<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-62911
Information in this prospectus supplement and the prospectus is not complete and
may be changed. 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 and prospectus are not an offering to sell these securities and are
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION, DATED JUNE 28, 1999
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 28, 1999)
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
AS DEPOSITOR
GENERAL AMERICAN LIFE INSURANCE COMPANY
AS MAJORITY SELLER
CONNING ASSET MANAGEMENT COMPANY
AS ORIGINATOR, MASTER SERVICER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-CAM1
-------------------
Morgan Stanley Capital I Inc. is offering seven classes of its Series
1999-CAM1 Commercial Mortgage Pass-Through Certificates, which represent
beneficial ownership interests in a trust. The trust's assets will primarily be
153 mortgage loans secured by liens on commercial and multifamily properties.
The Series 1999-CAM1 Certificates are not obligations of Morgan Stanley Capital
I Inc., the sellers of the mortgage loans or any of their affiliates and neither
the certificates nor the underlying mortgage loans are insured or guaranteed by
any governmental agency.
-------------------
Morgan Stanley Capital I Inc. will not list the offered certificates on
any national securities exchange or on any automated quotation system of any
registered securities association such as NASDAQ.
-------------------
INVESTING IN THE OFFERED CERTIFICATES INVOLVES RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 13 OF THE
PROSPECTUS.
-------------------
Certain characteristics of the offered certificates include:
<TABLE>
<CAPTION>
APPROXIMATE PASS-THROUGH EXPECTED FINAL
INITIAL INITIAL RATE RATINGS DISTRIBUTION
CLASS CERTIFICATE BALANCE PASS-THROUGH RATE DESCRIPTION (FITCH IBCA/S&P) DATE
- ----- ------------------- ----------------- ----------- ---------------- ----
<S> <C> <C> <C> <C> <C>
CLASS A-1 $442,000,000 6.73% FIXED AAA/AAA NOVEMBER 2008
CLASS A-2 $209,529,000 7.00% FIXED AAA/AAA NOVEMBER 2008
CLASS B $26,304,000 7.17% FIXED AA/AA DECEMBER 2010
CLASS C $26,304,000 NWAC - 0.13 VARIABLE A/A DECEMBER 2011
CLASS D $12,140,000 NWAC - 0.02 VARIABLE A-/A- MAY 2012
CLASS E $20,304,000 NWAC VARIABLE BBB/BBB JUNE 2013
CLASS F $8,094,000 NWAC VARIABLE BBB-/BBB- SEPTEMBER 2013
</TABLE>
-------------------
The rated final distribution date for each class of offered
certificates is the distribution date in March, 2032.
-------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus supplement or the accompanying prospectus are truthful or
complete. Any representation to the contrary is a criminal offense.
-------------------
Morgan Stanley & Co. Incorporated will act as sole lead manager and
bookrunner with respect to the Offered Certificates. Morgan Stanley & Co.
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Prudential
Securities Incorporated will purchase the offered certificates from Morgan
Stanley Capital I Inc. and will offer them to the public at negotiated prices
determined at the time of sale. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated
expect to deliver the offered certificates to purchasers on or about July ,
1999. Morgan Stanley Capital I Inc. expects to receive from this offering
approximately $ , plus accrued interest from July 1, 1999, before deducting
expenses payable by Morgan Stanley Capital I Inc.
-------------------
MORGAN STANLEY DEAN WITTER
DONALDSON, LUFKIN & JENRETTE
PRUDENTIAL SECURITIES
AND AS SELLING AGENT
A.G. EDWARDS & SONS, INC.
The date of this Prospectus Supplement is July , 1999
<PAGE>
[Pictures of Representative Properties]
[Properties listed across the page:]
[The Century Park Office Building: The facade of the The Century Park Office
Building.]
[The Landow Office Building: A view from the street of the Landow Office
Building.]
[Del Norte Plaza: A view from the parking lot showing the Vons Tenant.]
[The Picture Tel Building: A view from the parking lot showing the facade of the
Picture Tel Office Building.]
[Club Hotel & Suites by Doubletree: A view from the street of the Club Hotel and
Suites by Doubletree.]
[Downtown Woodinville Retail Development: A view from the parking lot showing
the facade of the development including the tenant Top.]
[Ram's Village Apartments: A view from the street showing representative
apartments in the Ram's Village Apartment complex.]
[45 West 45th Street: A view from 45th Street showing the facade of 45 West 45th
Street.]
[Walsh Research Center: A view from the parking lot of the Walsh Research
Center.]
[Mid Rivers Plaza Shopping Center: A view from the parking lot showing the
facade of the tenant Bed, Bath and Beyond and a Golf Outlet.]
S-2
<PAGE>
With respect to the table on the cover page:
The amounts under the column "Approximate Initial Certificate Balance" are
approximate and may vary by up to 5%.
The pass-through rates for the Class A-1, Class A-2 and Class B Certificates for
each distribution date will be equal to the fixed rates per annum set forth in
the table; provided, in each case, that such pass-through rate will not exceed
the NWAC rate for such distribution date. The pass-through rates for the
Class C, Class D, Class E and Class F Certificates set forth in the table are
the approximate initial pass-through rates for those classes. The pass-through
rate on the Class C Certificates will be a per annum rate equal to the NWAC rate
for such distribution date minus %, the pass-through rate on the Class D
Certificates will be a per annum rate equal to the NWAC rate for such
distribution date minus %, the pass-through rate on the Class E Certificates
will be a per annum rate equal to the NWAC rate for such distribution date and
the pass-through rate on the Class F Certificates will be a per annum rate equal
to the NWAC rate for such distribution date. The NWAC rate for a particular
distribution date is, generally, a weighted average of the interest rates on the
mortgage loans minus a weighted average annual administrative cost rate, which
includes the servicing fee rate, any excess servicing fee rate and the trustee
fee rate, calculated as described in the prospectus supplement.
You should read the section entitled "Ratings" in this prospectus supplement.
The expected final distribution date for each class of offered certificates is
the date on which such class is expected to be paid in full, assuming timely
payments (and no principal prepayments) will be made on the mortgage loans and
otherwise based on the Maturity Assumptions and a 0% CPR.
The City and County of San Francisco Employees' Retirement System
Pension Trust or an affiliate thereof is expected to purchase a portion of the
Class B and Class C Certificates. A Delaware business trust, of which General
American Life Insurance Company and City and County of San Francisco Employees'
Retirement System Pension Trust will be the sole beneficiaries, is expected to
purchase the Class D, Class E and Class F Certificates.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to
the offered certificates; and (b) this prospectus supplement, which describes
the specific terms of the offered certificates. IF THE TERMS OF THE OFFERED
CERTIFICATES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. Morgan Stanley Capital I Inc. has
not authorized anyone to provide you with information that is different from
that contained in this prospectus supplement and the prospectus. The information
in this prospectus supplement is accurate only as of the date of this prospectus
supplement.
This prospectus supplement and the accompanying prospectus include
cross references to sections in these materials where
you can find further related discussions. The Tables of Contents in this
prospectus supplement and the accompanying prospectus identify the pages where
these sections are located.
------------------------------
Until the date that is ninety days from the date of this prospectus
supplement, all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus
supplement and the accompanying prospectus. This is in addition to the dealers'
obligation to deliver a prospectus supplement and the accompanying prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
S-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-4
<PAGE>
TABLE OF CONTENTS
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.......................S-3
EXECUTIVE SUMMARY...........................................................S-7
CERTIFICATE SUMMARY FOR OFFERED CERTIFICATES................................S-8
SUMMARY OF TERMS............................................................S-9
What You Own................................................................S-9
Relevant Parties and Dates...............................................S-9
Offered Securities.......................................................S-10
Information About the Mortgage Pool......................................S-14
Additional Aspects of Certificates.......................................S-20
RISK FACTORS................................................................S-23
DESCRIPTION OF THE CERTIFICATES.............................................S-46
General..................................................................S-46
Certificate Balances and Notional Amount.................................S-47
Pass-Through Rates.......................................................S-48
Distributions............................................................S-49
Optional Termination.....................................................S-54
Advances.................................................................S-55
Reports to Certificateholders; Available Information.....................S-56
Example of Distributions.................................................S-59
The Trustee..............................................................S-60
Expected Final Distribution Date; Rated Final Distribution Date..........S-60
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS...............................S-60
General..................................................................S-60
Pass-Through Rates.......................................................S-61
Rate and Timing of Principal Payments....................................S-61
Losses and Shortfalls....................................................S-62
Certain Relevant Factors.................................................S-62
Weighted Average Life....................................................S-63
DESCRIPTION OF THE MORTGAGE POOL............................................S-67
General..................................................................S-67
Certain Terms and Characteristics of the Mortgage Loans..................S-68
Property Types...........................................................S-68
Property Location........................................................S-68
Assessments of Property Value and Condition..............................S-72
Additional Mortgage Loan Information.....................................S-73
Standard Hazard Insurance................................................S-74
The Sellers..............................................................S-75
Assignment of the Mortgage Loans.........................................S-76
Representations and Warranties...........................................S-76
Repurchases And Other Remedies...........................................S-78
Changes In Mortgage Pool Characteristics.................................S-79
SERVICING OF THE MORTGAGE LOANS.............................................S-79
General..................................................................S-79
The Master Servicer......................................................S-80
Rights Upon Event of Default.............................................S-81
The Special Servicer.....................................................S-82
Termination of Special Servicer..........................................S-83
The Operating Adviser....................................................S-83
Mortgage Loan Modifications..............................................S-83
Sale of Defaulted Mortgage Loans and REO Properties......................S-84
Foreclosures.............................................................S-85
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.....................................S-85
General..................................................................S-86
Original Issue Discount and Premium......................................S-86
Additional Considerations................................................S-88
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS LOCATED IN CALIFORNIA,
WASHINGTON, GEORGIA, FLORIDA, AND MARYLAND..................................S-88
California...............................................................S-88
Washington...............................................................S-89
Georgia..................................................................S-89
Florida..................................................................S-90
Maryland.................................................................S-90
ERISA CONSIDERATIONS........................................................S-90
Plan Assets..............................................................S-90
Special Exemption Applicable to Class A Certificates.....................S-91
Insurance Company General Accounts.......................................S-92
General Investment Considerations........................................S-93
LEGAL INVESTMENT............................................................S-93
USE OF PROCEEDS.............................................................S-93
PLAN OF DISTRIBUTION........................................................S-93
LEGAL MATTERS...............................................................S-95
RATINGS.....................................................................S-95
GLOSSARY OF TERMS...........................................................S-96
APPENDIX I - MORTGAGE POOL INFORMATION (TABLES).............................I-1
APPENDIX II - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS................II-1
APPENDIX III - SIGNIFICANT LOAN SUMMARIES.................................III-1
TERM SHEET..................................................................T-1
FORM OF STATEMENT TO CERTIFICATEHOLDERS.....................................R-1
S-5
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-6
<PAGE>
EXECUTIVE SUMMARY
This executive summary highlights selected information regarding the
offered certificates. It does not contain all of the information you need to
consider in making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF
THE OFFERING OF THE OFFERED CERTIFICATES AND THE UNDERLYING MORTGAGE LOANS, READ
THIS ENTIRE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS CAREFULLY.
CERTIFICATE STRUCTURE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
APPROXIMATE INITIAL RATINGS APPROXIMATE
CREDIT CERTIFICATE (FITCH IBCA/ PERCENT OF TOTAL
SUPPORT CLASS BALANCE S&P) CERTIFICATES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
19.50% CLASS X CLASS A-1 $442,000,000 AAA/AAA 80.50%
- ------------------ $809,353,823 --------------------------------------------------------------------------
19.50% (Approximate Notional CLASS A-2 $209,529,000 AAA/AAA 80.50%
- ------------------ Amount) --------------------------------------------------------------------------
16.25% CLASS B $26,304,000 AA/AA 3.25%
- ------------------ --------------------------------------------------------------------------
13.00% CLASS C $26,304,000 A/A 3.25%
- ------------------ --------------------------------------------------------------------------
11.50% CLASS D $12,140,000 A-/A- 1.50%
- ------------------ --------------------------------------------------------------------------
9.00% CLASS E $20,234,000 BBB/BBB 2.50%
- ------------------ --------------------------------------------------------------------------
8.00% CLASS F $8,094,000 BBB-/BBB- 1.00%
- ------------------ --------------------------------------------------------------------------
- --------- CLASSES G-O --------- --------- 8.00%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The percentages indicated under the columns "Approximate Credit Support" and
"Approximate Percent of Total Certificates" with respect to the Class A-1 and
Class A-2 Certificates represent the approximate credit support or total
certificates, as applicable, for the Class A-1 and Class A-2 Certificates in the
aggregate.
The Class X, Class G, Class H, Class J, Class K, Class L, Class M, Class N and
Class O Certificates are not offered hereby.
The Series 1999-CAM1 Class R-I, R-II and R-III Certificates also
represent ownership interests in the trust. Such certificates are not
represented in this table and are not offered hereby.
[ ] Offered certificates.
[ ] Certificates not offered hereby.
S-7
<PAGE>
<TABLE>
<CAPTION>
CERTIFICATE SUMMARY FOR OFFERED CERTIFICATES
- -----------------------------------------------------------------------------------------------------------------------------------
INITIAL PASS- WEIGHTED
APPROXIMATE THROUGH AVERAGE PRINCIPAL
CREDIT INITIAL CERTIFICATE APPROXIMATE RATE AND RATE RATINGS LIFE WINDOW
SUPPORT CLASS BALANCE % OF TOTAL DESCRIPTION FITCH IBCA/S&P (YRS.) (MONTHS)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
19.50% A-1 $442,000,000 80.50% % (Fixed) AAA/AAA 5.70 1-112
- -----------------------------------------------------------------------------------------------------------------------------------
19.50% A-2 $209,529,000 80.50% % (Fixed) AAA/AAA 9.69 112-124
- -----------------------------------------------------------------------------------------------------------------------------------
16.25% B $26,304,000 3.25% % (Fixed) AA/AA 11.02 124-137
- -----------------------------------------------------------------------------------------------------------------------------------
13.00% C $26,304,000 3.25% % (Variable) A/A 11.85 137-149
- -----------------------------------------------------------------------------------------------------------------------------------
11.50% D $12,140,000 1.50% % (Variable) A-/A- 12.73 149-154
- -----------------------------------------------------------------------------------------------------------------------------------
9.00% E $20,234,000 2.50% % (Variable) BBB/BBB 13.38 154-167
- -----------------------------------------------------------------------------------------------------------------------------------
8.00% F $8,094,000 1.00% % (Variable) BBB-/BBB- 14.12 167-170
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The amounts under the column "Initial Certificate Balance" are approximate. It
is possible that the balance of the certificates will vary by up to 5%.
The pass-through rates for the Class A-1, Class A-2 and Class B Certificates for
each distribution date will be equal to the fixed rates per annum set forth in
the table. In each case, the pass-through rate will never exceed the NWAC rate
for such distribution date. The pass-through rates for Class C, Class D, Class E
and Class F Certificates set forth in the table are the approximate initial
pass-through rates for those classes. Subsequent to the initial distribution
date, the pass-through rate on the Class C Certificates will be a per annum rate
equal to the NWAC rate for such distribution date minus %, the pass-through rate
on the Class D Certificates will be a per annum rate equal to the NWAC rate for
such distribution date minus %, the pass-through rate on the Class E
Certificates will be a per annum rate equal to the NWAC rate for such
distribution date and the pass-through rate on the Class F Certificates will be
a per annum rate equal to the NWAC rate for such distribution date.
With respect to the column entitled "Weighted Average Life," the principal
window is expressed in months following the closing date and reflects the period
during which distributions of principal would be received. The weighted average
life and principal window figures set forth above are based on the assumptions
that the mortgage loans suffer no losses and that they are fully paid on their
respective stated maturity dates.
The percentages indicated under the columns "Approximate Credit Support" and
"Approximate % of Total" with respect to the Class A-1 and Class A-2
Certificates represent the approximate credit support or total certificate
balance as applicable for the Class A-1 and Class A-2 Certificates in the
aggregate.
The City and County of San Francisco Employees' Retirement System Pension Trust
or an affiliate is expected to purchase a portion of the Class B and Class C
Certificates. A Delaware business trust, of which General American Life
Insurance Company and City and County of San Francisco Employees' Retirement
System Pension Trust will be the sole beneficiaries, is expected to purchase the
Class D, Class E and Class F Certificates.
S-8
<PAGE>
SUMMARY OF TERMS
This summary highlights selected information from this prospectus
supplement. It does not contain all of the information you need to consider in
making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING
OF THE OFFERED CERTIFICATES, READ THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS CAREFULLY.
WHAT YOU OWN
GENERAL............ Your certificates represent beneficial interests in a trust
created by Morgan Stanley Capital I Inc. All payments to you
will come only from the amounts received in connection with
those assets. The trust's assets will primarily be 153
mortgage loans secured by liens on commercial and
multifamily properties.
MORTGAGEPOOL....... The mortgage pool consists of approximately 153 mortgage
loans with an aggregate principal balance of all mortgage
loans as of July 1, 1999, of approximately $809,353,823,
which may vary by up to 5%. As of July 1, 1999, the balances
of the mortgage loans in the mortgage pool ranged from
approximately $755,588 to $23,896,720 and the mortgage loans
had an average balance of $5,289,894.
RELEVANT PARTIES AND DATES
DEPOSITOR.......... Morgan Stanley Capital I Inc. The depositor's principal
executive offices are located at 1585 Broadway, 37th Floor,
New York, New York 10036. The depositor's telephone number
is (212) 761-4700.
MASTER SERVICER.... Conning Asset Management Company, a Missouri corporation and
an affiliate of General American Life Insurance Company.
SPECIAL SERVICER... Conning Asset Management Company, a Missouri corporation and
an affiliate of General American Life Insurance Company.
TRUSTEE............ The Chase Manhattan Bank, a New York banking corporation.
OPERATING ADVISER.. The holders of certificates representing more than 50% of
the aggregate certificate balance of the most subordinate
class of certificates outstanding at any time of
determination (or, if the certificate balance of such class
of certificates is less than 50%, with respect to the Class
N and Class O Certificates, and 25%, with respect to all
other classes of subordinate certificates of the initial
certificate balance of such class, the next most subordinate
class of certificates) may appoint a representative for the
purposes described in this prospectus supplement.
SELLERS............ General American Life Insurance Company, as majority seller,
as to 130 mortgage loans, representing 77.6% of the
aggregate principal balance of the mortgage loans as of July
1, 1999; and City and County of San Francisco Employees'
Retirement System Pension Trust, as minority seller, as to
23 mortgage loans, representing 22.4% of the aggregate
principal balance of all mortgage loans as of July 1, 1999.
UNDERWRITERS....... Morgan Stanley & Co. Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation and Prudential Securities
Incorporated.
S-9
<PAGE>
CUT-OFF DATE....... July 1, 1999.
CLOSING DATE....... On or about July 14, 1999.
DISTRIBUTION DATE.. The 15th day of each month, or, if such 15th day is not a
business day, the business day immediately following such
15th day, commencing in August 1999.
RECORD DATE........ With respect to each distribution date, the close of
business on the last business day of the preceding month.
OFFERED SECURITIES
GENERAL............ Morgan Stanley Capital I Inc. is offering the following
seven classes of its Series 1999-CAM1 Commercial Mortgage
Pass-Through Certificates:
O Class A-l
O Class A-2
O Class B
O Class C
O Class D
O Class E
O Class F
The entire series will consist of a total of 19 classes, the
following twelve of which are not being offered by this
prospectus supplement and the accompanying prospectus: Class
X, Class G, Class H, Class J, Class K, Class L, Class M,
Class N, Class O, Class R-I, Class R-II, and Class R-III.
CERTIFICATE
BALANCE............ Your certificates will have the approximate aggregate
initial certificate balance set forth below, which may vary
by up to 5%:
- -------------------------------------------------------------------------
Class A-1 $442,000,000 Certificate Balance
- -------------------------------------------------------------------------
Class A-2 $209,529,000 Certificate Balance
- -------------------------------------------------------------------------
Class B $26,304,000 Certificate Balance
- -------------------------------------------------------------------------
Class C $26,304,000 Certificate Balance
- -------------------------------------------------------------------------
Class D $12,140,000 Certificate Balance
- -------------------------------------------------------------------------
Class E $20,234,000 Certificate Balance
- -------------------------------------------------------------------------
Class F $8,094,000 Certificate Balance
- -------------------------------------------------------------------------
S-10
<PAGE>
PASS-THROUGH
RATES.............. Your certificates will accrue interest at an annual rate
called a "pass-through rate," which is set forth below for
each class of offered certificates:
- ---------------------------------------------------
Class A-1 %, but not in excess of
the NWAC rate
- ---------------------------------------------------
Class A-2 %, but not in excess of
NWAC rate
- ---------------------------------------------------
Class B %, but not in excess of
the NWAC rate
- ---------------------------------------------------
Class C NWAC rate minus 0. %
- ---------------------------------------------------
Class D NWAC rate minus 0. %
- ---------------------------------------------------
Class E NWAC rate
- ---------------------------------------------------
Class F NWAC rate
- ---------------------------------------------------
Interest on the offered certificates will be calculated on
the basis of a 360-day year consisting of twelve 30-day
months, or a 30/360 basis.
The weighted average net mortgage rate or NWAC rate for a
particular distribution date is a weighted average of the
interest rates on the mortgage loans minus a weighted
average annual administrative cost rate, which includes the
master servicing fee rates, any excess servicing fee rate
and the trustee fee rate. The relevant weighting is based
upon the respective principal balances of the mortgage loans
as in effect immediately prior to such distribution date.
For purposes of calculating the NWAC rate, the mortgage loan
interest rates will not reflect any default interest rate.
The mortgage loan interest rates will also be determined
without regard to any loan term modifications agreed to by
the special servicer or resulting from the borrower's
bankruptcy or insolvency. In addition, for purposes of
calculating the NWAC rate, if a mortgage loan does not
accrue interest on a 30/360 basis, its interest rate for any
month that is not a 30-day month will, in general, be deemed
to be the rate per annum that, when calculated on a 30/360
basis, will produce the amount of interest that actually
accrues on that loan in that month.
DISTRIBUTIONS
A.AMOUNT AND
ORDER OF
DISTRIBUTIONS... On each distribution date, funds available for distribution
from the mortgage loans, net of specified trust expenses,
including all servicing fees, trustee fees and related
compensation, will be distributed in the following amounts
and priority:
S-11
<PAGE>
S-1
Step l/Class A and Class X: To interest on Classes
A-1, A-2 and X, pro rata, in accordance with their interest
entitlements.
Step 2/Class A: To the extent of amounts then
required to be distributed as principal on the Class A-1
and, if Class A-1 has been retired, to Class A-2, until each
in turn is reduced to zero. If the principal amount of each
class of certificates other than Classes A-1 and A-2 has
been reduced to zero as a result of losses on the mortgage
loans, principal will be distributed to Classes A-1 and A-2,
pro rata, rather than sequentially.
Step 3/Class A: To reimburse Classes A-1, A-2 and
Class X, pro rata, for any previously unreimbursed losses on
the mortgage loans allocable to principal that were
previously borne by those classes, together with interest
thereon.
Step 4/Class B: To Class B as follows: (a) to
interest on Class B in the amount of its interest
entitlement; (b) to principal on Class B in the amount of
its principal entitlement until its principal amount is
reduced to zero; and (c) to reimburse Class B for any
previously unreimbursed losses on the mortgage loans
allocable to principal that were previously borne by that
class, together with interest thereon.
Step 5/Class C: To Class C in a manner analogous
to the Class B allocations of Step 4.
Step 6/Class D: To Class D in a manner analogous
to the Class B allocations of Step 4.
Step 7/Class E: To Class E in a manner analogous
to the Class B allocations of Step 4.
Step 8/Class F: To Class F in a manner analogous
to the Class B allocations of Step 4.
Step 9/Subordinate Private Certificates: In the
amounts and order of priority described in this prospectus
supplement.
B. INTEREST AND
PRINCIPAL
ENTITLEMENTS... A description of each class's interest entitlement can be
found in "Description of the Certificates--Distributions" in
this prospectus supplement. As described in such section,
there are circumstances relating to the timing of
prepayments in which your interest entitlement for a
distribution date could be less than one full month's
interest at the pass-through rate on your certificate's
principal amount. The amount of principal required to be
distributed on the classes entitled to principal on a
particular distribution date will, in general, be equal to:
O the principal portion of all scheduled payments, other
than balloon payments, whether or not received, due
during the related collection period;
S-12
<PAGE>
O all principal prepayments and the principal portion of
balloon payments received during the related collection
period;
O the principal portion of other collections on the
mortgage loans received during the related collection
period such as liquidation proceeds, condemnation
proceeds, insurance proceeds and income on "real estate
owned" property; and
O the principal portion of proceeds of mortgage loan
repurchases received during the related collection
period.
C. PREPAYMENT
PREMIUMS....... The manner in which any prepayment premiums received during
a particular collection period will be allocated to the
Class X Certificates, on the one hand, and the classes of
certificates entitled to principal, on the other hand, is
described in "Description of the
Certificates--Distributions" in this prospectus supplement.
SUBORDINATION
A. GENERAL..... The chart below describes the manner in which the rights of
various classes will be senior to the rights of other
classes. Entitlement to receive principal and interest on
any distribution date is depicted in descending order. The
manner in which mortgage loan losses (including interest)
are allocated is depicted in ascending order.
---------------------------
Class A-l, Class A-2 and
Class X
---------------------------
---------------------------
Class B
---------------------------
---------------------------
Class C
---------------------------
---------------------------
Class D
---------------------------
---------------------------
Class E
---------------------------
---------------------------
Class F
---------------------------
---------------------------
Classes G-O
---------------------------
NO OTHER FORM OF CREDIT ENHANCEMENT WILL BE AVAILABLE FOR
THE BENEFIT OF THE HOLDERS OF THE OFFERED CERTIFICATES.
S-13
<PAGE>
B. SHORTFALLS
IN AVAILABLE
FUNDS.......... The following types of shortfalls in available funds will be
allocated in the same manner as mortgage loan losses:
O shortfalls resulting from compensation which the special
servicer is entitled to receive;
O shortfalls resulting from interest on advances made by
the master servicer or the trustee (to the extent not
covered by default interest and late payment charges paid
by the borrower); and
O shortfalls resulting from other extraordinary or default-
related expenses of the trust.
Shortfalls in mortgage loan interest as a result of the
timing of prepayments (net of the master servicer's fee,
other than the excess master servicing fee, or special
servicer's servicing fee, as applicable, payable on the
related distribution date) will be allocated to each class
of certificates, pro rata, in accordance with their
respective interest entitlements.
INFORMATION ABOUT THE MORTGAGE POOL
CHARACTERISTICS OF THE MORTGAGE POOL
A.GENERAL.......... All numerical information in this prospectus supplement
concerning the mortgage loans is approximate. All weighted
average information regarding the mortgage loans reflects
the weighting of the mortgage loans based upon their
outstanding principal balances as of July 1, 1999.
B.PRINCIPAL
BALANCES The trust's primary assets will be 153 mortgage loans with
an aggregate principal balance of all mortgage loans as of
July 1, 1999 of $809,353,823, secured, in the aggregate, by
158 properties. It is possible that the mortgage loan
balance will vary by up to 5%. As of July 1, 1999, the
aggregate principal balance of the mortgage loans in the
mortgage pool ranged from approximately $755,588 to
$23,896,720 and the mortgage loans had an average balance of
$5,286,894.
C.FEE SIMPLE/
LEASEHOLD...... Each mortgage loan is secured by a first
mortgage lien on a fee simple or leasehold estate in an
income-producing real property.
O Fee Interest. One hundred forty-four (144) mortgage
loans, representing 93.0% of the aggregate principal
balance of the mortgage loans as of July 1, 1999,
including three (3) mortgage loans, representing 3.2% of
the aggregate principal balance of the mortgage loans as
of July 1, 1999, wherein the related mortgage encumbers
both the related borrower's leasehold interest in the
related mortgaged property and the fee interest of the
person/entity which owns the related mortgaged property.
O Leasehold Interest. Nine (9) mortgage loans,
representing 7.0% of the aggregate principal balance of
the mortgage loans as of July 1, 1999, including two
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mortgage loans, representing 1.0% of the aggregate
principal balance of the mortgage loans as of July 1,
1999, wherein the related mortgage encumbers both the
related borrower's leasehold interest in a portion of
the related mortgaged property and fee simple interest
in the remainder of the related mortgaged property.
- -------------------------------------------------------------------------
Percentage of Aggregate Number of
Principal Balance of Mortgage Mortgage
Property Type Loans as of July 1, 1999 Loans
- -------------------------------------------------------------------------
Retail 37.1% 66
- -------------------------------------------------------------------------
Office 36.0% 47
- -------------------------------------------------------------------------
Industrial 17.7% 31
- -------------------------------------------------------------------------
Multifamily 6.2% 7
- -------------------------------------------------------------------------
Hospitality 3.1% 2
- -------------------------------------------------------------------------
E. PROPERTY
LOCATION...... The number of mortgage loans, and the approximate percentage
of the aggregate principal balance of the mortgage loans
represented by such mortgage loans, that are secured by
mortgaged properties located in the five states with the
highest concentrations of mortgaged properties, are as set
forth below:
- -------------------------------------------------------------------------
State Percentage of Aggregate Principal Number of
Balance of Mortgage Loans as of Mortgage Loans
July 1, 1999
- -------------------------------------------------------------------------
California 20.1% 31
- -------------------------------------------------------------------------
Washington 6.9% 10
- -------------------------------------------------------------------------
Georgia 6.6% 11
- -------------------------------------------------------------------------
Florida 6.1% 14
- -------------------------------------------------------------------------
Maryland 5.9% 9
- -------------------------------------------------------------------------
The remaining mortgaged properties are located throughout 23
other states. None of these states has a concentration of
mortgaged properties that represents security for more than
5% of the aggregate principal balance of the mortgage loans,
as of July 1, 1999.
F. OTHER MORTGAGE
LOAN FEATURES As of July 1, 1999, the mortgage loans had the
following characteristics:
O No scheduled payment of principal and interest on any
mortgage loan was thirty days or more past due, and no
mortgage loan had been thirty days or more delinquent in
the past year.
O Two (2) separate groups of mortgage loans are, within
such group, cross-collateralized with each other, the
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largest group of which represents 0.7% of the aggregate
principal balance of the mortgage loans.
O Ten (10) groups of mortgage loans, including the
cross-collateralized mortgage loans groups described
above, were made to the same borrower or to borrowers
that are affiliated with one another through partial or
complete direct or indirect common ownership. The three
largest of these groups represent 4.6%, 2.5% and 2.0%,
respectively, of the aggregate principal balance of the
mortgage loans.
O Sixty-five (65) mortgage loans, representing 32.8% of the
aggregate principal balance of the mortgage loans, are
secured by mortgaged properties that are each 100% leased
to a single tenant.
O The mortgage loans generally bear interest at fixed
rates.
O No mortgage loan permits negative amortization or the
deferral of accrued interest.
G. BALLOON/INTEREST-
ONLY LOANS...... Ninety-eight (98) of the mortgage loans, representing 73.7%
of the aggregate principal balance of the mortgage loans as
of July 1, 1999, are expected to have principal balances
equal to or greater than 5% of their respective original
principal balance as of their respective stated maturity
date. Two (2) of such mortgage loans, representing 2.4% of
the aggregate principal balance of the mortgage loans as of
July 1, 1999, provide for monthly payments of interest only
for the term of the mortgage loan with a "balloon payment"
due at maturity.
H. PREPAYMENT
PROVISIONS..... As of July 1, 1999, all of the mortgage loans restricted
voluntary principal prepayments as follows:
O Eighty (80) mortgage loans, representing 59.5% of the
aggregate principal balance of the mortgage loans, are
currently in a "lock-out period" where voluntary
principal payments are prohibited for a period ending on
a date determined by the related mortgage note. After
the applicable lock-out period, seventy-four (74) of
such mortgage loans provide for prepayment premiums
calculated on the basis of the greater of a yield
maintenance formula and 1% of the amount prepaid (of
which (1) mortgage loan then has an additional five
twelve-month periods during which a prepayment premium
is calculated on the basis of the lesser of a yield
maintenance formula and 5%, 4%, 3%, 2%, and 1% of the
amount prepaid, respectively); three (3) of such
mortgage loans provided for declining fixed percentage
premiums; two (2) of such mortgage loans provide for
prepayment premiums calculated on the basis of the
greater of a yield maintenance formula and 3% of the
amount prepaid; and one (1) of such mortgage loans
provides for a prepayment premium calculated on the
basis of a yield maintenance formula.
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<PAGE>
O Seventy (70) mortgage loans, representing 39.5% of the
aggregate principal balance of the mortgage loans
currently provide for a "yield maintenance period"
whereby prepayment premiums are calculated on the basis
of the greater of a yield maintenance formula and 1% of
the amount prepaid. After an applicable yield
maintenance period, five (5) of such mortgage loans
provide for declining fixed-percentage premiums, and one
(1) of such mortgage loans provides for a prepayment
premium calculated on the basis of a yield maintenance
formula plus an amount equal to 0.5% of the principal
prepaid for a period of time, then provides for a
prepayment premium calculated on the basis of a yield
maintenance formula plus an amount equal to 0.75% of the
principal prepaid.
O One (1) mortgage loan, representing 0.3% of the aggregate
principal balance of the mortgage loans, currently
provides for a prepayment premium calculated on the basis
of a yield maintenance formula.
O Two (2) mortgage loans, representing 0.7% of the
aggregate principal balance, currently provide for
declining fixed percentage premiums.
O Ten (10) mortgage loans, representing 5.4% of the
aggregate principal balance, permit prepayment of up to
10% of the original principal balance in any loan year,
without the payment of a prepayment premium.
O One (1) mortgage loan, representing 2.3% of the
aggregate principal balance of the mortgage loans,
currently permits voluntary prepayment of the full
amount of the mortgage loan without any prepayment
premium during the 58th through 63rd months of the loan
term if the mortgagee does not agree to increase the
principal amount of such mortgage loan above
$19,000,000, but subject to other conditions. The master
servicer will be prohibited from advancing additional
sums to the related borrower; therefore investors should
assume that the borrower will have such a prepayment
option.
O One (1) mortgage loan, representing 2.1% of the
aggregate principal balance of the mortgage loans,
currently has a $2,000,000 letter of credit in place as
a performance enhancement. If certain performance
thresholds are not met by January 14, 2004 (the fifth
anniversary of the note date), the letter of credit may
be applied to the then outstanding principal balance,
subject to a 4% prepayment premium. The letter of credit
application is at the option of the mortgagee.
O One (1) mortgage loan, representing 1.1% of the
aggregate principal balance of the mortgage loans,
permits prepayment of up to $800,000 of the outstanding
principal balance, without a prepayment premium, if a
certain tenant elects to prepay the non-
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amortized cost of its outstanding borrower-financed
tenant improvements. The prepayment may occur at any
time and if the prepayment occurs, the related principal
and interest payments would need to be recalculated.
O One (1) mortgage loan, representing 1.0% of the
aggregate principal balance of the mortgage loans,
permits prepayment of up to three (3) payments during
the loan term, as long as each separate payment is no
less than $500,000 and no greater than $1,500,000. These
prepayment options are subject to a 1% prepayment
premium.
I. MORTGAGE LOAN RANGES
AND WEIGHTED
AVERAGES...... As of July 1, 1999, the mortgage loans had the following
additional characteristics:
i. MORTGAGE INTEREST
RATES Mortgage interest rates ranging from 6.310% per annum to
9.875% per annum, and a weighted average mortgage interest
rate of 7.688% per annum;
ii. REMAINING
TERMS Remaining terms to scheduled maturity ranging from 40 months
to 230 months, and a weighted average remaining term to
scheduled maturity of 128 months;
iii. REMAINING
AMORTIZATION
TERMS Remaining amortization terms ranging from 98 months to 356
months, and a weighted average remaining amortization term
of 246 months;
iv. LOAN-TO-VALUE
RATIOS Loan-to-value ratios range from 25.0% to 91.4%, with a
weighted average loan-to-value ratio, calculated as
described in this prospectus supplement, of 63.8%. With
respect to 79 mortgage loans, representing 62.5% of the
aggregate principal balance of the mortgage loans,
appraisals were dated June 1, 1997, or later. For these
mortgage loans, the loan-to-value ratios were calculated
using these appraisals according to the methodology set
forth in this prospectus supplement and range from 25.0% to
75.1%;
With respect to all other mortgage loans, the
loan-to-value ratios were calculated according to the
methodology set forth in this prospectus supplement by
applying a capitalization rate to the underwritten cash flow
of such mortgaged property or properties to determine the
value of such mortgaged property or properties. For these
mortgage loans, the loan-to-value ratios range from 26.7% to
91.4%; and
V. DEBT SERVICE
COVERAGE
RATIOS Debt service coverage ratios, determined according to the
methodology set forth in this prospectus supplement, ranging
from 1.00x to 3.14x and a weighted average debt service
coverage ratio, calculated as described in this prospectus
supplement, of 1.41x; and
Assumed debt service coverage ratios, calculated assuming
each mortgage loan has an assumed fixed constant of 8.5%
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<PAGE>
as described in this prospectus supplement, ranging from
1.01x to 4.18x and a weighted average assumed debt service
coverage ratio, calculated as described in this prospectus
supplement, of 1.65x.
ADVANCES OF PRINCIPAL AND INTEREST
A. GENERAL....... The master servicer is required to "advance" delinquent
monthly mortgage loan payments. The master servicer will not
be required to advance any additional interest --- accrued
as a result of the imposition of any default rate. The
master servicer also is not required to advance prepayment
or yield maintenance premiums, or balloon payments. With
respect to any balloon payment, the master servicer will
instead be required to advance an amount equal to the
scheduled payment that would have been due if the related
balloon payment had not become due. If this type of advance
is made, the master servicer will defer rather than advance
its servicing fee, but will advance the trustee fee.
If the master servicer fails to make a required advance, the
trustee will be required to make the advance, subject to the
same limitations, and with the same rights of the master
servicer.
All advances made by the master servicer or the trustee will
accrue interest at a rate equal to the "prime rate" as
reported in The Wall Street Journal.
Neither the master servicer nor the trustee will be
obligated to make any advance if it reasonably determines
that such advance would not be recoverable.
B. ADVANCES DURING AN
APPRAISAL REDUCTION
EVENT........ The occurrence of certain adverse events affecting a
mortgage loan will require the special servicer to obtain a
new appraisal or other valuation of the related mortgaged
property. Based on the value of the mortgaged property
determined by such appraisal or other valuation, an
"appraisal reduction" may be created as described in this
prospectus supplement. If there exists an appraisal
reduction for any mortgage loan, the amount required to be
advanced in respect of interest on such mortgage loan will
be proportionately reduced to the extent of such appraisal
reduction. Due to the payment priorities described above,
this will reduce the funds available to pay interest on the
most subordinate class (or, in some cases, classes) of
certificates then outstanding.
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<PAGE>
ADDITIONAL ASPECTS OF CERTIFICATES
RATINGS............ The offered certificates will not be issued unless each such
class receives the following ratings from Fitch IBCA, Inc.
and Standard & Poor's Ratings Services.
- ------------------------------------------------------------------------
Class Ratings Fitch IBCA/S&P
- ------------------------------------------------------------------------
Classes A-1 and A-2 AAA/AAA
- ------------------------------------------------------------------------
Class B AA/AA
- ------------------------------------------------------------------------
Class C A/A
- ------------------------------------------------------------------------
Class D A-/A-
- ------------------------------------------------------------------------
Class E BBB/BBB
- ------------------------------------------------------------------------
Class F BBB-/BBB-
- ------------------------------------------------------------------------
A rating agency may lower or withdraw a security rating at
any time.
See "Ratings" in this prospectus supplement and in the
prospectus for a discussion of the basis upon which ratings
are given, the limitations of and restrictions on the
ratings, and the conclusions that should not be drawn from a
rating.
OPTIONAL
TERMINATION....... On any distribution date on which the aggregate certificate
balance of all classes of certificates is less than 1% of
the aggregate principal balance of the mortgage loans as of
July 1, 1999, the majority holders of the controlling class,
the depositor, master servicer, the special servicer and any
holder of a majority interest in the Class R-I Certificates,
each in turn, will have the option to purchase all of the
remaining mortgage loans (and all property acquired through
exercise of remedies in respect of any mortgage loan), at
the price specified in this prospectus supplement. Exercise
of this option will terminate the trust and retire the then
outstanding certificates.
DENOMINATIONS..... The Class A-1 and Class A-2 Certificates will be offered in
minimum denominations of $25,000. The remaining offered
certificates will be offered in minimum denominations of
$100,000. Investments in excess of the minimum denominations
may be made in multiples of $1.
REGISTRATION,
CLEARANCE
AND SETTLEMENT... Your certificates will be registered in the name of CEDE &
Co., as nominee of The Depository Trust Company ("DTC"), and
will not be registered in your name. You will not receive a
definitive certificate representing your interest, except in
very limited circumstances described in this prospectus
supplement. As a result, you will not be a certificateholder
of record, and you will receive distributions on your
certificates and reports relating to distributions only
S-20
<PAGE>
through DTC, or, through participants in DTC, Cedelbank,
societe anonyme ("CEDEL") or the Euroclear System
("Euroclear").
You may hold your offered certificates through (1) DTC in
the United States, or (2) CEDEL or Euroclear in Europe.
Transfers within DTC, CEDEL or Euroclear will be made in
accordance with the usual rules and operating procedures of
those systems. Cross-market transfers between persons
holding directly through DTC, CEDEL or Euroclear will be
effected in DTC through the relevant depositories 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.
Morgan Stanley Capital I Inc. expects that the offered
certificates will be delivered in book-entry form through
the facilities of DTC, CEDEL or Euroclear on or about July
14, 1999.
TAX STATUS........ An election will be made to treat designated portions of
the trust as three separate "real estate mortgage investment
conduits" --REMIC I, REMIC II and REMIC III--for federal
income tax purposes. In the opinion of counsel, the trust
will qualify for this treatment and each class of offered
certificates will constitute "regular interests" in REMIC
III.
Pertinent federal income tax consequences of an investment
in the offered certificates include:
o The regular interests will be treated as newly originated
debt instruments for federal income tax purposes.
o Beneficial owners of offered certificates will be
required to report income thereon in accordance with the
accrual method of accounting.
o The Class Certificates will, and the other classes of
offered certificates will not, be issued with original
issue discount.
ERISA
CONSIDERATIONS... Subject to the satisfaction of important conditions
described under "ERISA Considerations" in this prospectus
supplement and in the accompanying prospectus, the Class A-1
and Class A-2 Certificates may be purchased by persons
investing assets of employee benefit plans or individual
retirement accounts.
THE CLASS B, CLASS C, CLASS D, CLASS E AND CLASS F
CERTIFICATES MAY NOT BE PURCHASED BY, OR TRANSFERRED TO, AN
EMPLOYEE BENEFIT PLAN OR INDIVIDUAL RETIREMENT ACCOUNT OR
ANY PERSON INVESTING THE ASSETS OF AN EMPLOYEE BENEFIT PLAN
OR INDIVIDUAL RETIREMENT ACCOUNT, UNLESS SUCH TRANSACTION IS
COVERED BY A PROHIBITED TRANSACTION CLASS EXEMPTION ISSUED
BY THE U.S. DEPARTMENT OF LABOR (PTCE 95-60, SECTIONS I AND
II).
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<PAGE>
LEGAL INVESTMENTS. The offered certificates will not constitute "mortgage
related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984, as amended ("SMMEA").
No representation is made regarding the proper
characterization of the offered certificates for purposes of
any applicable legal investment restrictions, regulatory
capital requirements or other similar purposes. Regulated
entities should consult with their own advisors regarding
these matters.
S-22
<PAGE>
RISK FACTORS
You should carefully consider the risks before making an investment
decision. In particular, the timing and amount of distributions on your
certificates will depend on payments received on and other recoveries with
respect to the mortgage loans. Therefore, you should carefully consider the risk
factors relating to the mortgage loans and the mortgaged properties.
The risks and uncertainties described below summarize the material
risks relating to your certificates in addition to those risks described in the
prospectus under "Risk Factors."
This prospectus supplement also contains forward-looking statements
that involve risks and uncertainties. Actual results could differ materially
from those anticipated in these forward-looking statements as a result of a
variety of factors, including the risks described below and elsewhere in this
prospectus supplement.
YOUR INVESTMENT IS NOT INSURED
OR GUARANTEED AND YOUR SOURCE
FOR REPAYMENTS IS LIMITED Payments under the mortgage loans are not
insured or guaranteed by any person or
entity.
Prospective investors should consider all
of the mortgage loans to be nonrecourse
loans. If a default occurs, the lender's
remedies generally are limited to
foreclosing against the specific
properties and other assets that have been
pledged to secure the loan. Such remedies
may be insufficient to provide a full
return on your investment. Payment of
amounts due under the mortgage loan prior
to maturity is dependent primarily on the
sufficiency of the net operating income of
the mortgaged property. Payment of the
mortgage loan at maturity is primarily
dependent upon the borrower's ability to
sell or refinance the property for an
amount sufficient to repay the loan.
In certain limited circumstances, either
of General American Life Insurance
Company, as the majority seller, or the
City and County of San Francisco
Employees' Retirement System Pension
Trust, as the minority seller, may be
obligated to repurchase or replace a
mortgage loan as to which its
representations and warranties concerning
such mortgage loan are breached or if
there are material defects in the
documentation for the mortgage loan.
However, there can be no assurance that
either of such entities will be in a
financial position to effect such
repurchase or substitution.
THE REPAYMENT OF A COMMERCIAL
MORTGAGE LOAN IS DEPENDENT ON
THE CASH FLOW PRODUCED
BY THE PROPERTY WHICH
CAN BE VOLATILE AND
INSUFFICIENT TO ALLOW TIMELY
PAYMENT ON YOUR CERTIFICATES Ninety-six (96) of all of the mortgage
loans are "seasoned" mortgage loans,
having been outstanding for 12 or more
months prior to July 1, 1999. The weighted
average term the mortgage loans have been
outstanding is 22 months. While seasoned
mortgage loans generally have the benefit
of established payment histories, there
are a number of risks associated with
seasoned mortgage loans that are not
present, or present to a lesser degree,
with more recently-originated mortgage
loans. For example:
o property values and the surrounding
neighborhood may have changed
dramatically since origination;
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<PAGE>
o origination standards may have been
significantly different;
o the market for any related business may
have changed significantly from the
time the mortgage loan was originated;
and
o the current financial performance of
the related borrower, its business, or
the related mortgaged property in
general, may be significantly different
than at origination, and debt service
coverage ratios and tests established
at origination may no longer be
meaningful.
Among other things, such factors make it
difficult to estimate the current value on
the related mortgaged property, and
estimated values of mortgaged properties
discussed in this prospectus supplement,
to the extent based upon or extrapolated
from general market data, may not be
accurate in the case of particular
mortgaged properties.
The mortgage loans are secured by various
types of income-producing commercial
properties. Commercial lending is
generally thought to expose a lender to
greater risk than one-to-four family
residential lending because, among other
things, it typically involves larger
loans.
The repayment of a commercial mortgage
loan is typically dependent upon the
ability of the applicable property to
produce cash flow. Even the liquidation
value of a commercial property is
determined, in substantial part, by the
amount of the property's cash flow (or its
potential to generate cash flow). However,
net operating income and cash flow can be
volatile and may be insufficient to cover
debt service on the loan at any given
time.
The net operating income, cash flow and
property value of the mortgaged properties
may be adversely affected by the following
factors.
o the age, design and construction
quality of the property;
o perceptions regarding the safety,
convenience and attractiveness of the
property;
o the proximity and attractiveness of
competing properties;
o the adequacy of the property's
management and maintenance;
o increases in operating expenses at the
property and in relation to competing
properties;
o an increase in the capital expenditures
needed to maintain the property or make
improvements;
o the dependence upon a single tenant, or
a concentration of tenants in a
particular business or industry;
o a decline in the financial condition of
a major tenant;
o an increase in vacancy rates; and
o a decline in rental rates as leases are
renewed or entered into with new
tenants.
S-24
<PAGE>
Other factors are more general in nature,
such as:
o national, regional or local economic
conditions (including plant closings,
military base closings, industry
slowdowns and unemployment rates);
o local real estate conditions (such as
an oversupply of competing properties,
space or multifamily housing);
o demographic factors;
o decreases in consumer
confidence;
o changes in consumer tastes and
preferences; and
o retroactive changes in building
codes.
The volatility of net operating
income will be influenced by many of
the foregoing factors, as well as
by:
o the length of tenant leases;
o the creditworthiness of tenants;Cthe
level of tenant defaults;
o the rate at which new rentals occur;
and
o the property's "operating leverage"
(i.e., the percentage of total property
expenses in relation to revenue, the
ratio of fixed operating expenses to
those that vary with revenues, and the
level of capital expenditures required
to maintain the property and to retain
or replace tenants).
A decline in the real estate market or in
the financial condition of a major tenant
will tend to have a more immediate effect
on the net operating income of properties
with short-term revenue sources and may
lead to higher rates of delinquency or
defaults under mortgage loans.
Fifty-seven (57) of the mortgage loans,
representing 48.1% of the aggregate
principal balance of all mortgage loans as
of July 1, 1999, were originated within
twelve (12) months prior to the cut-off
date. Consequently, these mortgage loans
do not have a long-standing payment
history.
CONVERTING COMMERCIAL
PROPERTIES TO ALTERNATIVE USES
MAY REQUIRE SIGNIFICANT
EXPENSES WHICH COULD REDUCE
PAYMENTS ON YOUR CERTIFICATES Some of the mortgaged properties may not
be readily convertible to alternative uses
if those properties were to become
unprofitable for any reason. Converting
commercial properties to alternative uses
generally requires substantial capital
expenditures. In addition, zoning or other
restrictions also may prevent alternative
uses. The liquidation value of any such
mortgaged property consequently may be
substantially less than would be the case
if the property were readily adaptable to
other uses.
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<PAGE>
PROPERTY VALUE MAY BE ADVERSELY
AFFECTED EVEN WHEN THERE IS NO
CHANGE IN CURRENT OPERATING
INCOME Various factors may adversely affect
the value of the mortgaged properties
without affecting the properties' current
net operating income. These factors
include, among others:
o changes in governmental regulations,
fiscal policy, zoning or tax laws;
o potential environmental legislation or
liabilities or other legal liabilities;
o the availability of refinancing; and
o changes in interest rate levels.
TENANT CONCENTRATION INCREASES
THE RISK THAT CASH FLOW WILL BE
INTERRUPTED WHICH MAY
HAVE AN ADVERSE EFFECT ON THE
PAYMENT OF YOUR CERTIFICATES A deterioration in the financial condition
of a tenant can be particularly
significant if a mortgaged property is
leased to a single tenant, or a small
number of tenants. Sixty-five (65)
mortgage loans, representing 32.8% of the
aggregate principal balance of all
mortgage loans as of July 1, 1999, are
secured by mortgaged properties leased to
single tenants and in certain cases, the
tenant is related to the Borrower.
Mortgaged properties leased to a single
tenant, or a small number of tenants, also
are more susceptible to interruptions of
cash flow if a tenant fails to renew its
lease or defaults under its lease. This is
so because: (i) the financial effect of
the absence of rental income may be
severe; (ii) more time may be required to
re-lease the space; and (iii) substantial
capital costs may be incurred to make the
space appropriate for replacement tenants.
Retail and office properties also may be
adversely affected if there is a
concentration of particular tenants or of
tenants in a particular business or
industry at the property or properties.
LEASING MORTGAGED PROPERTIES TO
MULTIPLE TENANTS MAY RESULT IN
HIGHER RE-LEASING EXPENDITURES
WHICH MAY HAVE AN ADVERSE
EFFECT ON THE PAYMENT OF YOUR
CERTIFICATES If a mortgaged property has multiple
tenants, re-leasing expenditures may be
more frequent than in the case of
mortgaged properties with fewer tenants,
thereby reducing the cash flow available
for debt service payments. Multi-tenanted
mortgaged properties also may experience
higher continuing vacancy rates and
greater volatility in rental income and
expenses.
S-26
<PAGE>
THE CONCENTRATION OF LOANS WITH
THE SAME OR RELATED BORROWERS
INCREASES THE POSSIBILITY OF LOSS
ON THE LOANS WHICH MAY HAVE
AN ADVERSE EFFECT ON YOUR
CERTIFICATES The effect of mortgage pool loan losses
will be more severe: (i) if the pool is
comprised of a small number of loans, each
with a relatively large principal amount;
or (ii) if the losses relate to loans that
account for a disproportionately large
percentage of the pool's aggregate
principal balance of all mortgage loans.
The ten largest loans constitute 20.3% of
the outstanding aggregate principal
balance of all mortgage loans, as of July
1, 1999. Losses on any of these loans may
have a particularly adverse effect on the
certificates.
Each of the other mortgage loans
represents less than 2.0% of the
outstanding aggregate principal balance of
all mortgage loans, as of July 1, 1999.
A concentration of mortgaged property
types or of mortgage loans with the same
borrower or related borrowers also can
pose increased risks. The following
property types represent the indicated
percentage of the outstanding aggregate
principal balance of all mortgage loans as
of July 1, 1999:
o retail properties represent 37.1%;
o office properties represent 36.0%;
o industrial properties represent 17.7%;
o multifamily properties represent 6.2%;
and
o hospitality properties represent 3.1%.
With respect to concentration of
borrowers, ten (10) groups of mortgage
loans, including crosscollateralized
mortgage loan groups, are made to the same
borrower or borrowers related through
common ownership and where, in general,
the related mortgaged properties are
commonly managed. The three largest of
these groups represent 4.6%, 2.5% and 2.0%
respectively of the outstanding aggregate
principal balance of all mortgage loans,
as of July 1, 1999.
INCREASED GEOGRAPHIC
CONCENTRATIONS OF MORTGAGED
PROPERTIES MAY HAVE AN ADVERSE
EFFECT ON THE PAYMENT OF YOUR
CERTIFICATES Concentrations of mortgaged properties in
geographic areas may increase the risk
that adverse economic or other
developments or a natural disaster
affecting a particular region of the
country could increase the frequency and
severity of losses on mortgage loans
secured by the properties. In recent
periods, several regions of the United
States have experienced significant real
estate downturns. Regional economic
declines or adverse conditions in regional
real estate markets could adversely affect
the income from, and market value of, the
mortgaged properties located in the
region. Other regional factors--e.g.,
earthquakes, floods or hurricanes or
changes in governmental rules or fiscal
policies--also may adversely affect those
mortgaged properties.
The mortgaged properties are located
throughout 28 states. In particular,
investors should note that approximately
20.1% of the
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mortgaged properties, based on the
outstanding aggregate principal balance of
all mortgage loans as of July 1, 1999, are
located in California. Mortgaged
properties located in California may be
more susceptible to certain types of
special hazards not covered by insurance
(such as earthquakes) than properties
located in other parts of the country. The
mortgage loans generally do not require
any borrowers to maintain earthquake
insurance. In addition, 6.9%, 6.6%, 6.1%
and 5.9% of the mortgaged properties,
based on the outstanding aggregate
principal balance of all mortgage loans as
of July 1, 1999, are located in
Washington, Georgia, Florida and Maryland,
respectively, and concentrations of
mortgaged properties, in each case,
representing less than 5% of the
outstanding aggregate principal balance of
all mortgage loans as of July 1, 1999,
also exist in several other states.
MORTGAGED PROPERTIES WITHOUT
EARTHQUAKE INSURANCE MAY HAVE
AN ADVERSE EFFECT ON THE
PAYMENT OF YOUR CERTIFICATES The mortgaged properties relating to
forty-eight (48) of the mortgage loans,
representing 28.4% of the aggregate
principal balance of all mortgage loans as
of July 1, 1999, are located in areas
generally considered to be locations of
high seismic activity. In addition,
thirtysix (36) of such mortgage loans,
representing 16.2% of the aggregate
principal balance of all mortgage loans as
of July 1, 1999, have related mortgaged
properties that are located in areas of
high seismic activity for which no seismic
evaluations were conducted in connection
with their origination. The mortgage loans
do not require any borrower to maintain
earthquake insurance, including the three
(3) mortgage loans, identified on Appendix
II attached hereto as loan numbers 30, 84
and 121 and representing 1.7% of the
aggregate principal of all mortgage loans
as of July 1, 1999, that have a probable
maximum loss calculated to be greater than
20%. Accordingly, the occurrence of an
earthquake at the location of these
mortgaged properties could result in
losses for which there would be no
insurance or other form of recovery. The
three (3) mortgage loans with probable
maximum losses calculated at greater than
20% described in the second prior sentence
had loan-to-value ratios of 58.9%, 67.1%
and 49.3%, respectively, as of July 1,
1999.
INCREASED CONCENTRATIONS OF
RETAIL PROPERTIES SECURING
MORTGAGE LOANS WILL SUBJECT
YOUR INVESTMENT TO THE SPECIAL
RISKS OF RETAIL PROPERTIES Retail properties secure sixty-six (66) of
the mortgage loans, representing 37.1% of
the outstanding aggregate principal
balance of all mortgage loans, as of July
1, 1999. The quality and success of a
retail property's tenants significantly
affect the property's value. For example,
if the sales of retail tenants were to
decline, rents tied to a percentage of
gross sales may decline and those tenants
may be unable to pay their basic rent or
other occupancy costs.
The presence or absence of an "anchor
store" in a shopping center also can be
important because anchor stores play a key
role in generating customer traffic and
making a center desirable for other
tenants. Consequently, the economic
performance of an anchored retail property
will be adversely affected by:
o an anchor store's failure to renew its
lease;
o termination of an anchor store's lease;
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o the bankruptcy or economic decline of
an anchor store or self-owned anchor;
or
o the cessation of the business of an
anchor store at the shopping center,
even if, as a tenant, it continues to
pay rent.
There are retail properties with anchor
stores that are permitted to cease
operating if certain other stores are not
operated at those locations. Furthermore,
there may be non-anchor tenants that are
permitted to terminate their leases if
certain anchor stores are either not
operated or fail to meet certain business
objectives.
Retail properties also face competition
from sources outside a given real estate
market. For example, all of the following
compete with more traditional retail
properties for consumer dollars: factory
outlet centers, discount shopping centers
and clubs, catalogue retailers, home
shopping networks, internet web sites and
telemarketing. Continued growth of these
alternative retail outlets (which often
have lower operating costs) could
adversely affect the rents collectible at
the retail properties included in the
mortgage pool, as well as the income from,
and market value of, the mortgaged
properties. Moreover, additional competing
retail properties may be built in the
areas where the retail properties are
located.
INCREASED CONCENTRATIONS OF
OFFICE PROPERTIES SECURING
MORTGAGE LOANS WILL SUBJECT
YOUR INVESTMENT TO THE SPECIAL
RISKS OF OFFICE PROPERTIES Office properties secure forty-seven (47)
of the mortgage loans, representing 36.0%
of the outstanding aggregate principal
balance of all mortgage loans, as of July
1, 1999.
A large number of factors affect the
value of these office properties,
including:
o the quality of an office building's
tenants;
o the diversity of an office building's
tenants (or reliance on a single or
dominant tenant);
o the physical attributes of the building
in relation to competing buildings
(e.g., age, condition, design,
location, access to transportation and
ability to offer certain amenities,
such as sophisticated building
systems);
o the desirability of the area as a
business location; and
o the strength and nature of the local
economy (including labor costs and
quality, tax environment and quality of
life for employees).
Moreover, the cost of refitting office
space for a new tenant is often higher
than the cost of refitting other types of
property.
INCREASED CONCENTRATIONS OF
INDUSTRIAL PROPERTIES SECURING
MORTGAGE LOANS WILL SUBJECT
YOUR INVESTMENT TO THE SPECIAL
RISKS OF INDUSTRIAL PROPERTIES Industrial properties secure thirty-one
(31) of the mortgage loans, representing
17.7% of the outstanding aggregate
principal balance of all mortgage loans,
as of July 1, 1999. Various factors may
adversely
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<PAGE>
affect the economic performance of
these industrial properties, including:
o reduced demand for industrial space
because of a decline in a particular
industry segment;
o a property becoming functionally
obsolete;
o the unavailability of labor sources;
o changes in access to the property,
energy prices, strikes, relocation of
highways or the construction of
additional highways;
o a change in the proximity of supply
sources; and
o environmental hazards.
INCREASED CONCENTRATIONS OF
MULTIFAMILY PROPERTIES SECURING
MORTGAGE LOANS WILL SUBJECT
YOUR INVESTMENT TO THE SPECIAL
RISKS OF MULTIFAMILY PROPERTIES Multifamily properties secure seven (7) of
the mortgage loans, representing 6.2% of
the outstanding aggregate principal
balance of all mortgage loans, as of July
1, 1999.
A large number of factors may affect the
value and successful operation of these
multifamily properties, including:
o the physical attributes of the
apartment building, such as its age,
appearance and construction quality;
o the location of the property;
o the ability of management to provide
adequate maintenance and insurance;
o the types of services and amenities
provided at the property;
o the property's reputation;
o the level of mortgage interest rates,
which may encourage tenants to purchase
rather than rent housing;
o the presence of competing
properties;
o local or national economic
conditions;
o state and local regulations;
and
o government assistance/rent subsidy
programs.
INCREASED CONCENTRATIONS OF
HOSPITALITY PROPERTIES SECURING
MORTGAGE LOANS WILL SUBJECT
YOUR INVESTMENT TO THE SPECIAL
RISKS OF HOSPITALITY PROPERTIES Hospitality properties secure two (2) of
the mortgage loans, representing 3.1% of
the outstanding aggregate principal
balance of all mortgage loans, as of July
1, 1999. Various factors may adversely
affect the economic performance of a
hotel, including:
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<PAGE>
o adverse economic and social conditions,
either local, regional, national or
international which may limit the
amount that can be charged for a room
and reduce occupancy levels;
o the construction of competing hotels or
resorts;
o continuing expenditures for
modernizing, refurbishing, and
maintaining existing facilities prior
to the expiration of their anticipated
useful lives;
o a deterioration in the financial
strength or managerial capabilities of
the owner and/or operator of a hotel;
and
o changes in travel patterns, increases
in energy prices, strikes, relocation
of highways or the construction of
additional highways.
Because hotel rooms generally are rented
for short periods of time, the financial
performance of hotels tends to be affected
by adverse economic conditions and
competition more quickly than are other
types of commercial properties.
Moreover, the hotel and lodging industry
is generally seasonal in nature. This
seasonality can be expected to cause
periodic fluctuations in a hotel
property's revenues, occupancy levels,
room rates and operating expenses.
THE AFFILIATION OF SOME
OF THE PROPERTIES WITH A
FRANCHISE OR HOTEL MANAGEMENT
COMPANY MAY HAVE AN ADVERSE
EFFECT ON THE PAYMENT OF YOUR
CERTIFICATES There are mortgage loans secured by
hospitality properties that are operated
as franchises of national hotel chains or
managed by a hotel management company. The
performance of a hotel property operated
as a franchise or by a hotel management
company depends in part on:
o the continued existence and financial
strength of the franchisor or hotel
management company;
o the public perception of the franchise
or hotel chain service mark; and
o the duration of the franchise license
or management agreement.
The transferability of franchise license
agreements may be restricted. In the event
of a foreclosure, the lender or its agent
may not have the right to use the
franchise license without the franchisor's
consent. Conversely, in the case of some
of the mortgage loans, the lender may be
unable to remove a franchisor or a hotel
management company that it desires to
replace following a foreclosure.
Further, in the event of a foreclosure,
the trustee or a purchaser of the
mortgaged property probably would not be
entitled to the rights under any liquor
license for the mortgaged property.
Instead, the party would be required to
apply in its own right for such a license,
and we cannot assure you that a new
license could be obtained.
S-31
<PAGE>
TENANT BANKRUPTCY MAY
ADVERSELY AFFECT THE INCOME
PRODUCED BY THE PROPERTY AND
MAY HAVE AN ADVERSE EFFECT ON
THE PAYMENT OF YOUR CERTIFICATES The bankruptcy or insolvency of a major
tenant, or a number of smaller tenants, in
retail and office properties may adversely
affect the income produced by the
property. Under the U.S. bankruptcy code,
a tenant/debtor has the option of
affirming or rejecting any unexpired
lease. If the tenant rejects the lease,
the landlord's claim for breach of the
lease would be a general unsecured claim
against the tenant (absent collateral
securing the claim). The claim would be
limited to the unpaid rent under the lease
for the periods prior to the bankruptcy
petition (or earlier surrender of the
leased premises), plus the rent under the
lease for the greater of one year, or 15%
(not to exceed three years), of the
remaining term of such lease.
ENVIRONMENTAL ISSUES RELATING TO
SPECIFIC PROPERTIES MAY HAVE
AN ADVERSE EFFECT ON THE
PAYMENT OF YOUR CERTIFICATES A Phase I environmental report dated on or
after January 1, 1998, was obtained from a
third-party environmental engineer or
consultant in connection with the
origination of sixty-six (66) of the
mortgage loans, representing 52.6% of the
outstanding aggregate principal balance of
all mortgage loans as of July 1, 1999.
With respect to the mortgaged properties
relating to such mortgage loans, the
related seller has represented to the
depositor that, except as disclosed in
such report, it has no knowledge of the
presence of any adverse environmental
conditions.
With respect to all other mortgaged
properties, representing 47.4% of the
outstanding aggregate principal balance of
all mortgage loans as of July 1, 1999, the
related seller has represented to the
depositor that, except as disclosed, no
adverse environmental condition exists.
Except as described below, neither the
related seller nor the related
environmental reports disclosed the
presence or risk of environmental
contamination that is considered material
to the interests of the holders of the
Certificates or, with respect to a
disclosed adverse material condition, the
material condition has been remedied to
the seller's satisfaction or funds as
deemed necessary by the sellers or the
related environmental engineer or
consultant have been placed in escrow to
remedy the adverse material condition.
With respect to one (1) mortgage loan,
identified on Appendix II attached hereto
as loan number 3, representing 2.2% of the
aggregate principal balance of the
mortgage loans as of July 1, 1999, the
environmental report indicated that the
related mortgaged property is contaminated
by dry cleaning solvents emanating from a
dry cleaner located thereon. A plan for
remediation of such contamination was
approved in February 1998. Bids received
to complete such remediation range from
$290,000 to $340,000. CIGNA Investments
has guaranteed all remediation and
monitoring costs over $600,000. With
respect to one (1) mortgage loan,
identified on Appendix II attached hereto
as loan number 59, representing 0.7% of
the aggregate principal balance of the
mortgage loans as of July 1, 1999, the
environmental report indicated that the
groundwater at the related mortgaged
property has been contaminated by off-site
sources, and is subject to ongoing
monitoring and treatment by applicable
regulatory authorities. With respect to
one (1) mortgage loan, identified on
Appendix II attached hereto as loan number
72, representing 0.6% of the aggregate
principal balance of the mortgage loans as
of July 1,
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<PAGE>
1999, the environmental report indicated
that the related mortgaged property is
contaminated by dry cleaning solvents
emanating from a dry cleaner located on an
adjacent property. The report also
indicates that the contamination of the
mortgaged property is below actionable
levels and that such adjacent property has
been accepted into the Florida Department
of Environmental Protection Drycleaning
Solvent Cleanup Program, under which all
remediation costs, including those
affecting other properties, will be paid
by such program. The groundwater at the
mortgaged property for one (1) mortgage
loan, identified on Appendix II attached
hereto as loan number 121, representing
0.3% of the aggregate principal balance of
the mortgage loans as of July 1, 1999, has
been contaminated by a leaking underground
storage tank and is currently subject to
ongoing monitoring by applicable
regulatory authorities.
We cannot assure you, however, that either
the sellers or the environmental reports
revealed all existing or potential
environmental risks or that all adverse
environmental conditions have been
completely remediated. Moreover, we cannot
assure you that: (i) future laws,
ordinances or regulations will not impose
any material environmental liability; or
(ii) the current environmental condition
of the mortgaged properties will not be
adversely affected by tenants or by the
condition of land or operations in the
vicinity of the mortgaged properties (such
as underground storage tanks).
Before the special servicer acquires title
to a mortgaged property on behalf of the
trust or assumes operation of the
property, it must obtain an environmental
assessment of the property. This
requirement will decrease the likelihood
that the trust will become liable under
any environmental law. However, this
requirement may effectively preclude
foreclosure until a satisfactory
environmental assessment is obtained (or
until any required remedial action is
thereafter taken). There is accordingly
some risk that the mortgaged property will
decline in value while this assessment is
being obtained. Moreover, we cannot assure
you that this requirement will effectively
insulate the trust from potential
liability under environmental laws.
BORROWER MAY BE UNABLE TO
REPAY THE REMAINING PRINCIPAL
BALANCE ON ITS MATURITY DATE
WHICH MAY HAVE AN ADVERSE
EFFECT ON THE PAYMENT OF YOUR
CERTIFICATES Ninety-eight (98) of the mortgage loans,
representing 73.7% of the outstanding
aggregate principal balance of all
mortgage loans as of July 1, 1999, are
expected to have substantial remaining
principal balances, equal to or greater
than 5% of the original principal balance
of each mortgage loan, as of their
respective stated maturity dates. We
cannot assure you that each borrower will
have the ability to repay the principal
balance outstanding on the stated maturity
dates. Mortgage loans with substantial
remaining principal balances at their
stated maturity date (i.e., "balloon
loans"), involve greater risk than fully
amortizing loans.
We cannot assure you that each borrower
will have the ability to repay the
remaining principal balances on the
pertinent date. General American Life
Insurance Company, as Majority Seller, and
Conning Asset Management Company as
fiduciary for City and County of San
Francisco Employees' Retirement System
Pension Trust, as Minority Seller (as
defined hereafter), and their respective
affiliates are not under any obligation to
refinance any mortgage loan.
S-33
<PAGE>
THE MORTGAGE LOAN BORROWER'S
ABILITY TO EFFECT OTHER
BORROWINGS MAY REDUCE THE
CASH FLOW AVAILABLE TO THE
PROPERTY WHICH MAY HAVE AN
ADVERSE EFFECT ON THE PAYMENT OF
YOUR CERTIFICATES Ten (10) of the mortgage loans,
representing 9.3% of the outstanding
aggregate principal balance of all
mortgage loans as of July 1, 1999, permit
the borrower, subject to certain maximum
loantovalue and/or minimum debt service
coverage ratio restrictions and, in some
cases, subject to lender approval (or, in
one case, subject to a maximum subordinate
debt amount) to utilize the mortgaged
property as collateral for subordinated
loans. Substantially all of the mortgage
loans also permit the related borrower to
incur limited indebtedness in the ordinary
course of business.
When a mortgage loan borrower (or its
constituent members), also has one or more
other outstanding loans (even if the loans
are subordinated or mezzanine loans), the
trust is subjected to the following
additional risks. The borrower may have
difficulty servicing and repaying multiple
loans. Also, the existence of another loan
generally will make it more difficult for
the borrower to obtain refinancing of the
mortgage loan and may thus jeopardize
repayment of the mortgage loan at
maturity. Moreover, the need to service
additional debt may reduce the cash flow
available to the borrower to operate and
maintain the mortgaged property.
Additionally, if the borrower, or its
constituent members, defaults on the
mortgage loan and/or any other loan,
actions taken by other lenders could
impair the security available to the
trust. If a junior lender files an
involuntary bankruptcy petition against
the borrower (or the borrower files a
voluntary petition to stay enforcement by
a junior lender), the trust's ability to
foreclose on the property will be
automatically stayed, and principal and
interest payments might not be made during
the course of the bankruptcy case. The
bankruptcy of a junior lender also may
operate to stay foreclosure by the trust.
Further, if another loan secured by the
mortgaged property is in default, the
other lender may foreclose on the
mortgaged property, absent an agreement to
the contrary, thereby causing a delay in
payments and/or an involuntary repayment
of the mortgage loan prior to maturity.
The trust may also be subject to the costs
and administrative burdens of involvement
in foreclosure proceedings or related
litigation.
BANKRUPTCY PROCEEDINGS RELATING
TO BORROWERS THAT ARE
PARTNERSHIPS CAN RESULT IN
DISSOLUTION OF THE BORROWER AND
THE ACCELERATION OF THE
RELATED MORTGAGE LOAN A number of the borrowers under the
mortgage loans are limited or general
partnerships. Under certain circumstances,
the bankruptcy of a general partner in
partnership may result in the dissolution
of such partnership. The dissolution of a
borrower partnership, the winding up of
its affairs and the distribution of its
assets could result in an acceleration of
its payment obligations under the related
mortgage loan.
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<PAGE>
THE OPERATION OF COMMERCIAL
PROPERTIES IS DEPENDENT UPON
SUCCESSFUL MANAGEMENT The successful operation of a real estate
project depends upon the property
manager's performance and viability. The
property manager is generally responsible
for:
o responding to changes in the local
market;
o planning and implementing the rental
structure;
o operating the property and providing
building services;
o managing operating expenses;
and
o assuring that maintenance and capital
improvements are carried out in a
timely fashion.
Properties deriving revenues primarily
from short-term sources are generally more
managementintensive than properties leased
to creditworthy tenants under long-term
leases.
A good property manager, by controlling
costs, providing appropriate service to
tenants and, by seeing to the maintenance
of improvements, can improve cash flow,
reduce vacancy, leasing and repair costs
and preserve building value. On the other
hand, management errors can, in some
cases, impair short-term cash flow and the
longterm viability of an income producing
property.
We make no representation or warranty as
to the skills of any present or future
managers. Additionally, we cannot assure
you that the property managers will be in
a financial condition to fulfill their
management responsibilities throughout the
terms of their respective management
agreements.
PROPERTY INSPECTIONS PERFORMED
ON THE MORTGAGED PROPERTIES
MAY NOT REFLECT ALL CONDITIONS
THAT REQUIRE REPAIR ON THE
PROPERTY An engineering report dated on or after
January 1, 1998, was obtained from an
engineer or consultant in connection with
the origination of forty-four (44) of the
mortgage loans, representing 39.8% of the
aggregate principal balance of all
mortgage loans as of July 1, 1999. These
engineering reports were prepared in order
to assess items such as structure,
exterior walls, roofing, interior
construction, mechanical and electrical
systems and general condition of the site,
buildings and other improvements. However,
we cannot assure you that all conditions
requiring repair or replacement were
identified.
With respect to these mortgage loans, the
related sellers have represented to the
depositor that, except as disclosed in
such report, the mortgaged properties are
free and clear of any damage that would
materially and adversely affect its value
as security for the mortgage loan.
With respect to all other mortgaged
properties, representing 60.2% of the
aggregate principal balance of all
mortgage loans as of July 1, 1999, the
related sellers have represented to the
depositor that, except as disclosed, the
mortgaged properties are free and clear of
any damage that would materially and
adversely affect its value as security for
the mortgage loan. Neither the related
sellers nor the related engineering
reports disclosed any damage that is
considered material to the interests
S-35
<PAGE>
of the holders of the certificates, or,
with respect to a disclosed material
condition, the material condition has been
remedied to the seller's satisfaction or
funds as deemed necessary by the seller's
or the related engineer or consultant have
been held in escrow to remedy the material
condition.
THE ABSENCE OF OR INADEQUACY OF
INSURANCE COVERAGE ON THE
PROPERTY MAY HAVE AN ADVERSE
EFFECT ON THE PAYMENT OF
YOUR CERTIFICATES The mortgaged properties may suffer
casualty losses due to risks that are not
covered by insurance or for which
insurance coverage is not available at
commercially reasonable rates. With
respect to 23 mortgage loans, representing
9.8% of the aggregate principal balance of
all mortgage loans as of July 1, 1999,
there is no evidence that the related
borrower has obtained comprehensive
general liability insurance. In addition,
some of the mortgaged properties are
located in California and along the
southeastern coast of the United States,
areas that have historically been at
greater risk of acts of nature for which
adequate insurance is not generally
available (such as earthquakes, hurricanes
and floods). Forty-eight (48) of the
mortgage loans, representing 28.4% of the
aggregate principal balance of all
mortgage loans as of July 1, 1999, are
secured by mortgaged properties located in
areas generally considered locations of
high seismic activity, and which do not
require earthquake insurance coverage. The
mortgage loans generally do not require
borrowers to maintain hurricane or flood
insurance and we cannot assure you that
borrowers will attempt or be able to
obtain adequate insurance against such
risks. Moreover, if reconstruction or
major repairs are required following a
casualty, changes in laws that have
occurred since the time of original
construction may materially affect the
borrower's ability to effect such
reconstruction or major repairs or may
materially increase the cost thereof.
INACCURATE APPRAISALS MAY
INACCURATELY REFLECT THE
VALUE OF THE MORTGAGE LOANS In connection with the origination or
acquisition of each of the mortgage loans,
the related mortgaged property was
appraised by an independent appraiser or
by an employee of the respective
originator who was a state certified
appraiser. With respect to seventy-nine
(79) mortgage loans, representing 62.5% of
the outstanding aggregate principal
balance of all the mortgage loans as of
July 1, 1999, which have appraisals that
were dated June 1, 1997, or later, the
estimates of value in the appraisals were
used in the calculations of the
loan-to-value ratios for these mortgage
loans. Those estimates represent the
analysis and opinion of the person
performing the appraisal or market
analysis and are not guarantees of present
or future values. Moreover, the values of
the mortgaged properties may have changed
significantly since the appraisal or
market study was performed. In addition,
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. In addition, with
respect to seventy-four (74) mortgage
loans, representing 37.5% of the
outstanding aggregate principal balance of
all mortgage loans as of July 1, 1999, the
appraisals were dated prior to June 1,
1997. For these properties the
loan-to-value ratios as of July 1, 1999,
were not calculated using the resulting
estimates of such appraisals. Instead, the
loan-to-value ratios at the time of the
cut-off date for these mortgage loans were
calculated according to the methodology
described in this
S-36
<PAGE>
prospectus supplement using a
capitalization rate applied to the
underwritten cash flow of such mortgaged
property or properties to determine the
value of such mortgaged property or
properties.
When appraisals were performed, they were
performed within a year of the origination
of the related mortgage loan. Information
regarding the values of mortgaged
properties available to the depositor as
of the cut-off date is presented for
illustrative purposes only in Appendix I
and Appendix II in this prospectus
supplement.
THE TIMING OF MORTGAGE LOAN
AMORTIZATION MAY HAVE AN
ADVERSE EFFECT ON
THE PAYMENT OF YOUR CERTIFICATES As principal payments or prepayments are
made on mortgage loans, the remaining
mortgage pool may be subject to increased
concentrations of property types,
geographic locations and other pool
characteristics of the mortgage loans and
the mortgaged properties, some of which
may be unfavorable. Classes of
certificates that have a lower payment
priority are more likely to be exposed to
this concentration risk than are
certificate classes with a higher payment
priority. This occurs because realized
losses are allocated to the class
outstanding at any time with the lowest
payment priority and principal on the
certificates entitled to principal is
generally payable in sequential order
(that is, in alphabetical order), with
such classes generally not being entitled
to receive principal until the principal
amount of the preceding class or classes
entitled to receive principal has been
retired.
SUBORDINATION OF SUBORDINATE
OFFERED CERTIFICATES WILL AFFECT
THE TIMING OF PAYMENTS AND THE
APPLICATION OF LOSSES ON YOUR
CERTIFICATES As described in this prospectus
supplement, the rights of the holders of
each class of subordinate certificates to
receive payments of principal and interest
otherwise payable on their certificates
will be subordinated to such rights of the
holders of the more senior certificates
having an earlier alphabetical class
designation. Losses on the mortgage loans
will be allocated to the Class O, Class N,
Class M, Class L, Class K, Class J, Class
H, Class G, Class F, Class E, Class D,
Class C and Class B Certificates, in that
order, reducing amounts otherwise payable
to each class. Any remaining losses would
then be allocated to the Class A-1 and
Class A-2 certificates, and, solely with
respect to losses of interest, to the
Class X Certificates, in proportion to the
amounts of interest or principal
distributed thereon.
THE OPERATION OF THE MORTGAGED
PROPERTY UPON FORECLOSURE OF THE
MORTGAGE LOAN MAY AFFECT THE
TAX STATUS OF THE TRUST AND MAY
HAVE AN ADVERSE EFFECT ON THE
PAYMENT OF YOUR CERTIFICATES If the trust acquires a mortgaged property
pursuant to a foreclosure or deed in lieu
of foreclosure, the special servicer will
generally retain an independent contractor
to operate the property. Any net income
from such operation 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
non-customary service, will subject the
trust to a federal tax on such income at
the highest marginal corporate tax rate,
which is currently 35%, and, in addition,
possible state or local tax. In such
event, the net proceeds available for
distribution to certificateholders
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will be reduced. The special servicer may
permit the trust to earn "net income from
foreclosure property" that is subject to
tax if it determines that the net
after-tax benefit to certificateholders is
greater than under another method of
operating or leasing the mortgaged
property.
STATE LAWS APPLICABLE TO
FORECLOSURE ACTIONS MAY AFFECT
THE TIMING OF PAYMENTS ON YOUR
CERTIFICATES AND MAY HAVE AN
ADVERSE EFFECT ON THE PAYMENT
OF YOUR CERTIFICATES Some states (including California and
Washington) have laws prohibiting more
than one "judicial action" to enforce a
mortgage obligation. Some courts have
construed the term "judicial action"
broadly. In the case of a mortgage loan
secured by mortgaged properties located in
multiple states, the master servicer or
special servicer may be required to
foreclose first on mortgaged 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. As a
result, the ability to realize upon the
mortgage loans may be limited by the
application of state laws.
MORTGAGE LOANS SECURED BY
MORTGAGES ON BORROWERS'
LEASEHOLD INTERESTS WILL SUBJECT
YOUR INVESTMENT TO A RISK
OF LOSS UPON A LEASE DEFAULT Seven (7) of the mortgage loans,
representing 6.0% of the outstanding
aggregate principal balance of all
mortgage loans, as of July 1, 1999, are
secured solely by mortgages on borrowers'
leasehold interests under ground leases.
In addition, two (2) mortgage loans,
representing 1.0% of the outstanding
aggregate principal balance of all
mortgage loans, as of July 1, 1999, are
secured by mortgages on both the
borrower's leasehold interest in a portion
of the related mortgaged property and fee
simple interest in the remainder of the
related mortgaged property. Three (3)
mortgage loans, representing approximately
3.2% of the aggregate principal balance of
the mortgage loans as of July 1, 1999, are
each secured by a first lien encumbering
both the related borrower's leasehold
interest in the related mortgaged property
and the fee interest of the person/entity
which owns the related mortgaged property.
The execution of such mortgages by the fee
owners may be subject to challenge as a
fraudulent conveyance by creditors of such
fee owners in an action brought outside a
bankruptcy case or, if such a fee owner
were to become a debtor in a bankruptcy
case, by such fee owner or its
representative identical to the risks
described in this prospectus supplement
with respect to cross-collateralization
arrangements.
Leasehold mortgage loans are subject to
risks not associated with mortgage loans
secured by a lien on the fee estate of the
borrower. The most significant of these
risks is that if the borrower's leasehold
were to be terminated upon a lease
default, the leasehold mortgagee would
lose its security. Generally, the related
ground lease requires the lessor to give
the leasehold mortgagee notice of lessee
defaults and an opportunity to cure them,
permits the leasehold estate to be
assigned to the leasehold mortgagee or the
purchaser at a foreclosure sale, and
contains certain other protective
provisions typically included in a
"mortgageable" ground lease.
Upon the bankruptcy of a lessor or a
lessee under a ground lease, the debtor
entity has the right to assume or reject
the lease. If a debtor
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lessor rejects the lease, the lessee has
the right to remain in possession of its
leased premises under its current rent and
under the lease for the term of the lease
(including renewals). If a debtor
lessee/borrower rejects any or all of its
leases, the leasehold lender could succeed
to the lessee/borrower's position under
the lease only if the lessor specifically
grants the lender such right. As a result,
the lender may lose its security. If both
the lessor and the lessee/borrower are
involved in bankruptcy proceedings, the
trustee may be unable to enforce the
bankrupt lessee/borrower's obligation to
refuse to treat a ground lease rejected by
a bankrupt lessor as terminated. In such
circumstances, a lease could be terminated
notwithstanding lender protection
provisions contained therein or in the
mortgage so that the lender would lose its
security. Some of the ground leases
securing the mortgaged properties provide
that the ground rent payable thereunder
increases during the term of the lease.
These increases may adversely affect the
cash flow and net income of the borrower
from the mortgaged property.
CROSS-COLLATERALIZATION OF GROUPS
OF MORTGAGE LOANS COULD LEAD TO
REDUCED PAYMENT ON YOUR
CERTIFICATES AND MAY HAVE AN
ADVERSE EFFECT ON THE
PAYMENT OF YOUR CERTIFICATES The mortgage pool includes two (2) groups
of mortgage loans, the largest of which
collectively represents 0.7% of the
outstanding aggregate principal balance of
all mortgage loans as of July 1, 1999,
under which an aggregate amount of
indebtedness is evidenced by multiple
obligations that are cross-defaulted and
cross-collateralized among multiple
mortgaged properties.
Cross-collateralization arrangements
involving more than one borrower could be
challenged as fraudulent conveyances by
creditors of the related borrower in an
action brought outside a bankruptcy case
or, if such borrower were to become a
debtor in a bankruptcy case, by the
borrower or its representative.
Specifically, a lien granted by a borrower
entity for the benefit of another borrower
or borrowers in a cross-collateralization
arrangement could be avoided if a court
were to determine that: (i) such borrower
entity was insolvent when it granted 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) such
borrower entity did not receive fair
consideration or reasonably equivalent
value when it allowed its mortgaged
property or properties to be encumbered by
a lien benefiting the other borrowers.
Among other things, a legal challenge to
the granting of the liens may focus on the
benefits realized by such borrower entity
from the respective mortgage loan
proceeds, as well as the overall
cross-collateralization. If a court were
to conclude that the granting of the liens
was an avoidable fraudulent conveyance,
that court could subordinate all or part
of the pertinent mortgage loan to existing
or future indebtedness of that borrower.
The court also could recover payments made
under that mortgage loan or take other
actions detrimental to the holders of the
certificates, including, under certain
circumstances, invalidating the loan or
the mortgages that are subject to such
cross-collateralization.
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THE BANKRUPTCY OR INSOLVENCY OF
ANY GROUPS OF MORTGAGE LOANS
MADE TO AFFILIATED BORROWERS MAY
REDUCE THE CASH FLOW OF THE
PROPERTIES AND MAY HAVE AN
ADVERSE EFFECT ON THE PAYMENT OF
YOUR CERTIFICATES Ten (10) groups of mortgage loans
(including crosscollateralized mortgage
loan groups), the largest of which
represents 4.6% of the outstanding
aggregate principal balance of all
mortgage loans as of July 1, 1999, were
made to borrowers which are affiliated
through common ownership of partnership or
other equity interests and where, in
general, the related mortgaged properties
are commonly managed.
The bankruptcy or insolvency of any such
borrower or respective affiliate could
have an adverse effect on the operation of
all of the related mortgaged properties
and on the ability of such related
mortgaged properties to produce sufficient
cash flow to make required payments on the
related mortgage loans. For example, if a
person that owns or controls several
mortgaged properties experiences financial
difficulty at one such property, it could
defer maintenance at one or more other
mortgaged properties in order to satisfy
current expenses with respect to the
mortgaged property experiencing financial
difficulty, or it could attempt to avert
foreclosure by filing a bankruptcy
petition that might have the effect of
interrupting monthly payments for an
indefinite period on all the related
mortgage loans.
LEASES WHICH ARE SUBORDINATE TO
LIENS ON THE MORTGAGED
PROPERTIES MAY HAVE AN ADVERSE
EFFECT ON THE PAYMENT OF
YOUR CERTIFICATES In some jurisdictions, if tenant leases
are subordinate to the liens created by
the mortgage and do not contain attornment
provisions which require the tenant to
recognize a successor owner following
foreclosure as landlord under the lease,
the leases may terminate upon the transfer
of the property to a foreclosing lender or
purchaser at foreclosure. Not all leases
were reviewed to ascertain the existence
of these provisions. Accordingly, if a
mortgaged property is located in such a
jurisdiction and is leased to one or more
desirable tenants under leases that are
subordinate to the mortgage and do not
contain attornment provisions, such
mortgaged property could experience a
further decline in value if such tenants'
leases were terminated. This is
particularly likely if such tenants were
paying above-market rents or could not be
replaced.
If a lease is not subordinate to a
mortgage, the trust will not possess the
right to dispossess the tenant upon
foreclosure of the mortgaged property
unless it has otherwise agreed with the
tenant. If the lease contains provisions
inconsistent with the mortgage, for
example, provisions relating to
application of insurance proceeds or
condemnation awards, or which could affect
the enforcement of the lender's rights,
for example, a right of first refusal to
purchase the property, the provisions of
the lease will take precedence over the
provisions of the mortgage. Some of the
leases at the retail properties included
in the trust may not be subordinate to the
related mortgage.
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LITIGATION ARISING OUT OF
ORDINARY BUSINESS MAY AFFECT
THE TIMING AND/OR PAYMENT ON
YOUR CERTIFICATES AND MAY HAVE
AN ADVERSE EFFECT ON YOUR
CERTIFICATES There may be pending or threatened legal
proceedings against the borrowers and
managers of the mortgaged properties and
their respective affiliates arising out of
the ordinary business of the borrowers,
managers and affiliates. This litigation
could cause a delay in the payment on your
certificates. Therefore, we cannot assure
you that any such litigation would not
have a material adverse effect on your
certificates.
THERE ARE CONFLICTS OF INTEREST OF
THE OPERATING ADVISER, THE
MASTER SERVICER, THE SPECIAL
SERVICER AND THE MANAGERS OF THE
MORTGAGED PROPERTY THAT MAY
HAVE AN ADVERSE EFFECT ON YOUR
CERTIFICATES The special servicer is given considerable
latitude in determining whether and in
what manner to liquidate or modify
defaulted mortgage loans. The operating
adviser will have the right to replace the
special servicer upon satisfaction of
certain conditions. At any given time, the
operating adviser will be controlled
generally by the holders of the most
subordinated (or, under certain
circumstances, the next most subordinated)
class of certificates (that is, the
controlling class) outstanding from time
to time, and such holders may have
interests in conflict with those of the
holders of the other certificates. For
instance, the holders of certificates of
the controlling class might desire to
mitigate the potential for loss to that
class from a troubled mortgage loan by
deferring enforcement in the hope of
maximizing future proceeds. However, the
interests of the trust may be better
served by prompt action, since delay
followed by a market downturn could result
in less proceeds to the trust than would
have been realized if earlier action had
been taken.
A Delaware business trust of which the
sellers are the sole beneficiaries is
expected to acquire the Class D, Class E,
Class F, Class G, Class H, Class J, Class
K, Class L, Class M, Class N and Class O
Certificates and it will initially be the
controlling class. General American Life
Insurance Company is an affiliate of the
master servicer and the special servicer.
Under such circumstances, the master
servicer and the special servicer may have
interests that conflict with the interests
of the other holders of the certificates.
Substantially all of the property managers
for the mortgaged properties (or their
affiliates) manage additional properties,
including properties that may compete with
the mortgaged properties. Affiliates of
the managers, and certain of the managers
themselves, also may own other properties,
including competing properties. The
managers of the mortgaged properties may
accordingly experience conflicts of
interest in the management of such
mortgaged properties.
PREPAYMENTS MAY REDUCE
THE YIELD ON YOUR CERTIFICATES The yield to maturity on your certificates
will depend, in significant part, upon the
rate and timing of principal payments on
the mortgage loans. For this purpose,
principal payments include both voluntary
prepayments, if permitted, and involuntary
prepayments, such as prepayments resulting
from casualty or condemnation of mortgaged
properties, defaults and liquidations by
borrowers, or repurchases as a
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result of a seller's breach of
representations and warranties or material
defects in a mortgage loan's
documentation. In particular, the sellers
of the mortgage loans will make certain
representations as to structural damage
and environmental condition for mortgaged
properties that may not have been
inspected in over two years.
The investment performance of your
certificates may vary materially and
adversely from your expectations if the
actual rate of prepayment is higher or
lower than you anticipate.
Voluntary prepayments under certain of the
mortgage loans require payment of a
prepayment premium unless the prepayment
occurs within generally two to eight
months prior to the stated maturity date.
Nevertheless, we cannot assure you that
the related borrowers will refrain from
prepaying their mortgage loans due to the
existence of a prepayment premium. We also
cannot assure you that involuntary
prepayments will not occur. The rate at
which voluntary prepayments occur on the
mortgage loans will be affected by a
variety of factors, including:
o the terms of the mortgage loans;
o the length of any prepayment lockout
period;
o the level of prevailing interest rates;
o the availability of mortgage credit;
o the applicable yield maintenance
charges or prepayment premiums;
o the occurrence of casualties or natural
disasters; and
o economic, demographic, tax or legal
factors.
Generally, no prepayment premium will be
required for prepayments in connection
with a casualty or condemnation. In
addition, if a seller repurchases any
mortgage loan from the trust due to the
breach of a representation or warranty,
the repurchase price paid will be passed
through to the holders of the certificates
with the same effect as if the mortgage
loan had been prepaid in part or in full,
except that no prepayment premium will be
payable. Such a repurchase may, therefore,
adversely affect the yield to maturity on
your certificates.
Also, the description in the mortgage
notes of the method of calculation of
prepayment premiums is complex and it is
possible that another person would apply a
different methodology than the one used in
determining the yield to maturity on your
certificates as described in this
prospectus supplement.
THE YIELD ON YOUR CERTIFICATE
WILL BE AFFECTED BY THE PRICE AT
WHICH THE CERTIFICATE WAS
PURCHASED AND THE RATE, TIMING
AND AMOUNT OF DISTRIBUTIONS ON
THE CERTIFICATE The yield on any certificate will depend
on (1) the price at which such certificate
is purchased by an investor and (2) the
rate, timing and amount of distributions
on such certificate. The rate, timing and
amount of distributions on any certificate
will, in turn, depend on, among other
things:
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o the interest rate for such certificate;
o the rate and timing of principal
payments (including principal
prepayments) and other principal
collections on or in respect of the
mortgage loans and the extent to which
such amounts are to be applied or
otherwise result in a reduction of the
certificate balance of such
certificate;
o the rate, timing and severity of losses
on or in respect of the mortgage loans
or unanticipated expenses of the trust;
o the timing and severity of any interest
shortfalls resulting from prepayments;
o the timing and severity of any
reductions in the appraised value of
any mortgaged property in a manner that
has an effect on the amount of
advancing required on the related
mortgage loan; and
o the method of calculation of prepayment
premiums and the extent to which
prepayment premiums are collected and,
in turn, distributed on such
certificate.
YOU BEAR THE RISK OF
BORROWER DEFAULTS The rate and timing of delinquencies
or defaults on the mortgage loans will
affect the following aspects of the
offered certificates:
o the aggregate amount of distributions
on them;
o their yields to maturity;
o their rates of principal payments; and
o their weighted average lives.
The rights of holders of each class of
subordinate certificates to receive
payments of principal and interest
otherwise payable on their certificates
will be subordinated to such rights of the
holders of the more senior certificates
having an earlier alphabetical class
designation. Losses on the mortgage loans
will be allocated to the Class O, Class N,
Class M, Class L, Class K, Class J, Class
H, Class G, Class F, Class E, Class D,
Class C and Class B Certificates, in that
order, reducing amounts otherwise payable
to each class. Any remaining losses would
then be allocated to the Class A-1 and
Class A-2 Certificates.
If losses on the mortgage loans exceed the
aggregate certificate balance of the
classes of certificates subordinated to a
particular class, such class will suffer a
loss equal to the full amount of such
excess (up to the outstanding certificate
balance of such class).
If you calculate your anticipated yield
based on assumed rates of default and
losses that are lower than the default
rate and losses actually are experienced
and such losses are allocable to your
certificates, your actual yield to
maturity will be lower than the assumed
yield. Under certain extreme scenarios,
such yield could be negative. In general,
the earlier a loss borne by your
certificates occurs, the greater the
effect on your yield to maturity.
Even if losses on the mortgage loans are
not borne by your certificates, those
losses may affect the weighted average
life and yield to maturity of your
certificates. This may be so because those
losses cause your certificates to have a
higher percentage ownership interest in
the trust
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<PAGE>
(and therefore a greater portion of the
related distributions of principal
payments on the mortgage loans) than would
otherwise have been the case. The effect
on the weighted average life and yield to
maturity of your certificates will depend
upon the characteristics of the remaining
mortgage loans.
Additionally, delinquencies and defaults
on the mortgage loans may significantly
delay the receipt of distributions by you
on your certificates, unless advances are
made to cover delinquent payments or the
subordination of another class of
certificates fully offsets the effects of
any such delinquency or default.
COMPENSATION TO THE MASTER
SERVICER, THE SPECIAL SERVICER AND
THE TRUSTEE MAY HAVE AN
ADVERSE EFFECT ON THE PAYMENT OF
YOUR CERTIFICATES To the extent described in this prospectus
supplement, the master servicer or the
trustee will be entitled to receive
interest on unreimbursed advances they
have made with respect to defaulted
monthly payments or that are made with
respect to the preservation and protection
of the related mortgaged property. This
interest will generally accrue from the
date on which the related advance is made
or the related expense is incurred through
the date of reimbursement. In addition,
under certain circumstances, including
delinquencies in the payment of principal
and interest, a mortgage loan will be
serviced by the special servicer, and the
special servicer is entitled to
compensation for special servicing
activities. The right to receive interest
on advances and special servicing
compensation is senior to the rights of
certificateholders to receive
distributions.
THE SELLERS OF THE MORTGAGE
LOANS ARE SUBJECT TO BANKRUPTCY
OR INSOLVENCY LAWS THAT MAY
AFFECT THE TRUST'S OWNERSHIP OF
THE MORTGAGE LOANS General American Life Insurance Company is
a Missouri life insurance corporation
regulated under the insurance laws of the
State of Missouri. As such, General
American is not susceptible to bankruptcy
proceedings under federal law, but in the
event of its insolvency or comparable
circumstances, General American may be
placed in receivership or otherwise seized
for purposes of rehabilitation or
liquidation by the director of the
Missouri department of insurance.
The City and County of San Francisco
Employees' Retirement System Pension Trust
is a public pension plan created by a
municipal corporation for the benefit of
its employees. It is unclear whether
federal bankruptcy law or California
common law would govern if the Pension
Trust became insolvent.
In the event of the insolvency of either
seller, it is possible the trust's right
to payment from or ownership of the
mortgage loans could be challenged, and if
such challenge were successful, delays or
reductions in payments on the certificates
could occur.
Based upon an opinion of counsel that the
conveyance of the mortgage loans to the
depositor will be a true sale under
applicable state law, which opinion is
subject to various assumptions and
qualifications, the sellers believe that
such a challenge will be unsuccessful, but
there can be no assurance that the
director of the Missouri department of
insurance, a bankruptcy trustee, if
applicable, or other interested party
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will not attempt to assert such a
position. Even if actions seeking such
results were not successful, it is
possible that payments on the certificates
would be delayed while a court resolves
the claim.
COMPUTER PROGRAMMING
PROBLEMS RELATED TO THE YEAR
2000 MAY HAVE ADVERSE EFFECTS
ON THE PAYMENT OF YOUR
CERTIFICATES We are aware of the issues associated with
the programming code in existing computer
systems as the year 2000 approaches. The
"year 2000 problem" is pervasive and
complex. Virtually every computer
operation will be affected in some way by
the rollover of the two digit year value
to 00. The issue is whether computer
systems will properly recognize
date-sensitive information when the year
changes to 2000. Systems that do not
properly recognize such information could
generate erroneous data or otherwise fail.
We have been advised by each of the
trustee, the master servicer and the
special servicer that they are committed
either to (1) implement modifications to
their respective existing systems to the
extent required to cause them to be year
2000 compliant or (2) acquire computer
systems that are year 2000 compliant, in
each case prior to January 1, 2000.
However, we have not made any independent
investigation of the computer systems of
the trustee, the master servicer or the
special servicer. In the event that
computer problems arise out of a failure
of such efforts to be completed on time,
or in the event that the computer systems
of the trustee, the master servicer or the
special servicer are not fully year 2000
compliant, the resulting disruptions in
the collection or distribution of receipts
on the mortgage loans could materially
adversely affect your investment.
Additionally, no independent investigation
of the computer systems of any borrower or
any tenant of a mortgaged property has
been completed. The operation of a
borrower or a tenant at a mortgaged
property may be dependent upon computer
systems that are not fully year 2000
compliant. In such case, disruptions could
occur in the borrower's collection of
rents and other income from such mortgaged
property, potentially resulting in
disruptions in the borrower's required
payments due in connection with such
mortgage loan.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Series 1999-CAM1 Commercial Mortgage Pass-Through Certificates will
be issued on or about July 14, 1999 pursuant to a Pooling and Servicing
Agreement to be dated as of the Cut-Off Date, among the Depositor, the Master
Servicer, the Special Servicer and the Trustee.
Capitalized terms used and not otherwise defined herein have the
meanings given to them in the section of this Prospectus Supplement entitled
"Glossary of Terms."
The Certificates will represent in the aggregate the entire beneficial
ownership interest in the Trust Fund consisting primarily of:
o the Mortgage Loans and all payments under and proceeds of the
Mortgage Loans received after the Cut-Off Date (exclusive of
principal prepayments received prior to the Cut-Off Date and
scheduled payments of principal and interest due on or before
the Cut-Off Date);
o any Mortgaged Property acquired on behalf of the
Certificateholders in respect of a defaulted Mortgage Loan
through foreclosure, deed in lieu of foreclosure or otherwise;
and
o certain rights of the Depositor under, or assigned to the
Depositor pursuant to, each of the Mortgage Loan Purchase
Agreements relating to Mortgage Loan document delivery
requirements and the representations and warranties of the
related Seller regarding its Mortgage Loans.
The Certificates will consist of 19 classes, to be designated as:
o the Class A-1 Certificates and the Class A-2 Certificates;
o the Class X Certificates;
o the Class B Certificates, the Class C Certificates, the Class
D Certificates, the Class E Certificates, the Class F
Certificates, the Class G Certificates, the Class H
Certificates, the Class J Certificates, the Class K
Certificates, the Class L Certificates, the Class M
Certificates, the Class N Certificates and the Class O
Certificates; and
o the Class R-I Certificates, the Class R-II Certificates and
the Class R-III Certificates.
Only the Class A, Class B, Class C, Class D, Class E and Class F
Certificates are offered hereby. The Class X, Class G, Class H, Class J, Class
K, Class L, Class M, Class N and Class O Certificates and the Residual
Certificates have not been registered under the Securities Act of 1933, as
amended, and are not offered hereby.
The Class A Certificates will be issued in book-entry form in
denominations of $25,000 initial Certificate Balance and in any whole dollar
denomination in excess thereof. The Class B, Class C, Class D, Class E and
Class F Certificates will be issued in book-entry form in denominations of
$100,000 initial Certificate Balance and in any whole dollar denomination in
excess thereof.
Each Class of Offered Certificates will initially be represented by one
or more global Certificates registered in the name of the nominee of DTC. The
Depositor has been informed by DTC that DTC's nominee initially will be Cede &
Co. No person acquiring an interest in an Offered Certificate will be entitled
to receive a fully registered physical certificate representing such interest,
except as set forth in the Prospectus under "Description of the
Certificates--Book-Entry Registration and Definitive Certificates". Unless and
until Definitive Certificates are issued in respect of any Class of Offered
Certificates, all references to actions by holders of the Offered Certificates
will refer to actions taken by DTC upon instructions received from the related
Certificate Owners through DTC's participating organizations.
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All references herein to payments, notices, reports and statements to
holders of the 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 the related Certificate Owners through DTC's
Participants in accordance with DTC procedures. Until Definitive Certificates
are issued in respect of any Class of Offered Certificates, interests in such
Certificates will be transferred on the book-entry records of DTC (and its
Participants). See "Description of the Certificates--Book-Entry Registration and
Definitive Certificates" in the Prospectus.
Certificateholders must hold their Offered Certificates in book-entry
form, and delivery of the Offered Certificates will be made through the
facilities of DTC, in the United States, and may be made through the facilities
of CEDEL or Euroclear, in Europe. Transfers within DTC, CEDEL or Euroclear, as
the case may be, will be in accordance with the usual rules and operating
procedures of the relevant system. Crossmarket transfers between persons holding
directly or indirectly through DTC, on the one hand, and counterparties holding
directly or indirectly through CEDEL or Euroclear, on the other, will be
effected in DTC through Citibank, N.A. or The Chase Manhattan Bank, the relevant
depositaries of CEDEL and Euroclear, respectively.
Because of time-zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a DTC participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear participant or CEDEL customer on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
customer 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.
DTC management is aware that some DTC Systems are dependent upon
calendar dates, including dates before, on, and after January 1, 2000, may
encounter "Year 2000 problems." DTC has informed its Participants and other
members of the financial community that it has developed and is implementing a
program so that the DTC Systems, as the same relate to the timely payment of
distributions, including principal and income payments, to securityholders,
book-entry deliveries, and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as third party vendors from whom DTC licenses software and
hardware, and third party vendors on whom DTC relies for information or the
provisions of services, including telecommunication and electrical utility
service providers, among others.
DTC has informed its Participants and other members of the financial
community that it is contacting and will continue to contact third party vendors
from whom DTC acquires services to:
o impress upon them the importance of such services being Year
2000 compliant; and
o determine the extent of their efforts for Year 2000
remediation and, as appropriate, testing of their services. In
addition, DTC is in the process of developing such contingency
plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has
been provided to its Participants and other members of the financial community
for informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
CERTIFICATE BALANCES AND NOTIONAL AMOUNT
Upon initial issuance, the Class A-1, Class A-2, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M,
Class N and Class O Certificates will have the following aggregate Certificate
Balances. In each case, the Certificate Balances may vary by 5%:
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<TABLE>
<CAPTION>
APPROXIMATE RATINGS
INITIAL AGGREGATE PERCENT OF INITIAL (FITCH IBCA/ APPROXIMATE
CLASS CERTIFICATE BALANCE POOL BALANCE S&F) CREDIT SUPPORT
<S> <C> <C> <C> <C>
Class A-1 $442,000,000 80.50% AAA/AAA 19.50%
Class A-2 $209,529,000 80.50% AAA/AAA 19.50%
Class B $ 26,304,000 3.25% AA/AA 16.25%
Class C $ 26,304,000 3.25% A/A 13.00%
Class D $ 12,140,000 1.50% A-/A- 11.50%
Class E $ 20,234,000 2.50% BBB/BBB 9.00%
Class F $ 8,094,000 1.00% BBB-/BBB- 8.00%
Classes ------ 8.00% ------ ------
G-O
</TABLE>
The percentages indicated under the columns "Approximate Credit
Support" and "Approximate Percent of Initial Pool Balance" with respect to the
Class A-1 and Class A-2 Certificates represent the approximate credit support
and total certificate balance as applicable, for the Class A-1 and Class A-2
Certificates in the aggregate.
The initial Certificate Balance of each Principal Balance Certificate
will be set forth on the face thereof. On each Distribution Date, the
Certificate Balance of each Principal Balance Certificate will be reduced by any
distributions of principal actually made on that Certificate on the applicable
Distribution Date, and will be further reduced by any Realized Losses and
Expense Losses allocated to such Certificate on such Distribution Date. See
"--Distributions" and "--Distributions--Subordination; Allocation of Losses and
Certain Expenses" below.
The Interest Only Certificates will not have a Certificate Balance.
Such Class of Certificates will represent the right to receive distributions of
interest accrued as described herein on a Notional Amount.
The aggregate Notional Amount of the Interest Only Certificates will
equal 100% of the aggregate Scheduled Principal Balance of the Mortgage Loans
outstanding from time to time. The Interest Only Certificates will have an
initial aggregate Notional Amount of $809,353,823, subject to a permitted
variance of plus or minus 5%. The Notional Amount of each Interest Only
Certificate is used solely for the purpose of determining the amount of interest
to be distributed on such Certificate and does not represent the right to
receive any distributions of principal.
The Residual Certificates will not have Certificate Balances or
Notional Amounts.
PASS-THROUGH RATES
The Pass-Through Rates applicable to the Class A-1, Class A-2 and Class
B Certificates for each Distribution Date will, at all times, be equal to ___%,
___% and ___% per annum, respectively; provided, however, that each such
Pass-Through Rate will not exceed the Weighted Average Net Mortgage Rate for
such Distribution Date.
The Pass-Through Rates applicable to the Class C, Class D, Class E and
Class F Certificates for the initial Distribution Date will equal approximately
___%, ___%, ___% and ___% per annum, respectively. For each subsequent
Distribution Date, the Pass-Through Rate on the Class C Certificates will be a
per annum rate equal to the Weighted Average Net Mortgage Rate for such
Distribution Date minus ___%. For each subsequent Distribution Date, the
Pass-Through Rate on the Class D Certificates will be a per annum rate equal to
the Weighted Average Net Mortgage Rate for such Distribution Date minus ___%.
For each subsequent Distribution Date, the Pass-Through Rate on the Class E
Certificates will be a per annum rate equal to the Weighted Average Net Mortgage
Rate for such Distribution Date. For each subsequent Distribution Date, the
Pass-Through Rate on the Class F Certificates will be a per annum rate equal to
the Weighted Average Net Mortgage Rate for such Distribution Date.
The Pass-Through Rates applicable to the Class G, Class H, Class J,
Class K, Class L, Class M, Class N and Class O Certificates, which are Private
Certificates, for each Distribution Date will each, at all times, be equal to
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<PAGE>
___% per annum; provided, however, that each such Pass-Through Rate will not
exceed the Weighted Average Net Mortgage Rate for such Distribution Date.
The Pass-Through Rate applicable to the Class X Certificates, which are
Private Certificates, for the initial Distribution Date will equal approximately
___% per annum.
The Pass-Through Rate applicable to the Class X Certificates for each
Distribution Date subsequent to the initial Distribution Date will, in general,
equal the excess, if any, of:
o the Weighted Average Net Mortgage Rate for such Distribution
Date, over
o the weighted average of the Pass-Through Rates applicable to
the respective Classes of Principal Balance Certificates for
such Distribution Date, the relevant weighting to be on the
basis of the respective aggregate Certificate Balances of such
Classes of Certificates immediately prior to such Distribution
Date.
The Administrative Cost Rate for each Mortgage Loan is set forth in
Appendix II. The Administrative Cost Rate will be payable on the Scheduled
Principal Balance of each Mortgage Loan outstanding from time to time. The
Administrative Cost Rate applicable to a Mortgage Loan in any month will be
determined using the same interest accrual basis (i.e., a 360-day year
consisting of twelve 30-day months or a 360-day year and actual days elapsed) on
which interest accrues under the terms of such Mortgage Loan.
DISTRIBUTIONS
General
Distributions on or with respect to the Certificates will be made by
the Trustee, to the extent of available funds, and in accordance with the manner
and priority set forth herein, on each Distribution Date, commencing in August
1999. Except as otherwise described below, all such distributions will be made
to the persons in whose names the Certificates are registered at the close of
business on the related Record Date. Every distribution will be made 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 will have provided the Trustee with wiring
instructions on or before the related Record Date, or otherwise by check mailed
to such Certificateholder.
The final distribution on any Certificate will be determined without
regard to any possible future reimbursement of any Realized Losses or Expense
Losses previously allocated to such Certificate. The final distribution will be
made in the same manner as earlier distributions, but only upon presentation and
surrender of such Certificate at the location that will be specified in a notice
of the pendency of such final distribution. Any distribution that is to be made
with respect to a Certificate in reimbursement of a Realized Loss or Expense
Loss previously allocated thereto, which reimbursement is to occur after the
date on which such Certificate is surrendered as contemplated by the preceding
sentence, will be made by check mailed to the Certificateholder that surrendered
such Certificate. The likelihood of any such distribution is remote. All
distributions made on or with respect to a Class of Certificates will be
allocated pro rata among such Certificates based on their respective Percentage
Interests in such Class.
The Available Distribution Amount
With respect to any Distribution Date, distributions of interest on and
principal of the Certificates will be made from the Available Distribution
Amount for that Distribution Date.
With respect to the Distribution Date occurring in each January, other
than a leap year, and each February, the Interest Reserve Amount will be
deposited to the Interest Reserve Account in respect of each Interest Reserve
Loan in an amount equal to one day's interest at the related Net Mortgage Rate
on its principal balance as of the Due Date in the month in which such
Distribution Date occurs, to the extent a Scheduled Payment or P&I Advance is
timely made in respect thereof for such Due Date. The Net Mortgage Rate will be
applied without regard to any adjustment for Interest Reserve Amounts or the
interest accrual basis as described in the definition of "Net Mortgage Rate" in
the Glossary. With respect to the Distribution Date occurring in March of each
year, an amount is required to be withdrawn from the Interest Reserve Account in
respect of each Interest Reserve Loan equal to the related Interest Reserve
Amount from the preceding January, if applicable, and February, and the
withdrawn amount is to be included as part of the Available Distribution Amount
for such Distribution Date.
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<PAGE>
Application of the Available Distribution Amount
On each Distribution Date, except as described under "--Optional
Termination" below, for so long as any Class of Offered Certificates remains
outstanding, the Trustee will apply the Available Distribution Amount for such
date for the following purposes and in the following order of priority:
(i) to the holders of the Class A-1, Class A-2 and Class X
Certificates, the Distributable Certificate Interest Amount in
respect of each such Class of Certificates for such
Distribution Date, pro rata in proportion to the Distributable
Certificate Interest Amount payable in respect of each such
Class;
(ii) to the holders of the Class A-1 Certificates, the Principal
Distribution Amount for such Distribution Date, until the
aggregate Certificate Balance of the Class A-1 Certificates
has been reduced to zero;
(iii) upon payment in full of the aggregate Certificate Balance of
the Class A-1 Certificates, to the holders of the Class A-2
Certificates, the Principal Distribution Amount for such
Distribution Date until the aggregate Certificate Balance of
the Class A-2 Certificates has been reduced to zero; the
Principal Distribution Amount herein will be reduced by any
portion thereof distributed to the holders of the Class A-1
Certificates;
(iv) to the holders of the Class A and Class X Certificates, pro
rata in proportion to their respective entitlements to
reimbursement described in this clause, to reimburse them for
any Realized Losses previously allocated to such Classes of
Certificates, plus interest on such Realized Losses,
compounded monthly, at one-twelfth the applicable Pass-Through
Rate;
(v) to the holders of the Class B Certificates, the Distributable
Certificate Interest Amount in respect of such Class of
Certificates for such Distribution Date;
(vi) upon payment in full of the aggregate Certificate Balance of
the Class A-2 Certificates, to the holders of the Class B
Certificates, the Principal Distribution Amount for such
Distribution Date until the aggregate Certificate Balance of
the Class B Certificates has been reduced to zero; the
Principal Distribution Amount herein will be reduced by any
portion thereof distributed to the holders of the Class A
Certificates;
(vii) to the holders of the Class B Certificates, to reimburse them
for any Realized Losses previously allocated to such Class of
Certificates, plus interest on such Realized Losses,
compounded monthly, at one-twelfth the applicable Pass-Through
Rate;
(viii) to the holders of the Class C Certificates, the Distributable
Certificate Interest Amount in respect of such Class of
Certificates for such Distribution Date;
(ix) upon payment in full of the aggregate Certificate Balance of
the Class B Certificates, to the holders of the Class C
Certificates, the Principal Distribution Amount for such
Distribution Date until the aggregate Certificate Balance of
the Class C Certificates has been reduced to zero; the
Principal Distribution Amount herein will be reduced by any
portion thereof distributed to the holders of the Class A and
Class B Certificates;
(x) to the holders of the Class C Certificates, to reimburse them
for any Realized Losses previously allocated to such Class of
Certificates, plus interest on such Realized Losses,
compounded monthly, at one-twelfth the applicable Pass-Through
Rate;
(xi) to the holders of the Class D Certificates, the Distributable
Certificate Interest Amount in respect of such Class of
Certificates for such Distribution Date;
(xii) upon payment in full of the aggregate Certificate Balance of
the Class C Certificates, to the holders of the Class D
Certificates, the Principal Distribution Amount for such
Distribution Date until the aggregate Certificate Balance of
the Class D Certificates has
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<PAGE>
been reduced to zero; the Principal Distribution Amount herein
will be reduced by any portion thereof distributed to the
holders of the Class A, Class B and Class C Certificates;
(xiii) to the holders of the Class D Certificates, to reimburse them
for any Realized Losses previously allocated to such Class of
Certificates, plus interest on such Realized Losses,
compounded monthly, at one-twelfth the applicable Pass-Through
Rate;
(xiv) to the holders of the Class E Certificates, the Distributable
Certificate Interest Amount in respect of such Class of
Certificates for such Distribution Date;
(xv) upon payment in full of the aggregate Certificate Balance of
the Class D Certificates, to the holders of the Class E
Certificates, the Principal Distribution Amount for such
Distribution Date until the aggregate Certificate Balance of
the Class E Certificates has been reduced to zero; the
Principal Distribution Amount herein will be reduced by any
portion thereof distributed to the holders of the Class A,
Class B, Class C and Class D Certificates;
(xvi) to the holders of the Class E Certificates, to reimburse them
for any Realized Losses previously allocated to such Class of
Certificates, plus interest on such Realized Losses,
compounded monthly, at one-twelfth the applicable Pass-Through
Rate;
(xvii) to the holders of the Class F Certificates, the Distributable
Certificate Interest Amount in respect of such Class of
Certificates for such Distribution Date;
(xviii) upon payment in full of the aggregate Certificate Balance of
the Class E Certificates, to the holders of the Class F
Certificates, the Principal Distribution Amount for such
Distribution Date until the aggregate Certificate Balance of
the Class F Certificates has been reduced to zero; the
Principal Distribution Amount herein will be reduced by any
portion thereof distributed to the holders of the Class A,
Class B, Class C, Class D and Class E Certificates;
(xix) to the holders of the Class F Certificates, to reimburse them
for any Realized Losses previously allocated to such Class of
Certificates, plus interest on such Realized Losses,
compounded monthly, at one-twelfth the applicable Pass-Through
Rate; and
(xx) to make payments to the holders of the Private Certificates,
other than the Class X Certificates, as contemplated below.
Notwithstanding the foregoing, on each Distribution Date occurring on
or after the date, if any, upon which the aggregate Certificate Balance of all
Classes of Subordinate Certificates has been reduced to zero or the aggregate
Appraisal Reduction in effect is greater than or equal to the aggregate
Certificate Balance of all Classes of Subordinate Certificates, the Principal
Distribution Amount will be distributed, first, to the Class A-1 and Class A-2
Certificates, in proportion to their respective Certificate Balances, in
reduction of their respective Certificate Balances, until the aggregate
Certificate Balance of each such Class is reduced to zero; and, second, to the
Class A-1 and Class A-2 Certificates, in proportion to their respective
Certificate Balances, for the unreimbursed amount of Realized Losses and Expense
Losses previously allocated to such Classes.
On each Distribution Date, following the above-described distributions
on the Offered Certificates and the Class X Certificates, the Trustee will apply
the remaining portion, if any, of the Available Distribution Amount for such
date to make payments to the holders of each of the respective Classes of
Private Certificates (other than the Class X Certificates and Residual
Certificates), in alphabetical order of Class designation, in each case for the
following purposes and in the following order of priority (i.e., payments under
clauses (1), (2) and (3) below, in that order, to the holders of the Class G
Certificates, then payments under clauses (1), (2), and (3) below, in that
order, to the holders of the Class H, Class J, Class K, Class L, Class M, Class
N and Class O Certificates):
(1) to pay interest to the holders of the particular Class of
Certificates, up to an amount equal to the Distributable
Certificate Interest Amount in respect of such Class of
Certificates for such Distribution Date;
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<PAGE>
(2) if the aggregate Certificate Balance of each other Class of
Subordinate Certificates, if any, with an earlier alphabetical
Class designation has been reduced to zero, to pay principal
to the holders of the particular Class of Certificates, up to
an amount equal to the lesser of (a) the then outstanding
aggregate Certificate Balance of such Class of Certificates
and (b) the aggregate of the remaining Principal Distribution
Amount for such Distribution Date; and
(3) to reimburse the holders of the particular Class of
Certificates, up to an amount equal to (a) all Realized Losses
and Expense Losses, if any, previously allocated to such Class
of Certificates and for which no reimbursement has previously
been paid, plus (b) all unpaid interest on such amounts,
compounded monthly, at one-twelfth the Pass-Through Rate of
such Classes.
Any portion of the Available Distribution Amount for any Distribution
Date that is not otherwise payable to the holders of REMIC Regular Certificates
as contemplated above, will be paid to the holders of the Class R-I
Certificates.
Distributions of Prepayment Premiums
Any Yield Maintenance Payment collected with respect to a Mortgage Loan
during any particular Collection Period will be distributed on the following
Distribution Date as follows: The holders of the Class A, Class B, Class C,
Class D, Class E and Class F Certificates then entitled to distributions of
principal on such Distribution Date will be entitled to an aggregate amount,
allocable among such Classes, if more than one, as described below, equal to the
lesser of (a) such Yield Maintenance Payment and (b) such Yield Maintenance
Payment multiplied by a fraction, the numerator of which is equal to the excess,
if any, of the Pass-Through Rate applicable to the most senior of such Classes
of Principal Balance Certificates then outstanding, or, in the case of the two
Classes of Class A Certificates, first, the Pass-Through Rate applicable to the
Class A-1 Certificates and second, the Pass-Through Rate applicable to the Class
A-2 Certificates, over the relevant Discount Rate, and the denominator of which
is equal to the excess, if any, of the Mortgage Rate of the Mortgage Loan that
prepaid, over the relevant Discount Rate. If there is more than one such Class
of Principal Balance Certificates entitled to distributions of principal on such
Distribution Date, the aggregate amount described in the preceding sentence will
be allocated among such Classes on a pro rata basis in accordance with the
relative amounts of entitlement to such distributions of principal.
Any Percentage Premium collected with respect to a Mortgage Loan during
any particular Collection Period will be distributed on the following
Distribution Date as follows: The holders of the Class A, Class B, Class C,
Class D, Class E and Class F Certificates then entitled to distributions of
principal on such Distribution Date will be entitled to an aggregate amount,
allocable among such Classes, if more than one, as described below, equal to 25%
of such Percentage Premium. If there is more than one such Class of Principal
Balance Certificates entitled to distributions of principal on such Distribution
Date, the aggregate amount described in the preceding sentence will be allocated
among such Classes on a pro rata basis in accordance with the relative amounts
of entitlement to such distributions of principal.
Any portion of any Prepayment Premium remaining after any such payment
to the holders of such Principal Balance Certificates as described above will be
distributed to the holders of the Class X Certificates.
Any Prepayment Premiums distributed to the holders of a Class of
Certificates may not be sufficient to fully compensate such Certificateholders
for any loss in yield attributable to the related Principal Prepayments.
Treatment of REO Properties
Notwithstanding that any Mortgaged Property may be acquired as part of
the Trust Fund through foreclosure, deed in lieu of foreclosure or otherwise,
the related Mortgage Loan will, for purposes of, among other things, determining
Pass-Through Rates of, distributions on and allocations of Realized Losses and
Expense Losses to the Certificates, as well as the amount of Servicing Fees,
Trustee Fees and Special Servicing Fees payable under the Pooling and Servicing
Agreement, be treated as having remained outstanding until such REO Property is
liquidated. In connection therewith, operating revenues and other proceeds
derived from such REO Property, exclusive of related operating costs, will be
"applied" by the Master Servicer as principal, interest and other amounts "due"
on such Mortgage Loan; and, subject to the recoverability determination
described under "--Advances" below and the effect of any Appraisal Reductions
described under "--Appraisal Reductions" below, the Master Servicer will be
required to make P&I Advances in respect of such Mortgage Loan, in all cases
as if such Mortgage
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<PAGE>
Loan had remained outstanding. References to Mortgage Loan and Mortgage Loans in
the definitions of Weighted Average Net Mortgage Rate and Principal Distribution
Amount are intended to include any Mortgage Loan or Mortgage Loans as to which
the related Mortgaged Property has become an REO Property.
Appraisal Reductions
Not later than the earliest Appraisal Event, the Special Servicer is
required to obtain an MAI appraisal, if the Scheduled Principal Balance of the
Mortgage Loan is greater than $1,000,000, or an internal valuation, if the
Scheduled Principal Balance of the Mortgage Loan is equal to or less than
$1,000,000, of the related Mortgaged Property or REO Property, as the case may
be. However, the Special Servicer need not obtain either the MAI appraisal or
the internal valuation if such an appraisal or valuation had been obtained
within the prior twelve months. An appraisal must be obtained no later than 60
days after the Appraisal Event and an internal valuation must be obtained no
later than 30 days after the Appraisal Event. As a result of such appraisal or
internal valuation, an Appraisal Reduction may be created.
An Appraisal Reduction will be reduced to zero as of the date the
related Mortgage Loan is brought current under the then current terms of the
Mortgage Loan for at least three consecutive months. No Appraisal Reduction will
exist as to any Mortgage Loan after it has been paid in full, liquidated,
repurchased or otherwise disposed of. An appraisal for any Mortgage Loan that
has not been brought current for at least three consecutive months will be
updated annually, with a corresponding adjustment to the amount of the related
Appraisal Reduction. In addition, the Operating Adviser may at any time request
the Special Servicer to obtain (at the Operating Adviser's expense) an updated
appraisal, with a corresponding adjustment to the amount of the Appraisal
Reduction.
The existence of an Appraisal Reduction will proportionately reduce the
Master Servicer's or the Trustee's, as the case may be, obligation to make P&I
Advances in respect of interest on the related Mortgage Loan, which will
generally result in a reduction in current distributions of interest in respect
of the then most subordinate Class (or, in some cases, Classes) of Principal
Balance Certificates. See "--Advances--P&I Advances" below.
Subordination; Allocation of Losses and Certain Expenses
As and to the extent described herein, the rights of holders of the
Subordinate Certificates to receive distributions of amounts collected or
advanced on the Mortgage Loans will be subordinated, to the extent described
herein, to the rights of holders of the Senior Certificates, and to the rights
of the holders of each other Class of Subordinate Certificates with an earlier
alphabetical Class designation. This subordination is intended to enhance the
likelihood of timely receipt by the holders of the Senior Certificates of the
full amount of all interest payable in respect of the Senior Certificates on
each Distribution Date, and the ultimate receipt by the holders of each Class of
Class A Certificates of principal in an amount equal to the entire Certificate
Balance of the Class A Certificates.
Similarly, but to decreasing degrees and in alphabetical order of Class
designation, this subordination is also intended to enhance the likelihood of
timely receipt by the holders of the Subordinate Certificates, other than the
Class O Certificates, which do not have the benefit of any effective
subordination, of the full amount of interest payable in respect of such Classes
of Certificates on each Distribution Date, and the ultimate receipt by such
holders of principal equal to, in each case, the entire Certificate Balance of
such Class of Certificates. This subordination will be accomplished by the
application of the Available Distribution Amount on each Distribution Date in
accordance with the order of priority described above under "--Application of
the Available Distribution Amount" and by the allocation of Realized Losses and
Expense Losses as described below. No other form of credit support will be
available for the benefit of the holders of the Certificates.
Allocation to the Class A Certificates, for so long as they are
outstanding, of the entire Principal Distribution Amount for each Distribution
Date will generally have the effect of reducing the Certificate Balance of that
Class at a faster rate than would be the case if principal payments were
allocated pro rata to all Classes of Certificates with Certificate Balances.
Thus, as principal is distributed to the holders of the Class A Certificates,
the percentage interest in the Trust Fund evidenced by the Class A Certificates
will be decreased, with a corresponding increase in the percentage interest in
the Trust Fund evidenced by the Subordinate Certificates, thereby increasing,
relative to their respective Certificate Balances, the subordination afforded
the Class A Certificates by the Subordinate Certificates.
Following retirement of the Class A Certificates, the herein described
successive allocation to the Subordinate Certificates, in alphabetical order of
Class designation, in each case until such Class is paid in full, of
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<PAGE>
the entire Principal Distribution Amount for each Distribution Date will provide
a similar benefit to each such Class of Certificates as regards the relative
amount of subordination afforded thereto by the other Classes of Certificates
with later alphabetical Class designations.
Realized Losses of principal and interest on the Mortgage Loans and
Expense Losses for any Distribution Date (to the extent not previously
allocated) will be allocated to the Class O, Class N, Class M, Class L, Class K,
Class J, Class H, Class G, Class F, Class E, Class D, Class C and Class B
Certificates, in that order, and then to the Class A-1 and Class A-2
Certificates and, solely with respect to Realized Losses and Expense Losses of
interest, to the Class X Certificates, pro rata, in each case reducing principal
and/or interest otherwise payable thereon.
Any shortfall in the amount of the Distributable Certificate Interest
Amount paid to the Certificateholders of any Class of Certificates on any
Distribution Date will result in Unpaid Interest for such Class which, together
with interest thereon compounded monthly at one-twelfth the applicable
Pass-Through Rate, will be distributable in subsequent periods to the extent of
funds available therefor.
Prepayment Interest Shortfalls and Prepayment Interest Excesses
To the extent that the aggregate Prepayment Interest Shortfalls on all
Mortgage Loans other than Specially Serviced Mortgage Loans exceed the aggregate
Prepayment Interest Excesses for such Mortgage Loans for the Collection Period
related to a Distribution Date, the Servicing Fee (but not the Excess Servicing
Fee) will be reduced by the amount of such excess. Likewise, to the extent that
the aggregate Prepayment Interest Shortfalls on all Specially Serviced Mortgage
Loans that result from voluntary Principal Prepayments--not from Liquidations
Proceeds or from modifications to Specially Serviced Mortgage Loans--exceed the
aggregate Prepayment Interest Excesses for such Mortgage Loans for the
Collection Period related to a Distribution Date, the Special Servicing Fee will
be reduced by the amount of such excess. See "Servicing of the Mortgage
Loans--The Master Servicer--Master Servicer Compensation" and "--The Special
Servicer--Special Servicer Compensation" in this Prospectus Supplement.
Any Net Aggregate Prepayment Interest Shortfall for a Distribution Date
will be allocated to each Class of Certificates, pro rata, in each case reducing
interest otherwise payable thereon. The Distributable Certificate Interest
Amount in respect of any Class of REMIC Regular Certificates will be reduced to
the extent any Net Aggregate Prepayment Interest Shortfalls are allocated to
such Class of Certificates. See "Servicing of the Mortgage Loans--Servicing and
Other Compensation and Payment of Expense" in this Prospectus Supplement.
On any Distribution Date, to the extent that the aggregate Prepayment
Interest Excesses on all Mortgage Loans other than Specially Serviced Mortgage
Loans exceed the aggregate Prepayment Interest Shortfalls for such Mortgage
Loans for such Distribution Date, the excess amount will be payable to the
Master Servicer as additional servicing compensation. Likewise, to the extent
that the aggregate Prepayment Interest Excesses on all Specially Serviced
Mortgage Loans exceed the aggregate Prepayment Interest Shortfalls for such
Mortgage Loans for such Distribution Date, the excess amount will be payable to
the Special Servicer as additional servicing compensation.
OPTIONAL TERMINATION
The majority holders of the Controlling Class, the Depositor, the
Master Servicer, the Special Servicer and the holder of the majority interest in
the Class R-I Certificates, each in turn, will have the option to purchase, in
whole but not in part, the Mortgage Loans and any other property remaining in
the Trust Fund on any Distribution Date on or after the Distribution Date on
which the aggregate Certificate Balance of all Classes of Principal Balance
Certificates then outstanding is less than or equal to 1% of the Initial Pool
Balance.
The purchase price for any such purchase will be 100% of the aggregate
unpaid principal balances of the Mortgage Loans, other than any Mortgage Loans
as to which the Master Servicer has determined that all payments or recoveries
with respect thereto have been made, plus accrued and unpaid interest at the
Mortgage Rate--or the Mortgage Rate less the Servicing Fee Rate if the Master
Servicer is the purchaser--to the Due Date for each Mortgage Loan ending in the
Collection Period with respect to which such purchase occurs, plus unreimbursed
Advances, with interest thereon at the Advance Rate, and the fair market value
of any other property remaining in the Trust Fund. The optional termination of
the Trust Fund must be conducted so as to constitute a "qualified liquidation"
of each REMIC under Section 860F of the Code.
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Upon any such termination, the purchase price for the Mortgage Loans
and the other property in the Trust Fund will be applied to pay accrued and
unpaid interest on and reduce the Certificate Balance of all outstanding Classes
to zero in the manner provided under "Description of the
Certificates--Distributions--Application of the Available Distribution Amount"
in this Prospectus Supplement. Notice of any optional termination must be mailed
by the Trustee to the Certificateholders and the Rating Agencies upon the
receipt of written notice of such optional termination by the Trustee.
ANY SUCH TERMINATION WILL HAVE AN ADVERSE EFFECT ON THE YIELD OF ANY
OUTSTANDING OFFERED CERTIFICATES PURCHASED AT A PREMIUM. SEE "YIELD, PREPAYMENT
AND MATURITY CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT.
ADVANCES
P&I Advances
On the business day prior to each Distribution Date, the Master
Servicer will be obligated to make a P&I Advance, but only to the extent that
the Master Servicer determines, in its sole discretion, exercised in good faith,
that the amount so advanced, plus interest expected to accrue thereon, will be
recoverable from subsequent payments or collections, including Insurance
Proceeds and Liquidation Proceeds, in respect of the related Mortgage Loan, and
only until the Mortgage Loan has been liquidated; provided, however, that the
amount of any P&I Advance required to be advanced by the Master Servicer with
respect to interest on a Mortgage Loan as to which there has been an Appraisal
Reduction will be an amount equal to the product of:
o the amount of interest required to be advanced by the Master
Servicer without giving effect to this sentence, and
o a fraction, the numerator of which is the Scheduled Principal
Balance of such Mortgage Loan as of the immediately preceding
Determination Date less any Appraisal Reduction in effect with
respect to such Mortgage Loan and the denominator of which is
the Scheduled Principal Balance of the Mortgage Loan as of
such Determination Date.
With respect to any Mortgage Loan that is delinquent in respect of its
Balloon Payment, including any REO Property as to which the related Mortgage
Loan provided for a Balloon Payment, P&I Advances will be required in an amount
equal to the Assumed Scheduled Payment, less the related Servicing Fee and
Excess Servicing Fee, subject to the same conditions and limitations, as
described above, that apply to P&I Advances of other Scheduled Payments.
The Master Servicer will be entitled to interest on P&I Advances, which
interest will accrue at the Advance Rate.
P&I Advances and interest accrued thereon at the Advance Rate will be
reimbursable or payable from recoveries on the related Mortgage Loans and, to
the extent the Master Servicer determines in its sole discretion, exercised in
good faith, that a P&I Advance will not be ultimately recoverable from related
recoveries, from any funds on deposit in the Certificate Account and
Distribution Account. In no event will the Master Servicer be required to make
aggregate P&I Advances with respect to any Mortgage Loan which, when including
the amount of interest accrued thereon at the Advance Rate, equals an amount
greater than the Scheduled Principal Balance plus all overdue amounts thereof,
less any Appraisal Reductions with respect thereto.
The right of the Master Servicer to reimbursement or payment out of
recoveries will be prior to the right of the Certificateholders to receive any
amounts recovered with respect to any Mortgage Loan. If the Master Servicer
fails to make a required P&I Advance, the Trustee is required to make such P&I
Advance (subject to the same limitations, and with the same rights, as described
above for the Master Servicer).
Servicing Advances
Servicing Advances, in all cases, will be reimbursable as described
below. The Master Servicer will be permitted to pay, or to direct the payment
of, certain servicing expenses directly out of the Certificate Account or
Distribution Account and under certain circumstances without regard to the
relationship between the expense and the funds from which it is being paid.
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With respect to Mortgage Loans, the Master Servicer will be obligated
to make Servicing Advances for real estate taxes and insurance premiums (to the
extent that insurance coverage is available at commercially reasonable rates)
not paid by the related borrower on a timely basis and for collection or
foreclosure costs, including reasonable attorneys fees. With respect to REO
Properties, the Master Servicer will be obligated to make Servicing Advances, if
necessary and to the extent that funds from the operation of the related REO
Property are unavailable to pay any amounts due and payable, for:
o insurance premiums (to the extent that insurance coverage is available
at commercially reasonable rates);
o real estate taxes and assessments in respect of such REO Property that
may result in the imposition of a lien;
o any ground rents in respect of such REO Property; and
o costs and expenses necessary to maintain, manage or operate such REO
Property.
Notwithstanding the foregoing, the Master Servicer will be obligated to
make such Servicing Advances only to the extent that the Master Servicer
determines that the amount so advanced will be recoverable from subsequent
payments or collections, including Insurance Proceeds, Liquidation Proceeds and
REO Income, in respect of such Mortgage Loan or REO Property.
Servicing Advances, including interest accrued thereon at the Advance
Rate, will be reimbursable from recoveries or collections on the related
Mortgage Loan or REO Property. However, if the Master Servicer determines, as
described below, that any Servicing Advance previously made, and accrued
interest thereon at the Advance Rate, will not be ultimately recoverable from
such related recoveries, such advances will be reimbursable from any amounts on
deposit in the Certificate or Distribution Account. If the Master Servicer fails
to make a required Servicing Advance, the Trustee is required to make such
Servicing Advance (subject to the same limitations, and with the same rights, as
described above for the Master Servicer).
Nonrecoverable Advances
The determination by the Master Servicer that any P&I Advance or
Servicing Advance, previously made or proposed to be made, would not be
recoverable will be made in the sole discretion of the Master Servicer,
exercising good faith, and is required to be accompanied by an officer's
certificate delivered to the Trustee and setting forth the reasons for such
determination, with copies of appraisals or internal valuations, if any, or
other information that supports such determination. The Master Servicer's
determination of nonrecoverability will be conclusive and binding upon the
Certificateholders and the Trustee. The Trustee shall be entitled to rely
conclusively on any determination by the Master Servicer of nonrecoverability
with respect to such Advance and shall have no obligation, but will be entitled,
to make a separate determination of recoverability.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports
Based solely on information provided in monthly reports prepared by the
Master Servicer and the Special Servicer and delivered to the Trustee (in CSSA
standard file format, CSSA loan setup file format and CSSA loan periodic update
file format), the Trustee will be required to provide or make available to each
Certificateholder on each Distribution Date:
(a) A statement setting forth, to the extent applicable:
(i) the amount, if any, of such distributions to the
holders of each Class of Principal Balance
Certificates applied to reduce the aggregate
Certificate Balance thereof;
(ii) the amount of such distribution to holders of each
Class of REMIC Regular Certificates allocable to (A)
interest and (B) Prepayment Premiums;
(iii) the number of outstanding Mortgage Loans and the
aggregate principal balance and Scheduled Principal
Balance of the Mortgage Loans at the close of
business on the related Determination Date;
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(iv) the number and aggregate Scheduled Principal Balance
of Mortgage Loans:
(A) delinquent 30 to 59 days,
(B) delinquent 60 to 89 days,
(C) delinquent 90 days or more, or
(D) as to which foreclosure proceedings have been
commenced;
(v) with respect to any REO Property included in the
Trust Fund, the principal balance of the related
Mortgage Loan as of the date of acquisition of the
REO Property and the Scheduled Principal Balance
thereof;
(vi) as of the related Determination Date:
(A) as to any REO Property sold during the
related Collection Period, the date of the
related determination by the Special
Servicer that it has recovered all payments
which it expects to be finally recoverable
and the amount of the proceeds of such sale
deposited into the Certificate Account, and
(B) the aggregate amount of other revenues
collected by the Special Servicer with
respect to each REO Property during the
related Collection Period and credited to
the Certificate Account, in each case
identifying such REO Property by the loan
number of the related Mortgage Loan;
(vii) the aggregate Certificate Balance or Notional Amount
of each Class of REMIC Regular Certificates before
and after giving effect to the distribution made on
such Distribution Date;
(viii) the aggregate amount of Principal Prepayments made
during the related Collection Period;
(ix) the Pass-Through Rate applicable to each Class of
REMIC Regular Certificates for such Distribution
Date;
(x) the aggregate amount of servicing fees paid to the
Master Servicer and the Special Servicer;
(xi) the amount of Unpaid Interest, Realized Losses or
Expense Losses, if any, incurred with respect to the
Mortgage Loans;
(xii) the aggregate amount of Servicing Advances and P&I
Advances outstanding that have been made by the
Master Servicer and the Trustee, separately stated;
(xiii) the amount of any Appraisal Reductions effected
during the related Collection Period on a
loan-by-loan basis and the total Appraisal Reductions
in effect as of such Distribution Date; and
(xiv) such other information and in such form as shall be
specified in the Pooling and Servicing Agreement.
(b) A report containing information regarding the Mortgage Loans as of the end
of the related Collection Period, which report will contain substantially
the categories of information regarding the Mortgage Loans set forth in
Appendix I and will be presented in a tabular format substantially similar
to the format utilized in Appendix I.
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In the case of information furnished pursuant to subclauses above, the
amounts shall be expressed as a dollar amount per $1,000 of original actual
principal amount of the Certificates for all Certificates of each applicable
Class.
The Trustee will make available each month, to any interested party,
the foregoing reports via the Trustee's Website at www.globaltrustservices.com,
its electronic bulletin board and its customer service. The Trustee's electronic
bulletin board may be accessed by calling 1-800-204-2737, and its customer
service may be accessed by calling (212) 946-3471. For assistance with the
above-mentioned services, Certificateholders may call (212) 946-3228.
In addition, the Trustee will also make Mortgage Loan information as
presented in the CSSA standard file format, the CSSA loan setup file format, the
CSSA loan periodic update file format, the Special Servicer Reports and the
Annual Report each month to any Certificateholder, any Certificate Owner, the
Rating Agencies or any other interested party via the Trustee's Website. In
addition, pursuant to the Pooling and Servicing Agreement, the Trustee will make
available as a convenience for interested parties--and not in furtherance of the
distribution of the Prospectus or this Prospectus Supplement under the
securities laws--the Pooling and Servicing Agreement, the Prospectus and this
Prospectus Supplement via the Trustee's Website. The Trustee will make no
representations or warranties as to the accuracy or completeness of such
documents and will assume no responsibility therefor. In addition, the Trustee
may disclaim responsibility for any information of which it is not the original
source.
In connection with providing access to the Trustee's Website or
electronic bulletin board, the Trustee may require registration and the
acceptance of a disclaimer. The Trustee shall not be liable for the
dissemination of information in accordance with the Pooling and Servicing
Agreement.
On an annual basis, the Master Servicer is required to deliver the
Annual Report to the Trustee, which will deliver such report to the
Underwriters, the Certificateholders, the Depositor and anyone the Depositor or
any Underwriter reasonably designates, the Special Servicer, the Rating
Agencies, and, upon request, any Certificateholder.
On a monthly basis, the Trustee is required to make available on the
Trustee's website to the Underwriters, the Rating Agencies, the Depositor, the
Operating Adviser and anyone the Depositor or any Underwriter reasonably
designates, and upon request to any Certificateholder, a report, in electronic
format, substantially in the form of the data file contained on the diskette
attached to the inside back cover of this Prospectus Supplement with the
information contained therein updated to the date of such report.
Special Servicer Reports
On or about each Determination Date, the Special Servicer will prepare,
or provide the Master Servicer with the information to prepare, the Special
Servicer Reports with respect to Specially Serviced Mortgage Loans as required
by the Pooling and Servicing Agreement. Such reports will be delivered, no later
than the business day prior to each Distribution Date, to the Underwriters, the
Rating Agencies, the Trustee and the Depositor; provided that certain
limitations will be imposed on such recipients with respect to the use and
further dissemination of the information in such reports to the extent described
in the Pooling and Servicing Agreement.
Other Information
The Pooling and Servicing Agreement generally requires that the Trustee
make available, at its corporate trust offices or at such other office as it may
reasonably designate, during normal business hours, upon reasonable advance
notice for review by any holder of a Certificate, each Rating Agency or the
Depositor, 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:
o the Pooling and Servicing Agreement and any amendments thereto;
o all reports or statements delivered to holders of the relevant
Class of Certificates since the Closing Date;
o all officer's certificates delivered to the Trustee since the
Closing Date;
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o all accountants' reports delivered to the Trustee since the Closing
Date;
o the most recent property inspection report prepared by or on behalf
of the Master Servicer or the Special Servicer in respect of each
Mortgaged Property;
o the most recent Mortgaged Property annual operating statements and
rent rolls, if any, collected by or on behalf of the Master
Servicer or the Special Servicer;
o any and all modifications, waivers and amendments of the terms of a
Mortgage Loan entered into by the Master Servicer and/or the
Special Servicer; and
o any and all officer's certificates and other evidence delivered to
the Trustee to support the Master Servicer's determination that any
Advance was not or, if made, would not be, recoverable.
Copies of any and all of the foregoing items and any servicer reports
will be available from the Trustee upon request; however, the Trustee will be
permitted to require the requesting party to pay a sum sufficient to cover the
reasonable costs and expenses of providing such copies. Recipients of such
information will generally be required to acknowledge that such information may
be used only in connection with an evaluation of the Certificates by such
recipient.
Book-Entry Certificates
Until such time, if any, as Definitive Certificates are issued in
respect of the Offered Certificates, the foregoing information and access will
be available to the related Certificate Owners only to the extent it is
forwarded by, or otherwise available through, DTC and its Participants or
otherwise made available publicly by the Trustee. The manner in which notices
and other communications are conveyed by DTC to its Participants, and by such
Participants to the Certificate Owners, will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
The Master Servicer, the Special Servicer, the Trustee and the
Depositor are required to recognize as Certificateholders only those persons in
whose names the Certificates are registered with the Certificate Registrar as of
the related Record Date; however, any Certificate Owner that has delivered to
the Certificate Registrar a written certification, in the form prescribed by the
Pooling and Servicing Agreement, regarding such Certificate Owner's beneficial
ownership of Offered Certificates will be recognized as a Certificateholder for
purposes of obtaining the foregoing information and access.
EXAMPLE OF DISTRIBUTIONS
The following chart sets forth an example of distributions on the
Certificates for the first month of the Trust Fund's existence, assuming the
Certificates are issued in July, 1999:
The close of business on
July 1 (A) Cut-Off Date.
July 30 (B) Record Date for all Classes of
Certificates.
July 1 - August 9 (C) The Collection Period. The Master
Servicer receives Scheduled
Payments due on July 1 and any
Principal Prepayments made after
the Cut-Off Date and on or prior
to August 9.
August 9 (D) Determination Date.
August 13 (E) Master Servicer Remittance Date.
August 16 (F) Distribution Date.
Succeeding monthly periods follow the pattern of (B) through (F)
(except as described below).
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(A) The outstanding principal balance of the Mortgage Loans will be the
aggregate outstanding principal balance of the Mortgage Loans at the close of
business on July 1, 1999, after deducting principal payments due on or before
such date, whether or not received. Principal payments due on or before such
date, and the accompanying interest payments, are not part of the Trust Fund.
(B) Distributions on the next Distribution Date will be made to those
persons that are Certificateholders of record on this date. Each subsequent
Record Date will be the last business day of the month preceding the related
Distribution Date.
(C) Any Scheduled Payments due and collected and Principal Prepayments
collected, after the Cut-Off Date and on or prior to August 9, 1999 will be
deposited in the Certificate Account. Each subsequent Collection Period will
begin on the day after the Determination Date in the month preceding the month
of each Distribution Date and will end on the Determination Date in the month in
which the Distribution Date occurs.
(D) As of the close of business on the Determination Date, the Master
Servicer will have determined the amounts of principal and interest that will be
remitted with respect to the related Collection Period.
(E) The Master Servicer will remit to the Trustee no later than the
business day prior to the related Distribution Date all amounts held by the
Master Servicer, and any P&I Advances required to be made by the Master
Servicer, that together constitute the Available Distribution Amount for such
Distribution Date.
(F) The Trustee will make distributions to Certificateholders on the
15th day of each month or, if such day is not a business day, the next
succeeding business day.
THE TRUSTEE
The Trustee
The Chase Manhattan Bank, a New York banking corporation with its
principal offices in New York, New York, will act as the Trustee pursuant to the
Pooling and Servicing Agreement. The Trustee's corporate trust office is located
at 450 West 33rd Street, 14th Floor, New York, New York 10001; Capital Markets
Fiduciary Services (CMBS).
The Trustee will be paid the Trustee Fee.
EXPECTED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The Expected Final Distribution Date for each Class of Certificates
listed on the cover page of this Prospectus Supplement is the date on which such
Class is expected to be paid in full, assuming timely payments and no Principal
Prepayments will be made on the Mortgage Loans in accordance with their terms
and otherwise based on the Maturity Assumptions.
The Rated Final Distribution Date of each Class of Certificates is the
Distribution Date in March 2032.
The ratings assigned by the Rating Agencies to each Class of Principal
Balance Certificates reflects an assessment of the likelihood that the
Certificateholders of such Class will receive, on or before the Rated Final
Distribution Date, all principal distributions to which they are entitled.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
GENERAL
The yield to maturity on the Offered Certificates will be affected by
the price paid by the Certificateholder, the related Pass-Through Rates and the
rate, timing and amount of distributions on such Offered Certificates. The rate,
timing and amount of distributions on any such Certificate will in turn depend
on, among other things:
o the Pass-Through Rate for such Certificate;
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o the rate and timing of principal payments, including Principal
Prepayments, and other principal collections on the Mortgage Loans
and the extent to which such amounts are to be applied in reduction
of the Certificate Balance of such Certificate;
o the rate, timing and severity of Realized Losses and Expense Losses
and the extent to which such losses and expenses are allocable in
reduction of the Certificate Balance of such Certificate; and
o the timing and severity of any Net Aggregate Prepayment Interest
Shortfalls and the extent to which such shortfalls are allocable in
reduction of the Distributable Certificate Interest Amount payable
on such Certificate.
In addition, the effective yield to holders of the Offered Certificates
will differ from the yield otherwise produced by the applicable Pass-Through
Rate and purchase prices of such Certificates because interest distributions
will not be payable to such holders until at least the 15th day of the month
following the month of accrual without any additional distribution of interest
or earnings thereon in respect of such delay.
PASS-THROUGH RATES
The Pass-Through Rates on the Offered Certificates will be based on or
subject to the Weighted Average Net Mortgage Rate. Accordingly, the yields on
the Offered Certificates will be sensitive to changes in the relative
composition of the Mortgage Pool as a result of scheduled amortization,
voluntary prepayments and any unscheduled collections of principal and/or any
experience of Realized Losses as a result of liquidations of Mortgage Loans. In
general, the effect of any such changes on such yields and Pass-Through Rates
will be particularly adverse to the extent that Mortgage Loans with relatively
higher Mortgage Rates experience faster rates of such scheduled amortization,
voluntary prepayments and unscheduled collections or Realized Losses than
Mortgage Loans with relatively lower Mortgage Rates.
RATE AND TIMING OF PRINCIPAL PAYMENTS
The yield to maturity on any Class of Offered Certificate purchased at
a discount or premium will be affected by the rate and timing of principal
payments made in reduction of the aggregate Certificate Balance of such Class of
Certificates. As described herein, the Principal Distribution Amount for each
Distribution Date will be distributable entirely in respect of the Class A-1
Certificates until the Certificate Balance thereof is reduced to zero, and will
thereafter be distributable entirely in respect of each other Class of Principal
Balance Certificates, in descending alphabetical, and, if applicable, descending
numerical, order of Class designation, in each case until the aggregate
Certificate Balance of such Class of Certificates is, in turn, reduced to zero.
Consequently, the rate and timing of principal payments that are distributed or
otherwise result in reduction of the aggregate Certificate Balance of each Class
of Offered Certificates will be directly related to the rate and timing of
principal payments on or in respect of the Mortgage Loans, which will in turn be
affected by the amortization schedules thereof, the dates on which Balloon
Payments are due and the rate and timing of Principal Prepayments and other
unscheduled collections thereon, including for this purpose, collections made in
connection with liquidations of Mortgage Loans due to defaults, casualties or
condemnations affecting the Mortgaged Properties and purchases of Mortgage Loans
out of the Trust Fund.
Prepayments and, assuming the respective maturity dates therefor have
not occurred, liquidations of the Mortgage Loans will result in distributions on
the Certificates of amounts that would otherwise be distributed over the
remaining terms of the Mortgage Loans and will tend to shorten the weighted
average lives of the Principal Balance Certificates. Any early termination of
the Trust Fund as described herein under "Description of the
Certificates--Optional Termination" will also shorten the weighted average lives
of those Certificates then outstanding. Defaults on the Mortgage Loans,
particularly at or near their maturity dates, may result in significant delays
in payments of principal on the Mortgage Loans, and, accordingly, on the
Principal Balance Certificates, while work-outs are negotiated or foreclosures
are completed, and such delays will tend to lengthen the weighted average lives
of those Certificates. See "Servicing of the Mortgage Loans--Mortgage Loan
Modifications" in this Prospectus Supplement.
The extent to which the yield to maturity of any Offered Certificate
may vary from the anticipated yield will depend upon the degree to which such
Certificate is purchased at a discount or premium and when, and to what degree,
payments of principal on the Mortgage Loans in turn are distributed or otherwise
result in a reduction of the aggregate Certificate Balance of its Class. An
investor should consider, in the case of any such Certificate
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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
Certificate purchased at a premium, the risk that a faster 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.
In general, if an Offered Certificate is purchased at a discount or
premium, the earlier a payment of principal on the Mortgage Loans is distributed
or otherwise results in reduction of the Certificate Balance of the related
Class, the greater will be the effect on the yield to maturity of such
Certificate. As a result, the effect on an investor's yield of principal
payments on the Mortgage Loans occurring at a rate higher (or lower) than the
rate anticipated by the investor during any particular period may not be fully
offset by a subsequent like reduction (or increase) in the rate of such
principal payments. With respect to the Class A, Class B, Class C, Class D,
Class E and Class F Certificates, the allocation of a portion of collected
Prepayment Premiums to the Certificates as described herein is intended to
mitigate those risks; however, such allocation (if any) may be insufficient to
offset fully the adverse effects on yield that such prepayments may have. The
Prepayment Premium payable, if any, with respect to any Mortgage Loan, is
required to be calculated as set forth in "Appendix II - Certain Characteristics
of the Mortgage Loans."
Because the rate of principal payments on the Mortgage Loans will
depend on future events and a variety of factors (as described more fully
below), no assurance can be given as to such rate or the rate of Principal
Prepayments in particular. The Depositor is not aware of any relevant publicly
available or authoritative statistics with respect to the historical prepayment
experience of a large group of Mortgage Loans comparable to the Mortgage Loans.
LOSSES AND SHORTFALLS
The yield to holders of the Offered Certificates will also depend on
the extent to which such holders are required to bear the effects of any losses
or shortfalls on the Mortgage Loans. Realized Losses and Expense Losses will
generally be applied to reduce the Certificate Balances of the Principal Balance
Certificates in the following order: first, to the Class O Certificates until
the Certificate Balance thereof has been reduced to zero; then to the other
respective Classes of Principal Balance Certificates, in ascending (that is,
from N to A) alphabetical order of Class designation, until the remaining
Certificate Balance of each such Class of Certificates has been reduced to zero;
provided that with respect to interest, Realized Losses and Expense Losses of
interest will be allocated to the Class A-1, Class A-2 and Class X Certificates,
pro rata based on interest distributable on such Certificates. Net Aggregate
Prepayment Interest Shortfalls will be borne by the holders of each Class of
Certificates, pro rata in each case reducing interest otherwise payable thereon.
Shortfalls arising from delinquencies and defaults, to the extent the Master
Servicer determines that P&I Advances would be nonrecoverable, Appraisal
Reductions, Expense Losses and Realized Losses generally will result in, among
other things, a shortfall in current distributions of interest payable to the
most subordinate Class of Certificates outstanding.
CERTAIN RELEVANT FACTORS
The rate and timing of principal payments and defaults and the severity
of losses on the Mortgage Loans may be affected by a number of factors
including, without limitation, prevailing interest rates, the terms of the
Mortgage Loans--for example, provisions prohibiting Principal Prepayments for
certain periods and/or requiring the payment of Prepayment Premiums, and
amortization terms that require Balloon Payments--the demographics and relative
economic vitality of the areas in which the Mortgaged Properties are located and
the general supply and demand for rental units or comparable commercial space,
as applicable, in such areas, the quality of management of the Mortgaged
Properties, the servicing of the Mortgage Loans, possible changes in tax laws
and other opportunities for investment. See "Risk Factors" in this Prospectus
Supplement and "Risk Factors" in the Prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for Mortgage Loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
interest rate, the related borrower has an incentive to refinance its Mortgage
Loan. A requirement that a prepayment be accompanied by a Prepayment Premium may
not provide a sufficient economic disincentive to deter a borrower from
refinancing at a more favorable interest rate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance Mortgaged Properties in order to realize their equity therein, to meet
cash flow needs or to make other investments. In addition, some borrowers may be
motivated by
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federal and state tax laws, which are subject to change, to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
The Depositor makes no representation as to the particular factors that
will affect the rate and timing of prepayments and defaults on the Mortgage
Loans, as to the relative importance of such factors, as to the percentage of
the principal balance of the Mortgage Loans that will be prepaid or as to
whether a default will have occurred as of any date or as to the overall rate of
prepayment or default on the Mortgage Loans.
WEIGHTED AVERAGE LIFE
Weighted average life refers to the average amount of time from the
date of issuance of a security until each dollar of principal of such security
will be repaid to the investor. The weighted average life of any Principal
Balance Certificate will be influenced by, among other things, the rate at which
principal on the Mortgage Loans is paid or otherwise collected or advanced and
applied to reduce the Certificate Balance of such Certificate.
Prepayments on Mortgage Loans are commonly measured relative to a
prepayment standard or model. The prepayment model used in this Prospectus
Supplement is the Constant Prepayment Rate or CPR model. The Depositor makes no
representation as to the appropriateness of using the CPR model for purposes of
analyzing an investment in the Offered Certificates.
The following tables indicate the percent of the initial Certificate
Balance of each Class of Offered Certificates after each of the dates shown and
the corresponding weighted average life of each such Class of the Certificates,
if the Mortgage Pool were to prepay at the indicated levels of CPR, and sets
forth the percentage of the initial Certificate Balance of such Certificates
that would be outstanding after each of the dates shown. The tables below have
also been prepared generally on the basis of the Maturity Assumptions.
The Mortgage Loans do not have all of the characteristics of the
Maturity Assumptions. To the extent that the Mortgage Loans have characteristics
that differ from those assumed in preparing the tables, the Classes of
Certificates analyzed in the tables may mature earlier or later than indicated
by the tables. Certain of the Mortgage Loans permit partial prepayments.
Additionally, mortgage loans generally do not prepay at any constant rate.
Accordingly, it is highly unlikely that the Mortgage Loans will prepay in a
manner consistent with the Maturity Assumptions. Furthermore, it is unlikely
that the Mortgage Loans will experience no defaults or losses. In addition,
variations in the actual prepayment experience and the balance of the Mortgage
Loans that prepay may increase or decrease the percentages of initial
Certificate Balances, and shorten or extend the weighted average lives, shown in
the following tables. Investors are urged to conduct their own analyses of the
rates at which the Mortgage Loans may be expected to prepay.
For the purposes of each table, the weighted average life of a
Certificate is determined by:
o multiplying the amount of each principal distribution thereon by
the number of years from the date of issuance of the Certificate
to the related Distribution Date;
o summing the results; and
o dividing the sum by the aggregate amount of the reductions in the
Certificate Balance of such Certificate.
The characteristics of the Mortgage Loans differ in substantial
respects from those assumed in preparing the tables below, and the tables are
presented for illustrative purposes only. In particular, it is unlikely that the
Mortgage Pool will experience neither defaults nor losses, and neither the
Mortgage Pool nor any Mortgage Loan will prepay at any constant rate. Therefore,
there can be no assurance that the Mortgage Loans will prepay at any particular
rate.
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PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR
THE CLASS A-1 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
July, 2000 96 96 96 96 96 95
July, 2001 91 91 91 91 91 90
July, 2002 86 86 86 85 85 85
July, 2003 79 79 79 79 78 78
July, 2004 61 60 60 59 59 58
July, 2005 46 45 44 44 43 42
July, 2006 31 31 30 30 30 29
July, 2007 23 22 22 21 21 20
July, 2008 2 2 2 2 1 1
July, 2009 0 0 0 0 0 0
Weighted average life (years) 5.70 5.66 5.64 5.62 5.59 5.54
</TABLE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-2 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
July, 2000 100 100 100 100 100 100
July, 2001 100 100 100 100 100 100
July, 2002 100 100 100 100 100 100
July, 2003 100 100 100 100 100 100
July, 2004 100 100 100 100 100 100
July, 2005 100 100 100 100 100 100
July, 2006 100 100 100 100 100 100
July, 2007 100 100 100 100 100 100
July, 2008 100 100 100 100 100 100
July, 2009 3 3 2 2 2 1
July, 2010 0 0 0 0 0 0
Weighted average life (years) 9.69 9.69 9.68 9.68 9.68 9.67
</TABLE>
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<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS B CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
July, 2000 100 100 100 100 100 100
July, 2001 100 100 100 100 100 100
July, 2002 100 100 100 100 100 100
July, 2003 100 100 100 100 100 100
July, 2004 100 100 100 100 100 100
July, 2005 100 100 100 100 100 100
July, 2006 100 100 100 100 100 100
July, 2007 100 100 100 100 100 100
July, 2008 100 100 100 100 100 100
July, 2009 100 100 100 100 100 100
July, 2010 52 48 45 43 40 36
July, 2011 0 0 0 0 0 0
Weighted average life (years) 11.02 10.98 10.95 10.92 10.89 10.84
</TABLE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS C CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
July, 2000 100 100 100 100 100 100
July, 2001 100 100 100 100 100 100
July, 2002 100 100 100 100 100 100
July, 2003 100 100 100 100 100 100
July, 2004 100 100 100 100 100 100
July, 2005 100 100 100 100 100 100
July, 2006 100 100 100 100 100 100
July, 2007 100 100 100 100 100 100
July, 2008 100 100 100 100 100 100
July, 2009 100 100 100 100 100 100
July, 2010 100 100 100 100 100 100
July, 2011 27 24 22 20 18 15
July, 2012 0 0 0 0 0 0
Weighted average life (years) 11.85 11.82 11.80 11.78 11.76 11.73
</TABLE>
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<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS D CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
July, 2000 100 100 100 100 100 100
July, 2001 100 100 100 100 100 100
July, 2002 100 100 100 100 100 100
July, 2003 100 100 100 100 100 100
July, 2004 100 100 100 100 100 100
July, 2005 100 100 100 100 100 100
July, 2006 100 100 100 100 100 100
July, 2007 100 100 100 100 100 100
July, 2008 100 100 100 100 100 100
July, 2009 100 100 100 100 100 100
July, 2010 100 100 100 100 100 100
July, 2011 100 100 100 100 100 100
July, 2012 0 0 0 0 0 0
Weighted average life (years) 12.73 12.70 12.69 12.67 12.64 12.61
</TABLE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS E CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
July, 2000 100 100 100 100 100 100
July, 2001 100 100 100 100 100 100
July, 2002 100 100 100 100 100 100
July, 2003 100 100 100 100 100 100
July, 2004 100 100 100 100 100 100
July, 2005 100 100 100 100 100 100
July, 2006 100 100 100 100 100 100
July, 2007 100 100 100 100 100 100
July, 2008 100 100 100 100 100 100
July, 2009 100 100 100 100 100 100
July, 2010 100 100 100 100 100 100
July, 2011 100 100 100 100 100 100
July, 2012 79 76 73 71 69 65
July, 2013 0 0 0 0 0 0
Weighted average life (years) 13.38 13.34 13.32 13.30 13.27 13.24
</TABLE>
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<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS F CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
July, 2000 100 100 100 100 100 100
July, 2001 100 100 100 100 100 100
July, 2002 100 100 100 100 100 100
July, 2003 100 100 100 100 100 100
July, 2004 100 100 100 100 100 100
July, 2005 100 100 100 100 100 100
July, 2006 100 100 100 100 100 100
July, 2007 100 100 100 100 100 100
July, 2008 100 100 100 100 100 100
July, 2009 100 100 100 100 100 100
July, 2010 100 100 100 100 100 100
July, 2011 100 100 100 100 100 100
July, 2012 100 100 100 100 100 100
July, 2013 79 71 67 63 57 51
July, 2014 0 0 0 0 0 0
Weighted average life (years) 14.12 14.10 14.09 14.07 14.06 14.03
</TABLE>
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 153 fixed-rate Mortgage Loans with
aggregate Cut-Off Date Balances of $809,353,823 subject to a permitted variance
of plus or minus 5%. The Cut-Off Date Balances of the Mortgage Loans range from
$755,588 to $23,896,720, and the Mortgage Loans have an average Cut-Off Date
Balance of $5,289,894. All numerical information concerning the Mortgage Loans
is approximate. For purposes of the presentation of certain Mortgage Pool
Information herein, each Mortgage Loan is deemed to be secured by a mortgage on
one Mortgaged Property, whether or not such Mortgaged Property consists of more
than one parcel of real property.
The Mortgage Loans were originated between March 16, 1990 and June 10,
1999. As of the Cut-Off Date, none of the Mortgage Loans were 30 days or more
delinquent, or had been 30 days or more delinquent during the 12 calendar months
preceding the Cut-Off Date. Brief summaries of the material terms of the ten
(10) largest Mortgage Loans in the Mortgage Pool are contained in Appendix III
attached hereto.
Each Mortgage Loan is evidenced by a Mortgage Note and secured by a
Mortgage that creates a first mortgage lien on a fee simple or leasehold estate
income-producing Mortgaged Property, as follows:
o Fee Interest. One hundred forty-four (144) Mortgage Loans,
representing 93.0% of the Initial Pool Balance. Such Mortgage
Loans include three (3) Mortgage Loans, representing 3.2% of
the Initial Pool Balance, wherein the related Mortgage
encumbers both the related borrower's leasehold interest in
the related Mortgaged Property and the fee interest of the
person/entity which owns the related Mortgaged Property. The
execution of such Mortgages by such fee owners may be subject
to challenge as a fraudulent conveyance. See "Risk
Factors--Mortgage Loans Secured by Mortgages on Borrower's
Leasehold Interests Will Subject Your Investment to the Risk
of a
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<PAGE>
Loss Upon a Lease Default" in this Prospectus Supplement. Such
Mortgage Loans are deemed to be fee mortgages for purposes of
the information presented herein.
o Leasehold Interest. Nine (9) Mortgage Loans, representing 7.0%
of the Initial Pool Balance, including two Mortgage Loans,
representing 1.0% of the Initial Pool Balance, wherein the
related Mortgage encumbers both the related borrower's
leasehold interest in a portion of the related Mortgaged
Property and fee simple interest in the remainder of the
related Mortgaged Property.
One Hundred and Thirty (130) of the General American Mortgage Loans,
representing 77.6% of the Initial Pool Balance, were originated by Conning Asset
Management Company, as Originator, on behalf of the Majority Seller. Sixteen
(16) of the Retirement System Mortgage Loans, representing 15.1% of the Initial
Pool Balance, were originated by Conning Asset Management Company, as
Originator, on behalf of the Minority Seller and seven (7) of the Mortgage
Loans, representing 7.3% of the Initial Pool Balance were otherwise originated
on behalf of the Minority Seller.
On or prior to the Closing Date, the Depositor will acquire the
Mortgage Loans from the Sellers, in each case pursuant to a Mortgage Loan
Purchase Agreement to be entered into between the Depositor and the particular
Seller. The Depositor will thereupon assign its interests in the Mortgage Loans,
without recourse, to the Trustee for the benefit of the Certificateholders.
See "--The Sellers" and "--Assignment of Mortgage Loans" below.
CERTAIN TERMS AND CHARACTERISTICS OF THE MORTGAGE LOANS
Mortgage Rates; Calculations of Interest
The Mortgage Loans bear interest at Mortgage Rates that will remain
fixed for their remaining terms (except for one mortgage loan which provides for
an automatic increase in the interest rate within two years from the Cut-Off
Date). One hundred fifty (150) of the Mortgage Loans, representing 96.0% of the
Initial Pool Balance, accrue interest on the basis of a 360-day year consisting
of twelve 30-day months, or do not specify the basis for interest accruals. In
connection with those Mortgage Loans for which no interest accrual basis is
specified, the related Seller has been servicing such Mortgage Loans upon a
30/360 basis. The remaining three (3) Mortgage Loans, representing 4.0% of the
Initial Pool Balance, accrue interest on the basis of the actual number of days
elapsed each month in a 360-day year.
PROPERTY TYPES
The Mortgaged Properties consist of the following property types:
o Retail - Sixty-six (66) of the Mortgaged Loans, which
represent 37.1% of the Initial Pool Balance, are secured by
retail properties;
o Office - Forty-seven (47) of the Mortgaged Loans, which
represent 36.0% of the Initial Pool Balance, are secured by
office properties;
o Industrial - Thirty-one (31) of the Mortgaged Loans, which
represent 17.7% of the Initial Pool Balance, are secured by
industrial properties;
o Multifamily - Seven (7) of the Mortgaged Loans, which
represent 6.2% of the Initial Pool Balance, are secured by
multifamily properties; and
o Hospitality - Two (2) of the Mortgaged Loans, which represent
3.1% of the Initial Pool Balance, are secured by hospitality
properties.
PROPERTY LOCATION
The following five states contain the largest concentrations of
Mortgaged Properties securing the Mortgage Loans:
o California - Thirty-one (31) Mortgage Loans, representing
20.1% of the Initial Pool Balance are secured by mortgaged
properties located in California;
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<PAGE>
o Washington - Ten (10) Mortgage Loans, representing 6.9% of the
Initial Pool Balance are secured by mortgaged properties
located in Washington;
o Georgia - Eleven (11) Mortgage Loans, representing 6.6% of the
Initial Pool Balance are secured by mortgaged properties
located in Georgia;
o Florida - Fourteen (14) Mortgage Loans, representing 6.1% of
the Initial Pool Balance are secured by mortgaged properties
located in Florida;
o Maryland - Nine (9) Mortgage Loans, representing 5.9% of the
Initial Pool Balance are secured by mortgaged properties
located in Maryland;
Due Dates
All of the Mortgage Loans have Due Dates on the first of each calendar
month.
Amortization
The Mortgage Loans have the following amortization features:
o Ninety-eight (98) of the Mortgage Loans, representing 73.7% of
the Initial Pool Balance, are Balloon Loans and, as a result,
will have a Balloon Payment greater than 5% of their
respective original principal balance on their respective
maturity dates, unless prepaid prior thereto. The amount of
the Balloon Payments on those Mortgage Loans that accrue
interest on the basis of the actual number of days elapsed
each month in a 360-day year will be greater, and the actual
amortization terms will be longer, than would be the case if
such Mortgage Loans accrued interest on the basis of a 360-day
year consisting of 30-day months as a result of the
application of interest and principal on such Mortgage Loans
over time. See "Risk Factors And Other Special
Considerations--The Mortgage Loans--Balloon Payments."
o Two (2) of such Balloon Loans, representing 2.4% of the
Initial Pool Balance, are interest-only loans and do not
provide for any amortization of their respective principal
balances over their respective terms.
o The remaining Mortgage Loans fully amortize over their
respective terms.
Prepayment Restrictions
As of the Cut-Off Date, the following prepayment restrictions applied
to the Mortgage Loans:
o Eighty (80) Mortgage Loans, representing 59.5% of the Initial
Pool Balance, are currently in a Lock-out Period ranging from
1 to 105 months. The Prepayment Premiums applicable to such
Mortgage Loans after the applicable Lock-out Period are
calculated as follows:
o Seventy-three (73) of such Mortgage Loans (which
include (1) Mortgage Loan that permits the related
borrower to select either prepayment as described
herein or defeasance by delivery of non-terminable,
non-callable U.S. Treasury obligations in exchange
for the release of the related Mortgaged Property),
representing 53.2% of the Initial Pool Balance,
provide for Prepayment Premiums equal to the greater
of a yield maintenance formula and 1% of the amount
prepaid;
o One (1) of such Mortgage Loans, representing 0.5% of
the Initial Pool Balance, provides for a Prepayment
Premium for a specified period equal to the greater
of a yield maintenance formula and 1% of the amount
prepaid, and following such period an additional five
twelve-month periods during which a Prepayment
Premium is calculated on the basis of the lesser of a
yield maintenance formula and an amount equal to 5%,
4%, 3%, 2% and 1%, of the amount prepaid,
respectively;
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<PAGE>
o Two (2) of such Mortgage Loans, representing 1.4% of
the Initial Pool Balance, provide for Prepayment
Premiums equal to the greater of a yield maintenance
formula and 3% of the amount prepaid;
o One (1) of such Mortgage Loans, representing 0.6% of
the Initial Pool Balance, provide for Prepayment
Premiums equal to a yield maintenance formula; and
o Three (3) of such Mortgage Loans, representing 3.8%
of the Initial Pool Balance, provide for Prepayment
Premiums calculated on the basis of a percentage of
the amount prepaid, which percentage declines over
time.
o Seventy-three (73) Mortgage Loans, representing 40.5% of the
Initial Pool Balance, do not provide for a Lock-out Period or
have a Lock-out Period which has expired. The Prepayment
Premiums applicable to such Mortgage Loans are calculated as
follows:
o Seventy (70) of such Mortgage Loans, representing
39.5% of the Initial Pool Balance, provide for
Prepayment Premiums equal to the greater of a yield
maintenance formula and 1% of the amount prepaid.
With respect to six (6) of such Mortgage Loans, after
a specified period the Prepayment Premium is
calculated as follows:
o Five (5) of such Mortgage Loans,
representing 2.1% of the Initial Pool
Balance, provide for Prepayment Premiums
calculated on the basis of a percentage of
the amount prepaid, which percentage
generally declines over time; and
o One (1) of such Mortgage Loans, representing
1.4% of the Initial Pool Balance, provides
for Prepayment Premiums equal to a yield
maintenance formula plus an amount equal to
0.50% of the amount prepaid for a period of
time, and following such period equal to a
yield maintenance formula plus an amount
equal to 0.75% of the amount prepaid.
o One (1) of such Mortgage Loans, representing 0.3% of
the Initial Pool Balance, provides for a Prepayment
Premium equal to a yield maintenance formula;
o Two (2) of such Mortgage Loans, representing 0.7% of
the Initial Pool Balance, provide for Prepayment
Premiums calculated on the basis of a percentage of
the amount prepaid, which percentage declines over
time.
o Eighty (80) Mortgage Loans, representing 58.0% of the Initial
Pool Balance, permit voluntary principal prepayments of less
than the full amount of the Mortgage Loan.
o Ten (10) of such Mortgage Loans, representing 5.4% of
the Initial Pool Balance, permit voluntary principal
prepayments up to (10%) of the original principal
balance per year without requiring any Prepayment
Premium.
o One (1) Mortgage Loan, representing 2.3% of the Initial Pool
Balance, permits voluntary prepayment of the full amount of
the Mortgage Loan without any Prepayment Premium during the
58th through 63rd months of the loan term if the mortgagee
does not agree to increase the principal amount of such
Mortgage Loan above $19,000,000 subject to a maximum loan to
value ratio of 75% and a minimum debt service coverage ratio
of 1.25x. The Master Servicer will be prohibited from
advancing any additional funds to the related borrower; and
investors should assume that the borrower will have the option
to prepay such Mortgage Loan, without premium, during such
period.
o Fifty-five (55) Mortgage Loans, representing 44.9% of the
Initial Pool Balance, have an Open Period. The applicable Open
Period is eight months or less for fifty-three (53) of such
Mortgage Loans, is 12 months for one such Mortgage Loan and is
25 months for the remaining one such Mortgage Loan.
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<PAGE>
o One (1) Mortgage Loan, representing 2.1% of the Initial Pool
Balance, currently has a $2,000,000 letter of credit in place
as a performance enhancement. If certain performance
thresholds are not met by January 14, 2004 (the fifth
anniversary of the note date), the letter of credit may be
applied to the then outstanding principal balance, subject to
a 4% Prepayment Premium. The letter of credit application is
at the option of the mortgagee.
o One (1) Mortgage Loan, representing 1.1% of the Initial Pool
Balance, permits prepayment of up to $800,000 of the
outstanding principal balance, without a Prepayment Premium,
if a certain tenant elects to prepay the non-amortized cost of
their outstanding borrower-financed tenant improvements. The
prepayment may occur at any time and if the prepayment occurs,
the related principal and interest payments would need to be
recalculated.
o One (1) Mortgage Loan, representing 1.0% of the Initial Pool
Balance, permits prepayment of up to three (3) payments during
the loan term, as long as each separate payment is no less
than $500,000 and no greater than $1,500,000. These prepayment
options are subject to a 1% Prepayment Premium.
The method of calculation of any Prepayment Premium will vary for any
Mortgage Loan as set forth in "Appendix II Certain Characteristics of the
Mortgage Loans."
Non-Recourse Obligations
The Mortgage Loans are generally non-recourse obligations of the
related borrowers and, upon any such borrower's default in the payment of any
amount due under the related Mortgage Loan, the holder thereof may look only to
the related Mortgaged Property for satisfaction of the borrower's obligations.
In those cases where the loan documents permit recourse to the borrower or a
guarantor, the Depositor has not evaluated the financial condition of any such
person, and prospective investors should thus consider all of the Mortgage Loans
to be non-recourse. None of the Mortgage Loans is insured or guaranteed by the
United States, any government entity or instrumentality or any other person.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions
The Mortgages contain due-on-sale and due-on-encumbrance clauses that,
in general, permit the holder of the Mortgage to accelerate the maturity of the
related Mortgage Loan if the borrower sells or otherwise transfers or encumbers
the related Mortgaged Property or that prohibit the borrower from doing so
without the consent of the holder of the Mortgage. However, the Mortgage Loans
generally permit transfers of the related Mortgaged Property, subject to
reasonable approval of the proposed transferee by the holder of the Mortgage,
payment of an assumption fee (which may be waived by the Master Servicer or the
Special Servicer, as the case may be, or, if collected, will be paid to the
Master Servicer or the Special Servicer as additional servicing compensation)
and certain other conditions.
In addition, certain Mortgage Loans permit the borrower to transfer the
related Mortgaged Property to an affiliate or subsidiary of the borrower, or an
entity of which the borrower is the controlling beneficial owner, upon the
satisfaction of certain limited conditions as determined by the Master Servicer.
The Master Servicer or the Special Servicer, as the case may be, will determine,
in a manner consistent with the Servicing Standard, whether to exercise any
right it 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 in accordance with the Pooling and
Servicing Agreement.
Cross-Collateralization; Related Parties
The Mortgage Pool includes two (2) groups of Mortgage Loans, the
largest of which collectively represents 0.7% of the Initial Pool Balance, which
are cross-defaulted and cross-collateralized with the other Mortgage Loan in
such group. See Appendix II for further information with respect to such groups.
The borrowers in one such cross-collateralized group are affiliated,
through common ownership, with the borrower in one separate Mortgage Loan. Such
separate Mortgage Loan is not cross-defaulted and cross-collateralized with the
two Mortgage Loans in such group, and all three Mortgage Loans collectively
represent 1.3% of the Initial Pool Balance.
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<PAGE>
There are also eight (8) additional groups of Mortgage Loans, other
than the groups discussed above, for which the borrowers are affiliated through
common ownership and where, in general, the related Mortgaged Properties are
commonly managed. The three largest of these groups represent 4.6%, 2.5% and
2.0%, respectively, of the Initial Pool Balance.
Subordinate and Other Financing
Generally the Mortgage Loans prohibit subordinate indebtedness without
the mortgagee's prior consent thereto. However, with respect to ten (10)
Mortgage Loans, representing 9.3% of the Initial Pool Balance, subject to
certain maximum loan-to-value and/or minimum debt service coverage ratio
restrictions, and in certain cases, subject to lender approval (or, in one case,
subject to a maximum subordinate debt amount), the borrower may utilize the
mortgaged property to maintain secured subordinate debt or to incur secured
subordinate debt in the future. See "Certain Legal Aspects of the Mortgage Loans
and the Leases--Subordinate Financing" in the Prospectus.
ASSESSMENTS OF PROPERTY VALUE AND CONDITION
Appraisals
In connection with the origination or acquisition of each of the
Mortgage Loans, the related Mortgaged Property was appraised by an independent
appraiser or an employee of the originator who was a state certified appraiser.
In general, those appraisals represent the analysis and opinion of the person
performing the appraisal and are not guarantees of, and may not be indicative
of, present or future value. There can be no assurance that another person would
not have arrived at a different valuation, even if such person used the same
general approach to and same method of valuing the property. Moreover, such
appraisals sought to establish the amount of 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 herein for illustrative purposes only.
Environmental Assessments
An environmental site assessment was prepared in connection with the
origination of each Mortgage Loan. A Phase I environmental site assessment dated
on or after January 1, 1998 was obtained from a third-party environmental
engineer or consultant in connection with the origination of sixty-six (66)
Mortgage Loans, representing 52.6% of the Initial Pool Balance. With respect to
the Mortgaged Properties relating to such Mortgage Loans, the related Seller has
represented to the Depositor that, except as disclosed in such environmental
assessments, it has no knowledge of the presence of any adverse environmental
condition affecting any such Mortgaged Property. With respect to all other
Mortgaged Properties, representing 47.4% of the Initial Pool Balance, the
related Seller has represented to the Depositor that, except as disclosed to the
Depositor, no adverse environmental conditions exist affecting any such
Mortgaged Property. See "Risk Factors--Environmental Issues Relating to Specific
Properties May Have an Adverse Effect on the Payment of Your Certificates."
Property Condition Assessments
Engineering reports from engineers or consultants were generally
obtained with respect to Mortgaged Properties that were constructed more than
three years prior to the origination of the related Mortgage Loan. In cases
where the Mortgaged Property was newly constructed, an architect's certification
was generally obtained to ensure that the improvements were built to approved
plans and specifications.
Engineering reports dated on or after January 1, 1998, were obtained in
connection with the origination of forty-four (44) Mortgage Loans, representing
39.8% of the Initial Pool Balance. These reports are intended to assess items
such as structure, exterior walls, roofing, interior construction, mechanical
and electrical systems and general condition of the site, buildings and other
improvements. If such reports indicate the existence of significant repairs or
maintenance, the related borrower generally is required to establish reserves to
complete such repairs or maintenance.
With respect to such Mortgage Loans, the related Seller has represented
to the Depositor that, except as disclosed in such report, the related Mortgaged
Property is free and clear of any damage that would materially and adversely
affect its value as security for such Mortgage Loan. With respect to all other
Mortgaged Properties,
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<PAGE>
representing 60.2% of the Initial Pool Balance, the related Seller has
represented to the Depositor that, except as disclosed to the Depositor, no
adverse condition exists affecting any such Mortgaged Property. See "Risk
Factors Property Inspections Performed on the Mortgaged Properties May Not
Reflect All Conditions That Require Repair on the Property."
Seismic Review Process
A seismic study is considered if a Mortgaged Property is located in
close proximity to an existing fault line in California, Washington or Oregon,
and is not either a low rise, concrete tilt-wall industrial property, a newer
single-story retail property or a three story or less office property. The
Mortgaged Properties relating to forty-eight of the Mortgage Loans, representing
28.4% of the Initial Pool Balance, are located in areas generally considered
locations of high seismic activity. Seismic studies were obtained in connection
with twelve (12) of such Mortgage Loans, representing 12.2% of the Initial Pool
Balance. If a seismic study indicates a probable maximum loss factor of greater
than 20%, earthquake insurance and/or seismic retrofit is considered, but is
waived in many instances. No earthquake insurance or seismic retrofit was
required in connection with any of the Mortgage Loans, including the three (3)
Mortgage Loans, identified on Appendix II attached hereto as loan numbers 30, 84
and 121, representing 1.7% of the Initial Pool Balance, where the related
seismic study indicated a probable maximum loss factor of greater than 20%.
However, the three (3) Mortgage Loans described in the previous sentence had
loan-to value ratios of 58.9%, 67.1% and 49.3%, respectively, as of July 1,
1999.
ADDITIONAL MORTGAGE LOAN INFORMATION
Each of the tables set forth in Appendix I sets forth certain
characteristics of the Mortgage Pool presented, where applicable, as of the
Cut-Off Date. For a detailed presentation of certain of the characteristics of
the Mortgage Loans and the Mortgaged Properties, on an individual basis, see
Appendix II hereto, and for a brief summary of the significant Mortgage Loans in
the Mortgage Pool, see Appendix III hereto. Certain additional information
regarding the Mortgage Loans is contained in this Prospectus Supplement under
"Risk Factors and Other Special Considerations--The Mortgage Loans," elsewhere
in this "Description of the Mortgage Pool" section and under "Certain Legal
Aspects of Mortgage Loans and the Leases" in the Prospectus.
For purposes of the tables in Appendix I and for the information set
forth in Appendix II and Appendix III:
(1) References to "DSCR" are references to "Debt Service Coverage
Ratios" and references to "Assumed DSCR" are references to "Assumed
Debt Service Coverage Ratios." In general, debt service coverage
ratios are used by income property lenders to measure the ratio of
(a) cash currently generated by a property that is available for
debt service to (b) required debt service payments. However, debt
service coverage ratios only measure the current, or recent,
ability of a property to service mortgage debt. If a property does
not possess a stable operating expectancy (for instance, if it is
subject to material leases that are scheduled to expire during the
loan term and that provide for above-market rents and/or that may
be difficult to replace), a debt service coverage ratio may not be
a reliable indicator of a property's ability to service the
mortgage debt over the entire remaining loan term. For purposes of
this Prospectus Supplement, including for the tables in Appendix I
and the information set forth in Appendix II and Appendix III, the
"Debt Service Coverage Ratio" or "DSCR" for any Mortgage Loan (or
group of cross-collateralized Mortgage Loans) or "Assumed DSCR" or
"Assumed Debt Service Coverage Ratios" is calculated pursuant to
the definition thereof under the "Glossary of Terms" in this
Prospectus Supplement.
In connection with the calculation of DSCR, Assumed DSCR and
loan-to-value ratios, in determining Underwritable Cash Flow for a
Mortgaged Property, the applicable Seller relied on rent rolls and
other generally unaudited financial information provided by the
respective borrowers and calculated stabilized estimates of cash
flow that took into consideration historical financial statements,
material changes in the operating position of the Mortgaged
Property of which the Seller was aware (e.g., new signed leases or
end of "free rent" periods and market data), and estimated capital
expenditures, leasing commission and tenant improvement reserves.
The applicable Seller made certain changes to operating statements
and operating information obtained from the respective borrowers,
resulting in either an increase or decrease in the estimate of
Underwritable Cash Flow derived therefrom, based upon the Seller's
evaluation of such operating statements and operating information
and the assumptions applied by the respective borrowers in
preparing such statements and information. In most cases, borrower
supplied "trailing-12 months" income and/or expense information was
utilized. In certain cases, partial year operating income
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data was annualized, with certain adjustments for items deemed not
appropriate to be annualized. In certain instances, historical
expenses were inflated. For purposes of calculating Underwritable
Cash Flow for Mortgage Loans where leases have been executed by one
or more affiliates of the borrower, the rents under some of such
leases have been adjusted to reflect market rents for similar
properties.
Thirty-six (36) of the Mortgage Loans, representing 29.3% of the
Initial Pool Balance, are secured by Mortgaged Properties with
newly constructed improvements, Mortgaged Properties with triple
net leases, Mortgaged Properties that have recently undergone
substantial renovations and other Mortgaged Properties for which
there were no useful historical operating results or financial
statements available with respect to such Mortgaged Properties. In
such cases, items of revenue and expense used in calculating
Underwritable Cash Flow were generally derived from rent rolls,
estimates set forth in the related appraisal, leases with tenants
or from other borrower-supplied information. No assurance can be
given with respect to the accuracy of the information provided by
any borrowers, or the adequacy of the procedures used by the
applicable Seller in determining the presented operating
information.
The Debt Service Coverage Ratios are presented herein for
illustrative purposes only and, as discussed above, are limited in
their usefulness in assessing the current, or predicting the
future, ability of a Mortgaged Property to generate sufficient cash
flow to repay the related Mortgage Loan. Accordingly, no assurance
can be given, and no representation is made, that the Debt Service
Coverage Ratios accurately reflect that ability.
(2) References in the tables to "Cut-Off Date LTV" are references to
"Cut-Off Date Loan-to-Value" and references to "Balloon LTV" are
references to "Balloon Loan-to-Value." For purposes of this
Prospectus Supplement, including for the tables in Appendix I and
the information set forth in Appendix II and Appendix III, the
"Cut-Off Date LTV," "Cut-Off Date Loan-to-Value," "Balloon LTV" or
"Balloon Loan-to-Value" for any Mortgage Loan is calculated
pursuant to the definition thereof under the "Glossary of Terms" in
this Prospectus Supplement.
With respect to seventy-nine (79) Mortgage Loans, representing
62.5% of the Initial Pool Balance, for which appraisals were dated
on or after June 1, 1997, the value of the related Mortgaged
Property or Properties was based upon the determination of value in
such appraisal (as described above under "--Assessments of Property
Value and Condition--Appraisals"). With respect to all other
Mortgage Loans, the value was calculated by applying a
capitalization rate to the Underwritable Cash Flow of such
Mortgaged Property or Properties.
With respect to retail properties, the capitalization rate used was
9.0% for anchored properties, or 10.0% for unanchored and
freestanding properties. With respect to office properties, the
capitalization rate used was 9.5%. With respect to industrial
properties, the capitalization rate used was 9.5%. With respect to
multifamily properties, the capitalization rate used was 8.5%. With
respect to hospitality properties, the capitalization rate used was
11.0%.
No representation is made that any such value would approximate
either the value that would be determined in a current appraisal of
the related Mortgaged Property or the amount that would be realized
upon a sale.
(3) References to "weighted averages" are references to averages
weighted on the basis of the Cut-Off Date Balances of the related
Mortgage Loans.
The sum in any column of any of the tables in Appendix I may not equal
the indicated total due to rounding.
Generally, the loan documents with respect to the Mortgage Loans
require the borrowers to provide the related lender with annual operating
statements.
STANDARD HAZARD INSURANCE
To the extent required by the Servicing Standard, the Master Servicer
will require each borrower to maintain a fire and hazard insurance policy with
extended coverage in the manner required under the related
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Mortgage Loan. The coverage of each such policy will be in an amount, subject to
a deductible customary in the related geographic area, that is not less than the
lesser of the full replacement cost of the improvements that represent security
for such Mortgage Loan, with no deduction for depreciation, and the outstanding
principal balance owing on such Mortgage Loan, but in any event, unless
otherwise specified in the applicable Mortgage or Mortgage Note, in an amount
sufficient to avoid the application of any coinsurance clause.
If, on the date of origination of a Mortgage Loan, the related
Mortgaged Property was in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available), the Master Servicer will cause to be
maintained a flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administration in an amount representing
coverage of at least the lesser of:
o the outstanding principal balance of the related Mortgage
Loan; and
o the maximum amount of such insurance available for the related
Mortgaged Property, but only to the extent such Mortgage Loan
permits the lender to require such coverage and such coverage
conforms to the Servicing Standard.
If a borrower fails to maintain such hazard insurance, the Master
Servicer will be required to obtain such insurance and the cost thereof will be
a Servicing Advance, subject to a determination of recoverability. The Special
Servicer will be required to maintain fire insurance with extended coverage and,
if applicable, flood insurance on an REO Property in an amount not less than the
maximum amount obtainable with respect to such REO Property and the cost thereof
will be a Servicing Advance, subject to a determination of recoverability.
In addition, the Master Servicer may require any borrower to maintain
other forms of insurance as the Master Servicer may be permitted to require
under the related Mortgage, including, but not limited to, loss of rents
endorsements and comprehensive public liability insurance. The Master Servicer
will not require borrowers to maintain earthquake insurance unless the related
borrower is required under the terms of its Mortgage Loan to maintain earthquake
insurance. Any losses incurred with respect to Mortgage Loans due to uninsured
risks (including earthquakes, mudflows and floods) or insufficient hazard
insurance proceeds may adversely affect payments to Certificateholders.
THE SELLERS
General American Life Insurance Company.
General American Life Insurance Company, the Majority Seller, is a
Missouri life insurance corporation founded in 1933. General American does
business directly or through its subsidiaries in 49 states and the District of
Columbia. General American offers a variety of products, including traditional
life and universal life insurance policies and individual and group annuity
contracts. General American is the Seller with respect to 130 of the Mortgage
Loans, representing 77.6% of the Initial Pool Balance. Each of the General
American Mortgage Loans was underwritten and originated by Conning Asset
Management Company on behalf of General American. Conning Asset Management
Company acts as the investment advisor for General American. The principal
office of General American Life Insurance Company is located at 700 Market
Street, St. Louis, Missouri 63101. Its telephone number is (314) 231-1700.
City and County of San Francisco Employees' Retirement System Pension Trust
The City and County of San Francisco Employees' Retirement System
Pension Trust, the Minority Seller, is a public pension plan created by a
municipal corporation for the benefit of its employees. The Retirement System is
the Seller with respect to twenty-three (23) of the Mortgage Loans, representing
22.4% of the Initial Pool Balance. Sixteen (16) of the Mortgage Loans,
representing 15.1% of the Initial Pool Balance, were underwritten and originated
by Conning Asset Management Company on behalf of the Retirement System, and
seven (7) of the Mortgage Loans, representing 7.3% of the Initial Pool Balance,
were otherwise originated on behalf of the Minority Seller. Conning Asset
Management Company acts as the investment advisor for the Retirement System. The
principal office of the Retirement System is located at 1155 Market Street, San
Francisco, California 94103. Its telephone number is (415) 554-1541.
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ASSIGNMENT OF THE MORTGAGE LOANS
On or prior to the Closing Date, each Seller will assign its Mortgage
Loans, without recourse, to the Depositor, and the Depositor, in turn, will
assign all of the Mortgage Loans, without recourse, to the Trustee for the
benefit of the Certificateholders. In connection with such assignments, each
Seller is required in accordance with the related Mortgage Loan Purchase
Agreement to deliver the Mortgage File, with respect to each Mortgage Loan so
assigned by it to the Trustee.
The Trustee will be required to review the documents delivered by each
Seller with respect to its Mortgage Loans within 90 days following the Closing
Date, and the Trustee will hold the related documents in trust. Within 90 days
following the Closing Date, pursuant to the Pooling and Servicing Agreement, the
assignments with respect to each Mortgage Loan and any related assignment of
rents and leases (as described in the "Glossary of Terms" under the term
"Mortgage File") are to be completed in the name of the Trustee (if delivered in
blank) and submitted for recording in the real property records of the
appropriate jurisdictions.
REPRESENTATIONS AND WARRANTIES
In its respective Mortgage Loan Purchase Agreement, the related Seller
has represented and warranted with respect to each of its Mortgage Loans,
subject to certain exceptions specified in the applicable Mortgage Loan Purchase
Agreement, as of the Closing Date or as of such other date specifically provided
in the representation and warranty, among other things, generally to the effect
that:
o the information set forth in the schedule of the Mortgage
Loans attached to the related Mortgage Loan Purchase Agreement
is true and correct in all material respects;
o such Seller owns the Mortgage Loan free and clear of any and
all pledges, liens and/or other encumbrances;
o no scheduled payment of principal and interest under the
Mortgage Loan was 30 days or more past due as of the Cut-Off
Date, and the Mortgage Loan has not been 30 days or more
delinquent in the twelve-month period immediately preceding
the Cut-Off Date;
o subject to certain creditors' rights exceptions, the related
Mortgage constitutes a valid and enforceable first priority
mortgage lien (subject to certain permitted encumbrances) upon
the related Mortgaged Property;
o the assignment of the related Mortgage in favor of the Trustee
constitutes a legal, valid and binding assignment;
o subject to certain creditors' rights exceptions, the related
assignment of leases establishes and creates a valid and
enforceable first priority lien in the related borrower's
interest in all leases of the Mortgaged Property;
o the Mortgage has not been satisfied, cancelled, rescinded or
subordinated in whole or in material part, and the related
Mortgaged Property has not been released from the lien of such
Mortgage, in whole or in material part;
o the related Mortgaged Property is, to the Seller's knowledge,
free and clear of any damage that would materially and
adversely affect its value as security for the Mortgage Loan;
o with respect to the Mortgaged Properties relating to Mortgage
Loans for which a engineering report was obtained on or after
January 1, 1998, except as disclosed in such engineering
report, to the Seller's knowledge, such Mortgaged Properties
are free and clear of any damage that would materially and
adversely affect its value as security for the Mortgage Loan;
o with respect to any condition disclosed in the engineering
report, such condition has either been remedied to Seller's
satisfaction or funds as deemed necessary by the Seller or the
related engineer or consultant have been placed in escrow
sufficient to remedy such condition satisfactorily; and
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o with respect to all other Mortgaged Properties, other than as
disclosed, such Mortgaged Properties are, to the Seller's
knowledge, free and clear of any damage that would materially
and adversely affect its value as security for the related
Mortgage Loan or, such conditions have either been
satisfactorily remedied or funds have been placed in escrow to
remedy such conditions satisfactorily;
o the related Mortgaged Property is covered by an American Land
Title Association (or an equivalent form of) lender's title
insurance policy that insures that the related Mortgage is a
valid, first priority lien on such Mortgaged Property, subject
only to certain permitted encumbrances;
o the proceeds of the Mortgage Loan have been fully disbursed
and there is no obligation for future advances with respect
thereto;
o with respect to the Mortgaged Properties relating to Mortgage
Loans for which a Phase I environmental report was obtained on
or after January 1, 1998, except as disclosed in such report,
the Seller has no knowledge of the presence of any Adverse
Environmental Conditions;
o with respect to any Adverse Environmental Condition disclosed
in a Phase I environmental report, such condition has either
been remedied to the Seller's satisfaction or funds as deemed
necessary by the Seller or the related environmental engineer
or consultant have been placed in escrow sufficient to remedy
such condition to Seller's satisfaction; and
o with respect to all other Mortgaged Properties, other than as
disclosed, no Adverse Environmental Condition exists, or, with
respect to disclosed Adverse Environmental Conditions, such
conditions have either been remedied to Seller's satisfaction
or funds as deemed necessary by the Seller or the related
environmental engineer or consultant have been placed in
escrow sufficient to remedy such conditions to Seller's
satisfaction;
o each Mortgage Note, Mortgage and other agreement that
evidences or secures the Mortgage Loan is, subject to certain
creditors' rights exceptions and other exceptions of general
application, the legal, valid and binding obligation of the
maker thereof, enforceable in accordance with its terms, and
to the knowledge of the Seller there is no valid defense,
counterclaim or right of offset or rescission available to the
related borrower with respect to such Mortgage Note, Mortgage
or other agreement;
o the related Mortgaged Property is, and is required pursuant to
the related Mortgage to be, insured by casualty and liability
insurance policies of a type specified in the related Mortgage
Loan Purchase Agreement;
o there are no delinquent or unpaid taxes, assessments or other
outstanding charges affecting the related Mortgaged Property
that are or may become a lien of priority equal to or higher
than the lien of the related Mortgage;
o to the Seller's knowledge, the related borrower is not a
debtor in any state or federal bankruptcy or insolvency
proceeding;
o the related Mortgaged Property consists of the related
borrower's fee simple estate in real estate or, if the related
Mortgage encumbers the interest of a borrower as a lessee
under a ground lease of the Mortgaged Property:
o such ground lease or a memorandum thereof has been or will be
duly recorded and permits the interest of the lessee
thereunder to be encumbered by the related Mortgage;
o the borrower's interest in such ground lease is assignable to
the Depositor and its successors and assigns upon notice to,
but without the consent of, the lessor thereunder;
o Such ground lease is in full force and effect and, to the
knowledge of the Seller, no material default has occurred
thereunder;
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o such ground lease, or an estoppel letter related thereto,
requires the lessor under such ground lease to give notice of
any default by the lessee to the mortgagee that no notice of
termination given under such ground lease is effective against
such holder unless a copy has been delivered to such holder
and further provides that no modification of the ground lease
will be effective without prior written consent of the related
mortgagor;
o the holder of the Mortgage is permitted a reasonable
opportunity (including, where necessary, sufficient time to
gain possession of the interest of the lessee under such
ground lease) to cure any default under such ground lease,
which is curable after the receipt of notice of any such
default, before the lessor thereunder may terminate such
ground lease;
o such ground lease has an original term (including any
extension options set forth therein) which extends not less
than ten years beyond the scheduled maturity date of the
Mortgage Loan;
o the Mortgage Loan is not cross-collateralized with any loan
other than one or more other Mortgage Loans;
o no Mortgage requires the holder thereof to release all or any
material portion of the related Mortgaged Property from the
lien thereof except, upon payment in full of the Mortgage Loan
or, in certain cases, upon (a) the satisfaction of certain
legal and underwriting requirements and (b) except where the
portion of the Mortgaged Property permitted to be released was
not considered by the Seller in underwriting the Mortgage
Loan, the payment of a release price and prepayment
consideration in connection therewith; and
o to such Seller's knowledge, there exists no material default,
breach, violation or event of acceleration (and no event
which, with the passage of time or the giving of notice, or
both, would constitute any of the foregoing) under the related
Mortgage Note or Mortgage in any such case to the extent the
same materially and adversely affects the value of the
Mortgage Loan and the related Mortgaged Property.
REPURCHASES AND OTHER REMEDIES
If any Mortgage Loan document required to be delivered to the Trustee
by a Seller with respect to its Mortgage Loans as described under "--Assignment
of the Mortgage Loans" above has a Document Defect, or if there is Material
Document Defect or a Material Breach by a Seller regarding the characteristics
of any of its Mortgage Loans and/or the related Mortgaged Properties as
described under "--Representations and Warranties" above, then such Seller will
be obligated to cure such Material Document Defect or Material Breach in all
material respects within the applicable Permitted Cure Period.
If any such Material Document Defect or Material Breach cannot be
corrected or cured in all material respects within the applicable Permitted Cure
Period, the Seller will be obligated, not later than the last day of such
Permitted Cure Period, to:
o repurchase the affected Mortgage Loan from the Trust Fund at
the Purchase Price; or
o if within the three-month period commencing on the Closing
Date (or within the two-year period commencing on the Closing
Date if the related Mortgage Loan is a "defective obligation"
within the meaning of Section 860G(a)(4)(B)(ii) of the Code
and Treasury Regulation Section 1.860G-2(f)):
o replace such Mortgage Loan with a Qualifying
Substitute Mortgage Loan; and
o pay an amount generally equal to the excess of the
applicable Purchase Price for the Mortgage Loan to be
replaced (calculated as if it were to be repurchased
instead of replaced), over the unpaid principal
balance of the applicable Qualifying Substitute
Mortgage Loan as of the date of substitution, after
application of all payments due on or before such
date, whether or not received.
If such Material Document Defect or Material Breach would cause the
Mortgage Loan to be other than a "qualified mortgage" (as defined in the Code),
then notwithstanding the previous sentence, repurchase must occur within 90 days
from the date the Seller was notified of the defect and substitution must occur
within the sooner of:
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o 90 days from the date the Seller was notified of the defect;
or
o two years from the Closing Date.
The Seller must cure the Material Document Defect or the Material
Breach within the Permitted Cure Period. However, if such Material Document
Defect or Material Breach, as the case may be, cannot be corrected or cured in
all material respects within such 90-day period, but the related Seller is
diligently attempting to effect such correction or cure, then the applicable
Permitted Cure Period will be extended for an additional 90 days.
The foregoing obligations of each Seller to cure a Material Document
Defect or a Material Breach in respect of any of its Mortgage Loans or
repurchase or replace the defective Mortgage Loan, will constitute the sole
remedies of the Trustee and the Certificateholders with respect to such Material
Document Defect or Material Breach; and none of the Depositor, the other Seller
or any other person or entity will be obligated to repurchase or replace the
affected Mortgage Loan if the related Seller defaults on its obligation to do
so.
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 time the Offered Certificates are issued. 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. A limited number of other Mortgage Loans may be included in the
Mortgage Pool prior to the issuance of the Offered Certificates, unless
including such Mortgage Loans would materially alter the characteristics of the
Mortgage Pool as described herein. The information set forth herein is
representative of the characteristics of the Mortgage Pool as it will be
constituted at the time the Offered Certificates are issued, although the range
of Mortgage Rates and maturities and certain other characteristics of the
Mortgage Loans in the Mortgage Pool may vary.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or
through sub-servicers, will be required to service and administer the Mortgage
Loans in keeping with the Servicing Standard.
Each of the Master Servicer and the Special Servicer is required to
adhere to the Servicing Standard without regard to any conflict of interest that
it may have, any fees or other compensation to which it is entitled, any
relationship it may have with any borrower, and the different payment priorities
among the Classes of Certificates. Each of the Master Servicer and the Special
Servicer may become the owner or pledgee of Certificates with the same rights as
each would have if it were not the Master Servicer or a Special Servicer, as the
case may be.
Any such interest of the Master Servicer or the Special Servicer in the
Certificates will not be taken into account when evaluating whether actions of
the Master Servicer or the Special Servicer are consistent with their respective
obligations in accordance with the Servicing Standard, regardless of whether
such actions may have the effect of benefiting the Class or Classes of
Certificates owned by the Master Servicer or the Special Servicer. In addition,
the Master Servicer or the Special Servicer may, under certain limited
circumstances, lend money on an unsecured basis to, accept deposits from, and
otherwise generally engage in any kind of business or dealings with, any
borrower as though the Master Servicer or the Special Servicer were not a party
to the transactions contemplated hereby.
Each of the Master Servicer and the Special Servicer is permitted to
enter into a sub-servicing agreement and any such Sub-Servicer will receive a
fee for the services specified in such sub-servicing agreement. However, the
Master Servicer or the Special Servicer, as the case may be, will remain liable
for its servicing obligations under the Pooling and Servicing Agreement. The
Master Servicer or the Special Servicer, as the case may be, will be required to
pay any servicing compensation due to any Sub-Servicer out of its own funds.
The Master Servicer may resign from the obligations and duties imposed
on it under the Pooling and Servicing Agreement, upon 30 days notice to the
Trustee, provided that:
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o a successor servicer is available and willing to assume the
obligations of the Master Servicer, and accepts appointment as
successor Master Servicer, on substantially the same terms and
conditions, and for not more than equivalent compensation;
o the Master Servicer bears all costs associated with its resignation
and the transfer of servicing; and
o the Rating Agencies have confirmed in writing that such servicing
transfer will not result in a withdrawal, downgrade or qualification
of the then current ratings on the Certificates.
Furthermore, the Master Servicer may resign if it determines that the
Master Servicer's duties are no longer permissible under applicable law or are
in material conflict by reason of applicable law with any other activities
carried on by it. If the Master Servicer ceases to serve as such and shall not
have been replaced by a qualified successor, the Trustee or an agent of the
Trustee will assume the Master Servicer's duties and obligations under the
Pooling and Servicing Agreement. If the Special Servicer shall cease to serve as
such and a qualified successor shall not have been engaged, the Master Servicer
will assume the Special Servicer's duties and obligations and, if the Master
Servicer fails to so assume such duties and responsibilities, the Trustee or an
agent will assume the duties and obligations of the Special Servicer.
The relationship of each of the Master Servicer and the Special
Servicer to the Trustee is intended to be that of an independent contractor and
not that of a joint venturer, partner or agent.
The Master Servicer will have no responsibility for the performance by
the Special Servicer of its duties under the Pooling and Servicing Agreement,
and the Special Servicer will have no responsibility for the performance by the
Master Servicer of its duties under the Pooling and Servicing Agreement.
The Master Servicer initially will be responsible for the servicing and
administration of the entire Mortgage Pool. However, the Special Servicer will
be responsible for servicing and administering any Specially Serviced Mortgage
Loans.
In the event of any of the foregoing with respect to any Mortgage Loan,
the Master Servicer will be required to transfer its principal servicing
responsibilities with respect thereto to the Special Servicer in accordance with
certain procedures set forth in the Pooling and Servicing Agreement.
Notwithstanding such transfer, the Master Servicer will continue to receive
payments on such Mortgage Loan, including amounts collected by the Special
Servicer, to make certain calculations with respect to such Mortgage Loan, and
to make remittances and prepare certain reports to the Trustee with respect to
such Mortgage Loan. If title to the related Mortgaged Property is acquired by
the Trust Fund, whether through foreclosure, deed-in-lieu of foreclosure or
otherwise, the Special Servicer will be responsible for the operation and
management thereof and such loan will be considered a Specially Serviced
Mortgage Loan.
A Specially Serviced Mortgage Loan can become a Rehabilitated Mortgage
Loan to which the Master Servicer will re-assume all servicing responsibilities.
The Master Servicer and the Special Servicer will, in general, each be
required to pay all ordinary expenses incurred by it in connection with its
servicing activities under the Pooling and Servicing Agreement and will not be
entitled to reimbursement therefor except as expressly provided in the Pooling
and Servicing Agreement. See "Description of the
Certificates--Advances--Servicing Advances" in this Prospectus Supplement.
THE MASTER SERVICER
Conning Asset Management Company was organized under the laws of the
State of Missouri in 1982. Conning is a registered investment advisor that
provides, among other asset management services, loan servicing and asset
management for large pools of commercial real estate loans. Conning will be
responsible for servicing the Mortgage Loans as Master Servicer. Conning is a
wholly-owned subsidiary of Conning Corporation, a publicly traded company.
General American Life Insurance Company is the beneficial owner of a majority of
the outstanding common stock of Conning Corporation. Conning is the investment
advisor for General American Life Insurance Company as well as for the City and
County of San Francisco Employees' Retirement System Pension Trust. Conning's
address is 700 Market Street, St. Louis, Missouri 63101. Its Telephone number is
(800) 754-0754.
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As of March 31, 1999, Conning serviced approximately $3.8 billion of
multifamily and commercial Mortgage Loans, including approximately $1.4 billion
for third parties. The collateral for these loans is located in 38 states and
the District of Columbia. Approximately 125 of the loans, with a total principal
balance of approximately $621 million, pertain to commercial and multifamily
mortgage-backed securities for which Conning acted as primary servicer. The
portfolio includes multifamily, office, retail, hospitality and other types of
income producing properties.
The information set forth herein concerning Conning has been provided by
Conning. Accordingly, the Depositor makes no representations or warranty as to
the accuracy or completeness of such information. Conning has been approved as
Master Servicer by Fitch IBCA and S&P for this transaction.
Master Servicer Compensation
The Master Servicer will be entitled to a Servicing Fee equal to the
portion of the Servicing Fee Rate applied to the outstanding Scheduled Principal
Balance of each Mortgage Loan, including REO Properties. The Master Servicer
will be entitled to retain as additional servicing compensation all investment
income earned on amounts on deposit in the Certificate Account and interest on
escrow accounts if permitted by the related loan documents, and--in each case to
the extent not payable to the Special Servicer or any Sub-Servicer as provided
in the Pooling and Servicing Agreement or any sub-servicing agreement--late
payment charges, assumption fees, modification fees, extension fees and default
interest payable at a rate above the related Mortgage Rate.
However, the amount of the related Servicing Fee will be reduced, to
not less than zero, on each Distribution Date by the amount (if any) of
Compensating Interest paid by the Master Servicer on such Distribution Date. Any
Net Aggregate Prepayment Interest Shortfall will be allocated as set forth under
"Description of the Certificates--Distributions--Prepayment Interest Shortfalls
and Prepayment Interest Excesses" in this Prospectus Supplement. If Prepayment
Interest Excesses for all Mortgage Loans other than Specially Serviced Mortgage
Loans exceed Prepayment Interest Shortfalls for such Mortgage Loans as of any
Distribution Date, such excess amount will be payable to the Master Servicer as
additional servicing compensation.
In addition, Conning will be entitled to the Excess Servicing Fee. The
Excess Servicing Fee shall not be terminated even if Conning resigns or is
terminated as the Master Servicer.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default described under the second or third bullet under
the definition of "Event of Default" under the "Glossary of Terms" has occurred,
the obligations and responsibilities of the Master Servicer under the Pooling
and Servicing Agreement will terminate on the date which is 60 days following
the date on which the Trustee or Depositor gives written notice to the Master
Servicer that the Master Servicer is terminated.
After any other Event of Default, the Trustee may elect to terminate
the Master Servicer by providing such notice, and shall provide such notice if
holders of Certificates representing more than 25% of the Certificate Balance of
all Certificates so direct the Trustee. Upon such termination, all authority,
power and rights of the Master Servicer under the Pooling and Servicing
Agreement, whether with respect to the Mortgage Loans or otherwise, shall
terminate except for any rights related to unpaid servicing compensation or
unreimbursed advances or the Excess Servicing Fee, provided that in no event
shall the termination of the Master Servicer be effective until a successor
servicer shall have succeeded the Master Servicer as successor servicer,
notified the Master Servicer of such designation, and such successor servicer
shall have assumed the Master Servicer's obligations and responsibilities with
respect to the Mortgage Loans, as set forth in an agreement substantially in the
form of the Pooling and Servicing Agreement. The Trustee may not succeed the
Master Servicer as servicer until and unless it has satisfied certain provisions
specified in the Pooling and Servicing Agreement. However, if the Master
Servicer is terminated as a result of an Event of Default described under the
fifth, sixth or seventh bullet under the definition of "Event of Default" under
the "Glossary of Terms", the Trustee shall act as successor servicer immediately
and shall use its best efforts to either satisfy the conditions specified in the
Pooling and Servicing Agreement or transfer the duties of the Master Servicer to
a successor servicer who has satisfied such conditions.
However, if the Master Servicer is terminated solely due to an Event of
Default described in the fourth bullet of the definition thereof, prior to being
replaced as described in the previous paragraph, the terminated Master Servicer
will have sixty days to sell the rights and obligations of the Master Servicer
under the Pooling and Servicing Agreement to a successor servicer that meets the
requirements of a Master Servicer under the Pooling and
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Servicing Agreement, provided that the Rating Agencies have confirmed in writing
that such servicing transfer will not result in a withdrawal, downgrade or
qualification of the then current ratings on the Certificates. The termination
of the Master Servicer will be effective when such servicer has succeeded the
Master Servicer as successor servicer and such successor servicer has assumed
the Master Servicer's obligations and responsibilities with respect to the
Mortgage Loans, as set forth in an agreement substantially in the form of the
Pooling and Servicing Agreement. If a successor Master Servicer is not appointed
within sixty days, the Master Servicer will be replaced by the Trustee as
described in the previous paragraph.
THE SPECIAL SERVICER
The Special Servicer will oversee the resolution of Specially Serviced
Mortgage Loans, act as disposition manager of REO Properties acquired on behalf
of the Trust Fund through foreclosure or deed in lieu of foreclosure, maintain
insurance with respect to REO Properties and provide monthly reports to the
Master Servicer and the Trustee. It is anticipated that a Delaware business
trust, in which General American Life Insurance Company and the City and County
of San Francisco Employees' Retirement System Pension Trust will be the sole
beneficiaries, will purchase all or a significant portion of certain Classes of
the Subordinate Certificates on or about the Closing Date. General American Life
Insurance Company is an affiliate of the Special Servicer.
The information set forth herein concerning Conning has been provided
by Conning. Accordingly, the Depositor makes no representations or warranty as
to the accuracy or completeness of such information. Conning has been approved
as Special Servicer by Fitch IBCA and S&P for this transaction.
Special Servicer Compensation
The Special Servicer will be entitled to receive:
o a Special Servicing Fee;
o a Workout Fee; and
o a Liquidation Fee equal to 1.00% of the related Liquidation
Proceeds.
The Workout Fee with respect to any Rehabilitated Mortgage Loan will
cease to be payable if such loan again becomes a Specially Serviced Mortgage
Loan or if the related Mortgaged Property becomes an REO Property. If the
Special Servicer is terminated for any reason, it will retain the right to
receive any Workout Fees payable on Mortgage Loans that became Rehabilitated
Mortgage Loans while it acted as Special Servicer and remained Rehabilitated
Mortgage Loans at the time of such termination until such Mortgage Loan becomes
a Specially Serviced Mortgage Loan or if the related Mortgaged Property becomes
an REO Property. The successor Special Servicer will not be entitled to any
portion of such Workout Fees.
The Special Servicer is also permitted to retain, in general, certain
assumption fees, modification fees and extension fees collected on Specially
Serviced Mortgage Loans, certain borrower-paid fees, investment income earned on
amounts on deposit in any accounts maintained for REO Property collections, and
other charges specified in the Pooling and Servicing Agreement. The Special
Servicing Fee, the Liquidation Fee and the Workout Fee will be obligations of
the Trust Fund and will represent Expense Losses. The Special Servicer
Compensation will be payable in addition to the Servicing Fee payable to the
Master Servicer.
In addition, the Special Servicer will be entitled to all assumption
fees received in connection with any Specially Serviced Mortgage Loan and 50% of
any other assumption fees. The Special Servicer will be entitled to approve
assumptions with respect to all Mortgage Loans. The amount of the Special
Servicing Fee, but not the fee payable to the Trustee, will be reduced, to not
less than zero, on each Distribution Date by the amount (if any) of Compensating
Interest paid by the Special Servicer on such Distribution Date. If Prepayment
Interest Excesses for all Specially Serviced Mortgage Loans exceed Prepayment
Interest Shortfalls for such Mortgage Loans as of any Distribution Date, such
excess amount will be payable to the Special Servicer as additional servicing
compensation.
As described in this Prospectus Supplement under "--The Operating
Adviser," the Operating Adviser will have the right to receive notification of
certain actions of the Special Servicer, subject to the limitations described
herein.
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TERMINATION OF SPECIAL SERVICER
The Trustee may terminate the Special Servicer upon a Special Servicer
Event of Default.
In addition to the termination of the Special Servicer upon a Special
Servicer Event of Default, upon the direction of the Operating Adviser, subject
to the satisfaction of certain conditions, the Trustee will remove the Special
Servicer from its duties as Special Servicer at any time upon the appointment
and acceptance of such appointment by a successor Special Servicer appointed by
the Operating Adviser; provided that, prior to the effectiveness of any such
appointment the Trustee shall have received a letter from each Rating Agency to
the effect that such appointment would not result in a downgrade or withdrawal
in any rating then assigned to any Class of Certificates.
THE OPERATING ADVISER
An Operating Adviser appointed by the holders of a majority of the
Controlling Class will have the right to receive notification from the Special
Servicer in regard to certain actions. The Special Servicer will be required to
notify the Operating Adviser of, among other things:
o any proposed modification of a Money Term of a Mortgage Loan
other than an extension of the original maturity date for two
years or less;
o any foreclosure or comparable conversion of the ownership of a
Mortgaged Property;
o any proposed sale of a Specially Serviced Mortgage Loan, other
than in connection with the termination of the Trust Fund as
described in this Prospectus Supplement under "Description of
the Certificates--Optional Termination";
o any proposal to bring an REO Property into compliance with
applicable environmental laws; and
o any acceptance of substitute or additional collateral for a
Mortgage Loan.
In addition, subject to the satisfaction of certain conditions, the
Operating Adviser will have the right to direct the Trustee to remove the
Special Servicer at any time upon the appointment and acceptance of such
appointment by a successor Special Servicer appointed by the Operating Adviser;
provided that, prior to the effectiveness of any such appointment the Trustee
shall have received a letter from each Rating Agency to the effect that such
appointment would not result in a downgrade or withdrawal in any rating then
assigned to any Class of Certificates.
At any time, the holders of a majority of the Controlling Class may
direct the Trustee in writing to hold an election for an Operating Adviser,
which election will be held commencing as soon as practicable thereafter or
upon:
o the resignation or removal of the person acting as Operating
Adviser; or
o a determination by the Trustee, based upon a written notice
from the Certificate Registrar, that the Controlling Class has
changed. After such receipt or determination, the Trustee is
required to call a meeting of the holders of the Controlling
Class, which may be held by telephone, in the manner, and in
accordance with the procedures, specified in the Pooling and
Servicing Agreement. At the meeting, each such holder will be
entitled to nominate one person to act as Operating Adviser.
All expenses of the Operating Adviser are required to be paid by the
Controlling Class.
MORTGAGE LOAN MODIFICATIONS
Subject to any restrictions applicable to REMICs, and to certain
limitations imposed by the Pooling and Servicing Agreement, the Master Servicer
may amend any term, other than a Money Term, of a Mortgage Loan that is not a
Specially Serviced Mortgage Loan and may extend the maturity date of any Balloon
Loan (other than a Specially Serviced Mortgage Loan) to a date not more than 60
days beyond the original maturity date.
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Subject to any restrictions applicable to REMICs, the Special Servicer
will be permitted to enter into a modification, waiver or amendment of the terms
of any Specially Serviced Mortgage Loan, including any modification, waiver or
amendment to:
o reduce the amounts owing under any Specially Serviced Mortgage
Loan by forgiving principal, accrued interest and/or any
Prepayment Premium;
o reduce the amount of the Scheduled Payment on any Specially
Serviced Mortgage Loan, including by way of a reduction in the
related Mortgage Rate;
o forbear in the enforcement of any right granted under any
Mortgage Note or Mortgage relating to a Specially Serviced
Mortgage Loan;
o extend the maturity date of any Specially Serviced Mortgage
Loan; and/or
o accept a Principal Prepayment during any Lock-out Period;
provided in each case that (1) the related borrower is in default with respect
to the Specially Serviced Mortgage Loan or, in the reasonable judgment of the
Special Servicer, such default is reasonably foreseeable, and (2) in the
reasonable judgment of the Special Servicer, such modification, waiver or
amendment would increase the recovery to Certificateholders on a net present
value basis, as demonstrated in writing by the Special Servicer to the Trustee.
In no event, however, will the Special Servicer be permitted to:
o extend the maturity date of a Specially Serviced Mortgage Loan
beyond a date that is two years prior to the Rated Final
Distribution Date; and
o if the Specially Serviced Mortgage Loan is secured by a ground
lease, extend the maturity date of such Specially Serviced
Mortgage Loan beyond a date which is ten (10) years prior to
the expiration of the term of such ground lease.
Modifications that forgive principal or interest of a Mortgage Loan
will result in Realized Losses on such Mortgage Loan and such Realized Losses
will be allocated among the various Classes of Certificates in the manner
described under "Description of the Certificates--Distributions--Subordination;
Allocation of Losses and Certain Expenses" in this Prospectus Supplement.
The modification of a Mortgage Loan may tend to reduce prepayments by
avoiding liquidations and therefore may extend the weighted average life of the
Certificates beyond that which might otherwise be the case. See "Yield,
Prepayment and Maturity Considerations" in this Prospectus Supplement.
SALE OF DEFAULTED MORTGAGE LOANS AND REO PROPERTIES
The Pooling and Servicing Agreement grants to each of the Master
Servicer, the Special Servicer and any holder of Certificates evidencing a
majority interest in the Controlling Class a right to purchase from the Trust
Fund, at the applicable Purchase Price, those defaulted Mortgage Loans that are
at least 60 days delinquent and which the Special Servicer has determined, in
its reasonable and good faith judgment, in accordance with the Servicing
Standard, will become the subject of foreclosure proceedings (other than any
such Mortgage Loan that it determines, in its reasonable and good faith
judgment, in accordance with the Servicing Standard, is in default to avoid a
prepayment restriction).
The Special Servicer may, upon notice to the Operating Adviser and the
Trustee, offer to sell any such defaulted Mortgage Loan not otherwise purchased
pursuant to the prior paragraph (other than any such Mortgage Loan that it
determines, in its reasonable and good faith judgment, in accordance with the
Servicing Standard, is in default to avoid a prepayment restriction), if and
when the Special Servicer determines, consistent with the Servicing Standard,
that such a sale would be in the best economic interests of the Trust Fund. Such
offer is to be made in a commercially reasonable manner for a period of not less
than 30 days. Unless the Special Servicer determines that acceptance, in
accordance with the Servicing Standard, of any offer would not be in the best
economic interests of the Trust Fund, the Special Servicer shall accept the
highest cash offer received from any person that constitutes a fair price (which
may be less than the Purchase Price) for such Mortgage Loan. When an Interested
Party is to be
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the purchaser of any such defaulted Mortgage Loan, the Trustee is to determine
(with the aid of an independent real estate adviser and an appraisal) what
constitutes a fair price.
FORECLOSURES
The Special Servicer may at any time, with notification to the
Operating Adviser and in accordance with the Pooling and Servicing Agreement,
institute foreclosure proceedings, exercise any power of sale contained in any
Mortgage, accept a deed in lieu of foreclosure or otherwise acquire title to a
Mortgaged Property by operation of law or otherwise, if such action is
consistent with the Servicing Standard and a default on the related Mortgage
Loan has occurred but subject, in all cases, to certain limitations concerning
environmental matters and, in certain cases, the receipt of an opinion of
counsel relating to certain REMIC requirements.
If any Mortgaged Property is acquired as described in the preceding
paragraph, the Special Servicer is required to sell the REO Property within
three years after the end of the year in which it was acquired, or any
applicable extension period, unless the Special Servicer has obtained an
extension from the Internal Revenue Service or has previously delivered to the
Trustee an opinion of counsel to the effect that the holding of the REO Property
by the Trust Fund subsequent to three years after the end of the year in which
it was acquired, or to the expiration of such extension period, will not result
in the failure of such REO Property to qualify as "foreclosure property" under
the REMIC provisions of the Code. In addition, the Special Servicer is required
to use its best efforts to sell any REO Property prior to the Rated Final
Distribution Date.
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. Among other things, the
independent contractor will not be permitted to perform construction work on the
Mortgaged Property unless such construction was at least 10% completed when
default on the related Mortgage Loan became imminent. Generally, REMIC I will
not be taxable on income received with respect to a Mortgaged Property to the
extent that it constitutes "rents from real property," within the meaning of
Code Section 856(c)(3)(A) and Treasury regulations thereunder. "Rents from real
property" do not include the portion of any rental based on the net income or
gain of any tenant or sub-tenant. No determination has been made whether rent on
any of the Mortgaged Properties meets this requirement. "Rents from real
property" include charges for services customarily furnished or rendered in
connection with the rental of real property, whether or not the charges are
separately stated. Services furnished to the tenants of a particular building
will be considered as customary if, in the geographic market in which the
building is located, tenants in buildings which are of similar Class are
customarily provided with the service. No determination has been made whether
the services furnished to the tenants of the Mortgaged Properties are
"customary" within the meaning of applicable regulations. It is therefore
possible that a portion of the rental income with respect to a Mortgaged
Property owned by a 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 REMIC I,
including but not limited to a hotel or healthcare 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
REMIC I 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 REMIC I would result in a greater recovery to
Certificateholders on a net after-tax basis than a different method of operation
of such property. Prospective investors are advised to consult their own tax
advisors regarding the possible imposition of REO Taxes in connection with the
operation of commercial REO Properties by REMICs.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion, when read in conjunction with the discussion
of "Certain Federal Income Tax Consequences" in the Prospectus, describes the
material federal income tax considerations for investors in the Offered
Certificates. However, these two discussions do not purport to deal with all
federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules, and do not address state and local tax
considerations. Prospective purchasers should consult their own tax advisers in
determining the federal,
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state, local and any other tax consequences to them of the purchase, ownership
and disposition of the Offered Certificates.
GENERAL
For United States federal income tax purposes, the Trust Fund will be a
"tiered REMIC structure" described in the Prospectus. See "Certain Federal
Income Tax Consequences--REMICs--Tiered REMIC Structures" in the Prospectus.
Three separate REMIC elections will be made with respect to designated portions
of the Trust Fund. Upon the issuance of the Offered Certificates, Cadwalader,
Wickersham & Taft, counsel to the Depositor, will deliver its opinion generally
to the effect that, assuming:
o the making of proper elections;
o ongoing compliance with all provisions of the Pooling and
Servicing Agreement; and
o compliance with applicable provisions of the Code, as it may
be amended from time to time, and applicable Treasury
Regulations adopted thereunder, for federal income tax
purposes, each of REMIC I, REMIC II and REMIC III will qualify
as a REMIC under the Code.
For federal income tax purposes, the Residual Certificates will
represent three separate classes of REMIC residual interests evidencing the sole
class of "residual interests" in each of REMIC I, REMIC II and REMIC III; and
the REMIC Regular Certificates will evidence the "regular interests" in, and
will be treated as debt instruments of, REMIC III. See "Certain Federal Income
Tax Consequences--REMICs" in the Prospectus. The Offered Certificates will be
REMIC Regular Certificates issued by REMIC III. See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates" in the
Prospectus for a discussion of the principal federal income tax consequences of
the purchase, ownership and disposition of the Offered Certificates. References
in the Prospectus to the Master REMIC should be read as references to REMIC III.
Each of REMIC I and REMIC II will be a Subsidiary REMIC as such term is used in
the Prospectus.
The Offered Certificates will be "real estate assets" within the
meaning of Section 856(c)(4)(A) (formerly, Section 856(c)(5)(A)) and
856(c)(5)(B) (formerly, Section 856(c)(6)(B)) of the Code in the same proportion
that the assets of the Trust Fund underlying such Certificates would be so
treated. In addition, interest (including original issue discount, if any) on
the Offered Certificates will be interest described in Section 856(c)(3)(B) of
the Code to the extent that such Certificates are treated as "real estate
assets" under Section 856(c)(4)(A) of the Code.
Moreover, the Offered Certificates will be "qualified mortgages" under
Section 860G(a)(3) of the Code if transferred to another REMIC on its start-up
day in exchange for regular or residual interests therein. Offered Certificates
also will qualify for treatment as "permitted assets," within the meaning of
Section 860L(c)(1)(G) of the Code, of a FASIT generally in the same proportion
as the assets of the Trust Fund would be so treated, and those Offered
Certificates held by certain financial institution will constitute "evidence of
indebtedness" within the meaning of Section 582(c)(1) of the Code.
The Offered Certificates will be treated as assets described in Section
7701(a)(19)(C)(v) of the Code generally only to the extent that the Mortgage
Loans secured by mortgages on multifamily properties are a percentage of the
principal balance of the Mortgage Pool. The percentage of such Mortgage Loans
included in the initial principal balance of the Mortgage Pool is 6.2%. The
Small Business Job Protection Act of 1996, as part of the repeal of the bad debt
reserve method for thrift institutions, repealed the application of Section
593(d) to any taxable year beginning after December 31, 1995. See "Description
of the Mortgage Pool" in this Prospectus Supplement and "Certain Federal Income
Tax Consequences--REMICs" in the Prospectus.
ORIGINAL ISSUE DISCOUNT AND PREMIUM
The Class [ ] Certificates will, and the other Offered Certificates
will [not], be treated as having been issued with original issue discount or
federal income tax reporting purposes. Certain Classes of Offered Certificates
may be issued with premium depending on the price at which such Classes of
Certificates are sold. The prepayment assumption that will be used in
determining the rate of accrual of original issue discount and amortizable
premium, if any, for federal income tax purposes will be a 0% CPR (as described
in the Prospectus) applied to each Mortgage Loan during any period that
voluntary principal prepayments may be made thereon without a Yield Maintenance
Premium being required. For a description of CPR, see "Yield, Prepayment and
Maturity Considerations" in this
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Prospectus Supplement. However, the Depositor makes no representation that the
Mortgage Loans will not prepay during any such period or that they will prepay
at any particular rate before or during any such period.
The IRS has issued OID Regulations under Sections 1271 to 1275 of the
Code generally addressing the treatment of debt instruments issued with original
issue discount. See "Certain Federal Income Tax Consequences--REMICs--Taxation
of Owners of REMIC Regular Certificates--Original Issue Discount and Premium" in
the Prospectus. Purchasers of the Offered Certificates should be aware that the
OID Regulations and Section 1272(a)(6) of the Code do not adequately address
certain issues relevant to prepayable securities such as the Offered
Certificates.
Moreover, the OID Regulations include an anti-abuse rule allowing the
IRS to apply or depart from the OID Regulations where necessary or appropriate
to ensure a reasonable tax result in light of applicable statutory provisions.
No assurance can be given that the Internal Revenue Service will not take a
different position as to matters respecting accrual of original issue discount
in respect of Offered Certificates. See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates--Original
Issue Discount and Premium" in the Prospectus. Prospective purchasers of the
Offered Certificates are advised to consult their tax advisors concerning the
tax treatment of such Certificates, and the appropriate method of reporting
interest and original issue discount with respect to Offered Certificates.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a holder
of a Certificate, the amount of original issue discount allocable to such period
would be zero and such Certificateholder will be permitted to offset such
negative amount only against future original issue discount (if any)
attributable to such Certificate. Although the matter is not free from doubt, a
holder may be permitted to deduct a loss to the extent that his or her
respective remaining basis in such Certificate exceeds the maximum amount of
future payments to which such Certificateholder is entitled, assuming no further
prepayments of the Mortgage Loans. Any such loss might be treated as a capital
loss.
Certain Classes of Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
any such Class of Certificates will be treated as holding a Certificate with
amortizable bond premium will depend on such Certificateholder's purchase price
and the distributions remaining to be made on such Certificate at the time of
its acquisition by such Certificateholder.
On December 31, 1997, the IRS published in the Federal Register final
regulations on the amortization of bond premium. Those regulations (a) do not
apply to regular interests in a REMIC such as the Offered Certificates, and (b)
state that they are intended to create no inference concerning the amortization
of premium of such instruments. Holders of each such Class of Certificates
should consult their tax advisors regarding the possibility of making an
election to amortize such premium. See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates--Premium"
in the Prospectus.
To the extent that any Offered Certificate is purchased in this
offering or in the secondary market at not more than a de minimis discount, as
defined in the Prospectus, a holder who receives a payment that is included in
the stated redemption price at maturity (generally, the principal amount) of
such Certificate will recognize gain equal to the excess, if any, of the amount
of the payment over an allocable portion of the holder's adjusted basis in the
Offered Certificate. Such allocable portion of the holder's adjusted basis will
be based upon the proportion that such payment of stated redemption price bears
to the total remaining stated redemption price at maturity, immediately before
such payment is made, of such Certificate. See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates--Original
Issue Discount and Premium" and "--Sale Exchange or Redemption" in the
Prospectus.
The OID Regulations in some circumstances permit the holder of a debt
instrument to recognize original issue discount under a method that differs from
that used by the issuer. Accordingly, it is possible that holders of Offered
Certificates issued with original issue discount may be able to select a method
for recognizing original issue discount that differs from that used by the
Trustee in preparing reports to Certificateholders and the IRS. Prospective
purchasers of Offered Certificates issued with original issue discount are
advised to consult their tax advisors concerning the treatment of such
Certificates.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to the holders of each Class of Certificates entitled thereto as
described under "Description of the Certificates--Distributions--Distributions
of Prepayment Premiums" in this Prospectus Supplement. It is not entirely clear
under the Code when
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the amount of a Prepayment Premium should be taxed to the holders of a Class of
Certificates entitled to a Prepayment Premium. For federal income tax
information reporting purposes, Prepayment Premiums will be treated as income to
the holders of a Class of Certificates entitled to Prepayment Premiums only
after the Master Servicer's actual receipt of a Prepayment Premium to which the
holders of such Class of Certificates is entitled under the terms of the Pooling
and Servicing Agreement, rather than including projected Prepayment Premiums in
the determination of a Certificateholder's projected constant yield to maturity.
It appears that Prepayment Premiums are treated as ordinary income rather than
capital gain. However, the timing and characterization of such income is not
entirely clear and Certificateholders should consult their tax advisors
concerning the treatment of Prepayment Premiums.
ADDITIONAL CONSIDERATIONS
The Special Servicer is authorized, under certain circumstances in
which doing so is consistent with maximizing the Trust Fund's net after-tax
proceeds from an REO Property, to incur taxes on the Trust Fund in connection
with the operation of such REO Property. Any such taxes imposed on the Trust
Fund would reduce the amount distributable to Certificateholders. See "Servicing
of the Mortgage Loans--Foreclosure" in this Prospectus Supplement.
Federal income tax information reporting duties with respect to the
Offered Certificates and REMIC I, REMIC II and REMIC III will be the obligation
of the Trustee, and not of the Master Servicer. See "Certain Federal Income Tax
Consequences REMICs--Information Reporting and Backup Withholding" in the
Prospectus.
For further information regarding the tax consequences of investing in
the Offered Certificates, see "Certain Federal Income Tax Consequences--REMICs"
and "State Tax Considerations" in the Prospectus.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS LOCATED IN
CALIFORNIA, WASHINGTON, GEORGIA, FLORIDA, AND MARYLAND
The following discussion summarizes certain legal aspects of Mortgage
Loans secured by real property in California (approximately 20.1% of the Initial
Pool Balance), Washington (approximately 6.9% of the Initial Pool Balance),
Georgia (approximately 6.6% of the Initial Pool Balance), Florida (approximately
6.1% of the Initial Pool Balance) and Maryland (approximately 5.9% of the
Initial Pool Balance) which are general in nature. These summaries do not
purport to be complete and are qualified in their entirety by reference to the
applicable federal and state laws governing the Mortgage Loans.
CALIFORNIA
Mortgage Loans in California generally are secured by deeds of trust on
the related real estate. Foreclosure of a deed of trust in California may be
accomplished by a non-judicial trustee's sale under a specific provision in the
deed of trust or by judicial foreclosure. Public notice of either the trustee's
sale or the judgment of foreclosure is given for a statutory period of time
after which the mortgaged real estate may be sold by the Trustee, if foreclosed
pursuant to the Trustee's power of sale, or by court appointed sheriff under a
judicial foreclosure. Following a judicial foreclosure sale, the borrower or its
successor in interest may, for a period of up to one year, redeem the property.
California's "one action rule" requires the lender to exhaust the security
afforded under the deed of trust by foreclosure in an attempt to satisfy the
full debt before bringing a personal action (if otherwise permitted) against the
borrower for recovery of the debt, except in certain cases involving
environmentally impaired real property. California case law has held that acts
such as an offset of an unpledged account constitute violations of such
statutes. Violations of such statutes may result in the loss of some or all of
the security under the loan. Other statutory provisions in California limit any
deficiency judgment (if otherwise permitted) against the borrower following a
judicial sale to the excess of the outstanding debt over the greater of (i) the
fair market value of the property at the time of the public sale and (ii) the
amount of the winning bid in the foreclosure. Further, under California law,
once a property has been sold pursuant to a power-of-sale clause contained in a
deed of trust, the lender is precluded from seeking a deficiency judgment from
the borrower or, under certain circumstances, guarantors. California statutory
provisions regarding assignments of rents and leases require that a lender whose
loan is secured by such an assignment must exercise a remedy with respect to
rents as authorized by statute in order to establish its right to receive the
rents after an event of default. Among the remedies authorized by statute is the
lender's right to have a receiver appointed under certain circumstances.
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WASHINGTON
In Washington, it is most common to foreclose a deed of trust by a
non-judicial trustee's sale. Non-judicial foreclosure is available only if the
deed of trust provides that the property is not used principally for
agricultural purposes, and the property is, in fact, not so used, both at the
time the deed of trust is granted and at the time of foreclosure. The
non-judicial foreclosure process requires a preliminary 30-day notice of default
and a subsequent 90-day notice of sale. The notice of sale must be posted on the
premises and published twice in a local newspaper. The trustee's sale cannot be
held sooner than 190 days after the date of default.
Washington has a "one action" rule that prohibits non-judicial
foreclosure during the pendency of any action that seeks satisfaction of an
obligation secured by the deed of trust, with the exception of actions for the
appointment of a receiver or to enforce any other lien or security interest
granted to secure the obligation secured by the deed of trust.
Non-judicial foreclosure has the effect of satisfying the entire
obligation secured by the deed of trust, including any cross-collateralized
obligations and any obligations of the grantor contained in separate documents
that are the "substantial equivalent" of obligations secured by the deed of
trust. Limited exceptions to the "anti-deficiency" rule allow post-foreclosure
actions against the grantor within one year after the date of foreclosure to
collect misapplied rents, insurance or condemnation proceeds, or to recover for
waste committed against the property, in both instances, and cumulatively, to
the extent the fair value of the property, less the outstanding amount prior
liens, is less than the outstanding portion of the debt secured by the deed of
trust immediately prior to the trustee's sale. In the case of waste, the waste
must have been caused by the grantor after the deed of trust was granted and be
the cause of such difference.
In Washington, a lender may elect to foreclose a
deed of trust judicially as a mortgage and preserve the right to a deficiency
judgment against the grantor. There is a one-year redemption period from the
date of sale following a judicial foreclosure. The redemption period may be
reduced to eight months if the foreclosure complaint waives any deficiency
judgment against the grantor. There is no right to redeem the property following
a non-judicial trustee's sale, although the grantor has the statutory right to
reinstate the debt on a non-accelerated basis until eleven (11) days prior to
the date of the trustee's sale.
GEORGIA
Mortgage loans in Georgia are customarily secured by deeds to secure
debt and are generally foreclosed pursuant to a private, non-judicial sale under
the power of foreclosure remedy contained in the deed to secure debt. Judicial
foreclosure is also an available but rarely exercised, remedy. In the power of
sale foreclosure, the lender must provide notice of the sale by advertisement in
a newspaper in which Sheriff's notices are published in the county in which the
property is located once a week for four (4) consecutive weeks immediately
preceding the date of sale. The advertisement must contain certain information,
including a description of the property and the instrument pursuant to which the
sale is being conducted. The foreclosure sale is conducted by the lender or its
representatives, must always occur between the hours of 10:00 a.m. and 4:00 p.m.
on the first Tuesday of a month (except, if the first Tuesday of a month falls
on New Year's Day or Independence Day, then the sale must be conducted on the
immediately following Wednesday) and is held on the courthouse steps of the
court in which the property is located. At the sale the property is sold to the
highest bidder, and the lender may "bid in" the amount of its debt at the sale.
The debtor's right of redemption is extinguished by the power of the sale
foreclosure. In order to obtain a deficiency judgement for a recourse loan, the
lender must first report the foreclosure sale to a Judge of the Superior Court
of the county in which the property is located within thirty (30) days after the
date of sale. The Judge will then conduct a "confirmation hearing," notice of
which must be served at least five (5) days prior to the hearing on all
obligors, and at which hearing evidence must be presented to prove that (a) the
real property sold for its "true market value" (which has been interpreted to
mean "fair market value") and (b) the foreclosure sale was conducted in
accordance with law. The Judge may (a) confirm the sale (in which case the
creditor may pursue the deficiency claim in a separate action against the
obligors), (b) set the sale aside (in which case the parties are returned to
their respective positions immediately prior to the sale and a new foreclosure
sale must be conducted) or (c) deny confirmation of the sale and refuse to
permit a resale (in which case the sale stands as completed but the creditor may
not pursue a deficiency claim against the obligors). Georgia has no "one action"
rule or statute.
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FLORIDA
Mortgage loans involving real property in Florida are secured by
mortgages and foreclosures are accomplished by judicial foreclosure. There is no
power of sale in Florida. After an action for foreclosure is commenced and the
lender secures a judgment, the final judgment will provide that the property be
sold at a public sale at the courthouse if the full amount of the judgment is
not paid prior to the scheduled sale. Generally, the foreclosure sale must occur
no earlier than twenty (20) (but not more than thirty-five (35)) days after the
judgment is entered. During this period, a notice of sale must be published
twice in the county in which the property is located. There is no right of
redemption after the foreclosure sale. Florida does not have a "one action rule"
or "anti-deficiency legislation." Subsequent to a foreclosure sale, however, a
lender may be required to prove the value of the property sold as of the date of
foreclosure in order to recover a deficiency. In certain circumstances, the
lender may have a receiver appointed.
MARYLAND
Most mortgage loans are secured in the State of Maryland by deeds of
trust. A mortgage or deed of trust may be foreclosed by the secured party or
trustee pursuant to (i) a power of sale contained in the lien instrument, (ii)
an "assent to decree" (i.e., a provision in the lien instrument declaring a
debtor's assent to the entry of an order for the sale of the mortgaged property
upon a specified default), or (iii) a judicial decree by a court of equity. When
a lien instrument contains neither a power of sale nor an assent to decree, an
action to foreclose must be commenced and processed in the same manner as any
other civil action. Most foreclosures in the State of Maryland are effected by
non-judicial means. Nevertheless, even non-judicial foreclosure sales are
subject to approval of a court of equity in the county in which the mortgaged
property is located. A non-judicial foreclosure is commenced by the filing of an
order to docket or complaint to foreclose in the court. This filing is not a
pleading and does not require service of process, an answer from the debtor or a
hearing; it is simply a means by which the jurisdiction of the equity court is
exercised. Before conducting a foreclosure sale, the secured party or trustee
must (i) post a bond (generally in the amount of the debt, plus expenses of
foreclosure), (ii) advertise the sale in a newspaper of general circulation in
the county in which the mortgaged property is located once a week for three
consecutive weeks not less than fifteen (15) days and not more than one week
prior to the date of sale, and (iii) mail a notice of sale to the last know
addresses of the debtor, the present record owner of the mortgaged property and
all holders of subordinate mortgage or judgment liens on the mortgaged property.
Subject to the foregoing notice requirements, a non-judicial foreclosure sale
can be held in approximately twenty-one (21) days after docketing.
As Maryland law requires that a non-judicial foreclosure sale must be
approved by the court, a foreclosure sale is not effective to pass title until
the sale is ratified by the court. The court has full power to hear any
objection or exception filed against the foreclosure sale, but the court cannot
question the validity of an unopposed foreclosure sale. Notwithstanding the
requirement of court approval, a debtor's right of redemption is extinguished at
the time of sale. Under Maryland law, a debtor has no additional time after
foreclosure to redeem the mortgaged property.
The State of Maryland does not have a "one action" or "anti-deficiency"
rule. If the net proceeds of sale of the entire mortgaged property (after
deducting the costs and expenses allowed by the court) are insufficient to pay
the mortgage debt and accrued interest, a motion for a deficiency decree may be
filed at any time within three years after the court's final ratification of the
foreclosure sale.
ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on Plans that are
subject to ERISA and/or Section 4975 of the Code and on persons that are Parties
in Interest. ERISA also imposes certain duties on persons who are fiduciaries of
Plans subject to ERISA and prohibits certain transactions between a Plan and
Parties in Interest with respect to such Plan. Under ERISA, any person who
exercises any authority or control respecting the management or disposition of
the assets of a Plan, and any person who provides investment advice with respect
to such assets for a fee, is a fiduciary of such Plan.
PLAN ASSETS
The Department of Labor will promulgate the DOL Regulation, defining
the term "plan assets." There can be no assurance, however, that any of the
exceptions set forth in the DOL Regulation will apply to the purchase or holding
of Certificates. Accordingly, a Plan's investment in Certificates may cause the
Mortgage Loans or other assets constituting, or underlying the assets of, the
Trust Fund to be deemed Plan assets. If the Mortgage Loans or
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other Trust Fund assets constitute Plan assets, then any party exercising
management or discretionary control regarding those assets may be deemed to be a
"fiduciary" with respect to those assets, and thus subject to the fiduciary
requirements and prohibited transaction provisions of ERISA and Section 4975 of
the Code with respect to the Mortgage Loans and other Trust Fund assets.
Certain affiliates of the Depositor, the Underwriters, the Master
Servicer, the Special Servicer and certain of their respective affiliates might
be considered or might become fiduciaries or other Parties in Interest with
respect to investing Plans. Moreover, the Trustee, the Master Servicer, the
Special Servicer, the Operating Adviser, any insurer, primary insurer or any
other issuer of a credit support instrument relating to the primary assets in
the Trust Fund or certain of their respective affiliates might be considered
fiduciaries or other Parties in Interest with respect to investing Plans. In the
absence of an applicable exemption, "prohibited transactions" (within the
meaning of ERISA and Section 4975 of the Code) could arise if Certificates were
acquired by, or with "plan assets" of, a Plan with respect to which any such
person is a Party in Interest.
In addition, an insurance company proposing to acquire or hold the
Subordinate Certificates with assets of its general account should consider the
extent to which such acquisition or holding would be subject to the requirements
of ERISA and Section 4975 of the Code under John Hancock Mutual Life Insurance
Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993), and Section 401(c) of
ERISA, as amended by the Small Business Job Protection Act of 1996, Public Law
No. 104-188, and subsequent DOL and judicial guidance. See "--Insurance Company
General Accounts" below.
SPECIAL EXEMPTION APPLICABLE TO CLASS A CERTIFICATES
With respect to the acquisition and holding of Class A Certificates,
the DOL has granted to the Underwriters' Exemptions (Morgan Stanley & Co.
Incorporated, Prohibited Transaction Exemption 90-24, 55 Fed. Reg. 20548 (May
17, 1990), Donaldson Lufkin & Jenrette Securities Corporation, Prohibited
Transaction Exemption 90-83, 55 Fed. Reg. 50250 (December 5, 1990) and
Prudential Securities Incorporated, Prohibited Transaction Exemption 90-32, 55
Fed. Reg. 23147 (June 6, 1990) each as amended by Prohibited Transaction
Exemption 97-34), which generally exempt from certain of the prohibited
transaction rules of ERISA and Section 4975 of the Code transactions relating
to:
o the initial purchase, the holding, and the subsequent resale
by Plans of Certificates evidencing interests in pass-through
trusts; and
o transactions in connection with the servicing, management and
operation of such trusts, provided that the assets of such
trusts consist of certain secured receivables, loans and other
obligations that meet the conditions and requirements of the
Exemptions.
The assets covered by the Exemptions include mortgage loans such as the
Mortgage Loans and fractional undivided interests in such loans.
Among the conditions that must be satisfied for the Exemptions to apply
are the following:
o The acquisition of the Certificates by a Plan must be 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;
o The rights and interests evidenced by the Certificates
acquired by the Plan are not subordinated to the rights and
interests evidenced by other Certificates of the Trust Fund;
o The Certificates acquired by the Plan must have received a
rating at the time of such acquisition that is in one of the
three highest generic rating categories from Fitch IBCA, S&P,
Moody's Investor Services, Inc. or Duff & Phelps Credit Rating
Co.;
o The sum of all payments made to the Underwriters in connection
with the Distribution of the Certificates must represent not
more than reasonable compensation for underwriting the
Certificates; the sum of all payments made to and retained by
the Depositor in consideration of the assignment of the
Mortgage Loans to the Trust Fund must represent not more than
the fair market value of such Mortgage Loans; the sum of all
payments made to and retained by the Master Servicer, the
Special
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Servicer, and any sub-servicer must represent not more than
reasonable compensation for such person's services under the
Pooling and Servicing Agreement or other relevant servicing
agreement and reimbursement of such person's reasonable
expenses in connection therewith; and
o The Plan investing in the Certificates must be an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the 1933 Act.
Moreover, the Exemptions provide relief from certain
self-dealing/conflict of interest prohibited transactions, but only if, among
other requirements:
o the investing Plan fiduciary or its affiliates is an obligor
with respect to five percent or less of the fair market value
of the obligations contained in the trust;
o the Plan's investment in certificates does not exceed 25% of
all of the certificates outstanding at the time of the
acquisition; and
o immediately after the acquisition, no more than 25% of the
assets of the Plan are invested in certificates representing
an interest in one or more trusts containing assets sold or
serviced by the same entity.
The Depositor believes that the Exemptions will apply to the
acquisition and holding of Class A Certificates by Plans or persons acting on
behalf of or with "plan assets" of Plans, and that all conditions of the
Exemptions, other than those within the control of the investing Plans or Plan
investors, have been met. Upon request, the Underwriters will deliver to any
fiduciary or other person considering investing "plan assets" of any Plan in the
Certificates a list identifying each borrower that is the obligor under each
Mortgage Loan that constitutes more than 5% of the aggregate principal balance
of the assets of the Trust Fund.
Because the characteristics of the Class B, Class C, Class D, Class E
and Class F Certificates do not meet the requirements of the Exemptions, the
purchase or holding of such Certificates by, on behalf of or with "plan assets"
of any Plan may result in a non-exempt prohibited transaction or the imposition
of excise taxes or civil penalties under ERISA and/or Section 4975 of the Code.
Accordingly, such Certificates may not be purchased by, transferred to or held
by a Plan or any person using "plan assets" of any Plan to effect such
acquisition or holding. Each person that acquires or holds any Class B, Class C,
Class D, Class E or Class F Certificate shall be deemed to have represented and
warranted to the Depositor, the Trustee and the Master Servicer that it
satisfies the foregoing limitation, provided that an insurance company investing
solely assets of its general account may acquire and hold such Certificates
subject to the limitations described in "--Insurance Company General Accounts"
below.
INSURANCE COMPANY GENERAL ACCOUNTS
The Small Business Job Protection Act of 1996 added a new Section
401(c) to ERISA ("Section 401(c) Regulations"), which provides certain exemptive
relief from the provisions of Part 4 of Title I of ERISA and Section 4975 of the
Code, including the prohibited transaction restrictions imposed by ERISA and the
related excise taxes imposed by the Code, for transactions involving an
insurance company general account. The DOL issued proposed regulations under
Section 401(c) on December 22, 1997, but the required final regulations have not
been issued as of the date hereof. Section 401(c) required the DOL to issue
final regulations no later than December 31, 1997 to provide guidance for
purposes of determining, in cases where insurance policies or annuity contracts
supported by an insurer's general account are issued to or for the benefit of a
Plan on or before December 31, 1998, which general account assets constitute
Plan Assets.
Section 401(c) generally provides that, until the date which is 18
months after the 401(c) Regulations become final, no person shall be subject to
liability under Part 4 of Title I of ERISA and Section 4975 of the Code on the
basis of a claim that the assets of an insurance company general account
constitute "plan assets" of any Plan, except:
o as otherwise provided by the DOL in the 401(c) Regulations to
prevent avoidance of the Regulations; or
o as determined in an action brought by the DOL for certain
breaches of fiduciary duty which would also constitute a
violation of federal or state criminal law.
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Any assets of an insurance company general account which support
insurance policies or annuity contracts issued to Plans after December 31, 1998,
or on or before that date for which the insurer does not comply with the 401(c)
Regulations, may be treated as "plan assets" of such Plans. Because Section
401(c) does not relate to insurance company separate accounts, separate account
assets continue to be treated as "plan assets" of any Plan that is invested in
such separate account. Insurance companies contemplating the investment of
general account assets in the Subordinate Certificates should consult with their
legal counsel with respect to the applicability of Section 401(c), including the
general account's ability to continue to hold such Certificates after the date
which is 18 months after the date the 401(c) Regulations become final.
Accordingly, any insurance company that acquires or holds any Class B,
Class C, Class D, Class E or Class F Certificate shall be deemed to have
represented and warranted to the Depositor, the Trustee and the Master Servicer
that (1) such acquisition and holding is permissible under applicable law, will
not constitute or result in a non-exempt prohibited transaction under ERISA or
Section 4975 of the Code, and will not subject the Depositor, the Trustee or the
Master Servicer to any obligation in addition to those undertaken in the Pooling
and Servicing Agreement, and (2) the source of funds used to acquire and hold
such Certificates is an "insurance company general account" (as defined in DOL
Prohibited Transaction Class Exemption 5-60) and the conditions set forth in
Sections I and III of PTCE 95-60 have been satisfied.
GENERAL INVESTMENT CONSIDERATIONS
Prospective Plan investors should consult with their legal counsel
concerning the impact of ERISA and Section 4975 of the Code, the applicability
of the Exemptions, or other exemptive relief, and the potential consequences to
their specific circumstances, prior to making an investment in the Certificates.
Moreover, each Plan fiduciary should determine whether, under the general
fiduciary standards of ERISA regarding prudent investment procedure and
diversification, an investment in the Certificates is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended. The appropriate characterization of the Offered Certificates
under various legal investment restrictions, and thus the ability of investors
subject to these restrictions to purchase Offered Certificates, may be subject
to significant interpretive uncertainties. All investors whose investment
authority is subject to legal investment laws and regulations, regulatory
capital requirements or review by regulatory authorities should consult their
own legal advisors to determine whether, and to what extent, the Offered
Certificates will constitute legal investments for them or are subject to
investment, capital or other restrictions.
No representations are made as to the proper characterization of the
Offered Certificates for legal investment or financial institution regulatory
purposes, or as to the ability of particular investors to purchase the Offered
Certificates under applicable legal investment or other restrictions. The
uncertainties referred to above, and any unfavorable future determinations
concerning legal investment or financial institution regulatory characteristics
of the Offered Certificates, may adversely affect the liquidity of the Offered
Certificates. See "Legal Investment" in the Prospectus.
USE OF PROCEEDS
The Depositor will apply the net proceeds of the offering of the
Certificates towards the simultaneous purchase of the Mortgage Loans from the
Sellers and to the payment of certain expenses in connection with the issuance
of the Certificates.
PLAN OF DISTRIBUTION
The Depositor has entered into an Underwriting Agreement with Morgan
Stanley & Co., Incorporated, an affiliate of the Depositor, Donaldson, Lufkin &
Jenrette Securities Corporation and Prudential Securities Incorporated. Subject
to the terms and conditions set forth in the Underwriting Agreement, the
Depositor has agreed
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to sell to each Underwriter, and each Underwriter has agreed severally to
purchase from the Depositor, the percentage of the respective aggregate
Certificate Balance of each Class of Offered Certificates set forth below.
<TABLE>
<CAPTION>
UNDERWRITERS CLASS A-1 CLASS A-2 CLASS B CLASS C CLASS D CLASS E CLASS F
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Morgan Stanley & Co.
Incorporated 70% 70% 100% 100% 100% 100% 100%
Donaldson, Lufkin & Jenrette
Securities Corporation 15% 15% 0% 0% 0% 0% 0%
Prudential Securities Incorporated 15% 15% 0% 0% 0% 0% 0%
Total 100% 100% 100% 100% 100% 100% 100%
</TABLE>
Morgan Stanley & Co. Incorporated will act as sole lead manager and
bookrunner with respect to the Offered Certificates.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters severally will be obligated to purchase all of the Offered
Certificates if any are purchased. In the event of a default by an Underwriter,
the Underwriting Agreement provides that the purchase commitment of the
non-defaulting Underwriter may be increased. Proceeds to the Depositor from the
sale of the Offered Certificates, before deducting expenses payable by the
Depositor, will be approximately $______, plus accrued interest.
The Underwriters have advised the Depositor that they will propose to
offer the Offered Certificates from time to time for sale in one or more
negotiated transactions or otherwise at varying prices to be determined at the
time of sale. The Underwriter may effect such transactions by selling such
Classes of Offered Certificates to or through dealers and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriters and any purchasers of such Classes of Offered
Certificates for whom they may act as agent.
A.G. Edwards & Sons, Inc. is acting as a selling agent.
The Offered Certificates are offered by the Underwriters when, as and
if issued by the Depositor, delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Offered Certificates will be made in book-entry form through the
facilities of DTC against payment therefor on or about July 14, 1999, which is
the tenth business day following the date of pricing of the Certificates.
Under Rule 15c6-1 under the Securities Exchange Act of 1934, as
amended, trades in the secondary market generally are required to settle in
three business days, unless the parties to any such trade expressly agree
otherwise. Accordingly, purchasers who wish to trade Offered Certificates in the
secondary market prior to such delivery should specify a longer settlement
cycle, or should refrain from specifying a shorter settlement cycle, to the
extent that failing to do so would result in a settlement date that is earlier
than the date of delivery of such Offered Certificates.
The Underwriters and any dealers that participate with the Underwriters
in the distribution of the Offered Certificates may be deemed to be
underwriters, and any discounts or commissions received by them and any profit
on the resale of such Classes of Offered Certificates by them may be deemed to
be underwriting discounts or commissions, under the Securities Act of 1933, as
amended.
The Depositor has agreed to indemnify the Underwriters against civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or contribute to payments the Underwriters may be required to make in respect
thereof.
The Underwriters currently intend to make a secondary market in the
Offered Certificates, but they are not obligated to do so.
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LEGAL MATTERS
The legality of the Offered Certificates and the material federal
income tax consequences of investing in the Offered Certificates will be passed
upon for the Depositor by Cadwalader, Wickersham & Taft, New York, New York.
Certain legal matters with respect to the Offered Certificates will be passed
upon for the Underwriters by Cadwalader, Wickersham & Taft, New York, New York.
Certain legal matters will be passed upon for the Sellers by Morrison & Hecker
L.L.P., Kansas City, Missouri and Morrison & Foerster L.L.P., New York, New
York.
RATINGS
It is a condition of the issuance of the Offered Certificates that they
receive the following credit ratings from Fitch IBCA and S&P.
CLASS FITCH IBCA S&P
Class A-1 AAA AAA
Class A-2 AAA AAA
Class B AA AA
Class C A A
Class D A- A-
Class E BBB BBB
Class F BBB- BBB-
The ratings of the Offered Certificates address the likelihood of the
timely payment of interest and the ultimate payment of principal, if any, due on
the Offered Certificates by the Rated Final Distribution Date. That date is the
first Distribution Date that follows by at least 36 months the end of the
amortization term of the Mortgage Loan that, as of the Cut-Off Date, has the
longest remaining amortization term. The ratings on 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.
The ratings of the Certificates do not represent any assessment of (1)
the likelihood or frequency of principal prepayments, voluntary or involuntary,
on the Mortgage Loans, (2) the degree to which such prepayments might differ
from those originally anticipated, (3) whether and to what extent Prepayment
Premiums or default interest will be received or (4) the allocation of Net
Aggregate Prepayment Interest Shortfalls. A security rating does not represent
any assessment of the yield to maturity that investors may experience. In
general, the ratings thus address credit risk and not prepayment risk.
There can be no assurance as to whether any rating agency not requested
to rate the Offered Certificates will nonetheless issue a rating to any Class
thereof and, if so, what such rating would be. A rating assigned to any Class of
Offered Certificates by a rating agency that has not been requested by the
Depositor to do so may be lower than the ratings assigned thereto at the request
of the Depositor.
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GLOSSARY OF TERMS
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement. The following Glossary of Terms is not complete. You should also
refer to the Prospectus and the Pooling and Servicing Agreement for additional
definitions. If you send a written request to the Trustee at its corporate
office, the Trustee will provide to you without charge a copy of the Pooling and
Servicing Agreement (without exhibits and schedules).
Unless the context requires otherwise, the definitions contained in
this Glossary of Terms apply only to this Series of Certificates and will not
necessarily apply to any other series of certificates the Trust may issue.
"Accrued Certificate Interest" means, in respect of each Class of REMIC
Regular Certificates for each Distribution Date, the amount of interest for the
applicable Interest Accrual Period accrued at the applicable Pass-Through Rate
on the aggregate Certificate Balance or Notional Amount, as the case may be, of
such Class of Certificates outstanding immediately prior to such Distribution
Date. Accrued Certificate Interest will be calculated on the basis of a 360-day
year consisting of twelve 30-day months.
"Administrative Cost Rate" will equal the sum of the related Servicing
Fee, the Excess Servicing Fee and the Trustee Fee for any month (in each case,
expressed as a per annum rate) for any Mortgage Loan in such month.
"Advance Rate" means a rate equal to the "Prime Rate" as reported in
The Wall Street Journal from time to time.
"Advances" means Servicing Advances and P&I Advances, collectively.
"Adverse Environmental Condition" means:
o there is Hazardous Material present on the Mortgaged Property
related to such Mortgage Loan such that the value of such
Mortgaged Property is materially and adversely affected, or
under applicable federal, state or local law, such Hazardous
Material could be required to be eliminated at a cost
materially and adversely affecting the value of the Mortgaged
Property before such Mortgaged Property could be required to
be eliminated or before such Mortgaged Property could be
altered, renovated, demolished or transferred or the presence
of such Hazardous Material could (upon action by the
appropriate governmental authorities) subject the owner of
such Mortgaged Property, or the holders of a security interest
therein, to liability for the cost of eliminating such
Hazardous Material or the hazard created thereby at a cost
materially and adversely affecting the value of the Mortgaged
Property, or
o such Mortgaged Property is not in material compliance with all
applicable federal, state and local laws pertaining to
Hazardous Materials, or Seller or, to Seller's knowledge, the
related Mortgagor or any current tenant thereon, has received
a notice of any violation or potential violation of any such
law.
"Annual Report" means a report for each Mortgage Loan based on the most
recently available year-end financial statements and most recently available
rent rolls of each applicable borrower, to the extent such information is
provided to the Master Servicer, containing such information and analyses as
required by the Pooling and Servicing Agreement including, without limitation,
Debt Service Coverage Ratios, to the extent available, and in such form as shall
be specified in the Pooling and Servicing Agreement.
"Appraisal Event" means each of the following:
o the date 60 days after the occurrence of any delinquency in
payment with respect to a Mortgage Loan if such delinquency
remains uncured;
o the date 30 days after receipt of notice that the related
borrower has filed a bankruptcy petition or a receiver is
appointed in respect of the related Mortgaged Property,
provided that such petition or appointment remains in effect;
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o the effective date of any modification to a Money Term of a
Mortgage Loan, other than an extension of the date that a
Balloon Payment is due for a period of less than six months;
and
o the date 30 days following the date a Mortgaged Property
becomes an REO Property.
"Appraisal Reduction" will equal, for any Mortgage Loan, including a
Mortgage Loan as to which the related Mortgaged Property has become an REO
Property, an amount, calculated as of the first Determination Date that is at
least fifteen days after the date on which the appraisal is obtained or the
internal valuation is performed, equal to the excess, if any, of:
o the sum of:
o the Scheduled Principal Balance of such Mortgage
Loan;
o to the extent not previously advanced by the Master
Servicer or the Trustee, all accrued and unpaid
interest on the Mortgage Loan;
o all related unreimbursed Advances and interest on
such Advances at the Advance Rate; and
o to the extent not previously advanced by the Master
Servicer or the Trustee, all currently due and unpaid
real estate taxes and assessments, insurance premiums
and, if applicable, ground rents in respect of the
related Mortgaged Property or REO Property, as the
case may be (in each case, net of any amounts
escrowed for such item),
over
o 90% of the value (net of any prior mortgage liens) of such
Mortgaged Property or REO Property as determined by such
appraisal or internal valuation.
"Assumed Debt Service Coverage Ratio" or "Assumed DSCR" means, in
general, a ratio that was calculated in the same manner as DSCR, except that a
fixed constant of 8.5% was assumed in such calculation.
"Assumed DSCR" - See "Assumed Debt Service Coverage Ratio."
"Assumed Scheduled Payment" means an amount deemed due in respect of:
o any Balloon Loan that is delinquent in respect of its Balloon
Payment beyond the first Determination Date that follows its
original stated maturity date; or
o any Mortgage Loan as to which the related Mortgaged Property
has become an REO Property.
The Assumed Scheduled Payment deemed due on any such Balloon Loan on
its original stated maturity date and on each successive Due Date that it
remains or is deemed to remain outstanding will equal the Scheduled Payment that
would have been due on such date if the related Balloon Payment had not come
due, but rather such Mortgage Loan had continued to amortize in accordance with
its amortization schedule in effect immediately prior to maturity. With respect
to any Mortgage Loan as to which the related Mortgaged Property has become an
REO Property, the Assumed Scheduled Payment deemed due on each Due Date for so
long as the REO Property remains part of the Trust Fund, equals the Scheduled
Payment (or Assumed Scheduled Payment) due on the last Due Date prior to the
acquisition of such REO Property.
"Available Distribution Amount" means in general, for any Distribution
Date:
(1) all amounts on deposit in the Certificate Account as of the
business day preceding the related Distribution Date,
exclusive of any portion thereof that represents one or more
of the following:
o Scheduled Payments collected but due on a Due Date
subsequent to the related Collection Period;
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o Prepayment Premiums (which are separately
distributable on the Certificates as hereinafter
described);
o amounts that are payable or reimbursable to any
person other than the Certificateholders (including,
among other things, amounts attributable to Expense
Losses and amounts payable to the Master Servicer,
the Special Servicer and the Trustee as compensation
or in reimbursement of outstanding Advances);
o amounts deposited in the Certificate Account in
error; and
o if such Distribution Date occurs during January,
other than a leap year, or February of any year, the
Interest Reserve Amounts with respect to the Interest
Reserve Loans to be deposited into the Interest
Reserve Account;
(2) to the extent not already included in clause (1), any P&I
Advances made and any Compensating Interest Payments paid with
respect to such Distribution Date; and
(3) if such Distribution Date occurs during March of any year, the
aggregate of the Interest Reserve Amounts then on deposit in
the Interest Reserve Account in respect of each Interest
Reserve Loan.
"Balloon Loans" means Mortgage Loans which provide for Scheduled
Payments based on amortization schedules significantly longer than their terms
to maturity and which are expected to have remaining principal balances equal to
or greater than 5% of the original principal balance of each Mortgage Loan as of
their respective Stated Maturity Date.
"Balloon LTV" - See "Balloon LTV Ratio."
"Balloon LTV Ratio" or "Balloon LTV" means the ratio, expressed as a percentage,
of the principal balance of a Balloon Loan anticipated to be outstanding on the
date on which the related Balloon Payment is scheduled to be due (calculated
based on the Maturity Assumptions and a 0% CPR) to the value of the related
Mortgaged Property or Properties determined as described under "Description of
the Mortgage Pool--Additional Mortgage Loan Information" in this Prospectus
Supplement.
"Balloon Payment" means, with respect to the Balloon Loans, the
principal payments and scheduled interest due and payable on the relevant
maturity dates.
"CEDEL" means Cedelbank, societe anonyme.
"Certificate" means any of the Class A-1, Class A-2, Class X, Class B,
Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L,
Class M, Class N, Class O, Class R-I, Class R-II or Class R-III Certificates.
"Certificate Account" means one or more separate accounts established
and maintained by the Master Servicer (or any sub-servicer on behalf of the
Master Servicer) pursuant to the Pooling and Servicing Agreement.
"Certificate Balance" will equal the then maximum amount that the
holder of each Principal Balance Certificate will be entitled to receive in
respect of principal out of future cash flow on the Mortgage Loans and other
assets included in the Trust Fund.
"Certificateholder" or "Holder" means an investor certificateholder, a
Person in whose name a Certificate is registered in the Certificate Registrar or
a Person in whose name ownership of an uncertificated Certificate is recorded in
the books and records of the Trustee.
"Certificate Owner" means a Person acquiring an interest in an Offered
Certificate.
"Certificate Registrar" means Trustee, in its capacity as the
Certificate Registrar.
"Class" means the designation applied to the Offered Certificates and
the Private Certificates, pursuant to this Prospectus Supplement.
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"Class A Certificates" means the Class A-1 Certificates and the Class
A-2 Certificates.
"Closing Date" means July___, 1999.
"Collection Period" means, with respect to any Distribution Date, the
period beginning with the day after the Determination Date in the month
preceding such Distribution Date (or, in the case of the first Distribution
Date, the Cut-Off Date) and ending with the Determination Date occurring in the
month in which such Distribution Date occurs.
"Compensating Interest Payment" means with respect to any Distribution
Date, an amount equal to the excess of (A) Prepayment Interest Shortfalls
resulting from Principal Prepayments during the related Collection Period over
(B) Prepayment Interest Excesses resulting from Principal Prepayments during the
same Collection Period, but in any event (i) with respect to Compensating
Interest to be paid by the Master Servicer, not more than the portion of the
aggregate Servicing Fee for the related Collection Period calculated in respect
of all the Mortgage Loans less the portion payable to Sub-Servicers as fees to
the Sub-Servicers and (ii) with respect to Compensating Interest to be paid by
the Special Servicer, not more than the portion of the aggregate Special
Servicing Fee for the related Collection Period calculated in respect of all the
Specially Serviced Mortgage Loans.
"Conning" means Conning Asset Management Company.
"Constant Prepayment Rate" or "CPR" means a rate that represents an
assumed constant rate of prepayment each month (which is expressed on a per
annum basis) relative to the then outstanding principal balance of a pool of
Mortgage Loans for the life of such Mortgage Loans. CPR does not purport to be
either a historical description of the prepayment experience of any pool of
Mortgage Loans or a prediction of the anticipated rate of prepayment of any
Mortgage Loans, including the Mortgage Loans.
"Controlling Class" means the most subordinate Class of Subordinate
Certificates outstanding at any time of determination; provided, however, that
if the aggregate Certificate Balance of such Class of Certificates is less than
50%, with respect to the Class N and Class O Certificates, and 25%, with respect
to all other Classes, of the initial aggregate Certificate Balance of such Class
as of the Closing Date, the Controlling Class shall be the next most subordinate
Class of Certificates.
"CPR" - See "Constant Prepayment Rate" above.
"Cut-Off Date" means July 1, 1999.
"Cut-Off Date Balance" means, with respect to any Mortgage Loan, such
Mortgage Loan's principal balance outstanding as of the Cut-Off Date, after
application of all payments of principal due on or before such date, whether or
not received determined as described under "Description of the Mortgage
Pool--Additional Mortgage Loan Information" in this Prospectus Supplement.
"Cut-Off Date Loan-to-Value" or "Cut-Off Date LTV" means a ratio,
expressed as a percentage, of the Cut-Off Date Balance of a Mortgage Loan (or
the aggregate principal balance of a group of cross-collateralized Mortgage
Loans) to the value of the related Mortgaged Property or Properties determined
as described under "Description of the Mortgage Pool--Additional Mortgage Loan
Information" in this Prospectus Supplement.
"Cut-Off Date LTV" - See "Cut-Off Date Loan-to-Value."
"Debt Service Coverage Ratio" or "DSCR" means, the ratio of
Underwritable Cash Flow estimated to be produced by the related Mortgaged
Property or Properties to the annualized amount of debt service payable under
that Mortgage Loan (or that group of cross-collateralized Mortgage Loans).
"Definitive Certificate" means a fully registered physical certificate.
"Depositor" means Morgan Stanley Capital I Inc.
"Determination Date" means, with respect to any Distribution Date, the
5th business day prior to the related Distribution Date.
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"Discount Rate" means, for the purposes of the distribution of
Prepayment Premiums, the rate which, when compounded monthly, is equivalent to
the Treasury Rate when compounded semi-annually.
"Distributable Certificate Interest Amount" means, in respect of any
Class of REMIC Regular Certificates for any Distribution Date, the sum of:
o Accrued Certificate Interest in respect of such Class of
Certificates for such Distribution Date, reduced (to not less
than zero) by:
o any Net Aggregate Prepayment Interest Shortfalls;
o Realized Losses and Expense Losses, in each case specifically
allocated with respect to such Distribution Date to reduce the
Distributable Certificate Interest Amount payable in respect
of such Class in accordance with the terms of the Pooling and
Servicing Agreement; and
o the portion of the Distributable Certificate Interest Amount
for such Class remaining unpaid as of the close of business on
the preceding Distribution Date, plus the Unpaid Interest.
"Distribution Account" means the distribution account maintained by the
Trustee, in accordance with the Pooling and Servicing Agreement.
"Distribution Date" means the 15th day of each month, or if any such
15th day is not a business day, on the next succeeding business day.
"Document Defect" means a situation in which a Mortgage Loan is not
delivered as and when required, is not properly executed or is defective on its
face.
"DOL Regulation" means that final regulation, promulgated by the DOL,
defining the term "plan assets" which provides, generally, that when a Plan
makes an equity investment in another entity, the underlying assets of that
entity may be considered plan assets unless certain exceptions apply.
"DSCR" - See "Debt Service Coverage Ratio."
"DTC" means The Depository Trust Company.
"DTC Systems" means those computer applications, systems, and the like
for processing data for DTC. "Due Dates" means dates upon which the
related Scheduled Payments are due and occur on the first day of each
month.
"EPA" means the United States Environmental Protection Agency.
"Euroclear" means the Euroclear System.
"Event of Default" means, with respect to the Master Servicer under the
Pooling and Servicing Agreement, any one of the following events:
o any failure by the Master Servicer to remit to the Trustee any
payment required to be remitted by the Master Servicer under
the terms of the Pooling and Servicing Agreement, including
any required Advances;
o any failure on the part of the Master Servicer duly to observe
or perform in any material respect any other of the duties,
covenants or agreements on the part of the Master Servicer
contained in the Pooling and Servicing Agreement which
continues unremedied for a period of 30 days after the date on
which notice shall have been given by the Depositor or the
Trustee; provided, however, that if the Master Servicer
certifies to the Trustee and the Depositor that the Master
Servicer is in good faith attempting to remedy such failure,
such cure period will be extended to
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the extent necessary to permit the Master Servicer to cure
such failure; provided, further that such cure period may not
exceed 90 days;
o any breach of the representations and warranties of the Master
Servicer in the Pooling and Servicing Agreement that
materially and adversely affects the interest of any holder of
any Class of Certificates and that continues unremedied for a
period of 30 days after notice shall have been given to the
Master Servicer by the Depositor or the Trustee, provided,
however, that if the Master Servicer certifies to the Trustee
and the Depositor that the Master Servicer is in good faith
attempting to remedy such breach, such cure period will be
extended to the extent necessary to permit the Master Servicer
to cure such breach; provided, further that such cure period
may not exceed 90 days;
o the Trustee shall receive notice from Fitch IBCA to the effect
that the continuation of the Master Servicer in such capacity
would result in the downgrade, qualification or withdrawal of
any rating then assigned by Fitch IBCA to any Class of
Certificates or if the Master Servicer is not an "approved"
Master Servicer by S&P; or
o a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an
involuntary case under any present or future federal or state
bankruptcy, insolvency or similar law for the appointment of a
conservator, receiver, liquidator, trustee or similar official
in any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings,
or for the winding-up or liquidation of its affairs, shall
have been entered against the Master Servicer and such decree
or order shall have remained in force undischarged or unstayed
for a period of 60 days;
o the Master Servicer shall consent to the appointment of a
conservator, receiver, liquidator, trustee or similar official
in any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings
of or relating to the Master Servicer or of or relating to all
or substantially all of its property; or
o the Master Servicer admits in writing its inability to pay its
debts generally as they become due, files a petition to take
advantage of any applicable bankruptcy, insolvency or
reorganization statute, makes an assignment for the benefit of
its creditors, voluntarily suspend payment of its obligations,
or takes any corporate action in furtherance of the foregoing.
"Excess Servicing Fee" means an additional fee payable to Conning, as
set forth in the Pooling and Servicing Agreement, which is assignable and
non-terminable.
"Exemptions" means the individual prohibited transaction exemptions
granted by the DOL to the Underwriters.
"Expense Losses" means, among other things:
o any interest paid to the Master Servicer or Trustee in respect
of unreimbursed Advances;
o all Special Servicer Compensation payable to the Special
Servicer from amounts that are part of the Trust Fund;
o any of certain other expenses of the Trust Fund, including,
but not limited to, certain reimbursements and indemnification
payments to the Trustee and certain related persons, certain
reimbursements and indemnification payments to the Depositor,
the Master Servicer, the Special Servicer and certain related
persons, certain taxes payable from the assets of the Trust
Fund, the costs and expenses of any tax audits with respect to
the Trust Fund and certain other tax-related expenses and the
cost of various opinions of counsel required to be obtained in
connection with the servicing of the Mortgage Loans and
administration of the Trust Fund; and
o any other expense of the Trust Fund not specifically included
in the calculation of Realized Loss for which there is no
corresponding collection from the borrower.
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"FASIT" means a financial asset securitization investment trust.
"Fitch IBCA" means Fitch IBCA, Inc.
"401(c) Regulations" means the final regulations that DOL is required
to issue according to Section 401(c) of ERISA.
"General American" means General American Life Insurance Company.
"General American Mortgage Loans" means the one hundred thirty (130) of
the Mortgage Loans that were originated by Conning Asset Management Company on
behalf of General American Life Insurance Company.
"Hazardous Materials" means gasoline, petroleum products, explosives,
radioactive materials, polychlorinated biphenyls or related or similar
materials, and any other substance or material as may be defined as a hazardous
or toxic substance by any federal, state or local environmental law, ordinance,
rule, regulation or order, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. ss.ss. 9601 et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. ss.ss. 1801, et seq.), the Resource Conservation and Recovery
Act, as amended (42 U.S.C. ss.ss. 6901 et seq.), the Federal Water Pollution
Control Act, as amended (33 U.S.C. ss.ss. 1251 et seq.), the Clean Air Act, as
amended (42 U.S.C. ss.ss. 7401 et seq.), and any regulations promulgated
pursuant thereto.
"Initial Pool Balance" means the aggregate Cut-Off Date Balance of
$809,353,823.
"Insurance Proceeds" means all amounts paid by an insurer in connection
with a Mortgage Loan, other than any amounts required to be paid to the related
borrower.
"Interest Accrual Period" means, for each Class of REMIC Regular
Certificates and each Distribution Date, the calendar month immediately
preceding the month in which such Distribution Date occurs.
"Interest Only Certificates" means the Class X Certificates.
"Interest Reserve Account" means an account that the Trustee has
established and will maintain for the benefit of the holders of the
Certificates.
"Interest Reserve Amount" means all amounts deposited in the Interest
Reserve Account with respect to Scheduled Payments due in any applicable January
and February.
"Interest Reserve Loan" - See "Non-30/360 Loan" below.
"Interested Party" means the Special Servicer, the Master Servicer, the
Depositor, the holder of any Certificate, the Operating Advisor or any affiliate
of such party.
"Lock-out Period" means the period ending on a date determined by the
related mortgage note during which voluntary principal prepayments are
prohibited.
"Liquidation Fee" means 1.00% of the related Liquidation Proceeds.
"Liquidation Proceeds" means proceeds from the sale or liquidation of a
Mortgage Loan or related REO Property, net of expenses and any related Advances
and interest thereon.
"Majority Seller" means General American Life Insurance Company.
"Master Servicer" means Conning Asset Management Company.
"Material Breach" means a breach of any of the representations and
warranties that materially and adversely affects the interests of the holders of
the Certificates.
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"Material Document Defect" means a breach of any of the representations
and warranties has occurred that has resulted from a Document Defect and that
materially and adversely affects the interests of the holders of the
Certificates.
"Maturity Assumptions" means the following assumptions:
o the initial Certificate Balances and initial Pass-Through Rates of the
Certificates are as set forth herein;
o the settlement date for the sale of the
Certificates is July 14, 1999;
o distributions on the Certificates are made on the 15th day of
each month, commencing in August, 1999;
o there are no delinquencies, defaults or Realized Losses with
respect to the Mortgage Loans;
o Scheduled Payments on the Mortgage Loans are timely received
on the first day of each month;
o the Trust Fund does not experience any Expense Losses;
o no Principal Prepayment on any Mortgage Loan is made during
its Lock-out Period (if any) or during any period when
Principal Prepayments on such Mortgage Loans are required to
be accompanied by a Yield Maintenance Payment and otherwise
Principal Prepayments are made on the Mortgage Loans at the
indicated levels of CPR (notwithstanding any limitations in
the Mortgage Loans on partial prepayments);
o any Prepayment Premiums are allocated as described elsewhere
in this Prospectus Supplement;
o no Prepayment Interest Shortfalls occur;
o no Mortgage Loan is the subject of a repurchase or
substitution by the respective Seller and no optional
termination of the Trust Fund occurs;
o with respect to the Mortgage Loan identified as loan number 2
on Appendix II to this prospectus supplement, that the related
borrower does exercise its right to partially prepay during
the 58th through 63rd months of the Mortgage Loan term;
o with respect to the Mortgage Loan identified as loan number 5
on Appendix II to this prospectus supplement, the lender does
exercise its right to partially prepay the Mortgage Loan on
January 14, 2004 in scenarios where the prepayments are
assumed on the Mortgage Loan;
o with respect to the Mortgage Loan identified as loan number 18
on Appendix II to this Prospectus Supplement, that the related
borrower does not exercise its right to prepay $800,000 of the
principal balance of such Mortgage Loan;
o with respect to the Mortgage Loan identified as loan number 27
on Appendix II to this Prospectus Supplement, that the related
borrower does not exercise its right to prepay the three
installments which can be no less than $500,000 and no greater
than $1,500,000 of the principal balance of such Mortgage
Loan;
o with respect to the Mortgage Loan identified as loan number 75
on Appendix II to this prospectus supplement, that the related
borrower does exercise its right to partially prepay during
the lesser of yield maintenance and percentage premium
periods; and
o with respect to the Mortgage Loans identified as loan numbers
15, 29, 37, 85, 86, 109, 117, 120, 133 and 139 on Appendix II
to this prospectus supplement, that the related borrower does
not exercise their right to partially prepay during the
lockout and yield maintenance periods.
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"Minority Seller" means the City and County of San Francisco Employees'
Retirement System Pension Trust.
"Money Term" means, with respect to any Mortgage Loan, the maturity
date, Mortgage Rate, principal balance, amortization term or payment frequency
thereof or any provision thereof requiring the payment of a Prepayment Premium,
Yield Maintenance Premium or Percentage Premium in connection with a Principal
Prepayment (but shall not include late fees or default interest provisions).
"Mortgage" means a mortgage, deed of trust or other similar security
instrument.
"Mortgaged Property" means a fee simple estate income-producing real
property.
"Mortgage File" means the following documents, among others:
o the original Mortgage Note, endorsed (without recourse) in
blank or to the order of the Trustee;
o the original or a copy of the related Mortgage(s), together
with originals or copies of any intervening assignments of
such document(s), in each case with evidence of recording
thereon (unless such document(s) have not been returned by the
applicable recorder's office);
o the original or a copy of any related assignment(s) of rents
and leases (if any such item is a document separate from the
Mortgage), together with originals or copies of any
intervening assignments of such document(s), in each case with
evidence of recording thereon (unless such document(s) have
not been returned by the applicable recorder's office);
o an assignment of each related Mortgage in blank or in favor of
the Trustee, in recordable form;
o an assignment of any related assignment(s) of rents and leases
(if any such item is a document separate from the Mortgage) in
blank or in favor of the Trustee, in recordable form;
o an original or copy of the related lender's title insurance
policy (or, if a title insurance policy has not yet been
issued, a commitment for title insurance "marked-up" at the
closing of such Mortgage Loan); and
o when relevant, the related ground lease or a copy thereof.
"Mortgage Loan Purchase Agreement" means the agreements entered into
between the Depositor and the particular Seller, as the case may be.
"Mortgage Loans" and collectively, the "Mortgage Pool," means the 153
fixed rate Mortgage Loans with aggregate Cut-Off Date Balances of $809,353,823
subject to a permitted variance of plus or minus 5%.
"Mortgage Note" means a promissory note evidencing a respective
Mortgage Loan.
"Mortgage Pool" - See "Mortgage Loans."
"MSCI" means Morgan Stanley Capital I Inc., the Depositor.
"Mortgage Rate" means, for a given Mortgage Loan, the per annum rate at
which interest accrues on such Mortgage Loan.
"Mortgaged Property" means the real property, together with
improvements thereto, securing the indebtedness of the Mortgagor under the
related Mortgage Loan.
"Net Aggregate Prepayment Interest Shortfall" means, for the related
Distribution Date, the aggregate of all Prepayment Interest Shortfalls incurred
in respect of all of the Mortgage Loans during any Collection Period that are
neither offset by Prepayment Interest Excesses collected on the Mortgage Loans
during such Collection Period nor covered by a Compensating Interest Payment
paid by the Master Servicer or Special Servicer.
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"Net Mortgage Rate" means, in general, with respect to any Mortgage
Loan, a per annum rate equal to the related Mortgage Rate minus the related
Administrative Cost Rate; provided that, for purposes of calculating the
Pass-Through Rate for each Class of REMIC Regular Certificates from time to
time, the Net Mortgage Rate for any Mortgage Loan will be calculated without
regard to any modification, waiver or amendment of the terms of such Mortgage
Loan subsequent to the Closing Date. In addition, because the Certificates
accrue interest on the basis of a 360-day year consisting of twelve 30-day
months, when calculating the Pass-Through Rate for each Class of Certificates
for each Distribution Date, the Net Mortgage Rate on a Non-30/360 Loan will be
appropriately adjusted to reflect such difference. However, with respect to each
Non-30/360 Loan:
o the Net Mortgage Rate that would otherwise be in effect for
purposes of the Scheduled Payment due in January of each year
(other than a leap year) and February of each year will be
adjusted to take into account the applicable Interest Reserve
Amount; and
o the Net Mortgage Rate that would otherwise be in effect for
purposes of the Scheduled Payment due in March of each year
(commencing in 2000) will be adjusted to take into account the
applicable Interest Reserve Amount for the preceding January
(if applicable) and February.
"Non-30/360 Loan" or "Interest Reserve Loan" means a Mortgage Loan that
accrues interest other than on the basis of a 360-day year consisting of 12
30-day months.
"Notional Amount" means the notional principal amount of the Class X
Certificates, which will be based upon the outstanding principal balance of all
Principal Balance Certificates.
"NWAC Rate" - See "Weighted Average Net Mortgage Rate."
"Offered Certificates" means the Class A-1, Class A-2, Class B, Class
C, Class D, Class E and Class F Certificates. "OID" means original
issue discount. "Open Period" means the period beginning on a date
prior to maturity as determined by the related mortgage note when
voluntary principal prepayments are permitted without any Prepayment Premiums.
"Operating Adviser" means that entity appointed by the holders of a
majority of the Controlling Class which will have the right to receive
notification from the Special Servicer in regard to certain actions.
"Originator" means Conning Asset Management Company, to the extent it
was the originator of the Mortgage Loans.
"P&I Advance" means the amount of any Scheduled Payments or Assumed
Schedule Payment (net of the related Servicing Fees and Excess Servicing Fees),
other than any Balloon Payment, on the Mortgage Loans that are delinquent as of
the close of business on the preceding Determination Date.
"Participants" means DTC's participating organizations.
"Parties in Interest" means persons who have certain specified
relationships to Plans ("parties in interest" under ERISA or "disqualified
persons" under Section 4975 of the Code).
"Pass-Through Rate" means the rate per annum at which any Class of
Certificates (other than the Residual Certificates) accrues interest.
"Percentage Interest" will equal, as evidenced by any REMIC Regular
Certificate in the Class to which it belongs, a fraction, expressed as a
percentage, the numerator of which is equal to the initial Certificate Balance
or Notional Amount, as the case may be, of such Certificate as set forth on the
face thereof, and the denominator of which is equal to the initial aggregate
Certificate Balance or Notional Amount, as the case may be, of such Class.
"Percentage Premium" means, with respect to any Distribution Date, any
amount received as a Prepayment Premium, other than a Yield Maintenance Payment,
that is calculated as a percentage of the principal amount prepaid.
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"Permitted Cure Period" means, for the purposes of any Material
Document Defect or Material Breach in respect of any Mortgage Loan, the 90-day
period immediately following the earlier of the discovery by the related Seller
or receipt by the related Seller of notice of such Material Document Defect or
Material Breach, as the case may be.
"Plans" means, with respect to ERISA and the Code, employee benefit and
other plans that are subject to ERISA and/or Section 4975 of the Code.
"Pooling and Servicing Agreement" means that certain Pooling and
Servicing Agreement dated as of July 1, 1999, by and between Morgan Stanley
Capital I Inc., as Depositor, Conning, as Master Servicer and Special Servicer
and The Chase Manhattan Bank, as Trustee.
"Prepayment Interest Excess" means, in a case in which a full or
partial Principal Prepayment or a Balloon Payment is made during any Collection
Period after the Due Date for such Mortgage Loan, the amount of interest which
accrues on the amount of such Principal Prepayment or Balloon Payment that
exceeds the corresponding amount of interest accruing on the Certificates. The
amount of the Prepayment Interest Excess in any such case will generally equal
the interest that accrues on the Mortgage Loan from such Due Date to the date
such payment was made (net of the Servicing Fee and Excess Servicing Fee (or, if
the related Mortgage Loan is a Specially Serviced Mortgage Loan, the Special
Servicing Fee) and the Trustee Fee).
"Prepayment Interest Shortfall" means, for any Distribution Date and
with respect to any Mortgage Loan the related borrower has made a full or
partial Principal Prepayment or a Balloon Payment during the related Collection
Period, and the date such payment was made (or, in the case of a Balloon
Payment, the date through which interest thereon accrues) occurred prior to the
Due Date for such Mortgage Loan in such Collection Period. Such a shortfall
arises because the amount of interest (net of the Servicing Fee and Excess
Servicing Fee (or, if the related Mortgage Loan is a Specially Serviced Mortgage
Loan, the Special Servicing Fee) and the Trustee Fee) that accrues on the amount
of such Principal Prepayment or Balloon Payment will be less than the
corresponding amount of interest accruing on the Certificates. In such a case,
the Prepayment Interest Shortfall will generally equal the excess of:
o the aggregate amount of interest which would have accrued at
the Net Mortgage Rate on the Scheduled Principal Balance of
such Mortgage Loan for the 30 days ending on such Due Date if
such Principal Prepayment or Balloon Payment had not been
made, over
o the aggregate interest that did so accrue through the date
such payment was made.
"Prepayment Premium" means with respect to any Distribution Date, the
aggregate of all Yield Maintenance Payments, or Percentage Premiums, if any,
received during the related Collection Period in connection with Principal
Prepayments.
"Principal Balance Certificates" means, upon initial issuance, the
Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F, Class G,
Class H, Class J, Class K, Class L, Class M, Class N and Class O Certificates.
"Principal Distribution Amount" equals, in general, for any
Distribution Date, the aggregate of the following:
o the principal portions of all Scheduled Payments (other than
the principal portion of Balloon Payments) and any Assumed
Scheduled Payments due or deemed due, as the case may be, in
respect of the Mortgage Loans for their respective Due Dates
occurring during the related Collection Period; and
o all payments (including Principal Prepayments and the
principal portion of Balloon Payments) and other collections
(including Liquidation Proceeds, Condemnation Proceeds,
Insurance Proceeds and REO Income (each as defined herein) and
proceeds of Mortgage Loan repurchases) that were received on
or in respect of the Mortgage Loans during the related
Collection Period and that were identified and applied by the
Master Servicer as recoveries of principal thereof, in each
case net of any portion of such payment or other collection
that represents a recovery of the principal portion of any
Scheduled Payment (other than a Balloon Payment) due, or the
principal portion of any
S-106
<PAGE>
Assumed Scheduled Payment deemed due, in respect of the
related Mortgage Loan on a Due Date during or prior to the
related Collection Period and not previously recovered.
"Principal Prepayments" means the payments and collections with respect
to principal of the Mortgage Loans including all voluntary and involuntary
prepayments of principal made prior to their scheduled Due Dates.
"Private Certificates" means the Class X, Class G, Class H, Class J,
Class K, Class L, Class M, Class N and Class O Certificates and the Residual
Certificates.
"PTCE" means a DOL Prohibited Transaction Class Exemption.
"Purchase Price" means that amount at least equal to the unpaid
principal balance of such Mortgage Loan, together with accrued but unpaid
interest thereon to but not including the date of the repurchase and any related
expenses reimbursable to the Master Servicer, the Special Servicer or the
Trustee or any related unreimbursed Servicing Advances, including all unpaid
interest on all Advances.
"Qualifying Substitute Mortgage Loan" means a Mortgage Loan having
certain payment terms comparable to the Mortgage Loan to be replaced due to a
Material Document Defect or a Material Breach and for which the Rating Agencies
have confirmed in writing that the replacement with such Mortgage Loan would not
result in a withdrawal, downgrade or qualification of the then current ratings
on the Certificates.
"Rated Final Distribution Date" means the first Distribution Date that
follows by at least 36 months the end of the amortization term of the Mortgage
Loan that, as of the Cut-Off Date, has the longest remaining amortization term.
"Rating Agencies" means Fitch IBCA and S&P.
"Realized Losses" means losses arising from the inability of the Master
Servicer, the Trustee or the Special Servicer to collect all amounts due and
owing under any defaulted Mortgage Loan, including by reason of any
modifications to the terms of a Mortgage Loan, bankruptcy of the related
borrower or a casualty of any nature at the related Mortgaged Property, to the
extent not covered by insurance. The Realized Loss, if any, in respect of a
liquidated Mortgage Loan or related REO Property, will generally equal the
excess, if any, of:
o the outstanding principal balance of such Mortgage Loan as of
the date of liquidation, together with all accrued and unpaid
interest thereon at the related Mortgage Rate, over
o the aggregate amount of Liquidation Proceeds, if any,
recovered in connection with such liquidation, net of any
portion of such liquidation proceeds that is payable or
reimbursable in respect of related liquidation and other
servicing expenses. If the Mortgage Rate on any Mortgage Loan
is reduced or a portion of the debt due under any Mortgage
Loan is forgiven, whether in connection with a modification,
waiver or amendment granted or agreed to by the Special
Servicer or in connection with a bankruptcy or similar
proceeding involving the related borrower, the resulting
reduction in interest paid and the principal amount so
forgiven, as the case may be, also will be treated as a
Realized Loss.
"Record Date" means, with respect to each Class of Offered Certificates
for each Distribution Date, the last business day of the calendar month
immediately preceding the month in which such Distribution Date occurs.
"Rehabilitated Mortgage Loan" will result from a Specially Serviced
Mortgage Loan when (a) three consecutive Scheduled Payments have been made (in
the case of any such Mortgage Loan that was modified, based on the modified
terms), (b) no other Servicing Transfer Event has occurred and is continuing
with respect to such Mortgage Loan and (c) the Trust Fund has been reimbursed
for all costs incurred as a result of the occurrence of the Servicing Transfer
Event or such amounts have been forgiven.
"REMIC Regular Certificates" means the Senior Certificates and the
Subordinate Certificates.
"REO Income" means the Liquidation Proceeds and income received in
connection with the operation of an REO Property, net of certain expenses.
S-107
<PAGE>
"REO Property" means any Mortgaged Property acquired on behalf of the
Certificateholders in respect of a defaulted Mortgage Loan through foreclosure,
deed in lieu of foreclosure or otherwise.
"REO Tax" means a tax on "net income from foreclosure property" within
the meaning of the REMIC provisions of the Code.
"Residual Certificates" means the Class R-I Certificates, the Class
R-II Certificates and the Class R-III Certificates.
"Retirement System" means the City and County of San Francisco
Employees' Retirement System Pension Trust.
"Retirement System Mortgage Loans" means twenty-three (23) of the
Mortgage Loans that were either originated by Conning Asset Management Company
or others on behalf of the Minority Seller.
"Scheduled Payment" means, in general, for any Mortgage Loan on any Due
Date, the amount of the scheduled payment of principal and interest (or interest
only) due thereon on such date (taking into account any waiver, modification or
amendment of the terms of such Mortgage Loan subsequent to the Closing Date,
whether agreed to by the Special Servicer or occurring in connection with a
bankruptcy proceeding involving the related borrower).
"Scheduled Principal Balance" of any Mortgage Loan on any Distribution
Date will generally equal the Cut-Off Date Balance, as defined above, thereof,
reduced (to not less than zero) by:
o any payments or other collections of principal (or Advances in
lieu thereof) on such Mortgage Loan that have been collected
or received during any preceding Collection Period, other than
any Scheduled Payments due in any subsequent Collection
Period; and
o the principal portion of any Realized Loss incurred in respect
of such Mortgage Loan during any preceding Collection Period.
"Sellers" means General American Life Insurance Company and the City
and County of San Francisco Employees' Retirement System.
"Senior Certificates" means the Class A Certificates and the Class X
Certificates.
"Servicing Advances" means, in general, customary, reasonable and
necessary "out-of-pocket" costs and expenses required to be incurred by the
Master Servicer in connection with the servicing of a Mortgage Loan after a
default (whether or not a payment default), delinquency or other unanticipated
event, or in connection with the administration of any REO Property.
"Servicing Fee" means the monthly amount, based on the Servicing Fee
Rate, to which the Master Servicer is entitled in compensation for servicing the
Mortgage Loans.
"Servicing Fee Rate" means 0.04% per annum each month payable with
respect to a Mortgage Loan in connection with the Servicing Fee.
"Servicing Standard" means the higher of the following standards of
care:
o in the same manner in which and with the same care, skill,
prudence and diligence with which the Master Servicer or the
Special Servicer, as the case may be, services and administers
similar mortgage loans for other third-party portfolios,
giving due consideration to customary and usual standards of
practice of prudent institutional commercial mortgage lenders
servicing their own mortgage loans and to the maximization of
the net present value of the Mortgage Loans; and
o the care, skill, prudence and diligence the Master Servicer or
the Special Servicer, as the case may be, uses for loans which
it owns and which are substantially the same as the Mortgage
Loans, giving due consideration to the maximization of the net
present value of the Mortgage Loans.
S-108
<PAGE>
"Servicing Transfer Event" means an instance where an event has
occurred that has caused a Mortgage Loan to become a Specially Serviced Mortgage
Loan.
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
"Specially Serviced Mortgage Loan" means the following:
o any Mortgage Loan as to which a Balloon Payment is past due,
and the Master Servicer has determined that payment is
unlikely to be made on or before the second Due Date
succeeding the date the Balloon Payment was due, or any other
payment is more than 60 days past due or has not been made on
or before the second Due Date following the date such payment
was due;
o any Mortgage Loan as to which, to the Master Servicer's
knowledge, the borrower has consented to the appointment of a
receiver or conservator in any insolvency or similar
proceeding of or relating to such borrower or to all or
substantially all of its property, or the borrower has become
the subject of a decree or order issued under a bankruptcy,
insolvency or similar law and such decree or order shall have
remained undischarged or unstayed for a period of 60 days;
o any Mortgage Loan as to which the Master Servicer shall have
received notice of the foreclosure or proposed foreclosure of
any other lien on the Mortgaged Property;
o any Mortgage Loan as to which the Master Servicer has
knowledge of a default (other than a failure by the related
borrower to pay principal or interest) which, in the judgement
of the Master Servicer, materially and adversely affects the
interests of the Certificateholders and which has occurred and
remains unremedied for the applicable grace period specified
in such Mortgage Loan (or, if no grace period is specified, 60
days);
o any Mortgage Loan as to which the borrower admits in writing
its inability to pay its debts generally as they become due,
files a petition to take advantage of any applicable
insolvency or reorganization statute, makes an assignment for
the benefit of its creditors or voluntarily suspends payment
of its obligations; and
o any Mortgage Loan as to which, in the judgment of the Master
Servicer, a default has occurred or in the judgment of the
Master Servicer is imminent or is likely to occur within 60
days.
"Special Servicer" means Conning Asset Management Company.
"Special Servicer Compensation" means such fees payable to the Special
Servicer, collectively, the Special Servicing Fee, the Workout Fee and the
Liquidation Fee.
"Special Servicer Event of Default" means, with respect to the Special
Servicer under the Pooling and Servicing Agreement, any one of the following
events:
o any failure by the Special Servicer to remit to the Trustee or
the Master Servicer when due any amount required to be so
remitted under the terms of the Pooling and Servicing
Agreement;
o any failure on the part of the Special Servicer duly to
observe or perform in any material respect any other of the
covenants or agreements on the part of the Special Servicer
contained in the Pooling and Servicing Agreement which
continues unremedied for a period of 90 days after the date on
which written notice of such failure, requiring the same to be
remedied, shall have been given to the Special Servicer by the
Depositor or the Trustee; provided, however, that to the
extent that the Special Servicer certifies to the Trustee and
the Depositor that the Special Servicer is in good faith
attempting to remedy such failure and the Certificateholders
shall not be materially and adversely affected thereby, such
cure period will be extended for up to an additional 60 days;
o any breach by the Special Servicer of the representations and
warranties contained in the Pooling and Servicing Agreement
that materially and adversely affects the interests of the
holders of any Class of Certificates and that continues
unremedied for a period of 30 days after the date on which
notice of such breach, requiring the same to be remedied,
shall have been given to the Special
S-109
<PAGE>
Servicer by the Depositor or the Trustee, provided, however,
that to the extent that the Special Servicer is in good faith
attempting to remedy such breach and the Certificateholders
shall not be materially and adversely affected thereby, such
cure period may be extended for up to an additional 60 days;
o the Trustee shall receive notice from Fitch IBCA to the effect
that the continuation of the Special Servicer in such capacity
would result in the downgrade or withdrawal of any rating then
assigned by Fitch IBCA to any Class of Certificates or if the
Special Servicer is not an "approved" special servicer by S&P;
o a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an
involuntary case under any present or future federal or state
bankruptcy, insolvency or similar law for the appointment of a
conservator, receiver, liquidator, trustee or similar official
in any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings,
or for the winding-up or liquidation of its affairs, shall
have been entered against the Special Servicer and such decree
or order shall have remained in force undischarged or unstayed
for a period of 60 days;
o the Special Servicer shall consent to the appointment of a
conservator, receiver, liquidator, trustee or similar official
in any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings
of or relating to the Special Servicer or of or relating to
all or substantially all of its property; or
o the Special Servicer's having admitted in writing its
inability to pay its debts generally as they become due, file
a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization statute, make an assignment for
the benefit of its creditors, voluntarily suspend payment of
its obligations, or take any corporate action in furtherance
of the foregoing.
"Special Servicer Report" means, generally, a report showing
loan-by-loan detail on each Specially Serviced Mortgage Loan that is 60 days
delinquent, 90 days delinquent, or in the process of foreclosure, an REO status
report for each REO Property and a modification report showing loan-by-loan
detail for each modification closed during the most recent reporting period.
"Special Servicing Fee" means an amount equal to, in any month, the
portion of a rate equal to 0.25% per annum applicable to such month (determined
in the same manner as the applicable Mortgage Rate is determined for each
Specially Serviced Mortgage Loan for such month) of the outstanding Scheduled
Principal Balance of each Specially Serviced Mortgage Loan.
"S&P" means Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc.
"Subordinate Certificates" means the Class B Certificates, the Class C
Certificates, the Class D Certificates, the Class E Certificates, the Class F
Certificates, the Class G Certificates, the Class H Certificates, the Class J
Certificates, the Class K Certificates, the Class L Certificates, the Class M
Certificates, the Class N Certificates and the Class O Certificates.
"Sub-Servicer" means an entity with whom either the Master Servicer or
the Special Servicer has entered a sub-servicing agreement.
"Treasury Rate" is the yield calculated by the linear interpolation of
the yields, as reported in Federal Reserve Statistical Release H.15-Selected
Interest Rates under the heading "U.S. government securities/Treasury constant
maturities" for the week ending prior to the date of the relevant principal
prepayment, of U.S. Treasury constant maturities with a maturity date (one
longer and one shorter) most nearly approximating the maturity date of the
Mortgage Loan prepaid. If Release H.15 is no longer published, the Master
Servicer will select a comparable publication to determine the Treasury Rate.
"Trustee" means The Chase Manhattan Bank.
"Trustee Fee" means a monthly fee as set forth in the Pooling and
Servicing Agreement to be paid from the Distribution Account to the Trustee as
compensation for the performance of its duties.
S-110
<PAGE>
"Trustee's Website" means the Trustee's website, initially located at
"www.globaltrustservices.com".
"Trust Fund" means the trust fund created by the Pooling and Servicing
Agreement consisting primarily of:
o the Mortgage Loans and all payments under and proceeds of the
Mortgage Loans received after the Cut-Off Date (exclusive of
principal prepayments received prior to the Cut-Off Date and
scheduled payments of principal and interest due on or before
the Cut-Off Date);
o any Mortgaged Property acquired on behalf of the
Certificateholders in respect of a defaulted Mortgage Loan
through foreclosure, deed in lieu of foreclosure or otherwise;
and
o certain rights of the Depositor under, or assigned to the
Depositor pursuant to, each of the Mortgage Loan Purchase
Agreements relating to Mortgage Loan document delivery
requirements and the representations and warranties of the
related Seller regarding its Mortgage Loans.
"Underwritable Cash Flow" means an estimate of stabilized cash flow
available for debt service. In general, it is the estimated stabilized revenue
derived from the use and operation of a Mortgaged Property (consisting primarily
of rental income) less the sum of (a) estimated stabilized operating expenses
(such as utilities, administrative expenses, repairs and maintenance, management
fees and advertising), (b) fixed expenses (such as insurance, real estate taxes
and, if applicable, ground lease payments) and (c) reserves for capital
expenditures, including tenant improvement costs and leasing commissions.
Underwritable Cash Flow generally does not reflect interest expenses and
non-cash items such as depreciation and amortization.
"Underwriting Agreement" means that agreement, dated June , 1999,
entered into by the Depositor, Morgan Stanley & Co. Incorporated, an affiliate
of the Depositor, Donaldson, Lufkin & Jenrette Securities Corporation and
Prudential Securities Incorporated.
"Underwriters" means Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
"Unpaid Interest" means one month's interest upon the portion of the
Distributable Certificate Interest Amount for such Class remaining unpaid as of
the close of business on the preceding Distribution Date at the applicable
Pass-Through Rate.
"Weighted Average Net Mortgage Rate" or "NWAC Rate" means, for any
Distribution Date, the weighted average of the Net Mortgage Rates for the
Mortgage Loans (in the case of each Mortgage Loan that is a Non-30/360 Mortgage
Loan, adjusted as described under the definition of Net Mortgage Rate), weighted
on the basis of their respective Scheduled Principal Balances as of the close of
business on the preceding Distribution Date.
"Workout Fee" means that fee, payable with respect to any Rehabilitated
Mortgage Loan, equal to 1.00% of the amount of each collection of interest and
principal received on such Mortgage Loan for so long as it remains a
Rehabilitated Mortgage Loan.
"Years Built/Renovated" means the later of the year in which a
Mortgaged Property was originally constructed or the most recent year in which
such Mortgaged Property was substantially renovated.
"Yield Maintenance Payment" means, with respect to any Distribution
Date, any amount received as a Prepayment Premium which is calculated based upon
a yield maintenance formula.
S-111
<PAGE>
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<PAGE>
APPENDIX I MORTGAGE POOL INFORMATION
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
CUT-OFF DATE BALANCE ($) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 1,000,000 5 4,586,639 0.57 8.270 145 1.38 1.94 60.1 11.2
1,000,001 to 2,000,000 17 26,891,335 3.32 8.047 145 1.33 1.84 60.6 14.8
2,000,001 to 3,000,000 28 71,035,016 8.78 7.869 154 1.36 1.68 66.7 23.2
3,000,001 to 4,000,000 25 84,883,823 10.49 8.238 124 1.31 1.66 66.7 33.7
4,000,001 to 5,000,000 17 76,682,033 9.47 7.815 116 1.34 1.62 61.7 35.2
5,000,001 to 6,000,000 10 54,518,405 6.74 7.736 153 1.39 1.66 64.4 27.5
6,000,001 to 7,000,000 12 78,544,014 9.70 7.538 122 1.36 1.50 68.4 44.7
7,000,001 to 8,000,000 13 97,727,750 12.07 7.602 122 1.35 1.52 66.6 41.1
8,000,001 to 9,000,000 9 76,786,572 9.49 7.659 98 1.43 1.75 64.0 42.1
9,000,001 to 10,000,000 3 28,307,105 3.50 7.420 128 1.95 2.39 55.2 35.6
10,000,001 to 15,000,000 9 114,283,714 14.12 7.416 133 1.41 1.48 65.4 44.5
15,000,001 to 20,000,000 4 71,210,698 8.80 7.283 137 1.59 1.76 59.8 36.9
20,000,001 to 25,000,000 1 23,896,720 2.95 7.920 116 1.55 1.68 43.4 35.2
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL OF WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x 63.8% 36.4%
===================================================================================================================================
</TABLE>
Min: $755,588
Max: $23,896,720
Average: $5,289,894
I-1
<PAGE>
APPENDIX I MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
STATE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California 31 162,981,182 20.14 7.553 127 1.41 1.60 60.4 36.3
Washington 10 55,433,588 6.85 7.402 134 1.34 1.64 65.0 30.6
Georgia 11 53,311,636 6.59 7.455 146 1.40 1.51 70.6 37.3
Florida 14 49,356,595 6.10 7.951 121 1.28 1.55 70.7 45.0
Maryland 9 47,694,501 5.89 7.612 106 1.44 1.68 63.4 44.5
Arizona 8 38,946,795 4.81 7.507 128 1.45 1.67 62.2 31.5
Virginia 6 36,204,042 4.47 8.290 106 1.49 2.06 55.4 30.7
North Carolina 6 35,967,114 4.44 7.351 126 1.45 1.56 66.4 38.2
Nevada 6 31,021,745 3.83 8.081 125 1.35 1.61 67.2 41.1
Texas 5 30,187,823 3.73 7.738 84 1.34 1.49 64.8 54.8
New York 3 29,640,384 3.66 6.681 125 1.66 1.44 49.1 42.1
Illinois 4 29,012,796 3.58 7.947 133 1.23 1.44 74.1 40.1
Colorado 4 23,935,340 2.96 9.154 182 1.27 1.79 61.4 5.0
Missouri 3 23,931,276 2.96 7.634 124 1.46 1.84 64.0 34.7
District of Columbia 3 21,310,532 2.63 8.215 136 2.01 2.78 46.0 17.6
Michigan 3 19,603,440 2.42 8.129 103 1.31 1.51 67.6 50.0
Pennsylvania 3 19,544,178 2.41 7.151 140 1.33 1.37 71.6 47.8
Oregon 7 18,905,092 2.34 8.148 156 1.19 1.52 69.5 21.1
Massachusetts 1 17,756,107 2.19 7.400 210 1.78 2.14 46.7 0.0
New Jersey 1 16,842,081 2.08 7.375 115 1.77 2.01 63.6 44.2
Nebraska 3 13,059,059 1.61 7.298 128 1.23 1.29 72.0 49.3
Maine 1 8,190,600 1.01 7.750 84 1.27 1.47 80.1 64.6
Utah 2 6,800,105 0.84 8.035 126 1.34 1.55 71.1 37.1
Connecticut 1 6,397,909 0.79 8.000 78 1.13 1.30 81.7 69.6
Wisconsin 3 5,076,196 0.63 7.967 164 1.28 1.68 69.2 11.4
South Carolina 1 3,002,149 0.37 7.375 107 1.23 1.29 72.8 58.7
Indiana 3 2,997,821 0.37 8.994 156 1.17 1.83 65.9 0.0
Tennessee 1 2,243,737 0.28 8.150 194 1.19 1.56 75.6 0.0
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x 63.8% 36.4%
===================================================================================================================================
</TABLE>
I-2
<PAGE>
APPENDIX I MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE
PROPERTY TYPE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail 66 299,971,138 37.06 7.745 144 1.29 1.52
Anchored 32 206,783,887 25.55 7.626 132 1.33 1.52
Free Standing 31 76,173,824 9.41 8.126 178 1.19 1.52
Unanchored 3 17,013,427 2.10 7.487 140 1.30 1.49
- -------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 66 $299,971,138 37.06% 7.745% 144 1.29x 1.52x
Office 47 291,562,472 36.02 7.528 127 1.50 1.73
Suburban 35 197,944,352 24.46 7.439 127 1.44 1.67
Urban 7 68,802,008 8.50 7.699 118 1.65 1.86
Medical Office 5 24,816,111 3.07 7.770 152 1.61 1.78
- -------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 47 $291,562,472 36.02% 7.528% 127 1.50x 1.73x
Industrial 31 142,908,491 17.66 7.637 108 1.39 1.64
Warehouse 19 83,456,191 10.31 7.855 117 1.34 1.68
Flex Industrial 12 59,452,299 7.35 7.329 95 1.47 1.58
- -------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 31 $142,908,491 17.66% 7.637% 108 1.39x 1.64x
Multifamily 7 49,791,111 6.15 8.393 113 1.47 1.77
Garden 7 49,791,111 6.15 8.393 113 1.47 1.77
- -------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 7 $ 49,791,111 6.15% 8.393% 113 1.47x 1.77x
Hospitality 2 25,120,611 3.10 7.746 96 1.82 2.24
Full Service 1 16,842,081 2.08 7.375 115 1.77 2.01
Limited Service 1 8,278,530 1.02 8.500 56 1.93 2.71
- -------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 2 $ 25,120,611 3.10% 7.746% 96 1.82x 2.24x
- -------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $ 809,353,823 100.00% 7.688% 128 1.41x 1.65x
=========================================================================================================================
<CAPTION>
- ------------ --------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF BALLOON
DATE LTV (%) LTV (%)
- ------------ --------
<C> <C>
70.5 34.4
68.4 41.5
75.3 14.4
75.1 38.4
- ------------ --------
70.5% 34.4%
58.2 35.1
61.6 35.4
47.5 35.0
60.9 33.9
- ------------ --------
58.2% 35.1%
64.2 42.8
63.7 36.1
64.7 52.2
- ------------ --------
64.2% 42.8%
58.1 35.0
58.1 35.0
- ------------ --------
58.1% 35.0%
58.4 42.3
63.6 44.2
47.8 38.4
- ------------ --------
58.4% 42.3%
============ ========
63.8% 36.4%
============ ========
</TABLE>
I-3
<PAGE>
APPENDIX I MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
MORTGAGE RATE (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.001 to 6.500 1 10,640,384 1.31 6.310 172 2.00 1.89 48.4 28.8
6.501 to 7.000 18 144,965,741 17.91 6.854 105 1.45 1.39 66.0 51.9
7.001 to 7.500 51 296,962,697 36.69 7.275 143 1.47 1.63 64.6 38.1
7.501 to 8.000 33 149,091,665 18.42 7.878 128 1.32 1.61 64.5 31.9
8.001 to 8.500 21 88,662,083 10.95 8.282 130 1.41 1.83 64.9 28.8
8.501 to 9.000 12 57,751,147 7.14 8.778 95 1.36 1.93 59.9 34.2
9.001 to 9.500 10 29,248,283 3.61 9.321 118 1.27 1.86 61.0 24.2
9.501 to 10.000 7 32,031,823 3.96 9.754 144 1.26 1.96 55.3 11.1
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x 63.8% 36.4%
====================================================================================================================================
</TABLE>
Min: 6.310%
Max: 9.875%
Weighted Average Coupon: 7.688%
I-4
<PAGE>
APPENDIX IMORTGAGE POOL INFORMATION
CONSTANTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
CONSTANT (%) LOANS BALANCE($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.001 to 7.000 2 19,000,000 2.35 6.889 99 1.47 1.19 49.5 49.5
7.001 to 8.000 4 36,865,894 4.55 6.530 56 1.76 1.58 62.8 59.0
8.001 to 9.000 40 249,836,508 30.87 7.139 127 1.38 1.40 68.2 51.9
9.001 to 10.000 26 169,962,225 21.00 7.574 129 1.36 1.54 67.3 41.1
10.001 to 11.000 30 146,970,255 18.16 8.087 138 1.41 1.74 63.7 27.7
11.001 to 12.000 26 102,897,852 12.71 8.079 139 1.55 2.07 58.7 18.2
12.001 to 13.000 9 36,026,391 4.45 9.043 170 1.34 1.95 53.6 1.9
13.001 to 14.000 6 17,044,019 2.11 8.880 127 1.18 1.84 62.0 13.0
14.001 to 15.000 1 3,664,222 0.45 9.750 131 1.35 2.37 47.3 0.0
15.001 to 16.000 8 18,322,363 2.26 9.167 104 1.32 2.36 49.1 9.4
17.001 to 18.000 1 8,764,095 1.08 9.000 98 1.22 2.49 50.1 0.0
- ----------------------------------------------------------------------------------------------------------------------
TOTAL: 153 $809,353,823 100.00% 7.688% 128 1.41 1.65x 63.8% 36.4%
======================================================================================================================
</TABLE>
Min: 6.580%
Max: 17.335%
Weighted Average: 9.978%
I-5
<PAGE>
APPENDIX IMORTGAGE POOL INFORMATION
SEASONING
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
SEASONING (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 2 19,950,000 2.46 7.086 120 1.29 1.30 74.0 58.4
1 to 12 60 391,194,043 48.33 7.195 129 1.46 1.56 62.8 41.0
13 to 24 17 96,163,191 11.88 7.409 130 1.32 1.47 66.6 40.1
25 to 36 15 61,251,960 7.57 8.329 115 1.36 1.70 67.2 39.6
37 to 48 28 124,205,945 15.35 8.064 144 1.26 1.59 70.6 27.8
49 to 60 19 75,008,854 9.27 9.173 112 1.31 1.88 58.4 27.4
61 to 84 11 40,062,403 4.95 8.455 126 1.97 2.80 45.4 12.0
85 to 120 1 1,517,427 0.19 9.875 129 1.11 1.97 59.8 0.0
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x 63.8% 36.4%
===================================================================================================================================
</TABLE>
Min: 0
Max: 111
Weighted Average: 22
I-6
<PAGE>
APPENDIX I MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE
ORIGINAL TERM TO STATED MATURITY (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR(X) DSCR (X)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 to 60 5 41,865,894 5.17 6.536 56 1.71 1.51
61 to 120 75 444,739,646 54.95 7.670 100 1.38 1.56
121 to 180 30 148,820,573 18.39 7.608 147 1.38 1.72
181 to 240 41 163,115,804 20.15 8.067 200 1.47 1.87
241 to 300 2 10,811,906 1.34 8.247 219 1.29 1.61
- ------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x
========================================================================================================================
<CAPTION>CC
- -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF BALLOON
DATE LTV (%) LTV (%)
- -----------------------
<C> <C>
58.3 55.0
65.4 51.1
61.8 26.2
62.4 3.4
67.6 0.0
- -----------------------
63.8% 36.4%
=======================
</TABLE>
Min: 60
Max: 264
Weighted Average: 150
I-7
<PAGE>
APPENDIX I MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED
NUMBER OF AGGREGATE AGGREAGATE AVERAGE REMAINING WEIGHTED WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE
REMAINING TERM TO STATED MATURITY (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 to 60 9 66,706,345 8.24 7.270 54 1.68 1.74
61 to 120 77 450,448,018 55.66 7.644 103 1.36 1.54
121 to 180 35 149,362,588 18.45 7.708 160 1.48 1.88
181 to 240 32 142,836,871 17.65 8.000 208 1.38 1.70
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x
==========================================================================================================================
<CAPTION>
- -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT -OFF BALLOON
DATE LTV (%) LTV (%)
- -----------------------
<C> <C>
57.0 52.5
66.0 50.7
59.2 17.5
65.0 3.9
- -----------------------
63.8% 36.4%
=======================
</TABLE>
Min: 40
Max: 230
Weighted Average: 128
I-8
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL AMORTIZATION TERMS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED
NUMBER OF AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED
MORTGAGE AGGREGATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE
ORIGINAL AMORTIZATION TERM (MOS) LOANS CUT-OFF DATE BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALLOON LOAN
Interest Only 2 19,000,000 2.35 6.889 99 1.47 1.19
121 to 179 1 5,038,665 0.62 9.840 66 1.09 1.97
180 1 3,711,572 0.46 7.250 105 1.27 1.72
181 to 239 4 11,809,243 1.46 8.596 73 1.44 2.02
240 20 112,922,955 13.95 7.597 115 1.37 1.65
241 to 299 10 61,964,342 7.66 8.108 84 1.42 1.71
300 51 314,882,036 38.91 7.428 121 1.39 1.47
301 to 359 2 16,445,201 2.03 7.912 80 1.19 1.30
360 7 50,430,888 6.23 6.841 74 1.69 1.57
- ---------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 98 $596,204,902 73.66% 7.519% 109 1.41x 1.54x
FULLY AMORTIZING LOAN
60 to 119 1 8,764,095 1.08 9.000 98 1.22 2.49
121 to 179 1 1,831,682 0.23 8.125 108 1.18 2.17
180 16 51,313,405 6.34 7.894 153 1.42 2.10
181 to 239 8 36,113,122 4.46 8.047 196 1.54 1.98
240 26 100,093,635 12.37 8.269 197 1.43 1.89
241 to 299 3 15,032,982 1.86 8.107 215 1.33 1.63
- ---------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 55 $213,148,921 26.34% 8.159% 182 1.43x 1.97x
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x
===========================================================================================================================
Min: 105
Max: 360
Weighted Average: 268
<CAPTION>
- -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF BALLOON
DATE LTV (%) LTV (%)
- -----------------------
<C> <C>
49.5 49.5
56.7 33.9
70.6 34.0
57.1 40.9
66.4 42.1
65.1 51.6
66.7 50.4
71.5 62.6
63.7 58.1
- -----------------------
65.5% 49.5%
50.1 0.0
54.1 0.0
51.6 0.0
55.0 0.0
63.8 0.0
67.2 0.0
- -----------------------
59.0% 0.0%
- -----------------------
63.8% 36.4%
========================
</TABLE>
I-9
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING AMORTIZATION TERMS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
REMAINING AMORTIZATION MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
TERM (MOS) LOANS BALANCE BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Only 2 19,000,000 2.35 6.889 99 1.47 1.19 49.5 49.5
60 to 120 4 16,405,465 2.03 8.757 105 1.37 2.62 46.1 0.1
121 to 180 30 100,493,787 12.42 8.225 140 1.54 2.21 53.9 9.0
181 to 240 55 280,204,468 34.62 7.907 150 1.37 1.68 65.6 25.6
241 to 300 54 333,989,647 41.27 7.475 118 1.38 1.46 66.9 51.0
301 to 360 8 59,260,457 7.32 6.902 79 1.62 1.52 64.6 58.1
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x 63.8% 36.4%
====================================================================================================================================
</TABLE>
Min: 98
Max: 356
Weighted Average: 246
I-10
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
DEBT SERVICE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
COVERAGE RATIO (X) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.00(1) 1 5,590,230 0.69 8.125 202 1.00 1.29 91.4 0.0
1.01 to 1.15 21 83,049,074 10.26 8.333 118 1.11 1.47 71.7 33.9
1.16 to 1.25 35 153,922,754 19.02 7.565 135 1.21 1.45 70.9 37.9
1.26 to 1.35 41 227,817,283 28.15 7.746 137 1.30 1.50 67.1 38.7
1.36 to 1.50 24 121,156,540 14.97 7.695 114 1.43 1.68 62.9 38.4
1.51 to 1.75 15 108,637,148 13.42 7.554 126 1.55 1.71 55.2 37.9
1.76 to 2.00 10 76,505,731 9.45 7.454 121 1.83 2.14 51.6 30.6
2.01 or greater 6 32,675,064 4.04 7.111 126 2.46 2.75 44.2 28.2
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x 63.8% 36.4%
==================================================================================================================================
</TABLE>
Min: 1.00x
Max: 3.14x
Weighted Average: 1.41x
Note: (1) One loan, Tab 58 Home Depot, has a 1.00 DSCR. The loan is a 20-year
fully-amortizing loan based on a NNN lease to Home Depot for 20 years.
I-11
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ASSUMED DEBT SERVICE COVERAGE RATIOS @ 8.5% CONSTANT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
DEBT SERVICE COVERAGE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
RATIO @ 8.5% (X) LOANS BALANCE (4) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.01 to 1.15 2 12,454,074 1.54 6.906 63 1.20 1.09 54.6 50.1
1.16 to 1.25 7 34,284,123 4.24 7.097 126 1.19 1.22 72.8 53.4
1.26 to 1.35 24 152,788,312 18.88 7.251 113 1.29 1.30 71.6 55.3
1.36 to 1.50 28 164,400,181 20.31 7.576 141 1.27 1.42 72.9 41.8
1.51 to 1.75 46 218,382,144 26.98 7.805 127 1.38 1.61 63.6 33.4
1.76 to 2.00 21 105,545,634 13.04 8.073 128 1.54 1.88 56.0 25.4
2.01 or greater 25 121,499,355 15.01 8.089 138 1.81 2.47 47.4 14.2
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x 63.8% 36.4%
====================================================================================================================================
</TABLE>
Min: 1.01x
Max: 4.18x
Weighted Average: 1.65x
I-12
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
CUT-OFF DATE NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
LOAN-TO-VALUE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
RATIO (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20.1 to 30.0 2 14,383,281 1.78 7.180 134 2.50 3.08 26.1 8.7
30.1 to 40.0 2 4,269,808 0.53 8.500 94 2.20 3.17 34.8 18.5
40.1 to 50.0 20 113,781,466 14.06 7.910 141 1.72 2.14 46.0 18.9
50.1 to 60.0 24 128,084,846 15.83 7.905 125 1.45 1.78 55.5 26.5
60.1 to 70.0 40 242,270,215 29.93 7.695 120 1.40 1.58 65.7 41.9
70.1 to 80.0 58 271,469,469 33.54 7.441 130 1.25 1.38 73.5 45.0
80.1 to 90.0 6 29,504,509 3.65 8.148 131 1.19 1.41 81.7 47.2
91.4(1) 1 5,590,230 0.69 8.125 202 1.00 1.29 91.4 0.0
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x 63.8% 36.4%
==================================================================================================================================
</TABLE>
Min: 25.0%
Max: 91.4%
Weighted Average: 63.8%
Note: (1) One loan, Tab 58 Home Depot, has a 1.00 DSCR. The loan is a
20-year fully-amortizing loan based on a NNN lease to Home
Depot for 20 years.
I-13
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
BALLOON LOAN-TO-VALUE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
RATIO (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.0 54 208,953,129 25.82 8.149 184 1.42 1.95 59.4 0.0
0.1 to 10.0 2 5,905,882 0.73 8.259 146 1.49 2.39 47.8 2.2
10.1 to 20.0 1 5,721,128 0.71 7.180 229 2.42 2.49 43.0 15.8
20.1 to 30.0 7 40,365,021 4.99 7.207 153 1.55 1.64 54.2 27.8
30.1 to 40.0 15 88,422,518 10.93 7.856 120 1.46 1.76 57.2 34.6
40.1 to 50.0 19 106,576,353 13.17 7.659 109 1.44 1.66 64.1 45.8
50.1 to 60.0 46 295,915,482 36.56 7.420 104 1.38 1.43 68.6 55.8
60.1 to 70.0 9 57,494,311 7.10 7.514 69 1.27 1.34 75.6 66.6
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 153 $809,353,823 100.00% 7.688% 128 1.41 1.65x 63.8% 36.4%
====================================================================================================================================
</TABLE>
Min: 0.0%
Max: 69.6%
Weighted Average: 36.4%
I-14
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
FEE OR LEASEHOLD
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE ASSUMED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED WEIGHTED AVERAGE AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE AVERAGE CUT-OFF BALLOON
FEE OR LEASEHOLD LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fee 144 752,873,719 93.02 7.707 127 1.41 1.64 64.0 37.0
Fee/Leasehold 2 8,107,999 1.00 7.865 107 1.16 1.34 78.5 56.2
Leasehold 7 48,372,105 5.98 7.365 146 1.52 1.83 59.1 23.8
- --------------------------------------------------------------------------------------------------------------------------
TOTAL: 153 $809,353,823 100.00% 7.688% 128 1.41x 1.65x 63.8% 36.4%
==========================================================================================================================
</TABLE>
I-15
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PREPAYMENT RESTRICTION ANALYSIS
<TABLE>
<CAPTION>
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION
ASSUMING NO PREPAYMENTS(1)(2)
- -----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTION CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out/Defeasance 59.55% 57.13% 47.91% 31.44% 24.41% 2.74% 1.72% 1.81%
Yield Maintenance 39.75% 42.19% 50.06% 65.95% 69.56% 91.74% 92.34% 91.27%
Penalty Points
5.00% and greater 0.00% 0.00% 1.35% 0.00% 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.69% 0.68% 0.68% 1.78% 2.40% 0.00% 0.00% 0.44%
3.00% to 3.99% 0.00% 0.00% 0.00% 0.24% 2.65% 4.01% 1.14% 1.18%
2.00% to 2.99% 0.00% 0.00% 0.00% 0.00% 0.00% 1.51% 3.17% 0.32%
1.00% to 1.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.63% 3.13%
Open 0.00% 0.00% 0.00% 0.59% 0.97% 0.00% 0.00% 1.84%
- -----------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
===================================================================================================================================
Mortgage Pool Balance
Outstanding $809,353,823 $790,169,847 $769,392,012 $746,883,861 $718,302,556 $635,680,470 $569,158,329 506,440,706
(in millions)
% of Initial Pool Balance 100.00% 97.63% 95.06% 92.28% 88.75% 78.54% 70.32% 62.57%
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION
ASSUMING NO PREPAYMENTS(1)(2)
===================================================================================================================================
PREPAYMENT RESTRICTION 96 MO. 108 MO. 120 MO. 132 MO. 144 MO. 156 MO. 168 MO. 180 MO.
- -----------------------------------------------------------------------------------------------------------------------------------
Locked Out/Defeasance 1.14% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Yield Maintenance 91.63% 92.71% 93.53% 91.29% 94.37% 94.36% 94.04% 92.86%
Penalty Points
5.00% and greater 0.00% 1.83% 2.83% 2.93% 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.00% 0.00% 0.92% 0.00% 3.41% 3.80% 0.00% 0.00%
3.00% to 3.99% 0.88% 0.52% 0.00% 0.75% 0.00% 0.00% 4.06% 6.47%
2.00% to 2.99% 0.72% 0.81% 2.72% 2.68% 0.58% 0.00% 0.00% 0.00%
1.00% to 1.99% 3.62% 0.00% 0.00% 0.00% 1.64% 1.72% 0.00% 0.00%
Open 2.01% 4.14% 0.00% 2.35% 0.00% 0.11% 1.90% 0.68%
- -----------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
===================================================================================================================================
Mortgage Pool Balance
Outstanding $468,068,797 $376,562,097 $164,058,705 $145,151,123 $112,373,171 $88,905,274 $71,179,452 $36,559,114
(in millions)
% of Initial Pool Balance 57.83% 46.53% 20.27% 17.93% 13.88% 10.98% 8.79% 4.52%
</TABLE>
Notes: (1) For 1 of the Mortgage Loans (2.2% of the Cut-Off Date
Balance) which allow borrowers to choose between
Defeasance and Yield Maintenance, Yield Maintenance is
assumed.
(2) The above analysis is based on Maturity Assumptions and
a 0% CPR as discussed in the Prospectus Supplement.
I-16
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
LOAN
NO. SELLER(1) PROPERTY NAME(2)
- -----------------------------------------------------------------------------
<S> <C> <C>
1 GAL Century Park Office Building
2 SF Landow Office Building
3 GAL Del Norte Plaza
4 GAL Picture Tel Office Building
5 GAL Club Hotel & Suites by Doubletree
6 GAL Ram's Village Apartments
7 SF Walsh Research Center
8 SF 45 West 45th Street
9 GAL Downtown Woodinville Retail Development #2
10 GAL Mid Rivers Plaza Shopping Center
11 GAL Pahrump Valley Junction Shopping Center
12 SF Ogden Mall
13 GAL Westlake Village Marketplace
14 SF Ingram Micro Inc. Facility
15 GAL Greylyn Business Park
16 GAL 1700 Pennsylvania Avenue, N.W.
17 SF Federal Express
18 GAL Fairview Center
19 SF Stoneridge II Office Building
20 GAL Fort Collier Industrial Park
21 GAL Battelle Environmental Technology Bldg.
22 SF Parkview Office Building
23 SF Arboretum IV Office Building
24 GAL Drury Inn - Union Station
25 GAL Marketplace of Augusta - Phase 2
26 GAL Sonora Quest Laboratories
27 GAL Winder Corners Shopping Center
28 GAL Battelle Energy & Environmental Sciences Bldg.
29 GAL Encino Spectrum
30 SF Seventh Street Properties
31 GAL Townview Square Shopping Center
32 SF Highridge Apartments
33 SF Federal Express
34 GAL Seven Corners Corporate Center
35 GAL The Mark Office Building
36 SF Rancho Viejo Apartments
37 SF Eastway Crossing Shopping Center
38 GAL Fair Oaks Medical Plaza
39 GAL First Data Office Building
40 GAL 1301 Connecticut Avenue, N.W.
41 GAL Downtown Woodinville Retail Development #1
42 GAL Melbourne Square Promenade
43 GAL Glen Place Shopping Center
44 SF Richmond Plaza Shopping Center
45 GAL Ocean Terrace Apartments
46 GAL Pheasant Run Apartments
47 GAL Liberty Crossing
48 SF Loganville Town Center
49 GAL Danbury Commons Shopping Center
50 GAL Dairy Ashford Plaza Office Building
51 GAL Mt. Vernon Center
52 GAL Norwalk Plaza (A)
53 GAL Magnolia Plaza (A)
54 GAL Atrium Circle At Campus Circle
55 GAL Fair Oaks Professional Building
56 GAL Orthologics Building
57 GAL General Instruments Building
58 GAL Home Depot
59 SF 1875 Charleston Road
60 GAL Mountain View Professional Plaza
61 GAL Ventana Village Shopping Center
62 GAL MA Bioservices
63 GAL 65 K Street
64 SF 655 5th Avenue
65 GAL 14600 Winchester Blvd.
66 GAL Best Buy
67 GAL Village Grove Shopping Center
68 GAL 6006 Executive Boulevard
69 SF University Business Center
70 GAL 4215 Glencoe
71 GAL Snowcreek Crossing
72 GAL Lighthouse Crossing Shopping Center
73 GAL Best Buy
74 GAL Creekside Office Park
75 GAL Lithonia Lighting West Building
76 GAL 5353-5499 Downey Road
77 GAL Townley Apartments
78 GAL Walgreens and Staples
79 GAL Prince Frederick Office Park
80 GAL Bay Tree Village (B)
81 GAL Bugaboo Steak House (B)
82 GAL Cotswold Plaza II
83 GAL Lake Regency Building
84 GAL Merit Abrasiveproducts Inc.
85 GAL Totem Ridge Business Park
86 SF DSHS Office Building
87 GAL Stafford Corporate Center
88 GAL Best Buy
89 GAL R and R Plaza
90 GAL Best Buy
91 GAL Circuit City - Colorado Springs
92 GAL 204TH Street Partners
93 GAL Commons 1 Office Building
94 GAL Quail Business Park
95 GAL Hayden Island Business Park
96 GAL NW Corner of Hwy 74 & Mail Street
97 GAL Sportmart Plaza
98 GAL Spectrum Business Park V
99 GAL Northwest Business Center III
100 GAL Mizner Place
101 GAL Kroger
102 GAL Food 4 Less
103 GAL Oxford Hill Apartments
104 GAL Linens N' Things
105 GAL Parklane Centre
106 GAL Goldseker Industrial Portfolio (I)
107 SF Walgreens
108 GAL Cahners Publishing Company
109 GAL Safeway
110 GAL Walden Woods Village Shopping Center
111 GAL Grand Terrace Shopping Center
112 GAL 2199 Innerbelt Business Center Drive
113 GAL Kohl's
114 GAL Office Max
115 GAL Meadows Pavillion II
116 GAL Bernardo Gateway Business Park
117 GAL 1371 & 1375 N. Miller Street
118 GAL Blakely Corners Shopping Center
119 GAL Sparks Medical Office Building
120 GAL North Canal Office Park
121 GAL Federal Express
122 GAL Behr Processing Building
123 GAL The Shoppes at Salisbury II
124 GAL Walgreens (II)
125 SF Eckerd Drug Store
126 GAL Shop N' Kart Discount Grocery
127 GAL Office Max
128 SF Eckerd Drug Store
129 GAL Office Max
130 GAL DEA Building
131 GAL 56th Street Commerce Park
132 GAL 4520 36th Street
133 GAL Pacific Park
134 GAL Walgreens
135 GAL North Roseburg Plaza
136 GAL Probity International Corp
137 GAL NOAA-National Weather Service Building
138 GAL Winchester Court
139 GAL 2400 E. Francis
140 GAL Walgreens
141 GAL Walgreens
142 GAL The Shoppes at Salisbury
143 GAL Ames Department Store
144 GAL Eckerd Drug Store
145 GAL Pier I Office Building
146 GAL Harstad/Coates Industrial Park
147 GAL Blockbuster Video
148 GAL Walgreens
149 GAL Walgreens
150 GAL 15690 North 83rd Way
151 GAL Walgreens
152 GAL The McCormick Executive Center Office Building
153 GAL Blockbuster Video (III)
TOTAL/WEIGHTED AVERAGE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RELATED BORROWER
LOAN GROUPS
- ------------------------------------------------------------------------------------------
<S> <C>
Parkview Office Building (22), Rancho Viejo Apts (36), Richmond Plaza (44)
Downtown Woodinville Retail #1 (41)
Battelle Energy & Env. Sciences Bldg. (28)
Walsh Research Center (7), Rancho Viejo Apts (36), Richmond Plaza (44)
Orthologics Building (56)
Batelle Environmental Tech. Bldg (21)
Walsh Research Center (7), Parkview Office Building (22), Richmond Plaza (44)
Fair Oaks Professional Building (55)
Downtown Woodinville Retail #2 (9)
Bay Tree Village (80), Bugaboo Steakhouse (81)
Walsh Research Center (7), Parkview Office Building (22), Rancho Viejo Apts (36)
Magnolia Plaza (53)
Norwalk Plaza (52)
Fair Oaks Medical Plaza (38)
Sonora Quest Laboratories (26)
Bugaboo Steak House (81), Glen Place Shopping Center (43)
Bay Tree Village (80), Glen Place Shopping Center (43)
Shop N' Kart Discount Grocery (126)
Blockbuster (153)
The Shoppes at Salisbury (142)
Food 4 Less (102)
The Shoppes at Salisbury II (123)
Cahners Publishing Company (108)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL
AGGREGATE CUT-OFF TERM TO
CUT-OFF DATE BALANCE/ MORTGAGE NOTE MATURITY
DATE BALANCE(3) UNIT OR SF(4) RATE DATE MATURITY DATE(5) (MOS)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$23,896,720 $76.91 7.920% 02/23/1999 03/01/2009 120
$18,633,444 $86.58 7.000% 03/19/1998 04/01/2008 120
$17,979,067 $83.67 7.375% 05/11/1999 06/01/2009 120
$17,756,107 $88.78 7.400% 12/22/1998 01/01/2017 216
$16,842,081 $84,633.57 7.375% 01/14/1999 02/01/2009 120
$14,565,552 $41,029.72 9.750% 01/27/1995 02/01/2015 240
$14,347,808 $75.44 6.530% 02/26/1999 03/01/2004 60
$14,000,000 $118.46 7.000% 12/28/1998 01/01/2009 120
$13,050,000 $143.95 7.000% 06/10/1999 07/01/2009 120
$12,898,672 $67.53 7.000% 08/27/1998 09/01/2013 180
$12,806,774 $114.27 7.250% 12/23/1998 01/01/2009 120
$11,219,710 $40.34 8.280% 10/20/1995 10/31/2007 144
$10,754,814 $145.02 7.375% 12/29/1998 02/01/2014 180
$10,640,384 $53.18 6.310% 10/26/1998 11/01/2013 180
$9,607,369 $36.45 7.750% 07/24/1997 08/01/2007 120
$9,383,281 $62.17 7.500% 12/30/1993 01/01/2014 240
$9,316,456 $69.19 7.000% 01/28/1999 02/01/2009 120
$8,933,670 $107.35 7.125% 07/02/1998 01/01/2009 126
$8,829,570 $105.83 7.250% 03/31/1998 03/31/2008 120
$8,764,095 $21.67 9.000% 11/23/1998 09/01/2007 105
$8,614,708 $85.84 7.125% 08/09/1998 09/01/2013 180
$8,600,310 $68.48 6.530% 02/26/1999 03/01/2004 60
$8,454,403 $74.56 8.670% 10/31/1996 11/01/2006 120
$8,278,530 $47,037.10 8.500% 02/25/1994 03/01/2004 120
$8,190,600 $68.74 7.750% 06/27/1996 07/01/2006 120
$8,120,686 $68.82 7.000% 10/20/1998 11/01/2008 120
$7,910,389 $45.29 8.200% 10/30/1995 11/01/2017 264
$7,840,352 $78.12 7.125% 08/09/1998 09/01/2013 180
$7,798,047 $105.29 7.875% 02/12/1996 02/01/2011 180
$7,781,064 $114.37 7.125% 03/30/1999 05/01/2009 120
$7,676,106 $45.22 8.250% 06/12/1996 04/01/2006 120
$7,615,631 $25,728.48 8.680% 09/28/1996 08/31/2003 84
$7,509,920 $50.40 7.030% 04/08/1998 05/01/2012 168
$7,454,074 $86.44 7.125% 01/11/1999 02/01/2005 72
$7,398,413 $90.08 7.250% 03/15/1999 04/01/2009 120
$7,364,458 $27,685.93 6.530% 02/26/1999 03/01/2004 60
$7,287,699 $47.69 7.500% 03/09/1998 04/01/2018 240
$7,046,651 $89.81 8.875% 12/19/1994 01/01/2005 120
$7,044,946 $100.08 7.250% 01/15/1999 02/01/2009 120
$6,888,586 $107.70 8.000% 10/24/1995 11/01/2010 180
$6,900,000 $130.66 7.250% 06/10/1999 07/01/2009 120
$6,849,537 $63.06 8.750% 12/27/1997 01/01/2005 120
$6,648,658 $59.40 7.938% 11/07/1996 11/01/2005 107
$6,553,319 $38.41 6.530% 02/26/1999 03/01/2004 60
$6,537,273 $65,372.73 7.000% 02/02/1999 03/01/2009 120
$6,487,978 $26,161.20 8.000% 05/01/1996 05/01/2011 180
$6,487,896 $52.57 7.250% 05/12/1999 06/01/2009 120
$6,411,882 $82.56 7.200% 08/04/1998 08/01/2018 240
$6,397,909 $82.05 8.000% 12/21/1995 01/01/2006 120
$6,338,536 $29.09 7.310% 09/23/1998 11/01/2008 120
$6,042,439 $72.15 7.125% 06/12/1998 07/01/2018 240
$3,147,689 $54.58 7.875% 05/14/1996 05/01/2011 180
$2,797,946 $46.91 7.875% 05/14/1996 05/01/2011 180
$5,894,727 $69.39 7.150% 04/09/1998 05/01/2008 120
$5,721,128 $72.38 7.180% 08/03/1998 08/01/2018 240
$5,662,021 $56.62 7.000% 06/29/1998 07/01/2008 120
$5,590,556 $65.93 7.125% 01/13/1999 02/01/2009 120
$5,590,230 $54.61 8.125% 04/29/1996 05/01/2016 240
$5,366,560 $127.36 7.250% 04/12/1999 05/01/2014 180
$5,355,150 $122.04 7.500% 04/14/1998 05/01/2018 240
$5,151,783 $46.79 9.500% 08/20/1996 01/01/2015 221
$5,147,586 $106.14 7.000% 10/23/1997 11/01/2008 120
$5,038,665 $106.22 9.840% 05/09/1995 01/01/2005 115
$5,000,000 $102.40 6.580% 04/23/1999 05/01/2004 60
$4,962,419 $92.33 7.250% 02/08/1999 03/01/2009 120
$4,933,616 $109.64 8.125% 10/31/1995 12/01/2010 180
$4,843,323 $45.00 8.000% 09/15/1997 10/01/2007 120
$4,769,832 $113.30 9.125% 04/26/1995 05/01/2005 120
$4,748,373 $44.11 8.250% 10/31/1995 10/31/2002 84
$4,594,756 $103.25 7.500% 04/29/1999 06/01/2009 120
$4,583,447 $59.67 7.750% 07/16/1996 07/01/2006 120
$4,482,933 $60.06 7.125% 04/16/1999 05/01/2009 120
$4,334,333 $74.31 8.125% 11/03/1995 11/01/2015 240
$4,287,914 $107.57 7.125% 05/12/1998 06/01/2008 120
$4,222,763 $19.28 8.000% 10/20/1997 11/01/2012 180
$4,221,076 $19.43 7.750% 04/24/1996 05/01/2016 240
$4,197,916 $18,251.81 8.500% 08/12/1993 09/01/2003 120
$4,197,905 $125.31 7.750% 03/27/1996 04/01/2016 240
$4,195,792 $45.86 8.625% 09/29/1993 05/01/2009 179
$3,400,147 $60.72 7.750% 10/20/1995 11/01/2005 120
$755,588 $132.33 7.750% 10/20/1995 11/01/2005 120
$4,105,633 $107.93 7.375% 02/25/1999 03/01/2009 120
$3,985,677 $93.26 7.250% 03/11/1999 04/01/2009 120
$3,956,036 $26.37 8.260% 10/20/1997 11/01/2007 120
$3,778,994 $28.78 8.500% 05/12/1994 06/01/2014 240
$3,711,572 $77.49 7.250% 02/18/1998 04/01/2008 120
$3,695,610 $33.60 7.250% 05/10/1999 06/01/2009 120
$3,681,463 $63.47 7.750% 02/28/1996 03/01/2016 240
$3,664,222 $67.30 9.750% 05/08/1995 06/01/2010 180
$3,649,630 $61.63 8.125% 09/18/1995 10/01/2015 240
$3,431,393 $80.39 9.125% 12/15/1995 01/01/2016 240
$3,428,490 $42.96 8.875% 07/06/1994 08/01/2004 120
$3,401,447 $88.86 7.250% 04/28/1998 05/01/2008 120
$3,371,177 $31.21 9.500% 07/01/1994 08/01/2004 120
$3,370,101 $33.79 7.000% 11/11/1998 12/01/2008 120
$3,321,133 $36.50 7.375% 05/24/1999 06/01/2009 120
$3,269,186 $53.45 8.750% 07/06/1994 07/01/2014 240
$3,236,873 $37.28 9.625% 04/27/1995 06/01/2005 120
$3,211,277 $35.95 7.950% 06/24/1996 07/01/2006 96
$3,057,427 $105.13 9.100% 05/19/1995 06/01/2005 120
$3,044,970 $54.57 8.000% 11/13/1995 12/01/2015 240
$3,041,913 $55.16 9.750% 10/01/1992 10/01/2012 240
$3,022,303 $23,611.74 9.375% 12/28/1994 01/01/2005 120
$3,002,944 $88.32 7.550% 01/05/1996 02/01/2011 180
$3,002,149 $61.67 7.375% 05/29/1998 06/01/2008 120
$2,996,511 $37.27 7.375% 05/06/1999 06/01/2009 120
$2,996,369 $215.49 7.125% 05/17/1999 05/31/2009 120
$2,935,451 $47.46 7.875% 07/01/1994 08/01/2014 240
$2,901,517 $62.81 8.375% 08/11/1995 09/01/2017 264
$2,797,215 $37.63 7.875% 07/26/1996 08/01/2006 120
$2,780,387 $45.09 7.500% 12/01/1998 01/01/2009 120
$2,754,074 $49.43 8.000% 12/27/1995 01/01/2009 156
$2,730,798 $35.85 8.000% 06/22/1994 07/01/2014 240
$2,717,802 $120.79 8.000% 10/18/1995 01/01/2015 230
$2,683,897 $86.29 7.250% 10/14/1998 11/01/2008 120
$2,655,912 $33.81 8.500% 08/06/1996 08/01/2006 120
$2,653,366 $26.07 8.750% 05/20/1997 06/01/2015 216
$2,649,094 $39.75 7.375% 08/06/1998 09/01/2018 240
$2,587,549 $76.00 7.250% 01/25/1999 03/01/2009 120
$2,434,443 $79.44 7.750% 04/01/1996 04/01/2011 180
$2,391,234 $63.77 7.125% 03/30/1999 04/01/2009 120
$2,354,579 $20.97 8.250% 02/01/1996 02/01/2006 120
$2,329,992 $48.42 8.375% 07/24/1996 08/01/2016 240
$2,319,467 $63.47 9.500% 11/18/1992 12/01/2011 228
$2,280,279 $209.05 6.625% 12/17/1998 01/01/2018 228
$2,262,922 $55.53 8.000% 01/22/1998 02/01/2018 240
$2,243,737 $71.23 8.150% 12/27/1996 09/01/2015 225
$2,230,258 $204.46 6.625% 12/17/1998 08/01/2017 223
$2,216,658 $94.33 8.625% 03/24/1997 04/01/2017 240
$2,203,906 $149.48 8.000% 01/14/1997 02/01/2017 240
$2,100,632 $13.59 8.875% 07/21/1994 08/01/2004 120
$2,029,021 $22.25 7.625% 12/30/1997 01/01/2008 120
$1,884,552 $39.65 7.500% 10/20/1998 12/01/2008 120
$1,853,071 $139.91 7.000% 02/23/1999 04/01/2014 180
$1,835,871 $27.12 9.500% 01/11/1995 02/01/2010 180
$1,831,682 $157.90 8.125% 07/05/1996 07/01/2008 144
$1,797,159 $158.14 7.875% 06/30/1994 07/01/2012 216
$1,781,997 $135.49 7.050% 09/30/1998 11/01/2008 120
$1,727,502 $15.89 8.000% 02/22/1996 12/01/2005 120
$1,710,090 $107.35 7.360% 06/16/1998 07/01/2017 228
$1,674,970 $120.46 7.625% 07/18/1996 08/01/2016 240
$1,613,896 $15.98 8.500% 08/12/1993 09/01/2008 180
$1,517,427 $26.38 9.875% 03/16/1990 04/01/2010 240
$1,473,701 $146.08 7.350% 10/02/1998 04/01/2017 221
$1,387,116 $57.78 9.250% 09/26/1994 10/01/2009 180
$1,328,168 $12.33 8.125% 01/21/1998 02/01/2013 180
$1,188,692 $182.88 7.250% 01/26/1999 02/01/2009 120
$1,156,706 $88.98 8.625% 02/17/1994 03/01/2014 240
$1,128,736 $86.83 8.250% 03/08/1994 03/01/2014 240
$996,967 $32.16 7.450% 05/06/1999 06/01/2014 180
$967,171 $77.10 9.625% 11/24/1992 12/01/2012 240
$964,999 $50.89 7.250% 07/08/1998 08/01/2013 180
$901,914 $64.42 9.250% 11/01/1994 11/01/2009 180
$809,353,823 7.688% 150
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL
AMORT. BALLOON
REM. TERM TERM LOAN BALLOON SECURITY
TO MATURITY (MOS)(6) BALANCE LTV(4) TYPE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
116 300 $19,343,656 35.2% Fee
105 300 $14,940,345 51.0% Fee
119 300 $14,301,011 51.8% Fee
210 216 $0 0.0% Fee
115 240 $11,724,666 44.2% Fee
187 240 $0 0.0% Fee
56 360 $13,484,623 65.8% Fee
114 N/A $14,000,000 58.3% Fee
120 300 $10,261,657 58.8% Fee
170 240 $5,433,275 30.2% Fee
114 300 $10,214,248 59.4% Fee
100 264 $9,026,464 57.2% Fee
175 300 $6,698,004 43.2% Fee
172 300 $6,340,767 28.8% Fee
97 252 $7,133,292 47.8% Fee
174 240 $0 0.0% Fee
115 300 $7,371,881 59.0% Fee
114 300 $7,101,720 58.5% Fee
105 324 $7,395,454 58.2% Fee
98 105 $0 0.0% Fee
170 180 $0 0.0% Leasehold
56 360 $8,082,903 55.7% Fee
88 300 $7,184,121 55.1% Fee
56 240 $6,649,413 38.4% Fee
84 276 $6,597,575 64.6% Fee
112 240 $5,508,828 50.1% Leasehold
220 264 $0 0.0% Fee
170 180 $0 0.0% Leasehold
139 300 $3,477,448 30.9% Fee
118 300 $6,154,823 46.6% Fee
81 240 $5,754,505 54.6% Fee
50 324 $6,965,388 67.6% Fee
154 360 $5,836,750 51.2% Fee
67 300 $6,687,515 66.9% Fee
117 300 $5,879,131 56.5% Fee
56 360 $6,921,401 52.0% Fee
225 240 $0 0.0% Fee
66 300 $6,184,266 53.9% Leasehold
115 300 $5,611,898 59.1% Fee
136 240 $3,185,668 29.8% Fee
120 300 $5,463,434 57.5% Fee
66 264 $5,654,732 51.4% Fee
76 287 $5,667,463 66.5% Fee
56 360 $6,159,062 56.5% Fee
116 300 $5,166,213 58.0% Fee
142 240 $2,887,632 25.1% Fee
119 240 $4,375,978 47.1% Fee
229 300 $2,350,921 27.0% Fee
78 300 $5,451,522 69.6% Fee/
Leasehold
112 300 $5,075,842 44.1% Fee
228 240 $0 0.0% Fee
142 180 $0 0.0% Fee
142 180 $0 0.0% Fee
106 300 $4,737,758 57.1% Fee
229 300 $2,094,994 15.8% Leasehold
108 240 $3,872,873 48.4% Leasehold
115 300 $4,438,574 56.9% Fee
202 240 $0 0.0% Fee
178 180 $0 0.0% Leasehold
226 240 $0 0.0% Fee
186 220 $0 0.0% Fee
112 300 $4,088,936 59.7% Fee
66 175 $3,011,587 33.9% Fee
58 N/A $5,000,000 25.0% Fee
116 240 $3,366,137 37.4% Fee
137 300 $3,325,376 55.1% Fee
99 264 $3,723,849 42.8% Fee
70 204 $3,261,056 46.5% Fee
40 264 $4,322,404 43.2% Fee
119 300 $3,667,005 53.9% Fee
84 300 $3,848,153 55.0% Fee
118 240 $3,017,195 49.5% Fee
196 300 $1,755,002 33.9% Fee
107 240 $2,950,146 50.0% Fee
160 180 $0 0.0% Fee
202 264 $0 0.0% Fee
50 284 $3,761,445 38.4% Fee
201 240 $0 0.0% Fee
118 180 $52,202 0.5% Fee
76 300 $2,888,827 67.7% Fee
76 300 $641,960 67.7% Fee
116 300 $3,277,314 57.7% Fee
117 300 $3,167,208 56.6% Fee
100 240 $2,849,125 48.3% Fee
179 240 $0 0.0% Fee
105 180 $1,787,288 34.0% Fee
119 300 $2,938,657 59.4% Fee
200 240 $0 0.0% Fee
131 180 $0 0.0% Fee
195 240 $0 0.0% Fee
198 240 $0 0.0% Fee
61 300 $3,031,781 56.2% Fee
106 300 $2,740,624 58.0% Fee
61 360 $3,157,273 58.1% Fee
113 300 $2,673,534 53.5% Fee
119 300 $2,641,714 59.4% Fee
180 240 $0 0.0% Fee
71 300 $2,852,461 57.4% Fee
84 216 $2,374,779 41.6% Fee
71 240 $2,386,195 48.9% Fee
197 240 $0 0.0% Fee
159 240 $0 0.0% Fee
66 300 $2,635,485 47.0% Fee
139 252 $1,487,129 39.6% Fee
107 300 $2,423,227 58.7% Fee
119 300 $2,383,502 59.6% Fee
119 300 $2,367,239 57.2% Fee
181 240 $0 0.0% Fee
218 264 $0 0.0% Fee
85 240 $2,060,222 51.4% Fee
114 300 $1,907,965 44.4% Fee
114 240 $1,609,959 45.0% Fee
180 240 $0 0.0% Fee
186 230 $0 0.0% Fee
112 360 $2,370,132 64.1% Fee
85 264 $2,114,791 29.8% Fee
191 216 $0 0.0% Fee
230 240 $0 0.0% Fee
116 300 $2,058,686 51.8% Fee
141 180 $0 0.0% Fee
117 300 $1,893,792 39.0% Fee
79 240 $1,773,400 52.3% Fee
205 240 $0 0.0% Fee
149 228 $0 0.0% Fee
222 300 $930,688 30.0% Fee
223 240 $0 0.0% Fee
194 225 $0 0.0% Fee
217 300 $961,081 31.3% Fee
213 240 $0 0.0% Fee
211 240 $0 0.0% Fee
61 228 $1,618,765 32.3% Fee
102 240 $1,430,883 50.2% Fee
113 300 $1,514,631 59.4% Fee
177 300 $1,132,223 36.5% Fee
127 180 $0 0.0% Fee
108 144 $0 0.0% Fee
156 216 $0 0.0% Fee
112 300 $1,417,383 50.6% Fee
77 232 $1,267,877 34.9% Fee
216 240 $160,891 6.2% Fee/
Leasehold
205 240 $0 0.0% Fee
110 180 $0 0.0% Fee
129 240 $0 0.0% Fee
213 221 $0 0.0% Fee
123 180 $0 0.0% Fee
163 180 $0 0.0% Fee
115 240 $807,871 48.7% Fee
176 240 $0 0.0% Fee
176 240 $0 0.0% Fee
179 180 $0 0.0% Fee
161 240 $0 0.0% Fee
169 180 $0 0.0% Fee
124 180 $0 0.0% Fee
128 262 36.4%
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME(2) ADDRESS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Century Park Office Building 1880 Century Park East
2 Landow Office Building 7910 Woodmont Avenue
3 Del Norte Plaza 302-360 El Norte Parkway
4 Picture Tel Office Building 200 Minuteman Park
5 Club Hotel & Suites by Doubletree 455 Washington Boulevard
6 Ram's Village Apartments 900-901 Constitution Avenue
7 Walsh Research Center 2401-2403 Walsh Avenue
8 45 West 45th Street 45 West 45th Street
9 Downtown Woodinville Retail Development #2 NWQ NE 175th Street and 138th Ave. NE
10 Mid Rivers Plaza Shopping Center 235-281 Mid Rivers Mall Drive
11 Pahrump Valley Junction Shopping Center 100-240 S. Highway 160
12 Ogden Mall NW Corner Ogden Avenue & Naperville-Weaton Road
13 Westlake Village Marketplace 5754-5790 Lindero Canyon Road
14 Ingram Micro Inc. Facility 1759 Wehrle Drive & 395 Youngs Road
15 Greylyn Business Park 9301 - 9317 Monroe Road
16 1700 Pennsylvania Avenue, N.W. 1700 Pennsylvania Avenue, N.W.
17 Federal Express 300 Fulling Mill Road
18 Fairview Center 6601 North Illinois Street
19 Stoneridge II Office Building 2050 North Woodward Avenue
20 Fort Collier Industrial Park 265 West Brooke Road
21 Battelle Environmental Technology Bldg. 3200 Q Avenue
22 Parkview Office Building 5821 Fairview Road
23 Arboretum IV Office Building 34705 West 12 Mile Road
24 Drury Inn - Union Station 201 South 20TH Street
25 Marketplace of Augusta - Phase 2 N/S Townsend Road at Civic Center Drive
26 Sonora Quest Laboratories 1255 West Washington Street
27 Winder Corners Shopping Center Intersection of GA HWYS 8 & 11
28 Battelle Energy & Environmental Sciences Bldg. 3230 Q Avenue
29 Encino Spectrum 15503 Ventura Boulevard
30 Seventh Street Properties 2910 Seventh ST. & 890 Heinz Avenue
31 Townview Square Shopping Center SEC US Highway 301 & Pretty Pond Road
32 Highridge Apartments 9353 Viscount Boulevard
33 Federal Express 1500 Blueball Avenue
34 Seven Corners Corporate Center 6245 Leesburg Pike
35 The Mark Office Building 9290 West Dodge Street
36 Rancho Viejo Apartments 8530 North 22nd Avenue
37 Eastway Crossing Shopping Center 3304-3330 Eastway Drive
38 Fair Oaks Medical Plaza 3700 Joseph Siewick Drive
39 First Data Office Building 2975 Breckenridge
40 1301 Connecticut Avenue, N.W. 1301 Connecticut Avenue N.W.
41 Downtown Woodinville Retail Development #1 NEQ NE 175th Street and 138th Avenue NE
42 Melbourne Square Promenade 1900 Evans Road
43 Glen Place Shopping Center 110 Altama Avenue
44 Richmond Plaza Shopping Center NE Quad & I-520 Wrightsboro Road
45 Ocean Terrace Apartments 1630 Merrill Street
46 Pheasant Run Apartments 2101 North Evergreen Street
47 Liberty Crossing 8508-8514 Liberty Road
48 Loganville Town Center 4325 Atlanta Highway
49 Danbury Commons Shopping Center 13 Sugar Hollow Road
50 Dairy Ashford Plaza Office Building 2000 & 2020 Dairy Ashford Drive
51 Mt. Vernon Center 2480-2520 Mt. Vernon Road
52 Norwalk Plaza (A) 11752-94 Firestone Blvd.
53 Magnolia Plaza (A) 9035-9126 Garfield Ave and 18926 Magnolia Ave
54 Atrium Circle At Campus Circle 5800 Campus Circle Drive
55 Fair Oaks Professional Building 3650 Joseph Siewick Drive
56 Orthologics Building 1275 West Washington Street
57 General Instruments Building 1725 Lakepointe Drive
58 Home Depot 100 W. Dundee Road
59 1875 Charleston Road 1875 Charleston Road
60 Mountain View Professional Plaza 2851 North Tenaya Way
61 Ventana Village Shopping Center SWC Of Sunrise Drive & Kolb Road
62 MA Bioservices 14920 Broschart Road
63 65 K Street 65 K Street, N.E.
64 655 5th Avenue 655 5TH Avenue
65 14600 Winchester Blvd. 14600 Winchester Boulevard
66 Best Buy 12495 Kendall Drive
67 Village Grove Shopping Center 1401-1495 E. Foothill Boulevard
68 6006 Executive Boulevard 6006 Executive Boulevard
69 University Business Center 3019 Alvin Devane Boulevard
70 4215 Glencoe 4215 Glencoe Avenue
71 Snowcreek Crossing NEC Park Avenue & Kearns Boulevard
72 Lighthouse Crossing Shopping Center NEC Tyrone Boulevard & Park Street
73 Best Buy 12397 West Sunrise Boulevard
74 Creekside Office Park 1510-1560 140th Avenue NE
75 Lithonia Lighting West Building 18401 East Arenth Avenue
76 5353-5499 Downey Road 5353 - 5499 Downey Road
77 Townley Apartments Cherry Hill Road (11427-63)
78 Walgreens and Staples 3402 North Central Avenue & 106 West Osborn Street
79 Prince Frederick Office Park 201 Prince Frederick Drive
80 Bay Tree Village (B) 1741 Gornto Road
81 Bugaboo Steak House (B) 3505 Satellite Boulevard
82 Cotswold Plaza II 309 South Sharon Amity Road
83 Lake Regency Building 444 Regency Parkway Drive
84 Merit Abrasiveproducts Inc. 201 West Manville
85 Totem Ridge Business Park 13609-13637 N. E. 126TH Place
86 DSHS Office Building 900 East College Way
87 Stafford Corporate Center 7930 SW Burns Way
88 Best Buy 39330 10TH ST. West
89 R and R Plaza 8064-8084 West Sahara
90 Best Buy 888 Harriman Place
91 Circuit City - Colorado Springs SEC Academy Boulevard& Platte Avenue
92 204TH Street Partners 6412,6414, & 6416 204TH ST SW
93 Commons 1 Office Building 720 Goodlette Road North
94 Quail Business Park 5301 Longley Lane
95 Hayden Island Business Park 2408-2725 North Hayden Island Drive
96 NW Corner of Hwy 74 & Mail Street NW Corner of Hwy 74 & Mail Street
97 Sportmart Plaza SEC Army Trail Rd and Wall St.
98 Spectrum Business Park V 101 N. Pecos & 3300-3340 Sunrise
99 Northwest Business Center III 2220 And 2225 Northwest Parkway
100 Mizner Place 490 East Palmetto Park Road
101 Kroger 3508 High Point Road
102 Food 4 Less N.W. Corner Devonshire Avenue & Fisher Road
103 Oxford Hill Apartments 704-772 Madison Ave and 1017-1033 Preston Ave
104 Linens N' Things 5880 West 88TH Avenue
105 Parklane Centre 7499 Parklane Road
106 Goldseker Industrial Portfolio (I) 211 Emmorton Park Road, 2113 Columbia Park Road, &
201 Gateway Drive
107 Walgreens NEC Marks Avenue & Ashlan Avenue
108 Cahners Publishing Company 8878 Barrons Boulevard
109 Safeway 1990 114TH Avenue SE
110 Walden Woods Village Shopping Center 2410 James Redman Parkway
111 Grand Terrace Shopping Center 22409-22499 Barton Road
112 2199 Innerbelt Business Center Drive 2199 Innerbelt Business Center Drive
113 Kohl's 3711 Gateway Drive
114 Office Max 300 North York Road
115 Meadows Pavillion II 6240 Shiloh Road
116 Bernardo Gateway Business Park 10845, 10865, 10875 Ranch Bernardo Road
117 1371 & 1375 N. Miller Street 1371 & 1375 N. Miller Street
118 Blakely Corners Shopping Center Columbia St and South Church St
119 Sparks Medical Office Building 2385 East Prater Way
120 North Canal Office Park 146 North Canal Street
121 Federal Express 1600 63rd Street
122 Behr Processing Building 3400 W. Garry Avenue
123 The Shoppes at Salisbury II NWC Of U.S. Route 50 & Tilghman Road
124 Walgreens (II) 36 W. 16TH Street
125 Eckerd Drug Store 8522 US Highway 19
126 Shop N' Kart Discount Grocery 2000 Queen Avenue
127 Office Max 3110 Browns Mill Road
128 Eckerd Drug Store 8401 Armenia Avenue
129 Office Max 920 South University Avenue
130 DEA Building 5800 Newton Drive
131 56th Street Commerce Park 4302-4424 56th St, 5302-5556 56th Commerce Park Blvd
132 4520 36th Street 4520 36th Street
133 Pacific Park 18081, 18091 & 18101 Redondo Circle
134 Walgreens 1800 Concord
135 North Roseburg Plaza 1350 N.E. Stephens/Garden Valley/1289-97 Walnut Street
136 Probity International Corp 2900 Wilshire Blvd
137 NOAA-National Weather Service Building NE 122nd Ave and NE Marx Street
138 Winchester Court 1925 South Winchester Blvd
139 2400 E. Francis 2400 E. Francis
140 Walgreens 11079 South Military Trail
141 Walgreens NWC 25TH Street and 2ND Avenue
142 The Shoppes at Salisbury The N/W/C OF U.S. RT. 50 & Tilghman Road
143 Ames Department Store NEC Maryland Route 27 & Twin Arch Road
144 Eckerd Drug Store SEC of SR 19 & County Rd 44
145 Pier I Office Building West 111 North River Drive
146 Harstad/Coates Industrial Park 250 Dittmer Road
147 Blockbuster Video 3329 E. Express Court
148 Walgreens 8615 North Port Washington Rd
149 Walgreens 4001 Madison Avenue
150 15690 North 83rd Way 15690 North 83RD Way
151 Walgreens 3003 Kessler Boulevard
152 The McCormick Executive Center Office Building 8070 East Morgan Trail
153 Blockbuster Video (III) 6029 W. 10th St and 4903 Emerson Ave
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
PROPERTY PROPERTY
CITY STATE ZIP CODE TYPE SUB-TYPE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Los Angeles CA 90067 Office Urban
Bethesda MD 20814 Office Suburban
Escondido CA 92026 Retail Anchored
Andover MA 01810 Office Suburban
Jersey City NJ 07310 Hospitality Full Service
Fort Collins CO 80521 Multifamily Garden Apts.
Santa Clara CA 95051 Industrial Flex Industrial
New York NY 10036 Office Urban
Woodinville WA 98072 Retail Anchored
St. Peters MO 63376 Retail Anchored
Pahrump NV 89048 Retail Anchored
Naperville IL 60563 Retail Anchored
Westlake Village CA 91362 Retail Anchored
Amherst NY 14221 Office Suburban
Charlotte NC 28270 Industrial Warehouse
Washington DC 20006 Office Urban
Middletown PA 17057 Industrial Warehouse
Fairview Heights IL 62208 Retail Anchored
Bloomfield Hills MI 48304 Office Suburban
Winchester VA 22603 Industrial Warehouse
Richland WA 99352 Office Suburban
Charlotte NC 28209 Office Suburban
Farmington Hills MI 48331 Office Suburban
St. Louis MO 63103 Hospitality Limited Service
Augusta ME 04330 Retail Unanchored
Tempe AZ 85008 Industrial Warehouse
Winder GA 30680 Retail Anchored
Richland WA 99352 Office Suburban
Encino CA 91436 Office Suburban
Berkley CA 94710 Industrial Flex Industrial
Zephyrhills FL 33540 Retail Anchored
El Paso TX 79925 Multifamily Garden Apts.
Lower Chichester Township PA 19061 Industrial Flex Industrial
Falls Church VA 22044 Office Suburban
Omaha NE 68114 Office Suburban
Phoenix AZ 85021 Multifamily Garden Apts.
Charlotte NC 28205 Retail Anchored
Fairfax VA 22033 Office Medical Office
Norcross GA 30136 Office Suburban
Washington DC 20036 Office Urban
Woodinville WA 98072 Retail Anchored
Melbourne FL 32904 Retail Anchored
Brunswick GA 31525 Retail Anchored
Augusta GA 30901 Retail Anchored
Santa Cruz CA 95062 Multifamily Garden Apts.
Chandler AZ 85224 Multifamily Garden Apts.
Randallstown MD 21133 Retail Anchored
Loganville GA 30052 Retail Anchored
Danbury CT 06810 Retail Anchored
Houston TX 77077 Office Suburban
Dunwoody GA 30338 Retail Unanchored
Norwalk CA 90650 Retail Anchored
Fountain Valley CA 92708 Retail Anchored
Irving TX 75063 Office Suburban
Fairfax VA 22033 Office Medical Office
Tempe AZ 85008 Industrial Flex Industrial
Lewisville TX 75067 Industrial Flex Industrial
Cicero IL 60067 Retail Free Standing
Mountain View CA 94043 Office Suburban
Las Vegas NV 89128 Office Medical Office
Tucson AZ 85715 Retail Anchored
Rockville MD 20850 Office Suburban
Washington DC 20002 Office Urban
New York NY 10022 Office Urban
Los Gatos CA 95032 Industrial Warehouse
Miami FL 33186 Retail Free Standing
Upland CA 91786 Retail Anchored
Rockville MD 20852 Office Suburban
Austin TX 78741 Industrial Flex Industrial
Marina Del Rey CA 90292 Office Urban
Park City UT 84060 Retail Anchored
St. Petersburg FL 33710 Retail Anchored
Plantation FL 33324 Retail Free Standing
Bellevue WA 98005 Office Suburban
City of Industry CA 91745 Industrial Warehouse
Vernon CA 90058 Industrial Warehouse
Beltsville MD 20705 Multifamily Garden Apts.
Phoenix AZ 85012 Retail Anchored
Winchester VA 22602 Office Suburban
Valdosta GA 31601 Retail Free Standing
Duluth GA 30136 Retail Free Standing
Charlotte NC 28211 Office Medical Office
Omaha NE 68114 Office Suburban
Los Angeles CA 90220 Industrial Warehouse
Kirkland WA 98034 Industrial Warehouse
Mount Vernon WA 98273 Office Suburban
Wilsonville OR 97070 Industrial Warehouse
Palmdale CA 93551 Retail Free Standing
Las Vegas NV 89117 Office Suburban
San Bernardino CA 92408 Retail Free Standing
Colorado Springs CO 80909 Retail Free Standing
Lynnwood WA 98036 Industrial Warehouse
Naples FL 34104 Office Suburban
Reno NV 89511 Industrial Warehouse
Portland OR 97217 Industrial Warehouse
Rockingham NC 28379 Retail Anchored
Glendale Heights IL 60139 Retail Anchored
Las Vegas NV 89101 Industrial Flex Industrial
Marietta GA 30067 Office Suburban
Boca Raton FL 33434 Office Suburban
Greensboro NC 27407 Retail Free Standing
Salem OR 97305 Retail Free Standing
Charlottesville VA 22903 Multifamily Garden Apts.
Westminister CO 80030 Retail Free Standing
Columbia SC 29223 Office Suburban
Bel Air MD 21014/21040 Industrial Flex Industrial
Fresno CA 93706 Retail Anchored
Higlands Ranch CO 80126 Office Suburban
Albany OR 97321 Retail Free Standing
Plant City FL 33566 Retail Anchored
Grand Terrace CA 92313 Retail Unanchored
Overland MO 63114 Industrial Flex Industrial
Eau Claire WI 54701 Retail Free Standing
Upper Moreland Township PA 19090 Retail Free Standing
Alpharetta GA 30005 Office Suburban
San Diego CA 92127 Office Suburban
Anaheim CA 92806 Industrial Warehouse
Blakely GA 20705 Retail Anchored
Sparks NV 89434 Office Medical Office
Seattle WA 98103 Office Suburban
Emeryville CA 94608 Industrial Warehouse
Santa Ana CA 92704 Industrial Warehouse
Salisbury MD 21801 Retail Anchored
Holland MI 49423 Retail Free Standing
Port Richey FL 34668 Retail Free Standing
Albany OR 97321 Retail Free Standing
Johnson City TN 37604 Retail Free Standing
Tampa FL 33604 Retail Free Standing
Provo UT 84601 Retail Free Standing
Carlsbad CA 92008 Office Suburban
Tampa FL 33610 Industrial Flex Industrial
Orlando FL 32811 Industrial Warehouse
Huntington Beach CA 92648 Industrial Warehouse
Concord CA 94520 Retail Free Standing
Roseburg OR 97470 Retail Anchored
Santa Monica CA 90403 Retail Free Standing
Portland OR 97230 Office Suburban
Campbell CA 95008 Office Suburban
Ontario CA 91761 Industrial Flex Industrial
Boynton Beach FL 33436 Retail Free Standing
Kearney NE 68847 Retail Free Standing
Salisbury MD 21801 Retail Anchored
Mt. Airy MD 21771 Retail Free Standing
Eustis FL 32726 Retail Free Standing
Spokane WA 99201 Office Suburban
Fairfield CA 94585 Industrial Warehouse
Appleton WI 54915 Retail Free Standing
Fox Point WI 53217 Retail Free Standing
Indianapolis IN 46227 Retail Free Standing
Scottsdale AZ 85260 Industrial Flex Industrial
Indianapolis IN 46240 Retail Free Standing
Scottsdale AZ 85258 Office Suburban
Indianapolis IN 46224 Retail Free Standing
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR YEAR
UNITS/NSF BUILT RENOVATED
- --------------------------------------------------------
<S> <C> <C>
310,703 1970 1997
215,223 1971 1993
214,893 1984 N/A
200,000 1998 N/A
199 1998 N/A
355 1989 N/A
190,200 1972 1997
118,187 1923 1988
90,659 1998 N/A
191,017 1989 1996
112,071 1998 N/A
278,109 1973 1993
74,162 1998 N/A
200,075 1988 1998
263,583 1986 N/A
150,938 1968 N/A
134,642 1998 N/A
83,222 1970 1998
83,434 1984 1997
404,502 1991 1998
100,358 1994 N/A
125,580 1971 1990
113,394 1990 N/A
176 1907 1988
119,156 1995 N/A
118,000 1997 N/A
174,655 1994 N/A
100,358 1993 N/A
74,062 1993 N/A
68,034 1984 N/A
169,736 1990 N/A
296 1984 N/A
149,000 1997 N/A
86,233 1988 N/A
82,136 1986 N/A
266 1985 N/A
152,823 1990 1990
78,466 1993 N/A
70,393 1998 N/A
63,962 1918 1988
52,809 1998 N/A
108,615 1994 N/A
111,924 1992 1996
170,597 1979 N/A
100 1972 N/A
248 1985 N/A
123,414 1973 N/A
77,661 1997 N/A
77,972 1995 N/A
217,864 1983 1994
83,747 1974 1993
57,676 1988 N/A
59,650 1978 1993
84,954 1982 N/A
79,038 1987 N/A
100,000 1997 N/A
84,800 1998 N/A
102,370 1995 N/A
42,136 1998 N/A
43,879 1997 N/A
110,096 1994 N/A
48,500 1998 N/A
47,438 1968 1987
48,830 1932 N/A
53,744 1960 N/A
45,000 1995 N/A
107,626 1981 N/A
42,100 1970 1994
107,648 1986 N/A
44,500 1983 N/A
76,816 1996 N/A
74,647 1990 N/A
58,325 1995 N/A
39,861 1986 N/A
219,000 1972 N/A
217,264 1973 N/A
230 1966 1980
33,500 1995 N/A
91,500 1994 N/A
55,999 1992 N/A
5,710 1988 N/A
38,041 1998 N/A
42,736 1986 N/A
150,000 1952 1995
131,300 1984 N/A
47,900 1997 N/A
109,973 1999 N/A
58,000 1994 N/A
54,444 1991 N/A
59,220 1995 N/A
42,684 1995 N/A
79,800 1993 N/A
38,280 1982 N/A
108,006 1988 N/A
99,723 1982 N/A
90,991 1983 N/A
61,167 1993 N/A
86,822 1991 N/A
89,332 1988 N/A
29,083 1990 N/A
55,798 1979 N/A
55,150 1992 N/A
128 1970 N/A
34,000 1995 N/A
48,678 1988 N/A
80,400 1986 N/A
13,905 1999 N/A
61,850 1994 N/A
46,192 1995 N/A
74,336 1984 N/A
61,663 1975 N/A
55,720 1995 N/A
76,164 1993 N/A
22,500 1995 N/A
31,105 1998 N/A
78,552 1989 N/A
101,779 1974 N/A
66,650 1996 N/A
34,046 1982 N/A
30,644 1989 N/A
37,500 1988 N/A
112,270 1974 1990
48,120 1995 N/A
36,544 1962 1989
10,908 1997 N/A
40,750 1991 N/A
31,500 1995 N/A
10,908 1997 N/A
23,500 1996 N/A
14,744 1996 N/A
154,550 1981 N/A
91,182 1988 N/A
47,528 1977 N/A
13,245 1994 N/A
67,700 1975 N/A
11,600 1994 N/A
11,364 1994 N/A
13,152 1985 N/A
108,703 1987 N/A
15,930 1997 N/A
13,905 1996 N/A
101,023 1988 N/A
57,514 1989 N/A
10,088 1997 N/A
24,007 1910 1993
107,700 1973 N/A
6,500 1998 N/A
13,000 1993 N/A
13,000 1993 N/A
31,000 1997 N/A
12,544 1992 N/A
18,964 1982 N/A
14,000 1993 N/A
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LOAN UNDERWRITABLE MONTHLY
NO. PROPERTY NAME(2) CASH FLOW PAYMENT(7)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Century Park Office Building $3,413,707 $183,966
2 Landow Office Building $2,430,941 $134,288
3 Del Norte Plaza $2,098,688 $131,558
4 Picture Tel Office Building $3,232,529 $151,027
5 Club Hotel & Suites by Doubletree $2,878,190 $135,654
6 Ram's Village Apartments $2,453,982 $151,763
7 Walsh Research Center $1,597,231 $91,302
8 45 West 45th Street $1,496,194 $81,667
9 Downtown Woodinville Retail Development #2 $1,441,580 $92,235
10 Mid Rivers Plaza Shopping Center $1,490,157 $101,952
11 Pahrump Valley Junction Shopping Center $1,516,061 $93,242
12 Ogden Mall $1,420,087 $92,718
13 Westlake Village Marketplace $1,232,746 $79,070
14 Ingram Micro Inc. Facility $1,712,331 $71,387
15 Greylyn Business Park $1,416,842 $80,473
16 1700 Pennsylvania Avenue, N.W. $3,336,545 $88,615
17 Federal Express $994,566 $66,261
18 Fairview Center $992,234 $64,330
19 Stoneridge II Office Building $946,188 $63,166
20 Fort Collier Industrial Park $1,852,970 $126,605
21 Battelle Environmental Technology Bldg. $1,398,412 $80,619
22 Parkview Office Building $1,153,767 $54,728
23 Arboretum IV Office Building $1,238,826 $71,463
24 Drury Inn - Union Station $1,905,587 $82,443
25 Marketplace of Augusta - Phase 2 $1,022,010 $67,241
26 Sonora Quest Laboratories $941,320 $63,962
27 Winder Corners Shopping Center $1,097,917 $69,615
28 Battelle Energy & Environmental Sciences Bldg. $1,240,701 $73,372
29 Encino Spectrum $1,069,690 $70,302
30 Seventh Street Properties $1,050,901 $55,752
31 Townview Square Shopping Center $949,007 $70,581
32 Highridge Apartments $876,134 $65,342
33 Federal Express $918,890 $50,716
34 Seven Corners Corporate Center $725,747 $53,608
35 The Mark Office Building $775,054 $53,668
36 Rancho Viejo Apartments $1,132,477 $46,864
37 Eastway Crossing Shopping Center $945,487 $60,419
38 Fair Oaks Medical Plaza $1,090,966 $62,299
39 First Data Office Building $718,505 $51,229
40 1301 Connecticut Avenue, N.W. $862,989 $62,733
41 Downtown Woodinville Retail Development #1 $756,207 $49,874
42 Melbourne Square Promenade $989,795 $64,104
43 Glen Place Shopping Center $766,737 $53,959
44 Richmond Plaza Shopping Center $1,068,948 $41,702
45 Ocean Terrace Apartments $761,828 $46,435
46 Pheasant Run Apartments $978,064 $58,551
47 Liberty Crossing $839,630 $51,374
48 Loganville Town Center $746,665 $46,773
49 Danbury Commons Shopping Center $704,522 $52,098
50 Dairy Ashford Plaza Office Building $821,594 $46,507
51 Mt. Vernon Center $730,945 $48,437
52 Norwalk Plaza (A) $618,060 $34,144
53 Magnolia Plaza (A) $466,922 $30,350
54 Atrium Circle At Campus Circle $605,187 $42,983
55 Fair Oaks Professional Building $1,211,742 $41,662
56 Orthologics Building $627,456 $44,967
57 General Instruments Building $623,882 $40,206
58 Home Depot $611,421 $50,865
59 1875 Charleston Road $1,001,760 $49,295
60 Mountain View Professional Plaza $653,746 $44,308
61 Ventana Village Shopping Center $982,859 $53,171
62 MA Bioservices $548,498 $36,753
63 65 K Street $844,052 $64,588
64 655 5th Avenue $430,065 $27,417
65 14600 Winchester Blvd. $637,862 $39,519
66 Best Buy $603,533 $40,566
67 Village Grove Shopping Center $624,252 $40,309
68 6006 Executive Boulevard $665,896 $52,675
69 University Business Center $890,556 $41,933
70 4215 Glencoe $494,316 $33,994
71 Snowcreek Crossing $630,178 $36,222
72 Lighthouse Crossing Shopping Center $650,310 $35,227
73 Best Buy $518,361 $35,690
74 Creekside Office Park $455,680 $34,444
75 Lithonia Lighting West Building $543,973 $43,004
76 5353-5499 Downey Road $607,017 $35,562
77 Townley Apartments $832,734 $37,040
78 Walgreens and Staples $513,941 $37,353
79 Prince Frederick Office Park $988,572 $52,580
80 Bay Tree Village (B) $423,644 $27,192
81 Bugaboo Steak House (B) $97,847 $6,043
82 Cotswold Plaza II $455,983 $30,149
83 Lake Regency Building $445,624 $28,912
84 Merit Abrasiveproducts Inc. $514,234 $34,960
85 Totem Ridge Business Park $730,196 $37,316
86 DSHS Office Building $543,100 $35,602
87 Stafford Corporate Center $398,680 $26,744
88 Best Buy $495,678 $32,838
89 R and R Plaza $736,704 $45,553
90 Best Buy $492,967 $33,769
91 Circuit City - Colorado Springs $414,583 $33,588
92 204TH Street Partners $512,824 $30,527
93 Commons 1 Office Building $387,388 $25,018
94 Quail Business Park $516,412 $29,430
95 Hayden Island Business Park $375,461 $24,031
96 NW Corner of Hwy 74 & Mail Street $372,337 $24,302
97 Sportmart Plaza $523,094 $32,697
98 Spectrum Business Park V $472,302 $30,002
99 Northwest Business Center III $542,883 $28,750
100 Mizner Place $463,147 $30,357
101 Kroger $425,049 $27,812
102 Food 4 Less $451,412 $34,147
103 Oxford Hill Apartments $476,200 $28,113
104 Linens N' Things $375,782 $25,749
105 Parklane Centre $329,474 $22,292
106 Goldseker Industrial Portfolio (I) $411,325 $21,926
107 Walgreens $331,770 $21,443
108 Cahners Publishing Company $391,662 $27,761
109 Safeway $384,567 $25,947
110 Walden Woods Village Shopping Center $360,618 $24,860
111 Grand Terrace Shopping Center $400,114 $22,648
112 2199 Innerbelt Business Center Drive $339,568 $25,093
113 Kohl's $379,543 $26,097
114 Office Max $350,841 $25,540
115 Meadows Pavillion II $324,463 $18,419
116 Bernardo Gateway Business Park $673,066 $23,475
117 1371 & 1375 N. Miller Street $488,828 $25,785
118 Blakely Corners Shopping Center $334,226 $21,545
119 Sparks Medical Office Building $344,874 $18,793
120 North Canal Office Park $383,376 $26,356
121 Federal Express $359,557 $17,155
122 Behr Processing Building $322,114 $21,751
123 The Shoppes at Salisbury II $367,183 $21,498
124 Walgreens (II) $328,289 $26,568
125 Eckerd Drug Store $231,027 $15,700
126 Shop N' Kart Discount Grocery $265,867 $19,523
127 Office Max $296,903 $20,846
128 Eckerd Drug Store $229,994 $15,356
129 Office Max $268,303 $20,361
130 DEA Building $334,964 $19,489
131 56th Street Commerce Park $476,312 $21,816
132 4520 36th Street $260,754 $17,078
133 Pacific Park $245,387 $14,041
134 Walgreens $213,055 $13,146
135 North Roseburg Plaza $331,590 $22,973
136 Probity International Corp $338,424 $23,965
137 NOAA-National Weather Service Building $234,430 $18,441
138 Winchester Court $220,297 $12,780
139 2400 E. Francis $345,288 $16,104
140 Walgreens $213,961 $13,948
141 Walgreens $214,378 $14,639
142 The Shoppes at Salisbury $478,508 $21,172
143 Ames Department Store $253,941 $19,135
144 Eckerd Drug Store $166,627 $12,405
145 Pier I Office Building $270,920 $17,496
146 Harstad/Coates Industrial Park $187,064 $13,480
147 Blockbuster Video $152,888 $9,485
148 Walgreens $191,623 $11,604
149 Walgreens $159,023 $11,077
150 15690 North 83rd Way $226,529 $9,242
151 Walgreens $132,050 $10,720
152 The McCormick Executive Center Office Building $129,503 $9,129
153 Blockbuster Video (III) $174,364 $11,321
TOTAL/WEIGHTED AVERAGE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSUMED VALUATION(9) PERCENT LEASED(10)
DSCR(4) DSCR(4),(8) VALUE(9) DATE/CAP RATE LTV(4) LEASED DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1.55 1.68 $55,000,000 01/01/99 43.4% 80.3% 06/16/99
1.51 1.53 $29,300,000 12/05/97 63.6% 98.8% 03/01/99
1.33 1.37 $27,600,000 04/01/99 65.1% 83.9% 05/01/99
1.78 2.14 $38,000,000 10/01/98 46.7% 100.0% 12/31/98
1.77 2.01 $26,500,000 09/01/98 63.6% 67.2% 12/31/98
1.35 1.98 $28,870,376 8.5% 50.5% 100.0% 01/31/99
1.46 1.31 $20,500,000 06/03/98 70.0% 100.0% 01/22/99
1.53 1.26 $24,000,000 09/16/98 58.3% 94.4% 02/23/99
1.30 1.30 $17,450,000 12/18/98 74.8% 100.0% 04/15/99
1.22 1.36 $18,000,000 01/30/98 71.7% 99.5% 03/19/99
1.35 1.39 $17,200,000 09/25/98 74.5% 96.8% 01/01/99
1.28 1.49 $15,778,745 9.0% 71.1% 95.6% 04/15/99
1.30 1.35 $15,500,000 11/12/98 69.4% 89.8% 12/10/98
2.00 1.89 $22,000,000 10/01/98 48.4% 100.0% 04/15/99
1.47 1.73 $14,914,126 9.5% 64.4% 98.6% 09/30/98
3.14 4.18 $35,121,526 9.5% 26.7% 97.1% 02/28/99
1.25 1.26 $12,500,000 07/29/98 74.5% 100.0% 04/15/99
1.29 1.31 $12,135,000 02/15/99 73.6% 100.0% 02/15/99
1.25 1.26 $12,700,000 01/01/98 69.5% 91.9% 02/05/99
1.22 2.49 $17,500,000 06/24/98 50.1% 100.0% 04/15/99
1.45 1.91 $15,000,000 06/16/98 57.4% 100.0% 04/15/99
1.76 1.58 $14,500,000 09/24/98 59.3% 98.1% 02/02/99
1.44 1.72 $13,040,274 9.5% 64.8% 96.0% 03/25/99
1.93 2.71 $17,323,518 11.0% 47.8% 83.8% 12/31/98
1.27 1.47 $10,220,100 10.0% 80.1% 92.5% 12/31/98
1.23 1.36 $11,000,000 07/01/98 73.8% 100.0% 04/15/99
1.31 1.63 $12,199,078 9.0% 64.8% 100.0% 01/01/99
1.41 1.86 $14,000,000 06/16/98 56.0% 100.0% 04/15/99
1.27 1.61 $11,259,895 9.5% 69.3% 100.0% 04/15/99
1.57 1.59 $13,200,000 09/30/98 58.9% 100.0% 11/13/98
1.12 1.45 $10,544,524 9.0% 72.8% 100.0% 12/31/98
1.12 1.35 $10,307,459 8.5% 73.9% 95.6% 02/25/99
1.51 1.44 $11,400,000 03/31/98 65.9% 100.0% 04/15/99
1.13 1.15 $10,000,000 11/01/98 74.5% 100.0% 12/31/98
1.20 1.23 $10,400,000 01/15/99 71.1% 100.0% 02/23/99
2.01 1.81 $13,300,000 03/04/99 55.4% 94.7% 01/01/99
1.30 1.53 $10,716,000 12/01/97 68.0% 98.7% 03/31/99
1.46 1.82 $11,483,853 9.5% 61.4% 98.2% 12/31/98
1.17 1.20 $9,500,000 09/16/98 74.2% 100.0% 04/15/99
1.15 1.47 $10,700,000 08/26/98 64.4% 100.0% 03/12/99
1.26 1.29 $9,500,000 12/18/98 72.6% 100.0% 04/15/99
1.29 1.70 $10,997,722 9.0% 62.3% 100.0% 03/29/99
1.18 1.36 $8,519,300 9.0% 78.0% 99.0% 02/24/99
2.14 1.92 $10,900,000 02/01/98 60.1% 93.0% 01/31/99
1.37 1.37 $8,900,000 10/09/98 73.5% 100.0% 06/26/98
1.39 1.77 $11,506,635 8.5% 56.4% 90.3% 01/25/99
1.36 1.52 $9,300,000 11/03/98 69.8% 100.0% 01/03/99
1.33 1.37 $8,700,000 06/03/98 73.7% 100.0% 02/03/99
1.13 1.30 $7,828,022 9.0% 81.7% 100.0% 01/01/99
1.47 1.52 $11,500,000 06/15/98 55.1% 97.6% 02/12/99
1.26 1.42 $8,250,000 03/03/98 73.2% 100.0% 02/01/99
1.40 2.15 $6,867,333 9.0% 49.3% 100.0% 02/01/99
1.40 2.15 $5,188,022 9.0% 49.3% 100.0% 02/01/99
1.17 1.21 $8,300,000 01/01/98 71.0% 100.0% 07/02/98
2.42 2.49 $13,300,000 10/20/97 43.0% 99.4% 02/01/99
1.16 1.30 $8,000,000 03/05/98 70.8% 100.0% 03/03/98
1.29 1.31 $7,800,000 10/20/98 71.7% 100.0% 04/15/99
1.00 1.29 $6,114,212 10.0% 91.4% 100.0% 12/31/96
1.69 2.20 $11,600,000 11/12/98 46.3% 100.0% 04/15/99
1.23 1.44 $7,800,000 12/11/97 68.7% 94.3% 05/01/99
1.54 2.24 $10,920,657 9.0% 47.2% 98.8% 03/08/99
1.24 1.25 $6,850,000 06/29/98 75.1% 100.0% 04/15/99
1.09 1.97 $8,884,758 9.5% 56.7% 100.0% 04/15/99
1.31 1.01 $20,000,000 03/05/99 25.0% 100.0% 04/15/99
1.35 1.51 $9,000,000 10/13/98 55.1% 100.0% 04/07/99
1.24 1.44 $6,035,330 10.0% 81.7% 100.0% 04/15/99
1.29 1.52 $8,700,000 07/19/97 55.7% 90.1% 02/15/99
1.05 1.64 $7,009,436 9.5% 68.0% 100.0% 03/11/99
1.77 2.21 $10,000,000 02/08/99 47.5% 100.0% 01/31/99
1.21 1.27 $6,800,000 03/10/99 67.6% 100.0% 04/16/99
1.45 1.62 $7,001,978 9.0% 65.5% 97.5% 03/19/99
1.54 1.71 $6,100,000 10/01/98 73.5% 100.0% 02/28/99
1.21 1.41 $5,183,605 10.0% 83.6% 100.0% 12/31/98
1.10 1.25 $5,900,000 02/05/98 72.7% 100.0% 02/01/99
1.05 1.52 $6,885,000 07/15/97 61.3% 100.0% 05/01/99
1.42 1.69 $6,389,653 9.5% 66.1% 100.0% 01/01/99
1.87 2.33 $9,796,871 8.5% 42.8% 99.6% 03/25/99
1.15 1.44 $5,710,456 9.0% 73.5% 100.0% 01/01/99
1.57 2.77 $10,406,021 9.5% 40.3% 100.0% 04/15/99
1.31 1.48 $4,236,440 10.0% 79.7% 100.0% 02/24/99
1.31 1.48 $978,470 10.0% 79.7% 100.0% 04/15/99
1.26 1.31 $5,680,000 02/01/99 72.3% 93.9% 01/29/99
1.28 1.32 $5,600,000 10/05/98 71.2% 94.4% 02/25/99
1.23 1.53 $5,900,000 06/16/97 67.1% 100.0% 12/31/97
1.63 2.27 $7,686,276 9.5% 49.2% 98.4% 03/01/98
1.27 1.72 $5,260,000 03/17/98 70.6% 100.0% 04/15/99
1.24 1.27 $4,950,000 07/01/99 74.7% 100.0% 04/14/99
1.26 1.58 $4,956,780 10.0% 74.3% 100.0% 01/08/99
1.35 2.37 $7,754,780 9.5% 47.3% 94.6% 02/22/99
1.22 1.59 $4,929,671 10.0% 74.0% 100.0% 01/12/98
1.03 1.42 $4,145,828 10.0% 82.8% 100.0% 12/31/98
1.40 1.76 $5,398,146 9.5% 63.5% 100.0% 05/06/99
1.29 1.34 $4,725,000 02/12/98 72.0% 100.0% 02/13/99
1.46 1.80 $5,435,921 9.5% 62.0% 88.6% 03/24/99
1.30 1.31 $5,000,000 05/28/98 67.4% 95.7% 05/07/99
1.28 1.32 $4,450,000 11/01/98 74.6% 100.0% 04/15/99
1.33 1.88 $5,812,153 9.0% 56.2% 100.0% 04/15/99
1.31 1.72 $4,971,600 9.5% 65.1% 87.2% 01/31/99
1.57 1.99 $5,714,559 9.5% 56.2% 100.0% 02/16/99
1.27 1.78 $4,875,232 9.5% 62.7% 100.0% 04/15/99
1.27 1.64 $4,250,488 10.0% 71.6% 100.0% 12/31/98
1.10 1.75 $4,514,118 10.0% 67.4% 100.0% 04/15/99
1.41 1.85 $5,602,353 8.5% 53.9% 100.0% 03/23/98
1.22 1.47 $3,757,820 10.0% 79.9% 100.0% 04/15/99
1.23 1.29 $4,125,000 01/20/98 72.8% 91.7% 01/01/99
1.56 1.61 $4,000,000 11/12/98 74.9% 90.1% 04/01/99
1.29 1.30 $4,140,000 08/20/98 72.4% 100.0% 04/15/99
1.18 1.57 $4,122,757 9.5% 71.2% 100.0% 05/05/98
1.24 1.56 $3,845,670 10.0% 75.4% 100.0% 04/15/99
1.21 1.52 $4,006,867 9.0% 69.8% 95.7% 03/01/99
1.47 1.69 $4,300,000 10/09/98 64.7% 73.1% 10/30/98
1.13 1.45 $3,574,400 9.5% 77.0% 100.0% 04/15/99
1.21 1.64 $3,795,430 10.0% 71.9% 100.0% 01/01/99
1.14 1.52 $3,508,410 10.0% 77.5% 100.0% 03/16/99
1.47 1.42 $3,700,000 08/08/98 72.6% 100.0% 01/01/99
2.39 2.98 $7,084,905 9.5% 37.5% 100.0% 12/01/98
1.58 2.17 $5,145,558 9.5% 51.6% 100.0% 02/01/99
1.29 1.48 $3,650,000 05/05/98 72.6% 100.0% 01/19/99
1.53 1.57 $3,975,000 11/16/98 65.1% 95.8% 03/30/99
1.21 1.85 $4,035,537 9.5% 60.3% 100.0% 01/01/99
1.75 1.77 $4,850,000 09/30/98 49.3% 100.0% 04/15/99
1.23 1.61 $3,390,675 9.5% 69.4% 100.0% 04/15/99
1.42 1.85 $4,079,811 9.0% 57.1% 100.0% 12/31/98
1.03 1.67 $3,282,886 10.0% 70.7% 100.0% 04/15/99
1.23 1.19 $3,100,000 10/30/98 73.6% 100.0% 04/15/99
1.13 1.38 $3,113,000 09/01/97 72.7% 100.0% 04/15/99
1.19 1.56 $2,969,030 10.0% 75.6% 100.0% 04/15/99
1.25 1.21 $3,070,000 11/09/98 72.6% 100.0% 04/15/99
1.10 1.42 $2,683,030 10.0% 82.6% 100.0% 04/15/99
1.43 1.79 $3,525,937 9.5% 62.5% 100.0% 04/15/99
1.82 2.67 $5,013,811 9.5% 41.9% 92.5% 12/31/98
1.27 1.51 $2,850,000 08/20/97 71.2% 92.2% 03/01/99
1.46 1.53 $2,550,000 04/30/98 73.9% 100.0% 01/31/99
1.35 1.35 $3,100,000 11/01/98 59.8% 100.0% 04/15/99
1.20 2.12 $3,684,330 9.0% 49.8% 92.2% 07/01/98
1.18 2.17 $3,384,240 10.0% 54.1% 100.0% 01/01/99
1.06 1.53 $2,467,680 9.5% 72.8% 100.0% 12/31/98
1.44 1.45 $2,800,000 08/01/98 63.6% 92.5% 04/01/99
1.79 2.35 $3,634,613 9.5% 47.5% 100.0% 02/18/99
1.28 1.47 $2,580,000 11/14/97 66.3% 100.0% 04/15/99
1.22 1.51 $2,143,778 10.0% 78.1% 100.0% 04/15/99
1.88 3.49 $5,316,751 9.0% 30.4% 100.0% 12/31/98
1.11 1.97 $2,539,407 10.0% 59.8% 100.0% 04/15/99
1.12 1.33 $2,105,000 07/17/98 70.0% 100.0% 04/15/99
1.29 2.30 $2,851,791 9.5% 48.6% 100.0% 04/09/99
1.16 1.66 $2,400,000 10/13/97 55.3% 100.0% 04/15/99
1.34 1.51 $1,660,000 08/12/98 71.6% 100.0% 04/15/99
1.38 1.95 $1,916,230 10.0% 60.4% 100.0% 04/15/99
1.20 1.66 $1,590,232 10.0% 71.0% 100.0% 03/09/99
2.04 2.67 $2,100,000 02/04/98 47.5% 100.0% 11/01/98
1.03 1.61 $1,320,497 10.0% 73.2% 100.0% 01/02/97
1.18 1.58 $1,840,000 04/14/98 52.4% 100.0% 03/01/99
1.28 2.27 $1,743,640 10.0% 51.7% 100.0% 05/05/98
1.41 1.65 63.8%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
TENANT INFORMATION(11)
LARGEST TENANT % NSF
- -------------------------------------------------------------------------------------
<S> <C>
PictureTel Corporation 100.0%
Electronic Man. Systems, Inc. 50.3%
Top Foods 74.1%
Service Merchandise 26.2%
Lucky Supermarket 55.7%
Kmart 34.5%
Staples 32.3%
Ingram Micro, Inc. 100.0%
FDIC 41.5%
Federal Express 100.0%
Bed Bath & Beyond 44.8%
Price Waterhouse 35.4%
Southeastern Container, Inc. 100.0%
Battelle Memorial Institute 100.0%
PMH Caramanning, Inc. 78.9%
Barnes & Noble 25.2%
Sonora Quest Laboratories 100.0%
K-Mart 54.3%
Battelle Memorial Institute 100.0%
The Motion Picture Association of America, Inc. 100.0%
Xoma Corp. 35.7%
Kmart 51.0%
Federal Express 100.0%
Fairfax County 75.8%
Cornhusker Casualty 23.2%
Wal-Mart 74.9%
First Data Resources, Inc. 100.0%
Cineplex Odeon Corporation 85.2%
Best Buy Electronics 41.8%
Publix Super Market 50.0%
Service Mechandise 31.4%
EZ Store Self Storage 48.7%
Publix Supermarkets 66.2%
Sports Authority 54.6%
Foster Wheeler 49.5%
Harris Teeter 44.0%
Circuit City 52.0%
Hughes Market 58.7%
GTE Interworking 26.2%
Fairfax Family Practice Center 26.5%
Orthologic Corp. 100.0%
General Instruments Corp. 100.0%
Home Depot 100.0%
OmniOffices, Inc. 100.0%
Premier Medical Center 20.2%
Basha's 47.7%
MA Bioservices 100.0%
D.C. - D.P.W. 100.0%
Japan Airlines 100.0%
ICTV 55.4%
Best Buy 100.0%
Albertsons 54.6%
GSA 100.0%
Advanced Micro 27.9%
Berger, Kahn, Shafton 50.0%
Associated Food Stores 70.2%
PetsMart 34.3%
Best Buy 100.0%
National Service Industries 100.0%
J & J Snack Foods 62.9%
Staples 59.7%
US Army Corps of Engineers 100.0%
Publix Super Market 100.0%
Bugaboo Creek Steak House 100.0%
Charlotte Cardiology 29.5%
Omnium Worldwide, Inc. 22.0%
Merit Abrasive Products 100.0%
Dept. of Social & Health Services 100.0%
Kevco, Inc. 60.9%
Best Buy 100.0%
R&R Advertising 31.2%
Best Buy 100.0%
Circuit City 100.0%
Signature Bakery 27.8%
Florida Family Mutual Insurance 49.2%
High Sierra Industries 20.0%
Food Lion 31.9%
Sportmart 68.9%
Dean Witter Reynolds 100.0%
Kroger 100.0%
Fleming Foods West, Inc. 100.0%
Linens 'N' Things 100.0%
Walgreens 100.0%
Reed Publishing (USA) Inc. 100.0%
Safeway 100.0%
Winn Dixie 62.7%
Stater Brothers 41.3%
Clayco Construction Company 100.0%
Kohls Department Stores, Inc. 100.0%
Office Max 100.0%
Orion CEM, Inc. 100.0%
Block Medical\Center for Health Care 29.6%
Datatech Depot, Inc. 100.0%
Food Lion 43.5%
Vertical Connection 27.7%
Federal Express 100.0%
Behr Process Corporation 100.0%
Food Lion 68.6%
Walgreens 34.3%
Eckerd Drugs 100.0%
Shop 'N' Kart Discount Grocery 100.0%
Office Max 100.0%
Eckerd Drugs 100.0%
Office Max 100.0%
US Drug Enforcement Agency 100.0%
Piper Productions 71.9%
Walgreens 100.0%
Rite-Aid 51.7%
Blockbuster Music 100.0%
NOAA - U.S. Department of Commerce 100.0%
David R. Silva, Inc. 20.3%
Kim Lighting, Inc. 100.0%
Walgreens 100.0%
Walgreens 100.0%
TJX Companies/Ames 78.0%
Ames Department Store 100.0%
Eckerd Drugs 100.0%
American Express 37.4%
Primesource 100.0%
Blockbuster 100.0%
Walgreens 100.0%
Walgreens 100.0%
Tire Exchange, Inc. 35.9%
Walgreens 100.0%
National Benefit 36.7%
Blockbuster Video 53.6%
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
LOAN INTEREST ACCRUAL
NO. PROPERTY NAME(2) METHOD SEASONING(12)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Century Park Office Building 30/360 4
2 Landow Office Building 30/360 15
3 Del Norte Plaza 30/360 1
4 Picture Tel Office Building 30/360 6
5 Club Hotel & Suites by Doubletree Act/360 5
6 Ram's Village Apartments 30/360 53
7 Walsh Research Center 30/360 4
8 45 West 45th Street 30/360 6
9 Downtown Woodinville Retail Development #2 30/360 0
10 Mid Rivers Plaza Shopping Center Act/360 10
11 Pahrump Valley Junction Shopping Center 30/360 6
12 Ogden Mall 30/360 44
13 Westlake Village Marketplace 30/360 5
14 Ingram Micro Inc. Facility 30/360 8
15 Greylyn Business Park* 30/360 23
16 1700 Pennsylvania Avenue, N.W. 30/360 66
17 Federal Express 30/360 5
18 Fairview Center 30/360 12
19 Stoneridge II Office Building 30/360 15
20 Fort Collier Industrial Park 30/360 7
21 Battelle Environmental Technology Bldg. 30/360 10
22 Parkview Office Building 30/360 4
23 Arboretum IV Office Building 30/360 32
24 Drury Inn - Union Station 30/360 64
25 Marketplace of Augusta - Phase 2 30/360 36
26 Sonora Quest Laboratories 30/360 8
27 Winder Corners Shopping Center 30/360 44
28 Battelle Energy & Environmental Sciences Bldg. 30/360 10
29 Encino Spectrum* 30/360 41
30 Seventh Street Properties 30/360 2
31 Townview Square Shopping Center 30/360 39
32 Highridge Apartments 30/360 34
33 Federal Express 30/360 14
34 Seven Corners Corporate Center 30/360 5
35 The Mark Office Building 30/360 3
36 Rancho Viejo Apartments 30/360 4
37 Eastway Crossing Shopping Center* 30/360 15
38 Fair Oaks Medical Plaza 30/360 54
39 First Data Office Building 30/360 5
40 1301 Connecticut Avenue, N.W. 30/360 44
41 Downtown Woodinville Retail Development #1 30/360 0
42 Melbourne Square Promenade 30/360 54
43 Glen Place Shopping Center 30/360 31
44 Richmond Plaza Shopping Center 30/360 4
45 Ocean Terrace Apartments 30/360 4
46 Pheasant Run Apartments 30/360 38
47 Liberty Crossing 30/360 1
48 Loganville Town Center 30/360 11
49 Danbury Commons Shopping Center 30/360 42
50 Dairy Ashford Plaza Office Building 30/360 8
51 Mt. Vernon Center 30/360 12
52 Norwalk Plaza (A) 30/360 38
53 Magnolia Plaza (A) 30/360 38
54 Atrium Circle At Campus Circle 30/360 14
55 Fair Oaks Professional Building 30/360 11
56 Orthologics Building 30/360 12
57 General Instruments Building 30/360 5
58 Home Depot 30/360 38
59 1875 Charleston Road 30/360 2
60 Mountain View Professional Plaza 30/360 14
61 Ventana Village Shopping Center 30/360 35
62 MA Bioservices 30/360 8
63 65 K Street 30/360 49
64 655 5th Avenue 30/360 2
65 14600 Winchester Blvd. 30/360 4
66 Best Buy 30/360 43
67 Village Grove Shopping Center 30/360 21
68 6006 Executive Boulevard 30/360 50
69 University Business Center 30/360 44
70 4215 Glencoe 30/360 1
71 Snowcreek Crossing 30/360 36
72 Lighthouse Crossing Shopping Center 30/360 2
73 Best Buy 30/360 44
74 Creekside Office Park 30/360 13
75 Lithonia Lighting West Building 30/360 20
76 5353-5499 Downey Road 30/360 38
77 Townley Apartments 30/360 70
78 Walgreens and Staples 30/360 39
79 Prince Frederick Office Park 30/360 61
80 Bay Tree Village (B) 30/360 44
81 Bugaboo Steak House (B) 30/360 44
82 Cotswold Plaza II 30/360 4
83 Lake Regency Building 30/360 3
84 Merit Abrasiveproducts Inc. 30/360 20
85 Totem Ridge Business Park* 30/360 61
86 DSHS Office Building* 30/360 15
87 Stafford Corporate Center 30/360 1
88 Best Buy 30/360 40
89 R and R Plaza 30/360 49
90 Best Buy 30/360 45
91 Circuit City - Colorado Springs 30/360 42
92 204TH Street Partners 30/360 59
93 Commons 1 Office Building 30/360 14
94 Quail Business Park 30/360 59
95 Hayden Island Business Park 30/360 7
96 NW Corner of Hwy 74 & Mail Street 30/360 1
97 Sportmart Plaza 30/360 60
98 Spectrum Business Park V 30/360 49
99 Northwest Business Center III 30/360 12
100 Mizner Place 30/360 49
101 Kroger 30/360 43
102 Food 4 Less 30/360 81
103 Oxford Hill Apartments 30/360 54
104 Linens N' Things 30/360 41
105 Parklane Centre 30/360 13
106 Goldseker Industrial Portfolio (I) 30/360 1
107 Walgreens 30/360 1
108 Cahners Publishing Company 30/360 59
109 Safeway* 30/360 46
110 Walden Woods Village Shopping Center 30/360 35
111 Grand Terrace Shopping Center 30/360 6
112 2199 Innerbelt Business Center Drive 30/360 42
113 Kohl's 30/360 60
114 Office Max 30/360 44
115 Meadows Pavillion II Act/360 8
116 Bernardo Gateway Business Park 30/360 35
117 1371 & 1375 N. Miller Street* 30/360 25
118 Blakely Corners Shopping Center 30/360 10
119 Sparks Medical Office Building 30/360 4
120 North Canal Office Park* 30/360 39
121 Federal Express 30/360 3
122 Behr Processing Building 30/360 41
123 The Shoppes at Salisbury II 30/360 35
124 Walgreens (II) 30/360 79
125 Eckerd Drug Store 30/360 6
126 Shop N' Kart Discount Grocery 30/360 17
127 Office Max 30/360 31
128 Eckerd Drug Store 30/360 6
129 Office Max 30/360 27
130 DEA Building 30/360 29
131 56th Street Commerce Park 30/360 59
132 4520 36th Street 30/360 18
133 Pacific Park* 30/360 7
134 Walgreens 30/360 3
135 North Roseburg Plaza 30/360 53
136 Probity International Corp 30/360 36
137 NOAA-National Weather Service Building 30/360 60
138 Winchester Court 30/360 8
139 2400 E. Francis* 30/360 43
140 Walgreens 30/360 12
141 Walgreens 30/360 35
142 The Shoppes at Salisbury 30/360 70
143 Ames Department Store 30/360 111
144 Eckerd Drug Store 30/360 8
145 Pier I Office Building 30/360 57
146 Harstad/Coates Industrial Park 30/360 17
147 Blockbuster Video 30/360 5
148 Walgreens 30/360 64
149 Walgreens 30/360 64
150 15690 North 83rd Way 30/360 1
151 Walgreens 30/360 79
152 The McCormick Executive Center Office Building 30/360 11
153 Blockbuster Video (III) 30/360 56
TOTAL/WEIGHTED AVERAGE 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PREPAYMENT CODE(13)
LOCKOUT
PERIOD YM YM1 YM3 YM+0.5% YM+0.75% <YM5 <YM4 <YM3 <YM2
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 60
60
60 60
60 156
60 60
36 204
24 33
36 78
36 78
60 120
36 81
24 36 36 42
60 120
60 117
120
36 198
36 81
60 63
12 102
36 66
180
24 33
12 102
36 78
36 81
120
36 225
180
36 144
36 84
61 59
12 69
84 81
36 33
36 84
24 33
120
36 81
36 81
36 144
36 78
36 84
23 24
24 33
60 60
36 144
60 58
24 210
36 84
36 81
60 180
36 144
36 144
36 81
60 177
120
36 81
36 198
96 78
60 180
76
60 60
36 79
5 47
60 60
36 138
36 84
36 84
24 54
60 60
12 108
60 60
36 204
36 84
36 84 12 12 12 12
36 192
36 84
36 204
36 143
36 24
36 24
60 60
60 57
60 60
36 201
60 60
36 204
36 144
36 204
36 204
36 84
60 60
60 60
36 84
36 84
240
36 84
12 81
36 84
36 201
36 192
36 81
36 84
36 84
36 81
36 84
36 204
36 228
117
36 84
36 120
240
36 194
24 96
36 84
60 156
60 180
36 84
36 144
36 84
36 84
36 204
60 165
60 168
60 180
36 189
60 163
36 204
36 204
36 84
60 57
36 144
36 144
36 108
36 180
36 84
37 83
60 168
36 204
36 141
36 204
60 161
36 144
60 120
60 60
240
240
60 120
60 177
60 120
180
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
YM
<YM1 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.0% OPEN FORMULA(14)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A
12 12 12 21 3 N/A
A
A
A
E
3 H
6 A
6 A
A
3 A
6 D
A
3 I
A
6 E
3 A
3 A
6 F
3 C
A
3 H
6 D
6 A
3 A
A
3 A
A
E
A
A
3 D
3 A
3 A
A
3 H
36 12 12 12 12 12 21 3 N/A
3 C
3 A
A
6 A
A
12 12 12 12 9 3 B
3 H
A
A
2 A
6 A
A
3 B
A
E
E
3 B
3 A
A
3 B
6 B
6 A
A
48 48 24 25 N/A
A
A
8 A
A
6 E
E
A
6 G
A
B
A
E
A
12 E
12 E
C
A
C
12 12 12 12 9 3 B
12 12 12 12 9 3 B
A
3 A
E
3 E
60 60 N/A
A
E
E
E
B
E
A
B
A
A
B
E
3 B
E
3 E
9 3 B
3 C
12 24 24 E
A
3 A
E
B
E
3 A
A
A
B
A
A
E
E
A
B
E
A
E
A
3 E
A
A
A
A
A
E
B
3 A
36 36 24 18 6 N/A
E
E
E
E
A
E
E
E
3 E
B
A
E
A
B
B
B
A
3 E
A
B
</TABLE>
<PAGE>
PARTIAL PREPAYMENT ADMINISTRATIVE
PERMITTED(15) COST RATE (BPS)(16)
- ---------------------------------------------------
Yes 17.00
No 37.25
Yes 17.00
Yes 17.00
Yes 17.00
No 17.00
No 25.25
Yes 25.25
Yes 17.00
Yes 17.00
Yes 17.00
No 25.25
Yes 17.00
No 25.25
Yes 17.00
No 17.00
Yes 25.25
Yes 17.00
No 25.25
No 17.00
Yes 17.00
No 25.25
No 25.25
No 17.00
Yes 17.00
Yes 17.00
Yes 17.00
Yes 17.00
Yes 17.00
Yes 25.25
Yes 17.00
No 25.25
No 25.25
Yes 17.00
Yes 17.00
No 25.25
Yes 40.25
No 17.00
Yes 17.00
Yes 17.00
Yes 17.00
Yes 17.00
No 17.00
No 25.25
Yes 17.00
Yes 17.00
Yes 17.00
Yes 37.25
Yes 17.00
No 17.00
Yes 17.00
No 17.00
No 17.00
No 17.00
Yes 17.00
Yes 17.00
No 17.00
No 17.00
Yes 25.25
Yes 17.00
Yes 17.00
Yes 17.00
Yes 17.00
No 25.25
Yes 17.00
No 17.00
No 17.00
Yes 17.00
No 25.25
Yes 17.00
No 17.00
Yes 17.00
No 17.00
Yes 17.00
No 17.00
Yes 17.00
No 17.00
Yes 17.00
No 17.00
No 17.00
No 17.00
Yes 17.00
Yes 17.00
No 17.00
Yes 17.00
Yes 40.25
No 17.00
No 17.00
No 17.00
No 17.00
No 17.00
No 17.00
No 17.00
No 17.00
Yes 17.00
No 17.00
No 17.00
No 17.00
No 17.00
No 17.00
No 17.00
No 17.00
No 17.00
No 17.00
Yes 17.00
Yes 17.00
Yes 25.25
No 17.00
Yes 17.00
Yes 17.00
Yes 17.00
Yes 17.00
No 17.00
Yes 17.00
Yes 17.00
No 17.00
No 17.00
Yes 17.00
No 17.00
Yes 17.00
Yes 17.00
No 17.00
Yes 17.00
No 17.00
Yes 25.25
Yes 17.00
Yes 17.00
Yes 25.25
No 17.00
No 17.00
No 17.00
Yes 17.00
Yes 17.00
Yes 17.00
No 17.00
No 17.00
No 17.00
Yes 17.00
Yes 17.00
Yes 17.00
No 17.00
No 17.00
No 17.00
Yes 17.00
No 17.00
Yes 17.00
Yes 17.00
No 17.00
No 17.00
Yes 17.00
No 17.00
Yes 17.00
No 17.00
19.42
<PAGE>
FOOTNOTES TO APPENDIX II
1 "GAL" and "SF" denote General American Life Insurance Company and The
City and County of San Francisco Employees' Retirement System Pension
Trust, respectively, as Sellers. "
2 "Sets of Mortgage Loans that have identical alphabetical coding
designate multiple loans that are cross-collateralized and
cross-defaulted. Mortgage Loans that have Roman Numeral coding (inside
parenthesis) designate single-note, multi-property loans. Such loans are
further described below."
"Loan No. 106, The Goldseker Industrial Portfolio, is secured by three
properties, including industrial/retail improvements of 30,000 square
feet, 30,000 square feet, and 20,400 square feet, located in Bel Air and
Edgewood, Maryland. "
"Loan No. 124, Walgreens, is secured by three properties, including
freestanding retail improvements of 12,000 square feet, 12,000 square
feet and 12,544 square feet, each occupied by a Walgreens Drug Store.
Two of the properties are located in Wyoming, Michigan, and one is
located in Holland, Michigan."
"Loan No. 153, Blockbuster Video, is secured by two properties,
including freestanding retail improvements of 7,500 square feet and
6,500 square feet, each occupied by a Blockbuster Video, located in
Indianapolis, Indiana."
3 "Loan No. 3, Del Norte Plaza, is permitted to obtain additional secured
financing in the future, provided the additional financing does not
extend beyond the subject loan, a combined minimum DSCR of 1.30x is
maintained and a combined LTV of 75% is not exceeded."
"Loan No. 5, Club Hotel & Suites by Doubletree, has additional secured
financing as of June 1, 1999, with an outstanding principal balance of
approximately $1,853,410, payable to the New Jersey Economic Development
Authority. The additional financing is subordinate to the subject
mortgage loan, is fully amortizing over 20 years, and bears annual
interest of 5%."
"Loan No. 16, 1700 Pennsylvania Avenue, is permitted to obtain
additional secured financing in the future, provided a combined minimum
DSCR of 1.50x is maintained and a combined LTV of 50% is not exceeded."
"Loan No. 18, Fairview Center, is permitted to obtain additional secured
financing in the future, provided a combined minimum DSCR of 1.15x is
maintained and a combined LTV of 80% is not exceeded."
"Loan No. 24, Drury Inn - Union Station, is in the process of obtaining
additional secured financing with an estimated original principal
balance of $2,700,000, payable to First Bank. The expected additional
financing will be subordinate to the subject loan, is expected to
amortize over 15 years, and is scheduled to mature on 3/1/2004."
"Loan No. 67, Village Grove Shopping Center, is permitted to obtain
additional secured financing in the future, provided a combined minimum
DSCR of 1.25x is maintained and a combined LTV of 85% is not exceeded."
II-13
<PAGE>
FOOTNOTES TO APPENDIX II
"Loan No. 104, Linens N' Things, is permitted to obtain additional
secured financing in the future, provided a combined minimum DSCR of
1.15x is maintained or the combined debt outstanding does not exceed
$3,580,000."
"Loan No. 116, Bernardo Gateway Business Park, is permitted to obtain
additional secured financing in the future, provided a combined minimum
DSCR of 1.25x is maintained and a combined LTV of 75% is not exceeded."
"Loan No. 130, the DEA Building, is permitted, with the lender's
consent, to obtain additional secured financing in the future, provided
a combined minimum DSCR of 1.25x is maintained and a combined LTV of 71%
is not exceeded."
"Loan No. 148, Walgreens, is permitted to obtain additional secured
financing in the future, provided the additional financing does not
exceed $375,000 in principal balance."
4 "Certain ratios including Cut-Off Date Balance / Unit or SF, DSCR,
Assumed DSCR, LTV and Balloon LTV are calculated on a combined basis for
Mortgage Loans that are cross-collateralized and cross-defaulted. "
5 "Loan No. 108, Cahners Publishing Company, is a twenty year,
fully-amortizing loan. The lender has a call option on the fifteenth
anniversary of the note; however, the master servicer will be directed
not to exercise such call option."
6 "The Amortization Term shown is the basis for determining the fixed
monthly principal and interest payment as set forth in the related note.
Due to the actual/360 interest calculation methodology applied to
several Mortgage Loans, the actual amortization to a zero balance will
be longer. "
7 "Loan Nos. 8, 45 West 45th Street, and 64, 655 5th Avenue, require
monthly payments of interest only until their scheduled maturity. In
addition, Loan No. 12, Ogden Mall, requires payments of interest only
from its first scheduled payment date of 12/1/95 through 5/1/99, then on
6/1/99, begins to amortize according to a 264 month schedule, and Loan
No. 18, Fairview Center, requires payments of interest only from its
first scheduled payment date of 8/1/98 through 1/1/99, then on 2/1/99,
begins to amortize according to a 300 month schedule. Underwritten DSCR
and Assumed DSCR reflect scheduled payments of principal and interest
beginning on 6/1/99 and 2/1/99, respectively."
"Loan No. 32, Highridge Apartments, is subject to a payment of
$63,267.26 for the first 12 months of the loan term, which implies a 324
month amortization schedule. The loan is subject to a step in payment to
$65,341.64 (current payment amount) on the 13th month of the loan term
through the 48th month of the loan term, which implies a 288 month
amortization schedule. The loan is subject to a final payment step to
$66,199.63 on the 49th month of the loan term (10/1/2000), through
maturity, which implies a 276 month amortization schedule. Disclosed
Original Amortization Term is based on the original payment amount of
$63,267.26 per month. The interest rate remains unchanged throughout the
loan term. DSCR and Assumed DSCR are based on the current payment of
$65,341.64. The increased debt service effective on 10/1/2000, applied
to the property's underwritable cash flow, results in a DSCR of 1.10x."
"Loan No. 76, 5353-5499 Downey Road, is subject to an interest rate
reset to 8.000%, and a new amortization schedule on 6/1/2001. At that
time, the payment will be recalculated according to the 8.000% interest
rate, the then outstanding principal balance and a 15 year amortization
schedule. The monthly principal and interest payment as of 6/1/2001 will
be $38,469.93. DSCR and Assumed DSCR are based on the current payment of
$35,562.28, determined by the current interest rate of 7.750%, and the
current original amortization term of 264 months. The increased debt
service effective 6/1/2001, applied to the property's underwritable cash
flow, results in a DSCR of 1.31x."
II-14
<PAGE>
FOOTNOTES TO APPENDIX II
8 "Assumed DSCR is based on an assumed debt service constant of 8.5%, as
defined herein."
9 "Value is determined either by a) the appraised value for mortgaged
properties with June 1, 1997, or later value as of dates (appraised), or
b) by the amount determined by applying a capitalization rate, as shown
in the tables, to the Underwritable Cash Flow, for all other mortgaged
properties. LTV and Balloon LTV are based on this Value."
10 "In general for each property, ""Percent Leased"" was determined based
on a rent roll provided by the borrower. In certain cases, ""Percent
Leased"" was determined based on an appraisal, executed lease, operating
statement or occupancy report. ""Percent Leased as of Date"" indicates
the date as of which ""Percent Leased"" was determined based on such
information. For hospitality properties, the data shown is the average
daily occupancy rate, generally for the immediately preceding twelve
month period. "
11 "Largest Tenant refers to the tenant that represents the greatest
percentage, equal to, or in excess of 20%, of the total square footage
at the subject property. "
12 Seasoning represents the approximate number of months elapsed from the
date of the first regularly scheduled payment or due date to the Cut-Off
Date.
13 "Indicates prepayment provisions from the first Due Date as stated in
the Mortgage Loan. ""YM"" represents yield maintenance. ""YM1"", and
""YM3"", represent the greater of the product of the applicable yield
maintenance formula and one percent and three percent of the outstanding
principal balance prepaid, respectively. ""YM+0.5%"" and ""YM+0.75%""
represent the product of the applicable yield maintenance formula plus
one half of one percent and three quarters of one percent of the
principal balance prepaid, respectively. ""<YM5"", ""<YM4"", ""<YM3"",
""<YM2"", and ""<YM1"", represent the lesser of the product of the
applicable yield maintenance formula and five percent, four percent,
three percent, two percent and one percent of the outstanding principal
balance prepaid, respectively. The stated percentages represent fixed
percentage premiums based on the amount prepaid."
"Loan No. 2, Landow Office Building, has a six month open prepayment
period, without premium, during months 58-63 of the loan term (February
1, 2003 through July 31, 2003), if the borrower is denied a request to
increase the loan balance subject to certain conditions. The Master
Servicer will be prohibited from advancing additional principal;
therefore, investors should assume the borrower will have this
prepayment option."
"Loan No. 3, Del Norte Plaza, in addition to the prepayment option
indicated above, has the option of defeasing the subject loan after the
earlier of the second anniversary of the date the Del Norte Loan is
transferred to a REMIC or the expiration of the fifth year of the loan
term. Any such defeasance will include the release of the related Del
Norte Property and the pledge of substitute collateral in the form of
direct, non-callable, non-redeemable United States Treasury obligations
providing for payments prior, but as close as possible, to all
successive dates (including the maturity date of the Del Norte Loan) on
which a payment of principal and interest under the Del Norte Loan is
due, with each such payment being equal to or greater than such
scheduled principal or interest payment due on such date."
"Loan No. 5, Club Hotel & Suites by Doubletree, has a $2,000,000 letter
of credit in place as a performance enhancement. If certain performance
thresholds are not met by the fifth anniversary of the note date, the
letter of credit may be applied to the then outstanding principal
balance of the loan, subject to a 4% prepayment premium. Such letter of
credit application is at the lender's option."
II-15
<PAGE>
FOOTNOTES TO APPENDIX II
"Loan No. 18, Fairview Center, permits the prepayment of up to $800,000
of the outstanding principal balance, without premium, should the
Borders tenant elect to prepay the non-amortized cost of their
outstanding borrower-financed tenant improvements. Such prepayment may
occur at any time. Such prepayment would result in a recalculation of
the applicable monthly P&I payment."
"Loan No. 27, Winder Corners Shopping Center, permits prepayment of up
to three (3) payments during the loan term, so long as each separate
payment is no less than $500,000 and no greater than $1,500,000. Such
prepayments are subject to a 1% prepayment premium."
"Those properties denoted with an asterisk (*), including Loan Nos. 15,
Greylyn Business Park; 29, Encino Spectrum; 37, Eastway Crossing
Shopping Center; 85, Totem Ridge Business Park; 86, DSHS Office
Building; 109, Safeway; 117, 1371&1375 N. Miller Street; 120, North
Canal Office Park; 133, Pacific Park; and 139, 2400 E. Francis, permit
prepayment of up to 10% of the original principal balance in any loan
year, including any applicable lockout period (except Loan No. 85, Totem
Ridge Business Park, which does not permit prepayment during its related
lockout period), without the payment of a prepayment premium. The
original principal balances for the above loans were $10,000,000;
$8,250,000; $7,500,000; $4,300,000; $3,900,000; $3,125,000; $2,800,000;
$2,800,000; $1,900,000 and $1,898,500, respectively."
14 "Mortgage Loans with associated Yield Maintenance Prepayment Premiums
are categorized according to unique Yield Maintenance formulas. There
are nine different Yield Maintenance formulas represented by the loans
in the subject mortgage loan pool. The different formulas are reference
by the letters ""A"", ""B"", ""C"", ""D"", ""E"", "F", "G", "H", and
"I". Summaries for the nine formulas are listed beginning on page
II-17."
15 ""Yes" indicates that during any period in which the borrower is
permitted to prepay the outstanding principal balance of the related
mortgage loan (with or without a prepayment premium), such borrower may
prepay an amount less than the entire outstanding principal balance.
Loans so noted include the ten mortgage loans which permit prepayment in
any loan year of up to 10% of the original principal balance without
premium. Nine of the ten mortgage loans that permit such 10% prepayment
without premium also permit partial prepayments outside the scope of the
10% prepayment without premium option, but such additional partial
prepayments are subject to any applicable prepayment premium."
16 "The ""Administrative Cost Rate"" indicated for each Mortgage Loan will
be calculated based on the same interest calculation methodology
applicable to each Mortgage Loan."
II-16
<PAGE>
FOOTNOTES TO APPENDIX II
YIELD MAINTENANCE FORMULAS
"The following are summaries of yield maintenance provisions, or
formulas, contained in the related promissory note for certain of the
mortgage loans. There are nine unique yield maintenance formulas
represented by the mortgage loans, each labeled as "A", "B", "C", "D",
"E", "F", "G", "H", or "I". Each mortgage loan, which provides for a
yield maintenance formula, references the applicable formula printed
below in the column entitled "YM Formula"."
A "At any time after the specified anniversary of the date of this Note,
the principal amount of this Note may be prepaid by paying, in addition
to the principal amount, accrued interest, and all other sums due
hereunder, a prepayment consideration equal to the percentage of the
outstanding principal balance being prepaid multiplied by an amount
equal to the remainder obtained by subtracting (i) the entire
outstanding principal balance of this Note as of the date of the
prepayment from (ii) the present value as of the date of the prepayment
of the remaining scheduled payments of principal and interest under this
Note including any final installment of principal payable on the
maturity date of this Note determined by discounting such payments at
the U.S. Treasury rate, as such rate is reported in the Federal Reserve
Statistical Release H.15(519) Selected Interest Rates (or comparable
publication as determined by the holder of this Note) under the heading
"U.S. government securities/Treasury constant maturities" for the week
ending prior to the date of the relevant prepayment of the Note, with a
maturity date most nearly approximating the maturity of this Note when
compounded on a monthly basis."
B "At any time after the specified anniversary of the date of this Note,
the principal amount of this Note may be prepaid by paying, in addition
to the principal amount, accrued interest, and all other sums due
hereunder, a prepayment consideration equal to the product obtained by
multiplying (i) the difference obtained by subtracting from the then
applicable interest rate on this Note the yield rate on United States
Treasury Notes having a maturity date closest to the maturity date of
this Note, as such yield rate is reported in the Wall Street Journal or
similar publication on the fifth business day preceding the prepayment
date, and (ii) the number of years and fraction thereof remaining
between the prepayment date and the scheduled maturity date of this
Note, and (iii) the prepaid principal amount."
C "At any time after the specified anniversary of the date of this Note,
the principal amount of this Note may be prepaid by paying, in addition
to the principal amount, accrued interest, and all other sums due
hereunder, a prepayment consideration equal to the present value of an
annuity with (i) a monthly payment equal to the product obtained by
multiplying the prepaid principal amount by the difference obtained by
subtracting from the then applicable interest rate on this Note the
yield rate on United States Treasury Notes having a maturity date
closest to the maturity date of this Note, as such yield rate is
reported in the Wall Street Journal or similar publication on the fifth
business day preceding the prepayment date, and (ii) the number of
months and fraction thereof remaining between the prepayment date and
the scheduled maturity date of this Note, and (iii) a discount rate
equal to the yield rate of the Treasury Notes described above."
D "Yield Maintenance Amount" shall mean the amount equal to (a) the
present value as of the date of prepayment of the remaining scheduled
payments of principal and interest hereunder (allocable to the amount of
principal being prepaid), calculated by discounting such payments
monthly at a rate equal to one-twelfth of the Treasury Yield (as defined
below) less (b) the amount of principal then due (including any amount
then being prepaid and any amount then due remaining to be paid). The
Treasury Yield shall equal the yield on the Treasury Constant Maturities
series having a maturity date equal to the Stated Maturity, as set forth
in Federal Reserve Statistical Release H.15(519) (or a comparable
publication or source selected by Lender if such publication is no
longer available) for the first week ending not less than two full weeks
before the date of prepayment. If the Stated Maturity does not
correspond to one of the Treasury Constant Maturities published in
Federal Reserve Statistical Release H.15(519) (or such successor
publication or source), the Treasury Yield shall be determined by Lender
by interpolating between the yield on securities having" the next longer
and the next shorter maturity date. Maker agrees that Lender shall not
be obligated actually to reinvest the amount prepaid in any Treasury
obligation as a condition to receiving the Yield Maintenance Amount.
E "At any time after the specified anniversary of the date of this Note,
the principal amount of this Note may be prepaid by paying, in addition
to the principal amount, accrued interest, and all other sums due
hereunder, a prepayment consideration equal to the present value (as
determined by discounting back on a monthly basis, at the Treasury Notes
rate identified below in this paragraph, from the maturity date of this
Note to such prepayment date) of the product obtained by multiplying (i)
the difference obtained by subtracting from the then applicable interest
rate on this Note the yield rate on United States Treasury Notes having
a maturity date closest to the maturity date of this Note, as such yield
rate is reported in The Wall Street Journal or similar publication on
the fifth business day preceding the prepayment date, and (ii) the
number of years and fraction thereof remaining between the prepayment
date and the scheduled maturity date of this Note, and (iii) the prepaid
principal amount."
II-17
<PAGE>
FOOTNOTES TO APPENDIX II
YIELD MAINTENANCE FORMULAS
F "Yield Maintenance Amount" at any time shall mean the amount equal to
(a) the present value as of the date of prepayment of the remaining
scheduled payments of principal and interest hereunder (allocable to the
amount of principal being prepaid), calculated by discounting such
payments monthly at a rate equal to one-twelfth of the Treasury Yield
(as defined below) less (b) the amount of principal being prepaid. The
Treasury Yield shall equal the yield on the Treasury Bonds series having
a maturity date equal to the Stated Maturity, as set forth in The Wall
Street Journal (or a comparable publication or source selected by the
Lender if such publication is no longer available) as of the close of
business for the Friday that is two full weeks prior to the date of
prepayment (or the previous Thursday should the Treasury bond market be
closed on that Friday). Application of the previous sentence is
illustrated by the following examples:"
<TABLE>
<CAPTION>
If Prepayment Date is: Then apply Treasury Rate as of the end of the following day:
<S> <C>
"Monday, January 26, 1998" "Friday, January 9, 1998"
"Thursday, January 29,1998" "Friday, January 9, 1998"
"Friday, January 30, 1998" "Friday, January 16, 1998"
</TABLE>
"If the Stated Maturity does not correspond to one of the Treasury Bonds
published in The Wall Street Journal (or such successor publication or
source), the Treasury Yield shall be determined by Lender by
interpolating between the yield on securities having the next longer and
the next shorter maturity date. Maker agrees that Lender shall not be
obligated actually to reinvest the amount prepaid in any treasury
obligation as a condition to receiving the Yield Maintenance Amount. The
Yield Maintenance Amount shall be calculated by Lender in a commercially
reasonable manner and such calculation shall be binding on Maker absent
manifest error."
G "Yield Maintenance Amount" at any time shall mean the amount equal to
(a) the present value as of the date of prepayment of the remaining
scheduled payments of principal and interest hereunder (allocable to the
amount of principal being prepaid), calculated by discounting such
payments monthly at a rate equal to (y) one-twelfth of the Treasury
Yield (as defined below) for any prepayment made before the fourth
anniversary of the date of execution hereof and (z) one-twelfth of the
sum of Treasury Yield plus 0.50% for any prepayment after such fourth
anniversary less (b) the amount of principal then due (including any
amount then being prepaid and any amount then due remaining to be paid).
The Treasury Yield shall equal the yield on the Treasury Constant
Maturities series having a maturity date equal to the Stated Maturity,
as set forth in Federal Reserve Statistical Release H.15(519) (or a
comparable publication or source selected by Lender if such publication
is no longer available) for the first week ending not less than two full
weeks before the date of prepayment. If the Stated Maturity does not
correspond to one of the Treasury Constant Maturities " "published in
Federal Reserve Statistical Release H.15(519) (or such successor
publication or source), the Treasury Yield shall be determined by Lender
by interpolating between the yield on securities having the next longer
and the next shorter maturity date. Maker agrees that Lender shall not
be obligated actually to reinvest the amount prepaid in any treasury
obligation as a condition to receiving the Yield Maintenance Amount. Not
withstanding anything to the contrary in this paragraph, the Yield
Maintenance Amount shall be subject to the terms and provisions of
Section 8A hereof (Maximum Interest clause)."
H "Yield Maintenance Premium" shall mean the premium which shall be the
product of (1) a fraction, the numerator of which is the positive
excess, if any, of (i) the present value of all future Payments of
principal and interest on the Principal Amount, including the Principal
Amount due at maturity, to be made on the Note before the prepayment in
question, discounted at an interest rate per annum equal to the Treasury
Constant Maturity Yield Index published during the second full week
preceding the date on which such premium is payable for instruments
having a maturity coterminous with the remaining term of the Note, plus
35 basis points, over (ii) the Principal Amount immediately before such
prepayment, and the denominator of which is the Principal Amount
immediately prior to the prepayment, and (2) the Principal Amount being
prepaid; provided, however, that if there is no Treasury Constant
Maturity Yield Index for instruments having a maturity coterminous with
the remaining term of the Note, then the index referred to in (1) above
shall be equal to the weighted average yield to maturity of the Treasury
Constant Maturity Yield Indices with maturities next longer and shorter
than such remaining duration of the Note, calculated by averaging (and
rounding upward to the nearest whole multiple of 1/100 of 1% per annum,
" "if the average is not such a multiple) the yields of the relevant
Treasury Constant Maturity Yield Indices (rounded, if necessary, to the
nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded
upward)."
II-18
<PAGE>
FOOTNOTES TO APPENDIX II
YIELD MAINTENANCE FORMULAS
I "Yield Maintenance Premium" shall mean the premium which shall be the
product of (1) a fraction, the numerator of which is the positive
excess, if any, of (i) the present value of all future Payments of
principal and interest on the Principal Amount, including the Principal
Amount due at maturity, to be made on the Note before the prepayment in
question, discounted at an interest rate per annum equal to the Treasury
Constant Maturity Yield Index published during the second full week
preceding the date on which such premium is payable for instruments
having a maturity coterminous with the remaining term of the Note, over
(ii) the Principal Amount immediately before such prepayment, and the
denominator of which is the Principal Amount immediately prior to the
prepayment, and (2) the Principal Amount being prepaid; provided,
however, that if there is no Treasury Constant Maturity Yield Index for
instruments having a maturity coterminous with the remaining term of the
Note, then the index referred to in (1) above shall be equal to the
weighted average yield to maturity of the Treasury Constant Maturity
Yield Indices with maturities next longer and shorter than such
remaining duration of the Note, calculated by averaging (and rounding
upward to the nearest whole multiple of 1/100 of 1% per annum, if the
average is not " "such a multiple) the yields of the relevant Treasury
Constant Maturity Yield Indices (rounded, if necessary, to the nearest
1/100 of 1% with any figure of 1/200 of 1% or above rounded upward)."
II-19
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX III
SIGNIFICANT LOAN SUMMARIES
LOAN NO. 1 - CENTURY PARK OFFICE BUILDING LOAN AND PROPERTY
<TABLE>
<CAPTION>
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $23,896,720 Balloon Balance: $19,343,656
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
Loan Type: Principal and Interest Property Type: Office
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
Origination Date: February 23, 1999 Location: Los Angeles, CA
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
Maturity Date: March 1, 2009 Year Renovated: 1997
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
Mortgage Rate: 7.920% Appraised Value: $55,000,000
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
Annual Debt Service: $2,207,589 Current LTV: 43.4%
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
DSCR: 1.55x Balloon LTV: 35.2%
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
Underwritable Cash Flow: $3,413,707 Occupancy: 80.3%
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
Occupancy as of: 6/16/99
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
</TABLE>
THE LOAN
The Century Park Office Building Loan (the "Century Park Loan") is
secured by a first mortgage on Century Park Office Building, a 310,703 square
foot, 15-story office building located in Century City, California (the "Century
Park Property"). The Century Park Loan was originated on February 23, 1999.
General American Life Insurance Company is the Seller of the Century Park Loan.
THE BORROWER. The borrower is Century Park, a California limited
partnership (the "Century Park Borrower"). The general partner and managing
partner is Harold Held. Held and family members operating as Held Properties,
are real estate operators with a portfolio of five properties located within the
general area of the Century Park Property. Held has had an ownership interest in
the Century Park Property since its original development, in 1969.
SECURITY. The Century Park Loan is secured by a first deed of trust,
security agreement and fixture filing, a collateral assignment of lease or
leases, UCC financing statements and certain additional security documents. The
deed of trust is a first lien on a fee interest in the Century Park Property.
The Century Park Loan is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Century Park Loan has a fixed Mortgage Rate of
7.920%, a stated term of 120 months and an original amortization term of 300
months. The Century Park Loan requires monthly payments of principal and
interest of $183,965.79, with a balloon payment due at the maturity date.
Although the Century Park Loan documents are silent with respect to the accrual
basis of the loan, the related Seller has computed accrued interest on the
Century Park Loan on the basis of an assumed 360-day year with twelve 30-day
months.
PREPAYMENT. No prepayments are allowed during the first 60 months of
the term of the Century Park Loan. Thereafter, prepayments are allowed, in whole
or in part, upon the payment of a premium equal to the greater of yield
maintenance or 1% of the amount prepaid.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the holder of the Century Park Loan will have the option to declare it
immediately due and payable upon the transfer of any interest in the Century
Park Property or any ownership interest in the Century Park Borrower. The
Century Park Loan documents
III-1
<PAGE>
provide for a one-time right of the Century Park Borrower to transfer the
Century Park Property to a credit qualified third party approved by the holder
of the Century Park Loan upon such holder's receipt of (i) a true copy of the
deed or other transfer instrument, (ii) a letter authorizing the transfer of any
then existing escrow funds to the benefit of the transferee, (iii) satisfactory
evidence that transferee possess acceptable fire and extended coverage insurance
over the Century Park Property, and (iv) a one percent (1%) transfer fee. The
Century Park Loan documents also allow (a) a transfer of the general partner's
interest in the Century Park Borrower to a limited liability company with assets
and liabilities consistent with those of such general partners, and (b)
transfers of limited or general partnership interest among family members of the
limited and general partners.
ESCROW/RESERVES. There are no escrow reserves currently required for
the Century Park Loan.
SUBORDINATION/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited without the lender's prior consent.
THE PROPERTY
The Century Park Property is a 15-story high-rise office building
containing 310,703 square feet and a three level subterranean parking facility.
The building was completed in 1970 and has recently undergone a complete
renovation and asbestos abatement. It is located in Century City, ten miles west
of downtown Los Angeles. Century City is a master-planned, mixed-use, urban
community totaling 260 acres. Current uses include high-rise Class A office
buildings, high-rise hotels, an upscale regional shopping center, and high-rise
and mid-rise condos, along with the ABC Entertainment Center.
Major tenants of the Century Park Property include Gelfand Rennert
(37,159 square feet), Price Waterhouse (21,387 square feet) and Prudential
Insurance (11,949 square feet). The Century Park Property was 80.3% leased as of
June 16, 1999 to 48 tenants. Leases for 3% of property space expire in 1999, 3%
expire in 2000, 10% expire in 2001, 28% expire in 2002, 18% expire in 2003, 9%
expire in 2004, 2% expire in 2005, and 7% expire in 2006.
MANAGEMENT
The Century Park Borrower is the manager of the Century Park Property.
III-2
<PAGE>
LOAN NO. 2 - LANDOW OFFICE BUILDING LOAN AND PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------- ------------------------- ----------------------------- -------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $18,633,444 Balloon Balance: $14,940,345
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Loan Type: Principal and Interest Property Type: Office
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Origination Date: March 19, 1998 Location: Bethesda, MD
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Maturity Date: April 1, 2008 Year Renovated: 1993
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Mortgage Rate: 7.000% Appraised Value: $29,300,000
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Annual Debt Service: $1,611,457 Current LTV: 63.6%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
DSCR: 1.51x Balloon LTV: 51.0%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Underwritable Cash Flow: $2,430,941 Occupancy: 98.8%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Occupancy as of: 3/1/99
- ----------------------------------- ------------------------- ----------------------------- -------------------------
</TABLE>
THE LOAN
The Landow Office Building Loan (the "Landow Loan") is secured by a
first mortgage on a 215,223 square foot, 14-story office building located in
Bethesda, Maryland (the "Landow Property"). The Landow Loan was originated on
March 19, 1998. The City and County of San Francisco Employees' Retirement
System Pension Trust is the Seller of the Landow Loan.
THE BORROWER. The borrower is Landow Building Limited Partnership, a
Maryland limited partnership (the "Landow Borrower"). The general partner is
Nathan Landow, with Harolyn Landow Cardoza, David M. Landow and Michael Landow
as limited partners. The Landow Borrower is a special purpose entity. Nathan
Landow has had an ownership interest in the Landow Property since its original
development in 1971.
SECURITY. The Landow Loan is secured by a first amended and restated
deed of trust, security agreement and fixture filing, an amended and restated
assignment of lessor's interest in leases, a collateral assignment of lease, UCC
financing statements and certain additional security documents. The amended and
restated deed of trust is a first lien on a fee interest in the Landow Property.
The Landow Loan is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Landow Loan has a fixed Mortgage Rate of 7.000%, a
stated term of 120 months and an original amortization term of 300 months. The
Landow Loan requires monthly payments of principal and interest of $134,288.05,
with a balloon payment due at the maturity date. Although the Landow Loan
documents are silent with respect to the accrual basis of the loan, the related
Seller has computed accrued interest on the Landow Loan on the basis of an
assumed 360-day year with twelve 30-day months.
PREPAYMENT. Except as described below, no prepayments are allowed
during the first 60 months of the term of the Landow Loan. Thereafter,
prepayments are allowed, in whole but not in part, upon the payment of a premium
equal to the following specified percentages of the amount prepaid: (a) 4% -- 12
months, (b) 3% -- 12 months, (c) 2% -- 12 months, and (2) 1% -- 21 months. No
premium is required for a total prepayment during the final 3 months of the term
of the Landow Loan. Additionally, no premium is required for a total prepayment
during the 58th through 63rd months of the term of the Landow Loan if the holder
of the Landow Loan does not agree to increase the principal amount of the Landow
Loan above $19,000,000, subject to a maximum LTV of 75% and a minimum debt
service coverage ratio of 1.25x. The Master Servicer will be prohibited from
advancing any additional funds to the Landow Borrower, and investors should
assume that the Landow Borrower will have the option to prepay the Landow Loan,
without premium, during such period.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the holder of the Landow Loan will have the option to declare it
immediately due and payable upon the transfer of any interest in the Landow
III-3
<PAGE>
Property or any ownership interest in the Landow Borrower. The Landow Loan
documents provide for a one-time right of the Landow Borrower to transfer the
Landow Property to a credit qualified third party approved by the holder of the
Landow Loan upon such holder's receipt of (i) a true copy of the deed or other
transfer instrument, (ii) a letter authorizing the transfer of any then existing
escrow funds to the benefit of the transferee, (iii) satisfactory evidence that
transferee possess acceptable fire and extended coverage insurance over the
Landow Property, and (iv) a one percent (1%) transfer fee. The Landow Loan
documents also allow (a) transfers of partnership interests in the Landow
Borrower by and among Nathan Landow, Harolyn Landow Cardoza, David M. Landow and
Michael Landow so long as Nathan Landow remains the general partner of the
Landow Borrower, and (b) Harolyn Landow Cardoza, David M. Landow or Michael
Landow to succeed Nathan Landow as the general partner of the Landow Borrower
upon his death or disability.
ESCROW/RESERVES. There are no escrow reserves currently required for
the Landow Loan.
SUBORDINATION/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited without the lender's prior consent.
THE PROPERTY
The Landow Property is a 14-story high-rise office building containing
215,223 square feet and a three level subterranean parking facility. The
building was completed in 1971 and was substantially renovated during 1991-1993.
It is located in the central business district of Bethesda, Maryland.
Major tenants of the Landow Property include Global Exchange (15,619
square feet) and American Gastro (15,619 square feet). The Landow Property was
98.8% leased as of March 1, 1999 to 82 tenants. Leases for approximately 12% of
property space expire in 1999, 14% expire in 2000, 11% expire in 2001, 18%
expire in 2002, 15% expire 2003, 11% expire in 2004, 9% expire in 2005, 7%
expire in 2006, 1% expire in 2007, and 2% expire in 2009, or later.
MANAGEMENT
The Landow Borrower is the manager of the Landow Property.
III-4
<PAGE>
LOAN NO. 3 - DEL NORTE PLAZA LOAN AND PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------- ------------------------- ----------------------------- -------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $17,979,067 Balloon Balance: $14,301,011
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Loan Type: Principal and Interest Property Type: Retail
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Origination Date: May 11, 1999 Location: Escondido, CA
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Maturity Date: June 1, 2009 Year Built: 1984
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Mortgage Rate: 7.375% Appraised Value: $27,600,000
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Annual Debt Service: $1,578,700 Current LTV: 65.1%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
DSCR: 1.33x Balloon LTV: 51.8%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Underwritable Cash Flow: $2,098,688 Occupancy: 84.6%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Occupancy as of: 6/1/99
- ----------------------------------- ------------------------- ----------------------------- -------------------------
</TABLE>
THE LOAN
The Del Norte Plaza Loan (the "Del Norte Loan") is secured by a first
mortgage on a 214,893 square foot, 1-story shopping center located in Escondido,
California (the "Del Norte Property"). The Del Norte Loan was originated on
May 11, 1999. General American Life Insurance Company is the Seller of the Del
Norte Loan.
THE BORROWER. The borrower is Del Norte Plaza, L.L.C., a California
limited liability company (the "Del Norte Borrower"). Members of the Del Norte
Borrower are Pacific West Management, Samuel and Francis Ross, Sol and Ruth
Teichman and Alan and Rosana Miller. Pacific West Management is an entity owned
by David Hager and Adam Milstein. The borrower purchased the Del Norte Property
in 1998.
SECURITY. The Del Norte Loan is secured by a first deed of trust,
security agreement and fixture filing, a collateral assignment of leases and
rents, UCC financing statements and certain additional security documents. The
deed of trust is a first lien on a fee interest in the Del Norte Property. The
Del Norte Loan is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Del Norte Loan has a fixed Mortgage Rate of 7.375%,
a stated term of 120 months and an original amortization term of 300 months. The
Del Norte Loan requires monthly payments of principal and interest of
$131,558.34, with a balloon payment due at the maturity date. The Del Norte Loan
accrues interest computed on the basis of an assumed 360-day year with twelve
30-day months.
PREPAYMENT/DEFEASANCE. No prepayments are allowed during the first 60
months of the term of the Del Norte Loan. Thereafter, prepayments are allowed,
in whole or in part, upon the payment of a premium equal to the greater of yield
maintenance or 1% of the amount prepaid.
Alternatively, after the earlier of the second anniversary of the date
the Del Norte Loan is transferred to a REMIC or the expiration of the fifth year
of the loan term, the Del Norte Borrower may elect to defease the Del Norte
Loan. Any such defeasance will include release of the related Del Norte Property
and the pledge of substitute collateral in the form of direct, non-callable,
non-redeemable United States Treasury obligations providing for payments prior,
but as close as possible, to all successive dates (including the maturity date
of the Del Norte Loan) on which a payment of principal or interest under the Del
Norte Loan is due, with each such payment being equal to or greater than such
scheduled principal or interest payment due on such date.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the holder of the Del Norte Loan will have the option to declare it
immediately due and payable upon the transfer of any interest in the Del Norte
Property or any ownership interest in the Del Norte Borrower. So long as no
default then exists, the Del Norte Loan documents allow two transfers of the Del
Norte Property to a credit qualified third party approved by the
III-5
<PAGE>
holder of the Del Norte Loan upon such holder's receipt of (i) a true copy of
the deed or other transfer instrument, (ii) a letter authorizing the transfer of
any then existing escrow funds to the benefit of the transferee, (iii)
satisfactory evidence that transferee possess acceptable fire and extended
coverage insurance over the Del Norte Property, (iv) a transfer fee not to
exceed one percent (1%) of the loan balance, and (v) confirmation of the
transferee's federal tax identification number. The Del Norte Loan documents
also allow (a) a transfer of the general partner's interest in the Del Norte
Borrower to a limited liability company with assets and liabilities consistent
with those of such general partners, and (b) transfers of limited or general
partnership interest among family members of the limited and general partners.
ESCROW/RESERVES. A monthly tax escrow is currently required for the Del
Norte Loan.
SUBORDINATION/OTHER DEBT. The Del Norte Loan documents prohibit
subordinate financing without the mortgagee's prior consent; provided, however,
that so long as no payment or other material default then exists, the Del Norte
Borrower is permitted to grant a subordinate mortgage if (i) the terms of the
subordinate loan and the subordinate loan documents, must be acceptable to the
senior mortgagee, (ii) the subordinate mortgage must be subordinated to the Del
Norte Loan documents, (iii) the term of the subordinate loan must not extend
beyond the term of the Del Norte Loan, (iv) the underwritable cash flow from the
Del Norte Property equals or exceed 1.30 times the aggregate debt service on the
Del Norte Loan and such subordinate loan, and (v) the aggregate loan-to-value
ratio for the Del Norte Loan and such subordinate loan is not greater than 75%.
THE PROPERTY
The Del Norte Property is a one-story anchored neighborhood shopping
center containing 214,893 square feet that was constructed in 1984. It is
located in Escondido, San Diego County, California. The center has over 1,700
feet of frontage and one signalized entrance on El Norte and over 2,000 feet of
frontage along Center City Parkway.
Major tenants of the Del Norte Property are Vons (40,000 square feet),
United Artist Theatres (23,590 square feet) and Sav-On Drugs (22,880 square
feet). The Del Norte Property was 84.6% leased as of June 1, 1999 to 46 tenants.
Leases for approximately 8% of property space expire in 1999, 24% expire in
2000, 9% expire in 2001, 4% expire in 2002, 4% expire in 2003, 14% expire in
2004, 1% expire in 2005, 1% expire in 2006, 1% expire in 2007, and 19% expire in
2009 or later.
MANAGEMENT
The Del Norte Borrower is the manager of the Del Norte Property.
III-6
<PAGE>
LOAN NO. 4 - PICTURE TEL OFFICE BUILDING LOAN AND PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------- ------------------------- ----------------------------- -------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $17,756,107 Balloon Balance: N/A
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Loan Type: Principal and Interest Property Type: Office
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Origination Date: December 22, 1998 Location: Andover, MA
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Maturity Date: January 1, 2017 Year Built: 1998
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Mortgage Rate: 7.400% Appraised Value: $38,000,000
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Annual Debt Service: $1,812,321 Current LTV: 46.7%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
DSCR: 1.78x Balloon LTV: N/A
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Underwritable Cash Flow: $3,232,529 Occupancy: 100%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Occupancy as of: 12/31/98
- ----------------------------------- ------------------------- ----------------------------- -------------------------
</TABLE>
THE LOAN
The Picture Tel Office Building Loan (the "Picture Tel Loan") is
secured by a first mortgage on a 200,000 square foot, 3-story office building
located in Andover, Massachusetts (the "Picture Tel Property"). The Picture Tel
Loan was originated on December 22, 1998. General American Life Insurance
Company is the Seller of the Picture Tel Loan.
THE BORROWER. The borrower is 200 Minuteman, L.P., a Massachusetts
limited partnership (the "Picture Tel Borrower"). The general partner is Niuna -
200 Minuteman, Inc., a Massachusetts corporation. The principal entity of the
Picture Tel Borrower is The Brickstone Companies ("Brickstone"). Brickstone is a
real estate development firm. The primary principal of Brickstone is John
Kusmiersky. The Picture Tel Borrower is a special purpose entity. John
Kusmiersky has had an ownership interest in the Picture Tel Property since its
original development in 1997.
SECURITY. The Picture Tel Loan is secured by a mortgage and security
agreement, a collateral assignment of lease or leases, UCC financing statements
and certain additional security documents. The Mortgage is a first lien on a fee
interest in the Picture Tel Property. The Picture Tel Loan is non-recourse,
subject to certain limited exceptions.
PAYMENT TERMS. The Picture Tel Loan has a fixed Mortgage Rate of
7.400%, a stated term of 216 months and an original amortization term of 216
months. The Picture Tel Loan requires monthly payments of principal and interest
of $151,026.71. Although the Picture Tel Loan documents are silent with respect
to the accrual basis of the loan, the related Seller has computed accrued
interest on the Picture Tel Loan on the basis of an assumed 360-day year with
twelve 30-day months.
PREPAYMENT. No prepayments are allowed during the first 60 months of
the term of the Picture Tel Loan. Thereafter, prepayments are allowed, in whole
or in part, upon the payment of a premium equal to the greater of yield
maintenance or 1% of the amount prepaid.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the holder of the Picture Tel Loan will have the option to declare it
immediately due and payable upon the transfer of any interest in the Picture Tel
Property or any ownership interest in the Picture Tel Borrower. The Picture Tel
Loan documents provide for a one-time right of the Picture Tel Borrower to
transfer the Picture Tel Property to a credit qualified third party approved by
the holder of the Picture Tel Loan upon such holder's receipt of (i) a true copy
of the deed or other transfer instrument, (ii) a letter authorizing the transfer
of any then existing escrow funds to the benefit of the transferee, (iii)
satisfactory evidence that transferee possess acceptable fire and extended
coverage insurance over the Picture Tel Property, and (iv) a one percent (1%)
transfer fee. The Picture Tel Loan documents also allow (a) a
III-7
<PAGE>
transfer of the general partner's interest in the Picture Tel Borrower to a
limited liability company with assets and liabilities consistent with those of
such general partners, and (b) transfers of limited or general partnership
interest among family members of the limited and general partners.
ESCROW/RESERVES. There is a tax and insurance escrow reserve which
requires deposits in an amount sufficient to pay taxes and insurance premiums
when due.
SUBORDINATION/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited without the lender's prior consent.
THE PROPERTY
The Picture Tel Property is a 3-story 200,000 square foot office
building that was constructed in 1998. It is located in Andover, Massachusetts,
approximately 25 miles north of the Boston central business district and a few
miles south of the New Hampshire border.
The Picture Tel Property is 100% leased to Picture Tel for an 18-year
term commencing in December of 1998. Picture Tel's lease is a triple net lease
wherein Picture Tel is responsible for all expenses (including a 3.5% management
fee) relating to the Picture Tel Property, excepting structural repairs. After
year 9 of its lease, Picture Tel also assumes the responsibility for such
structural repairs.
MANAGEMENT
The Picture Tel Borrower is the manager of the Picture Tel Property,
however, as described above, Picture Tel is fully responsible for all aspects of
the Picture Tel Property pursuant to its triple net lease.
III-8
<PAGE>
LOAN NO. 5 - CLUB HOTEL & SUITES BY DOUBLETREE LOAN AND PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------- ------------------------- ----------------------------- -------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $16,842,081 Balloon Balance: $11,724,666
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Loan Type: Principal and Interest Property Type: Hospitality
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Origination Date: January 14, 1999 Location: Jersey City, NJ
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Maturity Date: February 1, 2009 Year Built: 1998
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Mortgage Rate: 7.375% Appraised Value: $26,500,000
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Annual Debt Service: $1,627,853.00 Current LTV: 63.6%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
DSCR: 1.77x Balloon LTV: 44.2%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Underwritable Cash Flow: $2,878,190 Average Occupancy: 71.2%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
For 12 Months Ending: 4/30/99
- ----------------------------------- ------------------------- ----------------------------- -------------------------
</TABLE>
THE LOAN
The Club Hotel & Suites by Doubletree Loan (the "Doubletree Loan") is
secured by a first mortgage on a 199 unit, 13-story Club Hotel located in Jersey
City, New Jersey (the "Doubletree Property"). The Doubletree Loan was originated
on January 14, 1999. General American Life Insurance Company is the Seller of
the Doubletree Loan.
THE BORROWER. The borrowers are Hudson Hospitality Services Urban
Renewal Associates, L.L.C. and J.C. Grandview Hotel, L.L.C. both New Jersey
limited liability companies (collectively the "Doubletree Borrower"). The
primary sponsors are Hartz Mountain Industries and Garden State Development.
Hartz is a real estate developer in the New Jersey and New York area. Each of
the separate Doubletree Borrowers is a special purpose entity. The sponsors have
had an ownership interest in the Doubletree Property since its original
development in 1996.
SECURITY. The Doubletree Loan is secured by a mortgage, security
agreement and fixture filing, a collateral assignment of lease or leases and
management agreement, UCC financing statements and certain additional security
documents. The mortgage is a first lien on a fee interest in the Doubletree
Property. The Doubletree Loan is non-recourse, subject to certain limited
exceptions.
PAYMENT TERMS. The Doubletree Loan has a fixed Mortgage Rate of 7.375%,
a stated term of 120 months and an original amortization term of 240 months. The
Doubletree Loan requires monthly payments of principal and interest of
$135,654.43, with a balloon payment due at the maturity date. The Doubletree
Loan accrues interest computed on the basis of the actual number of days elapsed
each month in a 360-day year.
LOCKBOX. The Doubletree Borrower has executed and delivered an
agreement to the holder of the Doubletree Loan providing that upon the
occurrence of a default under the Doubletree Loan, all gross income from the
Doubletree Property is to be directly deposited into a lockbox account
controlled by such holder. Disbursements from such account are made as follows:
(a) to pay all amounts then due with respect to the Doubletree Loan; and (b) to
fund the payment of all operating expenses, management fees and leasing
commissions.
PREPAYMENT. No prepayments are allowed during the first 60 months of
the term of the Doubletree Loan. Thereafter, prepayments are allowed, in whole
or in part, upon the payment of a premium equal to the greater of yield
maintenance or 1% of the amount prepaid.
Additionally, a 4% premium will be payable in connection with any
prepayment arising from the application of the $2,000,000 letter of credit
described below to the Doubletree Loan.
III-9
<PAGE>
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the holder of the Doubletree Loan will have the option to declare it
immediately due and payable upon the transfer of any interest in the Doubletree
Property or any ownership interest in the Doubletree Borrower; excepting,
however, certain transfers permitted under the operating agreements of the
Doubletree Borrower.
ESCROW/RESERVES. There are no escrow reserves currently required for
the Doubletree Loan.
Additionally the Doubletree Borrower has provided a $2,000,000 letter
of credit to ensure that operations at the Doubletree Property produce, for any
12-month period:
o A rolling average debt service ratio of 2.25 x (1.75 x when
also including the subordinate debt described below); and
o An average daily room rate and occupancy rate in excess of
$100 and 65%, respectively.
Upon the satisfaction of the foregoing requirements, if the Doubletree
Borrower is in possession of a valid franchise agreement and/or operating
agreement and no default then exists, the letter of credit is to be released. If
such requirements are not satisfied within the first 60 months of the term of
the Doubletree Loan, the lender may, upon three days prior notice to the
Doubletree Borrower, draw down the letter of credit and apply such amount to the
Doubletree Loan, subject to a 4% Prepayment Premium.
SUBORDINATION/OTHER DEBT. A $1,853,410 (June 1, 1999 balance)
subordinate loan is in place with the New Jersey Economic Development Authority
as the lender. All other subordinate indebtedness and encumbrances are
prohibited without the lender's prior consent.
THE PROPERTY
The Doubletree Property is a 199-room Club Hotel by Doubletree located
in Jersey City, New Jersey, near the Holland Tunnel leading to downtown
Manhattan, PATH commuter trains and water ferries. The first floor includes a
fitness room and a club room containing conference rooms, a self-service
business center, a TV-library area and bar and food service. The second floor
has approximately 1,300 square feet of conference area in 3 rooms. Free on-site
parking is available and the hotel offers shuttle service to several mass
transit points.
For the twelve months ending April 30, 1999, the Doubletree Property
achieved an average daily rate of $147.96, and an average occupancy of 71.2%.
MANAGEMENT
The Doubletree Property is managed by DT Management, a subsidiary of
Promus Hotel Corporation.
III-10
<PAGE>
LOAN NO. 6 - RAM'S VILLAGE APARTMENTS LOAN AND PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------- ------------------------- ----------------------------- -------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $14,565,552 Balloon Balance: N/A
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Loan Type: Principal and Interest Property Type: Multi-family
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Origination Date: January 27, 1995 Location: Fort Collins, CO
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Maturity Date: February 1, 2015 Year Built: 1989
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Mortgage Rate: 9.750% Value: $28,870,376
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Annual Debt Service: $1,821,152 Current LTV: 50.5%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
DSCR: 1.35x Balloon LTV: N/A
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Underwritable Cash Flow: $2,453,982 Occupancy: 100%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Occupancy as of: 1/31/99
- ----------------------------------- ------------------------- ----------------------------- -------------------------
</TABLE>
Note: The Ram's Village Value was determined by dividing the property's
Underwritable Net Cash Flow by an 8.5% capitalization rate.
THE LOAN
The Ram's Village Apartments Loan (the "Ram's Village Loan") is secured
by a first mortgage on the Ram's Village Apartments, a 355-unit multi-family
housing facility located in Ft. Collins, Colorado (the "Ram's Village
Property"). The Ram's Village Loan was originated on January 27, 1995. General
American Life Insurance Company is the Seller of the Ram's Village Loan.
THE BORROWER. The borrowers are Ronald D. Gray and Claudine V. Gray
(collectively, the "Ram's Village Borrower"). Ronald D. Gray and Claudine V.
Gray have had an ownership interest in the Ram's Village Property since its
original development in 1988.
SECURITY. The Ram's Village Loan is secured by a deed of trust, a
security agreement, UCC financing statements and certain additional security
documents. The deed of trust is a first lien on a fee interest in the Ram's
Village Property. The Ram's Village Loan is 25% recourse to Ram's Village
Borrower.
PAYMENT TERMS. The Ram's Village Loan has a fixed Mortgage Rate of
9.750%, a stated term of 240 months and an original amortization term of 240
months. The Ram's Village Loan requires monthly payments of principal and
interest of $151,762.70. Although the Ram's Village Loan documents are silent
with respect to the accrual basis of the loan, the related Seller has computed
accrued interest on the Ram's Village Loan on the basis of an assumed 360-day
year with twelve 30-day months. PREPAYMENT. No prepayments are allowed during
the first 36 months of the term of the Ram's Village Loan. Thereafter,
prepayments are allowed, in whole but not in part, upon the payment of a premium
equal to the greater of yield maintenance or 1% of the amount prepaid.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the holder of the Ram's Village Loan will have the option to declare it
immediately due and payable upon the transfer of any interest in the Ram's
Village Property or any ownership interest in the Ram's Village Borrower. The
Ram's Village Loan documents allow the Ram's Village Borrower to transfer the
Ram's Village Property to an entity or person owned or controlled by the Ram's
Village Borrower upon such holder's receipt of (i) a true copy of the deed or
other transfer instrument, (ii) a letter authorizing the transfer of any then
existing escrow funds to the benefit of the transferee, (iii) satisfactory
evidence that transferee possess acceptable fire and extended coverage insurance
over the Ram's Village Property, and (iv) confirmation of the transferee's
federal tax identification number.
III-11
<PAGE>
ESCROW/RESERVES. There is an escrow reserve for taxes which requires
deposits in an amount sufficient to pay taxes when due. Additionally, escrow
deposits of $8,875 are made on a monthly basis to fund a reserve for future
required capital expenditures. The aggregate amount of such capital expenditures
reserve is capped at $200,000.
SUBORDINATION/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited without the lender's prior consent.
THE PROPERTY
The Ram's Village Property is a garden apartment facility consisting of
355 units in 35 buildings. It is located in Fort Collins, Colorado, one block
from the Colorado State University campus. The Ram's Village Property is
oriented to student housing. Consequently, lease terms range from 10 months to
one year, and all units are completely furnished with living room, dining room
and bedroom furniture.
The Ram's Village Property was 100% leased as of January 31, 1999.
MANAGEMENT
The Ram's Village Borrower manages the Ram's Village Property through
an on-site manager.
III-12
<PAGE>
LOAN NO. 7 - WALSH RESEARCH CENTER LOAN AND PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------- ------------------------- ----------------------------- -------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $14,347,808 Balloon Balance: $13,484,623
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Loan Type: Principal and Interest Property Type: Industrial
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Origination Date: February 26, 1999 Location: Santa Clara, CA
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Maturity Date: March 1, 2004 Year Renovated: 1997
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Mortgage Rate: 6.530% Appraised Value: $20,500,000
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Annual Debt Service: $1,095,625 Current LTV: 70.0%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
DSCR: 1.46x Balloon LTV: 65.8%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Underwritable Cash Flow: $1,597,231 Occupancy: 100%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Occupancy as of: 1/22/99
- ----------------------------------- ------------------------- ----------------------------- -------------------------
</TABLE>
THE LOAN
The Walsh Research Center Loan (the "Walsh Loan") is secured by a first
mortgage on the Walsh Research Center, a facility with 2 manufacturing/R&D
buildings with a total of 190,200 square feet located in Santa Clara, California
(the "Walsh Property"). The Walsh Loan was originated on February 26, 1999. The
City and County of San Francisco Employees' Retirement System Pension Trust is
the Seller of the Walsh Loan.
THE BORROWER. The borrower is G&I Walsh, L.L.C., a Delaware limited
liability company (the "Walsh Borrower"). The principal member of the Walsh
Borrower is DRA Growth and Income Fund, L.L.C. ("DRA"). DRA was formed in
December, 1997, for the purposes of acquiring individual real estate assets or
select portfolios. DRA is the principal member in 18 separate limited liability
companies which are the owners of 18 office, multi-family, and R&D properties
located in Arizona, Georgia, Colorado, North Carolina, and California. The
borrower purchased the Walsh Property in 1998.
SECURITY. The Walsh Loan is secured by a deed of trust, security
agreement, fixture filing, financing statement and assignment of rents and
leases, an assignment of leases, rents and security deposits, UCC financing
statements and certain additional security documents. The deed of trust is a
first lien on a fee interest in the Walsh Property. The Walsh Loan is
non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Walsh Loan has a fixed Mortgage Rate of 6.530%, a
stated term of 60 months and an original amortization term of 360 months. The
Walsh Loan requires monthly payments of principal and interest of $91,302.09,
with a balloon payment due at the maturity date. The Walsh Loan accrues interest
computed on the basis of an assumed 360-day year with twelve 30-day months.
LOCKBOX. During the existence of any uncured default by the Walsh
Borrower, at the option of the holder of the Walsh Loan, all gross income from
the Walsh Property is to be directly deposited into a lockbox account controlled
by such holder. Disbursements from such account are made as follows: (a) to fund
the payment of taxes, assessments, ground rents, insurance and similar items,
(b) to pay all amounts then due with respect to the Walsh Loan; (c) to fund the
payment of all operating expenses, management fees and leasing commissions; and
(e) to fund, at the holder's option, principal prepayments (with the applicable
Prepayment Premium) or operating expenses, management fees and leasing
commissions.
PREPAYMENT. No prepayments are allowed during the first 24 months of
the term of the Walsh Loan. Thereafter, prepayments are allowed, in whole but
not in part, upon the payment of a premium equal to the greater of yield
maintenance or 1% of the amount prepaid. No premium is required for a total
prepayment during the last 3 months of the term of the Walsh Loan.
III-13
<PAGE>
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the holder of the Walsh Loan will have the option to declare it
immediately due and payable upon the transfer of any interest in the Walsh
Property or any ownership interest in the Walsh Borrower. Certain specified
transfers are not prohibited, including without limitation (i) transfers equal
to or less than a 49% ownership interest (when aggregated with prior transfers)
in either the Walsh Borrower or the managing member, general partner or similar
controlling entity of the Walsh Borrower, (ii) pledges of ownership interest as
security for a loan from an institutional lender (provided that any remedy
exercised by such lender might be deemed a default). Additionally, the Walsh
Loan documents allow two transfers of the Walsh Property by the Walsh Borrower
provided that (i) the holder either receives an acceptable non-consolidation
opinion or determines that such opinion is not necessary, (ii) the transferee is
organized as a single purpose entity, (iii) the holder reasonably determines
that the transferee and the Walsh Property satisfy the holder's then applicable
credit and underwriting standards, (iv) the holder reasonably determines that
the transferee possesses recent ownership and managerial experience of
properties similar to the Walsh Property, (v) that the officers, partners or
members, as applicable, of the transferee are reputable individuals, (vi) the
transferee satisfies all other conditions reasonably imposed by the holder,
(vii) the transferee assumes all obligations of the Walsh Borrower, (viii) the
holder receives a satisfactory title policy endorsement or new title policy
insuring the first lien priority of the Walsh Loan, (ix) the holder is
reimbursed for all costs and expenses incurred in connection with the proposed
transfer, and (x) the holder is paid a one percent (1%) assumption fee.
ESCROW/RESERVES. There are no escrow reserves currently required for
the Walsh Loan.
SUBORDINATION/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited without the lender's prior consent.
THE PROPERTY
The Walsh Property consists of two manufacturing/R&D buildings
containing an aggregate of 190,200 square feet. The buildings were constructed
in 1972 and renovated in 1997. The Walsh Property is located in Silicon Valley,
Santa Clara, California. Land use in the surrounding area is dominated by a
variety of light industrial development, primarily office/R&D.
The Walsh Property is 100% leased to the Talus Corporation (a
wholly-owned subsidiary of Electronic Manufacturing Systems) according to two
separate leases which expire on May 31, 2004, (95,700 square feet) and June 30,
2003, (94,500 square feet). The Talus Corporation is an independent provider of
contract metal fabrication and assembly services. Talus currently subleases
approximately 106,000 square feet of the Walsh Property to three subtenants.
MANAGEMENT
The Walsh Borrower is the manager of the Walsh Property.
III-14
<PAGE>
LOAN NO. 8 - 45 WEST 45TH STREET LOAN AND PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------- ------------------------- ----------------------------- -------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $14,000,000 Balloon Balance: $14,000,000
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Loan Type: Interest only Property Type: Office
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Origination Date: December 28, 1998 Location: New York, NY
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Maturity Date: January 1, 2009 Year Renovated: 1988
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Mortgage Rate: 7.000% Appraised Value: $24,000,000
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Annual Debt Service: $980,000 Current LTV: 58.3%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
DSCR: 1.53x Balloon LTV: 58.3%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Underwritable Cash Flow: $1,496,194 Occupancy: 94.4%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Occupancy as of: 2/23/99
- ----------------------------------- ------------------------- ----------------------------- -------------------------
</TABLE>
THE LOAN
The 45 West 45th Street Loan (the "45th Street Loan") is secured by a
first mortgage on a 118,187 square foot, 16-story multi-tenant office building
located in Mid-town Manhattan, New York City, New York (the "45th Street
Property"). The 45th Street Loan was originated on December 28, 1998. The City
and County of San Francisco Employees' Retirement System Pension Trust is the
Seller of the 45th Street Loan.
THE BORROWER. The borrower is TMT-45th Street, Inc., a Delaware
corporation (the "45th Street Borrower"), and is a wholly-owned subsidiary of
the TRW Master Trust. The 45th Street Borrower is a special purpose entity. The
borrower purchased the 45th Street Property in 1998.
SECURITY. The 45th Street Loan is secured by a consolidation,
modification and extension agreement, an assignment of leases, rents and
security deposits, UCC financing statements and certain additional security
documents. The mortgage is a first lien on a fee interest in the 45th Street
Property. The 45th Street Loan is non-recourse, subject to certain limited
exceptions.
PAYMENT TERMS. The 45th Street Loan has a fixed Mortgage Rate of 7.000%
and a stated term of 120 months. The 45th Street Loan requires monthly payments
of interest only of $81,666.67, with a balloon payment due at the maturity date.
Although the 45th Street Loan documents are silent with respect to the accrual
basis of the loan, the related Seller has computed accrued interest on the 45th
Street Loan on the basis of an assumed 360-day year with twelve 30-day months.
LOCKBOX. All gross income from the 45th Street Property is to be
directly deposited into a lockbox account controlled by the 45th Street
Borrower. Disbursements from such account are made as follows (a) to pay all
amounts then due with respect to the 45th Street Loan, (b) to fund required
reserves for the payment of taxes, assessments, insurance and similar items; and
(c) so long as no default has occurred, to the 45th Street Borrower.
PREPAYMENT/DEFEASANCE. No prepayments are allowed during the first 36
months of the term of the 45th Street Loan. Thereafter, prepayments are allowed,
in whole or in part, upon the payment of a premium equal to the greater of yield
maintenance or 1% of the amount prepaid. No premium is required for a prepayment
during the last 6 months of the term of the 45th Street Loan.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the holder of the 45th Street Loan will have the option to declare it
immediately due and payable upon the transfer of any interest in the 45th Street
Property or any ownership interest in the 45th Street Borrower. The 45th Street
Loan documents provide for a one-time right of the 45th Street Borrower to
transfer the 45th Street Property to a credit qualified third party approved by
the holder of the 45th Street Loan upon such holder's receipt of (i) a true copy
of the deed or other
III-15
<PAGE>
transfer instrument, (ii) a letter authorizing the transfer of any then existing
escrow funds to the benefit of the transferee, (iii) satisfactory evidence that
transferee possess acceptable fire and extended coverage insurance over the 45th
Street Property, (iv) a transfer fee not to exceed one percent (1%) of the loan
balance, and (v) confirmation of the transferee's federal tax identification
number.
ESCROW/RESERVES. There are no escrow reserves currently required for
the 45th Street Loan.
SUBORDINATION/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited without the lender's prior consent.
THE PROPERTY
The 45th Street Property is a 118,187 square foot, 16-story
multi-tenanted office building with ground floor retail located in Mid-town
Manhattan. The building is leased to approximately 25 tenants and is located one
block from the officially defined area of Times Square. The building was
constructed in 1923 and renovated in 1988.
Major tenants includes Weber's Enterprises Corp. (17,160 square feet),
Soundhood Music, Inc. (7,283 square feet) and Nutmeg Music, Inc. (7,283 square
feet). The 45th Street Property was 94.4% leased as of February 23, 1999 to 27
tenants. Leases for approximately 4% of property space expire in 1999, 5% expire
in 2001, 15% expire in 2002, 10% expire in 2004, 15% expire in 2005, 24% expire
in 2006, 15% expire in 2007, and 6% expire in 2008.
MANAGEMENT
The 45th Street Property is managed by Boston Financial.
III-16
<PAGE>
LOAN NO. 9 - DOWNTOWN WOODINVILLE RETAIL DEVELOPMENT #2 LOAN AND PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------- ------------------------- ----------------------------- -------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $13,050,000 Balloon Balance: $10,261,657
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Loan Type: Principal and Interest Property Type: Retail
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Origination Date: June 10, 1999 Location: Woodinville, WA
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Maturity Date: July 1, 2009 Year Built: 1998
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Mortgage Rate: 7.000% Appraised Value: $17,450,000
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Annual Debt Service: $1,106,816 Current LTV: 74.8%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
DSCR: 1.30x Balloon LTV: 58.8%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Underwritable Cash Flow: $1,441,580 Occupancy: 100%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Occupancy as of: 4/15/99
- ----------------------------------- ------------------------- ----------------------------- -------------------------
</TABLE>
THE LOAN
The Downtown Woodinville Retail Development #2 Loan (the "Woodinville
Loan") is secured by a first mortgage on a 90,659 square foot retail center
located in downtown Woodinville, Washington (the "Woodinville Property"). The
Woodinville Loan was originated on June 10, 1999. General American Life
Insurance Company is the Seller of the Woodinville Loan.
THE BORROWER. The borrower is Downtown Woodinville, L.L.C., a
Washington limited liability company (the "Woodinville Borrower"), was formed in
October 1996 to develop, own and operate the Woodinville Property. The
Woodinville Borrower is comprised of two members, Washington Capital Joint
Master Trust, a Group Trust and Woodinville Gardens, L.L.C., a Washington
limited liability company, each of which own a 50% interest.
Washington Capital Joint Master Trust is organized as a group trust,
qualified under the provisions of IRS Revenue Ruling 81-100. The Trust's
investors are: Locals 302 and 612 of the International Union of Operating
Engineers-Employers Construction Industry Retirement Fund; Washington State
Plumbing & Pipefitting Industry Pension Plan, and Western Washington Laborers
Employers Pension Trust Fund. The Trust is managed by Washington Capital
Management, Inc., which was established in 1977, is based in Seattle, and
reportedly has $1.3 billion under management for tax qualified pension plans,
90% of which are Taft-Hartley pension plans.
SECURITY. The Woodinville Loan is secured by a first deed of trust,
security agreement and fixture filing, a collateral assignment of lease and
rents, UCC financing statements and certain additional security documents. The
deed of trust is a first lien on a fee interest in the Woodinville Property. The
Woodinville Loan is 100% recourse to the Woodinville Borrower.
PAYMENT TERMS. The Woodinville Loan has a fixed Mortgage Rate of
7.000%, a stated term of 120 months and an original amortization term of 300
months. The Woodinville Loan requires monthly payments of principal and interest
of $92,234.69, with a balloon payment due at the maturity date. The Woodinville
Loan accrues interest computed on the basis of an assumed 360-day year with
twelve 30-day months.
PREPAYMENT/DEFEASANCE. No prepayments are allowed during the first 36
months of the term of the Woodinville Loan. Thereafter, prepayments are allowed,
in whole or in part, upon the payment of a premium equal to the greater of yield
maintenance or 1% of the amount prepaid. No premium is required for a prepayment
during the last 6 months of the term of the Woodinville Loan.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the holder of the Woodinville Loan will have the option to declare it
immediately due and payable upon the transfer of any interest in the Woodinville
Property or any ownership interest in the Woodinville Borrower. The Woodinville
Loan documents
III-17
<PAGE>
provide for a one-time right of the Woodinville Borrower to transfer the
Woodinville Property (i) to a transferee possessing net worth equal to at least
200% of the amount of the Woodinville Loan and demonstrated real estate
investment and management experience, (ii) upon receipt by the holder of the
Woodinville Loan of a true copy of the deed or other transfer instrument, (iii)
upon the holder's receipt of a letter authorizing the transfer of any then
existing escrow funds to the benefit of the transferee, (iv) upon the holder's
receipt of satisfactory evidence that transferee possess acceptable fire and
extended coverage insurance over the Woodinville Property, (v) upon the holder's
receipt of a transfer fee not to exceed one percent (1%) of the loan balance,
(vi) upon the holder's receipt of confirmation of the transferee's federal tax
identification number, and (vii) the transferee assumes all obligations of the
Woodinville Borrower in writing. Additionally, for any transfers occurring after
July 1, 2004, the holder may require the applicable interest rate to be adjusted
to 200 basis points over the U.S. Treasury Notes/Bonds with a maturity similar
to the Woodinville Loan, with an interest floor of 7.25% and ceiling of 8%. The
Woodinville Loan documents also allow transfers of membership interest by
members of the Woodinville Borrower as of the origination of the Woodinville
Loan to immediate family members and trusts so long as not more than 50%, in the
aggregate, of the membership interests in the Woodinville Borrower have been so
transferred and Washington Capital Joint Master Trust remains the owner of a
minimum 33% interest in the Woodinville Borrower.
ESCROW/RESERVES. There are no escrow reserves currently required for
the Woodinville Loan.
SUBORDINATION/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited without the lender's prior consent.
THE PROPERTY
The Woodinville Property is a newly-constructed 90,659 square foot
retail center in three buildings in downtown Woodinville, Washington. It is part
of a 43-acre retail development known as Downtown Woodinville, located
approximately 16 miles from Seattle. The Woodinville Property is across from
Molbak's, a large specialty garden center with 15 acres of greenhouses. When
fully completed in the fall of 1999, Downtown Woodinville Retail Center is to
contain approximately 500,000 square feet of retail space, and will be the
largest development in Woodinville's central business district.
Major tenants of the Woodinville Property include Top Foods (67,136
square feet), Hollywood Video (6,701 square feet) and Kinko's (5,092 square
feet). The Woodinville Property was 100% leased as of April 15, 1999 to 10
tenants. Leases for approximately 2% of property space expire in 1999, 2% expire
in 2002, 6% expire in 2003, 2% expire in 2004, 6% expire in 2005, 1% expire in
2007, 7% expire in 2008, and 74% expire in 2009 or later.
MANAGEMENT
The Woodinville Borrower is the manager of the Woodinville Property.
III-18
<PAGE>
LOAN NO. 10 - MID RIVERS PLAZA SHOPPING CENTER LOAN AND PROPERTY
<TABLE>
<CAPTION>
- ----------------------------------- ------------------------- ----------------------------- -------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $12,898,672.29 Balloon Balance: $5,433,275
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Loan Type: Principal and Interest Property Type: Retail
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Origination Date: August 27, 1998 Location: St. Peters, MO
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Maturity Date: September 1, 2013 Year Expanded: 1996
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Mortgage Rate: 7.000% Appraised Value: $18,000,000
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Annual Debt Service: $1,223,422 Current LTV: 71.7%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
DSCR: 1.22x Balloon LTV: 30.2%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Underwritable Cash Flow: $1,490,157 Occupancy: 99.5%
- ----------------------------------- ------------------------- ----------------------------- -------------------------
Occupancy as of: 3/19/99
- ----------------------------------- ------------------------- ----------------------------- -------------------------
</TABLE>
THE LOAN
The Mid Rivers Plaza Shopping Center Loan (the "Mid Rivers Loan") is
secured by a first mortgage on Mid Rivers Plaza Shopping Center, a 191,017
square foot shopping center located in St. Peters, Missouri (the "Mid Rivers
Property"). The Mid Rivers Loan was originated on August 27, 1998. General
American Life Insurance Company is the Seller of the Mid Rivers Loan.
THE BORROWER. The borrower is The Grewe Limited Partnership, a Missouri
limited partnership (the "Mid Rivers Borrower"). The general partner of the Mid
Rivers Borrower is G.J. Grewe of Illinois, Inc., a family-owned Illinois
corporation that was established in 1984. G.J. Grewe of Illinois, Inc., has had
an ownership interest in the Mid Rivers Property since its original development
in 1989.
SECURITY. The Mid Rivers Loan is secured by a deed of trust, security
agreement and fixture filing, a collateral assignment of lease or leases, UCC
financing statements and certain additional security documents. The deed of
trust is a first lien on a fee interest in the Mid Rivers Property. The Mid
Rivers Loan is non-recourse, subject to certain limited exceptions.
PAYMENT TERMS. The Mid Rivers Loan has a fixed Mortgage Rate of 7.000%,
a stated term of 180 months and an original amortization term of 240 months. The
Mid Rivers Loan requires monthly payments of principal and interest of
$101,951.82, with a balloon payment due at the maturity date. The Mid Rivers
Loan accrues interest computed on the basis of the actual number of days elapsed
each month in a 360-day year.
PREPAYMENT. No prepayments are allowed during the first 60 months of
the term of the Mid Rivers Loan. Thereafter, prepayments are allowed, in whole
or in part, upon the payment of a premium equal to the greater of yield
maintenance or 1% of the amount prepaid.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. Except as described
below, the holder of the Mid Rivers Loan will have the option to declare it
immediately due and payable upon the transfer of any interest in the Mid Rivers
Property or any ownership interest in the Mid Rivers Borrower. The Mid Rivers
Loan documents provide for a one-time right of the Mid Rivers Borrower to
transfer the Mid Rivers Property (i) to a transferee possessing income and net
worth greater than or equal to the Mid Rivers Borrower, (ii) upon receipt by the
holder of the Mid Rivers Loan of a true copy of the deed or other transfer
instrument, (iii) upon the holder's receipt of a letter authorizing the transfer
of any then existing escrow funds to the benefit of the transferee, (iv) upon
the holder's receipt of satisfactory evidence that transferee possess acceptable
fire and extended coverage insurance over the Mid Rivers Property, (v) upon the
holder's receipt of a transfer fee not to exceed one percent (1%) of the loan
balance, (vi) upon the holder's receipt of confirmation of the transferee's
federal tax identification number, (vii) with an interest rate adjustment for
any transfers occurring after October 1, 2003, to the lesser of 7% or 150 basis
points over
III-19
<PAGE>
the U.S. Treasury Notes/Bonds with a maturity similar to the Mid Rivers Loan,
and (viii) so long as Service Merchandise has not exercised the first refusal or
purchase option rights possessed by it with respect to a portion of the Mid
Rivers Property. The Mid Rivers Loan documents also allow transfers of
partnership interests among immediate family members of Gerard J. Grewe or Jane
M. Grewe, provided that the holder's approval is required for voluntary
transfers of general partnership interests in the Mid Rivers Borrower.
Service Merchandise, a tenant of a portion of the Mid Rivers Property,
possesses first refusal and purchase option rights with respect to its demised
premises. Any release of such Premises by the holder of the Mid Rivers Loan in
connection with such rights must be supported by a partial prepayment so that
the loan-to-value ratio of the Mid Rivers Loan does not exceed 75% after such
release, or the personal guarantee of Gerard G. Grewe for the loan amount in
excess of such 75% loan-to-value ratio.
ESCROW/RESERVES. There are no escrow reserves currently required for
the Mid Rivers Loan.
SUBORDINATION/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited without the lender's prior consent.
THE PROPERTY
The Mid Rivers Property is a 191,017 square foot shopping center
constructed in 1989 and expanded in 1996. It is located in St. Peters, Missouri,
and is a satellite center to the Mid Rivers Regional Mall (approximately 1.2
million square feet).
Major tenants of the Mid Rivers Property include Service Merchandise
(50,000 square feet), Bed Bath & Beyond (38,843 square feet) and Kloss Furniture
Interiors (15,653 square feet). The Mid Rivers Property was 99.5% leased as of
March 19, 1999 to 16 tenants. Leases for approximately 2% of property space
expire in 1999, 8% expire in 2000, 1% expire in 2002, 11% expire in 2003, 14%
expire in 2004, 6% expire in 2006, 8% expire in 2007, and 47% expire in 2009, or
later.
MANAGEMENT
The Mid Rivers Borrower is the manager of the Mid Rivers Property.
III-20
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- --------------------------------------------------------------------------------
MORGAN STANLEY June 28, 1999
Real Estate Debt Capital Markets [MSDW GRAPHIC]
Mortgage Capital Markets
- --------------------------------------------------------------------------------
CMBS NEW ISSUE
PRELIMINARY TERM SHEET
-------------------------------------
EXPECTED PRICING DATE: JULY [ ], 1999
-------------------------------------
$744,605,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
AS DEPOSITOR
GENERAL AMERICAN LIFE INSURANCE COMPANY
AS MAJORITY SELLER
CONNING ASSET MANAGEMENT COMPANY
AS ORIGINATOR, MASTER SERVICER AND SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
-----------------------------------
MORGAN STANLEY DEAN WITTER
DONALDSON, LUFKIN & JENRETTE
PRUDENTIAL SECURITIES
AND AS SELLING AGENT
A.G. EDWARDS & SONS, INC.
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
TRANSACTION FEATURES
- --------------------
>> Contributors: -----------------------------------------------------
NO. CUT-OFF DATE %
OF PRINCIPAL OF
SELLERS LOANS BALANCE POOL
-----------------------------------------------------
GAL 130 $628,454,354 77.6%
-----------------------------------------------------
City/County of SF 23 180,899,469 22.4%
-----------------------------------------------------
TOTAL: 153 $809,353,823 100.0%
-----------------------------------------------------
>> Loan Pool:
o Average Loan Balance: $5,289,894 million (0.7% of Pool)
o Largest Loan Balance: $23,896,720 (3.0% of Pool)
o Five Largest Loans: 11.8% of Pool
o Ten Largest Loans: 20.3% of Pool
>> Seasoning: Weighted average seasoning of 22 months. The seasoning ranges
from 0 to 111 months
>> Property Types:
PIE CHART
---------
OFFICE - 36.0% INDUSTRIAL - 17.7%
MULTIFAMILY - 6.2% HOSPITALITY - 3.1%
RETAIL - 37.1%
>> Credit Statistics:
o Weighted average Cut-Off Date loan-to-value ratio of 63.8% and a balloon
loan-to-value of 36.4%
o Weighted average debt service coverage ratio of 1.41x at an actual constant
of 9.98%
o Weighted average debt service coverage ratio of 1.65x at an 8.5% constant
o Weighted average remaining amortization of 246 months
>> Call Protection: (As of Cut-Off Date)
o Lockout period ranging from 1 to 94 months, followed by yield maintenance:
55.7%
o Yield maintenance periods ranging from 34 to 218 months: 37.7%
o Lockout period ranging from 41 to 105 months, followed by fixed percentage:
3.8%
o Yield maintenance periods ranging from 16 to 147 months followed by fixed
percentages: 2.1%
o Declining fixed percentages of the principal amount prepaid: 0.7%
>> Collateral Terms: The Pool has a WAC of 7.688% and a WAM of 128 months
>> Collateral Information Updates: Updated loan information is expected to be
part of the monthly certificate holder statement available from the Trustee
in addition to detailed payment and delinquency information. Information
provided by the trustee is expected to be available at
www.globaltrustservices.com. Updated property operating and occupancy
information, to the extent delivered by borrowers, is expected to be
available to Certificateholders from the Trustee.
>> Bond Information: Cash flows are expected to be modeled by TREPP, CONQUEST
and INTEX and are expected to be available on BLOOMBERG
T-1
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
OFFERED CERTIFICATES
- --------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
RATINGS EXPECTED FINAL INITIAL
AMOUNT(1) SUBORDINATION (FITCH IBCA/ AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
CLASS ($MM) LEVELS S&P) LIFE(2) WINDOW(2)(3) DATE RATE(4)(5)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 442,000,000 19.50 AAA/AAA 5.70 1-112 11/15/08 [6.73%]
- --------------------------------------------------------------------------------------------------------------------
A-2 209,529,000 19.50 AAA/AAA 9.69 112-124 11/15/09 [7.00]
- --------------------------------------------------------------------------------------------------------------------
B(6) 26,304,000 16.25 AA/AA 11.02 124-137 12/15/10 [7.17]
- --------------------------------------------------------------------------------------------------------------------
C(6) 26,304,000 13.00 A/A 11.85 137-149 12/15/11 [NWAC - 0.13]
- --------------------------------------------------------------------------------------------------------------------
D(6) 12,140,000 11.50 A-/A- 12.73 149-154 5/15/12 [NWAC - 0.02]
- --------------------------------------------------------------------------------------------------------------------
E(6) 20,234,000 9.00 BBB/BBB 13.38 154-167 6/15/13 [NWAC]
- --------------------------------------------------------------------------------------------------------------------
F(6) 8,094,000 8.00 BBB-/BBB- 14.12 167-170 9/15/13 [NWAC]
- --------------------------------------------------------------------------------------------------------------------
PRIVATE CERTIFICATES - NOT OFFERED HEREBY
- -----------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
RATINGS EXPECTED FINAL INITIAL
AMOUNT(1) SUBORDINATION (FITCH IBCA/ AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
CLASS ($MM) LEVELS S&P) LIFE(2) WINDOW(2)(3) DATE RATE(4)(5)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
G-O 64,748,823 -- -- -- -- -- [6.73%]
- --------------------------------------------------------------------------------------------------------------------
X Notional -- AAA/AAAr -- -- 9/15/18 Variable Rate
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) In the case of each such Class, subject to a permitted variance of
plus or minus 5%. The Class X Notional Amount is equal to the sum of
all Certificate Balances outstanding from time to time.
(2) Based on Maturity Assumptions and a 0% CPR as described in the
Prospectus Supplement.
(3) Principal Window is the period (expressed in terms of months and
commencing with the month of the first Distribution Date) during
which distributions of principal are expected to be made to the
holders of each designated Class in accordance with the Maturity
Assumptions and a 0% CPR as described in the Prospectus Supplement.
(4) Other than the Class C, Class D, Class E and Class F Certificates,
each Class of Certificates will accrue interest generally at a fixed
rate of interest except in limited circumstances as described in the
Prospectus Supplement.
(5) The pass-through rates shown are only for indicative purposes. The
final pass-through rates will be determined at pricing.
(6) The City and County of San Francisco Employees' Retirement System
Pension Trust or an affiliate may purchase a portion of the Class B,
Class C and Class D Certificates. A Delaware Business Trust, of
which General American Life Insurance Company and the City & County
of San Francisco Employees' Retirement System Pension Trust will be
the sole beneficiaries, is expected to purchase all of the Class E
and F certificates.
T-2
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
I. ISSUE CHARACTERISTICS
- ------------------------
Issue Type: Public: Class A-1, A-2, B, C, D, E and F (the
"Offered Certificates")
Private (Rule 144A): Class X, G, H, J, K, L, M, N
and O
Securities Offered: $744,605,000 monthly pay, multi-class sequential
pay commercial mortgage REMIC Pass-Through
Certificates, including three fixed-rate principal
and interest classes (A-1, A-2 and B) and four
variable-rate principal and interest classes (C,
D, E and F)
Collateral: The collateral consists of a $809,353,823 pool of
fixed-rate commercial and multifamily Mortgage
Loans
Sellers: General American Life Insurance Company City and
County of San Francisco Employees' Retirement
System Pension Trust
Lead Manager: Morgan Stanley & Co. Incorporated
Co-Managers: Donaldson, Lufkin & Jenrette Securities
Corporation Prudential Securities Incorporated
Selling Agent: A.G. Edwards & Sons, Inc.
Master Servicer: Conning Asset Management Company
Special Servicer: Conning Asset Management Company
Trustee/Fiscal Agent: The Chase Manhattan Bank
Expected Pricing Date: On or about July [ ], 1999
Expected Closing Date: On or about July [ ], 1999
Distribution Dates: The 15th of each month, commencing August 16, 1999
Cut-Off Date: July 1, 1999
Minimum Denominations: $25,000 for Class A Certificates; $100,000 for all
other Certificates (other than the Class R
Certificates)
Settlement Terms: DTC, Euroclear and Cedel, same day funds, with
accrued interest
Legal/Regulatory Status: Class A-1 and A-2 Certificates are expected to be
eligible for exemptive relief under ERISA. No
Class of Certificates is SMMEA eligible.
Risk Factors: THE CERTIFICATES INVOLVE A DEGREE OF RISK AND MAY
NOT BE SUITABLE FOR ALL INVESTORS. SEE THE "RISK
FACTORS" SECTION OF THE PROSPECTUS SUPPLEMENT AND
THE "RISK FACTORS" SECTION OF THE PROSPECTUS.
T-3
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
II. STRUCTURE CHARACTERISTICS
- -----------------------------
The Class A-1, Class A-2 and B Certificates are fixed-rate, monthly pay,
multi-class, sequential pay REMIC Pass-Through Certificates. The Class C, Class
D, Class E and Class F Certificates are variable rate, monthly pay, multi-class,
sequential pay REMIC Pass-Through Certificates. The Class X Certificates are
variable rate interest only REMIC Pass-Through Certificates. All Classes of
Certificates derive their cash flows from the entire pool of Mortgage Loans.
Class X(1)
|--------------|
- ------------------------------------------------------------
Class A-1 AAA/AAA $442.0MM
[6.73%]
- ------------------------------------------------------------
- ------------------------------------------------------------
Class A-2 AAA/AAA $209.5MM
[7.00%]
- ------------------------------------------------------------
- ------------------------------------------------------------
Class B AA/AA $26.3MM
[7.17%]
- ------------------------------------------------------------
- ------------------------------------------------------------
Class C A/A $26.3MM
[NWAC - 0.13%]
- ------------------------------------------------------------
- ------------------------------------------------------------
Class D A-/A- $12.1MM
[NWAC - 0.02%]
- ------------------------------------------------------------
- ------------------------------------------------------------
Class E BBB/BBB $20.2MM
[NWAC]
- ------------------------------------------------------------
- ------------------------------------------------------------
Class F BBB-/BBB- $8.0MM
[NWAC]
- ------------------------------------------------------------
- ------------------------------------------------------------
Class G-O -- $64.7MM
[6.73%]
- ------------------------------------------------------------
Note: (1) Class X is entitled to interest (on a notional amount equal to
the aggregate pool balance) at the weighted average Class X Strip
Rates for the respective classes of Principal Balance Certificates.
The Class X Strip Rate for each such class for any Distribution Date
is equal to the NWAC minus the Pass-Through Rate for such class and
such Distribution Date.
(2) The above analysis is based on the Maturity Assumptions and a 0% CPR
as described in the Prospectus Supplement.
T-4
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
Class X
A-1
A-1
/\ A-2
A C
P A A-2
P S
L H B
I
E F B
D L
O C
L W
O C
S
S D
E
S D
\/
E
E
F
F
0 50 100 150 200 250
Months
Notes: (1) The class A-1, A-2 and X certificates will be paid interest on a
pro rata basis.
(2) The above analysis is based on the Maturity Assumptions and a 0%
CPR as described in the Prospectus Supplement.
T-5
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
Interest Distributions: Each Class of Certificates (other
than the Class R-1, Class R-2, and Class R-3
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: Class A-1: [6.73%]
Class A-2: [7.00%]
Class B: [7.17%]
Class C: [NWAC - 0.13%]
Class D: [NWAC - 0.02%]
Class E: [NWAC]
Class F [NWAC]
Classes G-O: [6.73%]
Class X: See Note on page T-4
The Pass-Through Rate for each class of
Principal Balance Certificates for any
Distribution Date will not exceed the Weighted
Average Net Mortgage Rate ("NWAC") 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 outstanding,
until its Certificate Balance is reduced to zero
(sequential order). If, due to losses, the
Certificate Balances of the Class B through
Class O Certificates are reduced to zero or
Appraisal Reductions exceed the aggregate
Certificate Balance of the Subordinate
Certificates, payments of principal to the Class
A-1 and A-2 Certificates will be made on a pro
rata basis.
T-6
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
Prepayment Premium Any Yield Maintenance Payment collected with
Allocation: respect to a Mortgage Loan during any particular
Collection Period will be distributed to the
holders of each Class of Principal Certificates
(other than an excluded class as defined below)
then entitled to distributions of principal on
such distribution date will be entitled to an
aggregate amount (allocable on a pro-rata basis
based on principal payments if there is more
than one Class of Principal Balance Certificates
entitled to a distribution of principal) equal
to the lesser of (a) such Yield Maintenance
Payment and (b) such Yield Maintenance Payment
multiplied by a fraction, the numerator of which
is equal to the excess, if any, of the
Pass-Through Rate applicable to the most senior
of such Classes of Principal Balance
Certificates then outstanding (or, in the case
of two Classes of Class A Certificates, the one
with the earlier payment priority), over the
relevant Discount Rate (as defined in the
Prospectus Supplement), and the denominator of
which is equal to the excess, if any, of the
Mortgage Rate of the Mortgage Loan that prepaid,
over the relevant Discount Rate.
Any Percentage Premium collected with respect to
a Mortgage Loan during any particular Collection
Period will be distributed to the holders of
each Class of Principal Certificates (other than
an excluded class as defined below) then
entitled to distributions of principal on such
distribution date will be entitled to an
aggregate amount (allocable on a pro-rata basis
based on principal payments if there is more
than one Class of Principal Balance Certificates
entitled to a distribution of principal) equal
to the product of (a) such Percentage Premium
and (b) 25%.
The portion, if any, of the Prepayment Premium
remaining after such payments to the holders of
the Principal Balance Certificates will be
distributed to the holders of the Class X
Certificates. For the purposes of the foregoing,
the classes G, H, J, K, L, M, N and O are the
excluded classes.
Credit Enhancement: Each Class of Certificates (other than Classes
A-1, A-2 and X) will be subordinate to all other
Classes with an earlier alphabetical Class
designation.
Advancing: The Master Servicer and the Trustee (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.
T-7
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
Realized Losses and Realized Losses and Expense Losses, if any, will
Expense Losses: be allocated to the Class O, Class N, Class M,
Class L, Class K, Class J, Class H, Class G,
Class F, Class E, Class D, Class C and Class B
Certificates, in that order, and then to Classes
A-1 and A-2 and, with respect to losses
allocated to interest, Class X 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, together with interest thereon
compounded monthly at one-twelfth the applicable
Pass-Through Rate for such Class, will be
payable in subsequent periods, subject to
available funds.
Prepayment Interest For any Distribution Date, any Net Aggregate
Shortfalls: Prepayment Interest Shortfall not offset by the
Servicing Fee, will generally be allocated pro
rata to each Class of Certificates in proportion
to its entitlement to interest.
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 delinquent interest advanced for such
loan, which reduction will result, in general,
in a reduction of interest distributable to the
most subordinate Class of Principal Balance
Certificate 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.
Operating Adviser: The Operating Adviser, which may be appointed by
the Controlling Class, will have the right to
receive notice from the Special Servicer with
respect to certain actions regarding Specially
Serviced Mortgage Loans. Examples include the
right to make certain modifications, foreclose,
sell, bring an REO Property into environmental
compliance or accept substitute or additional
collateral.
T-8
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
Controlling Class: The Controlling Class will generally be the most
subordinate Class of Certificates outstanding at
any time or, if the Certificate Balance of such
Class is less than 50% with respect to the Class
N and Class O, and 25% with respect to all other
classes of subordinate certificates, the
Controlling Class will be the next most
subordinate Class of Principal Balance
Certificates.
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 may not (i) extend the
maturity date of a Mortgage Loan beyond two
years prior to the Final Rated Distribution Date
or (ii) if the Specially Serviced Mortgage Loan
is secured by a ground lease, extend the
maturity date beyond a date which is ten (10)
years prior to the expiration of the ground
lease.
Optional Termination: The majority holder of the controlling class,
then the Depositor, then the Master Servicer,
then the Special Servicer and then the holder of
a majority of the R-I Certificates 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 the aggregate
Certificate Balance of all Classes of
Certificates then outstanding is less than or
equal to 1% of the Initial Pool Balance. Such
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 The Trustee will prepare and deliver monthly
Certificateholders: 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 Master 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 is expected to be available
electronically at www.globaltrustservices.com.
T-9
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
III. SELLERS General American Life Insurance Company
------- ---------------------------------------
General American Life Insurance Company, the Majority
Seller, is a Missouri life insurance corporation founded
in 1933. General American does business directly or
through its subsidiaries in 49 states and the District of
Columbia. General American offers a variety of products,
including traditional life and universal life insurance
policies and individual and group annuity contracts.
General American is the Seller with respect to 130 of the
Mortgage Loans (77.6% of the Initial Pool Balance). Each
of the General American Mortgage Loans were underwritten
and originated by Conning Asset Management Company on
behalf of General American. Conning Asset Management
Company acts as the investment advisor for General
American. The principal office of General American Life
Insurance Company is located at 700 Market Street, St.
Louis, Missouri 63101. Its telephone number is (314)
231-1700.
City and County of San Francisco Employees' Retirement
System Pension
------------------------------------------------------
Trust The City and County of San Francisco Employees'
Retirement System Pension Trust, the Minority Seller, is a
public pension plan created by a municipal corporation for
the benefit of its employees. The Retirement System is the
Seller with respect to 23 of the Mortgage Loans (22.4% of
the Initial Pool Balance). Sixteen of the Mortgage Loans,
representing 15.1% of the Initial Pool Balance, were
underwritten and originated by Conning Asset Management
Company of behalf of the Retirement System, and 7 of the
Mortgage Loans, representing 7.3% of the Initial Pool
Balance, were otherwise originated on behalf of the
Minority Seller. Conning Asset Management Company acts as
the investment advisor for the Retirement System. The
principal office of the Retirement System is located at
1155 Market Street, San Francisco, California 94103. Its
telephone number is (415) 554-1541.
T-10
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
IV. COLLATERAL DESCRIPTION
----------------------
Summary: The Mortgage Pool consists of a $809,353,823 pool of 153
fixed-rate, mortgage loans secured by first liens on
commercial and multifamily properties located throughout
28 states. As of the Cut-Off Date, the Mortgage Loans have
a weighted average mortgage rate of 7.688% and a weighted
average remaining term to maturity of 128 months. See the
Appendices to the Prospectus Supplement for more detailed
collateral information.
TOP TEN LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
BALLOON
PROPERTY UNITS/ LOAN LOAN(2) LOAN
TYPE CURRENT SQUARE PER ASSUMED(1) TO TO
PROPERTY NAME CITY STATE BALANCE FEET UNIT/SF DSCR DSCR VALUE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Century Park Office Los
Building Angeles CA Office $23,896,720 310,703 $76.91 1.55x 1.68x 43.4% 35.2%
Landow Office Building Bethesda MD Office $18,633,444 215,223 $86.58 1.51x 1.53x 63.6% 51.0%
Del Norte Plaza Escondido CA Retail $17,979,067 214,893 $83.67 1.33x 1.37x 65.1% 51.8%
Picture Tel Office
Building Andover MA Office $17,756,107 200,000 $88.78 1.78x 2.14x 46.7% 0.0%
Club Hotel & Suites by Jersey
Doubletree City NJ Hospitality $16,842,081 199 $84,633.57 1.77x 2.01x 63.6% 44.2%
Ram's Village Apartments Fort
Collins CO Multifamily $14,565,552 355 $41,029.72 1.35x 1.98x 50.5% 0.0%
Walsh Research Center Santa
Clara CA Industrial $14,347,808 190,200 $75.44 1.46x 1.31x 70.0% 65.8%
45 West 45th Street New York NY Office $14,000,000 118,187 $118.46 1.53x 1.26x 58.3% 58.3%
Downtown Woodinville
Retail Development #2 Woodinville WA Retail $13,050,000 90,659 $143.95 1.30x 1.30x 74.8% 58.8%
Mid Rivers Plaza
Shopping Center St. Peters MO Retail $12,898,672 191,017 $67.53 1.22x 1.36x 71.7% 30.2%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumed DSCR based on an 8.5% constant.
(2) If the loan had an appraisal dated 6/1/97 or later, the loan to value was
calculated using the appraised value. In all other cases the loan to value
ratio was calculated by applying a capitalization to the underwritable cash
flow.
T-11
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
GEOGRAPHIC DISTRIBUTION
-----------------------
WASHINGTON 6.85% TENNESSEE 0.28%
OREGON 2.34% MAINE 1.01%
NEVADA 3.83% NEW YORK 3.66%
CALIFORNIA 20.14% PENNSYLVANIA 2.41%
UTAH 0.84% MASSACHUSETTS 2.19%
ARIZONA 4.81% CONNECTICUT 0.79%
COLORADO 2.96% NEW JERSEY 2.08%
NEBRASKA 1.61% MARYLAND 5.89%
TEXAS 3.73% WASHINGTON DC 2.63%
WISCONSIN 0.63% VIRGINIA 4.47%
MISSOURI 2.96% NORTH CAROLINA 4.44%
ILLINOIS 3.58% SOUTH CAROLINA 0.37%
MICHIGAN 2.42% GEORGIA 6.59%
INDIANA 0.37% FLORIDA 6.10%
T-12
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
CUT-OFF BALANCE ($)
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
1 - 1,000,000 5 4,586,639 0.57
1,000,001 - 2,000,000 17 26,891,335 3.32
2,000,001 - 3,000,000 28 71,035,016 8.78
3,000,001 - 4,000,000 25 84,883,823 10.49
4,000,001 - 5,000,000 17 76,682,033 9.47
5,000,001 - 6,000,000 10 54,518,405 6.74
6,000,001 - 7,000,000 12 78,544,014 9.70
7,000,001 - 8,000,000 13 97,727,750 12.07
8,000,001 - 9,000,000 9 76,786,572 9.49
9,000,001 - 10,000,000 3 28,307,105 3.50
10,000,001 - 15,000,000 9 114,283,714 14.12
15,000,001 - 20,000,000 4 71,210,698 8.80
20,000,001 - 25,000,000 1 23,896,720 2.95
- -------------------------------------------------------
TOTAL: 153 809,353,823 100.00
- -------------------------------------------------------
Min: 755,588 Max: 23,896,720 Average: 5,289,894
- -------------------------------------------------------
STATE
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
California 31 162,981,182 20.14
Washington 10 55,433,588 6.85
Georgia 11 53,311,636 6.59
Florida 14 49,356,595 6.10
Maryland 9 47,694,501 5.89
Arizona 8 38,946,795 4.81
Virginia 6 36,204,042 4.47
North Carolina 6 35,967,114 4.44
Nevada 6 31,021,745 3.83
Texas 5 30,187,823 3.73
Other 47 268,248,802 33.14
- -------------------------------------------------------
TOTAL: 153 809,353,823 100.0
- -------------------------------------------------------
PROPERTY TYPE
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
Retail 66 299,971,138 37.06
Office 47 291,562,472 36.02
Industrial 31 142,908,491 17.66
Multifamily 7 49,791,111 6.15
Hospitality 2 25,120,611 3.10
- -------------------------------------------------------
TOTAL: 153 809,353,823 100.00
- -------------------------------------------------------
SEASONING
(MOS)
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
=(less than) 0 2 19,950,000 2.46
1-12 60 391,194,043 48.33
13-24 17 96,163,191 11.88
25-36 15 61,251,960 7.57
37-48 28 124,205,945 15.35
49-60 19 75,008,854 9.27
61-84 11 40,062,403 4.95
85-120 1 1,517,427 0.19
- ------------------------------------------------------
TOTAL: 153 809,353,823 100.00
- ------------------------------------------------------
Min: 0 Max: 111 Average: 22
- ------------------------------------------------------
MORTGAGE RATE (%)
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
6.001 - 6.500 1 10,640,384 1.31
6.501 - 7.000 18 144,965,741 17.91
7.001 - 7.500 51 296,962,697 36.69
7.501 - 8.000 33 149,091,665 18.42
8.001 - 8.500 21 88,662,083 10.95
8.501 - 9.000 12 57,751,147 7.14
9.001 - 9.500 10 29,248,283 3.61
9.501 - 10.000 7 32,031,823 3.96
- ------------------------------------------------------
TOTAL: 153 809,353,823 100.00
- ------------------------------------------------------
Min: 6.310 Max: 9.875 Wtd Avg: 7.688
- ------------------------------------------------------
ORIGINAL TERM TO STATED MATURITY (MOS)
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
1 - 60 5 41,865,894 5.17
61 - 120 75 444,739,646 54.95
121 - 180 30 148,820,573 18.39
181 - 240 41 163,115,804 20.15
241 - 300 2 10,811,906 1.34
- ------------------------------------------------------
TOTAL: 153 809,353,823 100.00
- ------------------------------------------------------
Min: 60 Max: 264 Wtd Avg: 150
- ------------------------------------------------------
REMAINING TERM TO STATED MATURITY (MOS)
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
1 - 60 9 66,706,345 8.24
61 - 120 77 450,448,018 55.66
121 - 180 35 149,362,588 18.45
181 - 240 32 142,836,871 17.65
- ------------------------------------------------------
TOTAL: 153 809,353,823 100.00
- ------------------------------------------------------
Min: 40 Max: 230 Wtd Avg: 128
- ------------------------------------------------------
BALLOON LOAN
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
Yes 98 596,204,902 73.66
No 55 213,148,921 26.34
- -------------------------------------------------------
TOTAL: 153 809,353,823 100.00
- -------------------------------------------------------
DEBT SERVICE COVERAGE RATIO (X)
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
0.01 - 1.00 1 5,590,230 0.69%
1.01 - 1.15 21 83,049,074 10.26
1.16 - 1.25 35 153,922,754 19.02
1.26 - 1.35 41 227,817,283 28.15
1.36 - 1.50 24 121,156,540 14.97
1.51 - 1.75 15 108,637,148 13.42
1.76 - 2.00 10 76,505,731 9.45
2.01 >= 6 32,675,064 4.04
- ------------------------------------------------------
TOTAL: 153 809,353,823 100.00
- ------------------------------------------------------
Min: 1.00 Max: 3.14 Wtd Avg: 1.41
- ------------------------------------------------------
ASSUMED DEBT SERVICE COVERAGE RATIO (X)*
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
1.01 - 1.15 2 12,454,074 1.54
1.16 - 1.25 7 34,284,123 4.24
1.26 - 1.35 24 152,788,312 18.88
1.36 - 1.50 28 164,400,181 20.31
1.51 - 1.75 46 218,382,144 26.98
1.76 - 2.00 21 105,545,634 13.04
2.01 >= 25 121,499,355 15.01
- ------------------------------------------------------
TOTAL: 153 809,353,823 100.00
- ------------------------------------------------------
Min: 1.01 Max: 4.18 Wtd. Avg: 1.65
- ------------------------------------------------------
* AT AN 8.5% CONSTANT
CUT-OFF DATE LOAN-TO-VALUE RATIO (%)
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
20.1 - 30.0 2 14,383,281 1.78
30.1 - 40.0 2 4,269,808 0.53
40.1 - 50.0 20 113,781,466 14.06
50.1 - 60.0 24 128,084,846 15.83
60.1 - 70.0 40 242,270,215 29.93
70.1 - 80.0 58 271,469,469 33.54
80.1 - 90.0 6 29,504,509 3.65
90.1 - 100.0 1 5,590,230 0.69
- -------------------------------------------------------
TOTAL: 153 809,353,823 100.00
- -------------------------------------------------------
Min: 25.0 Max: 91.4 Wtd Avg: 63.8
- -------------------------------------------------------
BALLOON LOAN-TO-VALUE RATIO (%)
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
0.0 54 208,953,129 25.82
0.1 - 10.0 2 5,905,882 0.73
10.1 - 20.0 1 5,721,128 0.71
20.1 - 30.0 7 40,365,021 4.99
30.1 - 40.0 15 88,422,518 10.93
40.1 - 50.0 19 106,576,353 13.17
50.1 - 60.0 46 295,915,482 36.56
60.1 - 70.0 9 57,494,311 7.10
------------------------------------------------------
TOTAL: 153 809,353,823 100.00
------------------------------------------------------
Min: 0.0 Max: 69.6 Wtd Avg: 36.4
------------------------------------------------------
FEE VS. LEASEHOLD
- -------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
- -------------------------------------------------------
Fee 144 752,873,719 93.02
Fee/Leasehold 2 8,107,999 1.00
Leasehold 7 48,372,105 5.98
------------------------------------------------------
TOTAL: 153 809,353,823 100.00
------------------------------------------------------
T-13
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
$744,605,000 (APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT
RESTRICTION (%)(1)(2)(3)(4)(5)(6)(7)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS JULY 1999 JULY 2000 JULY 2001 JULY 2002 JULY 2003
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out 59.55% 57.13% 47.91% 31.44% 24.41%
Yield Maintenance Total(8) 39.75% 42.19% 50.06% 65.95% 69.56%
Penalty Points:
5.00% and greater 0.00% 0.00% 1.35% 0.00% 0.00%
4.00% to 4.99% 0.69% 0.68% 0.68% 1.78% 2.40%
3.00% to 3.99% 0.00% 0.00% 0.00% 0.24% 2.65%
2.00% to 2.99% 0.00% 0.00% 0.00% 0.00% 0.00%
1.00% to 1.99% 0.00% 0.00% 0.00% 0.00% 0.00%
Open 0.00% 0.00% 0.00% 0.59% 0.97%
- -------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
- -------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $809,353,823 $790,169,847 $769,392,012 $746,883,861 $718,302,556
% of initial Pool Balance 100% 97.63% 95.06% 92.28% 88.75%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT
RESTRICTION (%) - CONTINUED (1)(2)(3)(4)(5)(6)(7)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS JULY 2004 JULY 2005 JULY 2006 JULY 2007 JULY 2008
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out 2.74% 1.72% 1.81% 1.14% 0.00%
Yield Maintenance Total(8) 91.74% 92.34% 91.27% 91.63% 92.71%
Penalty Points:
5.00% and greater 0.00% 0.00% 0.00% 0.00% 1.83%
4.00% to 4.99% 0.00% 0.00% 0.44% 0.00% 0.00%
3.00% to 3.99% 4.01% 1.14% 1.18% 0.88% 0.52%
2.00% to 2.99% 1.51% 3.17% 0.32% 0.72% 0.81%
1.00% to 1.99% 0.00% 1.63% 3.13% 3.62% 0.00%
Open 0.00% 0.00% 1.84% 2.01% 4.14%
- -------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
- -------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $635,680,470 $569,158,329 $506,440,706 $468,068,797 $376,562,097
% of Initial Pool Balance 78.54% 70.32% 62.57% 57.83% 46.53%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT
RESTRICTION (%) - CONTINUED (1)(2)(3)(4)(5)(6)(7)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS JULY 2009 JULY 2010 JULY 2011 JULY 2012 JULY 2013 JULY 2014
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Locked Out 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Yield Maintenance 93.53% 91.29% 94.37% 94.36% 94.04% 92.86%
Total (8)
Penalty Points:
5.00% and greater 2.83% 2.93% 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.92% 0.00% 3.41% 3.80% 0.00% 0.00%
3.00% to 3.99% 0.00% 0.75% 0.00% 0.00% 4.06% 6.47%
2.00% to 2.99% 2.72% 2.68% 0.58% 0.00% 0.00% 0.00%
1.00% to 1.99% 0.00% 0.00% 1.64% 1.72% 0.00% 0.00%
Open 0.00% 2.35% 0.00% 0.11% 1.90% 0.68%
- -------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
- -------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $164,058,705 $145,151,123 $112,373,171 $88,905,274 $71,179,452 $36,559,114
% of Initial Pool Balance 20.27% 17.93% 13.88% 10.98% 8.79% 4.52%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) For 1 of the Mortgage Loans (2.2% of the Cut-Off Date Balance)
which allows the borrower to choose between Defeasance and Yield
Maintenance, Yield Maintenance is assumed.
(2) The above analysis is based on Maturity Assumptions and a 0% CPR as
discussed in the Prospectus Supplement.
(3) One (1) Mortgage Loan with a balance of $18,633,444, as of July 1,
1999 (2.3% of the Initial Principal Balance), permits the related
borrower, under certain circumstances, to prepay the entire loan
balance during the 58th through the 63rd months of the loan term
(February 1, 2003 through July 31, 2003), without a prepayment
premium. Investors should assume the related borrower will have
this no premium prepayment option.
(4) One (1) Mortgage Loan with a balance of $16,842,081, as of July 1,
1999 (2.1% of the Initial Principal Balance), permits the lender to
apply an existing $2,000,000 letter of credit to the then
outstanding principal balance on the fifth anniversary of the note
date (January 14, 2004), if the property should fail to meet
certain operating thresholds by that date. Such principal balance
reduction, if any, will be subject to a 4% prepayment premium.
(5) One (1) Mortgage Loan with a balance of $8,933,670, as of July 1,
1999 (1.1% of Initial Pool Balance), permits the related borrower
to prepay up to $800,000, without a prepayment premium, at any time
during the loan term, should a certain tenant of the subject
property elect to prepay the non-amortized cost of their
outstanding borrower-financed tenant improvements. Such a
prepayment would result in a recalculation of the related monthly
principal and interest payment.
(6) One (1) Mortgage Loan with a balance of $7,910,389, as of July 1,
1999 (1.0% of the Initial Pool Balance), permits the related
borrower to prepay up to three (3) payments of principal during the
loan term, so long as each permitted payment is no less than
$500,000, and no greater than $1,500,000. Such permitted
prepayments are subject to a 1% prepayment premium.
(7) Ten (10) Mortgage Loans, with a combined balance of $43,785,061, as
of July 1, 1999 (5.4% of the Initial Pool Balance), permit the
related borrowers to prepay up to 10% of the original principal
balance in any loan year (including any applicable lockout period,
with the exception of one of such mortgage loans) without a
prepayment premium.
(8) See footnote 14 in Appendix II for a description of the Yield
Maintenance.
T-14
- -------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Prudential Securities Incorporated.
(collectively the "Underwriters") disclaim any and all liability relating to
this information, including without limitation any express or implied
representations and warranties for, statements contained in, and omissions from,
this information. Additional information is available upon request. The
Underwriters and others associated with them may have positions in, and may
effect transaction in, securities and instruments of issuers mentioned herein
and may also perform or seek to perform investment banking services for the
issuers of such securities and instruments. Past performance is not necessarily
indicative of future results. Price and availability are subject to change
without notice. This material may be filed with the Securities and Exchange
Commission (the "SEC") and incorporated by reference into an effective
registration statement previously filed with the SEC under Rule 415 of the
Securities Act of 1933, including in cases where the material does not pertain
to securities that are ultimately offered for sale pursuant to such registration
statement. To Morgan Stanley's readers worldwide: In addition, please note that
this publication has been issued by Morgan Stanley & Co. Incorporated, approved
by Morgan Stanley International Limited, a member of The Securities and Futures
Authority, any by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International or Morgan Stanley Japan Ltd. representative about the
investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: 16-Aug-1999 BOND PAYMENT SUMMARY PAGE # 1-1
RECORD DATE: 30-Jul-1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Collateral
Support
Original Beginning Prepayment Deficit Ending
Certificate Certificate Principal Interest Penalties Allocation/ Total Certificate
Class Cusip # Balance Balance Distribution Distribution (PP/YMC) (Reimb) Distribution Balance
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Original Beginning Prepayment Ending
Notional Notional Interest Penalties Total Notional
Class Cusip # Amount Amount Distribution (PP/YMC) Distribution Balance
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Factor Information Per $1,000
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Beginning Prepayment Ending Current Next
Certificate Principal Interest Penalties Certificate Pass Through Pass Through
Class Cusip # Balance Distribution Distribution (PP/YMC) Balance Rate Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Factor Information Per $1,000
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Beginning Prepayment Ending
Notional Interest Penalties Notional
Class Cusip # Balance Distribution (PP/YMC) Balance
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
If there are any questions or comments, please contact the Administrator listed
below.
SusanLai
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001
212-946-3228
CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER
[LOGO OMITTED] (copyright) 1998, CHASE MANHATTAN BANK
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: 16-Aug-1999 BOND PAYMENT SUMMARY PAGE # 2-1
RECORD DATE: 30-Jul-1999
<TABLE>
<CAPTION>
<S> <C>
Sec.4.2 (a)(iii) P&I Advances
Sec.4.2 (a)(iv) Number of Mortgage Loans Outstanding as of Close of Business
Sec.4.2 (a)(v) Realized Losses
Sec.4.2 (a)(vi) Aggregate Stated Principal Balance
Sec.4.2 (a)(vii) Aggregate Unpaid Principal Balance
Sec.4.2 (a)(viii) Principal Balance of REO Loan and REO Date
Sec.4.2 (a)(ix) REO Proceeds from Final Recovery Determination and Date
Sec.4.2 (a)(x) Outstanding Principal Balance of REO loans and Appraisal
Sec.4.2 (a)(xi) Servicing Compensation
Sec.4.2 (a)(xii) Special Servicing Fee
Sec.4.2 (a)(xiii) Prepayment Premium
Yield Maintenance
Excess Interest
Sec.III.2 (a)(xiv) Default Interest
</TABLE>
---------------------------
Class Loss Amount
---------------------------
---------------------------
---------------------------------------
Loan Number Balance Date
---------------------------------------
---------------------------------------
---------------------------------------
Loan Number Proceeds Date
---------------------------------------
---------------------------------------
---------------------------------------
Loan Number Balance Date
---------------------------------------
---------------------------------------
CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER
[LOGO OMITTED] (copyright) 1998, CHASE MANHATTAN BANK
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: 16-Aug-1999 BOND PAYMENT SUMMARY PAGE # 2-2
RECORD DATE: 30-Jul-1999
Sec.III.2 (a)(xv) Appraisal Reduction
---------------------------------------
Loan Number Balance Date
---------------------------------------
---------------------------------------
CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER
[LOGO OMITTED] (copyright) 1998, CHASE MANHATTAN BANK
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
Distribution Mortgage of Loan Characteristics
DIST DATE: 16-Aug-1999
RECORD DATE: 30-Jul-1999
STRATIFICATION BY ENDING SCHEDULED BALANCE AMOUNT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
ENDING SCHEDULED # OF PRINCIPAL % OF AGG. WEIGHTED AVERAGE
------------------------------
BALANCE AMOUNT LOANS BALANCE ($) PRIN. BAL. WAM NOTE RATE(%) DSCR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,000,000 or less 0 0.00 0.00 0 0.000000 0.000000
$1,000,001 to $2,000,000 0 0.00 0.00 0 0.000000 0.000000
$2,000,001 to $4,000,000 0 0.00 0.00 0 0.000000 0.000000
$4,000,001 to $6,000,000 0 0.00 0.00 0 0.000000 0.000000
$6,000,001 to $8,000,000 0 0.00 0.00 0 0.000000 0.000000
$8,000.001 to $10,000,000 0 0.00 0.00 0 0.000000 0.000000
$10,000,001 to $15,000,000 0 0.00 0.00 0 0.000000 0.000000
$15,000,001 to $20,000,000 0 0.00 0.00 0 0.000000 0.000000
- -------------------------------------------------------------------------------------------------
TOTALS 0 0.00 0.00 0 0.000000 0.000000
- -------------------------------------------------------------------------------------------------
AVERAGE PRINCIPAL BALANCE 0.00
</TABLE>
STRATIFICATION BY CURRENT NOTE RATE
PAGE # 3-1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
# OF PRINCIPAL % OF AGG. WEIGHTED AVERAGE
--------------------------------
CURRENT NOTE RATE LOANS BALANCE ($) PRIN. BAL. WAM NOTE RATE(%) DSCR
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7.50000% or less 0 0.00 0.00 0 0.000000 0.000000
7.51000% to 7.75000% 0 0.00 0.00 0 0.000000 0.000000
7.76000% to 8.00000% 0 0.00 0.00 0 0.000000 0.000000
8.01000% to 8.25000% 0 0.00 0.00 0 0.000000 0.000000
8.26000% to 8.50000% 0 0.00 0.00 0 0.000000 0.000000
8.51000% to 8.75000% 0 0.00 0.00 0 0.000000 0.000000
8.76000% to 9.00000% 0 0.00 0.00 0 0.000000 0.000000
9.01000% to 9.25000% 0 0.00 0.00 0 0.000000 0.000000
9.26000% to 9.50000% 0 0.00 0.00 0 0.000000 0.000000
9.51000% to 9.75000% 0 0.00 0.00 0 0.000000 0.000000
9.75000% to 10.00000% 0 0.00 0.00 0 0.000000 0.000000
10.01000% to 11.01000% 0 0.00 0.00 0 0.000000 0.000000
- ------------------------------------------------------------------------------------------
TOTALS 0 0.00 0.00 0 0.000000 0.000000
- ------------------------------------------------------------------------------------------
</TABLE>
CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
Distribution Mortgage of Loan Characteristics
DIST DATE: 16-Aug-1999
RECORD DATE: 30-Jul-1999
STRATIFICATION BY REMAINING STATED TERM (BALLOON LOANS ONLY)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
# OF PRINCIPAL % OF AGG. WEIGHTED AVERAGE
------------------------------
REMAINING STATED TERM LOANS BALANCE ($) PRIN. BAL. WAM NOTE RATE(%) DSCR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
70 months or Less 0 0.00 0.00 0 0.000000 0.000000
71 months to 90 months 0 0.00 0.00 0 0.000000 0.000000
91 months to 110 months 0 0.00 0.00 0 0.000000 0.000000
111 months to 115 months 0 0.00 0.00 0 0.000000 0.000000
116 months to 120 months 0 0.00 0.00 0 0.000000 0.000000
121 months to 200 months 0 0.00 0.00 0 0.000000 0.000000
201 months to 274 months 0 0.00 0.00 0 0.000000 0.000000
- -------------------------------------------------------------------------------------------------
TOTALS 0 0.00 0.00 0 0.000000 0.000000
- -------------------------------------------------------------------------------------------------
</TABLE>
STRATIFICATION BY REMAINING STATED TERM (FULLY AMORTIZING LOANS ONLY)
PAGE # 3-2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
# OF PRINCIPAL % OF AGG. WEIGHTED AVERAGE
--------------------------------------
REMAINING STATED TERM LOANS BALANCE ($) PRIN. BAL. WAM NOTE RATE(%) DSCR
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
70 months or Less 0 0.00 0.00 0 0.000000 0.000000
71 months to 90 months 0 0.00 0.00 0 0.000000 0.000000
91 months to 110 months 0 0.00 0.00 0 0.000000 0.000000
111 months to 115 months 0 0.00 0.00 0 0.000000 0.000000
116 months to 120 months 0 0.00 0.00 0 0.000000 0.000000
121 months to 200 months 0 0.00 0.00 0 0.000000 0.000000
201 months to 0 months 0 0.00 0.00 0 0.000000 0.000000
- ------------------------------------------------------------------------------------------------
TOTALS 0 0.00 0.00 0 0.000000 0.000000
- ------------------------------------------------------------------------------------------------
</TABLE>
CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
<TABLE>
<CAPTION>
DIST DATE: 16-AUG-1999 DISTRIBUTION MORTGAGE OF LOAN CHARACTERISTICS PAGE # 3 - 3
RECORD DATE: 30-Jul-1999
STRATIFICATION BY DEBT SERVICE COVERAGE RATIO
- -----------------------------------------------------------------------------------------
WEIGHTED AVERAGE
DEBT SERVICE # OF PRINCIPAL % OF AGG. --------------------------------
COVERAGE RATIO LOANS BALANCE($) PRIN. BAL. WAM NOTE RATE(%) DSCR
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1.00x or Less 0 0.00 0.00 0 0.000000 0.000000
1.01x to 1.20x 0 0.00 0.00 0 0.000000 0.000000
1.21x to 1.24x 0 0.00 0.00 0 0.000000 0.000000
1.25x to 1.30x 0 0.00 0.00 0 0.000000 0.000000
1.31x to 1.40x 0 0.00 0.00 0 0.000000 0.000000
1.41x to 1.50x 0 0.00 0.00 0 0.000000 0.000000
1.51x to 1.60x 0 0.00 0.00 0 0.000000 0.000000
1.61x to 1.70x 0 0.00 0.00 0 0.000000 0.000000
1.71x to 1.80x 0 0.00 0.00 0 0.000000 0.000000
1.81x to 1.90x 0 0.00 0.00 0 0.000000 0.000000
1.91x to 2.00x 0 0.00 0.00 0 0.000000 0.000000
2.01x to 2.30x 0 0.00 0.00 0 0.000000 0.000000
2.31x to 2.40x 0 0.00 0.00 0 0.000000 0.000000
- -----------------------------------------------------------------------------------------
TOTALS 0 0.00 0.00 0 0.000000 0.000000
- -----------------------------------------------------------------------------------------
<CAPTION>
STRATIFICATION BY SEASONING
- ------------------------------------------------------------------------------------
WEIGHTED AVERAGE
# OF PRINCIPAL % OF AGG. ----------------------------
SEASONING LOANS BALANCE($) PRIN. BAL. WAM NOTE RATE(%) DSCR
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12 months or Less 0 0.00 0.00 0 0.000000 0.000000
13 months to 24 months 0 0.00 0.00 0 0.000000 0.000000
25 months to 36 months 0 0.00 0.00 0 0.000000 0.000000
37 months to 48 months 0 0.00 0.00 0 0.000000 0.000000
49 months to 60 months 0 0.00 0.00 0 0.000000 0.000000
61 months to 72 months 0 0.00 0.00 0 0.000000 0.000000
73 months to 84 months 0 0.00 0.00 0 0.000000 0.000000
85 months to 96 months 0 0.00 0.00 0 0.000000 0.000000
97 months to 108 months 0 0.00 0.00 0 0.000000 0.000000
- ------------------------------------------------------------------------------------
TOTALS 0 0.00 0.00 0 0.000000 0.000000
- ------------------------------------------------------------------------------------
</TABLE>
CONNING ASSET MANAGEMENT COMPANT
MASTER SERVICER
[LOGO OMITTED] (copyright) 1998, CHASE MANHATTAN BANK
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
<TABLE>
<CAPTION>
DIST DATE: 16-AUG-1999 DISTRIBUTION MORTGAGE OF LOAN CHARACTERISTICS PAGE # 3 - 4
RECORD DATE: 30-Jul-1999
STRATIFICATION BY STATE CODE
- -----------------------------------------------------------------------------------------
WEIGHTED AVERAGE
# OF PRINCIPAL % OF AGG. -------------------------------
STATE CODE LOANS BALANCE($) PRIN. BAL. WAM NOTE RATE(%) DSCR
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ARIZONA 0 0.00 0.00 0 0.000000 0.000000
CALIFORNIA 0 0.00 0.00 0 0.000000 0.000000
COLORADO 0 0.00 0.00 0 0.000000 0.000000
CONNECTICUT 0 0.00 0.00 0 0.000000 0.000000
FLORIDA 0 0.00 0.00 0 0.000000 0.000000
GEORGIA 0 0.00 0.00 0 0.000000 0.000000
ILLINOIS 0 0.00 0.00 0 0.000000 0.000000
INDIANA 0 0.00 0.00 0 0.000000 0.000000
MASSACHUSETTS 0 0.00 0.00 0 0.000000 0.000000
MARYLAND 0 0.00 0.00 0 0.000000 0.000000
MICHIGAN 0 0.00 0.00 0 0.000000 0.000000
MISSOURI 0 0.00 0.00 0 0.000000 0.000000
NEW JERSEY 0 0.00 0.00 0 0.000000 0.000000
NEW YORK 0 0.00 0.00 0 0.000000 0.000000
OHIO 0 0.00 0.00 0 0.000000 0.000000
OREGON 0 0.00 0.00 0 0.000000 0.000000
PENNSYLVANIA 0 0.00 0.00 0 0.000000 0.000000
SOUTH CAROLINA 0 0.00 0.00 0 0.000000 0.000000
TENNESSEE 0 0.00 0.00 0 0.000000 0.000000
TEXAS 0 0.00 0.00 0 0.000000 0.000000
VIRGINIA 0 0.00 0.00 0 0.000000 0.000000
- -----------------------------------------------------------------------------------------
TOTALS 0 0.00 0.00 0 0.000000 0.000000
- -----------------------------------------------------------------------------------------
<CAPTION>
STRATIFICATION BY PROPERTY TYPE
- ------------------------------------------------------------------------------------
WEIGHTED AVERAGE
# OF PRINCIPAL % OF AGG. ----------------------------
PROPERTY TYPE LOANS BALANCE($) PRIN. BAL. WAM NOTE RATE(%) DSCR
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Office 0 0.00 0.00 0 0.000000 0.000000
Industrial 0 0.00 0.00 0 0.000000 0.000000
Multi-Family 0 0.00 0.00 0 0.000000 0.000000
Retail, Anchored 0 0.00 0.00 0 0.000000 0.000000
Retail, Unanchored 0 0.00 0.00 0 0.000000 0.000000
Ministorage 0 0.00 0.00 0 0.000000 0.000000
Multiple 0 0.00 0.00 0 0.000000 0.000000
- ------------------------------------------------------------------------------------
TOTALS 0 0.00 0.00 0 0.000000 0.000000
- ------------------------------------------------------------------------------------
</TABLE>
Debt Coverage Service Ratios are calculated as described in the prospectus,
values are updated periodically as new NOI figures become available from
borrowers on an asset level. The TRUSTEE makes no representation as to
the accuracy of the data provided by the borrower for this calculation
CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER
[LOGO OMITTED] (copyright) 1998, CHASE MANHATTAN BANK
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
DIST DATE: 16-Aug-1999 HISTORICAL INFORMATION PAGE # 4-1
RECORD DATE: 30-Jul-1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Delinquencies Prepayments Rates & Maturities
---------------------------------------------------------------------------- ----------------------- ------------------
Modifi-
1 Month 2 Months 3 Months(+) Foreclosures REO cations Curtailment Payoff Next Weighted Avg.
Distrib. --------- ---------- ----------- ------------ ---------- --------- ----------- ---------- ------------------
Date # Balance # Balance # Balance # Balance # Balance # Balance # Balance # Balance Coupon Remit WAM
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/16/99 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0.000000 0.000000 0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FORECLOSURES AND REO TOTALS ARE EXCLUDED FROM THE DELINQUENT AGING
CATEGORIES
CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER
[LOGO OMITTED] (copyright) 1998, CHASE MANHATTAN BANK
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
<TABLE>
<CAPTION>
DIST DATE: 16-Aug-1999 LOAN STATUS DETAIL PAGE# 5-1
RECORD DATE: 30-Jul-1999
- -----------------------------------------------------------------------------------------------------------------------------------
Loan Offering Property Standard State Principal & Interest Gross Maturity Neg Beginning
Number Memo Type Metropolitan Payment Coupon Date Amt Scheduled Balance
Cross (I) Statistical Flag
Reference Area
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXAMPLE N/A N/A N/A N/A $0.00 .00000 N/A N/A $0.00
</TABLE>
Ending Scheduled Paid Appraisal Appraisal Has Loan Loan
Balance Through Reduction Reduction Ever Been Status
Date Date Amount Serviced? Code
(Y/N) (II)
- -------------------------------------------------------------------------------
$0.00 N/A N/A $0.00 N N/A
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(I) PROPERTY TYPE CODE: 6. Non-Exempt 12. Hotel (II) LOAN STATUS CODE:
1. Single Family 7. Church 13. Industrial 1. Specially Serviced 6. Discounted Payoff
2. Multi-Family 8. School,HCF,WF 14. Industrial/Flex 2. Foreclosure 7. Foreclosure Sale
3. Condo, Co-op or TH 9. Retail 15. Multiple Properties 3. Bankruptcy 8. Bankruptcy Sale
4. Mobile Home 10. Office 16. MiniStorage 4. REO 9. REO Disposal
5. Plan Unit Development 11. Retail/Office 32. Warehouse 5. Prepayment in Full 10. Modification/Workout
11. Rehabilitation
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO OMITTED] CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER (c) 1998, CHASE MANHATTAN BANK
</TABLE>
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
<TABLE>
<CAPTION>
DIST DATE: 16-Aug-1999 DELINQUENCY DETAIL PAGE# 6-1
RECORD DATE: 30-Jul-1999
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Number Offering # of Months Paid Through Current Loan Balance Current Outstanding P&I Advance
Memo Cross Delinquent Date P&I Advances ** Description
Reference Advances
(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NO DELINQUENT LOANS REPORTED THIS PERIOD
<CAPTION>
Loan Special Foreclosure Current Property Outstanding Outstanding REO Date
Status Servicer Date Protection Property Property
Start Date Advances Protection Bankruptcy
(II) Advances Date
- ---------------------------------------------------------------------------------------------------------
NO DELINQUENT LOANS REPORTED THIS PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
(I) ADVANCE DESCRIPTION: A. In grace period (II) LOAN STATUS CODE:
B. Late but (less than) 1 month 1. Specially Serviced 6. Discounted Payoff
1. 1 month delinquent 2. Foreclosure 7. Foreclosure Sale
2. 2 months delinquent 3. Bankruptcy 8. Bankruptcy Sale
3. 3+ months delinquent 4. REO 9. REO Disposal
5. Prepayment in Full 10. Modification/Workout
11. Rehabilitation
** Outstanding P&I advances include current period.
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO OMITTED] CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER (c) 1998, CHASE MANHATTAN BANK
</TABLE>
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
<TABLE>
<CAPTION>
DIST DATE: 16-Aug-1999 MODIFIED LOAN DETAIL PAGE# 7-1
RECORD DATE: 30-Jul-1999
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Offering Modification Modification Description
Number Memorandum Date
Cross
Reference
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NO MODIFIED LOANS REPORTED THIS PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO OMITTED] CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER (c) 1998, CHASE MANHATTAN BANK
</TABLE>
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADVANCED SUMMARY
DIST DATE: 16-AUG-1999 PAGE # 8-1
RECORD DATE: 30-JUL-1999
Master Servicer P&I Advances Made
Master Servicer Unreimbursed P&I Advanced Outstanding
Interest Accrued & Payable to Master Servicer in Respect of Advances Made
SERVICING FEE BREAKDOWN
Current Period Accrued Servicing Fees
Less Delinquent Servicing Fees
Plus Additional Servicing Fees
Less Reductions to Servicing Fees
Plus Servicing Fees For Delinquent Payments Received
Plus Adjustment for Prior Servicing Calculations
Total Servicing Fees Collected
ALLOCATION OF INTEREST SHORTFALLS, LOSSES & EXPENSES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
CLASS ACCRUED CERTIFICATE PREPAYMENT INTEREST BEGINNING UNPAID INTEREST LOSS
INTEREST SHORTFALL INTEREST
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
EXPENSES TOTAL INTEREST PAYABLE CERTIFICATE INTEREST ENDING UNPAID
DISTRIBUTABLE INTEREST
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER
- --------------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
REALIZED LOSS DETAIL
DIST DATE: 16-AUG-1999 PAGE # 9-1
RECORD DATE: 30-JUL-1999
- --------------------------------------------------------------------------------------------------------------
LOAN OFERING APPRAISAL APPRAISAL VALUE BEGINNING GROSS PROCEEDS GROSS
NUMBER MEMO DATE SCHEDULED PROCEEDS %
CROSS BALANCE SCHEDULED
REFERENCE PRINCIPAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------
LIQUIDATION NET NET REALIZED LOSS
EXPENSES LIQUIDATION PROCEEDS %
PROCEEDS SCHEDULED
BALANCE
- --------------------------------------------------------------
NO REALIZED LOSSES REPORTED THIS PERIOD
</TABLE>
- --------------------------------------------------------------------------------
CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER
- --------------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SPECIALLY SERVICED LOANS DETAIL
DIST DATE: 16-AUG-1999 PAGE #10-1
RECORD DATE: 30-JUL-1999
- --------------------------------------------------------------------------------------------------------------------
DISTRIBUTION LOAN O SS SPEC CURRENT BALANCE PROP ST INTEREST NET
DATE NUMBER M TRANSFER SERV SCHEDULE TRANSFER TYPE RATE OPERATING
C DATE CODE BALANCE DATE INCOME
R (II) (I)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
NOI DEBT MATURITY REM INSPECTION APPRAISAL APPRAISAL
DATE SERVICE DATE TERM DATE DATE VALUE
COVERAGE
RATIO
- -------------------------------------------------------------------------------------------------
NO SPECIALLY SERVICED LOANS REPORTED THIS PERIOD
- -------------------------------------------------------------------------------------------------
</TABLE>
(I)PROPERTY TYPE CODE: 6. Non-Exempt 12. Hotel
1. Single Family 7. Church 13. Industrial
2. Multi-Family 8. School, HCF, WF 14. Industrial/Flex
3. Condo, Co-op or TH 9. Retail 15. Multiple Properties
4. Mobile Home 10. Office 16. MiniStorage
5. Plan Unit Development 11. Retail/Office 32. Warehouse
(II) SPECIAL SERVICE CODE:
(1) Request to waive prepayment penalty (5) In Foreclosure
(2) Payment default (6) Now REO
(3) Request to modify or workout (7) Paid Off
(4) Borrower Bankruptcy (8) Returned to Master Servicer
- --------------------------------------------------------------------------------
CONNING ASSET MANAGEMENT COMPANY
MASTER SERVICER
- --------------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-CAM1
STATEMENT TO CERTIFICATEHOLDERS
- --------------------------------------------------------------------------------
PRINCIPAL PREPAYMENT DETAIL
DIST DATE: 16-AUG-1999 PAGE # 11-1
RECORD DATE: 30-JUL-1999
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<TABLE>
<CAPTION>
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LOAN OFFERING CURTAILMENT AMOUNT PAYOFF NET NET MORTGAGE
NUMBER MEMO AMOUNT LIQUIDATION INSURANCE REPURCHASE
CROSS PROCEEDS PROCEEDS PRICE
REFERNCE
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<S> <C> <C> <C> <C> <C> <C>
NO PRINCIPAL PREPAYMENT REPORTED THIS PERIOD
- --------------------------------------------------------------------------------
</TABLE>
CONNING ASSET MANGEMENT COMPANY
MASTER SERVICER
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PROSPECTUS
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
MORGAN STANLEY CAPITAL I INC.
DEPOSITOR
The Certificates offered hereby and by Supplements to this Prospectus
(the "Offered Certificates") will be offered from time to time in one or more
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 one or more segregated pools of various types of
multifamily or commercial mortgage loans (the "Mortgage Loans"), mortgage
participations, mortgage pass-through certificates, mortgage-backed securities
evidencing interests therein or secured thereby (the "MBS"), certain direct
obligations of the United States, agencies thereof or agencies created thereby
(the "Government Securities") or a combination of Mortgage Loans, MBS and/or
Government Securities (with respect to any series, collectively, "Assets"). If
so specified in the related Prospectus Supplement, some or all of the Mortgage
Loans will include assignments of the leases of the related Mortgaged Properties
(as defined herein) and/or assignments of the rental payments due from the
lessees under such leases (each type of assignment, a "Lease Assignment"). A
significant or the sole source of payments on certain Commercial Loans (as
defined herein) and, therefore, of distributions on certain series of
Certificates, will be such rent payments. The Mortgage Loans and MBS are
collectively referred to herein as the "Mortgage Assets." If so specified in the
related Prospectus Supplement, the Trust Fund for a series of Certificates may
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
commencing only following the occurrence of certain events, such as the
retirement of one or more other classes of Certificates of such series; (vi)
provide for distributions of principal sequentially, based on specified payment
schedules or other methodologies; and/or (vii) provide for distributions based
on a combination of two or more components thereof with one or more of the
characteristics described in this paragraph, 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."
Offers of the Offered Certificates may be made through one or more
different methods, including
offerings through underwriters, as more fully described under "Plan of
Distribution" herein and in the related Prospectus Supplement.
-----------------------------
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 OR THE RELATED PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------
INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, CERTAIN RISKS SET FORTH
UNDER THE CAPTION "RISK FACTORS" HEREIN AND IN THE RELATED PROSPECTUS
SUPPLEMENT.
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 the Offered Certificates
of any series unless accompanied by the Prospectus Supplement for such series.
------------------------------
MORGAN STANLEY & CO.
INCORPORATED
June 28, 1999
<PAGE>
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, Morgan Stanley & Co. Incorporated, any Master
Servicer, any Sub-Servicer, any Special Servicer or any of their respective
affiliates, except to the limited extent described herein and in the related
Prospectus Supplement. Neither the Certificates nor any assets in the related
Trust Fund will be guaranteed or insured by any governmental agency or
instrumentality or by any other person, unless otherwise provided in the related
Prospectus Supplement. 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 prepayments,
repurchase and defaults) 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 "Risk Factors" herein and such information as may be set forth under the
caption "Risk Factors" 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 a "real estate mortgage investment conduit" for federal income tax
purposes. See also "Certain Federal Income Tax Consequences" herein.
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 Sub-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
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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, Chicago, Illinois 60661; and New York
Regional Office, Seven World Trade Center, New York, New York 10048.
To the extent described in the related Prospectus Supplement, some or
all of the Mortgage Loans may be secured by an assignment of the lessors' (i.e.,
the related mortgagors') rights in one or more leases (each, a "Lease") of the
related Mortgaged Property. Unless otherwise specified in the related Prospectus
Supplement, no series of Certificates will represent interests in or obligations
of any lessee (each, a "Lessee") under a Lease. If indicated, however, in the
Prospectus Supplement for a given series, a significant or the sole source of
payments on the Mortgage Loans in such series, and, therefore, of distributions
on such Certificates, will be rental payments due from the Lessees under the
Leases. Under such circumstances, prospective investors in the related series of
Certificates may wish to consider publicly available information, if any,
concerning the Lessees. Reference should be made to the related Prospectus
Supplement for information concerning the Lessees and whether any such Lessees
are subject to the periodic reporting requirements of the Securities Exchange
Act of 1934, as amended.
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, or
unless otherwise provided in the related Prospectus Supplement, such reports
will 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. Such reports may 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 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.
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 an offering of Offered Certificates evidencing interests 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 Morgan Stanley Capital I Inc., c/o Morgan Stanley &
Co. Incorporated, 1585 Broadway, 37th Floor, New York, New York 10036,
Attention: John E. Westerfield, or by telephone at (212) 761-4700. The Depositor
has determined that its financial statements are not material to the offering of
any Offered Certificates.
3
<PAGE>
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT.....................................................2
AVAILABLE INFORMATION.....................................................2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.........................3
RISK FACTORS.............................................................13
DESCRIPTION OF THE TRUST FUNDS...........................................19
USE OF PROCEEDS..........................................................25
YIELD CONSIDERATIONS.....................................................25
THE DEPOSITOR............................................................29
DESCRIPTION OF THE CERTIFICATES..........................................29
DESCRIPTION OF THE AGREEMENTS............................................36
DESCRIPTION OF CREDIT SUPPORT............................................52
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES...............54
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................................69
STATE TAX CONSIDERATIONS.................................................94
CERTAIN ERISA CONSIDERATIONS.............................................94
LEGAL INVESTMENT.........................................................96
PLAN OF DISTRIBUTION.....................................................98
LEGAL MATTERS............................................................98
FINANCIAL INFORMATION....................................................99
RATING...................................................................99
4
<PAGE>
SUMMARY OF PROSPECTUS
The following summary of certain pertinent information 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.......................... Morgan Stanley Capital I Inc., a
wholly-owned subsidiary of Morgan Stanley
Group Inc. See "The Depositor."
MASTER SERVICER.................... The master servicer (the "Master Servicer"),
if any, for each series of Certificates,
which may be an affiliate of the Depositor,
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, which may be an affiliate of
the Depositor, 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 Servicers."
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."
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/or commercial
mortgage loans (collectively, the "Mortgage
Loans") and mortgage participations,
mortgage pass-through certificates or other
mortgage-backed securities evidencing
interests in or secured by Mortgage Loans
(collectively, the "MBS") or a combination
of Mortgage Loans and MBS. The Mortgage
Loans will not be guaranteed or insured by
the Depositor or any of its affiliates or,
unless otherwise provided in the Prospectus
Supplement, by any governmental agency or
instrumentality or other person. As more
specifically described herein, the Mortgage
Loans will be secured by first or junior
liens on, or security interests 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, retail stores,
hotels or motels, nursing homes, hospitals
or other health-care related facilities,
mobile home
5
<PAGE>
parks, warehouse facilities, mini-warehouse
facilities or self-storage facilities,
industrial plants, congregate care
facilities, mixed use or other types of
commercial properties (the "Commercial
Properties"). The term "Mortgaged
Properties" shall refer to Multifamily
Properties or Commercial Properties, or
both.
To the extent described in the related
Prospectus Supplement, some or all of the
Mortgage Loans may also be secured by an
assignment of one or more leases (each, a
"Lease") of one or more lessees (each, a
"Lessee") of all or a portion of the related
Mortgaged Properties. Unless otherwise
specified in the related Prospectus
Supplement, a significant or the sole source
of payments on certain Commercial Loans (as
defined herein) will be the rental payments
due under the related Leases. In certain
circumstances, with respect to Commercial
Properties, the material terms and
conditions of the related Leases may be set
forth in the related Prospectus Supplement.
See "Description of the Trust
Funds--Mortgage Loans--Leases" and "Risk
Factors--Limited Assets" herein.
The Mortgaged Properties may be located in
any one of the fifty states, the District of
Columbia or the Commonwealth of Puerto Rico.
The Prospectus Supplement will indicate
additional jurisdictions, if any, in which
the Mortgaged Properties may be located.
Unless otherwise provided 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. The related
Prospectus Supplement will indicate if any
such persons are affiliates of the
Depositor.
Each Mortgage Loan may 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, in each case as
described in the related Prospectus
Supplement. Adjustable Mortgage Rates on the
Mortgage Loans in a Trust Fund may be based
on one or more indices. Each Mortgage Loan
may provide for scheduled payments to
maturity, 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, in
each case as described in the related
Prospectus Supplement. Each Mortgage Loan
may be fully amortizing or require a balloon
payment due on its stated maturity date, in
each case as described in the related
Prospectus Supplement. Each Mortgage Loan
may contain prohibitions on prepayment or
require payment of a premium or a yield
maintenance penalty in connection
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with a prepayment, in each case as described
in the related Prospectus Supplement. The
Mortgage Loans may provide for payments of
principal, interest or both, on due dates
that occur monthly, quarterly, semi-annually
or at such other interval as is specified in
the related Prospectus Supplement. See
"Description of the Trust Funds--Assets."
(b) GOVERNMENT SECURITIES.......... If so provided in the related Prospectus
Supplement, the Trust Fund may include, in
addition to Mortgage Assets, certain direct
obligations of the United States, agencies
thereof or agencies created thereby which
provide for payment of interest and/or
principal (collectively, "Government
Securities").
(c) COLLECTION ACCOUNTS........... Each Trust Fund will include one or more
accounts established and maintained on
behalf of the Certificateholders into which
the person or persons designated in the
related Prospectus Supplement will, to the
extent described herein and in such
Prospectus Supplement, deposit all payments
and collections received or advanced with
respect to the Mortgage Assets and other
assets in the Trust Fund. Such an account
may be maintained as an interest bearing or
a non-interest bearing account, and funds
held therein may be held as cash or invested
in certain short-term, investment grade
obligations, in each case as described in
the related Prospectus Supplement. See
"Description of the Agreements--Certificate
Account and Other Collection Accounts."
(d) 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,
which other classes may include one or more
classes of Offered Certificates, or by one
or more other types of credit support, such
as a letter of credit, insurance policy,
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. The Prospectus Supplement for
any series of Certificates evidencing an
interest in a Trust Fund that includes MBS
will describe any similar forms of credit
support that are provided by or with respect
to, or are included as part of the trust
fund evidenced by or providing security for,
such MBS. See "Risk Factors--Credit Support
Limitations" and "Description of Credit
Support."
(e) 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
7
<PAGE>
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 Assets or
on one or more classes of Certificates.
(Currency exchange agreements might be
included in the Trust Fund if some or all of
the Mortgage Assets (such as Mortgage Loans
secured by Mortgaged Properties located
outside the United States) were denominated
in a non-United States currency.) 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. 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 by or
providing security for such MBS. See
"Description of the Trust Funds--Cash Flow
Agreements." Description of Certificates.
DISTRIBUTIONS ON CERTIFICATES...... Each series of Certificates evidencing an
interest in a Trust Fund that includes
Mortgage Loans as part of its assets will be
issued pursuant to a pooling and servicing
agreement, and each series of Certificates
evidencing an interest in a Trust Fund that
does not include Mortgage Loans will be
issued pursuant to a trust agreement.
Pooling and servicing agreements and trust
agreements are referred to herein as the
"Agreements." Each series of Certificates
will include one or more classes. 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, if any, and the
Pass-Through Rate for each class of
Certificates 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 of Certificates that may
(i) provide for the accrual of interest
thereon based on fixed, variable or
adjustable rates; (ii) 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; (iii) be
entitled to principal distributions, with
disproportionately low, nominal or no
interest distributions (collectively,
"Stripped Principal Certificates"); (iv) be
entitled to interest distributions,
8
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with disproportionately low, nominal or no
principal distributions (collectively,
"Stripped Interest Certificates"); (v)
provide for distributions of accrued
interest thereon commencing 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"); (vi)
provide for distributions of principal
sequentially, based on specified payment
schedules or other methodologies; and/or
(vii) provide for distributions based on a
combination of two or more components
thereof with one or more of the
characteristics described in this paragraph,
including a Stripped Principal Certificate
component and a Stripped Interest
Certificate component, 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. With respect to Certificates
with two or more components, references
herein to Certificate Balance, notional
amount and Pass-Through Rate refer to the
principal balance, if any, notional amount,
if any, and the Pass-Through Rate, if any,
for any such component.
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 "Risk
Factors--Limited Assets" and "Description of
the Certificates."
(a) INTEREST....................... Interest on each class of Offered
Certificates (other than Stripped Principal
Certificates and certain classes of Stripped
Interest 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 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, losses, prepayment
interest shortfalls, and other contingencies
described herein and in the related
Prospectus Supplement. See "Risk
Factors--Average Life of Certificates;
Prepayments; Yields," "Yield Considerations"
and "Description of the
Certificates--Distributions of Interest on
the Certificates."
(b) PRINCIPAL...................... The Certificates of each series initially
will have an aggregate Certificate Balance
no greater than the outstanding principal
balance of the Assets as of, unless the
related Prospectus Supplement provides
otherwise, the close of business on the
first day of the month of formation of 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
9
<PAGE>
in respect of principal from future cash
flow on the assets in the related Trust
Fund. Unless otherwise provided in the
related Prospectus Supplement, distributions
of principal will be made on each
Distribution Date to the class or classes of
Certificates entitled thereto until the
Certificate Balances of such Certificates
have been reduced to zero. Unless otherwise
specified in the related Prospectus
Supplement, distributions of principal of
any class of Certificates will be made on a
pro rata basis among all of the Certificates
of such class or by random selection, as
described in the related Prospectus
Supplement or otherwise established by the
related Trustee. 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.......................... Unless otherwise provided in the related
Prospectus Supplement, the Master Servicer
will be obligated as part of its servicing
responsibilities to make certain advances
that in its good faith judgment it deems
recoverable with respect to delinquent
scheduled payments on the Whole Loans in
such Trust Fund. Neither the Depositor nor
any of its affiliates will have any
responsibility to make such advances.
Advances made by a Master Servicer are
reimbursable generally from subsequent
recoveries in respect of such Whole Loans
and otherwise to the extent described herein
and in the related Prospectus Supplement. If
and to the extent provided in the Prospectus
Supplement for any series, 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."
TERMINATION....................... If so specified in the related Prospectus
Supplement, a series of Certificates may be
subject to optional early termination
through the repurchase of the Assets in the
related Trust Fund by the party specified
therein, under the circumstances and in the
manner set forth therein. 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 or on
and after a date specified in such
Prospectus Supplement, the party specified
therein will solicit bids for the purchase
of all of the Assets of the Trust Fund, or
of a sufficient portion of such Assets to
retire such class or classes, or purchase
such Assets at a price set forth in the
related Prospectus Supplement. In addition,
if so provided in the related Prospectus
Supplement, certain classes of Certificates
may be purchased subject to similar
conditions. 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
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one or more Certificates 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 "Risk
Factors--Book-Entry Registration" and
"Description of the Certificates--Book-Entry
Registration and Definitive Certificates."
TAX STATUS OF THE CERTIFICATES..... The Certificates of each series will
constitute either (i) "regular interests"
("REMIC Regular Certificates") and "residual
interests" ("REMIC Residual Certificates")
in a Trust Fund treated as a REMIC under
Sections 860A through 860G of the Code, or
(ii) interests ("Grantor Trust
Certificates") in a Trust Fund treated as a
grantor trust under applicable provisions of
the Code.
(a) REMIC.......................... REMIC Regular Certificates generally will be
treated as debt obligations of the
applicable REMIC for federal income tax
purposes. Certain REMIC Regular Certificates
may be issued with original issue discount
for federal income tax purposes. See
"Certain Federal Income Tax Consequences" in
the Prospectus Supplement.
A portion (or, in certain cases, all) of the
income from REMIC Residual Certificates (i)
may not be offset by any losses from other
activities of the holder of such REMIC
Residual Certificates, (ii) may be treated
as unrelated business taxable income for
holders of REMIC Residual Certificates that
are subject to tax on unrelated business
taxable income (as defined in Section 511 of
the Code), and (iii) may be subject to
foreign withholding rules. See "Certain
Federal Income Tax
Consequences--REMICs--Taxation of Owners of
REMIC Residual Certificates".
The Offered Certificates will be treated as
(i) assets described in section
7701(a)(19)(C) of the Internal Revenue Code
of 1986, as amended (the "Code") and (ii)
"real estate assets" within the meaning of
section 856(c)(4)(A) of the Code, in each
case to the extent described herein and in
the Prospectus. See "Certain Federal Income
Tax Consequences" herein and in the
Prospectus.
(b) GRANTOR TRUST.................. If no election is made to treat the Trust
Fund relating to a Series of Certificates as
a real estate mortgage investment conduit
("REMIC"), the Trust Fund will be classified
as a grantor trust and not as an association
taxable as a corporation for federal income
tax purposes, and therefore holders of
Certificates will be treated as the owners
of undivided pro rata interests in the
Mortgage Pool or pool of securities and any
other assets held by the Trust Fund.
Investors are advised to consult their tax
advisors and to review "Certain Federal
Income Tax Consequences" herein and in the
related Prospectus Supplement.
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ERISA CONSIDERATIONS............... A fiduciary of retirement plan or other
employee benefit plan or other retirement
plan or arrangement, including an individual
retirement account or annuity or a Keogh
plan, and any collective investment fund or
insurance company general or separate
account in which such plans, accounts,
annuities or arrangements are invested, that
is subject to Title I of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the
Code 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 "Certain ERISA
Considerations" herein and in the related
Prospectus Supplement. To the extent
specified in the related Prospectus
Supplement, certain classes of Certificates
may not be transferred unless the Trustee
and the Depositor are furnished with a
letter of representations or an opinion of
counsel to the effect that such transfer
will not result in a violation of the
prohibited transaction provisions of ERISA
and the Code, will not cause the assets of
the Trust to be deemed "plan assets" for
purposes of ERISA and the Code and will not
subject the Trustee, the Depositor or the
Master Servicer to additional obligations.
See "Certain ERISA Considerations" herein
and in the related Prospectus Supplement.
LEGAL INVESTMENT................... The related Prospectus Supplement will
specify whether any class or classes of the
Offered Certificates will constitute
"mortgage related securities" for purposes
of the Secondary Mortgage Market Enhancement
Act of 1984, as amended. 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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RISK FACTORS
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" 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 related 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. Except to the extent described herein and in the related
Prospectus Supplement, Certificateholders will have no redemption rights and the
Certificates are subject to early retirement only under certain specified
circumstances described herein and in the related Prospectus Supplement. See
"Description of the Certificates--Termination". Morgan Stanley & Co.
Incorporated currently expects to make a secondary market in the Offered
Certificates, but has no obligation to do so.
LIMITED ASSETS
The Certificates will not represent an interest in or obligation of the
Depositor, the Master Servicer, or any of their affiliates. The only obligations
with respect to the Certificates or the Assets will be the obligations (if any)
of the Warrantying Party (as defined herein) pursuant to certain limited
representations and warranties made with respect to the Mortgage Loans, the
Master Servicer's, any Special Servicer's and any Sub-Servicer's servicing
obligations under the related Pooling and Servicing Agreement (including the
limited obligation to make certain advances in the event of delinquencies on the
Mortgage Loans, but only to the extent deemed recoverable). Since certain
representations and warranties with respect to the Mortgage Assets may have been
made and/or assigned in connection with transfers of such Mortgage Assets prior
to the Closing Date, the rights of the Trustee and the Certificateholders with
respect to such representations or warranties will be limited to their rights as
an assignee thereof. Unless otherwise specified in the related Prospectus
Supplement, none of the Depositor, the Master Servicer or any affiliate thereof
will have any obligation with respect to representations or warranties made by
any other entity. Unless otherwise specified in the related Prospectus
Supplement, neither the Certificates nor the underlying Mortgage Assets will be
guaranteed or insured by any governmental agency or instrumentality, or by the
Depositor, the Master Servicer, any Special Servicer, any Sub-Servicer or any of
their affiliates. Proceeds of the assets included in the related Trust Fund for
each series of Certificates (including the Assets and any form of credit
enhancement) will be the sole source of payments on the Certificates, and there
will be no recourse to the Depositor or any other entity in the event that such
proceeds are insufficient or otherwise unavailable to make all payments provided
for under the Certificates.
Unless otherwise specified in the related Prospectus Supplement, 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. If so provided in the Prospectus Supplement for 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 Assets have been incurred, the amount of such losses or shortfalls will be
borne first by one or
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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 such Prospectus Supplement.
AVERAGE LIFE OF CERTIFICATES; PREPAYMENTS; YIELDS
Prepayments (including those caused by defaults) on the Mortgage Assets
in any Trust Fund 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 interest 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 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 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
(including those caused by defaults) 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
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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 the Credit Support, if any, described in the related
Prospectus Supplement, 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 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--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. Moreover, a decline in the value of a Mortgaged Property will increase
the risk of loss particularly with respect to any related junior Mortgage Loan.
See "--Junior Mortgage Loans."
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
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, if
applicable, a diversity of types of business operated by such tenants.
It is anticipated that 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 property and such other
assets, if any, as have been pledged to secure the related 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. Mortgage Assets in a Trust Fund
may consist of only a limited number of Mortgage Loans and/or relate to Leases
to only a single Lessee or a limited number of Lessees.
If applicable, certain legal aspects of the Mortgage Loans for a series
of Certificates may be described in the related Prospectus Supplement. See also
"Certain Legal Aspects of the Mortgage Loans and the Leases" herein.
RISKS ASSOCIATED WITH COMMERCIAL LOANS AND LEASES
If so described in the related Prospectus Supplement, each mortgagor
under a Commercial Loan may be an entity created by the owner or purchaser of
the related Commercial Property solely to own or purchase such property, in part
to isolate the property from the debts and liabilities of such owner or
purchaser. Unless otherwise specified, each such Commercial Loan will represent
a nonrecourse obligation of the related mortgagor secured by the lien of the
related Mortgage and the related Lease Assignments. Whether or not such loans
are recourse or nonrecourse obligations, it is not expected that the mortgagors
will have any significant assets other than the Commercial Properties and the
related Leases, which will be pledged to the Trustee under the related
Agreement. Therefore, the payment of amounts due on any such Commercial Loans,
and, consequently, the payment of principal
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of and interest on the related Certificates, will depend primarily or solely on
rental payments by the Lessees. Such rental payments will, in turn, depend on
continued occupancy by, and/or the creditworthiness of, such Lessees, which in
either case may be adversely affected by a general economic downturn or an
adverse change in their financial condition. Moreover, to the extent a
Commercial Property was designed for the needs of a specific type of tenant
(e.g., a nursing home, hospital, hotel or motel), the value of such property in
the event of a default by the Lessee or the early termination of such Lease may
be adversely affected because of difficulty in re-leasing the property to a
suitable substitute lessee or, if re-leasing to such a substitute is not
possible, because of the cost of altering the property for another more
marketable use. As a result, without the benefit of the Lessee's continued
support of the Commercial Property, and absent significant amortization of the
Commercial Loan, if such loan is foreclosed on and the Commercial Property
liquidated following a lease default, the net proceeds might be insufficient to
cover the outstanding principal and interest owing on such loan, thereby
increasing the risk that holders of the Certificates will suffer some loss.
BALLOON PAYMENTS
Certain of the Mortgage Loans (the "Balloon 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 interest 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 real properties, as the case may be, generally.
JUNIOR MORTGAGE LOANS
To the extent specified in the related Prospectus Supplement, certain
of the Mortgage Loans may be secured primarily by junior mortgages. In the case
of liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, such Mortgage Loan would suffer a loss and,
accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans will
be greater with respect to junior Mortgage Loans. See "--Risks Associated with
Mortgage Loans and Mortgaged Properties."
OBLIGOR DEFAULT
If so specified in the related Prospectus Supplement, in order to
maximize recoveries on defaulted Whole Loans, a Master Servicer, a Sub-Servicer
or a Special Servicer will be permitted (within prescribed parameters) to extend
and modify Whole Loans that are in default or as to which a payment default is
imminent, including in particular with respect to balloon payments. In addition,
a Master Servicer, a Sub-Servicer or a Special Servicer may receive a workout
fee based on receipts from or proceeds of such Whole Loans. While any such
entity generally will be required to determine that any such extension or
modification is reasonably 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 Whole Loans that are
in default or as to which a payment default is imminent. Additionally, if so
specified in the related Prospectus Supplement, certain of the Mortgage Loans
included in the Mortgage Pool for a Series may have been subject to workouts or
similar arrangements following periods of delinquency and default.
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 single family mortgage loans. The mortgagor's
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sophistication and form of organization may increase the likelihood of
protracted litigation or bankruptcy in default situations.
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), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce the
risk to holders of Senior Certificates of delinquent distributions or ultimate
losses, the amount of subordination will be limited and may decline under
certain circumstances. In addition, if principal payments on one or more classes
of Certificates of a series are made in a specified order of priority, 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 such series has been repaid. As a result, the impact of
significant losses and shortfalls on the 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."
Regardless of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will be subject to periodic
reduction in accordance with a schedule or formula. The Master Servicer will
generally be permitted to reduce, terminate or substitute all or a portion of
the credit enhancement for any series of Certificates, if the applicable Rating
Agency indicates that the then-current rating thereof will not be adversely
affected. The rating of any series of Certificates by any applicable Rating
Agency may be lowered following the initial issuance thereof as a result of the
downgrading of the obligations of any applicable credit support provider, or as
a result of losses on the related Mortgage Assets substantially in excess of the
levels contemplated by such Rating Agency at the time of its initial rating
analysis. None of the Depositor, the Master Servicer or any of their affiliates
will have any obligation to replace or supplement any credit enhancement, or to
take any other action to maintain any rating of any series of Certificates.
SUBORDINATION OF THE SUBORDINATE CERTIFICATES; EFFECT OF LOSSES ON THE ASSETS
The rights of Subordinate Certificateholders to receive distributions
to which they would otherwise be entitled with respect to the Assets will be
subordinate to the rights of the Master Servicer (to the extent that the Master
Servicer is paid its servicing fee, including any unpaid servicing fees with
respect to one or more prior Due Periods, and is reimbursed for certain
unreimbursed advances and unreimbursed liquidation expenses) and the Senior
Certificateholders to the extent described herein. As a result of the foregoing,
investors must be prepared to bear the risk that they may be subject to delays
in payment and may not recover their initial investments in the Subordinate
Certificates. See "Description of the Certificates--General" and "--Allocation
of Losses and Shortfalls."
The yields on the Subordinate Certificates may be extremely sensitive
to the loss experience of the Assets and the timing of any such losses. If the
actual rate and amount of losses experienced by the Assets exceed the rate and
amount of such losses assumed by an investor, the yields to maturity on the
Subordinate Certificates may be lower than anticipated.
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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. Such clauses are generally enforceable subject to certain exceptions.
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 are typically not 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 the Mortgage Loans and the
Leases--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. Moreover, the presence of hazardous or
toxic substances, or the failure to remediate such property, may adversely
affect the owner or operator's ability to borrow using such property as
collateral. In addition, under the laws of some states and under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA") and other federal law, a lender may be liable, as an "owner" or
"operator," for costs of addressing releases or threatened releases of hazardous
substances that require remedy at a property, if agents or employees of the
lender have become sufficiently involved in the operations of the mortgagor,
regardless of whether or not the environmental damage or threat was caused by a
prior owner. A lender also risks such liability on foreclosure of the mortgage
under certain circumstances. Unless otherwise specified in the related
Prospectus Supplement, each Pooling and Servicing Agreement will provide that
none of the Master Servicer, the Sub-Servicer or the Special Servicer, acting on
behalf of the Trust Fund, may 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 there are no circumstances 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 (ii) if the Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic interest of
the Trust Fund to acquire title to the Mortgaged Property and further to take
such actions as would be necessary and appropriate to effect such compliance
and/or respond to such circumstances. See "Certain Legal Aspects of the Mortgage
Loans and the Leases--Environmental Legislation."
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.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Except as provided in the Prospectus Supplement, REMIC Residual
Certificates, if offered hereunder, are anticipated to have "phantom income"
associated with them. That is, taxable income is anticipated to be allocated to
the REMIC Residual Certificates in the early years of the existence of the
related REMIC, even if the REMIC Residual Certificates receive no distributions
from the related REMIC, with a corresponding amount of losses allocated to the
REMIC Residual Certificates in later years. Accordingly, the present value of
the tax detriments associated with the REMIC Residual Certificates may
significantly exceed the present value of the tax benefits related thereto, and
the REMIC Residual Certificates may have a negative "value." Moreover, the REMIC
Residual Certificates will in effect be allocated an amount of gross income
equal to the non-interest expenses of the REMIC, but such expenses will be
deductible by holders of the REMIC Residual Certificates that are individuals
only as itemized deductions (and be subject to all the limitations applicable to
itemized deductions). Accordingly, investment in the REMIC Residual Certificates
will generally not be suitable for individuals or for certain pass-through
entities, such as partnerships or S corporations, that have individuals as
partners or shareholders. In addition, REMIC Residual Certificates are subject
to certain restrictions on transfer. Finally, prospective purchasers of a REMIC
Residual Certificate should be aware that recently issued final regulations
provide restrictions on the ability to mark-to-market certain "negative value"
REMIC residual interests may not be marked to market. See "Certain Federal
Income Tax Consequences--REMICs."
CONTROL
Under certain circumstances, the consent or approval of the holders of
a specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of a series or a similar means of allocating decision-making under
the related Agreement ("Voting Rights") will be required to direct, and will be
sufficient to bind all Certificateholders of such series to, certain actions,
including directing the Special Servicer or the Master Servicer with respect to
actions to be taken with respect to certain Mortgage Loans and REO Properties
and amending the related Agreement in certain circumstances. See "Description of
the Agreements--Events of Default," "--Rights Upon Event of Default,"
"--Amendment" and "--List of Certificateholders."
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."
DESCRIPTION OF THE TRUST FUNDS
ASSETS
The primary assets of each Trust Fund (the "Assets") will include (i)
multifamily and/or commercial mortgage loans (the "Mortgage Loans"), (ii)
mortgage participations, pass-through certificates or other mortgage-backed
securities evidencing interests in or secured by one or more Mortgage Loans or
other similar participations, certificates or securities ("MBS"), (iii) direct
obligations of the United States, agencies thereof or agencies created thereby
which are not subject to redemption prior to maturity at the option of the
issuer and are (a) interest-bearing securities, (b) non-interest-bearing
securities, (c) originally interest-bearing securities from which coupons
representing the right to payment of interest have been removed, or (d)
interest-bearing securities from which the right to payment of principal has
been removed (the "Government Securities"), or (iv) a combination of Mortgage
Loans, MBS and Government Securities. As used herein, "Mortgage Loans" refers to
both whole Mortgage Loans and Mortgage Loans underlying MBS. Mortgage Loans that
secure, or interests in which are evidenced by, MBS are herein sometimes
referred to as Underlying Mortgage Loans. Mortgage Loans that are not Underlying
Mortgage Loans are sometimes referred to as "Whole Loans." Any mortgage
participations, pass-through certificates or other asset-backed certificates in
which an MBS evidences an interest or which secure
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an MBS are sometimes referred to herein also as MBS or as "Underlying MBS."
Mortgage Loans and MBS are sometimes referred to herein as "Mortgage Assets."
The Mortgage Assets will not be guaranteed or insured by Morgan Stanley Capital
I Inc. (the "Depositor") or any of its affiliates or, unless otherwise provided
in the Prospectus Supplement, by any governmental agency or instrumentality or
by any other person. Each 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 (an "Asset Seller"), which may be an affiliate of the
Depositor and, with respect to Mortgage Assets, which prior holder may or may
not be the originator of such Mortgage Loan or the issuer of such MBS.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be entitled to payment only from the assets of the related
Trust Fund and will not be entitled to payments in respect of the assets of any
other trust fund established by the Depositor. If specified in the related
Prospectus Supplement, the assets of a Trust Fund will consist of certificates
representing beneficial ownership interests in another trust fund that contains
the Assets.
MORTGAGE LOANS
GENERAL
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, shopping centers, retail stores,
hotels or motels, nursing homes, hospitals or other health care-related
facilities, mobile home parks, warehouse facilities, mini-warehouse facilities
or self-storage facilities, industrial plants, congregate care facilities, mixed
use or other types of commercial properties ("Commercial Properties" and the
related loans, "Commercial Loans") located, unless otherwise specified in the
related Prospectus Supplement, in any one of the fifty states, the District of
Columbia or the Commonwealth of Puerto Rico. To the extent specified in the
related Prospectus Supplement, the Mortgage Loans will be secured by first or
junior mortgages or deeds of trust or other similar security instruments
creating a first or junior lien on Mortgaged Property. 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 interests in properties, the
title to which is held by third party lessors. Unless otherwise specified in the
Prospectus Supplement, the term of any such leasehold will exceed the term of
the related mortgage note by at least five years. Each Mortgage Loan will have
been originated by a person (the "Originator") other than the Depositor. The
related Prospectus Supplement will indicate if any Originator is an affiliate of
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.
LEASES
To the extent specified in the related Prospectus Supplement, the
Commercial Properties may be leased to Lessees that respectively occupy all or a
portion of such properties. Pursuant to a Lease Assignment, the related
mortgagor may assign its rights, title and interest as lessor under each Lease
and the income derived therefrom to the related mortgagee, while retaining a
license to collect the rents for so long as there is no default. If the
mortgagor defaults, the license terminates and the mortgagee or its agent is
entitled to collect the rents from the related Lessee or Lessees for application
to the monetary obligations of the mortgagor. State law may limit or restrict
the enforcement of the Lease Assignments by a mortgagee until it takes
possession of the related Mortgaged Property and/or a receiver is appointed. See
"Certain Legal Aspects of the Mortgage Loans and the Leases--Leases and Rents."
Alternatively, to the extent specified in the related Prospectus Supplement, the
mortgagor and the mortgagee may agree that payments under Leases are to be made
directly to the Master Servicer.
To the extent described in the related Prospectus Supplement, the
Leases may require the Lessees to pay rent that is sufficient in the aggregate
to cover all scheduled payments of principal and interest on the related
Mortgage Loans and, in certain cases, their pro rata share of the operating
expenses, insurance premiums and real
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estate taxes associated with the Mortgaged Properties. Certain of the Leases may
require the mortgagor to bear costs associated with structural repairs and/or
the maintenance of the exterior or other portions of the Mortgaged Property or
provide for certain limits on the aggregate amount of operating expenses,
insurance premiums, taxes and other expenses that the Lessees are required to
pay. If so specified in the related Prospectus Supplement, under certain
circumstances the Lessees may be permitted to set off their rental obligations
against the obligations of the mortgagors under the Leases. In those cases where
payments under the Leases (net of any operating expenses payable by the
mortgagors) are insufficient to pay all of the scheduled principal and interest
on the related Mortgage Loans, the mortgagors must rely on other income or
sources (including security deposits) generated by the related Mortgaged
Property to make payments on the related Mortgage Loan. To the extent specified
in the related Prospectus Supplement, some Commercial Properties may be leased
entirely to one Lessee. In such cases, absent the availability of other funds,
the mortgagor must rely entirely on rent paid by such Lessee in order for the
mortgagor to pay all of the scheduled principal and interest on the related
Commercial Loan. To the extent specified in the related Prospectus Supplement,
certain of the Leases may expire prior to the stated maturity of the related
Mortgage Loan. In such cases, upon expiration of the Leases the mortgagors will
have to look to alternative sources of income, including rent payment by any new
Lessees or proceeds from the sale or refinancing of the Mortgaged Property, to
cover the payments of principal and interest due on such Mortgage Loans unless
the Lease is renewed. As specified in the related Prospectus Supplement, certain
of the Leases may provide that upon the occurrence of a casualty affecting a
Mortgaged Property, the Lessee will have the right to terminate its Lease,
unless the mortgagor, as lessor, is able to cause the Mortgaged Property to be
restored within a specified period of time. Certain Leases may provide that it
is the lessor's responsibility, while other Leases provide that it is the
Lessee's responsibility, to restore the Mortgaged Property after a casualty to
its original condition. Certain Leases may provide a right of termination to the
related Lessee if a taking of a material or specified percentage of the leased
space in the Mortgaged Property occurs, or if the ingress or egress to the
leased space has been materially impaired.
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 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. Unless otherwise specified in the
Prospectus Supplement, 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"
means, for any given period, unless otherwise specified in the related
Prospectus Supplement, the total operating revenues derived from a Mortgaged
Property during such period, minus the total operating expenses incurred in
respect of such Mortgaged Property during such period other than (i) non-cash
items such as depreciation and amortization, (ii) capital expenditures and (iii)
debt service on loans secured by the Mortgaged Property. 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 (as
well as 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.
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
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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 some or all of these expenses;
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. See
"--Leases" above.
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 in particular may be subject to legal
limitations and regulations but, because of such regulations, may also be less
sensitive to fluctuations in market rents generally.
The Debt Service Coverage Ratio should not be relied upon as the sole
measure of the risk of default of any loan, however, since other factors may
outweigh a high Debt Service Coverage Ratio. With respect to a Balloon Mortgage
Loan, for example, the risk of default as a result of the unavailability of a
source of funds to finance the related balloon payment at maturity on terms
comparable to or better than those of such Balloon Mortgage Loans could be
significant even though the related Debt Service Coverage Ratio is high.
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.
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 Multifamily and Commercial
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 Multifamily
and Commercial Loans, or that, for any of such Mortgage Loans, they are complete
or relevant. See "Risk Factors--Risks Associated with Mortgage Loans and
Mortgaged Properties," "--Balloon Payments," "--Junior Mortgage Loans,"
"--Obligor Default" and "--Mortgagor Type."
LOAN-TO-VALUE RATIO
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. Unless
otherwise set forth in the related Prospectus Supplement, 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
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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.
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, 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 weighted average (by principal balance) of the original and remaining
terms to maturity of the Mortgage Loans, (iv) the earliest and latest
origination date and maturity date of the Mortgage Loans, (v) the weighted
average (by principal balance) of 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 state or
states in which most of the Mortgaged Properties are located, (viii) information
with respect to the 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 index, the frequency of
the adjustment dates, the highest, lowest and weighted average note margin and
pass-through margin, and the maximum Mortgage Rate or monthly payment variation
at the time of any adjustment thereof and over the life of the ARM Loan and the
frequency of such monthly payment adjustments, (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 "--Mortgage Loans--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 Securities and Exchange Commission
within fifteen days after such initial issuance.
PAYMENT PROVISIONS OF THE MORTGAGE LOANS
Unless otherwise specified in the related Prospectus Supplement, all of
the Mortgage Loans 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, on due
dates that occur monthly, quarterly or semi-annually or at such other interval
as is specified in the related Prospectus Supplement. Each Mortgage Loan may
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
pursuant to an election or as otherwise specified on the related Mortgage Note,
in each case as described in the related Prospectus Supplement. Each Mortgage
Loan may 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, in each case as described in the related Prospectus
Supplement. Each Mortgage Loan may be fully amortizing or require a balloon
payment due on its stated maturity date, in each case as described in the
related Prospectus Supplement. Each Mortgage Loan may 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
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Equity Participation and the method or methods by which distributions in respect
thereof will be allocated among such Certificates.
MBS
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, a trust 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 (or Underlying
MBS) 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 or MBS evidenced by
the MBS.
Distributions of any principal or interest, as applicable, 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. Any principal or 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 or other forms
of 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 or Underlying MBS
evidenced by or securing 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.
The Prospectus Supplement for a series of Certificates evidencing
interests in Mortgage Assets that include MBS will specify, to the extent
available, (i) the aggregate approximate initial and outstanding principal
amount or notional amount, as applicable, 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) whether such MBS is entitled only to interest
payments, only to principal payments or to both, (iv) the pass-through or bond
rate of the MBS or formula for determining such rates, if any, (v) the
applicable payment provisions for the MBS, including, but not limited to, any
priorities, payment schedules and subordination features, (vi) the MBS Issuer,
MBS Servicer and MBS Trustee, as applicable, (vii) 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, the Underlying MBS or directly to such MBS, (viii) the terms on
which the related Underlying Mortgage Loans or Underlying MBS for such MBS or
the MBS may, or are required to, be purchased prior to their maturity, (ix) the
terms on which Mortgage Loans or Underlying MBS may be substituted for those
originally underlying the MBS, (x) the servicing fees payable under the MBS
Agreement, (xi) the type of information in respect of the Underlying Mortgage
Loans described under "--Mortgage Loans--Mortgage Loan Information in Prospectus
Supplements" above, and the type of information in respect of the Underlying MBS
described in this paragraph, (xii) the characteristics of any cash flow
agreements that are included as part of the trust fund evidenced or secured by
the MBS and (xiii) whether the MBS is in certificated form, book-entry form or
held through a depository such as The Depository Trust Company or the
Participants Trust Company.
GOVERNMENT SECURITIES
The Prospectus Supplement for a series of Certificates evidencing
interests in Assets of a Trust Fund that include Government Securities will
specify, to the extent available, (i) the aggregate approximate initial and
outstanding principal amounts or notional amounts, as applicable, and types of
the Government Securities to be included in the Trust Fund, (ii) the original
and remaining terms to stated maturity of the Government Securities, (iii)
whether such Government Securities are entitled only to interest payments, only
to principal payments or to both, (iv) the interest rates of the Government
Securities or the formula to determine such rates, if any, (v) the applicable
payment provisions for the Government Securities and (vi) to what extent, if
any, the obligation evidenced thereby is backed by the full faith and credit of
the United States.
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ACCOUNTS
Each Trust Fund will include one or more accounts established and
maintained on behalf of the Certificateholders into which the person or persons
designated in the related Prospectus Supplement will, to the extent described
herein and in such Prospectus Supplement deposit all payments and collections
received or advanced with respect to the Assets and other assets in the Trust
Fund. Such an account may be maintained as an interest bearing or a non-interest
bearing account, and funds held therein may be held as cash or invested in
certain short-term, investment grade obligations, in each case as described in
the related Prospectus Supplement. See "Description of the Agreement-- and Other
Collection Accounts."
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the 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, 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
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 Assets or
on one or more classes of Certificates. (Currency exchange agreements might be
included in the Trust Fund if some or all of the Mortgage Assets (such as
Mortgage Loans secured by Mortgaged Properties located outside the United
States) were denominated in a non-United States currency.) 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 to the purchase of Assets and to pay for certain
expenses incurred in connection with such purchase of Assets and sale of
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 Assets acquired by the Depositor, prevailing
interest rates, availability of funds and general market conditions.
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 Assets in the related Trust Fund (which may be affected by
prepayments, defaults, liquidations or repurchases). See "Risk Factors."
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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 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.
The effective yield to maturity to each holder of Certificates entitled
to payments of interest will be below that otherwise produced by the applicable
Pass-Through Rate and purchase price of such Certificate because, while interest
may accrue on each Asset during a certain period, the distribution of such
interest will be made on a day which may be several days, weeks or months
following the period of accrual.
TIMING OF PAYMENT OF INTEREST
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. As indicated above under "--Pass-Through Rate," 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 if the Interest Accrual Period ended on
such Distribution Date. In addition, if so specified in the related Prospectus
Supplement, 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 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.
PAYMENTS OF PRINCIPAL; PREPAYMENTS
The yield to maturity on the Certificates will be affected by the rate
of principal payments on the Assets (including principal prepayments on Mortgage
Loans resulting from both voluntary prepayments by the mortgagors and
involuntary liquidations). Such payments may be directly dependent upon the
payments on Leases underlying such Mortgage Loans. 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 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 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 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 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 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 of principal that is
slower than
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that actually experienced on the Assets, the actual yield to maturity will be
lower than that so calculated. In either case, if so provided in the Prospectus
Supplement for a series of Certificates, the effect on yield on one or more
classes of the Certificates of such series of prepayments of the Assets in the
related Trust Fund may be mitigated or exacerbated by any provisions for
sequential or selective distribution of principal to such classes.
When a full prepayment is made on a Mortgage Loan, the mortgagor is
charged interest on the principal amount of the Mortgage Loan so prepaid for the
number of days in the month actually elapsed up to the date of the prepayment.
Unless otherwise specified in the related Prospectus Supplement, the effect of
prepayments in full will be to reduce the amount of interest paid in the
following month to holders of Certificates entitled to payments of interest
because interest on the principal amount of any Mortgage Loan so prepaid will be
paid only to the date of prepayment rather than for a full month. Unless
otherwise specified in the related Prospectus Supplement, a partial prepayment
of principal is applied so as to reduce the outstanding principal balance of the
related Mortgage Loan as of the Due Date in the month in which such partial
prepayment is received. As a result, unless otherwise specified in the related
Prospectus Supplement, the effect of a partial prepayment on a Mortgage Loan
will be to reduce the amount of interest passed through to holders of
Certificates in the month following the receipt of such partial prepayment by an
amount equal to one month's interest at the applicable Pass-Through Rate on the
prepaid amount.
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 on 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 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.
If so provided in the Prospectus Supplement for a series of
Certificates, one or more classes of Certificates may have a final scheduled
Distribution Date, which is the date on or prior to which the Certificate
Balance thereof is scheduled to be reduced to zero, calculated on the basis of
the assumptions applicable to such series set forth therein.
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 MBS. If any Mortgage Loans comprising or underlying the 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
Assets will, to some extent, be a function of the mix of Mortgage Rates and
maturities of the Mortgage Loans comprising or underlying such 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. 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.
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Neither CPR 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 was 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.
The Depositor is not aware of any meaningful publicly available
prepayment statistics for multifamily or commercial mortgage loans.
The Prospectus Supplement with respect to each series of Certificates
will contain tables, if applicable, setting forth the projected weighted average
life of each class 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 Assets are made at rates corresponding to
various percentages of CPR or at such other rates specified in such Prospectus
Supplement. Such tables and assumptions are intended to illustrate the
sensitivity of weighted average life of the Certificates to various prepayment
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
level of CPR or any other rate specified in the related Prospectus Supplement.
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
TYPE OF MORTGAGE ASSET
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, to the extent and under the circumstances set forth in the related
Prospectus Supplement, be permitted to modify Mortgage Loans that are in default
or as to which a payment default is imminent. 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 and principal amount 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 proceedings,
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 that may not be reflected in the prepayment
standards or models used in the relevant Prospectus Supplement. A number of the
Mortgage Loans comprising or underlying the 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, unless otherwise provided in the related Prospectus Supplement, the
Master
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Servicer, on behalf of the Trust Fund, will be required to exercise (or waive
its right to exercise) any such right that the Trustee may have as mortgagee to
accelerate payment of the Whole Loan in a manner consistent with the Servicing
Standard. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Due-on-Sale and Due-on-Encumbrance" and "Description of the
Agreements--Due-on-Sale and Due-on-Encumbrance Provisions."
THE DEPOSITOR
Morgan Stanley Capital I Inc., the Depositor, is a direct wholly-owned
subsidiary of Morgan Stanley Group Inc. and was incorporated in the State of
Delaware on January 28, 1985. The principal executive offices of the Depositor
are located at 1585 Broadway, 37th Floor, New York, New York 10036. Its
telephone number is (212) 761-4700.
The Depositor does not have, nor is it expected in the future to have,
any significant assets.
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 of Certificates that may (i)
provide for the accrual of interest thereon based on fixed, variable or
adjustable rates; (ii) 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;
(iii) be entitled to principal distributions, with disproportionately low,
nominal or no interest distributions (collectively, "Stripped Principal
Certificates"); (iv) be entitled to interest distributions, with
disproportionately low, nominal or no principal distributions (collectively,
"Stripped Interest Certificates"); (v) provide for distributions of accrued
interest thereon commencing 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"); (vi) provide for payments of
principal sequentially, based on specified payment schedules, from only a
portion of the Assets in such Trust Fund or based on specified calculations, to
the extent of available funds, in each case as described in the related
Prospectus Supplement; and/or (vii) provide for distributions based on a
combination of two or more components thereof with one or more of the
characteristics described in this paragraph including a Stripped Principal
Certificate component and a Stripped Interest Certificate component. Any such
classes may include classes of Offered Certificates.
Each class of Offered Certificates of a series will be issued in
minimum denominations corresponding to the Certificate Balances or, in case of
Stripped Interest Certificates, notional amounts or percentage interests
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, notional amount or percentage
interest but of different authorized denominations. See "Risk Factors--Limited
Liquidity" and "Limited Assets."
DISTRIBUTIONS
Distributions 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 Distribution Amount for such series and
such Distribution Date. Except as otherwise specified in the related Prospectus
Supplement, distributions (other than the final distribution) will be made to
the persons in whose names the Certificates are registered at the close
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of business on the last business day of the month preceding the month in which
the Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date"). 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
or by random selection, as described in the related Prospectus Supplement or
otherwise established by the related Trustee. 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 other person
required to make such payments 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 location specified in the notice to Certificateholders of
such final distribution.
AVAILABLE DISTRIBUTION AMOUNT
All distributions on the Certificates of each series on each
Distribution Date will be made from the Available Distribution Amount described
below, in accordance with the terms described in the related Prospectus
Supplement. Unless provided otherwise in the related Prospectus Supplement, the
"Available Distribution Amount" for each Distribution Date equals the sum of the
following amounts:
(i) the total amount of all cash on deposit in the related Certificate
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 Due Period (unless the
related Prospectus Supplement provides otherwise, a "Due Period" with
respect to any Distribution Date will commence on the second day of
the month in which the immediately preceding Distribution Date occurs,
or the day after the Cut-off Date in the case of the first Due Period,
and will end on the first day of the month of the related Distribution
Date),
(b) unless the related Prospectus Supplement provides otherwise,
all prepayments, together with related payments of the interest
thereon and related Prepayment Premiums, Liquidation Proceeds,
Insurance Proceeds and other unscheduled recoveries received
subsequent to the related Due Period, and
(c) all amounts in the Certificate Account that are due or
reimbursable to the Depositor, the Trustee, an Asset Seller, a
Sub-Servicer, a Special Servicer, the Master Servicer or any other
entity as specified in the related Prospectus Supplement 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 Certificate Account,
including any net amounts paid under any Cash Flow Agreements;
(iii)all advances made by a Master Servicer or any other entity as
specified in the related Prospectus Supplement with respect to such
Distribution Date;
(iv) if and to the extent the related Prospectus Supplement so
provides, amounts paid by a Master Servicer or any other entity as
specified in the related Prospectus Supplement with respect to interest
shortfalls resulting from prepayments during the related Prepayment Period;
and
(v) unless the related Prospectus Supplement provides otherwise, to
the extent not on deposit in the related Certificate 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.
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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 will be a fixed, variable or adjustable rate at which interest will
accrue on such class or a component thereof (the "Pass-Through Rate"). The
related Prospectus Supplement will specify the Pass-Through Rate for each class
or component or, in the case of a variable or adjustable Pass-Through Rate, the
method for determining the Pass-Through Rate. Unless otherwise specified in the
related Prospectus Supplement, interest on the Certificates will be calculated
on the basis of a 360-day year consisting of twelve 30-day months.
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, the amount of Accrued
Certificate Interest otherwise distributable 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 for a specified period on the outstanding Certificate Balance
thereof immediately prior to the Distribution Date, at the applicable
Pass-Through Rate, reduced as described below. Unless otherwise provided in the
Prospectus Supplement, Accrued Certificate Interest on Stripped Interest
Certificates will be equal to interest accrued for a specified period 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. Unless otherwise provided
in the related Prospectus Supplement, the Accrued Certificate Interest on a
series 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 such series. The particular manner in which such shortfalls are to be
allocated among some or all of the classes of Certificates of that series will
be specified in the related Prospectus Supplement. The related Prospectus
Supplement will also describe the extent to which the amount of Accrued
Certificate Interest that is otherwise distributable on (or, in the case of
Accrual Certificates, that may otherwise be added to the Certificate Balance of)
a class of Offered Certificates may be reduced as a result of any other
contingencies, including delinquencies, losses and deferred interest on or in
respect of the Mortgage Loans comprising or underlying the Mortgage Assets in
the related Trust Fund. Unless otherwise provided in the related Prospectus
Supplement, any reduction in the amount of Accrued Certificate Interest
otherwise distributable on a class of Certificates by reason of the allocation
to such class of a portion of any deferred interest on the Mortgage Loans
comprising or underlying the Mortgage Assets in the related Trust Fund will
result in a corresponding increase in the Certificate Balance of such class. 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 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, if and to the extent so provided in the related
Prospectus Supplement, by the amount of losses incurred in respect of the
related 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
related Accrued Certificate Interest. Unless otherwise provided in the related
Prospectus Supplement, 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 Assets as of the applicable Cut-off Date. The
initial aggregate Certificate
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Balance of a series and each class thereof will be specified in the related
Prospectus Supplement. Unless otherwise provided 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.
COMPONENTS
To the extent specified in the related Prospectus Supplement,
distribution on a class of Certificates may be based on a combination of two or
more different components as described under "--General" above. To such extent,
the descriptions set forth under "--Distributions of Interests on the
Certificates" and "--Distributions of Principal of the Certificates" above also
relate to components of such a class of Certificates. In such case, reference in
such sections to Certificate Balance and Pass-Through Rate refer to the
principal balance, if any, of any such component and the Pass-Through Rate, if
any, on any such component, respectively.
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN RESPECT OF EQUITY
PARTICIPATIONS
If so provided in the related Prospectus Supplement, 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 such Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the Prospectus Supplement for 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 such 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.
ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any series of Certificates evidencing an interest in a
Trust Fund, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer or another entity described therein 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 Certificate Account that are not included in
the Available Distribution Amount 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 Due Period and were
delinquent on the related Determination Date, subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable from Related Proceeds (as defined below). 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 Master Servicer's
(or another entity's) advance obligation may be limited only to the portion of
such delinquencies necessary to make the required distributions on one or more
classes of Senior Certificates and/or may be subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable not only from Related Proceeds but also from collections on other
Assets otherwise distributable on one or more classes of such Subordinate
Certificates. 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. Unless
otherwise provided in the related Prospectus Supplement, advances of the Master
Servicer's (or another entity's) funds will 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") and, if so provided in the Prospectus Supplement, out
of any amounts otherwise distributable on one or more classes of Subordinate
Certificates of such series; provided, however, that any such advance will be
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reimbursable from any amounts in the Certificate Account prior to any
distributions being made on the Certificates to the extent that the Master
Servicer (or such other entity) shall determine in good faith that such advance
(a "Nonrecoverable Advance") is not ultimately recoverable from Related Proceeds
or, if applicable, from collections on other Assets otherwise distributable on
such Subordinate Certificates. If advances have been made by the Master Servicer
from excess funds in the Certificate Account, the Master Servicer is required to
replace such funds in the Certificate Account on any future Distribution Date to
the extent that funds in the Certificate Account on such Distribution Date are
less than payments required to be made to Certificateholders on such date. If so
specified in the related Prospectus Supplement, the obligations of the Master
Servicer (or another entity) to make advances may be secured by a cash advance
reserve fund, a surety bond, a letter of credit or another form of limited
guaranty. If applicable, 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.
If and to the extent so provided in the related Prospectus Supplement,
the Master Servicer (or another entity) will be entitled to receive interest at
the rate specified therein on its outstanding advances and will be entitled to
pay itself such interest periodically from general collections on the Assets
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
Unless otherwise provided in the Prospectus Supplement, with each
distribution to holders of any class of Certificates of a series, the 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 (and, if payable directly out of the related Trust Fund, by 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 Assets at the close of
business on such Distribution Date;
(vii) the number and aggregate principal balance of Whole 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 Whole 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) if applicable, 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
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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 Due
Period (other than by payment in full), (a) the loan number thereof, (b)
the manner in which it was liquidated and (c) the aggregate amount of
liquidation proceeds received;
(x) with respect to any Whole Loan liquidated during the related Due
Period, (a) the portion of such liquidation proceeds payable or
reimbursable to the Master Servicer (or any other entity) in respect of
such Mortgage Loan and (b) the amount of any loss to Certificateholders;
(xi) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a) the
loan number of the related Mortgage Loan and (b) the date of acquisition;
(xii) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a) the
book value, (b) 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), (c) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof and (d) if applicable, the aggregate amount of
interest accrued and payable on related servicing expenses and related
advances;
(xiii) with respect to any such REO Property sold during the related
Due Period (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;
(xiv) 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;
(xv) the aggregate amount of principal prepayments made during the
related Due Period; (xvi) the amount deposited in the reserve fund, if any,
on such Distribution Date; (xvii) the amount remaining in the reserve fund,
if any, as of the close of business on such Distribution Date; (xviii) the
aggregate unpaid Accrued Certificate Interest, if any, on each class of
Certificates at the close of business on such Distribution Date;
(xix) in the case of Certificates with a variable Pass-Through Rate,
the Pass-Through Rate applicable to such Distribution Date, and, if
available, the immediately succeeding Distribution Date, as calculated in
accordance with the method specified in the related Prospectus Supplement;
(xx) 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 such Distribution
Date and the immediately succeeding Distribution Date as calculated in
accordance with the method specified in the related Prospectus Supplement;
(xxi)as to any series which includes 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
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(xxii) 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 Due Period.
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. In
addition, in the case of information furnished pursuant to subclauses (i), (ii),
(xiv), (xviii) and (xix) above, such amounts shall also be provided with respect
to each component, if any, of a class of Certificates. The Master Servicer or
the Trustee, as specified in the related Prospectus Supplement, will forward or
cause to be forwarded to each holder, to the Depositor and to such other parties
as may be specified in the Agreement, a copy of any statements or reports
received by the Master Servicer or the Trustee, as applicable, with respect to
any MBS. 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 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 Certificate 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 Asset subject thereto or the disposition of all property acquired upon
foreclosure of any Whole Loan subject thereto and (ii) the purchase of all of
the assets of the Trust Fund by the party entitled to effect such termination,
under the circumstances and in the manner set forth in the related Prospectus
Supplement. 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 presentation and surrender of
the Certificates at the location to be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the repurchase
of the assets in the related Trust Fund by the party specified therein, under
the circumstances and in the manner set forth therein. 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
assets of the Trust Fund, or of a sufficient portion of such assets to retire
such class or classes or purchase such class or classes at a price set forth in
the related Prospectus Supplement, in each case, under the circumstances and in
the manner set forth therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related Prospectus Supplement, one or more
classes of the Offered Certificates of any 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 a nominee for 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 Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. 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. Participants include Morgan Stanley & Co.
Incorporated, 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
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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"). Unless otherwise provided in the related
Prospectus Supplement, investors that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Book-Entry Certificates may do so only through Participants
and Indirect Participants. In addition, such investors ("Certificate Owners")
will receive all distributions on the Book-Entry Certificates through DTC and
its Participants. Under a book-entry format, Certificate Owners will receive
payments after the related Distribution Date because, while payments are
required to be forwarded to Cede & Co., as nominee for DTC ("Cede"), on each
such date, DTC will forward such payments to its Participants which thereafter
will be required to forward them to Indirect Participants or Certificate Owners.
Unless otherwise provided in the related Prospectus Supplement, the only
"Certificateholder" (as such term is used in the Agreement) will be Cede, as
nominee of DTC, and the Certificate Owners will not be recognized by the Trustee
as Certificateholders under the Agreement. Certificate Owners will be permitted
to exercise the rights of Certificateholders under the related Agreement only
indirectly through the 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 Book-Entry Certificates
and is required to receive and transmit distributions of principal of and
interest on the Book-Entry Certificates. Participants and Indirect Participants
with which Certificate Owners have accounts with respect to the Book-Entry
Certificates similarly are required to make book-entry transfers and receive and
transmit such payments on behalf of their respective Certificate Owners.
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 Certificate
Owner to pledge its interest in the Book-Entry Certificates to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of its interest in the Book-Entry Certificates, may be limited due to
the lack of a physical certificate evidencing such interest.
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 interests in the Book-Entry
Certificates are credited.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Certificate Owners 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 either 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 Certificate
Owners. Upon surrender by DTC of the certificate or certificates representing
the Book-Entry Certificates, together with instructions for reregistration, the
Trustee will issue (or cause to be issued) to the Certificate Owners identified
in such instructions the Definitive Certificates to which they are entitled, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each series evidencing interests in a Trust Fund
including Whole 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 not including
Whole Loans 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. In lieu of appointing a Master Servicer, a servicer may
be appointed pursuant to the Pooling and Servicing Agreement for any Trust Fund.
Such servicer will service all or a significant number of Whole Loans directly
without a Sub-Servicer. Unless otherwise specified in the related Prospectus
Supplement, the obligations of any such servicer shall be commensurate with
those of the Master Servicer described herein. References in this prospectus to
Master Servicer and its rights and
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obligations, unless otherwise specified in the related Prospectus Supplement,
shall be deemed to also be references to any servicer servicing Whole Loans
directly. A manager or administrator may be appointed pursuant to the Trust
Agreement for any Trust Fund to administer such Trust Fund. 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. Any Trust Agreement will generally
conform to the form of Pooling and Servicing Agreement filed herewith, but will
not contain provisions with respect to the servicing and maintenance of Whole
Loans. 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 in their
entirety by reference to, all of the provisions of the Agreement for each Trust
Fund and the description of such provisions in 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 Morgan Stanley Capital I Inc., c/o
Morgan Stanley & Co. Incorporated, 1585 Broadway, 37th Floor, New York, New York
10036, Attention: John E. Westerfield.
ASSIGNMENT OF ASSETS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor
will assign (or cause to be assigned) to the designated Trustee the Assets to be
included in the related Trust Fund, together with all principal and interest to
be received on or with respect to such 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 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.
Unless otherwise provided in the related Prospectus Supplement, such schedule
will include detailed information (i) in respect of each Whole Loan included in
the related Trust Fund, including without limitation, 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 the Debt Service Coverage Ratio as of the date indicated
and payment and prepayment provisions, if applicable, and (ii) 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 rate, 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, which unless otherwise specified in the related
Prospectus Supplement will include the original Mortgage Note endorsed, without
recourse, in blank or to the order of the Trustee, the original Mortgage (or a
certified copy thereof) with evidence of recording indicated thereon and an
assignment of the Mortgage to the Trustee in recordable form. Notwithstanding
the foregoing, a Trust Fund may include Mortgage Loans where the original
Mortgage Note is not delivered to the Trustee if the Depositor delivers to the
Trustee or the custodian a copy or a duplicate original of the Mortgage Note,
together with an affidavit certifying that the original thereof has been lost or
destroyed. With respect to such Mortgage Loans, the Trustee (or its nominee) may
not be able to enforce the Mortgage Note against the related borrower. Unless
otherwise specified in the related Prospectus Supplement, the Asset Seller will
be required to agree to repurchase, or substitute for, each such Mortgage Loan
that is subsequently in default if the enforcement thereof or of the related
Mortgage is materially adversely affected by the absence of the original
Mortgage Note. Unless otherwise provided in the related Prospectus Supplement,
the related Agreement will require the Depositor or another party specified
therein to promptly cause each such assignment of Mortgage 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
related Whole Loan against the claim of any subsequent transferee or any
successor to or creditor of the Depositor, the Master Servicer, the relevant
Asset Seller or any other prior holder of the Whole Loan.
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The Trustee (or a custodian) will review such Whole Loan documents
within a specified period of days after receipt thereof, and the Trustee (or a
custodian) will hold such documents in trust for the benefit of the
Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, if any such document is found to be missing or defective in any
material respect, the Trustee (or such custodian) shall immediately notify the
Master Servicer and the Depositor, and the Master Servicer shall immediately
notify the relevant Asset Seller. If the Asset Seller cannot cure the omission
or defect within a specified number of days after receipt of such notice, then
unless otherwise specified in the related Prospectus Supplement, the 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 an
Asset Seller will fulfill this repurchase or substitution obligation, and
neither the Master Servicer nor the Depositor will be obligated to repurchase or
substitute for such Mortgage Loan if the Asset Seller defaults on its
obligation. Unless otherwise specified in the related Prospectus Supplement,
this repurchase or substitution obligation constitutes the sole remedy available
to the Certificateholders or the Trustee for omission of, or a material defect
in, a constituent document. To the extent specified in the related Prospectus
Supplement, in lieu of curing any omission or defect in the Asset or
repurchasing or substituting for such Asset, the Asset Seller may agree to cover
any losses suffered by the Trust Fund as a result of such breach or defect.
If so provided in the related Prospectus Supplement, the Depositor
will, as to some or all of the Mortgage Loans, assign or cause to be assigned to
the Trustee the related Lease Assignments. In certain cases, the Trustee, or
Master Servicer, as applicable, may collect all moneys under the related Leases
and distribute amounts, if any, required under the Lease for the payment of
maintenance, insurance and taxes, to the extent specified in the related Lease
agreement. The Trustee, or if so specified in the Prospectus Supplement, the
Master Servicer, as agent for the Trustee, may hold the Lease in trust for the
benefit of the Certificateholders.
With respect to each Government Security or MBS in certificated form,
the Depositor will deliver or cause to be delivered to the Trustee (or the
custodian) the original certificate or other definitive evidence of such
Government Security or MBS, as applicable, together with bond power or other
instruments, certifications or documents required to transfer fully such
Government Security or MBS, as applicable, to the Trustee for the benefit of the
Certificateholders. With respect to each Government Security or MBS in
uncertificated or book-entry form or held through a "clearing corporation"
within the meaning of the UCC, the Depositor and the Trustee will cause such
Government Security or MBS to be registered directly or on the books of such
clearing corporation or of a financial intermediary in the name of the Trustee
for the benefit of the Certificateholders. Unless otherwise provided in the
related Prospectus Supplement, the related Agreement will require that either
the Depositor or the Trustee promptly cause any MBS and Government Securities in
certificated form not registered in the name of the Trustee to be re-registered,
with the applicable persons, in the name of the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related Prospectus Supplement the
Depositor will, with respect to each Whole Loan, make or assign certain
representations and warranties, as of a specified date (the person making such
representations and warranties, the "Warrantying 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 Assets appearing as an exhibit to
the related Agreement; (ii) the existence of title insurance insuring the lien
priority of the Whole Loan; (iii) the authority of the Warrantying Party 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 Warrantying Party, if other than the Depositor, shall be an 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. Unless otherwise specified in the related Prospectus Supplement, in
the event of a breach of any such representation or warranty, the
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Warrantying Party will be obligated to reimburse the Trust Fund for losses
caused by any such breach or either 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 Warrantying Party will have a reimbursement, 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.
Unless otherwise provided in the related Prospectus Supplement, each
Agreement will provide that the Master Servicer and/or Trustee will be required
to notify promptly the relevant Warrantying Party of any breach of any
representation or warranty made by it in respect of a Whole Loan that materially
and adversely affects the value of such Whole Loan or the interests therein of
the Certificateholders. If such Warrantying Party cannot cure such breach within
a specified period following the date on which such party was notified of such
breach, then such Warrantying Party will be obligated to repurchase such Whole
Loan from the Trustee within a specified period from the date on which the
Warrantying Party was notified of such breach, at the Purchase Price therefor.
As to any Whole Loan, unless otherwise specified in the related Prospectus
Supplement, the "Purchase Price" is 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 due date in the Due Period in
which the relevant purchase is to occur, plus certain servicing expenses that
are reimbursable to the Master Servicer. If so provided in the Prospectus
Supplement for a series, a Warrantying Party, rather than repurchase a Whole
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 Whole 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. If so provided in the Prospectus Supplement for a
series, a Warrantying Party, rather than repurchase or substitute a Whole Loan
as to which a breach has occurred, will have the option to reimburse the Trust
Fund or the Certificateholders for any losses caused by such breach. Unless
otherwise specified in the related Prospectus Supplement, this reimbursement,
repurchase or substitution obligation will constitute the sole remedy available
to holders of Certificates or the Trustee for a breach of representation by a
Warrantying Party.
Neither the Depositor (except to the extent that it is the Warrantying
Party) nor the Master Servicer will be obligated to purchase or substitute for a
Whole Loan if a Warrantying Party defaults on its obligation to do so, and no
assurance can be given that Warrantying Parties will carry out such obligations
with respect to Whole Loans.
Unless otherwise provided in the related Prospectus Supplement the
Warrantying Party will, with respect to a Trust Fund that includes Government
Securities or MBS, make or assign certain representations or warranties, as of a
specified date, with respect to such Government Securities or MBS, covering (i)
the accuracy of the information set forth therefor on the schedule of Assets
appearing as an exhibit to the related Agreement and (ii) the authority of the
Warrantying Party to sell such Assets. The related Prospectus Supplement will
describe the remedies for a 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. A breach of any such representation of
the Master Servicer which materially and adversely affects the interests of the
Certificateholders and which continues unremedied for thirty days after the
giving of written notice of such breach 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
(unless otherwise specified in the related Prospectus Supplement), will
constitute an Event of Default under such Pooling and Servicing Agreement. See
"Events of Default" and "Rights Upon Event of Default."
CERTIFICATE ACCOUNT AND OTHER COLLECTION ACCOUNTS
GENERAL
The Master Servicer and/or the Trustee will, as to each Trust Fund,
establish and maintain or cause to be established and maintained one or more
separate accounts for the collection of payments on the related Assets
(collectively, the "Certificate Account"), which must be either (i) an account
or accounts the deposits in which are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance
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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 Certificate Account or a perfected 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 Certificate Account is maintained or (ii) otherwise
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. The
collateral eligible to secure amounts in the Certificate Account is limited to
United States government securities and other investment grade obligations
specified in the Agreement ("Permitted Investments"). A Certificate 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
certain short-term Permitted Investments. Unless otherwise provided in the
related Prospectus Supplement, any interest or other income earned on funds in
the Certificate Account will be paid to a Master Servicer or its designee as
additional servicing compensation. The Certificate Account may be maintained
with an institution that is an affiliate of the Master Servicer, if applicable,
provided that such institution meets the standards imposed by the Rating Agency
or Agencies. If permitted by the Rating Agency or Agencies and so specified in
the related Prospectus Supplement, a Certificate 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.
DEPOSITS
A Master Servicer or the Trustee will deposit or cause to be deposited
in the Certificate Account for one or more Trust Funds on a daily basis, unless
otherwise provided in the related Agreement, 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, on the Assets;
(ii) all payments on account of interest on the Assets, including any
default interest collected, in each case net of any portion thereof
retained by a Master Servicer, a Sub-Servicer or a Special Servicer as its
servicing compensation and net of any Retained Interest;
(iii) all proceeds of the hazard, business interruption and general
liability insurance policies to be maintained in respect of each Mortgaged
Property securing a Whole Loan in the Trust Fund (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) and all proceeds of
rental interruption policies, if any, insuring against losses arising from
the failure of Lessees under a Lease to make timely rental payments because
of certain casualty events (collectively, "Insurance Proceeds") and all
other amounts received and retained in connection with the liquidation of
defaulted Mortgage Loans in the Trust Fund, 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 representing Prepayment Premiums;
(vii) any amounts paid under any Cash Flow Agreement, as described
under "Description of the Trust Funds--Cash Flow Agreements";
(viii) all proceeds of any Asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by the Depositor, any Asset
Seller or any other specified person as described under "Assignment of
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Assets; Repurchases" and "Representations and Warranties; Repurchases," all
proceeds of any defaulted Mortgage Loan purchased as described under
"Realization Upon Defaulted Whole Loans," and all proceeds of any Asset
purchased as described under "Description of the Certificates Termination"
(also, "Liquidation Proceeds");
(ix) any amounts paid by a Master Servicer to cover certain interest
shortfalls arising out of the prepayment of Whole Loans in the Trust Fund
as described under "Description of the Agreements Retained Interest;
Servicing Compensation and Payment of Expenses";
(x) to the extent that any such item does not constitute additional
servicing compensation to a Master Servicer, any payments on account of
modification or assumption fees, late payment charges, Prepayment Premiums
or Equity Participations on the Mortgage Assets; (xi) all payments required
to be deposited in the Certificate Account with respect to any deductible
clause in any blanket insurance policy described under "Hazard Insurance
Policies";
(xi) 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 Certificate Account; and
(xii)any other amounts required to be deposited in the Certificate
Account as provided in the related Agreement and described in the related
Prospectus Supplement.
WITHDRAWALS
A Master Servicer or the Trustee may, from time to time, unless
otherwise provided in the related Agreement and described in the related
Prospectus Supplement, make withdrawals from the Certificate Account for each
Trust Fund for any of the following purposes:
(i) to make distributions to the Certificateholders on each
Distribution Date;
(ii) to reimburse a Master Servicer for unreimbursed amounts advanced
as described under "Description of the Certificates Advances in Respect of
Delinquencies," such reimbursement to be made out of amounts received which
were identified and applied by the Master Servicer as late collections of
interest (net of related servicing fees and Retained Interest) on and
principal of the particular Whole Loans with respect to which the advances
were made or out of amounts drawn under any form of Credit Support with
respect to such Whole Loans;
(iii) to reimburse a Master Servicer for unpaid servicing fees earned
and certain unreimbursed servicing expenses incurred with respect to Whole
Loans and properties acquired in respect thereof, such reimbursement to be
made out of amounts that represent Liquidation Proceeds and Insurance
Proceeds collected on the particular Whole Loans and properties, and net
income collected on the particular properties, with respect to which such
fees were earned or such expenses were incurred or out of amounts drawn
under any form of Credit Support with respect to such Whole Loans and
properties;
(iv) to reimburse a Master Servicer for any advances described in
clause (ii) above and any servicing expenses described in clause (iii)
above which, in the Master Servicer's good faith judgment, will not be
recoverable from the amounts described in clauses (ii) and (iii),
respectively, such reimbursement to be made from amounts collected on other
Assets or, if and to the extent so provided by the related Agreement and
described in the related Prospectus Supplement, just from that portion of
amounts collected on other Assets that is otherwise distributable on one or
more classes of Subordinate Certificates, if any, remain outstanding, and
otherwise any outstanding class of Certificates, of the related series;
(v) if and to the extent described in the related Prospectus
Supplement, to pay a Master Servicer interest accrued on the advances
described in clause (ii) above and the servicing expenses described in
clause (iii) above while such remain outstanding and unreimbursed;
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(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments with respect to, and for containment,
clean-up or remediation of hazardous wastes, substances and materials on,
Mortgaged Properties securing defaulted Whole Loans as described under
"Realization Upon Defaulted Whole Loans";
(vii) to reimburse a Master Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may be,
for certain expenses, costs and liabilities incurred thereby, as and to the
extent described under "Certain Matters Regarding a Master Servicer and the
Depositor";
(viii) if and to the extent described in the related Prospectus
Supplement, to pay (or to transfer to a separate account for purposes of
escrowing for the payment of) the Trustee's fees;
(ix) to reimburse the Trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under "Certain
Matters Regarding the Trustee";
(x) unless otherwise provided in the related Prospectus Supplement, to
pay a Master Servicer, as additional servicing compensation, interest and
investment income earned in respect of amounts held in the Certificate
Account;
(xi) to pay the person entitled thereto any amounts deposited in the
Certificate Account that were identified and applied by the Master Servicer
as recoveries of Retained Interest;
(xii) to pay for costs reasonably incurred in connection with the
proper operation, management and maintenance of any Mortgaged Property
acquired for the benefit of Certificateholders by foreclosure or by deed in
lieu of foreclosure or otherwise, such payments to be made out of income
received on such property;
(xiii) if one or more elections have been made to treat the Trust Fund
or designated portions thereof as a REMIC, to pay any federal, state or
local taxes imposed on the Trust Fund or its assets or transactions, as and
to the extent described under "Certain Federal Income Tax
Consequences--REMICS--Prohibited Transactions Tax and Other Taxes";
(xiv) to pay for the cost of an independent appraiser or other expert
in real estate matters retained to determine a fair sale price for a
defaulted Whole Loan or a property acquired in respect thereof in
connection with the liquidation of such Whole Loan or property;
(xv) to pay for the cost of various opinions of counsel obtained
pursuant to the related Agreement for the benefit of Certificateholders;
(xvi)to pay for the costs of recording the related Agreement if such
recordation materially and beneficially affects the interests of
Certificateholders, provided that such payment shall not constitute a
waiver with respect to the obligation of the Warrantying Party to remedy
any breach of representation or warranty under the Agreement;
(xvii) to pay the person entitled thereto any amounts deposited in the
Certificate Account in error, including amounts received on any Asset after
its removal from the Trust Fund whether by reason of purchase or
substitution as contemplated by "Assignment of Assets; Repurchase" and
"Representations and Warranties; Repurchases" or otherwise;
(xviii) to make any other withdrawals permitted by the related
Agreement and described in the related Prospectus Supplement; and
(xix) to clear and terminate the Certificate Account at the
termination of the Trust Fund.
OTHER COLLECTION ACCOUNTS
Notwithstanding the foregoing, if so specified in the related
Prospectus Supplement, the Agreement for any series of Certificates may provide
for the establishment and maintenance of a separate collection account into
which
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the Master Servicer or any related Sub-Servicer or Special Servicer will deposit
on a daily basis the amounts described under "--Deposits" above for one or more
series of Certificates. Any amounts on deposit in any such collection account
will be withdrawn therefrom and deposited into the appropriate Certificate
Account by a time specified in the related Prospectus Supplement. To the extent
specified in the related Prospectus Supplement, any amounts which could be
withdrawn from the Certificate Account as described under "--Withdrawals" above,
may also be withdrawn from any such collection account. The Prospectus
Supplement will set forth any restrictions with respect to any such collection
account, including investment restrictions and any restrictions with respect to
financial institutions with which any such collection account may be maintained.
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 (i) the
terms of the related Agreement and any related hazard, business interruption,
rental interruption or general liability insurance policy or instrument of
Credit Support included in the related Trust Fund described herein or under
"Description of Credit Support," (ii) applicable law and (iii) the general
servicing standard specified in the related Prospectus Supplement or, if no such
standard is so specified, its normal servicing practices (in either case, the
"Servicing Standard"). In connection therewith, the Master Servicer will be
permitted in its discretion to waive any late payment charge or penalty interest
in respect of a late Whole Loan payment.
Each Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining (or causing
the mortgagor or Lessee on each Mortgage or Lease to maintain) hazard, business
interruption and general liability insurance policies (and, if applicable,
rental interruption 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 in those cases where the Master Servicer
has determined not to enforce any applicable due-on-sale clause; attempting to
cure delinquencies; supervising foreclosures; inspecting and managing Mortgaged
Properties under certain circumstances; and maintaining accounting records
relating to the Whole Loans. Unless otherwise specified in the related
Prospectus Supplement, 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."
The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan in a manner consistent with the Servicing Standard so long as the
modification, waiver or amendment will not (i) affect the amount or timing of
any scheduled 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, unless otherwise
provided in the related Prospectus Supplement, (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 is reasonably likely to
produce a greater recovery with respect to the Whole Loan on a present value
basis than would liquidation. The Master Servicer is required to notify the
Trustee in the event of any modification, waiver or amendment of any Whole Loan.
SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of
the Whole Loans to third-party servicers (each, a "Sub-Servicer"), but such
Master Servicer will remain obligated under the related Agreement. Each
sub-servicing agreement between a Master Servicer and a Sub-Servicer (a
"Sub-Servicing Agreement") must be consistent with the terms of the related
Agreement and must provide that, if for any reason the Master Servicer for the
related series of Certificates is no longer acting in such capacity, the Trustee
or any successor Master Servicer may assume the Master Servicer's rights and
obligations under such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer will be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to
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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 for certain expenditures which it
makes, generally to the same extent the Master Servicer would be reimbursed
under an Agreement. See "Retained Interest, Servicing Compensation and Payment
of Expenses."
SPECIAL SERVICERS
To the extent so specified in the related Prospectus Supplement, a
special servicer (the "Special Servicer") may be appointed. The related
Prospectus Supplement will describe the rights, obligations and compensation of
a Special Servicer. The Master Servicer will only be responsible for the duties
and obligations of a Special Servicer to the extent set forth in the Prospectus
Supplement.
REALIZATION UPON DEFAULTED WHOLE LOANS
A mortgagor's failure to make required payments may reflect inadequate
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. Unless otherwise provided in the related Prospectus
Supplement, 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 are consistent with the Servicing Standard. 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 Whole Loan and the laws of the jurisdiction in
which the Mortgaged Property is located. Under federal bankruptcy law, the
Master Servicer in certain cases 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 the Mortgage--Loans and the Leases."
Any Agreement relating to a Trust Fund that includes Whole Loans may
grant to the Master Servicer and/or the holder or holders of certain classes of
Certificates a right of first refusal to purchase from the Trust Fund at a
predetermined purchase price any such Whole Loan as to which a specified number
of scheduled payments thereunder are delinquent. Any such right granted to the
holder of an Offered Certificate will be described in the related Prospectus
Supplement. The related Prospectus Supplement will also describe any such right
granted to any person if the predetermined purchase price is less than the
Purchase Price described under "Representations and Warranties; Repurchases."
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer may offer to sell any defaulted Whole Loan described in the
preceding paragraph and not otherwise purchased by any person having a right of
first refusal with respect thereto, if and when the Master Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a greater
recovery on a present value basis than would liquidation through foreclosure or
similar proceeding. The related Agreement will provide that any such offering be
made in a commercially reasonable manner for a specified period and that the
Master Servicer accept the highest cash bid received from any person (including
itself, an affiliate of the Master Servicer or any Certificateholder) that
constitutes a fair price for such defaulted Whole Loan. In the absence of any
bid determined in accordance with the related Agreement to be fair, the Master
Servicer shall proceed with respect to such defaulted Mortgage Loan as described
below. Any bid in an amount at least equal to the Purchase Price described under
"Representations and Warranties; Repurchases" will in all cases be deemed fair.
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 securing a Whole Loan by operation of law or otherwise, if
such action is consistent with the
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Servicing Standard and a default on such Whole Loan has occurred or, in the
Master Servicer's judgment, is imminent. Unless otherwise specified in the
related Prospectus Supplement, the Master Servicer may not acquire title to any
related Mortgaged Property or take any other action that would cause the
Trustee, for the benefit of Certificateholders, or any other specified person to
be considered to hold title to, to be a "mortgagee-in-possession" of, or to be
an "owner" or an "operator" of such Mortgaged Property within the meaning of
certain federal environmental laws, unless the Master Servicer has 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
either:
(i) the Mortgaged Property is in compliance with applicable
environmental laws, and there are no circumstances 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
(ii) if the Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic
interest of the Trust Fund to acquire title to the Mortgaged Property and
further to take such actions as would be necessary and appropriate to
effect such compliance and/or respond to such circumstances (the cost of
which actions will be an expense of the Trust Fund).
Unless otherwise provided in the related Prospectus Supplement, if
title to any Mortgaged Property is acquired by a Trust Fund as to which a REMIC
election has been made, the Master Servicer, 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 of such Mortgaged Property by
the Trust Fund, unless (i) the Internal Revenue Service grants an extension of
time to sell such property or (ii) the Trustee receives an opinion of
independent counsel to the effect that the holding of the property by the Trust
Fund subsequent to such period 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. Subject to the foregoing, the
Master Servicer will be required to (i) solicit bids for any Mortgaged Property
so acquired in such a manner as will be reasonably likely to realize a fair
price for such property and (ii) accept the first (and, if multiple bids are
contemporaneously received, the highest) cash bid received from any person that
constitutes a fair price.
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. Unless
otherwise specified in the related Prospectus Supplement, any such property
acquired by the Trust Fund will be managed in a manner consistent with the
management and operation of similar property by a prudent lending institution.
The limitations imposed by the related 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 the Mortgage Loans and the Leases--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 Certificate 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.
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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.
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
Certificate 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
Unless otherwise specified in the related Prospectus Supplement, each
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 such coverage as is required under the related
Mortgage or, if any Mortgage permits the holder thereof to dictate to the
mortgagor the insurance coverage to be maintained on the related Mortgaged
Property, then such coverage as is consistent with the Servicing Standard.
Unless otherwise specified in the related Prospectus Supplement, such coverage
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 any hazard insurance policy and under
any other 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 Certificate 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 Certificate Account all sums that would have been deposited therein but for
such clause.
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.
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
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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.
Each Agreement for a Trust Fund that includes Whole Loans will require
the Master Servicer to cause the mortgagor on each Whole Loan, or, in certain
cases, the related Lessee, to maintain all such other insurance coverage with
respect to the related Mortgaged Property as is consistent with the terms of the
related Mortgage and the Servicing Standard, which insurance may typically
include flood insurance (if the related Mortgaged Property was located at the
time of origination in a federally designated flood area).
In addition, to the extent required by the related Mortgage, the Master
Servicer may require the mortgagor or related Lessee to maintain other forms of
insurance including, but not limited to, loss of rent endorsements, business
interruption insurance and comprehensive public liability insurance, and the
related Agreement may require the Master Servicer, Sub-Servicer or Special
Servicer to maintain public liability insurance with respect to any REO
Properties. Any cost incurred by the Master Servicer in maintaining any such
insurance policy will be added to the amount owing under the Mortgage Loan where
the terms of the Mortgage Loan so permit; provided, however, that the addition
of such cost will not be taken into account for purposes of calculating the
distribution to be made to Certificateholders. Such costs may be recovered by
the Master Servicer, Sub-Servicer or Special Servicer, as the case may be, from
the Collection Account, with interest thereon, as provided by the Agreement.
Under the terms of the Whole Loans, mortgagors will generally 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 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.
RENTAL INTERRUPTION INSURANCE POLICY
If so specified in the related Prospectus Supplement, the Master
Servicer or the mortgagors will maintain rental interruption insurance policies
in full force and effect with respect to some or all of the Leases. Although the
terms of such policies vary to some degree, a rental interruption insurance
policy typically provides that, to the extent that a Lessee fails to make timely
rental payments under the related Lease due to a casualty event, such losses
will be reimbursed to the insured. If so specified in the related Prospectus
Supplement, the Master Servicer will be required to pay from its servicing
compensation the premiums on the rental interruption policy on a timely basis.
If so specified in the Prospectus Supplement, if such rental interruption policy
is canceled or terminated for any reason (other than the exhaustion of total
policy coverage), the Master Servicer will exercise its best reasonable efforts
to obtain from another insurer a replacement policy comparable to the rental
interruption policy with a total coverage that is equal to the then existing
coverage of the terminated rental interruption policy; provided that if the cost
of any such replacement policy is greater than the cost of the terminated rental
interruption policy, the amount of coverage under the replacement policy will,
unless otherwise specified in the related Prospectus Supplement, be reduced to a
level such that the applicable premium does not exceed, by a percentage that may
be set forth in the related Prospectus Supplement, the cost of the rental
interruption policy that was replaced. Any amounts collected by the Master
Servicer under the rental interruption policy in the nature of insurance
proceeds will be deposited in the Certificate Account.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will require that the Master Servicer and any Special Servicer obtain
and maintain in effect a fidelity bond or similar form of insurance coverage
(which may provide blanket coverage) or any combination thereof insuring against
loss occasioned by fraud, theft or other intentional misconduct of the officers,
employees and agents of the Master Servicer or the Special Servicer, as
applicable. The related Agreement will allow the Master Servicer and any Special
Servicer to self-insure against loss occasioned by the errors and omissions of
the officers, employees and agents of the Master Servicer or the Special
Servicer so long as certain criteria set forth in the Agreement are met.
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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. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer, on behalf of the Trust Fund, will 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 a
manner consistent with the Servicing Standard. Unless otherwise specified in the
related Prospectus Supplement, 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 the Mortgage Loans and the Leases--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 Assets, and, if so, the
initial 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 an 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.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer's and a Sub-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 Asset. Since any Retained Interest and
a Master Servicer's primary compensation are percentages of the principal
balance of each Asset, such amounts will decrease in accordance with the
amortization of the Assets. 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 Certificate
Account or any account established by a Sub-Servicer pursuant to the Agreement.
The 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 and managing of the Assets, 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 Whole
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 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 Attestation Program
for Mortgage Bankers or the Audit Program for Mortgages serviced for the Federal
Home Loan Mortgage Corporation ("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 of the firm,
either the Audit Program for Mortgages serviced for FHLMC, or paragraph 4 of the
Uniform Single Attestation 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
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for examinations conducted substantially in compliance with the Uniform Single
Attestation 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 calendar
year or other specified twelve-month period.
Unless otherwise provided in the related Prospectus Supplement, copies
of such annual accountants' statement and such statements of officers 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 AND THE DEPOSITOR
The Master Servicer, if any, or a servicer for substantially all the
Whole Loans under each Agreement will be named in the related Prospectus
Supplement. The entity serving as Master Servicer (or as such servicer) may be
an affiliate of the Depositor and may have other normal business relationships
with the Depositor or the Depositor's affiliates. Reference herein to the Master
Servicer shall be deemed to be to the servicer of substantially all of the Whole
Loans, if applicable.
Unless otherwise specified in the related Prospectus Supplement, the
related Agreement will provide that the Master Servicer may resign from its
obligations and duties thereunder only upon a determination that its duties
under the Agreement are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it, the other activities of the Master Servicer so causing such a conflict
being of a type and nature carried on by the Master Servicer at the date of the
Agreement. 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.
Unless otherwise specified in the related Prospectus Supplement, 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 breach of a representation, warranty or covenant made in such
Agreement, or against any liability specifically imposed thereby, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of obligations or duties thereunder
or by reason of reckless disregard of obligations and duties thereunder. Unless
otherwise specified in the related Prospectus Supplement, 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; provided, however, that
such indemnification will not extend to any loss, liability or expense (i)
specifically imposed by such Agreement or otherwise incidental to the
performance of obligations and duties thereunder, including, in the case of a
Master Servicer, the prosecution of an enforcement action in respect of any
specific Whole Loan or Whole Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to such Agreement); (ii)
incurred in connection with any breach of a representation, warranty or covenant
made in such Agreement; (iii) incurred by reason of misfeasance, bad faith or
gross negligence in the performance of obligations or duties thereunder, or by
reason of reckless disregard of such obligations or duties; (iv) incurred in
connection with any violation of any state or federal securities law; or (v)
imposed by any taxing authority if such loss, liability or expense is not
specifically reimbursable pursuant to the terms of the related Agreement. 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
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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 Certificate Account.
Any person into which the Master Servicer or the Depositor may be
merged or consolidated, or any person resulting from any merger or consolidation
to which the Master Servicer or the Depositor is a party, or any person
succeeding to the business of the Master Servicer or the Depositor, will be the
successor of the Master Servicer or the Depositor, as the case may be, under the
related Agreement.
EVENTS OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement for a
Trust Fund that includes Whole Loans, Events of Default under the related
Agreement will include (i) any failure by the Master Servicer to distribute or
cause to be distributed to Certificateholders, or to remit to the Trustee for
distribution to Certificateholders, any required payment; (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 after written notice of such failure has been given
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; (iii) any breach of a
representation or warranty made by the Master Servicer under the Agreement which
materially and adversely affects the interests of Certificateholders and which
continues unremedied for thirty days after written notice of such breach has
been given 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 (iv) 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. Material
variations to the foregoing Events of Default (other than to shorten cure
periods or eliminate notice requirements) will be specified in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the Trustee shall, not later than the later of 60 days after the
occurrence of any event which constitutes or, with notice or lapse of time or
both, would constitute an Event of Default and five days after certain officers
of the Trustee become aware of the occurrence of such an event, transmit by mail
to the Depositor and all Certificateholders of the applicable series notice of
such occurrence, unless such default shall have been cured or waived.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under an Agreement remains unremedied,
the Depositor or the Trustee may, and 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 and in and to the Mortgage Loans (other than as a
Certificateholder or as the owner of any Retained Interest), 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, or if the related Prospectus Supplement so specifies, then the
Trustee will not be obligated to make such advances) and will be entitled to
similar compensation arrangements. Unless otherwise specified in the related
Prospectus Supplement, 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.
Unless otherwise described in the related Prospectus Supplement, the
holders of Certificates representing at least 66 2/3% of the Voting Rights
allocated to the respective classes of Certificates affected by any Event of
Default will be entitled to waive such Event of Default; provided, however, that
an Event of Default involving a failure to distribute a required payment to
Certificateholders described in clause (i) under "Events of Default" may be
waived only by all of the Certificateholders. Upon any such waiver of an Event
of Default, such Event of Default shall cease to exist and shall be deemed to
have been remedied for every purpose under the Agreement.
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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 sixty 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 parties thereto without the
consent of any of the holders of Certificates covered by the Agreement, (i) to
cure any ambiguity, (ii) to correct, modify or supplement any provision therein
which may be inconsistent with any other provision therein, (iii) to make any
other provisions with respect to matters or questions arising under the
Agreement which are not inconsistent with the provisions thereof, or (iv) to
comply with any requirements imposed by the Code; provided that such amendment
(other than an amendment for the purpose specified in clause (iv) above) will
not (as evidenced by an opinion of counsel to such effect) adversely affect in
any material respect the interests of any holder of Certificates covered by the
Agreement. Unless otherwise specified in the related Prospectus Supplement, each
Agreement may also be amended by the Depositor, the Master Servicer, if any, and
the Trustee, with the consent of the holders of Certificates affected thereby
evidencing not less than 51% of the Voting Rights, for any purpose; provided,
however, that unless otherwise specified in the related Prospectus Supplement,
no such amendment may (i) reduce in any manner the amount of or delay the timing
of, payments received or advanced 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 all Certificates of such class or (iii)
modify the provisions of such Agreement described in this paragraph 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 a
REMIC election 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 result in the imposition of a tax on the
related Trust Fund or cause the related Trust Fund to fail to qualify as a REMIC
at any time that the related Certificates are outstanding.
THE TRUSTEE
The Trustee under each Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company serving as Trustee may have a banking
relationship with the Depositor and its affiliates and with any Master Servicer
and its affiliates.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or
sufficiency of any Agreement, the Certificates or any Asset 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 Assets, 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.
CERTAIN MATTERS REGARDING THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Trustee and any director, officer, employee or agent of the Trustee shall be
entitled to indemnification out of the Certificate Account for any loss,
liability or expense (including costs and expenses of litigation, and of
investigation, counsel fees, damages,
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judgments and amounts paid in settlement) incurred in connection with the
Trustee's (i) enforcing its rights and remedies and protecting the interests,
and enforcing the rights and remedies, of the Certificateholders during the
continuance of an Event of Default, (ii) defending or prosecuting any legal
action in respect of the related Agreement or series of Certificates, (iii)
being the mortgagee of record with respect to the Mortgage Loans in a Trust Fund
and the owner of record with respect to any Mortgaged Property acquired in
respect thereof for the benefit of Certificateholders, or (iv) acting or
refraining from acting in good faith at the direction of the holders of the
related series of Certificates entitled to not less than 25% (or such higher
percentage as is specified in the related Agreement with respect to any
particular matter) of the Voting Rights for such series; provided, however, that
such indemnification will not extend to any loss, liability or expense that
constitutes a specific liability of the Trustee pursuant to the related
Agreement, or to any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence on the part of the Trustee in the
performance of its obligations and duties thereunder, or by reason of its
reckless disregard of such obligations or duties, or as may arise from a breach
of any representation, warranty or covenant of the Trustee made therein.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee may at any time resign from its obligations and duties
under an Agreement by giving written notice thereof to the Depositor, the Master
Servicer, if any, and all Certificateholders. Upon receiving such notice of
resignation, the Depositor is required promptly to appoint a successor trustee
acceptable to the Master Servicer, if any. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as
such under the related Agreement, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Depositor
may remove the Trustee and appoint a successor trustee acceptable to the Master
Servicer, if any. Holders of the Certificates of any series entitled to at least
51% of the Voting Rights for such series may at any time remove the Trustee
without cause and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee shall not become effective until acceptance of appointment by
the successor trustee.
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 Assets. Credit Support may
be in the form of the subordination of one or more classes of Certificates,
letters of credit, insurance policies, 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.
Unless otherwise provided in the related Prospectus Supplement for a
series of Certificates, the Credit Support will 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, if a form of Credit Support covers more than one series
of Certificates (each, a "Covered Trust"), holders of Certificates evidencing
interests in any of such Covered Trusts 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 Assets, the related Prospectus
Supplement will include a description of (a) the nature and amount of coverage
under
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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 of 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 "Risk Factors--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. To the
extent specified in the related Prospectus Supplement, 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. If so provided 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 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.
CROSS-SUPPORT PROVISIONS
If the 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 WHOLE LOANS
If so provided in the Prospectus Supplement for a series of
Certificates, the Whole Loans in the related Trust Fund will be covered for
various default risks by insurance policies or guarantees. 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, deficiencies in amounts otherwise payable on such Certificates or
certain classes thereof 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, generally equal to a percentage specified in the related
Prospectus Supplement of the aggregate principal balance of the Mortgage Assets
on the related Cut-off Date or of the initial aggregate Certificate Balance of
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 and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments
thereunder and may otherwise be reduced as described in the related Prospectus
Supplement. 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.
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INSURANCE POLICIES AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of
Certificates, deficiencies in amounts otherwise payable on such Certificates or
certain classes thereof 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.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of
Certificates, deficiencies in amounts otherwise payable on such Certificates or
certain classes thereof 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 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. If so specified in the related
Prospectus Supplement, 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.
Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, any
reinvestment income or other gain from such investments will be credited to the
related Reserve Fund for such series, and any loss resulting from such
investments will be charged to such Reserve Fund. However, such income may be
payable to any related Master Servicer or another service provider as additional
compensation. The Reserve Fund, if any, for a series will not be a part of the
Trust Fund unless otherwise specified in the related Prospectus Supplement.
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.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of
Certificates, the MBS in the related Trust Fund and/or the Mortgage Loans
underlying such MBS may be covered by one or more of the types of Credit Support
described herein. The related Prospectus Supplement will specify as to each such
form of Credit Support the information indicated above with respect thereto, to
the extent such information is material and available.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES
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
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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--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, security deeds 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 security deed or 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. 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
Sailors' Civil Relief Act of 1940) and, in some cases, in deed of trust
transactions, the directions of the beneficiary.
INTEREST IN REAL PROPERTY
The real property covered by a mortgage, deed of trust, security deed
or deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property such
as a tenant's interest in a lease of land or improvements, or both, and the
leasehold estate created by such lease. An instrument covering an interest in
real property other than the fee estate requires special provisions in the
instrument creating such interest or in the mortgage, deed of trust, security
deed or deed to secure debt, to protect the mortgagee against termination of
such interest before the mortgage, deed of trust, security deed or deed to
secure debt is paid. Unless otherwise specified in the Prospectus Supplement,
the Depositor or the Asset Seller will make certain representations and
warranties in the Agreement with respect to the Mortgage Loans which are secured
by an interest in a leasehold estate. Such representation and warranties will be
set forth in the Prospectus Supplement if applicable.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the mortgagor retains a revocable license to
collect the rents for so long as there is no default. Under such assignments,
the mortgagor typically assigns its right, title and interest as lessor
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under each lease and the income derived therefrom to the mortgagee, while
retaining a license to collect the rents for so long as there is no default
under the mortgage loan documentation. The manner of perfecting the mortgagee's
interest in rents may depend on whether the mortgagor's assignment was absolute
or one granted as security for the loan. Failure to properly perfect the
mortgagee's interest in rents may result in the loss of substantial pool of
funds, which could otherwise serve as a source of repayment for such loan. If
the mortgagor defaults, 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 revenues are considered
accounts receivable under the UCC; generally these revenues are either assigned
by the mortgagor, which remains entitled to collect such revenues absent a
default, or pledged by the mortgagor, as security for the loan. In general, the
lender must file financing statements in order to perfect its security interest
in the revenues 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 revenues 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 revenues 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.
Lenders that actually take possession of the property, however, may
incur potentially substantial risks attendant to being a mortgagee in
possession. Such risks include liability for environmental clean-up costs and
other risks inherent in property ownership. See "Environmental Legislation"
below.
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.
FORECLOSURE
GENERAL
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, 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 several 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 foreclose is contested, the
legal proceedings can be time-consuming. Upon successful completion of a
judicial foreclosure proceeding, the court generally issues a judgment of
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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.
EQUITABLE LIMITATIONS ON ENFORCEABILITY OF CERTAIN PROVISIONS
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 or remedy 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. Moreover, as discussed below, a
non-collusive, regularly conducted foreclosure sale may be challenged as a
fraudulent conveyance, regardless of the parties' intent, if a court determines
that the sale was for less than fair consideration and such sale occurred while
the mortgagor was insolvent (or the mortgagor was rendered insolvent as a result
of such sale) and within one year (or within the state statute of limitations if
the trustee in bankruptcy elects to proceed under state fraudulent conveyance
law) of the filing of bankruptcy.
NON-JUDICIAL FORECLOSURE/POWER OF SALE
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale pursuant to the power of sale granted in the deed of
trust. A power of sale is typically granted in a deed of trust. It may also be
contained in any other type of mortgage instrument. A power of sale allows a
non-judicial public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
mortgagor under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to such sale,
the trustee under a deed of trust must record a notice of default and notice of
sale and send a copy to the mortgagor and to any other party who has recorded a
request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record in the real property, including junior lienholders. A notice
of sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. The mortgagor or junior
lienholder may then have the right, during a reinstatement period required in
some states, to cure the default by paying the entire actual amount in arrears
(without acceleration) plus the expenses incurred in enforcing the obligation.
In other states, the mortgagor or the junior lienholder is not provided a period
to reinstate the loan, but has only the right to pay off the entire debt to
prevent the foreclosure sale. Generally, the procedure for public sale, the
parties entitled to notice, the method of giving notice and the applicable time
periods are governed by state law and vary among the states. Foreclosure of a
deed to secure debt is also generally accomplished by a non-judicial sale
similar to that required by a deed of trust, except that the lender or its
agent, rather than a trustee, is typically empowered to perform the sale in
accordance with the terms of the deed to secure debt and applicable law.
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PUBLIC SALE
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. For these reasons, it is common for the lender to
purchase the mortgaged property for an amount equal to or less than 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, restaurants, nursing or
convalescent homes or hospitals may be particularly significant because of the
expertise, knowledge and, with respect to nursing or convalescent homes or
hospitals, regulatory compliance, required to run such operations and the effect
which foreclosure and a change in ownership may have on the public's and the
industry's (including franchisors') perception of the quality of such
operations. The lender will commonly obtain the services of a real estate broker
and pay the broker's commission in connection with the sale of the property.
Depending upon market conditions, the ultimate proceeds of the sale of the
property may not equal the lender's investment in the property. Moreover, a
lender commonly incurs substantial legal fees and court costs in acquiring a
mortgaged property through contested foreclosure and/or bankruptcy proceedings.
Furthermore, a few states require that any environmental contamination at
certain types of properties be cleaned up before a property may be resold. In
addition, a lender may be responsible under federal or state law for the cost of
cleaning up a mortgaged property that is environmentally contaminated. See
"Environmental Legislation." Generally state law controls the amount of
foreclosure expenses and costs, including attorneys' fees, that may be recovered
by a lender.
A junior mortgagee may not foreclose on the property securing the
junior mortgage unless it forecloses subject to senior mortgages and any other
prior liens, in which case it may be obliged to make payments on the senior
mortgages to avoid their foreclosure. In addition, in the event that the
foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale"
clause contained in a senior mortgage, the junior mortgagee may be required to
pay the full amount of the senior mortgage to avoid its foreclosure.
Accordingly, with respect to those Mortgage Loans, if any, that 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
applied first to the costs, fees and expenses of sale 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.
REO PROPERTIES
If title to any Mortgaged Property is acquired by the Trustee on behalf
of the Certificateholders, the Master Servicer or any related Sub-servicer or
the Special Servicer, on behalf of such holders, will be required to sell the
Mortgaged Property prior to the close of the third calendar year following the
year of acquisition of such Mortgaged Property by the Trust Fund, unless (i) the
Internal Revenue Service grants an extension of time to sell such property (an
"REO Extension") or (ii) it obtains an opinion of counsel generally to the
effect that the holding of the property beyond the close of the third calendar
year after its acquisition will not result in the imposition of a tax on the
Trust Fund or cause any REMIC created pursuant to the Pooling and Servicing
Agreement to fail to qualify as a REMIC under the Code. Subject to the
foregoing, the Master Servicer or any related Sub-servicer or the Special
Servicer will generally be required to solicit bids for any Mortgaged Property
so acquired in such a manner as will be
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reasonably likely to realize a fair price for such property. The Master Servicer
or any related Sub-servicer or the Special Servicer may retain an independent
contractor to operate and manage any REO Property; however, the retention of an
independent contractor will not relieve the Master Servicer or any related
Sub-servicer or the Special Servicer of its obligations with respect to such REO
Property.
In general, the Master Servicer or any related Sub-servicer or the
Special Servicer or an independent contractor employed by the Master Servicer or
any related Sub-servicer or the Special Servicer at the expense of the Trust
Fund will be obligated to operate and manage any Mortgaged Property acquired as
REO Property in a manner that would, to the extent commercially feasible,
maximize the Trust Fund's net after-tax proceeds from such property. After the
Master Servicer or any related Sub-servicer or the Special Servicer reviews the
operation of such property and consults with the Trustee to determine the Trust
Fund's federal income tax reporting position with respect to the income it is
anticipated that the Trust Fund would derive from such property, the Master
Servicer or any related Sub-servicer or the Special Servicer could determine
(particularly in the case of an REO Property that is a hospitality or
residential health care facility) that it would not be commercially feasible to
manage and operate such property in a manner that would avoid the imposition of
a tax on "net income from foreclosure property," within the meaning of Section
857(b)(4)(B) of the Code (an "REO Tax") at the highest marginal corporate tax
rate (currently 35%). The determination as to whether income from an REO
Property would be subject to an REO Tax will depend on the specific facts and
circumstances relating to the management and operation of each REO Property. Any
REO Tax imposed on the Trust Fund's income from an REO Property would reduce the
amount available for distribution to Certificateholders. Certificateholders are
advised to consult their tax advisors regarding the possible imposition of REO
Taxes in connection with the operation of commercial REO Properties by REMICs.
See "Certain Federal Income Tax Consequences" herein and "Certain Federal Income
Tax Consequences-REMICs" in the Prospectus.
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 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 Provisions currently in effect, property acquired by
foreclosure generally must not be held beyond the close of the third calendar
year following the year of acquisition. Unless otherwise provided in the related
Prospectus Supplement, with respect to a series of Certificates for which an
election is made to qualify the Trust Fund or a part thereof as a REMIC, the
Agreement will permit foreclosed property to be held beyond the close of the
third calendar year following the year of acquisition if the Internal Revenue
Service grants an extension of time within which to sell such property or
independent counsel renders an opinion to the effect that holding such property
for such additional period is permissible under the REMIC Provisions.
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ANTI-DEFICIENCY LEGISLATION
Some or all of the Mortgage Loans may be nonrecourse loans, as to which
recourse may be had only against the specific property securing the related
Mortgage Loan and a personal money judgment may not be obtained against the
mortgagor. Even if a mortgage loan by its terms provides for recourse to the
mortgagor, some states impose prohibitions or limitations on such recourse. For
example, statutes in some states limit the right of the lender to obtain a
deficiency judgment against the mortgagor following foreclosure or sale under a
deed of trust. A deficiency judgment would be a personal judgment against the
former mortgagor equal to the difference between the net amount realized upon
the public sale of the real property and the amount due to the lender. Some
states require the lender to exhaust the security afforded under a mortgage by
foreclosure in an attempt to satisfy the full debt before bringing a personal
action against the mortgagor. In certain other states, the lender has the option
of bringing a personal action against the mortgagor on the debt without first
exhausting such security; however, in some of these states, the lender,
following judgment on such personal action, may be deemed to have elected a
remedy and may be precluded from exercising remedies with respect to the
security. In some cases, a lender will be precluded from exercising any
additional rights under the note or mortgage if it has taken any prior
enforcement action. Consequently, the practical effect of the election
requirement, in those states permitting such election, is that lenders will
usually proceed against the security first rather than bringing a personal
action against the mortgagor. Finally, other statutory provisions limit any
deficiency judgment against the former mortgagor following a judicial sale to
the excess of the outstanding debt over the fair market value of the property at
the time of the public sale. The purpose of these statutes is generally to
prevent a lender from obtaining a large deficiency judgment against the former
mortgagor as a result of low or no bids at the judicial sale.
LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on a ground lease.
Leasehold mortgages are subject to certain risks not associated with mortgage
loans secured by the fee estate of the mortgagor. The most significant of these
risks is that the ground lease creating the leasehold estate could terminate,
leaving the leasehold mortgagee without its security. The ground lease may
terminate if, among other reasons, the ground lessee breaches or defaults in its
obligations under the ground lease or there is a bankruptcy of the ground lessee
or the ground lessor. This risk may be minimized if the ground lease contains
certain provisions protective of the mortgagee, but the ground leases that
secure Mortgage Loans may not contain some of these protective provisions, and
mortgages may not contain the other protections discussed in the next paragraph.
Protective ground lease provisions include the right of the leasehold mortgagee
to receive notices from the ground lessor of any defaults by the mortgagor; the
right to cure such defaults, with adequate cure periods; if a default is not
susceptible of cure by the leasehold mortgagee, the right to acquire the
leasehold estate through foreclosure or otherwise; the ability of the ground
lease to be assigned to and by the leasehold mortgagee or purchaser at a
foreclosure sale and for the concomitant release of the ground lessee's
liabilities thereunder; and the right of the leasehold mortgagee to enter into a
new ground lease with the ground lessor on the same terms and conditions as the
old ground lease in the event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground lessee
from treating the ground lease as terminated in the event of the ground lessor's
bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor. As further protection, a leasehold mortgage may provide
for the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (Title
11 of the United States Code) (the "Bankruptcy Code"), although the
enforceability of such clause has not been established. Without the protections
described above, a leasehold mortgagee may lose the collateral securing its
leasehold mortgage. In addition, terms and conditions of a leasehold mortgage
are subject to the terms and conditions of the ground lease. Although certain
rights given to a ground lessee can be limited by the terms of a leasehold
mortgage, the rights of a ground lessee or a leasehold mortgagee with respect
to, among other things, insurance, casualty and condemnation will be governed by
the provisions of the ground lease.
BANKRUPTCY LAWS
The Bankruptcy Code and related state laws may interfere with or affect
the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) are
automatically stayed upon the filing
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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. In many
jurisdictions, the outstanding amount of the loan secured by the real property
may be reduced to the then-current value of the property (with a corresponding
partial reduction of the amount of lender's security interest) pursuant to a
confirmed plan or lien avoidance proceeding, thus leaving the lender a general
unsecured creditor for the difference between such value and the outstanding
balance of the loan. Other modifications may include the reduction in the amount
of each scheduled payment, which reduction may result from a reduction in the
rate of interest and/or the alteration of the repayment schedule (with or
without affecting the unpaid principal balance of the loan), and/or an extension
(or reduction) of the final maturity date. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years. Also, under federal bankruptcy law, a
bankruptcy court may permit a debtor through its rehabilitative plan to
de-accelerate a secured loan and to reinstate the loan even though the lender
accelerated the mortgage loan and final judgment of foreclosure had been entered
in state court (provided no sale of the property had yet occurred) prior to the
filing of the debtor's petition. This may be done even if the full amount due
under the original loan is never repaid.
Federal bankruptcy law provides generally that rights and obligation
under an unexpired lease of the debtor/lessee may not be terminated or modified
at any time after the commencement of a case under the Bankruptcy Code solely on
the basis of a provision in the lease to such effect or because of certain other
similar events. This prohibition on so-called "ipso facto clauses" could limit
the ability of the Trustee for a series of Certificates to exercise certain
contractual remedies with respect to the Leases. In addition, Section 362 of the
Bankruptcy Code operates as an automatic stay of, among other things, any act to
obtain possession of property from a debtor's estate, which may delay a
Trustee's exercise of such remedies for a related series of Certificates in the
event that a related Lessee or a related mortgagor becomes the subject of a
proceeding under the Bankruptcy Code. For example, a mortgagee would be stayed
from enforcing a Lease Assignment by a mortgagor related to a Mortgaged Property
if the related mortgagor was in a bankruptcy proceeding. The legal proceedings
necessary to resolve the issues could be time-consuming and might result in
significant delays in the receipt of the assigned rents. Similarly, the filing
of a petition in bankruptcy by or on behalf of a Lessee of a Mortgaged Property
would result in a stay 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. Rents and other proceeds of a
Mortgage Loan may also escape an assignment thereof if the assignment is not
fully perfected under state law prior to commencement of the bankruptcy
proceeding. See "--Leases and Rents" above.
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 in bankruptcy on behalf of the lessee, or the
lessee as debtor-in-possession, or the 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, such rejection generally constitutes a
breach of the executory contract or unexpired lease immediately before the date
of filing the petition. As a consequence, the other party or parties to such
lease, such as the mortgagor, as lessor under a Lease, would have only an
unsecured claim against the debtor for damages resulting from such breach, which
could adversely affect the security for the related Mortgage Loan. 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.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat such lease as terminated by such rejection or, in the alternative, the
lessee
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may remain in possession of the leasehold for the balance of such term and for
any renewal or extension of such term that is enforceable by the lessee under
applicable nonbankruptcy law. The Bankruptcy Code provides that if a lessee
elects to remain in possession after such a rejection of a lease, the lessee may
offset against rents reserved under the lease for the balance of the term after
the date of rejection of the lease, and any such renewal or extension thereof,
any damages occurring after such date caused by the nonperformance of any
obligation of the lessor under the lease after such date. To the extent provided
in the related Prospectus Supplement, the Lessee will agree under certain Leases
to pay all amounts owing thereunder to the Master Servicer without offset. To
the extent that such a contractual obligation remains enforceable against the
Lessee, the Lessee would not be able to avail itself of the rights of offset
generally afforded to lessees of real property under the Bankruptcy Code.
In a bankruptcy or similar proceeding of a mortgagor, action may be
taken seeking the recovery, as a preferential transfer or on other grounds, of
any payments made by the mortgagor, or made directly by the related Lessee,
under the related Mortgage Loan to the Trust Fund. Payments on long-term debt
may be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may have
the power to grant liens senior to the lien of a mortgage, and analogous state
statutes and general principles of equity may also provide a mortgagor with
means to halt a foreclosure proceeding or sale and to force a restructuring of a
mortgage loan on terms a lender would not otherwise accept. Moreover, the laws
of certain states also give priority to certain tax liens over the lien of a
mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that
actions of the mortgagee have been unreasonable, the lien of the related
mortgage may be subordinated to the claims of unsecured creditors.
To the extent described in the related Prospectus Supplement, certain
of the Mortgagors may be partnerships. The laws governing limited partnerships
in certain states provide that the commencement of a case under the Bankruptcy
Code with respect to a general partner will cause a person to cease to be a
general partner of the limited partnership, unless otherwise provided in writing
in the limited partnership agreement. This provision may be construed as an
"ipso facto" clause and, in the event of the general partner's bankruptcy, may
not be enforceable. To the extent described in the related Prospectus
Supplement, certain limited partnership agreements of the Mortgagors may provide
that the commencement of a case under the Bankruptcy Code with respect to the
related general partner constitutes an event of withdrawal (assuming the
enforceability of the clause is not challenged in bankruptcy proceedings or, if
challenged, is upheld) that might trigger the dissolution of the limited
partnership, the winding up of its affairs and the distribution of its assets,
unless (i) at the time there was at least one other general partner and the
written provisions of the limited partnership permit the business of the limited
partnership to be carried on by the remaining general partner and that general
partner does so or (ii) the written provisions of the limited partnership
agreement permit the limited partner to agree within a specified time frame
(often 60 days) after such withdrawal to continue the business of the limited
partnership and to the appointment of one or more general partners and the
limited partners do so. In addition, the laws governing general partnerships in
certain states provide that the commencement of a case under the Bankruptcy Code
or state bankruptcy laws with respect to a general partner of such partnerships
triggers the dissolution of such partnership, the winding up of its affairs and
the distribution of its assets. Such state laws, however, may not be enforceable
or effective in a bankruptcy case. The dissolution of a Mortgagor, the winding
up of its affairs and the distribution of its assets could result in an
acceleration of its payment obligation under a related Mortgage Loan, which may
reduce the yield on the related series of Certificates in the same manner as a
principal prepayment.
In addition, the bankruptcy of the general partner of a Mortgagor that
is a partnership may provide the opportunity for a trustee in bankruptcy for
such general partner, such general partner as a debtor-in-possession, or a
creditor of such general partner to obtain an order from a court consolidating
the assets and liabilities of the general partner with those of the Mortgagor
pursuant to the doctrines of substantive consolidation or piercing the corporate
veil. In such a case, the respective Mortgaged Property, for example, would
become property of the estate of such bankrupt general partner. Not only would
the Mortgaged Property be available to satisfy the claims of creditors of such
general partner, but an automatic stay would apply to any attempt by the Trustee
to exercise remedies with
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respect to such Mortgaged Property. However, such an occurrence should not
affect the Trustee's status as a secured creditor with respect to the Mortgagor
or its security interest in the Mortgaged Property.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGEES OR BENEFICIARIES
To the extent specified in the related Prospectus Supplement, some of
the Mortgage Loans for a series will be secured by junior mortgages or deeds of
trust which are subordinated to senior mortgages or deeds of trust held by other
lenders or institutional investors. The rights of the Trust Fund (and therefore
the related 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 Mortgaged 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 or Special Servicer, as applicable, asserts its subordinate
interest in a Mortgaged 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, or may
cure such default and bring the senior loan current, in either event 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 unless otherwise required by law.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgagee or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other casualty,
or in the event the property is taken by condemnation, the mortgagee or
beneficiary under the senior mortgage or deed of trust will have the prior right
to collect any insurance proceeds payable under the 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. 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 subordinated 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
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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 on behalf of the mortgagor or trustor. All sums so
expended by the mortgagee or beneficiary become part of the indebtedness secured
by the mortgage or deed of trust.
The form of mortgage or deed of trust used by many institutional
lenders typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting the mortgaged property,
including, without limitation, leasing activities (including new leases and
termination or modification of existing leases), alterations and improvements to
buildings forming a part of the mortgaged property and management and leasing
agreements for the mortgaged property. Tenants will often refuse to execute a
lease unless the mortgagee or beneficiary executes a written agreement with the
tenant not to disturb the tenant's possession of its premises in the event of a
foreclosure. A senior mortgagee or beneficiary may refuse to consent to matters
approved by a junior mortgagee or beneficiary with the result that the value of
the security for the junior mortgage or deed of trust is diminished. For
example, a senior mortgagee or beneficiary may decide not to approve the lease
or to refuse to grant a tenant a non-disturbance agreement. If, as a result, the
lease is not executed, the value of the mortgaged property may be diminished.
ENVIRONMENTAL LEGISLATION
Real property pledged as security to a lender may be subject to
unforeseen environmental liabilities. Of particular concern may be those
Mortgaged Properties which are, or have been, the site of manufacturing,
industrial or disposal activity. Such environmental liabilities may give rise to
(i) a diminution in value of property securing any Mortgage Loan, (ii)
limitation on the ability to foreclose against such property or (iii) in certain
circumstances, as more fully described below, liability for clean-up costs or
other remedial actions, which liability could exceed the value of the principal
balance of the related Mortgage Loan or of such Mortgaged 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 these states, the lien of a mortgage contemplated by this
transaction may lose its priority to such a superlien.
The presence of hazardous or toxic substances, or the failure to
remediate such property properly, may adversely affect the market value of the
property, as well as the owner's ability to sell or use the real estate or to
borrow using the real estate as collateral. In addition, certain environmental
laws and common law principles govern the responsibility for the removal,
encapsulation or disturbance of asbestos containing materials ("ACMs") when
these ACMs are in poor condition or when a property with ACMs is undergoing
repair, renovation or demolition. Such laws could also be used to impose
liability upon owners and operators of real properties for release of ACMs into
the air that cause personal injury or other damage. In addition to cleanup and
natural resource damages actions brought by federal, state, and local agencies
and private parties, the presence of hazardous substances on a property may lead
to claims of personal injury, property damage, or other claims by private
plaintiffs.
Under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), and under other federal law
and the law of certain states, a secured party which takes a deed-in-lieu of
foreclosure, purchases a mortgaged property at a foreclosure sale, or operates a
Mortgaged Property may become liable in some circumstances either to the
government or to private parties for cleanup costs, even if the lender does not
cause or contribute to the contamination. Liability under some federal or state
statutes may not be limited to the original or unamortized principal balance of
a loan or to the value of the property securing a loan. 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.
Lenders may be held liable under CERCLA as owners or operators.
Excluded from CERCLA's definition of "owner or operator," however, is a person
"who without participating in the management of the facility, holds indicia of
ownership primarily to protect his security interest." This exemption for
holders of a security interest such as a secured lender applies only in
circumstances where the lender acts to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities encroach on
the actual management of such facility
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or property, the lender faces potential liability as an "owner or operator"
under CERCLA. Similarly, when a lender forecloses and takes title to a
contaminated facility or property (whether it holds the facility or property as
an investment or leases it to a third party), the lender may incur potential
CERCLA liability.
Whether actions taken by a lender would constitute such an encroachment
on the actual management of a facility or property, so as to render the secured
creditor exemption unavailable to the lender has been a matter of judicial
interpretation of the statutory language, and court decisions have historically
been inconsistent.
This scope of the secured creditor exemption has been clarified by the
enactment of the Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Asset Conservation Act"), which was signed into law
by President Clinton on September 30, 1996, and which lists permissible actions
that may be undertaken by a lender holding security in a contaminated facility
without exceeding the bounds of the secured creditor exemption, subject to
certain conditions and limitations. The Asset Conservation Act provides that in
order to be deemed to have participated in the management of a secured property,
a lender must actually participate in the operational affairs of the property or
the borrower. The Asset Conservation Act also provides that a lender will
continue to have the benefit of the secured creditor exemption even if it
forecloses on a mortgaged property, purchases it at a foreclosure sale or
accepts a deed-in-lieu of foreclosure provided that the lender seeks to sell the
mortgaged property at the earliest practicable commercially reasonable time on
commercially reasonable terms. The protections afforded lenders under the Asset
Conversion Act are subject to terms and conditions that have not been clarified
by the courts.
The secured creditor exemption does not protect a lender from liability
under CERCLA in cases where the lender arranges for disposal of hazardous
substances or for transportation of hazardous substances. In addition, the
secured creditor exemption does not govern liability for cleanup costs under
federal laws other than CERCLA or under state law. CERCLA's jurisdiction extends
to the investigation and remediation of releases of "hazardous substances." The
definition of "hazardous substances" under CERCLA specifically excludes
petroleum products. Therefore, a federal statute of particular significance is
Subtitle I of the Resource Conservation and Recovery Act ("RCRA"), which governs
the operation and management of underground petroleum storage tanks. Under the
Asset Conservation Act, the holders of security interests in underground storage
tanks or properties containing such tanks are accorded protections similar to
the protections accorded to lenders under CERCLA. It should be noted, however,
that liability for cleanup of petroleum contamination may be governed by state
law, which may not provide for any specific protection for secured creditors.
In a few states, transfer of some types of properties is conditioned
upon clean up of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed-in-lieu of foreclosure
or otherwise, may be required to cleanup the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law
causes of action (for example, actions based on nuisance or on toxic tort
resulting in death, personal injury or damage to property) related to hazardous
environmental conditions on a property. While it may be more difficult to hold a
lender liable in such cases, unanticipated or uninsurable liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
If a lender is or becomes liable, it may bring an action for
contribution against the owner or operator who created the environmental hazard,
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
Warrantying 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 ("FNMA") Multifamily Guide has
been received and reviewed. In addition, unless otherwise provided in the
related Prospectus Supplement, the related Agreement will provide that the
Master Servicer, acting on behalf of the Trustee, may 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: (i) such Mortgaged Property is in
compliance with applicable environmental
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laws, and there are no circumstances 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 (ii) if such Mortgaged
Property is not so in compliance or such circumstances are so present, then it
would be in the best economic interest of the Trust Fund to acquire title to the
Mortgaged Property and further to take such actions as would be necessary and
appropriate to effect such compliance and/or respond to such circumstances. This
requirement effectively precludes enforcement of the security for the related
Mortgage Note until a satisfactory environmental inquiry is undertaken or any
required remedial action is provided for, reducing the likelihood that a given
Trust Fund will become liable for any condition or circumstance that may give
rise to any environmental claim (an "Environmental Hazard Condition") affecting
a Mortgaged Property, but making it more difficult to realize on the security
for the Mortgage Loan. However, there can be no assurance that any environmental
assessment obtained by the Master Servicer or a Special Servicer, as the case
may be, will detect all possible Environmental Hazard Conditions or that the
other requirements of the Agreement, even if fully observed by the Master
Servicer or Special Servicer, as the case may be, will in fact insulate a given
Trust Fund from liability for Environmental Hazard Conditions. See "Description
of the Agreements--Realization Upon Defaulted Whole Loans."
Unless otherwise specified in the related Prospectus Supplement, the
Depositor generally will not have determined whether environmental assessments
have been conducted with respect to the Mortgaged Properties relating to the
Mortgage Loans included in the Mortgage Pool for a Series, and it is likely that
any environmental assessments which would have been conducted with respect to
any of the Mortgaged Properties would have been conducted at the time of the
origination of the related Mortgage Loans and not thereafter. If specified in
the related Prospectus Supplement, a Warrantying Party will represent and
warrant that, as of the date of initial issuance of the Certificates of a Series
or as of another specified date, no related Mortgaged Property is affected by a
Disqualifying Condition (as defined below). In the event that, following a
default in payment on a Mortgage Loan that continues for 60 days, (i) the
environmental inquiry conducted by the Master Servicer or Special Servicer, as
the case may be, prior to any foreclosure indicates the presence of a
Disqualifying Condition that arose prior to the date of initial issuance of the
Certificates of a Series and (ii) the Master Servicer or the Special Servicer
certify that it has acted in compliance with the Servicing Standard and has not,
by any action, created, caused or contributed to a Disqualifying Condition the
Warrantying Party, at its option, will reimburse the Trust Fund, cure such
Disqualifying Condition or repurchase or substitute the affected Whole Loan, as
described under "Description of the Agreements--Representations and Warranties;
Repurchases." No such person will however, be responsible for any Disqualifying
Condition which may arise on a Mortgaged Property after the date of initial
issuance of the Certificates of the related Series, whether due to actions of
the Mortgagor, the Master Servicer, the Special Servicer or any other person. It
may not always be possible to determine whether a Disqualifying Condition arose
prior or subsequent to the date of the initial issuance of the Certificates of a
Series.
A "Disqualifying Condition" is defined generally as a condition,
existing as a result of, or arising from, the presence of Hazardous Materials
(as defined below) on a Mortgaged Property, such that the Mortgage Loan secured
by the affected Mortgaged Property would be ineligible, solely by reason of such
condition, for purchase by FNMA under the relevant provisions of FNMA's
Multifamily Seller/Servicer Guide in effect as of the date of initial issuance
of the Certificates of such series, including a condition that would constitute
a material violation of applicable federal state or local law in effect as of
their date of initial issuance of the Certificates of such series.
"Hazardous Materials" are generally defined under several federal and
state statutes, and include dangerous toxic or hazardous pollutants, chemicals,
wastes or substances, including, without limitation, those so identified
pursuant to CERCLA and RCRA, and specifically including, asbestos and asbestos
containing materials, polychlorinated biphenyls, radon gas, petroleum and
petroleum products, urea formaldehyde and any substances classified as being "in
inventory," "usable work in process" or similar classification which would, if
classified as unusable, be included in the foregoing definition.
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 related Mortgaged Property. Certain of these clauses
may provide that, upon an attempted breach
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thereof by the mortgagor of an otherwise non-recourse loan, the mortgagor
becomes personally liable for the mortgage debt. The enforceability of
due-on-sale clauses has been the subject of legislation or litigation in many
states and, in some cases, the enforceability of these clauses was limited or
denied. However, with respect to certain loans the Garn-St Germain Depository
Institutions Act of 1982 preempts state constitutional, statutory and case law
that prohibits the enforcement of due-on-sale clauses and permits lenders to
enforce these clauses in accordance with their terms subject to certain limited
exceptions. 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 a manner consistent with the Servicing Standard.
In addition, under federal bankruptcy laws, due-on-sale clauses may not
be enforceable in bankruptcy proceedings and may, under certain circumstances,
be eliminated in any modified mortgage resulting from such bankruptcy
proceeding.
SUBORDINATE FINANCING
Where a 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.
DEFAULT INTEREST, PREPAYMENT CHARGES AND PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if payments
are not timely made, and in some circumstances may provide for prepayment fees
or yield maintenance penalties if the obligation is paid prior to maturity or
prohibit such prepayment for a specified period. In certain states, there are or
may be specific limitations upon the late charges which a lender may collect
from a mortgagor for delinquent payments. Certain states also limit the amounts
that a lender may collect from a mortgagor as an additional charge if the loan
is prepaid. The enforceability, under the laws of a number of states of
provisions providing for prepayment fees or penalties upon, or prohibition of,
an involuntary prepayment is unclear, and no assurance can be given that, at the
time a Prepayment Premium is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, the obligation to make such payment,
or the provisions of any such prohibition, will be enforceable under applicable
state law. The absence of a restraint on prepayment, particularly with respect
to Mortgage Loans having higher Mortgage Rates, may increase the likelihood of
refinancing or other early retirements of the Mortgage Loans.
ACCELERATION ON DEFAULT
Unless otherwise specified in the related prospectus Supplement, some
of the Mortgage Loans included in the Mortgage Pool for a Series will include a
"debt-acceleration" clause, which permits the lender to accelerate the full debt
upon a monetary or nonmonetary default of the Mortgagor. 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 the 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 mortgagor 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.
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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 residential first mortgage loans 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.
In any state in which application of Title V has been expressly
rejected or a provision limiting discount points or other charges is adopted, no
Mortgage Loan originated after the date of such state action will be eligible
for inclusion in a Trust Fund unless (i) such Mortgage Loan provides for such
interest rate, discount points and charges as are permitted in such state or
(ii) such Mortgage Loan provides that the terms thereof shall be construed in
accordance with the laws of another state under which such interest rate,
discount points and charges would not be usurious and the mortgagor's counsel
has rendered an opinion that such choice of law provision would be given effect.
Statutes differ in their provisions as to the consequences of a
usurious loan. One group of statutes requires the lender to forfeit the interest
due above the applicable limit or impose a specified penalty. Under this
statutory scheme, the mortgagor may cancel the recorded mortgage or deed of
trust upon paying its debt with lawful interest, and the lender may foreclose,
but only for the debt plus lawful interest. A second group of statutes is more
severe. A violation of this type of usury law results in the invalidation of the
transaction, thereby permitting the mortgagor to cancel the recorded mortgage or
deed of trust without any payment or prohibiting the lender from foreclosing.
CERTAIN LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTIES
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 Mortgage Property which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(e.g., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related Mortgage Loan. Mortgages on
Mortgaged Properties which are owned by the Mortgagor 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 in that hotels and motels are
typically operated pursuant to franchise, management and operating agreements
which may be terminable by the operator, and the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchases or foreclosure is subject to the vagaries of local law
requirements. In addition, Mortgaged Properties which are multifamily
residential 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
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factors, the financial resources of the affected site, owner, landlord or other
applicable person. In addition to imposing a possible financial burden on the
Mortgagor 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
Mortgagor as owner of 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 Mortgagor of
complying with the requirements of the ADA may be subject to more stringent
requirements than those to which the Mortgagor is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such mortgagor's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
mortgagors who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to mortgagors
who enter military service (including reservists who are called to active duty)
after origination of the related Mortgage Loan, no information can be provided
as to the number of loans that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of any servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfalls in interest collections resulting from the
application of the Relief Act would result in a reduction of the amounts
distributable to the holders of the related series of Certificates, and would
not be covered by advances or, unless otherwise specified in the related
Prospectus Supplement, any form of Credit Support provided in connection with
such Certificates. In addition, the Relief Act imposes limitations that would
impair the ability of the servicer to foreclose on an affected Mortgage Loan
during the mortgagor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in the
event that such a Mortgage Loan goes into default, there may be delays and
losses occasioned thereby.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties "known to have an alleged interest in the property," including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
is based on the advice of Brown & Wood LLP or Cadwalader, Wickersham & Taft or
Latham & Watkins or such other counsel as may be specified in the related
Prospectus Supplement, counsel to the Depositor. This summary is based on laws,
regulations, including the REMIC regulations promulgated by the Treasury
Department (the "REMIC Regulations"), rulings and decisions now in effect or
(with respect to regulations) proposed, all of which are subject to change
either prospectively or retroactively. This summary does not address the federal
income tax consequences of an investment in Certificates applicable to all
categories of investors, some of which (for example, banks and insurance
companies) may be subject to special rules. Prospective investors should consult
their tax advisors regarding the federal, state, local and any other tax
consequences to them of the purchase, ownership and disposition of Certificates.
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GENERAL
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust Fund relating to a
particular Series of Certificates as a REMIC under the Code. The Prospectus
Supplement for each Series of Certificates will specify whether a REMIC election
will be made.
GRANTOR TRUST FUNDS
If a REMIC election is not made, Brown & Wood LLP or Cadwalader,
Wickersham & Taft or Latham & Watkins or such other counsel as may be specified
in the related Prospectus Supplement will deliver its opinion that the Trust
Fund will not be classified as an association taxable as a corporation and that
each such Trust Fund will be classified as a grantor trust under subpart E, Part
I of subchapter J of Chapter 1 of Subtitle A of the Code. In this case, owners
of Certificates will be treated for federal income tax purposes as owners of a
portion of the Trust Fund's assets as described below.
A. SINGLE CLASS OF GRANTOR TRUST CERTIFICATES
Characterization. The Trust Fund may be created with one class of
Grantor Trust Certificates. In this case, each Grantor Trust Certificateholder
will be treated as the owner of a pro rata undivided interest in the interest
and principal portions of the Trust Fund represented by the Grantor Trust
Certificates and will be considered the equitable owner of a pro rata undivided
interest in each of the Mortgage Assets in the Pool. Any amounts received by a
Grantor Trust Certificateholder in lieu of amounts due with respect to any
Mortgage Asset because of a default or delinquency in payment will be treated
for federal income tax purposes as having the same character as the payments
they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Mortgage Loans in the Trust Fund represented by Grantor Trust
Certificates, including interest, original issue discount ("OID"), if any,
prepayment fees, assumption fees, any gain recognized upon an assumption and
late payment charges received by the Master Servicer. Under Code Sections 162 or
212 each Grantor Trust Certificateholder will be entitled to deduct its pro rata
share of servicing fees, prepayment fees, assumption fees, any loss recognized
upon an assumption and late payment charges retained by the Master Servicer,
provided that such amounts are reasonable compensation for services rendered to
the Trust Fund. Grantor Trust Certificateholders that are individuals, estates
or trusts will be entitled to deduct their share of expenses as itemized
deductions only to the extent such expenses plus all other Code Section 212
expenses exceed two percent of its adjusted gross income. In addition, the
amount of itemized deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the applicable amount under Code
Section 68(b) (which amount will be adjusted for inflation) will be reduced by
the lesser of (i) 3% of the excess of adjusted gross income over the applicable
amount and (ii) 80% of the amount of itemized deductions otherwise allowable for
such taxable year. In general, a Grantor Trust Certificateholder using the cash
method of accounting must take into account its pro rata share of income as and
deductions as and when collected by or paid to the Master Servicer or, with
respect to original issue discount or certain other income items for which the
Certificateholder has made an election, as such amounts are accrued by the Trust
Fund on a constant interest basis, and will be entitled to claim its pro rata
share of deductions (subject to the foregoing limitations) when such amounts are
paid or such Certificateholder would otherwise be entitled to claim such
deductions had it held the Mortgage Assets directly. A Grantor Trust
Certificateholder using an accrual method of accounting must take into account
its pro rata share of income as payment becomes due or is made to the Master
Servicer, whichever is earlier and may deduct its pro rata share of expense
items (subject to the foregoing limitations) when such amounts are paid or such
Certificateholder otherwise would be entitled to claim such deductions had it
held the Mortgage Assets directly. If the servicing fees paid to the Master
Servicer are deemed to exceed reasonable servicing compensation, the amount of
such excess could be considered as an ownership interest retained by the Master
Servicer (or any person to whom the Master Servicer assigned for value all or a
portion of the servicing fees) in a portion of the interest payments on the
Mortgage Assets. The Mortgage Assets would then be subject to the "coupon
stripping" rules of the Code discussed below.
Unless otherwise specified in the related Prospectus Supplement or
otherwise provided below, as to each Series of Certificates, counsel to the
Depositor will have advised the Depositor that:
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(i) a Grantor Trust Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) representing
principal and interest payments on Mortgage Assets will be considered to
represent "loans . . . secured by an interest in real property which is . .
. residential property" within the meaning of Code Section
7701(a)(19)(C)(v), to the extent that the Mortgage Assets represented by
that Grantor Trust Certificate are of a type described in such Code
section;
(ii) a Grantor Trust Certificate owned by a real estate investment
trust representing an interest in Mortgage Assets will be considered to
represent "real estate assets" within the meaning of Code Section
856(c)(4)(A), and interest income on the Mortgage Assets will be considered
"interest on obligations secured by mortgages on real property" within the
meaning of Code Section 856(c)(3)(B), to the extent that the Mortgage
Assets represented by that Grantor Trust Certificate are of a type
described in such Code section;
(iii) a Grantor Trust Certificate owned by a REMIC will represent
"obligation[s] . . . which [are] principally secured by an interest in real
property" within the meaning of Code Section 860G(a)(3); and
(iv) a Grantor Trust Certificate owned by a financial asset
securitization investment trust will represent "permitted assets" with the
meaning of Code Section 860L(c).
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application of
Code Section 593(d) to any taxable year beginning after December 31, 1995.
Stripped Bonds and Coupons. Certain Trust Funds may consist of
Government Securities that constitute "stripped bonds" or "stripped coupons" as
those terms are defined in section 1286 of the Code, and, as a result, such
assets would be subject to the stripped bond provisions of the Code. Under these
rules, such Government Securities are treated as having original issue discount
based on the purchase price and the stated redemption price at maturity of each
Security. As such, Grantor Trust Certificateholders would be required to include
in income their pro rata share of the original issue discount on each Government
Security recognized in any given year on an economic accrual basis even if the
Grantor Trust Certificateholder is a cash method taxpayer. Accordingly, the sum
of the income includible to the Grantor Trust Certificateholder in any taxable
year may exceed amounts actually received during such year.
Premium. The price paid for a Grantor Trust Certificate by a holder
will be allocated to such holder's undivided interest in each Mortgage Asset
based on each Mortgage Asset's relative fair market value, so that such holder's
undivided interest in each Mortgage Asset will have its own tax basis. A Grantor
Trust Certificateholder that acquires an interest in Mortgage Assets at a
premium may elect to amortize such premium under a constant interest method,
provided that the underlying mortgage loans with respect to such Mortgage Assets
were originated after September 27, 1985. Premium allocable to mortgage loans
originated on or before September 27, 1985 should be allocated among the
principal payments on such mortgage loans and allowed as an ordinary deduction
as principal payments are made. Amortizable bond premium will be treated as an
offset to interest income on such Grantor Trust Certificate. The basis for such
Grantor Trust Certificate will be reduced to the extent that amortizable premium
is applied to offset interest payments. It is not clear whether a reasonable
prepayment assumption should be used in computing amortization of premium
allowable under Code Section 171. A Certificateholder that makes this election
for a Mortgage Asset or any other debt instrument that is acquired at a premium
will be deemed to have made an election to amortize bond premium with respect to
all debt instruments having amortizable bond premium that such Certificateholder
acquires during the year of the election or thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a Grantor Trust Certificate representing an
interest in a Mortgage Asset or Mortgage Loan acquired at a premium should
recognize a loss if a Mortgage Loan (or an underlying mortgage loan with respect
to a Mortgage Asset) prepays in full, equal to the difference between the
portion of the prepaid principal amount of such Mortgage Loan (or underlying
mortgage loan) that is allocable to the Certificate and the portion of the
adjusted basis of the Certificate that is allocable to such Mortgage Loan (or
underlying mortgage loan). If a reasonable prepayment assumption is used to
amortize such premium, it appears that such a loss would be available, if at
all, only if prepayments have occurred at a rate faster than the reasonable
assumed prepayment rate. It is not clear whether any other adjustments would be
required to reflect differences between an assumed prepayment rate and the
actual rate of prepayments.
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On December 30, 1997, the Internal Revenue Service (the "IRS") issued
final regulations (the "Amortizable Bond Premium Regulations") dealing with
amortizable bond premium. These regulations, which generally are effective for
bonds issued or acquired on or after March 2, 1998 (or, for holders making an
election for the taxable year that includes March 2, 1998 or any subsequent
taxable year, shall apply to bonds held on or after the first day of the taxable
year of the election). The Amortizable Bond Premium Regulations specifically do
not apply to prepayable debt instruments or any pool of debt instruments the
yield on which may be affected by prepayments, such as the Trust Fund, which are
subject to Section 1272(a)(6) of the Code. Absent further guidance from the IRS
and unless otherwise specified in the related Prospectus Supplement, the Trustee
will account for amortizable bond premium in the manner described above.
Prospective purchasers should consult their tax advisors regarding amortizable
bond premium and the Amortizable Bond Premium Regulations.
Original Issue Discount. The IRS has stated in published rulings that,
in circumstances similar to those described herein, the special rules of the
Code relating to original issue discount ("OID") (currently Code Sections 1271
through 1273 and 1275) and Treasury regulations issued on January 27, 1994,
under such Sections (the "OID Regulations"), will be applicable to a Grantor
Trust Certificateholder's interest in those Mortgage Assets meeting the
conditions necessary for these sections to apply. Rules regarding periodic
inclusion of OID 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. Such OID could arise by the financing of points
or other charges by the originator of the mortgages in an amount greater than a
statutory de minimis exception to the extent that the points are not currently
deductible under applicable Code provisions or are not for services provided by
the lender. OID generally must be reported as ordinary gross income as it
accrues under a constant interest method. See "--Multiple Classes of Grantor
Trust Certificates--Accrual of Original Issue Discount" below.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Mortgage Assets may be subject to the market discount
rules of Code Sections 1276 through 1278 to the extent an undivided interest in
a Mortgage Asset is considered to have been purchased at a "market discount."
Generally, the amount of market discount is equal to the excess of the portion
of the principal amount of such Mortgage Asset allocable to such holder's
undivided interest over such holder's tax basis in such interest. Market
discount with respect to a Grantor Trust Certificate will be considered to be
zero if the amount allocable to the Grantor Trust Certificate is less than 0.25%
of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986 shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at the
time of such payment. The amount of accrued market discount for purposes of
determining the tax treatment of subsequent principal payments or dispositions
of the market discount bond is to be reduced by the amount so treated as
ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have
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not been issued, it is impossible to predict what effect those regulations might
have on the tax treatment of a Grantor Trust Certificate purchased at a discount
or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry such Grantor Trust Certificate purchased with market discount. For
these purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method for Certificates acquired on or after April 4,
1994. If such an election were to be made with respect to a Grantor Trust
Certificate with market discount, the Certificateholder would be deemed to have
made an election to include in income currently market discount with respect to
all other debt instruments having market discount that such Certificateholder
acquires during the year of the election or thereafter. Similarly, a
Certificateholder that makes this election for a Certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder owns or acquires. See "--Premium" herein. The election to
accrue interest, discount and premium on a constant yield method with respect to
a Certificate is irrevocable without consent of the IRS.
Anti-Abuse Rule. The IRS can apply or depart from the rules contained
in the OID Regulations as necessary or appropriate to achieve a reasonable
result where a principal purpose in structuring a Mortgage Asset, Mortgage Loan
or Grantor Trust Certificate or applying the otherwise applicable rules is to
achieve a result that is unreasonable in light of the purposes of the applicable
statutes (which generally are intended to achieve the clear reflection of income
for both issuers and holders of debt instruments).
B. MULTIPLE CLASSES OF GRANTOR TRUST CERTIFICATES
1. Stripped Bonds and Stripped Coupons
Pursuant to Code Section 1286, the separation of ownership of the right
to receive some or all of the interest payments on an obligation from ownership
of the right to receive some or all of the principal payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of Code Sections 1271
through 1288, Code Section 1286 treats a stripped bond or a stripped coupon as
an obligation issued on the date that such stripped interest is created. If a
Trust Fund is created with two classes of Grantor Trust Certificates, one class
of Grantor Trust Certificates may represent the right to principal and interest,
or principal only, on all or a portion of the Mortgage Assets (the "Stripped
Bond Certificates"), while the second class of Grantor Trust Certificates may
represent the right to some or all of the interest on such portion (the
"Stripped Coupon Certificates").
Servicing fees in excess of reasonable servicing fees ("excess
servicing") will be treated under the stripped bond rules. If the excess
servicing fee is less than 100 basis points (i.e., 1% interest on the Mortgage
Asset principal balance) or the Certificates are initially sold with a de
minimis discount (assuming no prepayment assumption is required), any non-de
minimis discount arising from a subsequent transfer of the Certificates should
be treated as market discount. The IRS appears to require that reasonable
servicing fees be calculated on a Mortgage Asset by Mortgage Asset basis, which
could result in some Mortgage Assets being treated as having more than 100 basis
points of interest stripped off. See "--Non-REMIC Certificates" and "Multiple
Classes of Grantor Trust Certificates--Stripped Bonds and Stripped Coupons"
herein.
Although not entirely clear, a Stripped Bond Certificate generally
should be treated as an interest in Mortgage Assets issued on the day such
Certificate is purchased for purposes of calculating any OID. Generally, if the
discount on a Mortgage Asset is larger than a de minimis amount (as calculated
for purposes of the OID rules) a purchaser of such a Certificate will be
required to accrue the discount under the OID rules of the Code. See
"--Non-REMIC Certificates" and "--Single Class of Grantor Trust
Certificates--Original Issue Discount" herein.
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However, a purchaser of a Stripped Bond Certificate will be required to account
for any discount on the Mortgage Assets as market discount rather than OID if
either (i) the amount of OID with respect to the Mortgage Assets is treated as
zero under the OID de minimis rule when the Certificate was stripped or (ii) no
more than 100 basis points (including any amount of servicing fees in excess of
reasonable servicing fees) is stripped off of the Trust Fund's Mortgage Assets.
Pursuant to Revenue Procedure 91-49, issued on August 8, 1991, purchasers of
Stripped Bond Certificates using an inconsistent method of accounting must
change their method of accounting and request the consent of the IRS to the
change in their accounting method on a statement attached to their first timely
tax return filed after August 8, 1991.
The precise tax treatment of Stripped Coupon Certificates is
substantially uncertain. The Code could be read literally to require that OID
computations be made for each payment from each Mortgage Asset. Unless otherwise
specified in the related prospectus supplement, all payments from a Mortgage
Asset underlying a Stripped Coupon Certificate will be treated as a single
installment obligation subject to the OID rules of the Code, in which case, all
payments from such Mortgage Asset would be included in the Mortgage Asset's
stated redemption price at maturity for purposes of calculating income on such
Certificate under the OID rules of the Code.
It is unclear under what circumstances, if any, the prepayment of
Mortgage Assets will give rise to a loss to the holder of a Stripped Bond
Certificate purchased at a premium or a Stripped Coupon Certificate. If such
Certificate is treated as a single instrument (rather than an interest in
discrete mortgage loans) and the effect of prepayments is taken into account in
computing yield with respect to such Grantor Trust Certificate, it appears that
no loss will be available as a result of any particular prepayment unless
prepayments occur at a rate sufficiently faster than the assumed prepayment rate
so that the Certificateholder will not recover its investment. However, if such
Certificate is treated as an interest in discrete Mortgage Assets, or if no
prepayment assumption is used, then when a Mortgage Asset is prepaid, the holder
of such Certificate should be able to recognize a loss equal to the portion of
the adjusted issue price of such Certificate that is allocable to such Mortgage
Asset.
Holders of Stripped Bond Certificates and Stripped Coupon Certificates
are urged to consult with their own tax advisors regarding the proper treatment
of these Certificates for federal income tax purposes.
Treatment of Certain Owners. Several Code sections provide beneficial
treatment to certain taxpayers that invest in Mortgage Assets of the type that
make up the Trust Fund. With respect to these Code sections, no specific legal
authority exists regarding whether the character of the Grantor Trust
Certificates, for federal income tax purposes, will be the same as that of the
underlying Mortgage Assets. While Code Section 1286 treats a stripped obligation
as a separate obligation for purposes of the Code provisions addressing OID, it
is not clear whether such characterization would apply with regard to these
other Code sections. Although the issue is not free from doubt, each class of
Grantor Trust Certificates, unless otherwise specified in the related Prospectus
Supplement, should be considered to represent "real estate assets" within the
meaning of Code Section 856(c)(4)(A) and "loans . . . secured by, an interest in
real property which is . . . residential real property" within the meaning of
Code Section 7701(a)(19)(C)(v), and interest income attributable to Grantor
Trust 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 underlying Mortgage Assets and
interest on such Mortgage Assets qualify for such treatment. Prospective
purchasers to which such characterization of an investment in Certificates is
material should consult their own tax advisors regarding the characterization of
the Grantor Trust Certificates and the income therefrom. Grantor Trust
Certificates will be "obligation[s] . . . which [are] principally secured by an
interest in real property" within the meaning of Code Section 860G(a)(3)(A) and
"permitted assets" within the meaning of Code Section 860L(c).
2. Grantor Trust Certificates Representing Interests in Loans Other
Than ARM Loans
The original issue discount rules of Code Sections 1271 through 1275
will be applicable to a Certificateholder's interest in those Mortgage Assets as
to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount in 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 mortgage in an amount greater than the statutory de
minimis exception, including a payment of points that is currently deductible by
the borrower under applicable Code provisions, or under certain circumstances,
by the presence of "teaser" rates
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on the Mortgage Assets. OID on each Grantor Trust Certificate must be included
in the owner's ordinary income for federal income tax purposes as it accrues, in
accordance with a constant interest method that takes into account the
compounding of interest, in advance of receipt of the cash attributable to such
income. The amount of OID required to be included in an owner's income in any
taxable year with respect to a Grantor Trust Certificate representing an
interest in Mortgage Assets other than Mortgage Assets with interest rates that
adjust periodically ("ARM Loans") likely will be computed as described below
under "--Accrual of Original Issue Discount." The following discussion is based
in part on the OID Regulations and in part on the provisions of the Tax Reform
Act of 1986 (the "1986 Act"). The OID Regulations generally are effective for
debt instruments issued on or after April 4, 1994, but may be relied upon as
authority with respect to debt instruments, such as the Grantor Trust
Certificates, issued after December 21, 1992. Alternatively, proposed Treasury
regulations issued December 21, 1992 may be treated as authority for debt
instruments issued after December 21, 1992 and prior to April 4, 1994, and
proposed Treasury regulations issued in 1986 and 1991 may be treated as
authority for instruments issued before December 21, 1992. In applying these
dates, the issue date of the Mortgage Assets should be used, or, in the case of
Stripped Bond Certificates or Stripped Coupon Certificates, the date such
Certificates are acquired. The holder of a Certificate should be aware, however,
that neither the proposed OID Regulations nor the OID Regulations adequately
address certain issues relevant to prepayable securities.
Under the Code, the Mortgage Assets underlying the Grantor Trust
Certificate will be treated as having been issued on the date they were
originated with an amount of OID equal to the excess of such Mortgage Asset's
stated redemption price at maturity over its issue price. The issue price of a
Mortgage Asset is generally the amount lent to the mortgagee, which may be
adjusted to take into account certain loan origination fees. The stated
redemption price at maturity of a Mortgage Asset is the sum of all payments to
be made on such Mortgage Asset other than payments that are treated as qualified
stated interest payments. The accrual of this OID, as described below under
"--Accrual of Original Issue Discount," will, unless otherwise specified in the
related Prospectus Supplement, utilize the original yield to maturity of the
Grantor Trust Certificate calculated based on a reasonable assumed prepayment
rate for the mortgage loans underlying the Grantor Trust Certificates (the
"Prepayment Assumption") on the issue date of such Grantor Trust Certificate,
and will take into account events that occur during the calculation period. The
Prepayment Assumption will be determined in the manner prescribed by regulations
that have not yet been issued. In the absence of such regulations, the
Prepayment Assumption used will be the prepayment assumption that is used in
determining the offering price of such Certificate. No representation is made
that any Certificate will prepay at the Prepayment Assumption or at any other
rate. The prepayment assumption contained in the Code literally only applies to
debt instruments collateralized by other debt instruments that are subject to
prepayment rather than direct ownership interests in such debt instruments, such
as the Certificates represent. However, no other legal authority provides
guidance with regard to the proper method for accruing OID on obligations that
are subject to prepayment, and, until further guidance is issued, the Master
Servicer intends to calculate and report OID under the method described below.
Accrual of Original Issue Discount. Generally, the owner of a Grantor
Trust Certificate must include in gross income the sum of the "daily portions,"
as defined below, of the OID on such Grantor Trust Certificate for each day on
which it owns such Certificate, including the date of purchase but excluding the
date of disposition. In the case of an original owner, the daily portions of OID
with respect to each component generally will be determined as set forth under
the OID Regulations. A calculation will be made by the Master Servicer or such
other entity specified in the related Prospectus Supplement of the portion of
OID that accrues during each successive monthly accrual period (or shorter
period from the date of original issue) that ends on the day in the calendar
year corresponding to each of the Distribution Dates on the Grantor Trust
Certificates (or the day prior to each such date). This will be done, in the
case of each full month accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the respective component under the Prepayment
Assumption) of all remaining payments to be received under the Prepayment
Assumption on the respective component and (b) any payments included in the
stated redemption price at maturity received during such accrual period, and
(ii) subtracting from that total the "adjusted issue price" of the respective
component at the beginning of such accrual period. The adjusted issue price of a
Grantor Trust Certificate at the beginning of the first accrual period is its
issue price; the adjusted issue price of a Grantor Trust Certificate at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period reduced by the amount of any payment other than
a payment of qualified stated interest made at the end of or during that accrual
period. The OID accruing during such accrual period will then be divided by the
number of days in the period to determine the daily portion of OID for each day
in
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the period. With respect to an initial accrual period shorter than a full
monthly accrual period, the daily portions of OID must be determined according
to an appropriate allocation under any reasonable method.
Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest as it accrues rather than when received. However,
the amount of original issue discount includible in the income of a holder of an
obligation is reduced when the obligation is acquired 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 Assets acquired by a Certificateholder are purchased at a price
equal to the then unpaid principal amount of such Mortgage Asset, no original
issue discount attributable to the difference between the issue price and the
original principal amount of such Mortgage Asset (i.e. points) will be
includible by such holder. Other original issue discount on the Mortgage Assets
(e.g., that arising from a "teaser" rate) would still need to be accrued.
3. Grantor Trust Certificates Representing Interests in ARM Loans
The OID Regulations do not address the treatment of instruments, such
as the Grantor Trust Certificates, which represent interests in ARM Loans.
Additionally, the IRS has not issued guidance under the Code's coupon stripping
rules with respect to such instruments. In the absence of any authority, the
Master Servicer will report OID on Grantor Trust Certificates attributable to
ARM Loans ("Stripped ARM Obligations") to holders in a manner it believes is
consistent with the rules described above under the heading "--Grantor Trust
Certificates Representing Interests in Loans Other Than ARM Loans" and with the
OID Regulations. In general, application of these rules may require inclusion of
income on a Stripped ARM Obligation in advance of the receipt of cash
attributable to such income. Further, the addition of interest deferred by
reason of negative amortization ("Deferred Interest") to the principal balance
of an ARM Loan may require the inclusion of such amount in the income of the
Grantor Trust Certificateholder when such amount accrues. Furthermore, the
addition of Deferred Interest to the Grantor Trust Certificate's principal
balance will result in additional income (including possibly OID income) to the
Grantor Trust Certificateholder over the remaining life of such Grantor Trust
Certificates.
Because the treatment of Stripped ARM Obligations is uncertain,
investors are urged to consult their tax advisors regarding how income will be
includible with respect to such Certificates.
c. SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE
Sale or exchange of a Grantor Trust Certificate prior to its maturity
will result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the seller's purchase price for the Grantor
Trust Certificate, increased by the OID included in the seller's gross income
with respect to the Grantor Trust Certificate, and reduced by principal payments
on the Grantor Trust Certificate previously received by the seller. Such gain or
loss will be capital gain or loss to an owner for which a Grantor Trust
Certificate is a "capital asset" within the meaning of Code Section 1221, and
will generally be long-term capital gain if the Grantor Trust Certificate has
been owned for more than one year. Long-term capital gains of individuals are
subject to reduced maximum tax rates while capital gains recognized by
individuals on capital assets held less than twelve months are generally subject
to ordinary income tax rates. The use of capital losses is limited.
It is possible that capital gain realized by holders of one or more
classes of Grantor Trust Certificates could be considered gain realized upon the
disposition of property that was part of a "conversion transaction." A sale of a
Grantor Trust Certificate will be part of a conversion transaction if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract to
sell the Grantor Trust Certificate substantially contemporaneously with
acquiring the Grantor Trust Certificate, (ii) the Grantor Trust Certificate is
part of a straddle, (iii) the Grantor Trust Certificate is marketed or sold as
producing capital gain, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of a
Grantor Trust Certificate is part of a conversion transaction, all or any
portion of the gain realized upon the sale or other disposition would be treated
as ordinary income instead of capital gain.
Grantor Trust Certificates will be "evidences of indebtedness" within
the meaning of Code Section 582(c)(1), so that gain or loss recognized from the
sale of a Grantor Trust Certificate by a bank or a thrift institution to which
such section applies will be treated as ordinary income or loss.
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d. NON-U.S. PERSONS
Generally, to the extent that a Grantor Trust Certificate evidences
ownership in underlying Mortgage Assets that were issued on or before July 18,
1984, interest or OID paid by the person required to withhold tax under Code
Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as defined
below) or (ii) a Grantor Trust Certificateholder holding on behalf of an owner
that is not a U.S. Person will be subject to federal income tax, collected by
withholding, at a rate of 30% or such lower rate as may be provided for interest
by an applicable tax treaty, unless such income is effectively connected with a
U.S. trade or business of such owner or beneficial owner. Accrued OID recognized
by the owner on the sale or exchange of such a Grantor Trust Certificate also
will be subject to federal income tax at the same rate. Generally, such payments
would not be subject to withholding to the extent that a Grantor Trust
Certificate evidences ownership in Mortgage Assets issued after July 18, 1984,
by natural persons if such Grantor Trust Certificateholder complies with certain
identification requirements (including delivery of a statement, signed by the
Grantor Trust Certificateholder under penalties of perjury, certifying that such
Grantor Trust Certificateholder is not a U.S. Person and providing the name and
address of such Grantor Trust Certificateholder). To the extent payments to
Grantor Trust Certificateholders that are not U.S. Persons are payments of
"contingent interest" on the underlying Mortgage Assets, or such Grantor Trust
Certificateholder is ineligible for the exemption described in the preceding
sentence, the 30% withholding tax will apply unless such withholding taxes are
reduced or eliminated by an applicable tax treaty and such holder meets the
eligibility and certification requirements necessary to obtain the benefits of
such treaty. Additional restrictions apply to Mortgage Assets where the
mortgagor is not a natural person in order to qualify for the exemption from
withholding. If capital gain derived from the sale, retirement or other
disposition of a Grantor Trust Certificate is effectively connected with a U.S.
trade or business of a Grantor Trust Certificateholder that is not a U.S.
Person, such Certificateholder will be taxed on the net gain under the graduated
U.S. federal income tax rates applicable to U.S. Persons (and, with respect to
Grantor Trust Certificates held by or on behalf of corporations, also may be
subject to branch profits tax). In addition, if the Trust Fund acquires a United
States real property interest through foreclosure, deed in lieu of foreclosure
or otherwise on a Mortgage Asset secured by such an interest (which for this
purpose includes real property located in the United States and the Virgin
Islands), a Grantor Trust Certificateholder that is not a U.S. Person will
potentially be subject to federal income tax on any gain attributable to such
real property interest that is allocable to such holder. Non-U.S. Persons should
consult their tax advisors regarding the application to them of the foregoing
rules.
As used herein, a "U.S. Person" means a citizen or resident of the
United States, a corporation or a partnership organized in or under the laws of
the United States or any political subdivision thereof (other than a partnership
that is not treated as a U.S. Person under any applicable Treasury regulations),
an estate the income of which from sources outside the United States is
includible in gross income for federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States or a
trust if a court within the United States is able to exercise primary
supervision of the administration of the trust and one or more U.S. Persons have
the authority to control all substantial decisions of the trust. In addition,
certain trusts treated as U.S. Persons before August 20, 1996 may elect to
continue to be so treated to the extent provided in regulations.
e. INFORMATION REPORTING AND BACKUP WITHHOLDING
The Master Servicer will furnish or make available, within a reasonable
time after the end of each calendar year, to each person who was a
Certificateholder at any time during such year, such information as may be
deemed necessary or desirable to assist Certificateholders in preparing their
federal income tax returns, or to enable holders to make such information
available to beneficial owners or financial intermediaries that hold such
Certificates as nominees on behalf of beneficial owners. If a holder, beneficial
owner, financial intermediary or other recipient of a payment on behalf of a
beneficial owner fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be required with respect to any payments to
registered owners who are not "exempt recipients." In addition, upon the sale of
a Grantor Trust Certificate to (or through) a broker, the broker must withhold
31% of the entire purchase price, unless either (i) the broker determines that
the seller is a corporation or other exempt recipient, or (ii) the seller
provides, in the required manner, certain identifying information and, in the
case of a non-U.S. Person, certifies that such seller is a Non-U.S. Person, and
certain other conditions are met. Such as sale must also be reported by the
broker to the IRS, unless either (a) the broker determines that the seller is an
exempt recipient or (b) the seller certifies its non-U.S. Person status (and
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certain other conditions are met). Certification of the registered owner's
non-U.S. Person status normally would be made on IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against such recipient's federal income
tax liability.
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
2000, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
REMICS
The Trust Fund relating to a Series of Certificates may elect to be
treated as a REMIC. Qualification as a REMIC requires ongoing compliance with
certain conditions. Although a REMIC is not generally subject to federal income
tax (see, however "--Taxation of Owners of REMIC Residual Certificates" and
"--Prohibited Transactions" below), if a Trust Fund with respect to which a
REMIC election is made fails to comply with one or more of the ongoing
requirements of the Code for REMIC status during any taxable year, including the
implementation of restrictions on the purchase and transfer of the residual
interests in a REMIC as described below under "Taxation of Owners of REMIC
Residual Certificates," the Code provides that a Trust Fund will not be treated
as a REMIC for such year and thereafter. In that event, such entity may be
taxable as a separate corporation, and the related Certificates (the "REMIC
Certificates") may not be accorded the status or given the tax treatment
described below. While the Code authorizes the Treasury Department to issue
regulations providing relief in the event of an inadvertent termination of the
status of a trust fund as a REMIC, no such regulations have been issued. Any
such relief, moreover, may be accompanied by sanctions, such as the imposition
of a corporate tax on all or a portion of the REMIC's income for the period in
which the requirements for such status are not satisfied. With respect to each
Trust Fund that elects REMIC status, Brown & Wood LLP or Cadwalader, Wickersham
& Taft or Latham & Watkins or such other counsel as may be specified in the
related Prospectus Supplement will deliver its opinion generally to the effect
that, under then existing law and assuming compliance with all provisions of the
related Pooling and Servicing Agreement, such Trust Fund will qualify as a
REMIC, and the related Certificates will be considered to be regular interests
("REMIC Regular Certificates") or a sole class of residual interests ("REMIC
Residual Certificates") in the REMIC. The related Prospectus Supplement for each
Series of Certificates will indicate whether the Trust Fund will make a REMIC
election and whether a class of Certificates will be treated as a regular or
residual interest in the REMIC.
A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in such an obligation and any "regular interest"
in another REMIC) that is principally secured by an interest in real property
and that is transferred to the REMIC within a prescribed time period in exchange
for regular or residual interests in the REMIC.
In general, with respect to each Series of Certificates for which a
REMIC election is made, (i) Certificates held by a thrift institution taxed as a
"domestic building and loan association" will constitute assets described in
Code Section 7701(a)(19)(C); (ii) Certificates held by a real estate investment
trust will constitute "real estate assets" within the meaning of Code Section
856(c)(4)(A); and (iii) interest on Certificates held by a real estate
investment trust will be considered "interest on obligations secured by
mortgages on real property" within the meaning of Code Section 856(c)(3)(B). If
less than 95% of the REMIC's assets are assets qualifying under any of the
foregoing Code sections, the Certificates will be qualifying assets only to the
extent that the REMIC's assets are qualifying assets.
Tiered REMIC Structures. For certain Series of Certificates, two or
more separate elections may be made to treat designated portions of the related
Trust Fund as REMICs (respectively, the "Subsidiary REMIC" and the "Master
REMIC") for federal income tax purposes. Upon the issuance of any such Series of
Certificates, Brown & Wood LLP or Cadwalader, Wickersham & Taft or Latham &
Watkins or such other counsel as may be specified in the related Prospectus
Supplement, counsel to the Depositor, will deliver its opinion generally to the
effect that, assuming compliance with all provisions of the related Agreement,
the Master REMIC as well as any Subsidiary REMIC will each qualify as a REMIC,
and the REMIC Certificates issued by the Master REMIC and the Subsidiary
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REMIC or REMICs, respectively, will be considered to evidence ownership of
regular interests ("REMIC Regular Certificates") or residual interests ("REMIC
Residual Certificates") in the related REMIC within the meaning of the REMIC
provisions.
Other than the residual interest in a Subsidiary REMIC, only REMIC
Certificates issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC or REMICs and the Master REMIC will be treated as one REMIC
solely for purposes of determining whether the REMIC Certificates will be (i)
"real estate assets" within the meaning of Section 856(c)(4)(A) of the Code;
(ii) "loans secured by an interest in real property" under Section
7701(a)(19)(C) of the Code; and (iii) whether the income on such Certificates is
interest described in Section 856(c)(3)(B) of the Code.
a. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Moreover, holders of REMIC Regular Certificates that otherwise report income
under a cash method of accounting will be required to report income with respect
to REMIC Regular Certificates under an accrual method.
Original Issue Discount and Premium. The REMIC Regular Certificates may
be issued with OID. Generally, such OID, if any, will equal the difference
between the "stated redemption price at maturity" of a REMIC Regular Certificate
and its "issue price." Holders of any class of Certificates issued with OID will
be required to include such OID in gross income for federal income tax purposes
as it accrues, in accordance with a constant interest method based on the
compounding of interest as it accrues rather than in accordance with receipt of
the interest payments. The following discussion is based in part on the OID
Regulations and in part on the provisions of the Tax Reform Act of 1986 (the
"1986 Act"). Holders of REMIC Regular Certificates (the "REMIC Regular
Certificateholders") should be aware, however, that the OID Regulations do not
adequately address certain issues relevant to prepayable securities, such as the
REMIC Regular Certificates.
Rules governing OID are set forth in Code Sections 1271 through 1273
and 1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated reinvestment
rate, if any, relating to the REMIC Regular Certificates and prescribe a method
for adjusting the amount and rate of accrual of such discount where the actual
prepayment rate differs from the Prepayment Assumption. Under the Code, the
Prepayment Assumption must be determined in the manner prescribed by
regulations, which regulations have not yet been issued. The legislative history
of the 1986 Act (the "Legislative History") provides, however, that Congress
intended the regulations to require that the Prepayment Assumption be the
prepayment assumption that is used in determining the initial offering price of
such REMIC Regular Certificates. The Prospectus Supplement for each Series of
REMIC Regular Certificates will specify the Prepayment Assumption to be used for
the purpose of determining the amount and rate of accrual of OID. No
representation is made that the REMIC Regular Certificates will prepay at the
Prepayment Assumption or at any other rate.
In general, each REMIC Regular Certificate will be treated as a single
installment obligation issued with an amount of OID equal to the excess of its
"stated redemption price at maturity" over its "issue price." The issue price of
a REMIC Regular Certificate is the first price at which a substantial amount of
REMIC Regular Certificates of that class are first sold to the public (excluding
bond houses, brokers, underwriters or wholesalers). If less than a substantial
amount of a particular class of REMIC Regular Certificates is sold for cash on
or prior to the date of their initial issuance (the "Closing Date"), the issue
price for such class will be treated as the fair market value of such class on
the Closing Date. The issue price of a REMIC Regular Certificate also includes
the amount paid by an initial Certificateholder for accrued interest that
relates to a period prior to the issue date of the REMIC Regular Certificate.
The stated redemption price at maturity of a REMIC Regular Certificate includes
the original principal amount of the REMIC Regular Certificate, but generally
will not include distributions of interest if such distributions constitute
"qualified stated interest." Qualified stated interest generally means interest
payable at a single fixed rate or 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 REMIC Regular Certificate.
Interest is payable at a single fixed rate only if the rate appropriately takes
into account the length of the interval between payments. Distributions of
interest on REMIC Regular Certificates with respect to which Deferred Interest
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will accrue will not constitute qualified stated interest payments, and the
stated redemption price at maturity of such REMIC Regular Certificates includes
all distributions of interest as well as principal thereon.
Where the interval between the issue date and the first Distribution
Date on a REMIC Regular Certificate is longer than the interval between
subsequent Distribution Dates, the greater of any original issue discount
(disregarding the rate in the first period) and any interest foregone during the
first period is treated as the amount by which the stated redemption price at
maturity of the Certificate exceeds its issue price for purposes of the de
minimis rule described below. The OID Regulations suggest that all interest on a
long first period REMIC Regular Certificate that is issued with non-de minimis
OID, as determined under the foregoing rule, will be treated as OID. Where the
interval between the issue date and the first Distribution Date on a REMIC
Regular Certificate is shorter than the interval between subsequent Distribution
Dates, interest due on the first Distribution Date in excess of the amount that
accrued during the first period would be added to the Certificates, stated
redemption price at maturity. REMIC Regular Certificateholders should consult
their own tax advisors to determine the issue price and stated redemption price
at maturity of a REMIC Regular Certificate.
Under the de minimis rule, OID on a REMIC Regular Certificate will be
considered to be zero if such OID is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average maturity of the REMIC Regular Certificate. For this purpose, the
weighted average maturity of the REMIC 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 in
reduction of stated redemption price at maturity is scheduled to be made by a
fraction, the numerator of which is the amount of each distribution included in
the stated redemption price at maturity of the REMIC Regular Certificate and the
denominator of which is the stated redemption price at maturity of the REMIC
Regular Certificate. Although currently unclear, it appears that the schedule of
such distributions should be determined in accordance with the Prepayment
Assumption. The Prepayment Assumption with respect to a Series of REMIC 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 REMIC Regular Certificate
is held as a capital asset. However, accrual method holders may elect to accrue
all de minimis OID as well as market discount under a constant interest method.
The Prospectus Supplement with respect to a Trust Fund may provide for
certain REMIC Regular Certificates to be issued at prices significantly
exceeding their principal amounts or based on notional principal balances (the
"Super-Premium Certificates"). The income tax treatment of such REMIC Regular
Certificates is not entirely certain. For information reporting purposes, the
Trust Fund intends to take the position that the stated redemption price at
maturity of such REMIC Regular Certificates is the sum of all payments to be
made on such REMIC Regular Certificates determined under the Prepayment
Assumption, with the result that such REMIC Regular Certificates would be issued
with OID. The calculation of income in this manner could result in negative
original issue discount (which delays future accruals of OID rather than being
immediately deductible) when prepayments on the Mortgage Assets exceed those
estimated under the Prepayment Assumption. The IRS might contend, however, that
certain contingent payment rules contained in final regulations issued on June
11, 1996, with respect to original issue discount, should apply to such
Certificates. Although such rules are not applicable to instruments governed by
Code Section 1272(a)(6), they represent the only guidance regarding the current
views of the IRS with respect to contingent payment instruments. These proposed
regulations, if applicable, generally would require holders of Regular Interest
Certificates to take the payments considered contingent interest payments into
income on a yield to maturity basis in accordance with a schedule of projected
payments provided by the Depositor and to make annual adjustments to income to
account for the difference between actual payments received and projected
payment amounts accrued. In the alternative, the IRS could assert that the
stated redemption price at maturity of such REMIC Regular Certificates should be
limited to their principal amount (subject to the discussion below under
"--Accrued Interest Certificates"), so that such REMIC Regular Certificates
would be considered for federal income tax purposes to be issued at a premium.
If such a position were to prevail, the rules described below under "--Taxation
of Owners of REMIC Regular Certificates--Premium" would apply. It is unclear
when a loss may be claimed for any unrecovered basis for a Super-Premium
Certificate. It is possible that a holder of a Super-Premium Certificate may
only claim a loss when its remaining basis exceeds the maximum amount of future
payments, assuming no further prepayments or when the final payment is received
with respect to such Super-Premium Certificate.
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Under the REMIC Regulations, if the issue price of a REMIC Regular
Certificate (other than REMIC Regular Certificate based on a notional amount)
does not exceed 125% of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly, such REMIC Regular Certificate
generally should not be treated as a Super-Premium Certificate and the rules
described below under "--REMIC Regular Certificates--Premium" should apply.
However, it is possible that holders of REMIC Regular Certificates issued at a
premium, even if the premium is less than 25% of such Certificate's actual
principal balance, will be required to amortize the premium under an original
issue discount method or contingent interest method even though no election
under Code Section 171 is made to amortize such premium.
Generally, a REMIC Regular Certificateholder must include in gross
income the "daily portions," as determined below, of the OID that accrues on a
REMIC Regular Certificate for each day a Certificateholder holds the REMIC
Regular Certificate, including the purchase date but excluding the disposition
date. In the case of an original holder of a REMIC Regular Certificate, a
calculation will be made of the portion of the OID that accrues during each
successive period ("an accrual period") that ends on the day in the calendar
year corresponding to a Distribution Date (or if Distribution Dates are on the
first day or first business day of the immediately preceding month, interest may
be treated as payable on the last day of the immediately preceding month) and
begins on the day after the end of the immediately preceding accrual period (or
on the issue date in the case of the first accrual period). This will be done,
in the case of each full accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the REMIC Regular Certificates as calculated under
the Prepayment Assumption) of all remaining payments to be received on the REMIC
Regular Certificates under the Prepayment Assumption and (b) any payments
included in the stated redemption price at maturity received during such accrual
period, and (ii) subtracting from that total the adjusted issue price of the
REMIC Regular Certificates at the beginning of such accrual period. The adjusted
issue price of a REMIC Regular Certificate at the beginning of the first accrual
period is its issue price; the adjusted issue price of a REMIC Regular
Certificate at the beginning of a subsequent accrual period is the adjusted
issue price at the beginning of the immediately preceding accrual period plus
the amount of OID allocable to that accrual period and reduced by the amount of
any payment other than a payment of qualified stated interest made at the end of
or during that accrual period. The OID accrued during an accrual period will
then be divided by the number of days in the period to determine the daily
portion of OID for each day in the accrual period. The calculation of OID under
the method described above will cause the accrual of OID to either increase or
decrease (but never below zero) in a given accrual period to reflect the fact
that prepayments are occurring faster or slower than under the Prepayment
Assumption. With respect to an initial accrual period shorter than a full
accrual period, the daily portions of OID may be determined according to an
appropriate allocation under any reasonable method.
A subsequent purchaser of a REMIC Regular Certificate issued with OID
who purchases the REMIC Regular Certificate at a cost less than the remaining
stated redemption price at maturity will also be required to include in gross
income the sum of the daily portions of OID on that REMIC Regular Certificate.
In computing the daily portions of OID for such a purchaser (as well as an
initial purchaser that purchases at a price higher than the adjusted issue price
but less than the stated redemption price at maturity), however, the daily
portion is reduced by the amount that would be the daily portion for such day
(computed in accordance with the rules set forth above) multiplied by a
fraction, the numerator of which is the amount, if any, by which the price paid
by such holder for that REMIC Regular Certificate exceeds the following amount:
(a) the sum of the issue price plus the aggregate amount of OID that would have
been includible in the gross income of an original REMIC Regular
Certificateholder (who purchased the REMIC Regular Certificate at its issue
price), less (b) any prior payments included in the stated redemption price at
maturity, and the denominator of which is the sum of the daily portions for that
REMIC Regular Certificate for all days beginning on the date after the purchase
date and ending on the maturity date computed under the Prepayment Assumption. A
holder who pays an acquisition premium instead may elect to accrue OID by
treating the purchase as a purchase at original issue.
Variable Rate REMIC Regular Certificates. REMIC Regular Certificates
may provide for interest based on a variable rate. Interest based on a variable
rate will constitute qualified stated interest and not contingent interest if,
generally, (i) such interest is unconditionally payable at least annually, (ii)
the issue price of the debt instrument does not exceed the total noncontingent
principal payments and (iii) interest is based on a "qualified floating rate,"
an "objective rate," a combination of a single fixed rate and one or more
"qualified floating rates," one "qualified inverse floating rate," or a
combination of "qualified floating rates that do not operate in a manner that
significantly accelerates or defers interest payments" on such REMIC Regular
Certificates.
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The amount of OID with respect to a REMIC Regular Certificate bearing a
variable rate of interest will accrue in the manner described above under
"--Original Issue Discount and Premium" by assuming generally that the index
used for the variable rate will remain fixed throughout the term of the
Certificate. Appropriate adjustments are made for the actual variable rate.
Although unclear at present, the Depositor intends to treat interest on
a REMIC Regular Certificate that is a weighted average of the net interest rates
on Mortgage Loans as qualified stated interest. In such case, the weighted
average rate used to compute the initial pass-through rate on the REMIC Regular
Certificates will be deemed to be the index in effect through the life of the
REMIC Regular Certificates. It is possible, however, that the IRS may treat some
or all of the interest on REMIC Regular Certificates with a weighted average
rate as taxable under the rules relating to obligations providing for contingent
payments. Such treatment may effect the timing of income accruals on such REMIC
Regular Certificates.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market discount or original issue discount) and premium in income as
interest, based on a constant yield method. If such an election were to be made
with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Certificateholder acquires during the year of the
election or thereafter. Similarly, a Certificateholder that makes this election
for a Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or acquires. See
"--REMIC Regular Certificates--Premium" herein. The election to accrue interest,
discount and premium on a constant yield method with respect to a Certificate is
irrevocable without the consent of the IRS.
Market Discount. A purchaser of a REMIC Regular Certificate may also be
subject to the market discount provisions of Code Sections 1276 through 1278.
Under these provisions and the OID Regulations, "market discount" equals the
excess, if any, of (i) the REMIC Regular Certificate's stated principal amount
or, in the case of a REMIC Regular Certificate with OID, the adjusted issue
price (determined for this purpose as if the purchaser had purchased such REMIC
Regular Certificate from an original holder) over (ii) the price for such REMIC
Regular Certificate paid by the purchaser. A Certificateholder that purchases a
REMIC Regular Certificate at a market discount will recognize income upon
receipt of each distribution representing amounts included in such certificate's
stated redemption price at maturity. In particular, under Section 1276 of the
Code such a holder generally will be required to allocate each such distribution
first to accrued market discount not previously included in income, and to
recognize ordinary income to that extent. A Certificateholder may elect to
include market discount in income currently as it accrues rather than including
it on a deferred basis in accordance with the foregoing. If made, such election
will apply to all market discount bonds acquired by such Certificateholder on or
after the first day of the first taxable year to which such election applies.
Market discount with respect to a REMIC Regular Certificate will be
considered to be zero if the amount allocable to the REMIC Regular Certificate
is less than 0.25% of such REMIC Regular Certificate's stated redemption price
at maturity multiplied by such REMIC Regular Certificate's weighted average
maturity remaining after the date of purchase. If market discount on a REMIC
Regular Certificate is considered to be zero under this rule, the actual amount
of market discount must be allocated to the remaining principal payments on the
REMIC Regular Certificate, and gain equal to such allocated amount will be
recognized when the corresponding principal payment is made. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986, shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at the
time of such payment. The amount of accrued market discount for purposes of
determining the tax treatment of subsequent principal payments or dispositions
of the market discount bond is to be reduced by the amount so treated as
ordinary income.
The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury, rules described in
the Legislative History will
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apply. Under those rules, the holder of a market discount bond may elect to
accrue market discount either on the basis of a constant interest method rate or
according to one of the following methods. For REMIC Regular Certificates issued
with OID, the amount of market discount that accrues during a period is equal to
the product of (i) the total remaining market discount and (ii) a fraction, the
numerator of which is the OID accruing during the period and the denominator of
which is the total remaining OID at the beginning of the period. For REMIC
Regular Certificates issued without OID, the amount of market discount that
accrues during a period is equal to the product of (a) the total remaining
market discount and (b) a fraction, the numerator of which is the amount of
stated interest paid during the accrual period and the denominator of which is
the total amount of stated interest remaining to be paid at the beginning of the
period. For purposes of calculating market discount under any of the above
methods in the case of instruments (such as the REMIC Regular Certificates) that
provide for payments that may be accelerated by reason of prepayments of other
obligations securing such instruments, the same Prepayment Assumption applicable
to calculating the accrual of OID will apply.
A holder who acquired a REMIC Regular Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry such Certificate purchased with market discount. For these purposes,
the de minimis rule referred to above applies. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in which
such market discount is includible in income. If such holder elects to include
market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Premium. A purchaser of a REMIC Regular Certificate that purchases the
REMIC Regular Certificate at a cost (not including accrued qualified stated
interest) greater than its remaining stated redemption price at maturity will be
considered to have purchased the REMIC Regular Certificate at a premium and may
elect to amortize such premium under a constant yield method. A
Certificateholder that makes this election for a Certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder acquires during the year of the election or thereafter. It is
not clear whether the Prepayment Assumption would be taken into account in
determining the life of the REMIC Regular Certificate for this purpose. However,
the Legislative History states that the same rules that apply to accrual of
market discount (which rules require use of a Prepayment Assumption in accruing
market discount with respect to REMIC Regular Certificates without regard to
whether such Certificates have OID) will also apply in amortizing bond premium
under Code Section 171. The Code provides that amortizable bond premium will be
allocated among the interest payments on such REMIC Regular Certificates and
will be applied as an offset against such interest payment. On December 30,
1997, the IRS issued final resolutions on the amortizable bond premium, which
generally are effective for bonds acquired on or after March 2, 1998 or, for
holders making an election to amortize bond premium as described above for the
taxable year that includes March 2, 1998 or any subsequent taxable year, will
apply to bonds held on or after the first day of the taxable year in which the
election is made. The final regulations, by their express terms, do not apply to
prepayable securities described in Section 1272(a)(6) of the Code, such as the
REMIC Regular Certificates. Certificateholders should consult their tax advisors
regarding the possibility of making an election to amortize any such bond
premium.
Deferred Interest. Certain classes of REMIC Regular Certificates may
provide for the accrual of Deferred Interest with respect to one or more ARM
Loans. Any Deferred Interest that accrues with respect to a class of REMIC
Regular Certificates will constitute income to the holders of such Certificates
prior to the time distributions of cash with respect to such Deferred Interest
are made. It is unclear, under the OID Regulations, whether any of the interest
on such Certificates will constitute qualified stated interest or whether all or
a portion of the interest payable on such Certificates must be included in the
stated redemption price at maturity of the Certificates and accounted for as OID
(which could accelerate such inclusion). Interest on REMIC Regular Certificates
must in any event be accounted for under an accrual method by the holders of
such Certificates and, therefore, applying the latter analysis may result only
in a slight difference in the timing of the inclusion in income of interest on
such REMIC Regular Certificates.
Sale, Exchange or Redemption. If a REMIC Regular Certificate is sold,
exchanged, redeemed or retired, the seller will recognize gain or loss equal to
the difference between the amount realized on the sale, exchange, redemption, or
retirement and the seller's adjusted basis in the REMIC Regular Certificate.
Such adjusted basis
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generally will equal the cost of the REMIC Regular Certificate to the seller,
increased by any OID and market discount included in the seller's gross income
with respect to the REMIC Regular Certificate, and reduced (but not below zero)
by payments included in the stated redemption price at maturity previously
received by the seller, by any amortized premium and by previously recognized
losses. Similarly, a holder who receives a payment that is part of the stated
redemption price at maturity of a REMIC Regular Certificate will recognize gain
equal to the excess, if any, of the amount of the payment over an allocable
portion of the holder's adjusted basis in the REMIC Regular Certificate. A REMIC
Regular Certificateholder who receives a final payment that is less than the
holder's adjusted basis in the REMIC Regular Certificate will generally
recognize a loss. Except as provided in the following paragraph and as provided
under "--Market Discount" above, any such gain or loss will be capital gain or
loss, provided that the REMIC Regular Certificate is held as a "capital asset"
(generally, property held for investment) within the meaning of Code Section
1221.
Except as provided below, such capital gain or loss will generally be
long-term capital gain or loss if the REMIC Regular Certificate was held for
more than one year. Long-term capital gains of individuals are subject to
reduced maximum tax rates while capital gains recognized by individual on
capital assets held less than twelve months are generally subject to ordinary
income tax rates. The use of capital losses is limited.
Gain from the sale or other disposition of a REMIC Regular Certificate
that might otherwise be capital gain will be treated as ordinary income to the
extent that such gain does not exceed the excess, if any, of (i) the amount that
would have been includible in such holder's income with respect to the REMIC
Regular Certificate had income accrued thereon at a rate equal to 110% of the
AFR as defined in Code Section 1274(d) determined as of the date of purchase of
such REMIC Regular Certificate, over (ii) the amount actually includible in such
holder's income. Gain from the sale or other disposition of a REMIC Regular
Certificate that might otherwise be capita gain will be treated as ordinary
income if the REMIC 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 REMIC 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 disposition of property that was held as part of such transaction,
or if the REMIC Regular Certificate is held as part of a straddle. Potential
investors should consult their tax advisors with respect to tax consequences of
ownership and disposition of an investment in REMIC Regular Certificates in
their particular circumstances.
It is possible that capital gain realized by holders of one or more
classes of REMIC Regular Certificates could be considered gain realized upon the
disposition of property that was part of a "conversion transaction." A sale of a
REMIC Regular Certificate will be part of a "conversion transaction" if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract to
sell the REMIC Regular Certificate substantially contemporaneously with
acquiring the REMIC Regular Certificate, (ii) the REMIC Regular Certificate is
part of a straddle, (iii) the REMIC Regular Certificate is marketed or sold as
producing capital gains, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of a
REMIC Regular Certificate is part of a conversion transaction, all or a portion
of the gain realized upon the sale or other disposition of the REMIC Regular
Certificate would be treated as ordinary income instead of capital gain.
The Certificates will be "evidences of indebtedness" within the meaning
of Code Section 582(c)(1), so that gain or loss recognized from the sale of a
REMIC Regular Certificate by a bank or a thrift institution to which such
section applies will be ordinary income or loss.
The REMIC Regular Certificate information reports will include a
statement of the adjusted issue price of the REMIC Regular Certificate at the
beginning of each accrual period. In addition, the reports will include
information necessary to compute the accrual of any market discount that may
arise upon secondary trading of REMIC Regular Certificates. Because exact
computation of the accrual of market discount on a constant yield method would
require information relating to the holder's purchase price which the REMIC may
not have, it appears that the information reports will only provide information
pertaining to the appropriate proportionate method of accruing market discount.
Accrued Interest Certificates. Certain of the REMIC Regular
Certificates ("Payment Lag Certificates") may provide for payments of interest
based on a period that corresponds to the interval between Distribution Dates
but
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that ends prior to each such Distribution Date. The period between the Closing
Date for Payment Lag Certificates and their first Distribution Date may or may
not exceed such interval. Purchasers of Payment Lag Certificates for which the
period between the Closing Date and the first Distribution Date does not exceed
such interval could pay upon purchase of the REMIC Regular Certificates accrued
interest in excess of the accrued interest that would be paid if the interest
paid on the Distribution Date were interest accrued from Distribution Date to
Distribution Date. If a portion of the initial purchase price of a REMIC Regular
Certificate is allocable to interest that has accrued prior to the issue date
("pre-issuance accrued interest") and the REMIC Regular Certificate provides for
a payment of stated interest on the first payment date (and the first payment
date is within one year of the issue date) that equals or exceeds the amount of
the pre-issuance accrued interest, then the REMIC Regular Certificate's issue
price may be computed by subtracting from the issue price the amount of
pre-issuance accrued interest, rather than as an amount payable on the REMIC
Regular Certificate. However, it is unclear under this method how the OID
Regulations treat interest on Payment Lag Certificates. Therefore, in the case
of a Payment Lag Certificate, the Trust Fund intends to include accrued interest
in the issue price and report interest payments made on the first Distribution
Date as interest to the extent such payments represent interest for the number
of days that the Certificateholder has held such Payment Lag Certificate during
the first accrual period.
Investors should consult their own tax advisors concerning the
treatment for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury
regulations, if the REMIC is considered to be a "single-class REMIC," a portion
of the REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those REMIC Regular Certificateholders that are
"pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of these
rules on an investment in the REMIC Regular Certificates. See "Pass-Through of
Non-Interest Expenses of the REMIC" under "Taxation of Owners of REMIC Residual
Certificates" below.
Effects of Defaults, Delinquencies and Losses. Certain Series of
Certificates may contain one or more classes of Subordinated Certificates, and
in the event there are defaults or delinquencies on the Mortgage Assets, amounts
that would otherwise be distributed on the Subordinated Certificates may instead
be distributed on the Senior Certificates. Subordinated Certificateholders
nevertheless will be required to report income with respect to such Certificates
under an accrual method without giving effect to delays and reductions in
distributions on such Subordinated Certificates attributable to defaults and
delinquencies on the Mortgage Assets, except to the extent that it can be
established that such amounts are uncollectible. As a result, the amount of
income reported by a Subordinated Certificateholder in any period could
significantly exceed the amount of cash distributed to such holder in that
period. The holder will eventually be allowed a loss (or will be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Subordinated Certificate is reduced as a result of defaults
and delinquencies on the Mortgage Assets.
Although not entirely clear, it appears that holders of REMIC Regular
Certificates that are corporations should in general be allowed to deduct as an
ordinary loss any loss sustained during the taxable year on account of any such
Certificates becoming wholly or partially worthless, and that, in general,
holders of Certificates that are not corporations should be allowed to deduct as
a short-term capital loss any loss sustained during the taxable year on account
of any such Certificates becoming wholly worthless. Potential investors and
holders of the Certificates are urged to consult their own tax advisors
regarding the appropriate timing, amount and character of any loss sustained
with respect to such Certificates, including any loss resulting from the failure
to recover previously accrued interest or discount income. 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 Certificates.
Non-U.S. Persons. Generally, payments of interest (including any
payment with respect to accrued OID) on the REMIC Regular Certificates to a
REMIC Regular Certificateholder who is not a U.S. Person and is not engaged in a
trade or business within the United States will not be subject to federal
withholding tax if (i) such REMIC Regular Certificateholder does not actually or
constructively own 10 percent or more of the combined voting power of all
classes of equity in the issuer; (ii) such REMIC Regular Certificateholder is
not a controlled foreign corporation (within the meaning of Code Section 957)
related to the issuer; and (iii) such REMIC Regular Certificateholder complies
with certain identification requirements (including delivery of a statement,
signed by the REMIC Regular Certificateholder under penalties of perjury,
certifying that such REMIC Regular Certificateholder
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is a foreign person and providing the name and address of such REMIC Regular
Certificateholder). If a REMIC Regular Certificateholder is not exempt from
withholding, distributions of interest to such holder, including distributions
in respect of accrued OID, may be subject to a 30% withholding tax, subject to
reduction under any applicable tax treaty. If the interest on a REMIC Regular
Certificate is effectively connected with the conduct by the Non-U.S. REMIC
Regular Certificateholder of a trade or business within the United States, then
the Non-U.S. REMIC Regular Certificateholder will be subject to U.S. income tax
at regular graduated rates. Such a Non-U.S. REMIC Regular Certificateholder also
may be subject to the branch profits tax.
Further, a REMIC Regular Certificate will not be included in the estate
of a non-resident alien individual that does not actually or constructively own
10% or more of the combined voting power of all classes of equity in the Issuer
and will not be subject to United States estate taxes. However,
Certificateholders who are non-resident alien individuals should consult their
tax advisors concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons and persons
related to such holders should not acquire any REMIC Residual Certificates, and
holders of REMIC Residual Certificates (the "REMIC Residual Certificateholder")
and persons related to REMIC Residual Certificateholders should not acquire any
REMIC Regular Certificates without consulting their tax advisors as to the
possible adverse tax consequences of doing so. In addition, the IRS may assert
that non-U.S Persons that own directly or indirectly, a greater than 10%
interest in any Mortgagor, and foreign corporations that are "controlled foreign
corporations" as to the United States of which such a Mortgagor is a "United
States shareholder" within the meaning of Section 951(b) of the Code, are
subject to United States withholding tax on interest distributed to them to the
extent of interest concurrently paid by the related Mortgagor.
For these purposes, a "U.S. Person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in, or under the laws of, the United States or any political subdivision
thereof, an estate the income of which from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business or a trust
as to which (i) a court in the United States is able to exercise primary
supervision over its administration and (ii) one or more U.S. Persons have the
right to control all substantial decisions of the trust.
Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at any
time during such year, such information as may be deemed necessary or desirable
to assist REMIC Regular Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold such REMIC Regular Certificates on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments with respect to
any payments to registered owners who are not "exempt recipients." In addition,
upon the sale of a REMIC Regular Certificate to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient, or
(ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Person, certifies that such seller is
a Non-U.S. Person, and certain other conditions are met. Such as sale must also
be reported by the broker to the IRS, unless either (a) the broker determines
that the seller is an exempt recipient or (b) the seller certifies its non-U.S.
Person status (and certain other conditions are met). Certification of the
registered owner's non-U.S. Person status normally would be made on IRS Form W-8
under penalties of perjury, although in certain cases it may be possible to
submit other documentary evidence. Any amounts deducted and withheld from a
distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
On October 6, 1997, the Treasury Department issued the New Regulations,
which make certain modifications to the withholding, backup withholding and
information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
2000, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
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b. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
Allocation of the Income of the REMIC to the REMIC Residual
Certificates. The REMIC will not be subject to federal income tax except with
respect to income from prohibited transactions and certain other transactions.
See "--Prohibited Transactions and Other Taxes" below. Instead, each original
holder of a REMIC Residual Certificate will report on its federal income tax
return, as ordinary income, its share of the taxable income of the REMIC for
each day during the taxable year on which such holder owns any REMIC Residual
Certificates. The taxable income of the REMIC for each day will be determined by
allocating the taxable income of the REMIC for each calendar quarter ratably to
each day in the quarter. Such a holder's share of the taxable income of the
REMIC for each day will be based on the portion of the outstanding REMIC
Residual Certificates that such holder owns on that day. The taxable income of
the REMIC will be determined under an accrual method and will be taxable to the
holders of REMIC Residual Certificates without regard to the timing or amounts
of cash distributions by the REMIC. Ordinary income derived from REMIC Residual
Certificates will be "portfolio income" for purposes of the taxation of
taxpayers subject to the limitations on the deductibility of "passive losses."
As residual interests, the REMIC Residual Certificates will be subject to tax
rules, described below, that differ from those that would apply if the REMIC
Residual Certificates were treated for federal income tax purposes as direct
ownership interests in the Certificates or as debt instruments issued by the
REMIC.
A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests (that is, a fast-pay, slow-pay structure) may generate such a
mismatching of income and cash distributions (that is, "phantom income"). This
mismatching may be caused by the use of certain required tax accounting methods
by the REMIC, variations in the prepayment rate of the underlying Mortgage
Assets and certain other factors. Depending upon the structure of a particular
transaction, the aforementioned factors may significantly reduce the after-tax
yield of a REMIC Residual Certificate to a REMIC Residual Certificateholder or
cause the REMIC Residual Certificate to have negative "value." Investors should
consult their own tax advisors concerning the federal income tax treatment of a
REMIC Residual Certificate and the impact of such tax treatment on the after-tax
yield of a REMIC Residual Certificate.
A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that such REMIC Residual Certificateholder owns
such REMIC Residual Certificate. Those daily amounts generally would equal the
amounts that would have been reported for the same days by an original REMIC
Residual Certificateholder, as described above. The Legislative History
indicates that certain adjustments may be appropriate to reduce (or increase)
the income of a subsequent holder of a REMIC Residual Certificate that purchased
such REMIC Residual Certificate at a price greater than (or less than) the
adjusted basis such REMIC Residual Certificate would have in the hands of an
original REMIC Residual Certificateholder. See "--Sale or Exchange of REMIC
Residual Certificates" below. It is not clear, however, whether such adjustments
will in fact be permitted or required and, if so, how they would be made. The
REMIC Regulations do not provide for any such adjustments.
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed to
the REMIC for interest and OID on the REMIC Regular Certificates and, except as
described above under "--Taxation of Owners of REMIC Regular
Certificates--Non-Interest Expenses of the REMIC," other expenses. 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'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 REMIC Regular Certificates. Note that the timing of cancellation of
indebtedness income recognized by REMIC Residual Certificateholders resulting
from defaults and delinquencies on Mortgage Assets may differ from the time of
the actual loss on the Mortgage Asset. The REMIC's deductions include interest
and original issue discount expense on the REMIC Regular Certificates, servicing
fees on the Mortgage Loans, other administrative expenses of the REMIC and
realized losses on the Mortgage Loans. The requirement that REMIC
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Residual Certificateholders report their pro rata share of taxable income or net
loss of the REMIC will continue until there are no Certificates of any class of
the related Series outstanding.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the REMIC Regular Certificates and the REMIC Residual Certificates (or, if a
class of Certificates is not sold initially, its fair market value). Such
aggregate basis will be allocated among the Mortgage Assets and other assets of
the REMIC in proportion to their respective fair market values. A Mortgage Asset
will be deemed to have been acquired with discount or premium to the extent that
the REMIC's basis therein is less than or greater than its principal balance,
respectively. Any such discount (whether market discount or OID) will be
includible in the income of the REMIC as it accrues, in advance of receipt of
the cash attributable to such income, under a method similar to the method
described above for accruing OID on the REMIC Regular Certificates. The REMIC
may elect under Code Section 171 to amortize any premium on the Mortgage Assets.
Premium on any Mortgage Asset to which such election applies would be amortized
under a constant yield method. It is not clear whether the yield of a Mortgage
Asset would be calculated for this purpose based on scheduled payments or taking
account of the Prepayment Assumption. Additionally, such an election would not
apply to the yield with respect to any underlying mortgage loan originated on or
before September 27, 1985. Instead, premium with respect to such a mortgage loan
would be allocated among the principal payments thereon and would be deductible
by the REMIC as those payments become due.
The REMIC will be allowed a deduction for interest and OID on the REMIC
Regular Certificates. The amount and method of accrual of OID will be calculated
for this purpose in the same manner as described above with respect to REMIC
Regular Certificates except that the 0.25% per annum de minimis rule and
adjustments for subsequent holders described therein will not apply.
A REMIC Residual Certificateholder will not be permitted to amortize
the cost of the REMIC Residual Certificate as an offset to its share of the
REMIC's taxable income. However, REMIC taxable income will not include cash
received by the REMIC that represents a recovery of the REMIC's basis in its
assets, and, as described above, the issue price of the REMIC Residual
Certificates will be added to the issue price of the REMIC Regular Certificates
in determining the REMIC's initial basis in its assets. See "--Sale or Exchange
of REMIC Residual Certificates" below. For a discussion of possible adjustments
to income of a subsequent holder of a REMIC Residual Certificate to reflect any
difference between the actual cost of such REMIC Residual Certificate to such
holder and the adjusted basis such REMIC Residual Certificate would have in the
hands of an original REMIC Residual Certificateholder, see "--Allocation of the
Income of the REMIC to the REMIC Residual Certificates" above.
Net Losses of the REMIC. The REMIC will have a net loss for any
calendar quarter in which its deductions exceed its gross income. Such net loss
would be allocated among the REMIC Residual Certificateholders in the same
manner as the REMIC's taxable income. The net loss allocable to any REMIC
Residual Certificate will not be deductible by the holder to the extent that
such net loss exceeds such holder's adjusted basis in such REMIC Residual
Certificate. Any net loss that is not currently deductible by reason of this
limitation may only be used by such REMIC Residual Certificateholder to offset
its share of the REMIC's taxable income in future periods (but not otherwise).
The ability of REMIC Residual Certificateholders that are individuals or closely
held corporations to deduct net losses may be subject to additional limitations
under the Code.
Mark to Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that the IRS has finalized regulations (the
"Mark-to-Market Regulations") which provide that a REMIC Residual Certificate
acquired after January 3, 1995 cannot be marked to market. The Mark-to-Market
Regulations replaced the temporary regulations which allowed a Residual
Certificate to be marked to market provided that it was not a "negative value"
residual interest and did not have the same economic effect as a "negative
value" residual interest.
Pass-Through of Non-Interest Expenses of the REMIC. As a general rule,
all of the fees and expenses of a REMIC will be taken into account by holders of
the REMIC Residual Certificates. In the case of a single class REMIC, however,
the expenses and a matching amount of additional income will be allocated, under
temporary Treasury regulations, among the REMIC Regular Certificateholders and
the REMIC Residual Certificateholders on a daily basis in proportion to the
relative amounts of income accruing to each Certificateholder on that day. In
general terms, a single class REMIC is one that either (i) would qualify, under
existing Treasury regulations, as a grantor trust if it were not a REMIC
(treating all interests as ownership interests, even if they would be classified
as
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debt for federal income tax purposes) or (ii) is similar to such a trust and is
structured with the principal purpose of avoiding the single class REMIC rules.
Unless otherwise stated in the applicable Prospectus Supplement, the expenses of
the REMIC will be allocated to holders of the related REMIC Residual
Certificates in their entirety and not to holders of the related REMIC Regular
Certificates.
In the case of individuals (or trusts, estates or other persons that
compute their income in the same manner as individuals) who own an interest in a
REMIC Regular Certificate or a REMIC Residual Certificate directly or through a
pass-through interest holder that is required to pass miscellaneous itemized
deductions through to its owners or beneficiaries (e.g. a partnership, an S
corporation or a grantor trust), such expenses will be deductible under Code
Section 67 only to the extent that such expenses, plus other "miscellaneous
itemized deductions" of the individual, exceed 2% of such individual's adjusted
gross income. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a certain amount (the "Applicable Amount") will be reduced by the lesser
of (i) 3% of the excess of the individual's adjusted gross income over the
Applicable Amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for the taxable year. The amount of additional taxable income
recognized by REMIC Residual Certificateholders who are subject to the
limitations of either Code Section 67 or Code Section 68 may be substantial.
Further, holders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
holders' alternative minimum taxable income. The REMIC is required to report to
each pass-through interest holder and to the IRS such holder's allocable share,
if any, of the REMIC's non-interest expenses. The term "pass-through interest
holder" generally refers to individuals, entities taxed as individuals and
certain pass-through entities, but does not include real estate investment
trusts. Accordingly, investment in REMIC Residual Certificates will in general
not be suitable for individuals or for certain pass-through entities, such as
partnerships and S corporations, that have individuals as partners or
shareholders.
Excess Inclusions. A portion of the income on a REMIC Residual
Certificate (referred to in the Code as an "excess inclusion") for any calendar
quarter will be subject to federal income tax in all events. Thus, for example,
an excess inclusion (i) may not, except as described below, be offset by any
unrelated losses, deductions or loss carryovers of a REMIC Residual
Certificateholder; (ii) will be treated as "unrelated business taxable income"
within the meaning of Code Section 512 if the REMIC Residual Certificateholder
is a pension fund or any other organization that is subject to tax only on its
unrelated business taxable income (see "--Tax-Exempt Investors" below); and
(iii) is not eligible for any reduction in the rate of withholding tax in the
case of a REMIC Residual Certificateholder that is a foreign investor. See
"--Non-U.S. Persons" below.
Except as discussed in the following paragraph, with respect to any
REMIC Residual Certificateholder, the excess inclusions for any calendar quarter
is the excess, if any, of (i) the income of such REMIC Residual
Certificateholder for that calendar quarter from its REMIC Residual Certificate
over (ii) the sum of the "daily accruals" (as defined below) for all days during
the calendar quarter on which the REMIC Residual Certificateholder holds such
REMIC Residual Certificate. For this purpose, the daily accruals with respect to
a REMIC Residual Certificate are determined by allocating to each day in the
calendar quarter its ratable portion of the product of the "adjusted issue
price" (as defined below) of the REMIC Residual Certificate at the beginning of
the calendar quarter and 120 percent of the "Federal long-term rate" in effect
at the time the REMIC Residual Certificate is issued. For this purpose, the
"adjusted issue price" of a REMIC Residual Certificate at the beginning of any
calendar quarter equals the issue price of the REMIC Residual Certificate,
increased by the amount of daily accruals for all prior quarters, and decreased
(but not below zero) by the aggregate amount of payments made on the REMIC
Residual Certificate before the beginning of such quarter. The "federal
long-term rate" is an average of current yields on Treasury securities with a
remaining term of greater than nine years, computed and published monthly by the
IRS.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Code Section 857(b)(2),
excluding any net capital gain), will be allocated among the shareholders of
such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Regulated investment companies, common trust funds and certain
cooperatives are subject to similar rules.
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The Small Business Job Protection Act 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 REMIC 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 a thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides
three rules for determining the effect on excess inclusions on the alternative
minimum taxable income of a residual holder. First, alternative minimum taxable
income for such residual holder is determined without regard to the special rule
that taxable income cannot be less than excess inclusions. Second, the amount of
any alternative minimum tax net operating loss deductions must be computed
without regard to any excess inclusions. Third, a residual holder's alternative
minimum taxable income for a tax year cannot be less than excess inclusions for
the year. The effect of this last statutory amendment is to prevent the use of
nonrefundable tax credits to reduce a taxpayer's income tax below its tentative
minimum tax computed only on excess inclusions. These rules are effective for
tax years beginning after December 31, 1986, unless a residual holder elects to
have such rules apply only to tax years beginning after August 20, 1996.
Payments. Any distribution made on a REMIC Residual Certificate to a
REMIC Residual Certificateholder will be treated as a non-taxable return of
capital to the extent it does not exceed the REMIC Residual Certificateholder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
exceeds such adjusted basis, it will be treated as gain from the sale of the
REMIC Residual Certificate.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale or exchange
and its adjusted basis in the REMIC Residual Certificate (except that the
recognition of loss may be limited under the "wash sale" rules described below).
A holder's adjusted basis in a REMIC Residual Certificate generally equals the
cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder, increased by the taxable income of the REMIC that was
included in the income of such REMIC Residual Certificateholder with respect to
such REMIC Residual Certificate, and decreased (but not below zero) by the net
losses that have been allowed as deductions to such REMIC Residual
Certificateholder with respect to such REMIC Residual Certificate and by the
distributions received thereon by such REMIC Residual Certificateholder. In
general, any such gain or loss will be capital gain or loss provided the REMIC
Residual Certificate is held as a capital asset. Such capital gain or loss will
generally be long-term capital gain or loss if the REMIC Regular Certificate was
held for more than one year. Long-term capital gains of individuals are subject
to reduced maximum tax rates while capital gains recognized by individuals on
capital assets held less than twelve months are generally subject to ordinary
income tax rates. The use of capital losses is limited. However, REMIC Residual
Certificates will be "evidences of indebtedness" within the meaning of Code
Section 582(c)(1), so that gain or loss recognized from sale of a REMIC Residual
Certificate by a bank or thrift institution to which such section applies would
be ordinary income or loss. In addition, a transfer of a REMIC Residual
Certificate that is a "noneconomic residual interest" may be subject to
different rules. See "--Tax Related Restrictions on Transfers of REMIC Residual
Certificates--Noneconomic REMIC Residual Certificates" below.
Except as provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires such REMIC Residual
Certificate, or acquires any other REMIC Residual Certificate, any residual
interest in another REMIC or similar interest in a "taxable mortgage pool" (as
defined in Code Section 7701(i)) during the period beginning six months before,
and ending six months after, the date of such sale, such sale will be subject to
the "wash sale" rules of Code Section 1091. In that event, any loss realized by
the REMIC Residual Certificateholder on the sale will not be deductible, but,
instead, will increase such REMIC Residual Certificateholder's adjusted basis in
the newly acquired asset.
PROHIBITED TRANSACTIONS AND OTHER TAXES
The Code imposes a tax on REMICs equal to 100% of the net income
derived from "prohibited transactions" (the "Prohibited Transactions Tax"). In
general, subject to certain specified exceptions, a prohibited transaction means
the disposition of a Mortgage Asset, the receipt of income from a source other
than a Mortgage Asset or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the Mortgage Assets for temporary investment pending
distribution on
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the Certificates. It is not anticipated that the Trust Fund for any Series of
Certificates will engage in any prohibited transactions in which it would
recognize a material amount of net income.
In addition, certain contributions to a Trust Fund as to which an
election has been made to treat such Trust Fund as a REMIC made after the day on
which such Trust Fund issues all of its interests could result in the imposition
of a tax on the Trust Fund equal to 100% of the value of the contributed
property (the "Contributions TaxNo Trust Fund for any Series of Certificates
will accept contributions that would subject it to such tax.
In addition, a Trust Fund as to which an election has been made to
treat such Trust Fund as a REMIC may also 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. "Net
income from foreclosure property" generally means income from foreclosure
property other than qualifying income for a real estate investment trust.
Where any Prohibited Transactions Tax, Contributions Tax, tax on net
income from foreclosure property or state or local income or franchise tax that
may be imposed on a REMIC relating to any Series of Certificates arises out of
or results from (i) a breach of the related Servicer's, Trustee's or Depositor's
obligations, as the case may be, under the related Agreement for such Series,
such tax will be borne by such Servicer, Trustee or Depositor, as the case may
be, out of its own funds or (ii) the Depositor's obligation to repurchase a
Mortgage Loan, such tax will be borne by the Depositor. In the event that such
Servicer, Trustee or Depositor, as the case may be, fails to pay or is not
required to pay any such tax as provided above, such tax will be payable out of
the Trust Fund for such Series and will result in a reduction in amounts
available to be distributed to the Certificateholders of such Series.
LIQUIDATION AND TERMINATION
If the REMIC adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC's final tax return a date on which such adoption is deemed to occur,
and sells all of its assets (other than cash) within a 90-day period beginning
on such date, the REMIC will not be subject to any Prohibited Transaction Tax,
provided that the REMIC credits or distributes in liquidation all of the sale
proceeds plus its cash (other than the amounts retained to meet claims) to
holders of Regular and REMIC Residual Certificates within the 90-day period.
The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis in
the REMIC Residual Certificate exceeds the amount of cash distributed to such
REMIC Residual Certificateholder in final liquidation of its interest, then it
would appear that the REMIC Residual Certificateholder would be entitled to a
loss equal to the amount of such excess. It is unclear whether such a loss, if
allowed, will be a capital loss or an ordinary loss.
ADMINISTRATIVE MATTERS
Solely for the purpose of the administrative provisions of the Code,
the REMIC generally will be treated as a partnership and the REMIC Residual
Certificateholders will be treated as the partners. Certain information will be
furnished quarterly to each REMIC Residual Certificateholder who held a REMIC
Residual Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat items on its
return consistently with their treatment on the REMIC's return, unless the REMIC
Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency resulting
from a failure to comply with the consistency requirement without instituting an
administrative proceeding at the REMIC level. The REMIC does not intend to
register as a tax shelter pursuant to Code Section 6111 because it is not
anticipated that the REMIC will have a net loss for any of the first five
taxable years of its existence. Any person that holds a REMIC Residual
Certificate as a nominee for another person may be required to furnish the
REMIC, in a manner to be provided in Treasury regulations, with the name and
address of such person and other information.
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TAX-EXEMPT INVESTORS
Any REMIC Residual Certificateholder that is a pension fund or other
entity that is subject to federal income taxation only on its "unrelated
business taxable income" within the meaning of Code Section 512 will be subject
to such tax on that portion of the distributions received on a REMIC Residual
Certificate that is considered an excess inclusion. See "--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions" above.
RESIDUAL CERTIFICATE PAYMENTS--NON-U.S. PERSONS
Amounts paid to REMIC Residual Certificateholders who are not U.S.
Persons (see "--Taxation of Owners of REMIC Regular Certificates--Non-U.S.
Persons" above) are treated as interest for purposes of the 30% (or lower treaty
rate) United States withholding tax. Amounts distributed to holders of REMIC
Residual Certificates should qualify as "portfolio interest," subject to the
conditions described in "--Taxation of Owners of REMIC Regular Certificates"
above, but only to the extent that the underlying mortgage loans were originated
after July 18, 1984. Furthermore, the rate of withholding on any income on a
REMIC Residual Certificate that is excess inclusion income will not be subject
to reduction under any applicable tax treaties. See "--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions" above. If the portfolio interest
exemption is unavailable, such amount will be subject to United States
withholding tax when paid or otherwise distributed (or when the REMIC Residual
Certificate is disposed of) under rules similar to those for withholding upon
disposition of debt instruments that have OID. The Code, however, grants the
Treasury Department authority to issue regulations requiring that those amounts
be taken into account earlier than otherwise provided where necessary to prevent
avoidance of tax (for example, where the REMIC Residual Certificates do not have
significant value). See "--Taxation of Owners of REMIC Residual
Certificates--Excess Inclusions" above. If the amounts paid to REMIC Residual
Certificateholders that are not U.S. Persons are effectively connected with
their conduct of a trade or business within the United States, the 30% (or lower
treaty rate) withholding will not apply. Instead, the amounts paid to such
non-U.S. Person will be subject to U.S. federal income taxation at regular
graduated rates. For special restrictions on the transfer of REMIC Residual
Certificates, see "--Tax-Related Restrictions on Transfers of REMIC Residual
Certificates" below.
REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.
TAX-RELATED RESTRICTIONS ON TRANSFERS OF REMIC RESIDUAL CERTIFICATES
Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests in
such entity are not held by "disqualified organizations" (as defined below).
Further, a tax is imposed on the transfer of a residual interest in a REMIC to a
"disqualified organization." The amount of the tax equals the product of (A) an
amount (as determined under the REMIC Regulations) equal to the present value of
the total anticipated "excess inclusions" with respect to such interest for
periods after the transfer and (ii) the highest marginal federal income tax rate
applicable to corporations. The tax is imposed on the transferor unless the
transfer is through an agent (including a broker or other middleman) for a
disqualified organization, in which event the tax is imposed on the agent. The
person otherwise liable for the tax shall be relieved of liability for the tax
if the transferee furnished to such person an affidavit that the transferee is
not a disqualified organization and, at the time of the transfer, such person
does not have actual knowledge that the affidavit is false. A "disqualified
organization" means (A) the United States, any State, possession or political
subdivision thereof, any foreign government, any international organization or
any agency or instrumentality of any of the foregoing (provided that such term
does not include an instrumentality if all its activities are subject to tax
and, except for FHLMC, a majority of its board of directors is not selected by
any such governmental agency), (B) any organization (other than certain farmers'
cooperatives) generally exempt from federal income taxes unless such
organization is subject to the tax on "unrelated business taxable income" and
(C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding
a residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity, provided that all partners of an "electing large
partnership" as defined in Section 775 of the
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Code, are deemed to be disqualified organizations. The amount of the tax is
equal to the product of (A) the amount of excess inclusions for the taxable year
allocable to the interest held by the disqualified organization and (B) the
highest marginal federal income tax rate applicable to corporations. The
pass-through entity otherwise liable for the tax, for any period during which
the disqualified organization is the record holder of an interest in such
entity, will be relieved of liability for the tax if such record holder
furnishes to such entity an affidavit that such record holder is not a
disqualified organization and, for such period, the pass-through entity does not
have actual knowledge that the affidavit is false. For this purpose, a
"pass-through entity" means (i) a regulated investment company, real estate
investment trust or common trust fund, (ii) a partnership, trust or estate and
(iii) certain cooperatives. Except as may be provided in Treasury regulations
not yet issued, 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. Electing large partnerships (generally, non-service
partnerships with 100 or more members electing to be subject to simplified IRS
reporting provisions under Code sections 771 through 777) will be taxable on
excess inclusion income as if all partners were disqualified organizations.
In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a REMIC Residual Certificate may be
purchased, transferred or sold, directly or indirectly, without the express
written consent of the Master Servicer. The Master Servicer will grant such
consent to a proposed transfer only if it receives the following: (i) an
affidavit from the proposed transferee to the effect that it is not a
disqualified organization and is not acquiring the REMIC Residual Certificate as
a nominee or agent for a disqualified organization and (ii) a covenant by the
proposed transferee to the effect that the proposed transferee agrees to be
bound by and to abide by the transfer restrictions applicable to the REMIC
Residual Certificate.
Noneconomic REMIC Residual Certificates. The REMIC Regulations
disregard, for federal income tax purposes, any transfer of a Noneconomic REMIC
Residual Certificate to a "U.S. Person," as defined above, unless no significant
purpose of the transfer is to enable the transferor to impede the assessment or
collection of tax. A Noneconomic REMIC Residual Certificate is any REMIC
Residual Certificate (including a REMIC Residual Certificate with a positive
value at issuance) unless, at the time of transfer, taking into account the
Prepayment Assumption and any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents, (i) the
present value of the expected future distributions on the REMIC Residual
Certificate at least equals the product of the present value of the anticipated
excess inclusions and the highest corporate income tax rate in effect for the
year in which the transfer occurs and (ii) the transferor reasonably expects
that the transferee will receive distributions 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. 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 transferor is presumed not to have such knowledge if (i) the transferor
conducted a reasonable investigation of the transferee and (ii) the transferee
acknowledges to the transferor that the residual interest may generate tax
liabilities in excess of the cash flow and the transferee represents that it
intends to pay such taxes associated with the residual interest as they become
due. If a transfer of a Noneconomic REMIC Residual Certificate is disregarded,
the transferor would continue to be treated as the owner of the REMIC Residual
Certificate and would continue to be subject to tax on its allocable portion of
the net income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the transfer of a
REMIC Residual Certificate that has a "tax avoidance potential" to a "foreign
person" will be disregarded for federal income tax purposes. This rule appears
to apply to a transferee who is not a U.S. Person unless such transferee's
income in respect of the REMIC Residual Certificate is effectively connected
with the conduct of a United Sates trade or business. A REMIC Residual
Certificate is deemed to have a tax avoidance potential unless, at the time of
transfer, the transferor reasonably expect that the REMIC will distribute to the
transferee amounts that will equal at least 30 percent of each excess inclusion,
and that such amounts will be distributed at or after the time the excess
inclusion accrues and not later than the end of the calendar year following the
year of accrual. If the non-U.S. Person transfers the REMIC Residual Certificate
to a U.S. Person, the transfer will be disregarded, and the foreign transferor
will continue to be treated as the owner, if the transfer has the effect of
allowing the transferor to avoid tax on accrued excess inclusions. The
provisions in the REMIC Regulations regarding transfers of REMIC Residual
Certificates that have tax avoidance potential to foreign persons are effective
for all transfers after June 30, 1992. The Pooling and Servicing Agreement will
provide that no record or beneficial ownership interest in a REMIC Residual
Certificate
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may be transferred, directly or indirectly, to a non-U.S. Person unless such
person provides the Trustee with a duly completed IRS Form 4224 and the Trustee
consents to such transfer in writing.
Any attempted transfer or pledge in violation of the transfer
restrictions shall be absolutely null and void and shall vest no rights in any
purported transferee. Investors in REMIC Residual Certificates are advised to
consult their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax which may be imposed on a
pass-through entity.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in
"Certain Federal Income Tax Consequences," potential investors should consider
the state income tax consequences of the acquisition, ownership, and disposition
of the Offered Certificates. State income tax law may differ substantially from
the corresponding federal law, and this discussion does not purport to describe
any aspect of the income tax laws of any state. Therefore, potential investors
should consult their own tax advisors with respect to the various tax
consequences of investments in the Offered Certificates.
CERTAIN ERISA CONSIDERATIONS
GENERAL
Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), imposes certain restrictions on employee benefit plans
subject thereto ("ERISA Plans") and on persons who are parties in interest or
disqualified persons ("parties in interest") with respect to such ERISA Plans.
Certain employee benefit plans, such as governmental plans and church plans (if
no election has been made under Section 410(d) of the Code), are not subject to
the restrictions of ERISA, and assets of such plans may be invested in the
Certificates without regard to the ERISA considerations described below, subject
to other applicable federal, state or local law. However, any such governmental
or church plan which is qualified under Section 401(a) of the Code and exempt
from taxation under Section 501(a) of the Code is subject to the prohibited
transaction rules set forth in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in
accordance with the documents governing the ERISA Plan.
PROHIBITED TRANSACTIONS
GENERAL
Section 406 of ERISA prohibits parties in interest with respect to an
ERISA Plan from engaging in certain transactions involving such Plan and its
assets unless a statutory or administrative exemption applies to the
transaction. In some cases, a civil penalty may be assessed on non-exempt
prohibited transactions pursuant to Section 502(i) of ERISA. Section 4975 of the
Code imposes certain excise taxes on similar transactions between retirement
plans and certain other employee benefit plans and arrangements subject thereto,
including individual retirement accounts or annuities and Keogh plans subject
thereto, and disqualified persons with respect to such plans and arrangements
(together with ERISA Plans, "Plans").
The United States Department of Labor ("Labor") has issued a final
regulation (29 C.F.R. Section 2510.3-101) containing rules for determining what
constitutes the assets of a Plan. This regulation provides that, as a general
rule, the underlying assets and properties of corporations, partnerships, trusts
and certain other entities in which a Plan makes an "equity investment" will be
deemed for purposes of ERISA and Section 4975 of the Code to be assets of the
Plan unless certain exceptions apply.
Under the terms of the regulation, the Trust may be deemed to hold plan
assets by reason of a Plan's investment in a Certificate; such plan assets would
include an undivided interest in the Mortgage Loans and any other assets held by
the Trust. In such an event, the Depositor, the Master Servicer, any
Sub-Servicer, the Trustee,
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any insurer of the Mortgage Assets and other persons, in providing services with
respect to the assets of the Trust, may become fiduciaries subject to the
fiduciary responsibility provisions of Title I of ERISA, or may otherwise become
parties in interest or disqualified persons, with respect to such Plan. In
addition, transactions involving such assets could constitute or result in
prohibited transactions under Section 406 of ERISA or Section 4975 of the Code
unless such transactions are subject to a statutory or administrative exemption.
The regulations contain a de minimis safe-harbor rule that exempts the
assets of an entity from plan assets status as long as the aggregate equity
investment in such entity by plans is not significant. For this purpose, equity
participation in the entity will be significant if immediately after any
acquisition of any equity interest in the entity, "benefit plan investors" in
the aggregate, own at least 25% of the value of any class of equity interest
(excluding equity interests held by persons who have discretionary authority or
control with respect to the assets of the entity (or held by affiliates of such
persons)). "Benefit plan investors" are defined as Plans as well as employee
benefit plans not subject to Title I of ERISA (e.g., governmental plans and
foreign plans) and entities whose underlying assets include plan assets by
reason of plan investment in such entities. The 25% limitation must be met with
respect to each class of equity interests, regardless of the portion of total
equity value represented by such class, on an ongoing basis.
AVAILABILITY OF UNDERWRITER'S EXEMPTION FOR CERTIFICATES
Labor has granted to Morgan Stanley & Co. Incorporated Prohibited
Transaction Exemption 90-24, Exemption Application No. D-8019, 55 Fed. Reg.
20548 (1990) (the "Exemption") which exempts from the application of the
prohibited transaction rules transactions relating to: (1) the acquisition, sale
and holding by Plans of certain certificates representing an undivided interest
in certain asset-backed pass-through trusts, with respect to which Morgan
Stanley & Co. Incorporated or any of its affiliates is the sole underwriter or
the manager or co-manager of the underwriting syndicate; and (2) the servicing,
operation and management of such asset-backed pass-through trusts, provided that
the general conditions and certain other conditions set forth in the Exemption
are satisfied.
General Conditions of the Exemption. Section II of the Exemption sets
forth the following general conditions which must be satisfied before a
transaction involving the acquisition, sale and holding of the Certificates or a
transaction in connection with the servicing, operation and management of the
Trust may be eligible for exemptive relief thereunder:
(1) The acquisition of the Certificates by a Plan is on terms
(including the price for such Certificates) that are at least as favorable to
the investing Plan as they would be in an arm's-length transaction with an
unrelated party;
(2) The rights and interests evidenced by the Certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by other
certificates of the Trust with respect to the right to receive payment in the
event of default or delinquencies in the underlying assets of the Trust;
(3) The Certificates acquired by the Plan have received a rating at the
time of such acquisition that is in one of the three highest generic rating
categories from any of Duff & Phelps Credit Rating Co., Fitch Investors Service,
L.P., Moody's Investors Service, Inc. and Standard & Poor's Ratings Services;
(4) The Trustee is not an affiliate of the Depositor, any Underwriter,
the Master Servicer, any insurer of the Mortgage Assets, any borrower whose
obligations under one or more Mortgage Loans constitute more than 5% of the
aggregate unamortized principal balance of the assets in the Trust, or any of
their respective affiliates (the "Restricted Group");
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of the Certificates represents not more than
reasonable compensation for underwriting such Certificates; the sum of all
payments made to and retained by the Asset Seller pursuant to the sale of the
Mortgage Loans to the Trust represents not more than the fair market value of
such Mortgage Loans; the sum of all payments made to and retained by the Master
Servicer represent not more than reasonable compensation for the Master
Servicer's services under the Pooling Agreement and reimbursement of the Master
Servicer's reasonable expenses in connection therewith; and
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(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 as amended.
Before purchasing a Certificate in reliance on the Exemption, a
fiduciary of a Plan should itself confirm (a) that the Certificates constitute
"certificates" for purposes of the Exemption and (b) that the general conditions
and other requirements set forth in the Exemption would be satisfied.
REVIEW BY PLAN FIDUCIARIES
Any Plan fiduciary considering whether to purchase any Certificates on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Code to such investment. Among other things, before purchasing any
Certificates, a fiduciary of a Plan should make its own determination as to the
availability of the exemptive relief provided in the Exemption, and also
consider the availability of any other prohibited transaction exemptions. In
this regard, purchasers that are insurance companies should determine the extent
to which Prohibited Transaction Class Exemption 95-60 (for certain transactions
involving insurance company general accounts) may be available. The Prospectus
Supplement with respect to a series of Certificates may contain additional
information regarding the application of the Exemption, Prohibited Transaction
Class Exemption 83-1 (for certain transactions involving mortgage pool
investment trusts), or any other exemption, with respect to the Certificates
offered thereby.
LEGAL INVESTMENT
The Prospectus Supplement for each series of Offered Certificates will
identify those classes of Offered Certificates, if any, which constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"). Generally, only those classes of
Offered 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
representing interests in a Trust Fund consisting of Mortgage Loans or MBS,
provided that such Mortgage Loans (or the Mortgage Loans underlying the MBS) are
secured by first liens on Mortgaged Property and were originated by certain
types of originators as specified in SMMEA, will be "mortgage related
securities" for purposes of SMMEA (the "SMMEA Certificates"). As "mortgage
related securities," the SMMEA Certificates will constitute legal investments
for persons, trusts, corporations, partnerships, associations, business trusts
and business entities (including, but not limited to, depository institutions,
insurance companies, trustees and pension funds) 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 established by SMMEA for such enactments, limiting to varying
extents the ability of certain entities (in particular, insurance companies) to
invest in mortgage related securities, 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" (effective
December 31, 1996) to include, in relevant part, Offered Certificates satisfying
the rating, first lien and qualified originator requirements for "mortgage
related securities," but representing 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 Offered Certificates. Section 347
also provides that the enactment by a state of any such legislative restrictions
shall not affect the validity of any contractual commitment to purchase, hold or
invest in securities qualifying as "mortgage related securities" solely by
reason of Section 347 that was made, and shall not require the sale or
disposition of any securities acquired, prior to the enactment of such state
legislation. Accordingly, investors affected by such legislation, when and if
enacted, will be authorized to invest in SMMEA Certificates only to the extent
provided in such legislation.
SMMEA also amended the legal investment authority of federally-
chartered depository institutions as follows: federal savings and loan
associations and federal savings banks may invest in, sell or otherwise deal in
"mortgage related securities" without limitation as to the percentage of their
assets represented thereby, federal credit unions may invest in such securities,
and national banks may purchase such securities for their own account
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without regard to the limitations generally applicable to investment securities
set forth in 12 U.S. ss. 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 12 C.F.R.
ss. 1.5 concerning "safety and soundness" and retention of credit information),
certain "Type IV securities," defined in 12 C.F.R. ss. 1.2(1) 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 Offered Certificates will
qualify as "commercial mortgage-related securities," and thus as "Type IV
securities," for investment by national banks. The National Credit Union
Administration ("NCUA") has adopted rules, codified at 12 C.F.R. Part 703, which
permit federal credit unions to invest in "mortgage related securities" under
certain 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.
ss. 703.140. The Office of Thrift Supervision (the "OTS") has issued Thrift
Bulletin 13a (December 1, 1998), "Management of Interest Rate Risk, Investment
Securities, and Derivative Activities," which thrift institutions subject to the
jurisdiction of the OTS should consider before investing in any of the Offered
Certificates.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of
the Federal Financial Institutions Examination Council, which has been adopted
by the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the OCC and the OTS effective May 26, 1998, and by the
NCUA, effective October 1, 1998. The 1998 Policy Statement sets forth general
guidelines which depository institutions must follow in managing risks
(including market, credit, liquidity, operational (transaction), 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 Offered
Certificates, as certain series or classes may be deemed to be 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 Offered Certificates issued
in book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
If specified in the related Prospectus Supplement, other classes of
Offered Certificates offered pursuant to this Prospectus will not constitute
"mortgage related securities" under SMMEA. The appropriate characterization of
such Offered Certificates under various legal investment restrictions, and thus
the ability of investors subject to these restrictions to purchase such Offered
Certificates, may be subject to significant interpretive uncertainties.
Except as to the status of certain classes of Offered Certificates
identified in the Prospectus Supplement for a series as "mortgage related
securities" under SMMEA, no representations are 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 any Offered 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 Offered Certificates) may
adversely affect the liquidity of the Offered Certificates.
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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 own legal advisors in
determining whether and to what extent the Offered Certificates of any class
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.
PLAN OF DISTRIBUTION
The Offered Certificates offered hereby and by the Supplements to this
Prospectus will be offered in series. 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 Offered Certificates will be
distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by Morgan Stanley & Co. Incorporated
("Morgan Stanley") acting as underwriter with other underwriters, if any, named
therein. In such event, the Prospectus Supplement may also specify that the
underwriters will not be obligated to pay for any Offered Certificates agreed to
be purchased by purchasers pursuant to purchase agreements acceptable to the
Depositor. In connection with the sale of Offered Certificates, underwriters may
receive compensation from the Depositor or from purchasers of Offered
Certificates in the form of discounts, concessions or commissions. The
Prospectus Supplement will describe any such compensation paid by the Depositor.
Alternatively, the Prospectus Supplement may specify that Offered
Certificates will be distributed by Morgan Stanley acting as agent or in some
cases as principal with respect to Offered Certificates that it has previously
purchased or agreed to purchase. If Morgan Stanley acts as agent in the sale of
Offered Certificates, Morgan Stanley will receive a selling commission with
respect to such Offered Certificates, depending on market conditions, expressed
as a percentage of the aggregate Certificate Balance or notional amount of such
Offered Certificates as of the Cut-off Date. The exact percentage for each
series of Certificates will be disclosed in the related Prospectus Supplement.
To the extent that Morgan Stanley elects to purchase Offered Certificates as
principal, Morgan Stanley may realize losses or profits based upon the
difference between its purchase price and the sales price. The Prospectus
Supplement with respect to any series 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 purchasers of Offered
Certificates of such series.
The Depositor will indemnify Morgan Stanley and any underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, or will contribute to payments Morgan Stanley and any underwriters
may be required to make in respect thereof.
In the ordinary course of business, Morgan Stanley 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.
Offered Certificates will be sold primarily to institutional investors.
Purchasers of Offered 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 Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
As to each series of Certificates, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any non-investment-grade class may be initially retained by the Depositor, and
may be sold by the Depositor at any time in private transactions.
LEGAL MATTERS
Certain legal matters in connection with the Certificates, including
certain federal income tax consequences, will be passed upon for the Depositor
by Cadwalader, Wickersham & Taft, New York, New York or Latham & Watkins,
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New York, New York or Brown & Wood LLP, New York, New York or such other counsel
as may be specified in the related Prospectus Supplement.
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 rating 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
Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
Accrual Certificates........................................................9
ADA........................................................................68
Applicable Amount..........................................................89
ARM Loans..................................................................23
Asset Conservation Act.....................................................65
Asset Seller...............................................................20
Assets......................................................................2
Balloon Mortgage Loans.....................................................16
Bankruptcy Code............................................................60
Book-Entry Certificates....................................................29
Cash Flow Agreement.........................................................2
Cash Flow Agreements........................................................2
Cede........................................................................3
CERCLA.....................................................................64
Certificate Account.........................................................7
Certificate Balance.........................................................8
Certificate Owners.........................................................36
Certificateholders..........................................................3
Closing Date...............................................................13
Commercial Loans............................................................2
Commercial Properties.......................................................6
Commission..................................................................2
Contributions Tax..........................................................91
Cooperatives...............................................................20
Covered Trust..............................................................17
CPR........................................................................27
Credit Support..............................................................2
Crime Control Act..........................................................69
Deferred Interest..........................................................31
Definitive Certificates.....................................................3
Depositor...................................................................2
Determination Date.........................................................30
DTC.........................................................................3
Due Period.................................................................17
Environmental Hazard Condition.............................................66
Equity Participations......................................................23
ERISA......................................................................12
Exchange Act................................................................3
Exemption..................................................................64
FDIC.......................................................................40
FHLMC......................................................................48
FNMA.......................................................................65
Government Securities.......................................................2
Indirect Participants......................................................36
Insurance Proceeds.........................................................30
IRS.........................................................................5
L/C Bank...................................................................53
Labor......................................................................94
Lease.......................................................................3
Lease Assignment...........................................................15
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Legislative History........................................................72
Lessee......................................................................3
Liquidation Proceeds.......................................................30
Lock-out Date..............................................................23
Lock-out Period............................................................23
Mark-to-Market Regulations.................................................88
Master REMIC...............................................................78
MBS.........................................................................5
MBS Agreement..............................................................24
MBS Issuer.................................................................24
MBS Servicer...............................................................24
MBS Trustee................................................................24
Morgan Stanley..............................................................2
Mortgage Loans..............................................................3
Mortgage Notes.............................................................20
Mortgage Rate...............................................................6
Mortgages..................................................................16
Multifamily Loans..........................................................20
Multifamily Properties......................................................5
NCUA.......................................................................97
Nonrecoverable Advance.....................................................33
OID........................................................................72
OID Regulations............................................................72
Originator.................................................................17
Participants............................................................3, 35
Pass-Through Rate...........................................................2
Payment Lag Certificates...................................................84
Permitted Investments......................................................40
Plans......................................................................94
Prepayment Assumption......................................................75
Prepayment Premium.........................................................23
Prohibited Transactions Tax................................................90
RCRA.......................................................................65
Record Date................................................................29
Related Proceeds...........................................................32
Relief Act.................................................................69
REMIC Certificates.........................................................78
REMIC Regular Certificateholders...........................................79
REMIC Regular Certificates.................................................11
REMIC Regulations..........................................................69
REMIC Residual Certificateholder...........................................11
REMIC Residual Certificates................................................11
REO Extension..............................................................58
REO Tax....................................................................59
Restricted Group...........................................................95
RICO.......................................................................69
Senior Certificates.........................................................8
Servicing Standard.........................................................43
SMMEA......................................................................96
SMMEA Certificates.........................................................96
Special Servicer............................................................5
Stripped ARM Obligations...................................................76
Stripped Bond Certificates.................................................73
Stripped Coupon Certificates...............................................73
Stripped Interest Certificates..............................................9
Stripped Principal Certificates.............................................8
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Subordinate Certificates....................................................8
Sub-Servicers..............................................................43
Sub-Servicing Agreement....................................................43
Subsidiary REMIC...........................................................78
Super-Premium Certificates.................................................80
Title V....................................................................68
Trust Assets................................................................2
Trust Fund..................................................................2
UCC........................................................................35
Voting Rights..............................................................19
Warrantying Party..........................................................38
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