in the case of a variable or
adjustable Pass-Through Rate, the method for
determining the Pass-Through Rate. Each
series of Certificates will consist of one
or more classes or subclasses of
Certificates that may (i) be senior
(collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate
Certificates") to one or more other classes
of Certificates in respect of certain
distributions on the Certificates; (ii) be
entitled to principal distributions, with
disproportionately low, nominal or no
interest distributions (collectively,
"Stripped Principal Certificates"); (iii) be
entitled to interest distributions, with
disproportionately low, nominal or no
principal distributions (collectively,
"Stripped Interest Certificates"); (iv)
provide for distributions of accrued
interest thereon only following the
occurrence of certain events, such as the
retirement of one or more other classes of
Certificates of such series (collectively,
"Accrual Certificates"); and/or (v) provide
for payments of principal sequentially,
based on specified payment schedules or
other methodologies, to the extent of
available funds. Any such classes or
subclasses may include classes or subclasses
of Offered Certificates. The Certificates
will not be guaranteed or insured by the
Depositor or any of its affiliates, by any
governmental agency or instrumentality or by
any other person, unless otherwise provided
in the related Prospectus Supplement. See
"Special Considerations -- Limited Assets"
and "Description of the Certificates". The
Offered Certificates will not be listed on
any securities exchange and will not be
quoted in an automated quotation system of a
registered securities association. This fact
may limit the liquidity of the Offered
Certificates. See "Special Considerations --
Limited Liquidity and Market Value."
Distributions of Interest on
Certificates ................. Interest on each class of Offered
Certificates (other than certain classes of
Stripped Interest Certificates and Stripped
Principal Certificates) of each series will
accrue at the applicable Pass-Through Rate
on the outstanding Certificate Balance
thereof and will be distributed to
Certificateholders as provided in the
related Prospectus Supplement (each of the
specified dates on which distributions are
to be made, a "Distribution Date").
Distributions with respect to
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interest on Stripped Interest Certificates
may be made on each Distribution Date on the
basis of a notional amount as described in
the related Prospectus Supplement.
Distributions of interest with respect to
one or more classes of Certificates may be
reduced to the extent of certain
delinquencies and other contingencies
described herein and in the related
Prospectus Supplement. See "Special
Considerations -- Average Life of
Certificates; Prepayments; Yields", "Yield
Considerations", and "Description of the
Certificates --Distributions of Interest on
the Certificates".
Distributions of Principal of
Certificates ................. The initial aggregate Certificate Balance of
the Certificates of each series (other than
certain classes of Stripped Interest
Certificates) will generally not exceed the
outstanding principal balance of the
Mortgage Assets as of the close of business
on the day of the month specified in the
related Trust Fund (the "Cut-off Date"),
after application of scheduled payments due
on or before such date, whether or not
received. The Certificate Balance of a
Certificate outstanding from time to time
represents the maximum amount that the
holder thereof is then entitled to receive
in respect of principal from future cash
flow on the assets in the related Trust
Fund. Distributions of principal will be
made on each Distribution Date to the class
or classes of Certificates entitled thereto
until the Certificate Balance of such
Certificates have been reduced to zero.
Distributions of principal of any class of
Certificates will be made on a pro rata
basis among all of the Certificates of such
class. Stripped Interest Certificates with
no Certificate Balance will not receive
distributions in respect of principal. See
"Description of the Certificates --
Distributions of Principal of the
Certificates".
Advances ...................... In connection with a series of Certificates
evidencing an interest in a Trust Fund
consisting of Mortgage Assets other than
MBS, the Master Servicer may be obligated as
part of its servicing responsibilities to
make certain advances with respect to
delinquent scheduled payments on the
Mortgage Loans in such Trust Fund. Advances
made by a Master Servicer are reimbursable
generally from subsequent recoveries in
respect of such Mortgage Loans, and in
certain circumstances, from other assets
available in the Trust Fund. The Master
Servicer will be entitled to receive
interest on its outstanding advances,
payable from amounts in the related Trust
Fund. The Prospectus Supplement for any
series of Certificates evidencing an
interest in a Trust Fund that includes MBS
will describe any corresponding advancing
obligation of any person in connection with
such MBS. See "Description of the
Certificates -- Advances in Respect of
Delinquencies". Purchasers of any series of
Certificates will be advised of any advances
relating to such Certificates by means of
the report to be delivered to
Certificateholders in connection with each
distribution. See "Description of the
Certificates -- Reports to
Certificateholders".
<PAGE>
Termination ................... A series of Certificates may be subject to
optional early termination through the
repurchase of the Mortgage Assets in the
related Trust Fund. If so provided in the
related Prospectus Supplement, upon the
reduction of the Certificate Balance of a
specified class or classes of Certificates
by a specified percentage or amount, the
party specified therein will solicit bids
for the purchase of all of the Mortgage
Assets of the Trust Fund under the
circumstances and in the manner set forth
therein. See "Description of the
Certificates -- Termination".
Registration of Certificates .. If so provided in the related Prospectus
Supplement, one or more classes of the
Offered Certificates will initially be
represented by one or more Certificates
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<PAGE>
registered in the name of Cede & Co., as the
nominee of DTC. No person acquiring an
interest in Offered Certificates so
registered will be entitled to receive a
definitive certificate representing such
person's interest except in the event that
definitive certificates are issued under the
limited circumstances described herein. See
"Special Considerations -- Book-Entry
Registration" and "Description of the
Certificates -- Book-Entry Registration and
Definitive Certificates".
Special Considerations ........ An investment in the Offered Certificates
may include certain material risks. See
"Special Considerations" herein and "Risk
Factors and Other Special Considerations in
the related Prospectus Supplement.
Federal Income Tax
Consequences ................. The federal income tax consequences to
Certificateholders will vary depending on
whether one or more elections are made to
treat the Trust Fund or specified portions
thereof as one or more "real estate mortgage
investment conduits" (each, a "REMIC") under
the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"). The
Prospectus Supplement for each series of
Certificates will specify whether one or
more such elections will be made. See
"Federal Income Tax Consequences".
ERISA Considerations .......... A fiduciary of an employee benefit plan or
other retirement arrangement, including an
individual retirement account, or a Keogh
plan which is subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the
Code (each a "Plan"), or a collective
investment fund in which such Plans are
invested, or an insurance company using
assets of a separate account or general
account which includes assets of Plans (or
which is deemed pursuant to ERISA to include
assets of Plans), or other pensions acting
on behalf of any such Plan or using the
assets of any such Plan, which proposes to
cause a Plan to acquire any of the Offered
Certificates should carefully review with
its legal advisors whether the purchase or
holding of Offered Certificates could give
rise to a transaction that is prohibited or
is not otherwise permissible either under
ERISA or Section 4975 of the Code. See
"ERISA Considerations" herein and in the
related Prospectus Supplement.
Legal Investment .............. The related Prospectus Supplement will
specify whether the Offered Certificates
will constitute "mortgage related
securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984.
Investors whose investment authority is
subject to legal restrictions should consult
their own legal advisors to determine
whether and to what extent the Offered
Certificates constitute legal investments
for them. See "Legal Investment" herein and
in the related Prospectus Supplement.
Rating ........................ At the date of issuance, as to each series,
each class of Offered Certificates will be
rated not lower than investment grade by one
or more nationally recognized statistical
rating agencies (each, a "Rating Agency").
See "Rating" herein and in the related
Prospectus Supplement.
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<PAGE>
SPECIAL CONSIDERATIONS
Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in "Risk Factors and Other Special
Considerations" in the related Prospectus Supplement.
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Certificates of
any series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such
series remain outstanding. Any such secondary market may provide less
liquidity to investors than any comparable market for securities evidencing
interests in single-family mortgage loans. The market value of Certificates
will fluctuate with changes in prevailing rates of interest. Consequently,
sale of Certificates by a holder in any secondary market that may develop may
be at a discount from 100% of their original principal balance or from their
purchase price. Furthermore, secondary market purchasers may look only
hereto, to the related Prospectus Supplement and to the reports to
Certificateholders delivered pursuant to the Agreement as described herein
under the heading "Description of the Certificates -- Reports to
Certificateholders," "--Book-Entry Registration and Definitive Certificates"
and "Description of the Agreements -- Evidence as to Compliance" for
information concerning the Certificates. Certificateholders will have no
redemption rights. Each class of Offered Certificates of a series will be
issued in minimum denominations corresponding to Certificate Balances or, in
the case of Stripped Interest Certificates, notional amounts specified in the
related Prospectus Supplement. Nomura Securities International, Inc., through
one or more of its affiliates, currently expects to make a secondary market
in the Offered Certificates, but has no obligation to do so.
LIMITED ASSETS
A series of Certificates will not have any claim against or security
interest in the Trust Funds for any other series. If the related Trust Fund
is insufficient to make payments on such Certificates, no other assets will
be available for payment of the deficiency. Additionally, certain amounts
remaining in certain funds or accounts, including the Certificate Account and
any accounts maintained as Credit Support, may be withdrawn under certain
conditions, as described in the related Prospectus Supplement. In the event
of such withdrawal, such amounts will not be available for future payment of
principal of or interest on the Certificates. With respect to a series of
Certificates consisting of one or more classes of Subordinate Certificates,
on any Distribution Date in respect of which losses or shortfalls in
collections on the Mortgage Assets have been incurred, the amount of such
losses or shortfalls will be borne first by one or more classes of the
Subordinate Certificates, and, thereafter, by the remaining classes of
Certificates in the priority and manner and subject to the limitations
specified in the related Prospectus Supplement.
AVERAGE LIFE OF CERTIFICATES; PREPAYMENTS; YIELDS
Prepayments on the Mortgage Assets in any Trust Fund (including principal
prepayments on the Mortgage Loans resulting from both voluntary and
involuntary liquidations) generally will result in a faster rate of principal
payments on one or more classes of the related Certificates than if payments
on such Mortgage Assets were made as scheduled. Thus, the prepayment
experience on the Mortgage Assets may affect the average life of each class
of related Certificates. The rate of principal payments on pools of mortgage
loans varies between pools and from time to time is influenced by a variety
of economic, demographic, geographic, social, tax, legal and other factors.
There can be no assurance as to the rate of prepayment on the Mortgage Assets
in any Trust Fund or that the rate of payments will conform to any model
described herein or in any Prospectus Supplement. If prevailing interest
rates fall significantly below the applicable mortgage rates, principal
prepayments are likely to be higher than if prevailing rates remain at or
above the rates borne by the Mortgage Loans underlying or comprising the
Mortgage Assets in any Trust Fund. As a result, the actual maturity of any
class of Certificates could occur significantly earlier than expected. A
series of Certificates may include one or more classes of Certificates with
priorities of payment and, as a result, yields on other classes of
Certificates, including classes of Offered Certificates, of such series may
be more sensitive to prepayments on Mortgage Assets. A series of Certificates
may include one or more classes offered at a significant premium or discount.
Yields on such classes of Certificates will be sensitive, and in some cases
extremely sensitive, to voluntary and involuntary prepayments on Mortgage
Assets and, where the amount of interest payable with respect to a class is
disproportionately high, as compared to the amount of principal, as with
certain classes of Stripped Interest Certificates, a holder might, in some
prepayment scenarios, fail to recoup its original investment. A series of
Certificates may include one or more classes of Certificates, including
classes of Offered
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<PAGE>
Certificates, that provide for distribution of principal thereof from amounts
attributable to interest accrued but not currently distributable on one or
more classes of Accrual Certificates and, as a result, yields on such
Certificates will be sensitive to (a) the provisions of such Accrual
Certificates relating to the timing of distributions of interest thereon and
(b) if such Accrual Certificates accrue interest at a variable or adjustable
Pass-Through Rate, changes in such rate. See "Yield Considerations" herein
and, if applicable, in the related Prospectus Supplement.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Certificates will
reflect such Rating Agency's assessment solely of the likelihood that holders
of Certificates of such class will receive payments to which such
Certificateholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments on
the related Mortgage Assets will be made, the degree to which the rate of
such prepayments might differ from that originally anticipated or the
likelihood of early optional termination of the series of Certificates. Such
rating will not address the possibility that prepayment at higher or lower
rates than anticipated by an investor may cause such investor to experience a
lower than anticipated yield or that an investor purchasing a Certificate at
a significant premium might fail to recoup its initial investment under
certain prepayment scenarios. Each Prospectus Supplement will identify any
payment to which holders of Offered Certificates of the related series are
entitled that is not covered by the applicable rating.
The amount, type and nature of credit support, if any, established with
respect to a series of Certificates will be determined on the basis of
criteria established by each Rating Agency rating classes of such series.
Such criteria are sometimes based upon an actuarial analysis of the behavior
of mortgage loans in a larger group. Such analysis is often the basis upon
which each Rating Agency determines the amount of credit support required
with respect to each such class. There can be no assurance that the
historical data supporting any such actuarial analysis will accurately
reflect future experience nor any assurance that the data derived from a
large pool of mortgage loans accurately predicts the delinquency, foreclosure
or loss experience of any particular pool of Mortgage Assets. No assurance
can be given that values of any Mortgaged Properties have remained or will
remain at their levels on the respective dates of origination of the related
Mortgage Loans. Moreover, there is no assurance that appreciation of real
estate values generally will limit loss experiences on the Mortgaged
Properties. If the commercial or multifamily residential real estate markets
should experience an overall decline in property values such that the
outstanding principal balances of the Mortgage Loans underlying or comprising
the Mortgage Assets in a particular Trust Fund and any secondary financing on
the related Mortgaged Properties become equal to or greater than the value of
the Mortgaged Properties, the rates of delinquencies, foreclosures and losses
could be higher than those now generally experienced by institutional
lenders. In addition, adverse economic conditions (which may or may not
affect real property values) may affect the timely payment by mortgagors of
scheduled payments of principal and interest on the Mortgage Loans and,
accordingly, the rates of delinquencies, foreclosures and losses with respect
to any Trust Fund. To the extent that such losses are not covered by Credit
Support, such losses will be borne, at least in part, by the holders of one
or more classes of the Certificates of the related series. See "Description
of Credit Support" and "Rating".
RISKS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND MORTGAGED PROPERTIES
Mortgage loans made with respect to multifamily or commercial property may
entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single-family
property. See "Description of the Trust Funds -- Mortgage Assets". The
ability of a mortgagor to repay a loan secured by an income-producing
property typically is dependent primarily upon the successful operation of
such property rather than any independent income or assets of the mortgagor;
thus, the value of an income-producing property is directly related to the
net operating income derived from such property. In contrast, the ability of
a mortgagor to repay a single-family loan typically is dependent primarily
upon the mortgagor's household income, rather than the capacity of the
property to produce income; thus, other than in geographical areas where
employment is dependent upon a particular employer or an industry, the
mortgagor's income tends not to reflect directly the value of such property.
A decline in the net operating income of an income-producing property will
likely affect both the performance of the related loan as well as the
liquidation value of such property, whereas a decline in the income of a
mortgagor on a single-family property will likely affect the performance of
the related loan but may not affect the liquidation value of such property.
The performance of a mortgage loan secured by an income-producing property
leased by the mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the business operated by such tenants in
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<PAGE>
connection with such property, the creditworthiness of such tenants or both;
the risks associated with such loans may be offset by the number of tenants
or, of applicable, a diversity of types of business operated by such tenants.
It is anticipated that all or a substantial portion of the Mortgage Loans
included in any Trust Fund will be nonrecourse loans or loans for which
recourse may be restricted or unenforceable, as to which, in the event of
mortgagor default, recourse may be had only against the specific multifamily
or commercial property and such other assets, if any, as have been pledged to
secure the Mortgage Loan. With respect to those Mortgage Loans that provide
for recourse against the mortgagor and its assets generally, there can be no
assurance that such recourse will ensure a recovery in respect of a defaulted
Mortgage Loan greater than the liquidation value of the related Mortgaged
Property.
Further, the concentration of default, foreclosure and loss risks in
individual mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of
single-family loans both because the Mortgage Assets in a Trust Fund will
generally consist of a smaller number of loans than would a single-family
pool of comparable aggregate unpaid principal balance and because of the
higher principal balance of individual Mortgage Loans.
RETAIL PROPERTIES
Significant factors determining the value of retail properties are the
quality of the tenants as well as fundamental aspects of real estate such as
location and market demographics. The correlation between the success of
tenant businesses and property value is more direct with respect to retail
properties than other types of commercial property because a significant
component of the total rent paid by retail tenants is often tied to a
percentage of gross sales. Whether a retail property is "anchored" or
"unanchored" is also an important distinction. Retail properties that are
anchored have traditionally been percived to be less risky. While there is no
strict definition of an anchor, it is generally understood that a retail
anchor tenant is proportionately large in size and is vital in attracting
customers to the property. 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 hotel properties, retail properties also face competition
from sources outside a given real estate market. Catalogue retailers, home
shopping networks, telemarketing and outlet centers all compete with more
traditional retail properties for consumer dollars. Continued growth of these
alternative retail outlets (which are often characterized by lower operating
costs) could adversely affect the rent collectible at the retail properties
included in the Mortgaged Properties.
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.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g. floor sizes and layout), access to transportation and
ability or inability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiberoptic cables, satellite
communications or other base building technological features).
The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for
example, may be affected by such factors as labor cost and quality, tax
environment and quality of life issues such as schools and cultural
amenities. A central business district may have an economy which is markedly
different from that of a suburb. The local economy will impact on an office
property's ability to attract stable tenants on a consistent basis. In
addition, the cost of refitting office space of a new tenant is often more
costly than for other property types.
MULTIFAMILY PROPERTIES
Significant factors determining the value and successful operation of a
multifamily property are the location of the property, the number of
competing residential developments in the local market (such as apartment
buildings,
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<PAGE>
manufactured housing communities and site-built single family homes), the
physical attributes of the multifamily apartment building (such as its age
and appearance) and state and local regulations affecting such property. In
addition, the successful operation of an apartment building will depend upon
other factors, such as its reputation, the ability of management to provide
adequate maintenance and insurance, and the types of services it provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection.
For example, there are provisions that limit the basis on which a landlord
may terminate a tenancy or increase its rent or prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment
buildings. These ordinances may limit rent increases to fixed percentages, to
percentages of increases in the consumer price index, to increases set or
approved by a governmental agency, or to increases determined through
mediation or binding arbitration. In many cases, the rent control laws do not
permit vacancy decontrol. Local authority to impose rent control is
pre-empted by state law in certain states, and rent control is not imposed at
the state level in those states. In some states, however, local rent control
ordinances are not pre-empted for tenants having short-term or month-to-month
leases, and properties there may be subject to various forms of rent control
with respect to those tenants. Any limitations on a borrower's ability to
raise property rents may impair such borrower's ability to repay its Mortgage
Loan from its net operating income or the proceeds of a sale or refinancing
of the related Mortgaged Property.
Adverse economic conditions, either local or national, may limit the
amount of rent that can be charged and may result in a reduction in timely
rent payments or a reduction in occupancy levels. Occupancy and rent levels
may also be affected by construction of additional housing units, local
military base or factory closings and national and local politics, including
current or future rent stabilization and rent control laws and agreements. In
addition, the level of mortgage interest rates may encourage tenants to
purchase single-family housing. The housing 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.
HOTEL PROPERTIES
Various factors, including location, quality and franchise affiliation
affect the economic performance of a hotel. Adverse economic conditions,
either local, regional or national, may limit the amount that can be charged
for a room and may result in a reduction in occupancy levels. The
construction of competing hotels can have similar effects. To meet
competition in the industry and to maintain economic values, continuing
expenditures must be made for modernizing, refurbishing, and maintaining
existing facilities prior to the expiration of their anticipated useful
lives. Because hotel rooms are generally rented for short periods of time,
hotels tend to respond more quickly to adverse economic conditions and
competition than do other commercial properties. Furthermore, the financial
strength and capabilities of the owner and operator of a hotel may have a
substantial impact on such hotel's quality of service and economic
performance. Additionally, the hotel and lodging industry is generally
seasonal in nature and this seasonality can be expected to cause periodic
fluctuations in room and other revenues, occupancy levels, room rates and
operating expenses. The demand for particular accommodations may also be
affected by changes in travel patterns caused by changes in energy prices,
strikes, relocation of highways, the construction of additional highways and
other factors.
Hotel properties may be franchises of national or regional hotel chains.
The viability of any such hotel property depends in part on the continued
existence and financial strength of the franchisor, the public perception of
the franchise service mark and the duration of the franchise licensing
agreements. The transferability of franchise license agreements may be
restricted and, in the event of a foreclosure on any such hotel property, the
mortgage may not have the right to use the franchise license without the
franchisor's consent. Conversely, a lender may be unable to remove a
franchisor that it desires to replace following a foreclosure. Further, in
the event of a foreclosure on a hotel property, it is unlikely that the
Trustee (or Master Servicer or Special Servicer) or purchaser of such hotel
property would be entitled to the rights under any liquor license for such
hotel property and such party would be required to apply in its own right for
such license or licenses. There can be no assurance that a new license could
be obtained or that it could be obtained promptly.
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BALLOON PAYMENTS
Certain of the Mortgage Loans as of the Cut-off Date may not be fully
amortizing over their terms to maturity and, thus, will require substantial
principal payments (i.e., balloon payments) at their stated maturity.
Mortgage Loans with balloon payments involve a greater degree of risk because
the ability of a mortgagor to make a balloon payment typically will depend
upon its ability either to timely refinance the loan or to timely sell the
related Mortgaged Property. The ability of a mortgagor 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 sale or refinancing, the
mortgagor's equity in the related Mortgaged Property, the financial condition
and operating history of the mortgagor and the related Mortgaged Property,
tax laws, rent control laws (with respect to certain Multifamily Properties
and mobile home parks), reimbursement rates (with respect to certain
hospitals, nursing homes and convalescent homes), renewability of operating
licenses, prevailing general economic conditions and the availability of
credit for commercial or multifamily, as the case may be, real properties
generally.
OBLIGOR DEFAULT
In order to maximize recoveries on defaulted Mortgage Loans, a Master
Servicer typically will have considerable flexibility to extend and modify
Mortgage Loans that are in default or as to which a payment default is
reasonably foreseeable, including in particular with respect to balloon
payments. In addition, a Master Servicer or a Special Servicer may receive a
workout fee based on receipts from or proceeds of such Mortgage Loans. While
a Master Servicer generally will be required to determine that any such
extension or modification is likely to produce a greater recovery on a
present value basis than liquidation, there can be no assurance that such
flexibility with respect to extensions or modifications or payment of a
workout fee will increase the present value of receipts from or proceeds of
Mortgage Loans that are in default or as to which a default is reasonably
foreseeable. The recent foreclosure and delinquency experience with respect
to loans serviced by a Master Servicer or, if applicable, any Special
Servicer or significant Sub-Servicer will be provided in the related
Prospectus Supplement.
MORTGAGOR TYPE
Mortgage Loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of Mortgage Loans made to individuals. Partnerships, corporations and
certain other types of organizations generally limit the liability of the
beneficial owners of such organizations for the obligations of such
organizations, and therefore limit the recourse of a lender to the assets of
such beneficial owners. The mortgagor's sophistication and form of
organization may increase the likelihood of protracted litigation or
bankruptcy in default situations.
JUNIOR MORTGAGE LOANS
Certain of the Mortgage Loans may be secured by junior Mortgages which are
subordinate to senior mortgages or deeds of trust held by other lenders or
institutional investors. The rights of any Trust Fund (and therefore the
Certificateholders), as beneficiary under a junior Mortgage, are subordinate
to those of the mortgagee or beneficiary under the senior mortgage or deed of
trust, including the prior rights of the senior mortgage or beneficiary to
receive rents, hazard insurance and condemnation proceeds and to cause the
Mortgaged Property securing the Mortgage Loan to be sold upon default of the
mortgagor or trustor, thereby extinguishing the Trust Fund's junior Mortgage
unless the Servicer or the Special Servicer asserts the Trust Fund's
subordinate interest in the Mortgaged Property in foreclosure litigation or
satisfies the defaulted senior loan. See "Certain Legal Aspects of Mortgage
Loans -- Junior Mortgages; Rights of Senior Mortgages or Beneficiaries"
herein.
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for a series of Certificates will describe any
Credit Support in the related Trust Fund, which may include letters of
credit, insurance policies, guarantees, reserve funds or other types of
credit support, or combinations thereof. Use of Credit Support will be
subject to the conditions and limitations described herein and in the related
Prospectus Supplement. Moreover, such Credit Support may not cover all
potential losses or risks; for example, Credit Support may or may not cover
fraud or negligence by a mortgage loan originator or other parties.
A series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates). Although subordination
is intended to reduce the risk to holders of Senior Certificates of
delinquent
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distributions or ultimate losses, the amount of subordination will be limited
and may decline under certain circumstances. Any limits with respect to the
aggregate amount of claims under any related Credit Support may be exhausted
before the principal of the lower priority classes of Certificates of a
series has been repaid. As a result, the impact of significant losses and
shortfalls on the Mortgage Assets may fall primarily upon those classes of
Certificates having a lower priority of payment. Moreover, if a form of
Credit Support covers more than one series of Certificates (each, a "Covered
Trust"), holders of Certificates evidencing an interest in a Covered Trust
will be subject to the risk that such Credit Support will be exhausted by the
claims of other Covered Trusts.
The amount of any applicable Credit Support supporting one or more classes
of Offered Certificates, including the subordination of one or more classes
of Certificates, will be determined on the basis of criteria established by
each Rating Agency rating such classes of Certificates based on an assumed
level of defaults, delinquencies, other losses or other factors. There can,
however, be no assurance that the loss experience on the related Mortgage
Assets will not exceed such assumed levels. See "--Limited Nature of
Ratings," "Description of the Certificates" and "Description of Credit
Support".
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the mortgagor sells,
transfers or conveys the related Mortgaged Property or its interest in the
Mortgaged Property. Mortgages may also include a debt-acceleration clause,
which permits the lender to accelerate the debt upon a monetary or
non-monetary default of the mortgagor. The courts of all states will enforce
clauses providing for acceleration in the event of a material payment
default. The equity courts of any state, however, may refuse the foreclosure
of a mortgage or deed of trust when an acceleration of the indebtedness would
be inequitable or unjust or the circumstances would render the acceleration
unconscionable.
If so specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by an assignment of leases and rents pursuant to which the
mortgagor 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 mortgagor defaults, the license terminates and the lender is
entitled to collect rents. Such assignments may not be perfected as security
interests prior to actual possession of the cash flows. Some state laws may
require that the lender take possession of the Mortgaged Property and obtain
a judicial appointment of a receiver before becoming entitled to collect the
rents. In addition, if bankruptcy or similar proceedings are commenced by or
in respect of the mortgagor, the lender's ability to collect the rents may be
adversely affected. See "Certain Legal Aspects of Mortgage Loans -- Leases
and Rents".
ENVIRONMENTAL RISKS
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination
of a property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), a lender may be liable, as
an "owner" or "operator," for the costs of addressing releases or threatened
releases of hazardous substances that require remedial action at a property,
if agents or employees of the lender have become sufficiently involved in the
operations of the mortgagor, regardless of whether the environmental damage
or threat was caused by a prior owner. A lender also risks such liability on
foreclosure of the mortgage. Each Pooling and Servicing Agreement will
provide that the Master Servicer, acting on behalf of the Trust Fund, may not
acquire title to a Mortgaged Property securing a Mortgage Loan or take over
its operation unless the Master Servicer has previously determined, based
upon a report prepared by a person who regularly conducts environmental
audits, that (i) the Mortgaged Property is in compliance with applicable
environmental laws and regulations or, if not, that taking such actions as
are necessary to bring the Mortgaged Property in compliance therewith is
reasonably likely to produce a greater recovery on a present value basis than
not taking such actions and (ii) there are no circumstances or conditions
that have resulted in any contamination or, if circumstances or conditions
have resulted in any contamination or if such circumstances or conditions
require remedial action, taking such actions with respect to the affected
Mortgaged Property is reasonably likely to produce a greater recovery on a
present value basis that not taking such actions. See "Certain Legal Aspects
of Mortgage Loans -- Environmental Legislation".
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LIMITED LIQUIDITY AND MARKET VALUE
There is currently no secondary market for the Offered Certificates. In
addition, the Offered Certificates will not be listed on any securities
exchange and will not be quoted in an automated quotation system of a
registered securities association. While the underwriter with respect to a
series of Certificates may intend to make a secondary market in the related
Offered Certificates, underwriters are under no obligation to do so.
Accordingly, there can be no assurance that a secondary market for any series
of 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. Lack of liquidity could result in a
substantial 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 Certificates at any time.
ERISA CONSIDERATIONS
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations which govern such plans, prospective investors that are subject
to ERISA are urged to consult their own counsel regarding consequences under
ERISA of acquisition, ownership and disposition of the Offered Certificates
of any series. See "ERISA Considerations".
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING RESIDUAL CERTIFICATES
Holders of Residual Certificates will be required to report on their
federal income tax returns as ordinary income their pro rata share of the
taxable income of the REMIC, regardless of the amount or timing of their
receipt of cash payments, as described in "Federal Income Tax Consequences --
Federal Income Tax Consequences for REMIC Certificates". Accordingly, under
certain circumstances, holders of Offered Certificates that constitute
Residual Certificates may have taxable income and tax liabilities arising
from such investment during a taxable year in excess of the cash received
during such period. The requirement that holders of Residual Certificates
report their pro rata share of the taxable income and net loss of the REMIC
will continue until the Certificate Balances of all classes of Certificates
of the related series have been reduced to zero, even though holders of
Residual Certificates have received full payment of their stated interest and
principal. A portion (or, in certain circumstances, all) of such
Certificateholder's share of the REMIC taxable income may be treated as
"excess inclusion" income to such holder which (i) generally, will not be
subject to offset by losses from other activities, (ii) for a tax-exempt
holder, will be treated as unrelated business taxable income and (iii) for a
foreign holder, will not qualify for exemption from withholding tax.
Individual holders of Residual Certificates may be limited in their ability
to deduct servicing fees and other expenses of the REMIC. In addition,
Residual Certificates are subject to certain restrictions on transfer.
Because of the special tax treatment of Residual Certificates, the taxable
income arising in a given year on a Residual Certificate will not be equal to
the taxable income associated with investment in a corporate bond or stripped
instrument having similar cash flow characteristics and pre-tax yield.
Therefore, the after-tax yield on the Residual Certificate may be
significantly less than that of a corporate bond or stripped instrument
having similar cash flow characteristics.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING ORIGINAL ISSUE DISCOUNT
Accrual Certificates will be, and certain of the other Classes of
Certificates of a series may be, issued with "original issue discount" for
federal income tax purposes, which generally will result in recognition of
some taxable income in advance of the receipt of cash attributable to such
income. See "Federal Income Tax Consequences -- Federal Income Tax
Consequences for REMIC Certificates -- Taxation of Regular Certificates".
CONSENT
Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of all series or a similar means of allocating decision-making
under the Agreement ("Voting Rights") will be required to direct, and will be
sufficient to bind all Certificateholders to, certain actions, including
amending the related Agreement in certain circumstances. See "Description of
the Agreements -- Events of Default," "--Rights Upon Event of Default" and
"--Amendment".
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BOOK-ENTRY REGISTRATION
If so provided in the Prospectus Supplement, one or more classes of the
Certificates will be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be
registered in the names of the Certificateholders or their nominees. Because
of this, unless and until Definitive Certificates are issued,
Certificateholders will not be recognized by the Trustee as
"Certificateholders" (as that term is to be used in the related Agreement).
Hence, until such time, Certificateholders will be able to exercise the
rights of Certificateholders only indirectly through DTC and its
participating organizations. See "Description of the Certificates --
Book-Entry Registration and Definitive Certificates".
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DESCRIPTION OF THE TRUST FUNDS
MORTGAGE ASSETS
The primary assets of each Trust Fund (the "Mortgage Assets") will include
Multifamily and Commercial Loans (collectively, the "Mortgage Loans"). The
Mortgage Assets will not be guaranteed or insured by the Depositor or any of
its affiliates. The Prospectus Supplement will describe any guarantee or
insurance relating to the Mortgage Assets by any governmental agency or
instrumentality or by any other person. Each Mortgage Asset will be selected
by the Depositor for inclusion in a Trust Fund from among those purchased,
either directly or indirectly, from a prior holder thereof (a "Mortgage Asset
Seller"), which prior holder may or may not be the originator of such
Mortgage Loan and may be an affiliate of the Depositor.
MORTGAGE LOANS
The Mortgage Loans will be secured by liens on, or security interests in,
Mortgaged Properties consisting of (i) residential properties consisting of
five or more rental or cooperatively-owned dwelling units in high-rise,
mid-rise or garden apartment buildings ("Multifamily Properties" and the
related loans, "Multifamily Loans") or (ii) office buildings, retail stores,
hotels or motels, nursing homes, hospitals or other health care-related
facilities, mobile home parks, industrial plants, mixed use or other types of
commercial properties ("Commercial Properties" and the related loans,
"Commercial Loans") located in any one of the fifty states or the District of
Columbia or such other locations as are disclosed in the related Prospectus
Supplement. The Mortgage Loans will be secured by mortgages or deeds of trust
or other similar security instruments creating a first or more junior lien on
Mortgaged Properties. Multifamily Property may include mixed commercial and
residential structures and may include apartment buildings owned by private
cooperative housing corporations ("Cooperatives"). The Mortgaged Properties
may include leasehold interest in properties, the title to which is held by
third party lessors. The term of any such leasehold will exceed the term of
the mortgage note by at least ten years. Each Mortgage Loan will have been
originated by a person (the "Originator") other than the Depositor. The
Mortgage Loans will be evidenced by promissory notes (the "Mortgage Notes")
secured by mortgages or deeds of trust (the "Mortgages") creating a lien on
the Mortgaged Properties. Mortgage Loans will generally also be secured by an
assignment of leases and rents and/or operating or other cash flow guarantees
relating to the Mortgage Loan.
DEFAULT AND LOSS CONSIDERATIONS WITH RESPECT TO THE MORTGAGE LOANS
Mortgage Loans secured by commercial and multifamily properties are
markedly different from owner-occupied single-family home mortgage loans. The
repayment of loans secured by commercial or multifamily properties is
typically dependent upon the successful operation of such property rather
than upon the liquidation value of the real estate. The Mortgage Loans will
be non-recourse loans, which means that, absent special facts, the mortgagee
may look only to the Net Operating Income from the property for repayment of
the mortgage debt, and not to any other of the mortgagor's assets, in the
event of the mortgagor's default. 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. The "Debt Service Coverage
Ratio" of a Mortgage Loan at any given time is the ratio of the Net Operating
Income for a twelve-month period to the annualized scheduled payments on the
Mortgage Loan. "Net Operating Income" is typically defined as total operating
revenues (including primarily rental income and any expense reimbursement,
ancillary income, late charges and deposit forfeitures) minus total operating
expenses (including primarily expenses for advertising, general
administration, management fees and disbursements, utilities, repairs and
maintenance, insurance, real estate taxes and replacement reserves based
solely on the mortgagor's estimates of the useful lives of various assets).
Net Operating Income does not reflect capital expenditures or partnership
expenses. The Net Operating Income of a Mortgaged Property will fluctuate
over time and may be sufficient or insufficient to cover debt service on the
related Mortgage Loan at any given time.
As the primary component of Net Operating Income, rental income (and
maintenance payments from tenant-stockholders of a Cooperative) is subject to
the vagaries of the applicable real estate market and/or business climate.
Properties typically leased, occupied or used on a short-term basis, such as
health care-related facilities, hotels and motels, and mini-warehouse and
self-storage facilities, tend to be affected more rapidly by changes in
market or business conditions than do properties leased, occupied or used for
longer periods, such as (typically) warehouses, retail stores, office
buildings and industrial plants. Commercial Loans may be secured by
owner-occupied Mortgaged Properties or Mortgaged Properties leased to a
single tenant. Accordingly, a decline in the financial condition of the
mortgagor or single tenant, as applicable, 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.
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Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal
property tax rates and other operating expenses including energy costs;
changes in governmental rules, regulations and fiscal policies, including
environmental legislation; and acts of God may also affect the risk of
default on the related Mortgage Loan. As may be further described in the
related Prospectus Supplement, in some cases leases of Mortgaged Properties
may provide that the lessee, rather than the mortgagor, is responsible for
payment of certain of these expenses ("Net Leases"); however, because leases
are subject to default risks as well when a tenant's income is insufficient
to cover its rent and operating expenses, the existence of such "net of
expense" provisions will only temper, not eliminate, the impact of expense
increases on the performance of the related Mortgage Loan.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities and
hospitals, the income from which and the operating expenses of which are
subject to state and/or federal regulations, such as Medicare and Medicaid,
and multifamily properties and mobile home parks, which may be subject to
state or local rent control regulation and, in certain cases, restrictions on
changes in use of the property. Low-and moderate-income housing may be
particularly subject to legal limitations and regulations but, because of
such regulations, may also be less sensitive to fluctuations in market rents
generally.
The liquidation value of any Mortgaged Property may be adversely affected
by risks generally incident to interests in real property, including declines
in rental or occupancy rates. Lenders generally use the Loan-to-Value Ratio
of a mortgage loan as a measure of risk of loss if a property must be
liquidated upon a default by the mortgagor. The "Loan-to-Value Ratio" of a
Mortgage Loan at any given time is the ratio (expressed as a percentage) of
the then outstanding principal balance of the Mortgage Loan to the Value of
the related Mortgaged Property. The "Value" of a Mortgaged Property, other
than with respect to Refinance Loans, is generally the lesser of (a) the
appraised value determined in an appraisal obtained by the originator at
origination of such loan and (b) the sales price for such property. Refinance
Loans are loans made to refinance existing loans. The Value of the Mortgaged
Property securing a Refinance Loan is the appraised value thereof determined
in an appraisal obtained at the time of origination of the Refinance Loan.
The Value of a Mortgaged Property as of the date of initial issuance of the
related series of Certificates may be less than the value at origination and
will fluctuate from time to time based upon changes in economic conditions
and the real estate market.
Appraised values of income-producing properties may be based on the market
comparison method (recent resale value of comparable properties at the date
of the appraisal), the cost replacement method (the cost of replacing the
property at such date), the income capitalization method (a projection of
value based upon the property's projected net cash flow), or upon a selection
from or interpolation of the values derived from such methods. Each of these
appraisal methods presents analytical challenges. It is often difficult to
find truly comparable properties that have recently been sold; the
replacement cost of a property may have little to do with its current market
value; and income capitalization is inherently based on inexact projections
of income and expense and the selection of an appropriate capitalization
rate. Where more than one of these appraisal methods are used and create
significantly different results, or where a high Loan-to-Value Ratio
accompanies a high Debt Service Coverage Ratio (or vice versa), the analysis
of default and loss risks is even more difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Mortgage Loans from
single-family mortgage loans and provide insight to the risks associated with
income-producing real estate, there is no assurance that such factors will in
fact have been considered by the Originators of the Mortgage Loans, or that,
for a particular Mortgage Loan, they are complete or relevant. See "Risk
Factors -- Risks Associated with Certain Mortgage Loans and Mortgaged
Properties," "--Balloon Payments," "--Mortgagor Default" and "--Mortgagor
Type".
MORTGAGE LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS
Each Prospectus Supplement will contain information, as of the date of
such Prospectus Supplement and to the extent then applicable and specifically
known to the Depositor, with respect to the Mortgage Loans constituting
related Trust Assets, including (i) the aggregate outstanding principal
balance and the largest, smallest and average outstanding principal balance
of the Mortgage Loans as of the applicable Cut-off Date, (ii) the type of
property securing the Mortgage Loans (e.g., Multifamily Property or
Commercial Property and the type of property in each such category), (iii)
the original and remaining terms to maturity of the Mortgage Loans, and the
seasoning of the Mortgage Loans, (iv) the earliest
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and latest origination date and maturity date and weighted average original
and remaining terms to maturity of the Mortgage Loans, (v) the Loan-to-Value
Ratios at origination of the Mortgage Loans, (vi) the Mortgage Rates or range
of Mortgage Rates and the weighted average Mortgage Rate borne by the
Mortgage Loans, (vii) the geographical distribution of the Mortgaged
Properties on a state-by-state basis, (viii) information with respect to
prepayment provisions, if any, of the Mortgage Loans, (ix) the weighted
average Retained Interest, if any, (x) with respect to Mortgage Loans with
adjustable Mortgage Rates ("ARM Loans"), the adjustment dates, the highest,
lowest and weighted average margin, and the maximum Mortgage Rate variation
at the time of any adjustment and over the life of the ARM Loan, (xi) the
Debt Service Coverage Ratio either at origination or as of a more recent date
(or both) and (xii) information regarding the payment characteristics of the
Mortgage Loans, including without limitation balloon payment and other
amortization provisions. The related Prospectus Supplement will also contain
certain information available to the Depositor with respect to the provisions
of leases and the nature of tenants of the Mortgaged Properties and other
information referred to in a general manner under "Description of the Trust
Funds -- Mortgage Assets -- Default and Loss Considerations with Respect to
the Mortgage Loans" above. If specific information respecting the Mortgage
Loans is not known to the Depositor at the time Certificates are initially
offered, more general information of the nature described above will be
provided in the Prospectus Supplement, and specific information will be set
forth in a report which will be available to purchasers of the related
Certificates at or before the initial issuance thereof and will be filed as
part of a Current Report on Form 8-K with the Commission within fifteen days
after such initial issuance.
MORTGAGE UNDERWRITING STANDARDS AND PROCEDURES
The underwriting procedures and standards for Mortgage Loans included in a
Mortgage Pool will be specified in the related Prospectus Supplement to the
extent such procedures and standards are known or available. Such Mortgage
Loans may be originated by an affiliate of the Depositor in contemplation of
the transactions contemplated by this Prospectus and the related Prospectus
Supplement or may be have been originated by third-parties and acquired by
the Depositor directly or through its affiliates in negotiated transactions.
Underwriting procedures are intended to evaluate, among other things, the
income derived from the Mortgaged Property, the capabilities of the
management of the project, including a review of management's past
performance record, its management reporting and control procedures (to
determine its ability to recognize and respond to problems) and its
accounting procedures to determine cash management ability, the obligor's
credit standing and repayment ability and the value and adequacy of the
Mortgaged Property as collateral. Mortgage Loans insured by the Federal
Housing Administration ("FHA"), a division of the United States Department of
Housing and Urban Development ("HUD"), will have been originated by mortgage
lenders which are approved by HUD as an FHA mortgagee in the orginated course
of their real estate lending activities and will comply with the underwriting
policies of FHA.
The adequacy of a Mortgaged Property as security for repayment will
generally have been determined by appraisal by appraisers selected in
accordance with preestablished guidelines established by or acceptable to the
loan originator for appraisers or other appropriate market studies. If so
specified in the related Prospectus Supplement, the appraiser must have
personally inspected the property and verified that it was in good condition
and that construction, if new, has been completed. An appraisal can be based
upon, among other things, a cash flow analysis and/or a market data analysis
of recent sales of comparable properties or a replacement cost analysis based
on the current cost of constructing or purchasing a similar property.
No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. Further, there is no assurance that appreciation of
real estate values generally will limit loss experiences on commercial
properties or multifamily properties. If the commercial real estate market
should experience an overall decline in property values such that the
outstanding balances of the Mortgage Loans and any additional financing on
the Mortgaged Properties in a particular Mortgage Pool become equal to or
greater than the value of the Mortgaged Properties, the actual rates of
delinquencies, foreclosures and losses could be higher than those now
generally experienced in the mortgage lending industry. Even where Credit
Support covers all losses resulting from defaults and foreclosure, the effect
of defaults and foreclosures may be to increase prepayment experience on the
Mortgage Loans, thus shortening weighted average life and affecting yield to
maturity.
PAYMENT PROVISIONS OF THE MORTGAGE LOANS
The Mortgage Loans generally will (i) have individual principal balances
at origination of not less than $25,000, (ii) have original terms to maturity
of not more than 40 years and (iii) provide for payments of principal,
interest or both,
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on due dates that occur monthly, quarterly or semi-annually or at such other
interval as is specified in the related Prospectus Supplement. Mortgage Loan
may: (i) provide for no accrual of interest or for accrual of interest
thereon at an interest rate (a "Mortgage Rate") that is fixed over its term
or that adjusts from time to time, or that may be converted from an
adjustable to a fixed Mortgage Rate, or from a fixed to an adjustable
Mortgage Rate, from time to time at the mortgagor's election; (ii) provide
for scheduled payments to maturity or payments that adjust from time to time
to accommodate changes in the Mortgage Rate or to reflect the occurrence of
certain events, and may provide for negative amortization or accelerated
amortization, (iii) be fully amortizing or require a balloon payment due on
its stated maturity date; and (iv) contain prohibitions on prepayment (a
"Lock-out Period" and the date of expiration thereof, a "Lock-out Date") or
require payment of a premium or a yield maintenance penalty (a "Prepayment
Premium") in connection with a prepayment, in each case as described in the
related Prospectus Supplement. In the event that holders of any class or
classes of Offered Certificates will be entitled to all or a portion of any
Prepayment Premiums collected in respect of Mortgage Loans, the related
Prospectus Supplement will specify the method or methods by which any such
amounts will be allocated. A Mortgage Loan may also contain provisions
entitling the mortgagee to a share of profits realized from the operation or
disposition of the Mortgaged Property ("Equity Participations"), as described
in the related Prospectus Supplement. In the event that holders of any class
or classes of Offered Certificates will be entitled to all or a portion of an
Equity Participation, the related Prospectus Supplement will specify the
terms and provisions of the Equity Participation and the method or methods by
which distributions in respect thereof will be allocated among such
Certificates.
MBS
Any mortgage pass-through certificates or other mortgage-backed securities
evidencing interests in or secured by Mortgage Loans (collectively, the
"MBS") will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar
agreement (an "MBS Agreement"). A seller (the "MBS Issuer") and/or servicer
(the "MBS Servicer") of the underlying Mortgage Loans will have entered into
the MBS Agreement with a trustee or a custodian under the MBS Agreement (the
"MBS Trustee"), if any, or with the original purchaser of the interest in the
underlying Mortgage Loans evidenced by the MBS.
The MBS Issuer of any MBS may include the Depositor or an affiliate of the
Depositor. Any MBS (i) will have been issued in an offering exempt from the
registration requirements of the 1933 Act and, if offered in a private
placement, will have been held by persons other than the issuer of such MBS
or its affiliates for at least two years or (ii) will have been issued in an
offering registered under the 1933 Act, and thus may include one or more
Classes of Certificates.
Distributions of principal and interest will be made on MBS on the dates
specified in the related Prospectus Supplement. The MBS may be issued in one
or more classes with characteristics similar to the classes of Certificates
described in this Prospectus. Principal and interest distributions will be
made on the MBS by the MBS Trustee or the MBS Servicer. The MBS Issuer or the
MBS Servicer or another person specified in the related Prospectus Supplement
may have the right or obligation to repurchase or substitute assets
underlying the MBS after a certain date or under other circumstances
specified in the related Prospectus Supplement.
Enhancement in the form of reserve funds, subordination of other credit
support similar to that described for the Certificates under "Description of
Credit Support" may be provided with respect to the MBS. The type,
characteristics and amount of such credit support, if any, will be a function
of certain characteristics of the Mortgage Loans evidenced or secured by such
MBS and other factors and generally will have been established for the MBS on
the basis of requirements of either any Rating Agency that may have assigned
a rating to the MBS or the initial purchasers of the MBS. In addition, MBS
may consist of classes of MBS which are subordinate to other classes of MBS
of the same series.
The Prospectus Supplement for a series of Certificates evidencing
interests in Mortgage Assets that included MBS will specify, to the extent
available, (i) the aggregate approximate initial and outstanding principal
amount and type of the MBS to be included in the Trust Fund, (ii) the
original and remaining term to stated maturity of the MBS, if applicable,
(iii) the pass-through or bond rate of the MBS or formula for determining
such rates, (iv) the applicable payment provisions for the MBS, (v) the MBS
Issuer, MBS Servicer and MBS Trustee, as applicable, (vi) certain
characteristics of the credit support, if any, such as subordination, reserve
funds, insurance policies, letters of credit or guarantees relating to the
related Underlying Mortgage Loans or directly to such MBS, (vii) the
characteristics of any subordination to which such MBS may be subject; (viii)
the terms on which the related Underlying Mortgage Loans for such MBS or the
MBS may, or are required to, be purchased prior to their maturity, (ix) the
terms on which Mortgage Loans may be substituted for those originally
underlying the MBS, (x) the servicing fees payable under the MBS Agreement,
(xi) to the extent
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available to the Depositor, the type of information in respect of the
Underlying Mortgage Loans described under "Description of the Trust Funds --
Mortgage Assets -- Mortgage Loan Information in Prospectus Supplements" and
(xii) the characteristics of any cash flow agreements that are included as
part of the trust fund evidenced or secured by the MBS.
COLLECTION ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
"Collection Account") established and maintained on behalf of the
Certificateholders into which the person or persons designated in the related
Prospectus Supplement will deposit all payments and collections received or
advanced with respect to the Mortgage Assets and other assets in the Trust
Fund. A Collection Account may be maintained as an interest bearing or a
non-interest bearing account, and funds held therein may be invested in
certain short-term, investment grade obligations.
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in the
related Trust Fund may be provided to one or more classes of Certificates in
the related series in the form of subordination of one or more other classes
of Certificates in such series or by one or more other types of credit
support, such as a letter of credit, insurance policy for the Mortgage Loans,
certificate guarantee insurance, guarantee, reserve fund or another type of
credit support, or a combination thereof (any such coverage with respect to
the Certificates of any series, "Credit Support"). The amount and types of
coverage, the identification of the entity providing the coverage (if
applicable) and related information with respect to each type of Credit
Support, if any, will be described in the Prospectus Supplement for a series
of Certificates. See "Risk Factors -- Credit Support Limitations" and
"Description of Credit Support".
CASH FLOW AGREEMENTS
The Trust Fund may include guaranteed investment contracts pursuant to
which moneys held in the funds and accounts established for the related
series will be invested at a specified rate. The Trust Fund may also include
certain other agreements, such as interest rate exchange agreements, interest
rate cap or floor agreements, currency exchange agreements or similar
agreements provided to reduce the effects of interest rate or currency
exchange rate fluctuations on the Mortgage Assets on one or more classes of
Certificates. The principal terms of any such guaranteed investment contract
or other agreement (any such agreement, a "Cash Flow Agreement"), including,
without limitation, provisions relating to the timing, manner and amount of
payments thereunder and provisions relating to the termination thereof, will
be described in the Prospectus Supplement for the related series. In
addition, the related Prospectus Supplement will provide certain information
with respect to the obligor under any such Cash Flow Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor primarily to the purchase of Trust Assets. Any
remaining proceeds will be used by the Depositor for general corporate
purposes (such as paying its allocable share of rent, administrative expenses
and the cost of services rendered by employees of its affiliates) and
transaction-specific expenses (including, but not limited to, obtaining any
external credit enhancement, establishing any reserve funds and paying other
costs incurred in connection with structuring and issuing the Certificates).
The Depositor expects to sell the Certificates from time to time, but the
timing and amount of offerings of Certificates will depend on a number of
factors, including the volume of Mortgage Assets acquired by the Depositor,
prevailing interest rates, availability of funds and general market
conditions.
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YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate, the receipt and
timing of receipt of distributions on the Certificate and the weighted
average life of the Mortgage Assets in the related Trust Fund. See "Risk
Factors -- Average Life of Certificates; Prepayments; Yields".
PASS-THROUGH RATE
Certificates of any class within a series may have fixed, variable or
adjustable Pass-Through Rates, which may or may not be based upon the
interest rates borne by the Mortgage Assets in the related Trust Fund. The
Prospectus Supplement with respect to any series of Certificates will specify
the Pass-Through Rate for each class of such Certificates or in the case of a
variable or adjustable Pass-Through Rate, the method of determining the
Pass-Through Rate; the effect, if any, of the prepayment of any Mortgage
Asset on the Pass-Through Rate of one or more classes of Certificates; and
whether the distributions of interest on the Certificates of any class will
be dependent, in whole or in part, on the performance of any obligor under a
Cash Flow Agreement.
TIMING OF PAYMENT OF INTEREST AND PRINCIPAL
Each payment of interest on the Certificates (or addition to the
Certificate Balance of a class of Accrual Certificates) on a Distribution
Date will include interest accrued during the Interest Accrual Period for
such Distribution Date. If the Interest Accrual Period ends on a date other
than a Distribution Date for the related series, the yield realized by the
holders of such Certificates may be lower than the yield that would result in
the Interest Accrual Period ended on such Distribution Date. In addition,
interest accrued for an Interest Accrual period for one or more classes of
Certificates may be calculated on the assumption that distributions of
principal (and additions to the Certificate Balance of Accrual Certificates)
and allocations of losses on the Mortgage Assets may be made on the first day
of the Interest Accrual Period for a Distribution Date and not on such
Distribution Date. Such method would produce a lower effective yield than if
interest were calculated on the basis of the actual principal amount
outstanding during an Interest Accrual Period. The Interest Accrual Period
for any class of Offered Certificates will be described in the related
Prospectus Supplement.
PRINCIPAL PREPAYMENTS
The yield to maturity on the Certificates will be affected by the rate of
principal payments on the Mortgage Assets (including principal prepayments on
Mortgage Loans resulting from both voluntary prepayments by the mortgagors
and involuntary liquidations). The rate at which principal prepayments occur
on the Mortgage Loans will be affected by a variety of factors, including,
without limitation, the terms of the Mortgage Loans, the level of prevailing
interest rates, the availability of mortgage credit and economic,
demographic, geographic, tax, legal and other factors. In general, however,
if prevailing interest rates fall significantly below the Mortgage Rates on
the Mortgage Loans comprising or underlying the Mortgage Assets in a
particular Trust Fund, such Mortgage Loans are likely to be the subject of
higher principal prepayments than if prevailing rates remain at or above the
rates borne by such Mortgage Loans. In this regard, it should be noted that
certain Mortgage Assets may consist of Mortgage Loans with different Mortgage
Rates and the stated pass-through or pay-through interest rate of certain MBS
may be a number of percentage points higher or lower than certain of the
Underlying Mortgage Loans. The rate of principal payments on some or all of
the classes of Certificates of a series will correspond to the rate of
principal payments on the Mortgage Assets in the related Trust Fund and is
likely to be affected by the existence of Lock-out Periods and Prepayment
Premium provisions of the Mortgage Loans underlying or comprising such
Mortgage Assets, and by the extent to which the servicer of any such Mortgage
Loan is able to enforce such provisions. Mortgage Loans with a Lock-out
Period or a Prepayment Premium provision, to the extent enforceable,
generally would be expected to experience a lower rate of principal
prepayments than otherwise identical Mortgage Loans without such provisions,
with shorter Lock-out Periods or with lower Prepayment Premiums.
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
Assets, 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
or principal that is slower than that actually
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experienced on the Mortgage Assets, 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 Assets 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
Assets 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 Assets 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.
PREPAYMENTS -- MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the Mortgage Assets
included in or comprising a Trust Fund and the rate at which payments are
made from any Credit Support or Cash Flow Agreement for the related series of
certificates may affect the ultimate maturity and the weighted average life
of each class of such series. Prepayments on the Mortgage Loans comprising or
underlying the Mortgage Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the classes
of the Certificates of the related series.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of a
class of Certificates of a series will be influenced by the rate at which
principal on the Mortgage Loans comprising or underlying the Mortgage Assets
is paid to such class, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes prepayments, in
whole or in part, and liquidations due to default).
In addition, the weighted average life of the Certificates may be affected
by the varying maturities of the Mortgage Loans comprising or underlying the
Mortgage Assets. If any Mortgage Loans comprising or underlying the Mortgage
Assets in a particular Trust Fund have actual terms to maturity of less than
those assumed in calculating final scheduled Distribution Dates for the
classes of Certificates of the related series, one or more classes of such
Certificates may be fully paid prior to their respective final scheduled
Distribution Dates, even in the absence of prepayments. Accordingly, the
prepayment experience of the Mortgage Assets will, to some extent, be a
function of the mix of Mortgage Rates and maturities of the Mortgage Loans
comprising or underlying such Mortgage Assets. See "Description of the Trust
Funds".
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment
model or the Standard Prepayment Assumption ("SPA") prepayment model, each as
described below. CPR represents a constant assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of loans
for the life of such loans. SPA represents an assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of loans.
A prepayment assumption of 100% SPA assumes prepayment rates of 0.2% per
annum of the then outstanding principal balance of such loans in the first
month of the life of the loans and an additional 0.2% per annum in each month
thereafter until the thirtieth month. Beginning in the thirtieth month and in
each month thereafter during the life of the loans, 100% of SPA assumes a
constant prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of
the anticipated rate of prepayment of any pool of loans, including the
Mortgage Loans underlying or comprising the Mortgage Assets. Moreover, CPR
and SPA were developed based upon historical prepayment experience for
single-family loans. Thus, it is likely that prepayment of any Mortgage Loans
comprising or underlying the Mortgage Assets for any series will not conform
to any particular level of CPR or SPA.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average
life of each life of Offered Certificates of such series and the percentage
of the Initial Certificate Balance of each such class that would be
outstanding on specified Distribution Dates based on the assumptions stated
in such Prospectus Supplement, including assumptions that prepayments on the
Mortgage Loans comprising or underlying the related Mortgage Assets are made
at rates corresponding to various prepayment rates. Such tables and
assumptions are intended to illustrate the sensitivity of weighted average
life of the Certificates to various prepayment
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rates and will not be intended to predict or to provide information that will
enable investors to predict the actual weighted average life of the
Certificates. It is unlikely that prepayment of any Mortgage Loans comprising
or underlying the Mortgage Assets for any series will conform to any
particular prepayment rate.
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
Type of Mortgage Loan
A number of Mortgage Loans may have balloon payments due at maturity, and
because the ability of a mortgagor to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things,
bankruptcy of the mortgagor or adverse conditions in the market where the
property is located. In order to minimize losses on defaulted Mortgage Loans,
the servicer may be given considerable flexibility to modify Mortgage Loans
that are in default or as to which a default is reasonably foreseeable. Any
defaulted balloon payment or modification that extends the maturity of a
Mortgage Loan will tend to extend the weighted average life of the
Certificates, thereby lengthening the period of time elapsed from the date of
issuance of a Certificate until it is retired.
FORECLOSURES AND PAYMENT PLANS
The number of foreclosures and the principal amount of the Mortgage Loans
comprising or underlying the Mortgage Assets that are foreclosed in relation
to the number of Mortgage Loans that are repaid in accordance with their
terms will affect the weighted average life of the Mortgage Loans comprising
or underlying the Mortgage Assets and that of the related series of
Certificates. Servicing decisions made with respect to the Mortgage Loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of Mortgage Loans in bankruptcy proceeds, may also have an
effect upon the payment patterns of particular Mortgage Loans and thus the
weighted average life of the Certificates.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE CLAUSES
Acceleration of mortgage payments as a result of certain transfers of or
the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates. A number of the Mortgage Loans comprising
or underlying the Mortgage Assets may include "due-on-sale" clauses or
"due-on-encumbrance" clauses that allow the holder of the Mortgage Loans to
demand payment in full of the remaining principal balance of the Mortgage
Loans upon sale or certain other transfers of or the creation of encumbrances
upon the related Mortgaged Property. With respect to any Whole Loans, the
Master Servicer will, if required by the related Agreement, on behalf of the
Trust Fund, employ its usual practices in determining whether to exercise any
such right that the Trustee may have as mortgagee to accelerate payment of
the Whole Loan. See "Certain Legal Aspects of Mortgage Loans -- Due-on-Sale
and Due-on-Encumbrance" and "Description of the Agreements -- Due-on-Sale and
Due-on-Encumbrance Provisions".
THE DEPOSITOR
Nomura Asset Securities Corporation, the Depositor, is a Delaware
corporation organized on June 23, 1992 for the purpose of acquiring Mortgage
Assets and selling interests therein or bonds secured thereby. It is a wholly
owned subsidiary of Nomura Asset Capital Corporation, which is in turn a
wholly-owned subsidiary of Nomura Holding America Inc., a United States-based
holding company, incorporated in Delaware, which is wholly owned by The
Nomura Securities Co., Ltd., a Japanese corporation. The Nomura Securities
Co., Ltd. is engaged in the domestic and international securities business.
The Depositor maintains its principal office at Two World Financial Center --
Building B, 21st Floor, New York, New York 10281-1198. Its telephone number
is (212) 667-9300.
The Depositor does not have, nor is it expected in the future to have, any
significant assets.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of each series (including any class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in
the Trust Fund created pursuant to the related Agreement. Each series of
Certificates will consist of one or more classes or subclasses of
Certificates that may be senior (collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate Certificates") Certificates. Each
series may consist of one or more of the types of Certificates described
below.
Types of Certificates classified by interest payments can include:
<TABLE>
<CAPTION>
CATEGORY OF CLASS DEFINITION
- ------------------- ------------
<S> <C>
Ascending Rate............................ Certificates that have predetermined Pass-Through Rates that change one or more times
on dates determined before issuance.
Fixed Rate................................ Certificates with Pass-Through Rates that are fixed throughout the life of such
Certificates.
Floating Rate............................. Certificates with Pass-Through Rates that are reset periodically based on an index and
that vary directly with changes in the index.
Inverse Floating Rate..................... Certificates with Pass-Through Rates that are reset periodically based on an index and
that vary inversely with changes in the index.
Stripped Interest......................... Certificates that receive some or all of the interest payments made on the underlying
Mortgage Loans or other Trust Fund assets and little or no principal. Stripped Interest
Certificates have either a nominal or a notional principal amount. A nominal principal
amount represents actual principal that will be paid on the class. It is referred to
as nominal since it is extremely small compared to other classes of Certificates. A
notional principal amount is the amount used as a reference to calculate the amount
of interest due on a Stripped Interest Certificate that is not entitled to any
principal.
Stripped Principal........................ Certificates that do not receive any interest.
WAC (or Weighted Average Coupon).......... Certificates whose Pass-Through Rate represents a blended interest rate that may
change from period to period.
Accrual................................... Certificates that accrete all or a portion of their interest, which is added to the
outstanding principal balance. This accretion may continue until the class of
Certificates begins receiving principal payments, until some other event has occurred
or until the class is retired.
Types of Certificates classified by
allocation of principal distributions
can include:
PAC (or Planned Amortization Class) ...... Certificates that are designed to receive principal payments using a predetermined
schedule derived by assuming two constant prepayment rates for the underlying Mortgage
Loans. A PAC schedule will reflect a "structuring range" both above and below the
Prepayment Assumption for the related series. The PAC Certificates in any series may
include two or more "types". The PAC Certificates within any type have a single
structuring range. The different types have different structuring ranges and/or
different principal payment priorities.
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CATEGORY OF CLASS DEFINITION
- ----------------- ------------
Scheduled................................. Certificates that are designed to receive principal payments using a predetermined
schedule, but that are not designated as PAC or TAC Certificates. Classes consisting
of both PAC and TAC components are also designated as Scheduled Classes.
Sequential Pay............................ Certificates that receive principal payments in a prescribed sequence, that do not have
predetermined schedules and that under all circumstances receive payments of principal
continuously from the first Distribution Date on which they receive principal until
they are retired. Sequential Pay Certificates may receive principal payments
concurrently with one or more other classes of Sequential Pay Certificates. A single
class of Certificates that receives principal payments before or after all other classes
in the same series may be identified as a Sequential Pay Certificate.
Sticky Jump/Non-Sticky Jump............... Certificates whose principal payment priorities change temporarily or permanently upon
the occurrence of one or more "trigger" events. A Sticky Jump Certificate "jumps" to
its new priority on the first Distribution Date when the trigger condition is met and
retains ("sticks" to) that priority until retired. If the principal payment change is
not permanent, the Certificate is referred to as a Non-Sticky Jump.
Strip..................................... Certificates that receive a constant proportion, or "strip", of the principal payments
on the underlying Mortgage Loans or other Trust Fund assets.
Support (or Companion).................... Certificates that receive principal payments on any Payment Date only if scheduled
payments have been made on specified PAC, TAC and/or Scheduled Classes.
TAC (or Targeted Amortization Class) ..... Certificates that are designed to receive principal payments using a predetermined
schedule derived by assuming a single constant prepayment rate for the underlying
Mortgage Loans. The TAC Certificates in any series may include two or more "types".
The different types have different principal payment priorities and/or have schedules
that are derived from different assumed prepayment rates.
Index Allocation Class.................... Certificates whose principal payment allocations are based on the value of an index.
</TABLE>
The Prospectus Supplement for any series including classes similar to any
of those described above will contain a complete description of their
characteristics and risk factors, including, as applicable, (i) mortgage
principal prepayment effects on the weighted average lives of classes; (ii)
the risk that Stripped Interest Certificates 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 prepayment. Any
class of Certificates may be divided into two or more subclasses of
Certificates.
Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to Certificate Balances or, in case of Stripped
Interest Certificates, notional amounts specified in the related Prospectus
Supplement. The transfer of any Offered Certificates may be registered and
such Certificates may be exchanged without the payment of any service charge
payable in connection with such registration of transfer or exchange, but the
Depositor or the Trustee or any agent thereof may require payment of a sum
sufficient to cover any tax or other governmental charge. One or more classes
of Certificates of a series may be issued in definitive form ("Definitive
Certificates") or in book-entry form ("Book-Entry Certificates"), as provided
in the related Prospectus Supplement. See "Risk Factors -- Book-Entry
Registration" and "Description of the Certificates -- Book-Entry Registration
and Definitive Certificates". Definitive Certificates will be exchangeable
for other Certificates of the same class and series of a like aggregate
Certificate Balance or notional amount but of different authorized
denominations. See "Risk Factors -- Limited Liquidity" and "--Limited
Assets".
DISTRIBUTIONS
Distributions allocable to principal and interest on the Certificates of
each series will be made by or on behalf of the Trustee on each Distribution
Date as specified in the related Prospectus Supplement from the Available
Funds for such
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series on such Distribution Date. Distributions (other than the final
distribution) will be made to the persons in whose names the Certificates are
registered (the "Record Date"), and the amount of each distribution will be
determined (the "Determination Date") as of the close of business on the date
specified in the related Prospectus Supplement. All distributions with
respect to each class of Certificates on each Distribution Date will be
allocated pro rata among the outstanding Certificates in such class. Payments
will be made either by wire transfer in immediately available funds to the
account of a Certificateholder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder has so notified the Trustee or
its designee no later than the date specified in the related Prospectus
Supplement (and, if so provided in the related Prospectus Supplement, holds
Certificates in the requisite amount specified therein), or by check mailed
to the address of the person entitled thereto as it appears on the
Certificate Register; provided, however, that the final distribution in
retirement of the Certificates (whether Definitive Certificates or Book-Entry
Certificates) will be made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee or its agent specified in
the notice to Certificateholders of such final distribution.
AVAILABLE FUNDS
All distributions on the Certificates of each series on each Distribution
Date will be made from the Available Funds described below, in accordance
with the terms described in the related Prospectus Supplement. "Available
Funds" for each Distribution Date will generally equal the sum of the
following amounts:
(i) the total amount of all cash on deposit in the related Collection
Account as of the corresponding Determination Date, exclusive of:
(a) all scheduled payments of principal and interest collected but
due on a date subsequent to the related Collection Period (a
"Collection Period" with respect to any Distribution Date will usually
commence on the second day of the month in which the immediately
preceding Distribution Date occurs, or the day after Cut-off Date in
the case of the first Collection Period, and will end on the first day
of the month of the related Distribution Date).
(b) all prepayments, together with related payments of the interest
thereon, Liquidation Proceeds, Insurance Proceeds, and other
unscheduled recoveries received subsequent to the related Prepayment
Period, as defined in the related Prospectus Supplement, and
(c) all amounts in the Collection Account that are due or
reimbursable to the Depositor, the Trustee, a Mortgage Asset Seller, a
Sub-Servicer or the Master Servicer or that are payable in respect of
certain expenses of the related Trust Fund;
(ii) if the related Prospectus Supplement so provides, interest or
investment income on amounts on deposit in the Collection Account,
including any net amounts paid under any Cash Flow Agreements;
(iii) all advances made by a Master Servicer with respect to such
Distribution Date;
(iv) if and to the extent the related Prospectus Supplement so provides,
amounts paid by a Master Servicer with respect to interest shortfalls
resulting from voluntary and involuntary prepayments during the related
Prepayment Period; and
(v) to the extent not on deposit in the related Collection Account as of
the corresponding Determination Date, any amounts collected under, from or
in respect of any Credit Support with respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Certificates (including any Certificates not
offered hereby) on each Distribution Date, and accordingly will be released
from the Trust Fund and will not be available for any future distributions.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates (other than classes of Stripped Principal
Certificates that have no Pass-Through Rate) may have a different
Pass-Through Rate, which may be a fixed, variable or adjustable Pass-Through
Rate. The related Prospectus Supplement will specify the Pass-Through Rate
for each class or, in the case of a variable or adjustable Pass-Through Rate,
the method for determining the Pass-Through Rate. Interest on the
Certificates will typically be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
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Distributions of interest in respect of the Certificates of any class will
be made on each Distribution Date (other than any class of Accrual
Certificates, which will be entitled to distributions of accrued interest
commencing only on the Distribution Date, or under the circumstances,
specified in the related Prospectus Supplement, and any class of Stripped
Principal Certificates that are not entitled to any distributions of
interest) based on the Accrued Certificate Interest for such class and such
Distribution Date, subject to the sufficiency of the portion of the Available
Distribution Amount allocable to such class on such Distribution Date. Prior
to the time interest is distributable on any class of Accrual Certificates,
Accrued Certificate Interest on such class will be added to the Certificate
Balance thereof on each Distribution Date. With respect to each class of
Certificates and each Distribution Date (other than certain classes of
Stripped Interest Certificates), "Accrued Certificate Interest" will be equal
to interest accrued during the related Interest Accrual Period on the
outstanding Certificate Balance thereof immediately prior to the Distribution
Date, at the applicable Pass-Through Rate, reduced to reflect prepayment
interest shortfalls as described below (for this purpose, the term
"prepayment" includes prepayments, in whole or in part, and liquidations due
to default). Accrued Certificate Interest on Stripped Interest Certificates
will be equal to interest accrued on the outstanding notional amount thereof
immediately prior to each Distribution Date, at the applicable Pass-Through
Rate, reduced as described below. The method of determining the notional
amount for any class of Stripped Interest Certificates will be described in
the related Prospectus Supplement. Reference to notional amount is solely for
convenience in certain calculations and does not represent the right to
receive any distributions of principal. The Accrued Certificate Interest on
each class of Certificates will be reduced in the event of prepayment
interest shortfalls, which are shortfalls in collections of interest for a
full accrual period resulting from prepayments prior to the due date in such
accrual period on the Mortgage Loans comprising or underlying the Mortgage
Assets in the Trust Fund for the related series, with such shortfall
allocated among all of the classes of Certificates of that series in the
manner specified in the related Prospectus Supplement. See "Risk Factors --
Average Life of Certificates; Prepayments; Yields" and "Yield
Considerations".
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
The Certificates of each series, other than certain classes of Stripped
Interest Certificates, will have a "Certificate Balance" which, at any time,
will equal the then maximum amount that the holder will be entitled to
receive in respect of principal out of the future cash flow on the Mortgage
Assets and other assets included in the related Trust Fund. The outstanding
Certificate Balance of a Certificate will be reduced to the extent of
distributions of principal thereon from time to time, and by the amount of
losses allocated to such Certificate incurred in respect of the related
Mortgage Assets, may be increased in respect of deferred interest on the
related Mortgage Loans to the extent provided in the related Prospectus
Supplement and, in the case of Accrual Certificates prior to the Distribution
Date on which distributions of interest are required to commence, will be
increased by any Accrued Certificate Interest. The initial aggregate
Certificate Balance of all classes of Certificates of a series will not be
greater than the outstanding aggregate principal balance of the related
Mortgage Assets as of the applicable Cut-off Date. The initial aggregate
Certificate Balance of a series and each class thereof will be specified in
the related Prospectus Supplement. Distributions of principal will be made on
each Distribution Date to the class or classes of Certificates entitled
thereto in accordance with the provisions described in such Prospectus
Supplement until the Certificate Balance of such class has been reduced to
zero. Stripped Interest Certificates with no Certificate Balance are not
entitled to any distributions of principal.
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN RESPECT OF
EQUITY PARTICIPATIONS
Prepayment Premiums or payments in respect of Equity Participations that
are collected on the Mortgage Assets in the related Trust Fund will be
distributed on each Distribution Date to the class or classes of Certificates
entitled thereto in accordance with the provisions described in the related
Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
With respect to a series of Certificates consisting of one or more classes
of Subordinate Certificates, on any Distribution Date in respect of which
losses or shortfalls in collections on the Mortgage Assets have been
incurred, the amount of such losses or shortfalls will be borne first by a
class of Subordinate Certificates in the priority and manner and subject to
the limitations specified in the related Prospectus Supplement. See
"Description of Credit Support" for a description of the types of protection
that may be included in a Trust Fund against losses and shortfalls on
Mortgage Assets comprising such Trust Fund.
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ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any series of Certificates evidencing an interest in a
Trust Fund consisting of Mortgage Assets other than MBS, the Master Servicer,
if required by the related Agreement, will be required as part of its
servicing responsibilities to advance on or before each Distribution Date its
own funds or funds held in the Collection Account that are not included in
the Available Funds for such Distribution Date, in an amount equal to the
aggregate of payments of principal (other than any balloon payments) and
interest (net of related servicing fees and Retained Interest) that were due
on the Whole Loans in such Trust Fund during the related Collection Period
and were delinquent on the related Determination Date, subject to the Master
Servicer's good faith determination that such advances will be reimbursable
from (a) Related Proceeds (as defined below) or (b) in the case of a series
of Certificates that includes one or more classes of Subordinate Certificates
and if so provided in the related Prospectus Supplement, the greater of (x)
the outstanding Certificate Balance of such Subordinate Certificates and (y)
Related Proceeds. See "Description of Credit Support".
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates
entitled thereto, rather than to guarantee or insure against losses. Advances
of the Master Servicer's funds will typically be reimbursable only out of
related recoveries on the Mortgage Loans (including amounts received under
any form of Credit Support) respecting which such advances were made (as to
any Mortgage Loan, "Related Proceeds"); provided, however, that any such
advance will be reimbursable from any amounts in the Collection Account to
the extent that the Master Servicer shall determine that such advance (a
"Nonrecoverable Advance") is not ultimately recoverable from Related
Proceeds. If advances have been made by the Master Servicer from excess funds
in the Collection Account, the Master Servicer is required to replace such
funds in the Collection Account on any future Distribution Date to the extent
that funds in the Collection Account on such Distribution Date are less than
payments required to be made to Certificateholders on such date. The
obligations of the Master Servicer to make advances may be secured by a cash
advance reserve fund or a surety bond. Information regarding the
characteristics of, and the identity of any obligor on, any such surety bond,
will be set forth in the related Prospectus Supplement.
The Master Servicer will be entitled to receive interest at the rate
specified in the related Prospectus Supplement on its outstanding advances
and will be entitled to pay itself such interest periodically from general
collections on the Mortgage Loans prior to any payment to Certificateholders
or as otherwise provided in the related Agreement and described in such
Prospectus Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust fund that includes MBS will describe any corresponding
advancing obligation of any person in connection with such MBS.
REPORTS TO CERTIFICATEHOLDERS
With each distribution to holders of any class of Certificates of a
series, a Master Servicer or the Trustee, as provided in the related
Prospectus Supplement, will forward or cause to be forwarded to each such
holder, to the Depositor and to such other parties as may be specified in the
related Agreement, a statement setting forth, in each case to the extent
applicable and available:
(i) the amount of such distribution to holders of Certificates of such
class applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount of such distribution allocable to (a) Prepayment
Premiums and (b) payments on account of Equity Participations;
(iv) the amount of related servicing compensation received by a Master
Servicer, any Special Servicer and any Sub-Servicer and such other
customary information as any such Master Servicer or the Trustee deems
necessary or desirable, or that a Certificateholder reasonably requests,
to enable Certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution, and
the aggregate amount of unreimbursed advances at the close of business on
such Distribution Date;
(vi) the aggregate principal balance of the Mortgage Assets at the close
of business on such Distribution Date;
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(vii) the number and aggregate principal balance of Mortgage Loans in
respect of which (a) one scheduled payment is delinquent, (b) two
scheduled payments are delinquent, (c) three or more scheduled payments
are delinquent and (d) foreclosure proceedings have been commenced;
(viii) with respect to each Mortgage Loan that is delinquent two or more
months, (a) the loan number thereof, (b) the unpaid balance thereof, (c)
whether the delinquency is in respect of any balloon payment, (d) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof, (e) the aggregate amount of any interest
accrued and payable on related servicing expenses and related advances
assuming such Mortgage Loan is subsequently liquidated through
foreclosure, (f) whether a notice of acceleration has been sent to the
mortgagor and, if so, the date of such notice, (g) whether foreclosure
proceedings have been commenced and, if so, the date so commenced and (h)
if such Mortgage Loan is more than three months delinquent and foreclosure
has not been commenced, the reason therefor;
(ix) with respect to any Whole Loan liquidated during the related
Collection Period or Prepayment Period, as applicable (other than by
payment in full), (a) the loan number thereof, (b) the manner in which it
was liquidated, (c) the aggregate amount of liquidation proceeds received,
(d) the portion of such liquidation proceeds payable or reimbursable to
the Master Servicer in respect of such Mortgage Loan and (e) the amount of
any loss to Certificateholders;
(x) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Collection Period
or Prepayment Period, as applicable, (a) the loan number of the related
Mortgage Loan, (b) the date of acquisition, (c) the book value, (d) the
principal balance of the related Mortgage Loan immediately following such
Distribution Date (calculated as if such Mortgage Loan were still
outstanding taking into account certain limited modifications to the terms
thereof specified in the Agreement), (e) the aggregate amount of
unreimbursed servicing expenses and unreimbursed advances in respect
thereof and (f) if applicable, the aggregate amount of interest accrued
and payable on related servicing expenses and related advances;
(xi) with respect to any such REO Property sold during the related Due
Period or Prepayment Period, as applicable, (a) the loan number of the
related Mortgage Loan, (b) the aggregate amount of sale proceeds, (c) the
portion of such sales proceeds payable or reimbursable to the Master
Servicer or a Special Servicer in respect of such REO Property or the
related Mortgage Loan and (d) the amount of any loss to Certificateholders
in respect of the related Mortgage Loan;
(xii) the aggregate Certificate Balance or notional amount, as the case
may be, of each class of Certificates (including any class of Certificates
not offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to
the allocation of any loss and increase in the Certificate Balance of a
class of Accrual Certificates in the event that Accrued Certificate
Interest has been added to such balance;
(xiii) the aggregate amount of principal prepayments made during the
related Prepayment Period;
(xiv) the amount deposited in the reserve fund, if any, on such
Distribution Date;
(xv) the amount remaining in the reserve fund, if any, as of the close of
business on such Distribution Date;
(xvi) the aggregate unpaid Accrued Certificate Interest, if any, on each
class of Certificates at the close of business on such Distribution Date;
(xvii) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, as calculated in
accordance with the method specified in the related Prospectus Supplement;
(xviii) in the case of Certificates with an adjustable Pass-Through Rate,
for statements to be distributed in any month in which an adjustment date
occurs, the adjustable Pass-Through Rate applicable to the next succeeding
Distribution Date as calculated in accordance with the method specified in
the related Prospectus Supplement;
(xix) as to any series which incudes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the
close of business on such Distribution Date; and
(xx) the aggregate amount of payments by the mortgagors of (a) default
interest, (b) late charges and (c) assumption and modification fees
collected during the related Collection Period or Prepayment Period, as
applicable.
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In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts shall be expressed as a dollar amount per minimum
denomination of Certificates or for such other specified portion thereof.
The Prospectus Supplement for each series of Offered Certificates will
describe any additional information to be included in reports to the
holders of such Certificates.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer, if any, or the Trustee, as provided in the related
Prospectus Supplement, shall furnish to each person who at any time during
the calendar year was a holder of a Certificate a statement containing the
information set forth in subclauses (i)-(iv) above, aggregated for such
calendar year or the applicable portion thereof during which such person was
a Certificateholder. Such obligation of the Master Servicer or the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Master Servicer or the
Trustee pursuant to any requirements of the Code as are from time to time in
force. See "Description of the Certificates -- Book-Entry Registration and
Definitive Certificates".
TERMINATION
The obligations created by the Agreement for each series of Certificates
will terminate upon the payment to Certificateholders of that series of all
amounts held in the Collection Account or by the Master Servicer, if any, or
the Trustee and required to be paid to them pursuant to such Agreement
following the earlier of (i) the final payment or other liquidation of the
last Mortgage Asset subject thereto or the disposition of all property
acquired upon foreclosure of any Mortgage Loan subject thereto and (ii) the
purchase of all of the assets of the Trust Fund by the party entitled to
effect such termination. In no event, however, will the trust created by the
Agreement continue beyond the date specified in the related Prospectus
Supplement. Written notice of termination of the Agreement will be given to
each Certificateholder, and the final distribution will be made only upon
surrender and cancellation of the Certificates at an office or agency
appointed by the Trustee, which will be specified in the notice of
termination.
If so specified in the related Prospectus Supplement, upon the reduction
of the aggregate Certificate Balance of a series of Certificates by a
specified percentage (which percentage will exceed 90%), certain parties
(which may include the Depositor, the Servicer, the Special Servicer, the
holders of certain Classes of Certificates or such other party as is
identified therein) will have the option to effect an early termination
through the repurchase of the assets in the related Trust Fund by the party
specified therein. If so provided in the related Prospectus Supplement, the
party specified therein will solicit bids for the purchase of all assets of
the Trust Fund under the circumstances and in the manner set forth therein;
provided, however, that the Trustee will not be permitted to accept any bid
for the purchase of the assets of such Trust Fund which is less than the
greater of (1) the aggregate fair market value of all the Mortgage Loans and
REO Properties then included in the Trust Fund, as mutually determined by the
Master Servicer and the Trustee, and (2) the sum of (i) the aggregate
Purchase Price of all the Mortgage Loans then included in the Trust Fund,
(ii) the aggregate amount of unreimbursed advances, if any, with interest
thereon at the rate specified in the related Prospectus Supplement and (iii)
the fair market value of all REO Properties then included in the Trust Fund,
as determined by an appraiser mutually agreed upon by the Master Servicer and
the Trustee. Upon the termination of a Trust Fund and the sale of the assets
of the Trust Fund neither the Trust Fund, the Trustee, the Depositor, the
Master Servicer, the Special Servicer nor the holders of any Class of
Certificates will have any liability with respect to the sale of the assets
of the Trust Fund; provided however that the foregoing will not limit or
otherwise affect any Certificateholders rights under any of the federal
securities laws. In the event that the fair market value of any REO
Properties included in the Trust Fund at the time of any such termination is
less than the principal balance of the related Mortgage Loans, a Realized
Loss may occur in connection with such termination.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the Prospectus Supplement for a series of Certificates,
the Offered Certificates of one or more classes of such series will be issued
as Book-Entry Certificates, and each such class will be represented by one or
more single Certificates registered in the name of the depository, The
Depository Trust Company ("DTC").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was
created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
their accounts, thereby eliminating the need for physical movement of
certificates.
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Participants include Nomura Securities International, Inc., securities
brokers and dealers, banks, trust companies and clearing corporations and may
include certain other organizations. 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").
Holders of 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, such Certificateholders will receive all
distributions of principal of and interest on the Offered Certificates from
the Trustee or the applicable paying agent through DTC and its Participants.
Under a book-entry format, Certificateholders will receive payments after the
related Distribution Date because, while payments are required to be
forwarded to Cede & Co. ("Cede"), as nominee for DTC, on each such date, DTC
will forward such payments to its Participants which thereafter will be
required to forward them to Indirect Participants or Certificateholders. The
only "Certificateholder" (as such term is used in the Agreement) will be
Cede, as nominee of DTC, and the Certificateholders will not be recognized by
the Trustee as Certificateholders under the Agreement. Certificateholders
will be permitted to exercise the rights of Certificateholders under the
related Agreement only indirectly through DTC and its Participants who in
turn will exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Certificates and is
required to receive and transmit distributions of principal and interest on
the Certificates. Participants and Indirect Participants with which
Certificateholders have accounts with respect to the Certificates similarly
are required to make book-entry transfers and receive and transmit such
payments on behalf of their respective Certificateholders.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificateholder to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for
such Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under an Agreement only at the direction of one
or more Participants to whose account with DTC the Certificates are credited.
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Certificateholders or their nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i)
the Depositor advises the Trustee in writing that DTC is no longer willing or
able to properly discharge its responsibilities as depository with respect to
the Certificates and the Depositor is unable to locate a qualified successor
or (ii) the Depositor, at its option, elects to terminate the book-entry
system through DTC.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for the Certificates.
Under surrender by DTC of the certificate or certificates representing such
Certificates and instructions for reregistration, the Trustee will issue such
Certificates in the form of Definitive Certificates, and thereafter the
Trustee will recognize the holders of such Definitive Certificates as
Certificateholders under the Agreement. In the event that Definitive
Certificates are issued or DTC ceases to be the clearing agency for the
Certificates, the Agreement will provide that the applicable
Certificateholders will be notified of such event.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each series evidencing interests in a Trust Fund
consisting of Mortgage Loans will be issued pursuant to a Pooling and
Servicing Agreement among the Depositor, a Master Servicer, any Special
Servicer appointed as of the date of the Pooling and Servicing Agreement and
the Trustee. The Certificates of each series evidencing interests in a Trust
Fund consisting exclusively of MBS will be issued pursuant to a Trust
Agreement between the Depositor and a Trustee. Any Master Servicer, any such
Special Servicer and the Trustee with respect to any series of Certificates
will be named in the related Prospectus Supplement. The provisions of each
Agreement will vary depending upon the nature of the Certificates to be
issued thereunder and the nature of the related Trust Fund. A form of a
Pooling and Servicing Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summaries describe certain provisions that may appear in each Agreement. The
Prospectus Supplement for a series of Certificates will describe any
provision of the Agreement relating to such series that materially differs
from the description thereof contained in this Prospectus. The summaries do
not purport to be complete and are subject to, and are qualified
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in their entirety by reference to, all of the provisions of the Agreement for
each Trust Fund and the related Prospectus Supplement. As used herein with
respect to any series, the term "Certificate" refers to all of the
Certificates of that series, whether or not offered hereby and by the related
Prospectus Supplement, unless the context otherwise requires. The Depositor
will provide a copy of the Agreement (without exhibits) relating to any
series of Certificates without charge upon written request of a holder of a
Certificate of such series addressed to Nomura Asset Securities Corporation,
Two World Financial Center -- Building B, 21st Floor, New York, New York
10281-1198. Attention: Secretary.
ASSIGNMENT OF MORTGAGE ASSETS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor will
cause the Mortgage Assets included in the related Trust Fund to be assigned
to the Trustee, together with all principal and interest received by or on
behalf of the Depositor on or with respect to such Mortgage Assets after the
Cut-off Date, other than principal and interest due on or before the Cut-off
Date and other than any Retained Interest. The Trustee will, concurrently
with such assignment, deliver the Certificates to the Depositor in exchange
for the Mortgage Assets and the other assets comprising the Trust Fund for
such series. Each Mortgage Asset will be identified in a schedule appearing
as an exhibit to the related Agreement. Such schedule will include detailed
information in respect of each Mortgage Loan included in the related Trust
Fund such as the address of the related Mortgaged Property and type of such
property, the Mortgage Rate and, if applicable, the applicable index, margin,
adjustment date and any rate cap information, the original and remaining term
to maturity, the original and outstanding principal balance and balloon
payment, if any, the Value, Loan-to-Value Ratio and Debt Service Coverage
Ratio as of the date indicated and payment and prepayment provisions, if
applicable and in respect of each MBS included in the related Trust Fund,
including without limitation, the MBS Issuer, MBS Servicer and MBS Trustee,
the pass-through or bond rate or formula for determining such rates, the
issue date and original and remaining term to maturity, if applicable, the
original and outstanding principal amount and payment provisions, if
applicable.
With respect to each Whole Loan, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to)
certain loan documents, including the Mortgage Note endorsed, without
recourse, to the order of the Trustee, the Mortgage with evidence of
recording indicated thereon (except for any Mortgage not returned from the
public recording office, in which case the Depositor will deliver or cause to
be delivered a copy of such Mortgage together with its certificate that the
original of such Mortgage was delivered to such recording office) and an
assignment of the Mortgage to the Trustee in recordable form. The Depositor
will promptly cause the assignment of each related Whole Loan to be recorded
in the appropriate public office for real property records, except in the
State of California or in other states where, in the opinion of counsel
acceptable to the Trustee, such recording is not required to protect the
Trustee's interest in the Whole Loan against the claim of any subsequent
transferee or any successor to or creditor of the Depositor, the Master
Servicer, the relevant Mortgage Asset Seller or any other prior holder of the
Whole Loan.
The Trustee (or the custodian) will review such Whole Loan documents
within a specified period of days after receipt thereof, and the Trustee (or
the custodian) will hold such documents in trust for the benefit of the
Certificateholders. If any such document is found to be missing or defective
in any material respect, the Trustee (or such custodian) shall take such
action as required in the Agreement, which may include immediately notifying
the Master Servicer and the Depositor. If the Mortgage Asset Seller, upon
notification, cannot cure the omission or defect within a specified number of
days after receipt of such notice, the Mortgage Asset Seller will be
obligated, within a specified number of days of receipt of such notice, to
repurchase the related Whole Loan from the Trustee at the Purchase Price or
substitute for such Mortgage Loan. There can be no assurance that a Mortgage
Asset Seller will fulfill this repurchase or substitution obligation.
Although the Master Servicer is obligated to use its best efforts to enforce
such obligation to the extent of its obligations with respect to a Warranting
Party as described under "--Representations and Warranties; Repurchases",
neither the Master Servicer nor the Depositor will be obligated to repurchase
or substitute for such Mortgage Loan if the Mortgage Asset Seller defaults on
its obligation. This repurchase or substitution obligation may constitute the
sole remedy available to the Certificateholders or the Trustee for omission
of, or a material defect in, a constituent document.
With respect to each MBS, the Depositor will deliver or cause to be
delivered to the Trustee (or the custodian) the original certificate or other
definitive evidence of the MBS, together with bond power or other
instruments, certifications or documents required to transfer fully the MBS
to the Trustee for the benefit of the Certificateholders in accordance with
the related MBS Agreement. The Depositor will promptly cause the Trustee to
be registered, with the applicable persons, as the holder of the MBS.
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REPRESENTATIONS AND WARRANTIES; REPURCHASES
The Depositor may make or assign certain representations and warranties
pursuant to the related Agreement with respect to each Whole Loan
constituting a Mortgage Asset in the related Trust Fund, as of a specified
date (the person making such representations and warranties, the "Warranting
Party") covering, by way of example, the following types of matters: (i) the
accuracy of the information set forth for such Whole Loan on the schedule of
Mortgage Assets appearing as an exhibit to the Agreement; (ii) the existence
of title insurance insuring the lien priority of the Whole Loan; (iii) the
authority of the Mortgage Asset Seller to sell the Whole Loan; (iv) the
payment status of the Whole Loan and the status of payments of taxes,
assessments and other charges affecting the related Mortgaged Property; (v)
the existence of customary provisions in the related Mortgage Note and
Mortgage to permit realization against the Mortgaged Property of the benefit
of the security of the Mortgage; and (vi) the existence of hazard and
extended perils insurance coverage on the Mortgaged Property.
Any Warranting Party shall be a Mortgage Asset Seller or an affiliate
thereof or such other person acceptable to the Depositor and shall be
identified in the related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related series of Certificates evidencing an interest in such
Whole Loan. In the event of a breach of any such representation or warranty,
the Warranting Party may be obligated pursuant to the related Agreement to
cure such breach or repurchase or replace the affected Whole Loan as
described below. Since the representations and warranties may not address
events that may occur following the date as of which they were made, the
Warranting Party will have a cure, repurchase or substitution obligation in
connection with a breach of such a representation and warranty only if the
relevant event that causes such breach occurs prior to such date. Such party
would have no such obligations if the relevant event that causes such breach
occurs after such date. However, the Depositor will not include any Whole
Loan in the Trust Fund for any series of Certificates if anything has come to
the Depositor's attention that would cause it to believe that the
representations and warranties made in respect of such Whole Loan will not be
accurate and complete in all material respects as of the date of initial
issuance of the related series of Certificates.
Each Agreement will provide that the Master Servicer and/or Trustee will
be required to notify promptly the relevant Warranting Party of any breach of
any representation or warranty made by or on behalf of it in respect of a
Whole Loan that materially and adversely affects the value of such Mortgage
Loan or the interests therein of the Certificateholders. If such Warranting
Party cannot cure such breach within a specified period following the date on
which such party was notified of such breach, then such Warranting Party will
be obligated to repurchase such Mortgage Loan from the Trustee within a
specified period from the date on which the Warranting Party was notified of
such breach, at the Purchase Price therefor. As to any Whole Loan, the
"Purchase Price" will typically equal to the sum of the unpaid principal
balance thereof plus unpaid accrued interest thereon at the Mortgage Rate
from the date as to which interest was last paid to the end of the accrual
period in which the relevant purchase is to occur. If so provided in the
Prospectus Supplement for a series, a Warranting Party, rather than
repurchase a Mortgage Loan as to which a breach has occurred, will have the
option, within a specified period after initial issuance of such series of
Certificates, to cause the removal of such Mortgage Loan from the Trust Fund
and substitute in its place one or more other Whole Loans, in accordance with
the standards described in the related Prospectus Supplement. The Master
Servicer will be required under the applicable Agreement to use its best
efforts to enforce such obligations of the Warranting Party for the benefit
of the Trustee and the holders of the Certificates, following the practices
it would employ in its good faith business judgment were it the owner of such
Whole Loan. This repurchase or substitution obligation will constitute the
sole remedy available to holders of Certificates or the Trustee for a breach
of representation by a Warranting Party.
Neither the Depositor (except to the extent that it is the Warranting
Party) nor the Master Servicer will be obligated to purchase or substitute
for a Whole Loan if a Warranting Party defaults on its obligation to do so,
and no assurance can be given that Warranting Parties will carry out such
obligations with respect to Whole Loans.
With respect to a Trust Fund that includes MBS, the related Prospectus
Supplement will describe any representations or warranties made or assigned
by the Depositor with respect to such MBS, the person making them and the
remedies for breach thereof.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. Upon a breach of any such
representation of the Master Servicer which materially and adversely affects
the interests of the Certificateholders, the Master Servicer will be
obligated to cure the breach in all material respects.
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PAYMENTS ON MORTGAGE ASSETS; DEPOSITS TO COLLECTION ACCOUNT
The Master Servicer, if any, and/or the Trustee will, as to each Trust
Fund, establish and maintain or cause to be established and maintained one or
more Collection Accounts for the collection of payments on the related
Mortgage Assets, which must be either (i) maintained with a bank or trust
company, and in a manner, satisfactory to the Rating Agency or Agencies
rating any class of Certificates of such series or (ii) an account or
accounts the deposits in which are insured by the Bank Insurance Fund ("BIF")
or the Savings Association Insurance Fund ("SAIF") of the Federal Deposit
Insurance Corporation ("FDIC") (to the limits established by the FDIC) and
the uninsured deposits in which are otherwise secured such that the
Certificateholders have a claim with respect to the funds in the Collection
Account or a certified first priority security interest against any
collateral securing such funds that is superior to the claims of any other
depositors or general creditors of the institution with which the Collection
Account is maintained. The collateral eligible to secure amounts in the
Collection Account is limited to United States government securities and
other investment grade investments specified in the Agreement ("Permitted
Investments"). A Collection Account may be maintained as an interest bearing
or a non-interest bearing account and the funds held therein may be invested
pending each succeeding Distribution Date in Permitted Investments. Any
interest or other income earned on funds in the Collection Account will
generally be paid to a Master Servicer or its designee as additional
servicing compensation. The Collection Account may be maintained with an
institution that is an affiliate of the Master Servicer, if applicable,
provided that such institution meets the standards set forth above. If
permitted by the Rating Agency or Agencies and so specified in the related
Prospectus Supplement, a Collection Account may contain funds relating to
more than one series of mortgage pass-through certificates and may contain
other funds respecting payments on mortgage loans belonging to the Master
Servicer or serviced or master serviced by it on behalf of others.
A Master Servicer or the Trustee will deposit or cause to be deposited in
the Collection Account for each Trust Fund on a daily basis, unless otherwise
provided in the Agreement and described in the related Prospectus Supplement,
the following payments and collections received, or advances made, by the
Master Servicer or the Trustee or on its behalf subsequent to the Cut-off
Date (other than payments due on or before the Cut-off Date, and exclusive of
any amounts representing a Retained Interest):
(i) all payments on account of principal, including principal
prepayments, and on account of modification or assumption fees, on the
Mortgage Assets;
(ii) all payments on account of interest on the Mortgage Assets,
including any late charges or default interest collected, and to the
extent that any class or classes of Certificates is entitled thereto, all
payments on account of Prepayment Premiums or Equity Participations, in
each case net of any portion thereof retained by a Master Servicer or a
Sub-Servicer as its servicing compensation and net of any Retained
Interest;
(iii) all proceeds of the hazard insurance policies (to the extent such
proceeds are not applied to the restoration of the property or released to
the mortgagor in accordance with the normal servicing procedures of a
Master Servicer or the related Sub-Servicer, subject to the terms and
conditions of the related Mortgage and Mortgage Note) (collectively,
"Insurance Proceeds") and all other amounts received and retained in
connection with a taking of a Mortgaged Property by exercise of a power of
eminent domain or condemnation or the liquidation of defaulted Mortgage
Loans, by foreclosure or otherwise ("Liquidation Proceeds"), together with
the net proceeds on a monthly basis with respect to any Mortgaged
Properties acquired for the benefit of Certificateholders by foreclosure
or by deed in lieu of foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as
described under "Description of Credit Support";
(v) any advances made as described under "Description of the Certificates
-- Advances in Respect of Delinquencies";
(vi) any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds -- Cash Flow Agreements";
(vii) all proceeds of any Mortgage Loan or property in respect thereof
purchased by the Master Servicer, the Depositor, any Sub-Servicer or any
Mortgage Asset Seller as described under "Description of the Agreements --
Assignment of Mortgage Assets; Repurchases" and "--Representations and
Warranties; Repurchases", exclusive of the Retained Interest, if any, in
respect of such Mortgage Loan, and all proceeds of any Mortgage Asset
purchased as described under "Description of the Certificates --
Termination";
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(viii) all payments required to be deposited in the Collection Account
with respect to any deductible clause in any blanket insurance policy
described under "--Hazard Insurance Policies"; and
(ix) any amount required to be deposited by a Master Servicer or the
Trustee in connection with losses realized on investments for the benefit
of the Master Servicer or the Trustee, as the case may be, of funds held
in the Collection Account.
The Agreement for a series of Certificates may provide that a special
trust account (the "REO Account") will be established and maintained in order
to be used in connection with REO Properties 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 Mortgaged Properties and certain third-party
expenses in accordance with 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 the 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. 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.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer, directly or through Sub-Servicers, is required to
make reasonable efforts to collect all scheduled payments under the Whole
Loans and will follow or cause to be followed such collection procedures as
it would follow with respect to mortgage loans that are comparable to the
Whole Loans and held for its own account, provided such procedures are
consistent with the Agreement and any related hazard insurance policy or
instrument of Credit Support included in the related Trust Fund described
herein or under "Description of Credit Support". Each Master Servicer will be
required to perform the customary functions of a servicer of comparable
loans, including collecting payments from mortgagors; maintaining hazard
insurance policies as described herein and in any related Prospectus
Supplement, and filing and settling claims thereunder; maintaining escrow or
impoundment accounts of mortgagors for payment of taxes, insurance and other
items required to be paid by any mortgagor pursuant to the Whole Loan;
processing assumptions or substitutions, although the Master Servicer is
generally required to exercise due-on-sale clauses to the extent such
exercise is permitted by law and would not adversely affect insurance
coverage; attempting to cure delinquencies; supervising foreclosures;
inspecting and managing Mortgaged Properties under certain circumstances; and
maintaining accounting records relating to the Whole Loans. The Master
Servicer will be responsible for filing and settling claims in respect of
particular Whole Loans under any applicable instrument of Credit Support. See
"Description of Credit Support".
Consistent with the general servicing standard set forth above, the Master
Servicer may, in its discretion, waive any late payment charge in respect of
a late Whole Loan payment and, only upon determining that the coverage under
any related hazard insurance policy or instrument of Credit Support will not
be affected, extend or cause to be extended the due dates for payments due on
a Whole Loan for a period not greater than that specified in the applicable
Agreement.
The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan in a manner consistent with the general servicing standards set
forth above so long as the modification, waiver or amendment will not (i)
affect the amount or timing of any payments of principal or interest on the
Whole Loan or (ii) in its judgment, materially impair the security for the
Whole Loan or reduce the likelihood of timely payment of amounts due thereon.
The Master Servicer also may agree to any modification, waiver or amendment
that would so affect or impair the payments on, or the security for, a Whole
Loan if (i) in its judgment, a material default on the Whole Loan has
occurred or a payment default is imminent and (ii) in its judgment, such
modification, waiver or amendment will minimize the loss that might otherwise
be experienced with respect to the Whole Loan. The Master Servicer is
required to notify the Trustee in the event of any modification, waiver or
amendment of any Whole Loan.
SPECIAL SERVICERS
To the extent so specified in the related Prospectus Supplement, generally
in the event that a Mortgage Loan is in default or if certain events occur
that indicate that a default is imminent, a special servicer (the "Special
Servicer") may
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be appointed to perform certain servicing functions in connection with such
Mortgage Loan. The related Prospectus Supplement will set forth certain
information with respect to the Special Servicer and will describe the
rights, obligations and compensation of a Special Servicer. A Master Servicer
will only be responsible for the duties and obligations of a Special Servicer
to the extent set forth in the Prospectus Supplement. A Special Servicer may
be an affiliate of the Depositor and may have other business relationships
with the Depositor and its affiliates.
SUB-SERVICERS
A Master Servicer and/or any Special Servicer may each delegate their
respective servicing obligations in respect of the Whole Loans to third-party
servicers (each, a "Sub-Servicer"), but such Master Servicer and/or Special
Servicer will remain obligated under the related Agreement. The sub-servicing
agreement between a Master Servicer and/or Special Servicer and a
Sub-Servicer (a "Sub-Servicing Agreement") will be consistent with the terms
of the related Agreement and will not result in a withdrawal or downgrading
of the rating of any class of Certificates issued pursuant to such Agreement.
Although each Sub-Servicing Agreement will be a contract solely between the
Master Servicer or Special Servicer, as applicable, and the Sub-Servicer, the
related Agreement will provide that, if for any reason the Master Servicer or
Special Servicer for such series of Certificates is no longer acting in such
capacity, the Trustee or any successor Master Servicer or Special Servicer
must recognize the Sub-Servicer's rights and obligations under such
Sub-Servicing Agreement.
The Master Servicer or Special Servicer, as applicable, will be solely
liable for all fees owed by it to any Sub-Servicer, irrespective of whether
the Master Servicer's or Special Servicer's compensation pursuant to the
related Agreement is sufficient to pay such fees. However, a Sub-Servicer may
be entitled to a Retained Interest in certain Whole Loans. Each Sub-Servicer
will be reimbursed by the Master Servicer or Special Servicer, as applicable,
for certain expenditures which it makes, generally to the same extent the
Master Servicer or Special Servicer, as applicable, would be reimbursed under
an Agreement. See "--Retained Interest, Servicing Compensation and Payment of
Expenses".
The Master Servicer or Special Servicer, as applicable, may require any
Sub-Servicer to agree to indemnify the Master Servicer or Special Servicer
for any liability or obligation sustained by the Master Servicer or Special
Servicer in connection with any act or failure to act by the Sub-Servicer in
its servicing capacity. An Agreement may require a Sub-Servicer to maintain a
fidelity bond and an errors and omissions policy with respect to its
officers, employees and other persons acting on its behalf or on behalf of
the Master Servicer or Special Servicer.
REALIZATION UPON DEFAULTED WHOLE LOANS
A mortgagor's failure to make required payments may reflect inadequate
operating income or the diversion of that income from the service of payments
due under the Mortgage Loan, and may call into question such mortgagor's
ability to make timely payment of taxes and to pay for necessary maintenance
of the related Mortgaged Property. The Master Servicer is required to monitor
any Whole Loan which is in default, contact the mortgagor concerning the
default, evaluate whether the causes of the default can be cured over a
reasonable period without significant impairment of the value of the
Mortgaged Property, initiate corrective action in cooperation with the
mortgagor if cure is likely, inspect the Mortgaged Property and take such
other actions as it would normally take with respect to similar loans
serviced for its own portfolio. A significant period of time may elapse
before the Master Servicer is able to assess the success of such corrective
action or the need for additional initiatives.
The time within which the Master Servicer makes the initial determination
of appropriate action, evaluates the success of corrective action, develops
additional initiatives, institutes foreclosure proceedings and actually
forecloses (or takes a deed to a Mortgaged Property in lieu of foreclosure)
on behalf of the Certificateholders, may vary considerably depending on the
particular Whole Loan, the Mortgaged Property, the mortgagor, the presence of
an acceptable party to assume the Mortgage Loan and the laws of the
jurisdiction in which the Mortgaged Property is located. Under federal
bankruptcy law, in certain cases the Master Servicer may not be permitted to
accelerate a Whole Loan or to foreclose on a Mortgaged Property for a
considerable period of time. See "Certain Legal Aspects of Mortgage Loans".
If so specified in the Prospectus Supplement for a series of Certificates
that includes one or more subordinate classes, any holder or holders of a
class of Subordinate Certificates having the lowest priority of payment may
purchase from the Trust Fund at the purchase price described in such
Supplement any Whole Loan as to which the number of scheduled payments
thereunder specified in such Supplement are delinquent.
The Master Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any
mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire title to
a Mortgaged Property
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securing a Whole Loan by operation of law or otherwise, if such action is
consistent with the servicing standard described herein and a default on the
related Mortgage Loan has occurred or, in the Master Servicer's judgment, is
imminent. The Master Servicer may not, however, acquire title to any
Mortgaged Property or take any action that would cause the Trust Fund to be
an "owner" or an "operator" within the meaning of certain federal or state
environmental laws, unless the Master Servicer has also previously
determined, based on a report prepared by a person who regularly conducts
environmental audits (which report will be an expense of the Trust Fund),
that:
(i) The Mortgaged Property is in compliance with applicable environmental
laws or, if not, that it would be in the best economic interest of the
Trust Fund to take such actions as are necessary to cause the Mortgaged
Property to comply therewith (the cost of which actions will be an expense
of the Trust Fund); and
(ii) There are no circumstances or conditions present at the Mortgaged
Property relating to the use, management or disposal of any hazardous
substances, hazardous materials, wastes, or petroleum-based materials for
which investigation, testing, monitoring, containment, clean-up or
remediation could be required under any federal, state or local law or
regulation, or, if such substances, materials or wastes are present for
which such action could be required, that it would be in the best economic
interest of the Trust Fund to take such actions with respect to the
Mortgaged Property (the cost of which actions will be an expense of the
Trust Fund).
If title to any Mortgaged Property is acquired by the Trust Fund, the
Master Servicer, pursuant to the related Agreement and on behalf of the Trust
Fund, will be required to sell the Mortgaged Property within two years of
acquisition, unless the Trustee receives (i) an opinion of independent
counsel to the effect that the holding of the property by the Trust Fund
subsequent to two years after its acquisition will not result in the
imposition of a tax on the Trust Fund or cause the Trust Fund to fail to
qualify as a REMIC under the Code at any time that any Certificate is
outstanding or (ii) an extension from the Internal Revenue Service.
If the Trust Fund acquires title to any Mortgaged Property, the Master
Servicer, on behalf of the Trust Fund, may retain an independent contractor
to manage and operate such property. The retention of an independent
contractor, however, will not relieve the Master Servicer of any of its
obligations with respect to the management and operation of such Mortgaged
Property. Any such property acquired by the Trust Fund will be managed in a
manner consistent with the management and operation by the Master Servicer of
similar property owned by it.
The limitations imposed by the Agreement and the REMIC provisions of the
Code (if a REMIC election has been made with respect to the related Trust
Fund) on the operations and ownership of any Mortgaged Property acquired on
behalf of the Trust Fund may result in the recovery of an amount less than
the amount that would otherwise be recovered. See "Certain Legal Aspects of
Mortgage Loans -- Foreclosure".
If recovery on a defaulted Whole Loan under any related instrument of
Credit Support is not available, the Master Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
Whole Loan. If the proceeds of any liquidation of the property securing the
defaulted Whole Loan are less than the outstanding principal balance of the
defaulted Whole Loan plus interest accrued thereon at the Mortgage Rate plus
the aggregate amount of expenses incurred by the Master Servicer in
connection with such proceedings and which are reimbursable under the
Agreement, the Trust Fund will realize a loss in the amount of such
difference. The Master Servicer will be entitled to withdraw or cause to be
withdrawn from the Collection Account out of the Liquidation Proceeds
recovered on any defaulted Whole Loan, prior to the distribution of such
Liquidation Proceeds to Certificateholders, amounts representing its normal
servicing compensation on the Whole Loan, unreimbursed servicing expenses
incurred with respect to the Whole Loan and any unreimbursed advances of
delinquent payments made with respect to the Whole Loan.
If any property securing a defaulted Whole Loan is damaged and proceeds,
if any, from the related hazard insurance policy are insufficient to restore
the damaged property to a condition sufficient to permit recovery under the
related instrument of Credit Support, if any, the Master Servicer is not
required to expend its own funds to restore the damaged property unless it
determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Whole Loan after reimbursement of
the Master Servicer for its expenses and (ii) that such expenses will be
recoverable by it from related Insurance Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans, a Master Servicer, on behalf of itself,
the Trustee and the Certificateholders, will present claims to the obligor
under each instrument of Credit Support, and will take such reasonable steps
as are necessary to receive payment or to permit recovery thereunder with
respect to defaulted Whole Loans.
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If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from
the Collection Account out of such proceeds, prior to distribution thereof to
Certificateholders, amounts representing its normal servicing compensation on
such Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan. See "--Hazard Insurance Policies" and "Description
of Credit Support".
HAZARD INSURANCE POLICIES
Any Agreement for a Trust Fund that includes Whole Loans will require the
Master Servicer to cause the mortgagor on each Whole Loan to maintain a
hazard insurance policy providing for coverage of the standard form of fire
insurance policy with extended coverage customary in the state in which the
Mortgaged Property is located. Such coverage generally will be in general in
an amount equal to the lesser of the principal balance owing on such Whole
Loan and the amount necessary to fully compensate for any damage or loss to
the improvements on the Mortgaged Property on a replacement cost basis, but
in either case not less than the amount necessary to avoid the application of
any co-insurance clause contained in the hazard insurance policy. The ability
of the Master Servicer to assure that hazard insurance proceeds are
appropriately applied may be dependent upon its being named as an additional
insured under an hazard insurance policy and under any flood insurance policy
referred to below, or upon the extent to which information in this regard is
furnished by mortgagors. All amounts collected by the Master Servicer under
any such policy (except for amounts to be applied to the restoration or
repair of the Mortgaged Property or released to the mortgagor in accordance
with the Master Servicer's normal servicing procedures, subject to the terms
and conditions of the related Mortgage and Mortgage Note) will be deposited
in the Collection Account. The Agreement will provide that the Master
Servicer may satisfy its obligation to cause each mortgagor to maintain such
a hazard insurance policy by the Master Servicer's maintaining a blanket
policy insuring against hazard losses on the Whole Loans. If such blanket
policy contains a deductible clause, the Master Servicer will be required to
deposit in the Collection Account all sums that would have been deposited
therein but for such clause. The Master Servicer will also be required to
maintain a fidelity bond and errors and omission policy with respect to its
officers and employees that provides coverage against losses that may be
sustained as a result of an officer's or employee's misappropriation of funds
or errors and omissions in failing to maintain insurance, subject to certain
limitations as to amount of coverage, deductible amounts, conditions,
exclusions and exceptions.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions specified in each
policy. Although the policies relating to the Whole Loans will be
underwritten by different insurers under different state laws in accordance
with different applicable state forms, and therefore will not contain
identical terms and conditions, the basic terms thereof are dictated by
respective state laws, and most such policies typically do not cover any
physical damage resulting from war, revolution, governmental actions, floods
and other water-related causes, earth movement (including earthquakes,
landslides and mudflows), wet or dry rot, vermin, domestic animals and
certain other kinds of uninsured risks. When a Mortgaged Property securing a
Whole Loan is located at origination in a federally designated flood area,
each Agreement requires the Master Servicer to cause the mortgagor to acquire
and maintain flood insurance in an amount equal in general to the lesser of
(i) the amount necessary to fully compensate for any damage or loss to the
improvements which are part of the Mortgaged Property or a replacement cost
basis and (ii) the maximum amount of insurance available under the federal
flood insurance program, whether or not the area is participating in the
program.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that in effect
requires the insured at all times to carry insurance of a specified
percentage (generally 80% to 90%) of the full replacement value of the
improvements on the property in order to recover the full amount of any
partial loss. If the insured's coverage falls below this specified
percentage, such clause generally provides that the insurer's liability in
the event of partial loss does not exceed the lesser of (i) the replacement
cost of the improvements less physical depreciation and (ii) such proportion
of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
Under the terms of the Whole Loans, mortgagors will be required to present
claims to insurers under hazard insurance policies maintained on the related
Mortgaged Properties. The Master Servicer, on behalf of the Trustee and
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Certificateholders, is obligated to present or cause to be presented claims
under any blanket insurance policy insuring against hazard losses on
Mortgaged Properties securing the Whole Loans. However, the ability of the
Master Servicer to present or cause to be presented such claims is dependent
upon the extent to which information in this regard is furnished to the
Master Servicer by mortgagors.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Whole Loans may contain clauses requiring the consent of
the mortgagee to any sale or other transfer of the related Mortgaged
Property, or due-on-sale clauses entitling the mortgagee to accelerate
payment of the Whole Loan upon any sale or other transfer of the related
Mortgaged Property. Certain of the Whole Loans may contain clauses requiring
the consent of the mortgagee to the creation of any other lien or encumbrance
on the Mortgaged Property or due-on-encumbrance clauses entitling the
mortgagee to accelerate payment of the Whole Loan upon the creation of any
other lien or encumbrance upon the Mortgaged Property. The Master Servicer,
on behalf of the Trust Fund, will determine whether to exercise any right the
Trustee may have as mortgagee to accelerate payment of any such Whole Loan or
to withhold its consent to any transfer or further encumbrance in accordance
with the general servicing standard described herein under "Description of
the Agreements -- Collection and Other Servicing Procedures".
Any fee collected by or on behalf of the Master Servicer for entering into
an assumption agreement will be retained by or on behalf of the Master
Servicer as additional servicing compensation. See "Certain Legal Aspects of
Mortgage Loans -- Due-on-Sale and Due-on-Encumbrance".
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a series of Certificates will specify
whether there will be any Retained Interest in the Mortgage Assets, and, if
so, the owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related
Agreement. A "Retained Interest" in a Mortgage Asset represents a specified
portion of the interest payable thereon. The Retained Interest will be
deducted from mortgagor payments as received and will not be part of the
related Trust Fund.
A Master Servicer's primary servicing compensation with respect to a
series of Certificates will come from the periodic payment to it of a portion
of the interest payment on each Whole Loan. Since any Retained Interest and a
Master Servicer's primary compensation are percentages of the principal
balance of each Mortgage Asset, such amounts will decrease in accordance with
the amortization schedule of the Mortgage Loans underlying or comprising such
Mortgage Asset. The Prospectus Supplement with respect to a series of
Certificates evidencing interests in a Trust Fund that includes Whole Loans
may provide that, as additional compensation, the Master Servicer or the
Sub-Servicers may retain all or a portion of assumption fees, modification
fees, late payment charges or Prepayment Premiums collected from mortgagors
and any interest or other income which may be earned on funds held in the
Collection Account or any Sub-Servicing Account. Any Sub-Servicer will
receive a portion of the Master Servicer's compensation as its sub-servicing
compensation.
In addition to amounts payable to any Sub-Servicer, a Master Servicer may,
to the extent provided in the related Prospectus Supplement, pay from its
servicing compensation certain expenses incurred in connection with its
servicing of the Mortgage Loans, including, without limitation, payment of
the fees and disbursements of the Trustee and independent accountants,
payment of expenses incurred in connection with distributions and reports to
Certificateholders, and payment of any other expenses described in the
related Prospectus Supplement. Certain other expenses, including certain
expenses relating to defaults and liquidations on the Mortgage Loans and, to
the extent so provided in the related Prospectus Supplement, interest thereon
at the rate specified therein, and the fees of any Special Servicer, may be
borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
Each Agreement relating to Mortgage Assets which include Whole Loans will
provide that on or before a specified date in each year, beginning with the
first such date at least six months after the related Cut-off Date, a firm of
independent public accountants will furnish a statement to the Trustee to the
effect that, on the basis of the examination by such firm conducted
substantially in compliance with either the Uniform Single Audit Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, the
servicing by or on behalf of the Master Servicer of mortgage loans under
pooling and servicing agreements substantially similar to each other
(including the related Agreement) was conducted in compliance with the terms
of such agreements except for any significant exceptions or errors in records
that, in the opinion
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of the firm, either the Audit Program for Mortgages serviced for FHLMC, or
paragraph 4 of the Uniform Single Audit Program for Mortgage Bankers,
requires it to report. In rendering its statement such firm may rely, as to
matters relating to the direct servicing of mortgage loans by Sub-Servicers,
upon comparable statements for examinations conducted substantially in
compliance with the Uniform Single Audit Program for Mortgage Bankers or the
Audit Program for Mortgages serviced for FHLMC (rendered within one year of
such statement) of firms of independent public accountants with respect to
the related Sub-Servicer.
Each such Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of officers
of a Master Servicer will be obtainable by Certificateholders without charge
upon written request to the Master Servicer at the address set forth in the
related Prospectus Supplement.
CERTAIN MATTERS REGARDING A MASTER SERVICER, A SPECIAL SERVICER AND THE
DEPOSITOR
The Master Servicer, if any, under each Agreement will be named in the
related Prospectus Supplement. The entity serving as Master Servicer may be
an affiliate of the Depositor and may have other normal business
relationships with the Depositor or Depositor's affiliates.
The Agreement will provide that the Master Servicer may resign from its
obligations and duties thereunder only if such resignation, and the
appointment of a successor, will not result in a downgrading of the rating of
any class of Certificates or upon a determination that its duties under the
Agreement are no longer permissible under applicable law. No such resignation
will become effective until the Trustee or a successor servicer has assumed
the Master Servicer's obligations and duties under the Agreement.
Each Agreement will further provide that neither any Master Servicer, the
Depositor nor any director, officer, employee, or agent of a Master Servicer
or the Depositor will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be
protected against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of
duties thereunder or by reason of reckless disregard of obligations and
duties thereunder. Each Agreement will further provide that any Master
Servicer, the Depositor and any director, officer, employee or agent of a
Master Servicer or the Depositor will be entitled to indemnification by the
related 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
related to any specific Mortgage Loan or Mortgage Loans (unless any such
loss, liability or expense is otherwise reimbursable pursuant to the
Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
thereunder or by reason of reckless disregard of obligations and duties
thereunder. In addition, each Agreement will provide that neither any Master
Servicer nor the Depositor will be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its
respective responsibilities under the Agreement and which in its opinion may
involve it in any expense or liability. Any such Master Servicer or the
Depositor may, however, in its discretion undertake any such action which it
may deem necessary or desirable with respect to the Agreement and the rights
and duties of the parties thereto and the interests of the Certificateholders
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 Certificateholders, and the Master Servicer or the Depositor, as the case
may be, will be entitled to be reimbursed therefor and to charge the
Collection Accounts.
Any person into which the Master Servicer may be merged or consolidated,
or any person resulting from any merger or consolidation to which the Master
Servicer is a party, or any person succeeding to the business of the Master
Servicer, will be the successor of the Master Servicer under the related
Agreement, provided that such person satisfies the criteria specified in the
Agreement.
If the Master Servicer retains a Special Servicer, the standard of care
for, and any indemnification to be provided to, the Special Servicer will be
set forth in the related Agreement.
EVENT OF DEFAULT
Events of Default under the related Agreement for a Trust Fund that
includes Whole Loans will, in general, consist of (i) any failure by the
Master Servicer to distribute or cause to be distributed to
Certificateholders, or to remit to the
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Trustee for distribution to Certificateholders, any required payment that
continues unremedied for five days after the giving of written notice of such
failure to the Master Servicer by the Trustee or the Depositor, or to the
Master Servicer, the Depositor and the Trustee by the holders of Certificates
evidencing not less than 25% of the Voting Rights, (ii) any failure by the
Master Servicer duly to observe or perform in any material respect any of its
other covenants or obligations under the Agreement which continues unremedied
for thirty days (fifteen days in the case of a failure to pay the premium for
any insurance policy or instrument of Credit Support required to be
maintained pursuant to the Agreement) after the giving of written notice of
such failure to the Master Servicer by the Trustee or the Depositor, or to
the Master Servicer, the Depositor and the Trustee by the holders of
Certificates evidencing not less than 25% of the Voting Rights; and (iii)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings and certain actions by or on behalf of the
Master Servicer indicating its insolvency or inability to pay its
obligations.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under an Agreement remains unremedied, the
Depositor or the Trustee may, at the direction of holders of Certificates
evidencing not less than 51% of the Voting Rights, the Trustee shall,
terminate all of the rights and obligations of the Master Servicer under the
Agreement relating to such Trust Fund and in and to the Mortgage Loans (other
than any Retained Interest of the Master Servicer), whereupon the Trustee
will succeed to all of the responsibilities, duties and liabilities of the
Master Servicer under the Agreement (except that if the Trustee is prohibited
by law from obligating itself to make advances regarding delinquent mortgage
loans, then the Trustee will not be so obligated) and will be entitled to
similar compensation arrangements. In the event that the Trustee is unwilling
or unable so to act, it may or, at the written request of the holders of
Certificates entitled to at least 51% of the Voting Rights, it shall appoint,
or petition a court of competent jurisdiction for the appointment of, a loan
servicing institution acceptable to the Rating Agency with a net worth at the
time of such appointment of at least $15,000,000 to act as successor to the
Master Servicer under the 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, which in no event may be
greater than the compensation payable to the Master Servicer under the
Agreement.
No Certificateholder will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given
to the Trustee written notice of default and unless the holders of
Certificates evidencing not less than 25% of the Voting Rights have made
written request upon the Trustee to institute such proceeding in its own name
as Trustee thereunder and have offered to the Trustee reasonable indemnity,
and the Trustee for fifteen days has neglected or refused to institute any
such proceeding. The Trustee, however, is under no obligation to exercise any
of the trusts or powers vested in it by any Agreement or to make any
investigation of matters arising thereunder 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 covered by such Agreement,
unless such Certificateholders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby.
AMENDMENT
Each Agreement may be amended by the Depositor, the Master Servicer, if
any, and the Trustee, without the consent of any of the holders of
Certificates covered by the Agreement, to cure any ambiguity, to correct,
modify or supplement any provision therein, or to make any other provisions
with respect to matters or questions arising under the Agreement which are
not inconsistent with the provisions thereof, provided that such action will
not adversely affect in any material respect the interests of any holder of
Certificates covered by the Agreement. An Agreement may also be amended by
the Depositor, the Master Servicer, if any, and the Trustee with the consent
of the holders of Certificates evidencing not less than 66% of the Voting
Rights, for any purpose; 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 the holder of such Certificate, (ii) adversely affect
in any material respect the interests of the holders of any class of
Certificates in a manner other than as described in (i), without the consent
of the holders of Certificates of such class evidencing not less than 66% of
the aggregate Voting Rights of such class or (iii) reduce the aforesaid
percentage of Voting Rights required for the consent to any such amendment
without the consent of the holders of all Certificates covered by such
Agreement then outstanding. However, with respect to any series of
Certificates as to which one or more REMIC elections is to be made, the
Trustee will not consent to any amendment of the Agreement unless it shall
first have received an opinion of counsel to the effect that such amendment
will not cause the Trust Fund (or designated portion thereof) to fail to
qualify as a REMIC at any time that the related Certificates are outstanding.
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DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of any Agreement, the Certificates or any Mortgage Loan or related document
and is not accountable for the use or application by or on behalf of any
Master Servicer of any funds paid to the Master Servicer or its designee or
any Special Servicer in respect of the Certificates or the Mortgage Loans, or
deposited into or withdrawn from the Certificate Account or any other account
by or on behalf of the Master Servicer or any Special Servicer. If no Event
of Default has occurred and is continuing, the Trustee is required to perform
only those duties specifically required under the related Agreement. However,
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 to the requirements of the
Agreement.
THE TRUSTEE
The Trustee under each Agreement will be named in the related Prospectus
Supplement. The commercial bank, national banking association or trust
company serving as Trustee may have typical banking relationships with the
Depositor and its affiliates and with any Master Servicer and its affiliates.
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DESCRIPTION OF CREDIT SUPPORT
GENERAL
For any series of Certificates, Credit Support may be provided with
respect to one or more classes thereof or the related Mortgage Assets. Credit
Support may be in the form of the subordination of one or more classes of
Certificates, letters of credit, insurance policies on the Mortgage Loans,
certificate guarantee insurance, guarantees, the establishment of one or more
reserve funds or another method of Credit Support described in the related
Prospectus Supplement, or any combination of the foregoing. If so provided in
the related Prospectus Supplement, any form of Credit Support may be
structured so as to be drawn upon by more than one series to the extent
described therein.
Credit Support will generally not provide protection against all risks of
loss and will not guarantee repayment of the entire Certificate Balance of
the Certificates and interest thereon. If losses or shortfalls occur that
exceed the amount covered by Credit Support or that are not covered by Credit
Support, Certificateholders will bear their allocable share of deficiencies.
Moreover, holders of Certificates of a Covered Trust will be subject to the
risk that such Credit Support will be exhausted by the claims of other
Covered Trusts prior to such Covered Trust receiving any of its intended
share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or the related Mortgage Assets, the related
Prospectus Supplement will include a description of (a) the nature and amount
of coverage under such Credit Support, (b) any conditions to payment
thereunder not otherwise described herein, (c) the conditions (if any) under
which the amount of coverage under such Credit Support may be reduced and
under which such Credit Support may be terminated or replaced and (d) the
material provisions relating to such Credit Support. Additionally, the
related Prospectus Supplement will set forth certain information with respect
to the obligor under any instrument of Credit Support, including (i) a brief
description of its principal business activities, (ii) its principal place of
business, place or incorporation and the jurisdiction under which it is
chartered or licensed to do business, (iii) if applicable, the identity of
regulatory agencies that 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 the
Prospectus Supplement. See "Special Considerations -- Credit Support
Limitations".
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. The rights of
the holders of Subordinate Certificates to receive distributions of principal
and interest from the Certificate Account on any Distribution Date will be
subordinated to such rights of the holders of Senior Certificates to the
extent 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 or shortfalls. The relative interests of the Senior Certificates and
the Subordinate Certificates of a Series may be subject to adjustment from
time to time on the basis of distributions received in respect thereof. 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
and the manner, if any, in which the amount of subordination will be
effected. If one or more classes of Subordinate Certificates of a series are
Offered Certificates, the related Prospectus Supplement will provide
information as to the sensitivity of distributions on such Certificates based
on certain default assumptions.
CROSS-SUPPORT PROVISIONS
If the Mortgage Assets for a series are divided into separate groups, each
supporting a separate class or classes of Certificates of a series, credit
support may be provided by cross-support provisions requiring that
distributions be made on Senior Certificates evidencing interests in one
group of Mortgage Assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of Mortgage Assets within the Trust
Fund. The Prospectus Supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying such
provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO THE MORTGAGE ASSETS
If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the
related Trust Fund will be covered for various default risks by insurance
policies or guarantees,
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or the MBS comprising the Mortgage Assets in the related Trust Fund will be
covered by the types of Credit Support described herein. A copy of any such
material instrument for a series 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 related series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the
related Trust Fund will be covered by one or more letters of credit, issued
by a bank or financial institution specified in such Prospectus Supplement
(the "L/C Bank"). Under a letter of credit, the L/C Bank will be obligated to
honor draws 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 Assets on the related Cut-off Date or one or more classes of
Certificates. If so specified in the related Prospectus Supplement, the
letter of credit may permit draws in the event of only certain types of
losses. 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 L/C Bank under the letter of credit for each 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 any
such letter of credit for a series 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 related series.
INSURANCE POLICIES AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the
related Trust Fund will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of Certificates of the related
series, timely distributions of interest and/or full distributions of
principal on the basis of a schedule of principal distributions set forth in
or determined in the manner specified in the related Prospectus Supplement. A
copy of any such instrument for a series 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 related 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 guarantee
insurance will guarantee, with respect to one or more classes of Certificates
of the applicable series, timely distributions of interest and full
distributions of principal on the basis of a schedule of principal
distributions set forth in or determined in the manner specified in the
related Prospectus Supplement. 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 recovered as a
"voidable preference" payment under the Bankruptcy Code. A copy of the
certificate guarantee insurance 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 so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the
related Trust Fund will be covered by one or more reserve funds in which
cash, a letter of credit, Permitted Investments, a demand note or a
combination thereof will be deposited, in the amounts so specified in such
Prospectus Supplement. The reserve funds for a series may also be funded over
time by depositing therein a specified amount of the distributions received
on the related Mortgage Assets as 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 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
distributions of principal of and interest on the Certificates. Reserve funds
may be established to provide limited protection against only certain types
of losses and shortfalls. Following each Distribution Date amounts in a
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 to the Certificates.
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Moneys deposited in any Reserve Funds will be invested in Permitted
Investments. 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.
However, such income may be payable to any related Master Servicer or another
service provider as additional compensation. Whether a Reserve Fund, if any,
for a series will be a part of the Trust Fund will be disclosed in the
related Prospectus Supplement.
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 purposes 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.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do
not purport to be complete nor to reflect the laws of any particular state,
nor to encompass the laws of all states in which the security for the
Mortgage Loans is situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the Mortgage
Loans. See "Description of the Trust Funds -- Mortgage Assets".
GENERAL
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which
may be mortgages, deeds of trust, or deeds to secure debt, depending upon the
prevailing practice and law in the state in which the Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as "mortgages". Any of the foregoing types of
mortgages will create a lien upon, or grant a title interest in, the subject
property, the priority of which will depend on the terms of the particular
security instrument, as well as separate, recorded, contractual arrangements
with others holding interests in the mortgaged property, the knowledge of the
parties to such instrument as well as the order of recordation of the
instrument in the appropriate public recording office. However, recording
does not generally establish priority over governmental claims for real
estate taxes and assessments and other charges imposed under governmental
police powers.
TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties -a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In contrast,
a deed of trust is a three-party instrument, among a trustor (the equivalent
of a mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "mortgagor" includes
the trustor under a deed of trust and a grantor under a deed to secure debt.
Under a deed of trust, the mortgagor grants the property, irrevocably until
the debt is paid, in trust, generally with a power of sale as security for
the indebtedness evidenced by the related note. A deed to secure debt
typically has two parties. By executing a deed to secure debt, the grantor
conveys title to, as opposed to merely creating a lien upon, the subject
property to the grantee until such time as the underlying debt is repaid,
generally with a power of sale as security for the indebtedness evidenced by
the related mortgage note. As used in this Prospectus, unless the context
otherwise requires, the term "mortgagee" means the lender and, in the case of
the deed of trust, the trustee thereunder in certain cases. In case the
mortgagor under a mortgage is a land trust, there would be an additional
party because legal title to the property is held by a land trustee under a
land trust agreement for the benefit of the mortgagor. At origination of a
mortgage loan involving a land trust, the mortgagor executes a separate
undertaking to make payments on the mortgage note. The mortgagee's authority
under a mortgage, the trustee's authority under a deed of trust and the
grantee's authority under a deed to secure debt are governed by the express
provisions of the mortgage, the law of the state in which the real property
is located, certain federal laws (including, without limitation, the
Soldiers' and Sailor's Civil Relief Act of 1940) and, in some cases, in deed
of trust transactions, the directions of the beneficiary.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to
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the lender, while the mortgagor retains a revocable license to collect the
rents for so long as there is no unremedied default. If the mortgagor
defaults and such default is not remedied by the mortgagor within the cure
period, if any, the license terminates and the lender is entitled to collect
the rents. Local law may require that the lender take possession of the
property and/or obtain a court-appointed receiver before becoming entitled to
collect the rents. In most States, hotel and motel room rates are considered
accounts receivable under the Uniform Commercial Code ("UCC"); generally
these rates are either assigned by the mortgagor, which remains entitled to
collect such rates absent a default, or pledged by the mortgagor, as security
for the loans. In general, the lender must file financing statements in order
to perfect its security interest in the rates and must file continuation
statements, generally every five years, to maintain perfection of such
security interest. Even if the lender's security interest in room rates is
perfected under the UCC, the lender will generally be required to commence a
foreclosure or otherwise take possession of the property in order to collect
the room rates after a default. Even after a foreclosure, the potential rent
payments from the property may be less than the periodic payments that had
been due under the mortgage. For instance, the net income that would
otherwise be generated from the property may be less than the amount that
would have been needed to service the mortgage debt if the leases on the
property are at below-market rents, or as the result of excessive
maintenance, repair or other obligations which a lender succeeds to as
landlord.
PERSONALTY
Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value
from personal property which does not constitute "fixtures" under applicable
state real property law, and hence, would not be subject to the lien of a
mortgage. Such property is generally pledged or assigned as security to the
lender under the UCC. In order to perfect its security interest therein, the
lender generally must file UCC financing statements and, to maintain
perfection of such security interest, file continuation statements generally
every five years.
INSTALLMENT CONTRACTS
The Mortgage Loans included in a Trust Fund may also consist of
Installment Contracts. Under an Installment Contract the seller (hereinafter
referred to in this Section as the "lender") retains legal title to the
property and enters into an agreement with the purchaser (hereinafter
referred to in this Section as the "borrower") for the payment of the
purchase price, plus interest, over the term of such contract. Only after
full performance by the borrower of the contract is the lender obligated to
convey title to the real estate to the borrower. As with mortgage or deed of
trust financing, during the effective period of the Installment Contract, the
borrower is generally responsible for maintaining the property in good
condition and for paying real estate taxes, assessments and hazard insurance
premiums associated with the property.
The method of enforcing the rights of the lender under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state statute, to enforce the
contract strictly according to its terms. The terms of Installment Contracts
generally provide that upon a default by the borrower, the borrower loses his
or her right to occupy the property, the entire indebtedness is accelerated,
and the buyer's equitable 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.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGES OR BENEFICIARIES
Some of the Mortgage Loans included in the Mortgage Pool for a series will
be secured by junior mortgages or deeds of trust which are subordinate to
senior mortgages or deeds of trust held by other lenders or institutional
investors. The
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rights of the Trust Fund (and therefore the Certificateholders), as
beneficiary under a junior deed of trust or as mortgagee under a junior
mortgage, are subordinate to those of the mortgagee or beneficiary under the
senior mortgage or deed of trust, including the prior rights of the senior
mortgagee or beneficiary to receive rents, hazard insurance and condemnation
proceeds and to cause the property securing the Mortgage Loan to be sold upon
default of the mortgagor or trustor, thereby extinguishing the junior
mortgagee's or junior beneficiary's lien unless the Master Servicer asserts
its subordinate interest in a property in foreclosure litigation or satisfies
the defaulted senior loan. As discussed more fully below, in many states a
junior mortgagee or beneficiary may satisfy a defaulted senior loan in full,
adding the amounts expended to the balance due on the junior loan. Absent a
provision in the senior mortgage, no notice of default is required to be
given to the junior mortgagee.
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 mortgage 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 to the extent the junior mortgage or deed of trust so
provides. 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.
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 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
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mortgaged property. Tenants will often refuse to execute 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.
SUBORDINATE FINANCING
Where the mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the
mortgagor may have difficulty servicing and repaying multiple loans. In
addition, if the junior loan permits recourse to the mortgagor (as junior
loans often do) and the senior loan does not, a mortgagor may be more likely
to repay sums due on the junior loan than those on the senior loan. Second,
acts of the senior lender that prejudice the junior lender or impair the
junior lender's security may create a superior equity in favor of the junior
lender. For example, if the mortgagor and the senior lender agree to an
increase in the principal amount of or the interest rate payable on the
senior loan, the senior lender may lose its priority to the extent any
existing junior lender is harmed or the mortgagor is additionally burdened.
Third, if the mortgagor defaults on the senior loan and/or any junior loan or
loans, the existence of junior loans and actions taken by junior lenders can
impair the security available to the senior lender and can interfere with or
delay the taking of action by the senior lender. Moreover, the bankruptcy of
a junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
FORECLOSURE
Foreclosure is a legal procedure that allows the mortgagee to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its
obligations under the note or mortgage and, by reason thereof, the
indebtedness has been accelerated, the mortgagee has the right to institute
foreclosure proceedings to sell the mortgaged property at public auction to
satisfy the indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage vary
from state to state. Two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage instrument. There are other foreclosure procedures
available in some states that are either infrequently used or available only
in certain limited circumstances, such as strict foreclosure.
JUDICIAL FORECLOSURE
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated
by the service of legal pleadings upon all parties having a subordinate
interest of record in the real property and all parties in possession of the
property, under leases or otherwise, whose interests are subordinate to the
mortgage. Delays in completion of the foreclosure may occasionally result
from difficulties in locating defendants. When the lender's right to
foreclosure is contested, the legal proceedings can be costly and
time-consuming. Upon successful completion of a judicial foreclosure
proceeding, the court generally issues a judgment of foreclosure and appoints
a referee or other officer to conduct a public sale of the mortgaged
property, the proceeds of which are used to satisfy the judgment. Such sales
are made in accordance with procedures that vary from state to state.
NON-JUDICIAL FORECLOSURE/POWER OF SALE
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale pursuant to the power of sale granted in the deed of trust. A
power of sale is typically granted in a deed of trust. It may also be
contained in any other type of mortgage instrument. A power of sale allows a
non-judicial public sale to be conducted generally following a request from
the beneficiary/lender to the trustee to sell the property upon any default
by the mortgagor under the terms of the mortgage note or the mortgage
instrument and after notice of sale is given in accordance with the terms of
the mortgage instrument, as well as applicable state law. In some states,
prior to such sale, the trustee under a deed of trust must record a notice of
default and notice of sale and send a copy to the mortgagor and to any other
party who has recorded a request for a copy of a notice of default and notice
of sale. In addition, in some states the trustee must provide notice to any
other party having an interest of record in the real property, including
junior lienholders. A notice of sale must be posted in a public place and, in
most states, published for a specified period of time in one or more
newspapers.
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The mortgagor or junior lienholder may then have the right, during a
reinstatment period required in some states, to cure the default by paying
the entire actual amount in arrears (without acceleration) plus the expenses
incurred in enforcing the obligation. In other states, the mortgagor or the
junior lienholder is not provided a period to reinstate the loan, but has
only the right to pay off the entire debt to prevent the foreclosure sale.
Generally, the procedure for public sale, the parties entitled to notice, the
method of giving notice and the applicable time periods are governed by state
law and vary among the states. Foreclosure of a deed to secure debt is also
generally accomplished by a non-judicial sale similar to that required by a
deed of trust, except that the lender or its agent, rather than a trustee, is
typically empowered to perform the sale in accordance with the terms of the
deed to secure debt and applicable law.
LIMITATIONS ON LENDER'S RIGHTS
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with
foreclosure. These equitable principles are generally designed to relieve the
mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is perceived as harsh or unfair. Relying on such principles, a court
may alter the specific terms of a loan to the extent it considers necessary
to prevent an injustice, undue oppression or overreaching, or may require the
lender to undertake affirmative and expensive actions to determine the cause
of the mortgagor's default and the likelihood that the mortgagor will be able
to reinstate the loan. In some cases, courts have substituted their judgment
for the lender's and have required that lenders reinstate loans or recast
payment schedules in order to accommodate mortgagors who are suffering from a
temporary financial disability. In other cases, courts have limited the right
of the lender to foreclose if the default under the mortgage is not monetary,
e.g., the mortgagor failed to maintain the mortgaged property adequately or
the mortgagor executed a junior mortgage on the mortgaged property. The
exercise by the court of its equity powers will depend on the individual
circumstances of each case presented to it. Finally, some courts have been
faced with the issue of whether federal or state constitutional provisions
reflecting due process concerns for adequate notice require that a mortgagor
receive notice in addition to statutorily-prescribed minimum notice. For the
most part, these cases have upheld the reasonableness of the notice
provisions or have found that a public sale under a mortgage providing for a
power of sale does not involve sufficient state action to afford
constitutional protections to the mortgagor.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes require several years to complete.
Also, a third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such
property at the time of sale, due to, among other things, redemption rights
which may exist and the possibility of physical deterioration of the property
during the foreclosure proceedings. Potential buyers may be reluctant to
purchase property at a foreclosure sale as a result of the 1980 decision of
the United States Court of Appeals for the Fifth Circuit in Durrett v.
Washington National Insurance Company and other decisions that have followed
its reasoning. The court in Durrett held that even a non-collusive, regularly
conducted foreclosure sale was a fraudulent transfer under the federal
Bankruptcy Code, as amended from time to time (11 U.S.C.) and, therefore,
could be rescinded in favor of the bankrupt's estate, if (i) the foreclosure
sale was held while the debtor was insolvent and not more than one year prior
to the filing of the bankruptcy petition and (ii) the price paid for the
foreclosed property did not represent "fair consideration" ("reasonably
equivalent value" under the Bankruptcy Code). Although the reasoning and
result of Durrett in respect of the Bankruptcy Code was rejected by the
United States Supreme Court in May 1994, the case could nonetheless be
persuasive to a court applying a state fraudulent conveyance law which has
provisions similar to those construed in Durrett. For these reasons, it is
common for the lender to purchase the mortgaged property for an amount equal
to the lesser of fair market value and the underlying debt and accrued and
unpaid interest plus the expenses of foreclosure. Generally, state law
controls the amount of foreclosure costs and expenses which may be recovered
by a lender. Thereafter, subject to the mortgagor's right in some states to
remain in possession during a redemption period, if applicable, the lender
will become the owner of the property and have both the benefits and burdens
of ownership of the mortgaged property. For example, the lender will have the
obligation to pay debt service on any senior mortgages, to pay taxes, obtain
casualty insurance and to make such repairs at its own expense as are
necessary to render the property suitable for sale. Frequently, the lender
employs a third party management company to manage and operate the property.
The costs of operating and maintaining a commercial or multifamily
residential property may be significant and may be greater than the income
derived from that property. The costs of management and operation of those
mortgaged properties which are hotels, motels or restaurants or nursing or
convalescent homes or hospitals may be particularly significant because of
the expertise, knowledge and, with respect to nursing or convalescent homes
or hospitals, regulatory compliance, required to run such operations and the
effect which foreclosure and a change in ownership may have on the
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public's and the industry's (including franchisors') perception of the
quality of such operations. The lender will commonly obtain the services of a
real estate broker and pay the broker's commission in connection with the
sale of the property. Depending upon market conditions, the ultimate proceeds
of the sale of the property may not equal the lender's investment in the
property. Moreover, a lender commonly incurs substantial legal fees and court
costs in acquiring a mortgaged property through contested foreclosure and/or
bankruptcy proceedings. Furthermore, a few states require that any
environmental contamination at certain types of properties be cleaned up
before a property may be resold. In addition, a lender may be responsible
under federal or state law for the cost of cleaning up a mortgaged property
that is environmentally contaminated. See "--Environmental Legislation".
Generally state law controls the amount of foreclosure expenses and costs,
including attorneys' fees, that may be recovered by a lender.
A junior mortgagee may not foreclose on the property securing the junior
mortgage unless it forecloses subject to senior mortgages and any other prior
liens, in which case it may be obliged to make payments on the senior
mortgages to avoid their foreclosure. In addition, in the event that the
foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale"
clause contained in a senior mortgage, the junior mortgagee may be required
to pay the full amount of the senior mortgage to avoid its foreclosure.
Accordingly, with respect to those Mortgage Loans which are junior mortgage
loans, if the lender purchases the property the lender's title will be
subject to all senior mortgages, prior liens and certain governmental liens.
The proceeds received by the referee or trustee from the sale are
generally applied first to the costs, fees and expenses of sale, to unpaid
real estate taxes and assessments and then in satisfaction of the
indebtedness secured by the mortgage under which the sale was conducted. Any
proceeds remaining after satisfaction of senior mortgage debt are generally
payable to the holders of junior mortgages and other liens and claims in
order of their priority, whether or not the mortgagor is in default. Any
additional proceeds are generally payable to the mortgagor. The payment of
the proceeds to the holders of junior mortgages may occur in the foreclosure
action of the senior mortgage or a subsequent ancillary proceeding or may
require the institution of separate legal proceedings by such holders.
In connection with a series of Certificates for which an election is made
to qualify the Trust Fund, or a portion thereof, as a REMIC, the REMIC
Regulations and the Agreement may require the Master Servicer to hire an
independent contractor to operate any foreclosed property relating to Whole
Loans.
RIGHTS OF REDEMPTION
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the mortgagor, and all persons who have
an interest in the property which is subordinate to the mortgage being
foreclosed, from exercise of their "equity of redemption". The doctrine of
equity of redemption provides that, until the property covered by a mortgage
has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having an interest which is subordinate to that of
the foreclosing mortgagee have an equity of redemption and may redeem the
property by paying the entire debt with interest. In addition, in some
states, when a foreclosure action has been commenced, the redeeming party
must pay certain costs of such action. Those having an equity of redemption
must generally be made parties and joined in the foreclosure proceeding in
order for their equity of redemption to be cut off and terminated.
The equity of redemption is generally a common-law (non-statutory) right
which exists prior to completion of the foreclosure, is not waivable by the
mortgagor, must be exercised prior to foreclosure sale and should be
distinguished from the post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage,
the mortgagor and foreclosed junior lienors are given a statutory period in
which to redeem the property from the foreclosure sale. In some states,
statutory redemption may occur only upon payment of the foreclosure sale
price. In other states, redemption may be authorized if the former mortgagor
pays only a portion of the sums due. The effect of a statutory right of
redemption is to diminish the ability of the lender to sell the foreclosed
property. The exercise of a right of redemption would defeat the title of any
purchaser from a foreclosure sale or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership until the
redemption period has expired. In some states, a post-sale statutory right of
redemption may exist following a judicial foreclosure, but not following a
trustee's sale under a deed of trust.
Under the REMIC Regulations currently in effect, property acquired by
foreclosure generally must not be held for more than two years. With respect
to a series of Certificates for which an election is made to qualify the
Trust Fund or a
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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 REMIC
Regulations.
ANTI-DEFICIENCY LEGISLATION
Some or all of the Mortgage Loans may be nonrecourse loans, as to which
recourse may be had only against the specific property securing the related
Mortgage Loan and a personal money judgment may not be obtained against the
mortgagor. Even if a mortgage loan by its terms provides for recourse to the
mortgagor, some states impose prohibitions or limitations on such recourse.
For example, statutes in some states limit the right of the lender to obtain
a deficiency judgment against the mortgagor following foreclosure or sale
under a deed of trust. A deficiency judgment would be a personal judgment
against the former mortgagor equal to the difference between the net amount
realized upon the public sale of the real property and the amount due to the
lender. Some states require the lender to exhaust the security afforded under
a mortgage by foreclosure in an attempt to satisfy the full debt before
bringing a personal action against the mortgagor. In certain other states,
the lender has the option of bringing a personal action against the mortgagor
on the debt without first exhausting such security; however, in some of these
states, the lender, following judgment on such personal action, may be deemed
to have elected a remedy and may be precluded from exercising remedies with
respect to the security. In some cases, a lender will be precluded from
exercising any additional rights under the note or mortgage if it has taken
any prior enforcement action. Consequently, the practical effect of the
election requirement, in those states permitting such election, is that
lenders will usually proceed against the security first rather than bringing
a personal action against the mortgagor. Finally, other statutory provisions
limit any deficiency judgment against the former mortgagor following a
judicial sale to the excess of the outstanding debt over the fair market
value of the property at the time of the public sale. The purpose of these
statutes is generally to prevent a lender from obtaining a large deficiency
judgment against the former mortgagor as a result of low or no bids at the
judicial sale.
LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of these
risks is that the ground lease creating the leasehold estate could terminate,
leaving the leasehold mortgagee without its security. The ground lease may
terminate if, among other reasons, the ground lessee breaches or defaults in
its obligations under the ground lease or there is a bankruptcy of the ground
lessee or the ground lessor. This risk may be minimized if the ground lease
contains certain provisions protective of the mortgagee, but the ground
leases that secure Mortgage Loans may not contain some of these protective
provisions, and mortgages may not contain the other protections discussed in
the next paragraph. Protective ground lease provisions include the right of
the leasehold mortgagee to receive notices from the ground lessor of any
defaults by the the mortgagor; the right to cure such defaults, with adequate
cure periods; if a default is not susceptible of cure by the leasehold
mortgagee, the right to acquire the leasehold estate through foreclosure or
otherwise; the ability of the ground lease to be assigned to and by the
leasehold mortgagee or purchaser at a foreclosure sale and for the
concomitant release of the ground lessee's liabilities thereunder; and the
right of the leasehold mortgagee to enter into a new ground lease with the
ground lessor on the same terms and conditions as the old ground lease in the
event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground
lessee from treating the ground lease as terminated in the event of the
ground lessor's bankruptcy and rejection of the ground lease by the trustee
for the debtor-ground lessor. As further protection, a leasehold mortgage may
provide for the assignment of the debtor-ground lessee's right to reject a
lease pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as
amended (11 U.S.C.) (the "Bankruptcy Code"), although the enforceability of
such clause has not been established. Without the protections described in
the foregoing paragraph, a leasehold mortgagee may lose the collateral
securing its leasehold mortgage. In addition, terms and conditions of a
leasehold mortgage are subject to the terms and conditions of the ground
lease. Although certain rights given to a ground lessee can be limited by the
terms of a leasehold mortgage, the rights of a ground lessee or a leasehold
mortgagee with respect to, among other things, insurance, casualty and
condemnation will be governed by the provisions of the ground lease.
BANKRUPTCY LAWS
The Bankruptcy Code and related state laws may interfere with or affect
the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions
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(including foreclosure actions and deficiency judgment proceedings) are
automatically stayed upon the filing of the bankruptcy petition, and,
usually, no interest or principal payments are made during the course of the
bankruptcy case. The delay and the consequences thereof caused by such
automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienor may
stay the senior lender from taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured
by property of the debtor may be modified under certain circumstances. The
outstanding amount of the loan secured by the real property may be reduced to
the then-current value of the property (with a corresponding partial
reduction of the amount of lender's security interest) pursuant to a
confirmed plan or lien avoidance proceeding, thus leaving the lender a
general unsecured creditor for the difference between such value and the
outstanding balance of the loan. Other modifications may include the
modification or denial of enforceability of due-on-sale or due-on-encumbrance
clauses, the reduction in the amount of each scheduled payment, which
reduction may result from a reduction in the rate of interest and/or the
alteration of the repayment schedule (with or without affecting the unpaid
principal balance of the loan), and/or an extension (or reduction) of the
final maturity date. Some courts with federal bankruptcy jurisdiction have
approved plans, based on the particular facts of the reorganization case,
that effected the curing of a mortgage loan default by paying arrearages over
a number of years. Also, under federal bankruptcy law, a bankruptcy court may
permit a debtor through its rehabilitative plan to de-accelerate a secured
loan and to reinstate the loan even though the lender accelerated the
mortgage loan and final judgment of foreclosure had been entered in state
court (provided no sale of the property had yet occurred) prior to the filing
of the debtor's petition. This may be done even if the full amount due under
the original loan is never repaid.
The Bankruptcy Code has been amended to provide that a lender's perfected
pre-petition security interest in leases, rents and hotel revenues continues
in the post-petition leases, rents and hotel revenues, unless a bankruptcy
court orders to the contrary "based on the equities of the case." Thus,
unless a court orders otherwise, revenues from a Mortgaged Property generated
after the date the bankruptcy petition is filed will constitute "cash
collateral" under the Bankruptcy Code. Debtors may only use cash collateral
upon obtaining the lender's consent or a prior court order finding that the
lender's interest in the Mortgaged Properties and the cash collateral is
"adequately protected" as such term is defined and interpreted under the
Bankruptcy Code. It should be noted, however, that the court may find that
the lender has no security interest in either pre-petition or post-petition
revenues if the court finds that the loan documents do not contain language
covering accounts, room rents, or other forms of personalty necessary for a
security interest to attach to hotel revenues.
To the extent that a mortgagor's ability to make payment on a mortgage
loan is dependent on its receipt of payments of rent under a lease of the
related property, such ability may be impaired by the commencement of a
bankruptcy proceeding relating to a lessee under such lease. Under the
Bankruptcy Code, the commencement of a bankruptcy proceeding in which the
lessee is the debtor results in a stay in bankruptcy against the commencement
or continuation of any state court proceeding for past due rent, for
accelerated rent, for damages or for a summary eviction order with respect to
a default under the lease that occurred prior to the filing of the lessee's
petition.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the
lease and retain it or assign it to a third party or (b) reject the lease. If
the lease is assumed, the trustee or debtor in possession (or assignee, if
applicable) must cure any defaults under the lease, compensate the lessor for
its losses and provide the lessor with "adequate assurance" of future
performance. Such remedies may be insufficient, however, as the lessor may be
forced to continue under the lease with a lessee that is a poor credit risk
or an unfamiliar tenant if the lease was assigned, and any assurances
provided to the lessor may, in fact, be inadequate. If the lease is rejected,
the lessor will be treated as an unsecured creditor with respect to its claim
for damages for termination of the lease. In addition, pursuant to Section
502(b)(6) of the Bankruptcy Code, a lessor's damages for lease rejection in
respect of future rent installments are limited to the rent reserved by the
lease, without acceleration, for the greater of one year, or 15%, not to
exceed three years, of the remaining term of the lease.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor
under the related Mortgage Loan to the Trust Fund. Payments on long-term debt
may be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction.
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A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may
have the power to grant liens senior to the lien of a mortgage, and analogous
state statutes and general principles of equity may also provide a mortgagor
with means to halt a foreclosure proceeding or sale and to force a
restructuring of a mortgage loan on terms a lender would not otherwise
accept. Moreover, the laws of certain states also give priority to certain
tax liens over the lien of a mortgage or deed of trust. Under the Bankruptcy
Code, if the court finds that actions of the mortgagee have been
unreasonable, the lien of the related mortgage may be subordinated to the
claims of unsecured creditors.
Pursuant to the federal doctrine of "substantive consolidation" or to the
(predominantly state law) doctrine of "piercing the corporate veil", a
bankruptcy court, in the exercise of its equitable powers, also has the
authority to order that the assets and liabilities of a related entity be
consolidated with those of an entity before it. Thus, property ostensibly the
property of one entity may be determined to be the property of a different
entity in bankruptcy, the automatic stay applicable to the first bankrupt
entity extended to the second and the rights of creditors of the second
entity impaired in the fashion set forth above in the discussion of ordinary
bankruptcy principles. Depending on facts and circumstances not wholly in
existence at the time a loan is originated or transferred to the Trust Fund,
the application of any of these doctrines to one or more of the mortgagors in
the context of the bankruptcy of one or more of their affiliates could result
in material impairment of the rights of the Certificateholders. For each
mortgagor that is described as a "special purpose entity", "single purpose
entity" or "bankruptcy-remote entity" in the Prospectus Supplement, the
activities that may be conducted by such mortgagor and its ability to incur
debt are restricted by the applicable Mortgage or the organizational
documents of such mortgagor in such manner as is intended to make the
likelihood of a bankruptcy proceeding being commenced by or against such
mortgagor remote, and such mortgagor has been organized and is designed to
operate in a manner such that its separate existence should be respected
notwithstanding a bankruptcy proceeding in respect of one or more affiliated
entities of such mortgagor. However, the Depositor makes no representation as
to the likelihood of the institution of a bankruptcy proceeding by or in
respect of any mortgagor or the likelihood that the separate existence of any
mortgagor would be respected if there were to be a bankruptcy proceeding in
respect of any affiliated entity of a mortgagor.
ENVIRONMENTAL LEGISLATION
A lender may be subject to unforeseen environmental risks when taking a
security interest in real or personal property.
Under the laws of many states, contamination on a property may give rise
to a lien on the property for cleanup costs. In several states, such a lien
has priority over all existing liens (a "superlien") including those of
existing mortgages; in those states, the lien of a mortgage contemplated by
this transaction may lose its priority to such a superlien.
CERCLA imposes strict, as well as joint and several, liability on several
classes of potentially responsible parties, including current owners and
operators of the property, regardless of whether they caused or contributed
to the contamination. Many states have laws similar to CERCLA. CERCLA
excludes from the definition of "owner or operator" any person "who, without
participating in the management of . . . [the] facility, holds indicia of
ownership primarily to protect his security interest" ("secured-creditor
exemption").
A lender may lose its secured-creditor exemption and be held liable under
CERCLA as an owner or operator, if such lender or its employees or agents
participate in management of the property. Also, if the lender takes title to
or possession of the property, the secured-creditor exemption may be deemed
to be unavailable, and the lender may be liable to the government or private
parties for clean-up or other remedial costs pursuant to CERCLA.
A decision in May 1990 of the United States Court of Appeals for the
Eleventh Circuit in United States v. Fleet Factors Corp. very narrowly
construed the CERCLA secured-creditor exemption. The Court held that a
mortgagee need not have involved itself in the day-to-day operations of the
mortgaged property or in decisions relating to hazardous waste in order to be
liable under CERCLA; rather, liability could attach to a mortgagee if its
involvement in the management of the property is sufficiently broad to
support the inference that it had the capacity to influence the mortgagor's
treatment of hazardous waste. Such capacity to influence could be inferred
from the extent of the mortgagee's involvement in the mortgagor's financial
management. A subsequent decision by the United States Court of Appeals for
the Ninth Circuit in In re Bergsoe Metal Corp. disagreed with the Fleet
Factors opinion, ruling that a secured lender had no liability absent "some
actual management of the facility" on the part of the lender. The scope of
the secured-creditor exemption is thus unclear.
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If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental contamination,
but that person or entity may be bankrupt or otherwise judgment proof. It is
possible that cleanup costs could become a liability of the Trust Fund and
occasion a loss to Certificateholders in certain circumstances described
above if such remedial costs were incurred.
Unless otherwise provided in the related Prospectus Supplement, the
Warranting Party with respect to any Whole Loan included in a Trust Fund for
a particular series of Certificates will represent that a "Phase I
assessment" as described in and meeting the requirements of the then current
version of Chapter 5 of the Federal National Mortgage Association Multifamily
Guide has been received and reviewed. In addition, the Agreement may provide
that the Master Servicer, acting on behalf of the Trustee, will not acquire
title to a Mortgaged Property or take over its operation unless the Master
Servicer has previously determined, based on a report prepared by a person
who regularly conducts environmental audits, that (a) there are no
circumstances or conditions present at the Mortgaged Property relating to
substances for which some investigation or clean-up action could be required
or that it would be in the best economic interest of the Trust Fund to take
such actions with respect to the affected Mortgaged Property and (b) that the
Mortgaged Property is in compliance with applicable environmental laws or
that it would be in the best economic interest of the Trust Fund to take the
actions necessary to comply with such laws. See "Description of the
Agreements -- Realization Upon Defaulted Whole Loans".
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender
may accelerate the maturity of the loan if the mortgagor sells or otherwise
transfers or encumbers the mortgaged property. Certain of these clauses may
provide that, upon an attempted breach thereof by the mortgagor of an
otherwise non-recourse loan, the mortgager becomes personally liable for the
mortgage debt. The enforceability of due-on-sale clauses has been the subject
of legislation or litigation in many states and, in some cases, the
enforceability of these clauses was limited or denied. However, with respect
to certain loans the Garn-St Germain Depository Institutions Act of 1982
preempts state constitutional, statutory and case law that prohibits the
enforcement of due-on-sale clauses and permits lenders to enforce these
clauses in accordance with their terms subject to certain limited exceptions.
Unless otherwise provided in the related Prospectus Supplement, a Master
Servicer, on behalf of the Trust Fund, will determine whether to exercise any
right the Trustee may have as mortgagee to accelerate payment of any such
Mortgage Loan or to withhold its consent to any transfer or further
encumbrance in accordance with the general servicing standard described
herein under "Description of the Agreements -- Collection and Other Servicing
Procedures".
ACCELERATION ON DEFAULT
Some of the Mortgage Loans included in a Trust Fund will include a
"debt-acceleration" clause, which permits the lender to accelerate the full
debt upon a monetary or nonmonetary default of the borrower. The courts of
all states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices. The
equity courts of any state, however, may refuse to foreclose a mortgage or
deed of trust when an acceleration of the indebtedness would be inequitable
or unjust or the circumstances would render the acceleration unconscionable.
Furthermore, in some states, the borrower may avoid foreclosure and reinstate
an accelerated loan by paying only the defaulted amounts and the costs and
attorneys' fees incurred by the lender in collecting such defaulted payments.
State courts also are known to apply various legal and equitable
principles to avoid enforcement of the forfeiture provisions of Installment
Contracts. For example, a lender's practice of accepting late payments from
the borrower may be deemed a waiver of the forfeiture clause. State courts
also may impose equitable grace periods for payment of arrearages or
otherwise permit reinstatement of the contract following a default. Not
infrequently, if a borrower under an Installment Contract has significant
equity in the property, equitable principles will be applied to reform or
reinstate the contract or to permit the borrower to share the proceeds upon a
foreclosure sale of the property if the sale price exceeds the debt.
DEFAULT INTEREST, PREPAYMENT CHARGES AND PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if
payments are not timely made, and in some circumstances may provide for
prepayment fees or yield maintenance penalties if the obligation is paid
prior to maturity or prohibit such prepayment for a specified period. In
certain states, there are or may be specific limitations upon the late
charges which a lender may collect from a mortgagor
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for delinquent payments. Certain states also limit the amounts that a lender
may collect from a mortgagor as an additional charge if the loan is prepaid.
The enforceability, under the laws of a number of states of provisions
providing for prepayment fees or penalties upon, or prohibition of, an
involuntary prepayment is unclear, and no assurance can be given that, at the
time a Prepayment Premium is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, the obligation to make such
payment, or the provisions of any such prohibition, will be enforceable under
applicable state law. The absence of a restraint on prepayment, particularly
with respect to Mortgage Loans having higher Mortgage Rates, may increase the
likelihood of refinancing or other early retirements of the Mortgage Loans.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential (including
multifamily but not other commercial) first mortgage loans originated by
certain lenders after March 31, 1980. A similar federal statute was in effect
with respect to mortgage loans made during the first three months of 1980.
The statute authorized any state to reimpose interest rate limits by
adopting, before April 1, 1983, a law or constitutional provision that
expressly rejects application of the federal law. In addition, even where
Title V is not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on mortgage loans covered
by Title V. Certain states have taken action to reimpose interest rate limits
and/or to limit discount points or other charges.
The Depositor has been advised by counsel that a court interpreting Title
V would hold that first mortgage loans secured by primarily residential
properties that are originated on or after January 1, 1980 are subject to
federal preemption. Therefore, in a state that has not taken the requisite
action to reject application of Title V or to adopt a provision limiting
discount points or other charges prior to origination of such mortgage loans,
any such limitation under such state's usury law would not apply to such
mortgage loans.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans, originated by non-federally chartered lenders have historically been
subjected to a variety of restrictions. Such restrictions differed from state
to state, resulting in difficulties in determining whether a particular
alternative mortgage instrument originated by a state-chartered lender was in
compliance with applicable law. These difficulties were alleviated
substantially as a result of the enactment of Title VIII of the Garn-St
Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any
state law to the contrary, state-chartered banks may originate alternative
mortgage instruments in accordance with regulations promulgated by the
Comptroller of the Currency with respect to origination of alternative
mortgage instruments by national banks, state-chartered credit unions may
originate alternative mortgage instruments in accordance with regulations
promulgated by the National Credit Union Administration (the "NCUA") with
respect to origination of alternative mortgage instruments by federal credit
unions, and all other non-federally chartered housing creditors, including
state-chartered savings and loan associations, state-chartered savings banks
and mortgage banking companies, may originate alternative mortgage
instruments in accordance with the regulations promulgated by the Federal
Home Loan Bank Board (now the Office of Thrift Supervision) with respect to
origination of alternative mortgage instruments by federal savings and loan
associations. Title VIII provides that any state may reject applicability of
the provision of Title VIII by adopting, prior to October 15, 1985, a law or
constitutional provision expressly rejecting the applicability of such
provisions. Certain states have taken such action.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor who was
in reserve status and is called to active duty after origination of the
Mortgage Loan), may not be charged interest (including fees and charges)
above an annual rate of 6% during the period of such mortgagor's active duty
status, unless a court orders otherwise upon application of the lender. The
Relief Act applies to mortgagors who are members of the Army, Navy, Air
Force, Marines, National Guard, Reserves, Coast Guard and officers of the
U.S. Public Health Service assigned to duty with the military. Because the
Relief Act applies to mortgagors who enter military service (including
reservists who are called to active duty) after origination of the related
Mortgage Loan, no information can be provided as to the number of loans that
may be affected by the Relief Act. Application of the Relief Act would
adversely affect, for an indeterminate period of time, the ability of any
servicer to collect full amounts of interest on certain of the Mortgage
Loans. Any
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shortfalls in interest collections resulting from the application of the
Relief Act would result in a reduction of the amounts distributable to the
holders of the related series of Certificates and would not be covered by
advances or any form of Credit Support (if any) provided in connection with
such Certificates. In addition, the Relief Act imposes limitations that would
impair the ability of the servicer to foreclose on an affected Mortgage Loan
during the mortgagor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in
the event that such a Mortgage Loan goes into default, there may be delays
and losses occasioned thereby.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the
"Crime Control Act"), the government may seize the property even before
conviction. The government must publish notice of the forfeiture proceeding
and may give notice to all parties "known to have an alleged interest in the
property", including the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before
commission of the crime upon which the forfeiture is based, or (ii) the
lender was, at the time of execution of the mortgage, "reasonably without
cause to believe" that the property was used in, or purchased with the
proceeds of, illegal drug or RICO activities.
CERTAIN LAWS AND REGULATIONS
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply
(together with an inability to remedy any such failure) could result in
material diminution in the value of a Mortgaged Property which could,
together with the possibility of limited alternative uses for a particular
Mortgaged Property (i.e., a nursing or convalescent home or hospital), result
in a failure to realize the full principal amount of the related Mortgage
Loan.
TYPE OF MORTGAGED PROPERTY
The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or convalescent homes may present special
risks to lenders in large part due to significant governmental regulation of
the operation, maintenance, control and financing of health care
institutions. Mortgages on Mortgaged Properties which are owned by the
borrower under a condominium form of ownership are subject to the
declaration, by-laws and other rules and regulations of the condominium
association. Mortgaged Properties which are hotels or motels may present
additional risk to the lender in that: (i) hotels and motels are typically
operated pursuant to franchise, management and operating agreements which may
be terminable by the operator; and (ii) the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchase or foreclosure is subject to the vagaries of local law
requirements. In addition, Mortgaged Properties which are multifamily
residential properties or cooperatively owned multifamily properties may be
subject to rent control laws, which could impact the future cash flows of
such properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which
are structural in nature from existing places of public accommodation to the
extent "readily achievable." In addition, under the ADA, alterations to a
place of public accommodation or a commercial facility are to be made so
that, to the maximum extent feasible, such altered portions are readily
accessible to and usable by disabled individuals. The "readily achievable"
standard takes into account, among other factors, the financial resources of
the affected site, owner, landlord or other applicable person. In addition to
imposing a possible financial burden on the borrower in its capacity as owner
or landlord, the ADA may also impose such requirements on a foreclosing
lender who succeeds to the interest of the borrower as owner or landlord.
Furthermore, since the "readily achievable" standard may vary depending on
the financial condition of the owner or landlord, a foreclosing lender who is
financially more capable than the borrower of complying with the requirements
of the ADA may be subject to more stringent requirements than those to which
the borrower is subject.
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FEDERAL INCOME TAX CONSEQUENCES
The following represents the opinion of Cadwalader, Wickersham & Taft as
to the matters discussed herein. The following is a general discussion of the
anticipated material federal income tax consequences of the purchase,
ownership and disposition of Certificates. The discussion below does not
purport to address all federal income tax consequences that may be applicable
to particular categories of investors, some of which may be subject to
special rules. The authorities on which this discussion is based are subject
to change or differing interpretations, and any such change or interpretation
could apply retroactively. This discussion reflects the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), as well as
regulations (the "REMIC Regulations") promulgated by the U.S. Department of
Treasury (the "Treasury") on December 23, 1992. Investors should consult
their own tax advisors in determining the federal, state, local and other tax
consequences to them of the purchase, ownership and disposition of
Certificates.
For purposes of this discussion, where the applicable Prospectus
Supplement provides for a fixed retained yield with respect to the Mortgage
Assets underlying a series of Certificates, references to the Mortgage will
be deemed to refer to that portion of the Mortgage Assets held by the Trust
Fund which does not include the Retained Interest. References to a "holder"
or "Certificateholder" in this discussion generally mean the beneficial owner
of a Certificate.
FEDERAL INCOME TAX CONSEQUENCES FOR REMIC CERTIFICATES
GENERAL
With respect to a particular series of Certificates, an election may be
made to treat the Trust Fund or one or more segregated pools of assets
therein as one or more REMICs within the meaning of Code Section 860D. A
Trust Fund or a portion thereof as to which a REMIC election will be made
will be referred to as a "REMIC Pool". For purposes of this discussion,
Certificates of a series as to which one or more REMIC elections are made are
referred to as "REMIC Certificates" and will consist of one or more Classes
of "Regular Certificates" and one Class of "Residual Certificates" in the
case of each REMIC Pool. Qualification as a REMIC requires ongoing compliance
with certain conditions. With respect to each series of REMIC Certificates,
Cadwalader, Wickersham & Taft, tax counsel to the Depositor, has advised the
Depositor that in the firm's opinion, assuming (i) the making of such an
election, (ii) compliance with the Agreement and (iii) compliance with any
changes in the law, including any amendments to the Code or applicable
Treasury regulations thereunder, each REMIC Pool will qualify as a REMIC. In
such case, the Regular Certificates will be considered to be "regular
interests" in the REMIC Pool and generally will be treated for federal income
tax purposes as if they were newly originated debt instruments, and the
Residual Certificates will be considered to be "residual interests" in the
REMIC Pool. The Prospectus Supplement for each series of Certificates will
indicate whether one or more REMIC elections with respect to the related
Trust Fund will be made, in which event references to "REMIC" or "REMIC Pool"
herein shall be deemed to refer to each such REMIC Pool. If so specified in
the applicable Prospectus Supplement, the portion of a Trust Fund as to which
a REMIC election is not made may be treated as a grantor trust for federal
income tax purposes. See "--Federal Income Tax Consequences for Certificates
as to Which No REMIC Election Is Made". For purposes of this discussion,
unless otherwise specified, the term "Mortgage Loans" will be used to refer
to Mortgage Loans, MBS and Installment Contracts.
STATUS OF REMIC CERTIFICATES
REMIC Certificates held by a domestic building and loan association will
constitute "a regular or residual interest in a REMIC" within the meaning of
Code Section 7701(a)(19)(C)(xi) but only in the same proportion that the
assets of the REMIC Pool would be treated as "loans . . . secured by an
interest in real property which is . . . residential real property" (such as
single family or multifamily properties, but not commercial properties)
within the meaning of Code Section 7701(a)(19)(C)(v) or as other assets
described in Code Section 7701(a)(19)(C), and otherwise will not qualify for
such treatment. REMIC Certificates held by a real estate investment trust
will constitute "real estate assets" within the meaning of Code Section
856(c)(4)(A), and interest on the Regular Certificates and income with
respect to Residual Certificates will be considered "interest on obligations
secured by mortgages on real property or on interests in real property"
within the meaning of Code Section 856(c)(3)(B) in the same proportion that,
for both purposes, the assets of the REMIC Pool would be so treated. If at
all times 95% or more of the assets of the REMIC Pool qualify for each of the
foregoing respective treatments, the REMIC Certificates will qualify for the
corresponding status in their entirety. For purposes of Code Section
856(c)(4)(A), payments of principal and interest on the Mortgage Loans that
are reinvested pending distribution to holders of REMIC Certificates qualify
for such treatment. Where two REMIC Pools are a part of a tiered
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structure they will be treated as one REMIC for purposes of the tests
described above respecting asset ownership of more or less than 95%. In
addition, if the assets of the REMIC include Buy-Down Mortgage Loans, it is
possible that the percentage of such assets constituting "qualifying real
property loans" or "loans . . . secured by an interest in real property" for
purposes of Code Section 7701(a)(19)(C)(v), respectively, may be required to
be reduced by the amount of the related Buy-Down Funds. Regular Certificates
will represent "qualified mortgages," within the meaning of Code Section
860G(a)(3), for other REMICs and "permitted assets," within the meaning of
Code Section 860L(c), for financial asset securitization investment trusts.
REMIC Certificates held by a regulated investment company will not constitute
"Government securities" within the meaning of Code Section 851(b)(4)(A)(i).
REMIC Certificates held by certain financial institutions will constitute an
"evidence of indebtedness" within the meaning of Code Section 582(c)(1). The
Small Business Job Protection Act of 1996 (the "SBJPA of 1996") repealed the
reserve method for bad debts of domestic building and loan associations and
mutual savings banks, and thus has eliminated the asset category of
"qualifying real property loans" in former Code Section 593(d) for taxable
years beginning after December 31, 1995. The requirement in the SBJPA of 1996
that such institutions must "recapture" a portion of their existing bad debt
reserves is suspended if a certain portion of their assets are maintained in
"residential loans" under Code Section 7701(a)(19)(C)(v), but only if such
loans were made to acquire, construct or improve the related real property
and not for the purpose of refinancing. However, no effort will be made to
identify the portion of the Mortgage Loans of any Series meeting this
requirement, and no representation is made in this regard.
QUALIFICATION AS A REMIC
In order for the REMIC Pool to qualify as a REMIC, there must be ongoing
compliance on the part of the REMIC Pool with the requirements set forth in
the Code. The REMIC Pool must fulfill an asset test, which requires that no
more than a de minimis portion of the assets of the REMIC Pool, as of the
close of the third calendar month beginning after the "Startup Day" (which
for purposes of this discussion is the date of issuance of the REMIC
Certificates) and at all times thereafter, may consist of assets other than
"qualified mortgages" and "permitted investments". The REMIC Regulations
provide a safe harbor pursuant to which the de minimis requirement is met if
at all times the aggregate adjusted basis of the nonqualified assets is less
than 1% of the aggregate adjusted basis of all the REMIC Pool's assets. An
entity that fails to meet the safe harbor may nevertheless demonstrate that
it holds no more than a de minimis amount of nonqualified assets. A REMIC
also must provide "reasonable arrangements" to prevent its residual interest
from being held by "disqualified organizations" and must furnish applicable
tax information to transferors or agents that violate this requirement. See
"Taxation of Residual Certificates -- Tax-Related Restrictions on Transfer of
Residual Certificates -- Disqualified Organizations".
A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC Pool on
the Startup Day or is purchased by the REMIC Pool within a three-month period
thereafter pursuant to a fixed price contract in effect on the Startup Day.
Qualified mortgages include whole mortgage loans, such as the Mortgage Loans,
certificates of beneficial interest in a grantor trust that holds mortgage
loans, such as the Mortgage Certificates, regular interests in another REMIC,
such as Mortgage Certificates in a trust as to which a REMIC election has
been made, loans secured by timeshare interests and loans secured by shares
held by a tenant stockholder in a cooperative housing corporation, provided,
in general, (i) the fair market value of the real property security
(including buildings and structural components thereof) is at least 80% of
the principal balance of the related Mortgage Loan or mortgage loan
underlying the Mortgage Certificate either at origination or as of the
Startup Day (an original loan-to-value ratio of not more than 125% with
respect to the real property security) or (ii) substantially all the proceeds
of the Mortgage Loan or the underlying mortgage loan were used to acquire,
improve or protect an interest in real property that, at the origination
date, was the only security for the Mortgage Loan or underlying mortgage
loan. If the Mortgage Loan has been substantially modified other than in
connection with a default or reasonably foreseeable default, it must meet the
loan-to-value test in (i) of the preceding sentence as of the date of the
last such modification. A qualified mortgage includes a qualified replacement
mortgage, which is any property that would have been treated as a qualified
mortgage if it were transferred to the REMIC Pool on the Startup Day and that
is received either (i) in exchange for any qualified mortgage within a
three-month period thereafter or (ii) in exchange for a "defective
obligation" within a two-year period thereafter. A "defective obligation"
includes (i) a mortgage in default or as to which default is reasonably
foreseeable, (ii) a mortgage as to which a customary representation or
warranty made at the time of transfer to the REMIC Pool has been breached,
(iii) a mortgage that was fraudulently procured by the mortgagor, and (iv) a
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mortgage that was not in fact principally secured by real property (but only
if such mortgage is disposed of within 90 days of discovery). A Mortgage Loan
that is "defective" as described in clause (iv) that is not sold or, if
within two years of the Startup Day, exchanged, within 90 days of discovery,
ceases to be a qualified mortgage after such 90-day period.
The REMIC Regulations provide that obligations secured by interests in
manufactured housing which qualify as "single family residences" within the
meaning of Code Section 25(e)(10) may be treated as "qualified mortgages" of
a REMIC. Under Code Section 25(e)(10), the term "single family residence"
includes any manufactured home which has a minimum of 400 square feet of
living space and a minimum width in excess of 102 inches and which is of a
kind customarily used at a fixed location. With respect to each series with
respect to which Contracts are included in a REMIC Pool, the Depositor will
represent and warrant that each of the manufactured homes securing the
Contracts meets this definition of "single family residence".
Permitted investments include cash flow investments, qualified reserve
assets, and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding 13
months, until the next scheduled distribution to holders of interests in the
REMIC Pool. A qualified reserve asset is any intangible property held for
investment that is part of any reasonably required reserve maintained by the
REMIC Pool to provide for payments of expenses of the REMIC Pool or amounts
due on the regular or residual interests in the event of defaults (including
delinquencies) on the qualified mortgages, lower than expected reinvestment
returns, prepayment interest shortfalls and certain other contingencies. The
reserve fund will be disqualified if more than 30% of the gross income from
the assets in such fund for the year is derived from the sale or other
disposition of property held for less than three months, unless required to
prevent a default on the regular interests caused by a default on one or more
qualified mortgages. A reserve fund must be reduced "promptly and
appropriately" as payments on the Mortgage Loans are received. Foreclosure
property is real property acquired by the REMIC Pool in connection with the
default or imminent default of a qualified mortgage and generally not held
beyond the close of the third calendar year following the year in which such
property is acquired with an extension that may be granted by the Internal
Revenue Service (the "Service").
In addition to the foregoing requirements, the various interests in a
REMIC Pool also must meet certain requirements. All of the interests in a
REMIC Pool must be either of the following: (i) one or more classes of
regular interests or (ii) a single class of residual interests on which
distributions, if any, are made pro rata. A regular interest is an interest
in a REMIC Pool that is issued on the Startup Day with fixed terms, is
designated as a regular interest, and unconditionally entitles the holder to
receive a specified principal amount (or other similar amount), and provides
that interest payments (or other similar amounts), if any, at or before
maturity either are payable based on a fixed rate or a qualified variable
rate, or consist of a specified, nonvarying portion of the interest payments
on qualified mortgages. Such a specified portion may consist of a fixed
number of basis points, a fixed percentage of the total interest, or a fixed
or qualified variable or inverse variable rate on some or all of the
qualified mortgages minus a different fixed or qualified variable rate. The
specified principal amount of a regular interest that provides for interest
payments consisting of a specified, nonvarying portion of interest payments
on qualified mortgages may be zero. A residual interest is an interest in a
REMIC Pool other than a regular interest that is issued on the Startup Day
and that is designated as a residual interest. An interest in a REMIC Pool
may be treated as a regular interest even if payments of principal with
respect to such interest are subordinated to payments on other regular
interests or the residual interest in the REMIC Pool, and are dependent on
the absence of defaults or delinquencies on qualified mortgages or permitted
investments, lower than reasonably expected returns on permitted investments,
unanticipated expenses incurred by the REMIC Pool or prepayment interest
shortfalls. Accordingly, the Regular Certificates of a series will constitute
one or more classes of regular interests, and the Residual Certificates with
respect to that series will constitute a single class of residual interests
on which distributions are made pro rata.
If an entity, such as the REMIC Pool, fails to comply with one or more of
the ongoing requirements of the Code for REMIC status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for
such year and thereafter. In this event, an entity with multiple classes of
ownership interests may be treated as a separate association taxable as a
corporation under Treasury regulations, and the Regular Certificates may be
treated as equity interests therein. The Code, however, authorizes the
Treasury Department to issue regulations that address situations where
failure to meet one or more of the requirements for REMIC status occurs
inadvertently and in good faith, and disqualification of the REMIC Pool would
occur absent regulatory relief. Investors should be aware, however, that the
Conference Committee Report to the Tax Reform Act of 1986 (the "1986 Act")
indicates that the relief may be accompanied by sanctions, such as the
imposition of a corporate tax on all or a portion of the REMIC Pool's income
for the period of time in which the requirements for REMIC status are not
satisfied.
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TAXATION OF REGULAR CERTIFICATES
General
In general, interest, original issue discount and market discount on a
Regular Certificate will be treated as ordinary income to a holder of the
Regular Certificate (the "Regular Certificateholder") as they accrue, and
principal payments on a Regular Certificate will be treated as a return of
capital to the extent of the Regular Certificateholder's basis in the Regular
Certificate allocable thereto. Regular Certificateholders must use the
accrual method of accounting with regard to Regular Certificates, regardless
of the method of accounting otherwise used by such Regular
Certificateholders.
ORIGINAL ISSUE DISCOUNT
Accrual Certificates will be, and other Classes of Regular Certificates
may be, issued with "original issue discount" within the meaning of Code
Section 1273(a). Holders of any Class of Regular Certificates having original
issue discount generally must include original issue discount in ordinary
income for federal income tax purposes as it accrues, in accordance with the
constant yield method that takes into account the compounding of interest, in
advance of receipt of the cash attributable to such income. The following
discussion is based in part on temporary and final Treasury regulations
issued on February 2, 1994 (the "OID Regulations"), as amended on June 14,
1996, under Code Sections 1271 through 1273 and 1275 and in part on the
provisions of the 1986 Act. Regular Certificateholders should be aware,
however, that the OID Regulations and the Proposed OID Regulations do not
adequately address certain issues relevant to prepayable securities, such as
the Regular Certificates. To the extent such issues are not addressed in such
regulations, the Depositor intends to apply the methodology described in the
Conference Committee Report to the 1986 Act. No assurance can be provided
that the Service will not take a different position as to those matters not
currently addressed by the OID Regulations. Moreover, the OID Regulations
include an anti-abuse rule allowing the Service to apply or depart from the
OID Regulations where necessary or appropriate to ensure a reasonable tax
result in light of the applicable statutory provisions. A tax result will not
be considered unreasonable under the anti-abuse rule in the absence of a
substantial effect on the present value of a taxpayer's tax liability.
Investors are advised to consult their own tax advisors as to the discussion
herein and the appropriate method for reporting interest and original issue
discount with respect to the Regular Certificates.
Each Regular Certificate (except to the extent described below with
respect to a Regular Certificate on which principal is distributed by random
lot ("Random Lot Certificates")) will be treated as a single installment
obligation for purposes of determining the original issue discount includible
in a Regular Certificateholder's income. The total amount of original issue
discount on a Regular Certificate is the excess of the "stated redemption
price at maturity" of the Regular Certificate over its "issue price". The
issue price of a Class of Regular Certificates offered pursuant to this
Prospectus generally is the first price at which a substantial amount of
Regular Certificates of that Class is sold to the public (excluding bond
houses, brokers and underwriters). Although unclear under the OID
Regulations, the Depositor intends to treat the issue price of a Class as to
which there is no substantial sale as of the issue date or that is retained
by the Depositor as the fair market value of that Class as of the issue date.
The issue price of a Regular Certificate also includes the amount paid by an
initial Regular Certificateholder for accrued interest that relates to a
period prior to the issue date of the Regular Certificate, unless the Regular
Certificateholder elects on its federal income tax return to exclude such
amount from the issue price and to recover it on the first Distribution Date.
The stated redemption price at maturity of a Regular Certificate always
includes the original principal amount of the Regular Certificate, but
generally will not include distributions of stated interest if such interest
distributions constitute "qualified stated interest". Under the OID
Regulations, qualified stated interest generally means interest payable at a
single fixed rate or a qualified variable rate (as described below) provided
that such interest payments are unconditionally payable at intervals of one
year or less during the entire term of the Regular Certificate. Distributions
of interest on an Accrual Certificate, or on other Regular Certificates with
respect to which deferred interest will accrue, will not constitute qualified
stated interest, in which case the stated redemption price at maturity of
such Regular Certificates includes all distributions of interest as well as
principal thereon. Likewise, the Depositor intends to treat an "interest
only" class, or a class on which interest is substantially disproportionate
to its principal amount (a so-called "super-premium" class) as having no
qualified stated interest. Where the interval between the issue date and the
first Distribution Date on a Regular Certificate is shorter than the interval
between subsequent Distribution Dates, the interest attributable to the
additional days will be included in the stated redemption price at maturity.
Under a de minimis rule, original issue discount on a Regular Certificate
will be considered to be zero if such original issue discount is less than
0.25% of the stated redemption price at maturity of the Regular Certificate
multiplied by the
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weighted average maturity of the Regular Certificate. For this purpose, the
weighted average maturity of the Regular Certificate is computed as the sum
of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution is
scheduled to be made by a fraction, the numerator of which is the amount of
each distribution included in the stated redemption price at maturity of the
Regular Certificate and the denominator of which is the stated redemption
price at maturity of the Regular Certificate. The Conference Committee Report
to the 1986 Act provides that the schedule of such distributions should be
determined in accordance with the assumed rate of prepayment of the Mortgage
Loans (the "Prepayment Assumption") and the anticipated reinvestment rate, if
any, relating to the Regular Certificates. The Prepayment Assumption with
respect to a Series of Regular Certificates will be set forth in the related
Prospectus Supplement. Holders generally must report de minimis OID pro rata
as principal payments are received, and such income will be capital gain if
the Regular Certificate is held as a capital asset. However, under the OID
Regulations, Regular Certificateholders may elect to accrue all de minimis
original issue discount as well as market discount and market premium under
the constant yield method. See "Election to Treat All Interest Under the
Constant Yield Method".
A Regular Certificateholder generally must include in gross income for any
taxable year the sum of the "daily portions," as defined below, of the
original issue discount on the Regular Certificate accrued during an accrual
period for each day on which it holds the Regular Certificate, including the
date of purchase but excluding the date of disposition. The Depositor will
treat the monthly period ending on the day before each Distribution Date as
the accrual period. With respect to each Regular Certificate, a calculation
will be made of the original issue discount that accrues during each
successive full accrual period (or shorter period from the date of original
issue) that ends on the day before the related Distribution Date on the
Regular Certificate. The Conference Committee Report to the 1986 Act states
that the rate of accrual of original issue discount is intended to be based
on the Prepayment Assumption. Other than as discussed below with respect to a
Random Lot Certificate, the original issue discount accruing in a full
accrual period would be the excess, if any, of (i) the sum of (a) the present
value of all of the remaining distributions to be made on the Regular
Certificate as of the end of that accrual period that are included in the
Regular Certificate's stated redemption price at maturity and (b) the
distributions made on the Regular Certificate during the accrual period that
are included in the Regular Certificate's stated redemption price at
maturity, over (ii) the adjusted issue price of the Regular Certificate at
the beginning of the accrual period. The present value of the remaining
distributions referred to in the preceding sentence is calculated based on
(i) the yield to maturity of the Regular Certificate at the issue date, (ii)
events (including actual prepayments) that have occurred prior to the end of
the accrual period and (iii) the Prepayment Assumption. For these purposes,
the adjusted issue price of a Regular Certificate at the beginning of any
accrual period equals the issue price of the Regular Certificate, increased
by the aggregate amount of original issue discount with respect to the
Regular Certificate that accrued in all prior accrual periods and reduced by
the amount of distributions included in the Regular Certificate's stated
redemption price at maturity that were made on the Regular Certificate in
such prior periods. The original issue discount accruing during any accrual
period (as determined in this paragraph) will then be divided by the number
of days in the period to determine the daily portion of original issue
discount for each day in the period. With respect to an initial accrual
period shorter than a full accrual period, the daily portions of original
issue discount must be determined according to an appropriate allocation
under any reasonable method.
Under the method described above, the daily portions of original issue
discount required to be included in income by a Regular Certificateholder
generally will increase to take into account prepayments on the Regular
Certificates as a result of prepayments on the Mortgage Loans that exceed the
Prepayment Assumption, and generally will decrease (but not below zero for
any period) if the prepayments are slower than the Prepayment Assumption. An
increase in prepayments on the Mortgage Loans with respect to a Series of
Regular Certificates can result in both a change in the priority of principal
payments with respect to certain Classes of Regular Certificates and either
an increase or decrease in the daily portions of original issue discount with
respect to such Regular Certificates.
In the case of a Random Lot Certificate, the Depositor intends to
determine the yield to maturity of such Certificate based upon the
anticipated payment characteristics of the Class as a whole under the
Prepayment Assumption. In general, the original issue discount accruing on
each Random Lot Certificate in a full accrual period would be its allocable
share of the original issue discount with respect to the entire Class, as
determined in accordance with the preceding paragraph. However, in the case
of a distribution in retirement of the entire unpaid principal balance of any
Random Lot Certificate (or portion of such unpaid principal balance), (a) the
remaining unaccrued original issue discount allocable to such Certificate (or
to such portion) will accrue at the time of such distribution, and (b) the
accrual of original issue discount allocable to each remaining Certificate of
such Class (or the remaining unpaid principal balance of a partially redeemed
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Random Lot Certificate after a distribution of principal has been received)
will be adjusted by reducing the present value of the remaining payments on
such Class and the adjusted issue price of such Class to the extent
attributable to the portion of the unpaid principal balance thereof that was
distributed. The Depositor believes that the foregoing treatment is
consistent with the "pro rata prepayment" rules of the OID Regulations, but
with the rate of accrual of original issue discount determined based on the
Prepayment Assumption for the Class as a whole. Investors are advised to
consult their tax advisors as to this treatment.
ACQUISITION PREMIUM
A purchaser of a Regular Certificate at a price greater than its adjusted
issue price but less than its stated redemption price at maturity will be
required to include in gross income the daily portions of the original issue
discount on the Regular Certificate reduced pro rata by a fraction, the
numerator of which is the excess of its purchase price over such adjusted
issue price and the denominator of which is the excess of the remaining
stated redemption price at maturity over the adjusted issue price.
Alternatively, such a subsequent purchaser may elect to treat all such
acquisition premium under the constant yield method, as described below under
the heading "Election to Treat All Interest Under the Constant Yield Method".
VARIABLE RATE REGULAR CERTIFICATES
Regular Certificates may provide for interest based on a variable rate.
Under the OID Regulations, interest is treated as payable at a variable rate
if, generally, (i) the issue price does not exceed the original principal
balance by more than a specified amount and (ii) the interest compounds or is
payable at least annually at current values of (a) one or more "qualified
floating rates", (b) a single fixed rate and one or more qualified floating
rates, (c) a single "objective rate", or (d) a single fixed rate and a single
objective rate that is a "qualified inverse floating rate". A floating rate
is a qualified floating rate if variations in the rate can reasonably be
expected to measure contemporaneous variations in the cost of newly borrowed
funds, where such rate is subject to a fixed multiple that is greater than
0.65 but not more than 1.35. Such rate may also be increased or decreased by
a fixed spread or subject to a fixed cap or floor, or a cap or floor that is
not reasonably expected as of the issue date to affect the yield of the
instrument significantly. An objective rate is any rate (other than a
qualified floating rate) that is determined using a single fixed formula and
that is based on objective financial or economic information, provided that
such information is not (i) within the control of the issuer or a related
party or (ii) unique to the circumstances of the issuer or a related party. A
qualified inverse floating rate is a rate equal to a fixed rate minus a
qualified floating rate that inversely reflects contemporaneous variations in
the cost of newly borrowed funds; an inverse floating rate that is not a
qualified inverse floating rate may nevertheless be an objective rate. A
Class of Regular Certificates may be issued under this Prospectus that does
not have a variable rate under the foregoing rules, for example, a Class that
bears different rates at different times during the period it is outstanding
such that it is considered significantly "front-loaded" or "back-loaded"
within the meaning of the OID Regulations. It is possible that such a Class
may be considered to bear "contingent interest" within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of
contingent interest rate by their terms not applicable to Regular
Certificates. However, if final regulations dealing with contingent interest
with respect to Regular Certificates apply the same principles as the OID
Regulations, such regulations may lead to different timing of income
inclusion that would be the case under the OID Regulations. Furthermore,
application of such principles could lead to the characterization of gain on
the sale of contingent interest Regular Certificates as ordinary income.
Investors should consult their tax advisors regarding the appropriate
treatment of any Regular Certificate that does not pay interest at a fixed
rate or variable rate as described in this paragraph.
Under the REMIC Regulations, a Regular Certificate (i) bearing a rate that
qualifies as a variable rate under the OID Regulations that is tied to
current values of a variable rate (or the highest, lowest or average of two
or more variable rates, including a rate based on the average cost of funds
of one or more financial institutions), or a positive or negative multiple of
such a rate (plus or minus a specified number of basis points), or that
represents a weighted average of rates on some or all of the Mortgage Loans,
including such a rate that is subject to one or more caps or floors, or (ii)
bearing one or more such variable rates for one or more periods or one or
more fixed rates for one or more periods, and a different variable rate or
fixed rate for other periods qualifies as a regular interest in a REMIC.
Accordingly, unless otherwise indicated in the applicable Prospectus
Supplement, the Depositor intends to treat Regular Certificates that qualify
as regular interests under this rule in the same manner as obligations
bearing a variable rate for original issue discount reporting purposes.
The amount of original issue discount with respect to a Regular
Certificate bearing a variable rate of interest will accrue in the manner
described above under "Original Issue Discount" with the yield to maturity
and future payments on
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such Regular Certificate generally to be determined by assuming that interest
will be payable for the life of the Regular Certificate based on the initial
rate (or, if different, the value of the applicable variable rate as of the
pricing date) for the relevant Class. Unless otherwise specified in the
applicable Prospectus Supplement, the Depositor intends to treat such
variable interest as qualified stated interest, other than variable interest
on an interest-only or super-premium Class, which will be treated as
non-qualified stated interest includible in the stated redemption price at
maturity. Ordinary income reportable for any period will be adjusted based on
subsequent changes in the applicable interest rate index.
Although unclear under the OID Regulations, the Depositor intends to treat
Regular Certificates bearing an interest rate that is a weighted average of
the net interest rates on Mortgage Loans or Mortgage Certificates having
fixed or adjustable rates, as having qualified stated interest. In the case
of adjustable rate Mortgage Loans, the applicable index used to compute
interest on the Mortgage Loans in effect on the pricing date (or possibly the
issue date) will be deemed to be in effect beginning with the period in which
the first weighted average adjustment date occurring after the issue date
occurs. Adjustments will be made in each accrual period either increasing or
decreasing the amount or ordinary income reportable to reflect the actual
Pass-Through Rate on the Regular Certificates.
DEFERRED INTEREST
Under the OID Regulations, all interest on a Regular Certificate as to
which there may be Deferred Interest is includible in the stated redemption
price at maturity thereof. Accordingly, any Deferred Interest that accrues
with respect to a Class of Regular Certificates may constitute income to the
holders of such Regular Certificates prior to the time distributions of cash
with respect to such Deferred Interest are made.
MARKET DISCOUNT
A purchaser of a Regular Certificate also may be subject to the market
discount rules of Code Section 1276 through 1278. Under these Code sections
and the principles applied by the OID Regulations in the context of original
issue discount, "market discount" is the amount by which the purchaser's
original basis in the Regular Certificate (i) is exceeded by the then-current
principal amount of the Regular Certificate or (ii) in the case of a Regular
Certificate having original issue discount, is exceeded by the adjusted issue
price of such Regular Certificate at the time of purchase. Such purchaser
generally will be required to recognize ordinary income to the extent of
accrued market discount on such Regular Certificate as distributions
includible in the stated redemption price at maturity thereof are received,
in an amount not exceeding any such distribution. Such market discount would
accrue in a manner to be provided in Treasury regulations and should take
into account the Prepayment Assumption. The Conference Committee Report to
the 1986 Act provides that until such regulations are issued, such market
discount would accrue either (i) on the basis of a constant interest rate or
(ii) in the ratio of stated interest allocable to the relevant period to the
sum of the interest for such period plus the remaining interest as of the end
of such period, or in the case of a Regular Certificate issued with original
issue discount, in the ratio of original issue discount accrued for the
relevant period to the sum of the original issue discount accrued for such
period plus the remaining original issue discount as of the end of such
period. Such purchaser also generally will be required to treat a portion of
any gain on a sale or exchange of the Regular Certificate as ordinary income
to the extent of the market discount accrued to the date of disposition under
one of the foregoing methods, less any accrued market discount previously
reported as ordinary income as partial distributions in reduction of the
stated redemption price at maturity were received. Such purchaser will be
required to defer deduction of a portion of the excess of the interest paid
or accrued on indebtedness incurred to purchase or carry a Regular
Certificate over the interest distributable thereon. The deferred portion of
such interest expense in any taxable year generally will not exceed the
accrued market discount on the Regular Certificate for such year. Any such
deferred interest expense is, in general, allowed as a deduction not later
than the year in which the related market discount income is recognized or
the Regular Certificate is disposed of. As an alternative to the inclusion of
market discount in income on the foregoing basis, the Regular
Certificateholder may elect to include market discount in income currently as
it accrues on all market discount instruments acquired by such Regular
Certificateholder in that taxable year or thereafter, in which case the
interest deferral rule will not apply. See "Election to Treat All Interest
Under the Constant Yield Method" below regarding an alternative manner in
which such election may be deemed to be made.
Market discount with respect to a Regular Certificate will be considered
to be zero if such market discount is less than 0.25% of the remaining stated
redemption price at maturity of such Regular Certificate multiplied by the
weighted average maturity of the Regular Certificate (determined as described
above in the third paragraph under "Original Issue Discount") remaining after
the date of purchase. It appears that de minimis market discount would be
reported in a
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manner similar to de minimis original issue discount. See "Original Issue
Discount" above. Treasury regulations implementing the market discount rules
have not yet been issued, and therefore investors should consult their own
tax advisors regarding the application of these rules. Investors should also
consult Revenue Procedure 92-67 concerning the elections to include market
discount in income currently and to accrue market discount on the basis of
the constant yield method.
PREMIUM
A Regular Certificate purchased at a cost greater than its remaining
stated redemption price at maturity generally is considered to be purchased
at a premium. If the Regular Certificateholder holds such Regular Certificate
as a "capital asset" within the meaning of Code Section 1221, the Regular
Certificateholder may elect under Code Section 171 to amortize such premium
under the constant yield method. Final Treasury Regulations issued under Code
Section 171 do not by their terms apply to prepayable debt instruments such
as the Regular Certificates. However, the Conference Committee Report to the
1986 Act indicates a Congressional intent that the same rules that will apply
to the accrual of market discount on installment obligations will also apply
to amortizing bond premium under Code Section 171 on installment obligations
such as the Regular Certificates, although it is unclear whether the
alternatives to the constant yield method described above under "Market
Discount" are available. Amortizable bond premium will be treated as an
offset to interest income on a Regular Certificate rather than as a separate
deduction item. See "Election to Treat All Interest Under the Constant Yield
Method" below regarding an alternative manner in which the Code Section 171
election may be deemed to be made.
ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD METHOD
A holder of a debt instrument such as a Regular Certificate may elect to
treat all interest that accrues on the instrument using the constant yield
method, with none of the interest being treated as qualified stated interest.
For purposes of applying the constant yield method to a debt instrument
subject to such an election, (i) "interest" includes stated interest,
original issue discount, de minimis original issue discount, market discount
and de minimis market discount, as adjusted by any amortizable bond premium
or acquisition premium and (ii) the debt instrument is treated as if the
instrument were issued on the holder's acquisition date in the amount of the
holder's adjusted basis immediately after acquisition. It is unclear whether,
for this purpose, the initial Prepayment Assumption would continue to apply
or if a new prepayment assumption as of the date of the holder's acquisition
would apply. A holder generally may make such an election on an instrument by
instrument basis or for a class or group of debt instruments. However, if the
holder makes such an election with respect to a debt instrument with
amortizable bond premium or with market discount, the holder is deemed to
have made elections to amortize bond premium or to report market discount
income currently as it accrues under the constant yield method, respectively,
for all debt instruments acquired by the holder in the same taxable year or
thereafter. The election is made on the holder's federal income tax return
for the year in which the debt instrument is acquired and is irrevocable
except with the approval of the Service. Investors should consult their own
tax advisors regarding the advisability of making such an election.
SALE OR EXCHANGE OF REGULAR CERTIFICATES
If a Regular Certificateholder sells or exchanges a Regular Certificate,
the Regular Certificateholder will recognize gain or loss equal to the
difference, if any, between the amount received and its adjusted basis in the
Regular Certificate. The adjusted basis of a Regular Certificate generally
will equal the cost of the Regular Certificate to the seller, increased by
any original issue discount or market discount previously included in the
seller's gross income with respect to the Regular Certificate and reduced by
amounts included in the stated redemption price at maturity of the Regular
Certificate that were previously received by the seller, by any amortized
premium and by any recognized losses.
Except as described above with respect to market discount, and except as
provided in this paragraph, any gain or loss on the sale or exchange of a
Regular Certificate realized by an investor who holds the Regular Certificate
as a capital asset will be capital gain or loss and will be long-term,
mid-term or short-term depending on whether the Regular Certificate has been
held for the applicable capital gain holding period. Such gain will be
treated as ordinary income (i) if a Regular Certificate is held as part of a
"conversion transaction" as defined in Code Section 1258(c), up to the amount
of interest that would have accrued on the Regular Certificateholder's net
investment in the conversion transaction at 120% of the appropriate
applicable Federal rate under Code Section 1274(d) in effect at the time the
taxpayer entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior distribution of property that
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was held as a part of such transaction, (ii) in the case of a non-corporate
taxpayer, to the extent such taxpayer has made an election under Code Section
163(d)(4) to have net capital gains taxed as investment income at ordinary
rates, or (iii) to the extent that such gain does not exceed the excess, if
any, of (a) the amount that would have been includible in the gross income of
the holder if its yield on such Regular Certificate were 110% of the
applicable Federal rate as of the date of purchase, over (b) the amount of
income actually includible in the gross income of such holder with respect to
the Regular Certificate. In addition, gain or loss recognized from the sale
of a Regular Certificate by certain banks or thrift institutions will be
treated as ordinary income or loss pursuant to Code Section 582(c).
Generally, short-term capital gains of certain non-corporate taxpayers are
subject to the same tax rate as the ordinary income of such taxpayers (39.6%)
for property held for not more than one year; mid-term capital gains of such
taxpayers are subject to a maximum tax rate of 28% for property held for more
than one year but not more than 18 months; and long-term capital gains of
such taxpayers are subject to a maximum tax rate of 20% for property held for
more than 18 months. The maximum tax rate for corporations is the same with
respect to both ordinary income and capital gains.
TREATMENT OF LOSSES
Holders of Regular Certificates will be required to report income with
respect to Regular Certificates on the accrual method of accounting, without
giving effect to delays or reductions in distributions attributable to
defaults or delinquencies on the Mortgage Loans allocable to a particular
class of Regular Certificates, except to the extent it can be established
that such losses are uncollectible. Accordingly, the holder of a Regular
Certificate may have income, or may incur a diminution in cash flow as a
result of a default or delinquency, but may not be able to take a deduction
(subject to the discussion below) for the corresponding loss until a
subsequent taxable year. In this regard, investors are cautioned that while
they may generally cease to accrue interest income if it reasonably appears
that the interest will be uncollectible, the Internal Revenue Service may
take the position that original issue discount must continue to be accrued in
spite of its uncollectibility until the debt instrument is disposed of in a
taxable transaction or becomes worthless in accordance with the rules of Code
Section 166. To the extent the rules of Code Section 166 regarding bad debts
are applicable, it appears that holders of Regular Certificates that are
corporations or that otherwise hold the Regular Certificates in connection
with a trade or business should in general be allowed to deduct as an
ordinary loss any such loss sustained during the taxable year on account of
any such Regular Certificates becoming wholly or partially worthless, and
that, in general, holders of Regular Certificates that are not corporations
and do not hold the Regular Certificates in connection with a trade or
business will be allowed to deduct as a short-term capital loss any loss with
respect to principal sustained during the taxable year on account of a
portion of any class or subclass of such Regular Certificates becoming wholly
worthless. Although the matter is not free from doubt, non-corporate holders
of Regular Certificates should be allowed a bad debt deduction at such time
as the principal balance of any class or subclass of such Regular
Certificates is reduced to reflect losses resulting from any liquidated
Mortgage Loans. The Service, however, could take the position that
non-corporate holders will be allowed a bad debt deduction to reflect such
losses only after all Mortgage Loans remaining in the Trust Fund have been
liquidated or such class of Regular Certificates has been otherwise retired.
The Service could also assert that losses on the Regular Certificates are
deductible based on some other method that may defer such deductions for all
holders, such as reducing future cash flow for purposes of computing original
issue discount. This may have the effect of creating "negative" original
issue discount which would be deductible only against future positive
original issue discount or otherwise upon termination of the Class. Holders
of Regular Certificates are urged to consult their own tax advisors regarding
the appropriate timing, amount and character of any loss sustained with
respect to such Regular Certificates. While losses attributable to interest
previously reported as income should be deductible as ordinary losses by both
corporate and non-corporate holders the Service may take the position that
losses attributable to accrued original issue discount may only be deducted
as capital losses in the case of non-corporate holders who do not hold
Regular Certificates in connection with a trade or business. Special loss
rules are applicable to banks and thrift institutions, including rules
regarding reserves for bad debts. Such taxpayers are advised to consult their
tax advisors regarding the treatment of losses on Regular Certificates.
TAXATION OF RESIDUAL CERTIFICATES
TAXATION OF REMIC INCOME
Generally, the "daily portions" of REMIC taxable income or net loss will
be includible as ordinary income or loss in determining the federal taxable
income of holders of Residual Certificates ("Residual Certificateholders"),
and will not be taxed separately to the REMIC Pool. The daily portions of
REMIC taxable income or net loss of a Residual
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Certificateholder are determined by allocating the REMIC Pool's taxable
income or net loss for each calendar quarter ratably to each day in such
quarter and by allocating such daily portion among the Residual
Certificateholders in proportion to their respective holdings of Residual
Certificates in the REMIC Pool on such day. REMIC taxable income is generally
determined in the same manner as the taxable income of an individual using
the accrual method of accounting, except that (i) the limitations on
deductibility of investment interest expense and expenses for the production
of income do not apply, (ii) all bad loans will be deductible as business bad
debts and (iii) the limitation on the deductibility of interest and expenses
related to tax-exempt income will apply. The REMIC Pool's gross income,
includes interest, original issue discount income and market discount income,
if any, on the Mortgage Loans, reduced by amortization of any premium on the
Mortgage Loans plus income on reinvestment of cash flows and reserve assets,
plus any cancellation of indebtedness income upon allocation of realized
losses to the Regular Certificates. The REMIC Pool's deductions include
interest and original issue discount expense on the Regular Certificates,
servicing fees on the Mortgage Loans, other administrative expenses of the
REMIC Pool and realized losses on the Mortgage Loans. The requirement that
Residual Certificateholders report their pro rata share of taxable income or
net loss of the REMIC Pool will continue until there are no Certificates of
any class of the related series outstanding.
The taxable income recognized by a Residual Certificateholder in any
taxable year will be affected by, among other factors, the relationship
between the timing of recognition of interest and original issue discount or
market discount income or amortization of premium with respect to the
Mortgage Loans, on the one hand, and the timing of deductions for interest
(including original issue discount) or income from amortization of issue
premium on the Regular Certificates, on the other hand. In the event that an
interest in the Mortgage Loans is acquired by the REMIC Pool at a discount,
and one or more of such Mortgage Loans is prepaid, the Residual
Certificateholder may recognize taxable income without being entitled to
receive a corresponding amount of cash because (i) the prepayment may be used
in whole or in part to make distributions in reduction of principal on the
Regular Certificates and (ii) the discount on the Mortgage Loans which is
includible in income may exceed the deduction allowed upon such distributions
on those Regular Certificates on account of any unaccrued original issue
discount relating to those Regular Certificates. When there is more than one
class of Regular Certificates that distribute principal sequentially, this
mismatching of income and deductions is particularly likely to occur in the
early years following issuance of the Regular Certificates when distributions
in reduction of principal are being made in respect of earlier classes of
Regular Certificates to the extent that such classes are not issued with
substantial discount or are issued at a premium. If taxable income
attributable to such a mismatching is realized, in general, losses would be
allowed in later years as distributions on the later classes of Regular
Certificates are made. Taxable income may also be greater in earlier years
than in later years as a result of the fact that interest expense deductions,
expressed as a percentage of the outstanding principal amount of such a
series of Regular Certificates, may increase over time as distributions in
reduction of principal are made on the lower yielding classes of Regular
Certificates, whereas to the extent that the REMIC Pool includes fixed rate
Mortgage Loans, interest income with respect to any given Mortgage Loan will
remain constant over time as a percentage of the outstanding principal amount
of that loan. Consequently, Residual Certificateholders must have sufficient
other sources of cash to pay any federal, state or local income taxes due as
a result of such mismatching or unrelated deductions against which to offset
such income, subject to the discussion of "excess inclusions" below under
"Limitations on Offset or Exemption of REMIC Income". The timing of such
mismatching of income and deductions described in this paragraph, if present
with respect to a series of Certificates, may have a significant adverse
effect upon the Residual Certificateholder's after-tax rate of return. In
addition, a Residual Certificateholder's taxable income during certain
periods may exceed the income reflected by such Residual Certificateholder
for such periods in accordance with generally accepted accounting principles.
Investors should consult their own accountants concerning the accounting
treatment of their investment in Residual Certificates.
BASIS AND LOSSES
The amount of any net loss of the REMIC Pool that may be taken into
account by the Residual Certificateholder is limited to the adjusted basis of
the Residual Certificate as of the close of the quarter (or time of
disposition of the Residual Certificate if earlier), determined without
taking into account the net loss for the quarter. The initial adjusted basis
of a purchaser of a Residual Certificate is the amount paid for such Residual
Certificate. Such adjusted basis will be increased by the amount of taxable
income of the REMIC Pool reportable by the Residual Certificateholder and
will be decreased (but not below zero), first, by a cash distribution from
the REMIC Pool and, second, by the amount of loss of the REMIC Pool
reportable by the Residual Certificateholder. Any loss that is disallowed on
account of this limitation may be carried over indefinitely with respect to
the Residual Certificateholder as to whom such loss was disallowed and may be
used by such Residual Certificateholder only to offset any income generated
by the same REMIC Pool.
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A Residual Certificateholder will not be permitted to amortize directly
the cost of its Residual Certificate as an offset to its share of the taxable
income of the related REMIC Pool. However, that taxable income will not
include cash received by the REMIC Pool that represents a recovery of the
REMIC Pool's basis in its assets. Such recovery of basis by the REMIC Pool
will have the effect of amortization of the issue price of the Residual
Certificates over their life. However, in view of the possible acceleration
of the income of Residual Certificateholders described above under "Taxation
of REMIC Income", the period of time over which such issue price is
effectively amortized may be longer than the economic life of the Residual
Certificates.
A Residual Certificate may have a negative value if the net present value
of anticipated tax liabilities exceeds the present value of anticipated cash
flows. The REMIC Regulations appear to treat the issue price of such a
residual interest as zero rather than such negative amount for purposes of
determining the REMIC Pool's basis in its assets. The preamble to the REMIC
Regulations states that the Service may provide future guidance on the proper
tax treatment of payments made by a transferor of such a residual interest to
induce the transferee to acquire the interest, and Residual
Certificateholders should consult their own tax advisors in this regard.
Further, to the extent that the initial adjusted basis of a Residual
Certificateholder (other than an original holder) in the Residual Certificate
is greater that the corresponding portion of the REMIC Pool's basis in the
Mortgage Loans, the Residual Certificateholder will not recover a portion of
such basis until termination of the REMIC Pool unless future Treasury
regulations provide for periodic adjustments to the REMIC income otherwise
reportable by such holder. The REMIC Regulations currently in effect do not
so provide. See "Treatment of Certain Items of REMIC Income and Expense --
Market Discount" below regarding the basis of Mortgage Loans to the REMIC
Pool and "Sale or Exchange of a Residual Certificate" below regarding
possible treatment of a loss upon termination of the REMIC Pool as a capital
loss.
TREATMENT OF CERTAIN ITEMS OF REMIC INCOME AND EXPENSE
Although the Depositor intends to compute REMIC income and expense in
accordance with the Code and applicable regulations, the authorities
regarding the determination of specific items of income and expense are
subject to differing interpretations. The Depositor makes no representation
as to the specific method that it will use for reporting income with respect
to the Mortgage Loans and expenses with respect to the Regular Certificates,
and different methods could result in different timing of reporting of
taxable income or net loss to Residual Certificateholders or differences in
capital gain versus ordinary income.
Original Issue Discount. Generally, the REMIC Pool's deductions for
original issue discount will be determined in the same manner as original
issue discount income on Regular Certificates as described above under
"Taxation of Regular Certificates -- Original Issue Discount" and "--Variable
Rate Regular Certificates", without regard to the de minimis rule described
therein, and "--Premium".
Deferred Interest. Any Deferred Interest that accrues with respect to any
adjustable rate Mortgage Loans held by the REMIC Pool will constitute income
to the REMIC Pool and will be treated in a manner similar to the Deferred
Interest that accrues with respect to Regular Certificates as described above
under "Taxation of Regular Certificates -- Deferred Interest".
Market Discount. The REMIC Pool will have market discount income in
respect of Mortgage Loans if, in general, the basis of the REMIC Pool
allocable to such Mortgage Loans is exceeded by their unpaid principal
balances. The REMIC Pool's basis in such Mortgage Loans is generally the fair
market value of the Mortgage Loans immediately after the transfer thereof to
the REMIC Pool. The REMIC Regulations provide that such basis is equal in the
aggregate to the issue prices of all regular and residual interests in the
REMIC Pool (or the fair market value thereof at the Closing Date, in the case
of a retained Class). In respect of Mortgage Loans that have market discount
to which Code Section 1276 applies, the accrued portion of such market
discount would be recognized currently as an item of ordinary income in a
manner similar to original issue discount. Market discount income generally
should accrue in the manner described above under "Taxation of Regular
Certificates -- Market Discount".
Premium. Generally, if the basis of the REMIC Pool in the Mortgage Loans
exceeds the unpaid principal balances thereof, the REMIC Pool will be
considered to have acquired such Mortgage Loans at a premium equal to the
amount of such excess. As stated above, the REMIC Pool's basis in Mortgage
Loans is the fair market value of the Mortgage Loans, based on the aggregate
of the issue prices (or the fair market value of retained Classes) of the
regular and residual interests in the REMIC Pool immediately after the
transfer thereof to the REMIC Pool. In a manner analogous to the
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discussion above under "Taxation of Regular Certificates -- Premium", a REMIC
Pool that holds a Mortgage Loan as a capital asset under Code Section 1221
may elect under Code Section 171 to amortize premium on whole mortgage loans
or mortgage loans underlying MBS that were originated after September 27,
1985 or on Agency Securities, or Private Mortgage-Backed Securities that are
REMIC regular interests under the constant yield method. Amortizable bond
premium will be treated as an offset to interest income on the Mortgage
Loans, rather than as a separate deduction item. To the extent that the
mortgagors with respect to the Mortgage Loans are individuals, Code Section
171 will not be available for premium on Mortgage Loans (including underlying
mortgage loans) originated on or prior to September 27, 1985. Premium with
respect to such Mortgage Loans may be deductible in accordance with a
reasonable method regularly employed by the holder thereof. The allocation of
such premium pro rata among principal payments should be considered a
reasonable method; however, the Service may argue that such premium should be
allocated in a different manner, such as allocating such premium entirely to
the final payment of principal.
LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME
A portion or all of the REMIC taxable income includible in determining the
federal income tax liability of a Residual Certificateholder will be subject
to special treatment. That portion, referred to as the "excess inclusion", is
equal to the excess of REMIC taxable income for the calendar quarter
allocable to a Residual Certificate over the daily accruals for such
quarterly period of (i) 120% of the long-term applicable Federal rate that
would have applied to the Residual Certificate (if it were a debt instrument)
on the Startup Day under Code Section 1274(d), multiplied by (ii) the
adjusted issue price of such Residual Certificate at the beginning of such
quarterly period. For this purpose, the adjusted issue price of a Residual
Certificate at the beginning of a quarter is the issue price of the Residual
Certificate, plus the amount of such daily accruals of REMIC income described
in this paragraph for all prior quarters, decreased by any distributions made
with respect to such Residual Certificate prior to the beginning of such
quarterly period. Accordingly, the portion of the REMIC Pool's taxable income
that will be treated as excess inclusions will be a larger portion of such
income as the adjusted issue price of the Residual Certificates diminishes.
The portion of a Residual Certificateholder's REMIC taxable income
consisting of the excess inclusions generally may not be offset by other
deductions, including net operating loss carryforwards, on such Residual
Certificateholder's return. However, net operating loss carryovers are
determined without regard to excess inclusion income. Further, if the
Residual Certificateholder is an organization subject to the tax on unrelated
business income imposed by Code Section 511, the Residual Certificateholder's
excess inclusions will be treated as unrelated business taxable income of
such Residual Certificateholder for purposes of Code Section 511. In
addition, REMIC taxable income is subject to 30% withholding tax with respect
to certain persons who are not U.S. Persons (as defined below under
"Tax-Related Restrictions on Transfer of Residual Certificates -- Foreign
Investors"), and the portion thereof attributable to excess inclusions is not
eligible for any reduction in the rate of withholding tax (by treaty or
otherwise). See "Taxation of Certain Foreign Investors -- Residual
Certificates" below. Finally, if a real estate investment trust or a
regulated investment company owns a Residual Certificate, a portion
(allocated under Treasury regulations yet to be issued) of dividends paid by
the real estate investment trust or a regulated investment company could not
be offset by net operating losses of its shareholders, would constitute
unrelated business taxable income for tax-exempt shareholders, and would be
ineligible for reduction of withholding to certain persons who are not U.S.
Persons. The SBJPA of 1996 has eliminated the special rule permitting Section
593 institutions ("thrift institutions") to use net operating losses and
other allowable deductions to offset their excess inclusion income from
Residual Certificates that have "significant value" within the meaning of the
REMIC Regulations, effective for taxable years beginning after December 31,
1995, except with respect to Residual Certificates continuously held by
thrift institutions since November 1, 1995.
In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on the alternative minimum taxable income of a
Residual Holder. First, alternative minimum taxable income for a Residual
Holder is determined without regard to the special rule, discussed above,
that taxable income cannot be less than excess inclusions. Second, a Residual
Holder's alternative minimum taxable income for a taxable year cannot be less
than the excess inclusions for the year. Third, the amount of any alternative
minimum tax net operating loss deduction must be computed without regard to
any excess inclusions. These rules are effective for taxable years beginning
after December 31, 1986, unless a Residual Holder elects to have such rules
apply only to taxable years beginning after August 20, 1996.
TAX-RELATED RESTRICTIONS ON TRANSFER OF RESIDUAL CERTIFICATES
Disqualified Organizations. If any legal or beneficial interest in a
Residual Certificate is transferred to a Disqualified Organization (as
defined below), a tax would be imposed in an amount equal to the product of
(i) the present value of the
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total anticipated excess inclusions with respect to such Residual Certificate
for periods after the transfer and (ii) the highest marginal federal income
tax rate applicable to corporations. The REMIC Regulations provide that the
anticipated excess inclusions are based on actual prepayment experience to
the date of the transfer and projected payments based on the Prepayment
Assumption. The present value rate equals the applicable Federal rate under
Code Section 1274(d) as of the date of the transfer for a term ending with
the last calendar quarter in which excess inclusions are expected to accrue.
Such a tax generally would be imposed on the transferor of the Residual
Certificate, except that where such transfer is through an agent (including a
broker, nominee or other middleman) for a Disqualified Organization, the tax
would instead be imposed on such agent. However, a transferor of a Residual
Certificate would in no event be liable for such tax with respect to a
transfer 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 such affidavit
is false. The tax also may be waived by the Treasury Department if the
Disqualified Organization promptly disposes of the residual interest and the
transferor pays income tax at the highest corporate rate on the excess
inclusions for the period the Residual Certificate is actually held by the
Disqualified Organization.
In addition, if a "Pass-Through Entity" (as defined below) has excess
inclusion income with respect to a Residual Certificate during a taxable year
and a Disqualified Organization is the record holder of an equity interest in
such entity, then a tax is imposed on such entity equal to the product of (i)
the amount of excess inclusions on the Residual Certificate that are
allocable to the interest in the Pass-Through Entity during the period such
interest is held by such Disqualified Organization, and (ii) the highest
marginal federal corporate income tax rate. Such tax would be deductible from
the ordinary gross income of the Pass-Through Entity for the taxable year.
The Pass-Through Entity would not be liable for such tax if it has received
an affidavit from such record holder that it is not a Disqualified
Organization or stating such holder's taxpayer identification number and,
during the period such person is the record holder of the Residual
Certificate, the Pass-Through Entity does not have actual knowledge that such
affidavit is false.
For taxable years beginning on or after January 1, 1998, if an "electing
large partnership" holds a Residual Certificate, all interests in the
electing large partnership are treated as held by Disqualified Organizations
for purposes of the tax imposed upon a Pass-Through Entity by Section 860E(c)
of the Code. An exception to this tax, otherwise available to a Pass-Through
Entity that is furnished certain affidavits by record holders of interests in
the entity and that does not know such affidavits are false, is not available
to an electing large partnership.
For these purposes, (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 (provided, that such term does not include an instrumentality if
all of its activities are subject to tax and a majority of its board of
directors is not selected by any such governmental entity), any cooperative
organization furnishing electric energy or providing telephone service to
persons in rural areas as described in Code Section 1381(a)(2)(C), and any
organization (other than a farmers' cooperative described in Code Section
521) that is exempt from taxation under the Code unless such organization is
subject to the tax on unrelated business income imposed by Code Section 511,
(ii) "Pass-Through 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-Through Entity as a nominee for another will, with respect to such
interest, be treated as a Pass-Through Entity and (iii) an "electing large
partnership" means any partnership having more than 100 members during the
preceding tax year (other than certain service partnerships and commodity
pools), which elect to apply simplified reporting provisions under the Code.
The Agreement with respect to a series of Certificates will provide that
no legal or beneficial interest in a Residual Certificate may be transferred
unless (i) the proposed transferee provides to the transferor and the Trustee
an affidavit providing its taxpayer identification number and stating that
such transferee is the beneficial owner of the Residual Certificate, is not a
Disqualified Organization and is not purchasing such Residual Certificates on
behalf of a Disqualified Organization (i.e., as a broker, nominee or
middleman thereof), and (ii) the transferor provides a statement in writing
to the Depositor and the Trustee that it has no actual knowledge that such
affidavit is false. Moreover, the Agreement will provide that any attempted
or purported transfer in violation of these transfer restrictions will be
null and void and will vest no rights in any purported transferee. Each
Residual Certificate with respect to a series will bear a legend referring to
such restrictions on transfer, and each Residual Certificateholder will be
deemed to have agreed, as a condition of ownership thereof, to any amendments
to the related Agreement required under the Code or applicable Treasury
regulations to effectuate the foregoing restrictions. Information necessary
to compute an applicable excise tax must be furnished to the Service and to
the requesting party within 60 days of the request, and the Depositor or the
Trustee may charge a fee for computing and providing such information.
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Noneconomic Residual Interests. The REMIC Regulations would disregard
certain transfers of Residual Certificates, in which case the transferor
would continue to be treated as the owner of the Residual Certificates and
thus would continue to be subject to tax on its allocable portion of the net
income of the REMIC Pool. Under the REMIC Regulations, a transfer of a
"noneconomic residual interest" (as defined below) to a Residual
Certificateholder (other than a Residual Certificateholder who is not a U.S.
Person, as defined below under "Foreign Investors") is disregarded for all
federal income tax purposes if a significant purpose of the transferor is to
impede the assessment or collection of tax. A residual interest in a REMIC
(including a residual interest with a positive value at issuance) is a
"noneconomic residual interest" unless, at the time of the transfer, (i) the
present value of the expected future distributions on the residual interest
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 from the REMIC at or after the time
at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. The anticipated excess inclusions
and the present value rate are determined in the same manner as set forth
above under "Disqualified Organizations". The REMIC Regulations explain that
a significant purpose to impede the assessment or collection of tax 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 safe harbor is provided 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 historically had paid its debts as they came due and found no
significant evidence to indicate that the transferee would not continue to
pay its debts as they came due in the future, and (ii) the transferee
represents to the transferor that it understands that, as the holder of the
noneconomic residual interest, the transferee may incur tax liabilities in
excess of cash flows generated by the interest and that the transferee
intends to pay taxes associated with holding the residual interest as they
become due. The Agreement with respect to each series of Certificates will
require the transferee of a Residual Certificate to certify to the matters in
the preceding sentence as part of the affidavit described above under the
heading "Disqualified Organizations". The transferor must have no actual
knowledge or reason to know that such statements are false.
Foreign Investors. The REMIC Regulations provide that the transfer of a
Residual Certificate that has "tax avoidance potential" to a "foreign person"
will be disregarded for all federal tax purposes. This rule appears intended
to apply to a transferee who is not a "U.S. Person" (as defined below),
unless such transferee's income is effectively connected with the conduct of
a trade or business within the United States. A Residual Certificate is
deemed to have tax avoidance potential unless, at the time of the transfer,
(i) the future value of expected distributions equals at least 30% of the
anticipated excess inclusions after the transfer, and (ii) the transferor
reasonably expects that the transferee will receive sufficient distributions
from the REMIC Pool at or after the time at which the excess inclusions
accrue and prior to the end of the next succeeding taxable year for the
accumulated withholding tax liability to be paid. If the non-U.S. Person
transfers the Residual Certificate back to a U.S. Person, the transfer will
be disregarded and the foreign transferor will continue to be treated as the
owner unless arrangements are made so that the transfer does not have the
effect of allowing the transferor to avoid tax on accrued excess inclusions.
The Prospectus Supplement relating to a series of Certificates may provide
that a Residual Certificate may not be purchased by or transferred to any
person that is not a U.S. Person or may describe the circumstances and
restrictions pursuant to which such a transfer may be made. The term "U.S.
Person" means a citizen or resident of the United States, a corporation,
partnership (except to the extent provided in applicable Treasury
regulations) or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate that is subject
to U.S. federal income tax regardless of the source of its income, or a trust
if a court within the United States is able to exercise primary supervision
over the administration of such trust, and one or more United States
fiduciaries have the authority to control all substantial decisions of such
trust (or, to the extent provided in applicable Treasury regulations, certain
trusts in existence on August 20, 1996 which are eligible to elect to be
treated as U.S. Persons).
SALE OR EXCHANGE OF A RESIDUAL CERTIFICATE
Upon the sale or exchange of a Residual Certificate, the Residual
Certificateholder will recognize gain or loss equal to the excess, if any, of
the amount realized over the adjusted basis (as described above under
"Taxation of Residual Certificates -- Basis and Losses") of such Residual
Certificateholder in such Residual Certificate at the time of the sale or
exchange. In addition to reporting the taxable income of the REMIC Pool, a
Residual Certificateholder will have taxable income to the extent that any
cash distribution to it from the REMIC Pool exceeds such adjusted basis on
that Distribution Date. Such income will be treated as gain from the sale or
exchange of the Residual Certificate. It is possible that the termination of
the REMIC Pool may be treated as a sale or exchange of a Residual
Certificateholder's Residual
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Certificate, in which case, if the Residual Certificateholder has an adjusted
basis in such Residual Certificateholder's Residual Certificate remaining
when its interest in the REMIC Pool terminates, and if such Residual
Certificateholder holds such Residual Certificate as a capital asset under
Code Section 1221, then such Residual Certificateholder will recognize a
capital loss at that time in the amount of such remaining adjusted basis.
Any gain on the sale of a Residual Certificate will be treated as ordinary
income (i) if a Residual Certificate is held as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on the Residual Certificateholder's net investment in
the conversion transaction at 120% of the appropriate applicable Federal rate
in effect at the time the taxpayer entered into the transaction minus any
amount previously treated as ordinary income with respect to any prior
disposition of property that was held as a part of such transaction or (ii)
in the case of a non-corporate taxpayer, to the extent such taxpayer has made
an election under Code Section 163(d)(4) to have net capital gains taxed as
investment income at ordinary income rates. In addition, gain or loss
recognized from the sale of a Residual Certificate by certain banks or thrift
institutions will be treated as ordinary income or loss pursuant to Code
Section 582(c).
The Conference Committee Report to the 1986 Act provides that, except as
provided in Treasury regulations yet to be issued, the wash sale rules of
Code Section 1091 will apply to dispositions of Residual Certificates where
the seller of the Residual Certificate, during the period beginning six
months before the sale or disposition of the Residual Certificate and ending
six months after such sale or disposition, acquires (or enters into any other
transaction that results in the application of Section 1091) any residual
interest in any REMIC or any interest in a "taxable mortgage pool" (such as a
non-REMIC owner trust) that is economically comparable to a Residual
Certificate.
MARK TO MARKET REGULATIONS
Prospective purchasers of the Residual Certificates should also be aware
that on January 3, 1995, the Service issued final regulations (the "Proposed
Mark to Market Regulations") under Code Section 475 relating to the
requirement that a securities dealer mark to market securities held for sale
to customers. This mark-to-market requirement applies to all securities of a
dealer, except to the extent that the dealer has specifically identified a
security as held for investment. The Proposed Mark to Market Regulations
provide that, for purposes of this mark-to-market requirement, a Residual
Certificate is not treated as a security and thus may not be marked to
market. The Mark to Market Regulations apply to all Residual Certificates
acquired on or after January 4, 1995.
TAXES THAT MAY BE IMPOSED ON THE REMIC POOL
PROHIBITED TRANSACTIONS
Income from certain transactions by the REMIC Pool, called prohibited
transactions, will not be part of the calculation of income or loss
includible in the federal income tax returns of Residual Certificateholders,
but rather will be taxed directly to the REMIC Pool at a 100% rate.
Prohibited transactions generally include (i) the disposition of a qualified
mortgage other than for (a) substitution within two years of the Startup Day
for a defective (including a defaulted) obligation (or repurchase in lieu of
substitution of a defective (including a defaulted) obligation at any time)
or for any qualified mortgage within three months of the Startup Day, (b)
foreclosure, default or imminent default of a qualified mortgage, (c)
bankruptcy or insolvency of the REMIC Pool or (d) a qualified (complete)
liquidation, (ii) the receipt of income from assets that are not the type of
mortgages or investments that the REMIC Pool is permitted to hold, (iii) the
receipt of compensation for services or (iv) the receipt of gain from
disposition of cash flow investments other than pursuant to a qualified
liquidation. Notwithstanding (i) and (iv), it is not a prohibited transaction
to sell REMIC Pool property to prevent a default on Regular Certificates as a
result of a default on qualified mortgages or to facilitate a clean-up call
(generally, an optional termination to save administrative costs when no more
than a small percentage of the Certificates is outstanding). The REMIC
Regulations indicate that the modification of a Mortgage Loan generally will
not be treated as a disposition if it is occasioned by a default or
reasonably foreseeable default, an assumption of the Mortgage Loan, the
waiver of a due-on-sale or due-on-encumbrance clause or the conversion of an
interest rate by a mortgagor pursuant to the terms of a convertible
adjustable rate Mortgage Loan.
CONTRIBUTIONS TO THE REMIC POOL AFTER THE STARTUP DAY
In general, the REMIC Pool will be subject to a tax at a 100% rate on the
value of any property contributed to the REMIC Pool after the Startup Day.
Exceptions are provided for cash contributions to the REMIC Pool (i) during
the
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three months following the Startup Day, (ii) made to a qualified reserve fund
by a Residual Certificateholder, (iii) in the nature of a guarantee, (iv)
made to facilitate a qualified liquidation or clean-up call and (v) as
otherwise permitted in Treasury regulations yet to be issued.
NET INCOME FROM FORECLOSURE PROPERTY
The REMIC Pool will be subject to federal income tax at the highest
corporate rate on "net income from foreclosure property", determined by
reference to the rules applicable to real estate investment trusts.
Generally, property acquired by deed in lieu of foreclosure would be treated
as "foreclosure property" for a period not exceeding the close of the third
calendar year after the year in which the REMIC Pool acquired such property,
with a possible extension. Net income from foreclosure property generally
means gain from the sale of a foreclosure property that is inventory property
and gross income from foreclosure property other than qualifying rents and
other qualifying income for a real estate investment trust.
It is not anticipated that the REMIC Pool will receive income or
contributions subject to tax under the preceding three paragraphs, except as
described in the applicable Prospectus Supplement with respect to net income
from foreclosure property on a commercial or multifamily residential property
that secured a Mortgage Loan. In addition, unless otherwise disclosed in the
applicable Prospectus Supplement, it is not anticipated that any material
state income or franchise tax will be imposed on a REMIC Pool.
LIQUIDATION OF THE REMIC POOL
If a REMIC Pool adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC Pool's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on the date of the adoption of the plan of liquidation, the REMIC
Pool will not be subject to the prohibited transaction rules on the sale of
its assets, provided that the REMIC Pool credits or distributes in
liquidation all of the sale proceeds plus its cash (other than amounts
retained to meet claims) to holders of Regular Certificates and Residual
Certificateholders within the 90-day period.
ADMINISTRATIVE MATTERS
The REMIC Pool will be required to maintain its books on a calendar year
basis and to file federal income tax returns for federal income tax purposes
in a manner similar to a partnership. The form for such income tax return is
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return.
The Trustee will be required to sign the REMIC Pool's returns. Treasury
regulations provide that, except where there is a single Residual
Certificateholder for an entire taxable year, the REMIC Pool will be subject
to the procedural and administrative rules of the Code applicable to
partnerships, including the determination by the Service of any adjustments
to, among other things, items of REMIC income, gain, loss, deduction or
credit in a unified administrative proceeding. The Residual Certificateholder
owning the largest percentage interest in the Residual Certificates will be
obligated to act as "tax matters person", as defined in applicable Treasury
regulations, with respect to the REMIC Pool. Each Residual Certificateholder
will be deemed, by acceptance of such Residual Certificates, to have agreed
(i) to the appointment of the tax matters person as provided in the preceding
sentence and (ii) to the irrevocable designation of the Trustee as agent for
performing the functions of the tax matters person.
LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES
An investor who is an individual, estate or trust will be subject to
limitation with respect to certain itemized deductions described in Code
Section 67, to the extent that such itemized deductions, in the aggregate, do
not exceed 2% of the investor's adjusted gross income. In addition, Code
Section 68 provides that itemized deductions otherwise allowable for a
taxable year of an individual taxpayer will be reduced by the lesser of (i)
3% of the excess, if any, of adjusted gross income over $100,000 ($50,000 in
the case of a married individual filing a separate return) (subject to
adjustments for inflation) or (ii) 80% of the amount of itemized deductions
otherwise allowable for such year. In the case of a REMIC Pool, such
deductions may include deductions under Code Section 212 for the Servicer Fee
and all administrative and other expenses relating to the REMIC Pool, any
similar fees paid to the issuer or guarantor of the Agency Certificates or
the Private Mortgage-Backed Securities or Contracts, or any similar expenses
allocated to the REMIC Pool with respect to a regular interest it holds in
another REMIC. Such investors who hold REMIC Certificates either directly or
indirectly
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through certain pass-through entities may have their pro rata share of such
expenses allocated to them as additional gross income, but may be subject to
such limitation on deductions. In addition, such expenses are not deductible
at all for purposes of computing the alternative minimum tax, and may cause
such investors to be subject to significant additional tax liability.
Temporary Treasury regulations provide that the additional gross income and
corresponding amount of expenses generally are to be allocated entirely to
the holders of Residual Certificates in the case of a REMIC Pool that would
not qualify as a fixed investment trust in the absence of a REMIC election.
However, such additional gross income and limitation on deductions will apply
to the allocable portion of such expenses to holders of Regular Certificates,
as well as holders of Residual Certificates, where such Regular Certificates
are issued in a manner that is similar to pass-through certificates in a
fixed investment trust. In general, such allocable portion will be determined
based on the ratio that a REMIC Certificateholder's income, determined on a
daily basis, bears to the income of all holders of Regular Certificates and
Residual Certificates with respect to a REMIC Pool. As a result, individuals,
estates or trusts holding REMIC Certificates (either directly or indirectly
through a grantor trust, partnership, S corporation, REMIC, or certain other
pass-through entities described in the foregoing temporary Treasury
regulations) may have taxable income in excess of the interest income at the
pass-through rate on Regular Certificates that are issued in a single Class
or otherwise consistently with fixed investment trust status or in excess of
cash distributions for the related period on Residual Certificates. Unless
otherwise indicated in the applicable Prospectus Supplement, all such
expenses will be allocable to the Residual Certificates.
TAXATION OF CERTAIN FOREIGN INVESTORS
REGULAR CERTIFICATES
Interest, including original issue discount, distributable to Regular
Certificateholders who are non-resident aliens, foreign corporations, or
other Non-U.S Persons (as defined below), will be considered "portfolio
interest" and, therefore, generally will not be subject to 30% United States
withholding tax, provided that such Non-U.S. Person (i) is not a "10-percent
shareholder" within the meaning of Code Section 871(h)(3)(B) or a controlled
foreign corporation described in Code Section 881(c)(3)(C) and (ii) provides
the Trustee, or the person who would otherwise be required to withhold tax
from such distributions under Code Section 1441 or 1442, with an appropriate
statement, signed under penalties of perjury, identifying the beneficial
owner and stating, among other things, that the beneficial owner of the
Regular Certificate is a Non-U.S. Person. If such statement, or any other
required statement, is not provided, 30% withholding will apply unless
reduced or eliminated pursuant to an applicable tax treaty or unless the
interest on the Regular Certificate is effectively connected with the conduct
of a trade or business within the United States by such Non-U.S. Person. In
the latter case, such Non-U.S. Person will be subject to United States
federal income tax at regular rates. Prepayment Premiums distributable to
Regular Certificateholders who are Non-U.S. Persons may be subject to 30%
United States withholding tax. Investors who are Non-U.S. Persons should
consult their own tax advisors regarding the specific tax consequences to
them of owning a Regular Certificate. The term "Non-U.S. Person" means any
person who is not a U.S. Person.
The IRS recently issued final regulations (the "New Regulations") which
would provide alternative methods of satisfying the beneficial ownership
certification requirement described above. The New Regulations are effective
January 1, 1999, although valid withholding certificates that are held on
December 31, 1998, remain valid until the earlier of December 31, 1999 or the
due date of expiration of the certificate under the rules as currently in
effect. The New Regulations would require, in the case of Regular
Certificates held by a foreign partnership, that (x) the certification
described above be provided by the partners rather than by the foreign
partnership and (y) the partnership provide certain information, including a
United States taxpayer identification number. A look-through rule would apply
in the case of tiered partnerships. Non-U.S. Persons should consult their own
tax advisors concerning the application of the certification requirements in
the New Regulations.
RESIDUAL CERTIFICATES
The Conference Committee Report to the 1986 Act indicates that amounts
paid to Residual Certificateholders who are Non-U.S. Persons are treated as
interest for purposes of the 30% (or lower treaty rate) United States
withholding tax. Treasury regulations provide that amounts distributed to
Residual Certificateholders may qualify as "portfolio interest", subject to
the conditions described in "Regular Certificates" above, but only to the
extent that (i) the Mortgage Loans (including mortgage loans underlying MBS)
were issued after July 18, 1984 and (ii) the Trust Fund or segregated pool of
assets therein (as to which a separate REMIC election will be made), to which
the Residual Certificate relates, consists
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of obligations issued in "registered form" within the meaning of Code Section
163(f)(1). Generally, whole mortgage loans will not be, but MBS and regular
interests in another REMIC Pool will be, considered obligations issued in
registered form. Furthermore, a Residual Certificateholder will not be
entitled to any exemption from the 30% withholding tax (or lower treaty rate)
to the extent of that portion of REMIC taxable income that constitutes an
"excess inclusion". See "Taxation of Residual Certificates -- Limitations on
Offset or Exemption of REMIC Income". If the amounts paid to Residual
Certificateholders who are Non-U.S. Persons are effectively connected with
the conduct of a trade or business within the United States by such Non-U.S.
Persons, 30% (or lower treaty rate) withholding will not apply. Instead, the
amounts paid to such Non-U.S. Persons will be subject to United States
federal income tax at regular rates. If 30% (or lower treaty rate)
withholding is applicable, such amounts generally will be taken into account
for purposes of withholding only when paid or otherwise distributed (or when
the Residual Certificate is disposed of) under rules similar to withholding
upon disposition of debt instruments that have original issue discount. See
"Tax-Related Restrictions on Transfer of Residual Certificates -- Foreign
Investors" above concerning the disregard of certain transfers having "tax
avoidance potential". Investors who are Non-U.S. Persons should consult their
own tax advisors regarding the specific tax consequences to them of owning
Residual Certificates.
BACKUP WITHHOLDING
Distributions made on the Regular Certificates, and proceeds from the sale
of the Regular Certificates to or through certain brokers, may be subject to
a "backup" withholding tax under Code Section 3406 of 31% on "reportable
payments" (including interest distributions, original issue discount, and,
under certain circumstances, principal distributions) unless the Regular
Certificateholder complies with certain reporting and/or certification
procedures, including the provision of its taxpayer identification number to
the Trustee, its agent or the broker who effected the sale of the Regular
Certificate, or such Certificateholder is otherwise an exempt recipient under
applicable provisions of the Code. Any amounts to be withheld from
distribution on the Regular Certificates would be refunded by the Service or
allowed as a credit against the Regular Certificateholder's federal income
tax liability. The New Regulations change certain of the rules relating to
certain presumptions currently available relating to information reporting
and backup withholding. Non-U.S. Persons are urged to contact their own tax
advisors regarding the application to them of backup withholding and
information reporting.
REPORTING REQUIREMENTS
Reports of accrued interest, original issue discount and information
necessary to compute the accrual of any market discount on the Regular
Certificates will be made annually to the Service and to individuals,
estates, non-exempt and non-charitable trusts, and partnerships who are
either holders of record of Regular Certificates or beneficial owners who own
Regular Certificates through a broker or middleman as nominee. All brokers,
nominees and all other non-exempt holders of record of Regular Certificates
(including corporations, non-calendar year taxpayers, securities or
commodities dealers, real estate investment trusts, investment companies,
common trust funds, thrift institutions and charitable trusts) may request
such information for any calendar quarter by telephone or in writing by
contacting the person designated in Service Publication 938 with respect to a
particular series of Regular Certificates. Holders through nominees must
request such information from the nominee.
The Service's Form 1066 has an accompanying Schedule Q, Quarterly Notice
to Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation.
Treasury regulations require that Schedule Q be furnished by the REMIC Pool
to each Residual Certificateholder by the end of the month following the
close of each calendar quarter (41 days after the end of a quarter under
proposed Treasury regulations) in which the REMIC Pool is in existence.
Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual
Certificateholders, furnished annually, if applicable, to holders of Regular
Certificates, and filed annually with the Service concerning Code Section 67
expenses (see "Limitations on Deduction of Certain Expenses" above) allocable
to such holders. Furthermore, under such regulations, information must be
furnished quarterly to Residual Certificateholders, furnished annually to
holders of Regular Certificates, and filed annually with the Service
concerning the percentage of the REMIC Pool's assets meeting the qualified
asset tests described above under "Status of REMIC Certificates".
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FEDERAL INCOME TAX CONSEQUENCES FOR CERTIFICATES
AS TO WHICH NO REMIC ELECTION IS MADE
STANDARD CERTIFICATES
GENERAL
In the event that no election is made to treat a Trust Fund (or a
segregated pool of assets therein) with respect to a series of Certificates
that are not designated as "Stripped Certificates", as described below, as a
REMIC (Certificates of such a series hereinafter referred to as "Standard
Certificates"), in the opinion of Cadwalader, Wickersham & Taft, tax counsel
to the Depositor, the Trust Fund will be classified as a grantor trust under
subpart E, Part 1 of subchapter J of the Code and not as an association
taxable as a corporation or a "taxable mortgage pool" within the meaning of
Code Section 7701(i). Where there is no fixed retained yield with respect to
the Mortgage Loans underlying the Standard Certificates, the holder of each
such Standard Certificate (a "Standard Certificateholder") in such series
will be treated as the owner of a pro rata undivided interest in the ordinary
income and corpus portions of the Trust Fund represented by its Standard
Certificate and will be considered the beneficial owner of a pro rata
undivided interest in each of the Mortgage Loans, subject to the discussion
below under "Recharacterization of Servicing Fees". Accordingly, the holder
of a Standard Certificate of a particular series will be required to report
on its federal income tax return its pro rata share of the entire income from
the Mortgage Loans represented by its Standard Certificate, including
interest at the coupon rate on such Mortgage Loans, original issue discount
(if any), prepayment fees, assumption fees, and late payment charges received
by the Master Servicer, in accordance with such Standard Certificateholder's
method of accounting. A Standard Certificateholder generally will be able to
deduct its share of the Servicing Fee and all administrative and other
expenses of the Trust Fund in accordance with its method of accounting,
provided that such amounts are reasonable compensation for services rendered
to that Trust Fund. However, investors who are individuals, estates or trusts
who own Standard Certificates, either directly or indirectly through certain
pass-through entities, will be subject to limitation with respect to certain
itemized deductions described in Code Section 67, including deductions under
Code Section 212 for the Servicing Fee and all such administrative and other
expenses of the Trust Fund, to the extent that such deductions, in the
aggregate, do not exceed two percent of an investor's adjusted gross income.
In addition, Code Section 68 provides that itemized deductions otherwise
allowable for a taxable year of an individual taxpayer will be reduced by the
lesser of (i) 3% of the excess, if any, of adjusted gross income over
$100,000 ($50,000 in the case of a married individual filing a separate
return) (subject to adjustments for inflation), or (ii) 80% of the amount of
itemized deductions otherwise allowable for such year. As a result, such
investors holding Standard Certificates, directly or indirectly through a
pass-through entity, may have aggregate taxable income in excess of the
aggregate amount of cash received on such Standard Certificates with respect
to interest at the pass-through rate on such Standard Certificates. In
addition, such expenses are not deductible at all for purposes of computing
the alternative minimum tax, and may cause such investors to be subject to
significant additional tax liability. Moreover, where there is fixed retained
yield with respect to the Mortgage Loans underlying a series of Standard
Certificates or where the Servicing Fee is in excess of reasonable servicing
compensation, the transaction will be subject to the application of the
"stripped bond" and "stripped coupon" rules of the Code, as described below
under "Stripped Certificates" and "Recharacterization of Servicing Fees",
respectively.
TAX STATUS
In the opinion of Cadwalader, Wickersham & Taft, tax counsel to the
Depositor, Standard Certificates will have the following status for federal
income tax purposes:
1. A Standard Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) will be
considered to represent "loans secured by an interest in real property"
within the meaning of Code Section 7701(a)(19)(C)(v), provided that the
real property securing the Mortgage Loans represented by that Standard
Certificate is of the type described in such section of the Code.
2. A Standard Certificate owned by a real estate investment trust will be
considered to represent "real estate assets" within the meaning of Code
Section 856(c)(4)(A) to the extent that the assets of the related Trust
Fund consist of qualified assets, and interest income on such assets will
be considered "interest on obligations secured by mortgages on real
property" to such extent within the meaning of Code Section 856(c)(3)(B).
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3. A Standard Certificate owned by a REMIC will be considered to
represent an "obligation . . . which is principally secured by an interest
in real property" within the meaning of Code Section 860G(a)(3)(A) to the
extent that the assets of the related Trust Fund consist of "qualified
mortgages" within the meaning of Code Section 860G(a)(3).
4. A Certificate owned by a "financial asset securitization investment
trust" within the meaning of Code Section 860L(c) will be considered to
represent "permitted assets" within the meaning of Code Section 860L(c) to
the extent that the assets of the Trust Estate consist of "debt
instruments" or other permitted assets within the meaning of Code Section
860L(c).
PREMIUM AND DISCOUNT
Standard Certificateholders are advised to consult with their tax advisors
as to the federal income tax treatment of premium and discount arising either
upon initial acquisition of Standard Certificates or thereafter.
Premium. The treatment of premium incurred upon the purchase of a Standard
Certificate will be determined generally as described above under "Federal
Income Tax Consequences for REMIC Certificates -- Taxation of Residual
Certificates -- Premium".
Original Issue Discount. The original issue discount rules will be
applicable to a Standard Certificateholder's interest in those Mortgage Loans
as to which the conditions for the application of those sections are met.
Rules regarding periodic inclusion of original issue discount income are
applicable to mortgages of corporations originated after May 27, 1969,
mortgages of noncorporate mortgagors (other than individuals) originated
after July 1, 1982, and mortgages of individuals originated after March 2,
1984. Under the OID Regulations, such original issue discount could arise by
the charging of points by the originator of the mortgages in an amount
greater than a statutory de minimis exception, including a payment of points
currently deductible by the borrower under applicable Code provisions or,
under certain circumstances, by the presence of "teaser rates" on the
Mortgage Loans.
Original issue discount must generally be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest, in advance of the cash attributable to such
income. Unless indicated otherwise in the applicable Prospectus Supplement,
no prepayment assumption will be assumed for purposes of such accrual.
However, Code Section 1272 provides for a reduction in the amount of original
issue discount includible in the income of a holder of an obligation that
acquires the obligation after its initial issuance at a price greater than
the sum of the original issue price and the previously accrued original issue
discount, less prior payments of principal. Accordingly, if such Mortgage
Loans acquired by a Standard Certificateholder are purchased at a price equal
to the then unpaid principal amount of such Mortgage Loans, no original issue
discount attributable to the difference between the issue price and the
original principal amount of such Mortgage Loans (i.e., points) will be
includible by such holder.
Market Discount. Standard Certificateholders also will be subject to the
market discount rules to the extent that the conditions for application of
those sections are met. Market discount on the Mortgage Loans will be
determined and will be reported as ordinary income generally in the manner
described above under "Federal Income Tax Consequences for REMIC Certificates
- -- Taxation of Regular Certificates -- Market Discount", except that the
ratable accrual methods described therein will not apply. Rather, the holder
will accrue market discount pro rata over the life of the Mortgage Loans,
unless the constant yield method is elected. Unless indicated otherwise in
the applicable Prospectus Supplement, no prepayment assumption will be
assumed for purposes of such accrual.
RECHARACTERIZATION OF SERVICING FEES
If the Servicing Fee paid to the Master Servicer were deemed to exceed
reasonable servicing compensation, the amount of such excess would represent
neither income nor a deduction to Certificateholders. In this regard, there
are no authoritative guidelines for federal income tax purposes as to either
the maximum amount of servicing compensation that may be considered
reasonable in the context of this or similar transactions or whether, in the
case of the Standard Certificate, the reasonableness of servicing
compensation should be determined on a weighted average or loan-by-loan
basis. If a loan-by-loan basis is appropriate, the likelihood that such
amount would exceed reasonable servicing compensation as to some of the
Mortgage Loans would be increased. Service guidance indicates that a
servicing fee in excess of reasonable compensation ("excess servicing") will
cause the Mortgage Loans to be treated under the "stripped bond" rules. Such
guidance provides safe harbors for servicing deemed to be reasonable and
requires taxpayers to demonstrate that the value of servicing fees in excess
of such amounts is not greater than the value of the services provided.
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Accordingly, if the Service's approach is upheld, a servicer who receives
a servicing fee in excess of such amounts would be viewed as retaining an
ownership interest in a portion of the interest payments on the Mortgage
Loans. Under the rules of Code Section 1286, the separation of ownership of
the right to receive some or all of the interest payments on an obligation
from the right to receive some or all of the principal payments on the
obligation would result in treatment of such Mortgage Loans as "stripped
coupons" and "stripped bonds". Subject to the de minimis rule discussed below
under "--Stripped Certificates", each stripped bond or stripped coupon could
be considered for this purpose as a non-interest bearing obligation issued on
the date of issue of the Standard Certificates, and the original issue
discount rules of the Code would apply to the holder thereof. While Standard
Certificateholders would still be treated as owners of beneficial interests
in a grantor trust for federal income tax purposes, the corpus of such trust
could be viewed as excluding the portion of the Mortgage Loans the ownership
of which is attributed to the Master Servicer, or as including such portion
as a second class of equitable interest. Applicable Treasury regulations
treat such an arrangement as a fixed investment trust, since the multiple
classes of trust interests should be treated as merely facilitating direct
investments in the trust assets and the existence of multiple classes of
ownership interests is incidental to that purpose. In general, such a
recharacterization should not have any significant effect upon the timing or
amount of income reported by a Standard Certificateholder, except that the
income reported by a cash method holder may be slightly accelerated. See
"Stripped Certificates" below for a further description of the federal income
tax treatment of stripped bonds and stripped coupons.
SALE OR EXCHANGE OF STANDARD CERTIFICATES
Upon sale or exchange of a Standard Certificate, a Standard
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its aggregate adjusted basis in the
Mortgage Loans and the other assets represented by the Standard Certificate.
In general, the aggregate adjusted basis will equal the Standard
Certificateholder's cost for the Standard Certificate, increased by the
amount of any income previously reported with respect to the Standard
Certificate and decreased by the amount of any losses previously reported
with respect to the Standard Certificate and the amount of any distributions
received thereon. Except as provided above with respect to market discount on
any Mortgage Loans, and except for certain financial institutions subject to
the provisions of Code Section 582(c), any such gain or loss would be capital
gain or loss if the Standard Certificate was held as a capital asset.
However, gain on the sale of a Standard Certificate will be treated as
ordinary income (i) if a Standard Certificate is held as part of a
"conversion transaction" as defined in Code Section 1258(c), up to the amount
of interest that would have accrued on the Standard Certificateholder's net
investment in the conversion transaction at 120% of the appropriate
applicable Federal rate in effect at the time the taxpayer entered into the
transaction minus any amount previously treated as ordinary income with
respect to any prior disposition of property that was held as a part of such
transaction or (ii) in the case of a non-corporate taxpayer, to the extent
such taxpayer has made an election under Code Section 163(d)(4) to have net
capital gains taxed as investment income at ordinary income rates. Capital
gains of certain non-corporate taxpayers generally are subject to a lower
maximum tax rate (28%) than ordinary income of such taxpayers (39.6%) for
property held for more than one year but not more than 18 months, and a still
lower maximum tax rate (20%) for property held for more than 18 months. The
maximum tax rate for corporations is the same with respect to both ordinary
income and capital gains.
STRIPPED CERTIFICATES
GENERAL
Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the principal payments on an obligation from ownership
of the right to receive some or all of the interest payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of this discussion,
Certificates that are subject to those rules will be referred to as "Stripped
Certificates".
The Certificates will be subject to those rules if (i) the Depositor or
any of its affiliates retains (for its own account or for purposes of
resale), in the form of fixed retained yield or otherwise, an ownership
interest in a portion of the payments on the Mortgage Loans, (ii) the Master
Servicer is treated as having an ownership interest in the Mortgage Loans to
the extent it is paid (or retains) servicing compensation in an amount
greater than reasonable consideration for servicing the Mortgage Loans (see
"Standard Certificates -- Recharacterization of Servicing Fees" above) and
(iii) Certificates are issued in two or more classes or subclasses
representing the right to non-pro-rata percentages of the interest and
principal payments on the Mortgage Loans.
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In general, a holder of a Stripped Certificate will be considered to own
"stripped bonds" with respect to its pro rata share of all or a portion of
the principal payments on each Mortgage Loan and/or "stripped coupons" with
respect to its pro rata share of all or a portion of the interest payments on
each Mortgage Loan, including the Stripped Certificate's allocable share of
the servicing fees paid to the Master Servicer, to the extent that such fees
represent reasonable compensation for services rendered. See discussion above
under "Standard Certificates -- Recharacterization of Servicing Fees".
Although not free from doubt, for purposes of reporting to Stripped
Certificateholders, the servicing fees will be allocated to the Stripped
Certificates in proportion to the respective entitlements to distributions of
each class (or subclass) of Stripped Certificates for the related period or
periods. The holder of a Stripped Certificate generally will be entitled to a
deduction each year in respect of the servicing fees, as described above
under "Standard Certificates -- General", subject to the limitation described
therein.
Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued at an original issue discount on the date that such
stripped interest is purchased. Although the treatment of Stripped
Certificates for federal income tax purposes is not clear in certain respects
at this time, particularly where such Stripped Certificates are issued with
respect to a Mortgage Pool containing variable-rate Mortgage Loans, in the
opinion of Cadwalader, Wickersham & Taft, tax counsel to the Depositor, (i)
the Trust Fund will be treated as a grantor trust under subpart E, Part 1 of
subchapter J of the Code and not as an association taxable as a corporation
or a "taxable mortgage pool" within the meaning of Code Section 7701(i), and
(ii) each Stripped Certificate should be treated as a single installment
obligation for purposes of calculating original issue discount and gain or
loss on disposition. This treatment is based on the interrelationship of Code
Section 1286, Code Sections 1272 through 1275, and the OID Regulations. While
under Code Section 1286 computations with respect to Stripped Certificates
arguably should be made in one of the ways described below under "Taxation of
Stripped Certificates -- Possible Alternative Characterizations," the OID
Regulations state, in general, that two or more debt instruments issued by a
single issuer to a single investor in a single transaction should be treated
as a single debt instrument for original issue discount purposes. The
Agreement requires that the Trustee make and report all computations
described below using this aggregate approach, unless substantial legal
authority requires otherwise.
Furthermore, Treasury regulations issued December 28, 1992 provide for the
treatment of a Stripped Certificate as a single debt instrument issued on the
date it is purchased for purposes of calculating any original issue discount.
In addition, under these regulations, a Stripped Certificate that represents
a right to payments of both interest and principal may be viewed either as
issued with original issue discount or market discount (as described below),
at a de minimis original issue discount, or, presumably, at a premium. This
treatment suggests that the interest component of such a Stripped Certificate
would be treated as qualified stated interest under the OID Regulations.
Further, these final regulations provide that the purchaser of such a
Stripped Certificate will be required to account for any discount as market
discount rather than original issue discount if either (i) the initial
discount with respect to the Stripped Certificate was treated as zero under
the de minimis rule, or (ii) no more than 100 basis points in excess of
reasonable servicing is stripped off the related Mortgage Loans. Any such
market discount would be reportable as described under "Federal Income Tax
Consequences for REMIC Certificates -- Taxation of Regular Certificates
- --Market Discount," without regard to the de minimis rule therein, assuming
that a prepayment assumption is employed in such computation.
STATUS OF STRIPPED CERTIFICATES
No specific legal authority exists as to whether the character of the
Stripped Certificates, for federal income tax purposes, will be the same as
that of the Mortgage Loans. Although the issue is not free from doubt, in the
opinion of Cadwalader, Wickersham & Taft, tax counsel to the Depositor,
Stripped Certificates owned by applicable holders should be considered to
represent "real estate assets" within the meaning of Code Section
856(c)(4)(A), "obligation[s] principally secured by an interest in real
property" within the meaning of Code Section 860G(a)(3)(A), and "loans
secured by an interest in real property" within the meaning of Code Section
7701(a)(19)(C)(v), and interest (including original issue discount) income
attributable to Stripped Certificates should be considered to represent
"interest on obligations secured by mortgages on real property" within the
meaning of Code Section 856(c)(3)(B), provided that in each case the Mortgage
Loans and interest on such Mortgage Loans qualify for such treatment. The
application of such Code provisions to Buy-Down Mortgage Loans is uncertain.
See "Standard Certificates -- Tax Status" above.
TAXATION OF STRIPPED CERTIFICATES
Original Issue Discount. Except as described above under "General", each
Stripped Certificate will be considered to have been issued at an original
issue discount for federal income tax purposes. Original issue discount with
respect to
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a Stripped Certificate must be included in ordinary income as it accrues, in
accordance with a constant interest method that takes into account the
compounding of interest, which may be prior to the receipt of the cash
attributable to such income. Based in part on the OID Regulations and the
amendments to the original issue discount sections of the Code made by the
1986 Act, the amount of original issue discount required to be included in
the income of a holder of a Stripped Certificate (referred to in this
discussion as a "Stripped Certificateholder") in any taxable year likely will
be computed generally as described above under "Federal Income Tax
Consequences for REMIC Certificates -- Taxation of Regular Certificates --
Original Issue Discount" and "--Variable Rate Regular Certificates". However,
with the apparent exception of a Stripped Certificate issued with de minimis
original issue discount as described above under "General", the issue price
of a Stripped Certificate will be the purchase price paid by each holder
thereof, and the stated redemption price at maturity will include the
aggregate amount of the payments to be made on the Stripped Certificate to
such Stripped Certificateholder, presumably under the Prepayment Assumption.
If the Mortgage Loans prepay at a rate either faster or slower than that
under the Prepayment Assumption, a Stripped Certificateholder's recognition
of original issue discount will be either accelerated or decelerated and the
amount of such original issue discount will be either increased or decreased
depending on the relative interests in principal and interest on each
Mortgage Loan represented by such Stripped Certificateholder's Stripped
Certificate. While the matter is not free from doubt, the holder of a
Stripped Certificate should be entitled in the year that it becomes certain
(assuming no further prepayments) that the holder will not recover a portion
of its adjusted basis in such Stripped Certificate to recognize an ordinary
loss equal to such portion of unrecoverable basis.
As an alternative to the method described above, the fact that some or all
of the interest payments with respect to the Stripped Certificates will not
be made if the Mortgage Loans are prepaid could lead to the interpretation
that such interest payments are "contingent" within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of
contingent interest, are by their terms not applicable to prepayable
securities such as the Stripped Certificates. However, if final regulations
dealing with contingent interest with respect to the Stripped Certificates
apply the same principles as the OID Regulations, such regulations may lead
to different timing of income inclusion that would be the case under the OID
Regulations. Furthermore, application of such principles could lead to the
characterization of gain on the sale of contingent interest Stripped
Certificates as ordinary income. Investors should consult their tax advisors
regarding the appropriate tax treatment of Stripped Certificates.
Sale or Exchange of Stripped Certificates. Sale or exchange of a Stripped
Certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in such Stripped Certificate, as described
above under "Federal Income Tax Consequences for REMIC Certificates --
Taxation of Regular Certificates -- Sale or Exchange of Regular
Certificates". To the extent that a subsequent purchaser's purchase price is
exceeded by the remaining payments on the Stripped Certificates, such
subsequent purchaser will be required for federal income tax purposes to
accrue and report such excess as if it were original issue discount in the
manner described above. It is not clear for this purpose whether the assumed
prepayment rate that is to be used in the case of a Stripped
Certificateholder other than an original Stripped Certificateholder should be
the Prepayment Assumption or a new rate based on the circumstances at the
date of subsequent purchase.
Purchase of More Than One Class of Stripped Certificates. Where an
investor purchases more than one class of Stripped Certificates, it is
currently unclear whether for federal income tax purposes such classes of
Stripped Certificates should be treated separately or aggregated for purposes
of the rules described above.
Possible Alternative Characterizations. The characterizations of the
Stripped Certificates discussed above are not the only possible
interpretations of the applicable Code provisions. For example, the Stripped
Certificateholder may be treated as the owner of (i) one installment
obligation consisting of such Stripped Certificate's pro rata share of the
payments attributable to principal on each Mortgage Loan and a second
installment obligation consisting of such Stripped Certificate's pro rata
share of the payments attributable to interest on each Mortgage Loan, (ii) as
many stripped bonds or stripped coupons as there are scheduled payments of
principal and/or interest on each Mortgage Loan or (iii) a separate
installment obligation for each Mortgage Loan, representing the Stripped
Certificate's pro rata share of payments of principal and/or interest to be
made with respect thereto. Alternatively, the holder of one or more classes
of Stripped Certificates may be treated as the owner of a pro rata fractional
undivided interest in each Mortgage Loan to the extent that such Stripped
Certificate, or classes of Stripped Certificates in the aggregate, represent
the same pro rata portion of principal and interest on each such Mortgage
Loan, and a stripped bond or stripped coupon (as the case may be), treated as
an installment obligation or contingent payment obligation, as to the
remainder. Final regulations issued on
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December 28, 1992 regarding original issue discount on stripped obligations
make the foregoing interpretations less likely to be applicable. The preamble
to those regulations states that they are premised on the assumption that an
aggregation approach is appropriate for determining whether original issue
discount on a stripped bond or stripped coupon is de minimis, and solicits
comments on appropriate rules for aggregating stripped bonds and stripped
coupons under Code Section 1286.
Because of these possible varying characterizations of Stripped
Certificates and the resultant differing treatment of income recognition,
Stripped Certificateholders are urged to consult their own tax advisors
regarding the proper treatment of Stripped Certificates for federal income
tax purposes.
REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The Trustee will furnish, within a reasonable time after the end of each
calendar year, to each Standard Certificateholder or Stripped
Certificateholder at any time during such year, such information (prepared on
the basis described above) as the Trustee deems to be necessary or desirable
to enable such Certificateholders to prepare their federal income tax
returns. Such information will include the amount of original issue discount
accrued on Certificates held by persons other than Certificateholders
exempted from the reporting requirements. The amounts required to be reported
by the Trustee may not be equal to the proper amount of original issue
discount required to be reported as taxable income by a Certificateholder,
other than an original Certificateholder that purchased at the issue price.
In particular, in the case of Stripped Certificates, unless provided
otherwise in the applicable Prospectus Supplement, such reporting will be
based upon a representative initial offering price of each class of Stripped
Certificates. The Trustee will also file such original issue discount
information with the Service. If a Certificateholder fails to supply an
accurate taxpayer identification number or if the Secretary of the Treasury
determines that a Certificateholder has not reported all interest and
dividend income required to be shown on his federal income tax return, 31%
backup withholding may be required in respect of any reportable payments, as
described above under "Federal Income Tax Consequences for REMIC Certificates
- -- Backup Withholding".
TAXATION OF CERTAIN FOREIGN INVESTORS
To the extent that a Certificate evidences ownership in Mortgage Loans
that are issued on or before July 18, 1984, interest or original issue
discount paid by the person required to withhold tax under Code Section 1441
or 1442 to nonresident aliens, foreign corporations, or other Non-U.S.
Persons generally will be subject to 30% United States withholding tax, or
such lower rate as may be provided for interest by an applicable tax treaty.
Accrued original issue discount recognized by the Standard Certificateholder
or Stripped Certificateholder on original issue discount recognized by the
Standard Certificateholder or Stripped Certificateholders on the sale or
exchange of such a Certificate also will be subject to federal income tax at
the same rate.
Treasury regulations provide that interest or original issue discount paid
by the Trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in Mortgage Loans issued after July 18, 1984 will be
"portfolio interest" and will be treated in the manner, and such persons will
be subject to the same certification requirements, described above under
"Federal Income Tax Consequences for REMIC Certificates -- Taxation of
Certain Foreign Investors -- Regular Certificates".
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ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose certain requirements on employee benefit
plans and on certain other retirement plans and arrangements, including
individual retirement accounts, Keogh plans, collective investment funds,
insurance company separate accounts, and some insurance company general
accounts in which such plans, accounts or arrangements are invested, which
are subject to ERISA and the Code (all of which are hereinafter referred to
for purposes of this discussion as "Plans") and on persons who are
fiduciaries with respect to such Plans. The following is a general discussion
of such requirements, and certain applicable exceptions to and administrative
exemptions from such requirements.
Before purchasing any Offered Certificates, a Plan fiduciary should
consult with its counsel and determine whether there exists any prohibition
to such purchase under the requirements of ERISA, whether any prohibited
transaction class-exemption or any individual administrative prohibited
transaction exemption (as described below) applies, including whether the
appropriate conditions set forth therein would be met, or whether any
statutory prohibited transaction exemption is applicable, and further should
consult the applicable Prospectus Supplement relating to such Series of
Certificates.
CERTAIN REQUIREMENTS UNDER ERISA
General
In accordance with ERISA's general fiduciary standards, before investing
in a Certificate a Plan fiduciary should determine whether to do so is
permitted under the governing Plan instruments and is appropriate for the
Plan in view of its overall investment policy and the composition and
diversification of its portfolio. A Plan fiduciary should especially consider
the ERISA requirement of investment prudence and the sensitivity of the
return on the Certificates to the rate of principal repayments (including
voluntary prepayments by the mortgagors and involuntary liquidations) on the
Mortgage Loans, as discussed in "Yield Considerations" herein.
Parties in Interest/Disqualified Persons
Other provisions of ERISA (and corresponding provisions of the Code)
prohibit certain transactions involving the assets of a Plan and persons who
have certain specified relationships to the Plan (so-called "parties in
interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code, including, in both cases, Plan fiduciaries). The
Depositor, Master Servicer or the Trustee or certain affiliates thereof,
might be considered or might become "parties in interest" or "disqualified
persons" with respect to a 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 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 or 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 advice 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.
Delegation of Fiduciary Duty
Further, if the assets included in a Trust Fund were deemed to constitute
Plan assets, it is possible that a 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 the Code.
Neither ERISA nor the Code define the term "plan assets."
The U.S. Department of Labor (the "Department") has published final
regulations (the "Regulations") concerning whether or not a Plan's assets
would be deemed to include an interest in the underlying assets of an entity
(such as a 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.
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<PAGE>
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
a Trust Fund. However, the Depositor cannot predict in advance, nor can there
be any 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 interests are held by "benefit plan
investors," which are defined as Plans, IRAs, and employee benefit plans not
subject to ERISA (for example, governmental plans). However, this exception
is tested immediately after each acquisition of an equity interest in the
entity whether upon initial issuance or in the secondary market.
ADMINISTRATIVE EXEMPTIONS
Several underwriters of mortgage-backed securities have applied for and
obtained individual administrative ERISA prohibited transaction exemptions
which can only apply to the purchase and holding of 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 exemption might
be applicable to a Series of Certificates, the related Prospectus Supplement
will refer to such possibility, as well as provide a summary of the
conditions to the applicability.
GOVERNMENTAL PLANS
A governmental plan as defined in Section 3 (32) of ERISA is not subject
to ERISA, or Code Section 4975. However, such a governmental plan may be
subject to a federal, state, or local law, which is, to a material extent,
similar to the provisions of ERISA or Code Section 4975 ("Similar Law"). A
fiduciary of a governmental plan should make its own determination as to the
need for and the availability of any exemptive relief under Similar Law.
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation 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 Residual Certificates, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing a Residual Certificate on behalf of, a
"Disqualified Organization," which term as defined above includes certain
tax-exempt entities not subject to Code Section 511 including certain
governmental plans, as discussed above under the caption "Federal Income Tax
Consequences -- Federal Income Tax Consequences for REMIC Certificates --
Taxation of Residual Certificates -- Tax-Related Restrictions on Transfer of
Residual Certificates -- Disqualified Organizations."
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important
that potential investors who are Plan fiduciaries consult with their counsel
regarding the consequences under ERISA of their acquisition and ownership of
Certificates.
The sale of Certificates to an employee benefit plan is in no respect a
representation by the Depositor or the Underwriter that this investment meets
all relevant legal requirements with respect to investments by plans
generally or by any particular plan, or that this investment is appropriate
for plans generally or for any particular plan.
LEGAL INVESTMENT
The Prospectus Supplement for each Series of Certificates will specify
which, if any, of the Classes of Certificates offered thereby will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"). The appropriate
characterization of those 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.
Generally, only Classes of Certificates that (i) are rated in one of the
two highest rating categories by one or more Rating Agencies and (ii) are
part of a Series evidencing interests in a Trust Fund consisting of loans
originated by certain
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<PAGE>
types of Originators as specified in SMMEA, will be "mortgage related
securities" for purposes of SMMEA. As "mortgage related securities," such
Classes 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 such legislation will be authorized to invest in
Certificates qualifying as "mortgage related securities" 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, 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 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 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, codified at 12 C.F.R. Part
73, which permit federal credit unions to invest in certain "mortgage related
securities", except under limited circumstances, other than stripped mortgage
related securities, residual interests in mortgage related securities, and
commercial mortgage related securities, unless the credit union has obtained
written approval from the NCUA to participate in the "investment pilot
program" described in 12 C.F.R. Section 703.140.
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 "FFIEC"). The
Policy Statement, which has been adopted by the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, 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. On September 29, 1997, the FFIEC
released for public comment a proposed "Supervisory Policy Statement on
Investment Securities and End-User Derivatives Activities" (the "1997
Statement"), which would replace the Policy Statement. As proposed, the 1997
Statement would delete the specific "high-risk mortgage securities" tests,
and substitute
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<PAGE>
general guidelines which depository institutions should follow in managing
risks (including market, credit, liquidity, operational (transactional), and
legal risks) applicable to all securities (including mortgage pass-through
securities and mortgage-derivative products) used for investment purposes.
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.
Except as to the status of certain Classes of Certificates as "mortgage
related securities," no representation is made as to the proper
characterization of the Certificates for legal investment purposes, 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.
Accordingly, all investors whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their legal advisors in
determining whether and to what extent the Certificates constitute legal
investments or are subject to investment, capital or other restrictions and,
if applicable, whether SMMEA has been overridden in any jurisdiction relevant
to such investor.
METHOD OF DISTRIBUTION
The Certificates offered hereby and by the Prospectus Supplement will be
offered in Series through one or more of the various methods described below.
The Prospectus Supplement for each Series of Certificates will describe the
method of offering being utilized for that Series, the public offering or
purchase price of the Certificates and the net proceeds to the Depositor from
such sale. If so specified in the Prospectus Supplement, one or more Classes
of Certificates may be offered for sale only outside of the United States and
only to non-U.S. persons and foreign branches of U.S. banks (or in such other
manner and to such other persons as may be specified therein) and will not be
offered hereby.
The Certificates will be offered through the following methods from time
to time and that offerings may be made concurrently through more than one of
these methods or that an offering of a particular Series of Certificates may
be made through any combination of these methods:
1. Negotiated firm commitment underwriting and public reoffering by
underwriters;
2. Placements by the Depositor to institutional investors through
affiliated or unaffiliated dealers or agents; and
3. Direct placements by the Depositor to institutional investors.
If underwriters are used in a sale of any Certificates, such Certificates
will be acquired by the underwriters for their own account and may be resold.
The distribution of the Certificates may be effected 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 therefor. If so specified in the related Prospectus
Supplement, the Certificates will be distributed in a firm commitment
underwriting, subject to the terms and conditions of the underwriting
agreement, by Nomura Securities International, Inc. ("Nomura") acting as
underwriter with other underwriters, if any, named therein. Nomura Asset
Securities Corporation, the Depositor, is a wholly-owned subsidiary of Nomura
Asset Capital Corporation ("Nomura Capital"). Nomura and Nomura Capital are
both wholly-owned subsidiaries of Nomura Holding America Inc. See "The
Depositor" herein.
In connection with the sale of the Certificates, underwriters, dealers or
placement agents may receive compensation from the Depositor or from
purchasers of the Certificates in the form of discounts, concessions or
commissions. Underwriters, agents and dealers participating in the
distributions of the Certificates may be deemed to be underwriters in
connection with such Certificates, and any discounts or commissions received
by them from the Issuer and any profit on the resale of the Certificates by
them may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933, as amended (the "1933 Act").
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Any sales by the Depositor directly to investors, whether using an
affiliated or other placement agent or otherwise, may be made from time to
time in one or more transactions, including negotiated transactions, at a
fixed offering price or at varying prices to be determined at the time of
sale or the time of commitment therefor. The Prospectus Supplement with
respect to any Series of Certificates offered other than through underwriters
will contain information regarding the nature of such offering and any
agreements to be entered into between the Depositor and dealers or purchasers
of the Certificates for such Series.
The underwriting agreement pertaining to a sale of a series of
Certificates will provide that the obligations of Nomura and any underwriters
will be subject to certain conditions precedent, that the underwriters will
be obligated to purchase all such Certificates if any are purchased, and that
the Depositor will indemnify Nomura and any underwriters against certain
civil liabilities, including liabilities under the 1933 Act, or will
contribute to payments Nomura and any underwriters may be required to make in
respect thereof.
In the ordinary course of business, Nomura and the Depositor may engage in
various securities and financing transactions, including repurchase
agreements to provide interim financing of the Depositor's mortgage loans
pending the sale of such mortgage loans or interests therein, including the
Certificates.
All or part of any Class of Certificates may be reacquired by the
Depositor or acquired by an affiliate of the Depositor in a secondary market
transaction or from an affiliate (including Nomura). Such Certificates may
then be included in a trust fund, the beneficial ownership of which will be
evidenced by one or more classes of mortgage-backed certificates, including
subsequent series of Certificates offered pursuant to this Prospectus and a
Prospectus Supplement.
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 Securities Act of 1933 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.
If and to the extent required by applicable law or regulation, this
Prospectus will be used by Nomura in connection with offers and sales related
to market-making transactions in Certificates previously offered hereunder in
transactions in which Nomura acts as principal. Nomura may also act as agent
in such transactions. Sales may be made at negotiated prices determined at
the time of sale.
LEGAL MATTERS
The legality of the Certificates of each Series, including certain federal
income tax consequences with respect thereto, will be passed upon for the
Depositor by Cadwalader, Wickersham & Taft, New York, New York.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates
that they shall have been rated not lower than investment grade, that is, in
one of the four highest categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage
loans and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood
of principal prepayments by mortgagors or of the degree by which such
prepayments might differ from those originally anticipated. As a result,
certificateholders might suffer a lower than anticipated yield, and, in
addition, holders of stripped interest certificates in extreme cases might
fail to recoup their initial investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
rating organization. Each security rating should be evaluated independently
of any other security rating.
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INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE(S) ON WHICH
TERMS IS DEFINED
TERM IN THE PROSPECTUS
- ----- ---------------------
<S> <C>
1933 Act 89
1986 Act 64
Accrual Certificates 10
Accrued Certificate Interest 32
ADA 61
ARM Loans 23
Bankruptcy Code 56
BIF 39
Book-Entry Certificates 30
Cash Flow Agreements 1
Cede 2
CERCLA 18
Certificate Balance 10
Certificateholders 2
Certificates 8
Code 12
Collection Account 9, 25
Collection Period 31
Commercial Loans 21
Commercial Properties 8, 21
Commission 2
Cooperatives 21
Covered Trust 18
CPR 27
Credit Support 1
Crime Control Act 61
Cut-off Date 11
Debt Service Coverage Ratio 21
Definitive Certificates 30
Department 86
Determination Date 31
Disqualified Organization 74
Distribution Date 10
DTC 2
EDGAR 2
Equity Participations 24
ERISA 12
Exchange Act 3
FDIC 39
FHA 23
HUD 23
Indirect Participants 36
Insurance Proceeds 39
L/C Bank 49
Liquidation Proceeds 39
Loan-to-Value Ratio 22
Lock-out Date 24
91
<PAGE>
PAGE(S) ON WHICH
TERMS IS DEFINED
TERM IN THE PROSPECTUS
- ----- ---------------------
Lock-out Period 24
Master Servicer 8
MBS 24
MBS Agreement 24
MBS Issuer 24
MBS Servicer 24
MBS Trustee 24
Mortgage Asset Seller 21
Mortgage Assets 1, 21
Mortgage Loans 1, 8, 21
Mortgage Notes 21
Mortgage Rate 24
Mortgaged Properties 8
Mortgages 21
Multifamily Loans 21
Multifamily Properties 8, 21
NCUA 60
Net Leases 22
Net Operating Income 21
Nomura 89
Nomura Capital 89
Nonrecoverable Advance 33
Non-SMMEA Certificates 87
Offered Certificates 1
OID Regulations 65
Originator 21
Participants 35
Pass-Through Entity 74
Pass-Through Rate 10
Permitted Investments 39
Plan 12
Policy Statement 88
Prepayment Assumption 66
Prepayment Premium 24
Random Lot Certificates 65
Rating Agency 12
Record Date 31
Regular Certificateholder 64
Regular Certificates 62
Regulations 86
Related Proceeds 33
Relief Act 60
REMIC 12, 62
REMIC Certificates 62
REMIC Pool 62
REMIC Regulations 62
REO Account 40
Residual Certificateholders 70
Residual Certificates 62
92
<PAGE>
PAGE(S) ON WHICH
TERMS IS DEFINED
TERM IN THE PROSPECTUS
- ----- ---------------------
RICO 61
SAIF 39
Senior Certificates 10
Service 64
Similar Law 87
SMMEA 87
SPA 27
Special Servicer 8
Standard Certificateholder 79
Standard Certificates 79
Stripped Certificateholder 83
Stripped Certificates 79, 80, 81
Stripped Interest Certificates 10
Stripped Principal Certificates 10
Subordinate Certificates 10
Sub-Servicer 41
Sub-Servicing Agreement 41
Title VIII 60
Title V 60
Treasury 62
Trust Assets 2
Trust Fund 1
Trustee 8
UCC 51
U.S. Person 75
Value 22
Voting Rights 19
Warranting Party 38
Web
</TABLE>
93
