<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-77215-03
The information in this preliminary 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
preliminary 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 September 7, 2000
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated September 7, 2000)
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I TRUST 2000-PRIN
as Issuer
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
as Depositor
PRINCIPAL LIFE INSURANCE COMPANY
as Mortgage Loan Seller
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-PRIN
----------
Morgan Stanley Dean Witter Capital I Inc. is offering selected classes
of its Series 2000-PRIN Commercial Mortgage Pass-Through Certificates, which
represent beneficial ownership interests in a trust. The trust's assets will
primarily be 102 mortgage loans secured by liens on commercial properties. The
Series 2000-PRIN Certificates are not obligations of Morgan Stanley Dean Witter
Capital I Inc., the seller of the mortgage loans or any of their respective
affiliates, and neither the certificates nor the underlying mortgage loans are
insured or guaranteed by any governmental agency.
----------
INVESTING IN THE CERTIFICATES OFFERED TO YOU INVOLVES RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 11 OF
THE PROSPECTUS.
----------
Characteristics of the certificates offered to you include:
<TABLE>
<CAPTION>
PASS-THROUGH
APPROXIMATE INITIAL INITIAL PASS-THROUGH RATE
CLASS CERTIFICATE BALANCE RATE DESCRIPTION RATINGS (S&P/MOODY'S)
----- ------------------- ---- ----------- ---------------------
<S> <C> <C> <C> <C>
Class A-1 $56,100,000 % Fixed AAA/Aaa
Class A-2 $160,600,000 % Fixed AAA/Aaa
Class A-3 $104,500,000 % Fixed AAA/Aaa
Class A-4 $199,047,000 % Fixed AAA/Aaa
Class B $17,939,000 % Variable AA/Aa2
Class C $19,435,000 % Variable A/A3
</TABLE>
----------
The certificate balances are approximate and may vary by up to 5%.
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved the certificates offered to you or determined
if 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 and Goldman, Sachs & Co. will purchase the certificates offered to
you from Morgan Stanley Dean Witter Capital I Inc. and will offer them to the
public at negotiated prices determined at the time of sale. Morgan Stanley & Co.
Incorporated and Goldman, Sachs & Co. expect to deliver the certificates to
purchasers on or about September __, 2000. Morgan Stanley Dean Witter Capital I
Inc. expects to receive from this offering approximately $___________, plus
accrued interest from the cut-off date, before deducting expenses payable by
Morgan Stanley Dean Witter Capital I Inc.
----------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
September __, 2000
<PAGE>
MORGAN STANLEY CAPITAL I INC.
Commercial Mortgage Pass-Through Certificates, Series 2000-PRIN
Geographic Overview of Mortgage Pool
WASHINGTON FLORIDA MASSACHUSETTS
$22,629,089 $45,850,005 $7,643,889
3.78% of total 7.67% of total 1.28% of total
OREGON GEORGIA NEW YORK
$6,954,616 $31,537,703 $17,311,910
1.16% of total 5.27% of total 2.90% of total
NORTHERN CALIFORNIA TENNESSEE PENNSYLVANIA
$95,004,675 $3,117,287 $4,990,250
15.89% of total 0.52% of total 0.83% of total
CALIFORNIA NORTH CAROLINA OHIO
$147,287,221 $20,713,732 $36,150,118
24.63% of total 3.46% of total 6.05% of total
SOUTHERN CALIFORNIA VIRGINIA INDIANA
$52,282,546 $54,293,690 $2,352,449
8.74% of total 9.08% of total 0.39% of total
ARIZONA MARYLAND MINNESOTA
$2,518,654 $14,555,259 $7,945,688
0.42% of total 2.43% of total 1.33% of total
COLORADO NEW JERSEY IOWA
$23,662,833 $51,840,182 $5,457,213
3.96% of total 8.67% of total 0.91% of total
TEXAS CONNECTICUT MISSOURI
$45,128,538 $11,630,896 $3,913,893
7.55% of total 1.95% of total 0.65% of total
KANSAS
$30,500,000
5.10% of total
(less than)1.0% of Cut-Off Date Balance
1.0 - 5.0% of Cut-Off Date Balance
5.0 - 10.0% of Cut-Off Date Balance
(greater than)10.0% of Cut-Off Date Balance
<PAGE>
[PHOTOS OF THE FOLLOWING PROPERTIES]
LIGHTON PLAZA TOWER, Overland Park, KS
WOODMEN RETAIL, Colorado Springs, CO
LIBERTY SQUARE SHOPPING CENTER, Burlington, NJ
LIGHTON PLAZA I, Overland Park, KS
LIGHTON PLAZA II, Overland Park, KS
7799 LEESBURG PIKE, McLean, VA
1860-2159 LANDINGS DRIVE, Mountain View, CA
<PAGE>
3555 MONTE VILLA PARKWAY, Bothell, WA
14560 NE 87th STREET, Redmond, WA
SUN CENTER PHASE I, Columbus, OH
461 FIFTH AVENUE, New York, NY
14520 NE 87th STREET, Redmond, WA
NORTH POINT VILLAGE CENTER, Reston, VA
BIRD LUDLAM SHOPPING CENTER, South Miami, FL
<PAGE>
The pass-through rates on the Class A-1, Class A-2, Class A-3 and Class
A-4 Certificates will be a per annum fixed rate equal to [___]%, [___]%, [___]%
and [___]%, respectively. The pass-through rate on the Class B Certificates will
be a per annum rate equal to the NWAC rate described below less [___]% and the
pass-through rate on the Class C Certificates will be a per annum rate equal to
the NWAC rate described below less [___]% 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 master servicing fee rate, the
primary servicing fee rate and the trustee fee rate, calculated as described in
this prospectus supplement. You should read the section entitled "Ratings" in
this prospectus supplement.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the certificates offered to you 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 certificates offered to you; and (b) this prospectus supplement, which
describes the specific terms of the certificates offered to you.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. Morgan Stanley Dean Witter 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.
------------------------------
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 prospectus identify the pages where these sections are located.
The Series 2000-PRIN Certificates are not obligations of Morgan Stanley
Dean Witter Capital I Inc., the seller of the mortgage loans or any of their
respective affiliates, and neither the certificates nor the underlying mortgage
loans are insured or guaranteed by any governmental agency.
------------------------------
Morgan Stanley Dean Witter Capital I Inc. will not list the
certificates offered to you on any national securities exchange or any automated
quotation system of any registered securities association such as NASDAQ.
------------------------------
Until ninety days after the date of this prospectus supplement, all
dealers that buy, sell or trade the certificates offered by this prospectus
supplement, 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>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS.................................................................................. 3
Summary of Prospectus Supplement................................................................................. 7
What You Will Own....................................................................................... 7
Relevant Parties and Dates.............................................................................. 7
Offered Certificates.................................................................................... 9
Information About The Mortgage Pool.....................................................................13
Additional Aspects Of Certificates......................................................................19
Risk Factors.....................................................................................................23
Description Of The Offered Certificates..........................................................................51
General ......................................................................................51
Certificate Balances...........................................................................52
Pass-Through Rates.............................................................................53
Distributions..................................................................................53
Optional Termination...........................................................................58
Advances.......................................................................................59
Reports to Certificateholders; Available Information...........................................61
Example of Distributions.......................................................................64
The Trustee and the Fiscal Agent...............................................................65
Expected Final Distribution Date; Rated Final Distribution Date................................66
Yield, Prepayment And Maturity Considerations...........................................................66
General ......................................................................................66
Pass-Through Rates.............................................................................66
Rate and Timing of Principal Payments..........................................................67
Losses and Shortfalls..........................................................................67
Relevant Factors...............................................................................68
Weighted Average Life..........................................................................68
Description of the Mortgage Pool.................................................................................72
General ......................................................................................72
Material Terms and Characteristics of the Mortgage Loans.......................................72
Cross Collateralization; Related Parties.......................................................76
Assessments of Property Value and Condition....................................................76
Additional Mortgage Loan Information...........................................................78
Standard Hazard Insurance......................................................................79
The Seller.....................................................................................80
Sale of the Mortgage Loans.....................................................................80
Representations and Warranties.................................................................81
Repurchases and Other Remedies.................................................................84
Changes In Mortgage Pool Characteristics.......................................................84
Servicing of the Mortgage Loans.........................................................................85
General ......................................................................................85
The Master Servicer............................................................................86
The Special Servicer and Primary Servicer......................................................87
Events of Default..............................................................................87
The Special Servicer...........................................................................88
The Operating Adviser..........................................................................90
Mortgage Loan Modifications....................................................................90
Sale of Defaulted Mortgage Loans and REO Properties............................................91
Foreclosures...................................................................................92
Material Federal Income Tax Consequences................................................................92
General ......................................................................................93
S-4
<PAGE>
Original Issue Discount and Premium............................................................93
Additional Considerations......................................................................94
Legal Aspects of Mortgage Loans.........................................................................95
California.....................................................................................95
ERISA Considerations....................................................................................95
Plan Assets....................................................................................95
Special Exemption Applicable to Class A Certificates...........................................96
Insurance Company General Accounts.............................................................98
General Investment Considerations..............................................................98
Legal Investment........................................................................................99
Use of Proceeds.........................................................................................99
Plan of Distribution....................................................................................99
Legal Matters..........................................................................................100
Ratings ..............................................................................................100
Glossary Of Terms......................................................................................102
APPENDIX I...............................................................................................1
APPENDIX II..............................................................................................1
APPENDIX III.............................................................................................1
Term Sheet.............................................................................................T-1
Form of Monthly Reporting Statement....................................................................R-1
</TABLE>
S-5
<PAGE>
EXECUTIVE SUMMARY
This Executive Summary highlights selected information regarding the
certificates offered to you. It does not contain all of the information you need
to consider in making your investment decision. To understand all of the terms
of this offering and the underlying mortgage loans, you should read this entire
prospectus supplement and the accompanying prospectus carefully.
CERTIFICATE STRUCTURE
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
APPROXIMATE APPROXIMATE APPROXIMATE INITIAL WEIGHTED PRINCIPAL
CREDIT CERTIFICATE RATINGS PERCENT OF TOTAL PASS-THROUGH AVERAGE WINDOW
SUPPORT CLASS BALANCE (S&P/MOODY'S) CERTIFICATES RATE LIFE (YRS.) (MONTHS)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
13.00% A-1 $ 56,100,000 AAA /Aaa 9.38% (Fixed) 2.99 1-67
-----------------------------------------------------------------------------------------------------------------------
13.00% A-2 $ 160,600,000 AAA /Aaa 26.86% (Fixed) 5.69 1-104
-----------------------------------------------------------------------------------------------------------------------
13.00% A-3 $ 104,500,000 AAA /Aaa 17.48% (Fixed) 7.14 67-104
-----------------------------------------------------------------------------------------------------------------------
13.00% A-4 $ 199,047,000 AAA /Aaa 33.29% (Fixed) 10.66 104-172
-----------------------------------------------------------------------------------------------------------------------
10.00% B $ 17,939,000 AA /Aa2 3.00% (Variable) 14.76 172-183
-----------------------------------------------------------------------------------------------------------------------
6.75% C $ 19,435,000 A /A3 3.25% (Variable) 15.84 183-198
-----------------------------------------------------------------------------------------------------------------------
(X) -- D-M $ 40,364,115 -- 6.75% -- -- --
-----------------------------------------------------------------------------------------------------------------------
(X) N/A X $ 597,985,115 -- -- -- -- --
(Notional Amount)
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
With respect to the table above:
o The percentages indicated under the column "Approximate Credit Support"
with respect to the Class A-1, Class A-2, Class A-3 and Class A-4
Certificates represent the approximate credit support for the Class A-1,
Class A-2, Class A-3 and Class A-4 Certificates in the aggregate.
o The Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L,
Class M and Class X Certificates are not offered pursuant to this
prospectus supplement.
o The Series 2000-PRIN Class R-I and R-II Certificates also represent
ownership interests in the trust. These certificates are not represented in
this table and are not offered pursuant to this prospectus supplement.
o The initial certificate balances may vary by up to 5%.
o The pass-through rates for the Class B and Class C Certificates presented
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 B Certificates will be a per annum rate equal to the NWAC rate
for such distribution less [__]% and the pass-through rate on the Class C
Certificates will be a per annum rate equal to the NWAC rate for such
distribution date less [___]%.
o With respect to the column entitled "Principal Window," 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 presented 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.
[ ] Offered certificates.
[(X)] Certificates not offered pursuant to this prospectus supplement.
S-6
<PAGE>
Summary of Prospectus Supplement
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, you should read this entire document and the
accompanying prospectus carefully.
WHAT YOU WILL OWN
General............................. Your certificates (along with the
privately offered certificates) represent
beneficial interests in a trust created by
Morgan Stanley Dean Witter Capital I Inc.
All payments to you will come only from
the amounts received in connection with
the assets of the trust. The trust's
assets will primarily be 102 mortgage
loans secured by liens on commercial
properties.
Title of Certificates............... Commercial Mortgage Pass-Through
Certificates, Series 2000-PRIN.
Mortgage Pool....................... The mortgage pool consists of
approximately 102 mortgage loans with an
aggregate principal balance of all
mortgage loans as of September 1, 2000, of
approximately $597,985,115, which may vary
by up to 5%. For purposes of those
mortgage loans that have a due date on a
date other than the first of the month, we
have assumed that those mortgage loans are
due on the first of the month for purposes
of determining their cut-off dates and
cut-off date balances.
As of September 1, 2000, the balances of
the mortgage loans in the mortgage pool
ranged from approximately $1,998,635 to
approximately $30,500,000 and the mortgage
loans had an approximate average balance
of $5,862,599.
RELEVANT PARTIES AND DATES
Issuer.............................. Morgan Stanley Dean Witter Capital I Trust
2000-PRIN.
Depositor........................... Morgan Stanley Dean Witter Capital I Inc.
Master Servicer..................... Wells Fargo Bank, National Association, a
national banking association.
Special Servicer.................... Principal Capital Management, LLC, a
Delaware limited liability company.
Primary Servicer.................... Principal Capital Management, LLC.
Trustee............................. LaSalle Bank National Association, a
national banking association. The trustee
will also act as the certificate
registrar.
Fiscal Agent........................ ABN AMRO Bank N.V., a Netherlands banking
corporation and indirect corporate parent
of the trustee.
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 that class of certificates is
less than 25% of the
S-7
<PAGE>
initial certificate balance of that class,
the next most subordinate class of
certificates, may appoint a representative
for the purposes described in this
prospectus supplement. It is anticipated
that the initial operating adviser will be
Principal Capital Management, LLC.
Seller.............................. Principal Life Insurance Company, an Iowa
corporation.
Underwriters........................ Morgan Stanley & Co. Incorporated and
Goldman, Sachs & Co.
Cut-off Date........................ September 1, 2000 for any mortgage loan
that has a due date on the first day of
each month. The cut-off date for any
mortgage loan that has a due date on a
date other than the first day of each
month shall be deemed to be September 1,
2000. For purposes of the information
contained in this prospectus supplement
(including the appendices hereto) we
present those loans as if their scheduled
payments due in September 2000 were due on
September 1, 2000 and not the actual day
which such scheduled payments were due.
Closing Date........................ On or about September __, 2000.
Distribution Date................... The 23rd day of each month, or, if such
23rd day is not a business day, the
business day immediately following such
23rd day, commencing in October 2000.
Record Date......................... With respect to each distribution date,
the close of business on the last business
day of the preceding calendar month.
Expected Final Distribution Date Class A-1 April 23, 2006
Class A-2 May 23, 2009
Class A-3 May 23, 2009
Class A-4 January 23, 2015
Class B December 23, 2015
Class C March 23, 2017
The Expected Final Distribution Date for
each class of certificates is the date on
which such class is expected to be paid in
full.
Rated Final Distribution Date....... As to each class of offered certificates,
February 23, 2034.
S-8
<PAGE>
OFFERED CERTIFICATES
General............................. Morgan Stanley Dean Witter Capital I Inc.
is offering the following six (6) classes
of its Series 2000-PRIN Commercial
Mortgage Pass-Through Certificates:
o A-1
o A-2
o A-3
o A-4
o B
o C
The entire series will consist of a total
of eighteen (18) classes, the following
twelve (12) of which are not being offered
by this prospectus supplement and the
accompanying prospectus: Class D, Class E,
Class F, Class G, Class H, Class J, Class
K, Class L, Class M, Class X, Class R-I
and Class R-II.
Certificate Balance................. Your certificates will have the
approximate aggregate initial certificate
presented in the chart below and this
balance below may vary by up to 5%:
Class A-1 $56,100,000 Certificate Balance
Class A-2 $160,600,000 Certificate Balance
Class A-3 $104,500,000 Certificate Balance
Class A-4 $199,047,000 Certificate Balance
Class B $17,939,000 Certificate Balance
Class C $19,435,000 Certificate Balance
S-9
<PAGE>
Pass-Through Rates.................. Your certificates will accrue interest at
an annual rate called a pass-through rate.
The following table lists the initial
pass-through rates for each class of
offered certificates:
Class A-1[__________]% (Fixed)
Class A-2[__________]% (Fixed)
Class A-3[__________]% (Fixed)
Class A-4[__________]% (Fixed)
Class B [__________]% (NWAC - [__]%)
Class C [__________]% (NWAC - [__]%)
Interest on your certificates will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months, also
referred to in this prospectus supplement
as 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 rate, the primary 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 the relevant 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 any borrower's
bankruptcy or insolvency.
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:
Step 1/Class A and Class X: To interest on
Classes A-1, A-2, A-3, A-4 and X pro rata,
in accordance with their interest
entitlements.
S-10
<PAGE>
Step 2/Class A: To the extent of amounts
then required to be distributed as
principal to (A)(i) Class A-1 and Class
A-3 provided, however, amounts distributed
pursuant to clause A shall be paid to
Class A-1, and if Class A-1 has been
retired, to Class A-3 and (ii) Class A-2,
pro rata and, (B) if Class A-1, Class A-2
and Class A-3 have been retired, to Class
A-4, until reduced to zero. If the
principal amount of each class of
certificates other than Classes A-1, A-2,
A-3 and A-4 has been reduced to zero or
the aggregate appraisal reduction is
greater than or equal to the aggregate
principal balance of each class of
certificates other than Classes A-1, A-2,
A-3 and A-4, principal will be distributed
to Classes A-1, A-2, A-3 and A-4, pro
rata, rather than as described above.
Step 3/Class A: If the principal amount of
each class of certificates other than
Classes A-1, A-2, A-3 and A-4 has been
reduced to zero or the aggregate appraisal
reduction is greater than or equal to the
aggregate principal balance of each class
of certificates other than Classes A-1,
A-2, A-3 and A-4, principal will be
distributed to Classes A-1, A-2, A-3 and
A- 4, pro rata, rather than as described
above to reimburse Classes A-1, A-2, A-3
and A-4, for any previously unreimbursed
losses on the mortgage loans allocable to
principal that were previously borne by
those classes, together with interest on
such losses at the applicable pass-through
rate.
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 on such
losses at the applicable pass-through
rate.
Step 5/Class C: To Class C in a manner
analogous to the Class B allocations of
Step 4.
Step 6/Subordinate Private Certificates:
In the amounts and order of priority
described in this prospectus supplement.
B. Interest and
Principal Entitlements..... A description of the interest entitlement
payable to each Class can be found in
"Description of the Offered
Certificates--Distributions" in this
prospectus supplement. As described in
that 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. In addition, the right of the
master servicer, the trustee and the
fiscal agent to reimbursement or payment
for non-recoverable advances will be prior
to your right to receive distributions of
principal or interest. 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: the principal
portion of all scheduled payments, other
than balloon payments, whether or not
received, due during the related
collection period; all principal
prepayments and the principal portion of
balloon payments received during the
related collection period; the principal
portion of other collections on the
mortgage loans received during the related
S-11
<PAGE>
collection period, such as liquidation
proceeds, condemnation proceeds, insurance
proceeds and income on "real estate
owned"; and the principal portion of
proceeds of mortgage loan repurchases
received during the related collection
period. As described herein, the amount
actually available for principal
distributions on any distribution date may
be less than the amount required to be
distributed on that date.
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 Offered
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-1, Class A-2,
Class A-3, Class A-4
and
Class X
Class B
Class C
Classes D-M
NO OTHER FORM OF CREDIT ENHANCEMENT WILL
BE AVAILABLE TO YOU AS A HOLDER OF OFFERED
CERTIFICATES.
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.
S-12
<PAGE>
o shortfalls resulting from interest
on advances made by the master
servicer, the trustee or the fiscal
agent, to the extent not covered by
default interest and late payment
charges paid by the borrower.
o shortfalls resulting from a
reduction of a mortgage loan's
interest rate by a bankruptcy court
or from other unanticipated,
extraordinary or default-related
expenses of the trust.
Shortfalls in mortgage loan interest as a
result of the timing of prepayments (net of
certain amounts required to be used by the
master servicer or special servicer to
offset such shortfalls) 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 September 1, 2000. With
respect to mortgage loans not having due
dates on the first day of each month,
scheduled payments due in September 2000
have been deemed received on September 1,
2000.
B. Principal Balances......... The trust's primary assets will be 102
mortgage loans with an aggregate principal
balance of all mortgage loans as of
September 1, 2000 of $597,985,115. It is
possible that the mortgage loan balance will
vary by up to 5%. As of September 1, 2000,
the principal balance of the mortgage loans
in the mortgage pool ranged from
approximately $1,998,635 to approximately
$30,500,000 and the mortgage loans had an
approximate average balance of $5,862,599.
C. Fee Simple/Leasehold....... 101 mortgage loans, representing 99.1% of
the aggregate principal balance of the
mortgage loans, are secured by a first
mortgage lien on a fee simple estate in an
income-producing real property. In two (2)
of those cases, although the borrower's
interest in the property consists of a
ground leasehold interest, the fee owner of
the mortgaged property is a party to the
related mortgage and pursuant to such
mortgage, has encumbered such fee owner's
fee interest in the mortgaged property, and
any such mortgage loan is disclosed in this
prospectus supplement as a fee loan and the
borrower's interest in that mortgaged
property is disclosed as a fee simple
estate. One (1) mortgage loan, representing
0.9% of the aggregate principal balance of
the mortgage loans, is secured by a fee
simple estate in an income producing
property, together with a first mortgage
lien encumbering the borrower's leasehold
interest in an adjacent, non-income
producing real property.
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<PAGE>
D. Property Types............. The following table shows how the mortgage
loans are distributed among different types
of properties.
Percentage of
Aggregate Principal
Balance of Mortgage
Loans as of the Cut- Number of Mortgage
Property Type off Date Loans
------------- --------------------- ------------------
Retail 45.1% 45
o Anchored retail 38.9% 36
o Single tenant retail 6.2% 9
Industrial 27.0% 36
Office 25.0% 19
Other (leased fee) 2.9% 2
E. Property Location.......... The number of mortgage loans, and the
approximate percentage of the aggregate
principal balance of the mortgage loans
represented by the mortgage loans, that are
secured by mortgaged properties located in
the eight (8) states with the highest
concentrations of mortgaged properties, are
as described in the table below:
Percentage of Aggregate
Principal Balance of Number of
Mortgage Loans as of Mortgage
State the Cut-off Date Loans
----- ----------------------- ---------
California 24.6% 26
o Northern California 15.9% 17
o Southern California 8.7% 9
Virginia 9.1% 6
New Jersey 8.7% 9
Florida 7.7% 9
Texas 7.5% 9
Ohio 6.0% 4
Georgia 5.3% 9
Kansas 5.1% 1
The remaining mortgaged properties are
located throughout 15 other states. None of
these states has a concentration of
mortgaged properties that represents
security for more than 4.0% of the aggregate
principal balance of the mortgage loans, as
of September 1, 2000.
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<PAGE>
F. Other Mortgage
Loan Features............. As of September 1, 2000, 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 One (1) group of mortgage loans
contains separate obligations
cross-collateralized with each
other, which represents 3.0% of the
aggregate principal balance of the
mortgage loans. See Appendix II
attached hereto.
o Nine (9) groups of mortgage loans
were made to the same borrower or
to borrowers that are affiliated
with one another through partial or
complete direct or indirect common
ownership. Such groups collectively
represent 23.2% of the aggregate
principal balance of the mortgage
loans, with no group representing
more than 6.5% of the aggregate
principal balance of the mortgage
loans. See Appendix II attached
hereto.
o Certain of the mortgage loans are
included in more than one of the
categories described in the
preceding two paragraphs.
o Forty (40) mortgage loans,
representing 31.5% of the aggregate
principal balance of the mortgage
loans, are secured by mortgaged
properties that are each 100%
leased to a single tenant; nine (9)
of which (representing 6.2% of the
aggregate principal balance of the
mortgage loans) are single tenant
retail properties; eleven (11) of
which (representing 7.9% aggregate
principal balance of the mortgage
loans) are single tenant office
properties; nineteen (19) of which
(representing 17.0% of the
aggregate principal balance of the
mortgage loans) are single tenant
industrial properties; and one (1)
of which (representing 0.4% of the
aggregate principal balance of the
mortgage loans) is improved by a
single tenant property.
o All of the mortgage loans bear
interest at fixed rates.
o No mortgage loan permits negative
amortization or the deferral of
accrued interest.
G. Balloon Loans.............. As of September 1, 2000, the mortgage loans
had the following characteristics:
o Thirty-eight (38) of the mortgage
loans, representing 50.1% of the
aggregate principal balance of the
mortgage loans are "balloon loans".
For purposes of this prospectus
supplement, we consider a mortgage
loan to be a "balloon loan" if its
principal balance is greater than
1% of its original principal
balance as of its maturity date.
o Sixty-four (64) mortgage loans,
representing 49.9% of the aggregate
principal balance of the mortgage
loans as of September 1, 2000, are
expected to have principal balances
of
S-15
<PAGE>
less than approximately 1% of
their respective original principal
balance as of their respective
stated maturity dates.
H. Interest Only Loans........ One (1) of the mortgage loans representing
2.5% of the aggregate principal balance of
the mortgage loans as of September 1, 2000
requires monthly payments of interest only
for the full term of the mortgage loan. One
(1) of the mortgage loans representing 5.1%
of the aggregate principal balance of the
mortgage loans as of September 1, 2000,
provides for monthly payments of interest
only until January 15, 2002, and thereafter
provides for monthly payments of interest
and principal based on a 360 month
amortization schedule.
I. Prepayment Provisions...... As of September 1, 2000, the mortgage loans
restricted voluntary principal prepayments
as follows:
o All of the mortgage loans require
payment of a prepayment premium
upon a voluntary principal
prepayment:
o For ninety-nine (99) mortgage
loans, representing 96.3% of the
aggregate principal balance of the
mortgage loans, the prepayment
premium for each such mortgage loan
is calculated as an amount equal to
the greater of one percent (1%) of
the amount prepaid and an amount
based upon a yield maintenance
formula referencing United States
Treasury obligations.
o For three (3) mortgage loans,
representing 3.7% of the aggregate
principal balance of the mortgage
loans, the prepayment premium is
calculated by using other yield
maintenance formulas.
See Appendix II attached hereto for
a summary of the specific yield
maintenance provisions.
o For three (3) mortgage loans,
representing 4.4% of the aggregate
principal balance of the mortgage
loans, voluntary prepayment is
permitted without payment of a
prepayment premium for a period of
up to three months prior to and
including the maturity date.
o In certain cases, voluntary principal
prepayments are permitted only during
specified periods:
o Twelve (12) mortgage loans,
representing 11.4% of the aggregate
principal balance of the mortgage
loans, permit voluntary prepayment
in full only after expiration of a
lock-out period, subject to payment
of a prepayment premium, as further
described in this prospectus
supplement.
o All of the mortgage loans, other than
one (1) mortgage loan representing
0.5% of the aggregate principal
balance of the mortgage loans,
permit voluntary prepayment only in
full and not in part.
S-16
<PAGE>
J. Mortgage Loan Ranges
and Weighted Averages.... As of September 1, 2000, the mortgage loans
had the following additional
characteristics:
i. MORTGAGE INTEREST
RATES................. Mortgage interest rates ranging from 6.800%
per annum to 10.250% per annum, and a
weighted average mortgage interest rate of
7.856% per annum;
ii. REMAINING TERMS...... Remaining terms to scheduled maturity
ranging from 68 months to 274 months, and
a weighted average remaining term to
scheduled maturity of 151 months;
iii. REMAINING
AMORTIZATION TERMS.. Remaining amortization terms ranging from
103 months to 360 months, and a weighted
average remaining amortization term of 225
months;
iv. LOAN-TO-VALUE
RATIOS............... Loan-to-value ratios ranging from 18.6% to
80.6%, and a weighted average loan-to-value
ratio, calculated as described in this
prospectus supplement, of 57.5%.
With respect to one hundred and one (101)
mortgage loans, the loan-to- value ratios
were calculated based upon a value that has
been determined according to the methodology
set forth in this prospectus supplement by
applying a capitalization rate to the
underwritten net operating income of such
mortgaged property or properties to
determine the value of such mortgaged
property or properties.
For forty-three (43) of the mortgage loans,
representing 58.2% of the aggregate
principal balance of the mortgage loans as
of September 1, 2000, capitalization rates
were calculated on the basis of third party
market studies. For fifty-eight (58) of the
mortgage loans, representing 41.1% of the
aggregate principal balance of the mortgage
loans as of September 1, 2000, internal
valuations were prepared by the seller on
the basis of discounted cash flow analyses,
resulting in an implied capitalization rate.
For one (1) mortgage loan, representing 0.7%
of the aggregate principal balance of the
mortgage loans as of September 1, 2000, the
loan-to-value ratio was calculated according
to the methodology set forth in this
prospectus supplement based on the estimate
of value from a third party appraisal, dated
November 22, 1999.
v. DEBT SERVICE
COVERAGE RATIOS....... Debt service coverage ratios, determined
according to the methodology presented in
this prospectus supplement, ranging from
1.02x to 4.05x and a weighted average debt
service coverage ratio, calculated as
described in this prospectus supplement, of
1.50x.
The mortgage loans have implied debt service
coverage ratios ranging from 1.18x to 5.12x,
calculated assuming each mortgage loan has a
fixed constant of 9.0% as described in this
prospectus supplement, and all of the
mortgage loans have a weighted average
implied debt service coverage ratio,
calculated as described in this prospectus
supplement, of 1.74x.
S-17
<PAGE>
ADVANCES OF PRINCIPAL AND INTEREST
A. General.................... The master servicer is required to advance
delinquent monthly mortgage loan payments
except in the specific instances described
in the paragraphs below. 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 master
servicing fee and the primary servicing fee,
but will advance the trustee fee.
The master servicer is required to make
advances of scheduled loan payments for the
thirty-one (31) mortgage loans (representing
26.8% of the aggregate principal balance of
the mortgage loans as of September 1, 2000)
which have a due date (inclusive of any
grace periods) on or after the determination
date, to the extent such payment is not
received from the applicable borrower by the
related master servicer remittance date. See
"Description of the Mortgage Pool- Material
Terms and Characteristics of the Mortgage
Loans" in this prospectus supplement.
All advances made by the master servicer,
the trustee or the fiscal agent will accrue
interest at a rate equal to the "prime rate"
as reported in The Wall Street Journal.
Advances made in respect of mortgage loans
which have a due date (inclusive of any
grace periods) on or after the determination
date will not begin to accrue interest until
the day succeeding the later of such
mortgage loan's due date or the expiration
of any applicable grace period.
If the master servicer fails to make a
required advance, the trustee will be
required to make the advance, and if the
trustee fails to make a required advance,
the fiscal agent will be required to make
the advance, each subject to the same
limitations, and with the same rights of the
master servicer.
Neither the master servicer, the trustee nor
the fiscal agent will be obligated to make
any advance if it reasonably determines that
such advance would not be recoverable in
accordance with the servicing standard, or
in the case of the trustee and fiscal agent,
in their good faith business judgment, and
the trustee and the fiscal agent may rely on
any such determination made by the master
servicer.
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. In general, if the principal
amount of the loan plus all other amounts
due thereunder and interest on advances made
with respect thereto exceeds 90% of the
value of the mortgaged property determined
by an appraisal or other valuation, an
appraisal reduction may be created in the
amount of the excess as described in this
prospectus supplement. If there exists an
appraisal reduction for any mortgage loan,
the amount
S-18
<PAGE>
required to be advanced on that mortgage
loan will be proportionately reduced to the
extent of that appraisal reduction. This
will reduce the funds available to pay
interest and principal on the most
subordinate class or classes of certificates
then outstanding.
ADDITIONAL ASPECTS OF CERTIFICATES
RATINGS ......................... The certificates offered to you will not be
issued unless each of the classes of
certificates being offered by this
prospectus supplement receives the following
ratings from Standard & Poor's Ratings
Services and Moody's Investors Service, Inc.
Ratings
Class S&P/Moody's
----- -----------
Classes A-1, A-2, A-3 and A-4 AAA /Aaa
Class B AA /Aa2
Class C A /A3
A rating agency may downgrade, qualify 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 or equal to 1%
of the aggregate principal balance of the
mortgage loans as of September 1, 2000, the
seller, the special servicer, the primary
servicer, the master servicer, Morgan
Stanley Dean Witter Capital I Inc. 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 would terminate the trust and retire
the then outstanding certificates.
DENOMINATIONS .................... The Class A-1, Class A-2, Class A-3 and
Class A-4 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, and will not be
registered in your name. You will not
receive a definitive certificate
representing your ownership interest, except
in very limited circumstances described in
this prospectus supplement. As a result, you
will hold your certificates only in
book-entry form and will not be a
certificateholder of record. You will
receive distributions on your certificates
and reports relating to distributions only
through The Depository Trust Company,
Clearstream Banking, societe anonyme or the
Euroclear System or through participants in
The
S-19
<PAGE>
Depository Trust Company, Clearstream
Banking or Euroclear.
You may hold your certificates through:
The Depository Trust Company in the United
States; or
Clearstream Banking or Euroclear in Europe.
Transfers within The Depository Trust
Company, Clearstream Banking 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 The
Depository Trust Company, Clearstream
Banking or Euroclear will be effected in The
Depository Trust Company through the
relevant depositories of Clearstream Banking
or Euroclear.
Morgan Stanley Dean Witter Capital I Inc.
may elect to terminate the book-entry system
through The Depository Trust Company,
Clearstream Banking or Euroclear with
respect to all or any portion of any class
of the certificates offered to you.
Morgan Stanley Dean Witter Capital I Inc.
expects that the certificates offered to you
will be delivered in book-entry form through
the facilities of The Depository Trust
Company, Clearstream Banking or Euroclear on
or about September [__], 2000.
TAX STATUS ....................... An election will be made to treat designated
portions of the trust as two separate "real
estate mortgage investment conduits"--REMIC
I and REMIC II--for federal income tax
purposes. In the opinion of counsel, the
trust (and each such designated portion of
the trust) will qualify for this treatment
and each class of offered certificates will
constitute "regular interests" in REMIC II.
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 on the certificates
in accordance with the accrual
method of accounting.
o Certain classes of Certificates
offered hereby may be issued with
original issue discount.
S-20
<PAGE>
CONSIDERATIONS RELATED TO TITLE I
OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974........ Subject to the satisfaction of important
conditions described under "ERISA
Considerations" in this prospectus
supplement and in the accompanying
prospectus, the Class A-1, Class A-2, Class
A-3 and Class A-4 Certificates may be
purchased by persons investing assets of
employee benefit plans or individual
retirement accounts.
UNDER CURRENT LAW, THE CLASS B AND CLASS C
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 (PTC
95-60, SECTIONS I AND III). However, on
August 23, 2000, the U.S. Department of
Labor published a notice of a proposed
amendment to the individual prohibited
transaction exemptions granted to
underwriters (including the exemptions, as
discussed herein), which, if adopted as
currently proposed, might permit certain of
these classes to be eligible for purchase in
the secondary market by persons investing
assets of employee benefit plans or
individual retirement accounts. Prospective
purchasers should consult with their ERISA
advisers.
LEGAL INVESTMENTS................. The Class A and the Class B certificates
will constitute "mortgage related
securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984, as
amended, so long as they are rated in one of
the two highest rating categories by one or
more rating agencies. The Class C
Certificates will not constitute "mortgage
related securities". See "Legal Investment"
in this prospectus supplement.
Except with respect to the status of the
Class A and Class B Certificates as
"mortgage related securities,", neither the
prospectus nor this prospectus supplement
makes any representation to you regarding
the proper characterization of the
certificates offered by this prospectus
supplement for purposes of any applicable
legal investment, regulatory capital
requirements or other similar purposes. You
should consult with your own advisor
regarding these matters. See "Legal
Investment" in this prospectus supplement
and in the prospectus.
S-21
<PAGE>
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S-22
<PAGE>
RISK FACTORS
You should carefully consider the risks involved in owning a certificate
before purchasing a certificate. Among other risks, the timing of payments and
payments you receive on your certificates will depend on payments received on
and other recoveries with respect to the mortgage loans. Therefore, you should
carefully consider both the risk factors relating to the mortgage loans and the
mortgaged properties and the other risks relating to the certificates.
The risks and uncertainties described in this section, together with those
risks described in the prospectus under Risk Factors summarize the material
risks relating to your certificates. Your investment could be materially and
adversely affected by the actual and potential circumstances that we describe in
such sections.
YOUR INVESTMENT IS NOT INSURED OR
GUARANTEED AND YOUR SOURCE FOR
REPAYMENTS IS LIMITED TO PAYMENTS
UNDER THE MORTGAGE LOANS
Payments under the mortgage loans
are not insured or guaranteed by any
governmental entity or mortgage
insurer. Accordingly, the sources
for repayment of your certificates
are limited to amounts due with
respect to the mortgage loans.
You 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 (or, in the
case of mortgage loans secured by
land which is ground leased to a
ground tenant, the sufficiency of
related ground lease rents) of the
mortgaged property. Payment of those
mortgage loans that are balloon
loans 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 limited circumstances, Principal
Life Insurance Company, as the
mortgage loan seller, may be
obligated to repurchase or replace a
mortgage loan that it sold to Morgan
Stanley Dean Witter Capital I Inc.
if 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 Principal Life Insurance
Company will be in a financial
position to effect such repurchase
or substitution. The representations
and warranties address the
characteristics of the mortgage
loans and mortgaged properties as of
the date of transfer of the mortgage
loans and mortgaged properties. They
do not relieve you or the trust of
the risk of defaults and losses on
the mortgage loans.
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
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
S-23
<PAGE>
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 any one or more of 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.
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 or rental
space);
o demographic factors;
o decreases in consumer confidence;
S-24
<PAGE>
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;
o the level of tenant defaults;
o the rate at which new rentals
occur; and
o the property's operating
leverage (which is 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
secured by such
properties.
THE REPAYMENT OF A 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 The mortgage loans are not newly
originated and have been
outstanding for nine (9) or more
months prior to September 1, 2000.
The weighted average period the
mortgage loans have been
outstanding is forty-five (45)
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 since origination;
o origination standards may have
been different;
o the market for any related
business may have changed from the
time the mortgage loan was
originated;
o the current financial performance
of the related borrower, its
business, or the related mortgaged
property in general, may be
different than at origination; and
S-25
<PAGE>
o the environmental and engineering
characteristics of the mortgaged
property or improvements may have
changed.
Among other things, such factors
make it difficult to estimate the
current value of 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.
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. This
is because:
o converting commercial properties
to alternate uses or converting
single-tenant commercial
properties to multi-tenant
properties generally requires
substantial capital expenditures;
and
o zoning or other restrictions also
may prevent alternative uses.
The liquidation value of a
mortgaged property not readily
convertible to an alternative use
may be substantially less than
would be the case if the mortgaged
property were readily adaptable to
other uses. If this type of
mortgaged property were liquidated
and a lower liquidation value were
obtained, less funds would be
available for distributions on your
certificates.
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 COULD REDUCE
PAYMENTS ON 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, because rent interruptions
by a tenant may cause the borrower
to default on its obligations to
the
S-26
<PAGE>
lender. Forty (40) mortgage loans,
representing 31.5% of the aggregate
principal balance of all mortgage
loans as of September 1, 2000, are
secured by mortgaged properties
leased to single tenants and in
some 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:
o the financial effect of the
absence of rental income may be
severe;
o more time may be required to
re-lease the space; and
o substantial capital costs may be
incurred to make the space
appropriate for replacement
tenants.
Another factor that you should
consider is that retail, industrial
and office properties also may be
adversely affected if there is a
concentration of tenants or of
tenants in the same or similar
business or industry.
LEASING MORTGAGED PROPERTIES TO
MULTIPLE TENANTS MAY RESULT IN HIGHER
RE-LEASING COSTS WHICH COULD REDUCE
PAYMENTS ON YOUR CERTIFICATES
If a mortgaged property has
multiple tenants, re-leasing costs
may be incurred more frequently
than in the case of mortgaged
properties with fewer tenants,
thereby reducing the cash flow
available for debt service
payments. These costs may cause a
borrower to default in its
obligations to a lender which could
reduce 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.
THE CONCENTRATION OF LOANS WITH THE
SAME OR RELATED BORROWERS INCREASES
THE POSSIBILITY OF LOSS ON THE LOANS
WHICH COULD REDUCE PAYMENTS
ON YOUR CERTIFICATES
If losses relate to loans that
account for a disproportionately
large percentage of the pool's
aggregate principal balance of all
mortgage loans, the negative impact
on the pool of mortgage loans will
be more severe than if loss occurs
with respect to loans representing
a smaller percentage of the
aggregate principal balance of the
mortgage loans.
Nine (9) groups of mortgage loans,
including cross-collateralized
mortgage loan groups and single
obligation multiple mortgaged
property 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 loans associated with these
nine (9) borrower concentrations
constitute 23.2% of the outstanding
aggregate principal balance of all
mortgage loans, as of September 1,
2000. The three largest borrower
concentrations represent 6.5%, 3.6%
and 3.0%, respectively, of the
outstanding aggregate principal
balance of all mortgage loans as of
September 1,
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<PAGE>
2000. Moreover, even if such
mortgage loans are not
cross-collateralized, a default
with respect to one loan may make
defaults with respect to other
loans of the same or related
borrower more likely.
A CONCENTRATION OF LOANS WITH THE
SAME PROPERTY TYPES INCREASES THE
POSSIBILITY OF LOSS ON THE LOANS WHICH
COULD REDUCE PAYMENTS ON YOUR
CERTIFICATES
A concentration of mortgaged
property types 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
September 1, 2000:
o retail properties represent
45.1%; anchored retail properties
represent 38.9%; and single tenant
retail properties represent 6.2%;
o industrial properties represent
27.0%;
o office properties represent
25.0%; and
o other properties (consisting of a
leased fee improved in each case
by income producing improvements)
represent 2.9%.
A CONCENTRATION OF MORTGAGED
PROPERTIES IN A LIMITED NUMBER OF
LOCATIONS MAY ADVERSELY AFFECT
PAYMENTS ON 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 twenty-three
(23) states. In particular,
investors should note that
approximately 24.6% of the
mortgaged properties, based on the
outstanding aggregate principal
balance of all mortgage loans as of
September 1, 2000, are located in
California, 15.9% of which are
located in northern California and
8.7% of which are located in
southern California. Mortgaged
properties located in California
may be more susceptible to some
types of special hazards that may
not be 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.
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<PAGE>
In addition 9.1%, 8.7%, 7.7%, 7.5%,
6.0%, 5.3% and 5.1% of the
mortgaged properties, based upon
the outstanding aggregate principal
balance of all mortgage loans as of
September 1, 2000, are located in
Virginia, New Jersey, Florida,
Texas, Ohio, Georgia and Kansas,
respectively, and concentrations of
mortgaged properties, in each case
representing less than 4.0% of the
outstanding aggregate principal
balance of all mortgage loans as of
September 1, 2000 also exist in
fifteen (15) other states.
A LARGE CONCENTRATION OF RETAIL
PROPERTIES IN THE MORTGAGE POOL WILL
SUBJECT YOUR INVESTMENT TO THE SPECIAL
RISKS OF RETAIL PROPERTIES
Retail properties secure forty-five
(45) of the mortgage loans,
representing 45.1% of the
outstanding aggregate principal
balance of all mortgage loans, as
of September 1, 2000. Anchored
retail properties secure thirty-six
(36) of the mortgage loans
representing 38.9% of the
outstanding aggregate principal
balance of all mortgage loans as of
September 1, 2000 and single tenant
retail properties secure nine (9)
of the mortgage loans representing
6.2% of the outstanding aggregate
principal balance of all mortgage
loans as of September 1, 2000. The
quality and success of a retail
property's tenants significantly
affect the property's value.
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;
o the bankruptcy or economic
decline of an anchor store or
self- owned anchor or the parent
company thereof; 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 at any time 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.
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<PAGE>
Moreover, additional competing
retail properties may be built in
the areas where the retail
properties are located, which 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.
A LARGE CONCENTRATION OF INDUSTRIAL
PROPERTIES IN THE MORTGAGE POOL WILL
SUBJECT YOUR INVESTMENT TO THE SPECIAL
RISKS OF INDUSTRIAL PROPERTIES
Industrial properties secure
thirty-six (36) of the mortgage
loans, representing 27.0% of the
outstanding aggregate principal
balance of all mortgage loans, as
of September 1, 2000. Various
factors may adversely affect the
economic performance of these
industrial properties, which could
adversely affect payments on your
certificates, including:
o reduced demand for industrial
space because of a decline in a
particular industry segment;
o a property becoming functionally
obsolete;
o an insufficient supply of labor
to meet demand;
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.
A LARGE CONCENTRATION OF OFFICE
PROPERTIES IN THE MORTGAGE POOL WILL
SUBJECT YOUR INVESTMENT TO THE SPECIAL
RISKS OF OFFICE PROPERTIES
Office properties secure nineteen
(19) of the mortgage loans,
representing 25.0% of the
outstanding aggregate principal
balance of all mortgage loans, as
of September 1, 2000.
A 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
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<PAGE>
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.
TENANT BANKRUPTCY MAY ADVERSELY
AFFECT THE INCOME PRODUCED BY THE
PROPERTY AND MAY ADVERSELY AFFECT THE
PAYMENTS ON YOUR CERTIFICATES
The bankruptcy or insolvency of a
major tenant, or a number of
smaller tenants, in retail,
industrial and office properties
may adversely affect the income
produced by the property. Under the
federal 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 and the actual amount
of the recovery could be less than
the amount of the claim.
ENVIRONMENTAL LAWS ENTAIL RISKS
THAT MAY ADVERSELY AFFECT THE
PAYMENTS ON YOUR CERTIFICATES
Various environmental laws may make
a current or previous owner or
operator of real property liable
for the costs of removal or
remediation of hazardous or toxic
substances on, under or adjacent to
such property. Those laws often
impose liability whether or not the
owner or operator knew of, or was
responsible for, the presence of
the hazardous or toxic substances.
For example, certain laws impose
liability for release of
asbestos-containing materials into
the air or require the removal or
containment of asbestos-containing
materials. In some states,
contamination of a property may
give rise to a lien on the property
to assure payment of the costs of
cleanup. In some states, this lien
has priority over the lien of a
pre-existing mortgage.
Additionally, third parties may
seek recovery from owners or
operators of real properties for
cleanup costs, property damage or
personal injury associated with
releases of, or other exposure to
hazardous substances related to the
properties.
The owner's liability for any
required remediation generally is
not limited by law and could,
accordingly, exceed the value of
the property and/or the aggregate
assets of the owner. The presence
of hazardous or toxic substances
also may adversely affect the
owner's ability to refinance the
property or to sell the property to
a third party. The presence of, or
strong potential for contamination
by, hazardous substances
consequently can have a materially
adverse effect on the value of the
property and a borrower's ability
to repay its mortgage loan.
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<PAGE>
In addition, under certain
circumstances, a lender (such as
the trust) could be liable for the
costs of responding to an
environmental hazard.
ENVIRONMENTAL RISKS RELATING TO
SPECIFIC MORTGAGED PROPERTIES MAY
ADVERSELY AFFECT PAYMENTS ON YOUR
CERTIFICATES
In general, in connection with the
origination of the mortgage loans,
environmental site assessments were
prepared for the related mortgaged
properties. In all cases where such
environmental site assessments were
prepared, the minimum standard
required for such environmental
site assessments was a phase I type
of environmental site assessment.
None of the assessments were
updated in connection with the sale
of the related mortgage loans to
the trust. With respect to the
mortgaged properties relating to
the following ten (10) mortgage
loans, as referenced in Appendix II
(listed below together with the
date of the related assessment),
representing 11.9% of the aggregate
principal balance of all the
mortgage loans as of September 1,
2000: 75 (assessment dated May 21,
1999); 23 (assessment dated October
26, 1999); 30 (assessment dated
February 22, 1999); 2 (assessment
dated April 8, 1999); 46
(assessment dated April 12, 1999);
49 (assessment dated April 29,
1999); 84 (assessment dated March
31, 1999); 50 (assessment dated
April 26, 1999); 20 (assessment
dated September 13, 1999); and 54
(assessment dated October 14,
1999), the seller has represented
to the depositor that, except as
disclosed in such report, it has no
knowledge of the presence of any
material adverse environmental
conditions.
With respect to the remaining
mortgaged properties, representing
88.1% of the aggregate principal
balance of all mortgage loans as of
September 1, 2000, the seller has
represented to the depositor that
no material adverse environmental
condition exists.
The environmental reports generally
did not disclose the presence or
risk of environmental contamination
that is considered material and
adverse to the interests of the
holders of the certificates;
however, in certain cases, such
assessments did reveal conditions
that resulted in requirements that
the related borrowers establish
operations and maintenance plans,
monitor the mortgaged property,
abate or remediate the condition,
and/or take such other actions
necessary to address such adverse
conditions. Morgan Stanley Dean
Witter Capital I Inc. cannot assure
you, however, that the
environmental assessments revealed
all existing or potential
environmental risks or that all
adverse environmental conditions
have been completely abated or
remediated. Moreover, Morgan
Stanley Dean Witter Capital I Inc.
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).
Portions of some of the mortgaged
properties securing the mortgage
loans include tenants which operate
as on-site dry-cleaners and a
portion of one (1) of the mortgaged
properties securing a mortgage loan
includes a tenant which operates a
gasoline station. Both types
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<PAGE>
of operations involve the use and
storage of hazardous substances,
leading to an increased risk of
liability to the tenant, the
landowner and, under certain
circumstances, a lender (such as
the trust) under environmental
laws. Dry-cleaners and gasoline
station operators may be required
to obtain various environmental
permits and licenses in connection
with their operations and
activities and comply with various
environmental laws, including those
governing the use and storage of
hazardous substances. These
operations incur ongoing costs to
comply with environmental laws
governing, among other things,
containment systems and underground
storage tank systems. In addition,
any liability to borrowers under
environmental laws, including in
connection with releases into the
environment of gasoline,
dry-cleaning solvents or other
hazardous substances from
underground storage tank systems or
otherwise, could adversely impact
the related borrower's ability to
repay the related mortgage loan.
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, or rely
on a recent environmental
assessment. 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, Morgan
Stanley Dean Witter Capital I Inc.
cannot assure you that this
requirement will effectively
insulate the trust from potential
liability under environmental laws.
Any such potential liability could
reduce or delay payments to
certificateholders.
IF A BORROWER IS UNABLE TO REPAY ITS
LOAN ON ITS MATURITY DATE, YOU MAY
EXPERIENCE A LOSS
Thirty-eight (38) of the mortgage
loans, representing 50.1% of the
outstanding aggregate principal
balance of all mortgage loans as of
September 1, 2000, are balloon
loans. For purposes of this
prospectus supplement, we consider
a mortgage loan to be a "balloon
loan" if its principal balance is
not scheduled to be fully or
substantially amortized by the
loan's maturity date. Morgan
Stanley Dean Witter Capital I Inc.
cannot assure you that each
borrower will have the ability to
repay the principal balance
outstanding on the stated maturity
dates. Balloon loans involve
greater risk than fully amortizing
loans because borrower's ability to
repay the loan on its stated
maturity date typically will depend
upon its ability either to
refinance the loan or to sell the
mortgaged property at a price
sufficient to permit repayment. A
borrower's ability to achieve
either of these goals will be
affected by a number of factors,
including:
o the availability of, and
competition for, credit for
commercial real estate projects;
o prevailing interest rates;
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<PAGE>
o the fair market value of the
related mortgaged property;
o the borrower's equity in the
related mortgaged property;
o the borrower's financial
condition;
o the operating history and
occupancy level of the mortgaged
property;
o tax laws; and
o prevailing general and regional
economic conditions.
The availability of funds in the
credit markets fluctuates over
time.
Neither Principal Life Insurance
Company, as mortgage loan seller,
nor any of its affiliates, is under
any obligation to refinance any
mortgage loan.
A BORROWER'S OTHER LOANS MAY REDUCE
THE CASH FLOW AVAILABLE TO THE
MORTGAGED PROPERTY WHICH MAY
ADVERSELY AFFECT PAYMENT ON YOUR
CERTIFICATES
o Certain of the mortgage loans
permit the incurrence of debt
secured by a junior lien on the
mortgaged property.
o Five (5) of the mortgage loans,
representing 4.0% of the aggregate
principal balance of the mortgage
loans as of September 1, 2000,
permit the borrower to utilize the
mortgaged property as collateral
for subordinated loans, subject to
lender's approval.
o Four (4) of these mortgage
loans, representing 3.5% of the
aggregate principal balance of
the mortgage loans as of
September 1, 2000, each also
provides for a combined
maximum loan-to-value ratio of
75% and minimum combined debt
service coverage ratios ranging
from 1.10x to 1.50x.
o One (1) mortgage loan,
representing 0.6% of the
aggregate principal balance
of the mortgage laons as of
September 1, 2000, permits the
borrower to obtain financing
only for a 12,000 square foot
expansion of the related
property.
o Other than in the case of the two
(2) mortgage loans described
below, the mortgage loans prohibit
the pledge by the equity owners of
the borrower of their equity
ownership in the borrower. This
type of financing is referred to
in this prospectus supplement as
"mezzanine debt."
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<PAGE>
o One (1) mortgage loan,
representing 0.6% of the
aggregate principal balance of
the mortgage loans as of
September 1, 2000, permits the
incurrence of mezzanine debt,
subject to a maximum combined
loan-to-value ratio of 75% and
a minimum combined debt service
coverage ratio of 1.20x.
o In the case of one (1)
mortgage loan, representing
5.1% of the aggregate
principal balance of the
mortgage loans as of debt is
September 1, 2000, mezzanine
currently in place.
o All of the mortgage loans permit
the incurrence of unsecured debt.
Morgan Stanley Dean Witter Capital
I Inc. makes no representation as
to whether any other secured
subordinate financing currently
encumbers any mortgaged property or
whether a third-party holds debt
secured by a pledge of equity
interest in a related borrower.
Debt that is incurred by the owner
of equity in one or more borrowers
and is secured by a guaranty of the
borrower or by a pledge of the
equity ownership interests in such
borrowers effectively reduces the
equity owners' economic stake in
the related mortgaged property. The
existence of such debt may reduce
cash flow on the related borrower's
mortgaged property after the
payment of debt service and may
increase the likelihood that the
equity owner of a borrower will
permit the value or income
producing potential of a mortgaged
property to suffer by not making
capital infusions to support the
mortgaged property.
When a mortgage loan borrower, or
its constituent members, also have
one or more other outstanding
loans, even if the loans are
subordinated or are mezzanine loans
not directly secured by the
mortgaged property, the trust is
subjected to certain additional
risks. For example, 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 the borrower's ability
to repay any balloon payment due
under 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, are
obligated to another lender,
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
bankruptcy petition to stay
enforcement by a junior lender, the
trust's ability to foreclose on the
mortgaged 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
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<PAGE>
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 A
BORROWER CAN RESULT IN DISSOLUTION OF
THE BORROWER AND THE ACCELERATION OF
THE RELATED MORTGAGE LOAN AND CAN
OTHERWISE ADVERSELY IMPACT REPAYMENT
OF THE RELATED MORTGAGE LOAN
Under the federal bankruptcy code,
the filing of a bankruptcy petition
by or against a borrower will stay
the commencement or continuation of
a foreclosure action. In addition,
if a court determines that the
value of the mortgaged property is
less than the principal balance of
the mortgage loan it secures, the
court may reduce the amount of
secured indebtedness to the then
current value of the mortgaged
property. Such an action would make
the lender a general unsecured
creditor for the difference between
the then current value and the
amount of its outstanding mortgage
indebtedness. A bankruptcy court
also may:
o grant a debtor a reasonable time
to cure a payment default on a
mortgage loan;
o reduce monthly payments due under
a mortgage loan;
o change the rate of interest due
on a mortgage loan; or
o otherwise alter the mortgage
loan's repayment schedule.
Additionally, the trustee of the
borrower's bankruptcy or the
borrower, as debtor-in-possession,
has special powers to avoid,
subordinate or disallow debts. In
some circumstances, the claims of
the mortgage lender may be
subordinated to financing obtained
by a debtor-in-possession
subsequent to its bankruptcy.
The filing of a bankruptcy petition
will also stay the lender from
enforcing a borrower's assignment
of rents and leases. The federal
bankruptcy code also may interfere
with the trustee's ability to
enforce any lockbox requirements.
The legal proceedings necessary to
resolve these issues can be time
consuming and may significantly
delay the lender's receipt of
rents. A bankruptcy court may also
permit rents otherwise subject to
an assignment and/or lock-box
arrangement to be used by the
borrower to maintain the mortgaged
property or for other court
authorized expenses.
As a result of the foregoing, the
recovery with respect to borrowers
in bankruptcy proceedings may be
significantly delayed, and the
aggregate amount ultimately
collected may be substantially less
than the amount owed.
A number of the borrowers under the
mortgage loans are limited or
general partnerships. Under some
circumstances, the bankruptcy of a
general partner of the partnership
may result in the dissolution of
that
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<PAGE>
partnership. The dissolution of a
borrower partnership, the winding
up of its affairs and the
distribution of its assets could
result in an early repayment of the
related mortgage loan.
THE MORTGAGE LOANS WERE NOT
SPECIFICALLY ORIGINATED FOR
SECURITIZATION; THE BORROWERS ARE NOT
SPECIAL PURPOSE ENTITIES
None of the mortgage loans was
originated specifically for
securitization, and generally such
mortgage loans lack many provisions
which are customary in mortgage
loans intended for securitization.
Generally, the borrowers are not
required to make payments to
lockboxes, maintain reserves for
certain expenses such as capital
expenditures, tenant improvements
and leasing commissions, taxes and
insurance premiums, and the lender
does not have the right to
terminate the related property
manager upon the occurrence of
certain events or require lender
approval of a replacement property
manager. In addition, unlike
borrowers which have been formed
specifically for securitization,
the loan documents and
organizational documents of the
borrowers generally do not limit
the purpose of the borrowers to
owning the mortgaged properties and
the loan documents and
organizational documents of the
borrowers do not contain the
representations, warranties and
covenants customarily employed to
ensure that a borrower is a
special-purpose entity (such as
limitations on indebtedness,
affiliate transactions and the
conduct of other businesses,
restrictions on the borrower's
ability to dissolve, liquidate,
consolidate, merge or sell all of
its assets and restrictions on
amending its organizational
documents). Generally, neither the
borrowers nor entities having an
interest in the borrowers have
independent directors whose consent
would be required to file a
voluntary bankruptcy petition on
behalf of the borrowers. One of the
purposes of an independent director
of the borrower or of a special
purpose entity having an interest
in the borrower is to avoid a
bankruptcy petition filing which is
not justified by the borrower's own
economic circumstances but is
instead intended to benefit an
affiliate. Borrowers that are not
bankruptcy remote entities may be
more likely to file bankruptcy
petitions which may adversely
affect payments on your
certificates.
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
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<PAGE>
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
management-intensive than
properties leased to creditworthy
tenants under long-term leases.
A property manager, by controlling
costs, providing appropriate
service to tenants and seeing to
property maintenance and general
upkeep, 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
long-term viability of an income
producing property.
Morgan Stanley Dean Witter Capital
I Inc. makes no representation or
warranty as to the skills of any
present or future property
managers. Additionally, Morgan
Stanley Dean Witter Capital I Inc.
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.
THE ABSENCE OF LOCKBOXES ENTAILS RISKS
THAT COULD ADVERSELY AFFECT PAYMENTS
ON YOUR CERTIFICATES
The mortgage loans generally do not
require the related borrower to
cause rent and other payments to be
made into a lockbox account
maintained on behalf of the lender.
If rental payments are not required
to be made directly into a lockbox
account, there is a risk that the
borrower will divert such funds for
other purposes.
THE ABSENCE OF RESERVES MAY ADVERSELY
AFFECT PAYMENTS ON YOUR CERTIFICATES
The mortgage loans generally do not
require that the borrowers under
the related mortgage loans put
aside funds for specific reserves
controlled by the lender. Morgan
Stanley Dean Witter Capital I Inc.
cannot assure you that any reserve
amounts will be sufficient to cover
the actual costs of items such as
taxes, insurance premiums, capital
improvements and tenant
improvements and leasing
commissions or that borrowers under
the related mortgage loans will put
aside sufficient funds to pay for
such items. Morgan Stanley Dean
Witter Capital I Inc. also cannot
assure you that cash flow from the
properties will be sufficient to
fully fund the ongoing monthly
reserve requirements or sufficient
to enable the borrowers under the
related mortgage loans to fully pay
for such items.
INADEQUACY OF TITLE INSURERS MAY
ADVERSELY AFFECT PAYMENTS ON YOUR
CERTIFICATES
Title insurance for a mortgaged
property generally insures a lender
against risks relating to a lender
not having a first lien with
respect to a mortgaged property,
and in some cases can insure a
lender against specific other
risks. The protection afforded by
title insurance depends on the
ability of the title insurer to pay
claims made upon it. Morgan Stanley
Dean Witter Capital I Inc. cannot
assure you that
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o a title insurer will have the
ability to pay title insurance
claims made upon it;
o the title insurer will maintain
its present financial strength; or
o a title insurer will not contest
claims made upon it.
MORTGAGED PROPERTIES SECURING THE
MORTGAGE LOANS THAT ARE NOT IN
COMPLIANCE WITH ZONING AND BUILDING
CODE REQUIREMENTS COULD ADVERSELY
AFFECT PAYMENTS ON YOUR CERTIFICATES
Noncompliance with zoning and
building codes may cause the
borrower to experience cash flow
delays and shortfalls that would
reduce or delay the amount of
proceeds available for
distributions on your certificates.
The mortgage loan seller has taken
steps to establish that the use and
operation of the mortgaged
properties securing the mortgage
loans are in compliance in all
material respects with all
applicable zoning, land-use and
building ordinances, rules,
regulations, and orders. Evidence
of this compliance may be in the
form of legal opinions,
confirmations from government
officials, title policy
endorsements and/or representations
by the related borrower in the
related mortgage loan documents.
These steps may not have revealed
all possible violations.
Some violations of zoning, land use
and building regulations may be
known to exist at any particular
mortgaged property, but the
mortgage loan seller generally does
not consider those defects known to
it to be material. In many cases,
the use, operation and/or structure
of a mortgaged property constitutes
a permitted nonconforming use
and/or structure and the structure
may not be rebuilt to its current
state or be used for its current
purpose if a material casualty
event occurs. Generally, insurance
proceeds would be available for
application to the mortgage loan if
a material casualty event were to
occur, or the mortgaged property,
as rebuilt for a conforming use,
would generate sufficient income to
service the mortgage loan. If a
mortgaged property could not be
rebuilt to its current state or its
current use were no longer
permitted due to building
violations or changes in zoning or
other regulations, then the
borrower might experience cash flow
delays and shortfalls that would
reduce or delay the amount of
proceeds available for
distributions on your certificates.
CONDEMNATIONS WITH RESPECT TO
MORTGAGED PROPERTIES SECURING THE
MORTGAGE LOANS COULD ADVERSELY AFFECT
PAYMENTS ON YOUR CERTIFICATES
From time to time, there may be
condemnations pending or threatened
against one or more of the
mortgaged properties. There can be
no assurance that the proceeds
payable in connection with a total
condemnation will be sufficient to
restore the related mortgaged
property or to satisfy the
remaining indebtedness of the
related mortgage loan. The
occurrence of a partial
condemnation may have a material
adverse effect on the continued use
of the affected mortgaged property,
or on an affected borrower's
ability to meet its obligations
under the related mortgage loan.
Therefore, Morgan Stanley Dean
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<PAGE>
Witter Capital I Inc. cannot assure
you that the occurrence of any
condemnation will not have a
negative impact upon the
distributions on your certificates.
THE ABSENCE OF OR INADEQUACY OF
INSURANCE COVERAGE ON THE PROPERTY
MAY ADVERSELY AFFECT PAYMENTS ON
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. In addition, some
of the mortgaged properties are
located in California and in
coastal areas of Florida, areas
that have historically been at
greater risk of acts of nature for
which adequate insurance is
generally not available, including
earthquakes, hurricanes and floods.
The mortgage loans generally do not
require borrowers to maintain
earthquake, hurricane or flood
insurance and Morgan Stanley Dean
Witter Capital I Inc. 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 impair the borrower's
ability to effect such
reconstruction or major repairs or
may materially increase the cost
thereof.
As a result of these factors, the
amount available to make
distributions on your certificates
could be reduced.
CLAIMS UNDER BLANKET INSURANCE
POLICIES MAY ADVERSELY AFFECT PAYMENTS
ON YOUR CERTIFICATES
Some of the mortgaged properties
are covered by blanket insurance
policies which also cover other
properties of the related borrower
or its affiliates. In the event
that such policies are drawn on to
cover losses on such other
properties, the amount of insurance
coverage available under such
policies may thereby be reduced and
could be insufficient to cover each
mortgaged property's insurable
risks.
PROPERTY INSPECTIONS AND ENGINEERING
REPORTS MAY NOT REFLECT ALL CONDITIONS
THAT REQUIRE REPAIR ON THE PROPERTY
Principal Life Insurance Company,
or engineering consultants engaged
by it, inspected all of the
mortgaged properties in connection
with the origination of the
mortgage loans 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.
With respect to the mortgaged
properties relating to the
following ten (10) mortgage loans,
as referenced in Appendix II
(listed below together with the
date of the related report),
representing 11.9% of the aggregate
principal balance of the mortgage
loans as of September 1, 2000: 75
(report dated May 26, 1999), 23
(report dated June 3, 1999), 30
(report dated February 24, 1999), 2
(report dated March 8, 1999), 46
(report dated April 26, 1999), 49
(report dated April 2, 1999), 84
(report dated April 13, 1999), 50
(report dated April 29, 1999), 20
(report dated September 17, 1999)
and 54 (report
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<PAGE>
dated October 18, 1999), the seller
has represented to the depositor
that, except as disclosed in the
related report, it has no knowledge
of any material adverse property
condition.
With respect to the remaining
mortgaged properties, representing
88.1% of the aggregate principal
balance of all mortgage loans as of
September 1, 2000, the seller has
represented to the depositor that
no material adverse property
condition exists.
Morgan Stanley Dean Witter Capital
I Inc. cannot assure you that all
conditions requiring repair or
replacement were identified. In
those cases where a material and
adverse condition was disclosed,
such condition has been or is
required to be remedied to the
seller's satisfaction, or funds as
deemed necessary by the seller, or
the related engineering consultant
have been reserved to remedy the
material and adverse condition.
VALUATION ESTIMATES MAY INACCURATELY
REFLECT THE VALUE OF THE MORTGAGED
PROPERTIES
In connection with the origination
of each of the mortgage loans, the
related mortgaged property was
appraised by an internal appraiser
who, is either a Member Appraisal
Institute (MAI) or was supervised
and reviewed by a Member Appraisal
Institute. The appraisals were
either Complete Appraisals -
Restricted Reports or Limited
Appraisals Restricted Reports which
comply to the Uniform Standards of
Professional Appraisal Practice
(USPAP) and real estate appraisal
regulations.
The loan-to-value ratios and
implied valuations for one hundred
and one (101) of the mortgage loans
as of September 1, 2000 were
calculated according to the
methodology described in this
prospectus supplement using a
capitalization rate applied to the
underwritten net operating income
of such mortgaged property or
properties to determine the value
of such mortgaged property or
properties. For forty-three (43) of
the mortgage loans, representing
58.2% of the aggregate principal
balance of the mortgage loans as of
September 1, 2000, capitalization
rates were determined on the basis
of third party market studies
conducted on or after June 15,
2000. For fifty-eight (58) of the
mortgage loans, representing 41.1%
of the aggregate principal balance
of the mortgage loans as of
September 1, 2000, internal
valuations were prepared by the
seller's underwriters on the basis
of discounted cash flow analyses,
resulting in an implied
capitalization rate.
The loan-to-value ratio for one (1)
mortgage loan, representing 0.7% of
the aggregate principal balance of
the mortgage loans as of September
1, 2000, was calculated according
to the methodology described in
this prospectus supplement based on
the estimate of value from a third
party appraisal dated November 22,
1999.
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THE TIMING OF MORTGAGE LOAN
AMORTIZATION MAY ADVERSELY AFFECT
PAYMENTS ON 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 or alphabetical order, with
such classes generally not being
entitled to receive principal until
the preceding class or classes
entitled to receive principal have
been retired.
SUBORDINATION OF SOME CERTIFICATES MAY
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 M, Class L, Class K, Class J,
Class H, Class G, Class F, Class E,
Class D, Class C and Class B, in
that order, reducing amounts
otherwise payable to each class.
Any remaining losses would then be
allocated to the Class A-1, Class
A-2, Class A-3 and Class A-4
certificates, pro rata, and, solely
with respect to losses of interest,
to the Class X certificates, in
proportion to the amounts of
interest or principal payable
thereon.
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.
THE OPERATION OF THE MORTGAGED
PROPERTY FOLLOWING FORECLOSURE OF THE
MORTGAGE LOAN MAY AFFECT THE TAX
STATUS OF THE TRUST AND MAY ADVERSELY
AFFECT PAYMENTS ON YOUR CERTIFICATES
If the trust acquires a mortgaged
property as a result of a
foreclosure or deed in lieu of
foreclosure, the special servicer
will generally retain an
independent contractor to operate
the mortgaged property. Any net
income from operations 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
this event, the net proceeds
available for distribution on your
certificates will be reduced. The
special servicer may permit the
trust to earn such above described
"net income from foreclosure
property" but only if it determines
that the net after-tax benefit to
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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
Some states, including California,
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
these "one action" rules apply (and
where non-judicial foreclosure is
permitted) before foreclosing on
mortgaged 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.
CROSS-COLLATERALIZATION OF GROUPS OF
MORTGAGE LOANS COULD LEAD TO REDUCED
PAYMENTS ON YOUR CERTIFICATES
The mortgage pool includes one (1)
group of mortgage loans, which
represents 3.0% of the outstanding
aggregate principal balance of all
mortgage loans as of September 1,
2000, 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:
o 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
o such borrower entity did not
receive fair consideration or
reasonably equivalent value whent
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 (i) the benefits
realized by such borrower entity
from the respective mortgage loan
proceeds as compared to the value
of its respective property, and
(ii) 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 borrower's respective mortgage
loan to existing or future
indebtedness of that borrower. The
court also could recover payments
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<PAGE>
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 related mortgages that
are subject to such
cross-collateralization.
THE BANKRUPTCY OR INSOLVENCY OF ANY
AFFILIATED BORROWERS MAY ADVERSELY
AFFECT PAYMENTS ON YOUR CERTIFICATES
Nine (9) groups of mortgage loans
(including cross-collateralized
mortgage loan groups), the largest
of which represents 6.5% of the
outstanding aggregate principal
balance of all mortgage loans as of
September 1, 2000, were made to
borrowers that 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.
TENANT LEASES MAY HAVE PROVISIONS
THAT COULD ADVERSELY AFFECT PAYMENTS
ON YOUR CERTIFICATES
In certain 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.
Some of the leases at the mortgaged
properties securing the mortgage
loans included in the trust may not
be subordinate to the related
mortgage. 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
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<PAGE>
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.
LITIGATION ARISING OUT OF ORDINARY
BUSINESS COULD ADVERSELY AFFECT
PAYMENTS 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 their ordinary business. Morgan
Stanley Dean Witter Capital I Inc.
cannot assure you that any such
litigation would not have a
material adverse effect on your
certificates.
RISKS RELATING TO COMPLIANCE
WITH THE AMERICANS WITH
DISABILITIES ACT COULD ADVERSELY
AFFECT PAYMENTS ON YOUR
CERTIFICATES
Under the Americans with
Disabilities Act of 1990, public
accommodations are required to meet
certain federal requirements
related to access and use by
disabled persons. Borrowers may
incur costs complying with the
Americans with Disabilities Act. In
addition, noncompliance could
result in the imposition of fines
by the federal government or an
award of damages to private
litigants. If a borrower incurs
such costs or fines, the amount
available to pay debt service would
be reduced.
CONFLICTS OF INTEREST MAY HAVE
AN ADVERSE EFFECT ON YOUR
CERTIFICATES
Conflicts between various
certificateholders. 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 set forth in the
pooling and servicing agreement. At
any given time, the operating
adviser will be controlled
generally by the holders of the
most subordinate, or, if the
certificate principal balance
thereof is less than 25% of its
original certificate balance, the
next most subordinate, 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.
The special servicer and primary
servicer will be Principal Capital
Management, LLC and the master
servicer will delegate most of its
servicing obligations to the
primary servicer pursuant to a
primary servicing agreement. It is
anticipated that Principal Life
Insurance Company will acquire all
of the most subordinated
certificates, including those of
the initial controlling class, and
Principal Capital
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<PAGE>
Management, LLC will become the
operating adviser. Under such
circumstances, the special servicer
may have interests that conflict
with the interests of the other
holders of the certificates.
Conflicts between borrowers and
property managers. It is likely
that many of the property managers
of the mortgaged properties, or
their affiliates, manage additional
properties, including properties
that may compete with the mortgaged
properties. Affiliates of the
property managers, and property
managers themselves, also may own
other properties, including
competing properties. The property
managers of the mortgaged
properties may accordingly
experience conflicts of interest in
the management of such mortgaged
properties.
Conflicts between the trust and
seller. The activities of the
seller may involve properties which
are in the same markets as the
mortgaged properties underlying the
certificates. In such case, the
interests of the seller or its
affiliates may differ from, and
compete with, the interests of the
trust, and decisions made with
respect to those assets may
adversely affect the amount and
timing of distributions with
respect to the certificates.
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 result of the
seller's breach of representations
and warranties or material defects
in a mortgage loan's documentation.
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 most of
the mortgage loans require payment
of a prepayment premium. However,
in the case of three (3) mortgage
loans, representing 4.4% of the
aggregate principal balance of the
mortgage loans as of September 1,
2000, the related borrower may
prepay the mortgage loan without
premium for a maximum period
commencing three payment dates
prior to and including the maturity
date of the mortgage loan. Morgan
Stanley Dean Witter Capital I Inc.
cannot assure you that the related
borrowers will refrain from
prepaying their mortgage loans due
to the existence of a prepayment
premium. Morgan Stanley Dean Witter
Capital I Inc. 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, if any;
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<PAGE>
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 the
seller repurchases any mortgage
loan from the trust due to the
breach of a representation or
warranty or material defects in a
mortgage loan's documentation, 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 subject to legal
interpretation and it is possible
that another person would interpret
the methodology differently from
the way we did in estimating an
assumed yield to maturity on your
certificates as described in this
prospectus supplement. See Appendix
II attached hereto for a
description of the various
prepayment provisions.
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
YOUR CERTIFICATE
The yield on any certificate will
depend on (1) the price at which
such certificate is purchased by
you and (2) the rate, timing and
amount of distributions on your
certificate. The rate, timing and
amount of distributions on any
certificate will, in turn, depend
on, among other things:
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 to the extent not
offset by a reduction in master
servicer compensation as described
in this prospectus supplement;
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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 could 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.
If you calculate your anticipated
yield based on assumed rates of
default and losses that are lower
than the default rate and losses
actually experienced and such
losses are allocable to your
certificates, your actual yield to
maturity will be lower than the
assumed yield. Under 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, 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
PAYMENTS ON YOUR CERTIFICATES
To the extent described in this
prospectus supplement, the master
servicer, the trustee or the fiscal
agent 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
S-48
<PAGE>
advance is made or the related
expense is incurred to the date of
reimbursement. This interest may be
offset in part by default interest
and late payment charges paid by
the borrower or by certain other
amounts. 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 SELLER OF THE MORTGAGE LOANS IS
SUBJECT TO INSOLVENCY LAWS THAT MAY
AFFECT THE TRUST'S OWNERSHIP OF THE
MORTGAGE LOANS
In the event of the insolvency of
the 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 your
certificates could occur. The
seller is a life insurance company,
and state, not federal, law governs
its insolvency.
Based upon an opinion of counsel
that the conveyance of the mortgage
loans would generally be respected
in the event of insolvency of the
seller, which opinion is subject to
various assumptions and
qualifications, the seller believes
that such a challenge will be
unsuccessful, but there can be no
assurance that a state insurance
commissioner, as receiver, if
applicable, or other interested
party 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.
LIMITED LIQUIDITY AND MARKET VALUE
MAY ADVERSELY AFFECT PAYMENTS ON
YOUR CERTIFICATES
Your certificates will not be
listed on any securities exchange,
and there is currently no secondary
market for the certificates. While
Morgan Stanley & Co. Incorporated
and Goldman, Sachs & Co. each
currently intends to make a
secondary market in the
certificates, neither is obligated
to do so. Accordingly, you may not
have an active or liquid secondary
market for your certificates, which
could result in a substantial
decrease in the market value of
your certificates. The market value
of your certificates also may be
affected by many other factors,
including then-prevailing interest
rates. Furthermore, you should be
aware that the market for
securities of the same type as the
certificates has in the past been
volatile and has offered very
limited liquidity.
INTEREST RATES BASED ON A WEIGHTED
AVERAGE COUPON RATE ENTAIL RISKS
WHICH MAY ADVERSELY AFFECT PAYMENTS
ON YOUR CERTIFICATES
The interest rates on the Class B
and Class C Certificates are based
on a weighted average of the
mortgage loan interest rates, which
is calculated based upon the
respective principal balances of
those mortgage loans. This weighted
average rate is further described
in
S-49
<PAGE>
this prospectus supplement under
the definition of weighted average
net mortgage rate. All of those
classes of certificates which are
either fully or partially based
upon weighted average rate may be
adversely affected by
disproportionate principal
payments, prepayments, defaults and
other unscheduled payments on the
mortgage loans. Because some
mortgage loans will amortize their
principal more quickly than others,
the rate will fluctuate over the
life of those classes of your
certificates.
In general, mortgage loans with
relatively high mortgage interest
rates are more likely to prepay
than mortgage loans with relatively
low mortgage interest rates.
Varying rates of principal payments
on mortgage loans having mortgage
interest rates above the weighted
average of the rates of the
mortgage loans will have the effect
of reducing the interest rate of
the certificates.
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 above in this Risk Factors
section and elsewhere in this prospectus supplement.
S-50
<PAGE>
DESCRIPTION OF THE OFFERED CERTIFICATES
Capitalized terms are defined in the "Glossary of Terms" beginning on
page S-102.
GENERAL
The Series 2000-PRIN Commercial Mortgage Pass-Through Certificates will
be issued on or about September [__], 2000 pursuant to a Pooling and Servicing
Agreement to be dated as of the Cut-off Date, among Morgan Stanley Dean Witter
Capital I Inc., the master servicer, the special servicer, the fiscal agent and
the trustee.
The certificates will represent in the aggregate the entire beneficial
ownership interest in the trust 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 Morgan Stanley Dean Witter Capital I Inc. under,
or assigned to Morgan Stanley Dean Witter Capital I Inc. pursuant
to the Mortgage Loan Purchase Agreement relating to mortgage loan
document delivery requirements and the representations and
warranties of the seller regarding the mortgage loans.
The certificates will consist of eighteen (18) classes, to be
designated as:
o the Class A-1 Certificates, the Class A-2 Certificates, the Class
A-3 Certificates and the Class A-4 Certificates.
o the Class X Certificates;
o the Class B Certificates, Class C Certificates, Class D
Certificates, Class E Certificates, Class F Certificates, Class G
Certificates, Class H Certificates, Class J Certificates, Class K
Certificates, Class L Certificates and Class M Certificates; and
o the Class R-I Certificates and the Class R-II Certificates.
The Class A-1, Class A-2, Class A-3, Class A-4, Class B and Class C
Certificates are offered hereby. The Class X, Class D, Class E, Class F, Class
G, Class H, Class J, Class K, Class L, Class M, Class R-I and Class R-II
Certificates are not offered hereby.
The Class A-1, Class A-2, Class A-3 and Class A-4 Certificates will be
issued in denominations of $25,000 initial Certificate Balance and in any whole
dollar denomination in excess of that amount. The Class B and Class C
Certificates will be issued in denominations of $100,000 initial Certificate 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 The
Depository Trust Company ("DTC"). Morgan Stanley Dean Witter Capital I Inc. 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
presented 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.
S-51
<PAGE>
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 Clearstream Banking or Euroclear, in Europe. Transfers within DTC,
Clearstream Banking 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 Clearstream
Banking or Euroclear, on the other, will be effected in DTC through Citibank,
N.A. or The Chase Manhattan Bank, the relevant depositaries of Clearstream
Banking and Euroclear, respectively.
Because of time-zone differences, credits of securities received in
Clearstream Banking 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 Clearstream Banking customer on such
business day. Cash received in Clearstream Banking or Euroclear as a result of
sales of securities by or through a Clearstream 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 Clearstream Banking or
Euroclear cash account only as of the business day following settlement in DTC.
CERTIFICATE BALANCES
Upon initial issuance, the Class A-1, Class A-2, Class A-3, Class A-4,
Class B and Class C Certificates will have the following aggregate Certificate
Balances. In each case, the Certificate Balance may vary by 5%:
<TABLE>
<CAPTION>
APPROXIMATE
INITIAL AGGREGATE PERCENT OF INITIAL RATINGS APPROXIMATE
CLASS CERTIFICATE BALANCE POOL BALANCE (S&P/MOODY'S) CREDIT SUPPORT
<S> <C> <C> <C> <C>
Class A-1 $ 56,100,000 9.38% AAA /Aaa 13.00%
Class A-2 $ 160,600,000 26.86% AAA /Aaa 13.00%
Class A-3 $ 104,500,000 17.48% AAA /Aaa 13.00%
Class A-4 $ 199,047,000 33.29% AAA /Aaa 13.00%
Class B $ 17,939,000 3.00% AA /Aa2 10.00%
Class C $ 19,435,000 3.25% A /A3 6.75%
</TABLE>
The percentages indicated under the columns "Approximate Credit
Support" with respect to the Class A-1, Class A-2, Class A-3 and Class A-4
Certificates represent the approximate credit support for the Class A-1, Class
A-2, Class A-3 and Class A-4 Certificates in the aggregate.
The initial Certificate Balance of each Principal Balance Certificate
will be presented 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
S-52
<PAGE>
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 the aggregate Certificate Balance of the Principal Balance Certificates
outstanding from time to time. The Interest Only Certificates will have an
initial aggregate Notional Amount of $597,985,115, subject to a permitted
variance of plus or minus 5%. The Notional Amount of the Interest Only
Certificates 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, Class
A-3 and Class A-4 Certificates for the initial Distribution Date will equal
approximately [____]%, [____]%, [____]%, and [____]% per annum, respectively.
The initial Pass-Through Rates for the Class B and Class C Certificates will
equal approximately [___]% and [___]%, respectively. For each subsequent
Distribution Date, the Pass-Through Rates on the Class B and Class C
Certificates will be a per annum rate equal to the Weighted Average Net Mortgage
Rate less [___]% and the Weighted Average Net Mortgage Rate less [____]%,
respectively, for such Distribution Date.
The Administrative Cost Rate for each mortgage loan is presented 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, that is, 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 presented in this prospectus supplement or the Pooling and
Servicing Agreement, on each Distribution Date, commencing on October 23, 2000.
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.
S-53
<PAGE>
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.
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 other than
Excess Liquidation Proceeds, if any 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, Class A-3, Class
A-4 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 (A) the Class A-1 Certificates and Class A-3
Certificates (distributed in respect of the Class A-1
Certificates until retired and thereafter in respect of the
Class A-3 Certificates) and (B) the Class A-2 Certificates,
pro rata, the Principal Distribution Amount for such
Distribution Date, until the aggregate Certificate Balance of
the Class A-1, Class A-2 and Class A-3 Certificates have been
reduced to zero;
(iii) upon payment in full of the aggregate Certificate Balance of
the Class A-1, Class A-2 and Class A-3 Certificates, to the
holders of the Class A-4 Certificates, the Principal
Distribution Amount for such Distribution Date until the
aggregate Certificate Balance of the Class A-4 Certificates
has been reduced to zero; the portion of the Principal
Distribution Amount distributed hereunder will be reduced by
any portion thereof distributed to the holders of the Class
A-1, Class A-2 and Class A-3 Certificates as set forth above;
(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-4 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 portion
of the Principal Distribution Amount distributed hereunder
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 portion
of the Principal Distribution Amount distributed hereunder
will be reduced by any portion thereof distributed to the
holders of the Class A and Class B Certificates;
S-54
<PAGE>
(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; and
(xi) to make payments to the holders of the other private
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:
o first, to the Class A-1, Class A-2, Class A-3 and Class A-4 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,
o second, to the Class A-1, Class A-2, Class A-3 and Class A-4
Certificates, based on their respective entitlements to reimbursement,
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, that is, payments
under clauses (1), (2) and (3) below, in that order, to the holders of the Class
D Certificates, then payments under clauses (1), (2), and (3) below, in that
order, to the holders of the Class E, Class F, Class G, Class H, Class J, Class
K, Class L and Class M 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;
(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.
Excess Liquidation Proceeds will be deposited to the Reserve Account.
On each Distribution Date, amounts on deposit in the Reserve Account will be
used to reimburse the holders of the Principal Balance Certificates -- in order
of alphabetical Class designation -- for any, and to the extent of, Realized
Losses, including interest on Advances, previously allocated to them. Upon the
reduction of the aggregate Certificate Balance of the Principal Balance
Certificates to zero, amounts remaining on deposit in such account will not be
distributed to holders of the offered certificates, but instead will be
distributed as provided in the Pooling and Servicing Agreement.
S-55
<PAGE>
Distributions of Prepayment Premiums
Any Prepayment Premium collected with respect to a mortgage loan during
any particular Collection Period will be distributed by the trustee on the
following Distribution Date as follows: The holders of the Class A, Class B,
Class C and Class D 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 Prepayment Premium and (b) such Prepayment Premium 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 Class A-1, Class
A-2, Class A-3 and Class A-4 Certificates, first, the Pass-Through Rate
applicable to the Class A-1 Certificates, second, the Pass-Through Rate
applicable to the Class A-2 Certificates, third, the Pass-Through Rate
applicable to the Class A-3 Certificates and fourth, the Pass-Through Rate
applicable to the Class A-4 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 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 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 Master Servicing
Fees, Primary 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 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 $2,000,000, or an internal valuation, if the
Scheduled Principal Balance of the mortgage loan is equal to or less than
$2,000,000, of the related mortgaged property or REO Property, as the case may
be. However, the special servicer, in accordance with the Servicing Standard,
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.
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 (in accordance with the standard set forth in the
preceding paragraph), 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
S-56
<PAGE>
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, the trustee's or the fiscal agent's, as the case may be,
obligation to make P&I Advances in respect of the related mortgage loan, which
will generally result in a reduction in current distributions in respect of the
then most subordinate Class or 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 M 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 evidenced by the Class A Certificates will
be decreased, with a corresponding increase in the percentage interest in the
trust 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 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
and net of amounts, if any, on deposit in the Reserve Account, will be allocated
to the 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, Class A-2, Class A-3 and Class A-4 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.
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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 Master 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 Liquidation 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 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 seller, the special servicer, the Primary Servicer, the master
servicer, Morgan Stanley Dean Witter Capital I Inc. and the holder of the
majority interest in the Class R-I Certificates, in that order, will have the
option to purchase, in whole but not in part, the mortgage loans and any other
property remaining in the trust 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 Master Servicing Fee Rate--if the
master servicer is the purchaser--to the Due Date for each mortgage loan ending
in the Collection Period (or, as to the mortgage loans with a Due Date after the
Distribution Date, ending in the month in which such Distribution Date occurs)
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. The optional termination of the trust must be
conducted so as to constitute a "qualified liquidation" of each REMIC under
Section 860F of the Code.
Upon any such termination, the purchase price for the mortgage loans
and the other property in the trust 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.
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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 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 Master Servicing Fee
and Primary 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 is required to make advances of Scheduled Payments for those
mortgage loans which have a Due Date (inclusive of any grace periods) on or
after the Determination Date to the extent a Scheduled Payment is not received
from the applicable borrower by the related Master Servicer Remittance Date.
Notwithstanding any provision to the contrary described above, with
respect to each mortgage loan that provides for the payment of interest in
advance and not in arrears, the master servicer will not be required to make a
P&I Advance as to the Scheduled Payment due or the Assumed Scheduled Payment
deemed to be due during any Collection Period until the date (in the following
month) when the master servicer is required to make P&I Advances in respect of
the next succeeding Collection Period (in which case it will be required to make
such P&I Advance only if the amount of the Scheduled Payment or Assumed
Scheduled Payment has not then been collected in respect of such mortgage loan).
The master servicer will be entitled to interest on P&I Advances, which
interest will accrue at the Advance Rate. Interest on P&I Advances made because
a mortgage loan's Due Date (inclusive of any grace periods) is on or after the
Determination Date will accrue interest at the Advance Rate, commencing on the
later of the day succeeding the applicable Due Date or the expiration of any
grace period with respect to the related mortgage loan.
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, and if the trustee fails to make a required P&I Advance, the fiscal
agent is required to make such P&I Advance, each subject to the same
limitations, and with the same rights, as described above for the master
servicer.
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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.
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,
and 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 items such as 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, as described below, 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.
The master servicer may incur certain costs and expenses in connection
with the servicing of a mortgage loan or the administration of 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 Account or Distribution Account. If the master servicer fails to
make a required Servicing Advance, the trustee is required to make such
Servicing Advance, and if the trustee fails to make a required Servicing
Advance, the fiscal agent is required to make such Servicing Advance, each
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, the special servicer, the operating
adviser, the Rating Agencies and Morgan Stanley Dean Witter Capital I Inc. 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, the trustee and the fiscal
agent. The trustee and the fiscal agent will 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.
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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, 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;
(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,
(D) as to which foreclosure proceedings have been
commenced, or
(E) as to which bankruptcy proceedings have been
commenced;
(v) with respect to any REO Property included in the trust, the
principal balance of the related mortgage loan as of the
date of acquisition of the REO Property and the Scheduled
Principal Balance of the mortgage loan;
(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;
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(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, the Primary 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, including a break out by type of such Expense
Losses;
(xii) the aggregate amount of Servicing Advances and P&I Advances
outstanding, separately stated, that have been made by the
master servicer, the trustee and the fiscal agent;
(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 will 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 presented in Appendix I and will be presented in a tabular
format substantially similar to the format utilized in Appendix I.
The reports described in clauses (a) and (b) above may be combined into
one report for purposes of dissemination.
In the case of information furnished pursuant to subclauses (a)(i),
(a)(ii) and (a)(xi) 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 the foregoing reports available each month via
the trustee's website, which shall initially be located at www.lnbabs.com (the
"trustee's website") and an electronic bulletin board. The trustee's electronic
bulletin board may be initially accessed by calling (714) 282-3990. In addition,
the Trustee will also make mortgage loan information as presented in the "CMSA
f/k/a CSSA" standard file formats, the "CMSA f/k/a CSSA" loan setup file format,
"CMSA f/k/a CSSA" property file format, the "CMSA f/k/a CSSA" loan periodic
update file format, "CMSA f/k/a CSSA" comparative financial status report file
format, the Special Servicer Reports and the Operating Statement Analysis Report
available each month to any Certificateholder, any Certificate Owner, the Rating
Agencies or any other interested party via the trustee's website or other
electronic means. Access to information on the trustee's website shall be
restricted to the Depositor, the Rating Agencies, parties to the Pooling and
Servicing Agreement, the Underwriters, Certificateholders, and any beneficial
owners of certificates who provide the trustee with an investor certification
satisfactory to the trustee. 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, the
trustee may require registration and the acceptance of a disclaimer. The trustee
will 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 in
electronic format the Operating Statement Analysis Report to the trustee, which
will make such report available as described above to the Underwriters, the
Certificateholders, Morgan Stanley Dean Witter Capital I Inc. and anyone Morgan
Stanley Dean Witter Capital I Inc. or either Underwriter reasonably designates,
the special servicer, the Rating Agencies, and any Certificateholder.
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The trustee shall make available at its corporate trust offices (either
in physical or electronic form), during normal business hours, upon reasonable
advance written notice for review by any certificateholder, any certificate
owner, any prospective investor, the Underwriters, each rating agency, the
special servicer and the depositor, originals or copies of, among other things,
the following items: (i) the most recent property inspection reports in the
possession of the trustee in respect of each mortgaged property and REO
Property, (ii) the most recent mortgaged property/REO Property annual operating
statement and rent roll, if any, collected or otherwise obtained by or on behalf
of the master servicer or the special servicer and delivered to the trustee,
(iii) any Phase I Environmental Report or engineering report prepared or
appraisals performed in respect of each mortgaged property provided, however,
that the trustee shall be permitted to require payment by the requesting party
(other than either rating agency) of a sum sufficient to cover the reasonable
expenses actually incurred by the trustee of providing access or copies
(including electronic or digital copies) of any such information reasonably
requested in accordance with the preceding sentence.
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 Morgan Stanley Dean Witter Capital I Inc.;
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 Certificateholder, each Rating Agency or Morgan Stanley
Dean Witter Capital I Inc., 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;
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
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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 Morgan
Stanley Dean Witter Capital I Inc. 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's existence, assuming the
Certificates are issued in September 2000:
The close of business on
September 1 (A) Cut-off Date.
September 29 (B) Record Date for all Classes
of certificates.
September 2 - October 16 (C) The Collection Period. The
master servicer receives
Scheduled Payments due after
the Cut-off Date and any
Principal Prepayments made
after the Cut-off Date and
on or prior to October 16.
October 16 (D) Determination Date.
October 20 (E) Master Servicer Remittance
Date.
October 23 (F) Distribution Date.
Succeeding monthly periods follow the pattern of (B) through (F)
(except as described below).
(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 the Cut-off Date, 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.
(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 October 16, 2000 will be
deposited in the Certificate Account. Each subsequent Collection
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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. With respect to a Distribution
Date, for each mortgage loan with a Due Date (inclusive of any grace period)
after the related Determination Date, any Scheduled Payments for that Due Date
made on or after such Distribution Date, shall be applied to reimburse any P&I
Advances made on such Distribution Date and shall not be part of the Available
Distribution Amount for the next following Distribution Date.
(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
23rd day of each month or, if such day is not a business day, the next
succeeding business day.
THE TRUSTEE AND THE FISCAL AGENT
The Trustee
LaSalle Bank National Association will act as the trustee. LaSalle Bank
National Association is a subsidiary of LaSalle National Corporation which is a
subsidiary of the fiscal agent. The trustee, is at all times required to be, and
will be required to resign if it fails to be, (i) an institution insured by the
FDIC, (ii) a corporation, national bank or national banking association,
organized and doing business under the laws of the United States of America or
any state thereof, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by federal or state authority and (iii) an
institution whose long-term senior unsecured debt, or that of its fiscal agent,
if applicable, is rated not less than "AA" by S&P and "Aa3" by Moody's, or such
lower ratings as the Rating Agencies confirm in writing that will not result in
a downgrade, withdrawal or qualification of the then current ratings of the
certificates. The corporate trust office of the trustee responsible for
administration of the trust is located at 135 South LaSalle Street, Suite 1625,
Chicago, Illinois 60603, Attention: Asset-Backed Securities Trust Services Group
- Morgan Stanley Dean Witter Capital I Inc., Commercial Mortgage Pass-Through
Certificates, Series 2000-PRIN. As of December 31, 1999, the trustee had assets
of approximately $30.4 billion. See "Servicing of the Mortgage Loans--Duties of
the Trustee", "Servicing of the Mortgage Loans--Certain Matters Regarding the
Trustee" and "Servicing of the Mortgage Loans--Resignation and Removal of the
Trustee" in the prospectus.
In addition, LaSalle Bank National Association will serve as
certificate registrar (in such capacity, the "Certificate Registrar") for
purposes of recording and otherwise providing for the registration of the
offered certificates and of transfers and exchanges of the definitive
certificates, if issued, and as authenticating agent of the certificates (in
such capacity, the "Authenticating Agent").
The trustee will be paid the Trustee Fee as compensation for its duties
as trustee, Certificate Registrar and Authenticating Agent under the Pooling and
Servicing Agreement.
The Fiscal Agent
ABN AMRO Bank N.V., a Netherlands banking corporation and the indirect
corporate parent of the trustee, will act as fiscal agent for the trust and will
be obligated to make any Advance required to be made, and not made, by the
master servicer and the trustee under the Pooling and Servicing Agreement,
provided that the fiscal agent will not be obligated to make any Advance that it
deems to be a Nonrecoverable Advance. The fiscal agent will be entitled -- but
not obligated -- to rely conclusively on any determination by the master
servicer, the special servicer -- solely in the case of Servicing Advances -- or
the trustee that an Advance, if made, would be a Nonrecoverable Advance. The
fiscal agent will be entitled to reimbursement for each Advance made by it in
the same manner and to the same extent as, but prior to, the master servicer and
the trustee. See "--Advances" above.
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The fiscal agent will be entitled to various rights, protections and indemnities
similar to those afforded the trustee. The trustee will be responsible for
payment of the compensation of the fiscal agent. As of December 31, 1999, the
fiscal agent had consolidated assets of approximately $460.1 billion. In the
event that LaSalle Bank National Association shall, for any reason, cease to act
as trustee under the Pooling and Servicing Agreement, ABN AMRO Bank N.V.
likewise shall no longer serve in the capacity of fiscal agent thereunder.
EXPECTED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The Expected Final Distribution Date for each Class of certificates
presented under "Summary of Prospectus Supplement--Expected Final Distribution
Date" in 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 Structuring Assumptions.
The Rated Final Distribution Date of each Class of certificates is the
Distribution Date in February 2034.
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;
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 23rd 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 Class B and Class C Certificates will be
based on or subject to the Weighted Average Net Mortgage Rate. Accordingly, the
yields on such 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.
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RATE AND TIMING OF PRINCIPAL PAYMENTS
The yield to maturity on any Class of offered certificates 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
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.
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 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 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-1, Class A-2, Class A-3, Class
A-4, Class B, Class C and Class D 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 presented in "Appendix II - Certain
Characteristics of 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 M 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 L to A -- alphabetical order of Class designation, until the remaining
Certificate Balance of each such Class of certificates has been reduced to
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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, Class A-3, Class A-4
and 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 to the most subordinate Class of certificates outstanding.
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 federal and state tax laws, which are subject to change, to sell
mortgaged properties prior to the exhaustion of tax depreciation benefits.
Morgan Stanley Dean Witter Capital I Inc. 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. Morgan Stanley Dean
Witter Capital I Inc. 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 or 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 Structuring Assumptions.
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The mortgage loans do not have all of the characteristics of the
Structuring 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 Structuring 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 reduction in the Certificate Balance
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 not experience any defaults or losses, or that the mortgage
pool or 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.
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>
Closing Date 100 100 100 100 100 100
September 2001 85 85 85 85 85 85
September 2002 69 69 69 69 69 69
September 2003 51 51 51 51 51 51
September 2004 32 32 32 32 32 32
September 2005 11 11 11 11 11 11
September 2006 0 0 0 0 0 0
Weighted Average Life (in years) 2.99 2.99 2.99 2.99 2.99 2.99
</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>
Closing Date 100 100 100 100 100 100
September 2001 95 95 95 95 95 95
September 2002 89 89 89 89 89 89
September 2003 83 83 83 83 83 83
September 2004 76 76 76 76 76 76
September 2005 69 69 69 69 69 69
September 2006 55 55 55 55 55 55
September 2007 32 32 32 32 32 32
September 2008 21 21 21 21 21 21
September 2009 0 0 0 0 0 0
Weighted Average Life (in years) 5.69 5.69 5.69 5.69 5.69 5.69
</TABLE>
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<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-3 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
Distribution Date 0% 3% 5% 7% 10% 15%
----------------- -- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100 100
September 2001 100 100 100 100 100 100
September 2002 100 100 100 100 100 100
September 2003 100 100 100 100 100 100
September 2004 100 100 100 100 100 100
September 2005 100 100 100 100 100 100
September 2006 85 85 85 85 85 85
September 2007 49 49 49 49 49 49
September 2008 32 32 32 32 32 32
September 2009 0 0 0 0 0 0
Weighted Average Life (in years) 7.14 7.14 7.14 7.14 7.14 7.14
</TABLE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-4 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
Distribution Date 0% 3% 5% 7% 10% 15%
----------------- -- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100 100
September 2001 100 100 100 100 100 100
September 2002 100 100 100 100 100 100
September 2003 100 100 100 100 100 100
September 2004 100 100 100 100 100 100
September 2005 100 100 100 100 100 100
September 2006 100 100 100 100 100 100
September 2007 100 100 100 100 100 100
September 2008 100 100 100 100 100 100
September 2009 76 76 76 76 76 76
September 2010 55 55 55 55 55 55
September 2011 37 37 37 37 37 37
September 2012 25 25 25 25 25 25
September 2013 14 14 14 14 14 14
September 2014 3 3 3 3 3 3
September 2015 0 0 0 0 0 0
Weighted Average Life (in years) 10.66 10.66 10.66 10.66 10.66 10.66
</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>
Closing Date 100 100 100 100 100 100
September 2001 100 100 100 100 100 100
September 2002 100 100 100 100 100 100
September 2003 100 100 100 100 100 100
September 2004 100 100 100 100 100 100
September 2005 100 100 100 100 100 100
September 2006 100 100 100 100 100 100
September 2007 100 100 100 100 100 100
September 2008 100 100 100 100 100 100
September 2009 100 100 100 100 100 100
September 2010 100 100 100 100 100 100
September 2011 100 100 100 100 100 100
September 2012 100 100 100 100 100 100
September 2013 100 100 100 100 100 100
September 2014 100 100 100 100 100 100
September 2015 20 20 20 20 20 20
September 2016 0 0 0 0 0 0
Weighted Average Life (in years) 14.76 14.76 14.76 14.76 14.76 14.76
</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>
Closing Date 100 100 100 100 100 100
September 2001 100 100 100 100 100 100
September 2002 100 100 100 100 100 100
September 2003 100 100 100 100 100 100
September 2004 100 100 100 100 100 100
September 2005 100 100 100 100 100 100
September 2006 100 100 100 100 100 100
September 2007 100 100 100 100 100 100
September 2008 100 100 100 100 100 100
September 2009 100 100 100 100 100 100
September 2010 100 100 100 100 100 100
September 2011 100 100 100 100 100 100
September 2012 100 100 100 100 100 100
September 2013 100 100 100 100 100 100
September 2014 100 100 100 100 100 100
September 2015 100 100 100 100 100 100
September 2016 34 34 34 34 34 34
September 2017 0 0 0 0 0 0
Weighted Average Life (in years) 15.84 15.84 15.84 15.84 15.84 15.84
</TABLE>
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The mortgage pool will consist of one hundred and two (102) fixed-rate
mortgage loans with an aggregate Cut-off Date Balance of $597,985,115 subject to
a permitted variance of plus or minus 5%. The Cut-off Date Balances of the
mortgage loans range from $1,998,635 to $30,500,000, and the mortgage loans have
an average Cut-off Date Balance of $5,862,599. All numerical information
concerning the mortgage loans is approximate.
The mortgage loans were originated by the seller and/or a life
insurance company affiliate of the seller between September 30, 1988 and
November 12, 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 mortgage loans associated with the ten (10) largest mortgage loans
(treating cross-collateralized mortgage loans as one mortgage loan) in the
mortgage pool are contained in Appendix III attached hereto. None of the
mortgage loans was originated for securitization.
One hundred and one (101) mortgage loans, representing 99.1% of the
Initial Pool Balance are secured by a first mortgage lien on a fee simple estate
in an income-producing real property. In two (2) of those cases, although the
borrower's interest in the property consists of a ground leasehold interest, the
fee owner of the mortgaged property is a party to the related mortgage and
pursuant to such mortgage, has encumbered such fee owner's fee interest in the
mortgaged property, and any such mortgage loan is disclosed in this prospectus
supplement as a fee loan and the borrower's interest in that property is
disclosed as a fee simple estate. One (1) mortgage loan, representing 0.9% of
the Initial Pool Balance is secured by a fee simple estate in an income
producing property, together with a first mortgage lien encumbering the
borrower's leasehold interest in an adjacent, non-income producing real
property.
On or prior to the Closing Date, Morgan Stanley Dean Witter Capital I
Inc. will acquire the mortgage loans from the seller, pursuant to the Mortgage
Loan Purchase Agreement to be entered into between Morgan Stanley Dean Witter
Capital I Inc. and the seller. Morgan Stanley Dean Witter Capital I Inc. will
thereupon sell its interests in the mortgage loans, without recourse, to the
trustee for the benefit of the Certificateholders. See "--The Seller" and
"--Assignment of Mortgage Loans" below.
MATERIAL 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. All of the mortgage loans accrue interest on
the basis of a 360-day year consisting of twelve 30-day months.
Property Types
The mortgaged properties consist of the following property types:
o Retail - forty-five (45) of the mortgage loans, representing
45.1% of the Initial Pool Balance, are secured by retail
properties. Anchored retail properties secure thirty-six (36) of
the mortgage loans, representing 38.9% of the Initial Pool
Balance and single tenant retail properties secure nine (9) of
the mortgage loans, representing 6.2% of the Initial Pool
Balance. Thirty-one (31) of such anchored retail properties,
representing 28.1% of the Initial Pool Balance, are anchored
grocery properties and six (6) of such single tenant retail
properties, representing 3.7% of the Initial Pool Balance, are
free standing grocery properties.
o Industrial - thirty-six (36) of the mortgage loans, which
represent 27.0% of the Initial Pool Balance, are secured by
industrial properties, thirty-one (31) of such mortgage loans,
representing 23.8% of the Initial Pool Balance, are secured by
warehouse properties; nineteen (19) of such mortgage loans
(representing 17.0% of the Initial Pool Balance) are single
tenant industrial properties;
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o Office - nineteen (19) of the mortgage loans, which represent
25.0% of the Initial Pool Balance, are secured by office
properties; eleven (11) of which (representing 7.9% of the
Initial Pool Balance) are single tenant office properties;
o Other - two (2) of the mortgage loans, which represent 2.9% of
the Initial Pool Balance, are secured by a mortgage encumbering
the related borrower's fee simple interest in land that is
ground leased to a ground tenant, one (1) of which (representing
0.4% of the Initial Pool Balance) is improved by a single tenant
property. One (1) of such mortgaged properties, representing
2.5% of the Initial Pool Balance, is leased to a tenant who
developed the property as an office property and the other
mortgaged property, representing 0.4% of the Initial Pool
Balance, is leased to a tenant who developed the property for
retail use.
Property Location
24.6%, 9.1%, 8.7%, 7.7%, 7.5%, 6.0%, 5.3% and 5.1% of the mortgaged
properties, based upon the Initial Pool Balance are located in California,
Virginia, New Jersey, Florida, Texas, Ohio, Georgia and Kansas, respectively,
and concentrations of mortgaged properties, in each case representing less than
4.0% of the Initial Pool Balance, also exist in fifteen other states.
Due Dates
Most of the mortgage loans have Due Dates on days other than the first
of each month and many have payment grace periods. Thirty-one (31) mortgage
loans, representing 26.8% of the Initial Pool Balance, have Due Dates (inclusive
of any grace periods) on or after the Determination Date. Two (2) of these
mortgage loans, representing 1.1% of the Initial Pool Balance have Due Dates on
the twenty-fifth calendar day of each month and twenty-nine (29) of these
mortgage loans, representing 25.8% of the Initial Pool Balance, have grace
periods which expire on or after the Determination Date. The master servicer is
required to make advances of Scheduled Payments on these mortgage loans, to the
extent a Scheduled Payment is not received by the applicable borrower by the
related Master Servicer Remittance Date. See "Description of the Offered
Certificates -- Advances -- P&I Advances" and Appendix II for specific
information with respect to grace periods in this prospectus supplement.
--------------------------------------------------------------------------------
Percentage of
Due Date Number of Mortgage Loans Initial Pool Balance
-------- ------------------------ --------------------
First day of each calendar month 32 28.2%
Fifth day of calendar month 2 1.0%
Tenth day of calendar month 8 5.5%
Fifteenth day of calendar month 58 64.2%
Twenty-fifth day of calendar month 2 1.1%
--------------------------------------------------------------------------------
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Amortization
The mortgage loans have the following amortization features:
o Sixty-four (64) of the mortgage loans, representing 49.9% of the Initial
Pool Balance are expected to have principal balances of less than
approximately 1% of their respective original principal balance as of
their respective stated maturity dates.
o Thirty-eight (38) of the mortgage loans, representing 50.1% of the
Initial Pool Balance, are balloon loans. For the purposes of this
prospectus supplement, we consider a mortgage loan to be a "Balloon Loan"
if its principal balance is greater than approximately 1% of its original
principal balance as of its stated maturity date. See "Risk Factors And
Other Special Considerations--The Mortgage Loans--Balloon Payments." One
(1) of such mortgage loans, representing 2.5% of the Initial Pool
Balance, requires monthly payments of interest only for the full term of
the loan and does not provide for any amortization of its principal
balance over its term and one (1) of such mortgage loans, representing
5.1% of the Initial Pool Balance, provides for monthly payments of
interest until January 15, 2002 and thereafter provides for monthly
payments of interest and principal based on a 360 month amortization
period.
Prepayment Restrictions
As of the Cut-off Date, the following prepayment restrictions applied
to the mortgage loans:
o All of the mortgage loans require payment of a prepayment premium upon a
voluntary principal prepayment:
o For ninety-nine (99) mortgage loans, representing 96.3% of the
Initial Pool Balance, the prepayment premium for each such mortgage
loan is calculated as an amount equal to the greater of one percent
(1%) of the amount prepaid and an amount based upon a yield
maintenance formula referencing United States Treasury obligations.
o For three (3) mortgage loans, representing 3.7% of the Initial Pool
Balance, the prepayment premium is calculated by using other yield
maintenance formulas.
See Appendix II attached hereto for a summary of the specific yield
maintenance provisions.
o For three (3) mortgage loans, representing 4.4% of the Initial Pool
Balance, voluntary prepayment is permitted without payment of a
prepayment premium for a period of up to three months prior to and
including the maturity date.
o In certain cases, voluntary principal prepayments are permitted only
during specified periods:
o Twelve (12) mortgage loans, representing 11.4% of the Initial Pool
Balance, permit voluntary prepayment in full only after expiration of
a lock-out period, subject to payment of a prepayment premium, as
further described in this prospectus supplement.
o All of the mortgage loans, other than one (1) mortgage loan representing
0.5% of the Initial Pool Balance, permit voluntary prepayment only in
full and not in part.
The method of calculation of any Prepayment Premium will vary for any
mortgage loan as presented in "Appendix II - Certain Characteristics of the
Mortgage Loans - Prepayment and Servicing Information."
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
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documents permit recourse to the borrower or a guarantor, Morgan Stanley Dean
Witter Capital I Inc. 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 mortgage insurer.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions
The mortgages generally contain due-on-sale and due-on-encumbrance
clauses that 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 special servicer, or,
if collected, will be paid to the special servicer as additional servicing
compensation, and certain other conditions.
In addition, some of the 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 set forth in the applicable mortgage
loan documents and/or as determined by the special servicer. The special
servicer 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.
Subordinate and Other Financing
Certain of the mortgage loans permit the incurrence of debt secured by
a junior lien on the mortgaged property. Five (5) of the mortgage loans,
representing 4.0% of the Initial Pool Balance, permit the borrower to utilize
the mortgaged property as collateral for subordinated loans, subject to lender's
approval. Four (4) of these mortgage loans, representing 3.5% of the Initial
Pool Balance, each also provides for a combined maximum loan-to-value ratio of
75% and minimum combined debt service coverage ratios ranging from 1.10x to
1.50x. One (1) mortgage loan, representing 0.6% of the Initial Pool Balance,
permits the borrower to obtain financing only for a 12,000 square foot expansion
of the related property.
Other than in the case of the two (2) mortgage loans described below,
the mortgage loans prohibit the pledge by the equity owners of the borrower of
their equity ownership in the borrower. This type of financing is referred to in
this prospectus supplement as "mezzanine debt." One (1) mortgage loan,
representing 0.6% of the Initial Pool Balance, permits the incurrence of
mezzanine debt, subject to a maximum combined loan-to-value ratio of 75% and a
minimum combined debt service coverage ratio of 1.20x. In the case of one (1)
mortgage loan, representing 5.1% of the Initial Pool Balance, mezzanine debt is
currently in place. All of the mortgage loans permit the incurrence of unsecured
debt.
Morgan Stanley Dean Witter Capital I Inc. makes no representation as to
whether any other secured subordinate financing currently encumbers any mortgage
property or whether a third-party holds debt secured by a pledge of an equity
interest in a related borrower. See "Certain Legal Aspects of the Mortgage Loans
and the Leases--Subordinate Financing" in the prospectus and "Risk
Factors--Authority to Effect Other Borrowings Entails Risks" in this prospectus
supplement.
Additional Collateral/Reserves
Certain mortgage loans have additional collateral in the form of
reserves under which monies disbursed by the originating lender are reserved for
specified periods which are to be released only upon the satisfaction of certain
conditions by the borrower.
If the borrowers do not satisfy conditions for release of the monies by
the outside release date, such monies may be applied to partially repay the
related mortgage loan, in some cases, without the payment of any prepayment
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<PAGE>
premium, or may be held by the lender as additional security for the mortgage
loans. In addition, some of the other mortgage loans provide for reserves for
items such as deferred maintenance, environmental remediation and capital
improvements. For further information with respect to additional collateral, see
Appendix II.
CROSS COLLATERALIZATION; RELATED PARTIES
The mortgage pool includes one (1) group of mortgage loans, which
represent 3.0% of the Initial Pool Balance, under which an aggregate amount of
indebtedness is evidenced by multiple obligations and is secured by mortgages on
multiple mortgaged properties. Each such mortgage loan is cross defaulted and
cross collateralized with the other mortgage loan or loans in such group.
Certain ratios including DSCR, Implied DSCR, Cut-off Date loan-to-value and
Balloon LTV are calculated on a combined basis for mortgage loans that are
cross-collateralized and cross-defaulted. See Appendix II for further
information with respect to such groups.
Nine (9) groups of mortgage loans, collectively representing 23.2% of
the Initial Pool Balance, were made to the same borrower or groups of borrowers
that are affiliated with one another through partial or complete direct or
indirect common ownership, with no group representing more than 6.5% of the
Initial Pool Balance.
ASSESSMENTS OF PROPERTY VALUE AND CONDITION
Appraisals
In connection with the origination of each of the mortgage loans, the
related mortgaged property was appraised by an internal appraiser who, is either
a Member Appraisal Institute (MAI) or was supervised and reviewed by a Member
Appraisal Institute. The appraisals were either Complete Appraisals - Restricted
Reports or Limited Appraisals - Restricted Reports which comply to the Uniform
Standards of Professional Appraisal Practice (USPAP) and real estate appraisal
regulations.
The loan-to-value ratios for one hundred and one (101) mortgage loans
were calculated as of the Cut-off Date according to the methodology described in
this prospectus supplement using a capitalization rate applied to the
underwritten net operating income of such mortgaged property or properties to
determine the value of such mortgaged property or properties. For forty-three
(43) of the mortgage loans, representing 58.2% of the aggregate principal
balance of the mortgage loans as of September 1, 2000, capitalization rates were
determined on the basis of third party market studies conducted on or after June
15, 2000. For fifty-eight (58) of the mortgage loans, representing 41.1% of the
aggregate principal balance of the mortgage loans as of September 1, 2000,
internal valuations were prepared by the seller's underwriters with
responsibility for the relevant market, with oversight provided by the seller's
internal MAI appraisers, to ensure compliance with the seller's standard
valuation guidelines. The valuations were prepared on the basis of discounted
cash flow analyses, resulting in an implied capitalization rate. The
loan-to-value ratio for one (1) mortgage loan, representing 0.7% of the Initial
Pool Balance, was calculated according to the methodology described in this
prospectus supplement based on the estimate of value from a third party
appraisal, dated November 22, 1999.
Environmental Assessments
In general, in connection with the origination of each of the mortgage
loans, environmental site assessments were prepared for the related mortgaged
properties. In all cases where environmental site assessments were prepared, the
minimum standard required for such environmental site assessments was a phase I
type environmental site assessment, and no assessments were updated in
connection with the sale of the related mortgage loans to the trust. With
respect to the mortgaged properties relating to the following ten (10) mortgage
loans, as referenced in Appendix II (listed below together with the date of the
related assessment date) representing 11.9% of the Initial Pool Balance: 75
(assessment dated May 21, 1999); 23 (assessment dated October 26, 1999); 30
(assessment dated February 22, 1999); 2 (assessment dated April 8, 1999); 46
(assessment dated April 12, 1999); 49 (assessment dated April 29, 1999); 84
(assessment dated March 31, 1999); 50 (assessment dated April 26, 1999); 20
(assessment dated September 13, 1999); and 54 (assessment dated October 14,
1999), the seller has represented to the depositor that, except as disclosed in
such assessment, it has no knowledge of the presence of any material adverse
environmental conditions.
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With respect to the remaining mortgaged properties, representing 88.1%
of the Initial Pool Balance, the seller has represented to the depositor that no
material adverse environmental condition exists.
The environmental reports generally did not disclose the presence or
risk of environmental contamination that is considered material and adverse to
the interests of the holders of the certificates; however, in certain cases,
such assessments did reveal conditions that resulted in requirements that the
related borrowers establish operations and maintenance plans, monitor the
mortgaged property, abate or remediate the condition, and/or take such other
actions necessary to address such adverse conditions.
Portions of some of the mortgaged properties securing the mortgage
loans include tenants which operate as on-site dry-cleaners and a portion of one
of the mortgaged properties securing a mortgage loan includes a tenant which
operates a gasoline station. Both types of operations involve the use and
storage of hazardous substances, leading to an increased risk of liability to
the tenant, the landowner and, under certain circumstances, a lender (such as
the trust) under environmental laws. Dry-cleaners and gasoline station operators
may be required to obtain various environmental permits and licenses in
connection with their operations and activities and comply with various
environmental laws, including those governing the use and storage of hazardous
substances. These operations incur ongoing costs to comply with environmental
laws governing, among other things, containment systems and underground storage
tank systems. In addition, any liability to borrowers under environmental laws,
including in connection with releases into the environment of gasoline,
dry-cleaning solvents or other hazardous substances from underground storage
tank systems or otherwise, could adversely impact the related borrower's ability
to repay the related mortgage loan. See "Risk Factors--Environmental Risks
Relating to Specific Mortgaged Properties" in this prospectus supplement.
Property Condition Assessments
The seller, or engineering consultants engaged by it, inspected all of
the mortgaged properties in connection with the origination of the mortgage
loans 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. With respect to the following ten (10)
mortgage loans, as referenced in Appendix II (listed below together with the
date of the related report) representing 11.9% of the Initial Pool Balance: 75
(report dated May 26, 1999); 23 (report dated June 3, 1999); 30 (report dated
February 24, 1999); 2 (report dated March 8, 1999); 46 (report dated April 26,
1999); 49 (report dated April 23, 1999); 84 (report dated April 26, 1999); 50
(report dated April 29, 1999); 20 (report dated September 17, 1999); and 54
(report dated October 18, 1999), the seller has represented to the depositor
that, except as disclosed in the related report, no material adverse condition
exists. With respect to the remaining mortgaged properties, representing 88.1%
of the Initial Pool Balance, the seller has represented to the depositor that no
material adverse condition exists. In those cases where a material and adverse
property condition was disclosed, such property condition has been or is
required to be remedied to the seller's satisfaction, or funds as deemed
necessary by the seller, or the related engineer or consultant have been
reserved to remedy the material property condition.
Seismic Review Process
In general, the underwriting guidelines applicable to the origination
of the mortgage loans required that prospective borrowers seeking loans secured
by properties located in California and areas of other states where seismic risk
is deemed material obtain a seismic engineering report of the building and,
based thereon and on certain statistical information, an estimate of probable
maximum loss ("PML"), in an earthquake scenario. Generally, any of the mortgage
loans as to which the property was estimated to have PML in excess of 20% of the
estimated replacement cost would either be subject to a lower loan-to-value
limit at origination, be conditioned on seismic upgrading (or appropriate
reserves or letter of credit for retrofitting), be conditioned on satisfactory
earthquake insurance or be declined.
The mortgage pool contains one (1) mortgage loan (mortgage loan number
81), as referenced in Appendix II, representing 0.5% of the Initial Pool
Balance, that has a PML in excess of 20% of the estimated replacement costs of
the improvements and is subject to the above-described mitigants.
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Zoning and Building Code Compliance
The seller took steps to establish that the use and operation of the
mortgaged properties that represent security for its mortgage loans were, at
their respective dates of origination, in compliance in all material respects
with applicable zoning, land-use and similar laws and ordinances, but no
assurance can be given that such steps revealed all possible violations.
Evidence of such compliance may have been in the form of legal opinions,
confirmations from government officials, title insurance endorsements, survey
endorsements and/or representations by the related borrower contained in the
related mortgage loan documents. Violations may be known to exist at any
particular mortgaged property, but the seller has informed Morgan Stanley Dean
Witter Capital I Inc. that it does not consider any such violations known to it
to be material.
ADDITIONAL MORTGAGE LOAN INFORMATION
Each of the tables presented in Appendix I sets forth selected
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 mortgage loans associated
with the ten (10) largest mortgage loans in the mortgage pool (treating
cross-collateralized mortgage loans as one mortgage loan), see Appendix III
hereto. Additional information regarding the mortgage loans is contained in this
prospectus supplement under "Risk Factors" elsewhere in this "Description of the
Mortgage Pool" section and under "Legal Aspects of Mortgage Loans and the
Leases" in the prospectus.
For purposes of the tables in Appendix I and for the information
presented in Appendix II and Appendix III:
(1) References to "DSCR" are references to "Debt Service Coverage
Ratios" and references to "Implied DSCR" are references to
"Implied 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 or expected to be generated by a property based upon
executed leases that is available for debt service to (b)
required debt service payments (with respect to Debt Service
Coverage Ratios) or debt service payments based on 9.0% fixed
constant (with respect to Implied Debt Service Coverage
Ratios). 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 presented in Appendix
II and Appendix III, the "Debt Service Coverage Ratio" or
"DSCR" for any mortgage loan or "Implied DSCR" or "Implied
Debt Service Coverage Ratio" (or group of cross-collateralized
mortgage loans) is calculated pursuant to the definition
thereof under the "Glossary of Terms" in this prospectus
supplement.
In connection with the calculation of DSCR, Implied DSCR and
loan-to-value ratios, in determining Underwritable Cash Flow
for a mortgaged property, the 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 seller made 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 or the most recent operating statements or rent
rolls were utilized. In some cases,
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partial year operating income data was annualized, with
certain adjustments for items deemed not appropriate to be
annualized. In some 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.
Historical operating results may not be available for some of
the mortgage loans which are secured by mortgaged properties
with newly constructed improvements, mortgaged properties with
triple net leases, mortgaged properties that have recently
undergone substantial renovations and newly acquired 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 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 presented 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.
The value of the related mortgaged property or properties for
purposes of determining the Cut-off Date LTV are each
determined using the third party market studies, the seller's
internal valuations and in the case of one (1) mortgage loan,
a third party appraisal described above under "--Assessments
of Property Value and Condition--Appraisals".
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 quarterly and/or annual
operating statements and rent rolls.
STANDARD HAZARD INSURANCE
The master servicer will, consistent with the Servicing Standard
require each borrower to maintain a fire and hazard insurance policy with
extended coverage in the manner required under the related mortgage loan.
Certain mortgage loans may permit such hazard insurance policy to be maintained
by a tenant at the related mortgaged property, or may permit the related
borrower or a tenant to self-insure. 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
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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, a portion of the
building on a 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
special servicer will have the right, but not the obligation, at the expense of
the trust, to obtain earthquake insurance on any mortgaged property securing a
Specially Serviced Mortgage Loan and/or any REO Property so long as such
insurance is available at commercially reasonable rates.
THE SELLER
Principal Life Insurance Company
Each of the mortgage loans was originated and underwritten by Principal
Life Insurance Company and/or its life insurance company affiliate. Principal
Life Insurance Company is headquartered at 801 Grand Street, Des Moines, Iowa
50392. Principal Life Insurance Company's telephone number is (515) 248-3944.
Principal Life Insurance Company is the flagship and largest member of Principal
Financial Group, a diversified family of companies offering a wide range of
financial products and services for businesses, groups and individuals. The
Principal Financial Group as of June 30, 2000 had more than $117 billion in
assets under management. In 1999, it had $76 billion in statutory assets. Its
financial strength rating from S&P is "AA" and from Moody's is "Aa2". Principal
Life Insurance Company and its affiliates have been originating commercial
mortgage loans since the 1950's and as of June 30, 2000 have over $20 billion in
commercial real estate debt and assets under management.
SALE OF THE MORTGAGE LOANS
On or prior to the Closing Date, the seller will sell the mortgage
loans, without recourse, to Morgan Stanley Dean Witter Capital I Inc., and
Morgan Stanley Dean Witter Capital I Inc., in turn, will sell all of the
mortgage loans, without recourse, to the trustee for the benefit of the
Certificateholders. In connection with such assignments, the seller is required
in accordance with the Mortgage Loan Purchase Agreement to deliver the mortgage
file, with respect to each mortgage loan so assigned by it to the trustee or its
designee.
The trustee will be required to review the documents delivered by the
seller with respect to the mortgage loans within 75
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days following the Closing Date, and the trustee will hold the related documents
in trust. Within 75 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 at the expense of the seller.
REPRESENTATIONS AND WARRANTIES
In the Mortgage Loan Purchase Agreement, the seller has represented and
warranted with respect to each of the mortgage loans, subject to certain
specified exceptions, 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:
(1) the information presented in the schedule of the mortgage loans
attached to the Mortgage Loan Purchase Agreement is complete, true and correct
in all material respects;
(2) the seller owns the mortgage loan free and clear of any and all
pledges, liens and/or other encumbrances;
(3) 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;
(4) the related mortgage constitutes a valid and, subject to certain
creditors' rights exceptions, enforceable first priority mortgage lien, subject
to certain permitted encumbrances, upon the related mortgaged property;
(5) the assignment of the related mortgage in favor of the trustee
constitutes a legal, valid and binding assignment;
(6) the related assignment of leases establishes and creates a valid
and, subject to certain creditor's rights exceptions, enforceable first priority
lien in the related borrower's interest in all leases of the mortgaged property;
(7) 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;
(8) a property inspection report was prepared in connection with the
origination of each mortgage loan. With respect to the following ten (10)
mortgage loans, as referenced in Appendix II: 75, 23, 30, 2, 46, 49, 84, 50, 20
and 54, other than as disclosed in the related report, the related mortgaged
property is, to the seller's knowledge, (a) free and clear of any damage that
would materially and adversely affect its value as security for the mortgage
loan; (b) in good repair and condition so as not to materially and adversely
affect its value as security for the related mortgage loan; and (c) all building
systems contained therein are in good working order so as not to materially and
adversely affect its value as security for the related mortgage loan. The seller
has received no notice of the commencement of any proceeding for the
condemnation of all or any material portion of any mortgaged property. To the
seller's knowledge (based on surveys and/or title insurance obtained in
connection with the origination of the mortgage loans), as of the date of the
origination of each mortgage loan, all of the material improvements on the
related mortgaged property that were considered in determining the value of the
mortgaged property lay wholly within the boundaries and building restriction
lines of such property, except for encroachments that are insured against by the
lender's title insurance policy referred to herein or that do not materially and
adversely affect the value or marketability of such mortgaged property, and no
improvements on adjoining properties materially encroached upon such mortgaged
property so as to materially and adversely affect the value or marketability of
such mortgaged property, except those encroachments that are insured against by
a title policy.
With respect to the remaining mortgage loans, the related mortgaged
property is (a) free and clear of any damage that would materially and adversely
affect its value as security for the mortgage loan; (b) in good repair and
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condition so as not to materially and adversely affect its value as security for
the related mortgage loan; and (c) all building systems contained therein are in
good working order so as not to materially and adversely affect its value as
security for the related mortgage loan. The seller has received no notice of the
commencement of any proceeding for the condemnation of all or any material
portion of any mortgaged property;
(9) the seller has received no notice of the commencement of any
proceeding for the condemnation of all or any material portion of any mortgaged
property;
(10) 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;
(11) the proceeds of the mortgage loan have been fully disbursed and
there is no obligation for future advances with respect thereto;
(12) in general, an environmental site assessment was performed with
respect to each mortgaged property in connection with the origination of the
mortgage loans. With respect to the following ten (10) mortgage loans, as
referenced in Appendix II (set forth below together with the date of the related
environmental site assessment) and its related mortgaged property: 75;
(assessment dated May 21, 1999); 23 (assessment dated October 26, 1999); 30
(assessment dated February 22, 1999); 2 (assessment dated April 8, 1999); 46
(assessment dated April 12, 1999); 49 (assessment dated April 29, 1999); 84
(assessment dated March 31, 1999); 50 (assessment dated April 26, 1999), 20
(assessment dated September 13, 1999); and 54 (assessment dated October 14,
1999), other than as disclosed in the related environmental assessment, to
seller's knowledge, (X) no Hazardous Material is present on such mortgaged
property, such that (1) the value, use or operations of such mortgaged property
is materially and adversely affected, or (2) under applicable federal, state or
local law, (a) such Hazardous Material could be required to be eliminated,
remediated or otherwise responded to at a cost materially and adversely
affecting the value, use or operations of the mortgaged property before such
mortgaged property could be altered, renovated, demolished or transferred or (b)
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
remodeling or otherwise responding to such Hazardous Material or the hazard
created thereby at a cost or manner materially and adversely affecting the
value, use or operations of the mortgaged property, and (Y) such mortgaged
property is in material compliance with all applicable federal, state and local
laws and regulations pertaining to Hazardous Materials or environmental hazards,
any noncompliance with such laws or regulations does not have a material adverse
effect on the value use or operations of such mortgaged property and neither
seller nor, to seller's knowledge, the related mortgagor or any current tenant
thereon, has received any notice of any violation or potential violation of any
such law. With respect to any condition disclosed in an environmental report,
which condition constituted a violation of applicable laws or regulations or
would materially and adversely affect the value, use or operations of the
related mortgaged property if not remedied, such condition has either been
satisfactorily remedied or the applicable loan documents contain provisions
which address such condition and, to the satisfaction of seller, adequate
funding or reserves are available to remedy or otherwise respond to such
condition.
With respect to the remaining mortgage loans and the related mortgaged
property, (X) no Hazardous Material is present on such mortgaged property, such
that (1) the value, use or operations of such mortgaged property is materially
and adversely affected, or (2) under applicable federal, state or local law and
regulations, (a) such Hazardous Material could be required to be eliminated,
remediated or otherwise responded to at a cost materially and adversely
affecting the value, use or operations of the mortgaged property before such
mortgaged property could be altered, renovated, demolished or transferred or (b)
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, use or operations of the mortgaged property, and
(Y) such mortgaged property is in material compliance with all applicable
federal, state and local laws and regulations pertaining to Hazardous Material
or environmental hazards, any noncompliance with such laws does not have a
material adverse effect on the value, use or operations of such mortgaged
property and neither seller nor, to seller's knowledge, the related mortgagor or
any current tenant thereon, has received any notice of any violation or
potential violation of any such law. With respect to any condition disclosed in
an environmental report, which
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condition constituted a violation of applicable laws or regulations or would
materially and adversely affect the value, use or operations of the related
mortgaged property if not remedied, such condition has either been
satisfactorily remedied or the applicable loan documents contain provisions with
respect to such condition and, to the satisfaction of seller, adequate funding
or reserves are available to remedy or otherwise respond to such condition;
(13) 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
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;
(14) the related mortgaged property is, and is required pursuant to the
related mortgage to be, insured by casualty, business interruption and liability
insurance policies of a type specified in the Mortgage Loan Purchase Agreement;
(15) to the seller's knowledge, 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;
(16) the related borrower is not, to the seller's knowledge, a debtor
in any state or federal bankruptcy or insolvency proceeding;
(17) the mortgage loan is not cross-collateralized with any loan other
than one or more other mortgage loans;
(18) 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 related mortgaged property permitted to be released was not
considered by the seller to be material in underwriting the mortgage loan, the
payment of a release price and prepayment consideration in connection therewith;
(19) to the 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, other than those defaults that are covered by
certain other of the preceding representations and warranties; and
(20) except as set forth in clauses (i) and (ii) of this clause (20),
each mortgaged property consists of a fee simple estate in real estate, and (i)
where the mortgagor is a lessee under a ground lease of the mortgaged property
(a "Ground Lease"), the related mortgage loan is secured by a mortgage
encumbering both the mortgagor's interest in the Ground Lease and the ground
landlord's fee simple interest in the mortgaged property, and each such mortgage
constitutes a first priority lien on both the fee simple and leasehold estates,
subject only to the applicable permitted encumbrances specified in the Mortgage
Loan Purchase Agreement (which permitted encumbrances do not include any loan
secured by a lien encumbering the fee simple or leasehold estates with priority
over the related mortgage loan); and (ii) one mortgage loan is secured by a
first priority lien (subject to the permitted encumbrances) encumbering (a) a
fee simple estate of real property constituting a portion of the Mortgaged
Property and (b) a leasehold interest created by a Ground Lease of 82 parking
spaces located on land adjacent to such real property and the termination of the
Ground Lease will not materially and adversely affect: (1) the ability of the
mortgagor to pay in full the principal and interest on the mortgage loan in a
timely manner or (2) the use of the mortgaged property for the use currently
being made thereof, the operation of the mortgaged property as currently being
operated or the value of the mortgaged property.
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REPURCHASES AND OTHER REMEDIES
If any mortgage loan document required to be delivered to the trustee
by the seller as described under "--Sale of the Mortgage Loans" above has a
Material Document Defect, or if there is a Material Breach by the seller
regarding the characteristics of any of the mortgage loans and/or the related
mortgaged properties as described under "--Representations and Warranties"
above, then the 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 at the Purchase
Price; or, at its option,
o if within the two-year period commencing on the Closing Date:
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.
The seller must cure any Material Document Defect or the Material
Breach within the Permitted Cure Period, provided, however, that 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 the repurchase
or substitution must occur within 85 days from the date the seller was notified
of the defect or breach.
The foregoing obligations of the seller to cure a Material Document
Defect or a Material Breach in respect of any of the 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 Morgan Stanley Dean Witter
Capital I Inc., the seller or any other person or entity will be obligated to
repurchase or replace the affected mortgage loan if the 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 Morgan Stanley Dean Witter Capital I Inc. 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
presented 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.
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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 accordance 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 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 and the Pooling and Servicing Agreement.
By the Closing Date, the master servicer will enter into an agreement
with the Primary Servicer under which the Primary Servicer will assume many of
the servicing obligations of the master servicer presented in this section with
respect to the mortgage loans. The Primary Servicer is subject to the Servicing
Standard. If an Event of Default occurs in respect of the master servicer and
the master servicer is terminated, such termination will not in and of itself
cause the termination of the Primary Servicer. Notwithstanding the provisions of
the primary servicing agreement or the Pooling and Servicing Agreement, the
master servicer shall remain obligated and liable to the trustee and the
certificateholders for servicing and administering of the mortgage loans in
accordance with the provisions of the Pooling and Servicing Agreement to the
same extent as if the master servicer was alone servicing and administering the
mortgage loans.
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, any
subservicing is subject to various conditions set forth in the Pooling and
Servicing Agreement including the requirement that 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:
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. A resignation of the master servicer will not affect the
rights and obligations of the Primary Servicer to continue to act as primary
servicer. If the master servicer ceases to serve as such and shall not have been
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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 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, to the extent they are different entities, 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
the procedures set forth in the Pooling and Servicing Agreement. Notwithstanding
such transfer, the master servicer will continue to receive any payments on such
mortgage loan, including amounts collected by the special servicer, to make
selected calculations with respect to such mortgage loan, and to make
remittances to the trustee and prepare reports to the trustee and the trustee
with respect to such mortgage loan. If title to the related mortgaged property
is acquired by the trust, 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 Operating Adviser has certain rights to advise, and receive notice
from, the special servicer, provided that the special servicer may not take any
action inconsistent with the Servicing Standard.
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
Master Servicer
Wells Fargo Bank, National Association ("Wells Fargo") will be
responsible for servicing the mortgage loans as master servicer. Wells Fargo
provides a full range of banking services to individual, agribusiness, real
estate, commercial and small business customers.
Wells Fargo's principal servicing offices are located at 555 Montgomery
Street, San Francisco, California 94104.
As of June 30, 2000, Wells Fargo was responsible for servicing
approximately 2,168 commercial and multifamily mortgage loans, totaling
approximately $12.51 billion in aggregate outstanding principal amounts,
including loans securitized in mortgage-backed securitization transactions.
Wells Fargo & Company is the holding company for Wells Fargo. Wells
Fargo & Company files reports with the Securities and Exchange Commission that
are required under the Securities Exchange Act of 1934. Such
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reports include information regarding the master servicer and may be obtained at
the website maintained by the Securities and Exchange Commission at
http://www.sec.gov.
The information presented herein concerning Wells Fargo has been
provided by Wells Fargo. Accordingly, Morgan Stanley Dean Witter Capital I Inc.
makes no representations or warranty as to the accuracy or completeness of such
information.
Master Servicer Compensation
The master servicer will be entitled to a Master Servicing Fee equal to
the Master 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 or Primary
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.
The amount of the related Master Servicing Fee will be reduced, to not
less than zero, on each Distribution Date by the amount, if any, of the
Compensating Interest Payment made by the master servicer on such Distribution
Date. Any Net Aggregate Prepayment Interest Shortfall will be allocated as
presented 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.
THE SPECIAL SERVICER AND PRIMARY SERVICER
Principal Capital Management, LLC, a Delaware limited liability company
and an affiliate of the seller, will initially be appointed as special servicer
and Primary Servicer of the mortgage loans. Its executive offices are located at
801 Grand Street, Des Moines, Iowa 50392, and its telephone number is (515)
248-3944. Principal Capital Management, LLC and its affiliates offer real estate
investment services in all aspects of public and private debt and equity real
estate investments, including (i) acquiring, developing, managing and
repositioning commercial real estate properties, (ii) originating, closing and
servicing portfolios of commercial mortgage loans and (iii) investing and
managing commercial mortgage-backed securities. As of June 30, 2000, Principal
Capital Management, LLC was managing a portfolio of over $20 billion in
commercial real estate mortgage and equity assets. Principal Capital Management,
LLC and its affiliates own and are in the business of acquiring assets similar
in type to the assets of the trust fund. Accordingly, the assets of the special
servicer and its affiliates may, depending upon the particular circumstances
including the nature and location of such assets, compete with the mortgaged
properties for tenants, purchasers, financing and so forth.
The information set forth herein concerning the special servicer has
been provided by it, and neither Morgan Stanley Dean Witter Capital I Inc. nor
the Underwriters make any representation or warranty as to the accuracy or
completeness of such information.
EVENTS OF DEFAULT
If an Event of Default described under the third, fourth, fifth or
ninth 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 Morgan Stanley Dean Witter
Capital I Inc. gives written notice to the master servicer that the master
servicer is terminated. If an event of default described under the first,
second, sixth, seventh or eighth 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, immediately upon the date which the trustee or Morgan
Stanley Dean Witter Capital I Inc. give written notice to the master servicer
that the master
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servicer is terminated. After any 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. Notwithstanding the
foregoing, and in accordance with the Pooling and Servicing Agreement, if the
Event of Default occurs primarily by reason of the occurrence of a default by
the Primary Servicer under the primary servicing agreement between the master
servicer and the Primary Servicer, then the initial master servicer will have
the right to require that the successor master servicer enter into a primary
servicing agreement with the initial master servicer, which would thereafter act
as successor Primary Servicer.
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, 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, subject to receipt of written confirmation from the Rating Agencies
that the appointment of the successor servicer will not cause a downgrade,
withdrawal or qualification of the then current ratings of the Certificates,
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 the Pooling and Servicing
Agreement. The trustee may not succeed the master servicer as servicer until and
unless it has satisfied the 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 sixth, seventh or eighth 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 fifth or ninth bullet of the definition thereof, and
prior to being replaced as described in the previous paragraph the terminated
master servicer provides the trustee with the appropriate "request for proposal"
material and the names of at least three parties from whom bids should be
solicited, the trustee will solicit good faith bids from such parties for the
right to service the mortgage loans in accordance with the Pooling and Servicing
Agreement. The trustee will have thirty 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
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. All expenses
incurred by the trustee in connection with such sale shall be paid by the master
servicer, and if not paid by the master servicer being terminated upon demand,
by the trust fund. 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 thirty 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 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.
Special Servicer Compensation
The special servicer will be entitled to receive:
o a Special Servicing Fee;
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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; otherwise
such fee is paid until maturity. 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, extension fees collected on Specially
Serviced Mortgage Loans and certain borrower paid fees collected on the mortgage
loans, 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 and will represent Expense Losses.
The Special Servicer Compensation will be payable in addition to the Master
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 Loans and 50%
of any other assumption fee. The special servicer will be entitled to approve
assumptions, modifications, amendments, waivers and consents 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
actions of the special servicer, subject to the limitations described in this
prospectus supplement.
Termination of Special Servicer
The trustee may terminate the special servicer upon a Special Servicer
Event of Default. However, if the special servicer is terminated solely due to a
Special Servicer Event of Default described in the fifth or ninth bullet of the
definition thereof, and prior to being replaced the terminated special servicer
provides the trustee with the appropriate request for proposal material and the
names of at least three parties from whom bids should be solicited, the trustee
will solicit good faith bids from such parties for the right to specially
service the mortgage loans in accordance with the Pooling and Servicing
Agreement. The trustee will have thirty days to sell the rights and obligations
of the special servicer under the Pooling and Servicing Agreement to a successor
servicer that meets the requirements of a special servicer under the Pooling and
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 special
servicer is required to consult with the Operating Adviser in connection with
such sale of servicing rights. All expenses incurred by the trustee in
connection with such sale shall be paid by the special servicer, and if not paid
by the special servicer being terminated upon demand, by the trust fund. The
termination of the special servicer, will be effective when such servicer has
succeeded the special servicer, as successor servicer and such successor
servicer has assumed the special 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 special
servicer is not appointed within thirty days, the special servicer, will be
replaced by the trustee as described in the previous paragraphs.
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
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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,
withdrawal or qualification 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 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, with or without cause, 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, withdrawal or
qualification in any rating then assigned to any class of certificates. The
Operating Adviser shall pay costs and expenses incurred in connection with the
removal and appointment of a special servicer (unless such removal is based on
certain events or circumstances specified in the Pooling and Servicing
Agreement).
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.
The Operating Adviser shall be responsible for its own expenses.
MORTGAGE LOAN MODIFICATIONS
Subject to any restrictions applicable to REMICs, and to limitations
imposed by the Pooling and Servicing Agreement, the master servicer may amend
any term that is not 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.
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 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;
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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 2 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 mortgage loan beyond a date which is
twenty (20) 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 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, any holder of certificates evidencing a majority
interest in the Controlling Class and the seller a right to purchase from the
trust, 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. 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, 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 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. The trustee is not permitted to purchase any defaulted mortgage
loan.
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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 limitations concerning
environmental matters and, in specified situations, the receipt of an opinion of
counsel relating to 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 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 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 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, 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.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion, when read in conjunction with the discussion
of "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 will be a
"tiered REMIC structure" described in the prospectus. See "Federal Income Tax
Consequences--REMICs--Tiered REMIC Structures" in the prospectus. Two separate
REMIC elections will be made with respect to designated portions of the trust.
Upon the issuance of the offered certificates, Cadwalader, Wickersham and Taft,
counsel to Morgan Stanley Dean Witter Capital I Inc., 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 and REMIC II will
qualify as a REMIC under the Code.
For federal income tax purposes, the Residual Certificates will
represent two separate classes of REMIC residual interests evidencing the sole
class of "residual interests" in each of REMIC I and REMIC II; and the REMIC
Regular Certificates will evidence the "regular interests" in, and will be
treated as debt instruments of, REMIC II. See "Federal Income Tax
Consequences--REMICs" in the prospectus. The offered certificates will be REMIC
Regular Certificates issued by REMIC II. See "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 II.
REMIC I 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) and 856(c)(5)(B) of the Code in the same
proportion that the assets REMIC 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. However, if 95% or more of the REMIC's assets are real estate assets
within the meaning of Section 856(c)(4)(A), then the entire offered certificates
shall be treated as real estate assets and all interest from the offered
certificates shall be treated as interest described in Section 856(c)(3)(B).
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, and those offered certificates
held by certain financial institutions will constitute "evidence of
indebtedness" within the meaning of Section 582(c)(1) of the Code.
The offered certificates will not be treated as assets described in
Section 7701(a)(19)(C)(xi) of the Code for domestic building and loan
associations. 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
"Federal Income Tax Consequences--REMICs" in the prospectus.
ORIGINAL ISSUE DISCOUNT AND PREMIUM
The offered certificates may be treated as having been issued with
original issue discount for 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 initially sold. The prepayment
assumption that will be used in
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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 Prepayment Premium
being required. For a description of CPR, see "Yield, Prepayment and Maturity
Considerations" in this prospectus supplement. However, Morgan Stanley Dean
Witter Capital I Inc. 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 "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 all of
the issues relevant to accrual of original issue discount on prepayable
securities such as the offered certificates.
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 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.
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.
Whether any holder of any 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.
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 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, when doing so is consistent with
maximizing the trust's net after-tax proceeds from an REO Property, to incur
taxes on the trust in connection with the operation of such REO Property. Any
such taxes imposed on the trust 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 and REMIC II will be the obligation of the
trustee, and not of the master servicer. See "Federal Income Tax Consequences
REMICs--Information Reporting and Backup Withholding" in the prospectus.
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For further information regarding the tax consequences of investing in
the offered certificates, see "Federal Income Tax Consequences--REMICs" and
"State Tax Considerations" in the prospectus.
LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion summarizes certain legal aspects of mortgage
loans secured by real property in California (approximately 24.6% of the initial
pool balance) which are general in nature. This summary does not purport to be
complete and is qualified in its entirety by reference to the applicable federal
and state laws governing the mortgage loans.
CALIFORNIA
Under California law a foreclosure may be accomplished either
judicially or non-judicially. Generally, no deficiency judgment is permitted
under California law following a nonjudicial sale under a deed of trust. Other
California statutes, except in certain cases involving environmentally impaired
real property, require the lender to attempt to satisfy the full debt through a
foreclosure against the property before bringing a personal action, if otherwise
permitted, against the borrower for recovery of the debt. California case law
has held that acts such as an offset of an unpledged account or the application
of rents from secured property prior to foreclosure, under some circumstances,
constitute violations of such statutes. Violations of such statutes may result
in the loss of some or all of the security under the loan. Finally, other
statutory provisions in California limit any deficiency judgment (if otherwise
permitted) against the borrower, and possibly any guarantor, following a
judicial sale to the excess to the outstanding debt over the greater (i) the
fair market value of the property at the time of the public sale or (ii) the
amount of the winning bid in the foreclosure. Borrowers also are allowed a
one-year period within which to redeem the property.
ERISA CONSIDERATIONS
ERISA and the Code impose 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 duties on persons who are fiduciaries of Plans
subject to ERISA and prohibits selected 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
Neither ERISA nor the Code defines the term "plan assets." However, the
U.S. Department of Labor ("DOL") has issued a final regulation (29 C.F.R.
Section 2510.3-101) concerning the definition of what constitutes the assets of
a Plan. The DOL 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 certain
purposes, including the prohibited transaction provisions of ERISA and Section
4975 of the Code, to be assets of the investing Plan unless certain exceptions
apply. Under the terms of the regulation, if the assets of the trust were deemed
to constitute Plan assets by reason of a Plan's investment in certificates, such
Plan asset would include an undivided interest in the mortgage loans and any
other assets of the trust. If the mortgage loans or other trust 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 assets.
Affiliates of Morgan Stanley Dean Witter Capital I, Inc., 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
fiscal agent, 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 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
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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 individual prohibited transaction
exemptions, 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.
The Exemptions set forth the following six general conditions which
must be satisfied for exemptive relief:
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;
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, S&P or Moody's;
o the trustee cannot be an affiliate of any member of the "Restricted
Group," which consists of the Underwriters, the depositor, the master
servicer, the special servicer, each primary servicer and any mortgagor
with respect to mortgage loans constituting more than 5% of the aggregate
unamortized principal balance of the mortgage loans as of the date of
initial issuance of such classes of certificates;
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 Morgan Stanley Dean Witter Capital I Inc. in
consideration of the assignment of the mortgage loans to the trust 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 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.
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Because the Class A Certificates are not subordinate to any other class
of certificates, the second general condition set forth above is satisfied with
respect to such certificates. It is a condition of the issuance of Class A
Certificates that they be rated "Aaa" by Moody's and "AAA" by S&P. A fiduciary
of a Plan contemplating purchasing any such class of certificates in the
secondary market must make its own determination that at the time of such
acquisition, any such class of certificates continues to satisfy the third
general condition set forth above. Morgan Stanley Dean Witter Capital I Inc.
expects that the fourth general condition set forth above will be satisfied with
respect to each of such classes of certificates. A fiduciary of a Plan
contemplating purchasing any such class of certificates must make its own
determination that the first, third, fifth and sixth general conditions set
forth above will be satisfied with respect to any such class of certificate.
The Class B and C Certificates do not satisfy the second condition
described above because they are subordinated to the Class A Certificates.
Before purchasing any Class A Certificates, a fiduciary of a Plan
should itself confirm (a) that such certificates constitute "certificates" for
purposes of the Exemptions and (b) that the specific and general conditions of
the Exemptions and the other requirements set forth in the Exemptions would be
satisfied. In addition to making its own determination as to the availability of
the exemptive relief provided in the Exemptions, the Plan fiduciary should
consider the availability of other prohibited transaction exemptions.
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 each class of certificates does not exceed 25%
of all of the certificates outstanding of that class 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.
Morgan Stanley Dean Witter Capital I Inc. 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.
Because the characteristics of the Class B and Class C 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 and Class C Certificate shall be
deemed to have represented and warranted to Morgan Stanley Dean Witter Capital I
Inc., the trustee, the fiscal agent 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.
On August 23, 2000, the DOL published a notice of a proposed amendment
("Amendment") to the Exemptions at 65 FR 51454. If adopted as currently
proposed, the Amendment would permit certain investment grade mortgage-backed
securities to be purchased by Plan investors if the conditions of the Amendment
have been met. If the Amendment is adopted by DOL, additional classes of
certificates may become eligible for purchase in the secondary market by Plans
subject to ERISA and the Code. Fiduciaries of prospective Plan investors should
consult with their legal counsel concerning the impact of the proposed Amendment
on their ability to purchase any of the certificates.
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INSURANCE COMPANY GENERAL ACCOUNTS
Based on the reasoning of the United States Supreme Court in John
Hancock Life Ins. Co. v. Harris Trust and Savings Bank, an insurance company's
general account may be deemed to include assets of the Plans investing in the
general account (e.g., through the purchase of an annuity contract), and the
insurance company might be treated as a Party in Interest with respect to a Plan
by virtue of such investment. Any investor that is an insurance company using
the assets of an insurance company general account should note that the Small
Business Job Protection Act of 1996 added Section 401(c) of ERISA relating to
the status of the assets of insurance company general accounts under ERISA and
Section 4975 of the Code. Pursuant to Section 401(c), the Department of Labor
issued final regulations effective January 5, 2000 with respect to insurance
policies issued on or before December 31, 1998 that are supported by an
insurer's general account. As a result of these regulations, assets of an
insurance company general account will not be treated as "plan assets" for
purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code to the extent such assets relate to contracts issued to employee
benefit plans on or before December 31, 1998 and the insurer satisfied various
conditions.
Section 401(c) also provides that until the date that is 18 months
after the 401(c) Regulations became final (January 5, 2000), no liability under
the fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code may result on the basis of a claim that the assets of
the general account of an insurance company constitute the "plan assets" of any
such plan, except (a) to prevent avoidance of the 401(c) Regulations, and (b)
actions brought by the Secretary of Labor relating to certain breaches of
fiduciary duties that also constitute breaches of state or federal criminal law.
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 July 5,
2001, which is the date 18 months after the date the 401(c) Regulations became
final.
Accordingly, any insurance company that acquires or holds any Class B
or Class C Certificate shall be deemed to have represented and warranted to
Morgan Stanley Dean Witter Capital I Inc., the trustee, the fiscal agent 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 Morgan
Stanley Dean Witter Capital I Inc., the trustee, the fiscal agent or the master
servicer to any obligation in addition to those undertaken in the Pooling and
Servicing Agreement, or (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 95-60, and the applicable conditions set
forth in 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.
A governmental plan as defined in Section 3(32) of ERISA is not subject
to Title I of the ERISA or Section 4975 of the Code. However, a governmental
plan may be subject to a federal, state or local law which is, to a material
extent, similar to the foregoing provisions of ERISA or the Code. A fiduciary of
a governmental plan should make its own determination as to the need for and the
availability of any exemptive relief under any similar law.
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LEGAL INVESTMENT
The Class A and Class B certificates will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended ("SMMEA"), so long as such certificates are rated in one of the
two highest rating categories by one or more Rating Agencies. The other Classes
of offered certificates will not constitute "mortgage related securities" for
purposes of SMMEA. Except as to the status of the Class A and Class B
certificates as "mortgage related securities," no representation is made as to
the proper characterization of the offered certificates for legal investment
purposes, financial regulatory purposes, or other purposes, or as to the ability
of particular investors to purchase the offered certificates of any Class under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the offered certificates.
Accordingly, all 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. See "Legal Investment" in the prospectus.
USE OF PROCEEDS
Morgan Stanley Dean Witter Capital I Inc. will apply the net proceeds
of the offering of the certificates towards the simultaneous purchase of the
mortgage loans from the seller and to the payment of expenses in connection with
the issuance of the certificates.
PLAN OF DISTRIBUTION
Morgan Stanley Dean Witter Capital I Inc. has entered into an
Underwriting Agreement with Morgan Stanley & Co., Incorporated, an affiliate of
Morgan Stanley Dean Witter Capital I Inc. and Goldman, Sachs & Co. Subject to
the terms and conditions set forth in the Underwriting Agreement, Morgan Stanley
Dean Witter Capital I Inc. has agreed to sell to each Underwriter, and each
Underwriter has agreed severally to purchase from Morgan Stanley Dean Witter
Capital I Inc. the respective aggregate Certificate Balance of each Class of
offered certificates presented below.
<TABLE>
<CAPTION>
Underwriters Class A-1 Class A-2 Class A-3 Class A-4 Class B Class C
------------ --------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Morgan $ $ $ $ $ $
Stanley &
Co.
Incorporated
Goldman, $ $ $ $ $ $
Sachs & Co. --------- ---------- ---------- ---------- ---------- ----------
Total.... $ $ $ $ $ $
</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 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 Morgan Stanley Dean Witter Capital I
Inc. from the sale of the offered certificates, before deducting expenses
payable by Morgan Stanley Dean Witter Capital I Inc., will be approximately
$[__________], plus accrued interest.
The Underwriters have advised Morgan Stanley Dean Witter Capital I Inc.
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 Underwriters 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
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discounts, concessions or commissions from the Underwriters and any purchasers
of such Classes of offered certificates for whom they may act as agent.
The offered certificates are offered by the Underwriters when, as and
if issued by Morgan Stanley Dean Witter Capital I Inc., 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 September [__], 2000, which is the [_______] 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.
Morgan Stanley Dean Witter Capital I Inc. 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.
LEGAL MATTERS
Legal matters will be passed upon for Principal Life Insurance Company
by Dechert, New York, New York. The legality of the offered certificates and the
material federal income tax consequences of investing in the offered
certificates will be passed upon for Morgan Stanley Dean Witter Capital I Inc.
by Cadwalader, Wickersham & Taft, New York, New York. Legal matters with respect
to the offered certificates will be passed upon for the Underwriters by
Cadwalader, Wickersham & Taft, New York, New York.
RATINGS
It is a condition of the issuance of the offered certificates that they
receive the following credit ratings from S&P and Moody's.
CLASS S&P MOODY'S
------------- ------- -----------
Class A-1............................. AAA Aaa
Class A-2............................. AAA Aaa
Class A-3............................. AAA Aaa
Class A-4............................. AAA Aaa
Class B............................... AA Aa2
Class C .............................. A A3
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 twenty-four (24) 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
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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 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 Morgan
Stanley Dean Witter Capital I Inc. to do so may be lower than the ratings
assigned thereto at the request of Morgan Stanley Dean Witter Capital I Inc.
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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 Master
Servicing Fee, the Primary 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.
"Appraisal Event" means not later than the earliest of the following:
o the date 120 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, an involuntary bankruptcy has occurred or a
receiver is appointed in respect of the related mortgaged property,
provided that such petition or appointment remains in effect;
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 from the original due date of such
Balloon Payment; 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 or in the
case of an REO Property, the related REO Mortgage Loan, less the
principal amount of any undrawn letter of credit that is then
securing such mortgage loan;
o to the extent not previously advanced by the master servicer,
the trustee or the fiscal agent, all accrued and unpaid interest
on the mortgage loan;
o all related unreimbursed Advances and interest on such Advances
at the Advance Rate; and
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o to the extent funds on deposit in any applicable Escrow Accounts
are not sufficient therefor, and to the extent not previously
advanced by the master servicer, the trustee or the fiscal
agent, 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,
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 plus the amount of any escrows held by or on behalf of the
trustee as security for the mortgage loan (less the estimated amount of
obligations anticipated to be payable in the next twelve months to which
such escrows relate).
"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, 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 (or, in the
case of mortgage loans that have their Due Dates
(inclusive of any grace periods) in the calendar month
of the Distribution Date but after the end of the
Collection Period for that Distribution Date, Scheduled
Payments collected in such calendar month but due on a
Due Date subsequent to that calendar month);
o Prepayment Premiums (which are separately distributable
on the certificates as described in this prospectus
supplement);
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, the Primary Servicer, the trustee and the
fiscal agent 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; and
o with respect to two (2) mortgage loans for which
interest is payable in advance and not in arrears,
payments collected in a Collection Period shall be part
of the "Available
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Distribution Amount" for the Distribution Date in the
calendar month following the calendar month in which
such Collection Period ends, except that the master
servicer will be entitled (but not obligated) to remit
principal prepayments thereon to the trustee for
inclusion in the "Available Distribution Amount" for
the Distribution Date immediately following the
Collection Period in which those principal prepayments
are received for the purpose of avoiding a Prepayment
Interest Shortfall in respect of the mortgage loan in
the next succeeding Collection Period;
(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 that provide for Scheduled
Payments based on amortization schedules significantly longer than their terms
to maturity and that are expected to have remaining principal balances equal to
or greater than 1% of the original principal balance of those mortgage loans 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 Structuring 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.
"Certificate Account" means one or more separate accounts established
and maintained by the master servicer, any Primary 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.
"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 Certificate Registrar.
"Certificate Owner" means a Person acquiring an interest in an offered
certificate.
"Certificate Registrar" means the 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.
"Class A Certificates" means the Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates and the Class A-4 Certificates.
"Clearstream Banking" means Clearstream Banking, societe anonyme.
"Closing Date" means September [__], 2000.
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"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" 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
Master Servicing Fee for the related Collection Period calculated in respect of
all the mortgage loans 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.
"Compensating Interest Payment" means any payment of Compensating
Interest.
"Constant" means, with respect to a mortgage loan, the percentage
calculated by dividing the annualized amount of debt service payable by the
Cut-off Date Balance of such mortgage loan.
"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 underlying the certificates.
"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
25% of the initial aggregate Certificate Balance of such Class as of the Closing
Date, the Controlling Class will be the next most subordinate Class of
certificates.
"CPR" - See "Constant Prepayment Rate" above.
"Cut-off Date" means September 1, 2000.
"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. For
purposes of those mortgage loans that have a due date on a date other than the
first of the month, we have assumed that monthly payments on such mortgage loans
are due on the first of the month for purposes of determining their Cut-off Date
Balances.
"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).
"Determination Date" means, with respect to any Distribution Date, the
earlier of (i) the 18th day of the month in which such Distribution Date occurs,
or, if such day is not a business day, the next preceding business day, and (ii)
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; and
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 23rd day of each month, or if any such
23rd 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 the final regulation, issued 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 exceptions apply (29 C.F.R. Section
2510.3-101).
"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.
"EPA" means the United States Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"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 by the master servicer to make a required deposit to the
Certificate Account which continues unremedied for one business day
following the date on which such deposit was first required to be made;
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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 written notice of such failure, requiring the same to be
remedied, shall have been given to the master servicer by Morgan Stanley
Dean Witter Capital I Inc. or the trustee; provided, however, that if the
master servicer certifies to the trustee and Morgan Stanley Dean Witter
Capital I Inc. that the master servicer is in good faith attempting to
remedy such failure, such cure period will be extended to 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 the date on which
notice of such breach, requiring the same to be remedied shall have been
given to the master servicer by Morgan Stanley Dean Witter Capital I Inc.
or the trustee, provided, however, that if the master servicer certifies
to the trustee and Morgan Stanley Dean Witter Capital I Inc. 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 master servicer is no longer on the approved list of commercial
mortgage loan master servicers maintained 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 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;
o the master servicer shall admit 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; or
o one or more ratings assigned to the certificates by Moody's have or will
be downgraded, withdrawn or qualified as a result of the master servicer
acting in its capacity as master servicer.
"Excess Liquidation Proceeds" the excess of (i) proceeds from the sale
or liquidation of a mortgage loan or related REO Property, net of expenses and
any related Advances and interest thereon over (ii) the amount that would have
been received if a prepayment in full had been made with respect to such
mortgage loan on the date such proceeds were received.
"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, the trustee or the fiscal agent
in respect of unreimbursed Advances;
o all Special Servicer Compensation payable to the special servicer from
amounts that are part of the trust;
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o other expenses of the trust, including, but not limited to, specified
reimbursements and indemnification payments to the trustee and certain
related persons, specified reimbursements and indemnification payments to
Morgan Stanley Dean Witter Capital I Inc., the master servicer, the
special servicer, the Primary Servicer and certain related persons,
specified taxes payable from the assets of the trust, the costs and
expenses of any tax audits with respect to the trust and 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; and
o any other expense of the trust not specifically included in the
calculation of Realized Loss for which there is no corresponding
collection from the borrower.
"FASIT" means a financial asset securitization investment trust.
"401(c) Regulations" means the final regulations issued by the DOL
under Section 401(c) clarifying the application of ERISA to Insurance Company
General Accounts of ERISA.
"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, material or waste 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.
"Implied DSCR" -See "Implied Debt Service Coverage Ratio."
"Implied Debt Service Coverage Ratio" means, in general, a ratio that
was calculated in the same manner as DSCR, except that the annualized amount of
debt service was calculated by multiplying the Cut-off Date Balance by a fixed
percentage of 9.0%.
"Initial Pool Balance" means the aggregate Cut-off Date Balance of
$597,985,115.
"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.
"Interested Party" means the special servicer, the master servicer,
Morgan Stanley Dean Witter Capital I Inc., the holder of any related junior
indebtedness, the Operating Adviser, a holder of 50% or more of the Controlling
Class, any independent contractor engaged by the master servicer or the special
servicer pursuant to the Pooling and Servicing Agreement or any person actually
know to a responsible officer of the trustee to be an affiliate of any of them.
"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.
"Lock-out Period" means the period ending on a date determined by the
related mortgage note during which voluntary principal prepayments are
prohibited.
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"Master Servicer Remittance Date" means in each month the business day
preceding the Distribution Date.
"Master Servicing Fee" means the monthly amount, based on the Master
Servicing Fee Rate, to which the master servicer is entitled in compensation for
servicing the mortgage loans.
"Master Servicing Fee Rate" means 0.02% per annum.
"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.
"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.
"Money Term" means, with respect to any mortgage loan, the stated
maturity date, mortgage rate, principal balance, amortization term or payment
frequency thereof or any provision thereof requiring the payment of a Prepayment
Premium (but does not include late fee or default interest provisions).
"Moody's" means Moody's Investors Service, Inc.
"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 agreement entered into
between Morgan Stanley Dean Witter Capital I Inc. and the seller.
"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.
"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
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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.
"Notional Amount" means the notional principal amount of the Class X
Certificates, which will be equal to the Certificate Balance of the Principal
Balance Certificates outstanding from time to time.
"NWAC Rate" - See "Weighted Average Net Mortgage Rate."
"OID" means original issue discount.
"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, and in specified cases to direct, the special servicer in
regard to specified actions.
"Operating Statement Analysis 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.
"P&I Advance" means the amount of any Scheduled Payments or Assumed
Scheduled Payment (net of the related Master Servicing Fees and Primary
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 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.
"Permitted Cure Period" means, for the purposes of any Material
Document Defect or Material Breach in respect of any mortgage loan, the 85-day
period immediately following the earlier of the discovery by the seller or
receipt by the seller of notice of such Material Document Defect or Material
Breach, as the case may be. 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 85-day period and such Document Defect or breach
would not cause the mortgage loan to be other than a "qualified mortgage", but
the seller is diligently attempting to effect such correction or cure, then the
applicable Permitted Cure Period will be extended for an additional 90 days.
"Plans" means (a) employee benefit plans as defined in Section 3(3) of
ERISA that are subject to Title I of ERISA, (b) plans as defined in Section 4975
of the Code that are subject to Section 4975 of the Code, and (c) entities whose
underlying assets include plan assets by reason of a Plan's investment in such
entities.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of September 1, 2000, among Morgan Stanley Dean Witter
Capital I Inc., as depositor, Wells Fargo Bank, National Association, as master
servicer, Principal Capital Management, LLC, as special servicer, LaSalle Bank
National Association, as trustee and certificate registrar and ABN AMRO Bank
N.V., as fiscal agent.
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"Prepayment Interest Excess" means, in the case of a mortgage loan
(other than a mortgage loan that provides for the payment of interest in advance
and not in arrears) 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
Master Servicing Fee and the Primary Servicing Fee or, if the related mortgage
loan is a Specially Serviced Mortgage Loan, the Special Servicing Fee and the
Trustee Fee. In case of a mortgage loan that provides for the payment of
interest in advance and not in arrears, a "Prepayment Interest Excess" means, if
(and only if) the master servicer remits a principal prepayment to the trustee
for inclusion in the Available Distribution Amount for the Distribution Date
immediately following the Collection Period in which the principal prepayment is
received, the amount of interest that was paid by the borrower in the Collection
Period prior to the one in which the principal prepayment is received and that
is attributable to the principal amount that is prepaid. Such a Prepayment
Interest Excess would be deemed to have occurred in respect of the Collection
Period in which the principal prepayment was received.
"Prepayment Interest Shortfall" means, for any Distribution Date and
with respect to any mortgage loan (other than a mortgage loan that provides for
the payment of interest in advance and not in arrears) as to which 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 Master
Servicing Fee, the Primary Servicing Fee, the Special Servicing Fee, if the
related mortgage loan is a Specially Serviced Mortgage Loan 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 that would have accrued at the Net
Mortgage Rate (less the Special Servicing Fee, if the related mortgage
loan is a Specially Serviced Mortgage Loan) 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.
In the case of a mortgage loan that provides for the payment of
interest in advance and not in arrears, a "Prepayment Interest Shortfall" means,
if (and only if) the master servicer does not remit a principal prepayment to
the trustee for inclusion in the Available Distribution Amount for the
Distribution Date immediately following the Collection Period in which the
principal prepayment is received interest for a full 30 day period on the
principal amount that was prepaid. Such a Prepayment Interest Shortfall would be
deemed to have occurred in respect of the Collection Period immediately
following the one in which the principal prepayment was received.
"Prepayment Premium" means, with respect to any Distribution Date, the
aggregate of all prepayment premiums, yield maintenance charges and prepayment
charges, if any, received during the related Collection Period in connection
with Principal Prepayments.
"Primary Servicer" means Principal Capital Management, LLC.
"Primary Servicing Agreement" means the primary servicing agreement
between the master servicer and the Primary Servicer, dated as of September 1,
2000.
"Primary Servicing Fee" means the monthly amount, based on the Primary
Servicing Fee Rate, to which the Primary Servicer is entitled in compensation
for servicing the mortgage loans.
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<PAGE>
"Primary Servicing Fee Rate" means an amount per annum set forth in the
Pooling and Servicing Agreement, which is payable each month with respect to a
Mortgage Loan in connection with the Primary Servicing Fee.
"Principal Balance Certificates" means, upon initial issuance, the
Class A-1, Class A-2, Class A-3, Class A-4, Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class K, Class L and Class M 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 (or (1) in the case of mortgage loans that have their Due Dates
(inclusive of any grace periods) in the calendar month of the
Distribution Date but after the end of the Collection Period for that
Distribution Date, the Scheduled Payments (other than the principal
portion of Balloon Payments) and any Assumed Scheduled Payments due or
deemed due, as the case may be, for such Due Dates occurring in that
calendar month and (2) in the case of the mortgage loans that provide for
the payment of interest in advance and not in arrears, the Scheduled
Payments (other than the principal portion of Balloon Payments) and any
Assumed Scheduled Payments due or deemed due, as the case may be, for
their Due Dates occurring during the Collection Period related to the
immediately preceding Distribution Date); and
o all payments (including Principal Prepayments and the principal portion
of Balloon Payments) and other collections (including Liquidation
Proceeds (other than the portion thereof, if any, constituting Excess
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 Assumed Scheduled
Payment deemed due, in respect of the related Mortgage Loan on a Due Date
occurring during or prior to the related Collection Period (or (1) in the
case of mortgage loans that have their Due Dates (inclusive of any grace
periods) in the calendar month of the Distribution Date but after the end
of the Collection Period for that Distribution Date, due or deemed due,
as the case may be, for such Due Date occurring in that calendar month
and (2) in the case of mortgage loans that provide for the payment of
interest in advance, due or deemed due on a Due Date occurring prior to
(but not during) the related Collection Period) and not previously
recovered, exclusive, however, in the case of mortgage loans that provide
for the payment of interest in advance and not arrears, of any Principal
Prepayments received during the related Collection Period that the master
servicer does not remit for inclusion in the Available Distribution
Amount for such Distribution.
"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.
"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 Due Date in the Collection Period (or
in the case of mortgage loans with Due Dates (inclusive of grace periods) in the
calendar month of the Distribution Date, but after the end of the Collection
Period for such Distribution Date, in the month in which such Collection Period
terminates) in which the purchase occurs and the amount of any expenses related
to such mortgage loan or REO Property (including any Servicing Advances, Advance
interest related to such mortgage loan and any Special Servicing Fees and
Liquidation Fees) that are reimbursable to the master servicer, the special
servicer, the trustee or the fiscal agent, plus if such mortgage loan is being
repurchased or substituted for by the seller pursuant to the Mortgage Loan
Purchase Agreement, all expenses reasonably incurred or to be incurred by the
primary servicer, the
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master servicer, the special servicer, Morgan Stanley Dean Witter Capital I Inc.
or the trustee in respect of the Material Breach or Material Document Defect
giving rise to the repurchase or substitution obligation (and that are not
otherwise included above).
"Qualifying Substitute Mortgage Loan" means a mortgage loan having the
characteristics required in the Pooling and Servicing Agreement and otherwise
satisfying the conditions set forth therein and for which the Rating Agencies
have confirmed in writing that such mortgage loan would not result in a
withdrawal, downgrade or qualification of the then current ratings on any of the
certificates.
"Rated Final Distribution Date" means the first Distribution Date that
follows by at least twenty-four 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 Moody's and S&P.
"Realized Losses" means losses arising from the inability of the master
servicer 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" means a Specially Serviced Mortgage Loan
for which (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 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" means a real estate mortgage investment conduit within the
meaning of Section 860D of the Code.
"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
specified in the Pooling and Servicing Agreement.
"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.
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"Reserve Account" means an account in the name of the trustee for the
deposit of any Excess Liquidation Proceeds.
"Residual Certificates" means the Class R-I Certificates and the Class
R-II Certificates.
"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 (or in the case of mortgage loans
that have Due Dates (inclusive of grace periods) in the calendar month of
the Distribution Date, but after the end of the Collection Period for
that Distribution Date, during any preceding calendar month), other than
any Scheduled Payments due in any subsequent Collection Period (or, in
the case of mortgage loans that have their Due Dates (inclusive of any
grace periods) in the calendar month of the Distribution Date but after
the end of the Collection Period for that Distribution Date, any
Scheduled Payments due after that calendar month) and, in the case of
mortgage loans that provide for the payment of interest in advance and
not in arrears, any Scheduled Payment due during the immediately
preceding Collection Period; and
o the principal portion of any Realized Loss incurred in respect of such
mortgage loan during any preceding Collection Period.
"Senior Certificates" means the Class A 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 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 similar to the mortgage loans, giving due consideration to the
maximization of the net present value of the mortgage loans, but without
regard to:
i. any other relationship that the master servicer, the
special servicer, the Primary Servicer, Morgan Stanley
Dean Witter Capital I Inc. or the trustee, or any
affiliate of any of them may have with the related
borrower or any affiliate of the borrower, Morgan Stanley
Dean Witter Capital I Inc. or the seller;
ii. the ownership of any certificate by the master servicer,
the Primary Servicer, the special servicer or any
affiliate of any of them;
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iii. the master servicer's, the trustee's or the fiscal agent's
obligation to make Advances or to incur servicing expenses
with respect to the mortgage loan;
iv. the master servicer's, the special servicer's or the
Primary Servicer's right to receive compensation for its
services or with respect to any particular transaction;
v. the ownership or servicing or management for others by the
master servicer, the special servicer or the Primary
Servicer of any other mortgage loans or property;
vi. any obligation of the master servicer to pay any indemnity
with respect to any repurchase obligation; or
vii. the ownership of any junior indebtedness by the master
servicer or special servicer or any Affiliate with respect
to the mortgaged property securing any mortgage loan.
"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 60th day 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 30 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 judgment 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; or
o any mortgage loan as to which, in the judgment of the master servicer,
(a) a payment default is imminent or is likely to occur within 60 days,
or (b) any other default is imminent or is likely to occur within 60 days
and such default, in the judgment of the master servicer is reasonably
likely to materially and adversely affect the interests of the
Certificateholders.
"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:
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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 by the special servicer to deposit into any account any
amount required to be so deposited or remitted under the terms of the
Pooling and Servicing Agreement which failure continues unremedied for
one business day following the date on which such deposit or remittance
was first required to be made;
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 30 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
Morgan Stanley Dean Witter Capital I Inc. or the trustee; provided,
however, that to the extent that the special servicer certifies to the
trustee and Morgan Stanley Dean Witter Capital I Inc. 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 to the extent necessary to
permit the special servicer to cure such failure, provided that such cure
period may not exceed 90 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 servicer by Morgan Stanley
Dean Witter Capital I Inc. 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 to the
extent necessary to permit the special servicer to cure such failure,
provided that such cure period may not exceed 90 days;
o the special servicer is no longer on the approved list of commercial
mortgage loan special servicers maintained 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 or an affiliate thereof and such decree or order shall
have remained in force undischarged or unstayed for a period of 60 days;
o the special servicer or an affiliate thereof 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;
o the special servicer or an affiliate thereof shall admit 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; or
o one or more ratings assigned to the certificates by Moody's have or will
be downgraded, withdrawn or qualified as a result of the special
servicer, acting in its capacity as special servicer.
"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.
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"Special Servicing Fee" means an amount (subject to reduction in
respect of Compensating Interest) 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 Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Structuring Assumptions" means the following assumptions:
o the initial Certificate Balances and initial Pass-Through Rates of the
Certificates are as presented herein;
o the settlement date for the sale of the certificates is September 26,
2000;
o distributions on the certificates are made on the 23rd day of each month,
commencing in October 2000;
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 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 Prepayment Premium,
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
seller and no optional termination of the trust occurs; and
o for those mortgage loans with respect to which the borrower has an
extension option, the borrower will not exercise such option. See
Appendix II in this prospectus supplement for those mortgage loans which
have extension options.
"Subordinate Certificates" means the Class B, Class C, Class D, Class
E, Class F, Class G, Class H, Class J, Class K, Class L and Class M
Certificates.
"Sub-Servicer" means an entity with whom either the master servicer,
the Primary 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 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.
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"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 September [___],
2000, entered into by Morgan Stanley Dean Witter Capital I Inc., Morgan Stanley
& Co. Incorporated, an affiliate of Morgan Stanley Dean Witter Capital I Inc.
and Goldman, Sachs & Co.
"Underwriters" means Morgan Stanley & Co. Incorporated and Goldman,
Sachs & Co.
"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 plus one month's
interest thereon at the applicable Pass-Through Rate other than unpaid interest
relating to Net Aggregate Prepayment Interest Shortfalls.
"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, 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.
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APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED DATE LTV BALLOON
LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CUT-OFF DATE BALANCE ($)
1,000,001-2,000,000 1 1,998,635 0.33 8.100 140 1.90 2.80 30.5 0.3
2,000,001-3,000,000 25 64,523,137 10.79 7.920 159 1.57 2.04 49.8 6.3
3,000,001-4,000,000 21 74,212,769 12.41 7.989 162 1.33 1.73 57.5 8.8
4,000,001-5,000,000 18 79,087,921 13.23 7.696 151 1.51 1.78 57.5 17.2
5,000,001-6,000,000 8 42,964,212 7.18 7.919 173 1.26 1.54 62.7 10.9
6,000,001-7,000,000 5 31,898,243 5.33 8.069 115 1.37 1.57 60.8 40.3
7,000,001-8,000,000 8 60,633,388 10.14 7.937 191 1.38 1.54 65.3 20.6
8,000,001-9,000,000 2 17,011,257 2.84 9.161 121 1.43 1.99 52.4 30.4
9,000,001-10,000,000 2 19,019,803 3.18 7.740 187 1.34 1.60 60.2 8.1
10,000,001-15,000,000 5 58,396,700 9.77 7.730 123 1.40 1.54 63.7 33.7
15,000,001-20,000,000 3 50,289,936 8.41 8.089 175 1.72 2.03 51.1 16.4
20,000,001-25,000,000 3 67,449,115 11.28 7.553 133 1.62 1.65 58.8 40.0
25,000,001>= 1 30,500,000 5.10 7.190 75 2.22 1.78 45.7 43.2
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: $1,998,635
Max: $30,500,000
Average: $5,862,599
I-1
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED DATE LTV BALLOON
STATE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California 26 147,287,221 24.63 7.727 161 1.52 1.77 57.4 19.1
Northern California 17 95,004,675 15.89 7.696 155 1.68 1.96 52.2 17.8
Southern California 9 52,282,546 8.74 7.783 171 1.22 1.43 66.9 21.6
Virginia 6 54,293,690 9.08 8.044 133 1.73 2.06 44.4 18.6
New Jersey 9 51,840,182 8.67 8.237 146 1.40 1.69 59.3 29.7
Florida 9 45,850,005 7.67 7.788 171 1.33 1.61 62.2 9.4
Texas 9 45,128,538 7.55 8.201 186 1.30 1.58 62.1 11.9
Ohio 4 36,150,118 6.05 8.149 150 1.31 1.63 62.8 22.7
Georgia 9 31,537,703 5.27 8.026 179 1.34 1.66 62.1 8.0
Kansas 1 30,500,000 5.10 7.190 75 2.22 1.78 45.7 43.2
Colorado 1 23,662,833 3.96 6.870 104 1.49 1.33 70.6 61.4
Washington 6 22,629,089 3.78 7.740 132 1.44 2.01 46.3 6.4
North Carolina 5 20,713,732 3.46 7.928 171 1.42 1.69 58.5 14.1
New York 2 17,311,910 2.90 7.663 79 1.74 1.57 60.5 53.7
Maryland 3 14,555,259 2.43 9.195 149 1.61 2.45 40.1 0.2
Connecticut 2 11,630,896 1.95 7.369 202 1.53 1.72 57.1 12.8
Minnesota 1 7,945,688 1.33 7.170 110 1.42 1.38 76.4 61.3
Massachusetts 1 7,643,889 1.28 7.500 215 1.76 1.68 72.8 44.0
Oregon 2 6,954,616 1.16 7.979 162 1.24 1.64 55.0 10.9
Iowa 1 5,457,213 0.91 7.750 189 1.13 1.38 70.4 0.6
Pennsylvania 1 4,990,250 0.83 8.200 80 1.40 1.71 60.1 45.4
Missouri 1 3,913,893 0.65 9.000 139 1.13 1.75 60.2 0.7
Tennessee 1 3,117,287 0.52 7.000 227 1.27 1.35 68.1 0.5
Arizona 1 2,518,654 0.42 6.800 165 2.20 2.74 32.7 0.3
Indiana 1 2,352,449 0.39 8.625 159 1.20 1.45 67.2 30.1
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
I-2
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE AVERAGE AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED CUT-OFF BALLOON
PROPERTY TYPE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retail
Anchored 36 232,619,336 38.90 7.994 176 1.40 1.69 61.6 15.6
Single Tenant 9 36,877,129 6.17 8.047 190 1.30 1.55 62.8 9.8
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 45 269,496,465 45.07 8.001 178 1.39 1.67 61.8 14.8
Office
Suburban 19 149,415,566 24.99 7.712 111 1.80 1.94 46.8 29.4
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 19 149,415,566 24.99 7.712 111 1.80 1.94 46.8 29.4
Industrial
Warehouse 31 142,545,496 23.84 7.787 149 1.34 1.62 60.6 22.9
Flex Industrial 3 11,273,778 1.89 7.475 132 2.08 2.45 48.6 29.3
Light Industrial 2 7,787,527 1.30 7.987 184 1.18 1.49 65.5 0.7
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 36 161,606,800 27.03 7.775 150 1.39 1.67 60.0 22.2
Other (Leased Fee) 2 17,466,284 2.92 7.586 82 1.82 1.66 58.3 53.2
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 2 17,466,284 2.92 7.586 82 1.82 1.66 58.3 53.2
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
I-3
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED DATE LTV BALLOON
MORTGAGE RATE (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.501-7.000 4 34,325,462 5.74 6.894 136 1.49 1.44 67.6 42.5
7.001-7.500 24 158,565,706 26.52 7.299 139 1.73 1.77 56.2 31.5
7.501-8.000 36 217,065,543 36.30 7.818 160 1.48 1.74 56.7 14.8
8.001-8.500 24 126,961,794 21.23 8.286 149 1.34 1.71 57.7 18.9
8.501-9.000 10 41,562,686 6.95 8.670 182 1.27 1.54 64.9 14.5
9.001-9.500 1 3,253,507 0.54 9.375 103 1.95 3.68 26.7 0.4
9.501-10.000 2 10,149,739 1.70 9.975 129 1.55 2.55 36.8 4.0
10.001-10.500 1 6,100,679 1.02 10.250 103 1.20 1.83 56.0 30.2
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: 6.800%
Max: 10.250%
Weighted Average Coupon: 7.856%
I-4
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CONSTANTS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE AVERAGE AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED CUT-OFF BALLOON
CONSTANT (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7.001 to 7.500 1 30,500,000 5.10 7.190 75 2.22 1.78 45.7 43.2
7.501 to 8.000 2 38,662,833 6.47 7.153 90 1.61 1.40 67.2 61.6
8.501 to 9.000 8 51,325,860 8.58 7.255 122 1.40 1.36 73.2 56.9
9.001 to 9.500 2 17,111,652 2.86 7.609 243 1.32 1.38 68.3 8.9
9.501 to 10.000 14 103,902,344 17.38 7.863 153 1.51 1.63 58.7 28.3
10.001 to 10.500 14 90,956,144 15.21 7.971 178 1.60 1.83 57.0 18.1
10.501 to 11.000 14 61,604,416 10.30 7.816 194 1.45 1.74 57.6 3.1
11.001 to 11.500 9 42,482,506 7.10 7.922 168 1.55 1.94 55.8 8.3
11.501 to 12.000 12 54,964,199 9.19 7.991 161 1.43 1.86 53.1 6.2
12.001 to 12.500 6 25,536,116 4.27 8.075 160 1.43 1.93 54.2 1.2
13.001 to 13.500 5 20,358,877 3.40 8.169 111 1.19 1.75 54.4 18.2
13.501 to 14.000 7 29,145,369 4.87 8.818 127 1.18 1.81 53.4 8.1
14.001 to 14.500 4 13,117,400 2.19 7.863 121 1.16 1.87 46.5 0.6
14.501 to 15.000 2 6,970,582 1.17 7.990 119 1.16 1.88 46.0 0.6
15.001 to 15.500 1 8,093,312 1.35 10.000 133 1.63 2.72 32.7 0.0
17.001 to 17.500 1 3,253,507 0.54 9.375 103 1.95 3.68 26.7 0.4
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: 7.190%
Max: 17.003%
Weighted Average 10.548%
I-5
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
SEASONING
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED DATE LTV BALLOON
SEASONING (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 12 2 13,105,024 2.19 8.336 130 1.21 1.38 69.0 39.7
13 to 24 16 98,085,710 16.40 7.181 134 1.45 1.46 67.3 43.7
25 to 36 14 118,477,322 19.81 7.710 170 1.56 1.72 60.2 23.0
37 to 48 31 191,053,646 31.95 7.876 145 1.64 1.83 52.0 18.1
49 to 60 14 67,593,764 11.30 8.024 157 1.28 1.58 62.2 18.5
61 to 84 19 82,083,088 13.73 8.080 162 1.46 1.90 52.1 5.3
85 to 120 2 12,007,206 2.01 9.674 135 1.47 2.40 41.7 0.2
121 to 180 4 15,579,357 2.61 9.239 119 1.34 2.14 52.7 14.7
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: 9
Max: 144
Weighted Average: 45
I-6
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE CUT-OFF AVERAGE
ORIGINAL TERM TO STATED MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED DATE LTV BALLOON
MATURITY (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
61 to 120 18 158,083,884 26.44 7.539 89 1.58 1.53 60.6 50.7
121 to 180 26 131,147,524 21.93 7.890 120 1.48 1.83 52.9 23.9
181 to 240 47 237,353,354 39.69 7.876 187 1.52 1.84 56.9 6.9
241 to 300 11 71,400,353 11.94 8.425 220 1.35 1.66 60.9 1.5
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: 105
Max: 300
Weighted Average: 195
I-7
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE AVERAGE AVERAGE
REMAINING TERM MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED CUT-OFF BALLOON
TO STATED MATURITY (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
61 to 120 31 235,418,834 39.37 7.689 94 1.60 1.67 57.1 44.3
121 to 180 34 144,801,599 24.21 8.139 150 1.39 1.89 53.5 8.4
181 to 240 30 177,691,306 29.72 7.755 202 1.53 1.77 58.5 6.9
241 to 300 7 40,073,376 6.70 8.258 259 1.28 1.41 69.4 0.6
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: 68
Max: 274
Weighted Average: 151
I-8
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL AMORTIZATION TERMS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE AVERAGE AVERAGE
ORIGINAL AMORTIZATION MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED CUT-OFF BALLOON
TERM (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALLOON LOANS
Interest Only 1 15,000,000 2.51 7.600 69 1.81 1.52 61.9 61.9
121 to 180 1 10,992,190 1.84 8.210 85 1.06 1.55 61.4 33.3
181 to 240 9 34,318,559 5.74 8.021 107 1.40 1.70 55.3 32.2
241 to 300 23 170,105,030 28.45 7.869 130 1.46 1.58 62.5 40.2
301 to 360 4 69,106,772 11.56 7.278 101 1.83 1.58 58.8 50.8
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 38 299,522,551 50.09 7.749 116 1.54 1.59 60.7 42.6
FULLY AMORTIZING LOANS
121 to 180 17 55,481,585 9.28 7.962 135 1.29 1.94 48.1 0.6
181 to 240 37 175,441,553 29.34 7.774 187 1.57 1.95 53.6 0.5
241 to 300 10 67,539,426 11.29 8.451 222 1.35 1.67 60.8 0.5
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 64 298,462,564 49.91 7.962 185 1.47 1.89 54.2 0.5
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: 180
Max: 360
Weighted Average: 237
I-9
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING AMORTIZATION TERMS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE AVERAGE AVERAGE
REMAINING AMORTIZATION MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED CUT-OFF BALLOON
TERM (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Only 1 15,000,000 2.51 7.600 69 1.81 1.52 61.9 61.9
61 to 120 4 13,262,265 2.22 8.259 115 1.35 2.32 41.3 0.6
121 to 180 33 139,604,571 23.35 8.210 142 1.37 1.94 51.2 5.9
181 to 240 40 192,515,533 32.19 7.783 175 1.55 1.83 55.3 10.2
241 to 360 24 237,602,747 39.73 7.700 143 1.53 1.52 63.5 38.6
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: 103
Max: 360
Weighted Average: 225
I-10
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE CUT-OFF AVERAGE
DEBT SERVICE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED DATE LTV BALLOON
COVERAGE RATIO (X) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.01 to 1.15 11 48,371,691 8.09 8.136 141 1.10 1.53 63.3 10.3
1.16 to 1.25 28 148,006,568 24.75 8.016 154 1.21 1.48 65.9 22.7
1.26 to 1.35 20 102,748,665 17.18 7.924 193 1.28 1.49 64.4 13.5
1.36 to 1.50 15 106,799,785 17.86 7.759 131 1.43 1.57 60.9 35.7
1.51 to 1.75 9 52,564,067 8.79 8.058 174 1.62 2.11 46.3 1.5
1.76 to 2.00 11 51,168,204 8.56 7.598 128 1.84 2.03 51.6 32.6
2.01 or greater 8 88,326,136 14.77 7.498 125 2.30 2.37 37.9 23.6
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: 1.02x
Max: 4.05x
Weighted Average: 1.50x
I-11
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
IMPLIED DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE AVERAGE AVERAGE
IMPLIED DEBT SERVICE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED CUT-OFF BALLOON
COVERAGE RATIO (X) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.16 to 1.25 5 33,066,859 5.53 7.322 146 1.22 1.21 77.3 47.8
1.26 to 1.35 6 66,954,096 11.20 7.549 151 1.34 1.33 71.3 43.5
1.36 to 1.50 25 136,136,256 22.77 7.977 182 1.25 1.43 67.4 17.8
1.51 to 1.75 24 123,847,832 20.71 7.940 134 1.37 1.61 60.3 25.3
1.76 to 2.00 22 121,333,744 20.29 7.916 131 1.59 1.84 49.4 15.9
2.01 or greater 20 116,646,329 19.51 7.889 153 2.02 2.51 37.7 7.8
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5X 21.6%
====================================================================================================================================
</TABLE>
Min: 1.18x
Max: 5.12x
Non-Zero Weighted Average: 1.74x
I-12
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED WEIGHTED WEIGHTED
CURRENT NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE AVERAGE AVERAGE
LOAN-TO-VALUE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED CUT-OFF BALLOON
RATIO (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) DATE LTV (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.1 to 20.0 1 2,509,337 0.42 8.375 192 4.05 5.12 18.6 0.2
20.1 to 30.0 2 5,551,887 0.93 8.417 125 2.24 3.59 25.9 0.3
30.1 to 40.0 9 68,184,915 11.40 7.918 145 2.12 2.55 34.4 11.2
40.1 to 50.0 20 111,906,258 18.71 7.605 132 1.72 1.94 46.3 15.5
50.1 to 60.0 24 106,499,981 17.81 8.197 154 1.34 1.73 54.8 11.0
60.1 to 70.0 27 148,320,924 24.80 7.964 154 1.31 1.50 64.0 22.3
70.1 to 80.0 18 150,982,436 25.25 7.635 159 1.31 1.35 72.8 39.2
80.1 to 90.0 1 4,029,378 0.67 7.900 249 1.17 1.27 80.6 0.7
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: 18.6%
Max: 80.6%
Non-Zero Weighted Average: 57.5%
I-13
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
PERCENT BY WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE STATED WEIGHTED AVERAGE CUT-OFF AVERAGE
BALLOON LOAN-TO-VALUE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE IMPLIED DATE LTV BALLOON
RATIO (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) DSCR (X) (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.0 1 8,093,312 1.35 10.000 133 1.63 2.72 32.7 0.0
0.1 to 10.0 65 297,197,199 49.70 7.909 187 1.46 1.86 55.1 0.7
10.1 to 20.0 4 19,019,665 3.18 7.802 190 1.42 1.61 59.4 17.0
20.1 to 30.0 5 54,443,957 9.10 7.944 145 1.74 1.90 51.1 27.8
30.1 to 40.0 9 44,703,117 7.48 8.327 101 1.28 1.65 56.7 33.2
40.1 to 50.0 6 68,428,435 11.44 7.626 107 1.78 1.65 57.1 44.8
50.1 to 60.0 6 37,311,924 6.24 8.002 91 1.34 1.42 64.8 54.7
60.1 to 70.0 6 68,787,505 11.50 7.161 97 1.47 1.33 72.0 62.2
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 102 $597,985,115 100.00% 7.856% 151 1.50X 1.74X 57.5% 21.6%
====================================================================================================================================
</TABLE>
Min: 0.0%
Max: 64.1%
Weighted Average: 21.6%
I-14
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PREPAYMENT RESTRICTION ANALYSIS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTION SEPT 00 SEPT 01 SEPT 02 SEPT 03 SEPT 04 SEPT 05
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Locked Out/Defeasance 11.36% 9.50% 8.66% 8.75% 3.81% 3.82%
Yield Maintenance 88.64% 90.50% 91.34% 91.25% 96.19% 96.18%
Penalty Points
5.00% and greater 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
3.00% to 3.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2.00% to 2.99% 0.00% 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% 0.00%
Open 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
------------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
====================================================================================================================================
Mortgage Pool Balance Outstanding
(in millions) 597,985,115.14 581,280,737.04 562,996,122.08 543,096,011.17 521,548,562.67 498,216,401.86
% of Initial Pool Balance 100.00% 97.21% 94.15 90.82% 87.22% 83.32%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTION SEPT 06 SEPT 07 SEPT 08 SEPT 09 SEPT 10
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out/Defeasance 3.99% 1.07% 1.09% 1.49% 1.62%
Yield Maintenance 96.01% 98.93% 98.91% 98.51% 98.38%
Penalty Points
5.00% and greater 0.00% 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.00% 0.00% 0.00% 0.00% 0.00%
3.00% to 3.99% 0.00% 0.00% 0.00% 0.00% 0.00%
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% 0.00% 0.00%
-----------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00%
===================================================================================================================================
Mortgage Pool Balance Outstanding (in millions) 453,547,318.73 378,479,466.92 342,697,900.04 228,159,335.30 187,864,249.88
% of Initial Pool Balance 75.85% 63.29% 57.31% 38.15% 31.42%
</TABLE>
Notes: (1) For one of the Mortgage Loans (2.2% of the Cut-Off Date 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-15
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
RELATED AGGREGATE CUT-OFF
LOAN BORROWER CUT-OFF DATE BALANCE/
NO. PROPERTY NAME(1) LOAN GROUPS DATE BALANCE(2) SQUARE FOOT (3)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Lighton Plaza Tower, I, & II $30,500,000 $64.10
2 Woodmen Retail $23,662,833 $83.19
3 7799 Leesburg Pike 12 $23,601,958 $66.67
4 Liberty Square Shopping Center $20,184,323 $58.28
5 1860-2159 Landings Drive $18,675,046 $78.29
6 3555 Monte Villa Parkway (A) 7, 8, 9, 10 $5,542,604 $44.81
7 14520 NE 87th Street (A) 6, 8, 9, 10 $3,876,893 $44.81
8 26755 SW 95th Avenue (A) 6, 7, 9, 10 $3,093,689 $44.81
9 14500 NE 87th Street (A) 6, 7, 8, 10 $3,038,177 $44.81
10 14560 NE 87th Street (A) 6, 7, 8, 9 $2,335,814 $44.81
11 Sun Center Phase I $16,410,896 $75.81
12 North Point Village Center 3 $15,203,993 $115.62
13 461 Fifth Avenue $15,000,000 $74.57
14 Bird Ludlam Shopping Center $11,974,433 $62.28
15 11618 Mulberry Avenue $10,992,190 $21.55
16 2425 South Watney Way $10,303,525 $29.56
17 311-325 Gellert Boulevard $10,126,552 $142.33
18 Hilltop Plaza $9,855,994 $56.64
19 Stop & Shop $9,163,808 $136.72
20 Yorktown Plaza $8,917,945 $45.32
21 Aspen Hill Shopping Center $8,093,312 $47.52
22 5560 Katella Avenue 29 $7,947,843 $36.97
23 4600, 4650, & 4680 Olson Memorial Highway $7,945,688 $33.70
24 10900 Research Boulevard 88, 40 $7,881,052 $106.67
25 Stop & Shop $7,643,889 $40.23
26 364 Ferguson Drive $7,464,080 $59.71
27 Sherwin Williams $7,368,502 $16.30
28 12000 Biscayne Building $7,300,049 $48.92
29 6100 Gateway Drive & 10700 Valley View Street 22 $7,082,284 $54.48
30 Don Julian $6,956,551 $30.84
31 47 Brunswick Avenue $6,461,697 $24.37
32 ASC Building $6,297,353 $75.60
33 189 Berdan Avenue $6,100,679 $78.46
34 42701-42735 Christy Street $6,081,962 $24.00
35 Wheelersburg Lowes $5,619,323 $43.06
36 Burlington Lowes $5,457,213 $41.45
37 Lichtin Office $5,394,847 $78.02
38 Kroger Center $5,382,516 $50.87
39 14000 Guadalupe Mines 46, 49, 57, 84 $5,338,761 $96.86
40 Randall's Austin 24, 88 $5,202,258 $64.27
41 Hollybrook Plaza $5,026,689 $72.31
42 110-116,119-123,146-152,156-162,166-170 Keystone Drive $4,990,250 $23.28
43 8945 Dice Road $4,918,908 $37.37
44 Oglethorpe Crossing 68 $4,855,013 $83.12
45 Eisenhower Plaza $4,716,078 $56.50
46 6580 Via Del Oro 39, 49, 57, 84 $4,563,486 $63.56
47 Harris Teeter $4,550,519 $69.63
48 Cobb Parkway 60 $4,467,746 $49.73
49 532 Race Street 39, 46, 57, 84 $4,319,914 $105.90
50 16040 Stephens Street $4,278,050 $23.90
51 I-295 Industrial Center $4,274,640 $17.45
52 Great Eastern Shopping Center $4,263,903 $28.31
53 Holiday Publix $4,231,171 $63.02
54 20559, 20611 & 20621 Prairie Street $4,187,079 $42.47
55 Waters And Armenia $4,168,744 $42.19
56 10116 NE 8th Street $4,122,726 $47.24
57 490 Race Street 39, 46, 49, 84 $4,100,034 $61.89
58 Oregon Business Center 94 $4,050,281 $20.71
59 Winn Dixie & Video $4,029,378 $72.16
60 Publix @ Mt. Zion 48 $3,938,503 $51.28
61 Blue Springs HyVee $3,913,893 $49.81
62 Bombay Co. Warehouse 79 $3,913,233 $15.65
63 5452 Betsy Ross Drive $3,875,980 $70.73
64 Milstead Crossing Shopping Center $3,862,264 $66.14
65 Circuit City Stores $3,860,927 $93.96
66 2076-2098 Nickerson Boulevard $3,736,074 $53.03
67 2401 West Valley Highway Warehouse $3,712,876 $23.06
68 6149 S. Norcross Tucker Road 44 $3,643,774 $60.30
69 9701 Metric Boulevard $3,600,447 $37.04
70 Iron Mountain $3,586,980 $37.52
71 Indian Creek Winn Dixie $3,343,816 $52.53
72 1805-1809 Lower Road $3,339,464 $33.39
73 Three Meadow Plaza $3,307,130 $59.06
74 Lyon Village Shopping Center $3,253,507 $67.60
75 Nashville Food Lion $3,117,287 $71.17
76 238 240 & 242 Lawrence Avenue $3,113,752 $38.67
77 Colonial Plaza $3,084,104 $67.01
78 Pacific Avenue Distribution Center $2,989,729 $20.31
79 Sprint Spectrum Building 62 $2,973,808 $19.83
80 Belvedere Kroger $2,965,684 $38.64
81 Los Alalmitos Industrial $2,965,136 $31.28
82 17011-17115 Kingsview Avenue $2,954,504 $20.62
83 575 Redwood $2,940,032 $195.34
84 10341-10351 Bubb 39, 46, 49, 57 $2,913,868 $107.92
85 Harris Teeter $2,853,253 $63.43
86 Walgreens/Payless $2,728,307 $142.62
87 2009 Country Club Drive $2,723,248 $19.12
88 7117 Inwood 24, 40 $2,548,045 $73.93
89 Camfield Corners $2,532,596 $48.44
90 Shea Plaza Shopping Center $2,518,654 $30.34
91 Baylands Business Park $2,509,337 $46.27
92 Kennedy Business Park $2,467,088 $24.08
93 Home Depot Land $2,466,284 $7.08
94 9104 Yellow Brick Road 58 $2,411,666 $25.72
95 Warehouse Cobb International Park $2,404,476 $22.50
96 5325 E. Thompson Road $2,352,449 $40.69
97 700 Bradley Hill Road #3 $2,311,910 $19.76
98 75 Lackawanna Avenue $2,298,380 $11.51
99 3325 Taylor Road $2,200,805 $36.61
100 233 E. Harris Street $2,101,638 $35.03
101 Park Aire Kroger $2,056,427 $34.78
102 675 County Road $1,998,635 $12.96
Total/Weighted Average $597,985,115
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
ORIGINAL ORIGINAL
TERM TO REMAINING AMORT. BALLOON
LOAN MORTGAGE NOTE MATURITY MATURITY TERM TO TERM LOAN BALLOON SECURITY
NO. RATE CONSTANT DATE DATE(4) (MOS) MATURITY (MOS) (MOS)(5) BALANCE LTV(3) TYPE (6)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7.190% 7.190% 12/12/1996 12/15/2006 120 75 360 $28,835,973 43.2% Fee Simple
2 6.870% 7.991% 04/19/1999 05/15/2009 120 104 360 $20,571,366 61.4% Fee Simple
3 7.880% 9.710% 12/20/1996 01/01/2009 145 100 300 $18,606,114 28.3% Fee Simple
4 7.970% 9.611% 12/15/1997 12/15/2017 240 207 300 $8,086,636 28.7% Fee Simple
5 7.460% 10.322% 12/05/1997 12/15/2017 240 207 240 $159,539 0.3% Fee Simple
6 7.990% 14.475% 11/08/1995 10/10/2010 180 121 180 $66,153 0.6% Fee Simple
7 7.990% 14.633% 08/31/1995 08/10/2010 180 119 180 $46,692 0.6% Fee Simple
8 7.990% 14.633% 08/31/1995 08/10/2010 180 119 180 $37,290 0.6% Fee Simple
9 7.680% 14.438% 09/05/1995 08/10/2010 180 119 180 $36,172 0.6% Fee Simple
10 7.990% 14.475% 10/24/1995 10/10/2010 180 121 180 $27,889 0.6% Fee Simple
11 8.480% 10.287% 04/22/1996 04/15/2011 180 127 300 $11,416,184 49.4% Fee Simple
12 8.440% 11.526% 05/31/1994 05/01/2016 264 188 264 $145,021 0.5% Fee Simple
13 7.600% 7.600% 09/25/1997 06/30/2006 105 69 IO $15,000,000 61.9% Fee Simple
14 7.680% 11.491% 02/13/1997 02/15/2015 216 173 216 $113,940 0.5% Fee Simple
15 8.210% 13.075% 11/03/1997 10/15/2007 120 85 180 $5,956,562 33.3% Fee Simple
16 7.200% 8.800% 06/05/1999 06/15/2009 120 105 300 $8,328,076 64.1% Fee Simple
17 8.000% 10.754% 10/03/1997 10/15/2017 240 205 240 $90,005 0.6% Fee Simple
18 8.000% 12.221% 01/24/1994 01/01/2014 240 160 240 $99,707 0.6% Fee Simple
19 7.460% 9.440% 09/18/1998 09/15/2018 240 216 276 $2,376,251 16.1% Fee Simple
20 8.400% 9.670% 10/22/1999 12/01/2009 120 111 300 $7,361,831 58.0% Fee Simple
21 10.000% 15.024% 09/24/1991 10/01/2011 241 133 241 $2 0.0% Fee Simple
22 7.780% 9.376% 06/12/1998 07/15/2023 300 274 300 $61,700 0.6% Fee Simple
23 7.170% 8.720% 04/20/1999 11/15/2009 127 110 300 $6,375,663 61.3% Fee Simple
24 8.590% 10.253% 12/11/1996 12/15/2021 300 255 300 $66,864 0.6% Fee Simple
25 7.500% 8.562% 09/01/1998 08/15/2018 240 215 360 $4,620,264 44.0% Fee Simple
26 8.125% 13.779% 09/05/1996 09/01/2011 180 132 180 $85,124 0.6% Fee Simple
27 7.490% 10.657% 01/24/1997 12/10/2016 238 195 238 $65,036 0.4% Fee Simple
28 8.740% 9.690% 05/14/1997 05/15/2007 120 80 360 $6,685,693 55.7% Fee Simple
29 8.160% 9.811% 08/13/1997 08/15/2022 300 263 300 $57,510 0.5% Fee Simple
30 7.140% 8.766% 04/09/1999 05/15/2009 120 104 300 $5,622,161 62.5% Fee Simple
31 7.950% 9.705% 03/31/1997 04/01/2007 120 79 300 $5,500,729 51.7% Fee Simple
32 7.290% 8.916% 02/25/1998 02/15/2009 132 101 300 $5,128,344 52.3% Fee Simple
33 10.250% 13.666% 04/13/1989 04/01/2009 240 103 300 $3,292,346 30.2% Fee Simple
34 7.875% 10.955% 11/19/1996 11/15/2016 240 194 240 $54,807 0.4% Fee Simple
35 7.900% 11.116% 07/01/1996 06/15/2016 240 189 240 $51,720 0.6% Fee Simple
36 7.750% 11.012% 07/03/1996 06/15/2016 240 189 240 $49,758 0.6% Fee Simple
37 7.670% 10.092% 05/23/1996 05/15/2006 120 68 293 $4,487,789 52.6% Fee Simple
38 8.480% 10.126% 03/13/1997 03/15/2022 300 258 300 $45,096 0.5% Fee/Leasehold
39 8.000% 11.603% 04/25/1997 05/01/2009 144 104 216 $2,976,015 30.8% Fee Simple
40 8.530% 10.265% 08/15/1996 08/15/2021 300 251 300 $44,189 0.6% Fee Simple
41 6.990% 9.848% 07/08/1998 06/15/2018 240 213 240 $41,014 0.6% Fee Simple
42 8.200% 11.024% 05/14/1997 05/15/2007 120 80 240 $3,765,786 45.4% Fee Simple
43 7.160% 8.746% 11/23/1998 09/15/2009 130 108 300 $3,949,222 63.7% Fee Simple
44 7.300% 10.443% 03/27/1997 03/15/2017 240 198 240 $41,994 0.6% Fee Simple
45 8.180% 10.396% 08/07/1997 08/15/2007 120 83 265 $3,763,679 37.3% Fee Simple
46 7.280% 9.791% 05/26/1999 06/01/2009 120 105 240 $3,185,013 40.1% Fee Simple
47 7.650% 10.797% 11/14/1996 11/15/2016 240 194 240 $40,682 0.5% Fee Simple
48 7.650% 10.942% 06/04/1996 06/15/2016 240 189 240 $40,481 0.4% Fee Simple
49 7.380% 8.937% 06/04/1999 06/01/2009 120 105 300 $3,506,872 43.8% Fee Simple
50 7.680% 10.079% 05/27/1999 06/15/2019 240 225 240 $35,704 0.6% Fee Simple
51 8.140% 11.532% 10/09/1997 10/01/2007 120 85 216 $2,912,696 36.4% Fee Simple
52 7.550% 11.834% 03/16/1994 03/01/2014 240 162 240 $41,787 0.3% Fee Simple
53 7.600% 11.511% 12/27/1994 12/01/2014 240 171 240 $40,333 0.6% Fee Simple
54 8.200% 11.920% 11/12/1999 12/01/2014 180 171 180 $41,310 0.7% Fee Simple
55 7.340% 11.959% 09/30/1988 09/01/2013 300 156 276 $41,294 0.7% Fee Simple
56 7.530% 10.576% 03/31/1997 04/15/2017 240 199 240 $35,714 0.4% Fee Simple
57 7.875% 10.323% 01/13/1994 01/01/2009 180 100 300 $2,938,890 21.6% Fee Simple
58 7.970% 12.116% 03/08/1994 03/01/2014 240 162 240 $40,627 0.5% Fee Simple
59 7.900% 9.816% 06/30/1997 06/15/2021 288 249 288 $32,744 0.7% Fee Simple
60 7.350% 10.424% 05/11/1994 05/14/2014 240 164 276 $1,129,410 15.5% Fee Simple
61 9.000% 13.931% 04/07/1992 04/15/2012 240 139 240 $45,098 0.7% Fee Simple
62 8.170% 13.619% 12/18/1996 12/15/2011 180 135 180 $44,113 0.6% Fee Simple
63 7.300% 9.826% 04/15/1999 05/15/2009 120 104 240 $2,712,398 32.3% Fee Simple
64 7.600% 9.885% 01/29/1999 01/15/2019 240 220 252 $395,826 8.1% Fee Simple
65 7.970% 10.049% 07/21/1995 02/10/2017 259 197 300 $1,181,624 19.1% Fee Simple
66 7.800% 10.587% 12/02/1997 11/15/2017 240 206 240 $32,749 0.5% Fee Simple
67 7.230% 10.040% 04/19/1996 05/10/2009 156 104 264 $2,476,915 35.9% Fee Simple
68 8.750% 10.889% 05/05/1995 05/15/2015 240 176 288 $1,358,198 25.2% Fee Simple
69 7.740% 10.723% 04/07/1997 04/01/2017 240 199 240 $31,967 0.6% Fee Simple
70 8.200% 11.574% 10/06/1997 10/01/2015 216 181 216 $34,364 0.6% Fee Simple
71 8.720% 12.468% 08/03/1994 07/05/2014 240 166 240 $34,491 0.7% Fee Simple
72 8.370% 11.120% 07/01/1997 06/15/2012 180 141 240 $1,533,215 32.6% Fee Simple
73 7.500% 10.962% 02/23/1996 02/25/2016 240 185 240 $30,025 0.6% Fee Simple
74 9.375% 17.003% 04/09/1990 04/01/2009 228 103 228 $45,740 0.4% Fee Simple
75 7.000% 9.550% 08/07/1999 08/15/2019 240 227 240 $24,664 0.5% Fee Simple
76 7.750% 10.757% 03/27/1997 03/01/2017 240 198 240 $27,309 0.5% Fee Simple
77 8.360% 11.113% 06/20/1997 06/25/2017 240 201 240 $28,364 0.5% Fee Simple
78 8.400% 11.411% 08/15/1996 08/01/2016 240 191 240 $28,016 0.5% Fee Simple
79 8.070% 13.554% 12/18/1996 12/15/2011 180 135 180 $33,367 0.5% Fee Simple
80 8.625% 12.402% 07/07/1994 09/01/2013 230 156 240 $323,066 6.2% Fee Simple
81 7.100% 9.834% 10/13/1998 10/15/2018 240 217 240 $24,066 0.4% Fee Simple
82 8.100% 13.277% 05/16/1997 05/01/2012 180 140 180 $32,468 0.5% Fee Simple
83 7.210% 8.819% 04/07/1999 05/15/2009 120 104 300 $2,380,100 57.4% Fee Simple
84 7.380% 9.863% 05/24/1999 06/01/2009 120 105 240 $2,039,446 28.6% Fee Simple
85 8.063% 12.016% 06/01/1994 07/01/2014 240 166 240 $28,378 0.5% Fee Simple
86 7.700% 10.889% 02/05/1997 09/15/2016 235 192 235 $24,600 0.6% Fee Simple
87 8.200% 13.639% 12/16/1996 12/15/2011 180 135 180 $30,742 0.6% Fee Simple
88 8.530% 10.265% 08/15/1996 08/15/2021 300 251 300 $21,646 0.6% Fee Simple
89 7.650% 11.582% 11/29/1994 11/05/2014 240 170 240 $24,289 0.5% Fee Simple
90 6.800% 11.214% 06/24/1998 06/15/2014 192 165 192 $23,405 0.3% Fee Simple
91 8.375% 11.365% 08/29/1996 09/01/2016 240 192 240 $23,532 0.2% Fee Simple
92 7.030% 12.045% 04/02/1998 03/15/2013 180 150 180 $24,621 0.4% Fee Simple
93 7.500% 11.759% 04/29/1994 04/15/2014 240 163 240 $23,906 0.4% Fee Simple
94 8.550% 11.919% 06/16/1995 07/01/2015 240 178 240 $23,305 0.5% Fee Simple
95 7.600% 10.938% 05/22/1996 05/15/2016 240 188 240 $21,778 0.5% Fee Simple
96 8.625% 10.895% 12/30/1993 12/01/2013 240 159 300 $1,051,800 30.1% Fee Simple
97 8.070% 13.201% 06/04/1997 06/15/2012 180 141 180 $25,264 0.6% Fee Simple
98 7.060% 11.776% 09/16/1998 09/15/2013 180 156 180 $22,423 0.2% Fee Simple
99 7.660% 14.037% 01/23/1996 01/15/2011 180 124 180 $25,579 0.6% Fee Simple
100 8.230% 13.196% 07/16/1997 08/01/2012 180 143 180 $22,640 0.6% Fee Simple
101 9.875% 13.958% 03/05/1990 03/01/2010 240 114 240 $760,216 19.5% Fee Simple
102 8.100% 13.277% 05/01/1997 05/15/2012 180 140 180 $21,965 0.3% Fee Simple
7.856% 10.548% 195 151 260 21.6%
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME(1) ADDRESS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Lighton Plaza Tower, I, & II 7300, 7400, 7500 College Boulevard
2 Woodmen Retail NEC Academy Boulevard & Woodmen Road
3 7799 Leesburg Pike 7799 Leesburg Pike
4 Liberty Square Shopping Center Route 541 & Sunset Road
5 1860-2159 Landings Drive 1860-2159 Landings Drive
6 3555 Monte Villa Parkway (A) 3555 Monte Villa Parkway
7 14520 NE 87th Street (A) 14520 NE 87th Street
8 26755 SW 95th Avenue (A) 26755 SW 95th Avenue
9 14500 NE 87th Street (A) 14500 NE 87th Street
10 14560 NE 87th Street (A) 14560 NE 87th Street
11 Sun Center Phase I 3610-3680 W Dublin-Granville Road
12 North Point Village Center Reston PKWY & Lake Newport Road
13 461 Fifth Avenue 461 Fifth Avenue
14 Bird Ludlam Shopping Center 6710-6848 Bird Road
15 11618 Mulberry Avenue 11618 Mulberry Avenue
16 2425 South Watney Way 2425 South Watney Way
17 311-325 Gellert Boulevard 311-325 Gellert Boulevard
18 Hilltop Plaza 5100-5236 Wilson Mills Road
19 Stop & Shop 2500 Madison Avenue
20 Yorktown Plaza 5353-5373 West Alabama
21 Aspen Hill Shopping Center 13601-13781 Connecticut Avenue
22 5560 Katella Avenue 5560 Katella Avenue
23 4600, 4650, & 4680 Olson Memorial Highway 4600, 4650, & 4680 Olson Memorial Highway
24 10900 Research Boulevard 10900 Research Boulevard
25 Stop & Shop 1415 Providence Highway
26 364 Ferguson Drive 364 Ferguson Drive
27 Sherwin Williams 2700 Texas Central Parkway
28 12000 Biscayne Building 12000 Biscayne Boulevard
29 6100 Gateway Drive & 10700 Valley View Street 6100 Gateway Drive & 10700 Valley View Street
30 Don Julian 14840-14850 Don Julian Road
31 47 Brunswick Avenue 47 Brunswick Avenue
32 ASC Building 13990 Parkeast Circle
33 189 Berdan Avenue 189 Berdan Avenue
34 42701-42735 Christy Street 42701-42735 Christy Street
35 Wheelersburg Lowes 7701 Ohio River Road
36 Burlington Lowes 3455 Agency Street
37 Lichtin Office 801 Jones Franklin Road
38 Kroger Center 4640 W Market Street
39 14000 Guadalupe Mines 6409 Guadalupe Mines Road
40 Randall's Austin 6600 Mopac Expressway South
41 Hollybrook Plaza 5348-5454 CR581
42 110-116,119-123,146-152,156-162,166-170 Keystone Drive 110-116,119-123,146-152,156-162,166-170 Keystone Drive
43 8945 Dice Road 8945 Dice Road
44 Oglethorpe Crossing 2221 Johnson Ferry Road
45 Eisenhower Plaza 70 South Orange Avenue
46 6580 Via Del Oro 6580 Via Del Oro
47 Harris Teeter 1 Davidson Drive
48 Cobb Parkway 2774 N. Cobb Parkway
49 532 Race Street 532 Race Street
50 16040 Stephens Street 16040 Stephens Street
51 I-295 Industrial Center Frontage Road & Ryan Avenue
52 Great Eastern Shopping Center NEC E. Main & Hamilton Road
53 Holiday Publix NEC Of US Hwy. 19
54 20559, 20611 & 20621 Prairie Street 20559, 20611 & 20621 Prairie Street
55 Waters And Armenia 8408-8438 North Armenia Avenue
56 10116 NE 8th Street 10116 NE 8th Street
57 490 Race Street 490 Race Street
58 Oregon Business Center 810 & 812 Oregon Avenue
59 Winn Dixie & Video 1401-1405 S. Hiawassee Road
60 Publix @ Mt. Zion 2015-2055 MT. Zion Road
61 Blue Springs HyVee 601 West 40 Highway
62 Bombay Co. Warehouse 2900 Meacham Boulevard
63 5452 Betsy Ross Drive 5452 Betsy Ross Drive
64 Milstead Crossing Shopping Center 1591 & 1571 GA Hwy. 20 & Sigman
65 Circuit City Stores 10722 SE 82nd Avenue
66 2076-2098 Nickerson Boulevard 2076-2098 Nickerson Boulevard
67 2401 West Valley Highway Warehouse 2402 R Street NW
68 6149 S. Norcross Tucker Road 6149 S. Norcross Tucker Road
69 9701 Metric Boulevard 9701 Metric Boulevard
70 Iron Mountain 336 Oyster Point Boulevard
71 Indian Creek Winn Dixie 4100-4112 Redan Road
72 1805-1809 Lower Road 1805-1809 Lower Road
73 Three Meadow Plaza 602-624 Barnes Boulevard
74 Lyon Village Shopping Center 3115-41 Lee Highway
75 Nashville Food Lion 11459-11477 Old Nashville Highway
76 238 240 & 242 Lawrence Avenue 238 240 & 242 Lawrence Avenue
77 Colonial Plaza 9510-9676 SW 160TH Street
78 Pacific Avenue Distribution Center 1600-1636 Pacific Street
79 Sprint Spectrum Building 4701 Merchantile Drive North
80 Belvedere Kroger 3433-3545 Memorial Drive
81 Los Alalmitos Industrial 10801-10805 Bloomfield & 10500, 10610-40, 10650-60, 10671 Humbolt
82 17011-17115 Kingsview Avenue 17011-17115 Kingsview Avenue
83 575 Redwood 575 Redwood Highway
84 10341-10351 Bubb 10341-10351 Bubb
85 Harris Teeter 2201 W. T. Harris Boulevard
86 Walgreens/Payless 1501 163rd Street
87 2009 Country Club Drive 2009 Country Club Drive
88 7117 Inwood 7117 Inwood
89 Camfield Corners 8620 Camfield Street
90 Shea Plaza Shopping Center 3222 E. Shea & 10607, 10615, 10621-31, 10639 N. 32nd
91 Baylands Business Park 2440-2478 Embarcadero Way
92 Kennedy Business Park 425-431 Hayden Station
93 Home Depot Land 1055 Paterson Plank Road
94 9104 Yellow Brick Road 9104 Yellow Brick Road
95 Warehouse Cobb International Park 1900/1910 Albritton Drive & 2000 Cobb International Boulevard
96 5325 E. Thompson Road 5325 E. Thompson Road
97 700 Bradley Hill Road #3 700 Bradley Hill Road #3
98 75 Lackawanna Avenue 75 Lackawanna Avenue
99 3325 Taylor Road 3325 Taylor Road
100 233 E. Harris Street 233 E. Harris Street
101 Park Aire Kroger 4880 Lower Roswell Road
102 675 County Road 675 County Road
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
LOAN ZIP PROPERTY PROPERTY YEAR YEAR
NO. CITY STATE CODE TYPE SUB-TYPE UNITS/NSF BUILT RENOVATED
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Overland Park KS 66204 Office Suburban Office 475,804 1987-1991 NAP
2 Colorado Springs CO 80919 Retail Anchored 284,427 1998/1999 NAP
3 McLean VA 22043 Office Suburban Office 354,018 1986 NAP
4 Burlington NJ 08016 Retail Anchored 346,338 1972 1992
5 Mountain View CA 94043 Office Suburban Office 238,551 1980-1984 NAP
6 Bothell WA 98011 Office Suburban Office 78,000 1995 NAP
7 Redmond WA 98052 Office Suburban Office 59,565 1995 NAP
8 Wilsonville OR 97070 Industrial Warehouse 165,810 1995 NAP
9 Redmond WA 98052 Office Suburban Office 60,000 1995 NAP
10 Redmond WA 98052 Office Suburban Office 35,760 1995 NAP
11 Columbus OH 43235 Retail Anchored 216,470 1995/1996 NAP
12 Reston VA 22094 Retail Anchored 131,504 1993 NAP
13 New York NY 10016 Other Office 201,152 N/A NAP
14 South Miami FL 33139 Retail Anchored 192,282 1987 NAP
15 Fontana CA 92337 Industrial Warehouse 510,000 1997 NAP
16 Fairfield CA 94533 Industrial Warehouse 348,607 1999 NAP
17 Daly City CA 94015 Retail Anchored 71,146 1997 NAP
18 Cleveland OH 44143 Retail Anchored 174,019 Late 1960s 1993
19 Bridgeport CT 06002 Retail Free Standing 67,026 1998 NAP
20 Houston TX 77056 Office Suburban Office 196,764 1976 NAP
21 Wheaton MD 20853 Retail Anchored 170,327 1962, 1989 NAP
22 Cypress CA 90630 Industrial Warehouse 215,000 1998 NAP
23 Golden Valley MN 55422 Industrial Warehouse 235,756 1955/1957-8/1975/1993/1999 NAP
24 Austin TX 78759 Retail Anchored 73,880 1996 NAP
25 Norwood MA 02062 Retail Anchored 190,021 1998 NAP
26 Mountain View CA 94043 Office Suburban Office 125,000 1981 NAP
27 Waco TX 76712 Industrial Warehouse 452,018 1990 NAP
28 Miami FL 33181 Office Suburban Office 149,215 1982 NAP
29 Cypress CA 90630 Industrial Warehouse 130,005 1997 NAP
30 City of Industry CA 91746 Industrial Warehouse 225,600 1981 NAP
31 Edison NJ 08818 Industrial Warehouse 265,134 1985 NAP
32 Chantilly VA 20151 Industrial Flex Industrial 83,300 1998-1999 NAP
33 Wayne NJ 07470 Retail Anchored 77,753 1989 NAP
34 Fremont CA 94536 Industrial Warehouse 253,440 1992 NAP
35 Wheelersburg OH 45694 Retail Free Standing 130,497 1996 NAP
36 Burlington IA 52601 Retail Free Standing 131,644 1996 NAP
37 Raleigh NC 27606 Office Suburban Office 69,151 1995 NAP
38 Greensboro NC 27407 Retail Anchored 105,807 1972 1997
39 San Jose CA 95120 Office Suburban Office 55,116 1997 NAP
40 Austin TX 78745 Retail Anchored 80,938 1995 NAP
41 Wesley Chapel FL 33543 Retail Anchored 69,520 1997 NAP
42 Montgomeryville PA 18936 Industrial Warehouse 214,386 1984-1986, 1995 NAP
43 Santa Fe Springs CA 90670 Industrial Warehouse 131,642 1998-1999 NAP
44 Atlanta GA 30304 Retail Anchored 58,413 1997 NAP
45 Livingston NJ 07039 Office Suburban Office 83,466 1978 NAP
46 San Jose CA 95119 Office Suburban Office 71,800 1981 & 1983 NAP
47 Concord NC 28025 Retail Anchored 65,355 1996 NAP
48 Kennesaw GA 30152 Retail Anchored 89,846 1996 NAP
49 San Jose CA 95126 Office Suburban Office 40,792 1990 NAP
50 City of Industry CA 91745 Industrial Warehouse 179,000 1972 NAP
51 Deptford-Westville NJ 08096 Industrial Warehouse 245,000 1972-1980 NAP
52 Whitenhall OH 43213 Retail Anchored 150,612 1954 1976/1993/1994
53 Holiday FL 34621 Retail Anchored 67,143 1994 NAP
54 Chatsworth CA 91311 Industrial Light Industrial 98,600 1987 NAP
55 Tampa FL 33603 Retail Anchored 98,808 1970 NAP
56 Bellevue WA 98004 Retail Anchored 87,270 1966-1969 1985/86
57 San Jose CA 95126 Office Suburban Office 66,250 1984 NAP
58 Linthicum MD 21090 Industrial Warehouse 195,615 1989/1990 NAP
59 Orlando FL 32802 Retail Anchored 55,840 1997 NAP
60 Jonesboro GA 30260 Retail Anchored 76,799 1994 NAP
61 Blue Springs MO 64015 Retail Anchored 78,570 1991 NAP
62 Fort Worth TX 76137 Industrial Warehouse 250,000 1992 1996
63 Santa Clara CA 95050 Office Suburban Office 54,800 1983 NAP
64 Conyers GA 30207 Retail Anchored 58,392 1998 NAP
65 Portland OR 97266 Retail Free Standing 41,090 1994 NAP
66 Hampton VA 23663 Retail Anchored 70,450 1997 NAP
67 Auburn WA 98001 Industrial Warehouse 161,000 1988 NAP
68 Atlanta GA 30093 Retail Anchored 60,425 1995 NAP
69 Austin TX 78758 Industrial Light Industrial 97,200 1997 NAP
70 S. San Francisco CA 94080 Industrial Warehouse 95,600 1972 NAP
71 Stone Mountain GA 30083 Retail Anchored 63,650 1994 NAP
72 Linden NJ 07036 Industrial Warehouse 100,000 1997 NAP
73 Rockledge FL 32955 Retail Anchored 56,000 1996 NAP
74 Arlington VA 22201 Retail Anchored 48,132 1962/1967 NAP
75 Smyrna TN 37167 Retail Anchored 43,800 1999 NAP
76 South San FranciscoCA 94080 Industrial Warehouse 80,524 1986 NAP
77 Miami FL 33157 Retail Anchored 46,027 1997 NAP
78 Union City CA 94587 Industrial Warehouse 147,175 1991 NAP
79 Fort Worth TX 76137 Industrial Warehouse 150,000 1996 NAP
80 Decatur GA 30032 Retail Free Standing 76,750 1994 NAP
81 Los Alamitos CA 90720 Industrial Warehouse 94,787 1987 NAP
82 Carson CA 90746 Industrial Warehouse 143,303 1979 NAP
83 Mill Valley CA 94941 Office Suburban Office 15,051 1998 NAP
84 Cupertino CA 95014 Office Suburban Office 27,000 1971 NAP
85 Charlotte NC 28269 Retail Free Standing 44,985 1994 NAP
86 North Miami Beach FL 33433 Retail Anchored 19,130 1996 NAP
87 Carrollton TX 75006 Industrial Warehouse 142,428 1990 NAP
88 Dallas TX 75221 Retail Free Standing 34,467 1988 NAP
89 Charlotte NC 28277 Retail Anchored 52,280 1994 NAP
90 Phoenix AZ 85028 Retail Anchored 83,012 1970 NAP
91 Palo Alto CA 94303 Industrial Flex Industrial 54,232 1973/1974 NAP
92 Windsor CT 06095 Industrial Flex Industrial 102,473 1987-1989 NAP
93 Secaucus NJ 07094 Other Retail 348,349 N/A NAP
94 Rossville MD 21237 Industrial Warehouse 93,755 1995 NAP
95 Kennesaw GA 30152 Industrial Warehouse 106,862 1988 NAP
96 Indianapolis IN 46237 Retail Free Standing 57,816 1992 NAP
97 Blauvelt NY 10913 Industrial Warehouse 117,000 1977 NAP
98 Parsippany NJ 07950 Industrial Warehouse 199,742 1972 NAP
99 Chesapeake VA 23321 Retail Anchored 60,110 1988 NAP
100 South San FranciscoCA 94080 Industrial Warehouse 60,000 1969 1996
101 Atlanta GA 30062 Retail Free Standing 59,134 1987 NAP
102 Secaucus NJ 07094 Industrial Warehouse 154,260 1965 NAP
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
NET
LOAN OPERATING UNDERWRITABLE MONTHLY
NO. PROPERTY NAME(1) INCOME CASH FLOW PAYMENT(7) DSCR(3)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Lighton Plaza Tower, I, & II $5,668,486 $4,872,914 $182,746 2.22
2 Woodmen Retail $2,929,554 $2,822,285 $157,583 1.49
3 7799 Leesburg Pike $5,420,960 $4,739,802 $190,971 2.07
4 Liberty Square Shopping Center $2,608,282 $2,445,123 $161,664 1.26
5 1860-2159 Landings Drive $5,373,984 $4,564,311 $160,630 2.37
6 3555 Monte Villa Parkway (A) $967,117 $885,392 $66,856 1.16
7 14520 NE 87th Street (A) $817,262 $754,852 $47,277 1.16
8 26755 SW 95th Avenue (A) $457,259 $414,354 $37,726 1.16
9 14500 NE 87th Street (A) $565,227 $502,361 $36,554 1.16
10 14560 NE 87th Street (A) $500,919 $462,676 $28,175 1.16
11 Sun Center Phase I $2,195,813 $2,094,764 $140,679 1.24
12 North Point Village Center $2,614,267 $2,526,660 $146,039 1.44
13 461 Fifth Avenue $2,058,026 $2,058,026 $95,000 1.81
14 Bird Ludlam Shopping Center $2,299,945 $2,165,548 $114,665 1.57
15 11618 Mulberry Avenue $1,656,302 $1,529,950 $119,767 1.06
16 2425 South Watney Way $1,166,583 $1,094,675 $75,557 1.21
17 311-325 Gellert Boulevard $1,341,208 $1,268,186 $90,754 1.16
18 Hilltop Plaza $1,599,031 $1,515,399 $100,373 1.26
19 Stop & Shop $1,247,055 $1,225,916 $72,091 1.42
20 Yorktown Plaza $1,239,212 $1,075,906 $71,865 1.25
21 Aspen Hill Shopping Center $2,105,609 $1,977,903 $101,327 1.63
22 5560 Katella Avenue $968,450 $893,603 $62,099 1.20
23 4600, 4650, & 4680 Olson Memorial Highway $1,068,296 $984,849 $57,736 1.42
24 10900 Research Boulevard $1,062,883 $1,034,897 $67,338 1.28
25 Stop & Shop $1,238,057 $1,152,544 $54,539 1.76
26 364 Ferguson Drive $1,342,327 $1,228,690 $85,709 1.19
27 Sherwin Williams $1,291,315 $1,246,115 $65,441 1.59
28 12000 Biscayne Building $1,150,860 $961,435 $58,949 1.36
29 6100 Gateway Drive & 10700 Valley View Street $1,040,649 $887,813 $57,901 1.28
30 Don Julian $831,097 $750,709 $50,817 1.23
31 47 Brunswick Avenue $985,125 $905,584 $52,258 1.44
32 ASC Building $812,032 $751,468 $46,787 1.34
33 189 Berdan Avenue $1,061,560 $1,003,707 $69,479 1.20
34 42701-42735 Christy Street $1,225,446 $1,105,184 $55,522 1.66
35 Wheelersburg Lowes $750,171 $730,596 $52,055 1.17
36 Burlington Lowes $698,400 $678,825 $50,078 1.13
37 Lichtin Office $817,280 $740,828 $45,370 1.36
38 Kroger Center $816,874 $790,050 $45,419 1.45
39 14000 Guadalupe Mines $825,711 $760,148 $51,623 1.23
40 Randall's Austin $711,636 $690,789 $44,500 1.29
41 Hollybrook Plaza $652,210 $624,393 $41,253 1.26
42 110-116,119-123,146-152,156-162,166-170 Keystone Drive $854,321 $769,306 $45,842 1.40
43 8945 Dice Road $570,030 $532,318 $35,851 1.24
44 Oglethorpe Crossing $629,838 $606,724 $42,249 1.20
45 Eisenhower Plaza $852,860 $694,028 $40,856 1.42
46 6580 Via Del Oro $631,593 $566,757 $37,234 1.27
47 Harris Teeter $682,399 $660,599 $40,943 1.34
48 Cobb Parkway $874,041 $830,099 $40,740 1.70
49 532 Race Street $735,894 $697,503 $32,173 1.81
50 16040 Stephens Street $580,253 $537,707 $35,932 1.25
51 I-295 Industrial Center $774,697 $671,531 $41,080 1.36
52 Great Eastern Shopping Center $1,081,161 $967,027 $42,050 1.92
53 Holiday Publix $577,379 $559,967 $40,586 1.15
54 20559, 20611 & 20621 Prairie Street $580,165 $552,044 $41,591 1.11
55 Waters And Armenia $609,132 $567,911 $41,545 1.14
56 10116 NE 8th Street $1,103,098 $1,032,128 $36,335 2.37
57 490 Race Street $1,260,731 $1,140,351 $35,272 2.69
58 Oregon Business Center $956,189 $849,669 $40,894 1.73
59 Winn Dixie & Video $475,829 $461,437 $32,959 1.17
60 Publix @ Mt. Zion $714,698 $670,196 $34,211 1.63
61 Blue Springs HyVee $642,128 $617,471 $45,436 1.13
62 Bombay Co. Warehouse $623,698 $573,698 $44,413 1.08
63 5452 Betsy Ross Drive $775,165 $718,372 $31,737 1.89
64 Milstead Crossing Shopping Center $467,340 $453,454 $31,815 1.19
65 Circuit City Stores $528,589 $502,544 $32,333 1.30
66 2076-2098 Nickerson Boulevard $656,495 $626,497 $32,961 1.58
67 2401 West Valley Highway Warehouse $600,540 $558,342 $31,064 1.50
68 6149 S. Norcross Tucker Road $495,429 $474,336 $33,064 1.20
69 9701 Metric Boulevard $544,266 $490,827 $32,173 1.27
70 Iron Mountain $536,260 $513,507 $34,597 1.24
71 Indian Creek Winn Dixie $502,575 $481,267 $34,743 1.15
72 1805-1809 Lower Road $434,077 $408,221 $30,946 1.10
73 Three Meadow Plaza $470,152 $449,199 $30,210 1.24
74 Lyon Village Shopping Center $1,102,499 $1,076,634 $46,100 1.95
75 Nashville Food Lion $400,928 $378,814 $24,810 1.27
76 238 240 & 242 Lawrence Avenue $462,820 $418,053 $27,913 1.25
77 Colonial Plaza $494,945 $474,556 $28,561 1.38
78 Pacific Avenue Distribution Center $488,577 $430,797 $28,430 1.26
79 Sprint Spectrum Building $651,692 $557,315 $33,589 1.38
80 Belvedere Kroger $495,887 $484,374 $30,651 1.32
81 Los Alalmitos Industrial $585,311 $527,631 $24,299 1.81
82 17011-17115 Kingsview Avenue $557,444 $499,158 $32,689 1.27
83 575 Redwood $350,951 $329,743 $21,607 1.27
84 10341-10351 Bubb $594,945 $520,057 $23,949 1.81
85 Harris Teeter $541,090 $534,342 $28,571 1.56
86 Walgreens/Payless $366,071 $361,308 $24,757 1.22
87 2009 Country Club Drive $432,497 $401,259 $30,951 1.08
88 7117 Inwood $349,155 $343,985 $21,796 1.32
89 Camfield Corners $448,525 $431,723 $24,444 1.47
90 Shea Plaza Shopping Center $655,803 $620,841 $23,537 2.20
91 Baylands Business Park $1,293,414 $1,155,609 $23,765 4.05
92 Kennedy Business Park $692,305 $579,738 $24,764 1.95
93 Home Depot Land $550,598 $550,598 $24,168 1.90
94 9104 Yellow Brick Road $421,191 $378,841 $23,953 1.32
95 Warehouse Cobb International Park $414,606 $353,864 $21,916 1.35
96 5325 E. Thompson Road $316,074 $307,403 $21,359 1.20
97 700 Bradley Hill Road #3 $440,066 $395,121 $25,432 1.29
98 75 Lackawanna Avenue $796,303 $716,598 $22,555 2.65
99 3325 Taylor Road $401,779 $363,668 $25,744 1.18
100 233 E. Harris Street $304,129 $283,455 $23,111 1.02
101 Park Aire Kroger $367,497 $352,627 $23,919 1.23
102 675 County Road $539,213 $504,104 $22,113 1.90
TOTAL/WEIGHTED AVERAGE 1.50X
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
CUT-OFF
LOAN IMPLIED MARKET CAP RATE MARKET DATE PERCENT (10)
NO. DSCR(3)(8) VALUE(9) RATE (9) STUDY (9) LTV(3) LEASED DATE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1.78 $66,700,000 8.50% Yes 45.7% 92.9% 06/30/00
2 1.33 $33,500,000 8.75% Yes 70.6% 100.0% 12/31/99
3 2.23 $65,700,000 8.25% Yes 35.9% 99.2% 12/31/99
4 1.35 $28,200,000 9.25% Yes 71.6% 100.0% 04/17/00
5 2.72 $55,100,000 9.75% Yes 33.9% 100.0% 05/01/00
6 1.88 $11,100,000 8.75% Yes 46.0% 100.0% 06/05/00
7 1.88 $9,600,000 8.50% Yes 46.0% 100.0% 06/05/00
8 1.88 $5,700,000 8.00% No 46.0% 100.0% 06/05/00
9 1.88 $6,600,000 8.50% Yes 46.0% 100.0% 06/05/00
10 1.88 $5,900,000 8.50% Yes 46.0% 100.0% 06/05/00
11 1.42 $23,100,000 9.50% Yes 71.0% 99.3% 04/07/00
12 1.85 $29,900,000 8.75% Yes 50.8% 96.6% 12/31/99
13 1.52 $24,250,000 8.50% No 61.9% 96.8% 12/30/99
14 2.01 $24,200,000 9.50% Yes 49.5% 100.0% 03/31/00
15 1.55 $17,900,000 9.25% Yes 61.4% 100.0% 12/31/99
16 1.18 $13,000,000 9.00% Yes 79.3% 100.0% 05/22/00
17 1.39 $14,500,000 9.25% Yes 69.8% 100.0% 06/02/00
18 1.71 $16,800,000 9.50% Yes 58.7% 92.2% 05/30/00
19 1.49 $14,800,000 8.50% No 61.9% 100.0% 12/31/99
20 1.34 $12,700,000 9.75% Yes 70.2% 90.3% 12/31/99
21 2.72 $24,750,000 8.50% No 32.7% 83.7% 03/22/00
22 1.25 $10,500,000 9.25% Yes 75.7% 100.0% 02/17/00
23 1.38 $10,400,000 10.25% Yes 76.4% 100.0% 06/29/00
24 1.46 $11,200,000 9.50% Yes 70.4% 100.0% 12/31/99
25 1.68 $10,500,000 11.75% No 72.8% 100.0% 12/31/99
26 1.83 $14,500,000 9.25% Yes 51.5% 100.0% 04/26/99
27 1.88 $14,800,000 8.75% No 49.8% 100.0% 06/29/00
28 1.46 $12,000,000 9.50% No 60.8% 93.4% 07/13/00
29 1.39 $11,300,000 9.25% Yes 62.7% 100.0% 02/17/00
30 1.20 $9,000,000 9.25% Yes 77.3% 100.0% 04/10/00
31 1.56 $10,650,000 9.25% No 60.7% 100.0% 04/05/00
32 1.33 $9,800,000 8.25% No 64.3% 89.5% 05/31/00
33 1.83 $10,900,000 9.75% Yes 56.0% 100.0% 03/20/00
34 2.02 $14,100,000 8.75% No 43.1% 100.0% 02/15/00
35 1.44 $8,350,000 9.00% No 67.3% 100.0% 06/13/00
36 1.38 $7,750,000 9.00% No 70.4% 100.0% 06/29/00
37 1.53 $8,525,000 9.50% No 63.3% 100.0% 04/01/00
38 1.63 $9,035,000 9.00% No 59.6% 100.0% 06/30/00
39 1.58 $9,650,000 8.50% No 55.3% 100.0% 03/01/00
40 1.48 $7,500,000 9.50% Yes 69.4% 100.0% 04/01/00
41 1.38 $7,100,000 9.25% No 70.8% 100.0% 05/03/00
42 1.71 $8,300,000 10.25% No 60.1% 100.0% 03/01/00
43 1.20 $6,200,000 9.25% Yes 79.3% 100.0% 03/08/00
44 1.39 $6,900,000 9.13% Yes 70.4% 100.0% 05/31/00
45 1.64 $10,100,000 8.50% No 46.7% 100.0% 04/17/00
46 1.38 $7,950,000 8.00% No 57.4% 100.0% 03/01/00
47 1.61 $7,400,000 9.25% No 61.5% 90.1% 06/19/00
48 2.06 $9,000,000 9.75% No 49.6% 100.0% 12/31/99
49 1.79 $8,000,000 9.25% Yes 54.0% 100.0% 03/01/00
50 1.40 $6,300,000 9.25% Yes 67.9% 100.0% 04/06/00
51 1.75 $8,000,000 9.75% No 53.4% 95.9% 07/05/00
52 2.52 $12,400,000 8.75% No 34.4% 91.1% 04/26/00
53 1.47 $6,650,000 8.75% No 63.6% 95.2% 01/01/00
54 1.46 $6,300,000 9.25% No 66.5% 100.0% 05/16/00
55 1.51 $6,100,000 10.00% No 68.3% 100.0% 06/12/00
56 2.78 $10,100,000 11.00% No 40.8% 100.0% 01/01/00
57 3.09 $13,600,000 9.25% Yes 30.1% 100.0% 03/01/00
58 2.33 $8,900,000 10.75% No 45.5% 100.0% 05/31/00
59 1.27 $5,000,000 9.50% Yes 80.6% 100.0% 07/13/00
60 1.89 $7,300,000 9.75% No 54.0% 100.0% 12/01/99
61 1.75 $6,500,000 10.00% No 60.2% 100.0% 06/27/00
62 1.63 $7,200,000 8.70% Yes 54.4% 100.0% 03/15/00
63 2.06 $8,400,000 9.25% Yes 46.1% 100.0% 07/05/00
64 1.30 $4,900,000 9.50% Yes 78.8% 92.8% 12/31/99
65 1.45 $6,200,000 8.50% Yes 62.3% 100.0% 06/27/00
66 1.86 $7,225,000 9.00% No 51.7% 100.0% 03/14/00
67 1.67 $6,900,000 8.75% No 53.8% 100.0% 02/01/00
68 1.45 $5,400,000 9.25% Yes 67.5% 100.0% 06/28/00
69 1.51 $5,600,000 9.75% Yes 64.3% 100.0% 02/29/00
70 1.59 $5,700,000 9.50% No 62.9% 100.0% 02/18/00
71 1.60 $5,100,000 9.75% No 65.6% 100.0% 01/24/00
72 1.36 $4,700,000 9.25% No 71.1% 100.0% 06/23/00
73 1.51 $5,300,000 8.88% Yes 62.4% 100.0% 06/16/00
74 3.68 $12,200,000 9.00% Yes 26.7% 100.0% 05/23/00
75 1.35 $4,575,000 8.75% No 68.1% 97.3% 07/05/00
76 1.49 $5,350,000 8.75% No 58.2% 100.0% 05/23/00
77 1.71 $5,200,000 9.50% No 59.3% 96.1% 05/01/00
78 1.60 $5,400,000 9.00% No 55.4% 100.0% 04/01/99
79 2.08 $7,200,000 9.05% Yes 41.3% 100.0% 03/15/00
80 1.81 $5,200,000 9.50% No 57.0% 100.0% 06/28/00
81 1.98 $6,100,000 9.50% No 48.6% 100.0% 01/01/00
82 1.88 $6,350,000 8.75% No 46.5% 100.0% 03/15/00
83 1.25 $4,150,000 8.50% No 70.8% 100.0% 06/01/00
84 1.98 $7,125,000 8.25% No 40.9% 100.0% 03/01/00
85 2.08 $6,000,000 9.00% No 47.6% 100.0% 07/05/00
86 1.47 $3,850,000 9.50% No 70.9% 100.0% 07/10/00
87 1.64 $4,900,000 8.75% Yes 55.6% 100.0% 07/06/00
88 1.50 $3,700,000 9.50% No 68.9% 100.0% 06/23/00
89 1.89 $4,775,000 9.50% No 53.0% 100.0% 03/07/00
90 2.74 $7,700,000 8.50% No 32.7% 100.0% 03/01/00
91 5.12 $13,500,000 9.50% No 18.6% 100.0% 01/05/00
92 2.61 $6,300,000 11.00% No 39.2% 86.2% 03/30/00
93 2.48 $6,800,000 8.00% No 36.3% 100.0% 04/14/94
94 1.75 $4,300,000 9.75% No 56.1% 98.6% 10/27/99
95 1.64 $4,300,000 9.75% Yes 55.9% 94.5% 03/31/00
96 1.45 $3,500,000 9.00% No 67.2% 100.0% 03/08/00
97 1.90 $4,500,000 9.75% Yes 51.4% 100.0% 12/31/99
98 3.46 $9,250,000 8.50% No 24.8% 100.0% 03/20/00
99 1.84 $4,500,000 9.00% No 48.9% 100.0% 07/31/00
100 1.50 $3,800,000 8.00% No 55.3% 100.0% 02/16/00
101 1.91 $3,900,000 9.50% No 52.7% 100.0% 06/26/00
102 2.80 $6,550,000 8.25% No 30.5% 100.0% 06/26/00
1.74X 57.5%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
LOAN TENANT INFORMATION(11)
NO. LARGEST TENANT % NSF
--------------------------------------------------------------------------------
<S> <C> <C>
1 CNA Insurance Companies 19.1%
2 Sam's Club (Walmart) 45.1%
3 US Government GS 20.4%
4 Wal-Mart 35.1%
5 IDC 12.0%
6 AT&T Wireless 100.0%
7 AT&T Wireless 100.0%
8 Hollywood Entertainment 100.0%
9 SeaMED Corp (AT&T sublease) 100.0%
10 AT&T Wireless 100.0%
11 Big Bear 34.6%
12 Giant Of Maryland, Inc. 44.6%
13 Watson Wyatt & Co. 41.4%
14 Winn Dixie Stores 23.1%
15 General Mills, Inc. 100.0%
16 Schmalbach-Lubeca 100.0%
17 Ross Stores, Inc. 40.2%
18 First National Supermkts, Inc. 31.8%
19 Stop & Shop Supermarket 100.0%
20 Litton 32.3%
21 Giant Food, Inc. 22.0%
22 Viad Corporation 100.0%
23 Room & Board, Inc. 100.0%
24 Randall's #490 78.6%
25 Home Depot 60.7%
26 G.T.E. Products Corp. 100.0%
27 Sherwin Williams Co 100.0%
28 Travalco USA, Inc. 8.4%
29 PacifiCare 100.0%
30 Ventura Foods - Specialty Products 55.4%
31 Etienne Aigner Corp 100.0%
32 American Systems Corporation 75.7%
33 Kings Supermarkets, Inc. 45.0%
34 IPC Software Services-Subleased to RSP Manufacturing 61.4%
35 Lowes 100.0%
36 Lowe's Companies, Inc. 100.0%
37 Dsatlantic 37.2%
38 Harris Teeter 77.2%
39 Viking Freight 100.0%
40 Randalls 87.6%
41 Publix Super Markets 74.0%
42 Matheson Gas 34.2%
43 Sohnen Enterprises 100.0%
44 Publix 64.9%
45 MicroBank Software, Inc. 25.2%
46 Candescent Technologies Corp. 100.0%
47 Harris Teeter, Inc. 69.1%
48 Publix 62.5%
49 ICG Services, Inc. 100.0%
50 Falcon Products 100.0%
51 Star Bindery, Inc. 10.2%
52 Kroger 40.8%
53 Publix 63.0%
54 General Ribbon 71.1%
55 Winn Dixie Stores, Inc. 51.7%
56 QFC Supermarket 61.7%
57 Telocity, Inc. 100.0%
58 Circle Freight 28.9%
59 Winn Dixie 91.4%
60 Publix 72.9%
61 Hy-Vee Food & Drug 83.4%
62 The Bombay Company, Inc. 100.0%
63 Wireless Inc. 100.0%
64 Winn Dixie Atlanta, Inc. 80.8%
65 Circuit City Stores, Inc 100.0%
66 Winn Dixie 64.6%
67 Schucks (csk Auto, Inc.) 100.0%
68 Publix 79.4%
69 Lonestar Electronics Corp 55.6%
70 Iron Mountain 100.0%
71 Winn Dixie 69.1%
72 Linden Warehouse & Distribution Co., Inc. 100.0%
73 Winn Dixie 78.6%
74 Giant of Virginia, Inc. 44.9%
75 Food Lion, Inc. 75.3%
76 Aeroground 87.8%
77 Publix 60.6%
78 Mancini Sleepworld 52.0%
79 Sprint Spectrum Holding Co. 100.0%
80 The Kroger Company 100.0%
81 Visual Structures 37.9%
82 Parter Medical Products 21.8%
83 Gensteam Co. 51.0%
84 Kanisa, Inc. 100.0%
85 Harris Teeter, Inc. 100.0%
86 Walgreens 81.2%
87 Daryl Flood Warehouse & Movers, Inc. 100.0%
88 Randall's Food Market, Inc. 100.0%
89 Bi-lo 81.6%
90 Basha's 49.3%
91 Copper Mountain 25.4%
92 Barton-Cyker Dental 14.8%
93 Home Depot 100.0%
94 York International 50.0%
95 US Office Products 25.0%
96 Kroger 100.0%
97 Oak Beverages 55.6%
98 International Playthings, Inc. 59.8%
99 Food Lion #622 41.6%
100 R. Torre & Company 100.0%
101 The Kroger Company 100.0%
102 Veeco Services 100.0%
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
INTEREST
LOAN DUE GRACE ACCRUAL
NO. PROPERTY NAME(1) DATE (12) PERIOD (12) METHOD SEASONING(13)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Lighton Plaza Tower, I, & II 15 0 30/360 45
2 Woodmen Retail 15 0 30/360 16
3 7799 Leesburg Pike 1 10 30/360 45
4 Liberty Square Shopping Center 15 5 30/360 33
5 1860-2159 Landings Drive 15 0 30/360 33
6 3555 Monte Villa Parkway (A) 10 0 30/360 59
7 14520 NE 87th Street (A) 10 0 30/360 61
8 26755 SW 95th Avenue (A) 10 0 30/360 61
9 14500 NE 87th Street (A) 10 0 30/360 61
10 14560 NE 87th Street (A) 10 0 30/360 59
11 Sun Center Phase I 15 0 30/360 53
12 North Point Village Center 1 10 30/360 76
13 461 Fifth Avenue 15 0 30/360 36
14 Bird Ludlam Shopping Center 15 0 30/360 43
15 11618 Mulberry Avenue 15 0 30/360 35
16 2425 South Watney Way 15 0 30/360 15
17 311-325 Gellert Boulevard 15 0 30/360 35
18 Hilltop Plaza 1 0 30/360 80
19 Stop & Shop 15 5 30/360 24
20 Yorktown Plaza 1 0 30/360 9
21 Aspen Hill Shopping Center 1 0 30/360 108
22 5560 Katella Avenue 15 5 30/360 26
23 4600, 4650, & 4680 Olson Memorial Highway 15 0 30/360 17
24 10900 Research Boulevard 15 5 30/360 45
25 Stop & Shop 15 5 30/360 25
26 364 Ferguson Drive 1 0 30/360 48
27 Sherwin Williams 10 5 30/360 43
28 12000 Biscayne Building 15 0 30/360 40
29 6100 Gateway Drive & 10700 Valley View Street 15 5 30/360 37
30 Don Julian 15 0 30/360 16
31 47 Brunswick Avenue 1 0 30/360 41
32 ASC Building 15 0 30/360 31
33 189 Berdan Avenue 1 0 30/360 137
34 42701-42735 Christy Street 15 0 30/360 46
35 Wheelersburg Lowes 15 5 30/360 51
36 Burlington Lowes 15 5 30/360 51
37 Lichtin Office 15 15 30/360 52
38 Kroger Center 15 15 30/360 42
39 14000 Guadalupe Mines 1 0 30/360 40
40 Randall's Austin 15 5 30/360 49
41 Hollybrook Plaza 15 5 30/360 27
42 110-116,119-123,146-152,156-162,166-170 Keystone Drive 15 0 30/360 40
43 8945 Dice Road 15 5 30/360 22
44 Oglethorpe Crossing 15 5 30/360 42
45 Eisenhower Plaza 15 0 30/360 37
46 6580 Via Del Oro 1 0 30/360 15
47 Harris Teeter 15 15 30/360 46
48 Cobb Parkway 15 5 30/360 51
49 532 Race Street 1 0 30/360 15
50 16040 Stephens Street 15 5 30/360 15
51 I-295 Industrial Center 1 0 30/360 35
52 Great Eastern Shopping Center 1 5 30/360 78
53 Holiday Publix 1 5 30/360 69
54 20559, 20611 & 20621 Prairie Street 1 0 30/360 9
55 Waters And Armenia 1 5 30/360 144
56 10116 NE 8th Street 15 0 30/360 41
57 490 Race Street 1 0 30/360 80
58 Oregon Business Center 1 0 30/360 78
59 Winn Dixie & Video 15 5 30/360 39
60 Publix @ Mt. Zion 15 5 30/360 76
61 Blue Springs HyVee 15 0 30/360 101
62 Bombay Co. Warehouse 15 5 30/360 45
63 5452 Betsy Ross Drive 15 0 30/360 16
64 Milstead Crossing Shopping Center 15 5 30/360 20
65 Circuit City Stores 10 5 30/360 62
66 2076-2098 Nickerson Boulevard 15 7 30/360 34
67 2401 West Valley Highway Warehouse 10 0 30/360 52
68 6149 S. Norcross Tucker Road 15 5 30/360 64
69 9701 Metric Boulevard 1 5 30/360 41
70 Iron Mountain 1 0 30/360 35
71 Indian Creek Winn Dixie 5 0 30/360 74
72 1805-1809 Lower Road 15 0 30/360 39
73 Three Meadow Plaza 25 5 30/360 55
74 Lyon Village Shopping Center 1 0 30/360 125
75 Nashville Food Lion 15 5 30/360 13
76 238 240 & 242 Lawrence Avenue 1 5 30/360 42
77 Colonial Plaza 25 0 30/360 39
78 Pacific Avenue Distribution Center 1 0 30/360 49
79 Sprint Spectrum Building 15 5 30/360 45
80 Belvedere Kroger 1 0 30/360 74
81 Los Alalmitos Industrial 15 0 30/360 23
82 17011-17115 Kingsview Avenue 1 5 30/360 40
83 575 Redwood 15 0 30/360 16
84 10341-10351 Bubb 1 0 30/360 15
85 Harris Teeter 1 15 30/360 74
86 Walgreens/Payless 15 0 30/360 43
87 2009 Country Club Drive 15 0 30/360 45
88 7117 Inwood 15 5 30/360 49
89 Camfield Corners 5 15 30/360 70
90 Shea Plaza Shopping Center 15 0 30/360 27
91 Baylands Business Park 1 5 30/360 48
92 Kennedy Business Park 15 0 30/360 30
93 Home Depot Land 15 5 30/360 77
94 9104 Yellow Brick Road 1 0 30/360 62
95 Warehouse Cobb International Park 15 0 30/360 52
96 5325 E. Thompson Road 1 0 30/360 81
97 700 Bradley Hill Road #3 15 0 30/360 39
98 75 Lackawanna Avenue 15 5 30/360 24
99 3325 Taylor Road 15 0 30/360 56
100 233 E. Harris Street 1 0 30/360 37
101 Park Aire Kroger 1 0 30/360 126
102 675 County Road 15 0 30/360 40
TOTAL/WEIGHTED AVERAGE 45
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE(14)
YIELD MAINTENANCE
LOAN LOCKOUT LANGUAGE YIELD MAINTENANCE ADMINISTRATIVE
NO. PERIOD YM YM1 OPEN CONFORMS TO STANDARD (15) EXCEPTION (16) COST RATE (BPS)(17)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 24 96 No J, U 7.20
2 60 60 No Aa 7.20
3 7 138 No J, S 7.20
4 240 No Y 7.20
5 240 No I, O 7.20
6 60 120 No H 7.20
7 60 120 No H 7.20
8 60 120 No H 7.20
9 60 120 No H 7.20
10 60 120 No H 7.20
11 5 175 No G 7.20
12 261 3 No A, T 7.20
13 106 Yes 7.20
14 216 Yes 7.20
15 120 Yes 7.20
16 120 Yes 7.20
17 240 No J 7.20
18 240 Yes 7.20
19 240 No Y 7.20
20 120 No M 7.20
21 240 Yes 7.20
22 300 Yes 7.20
23 120 7 Yes 7.20
24 300 No I, O, M 7.20
25 5 235 No Z, S 7.20
26 180 No I 7.20
27 235 3 No I, T 7.20
28 120 Yes 7.20
29 300 Yes 7.20
30 120 Yes 7.20
31 2 118 No X 7.20
32 12 4 116 No D 7.20
33 120 120 Yes 7.20
34 240 No I 7.20
35 240 Yes 7.20
36 240 Yes 7.20
37 36 84 Yes 7.20
38 60 240 No P 7.20
39 120 3 21 No Q, R 7.20
40 300 No I, M, O 7.20
41 240 No Y 7.20
42 4 116 No D 7.20
43 130 Yes 7.20
44 240 No J 7.20
45 120 Yes 7.20
46 96 3 21 No Bb, R 7.20
47 84 156 No K 7.20
48 240 No J 7.20
49 96 3 21 No Bb, R 7.20
50 240 Yes 7.20
51 4 116 Yes 7.20
52 240 Yes 7.20
53 240 Yes 7.20
54 180 Yes 7.20
55 121 179 No A, B 7.20
56 240 No I 7.20
57 3 177 No D 7.20
58 240 Yes 7.20
59 288 Yes 7.20
60 3 237 No C 7.20
61 240 Yes 7.20
62 180 No I 7.20
63 120 Yes 7.20
64 240 No Y 7.20
65 259 No I 7.20
66 240 Yes 7.20
67 61 2 93 No L 7.20
68 4 236 No D 7.20
69 240 No M, W 7.20
70 213 3 No D 7.20
71 240 Yes 7.20
72 180 Yes 7.20
73 240 Yes 7.20
74 114 114 Yes 7.20
75 240 No Y 7.20
76 180 60 No V, I 7.20
77 240 Yes 7.20
78 240 Yes 7.20
79 180 No I 7.20
80 230 Yes 7.20
81 240 No Y 7.20
82 180 Yes 7.20
83 120 Yes 7.20
84 96 3 21 No Bb, R 7.20
85 240 No E 7.20
86 235 Yes 7.20
87 180 No M 7.20
88 300 No I, M, O 7.20
89 60 180 Yes 7.20
90 192 No Z 7.20
91 180 60 No N 7.20
92 180 Yes 7.20
93 240 Yes 7.20
94 240 Yes 7.20
95 240 Yes 7.20
96 240 Yes 7.20
97 180 Yes 7.20
98 180 Yes 7.20
99 180 Yes 7.20
100 180 Yes 7.20
101 120 120 Yes 7.20
102 180 Yes 7.20
</TABLE>
<PAGE>
FOOTNOTES TO APPENDIX II
1 Sets of Mortgage Loans that have identical alphabetical coding designate
multiple loans that are cross-collateralized and cross-defaulted.
2 With respect to Mortgage Loan No. 1, Lighton Plaza Tower, I and II, the
100% owner of the Borrower, has received financing that is secured, among
other things, by its ownership interest in the Borrower.
With respect to Mortgage Loan No. 21, Aspen Hill Shopping Center, the
Borrower is permitted to obtain additional financing secured by the real
property, provided a stated combined minimum DSCR of 1.20x is maintained
and a combined maximum LTV of 75% is not exceeded. Lender has right to
approve the subordinate debt documents.
With respect to Mortgage Loan No. 33, 189 Berdan Avenue, the Borrower is
permitted to obtain additional financing secured by the real property,
provided a stated combined minimum DSCR of 1.15x is maintained and a
combined maximum LTV of 75% is not exceeded. Lender has right to approve
the subordinate debt documents.
With respect to Mortgage Loan No. 55, Waters and Armenia, the Borrower is
permitted to obtain additional financing secured by the real property. The
additional debt cannot exceed $400,000 and a combined minimum DSCR of 1.10
must be maintained.
With respect to Mortgage Loan No. 71, Indian Creek Winn Dixie, the Borrower
is permitted to obtain additional financing secured by the real property
for the sole purpose of financing a 12,000 square foot expansion with the
terms and conditions being subject to Lender's approval.
With respect to Mortgage Loan No. 95, Warehouse Cobb International Park,
the Borrower is permitted to obtain financing secured by the real property,
provided a stated combined minimum DSCR of 1.50x is maintained and a
maximum combined LTV of 70% is not exceeded. Lender has right to approve
the subordinate debt documents.
With respect to Mortgage Loan No. 73, Three Meadow Plaza, the Borrower is
permitted to obtain additional mezzanine financing, secured by a pledge of
the ownership interest in the borrower and not a lien on the real property.
The Lender has the right to approve the mezzanine lender and the terms and
conditions. The Lender also has the option to require rating agency
approval. The terms are subject to a combined minimum DSCR of 1.20x and a
combined maximum LTV of 75%.
With respect to Mortgage Loan No. 46, 6580 Via Del Oro, the Candescent
Technology lease grants the tenant a purchase option which is currently not
sufficient to pay the outstanding balance. However, the tenant purchase
option is only operational if an uninsured casualty occurs which exceeds 5%
of the replacement cost and the landlord exercises its right to terminate
the lease. The loan documents do not permit the landlord to terminate the
lease without lender's consent and the property currently has insurance in
place which provides for replacement cost coverage.
Mortgage Loan No. 57, 490 Race Street, does not have a seismic report.
II-13
<PAGE>
FOOTNOTES TO APPENDIX II
Mortgage Loan No. 37, Lichtin Office, has a monthly TI/LC Escrow accruing
to cover anticipated tenant improvements and leasing commissions on the
property during the duration of the Mortgage Loan. It will be released upon
receipt of lien waivers, title endorsements, a contractor's certificate,
fully executed leases, a certificate of occupancy and inspection and
approval by the Lender.
Mortgage Loan No. 73, Three Meadow Plaza, has a monthly Capital Expenditure
Escrow accruing to cover anticipated roof and parking lot replacement and
structural repairs at the property during the duration of the Mortgage
Loan. It will be released upon receipt of lien waivers, title endorsements,
an architect's certificate and inspection and approval by the Lender.
Mortgage Loan No. 86, Walgreens/Payless, has a monthly Capital Expenditure
Escrow accruing to cover anticipated roof and parking lot replacement costs
at the property during the duration of the Mortgage Loan. It will be
released upon receipt of lien waivers, title endorsements, an architect's
certificate and inspection and approval by the Lender.
3 Certain ratios including Cut-Off Date Balance /Square Foot, DSCR, Implied
DSCR, LTV and Balloon LTV are calculated on a combined basis for Mortgage
Loans that are cross-collateralized and cross-defaulted.
4 Mortgage Loan No. 1, Lighton Plaza Tower, I, & II, provided there is no
default, may be extended once for a four (4) month period to April 15, 2007
at the current mortgage rate.
Mortgage Loan No. 3, 7799 Leesburg Pike, provided there is no default, may
be extended once for a four (4) month period to May 1, 2009 on a 13-year
amortization at 7.88% or 400 basis points over the yield on or around a
1/1/2009 Treasury Bill maturing on or around 05/01/09. The choice of
Treasury Bill shall be at Lenders sole discretion.
Mortgage Loan No. 83, 575 Redwood, may be extended three times for one (1)
month periods at the greater of the current mortgage rate or the rate
established by the Lender considering the economics of the loan at that
time. The extension will only be granted upon fulfillment of certain
additional requirements, including a $4,000 fee per extension.
5 The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related note.
6 Mortgage Loan Nos. 24, 10900 Research Boulevard, and 74, Lyon Village
Shopping Center, are subject to a ground lease on the subject properties.
However, in each case, the related fee-owner is a party to the mortgage and
has subordinated its interest. The loans are disclosed as fee simple.
Mortgage Loan No. 13, 461 Fifth Avenue, is secured by a fee interest in the
real property only. Borrower, as landlord, ground leased the real property
to 461 Fifth Avenue Associates who owns the improvements consisting of a
multi-tenanted office building.
II-14
<PAGE>
FOOTNOTES TO APPENDIX II
Mortgage Loan No. 93, Home Depot Land, is secured by a fee interest in the
real property only. Borrower, as landlord, ground leased the real property
to Home Depot USA, Inc. who owns the improvements consisting of a retail
building that is occupied entirely by Home Depot.
7 Mortgage Loan No. 13, 461 5th Avenue, requires monthly payments of interest
only until its scheduled maturity.
Mortgage Loan No. 1, Lighton Plaza Tower, I and II, provides for monthly
payments of interest only until January 15, 2002, and thereafter provides
for monthly payments of interest and principal based on a 360 month
amortization term. The monthly payment used to calculate the DSCR for this
Mortgage Loan reflects only the monthly interest payment.
Mortgage Loan Nos. 35, Wheelersburg Lowes, and 36, Burlington Lowes, pay
interest in advance.
8 Implied DSCR is based on an assumed constant of 9.0%, as defined herein.
9 The Market Value for the Mortgage Loans as of September 1, 2000 was
calculated according to the methodology described in this Prospectus
Supplement using a capitalization rate applied to the underwritten net
operating income of such mortgaged property or properties. Capitalization
rates were determined by a) third party market studies conducted on or
after June 15, 2000, or b) internal valuations were prepared by Seller's
underwriters on the basis of a discounted cash flow analysis, resulting in
an implied capitalization rate. A "Yes" in the Market Study column
indicates that a capitalization rate from a third party market study was
used to calculate the Market Value.
With respect to Mortgage Loan No. 54, 20559, 20611 & 20621 Prairie Street,
the Market Value was determined by an third party appraisal dated November
22, 1999.
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 executed lease or occupancy report. "Percent Leased
as of Date" indicates the date as of which "Percent Leased" was determined
based on such information.
11 Largest Tenant refers to the tenant that represents the greatest percentage
of the total square footage at the subject property.
With respect to Mortgage Loan No. 86, Walgreens/Payless, the largest
tenant, Walgreens, has a 60 year lease commencing on January 1, 1996, but
has an option to terminate every five years starting in year 20 through
year 50.
II-15
<PAGE>
FOOTNOTES TO APPENDIX II
12 With respect to Mortgage Loans that have a Due Date (inclusive of any grace
periods) on or after the Determination Date, the master servicer is
required to make advances of scheduled loan payments, to the extent such
payment is not received from the applicable borrower by the Determination
Date. Advances made in respect of the aforementioned loans, will not begin
to accrue interest until a date which is the later of such mortgage loan's
due date or the expiration of any applicable grace period.
13 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.
14 The "Prepayment Code" includes the number of loan payments from the first
Due Date to the stated maturity. "YM" represents yield maintenance. "YM1"
represents the greater of the product of the applicable yield maintenance
formula or one percent of the outstanding principal balance prepaid,
respectively. "Open" represents the number of payments, including the
maturity date, at which principal payments are permitted without payment of
a Yield Maintenance premium. For each Mortgage Loan, the number set forth
under the category of "Prepayment Code" represents the number of payments
in the "Original Term to Maturity" for which such provision applies.
With respect to Mortgage Loan No. 23, 4600, 4650 & 4680 Olson Memorial
Highway, the "Open" period was at the beginning of the loan term and has
since expired.
Mortgage Loan No. 85, Harris Teeter, has the right to make one partial
prepayment in the amount of not less than $150,000 each calendar year with
a make whole premium of the greater of yield maintenance or 1%.
15 "Yes" indicates that the Mortgage Loan conforms to the Standard Yield
Maintenance Language, as detailed below. "No" indicates that there is an
Exception to the Standard Language.
16 There are twenty-eight different Yield Maintenance Exceptions to the
Standard Language. The different Exceptions are referenced by the letters
"A", "B", "C", "D", "E", "F", "G", "H", "I", "J", "K", "L", "M", "N", "O",
"P", "Q", "R", "S", "T", "U", "V", "W", "X", "Y", "Z", "Aa" and "Bb".
Summaries for the twenty-eight exceptions are listed beginning on page
II-17
17 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
STANDARD YIELD MAINTENANCE LANGUAGE
LOAN PREPAYMENT. Borrower may not prepay any principal of the Note prior to
the Maturity Date, except that Borrower may prepay the Loan, upon [twenty
(20)] [forty-five (45)][thirty (30] [sixty (60)] days' prior written notice
to the Lender, in full, but not in part, by paying all principal and
interest to the date of prepayment, along with all other Indebtedness then
due, and upon payment of a "Make Whole Premium." The Make Whole Premium
shall be the greater of one percent (1%) of the principal amount to be
prepaid or a premium calculated as provided in subparagraphs (i) through
(iii) below:
(i) Determine "Reinvestment Yield." The Reinvestment Yield will be
equal to the yield on the U.S. Treasury Issue** ("Primary Issue")
* published [one] [two] week[s] prior to the date of prepayment
and converted to an equivalent monthly compounded nominal yield.
[*In the event there is not market activity involving the Primary
Issue at the time of prepayment, the Lender shall choose a
comparable Treasury Bond, Note or Bill ("Secondary Issue") which
the Lender deems to be similar to the Primary Issue's
characteristics (i.e., rate, remaining time to maturity, yield).
and/or
**At this time there is not a U.S. Treasury Issue for this
prepayment period. At the time of prepayment, Lender shall select
in its sole and absolute discretion a U.S. Treasury Issue with
similar remaining time to maturity as the Note.]
(ii) Calculate the "Present Value of the Loan." The Present Value of
the Loan is the present value of the payments to be made in
accordance with the Note (all installment payments and any
remaining payment due on the Maturity Date) discounted at the
Reinvestment Yield for the number of months remaining from the
date of prepayment to the Maturity Date.
(iii)Subtract the amount of the prepaid proceeds from the Present
Value of the Loan as of the date of prepayment. Any resulting
positive differential shall be the premium.
Provided no default exists under the Loan Documents, the above premium
shall not be applicable to a prepayment resulting from Lender's election to
require insurance loss proceeds or condemnation awards to be applied to a
payment of principal.
EXCEPTIONS TO THE STANDARD YIELD MAINTENANCE LANGUAGE
There are twenty-eight different Yield Maintenance Exceptions to the
Standard Language. The different Exceptions are referenced by the letters
"A", "B", "C", "D", "E", "F", "G", "H", "I", "J", "K", "L", "M", "N", "O",
"P", "Q","R", "S", "T", "U", "V", "W", "X", "Y", "Z", "Aa" and "Bb" Each
Mortgage Loan which contains prepayment language which is an exception to
the Standard Yield Maintenance Language (see above), references the
applicable exception printed below in the column titled "Yield Maintenance
Exception".
A In the event the Loan is voluntarily prepaid, the Make Whole Premium shall
not be subject to the one percent (1%) minimum.
B If the Reinvestment Yield is greater than the then applicable Note rate, no
premium will be due.
C In the event the Loan is voluntarily prepaid commencing on the date the
237th payment is due and continuing through Maturity, the Make Whole
Premium shall not be subject to the one percent (1%) minimum.
D In the event the Loan is voluntarily prepaid on or after a date which is
three (3) months prior to the Maturity Date, the Make Whole Premium shall
not be subject to the one percent (1%) minimum.
II-17
<PAGE>
FOOTNOTES TO APPENDIX II
STANDARD YIELD MAINTENANCE LANGUAGE
E Borrower shall have the right to make one partial prepayment in an amount
no less than $150,000 each calendar year throughout the term of the loan
with sixty (60) days written notice to the Lender provided no default
exists. Any such partial prepayments will be subject to the Make Whole
Premium, including the one percent (1%) minimum.
F In the event the Mortgage Loan is voluntarily prepaid on or after the date
which is three (3) months prior to the Maturity Date, no Make Whole Premium
shall be due.
G In the event the Loan is voluntarily prepaid on or after a date which is
one hundred twenty (120) days prior to the Maturity Date, the Make Whole
Premium shall not be subject to the one percent (1%) minimum.
H The Loan is part of a crossed pool containing four (4) other notes (the
"Other Notes") and prepayment is subject to the following additional
requirements:
(i) prior to such prepayment, the loan-to-value ratio of the loan
evidenced by this Note and the loans evidenced by the Other
Notes collectively is no greater than 75% and the debt service
coverage ratio on the loan evidenced by this Note and the loans
evidenced by the Other Notes collectively is equal to or
greater than 1.20x, and
(ii) the loan-to-value ratio of loans evidenced by the Other Notes
collectively shall be no greater than the loan-to-value ratio
of the loan evidenced by this Note and the loans evidenced by
the Other Notes collectively, immediately preceding the
prepayment, and
(iii) immediately following such prepayment the loans evidenced by
the Other Notes must collectively provide a debt service
coverage ratio of 1.20x, and
(iv) all leases on the properties that serve as security for the
Other Notes (except for certain lease(s) specified in the Note)
must have a minimum of 24 months remaining in the term of the
lease; and
(v) the Lender shall receive all documentation necessary for it to
determine whether the undersigned has satisfied these
conditions not less than 60 days prior to such prepayment date,
which documentation shall be subject to review and approval by
the Lender; and
(vi) the Borrower shall pay the Lender a reasonable fee for the
handling of such prepayment on or before the date of the
prepayment.
I The Make Whole Premium shall be the greater of one percent (1%) of the
principal amount to be prepaid or the excess, if any, of:
(i) the aggregate present value as of the date of payment or
prepayment notice as set forth above (hereinafter, the "Payment
Date") of each dollar of principal being paid or prepaid
(taking into account the application of such prepayment as set
forth herein) and the amount of interest (exclusive of interest
accrued to the Payment Date) that would have been payable in
respect of such dollar of principal being paid or prepaid if
such payment or prepayment had not been made, determined by
discounting such amounts monthly at a rate which is equal to
the "Treasury Rate" from the due date of this Note, over
(ii) 100% of the principal amount being paid or prepaid.
II-18
<PAGE>
FOOTNOTES TO APPENDIX II
STANDARD YIELD MAINTENANCE LANGUAGE
The "Treasury Rate" will be equal to the arithmetic mean of the
yields to maturity converted to a monthly equivalent of the
United States Treasury obligations with a constant maturity (as
compiled by and published in the United States Federal Reserve
Bulletin [H.R. 15] or its successor publication for each of the
two weeks immediately preceding the Payment Date" most nearly
equal to the remaining "Weighted Average Life to Maturity" of
this Note as of the Payment Date. If the yields referred to in
the preceding sentence shall not have been so published, the
yields corresponding to the Payment Date shall be calculated on
the basis of the arithmetic mean of the arithmetic means of the
secondary market ask rates, as of approximately 3:30P.M., New
York City time, on the last business days of each of the two
weeks preceding the Payment Date, for the actively traded U.S.
Treasury security or securities with a maturity or maturities
most closely corresponding to the "Weighted Average Life to
Maturity", as reported faith by the Lender. If no maturity
exactly corresponding to such remaining "Weighted Average Life
to Maturity" should appear therein, yields for the next longer
and the next shorter published maturities shall be calculated
pursuant to the foregoing sentence and the Treasury Rate shall
be interpolated from such yields on a straight-line basis
(rounding to the nearest month).
The "Weighted Average Life to Maturity" with respect to this
Note means, at the Payment Date, the number of years obtained
by dividing the "Remaining Dollar-years" of this Note by the
outstanding principal amount hereof. "Remaining Dollar-years"
means the sum of the product obtained by multiplying (A) the
amount of each then remaining required principal repayment
(including repayment of any principal at the due date of this
Note) by (B) the number of years (rounded to the nearest
one-twelfth) which will elapse between the Payment Date and the
date such required payment is due.
J The Reinvestment Yield will be equal to the yield on the U.S. Treasury
Issue ("Primary Issue") published two weeks prior to the date of prepayment
and converted to an equivalent monthly compounded nominal yield plus fifty
(50) basis points.
K No Prepayment is allowed until after December 15, 2003.
L No Prepayment is allowed until on or after June 10, 2001.
M Make Whole Premium shall not exceed the maximum amount which is allowable
under Texas law limiting the amount of interest which may be contracted
for, charged or received after considering all other amounts constituting
or deemed to constitute interest.
N No Prepayment is allowed until on or after October 1, 2011.
O In the event the Loan is voluntarily prepaid, Lender agrees that 25 basis
points shall be added to the Treasury Rate when calculating the Make Whole
Premium.
P No Prepayment is allowed until on or after April 15, 2002.
Q No Prepayment is allowed until on or after June 1, 2007.
R In the event the Loan is voluntarily prepaid on or after a date which is
two (2) months prior to the Maturity Date, the Make Whole Premium shall not
be subject to the one percent (1%) minimum.
II-19
<PAGE>
FOOTNOTES TO APPENDIX II
STANDARD YIELD MAINTENANCE LANGUAGE
S In the event the Loan is voluntarily prepaid on or after the date which is
six (6) months prior to the Maturity Date, the Make Whole Premium shall not
be subject to a one percent (1%) minimum.
T In the event the Loan is voluntarily prepaid on or after the date which is
two (2) months prior to the Maturity Date, no Make Whole Premium shall be
due.
U In the event the Loan is voluntarily prepaid on or after the date which is
one (1) year prior to the Maturity Date, the Make Whole Premium shall not
be subject to a one percent (1%) minimum.
V No Prepayment is allowed until on or after April 1, 2012.
W At the time of prepayment, Lender is expressly prohibited from selecting an
inflation-indexed security as the Primary Issue.
X In the event the Loan is voluntarily prepaid on or after the date which is
one (1) month prior to the Maturity Date, the Make Whole Premium shall not
be subject to the one percent (1%) minimum.
Y The Reinvestment Yield will be equal to the yield on a U.S. Treasury Issue
selected by Lender, published one week prior to the date of prepayment,
most equal in maturity to the remaining "Weighted Average Life to Maturity"
(defined below) as of the date of prepayment. The published yield shall be
converted to an equivalent monthly compounded nominal yield.
The "Weighted Average Life to Maturity" with respect to this Note means, at
the date of prepayment, the number of years obtained by dividing the
"Remaining Dollar-years" of this Note by the outstanding principal amount
hereof. "Remaining Dollar-years" means the sum of the product obtained by
multiplying (A) the amount of each then remaining required principal
repayment (including repayment of any principal at the due date of this
Note) by (B) the number of years (rounded to the nearest one-twelfth) which
will elapse between the date of prepayment and the date such required
payment is due.
Z The Reinvestment Yield will be equal to the yield on the U.S. Treasury
Issue ("Primary Issue") published one week prior to the date of prepayment
plus 25 basis points and converted to an equivalent monthly compounded
nominal yield.
AA No prepayment is allowed until on or after June 15, 2004
BB No prepayment is allowed until on or after July 1, 2007.
II-20
<PAGE>
APPENDIX III
SIGNIFICANT LOAN SUMMARIES
Loan No. 1 -- Lighton Plaza Loan and Property
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $30,500,000 Property Type: Office
Loan Type: Interest only until Location: Overland Park, KS
2/15/2002; Principal Year Built/Renovated: 1987-1991/NA
& Interest
thereafter; Balloon
Origination Date: 12/12/1996 Square Footage: 475,804
Maturity Date: 12/15/2006 Cut-Off Date Balance/Sq. Ft.: $64.10
Mortgage Rate: 7.190% Appraisal Value: $66,700,000
Annual Debt Service: $2,192,949.96 Cut-Off Date LTV: 45.7%
DSCR: 2.22x Balloon LTV: 43.2%
Implied DSCR: 1.78x
Underwritten Cash Flow: $4,872,914 Percentage Leased: 92.9%
Balance at Maturity: $28,835,973 Percentage Leased as of Date: 6/30/2000
--------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The Lighton Plaza Loan (the "Lighton Plaza Loan") is secured by a first mortgage
on two six-story office buildings and one thirteen story suburban office
building, comprising a total of 475,804 square feet, located in Overland Park,
Kansas (the "Lighton Plaza Property"). The Lighton Plaza Loan was originated by
Principal Life Insurance Company on December 12, 1996.
THE BORROWER
------------
The borrower is ASP Lighton, LLC, a Delaware limited liability company (the
"Lighton Plaza Borrower"). The Lighton Plaza Borrower is 100% owned by ASP
Financing, L.L.C., a Delaware limited liability company. ASP Financing, L.L.C.
is controlled, through intermediate entities, by Westbrook Real Estate Fund III,
L.P., a real estate investment vehicle sponsored by Westbrook Real Estate
Partners Management III, L.L.C. (the "General Partner" and, collectively with
its affiliates, "Westbrook"). Westbrook's investments range in size from $5
million to over $1 billion in purchase price and aggregate $8.9 billion at peak
capitalization and include office, retail, industrial, apartments, hotels,
resorts, residential lot developments, operating companies, real estate
investment trusts, high yield debt securities, and commercial mortgage-backed
securities investments.
SECURITY
--------
The Lighton Plaza Loan is secured by a Mortgage and Security Agreement,
Assignment of Rents and Leases and certain additional security documents (the
"Lighton Plaza Financing Documents"). The Mortgage and Security Agreement is a
first lien on the Lighton Plaza Borrower's fee interest in the Lighton Plaza
Property. The Lighton Plaza Loan is non-recourse to the Lighton Plaza Borrower,
subject to certain limited exceptions. The Lighton Plaza Borrower is also
required to provide insurance against environmental hazards, as may be
reasonably required by lender. Lender obtained such a policy in connection with
the Lighton Plaza Borrower's assumption of the loan in 1988 and the lender's
release of Allstate Insurance Company (a member of the prior borrower) from
liability under an environmental indemnity agreement. The environmental
insurance policy was not required in connection with any known environmental
issues with respect to the Lighton Plaza Property.
III-1
<PAGE>
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.190% per annum. The Lighton Plaza Loan
requires monthly payments interest of $182,745.83 until January 15, 2002.
Beginning on February 15, 2002, the Lighton Plaza Loan requires monthly payments
of principal and interest of $206,823.97 until December 15, 2006, at which time
all unpaid principal and accrued but unpaid interest is due. The Lighton Plaza
Loan accrues interest computed on the basis of a 360-day year comprised of
twelve 30-day months. The Lighton Plaza Borrower has the right to extend the
maturity date for four (4) periods of 30 days each at the then-existing interest
rate (each such period, an "Extension Period").
PREPAYMENT
----------
The Lighton Plaza Loan may be prepaid in whole, but not in part, on any business
day during the term of the Lighton Plaza Loan, with at least 60 days prior
written notice. Prepayment is conditioned upon payment of a prepayment premium
calculated on the basis of the greater of (i) a yield maintenance premium
calculated by reference to U.S. Treasury obligations plus fifty (50) basis
points and (ii) one percent (1%) of the amount prepaid. Beginning on January 1,
2005, the prepayment premium will not be subject to the one percent (1%)
minimum. If the Lighton Plaza Borrower repays the Lighton Plaza Loan during any
Extension Period, no prepayment premium is payable by the Lighton Plaza
Borrower.
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 2% late fee on overdue installments unless the failure to make the
payment was not the fault of the Lighton Plaza Borrower. The Lighton Plaza Loan
accrues interest at the mortgage interest rate plus 2% per annum while the
Lighton Plaza Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The Lighton Plaza Loan provides that it will become immediately due and payable
upon the transfer of the Lighton Plaza Property or any ownership interest in the
Lighton Plaza Borrower, except in connection with any of the permitted transfers
described below.
The Lighton Plaza Financing Documents permit a single transfer of the Lighton
Plaza Property and assumption of the Lighton Plaza Borrower's obligations under
the Lighton Plaza Financing Documents provided that: (i) lender approves the
proposed purchaser and (ii) lender receives an assumption fee of seventy-five
(75) basis points on the outstanding principal balance of the note and a
reasonable processing fee for handling the transaction.
The Lighton Plaza Financing Documents also permit the equity owners of the
Lighton Plaza Borrower to pledge all of their respective membership interests in
connection with a loan to the Lighton Plaza Borrower as described further in the
paragraph entitled "Subordinated/Other Debt" below.
SUBORDINATED/OTHER DEBT
-----------------------
Generally, subordinate indebtedness secured by the Lighton Plaza Property and
other encumbrances are prohibited by the Lighton Plaza Financing Documents.
Notwithstanding the foregoing, the members of the Lighton Plaza Borrower may (a)
pledge all of such members' membership interests in the Lighton Plaza Borrower
to Midland Loan Services, Inc. and its successors and assigns (including any
servicers of and/or participants in the loan secured thereby) as the holder of a
pledge and security agreement ("Pledge Agreement") entered into to secure a loan
to the Lighton Plaza Borrower (the holder of the Pledge Agreement hereinafter
referred to as the "Pledgee") and (b) any transfer resulting from the exercise
by Pledgee of its remedies under the Pledge Agreement. The Lighton Plaza
Financing Documents do not prohibit the Lighton Plaza Borrower from incurring
unsecured indebtedness.
THE PROPERTY
------------
The Lighton Plaza Property consists of two (2) six story suburban office
buildings (Lighton Plaza I and Lighton Plaza II) and one (1) thirteen (13) story
suburban office building (Lighton Tower) comprising a total of 475,804
III-2
<PAGE>
square feet located in Overland Park, Kansas. The Lighton Plaza Property is
situated in southern Johnson County, Kansas, approximately 12 miles from the
Kansas City central business district. The Lighton Plaza Property is located
along the College Boulevard office corridor at 7300-7500 College Boulevard, just
south of Interstate 435 and west of Metcalf Avenue in Overland Park, Kansas. The
buildings were constructed from 1987 through 1991. Lighton Plaza I contains two
elevators, Lighton Plaza II contains three elevators and Lighton Tower contains
six elevators. Parking is provided for 1,796 vehicles at a ratio of 3.80 spaces
per 1,000 square feet. The Lighton Plaza Property buildings were constructed of
structural steel frames, with exterior walls made of one-inch thick Taivassallo
polished granite over a 5-inch precast concrete slab.
As of June 30, 2000, 92.9% of the net rentable space of the Lighton Plaza
Property was leased. The Lighton Plaza Property is leased in part to CNA
Insurance Company (19.1% of net rentable space), US Central Credit Union (14.2%
of net rentable space) and Travelers Insurance Company (8.3% of net rentable
space).
ESCROWS/RESERVES
----------------
The Lighton Plaza Financing Documents require monthly escrow deposits in amounts
sufficient to pay taxes when due. Upon an Event of Default monthly escrow
deposits for insurance premiums are required.
III-3
<PAGE>
Loan No. 2 -- Woodmen Retail Loan and Property
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $23,662,833 Property Type: Retail
Loan Type: Principal & Location: Colorado Springs, CO
Interest; Balloon Year Built/Renovated: 1998-9/NA
Origination Date: 4/19/1999 Square Footage: 284,427
Maturity Date: 5/15/2009 Cut-Off Date Balance/Sq. Ft.: $83.19
Mortgage Rate: 6.870% Appraisal Value: $33,500,000
Annual Debt Service: $1,890,992.88 Cut-Off Date LTV: 70.6%
DSCR: 1.49x Balloon LTV: 61.4%
Implied DSCR: 1.33x
Underwritten Cash Flow: $2,822,285 Percentage Leased: 100.0%
Balance at Maturity: $20,571,366 Percentage Leased as of Date: 12/31/1999
-----------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The Woodmen Retail Loan (the "Woodmen Retail Loan") is secured by a first
mortgage on nine (9), single-story buildings comprising a 284,427 square foot
community shopping center located at the northwest corner of Woodmen Road and
Academy Boulevard in Colorado Springs, Colorado (the "Woodmen Retail Property").
The Woodmen Retail Loan was originated by Principal Life Insurance Company on
April 19, 1999.
THE BORROWER
------------
The borrower is Woodmen Retail Center LLC, a Colorado limited liability company
(the "Woodmen Retail Borrower"). The Woodmen Retail Borrower is owned by its
sole member, RD Woodmen, LLC ("RD"), a Colorado limited liability company. RD is
owned by Jay Rosenbaum and Warren Dean, each owning a 50% membership interest.
Jay Rosenbaum and Warren Dean have been in the commercial real estate business
since 1979 and have developed more than 15 retail centers.
SECURITY
--------
The Woodmen Retail Loan is secured by a Deed of Trust, Security Agreement and
Assignment of Rents and certain additional security documents (the "Woodmen
Retail Financing Documents"). The Deed of Trust is a first lien on the Woodmen
Retail Borrower's fee interest in the Woodmen Retail Property. The Woodmen
Retail Loan is non-recourse to the Woodmen Retail Borrower, subject to certain
limited exceptions. Jay Rosenbaum and Warren Dean have each executed a guaranty
of the Woodmen Retail Borrower's recourse obligations with respect to fraud,
misrepresentation and environmental matters.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 6.870% per annum. The Woodmen Retail Loan
requires monthly payments of principal and interest of $157,582.74 until May 15,
2009, at which time all unpaid principal and accrued but unpaid interest is due.
The Woodmen Retail Loan accrues interest computed on the basis of a 360-day year
composed of twelve 30-day months.
PREPAYMENT
----------
The Woodmen Retail Loan may be prepaid in whole, but not in part, on any
business day during the term of the Woodmen Retail Loan, with at least 30 days
prior written notice on or after June 15, 2004. Prepayment is conditioned upon
payment of a prepayment premium calculated on the basis of the greater of a
yield maintenance premium calculated by reference to U.S. Treasury obligations
and one percent (1%) of the amount prepaid.
III-4
<PAGE>
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a late fee on overdue installments of 2% on the amount overdue. The
Woodmen Retail Loan accrues interest at the mortgage interest rate plus 2% per
annum while the Woodmen Retail Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The Woodmen Retail Loan provides that it will become immediately due and payable
upon the transfer of the Woodmen Retail Property or any ownership interest in
the Woodmen Retail Borrower, except in connection with any of the permitted
transfers described below.
Upon the payment of an assumption fee in the amount equal to the greater of one
percent (1%) of the then outstanding principal balance of the Woodmen Retail
Loan or $15,000, the Woodmen Retail Borrower may transfer its ownership interest
in the Woodmen Retail Property one (1) time. Such transfer is permitted only
upon the satisfaction of certain conditions specified in the Woodmen Retail
Financing Documents, including the condition that the proposed transferee must
reasonably satisfy the lender's underwriting standards for proposed transferees.
The Woodmen Retail Financing Documents also permit the transfer of all or part
of the membership interests in RD to immediate family members of Jay Rosenbaum
or Warren Dean or to trusts established for the benefit of such immediate family
members provided: (i) Rosenbaum and Dean together retain a 51% ownership
interest in, and retain management and control of, RD and RD retains 100%
ownership of, and retains management and control as the managing member of, the
Woodmen Retail Borrower; (ii) Rosenbaum, Dean or an experienced individual or
entity acceptable to lender continues to manage and lease the Woodmen Retail
Property; (iii) lender receives at least ninety (90) days prior written notice
of each such transfer; (iv) lender receives a reasonable fee for handling each
such transfer; and (v) certain other miscellaneous conditions are met.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the Woodmen Retail Property and other
encumbrances are prohibited by the Woodmen Retail Financing Documents. The
Woodmen Retail Financing Documents do not prohibit the Woodmen Retail Borrower
from incurring unsecured indebtedness.
THE PROPERTY
------------
The Woodmen Retail Property consists of a total of 284,427 square feet of net
rentable space in nine (9), one-story buildings comprising a community shopping
center located at the northwest corner of Woodmen Road and Academy Boulevard in
Colorado Springs, Colorado. The center was completed in late 1998/early 1999.
Parking is provided at a ratio of 4.77 spaces per 1,000 square feet.
A General Improvement District has been established by the City of Colorado
Springs with a [mil levy tax] expected to be allocated to the Woodmen Retail
Property for upcoming improvements to the Woodmen Road/Academy Boulevard
intersection. The tenants were notified of the existence of the additional tax
and have paid their initial portions in 1999.
As of December 31, 1999, the Woodmen Retail Property was 100% leased. The
largest tenant is Sam's Club, an affiliate of Wal-Mart Stores, Inc., which
occupies 128,408 square feet (45.1% of net rentable space) under a lease
expiring in January 31, 2019. Other major tenants include Bed, Bath & Beyond,
which occupies 38,000 square feet (13.4% of net rentable space) under a lease
expiring on January 31, 2014 and Office Depot, which occupies 31,372 square feet
(11.0% of net rentable space) under a lease expiring on November 30, 2013.
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves related to the Woodmen Retail Loan.
Lender has the right, however, to require the Woodmen Retail Borrower to make
monthly reserve deposits for taxes and insurance if an event of
III-5
<PAGE>
default under the Woodmen Retail Loan occurs or there is a material adverse
change in the value of the Woodmen Retail Property, as reasonably determined by
lender.
III-6
<PAGE>
Loan No. 3 -- 7799 Leesburg Pike Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $23,601,958 Property Type: Office
Loan Type: Principal & Interest; Location: McLean, VA
Balloon Year Built/Renovated: 1986/NA
Origination Date: 12/20/1996 Square Footage: 354,018
Maturity Date: 1/01/2009 Cut-Off Date Balance/Sq. Ft.: $66.67
Mortgage Rate: 7.880% Appraisal Value: $65,700,000
Annual Debt Service: $2,291,651.16 Cut-Off Date LTV: 35.9%
DSCR: 2.07x Balloon LTV: 28.3%
Implied DSCR: 2.23x
Underwritten Cash Flow: $4,739,802 Percentage Leased: 99.2%
Balance at Maturity: $18,606,114 Percentage Leased as of Date: 12/31/1999
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The 7799 Leesburg Pike Loan (the "Leesburg Pike Loan") is secured by a first
mortgage on two (2) eleven story suburban office buildings comprising a total of
354,018 square feet located in McLean, Virginia (the "Leesburg Pike Property").
The Leesburg Pike Loan was originated by Principal Life Insurance Company on
December 20, 1996.
THE BORROWER
------------
The borrower is 7799 Leesburg Pike, L.P., a Virginia limited partnership (the
"Leesburg Pike Borrower"). Lerner Enterprises Limited Partnership, a Maryland
limited partnership ("Lerner Enterprises") is the general partner of the
Leesburg Pike Borrower and owns 80.25% of the Leesburg Pike Borrower. The
limited partners and their respective ownership percentages are as follows:
Lenkin Associates Limited Partnership owns 10.0% and One Huff Court Associates
Limited Partnership owns 9.75%.
SECURITY
--------
The Leesburg Pike Loan is secured by a Deed of Trust, Assignment of Rents and
Leases, and certain additional security documents (the "Leesburg Pike Financing
Documents"). The Deed of Trust is a first lien on the Leesburg Pike Borrower's
fee interest in the Leesburg Pike Property. The Leesburg Pike Loan is
non-recourse to the Leesburg Pike Borrower, subject to certain limited
exceptions.
GUARANTY
--------
Lenkin Associates, L.P., a Maryland limited partnership, has provided a guaranty
of the Leesburg Pike Loan equivalent to the difference between $6,825,000 and
the proceeds payable to lender upon sale or foreclosure.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.880% per annum. The Leesburg Pike Loan
requires monthly payments of principal and interest of $190,970.93 until January
1, 2009, at which time all unpaid principal and accrued but unpaid interest is
due. Upon the request of the Leesburg Pike Borrower, the maturity date may be
extended to May 1, 2009 whereupon monthly principal and interest payments shall
be paid based upon a thirteen (13) year amortization schedule at an interest
rate equal to the greater of (i) 7.880% or (ii) 400 basis points over the yield
on or about January 1, 2009 of a U.S. Treasury Bill selected by lender that will
mature on or about May 1, 2009. The Leesburg Pike Loan accrues interest computed
on the basis of a 360-day year composed of twelve 30-day months.
PREPAYMENT
----------
The Leesburg Pike Loan may be prepaid in whole, but not in part, on any business
day during the term of the Leesburg Pike Loan, with at least 60 days prior
written notice. Prepayment is conditioned upon payment of a make
III-7
<PAGE>
whole premium equal to the greater of (i) 1% of the amount prepaid, or (ii) such
amount calculated by reference to U.S. Treasury obligations maturing on January
1, 2004 plus fifty (50) basis points with reference to the amount prepaid. The
calculation in clause (ii) shall apply during the six (6) months prior to
maturity. No make whole premium shall be due in the event the Leesburg Pike
Borrower elects to extend the maturity date of the Leesburg Pike Loan by four
(4) months to May 1, 2009.
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 4% late fee on installments overdue for a period exceeding ten (10)
days. The Leesburg Pike Loan accrues interest at the mortgage interest rate plus
4% per annum while the Leesburg Pike Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The Leesburg Pike Loan provides that it will become immediately due and payable
upon the transfer of the Leesburg Pike Property or any ownership interest in the
Leesburg Pike Borrower, except in connection with any permitted transfer
described below.
The Leesburg Pike Financing Documents permit transfers of (i) the general
partnership interests and limited partnership interests in the Leesburg Pike
Borrower or (ii) limited or general partnership interests of any partnership
that is a partner of the Leesburg Pike Borrower, provided that Lerner
Enterprises (A) remains a general partner of the Leesburg Pike Borrower, (B) is
controlled throughout the term of the loan directly or indirectly by Theodore N.
Lerner, Annette M. Lerner, the descendents of Theodore N. Lerner and Annette M.
Lerner, or trusts for the benefit of the descendents of Theodore N. Lerner and
Annette M. Lerner, (C) does not decrease its general partner interest in the
Leesburg Pike Borrower below 30%, and (D) all relevant information and
documentation is provided to lender.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the Leesburg Pike Property and other
encumbrances are prohibited by the Leesburg Pike Financing Documents. The
Leesburg Pike Financing Documents do not prohibit the Leesburg Pike Borrower
from incurring unsecured indebtedness.
THE PROPERTY
------------
The Leesburg Pike Property consists of two eleven story suburban office
buildings comprising a total of 354,018 square feet located in McLean, Virginia.
The Leesburg Pike Property is situated in the Tysons Corner submarket of
Northern Virginia at the southeast quadrant of the full cloverleaf intersection
of I-495 (the Capital Beltway) and Leesburg Pike (Route 7). Access to the
Leesburg Pike Property is provided directly from the Capital Beltway via Exit
10-A ramp, northbound, or from either direction on Leesburg Pike. The buildings
were constructed in 1986. Each building contains four (4) passenger elevators
and one (1) freight elevator. Parking is provided for 1,279 vehicles which is a
ratio of 3.61 spaces per 1,000 square feet, by a combination of a five-level
exterior deck, a three-level subsurface garage and surface lots around the
building perimeter. The Leesburg Pike Property is a concrete structure with
precast concrete and glass exterior. The two buildings share a three-bay truck
dock. Amenities include a cafeteria, fitness center, bank branch with drive
through banking and ATM facilities.
Pursuant to three (3) separate leases, 27.4% of the net rentable space of the
Leesburg Pike Property is leased to the United States General Services
Administration. The first such lease, with respect to 20.4% of the net rentable
space, will expire on July 14, 2002; the second such lease, with respect to 4.8%
of the GLA, will expire on April 30, 2003 and the third such lease, with respect
to 2.4% of the net rentable space, will expire on July 14, 2003. Signet Bank
leases 16.2% of the net rentable space pursuant to a sublease from First Union
Bank expiring August 31, 2005. In addition, 12.1% of the net rentable space is
leased to Winstar Wireless under five (5) separate leases expiring December 31,
2006, and 11.9% of the net rentable space is leased to Orkand Corporation
expiring May 31, 2006.
III-8
<PAGE>
ESCROWS/RESERVES
----------------
The Leesburg Pike Financing Documents require monthly escrow deposits in amounts
sufficient to pay taxes when due and upon an Event of Default, monthly escrow
deposits shall be made for insurance premiums.
BANKRUPTCY
----------
The Lerner Enterprises affiliate that owned the Leesburg Property (the "Original
Leesburg Borrower") was subject to bankruptcy in the early 1990's. The Original
Leesburg Borrower filed for bankruptcy in December 1993. The Original Leesburg
Borrower and the then-applicable mortgage lender presented a consensual plan to
the bankruptcy court that was approved in 1994 and closed in February 1995. As
of the date of the bankruptcy the Leesburg Property was encumbered by a mortgage
loan of approximately $50 million. Principal Life Insurance Company originated a
loan on this property in 1996 for $25 million secured by a first mortgage lien
on this property.
THREE FLINT HILL
----------------
A loan secured by a mortgage lien on this property was made to a Lerner
Enterprises affiliate (the "Flint Hill Borrower") by Prudential. The property, a
160,000 square foot office building (the "Flint Hill Property") had been 100%
occupied by AT&T, but was vacated in October 1994 as part of AT&T's
consolidation. As a result of the vacancy, Prudential placed the loan in default
and commenced foreclosure. In response, the Flint Hill Borrower filed for
bankruptcy in November, 1994. The Flint Hill Borrower, who with affiliated
partnerships, owned the other two office buildings in the park in which the
Flint Hill Property is located.
After the bankruptcy filing the Flint Hill Borrower continued to operate the
Flint Hill Property. The Flint Hill Borrower paid operating expenses with
unencumbered funds and in the fourth quarter of 1995 it negotiated a lease for
100% of the building with Lora/Lockheed Corporation. The Flint Hill Borrower
invested $7 million for tenant improvements and other expenses associated with
the lease.
In the summer of 1997, the bankruptcy court confirmed a reorganization plan
proposed by Prudential. The Flint Hill Borrower appealed the court's decision,
but earlier this year, before the appeal was heard, Prudential and the Flint
Hill Borrower resolved their dispute.
OTHER LOANS
-----------
Lerner Enterprises is also a 51% owner of Reston North Point Village Limited
Partnership, a District of Columbia limited partnership (the "North Point
Village Center Borrower") which is the borrower under Loan No. 12, which is also
described in this Appendix III.
III-9
<PAGE>
Loan No. 4 - Liberty Square Shopping Center Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $20,184,323 Property Type: Retail
Loan Type: Principal & Interest; Location: Burlington, NJ
Balloon Year Built/Renovated: 1972/1992
Origination Date: 12/15/1997 Square Footage: 346,338
Maturity Date: 12/15/2017 Cut-Off Date Balance/Sq. Ft.: $58.28
Mortgage Rate: 7.970% Appraisal Value: $28,200,000
Annual Debt Service: $1,939,971.36 Cut-Off Date LTV: 71.6%
DSCR: 1.26x Balloon LTV: 28.7%
Implied DSCR: 1.35x
Underwritten Cash Flow: $2,445,123 Percentage Leased: 100.0%
Balance at Maturity: $8,086,636 Percentage Leased as of Date: 4/17/2000
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The Liberty Square Shopping Center Loan (the "Liberty Square Loan") is secured
by a first mortgage on a single story, 346,338 square foot community shopping
center located in southeastern Burlington Township, Burlington County, New
Jersey (the "Liberty Square Property"). The Liberty Square Property was
developed in two (2) phases, one in 1972 and the other in 1992. The Liberty
Square Loan was originated by Principal Life Insurance Company on December 15,
1997.
THE BORROWER
------------
The borrower is Midmall Resources Limited Partnership, a Delaware limited
partnership (the "Liberty Square Borrower"). The Liberty Square Borrower is
owned by Midmall Building Corp., its general partner owning a 1.01% partnership
interest, and the following limited partners: Robert Baker (51.66%), Richard
Baker (32.83%), Ellen Oshins (10%), FBO Ashley Baker Trust (2.5%) and John
Scala, Jr. (2%). The general partner is owned by Robert Baker and Richard Baker,
each owning a 50% interest. Robert Baker has an ownership interest in, and
manages, 90 commercial properties.
SECURITY
--------
The Liberty Square Loan is secured by a Mortgage and Security Agreement and
certain additional security documents (the "Liberty Square Financing
Documents"). The Mortgage is a first lien on the Liberty Square Borrower's fee
interest in the Liberty Square Property. The Liberty Square Loan is non-recourse
to the Liberty Square Borrower, subject to certain limited exceptions. Robert
Baker and Richard Baker have executed a joint and several guaranty of the
Liberty Square Borrower's recourse obligations with respect to fraud,
misrepresentation and environmental matters.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.970% per annum. The Liberty Square Loan
requires monthly payments of principal and interest of $161,664.28 until
December 15, 2017, at which time all unpaid principal and accrued but unpaid
interest is due. The Liberty Square Loan accrues interest computed on the basis
of a 360-day year composed of twelve 30-day months.
PREPAYMENT
----------
The Liberty Square Loan may be prepaid in whole, but not in part, on any
business day during the term of the Liberty Square Loan, with at least 60 days
prior written notice. Prepayment is conditioned upon payment of a prepayment
premium calculated on the basis of the greater of a yield maintenance premium
calculated by reference to U.S. Treasury obligations and 1% of the amount
prepaid.
III-10
<PAGE>
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 2% late fee on installments overdue for a period exceeding five days.
The Liberty Square Loan accrues interest at the mortgage interest rate plus 2%
per annum while the Liberty Square Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The Liberty Square Loan provides that it will become immediately due and payable
upon the transfer of the Liberty Square Property or any ownership interest in
the Liberty Square Borrower, except in connection with any of the permitted
transfers described below.
Upon the payment of an assumption fee in the amount of one percent (1%) of the
outstanding principal balance of the Liberty Square Loan, the Liberty Square
Borrower may make a one time transfer of its interests in the Liberty Square
Property. Such transfer is permitted only upon the satisfaction of certain
conditions specified in the Liberty Square Financing Documents, including that
the proposed transferee must reasonably satisfy the lender's underwriting
standards for proposed transferees.
The Liberty Square Financing Documents also permit the transfer of all or part
of the partnership interests in the Liberty Square Borrower provided that: (i)
Robert Baker and/or Richard Baker remain as president and retain at least a 50%
ownership interest in the general partner(s) of the Liberty Square Borrower;
(ii) Robert Baker, Richard Baker, an immediate family member of Robert Baker or
Richard Baker, or an experienced individual or entity acceptable to lender
continues to manage and lease the Liberty Square Property; (iii) lender receives
notice of such transfer within 30 days of its consummation, along with
appropriate documentation thereof; (iv) the guarantors of the Liberty Square
Borrower's recourse obligations for fraud, misrepresentation and environmental
matters reconfirm their obligations under the guaranty or an individual or
entity acceptable to lender assumes the obligations under the guaranty; and (v)
lender receives a reasonable fee for handling such transfer.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the Liberty Square Property and other
encumbrances are prohibited by the Liberty Square Financing Documents. The
Liberty Square Financing Documents do not prohibit the Liberty Square Borrower
from incurring unsecured indebtedness.
THE PROPERTY
------------
The Liberty Square Property consists of 346,338 square feet of net rentable
space in a one-story building comprising a community shopping center located in
southeastern Burlington Township, Burlington County, New Jersey. The Liberty
Square Property is located on Route 541 approximately 1/2 mile west of I-295 at
exit 47 and 1.5 miles west of the New Jersey Turnpike at exit 5. Phase I of the
center was completed in 1972 and phase II was completed in 1992. Parking is
provided at a ratio of 5.31 spaces per 1000 square feet.
As of April 17, 2000, 100% of the net rentable space of the Liberty Square
Property was leased. The largest tenant is Wal-Mart Stores, Inc., which occupies
121,480 square feet (35.1% of net rentable space) under a lease expiring on
October 24, 2013. The Wal-Mart lease contains a tenant expansion right, which
gives the landlord an option to purchase the completed expansion improvements
from the tenant. The lease states that in the event the tenant elects to expand
the tenant's leased premises and the landlord refuses or fails to purchase the
expansion improvements and otherwise fails to cause such expanded area to be
released from the lien of any mortgage granted by landlord, then, upon such
event, tenant shall be entitled to a five cent ($0.05) per square foot reduction
in tenant's rent. Other major tenants include Acme Markets, Inc. which occupies
63,500 square feet (18.3% of net rentable space) under a lease expiring on
November 13, 2022, Marshall's, which occupies 36,274 square feet (10.5% of net
rentable space) under a lease expiring on October 31, 2007 and Toys R Us, which
occupies 34,200 square feet (9.9% of net rentable space) under a lease expiring
in January, 2007.
III-11
<PAGE>
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves relating to the Liberty Square Loan.
Lender has the right, however, to establish, upon an event of default under the
Liberty Square Loan, monthly escrow deposits for insurance and taxes.
III-12
<PAGE>
Loan No. 5 -- 1860-2159 Landings Drive Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $18,675,046 Property Type: Office
Loan Type: Principal & Location: Mountain View, CA
Interest; Fully
Amortizing
Year Built/Renovated: 1980-1984/NA
Origination Date: 12/05/1997 Square Footage: 238,551
Maturity Date: 12/15/2017 Cut-Off Date Balance/Sq. Ft.: $78.29
Mortgage Rate: 7.460% Appraisal Value: $55,100,000
Annual Debt Service: $1,927,560 Cut-Off Date LTV: 33.9%
DSCR: 2.37x Balloon LTV: 0.3%
Implied DSCR: 2.72x
Underwritten Cash Flow: $4,564,311 Percentage Leased: 100.0%
Balance at Maturity: $159,539 Percentage Leased as of Date: 5/01/2000
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The 1860-2159 Landings Drive Loan (the "Landings Drive Loan") is secured by a
first mortgage on sixteen (16) two story office buildings comprising a total of
238,551 square feet located in Mountain View, California (the "Landings Drive
Property"). The Landings Drive Loan was originated by Principal Life Insurance
Company on December 5, 1997.
THE BORROWER
------------
The borrower is Landmark Investments Limited, a California limited partnership
(the "Landings Drive Borrower"). Thrust IV, Inc., a California corporation, owns
49.4% of the Landings Drive Borrower in its capacity as general partner and 1.6%
in its capacity as limited partner. The remaining 49% is owned by various
limited partners. Thrust IV, Inc. is owned by Hugh Bikle (51%) and Gordon Call
(49%).
SECURITY
--------
The Landings Drive Loan is secured by a Deed of Trust, Assignment of Rents and
Leases, and certain additional security documents (the "Landings Drive Financing
Documents"). The Deed of Trust is a first lien on the Landings Drive Borrower's
fee interest in the Landings Drive Property. The Landings Drive Loan is
non-recourse to the Landings Drive Borrower, subject to certain limited
exceptions. Trust IV, Inc., as general partner, is, by operation of law,
personally liable for the same aforesaid limited exceptions.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.460% per annum. The Landings Drive Loan
requires monthly payments of principal and interest of $160,630.00 until
December 15, 2017, at which time all unpaid principal and accrued but unpaid
interest is due. The Landings Drive Loan accrues interest computed on the basis
of a 360-day year comprised of twelve 30-day months.
PREPAYMENT
----------
The Landings Drive Loan may be prepaid in whole, but not in part, on any
business day during the term of the Landings Drive Loan, with at least 60 days
prior written notice. Prepayment is conditioned upon payment of a make whole
premium equal to the greater of (i) 1% of the amount prepaid or (ii) such amount
calculated by reference to U.S. Treasury obligations plus twenty five (25) basis
points.
III-13
<PAGE>
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 2% late fee on overdue installments. The Landings Drive Loan accrues
interest at the mortgage interest rate plus 2% per annum while the Landings
Drive Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The Landings Drive Loan provides that it will become immediately due and payable
upon the transfer of the Landings Drive Property or any ownership interest in
the Landings Drive Borrower, except in connection with any permitted transfer
described below.
The Landings Drive Financing Documents permit two transfers of the Landings
Drive Property. The first transfer requires payment to lender of 1% of the then
outstanding principal balance of the Landings Drive Loan and the second transfer
requires payment to lender of 2% of the then outstanding principal balance of
the Landings Drive Loan. The Lender shall be entitled to review the proposed
transferee and be satisfied with such person's or entity's credit worthiness,
financial strength and real estate management expertise.
Additionally, transfers of ownership interests in Thrust IV, Inc. to immediate
family members of Hugh Bikle and Gordon Call are permitted provided that (i)
Thrust IV, Inc. remains the managing general partner of the Landings Drive
Borrower, (ii) the Landings Drive Property remains managed by Thrust IV, Inc. or
an unrelated entity satisfactory to lender, (iii) all documentation for
accomplishing such transfers shall be provided to lender and subject to lender's
approval, and (iv) lender is paid a fee not to exceed $1,000 for each
transaction. Transfers of limited partnership interests in the Landings Drive
Borrower are also permitted provided that (y) lender receives all documentation
for accomplishing such transfers and (z) lender receives a fee not to exceed
$500 for each transfer.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the Landings Drive Property and other
encumbrances are prohibited by the Landings Drive Financing Documents. The
Landings Drive Financing Documents do not prohibit the Landings Drive Borrower
from incurring unsecured indebtedness.
THE PROPERTY
------------
The Landings Drive Property consists of sixteen (16) two story office buildings
comprising a total of 238,551 square feet located in Mountain View, California
adjacent to the Bayshore Freeway at the Rengsdorff Avenue interchange within the
Shoreline Business Park. The buildings were constructed during the years 1980
through 1984. The Landings Drive Property's office buildings are wood framed
with cedar sided exteriors and provide surface parking for 800 automobiles at a
ratio of 3.5 spaces per 1,000 square feet). As of May 1, 2000, 100% of the net
rentable space of the Landings Drive Property is leased to a total of 59
tenants, none of which occupy more than 12.0% of the net rentable space of the
Landings Drive Property.
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves relating to the Landings Drive Loan.
Lender has the right, however, to establish, upon an event of default under the
Landings Drive Loan, monthly escrow deposits for insurance and taxes.
III-14
<PAGE>
Loan No. 6 -- 3555 Monte Villa Parkway Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $5,542,604 Property Type: Office
Loan Type: Principal & Location: Bothell, WA
Interest; Fully
Amortizing
Year Built/Renovated: 1995/NA
Origination Date: 11/08/1995 Square Footage: 78,000
Maturity Date: 10/10/2010 Cut-Off Date Balance/Sq. Ft.: $44.81
Mortgage Rate: 7.990% Appraisal Value: $11,100,000
Annual Debt Service: $802,272.00 Cut-Off Date LTV: 46.0%
DSCR: 1.16x Balloon LTV: 0.6%
Implied DSCR: 1.88x
Underwritten Cash Flow: $885,392 Percentage Leased: 100.0%
Balance at Maturity: $66,153 Percentage Leased as of Date: 6/05/2000
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The 3555 Monte Villa Loan (the "Monte Villa Loan") is secured by a first
mortgage on a two-story office building comprising 78,000 square feet located in
Bothell, Washington (the "Monte Villa Property"). The Monte Villa Loan was
originated by Principal Life Insurance Company on November 8, 1995. The Monte
Villa Loan is cross collateralized and cross defaulted with Loan Nos. 7, 8, 9
and 10 (the "Other Loans"). The Other Loans are secured by first mortgages on
three (3) other separate office properties in Redmond, WA and one (1) industrial
property in Wilsonville, OR.
THE BORROWER
------------
The borrower is M.V. 1995, AN L.L.C., a Washington limited liability company
(the "Monte Villa Borrower"). John M. Martin and Nicholas Westlund each own a
fifty percent (50%) membership interest in the Monte Villa Borrower.
SECURITY
--------
The Monte Villa Loan is secured by a Deed of Trust, Assignment of Rents and
Leases, and certain additional security documents (the "Monte Villa Financing
Documents"). The Deed of Trust is a first lien on the Monte Villa Borrower's fee
interest in the Monte Villa Property. The Monte Villa Loan is non-recourse to
the Monte Villa Borrower, subject to certain limited exceptions.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.990% per annum. The Monte Villa Loan
requires monthly payments of principal and interest of $66,856.00 until October
10, 2010, at which time all unpaid principal and accrued but unpaid interest is
due. The Monte Villa Loan accrues interest computed on the basis of a 360-day
year comprised of twelve 30-day months.
PREPAYMENT
----------
The Monte Villa Loan is subject to a lock-out on prepayments such that the Monte
Villa Loan may be prepaid (in whole, but not in part) on any business day (with
at least 60 days prior written notice) during the term of the Monte Villa Loan,
but only on and after the November 10, 2000 payment. Prepayment is conditioned
upon payment of a make whole premium equal to the greater of (i) 1% of the
amount prepaid or (ii) such amount calculated by reference to U.S. Treasury
obligations with reference to the amount prepaid, provided the following
conditions are satisfied: (a) the loan to value ratio of the Monte Villa Loan
and the Other Loans collectively is no greater than 75%
III-15
<PAGE>
and the debt service coverage ratio for the Monte Villa Loan and the Other Loans
collectively is equal to or greater than 1.20x; (b) the loan to value ratio of
the Other Loans collectively is no greater than the loan to value ratio for the
Monte Villa Loan immediately preceding payment; (c) immediately following
prepayment, the debt service coverage ratio for the Other Loans shall be 1.20x;
(d) all leases on the properties secured by the Other Loans must have a minimum
remaining term of 24 months; (e) the lender shall receive all documentation to
satisfy these conditions; and (f) the lender shall receive a reasonable
processing fee.
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 4% late fee on overdue installments. The Monte Villa Loan accrues
interest at the mortgage interest rate plus 4% per annum while the Monte Villa
Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The Monte Villa Loan provides that it will become immediately due and payable
upon the transfer of the Monte Villa Property or any ownership interest in the
Monte Villa Borrower, except in connection with any permitted transfer. Lender
may consent to transfers of the Monte Villa Property and assumptions of the
Monte Villa Borrower's obligations under the Monte Villa Financing Documents
and/or transfers of ownership interests in the Monte Villa Borrower in Lender's
discretion. Any such consent may be conditioned upon an increase in the interest
rate and/or the imposition of other terms and conditions.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the Monte Villa Property and other
encumbrances are prohibited by the Monte Villa Financing Documents. The Monte
Villa Loan Financing Documents do not prohibit the Monte Villa Borrower from
incurring unsecured indebtedness.
THE PROPERTY
------------
The Monte Villa Property consists of a two-story office building comprising
78,000 square feet located in Bothell, Washington off of the Interstate 405 and
NE 195th St. interchange in the Quadrant Monte Villa Business Park. The building
was constructed in 1995. The Monte Villa Property is improved by a two story
concrete tilt up and steel frame. Parking is provided at a ratio of 4.0 spaces
per 1,000 square feet and the Monte Villa Property has one (1) elevator. AT&T
Wireless, a wholly owned subsidiary of AT&T Corp. occupies 100% of the net
rentable space under a lease expiring on October 31, 2005.
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves relating to the Monte Villa Loan.
Lender has the right, however, to establish, upon an event of default under the
Monte Villa Loan, monthly escrow deposits for insurance and taxes.
III-16
<PAGE>
Loan No. 7 -- 14520 NE 87th Street Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $3,876,893 Property Type: Office
Loan Type: Principal & Location: Redmond, WA
Interest; Fully
Amortizing
Year Built/Renovated: 1995/NA
Origination Date: 8/31/1995 Square Footage: 59,565
Maturity Date: 8/10/2010 Cut-Off Date Balance/Sq. Ft.: $44.81
Mortgage Rate: 7.990% Appraisal Value: $9,600,000
Annual Debt Service: $567,324.00 Cut-Off Date LTV: 46.0%
DSCR: 1.16x Balloon LTV: 0.6%
Implied DSCR: 1.88x
Underwritten Cash Flow: $754,852 Percentage Leased: 100.0%
Balance at Maturity: $46,692 Percentage Leased as of Date: 6/05/2000
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The 14520 NE 87th Street Loan (the "14520 NE 87th Street Loan") is secured by a
first mortgage on a two-story office building comprising 59,565 square feet
located in Redmond, Washington (the "14520 NE 87th Street Property"). The 14520
NE 87th Street Loan was originated by Principal Life Insurance Company on August
31, 1995. The 14520 NE 87th Street Loan is cross collateralized and cross
defaulted with Loan Nos. 6, 8, 9 and 10 ("Other Loans"). The Other Loans are
secured by first mortgages on two (2) other separate office buildings in
Redmond, WA, one (1) office property in Bothell, WA and one (1) industrial
building in Wilsonville, OR.
THE BORROWER
------------
The borrower is 87th Avenue Associates, AN L.L.C., a Washington limited
liability company (the "14520 NE 87th Street Borrower"). John M. Martin and
Nicholas Westlund each own a fifty percent (50%) membership interest in the
14520 NE 87th Street Borrower. The 14520 NE 87th Street Borrower is also the
Borrower under Loan No. 750711 (the 14560 NE 87th Street Loan).
SECURITY
--------
The 14520 NE 87th Street Loan is secured by a Deed of Trust, Assignment of Rents
and Leases, and certain additional security documents (the "14520 NE 87th Street
Financing Documents"). The Deed of Trust is a first lien on the 14520 NE 87th
Street Borrower's fee interest in the 14520 NE 87th Street Property. The 14520
NE 87th Street Loan is non-recourse to the 14520 NE 87th Street Borrower,
subject to certain limited exceptions.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.990% per annum. The 14520 NE 87th
Street Loan requires monthly payments of principal and interest of $47,277.00
until August 10, 2010, at which time all unpaid principal and accrued but unpaid
interest is due. The 14520 NE 87th Street Loan accrues interest computed on the
basis of a 360-day year comprised of twelve 30-day months.
PREPAYMENT
----------
The 14520 NE 87th Street Loan is subject to a lock-out on prepayments such that
the 14520 NE 87th Street Loan may be prepaid (in whole, but not in part) on any
business day (with at least 60 days prior written notice) during the term of the
14520 NE 87th Street Loan, but only on and after the September 10, 2000 payment.
Prepayment is conditioned upon payment of a make whole premium equal to the
greater of (i) 1% of the amount prepaid or (ii) such amount calculated by
reference to U.S. Treasury obligations with reference to the amount prepaid,
provided the following conditions are satisfied: (a) the loan to value ratio of
the 14520 NE 87th Street Loan and the Other
III-17
<PAGE>
Loans collectively is no greater than 75% and the debt service coverage ratio
for the 14520 NE 87th Street Loan and the Other Loans collectively is equal to
or greater than 1.20x; (b) the loan to value ratio of the Other Loans
collectively is no greater than the loan to value ratio for the 14520 NE 87th
Street Loan immediately preceding payment; (c) immediately following prepayment,
the debt service coverage ratio for the Other Loans shall be 1.20x; (d) all
leases on the properties secured by the Other Loans must have a minimum
remaining term of 24 months; (e) the lender shall receive all documentation to
satisfy these conditions; and (f) the lender shall receive a reasonable
processing fee.
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 4% late fee on overdue installments. The 14520 NE 87th Street Loan
accrues interest at the mortgage interest rate plus 4% per annum while the 14520
NE 87th Street Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The 14520 NE 87th Street Loan provides that it will become immediately due and
payable upon the transfer of the 14520 NE 87th Street Property or any ownership
interest in the 14520 NE 87th Street Borrower. Lender may consent to transfers
of the 14520 NE 87th Street Property and assumptions of the 14520 NE 87th Street
Borrower's obligations under the 14520 NE 87th Street Financing Documents and/or
transfers of ownership interests in the 14520 NE 87th Street Borrower in
Lender's discretion. Any such consent may be conditioned upon an increase in the
interest rate and/or the imposition of other terms and conditions.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the 14520 NE 87th Street Property and other
encumbrances are prohibited by the 14520 NE 87th Street Financing Documents. The
14520 NE 87th Street Financing Documents do not prohibit the 14520 NE 87th
Street Borrower from incurring unsecured indebtedness.
THE PROPERTY
------------
The 14520 NE 87th Street Property consists of a 2 story office building
comprising 59,565 square feet located in Redmond, Washington off of the
Interstate 405 and NE Redmond Way. The 14520 NE 87th Street Property was
completed in 1995. The 14520 NE 87th Street Property is improved by a two story
concrete tilt up and steel frame. Parking is provided at a ratio of 3.07 spaces
per 1000 square feet. AT&T Wireless, a wholly owned subsidiary of AT&T Corp.,
occupies 100% of the net rentable space of the 14520 NE 87th Street Property
under a lease expiring on May 4, 2003. AT&T Wireless may terminate the lease
after the 60th month from the commencement date of the lease upon nine (9)
months notice provided a lease termination fee is paid by AT&T Wireless to the
14520 NE 87th Street borrower, ranging from 6 months base rent (if terminated in
months 61-65 of the lease) to 1 month's base rent (if terminated in months 86-90
of the lease).
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves relating to the 14520 NE 87th Street
Loan. Lender has the right, however, to establish, upon an event of default
under the 14520 NE 87th Street Loan, monthly escrow deposits for insurance and
taxes. Upon termination of the AT&T Lease, the lease termination fee shall be
held in escrow pursuant to a Deposit Security Agreement for the payment of
tenant improvements and/or leasing commissions to allow for the 14520 NE 87th
Street Property to be re-tenanted. The escrowed funds will be released upon
certain conditions being satisfied including but not limited to evidence that
the space has been accepted by the replacement tenant.
III-18
<PAGE>
Loan No. 8 -- 26755 SW 95th Avenue Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $3,093,689 Property Type: Industrial
Loan Type: Principal & Location: Wilsonville, OR
Interest; Fully
Amortizing
Year Built/Renovated: 1995/NA
Origination Date: 8/31/1995 Square Footage: 165,810
Maturity Date: 8/10/2010 Cut-Off Date Balance/Sq. Ft.: $44.81
Mortgage Rate: 7.990% Appraisal Value: $5,700,000
Annual Debt Service: $452,712.00 Cut-Off Date LTV: 46.0%
DSCR: 1.16x Balloon LTV: 0.6%
Implied DSCR: 1.88x
Underwritten Cash Flow: $414,354 Percentage Leased: 100.0%
Balance at Maturity: $37,290 Percentage Leased as of Date: 6/05/2000
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The 26755 SW 95th Avenue Loan (the "26755 SW 95th Avenue Loan") is secured by a
first mortgage on a single story distribution building comprising 165,810 square
feet located in Wilsonville, Oregon (the "26755 SW 95th Avenue Property"). The
26755 SW 95th Avenue Loan was originated by Principal Life Insurance Company on
August 31, 1995. The 26755 SW 95th Avenue Loan is cross collateralized and cross
defaulted with Loan Nos. 6, 7, 9 and 10 ("Other Loans"). The Other Loans are
secured by first mortgages on three (3) separate office properties in Redmond,
WA and one (1) office property in Bothell, WA.
THE BORROWER
------------
The borrower is North Wilsonville Associates, AN L.L.C., a Washington limited
liability company (the "26755 SW 95th Avenue Borrower"). John M. Martin and
Nicholas Westlund each own fifty percent (50%) membership interests in the 26755
SW 95th Avenue Borrower.
SECURITY
--------
The 26755 SW 95th Avenue Loan is secured by a Deed of Trust, Assignment of Rents
and Leases, and certain additional security documents (the "26755 SW 95th Avenue
Financing Documents"). The Deed of Trust is a first lien on the 26755 SW 95th
Avenue Borrower's fee interest in the 26755 SW 95th Avenue Property. The 26755
SW 95th Avenue Loan is non-recourse to the 26755 SW 95th Avenue Borrower,
subject to certain limited exceptions.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.990% per annum. The 26755 SW 95th
Avenue Loan requires monthly payments of principal and interest of $37,726.00
until August 10, 2010, at which time all unpaid principal and accrued but unpaid
interest is due. The 26755 SW 95th Avenue Loan accrues interest computed on the
basis of a 360-day year comprised of twelve 30-day months.
PREPAYMENT
----------
The 26755 SW 95th Avenue Loan is subject to a lock-out on prepayments such that
the 26755 SW 95th Avenue Loan may be prepaid (in whole, but not in part) on any
business day (with at least 60 days prior written notice) during the term of the
lease, but only on and after the September 10, 2000 payment. Prepayment is
conditioned upon payment of a make whole premium equal to the greater of (i) 1%
of the amount prepaid or (ii) such amount calculated by reference to U.S.
Treasury obligations with reference to the amount prepaid, provided the
following conditions are satisfied: (a) the loan to value ratio of the 26755 SW
95th Avenue Loan and the Other Loans collectively is no greater than 75% and the
debt service coverage ratio for the 26755 SW 95th Avenue Loan and the Other
Loans collectively is equal to or greater than 1.20x; (b) the loan to value
ratio of the Other Loans collectively is no greater
III-19
<PAGE>
than the loan to value ratio for the 26755 SW 95th Avenue Loan immediately
preceding payment; (c) immediately following prepayment, the debt service
coverage ratio for the Other Loans shall be 1.20x; (d) all leases on the
properties secured by the Other Loans must have a minimum remaining term of 24
months; (e) the lender shall receive all documentation to satisfy these
conditions; and (f) the lender shall receive a reasonable processing fee.
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 4% late fee on overdue installments. The 26755 SW 95th Avenue Loan
accrues interest at the mortgage interest rate plus 4% per annum while the 26755
SW 95th Avenue Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The 26755 SW 95th Avenue Loan provides that it will become immediately due and
payable upon the transfer of the 26755 SW 95th Avenue Property. Lender may
consent to transfers of the 26755 SW 95th Avenue Property and assumptions of the
26755 SW 95th Avenue Borrower's obligations under the 26755 SW 95th Avenue
Financing Documents and/or transfers of ownership interests in the 26755 SW 95th
Avenue Borrower in Lender's discretion. Any such consent may be conditioned upon
an increase in the interest rate and/or the imposition of other terms and
conditions.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the 26755 SW 95th Avenue Property and other
encumbrances are prohibited by the 26755 SW 95th Avenue Financing Documents. The
26755 SW 95th Avenue Financing Documents do not prohibit the 26755 SW 95th
Avenue Borrower from incurring unsecured indebtedness.
THE PROPERTY
------------
The 26755 SW 95th Avenue Property consists of a single story distribution
building comprising 165,810 square feet located in Wilsonville, Oregon off of
Interstate 5 and the Boones Ferry Road interchange. The 26755 SW 95th Avenue
Property was constructed in 1995. The 26755 SW 95th Avenue Property is improved
by a single story concrete tilt up and distribution warehouse. Parking is
provided at a ratio of 0.84 spaces per 1,000 square feet. Hollywood
Entertainment Corporation occupies 100% of the net rentable space of the 26755
SW 95th Avenue Property under a lease expiring on June 30, 2005.
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves relating to the 26755 SW 95th Avenue
Loan. Lender has the right, however, to establish, upon an event of default
under the 26755 SW 95th Avenue Loan, monthly escrow deposits for insurance and
taxes.
III-20
<PAGE>
Loan No. 9 -- 14500 NE 87th Street Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $3,038,177 Property Type: Office
Loan Type: Principal & Location: Redmond, WA
Interest; Fully
Amortizing
Year Built/Renovated: 1995/NA
Origination Date: 9/05/1995 Square Footage: 60,000
Maturity Date: 8/10/2010 Cut-Off Date Balance/Sq. Ft.: $44.81
Mortgage Rate: 7.680% Appraisal Value: $6,600,000
Annual Debt Service: $438,648.00 Cut-Off Date LTV: 46.0%
DSCR: 1.16x Balloon LTV: 0.6%
Implied DSCR: 1.88x
Underwritten Cash Flow: $502,361 Percentage Leased: 100.0%
Balance at Maturity: $36,172 Percentage Leased as of Date: 6/05/2000
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The 14500 NE 87th Street Loan (the "14500 NE 87th Street Loan") is secured by a
first mortgage on a two-story office building comprising 60,000 square feet
located in Redmond, Washington (the "14500 NE 87th Street Property"). The 14500
NE 87th Street Loan was originated by Principal Life Insurance Company on
September 5, 1995. The 14500 NE 87th Street Loan is cross collateralized and
cross defaulted with Loan Nos. 6, 7, 8 and 10 ("Other Loans"). The Other Loans
are secured by first mortgages on two (2) other separate office properties in
Redmond, WA, one (1) office property in Bothell, WA and one (1) industrial
property in Wilsonville, OR.
THE BORROWER
------------
The borrower is Med Willow Associates, AN L.L.C., a Washington limited liability
company (the "14500 NE 87th Street Borrower"). John M. Martin and Nicholas
Westlund each own a fifty percent (50%) membership interest in the 14500 NE 87th
Street Borrower.
SECURITY
--------
The 14500 NE 87th Street Loan is secured by a Deed of Trust, Assignment of Rents
and Leases, and certain additional security documents (the "14500 NE 87th Street
Financing Documents"). The Deed of Trust is a first lien on the 14500 NE 87th
Street Borrower's fee interest in the 14500 NE 87th Street Property. The 14500
NE 87th Street Loan is non-recourse to the 14500 NE 87th Street Borrower,
subject to certain limited exceptions.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.68% per annum. The 14500 NE 87th Street
Loan requires monthly payments of principal and interest of $36,554.00 until
August 10, 2010, at which time all unpaid principal and accrued but unpaid
interest is due. The 14500 NE 87th Street Loan accrues interest computed on the
basis of a 360-day year comprised of twelve 30-day months.
PREPAYMENT
----------
The 14500 NE 87th Street Loan is subject to a lock-out on prepayments such that
the 14500 NE 87th Street Loan may be prepaid (in whole, but not in part) on any
business day (with at least 60 days prior written notice) during the term of the
14500 NE 87th Street Loan, but only on and after the September 10, 2000 payment.
Prepayment is conditioned upon payment of a make whole premium equal to the
greater of (i) 1% of the amount prepaid or (ii)
III-21
<PAGE>
such amount calculated by reference to U.S. Treasury obligations with reference
to the amount prepaid, provided the following conditions are satisfied: (a) the
loan to value ratio of the 14500 NE 87th Street Loan and the Other Loans
collectively is no greater than 75% and the debt service coverage ratio for the
14500 NE 87th Street Loan and the Other Loans collectively is equal to or
greater than 1.20x; (b) the loan to value ratio of the Other Loans collectively
is no greater than the loan to value ratio for the 14500 NE 87th Street Loan
immediately preceding payment; (c) immediately following prepayment, the debt
service coverage ratio for the Other Loans shall be 1.20x; (d) all leases on the
properties secured by the Other Loans must have a minimum remaining term of 24
months; (e) the lender shall receive all documentation to satisfy these
conditions; and (f) the lender shall receive a reasonable processing fee.
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 4% late fee on overdue installments. The 14500 NE 87th Street Loan
accrues interest at the mortgage interest rate plus 4% per annum while the 14500
NE 87th Street Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The 14500 NE 87th Street Loan provides that it will become immediately due and
payable upon the transfer of the 14500 NE 87th Street Property or any ownership
interest in the 14500 NE 87th Street Borrower. Lender may consent to transfers
of the 14500 NE 87th Street Property and assumptions of the 14500 NE 87th Street
Borrower's obligations under the 14500 NE 87th Street Financing Documents and/or
transfers of ownership interests in the 14500 NE 87th Street Borrower in
Lender's discretion. Any such consent may be conditioned upon an increase in the
interest rate and/or the imposition of other terms and conditions.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the 14500 NE 87th Street Property and other
encumbrances are prohibited by the 14500 NE 87th Street Financing Documents. The
14500 NE 87th Street Financing Documents do not prohibit the 14500 NE 87th
Street Borrower from incurring unsecured indebtedness.
THE PROPERTY
------------
The 14500 NE 87th Street Property consists of a two-story office building
comprising 60,000 square feet located in Redmond, Washington off of the
Interstate 405 and NE Redmond Way. The 14500 NE 87th Street Property was
completed in 1995. The 14500 NE 87th Street Property is improved by a two story
concrete tilt up and steel frame. Parking is provided at a ratio of 3.03 spaces
per 1,000 square feet. Sea Med Corp. leases 100% of the net rentable space at
the 14500 NE 87th Street Property and has subleased 100% of the net rentable
space to AT&T Wireless. AT&T Wireless, a wholly owned subsidiary of AT&T Corp.,
occupies 100% of the net rentable space with a lease expiring on April 30, 2007.
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves relating to the 14500 NE 87th Street
Loan. Lender has the right, however, to establish, upon an event of default
under the 14500 NE 87th Street Loan, monthly escrow deposits for insurance and
taxes.
III-22
<PAGE>
Loan No. 10 -- 14560 NE 87th Street Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $2,335,814 Property Type: Office
Loan Type: Principal & Location: Redmond, WA
Interest; Fully
Amortizing
Year Built/Renovated: 1995/NA
Origination Date: 10/24/1995 Square Footage: 35,760 35,760
Maturity Date: 10/10/2010 Cut-Off Date Balance/Sq. Ft.: $44.81
Mortgage Rate: 7.990% Appraisal Value: $5,900,000
Annual Debt Service: $338,100.00 Cut-Off Date LTV: 46.0%
DSCR: 1.16x Balloon LTV: 0.6%
Implied DSCR: 1.88x
Underwritten Cash Flow: $462,676 Percentage Leased: 100.0%
Balance at Maturity: $27,889 Percentage Leased as of Date: 6/05/2000
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The 14560 NE 87th Street Loan (the "14560 NE 87th Street Loan") is secured by a
first mortgage on a two-story office building comprising 35,760 square feet
located in Redmond, Washington (the "14560 NE 87th Street Property"). The 14560
NE 87th Street Loan was originated by Principal Life Insurance Company on
October 24, 1995. The 14560 NE 87th Street Loan is cross collateralized and
cross defaulted with Loan Nos. 6, 7, 8 and 9 ("Other Loans"). The Other Loans
are secured by first mortgages on two (2) other separate office properties in
Redmond, WA, one (1) office property in Bothell, WA and one (1) industrial
property in Wilsonville, OR.
THE BORROWER
------------
The borrower is 87th Avenue Associates, AN L.L.C., a Washington limited
liability company (the "14560 NE 87th Street Borrower"). John M. Martin and
Nicholas Westlund each own a fifty percent (50%) membership interest in the
14560 NE 87th Street Borrower. The 14560 NE 87th Street Borrower is also the
borrower under Loan No. 750713 (the 14520 NE 87th Street Loan).
SECURITY
--------
The 14560 NE 87th Street Loan is secured by a Deed of Trust, Assignment of Rents
and Leases, and certain additional security documents (the "14560 NE 87th Street
Financing Documents"). The Deed of Trust is a first lien on the 14560 NE 87th
Street Borrower's fee interest in the 14560 NE 87th Street Property. The 14560
NE 87th Street Loan is non-recourse to the 14560 NE 87th Street Borrower,
subject to certain limited exceptions.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.990% per annum. The 14560 NE 87th
Street Loan requires monthly payments of principal and interest of $28,175.00
until October 10, 2010, at which time all unpaid principal and accrued but
unpaid interest is due. The 14560 NE 87th Street Loan accrues interest computed
on the basis of a 360-day year comprised of twelve 30-day months.
PREPAYMENT
----------
The 14560 NE 87th Street Loan is subject to a lock-out on prepayments such that
the 14560 NE 87th Street Loan may be prepaid (in whole, but not in part) on any
business day (with at least 60 days prior written notice) during the term of the
Loan, but only on and after the November 10, 2000 payment. Prepayment is
conditioned upon payment of a make whole premium equal to the greater of (i) 1%
of the amount prepaid or (ii) such amount calculated by reference to U.S.
Treasury obligations with reference to the amount prepaid, provided the
following conditions are satisfied: (a) the loan to value ratio of the 14560 NE
87th Street Loan and the Other Loans collectively is no greater
III-23
<PAGE>
than 75% and the debt service coverage ratio for the 14560 NE 87th Street Loan
and the Other Loans collectively is equal to or greater than 1.20x; (b) the loan
to value ratio of the Other Loans collectively is no greater than the loan to
value ratio for the 14560 NE 87th Street Loan immediately preceding payment; (c)
immediately following prepayment, the debt service coverage ratio for the Other
Loans shall be 1.20x; (d) all leases on the properties secured by the Other
Loans must have a minimum remaining term of 24 months; (e) the lender shall
receive all documentation to satisfy these conditions; and (f) the lender shall
receive a reasonable processing fee.
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 4% late fee on overdue installments. The 14560 NE 87th Street Loan
accrues interest at the mortgage interest rate plus 4% per annum while the 14560
NE 87th Street Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The 14560 NE 87th Street Loan provides that it will become immediately due and
payable upon the transfer of the 14560 NE 87th Street Property or any ownership
interest in the 14560 NE 87th Street Borrower. Lender may consent to transfers
of the 14560 NE 87th Street Property and assumptions of the 14560 NE 87th Street
Borrower's obligations under the 14560 NE 87th Street Financing Documents and/or
transfers of ownership interests in the 14560 NE 87th Street Borrower in
Lender's discretion. Any such consent may be conditioned upon an increase in the
interest rate and/or the imposition of other terms and conditions.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the 14560 NE 87th Street Property and other
encumbrances are prohibited by the 14560 NE 87th Street Financing Documents. The
14560 NE 87th Street Financing Documents do not prohibit the 14560 NE 87th
Street Borrower from incurring unsecured indebtedness.
THE PROPERTY
------------
The 14560 NE 87th Street Property consists of a two story office building
comprising 35,760 square feet located in Redmond, Washington off of the
Interstate 405 and NE Redmond Way. The 14560 NE 87th Street Property is improved
by a two story concrete tilt up and steel frame. Parking is provided at a ratio
of 3.10 spaces per 1000 square feet. The 14560 NE 87th Street Property was
completed in 1995. AT&T Wireless, a wholly owned subsidiary of AT&T Corp.,
occupies 100% of the net rentable space under a lease expiring on May 4, 2004.
AT&T Wireless has a termination right after May 1, 2001 with nine (9) months
notice provided a lease termination fee is paid by AT&T Wireless to the 14560 NE
87th Street Borrower ranging from $260,934 to $46,252.
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves relating to the 14560 NE 87th Street
Loan. Lender has the right, however, to establish, upon an event of default
under the 14560 NE 87th Street Loan, monthly escrow deposits for insurance and
taxes. Upon termination of the AT&T Lease, the lease termination fee shall be
held in escrow pursuant to a Deposit Security Agreement for the payment of
tenant improvements and/or leasing commissions to allow for the 14560 NE 87th
Street Property to be re-tenanted. The escrowed funds will be released upon
certain conditions being satisfied including but not limited to evidence that
the space has been accepted by the replacement tenant.
III-24
<PAGE>
Loan No. 11 - Sun Center Phase I Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $16,410,896 Property Type: Retail
Loan Type: Principal & Interest; Location: Columbus, OH
Balloon Year Built/Renovated: 1995-6/NA
Origination Date: 4/22/1996 Square Footage: 216,470
Maturity Date: 4/15/2011 Cut-Off Date Balance/Sq. Ft.: $75.81
Mortgage Rate: 8.480% Appraisal Value: $23,100,000
Annual Debt Service: $1,688,147.52 Cut-Off Date LTV: 71.0%
DSCR: 1.24x Balloon LTV: 49.4%
Implied DSCR: 1.42x
Underwritten Cash Flow: $2,094,764 Percentage Leased: 99.3%
Balance at Maturity: $11,416,184 Percentage Leased as of Date: 4/07/2000
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The Sun Center Phase I Loan (the "Sun Center Loan") is secured by a first
mortgage on two one-story buildings, comprising 216,470 square foot regional
shopping center located in Columbus, Ohio (the "Sun Center Property"). The Sun
Center Loan was originated by Principal Life Insurance Company on April 22,
1996.
THE BORROWER
------------
The borrower is Sun Center Limited, an Ohio limited liability company (the "Sun
Center Borrower"). The Sun Center Borrower is owned by DDR Continental LP, an
Ohio limited partnership (79.45% interest) and KEF Limited, an Ohio limited
liability company (20.55% interest). Columbus Realty Investments, Ltd., an Ohio
limited liability company, owns 75% of the membership interests in KEF Limited.
Columbus Realty Investments, Ltd. owns and manages over 5,100,000 square feet of
retail space in Central Ohio and has a total commercial real estate portfolio
valued in excess of $582,000,000. The managing members of Columbus Realty
Investments, Ltd. are Don M. Castro III, Frank Benson III, Paul Lukeman and
Richard Solove.
SECURITY
--------
The Sun Center Loan is secured by a Mortgage and Security Agreement and certain
additional security documents (the "Sun Center Financing Documents"). The
Mortgage is a first lien on the Sun Center Borrower's fee interest in the Sun
Center Property. The Sun Center Loan is non-recourse to the Sun Center Borrower,
subject to certain limited exceptions. Columbus Realty Investments, Ltd.
executed a guaranty of the Sun Center Borrower's recourse obligations with
respect to fraud, misrepresentation and environmental matters.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 8.480% per annum. The Sun Center Loan
requires monthly payments of principal and interest of $140,678.96 until April
15, 2011, at which time all unpaid principal and accrued but unpaid interest is
due. The Sun Center Loan accrues interest computed on the basis of a 360-day
year composed of twelve 30-day months.
PREPAYMENT
----------
The Sun Center Loan may be prepaid in whole, but not in part, or any business
day during the term of the Sun Center Loan, with at least 60 days prior written
notice. Prepayment is conditioned upon payment of a prepayment premium
calculated on the basis of the greater of a yield maintenance premium calculated
by reference to U.S. Treasury obligations and one percent (1%) of the amount
prepaid. No prepayment premium is due if the Sun Center Loan is prepaid within
120 days prior to maturity.
III-25
<PAGE>
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 4% late fee on overdue installments. The Sun Center Loan accrues
interest at the mortgage interest rate plus 2% per annum while the Sun Center
Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The Sun Center Loan provides that it will become immediately due and payable
upon the transfer of the Sun Center Property or any ownership interest in the
Sun Center Borrower, except in connection with any of the permitted transfers
described below.
THE SUN CENTER FINANCING DOCUMENTS PERMIT THE TRANSFER OF ALL OR PART OF THE
----------------------------------------------------------------------------
membership interests in KEF Limited ("KEF") among the original members of KEF
provided that: (i) borrower gives lender 60 days prior written notice of any
such transfer; (ii) borrower pays lender a reasonable fee for handling each
transaction; (iii) borrower gives lender copies of all documentation for each
such transfer, which documentation shall be subject to lender's approval which
shall not be unreasonably withheld; and (iv) Columbus Realty Investments, Ltd.
reconfirms its obligations under the guaranty. In the event of a transfer by
Columbus Realty Investments, Ltd., lender agrees to release Columbus Realty
Investments, Ltd. from its obligations under its guaranty so long as such
obligations are either assumed by a substitute guarantor acceptable to lender or
lender determines that the guaranty from the remaining guarantors is acceptable.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the Sun Center Property and other
encumbrances are prohibited by the Sun Center Financing Documents. The Sun
Center Financing Documents do not prohibit the Sun Center Borrower from
incurring unsecured indebtedness.
THE PROPERTY
------------
The Sun Center Property consists of 216,470 square feet of net rentable space in
two one-story buildings which comprise phase one of a regional shopping center
located in Columbus, Ohio. Phase II of the shopping center is not part of the
Security for the Sun Center Property Loan. The Sun Center Property is located
directly north of Dublin Granville Road along the Sawmill Road retail corridor
at the intersection of Sawmill Road and Highway 161. The Sun Center Property was
completed in 1995-1996.
As of April 7, 2000, the Sun Center Property was 99.3% leased. The largest
tenant is a grocery store, Big Bear, which occupies 74,901 square feet (34.6% of
net rentable space) under a lease expiring on April 12, 2016. Other major
tenants include HomePlace, which occupies 53,453 square feet (24.7% of net
rentable space) under a lease expiring on November 30, 2010, and Babies "R" Us,
which occupies 42,296 square feet (19.5% of net rentable space) under a lease
expiring on January 31, 2011. HomePlace filed for Chapter 11 bankruptcy
protection in January, 1998. In June, 1999, the bankruptcy court approved a plan
of reorganization that includes a merger with Waccamaw Corporation, allowing
HomePlace to emerge from bankruptcy.
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves relating to the Sun Center Loan.
Lender has the right, however, to establish, upon an event of default under the
Sun Center Loan, monthly escrow deposits for insurance and taxes.
III-26
<PAGE>
Loan No. 12 -- North Point Village Center Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $15,203,993 Property Type: Retail
Loan Type: Principal & Interest; Location: Reston, VA
Fully Amortizing Year Built/Renovated: 1993/NA
Origination Date: 5/31/1994 Square Footage: 131,504
Maturity Date: 5/01/2016 Cut-Off Date Balance/Sq. Ft.: $115.62
Mortgage Rate: 8.440% Appraisal Value: $29,900,000
Annual Debt Service: $1,752,470.64 Cut-Off Date LTV: 50.8%
DSCR: 1.44x Balloon LTV: 0.5%
Implied DSCR: 1.85x
Underwritten Cash Flow: $2,526,660 Percentage Leased: 96.6%
Balance at Maturity: $145,021 Percentage Leased as of Date: 12/31/1999
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The North Point Village Center Loan (the "North Point Village Center Loan") is
secured by a first mortgage on a single story retail center comprising 131,504
square feet located in Reston, Virginia (the "North Point Village Center
Property"). The North Point Village Center Loan was originated by Principal Life
Insurance Company on May 31, 1994.
THE BORROWER
------------
The borrower is Reston North Point Village Limited Partnership, a District of
Columbia limited partnership (the "North Point Village Center Borrower").
Planden Corporation, a Maryland corporation, is the general partner of the North
Point Village Center Borrower and owns 1% of the North Point Village Center
Borrower. Lerner Enterprises Limited Partnership, a Maryland limited partnership
("Lerner Enterprises") is a limited partner of the North Point Village Center
Borrower and owns 51% of the North Point Village Center Borrower. The remaining
limited partners and their respective ownership percentages are as follows: Mark
and Judy Lerner (9.67%), Edward and Debra Cohen (9.67%), Robert and Marla
Tanenbaum (9.67%), Fucillo Family L.P. (4.00%), Henry Children's Trust (6.00%)
and Peter and Leigh Henry (9.00%).
SECURITY
--------
The North Point Village Center Loan is secured by a Deed of Trust, Assignment of
Rents and Leases, and certain additional security documents (the "North Point
Village Center Financing Documents"). The Deed of Trust is a first lien on the
North Point Village Center Borrower's fee interest in the North Point Village
Center Property. The North Point Village Center Loan is non-recourse to the
North Point Village Center Borrower, subject to certain limited exceptions.
Lerner Enterprises has executed a guaranty of the North Point Village Borrower's
recourse obligations for fraud, misrepresentation and environmental matters;
provided, however, such guaranty is limited to $1,500,000.00.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 8.440% per annum. The North Point Village
Center Loan requires monthly payments of principal and interest of $146,039.22
until May 1, 2016, at which time all unpaid principal and accrued but unpaid
interest is due. The North Point Village Center Loan accrues interest computed
on the basis of a 360-day year composed of twelve 30-day months.
PREPAYMENT
----------
The North Point Village Center Loan may be prepaid in whole, but not in part, on
any business day during the term of the North Point Village Center Loan, with at
least 60 days prior written notice. Prepayment is conditioned upon
III-27
<PAGE>
payment of a make whole premium equal to the greater of (i) one percent (1%) of
the amount prepaid or (ii) such amount calculated by reference to U.S. Treasury
obligations. On or after March 1, 2016 the North Point Village Center Loan may
be prepaid without payment of a make whole premium.
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 2% late fee on overdue installments. The North Point Village Center
Loan accrues interest at the mortgage interest rate plus 2% per annum while the
North Point Village Center Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The North Point Village Center Loan provides that it will become immediately due
and payable upon the transfer of the North Point Village Center Property or any
ownership interest in the North Point Village Center Borrower, except in
connection with any permitted transfer described below.
The North Point Village Center Financing Documents permit the following
transfers without payment of a fee: (i) any partner of the North Point Village
Center Borrower may transfer ownership interests to Lerner Enterprises or to
family members of the partners of Lerner Enterprises or trusts for the benefit
of such family members, (ii) the partners of Lerner Enterprises shall have the
right to transfer partnership interests to family members of partners of Lerner
Enterprises; and (iii) the limited partners of North Point Village Center
Borrower may transfer limited partnership interests provided Lerner Enterprises
and family members of the partners of Lerner Enterprises or trusts for the
benefit of such family members maintain in the aggregate at least 60% of the
total limited partnership interests.
The North Point Village Center Borrower has the right to transfer its interests
in the North Point Village Center Loan a single time during the term of the
North Point Village Center Loan after the 24th month of the term to a party with
equal or greater credit worthiness subject to lender's review of the proposed
purchaser. The scope of the lender's review shall include, but not be limited
to, an assessment of the purchaser's credit worthiness, financial strength and
real estate management expertise. Also, (i) the debt service coverage ratio must
be 1.25 times for both the 12 months preceding the request to transfer and on
the transfer date, (ii) the purchaser must have commercial real estate
experience, (iii) North Point Village Center Borrower must pay a fee equal to
0.50% of the outstanding principal balance to lender, and (iv) a guaranty must
be received from acceptable entities or persons relating to the recourse
obligations of the Borrower for fraud, misrepresentation and environmental
matters.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the North Point Village Center Property and
other encumbrances are prohibited by the North Point Village Center Financing
Documents. The North Point Village Center Financing Documents do not prohibit
the North Point Village Center from incurring unsecured indebtedness.
THE PROPERTY
------------
The North Point Village Center Property consists of a single story retail center
comprising 131,504 square feet located in Reston, Virginia located 20 miles west
of Washington, D.C. and 5 miles east of Washington Dulles International Airport.
It is located at the northwest quadrant of Reston Parkway and Lake Newport Road.
The North Point Village Center Property was completed in 1993. Parking is
provided at a rate of 5.37 spaces per 1,000 square feet. The North Point Village
Center Property is a concrete structure with precast concrete and glass
exterior.
Pursuant to a lease expiring on November 30, 2013, 44.6% of the net rentable
space of the North Point Village Center Property is leased to Giant of Maryland,
Inc. No other tenant occupies more than 3.9% of the net rentable space of the
North Point Village Center Property.
III-28
<PAGE>
OTHER LOANS
-----------
Lerner Enterprises is also an 80.25% owner of 7799 Leesburg Pike, L.P., a
Virginia limited partnership (the "Leesburg Pike Borrower") which is the
borrower under Loan No. 3, which is also described in this Appendix III.
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves relating to the North Point Village
Center Loan. Lender has the right, however, to establish, upon an event of
default under the North Point Village Center Loan, monthly escrow deposits for
insurance and taxes.
III-29
<PAGE>
Loan No. 13 -- 461 Fifth Avenue Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $15,000,000 Property Type: Other
Loan Type: Interest only; Location: New York, NY
Balloon
Year Built/Renovated: N/A
Origination Date: 9/25/1997 Square Footage: 11,423
Maturity Date: 6/30/2006 Cut-Off Date Balance/Sq. Ft.: $74.57
Mortgage Rate: 7.600% Appraisal Value: $24,250,000
Annual Debt Service: $1,140,000.00 Cut-Off Date LTV: 61.9%
DSCR: 1.81x Balloon LTV: 61.9%
Implied DSCR: 1.52x
Underwritten Cash Flow: $2,058,026 Percentage Leased: 96.8%
Balance at Maturity: $15,000,000 Percentage Leased as of Date: 12/30/1999
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The 461 Fifth Avenue Loan (the "461 Fifth Avenue Loan") is secured by a first
mortgage on a 0.262 acre (11,423 square feet) parcel of land located in New
York, New York (the "461 Fifth Avenue Property"). The 461 Fifth Avenue Loan was
originated by Principal Life Insurance Company on September 25, 1997.
THE BORROWER
------------
The borrower is Lane Associates, a New York limited partnership (the "461 Fifth
Avenue Borrower"). Three Arrows Company, a New York general partnership, is the
general partner of the 461 Fifth Avenue Borrower and owns 25% of the 461 Fifth
Avenue Borrower. The limited partners owning the largest equity interests in the
461 Fifth Avenue Borrower include Steve M. Meltzer (18.75%), Richard M. Meltzer
(18.75%) and Sol Berger (37.5%). Three Arrows Company is owned by of Eileen Karp
(70%), Howard Karp (10%), David Karp (10%) and Francine Antell (10%).
SECURITY
--------
The 461 Fifth Avenue Loan is secured by a Deed of Trust, Assignment of Rents and
Leases, and certain additional security documents (the "461 Fifth Avenue
Financing Documents"). The Deed of Trust is a first lien on the 461 Fifth Avenue
Borrower's fee interest in the 461 Fifth Avenue Property. The 461 Fifth Avenue
Loan is non-recourse to the 461 Fifth Avenue Borrower, subject to certain
limited exceptions. The 461 Fifth Avenue Property underlies a 26 story office
building constructed in 1988. The 461 Fifth Avenue Borrower has ground leased
the 461 Fifth Avenue Property to 461 Fifth Avenue Associates, a New York general
partnership which is owned by two general partners, Mitsui Fudosan (New York),
Inc. and MFD 461 Fifth Avenue Corporation, pursuant to that certain Amended and
Restated Ground Lease dated June 17, 1985 as amended by that certain First
Amendment to Ground Lease dated April 9, 1986 and that certain Second Amendment
to Amended and Restated Ground Lease dated September 25, 1997 (the "Ground
Lease").
The 461 Fifth Avenue Borrower has not subordinated its fee interest in the 461
Fifth Avenue Property to any leasehold mortgage placed on the leasehold estate
created by the Ground Lease. The Ground Lease annual base rent is $2,100,000
from July 1, 1997 until June 30, 2003 and $2,400,000 from July 1, 2003 until
June 30, 2006. The Ground Lease expires on June 30, 2006.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.600% per annum. The 461 Fifth Avenue
Loan requires monthly payments of principal and interest of $95,000.00 until
June 30, 2006, at which time all unpaid principal and accrued but unpaid
III-30
<PAGE>
interest is due. The 461 Fifth Avenue Loan accrues interest computed on the
basis of a 360-day year comprised of twelve 30-day months.
PREPAYMENT
----------
The 461 Fifth Avenue Loan may be prepaid in whole, but not in part, on any
business day during the term of the 461 Fifth Avenue Loan, with at least 60 days
prior written notice. Prepayment is conditioned upon payment of a make whole
premium equal to the greater of (i) 1% of the amount prepaid or (ii) such amount
calculated by reference to U.S. Treasury obligations.
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 4% late fee on overdue installments. The 461 Fifth Avenue Loan
accrues interest at the mortgage interest rate plus 4% per annum while the 461
Fifth Avenue Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The 461 Fifth Avenue Loan provides that it will become immediately due and
payable upon the transfer of the 461 Fifth Avenue Property or any ownership
interest in the 461 Fifth Avenue Borrower, except in connection with any
permitted transfer described below. The 461 Fifth Avenue Borrower is permitted
to transfer up to a forty-nine percent (49%) interest in the aggregate of the
general or limited partnership interests provided copies of relevant
documentation are provided to lender and lender receives a reasonable
administrative fee. The 461 Fifth Avenue Financing Documents preclude transfers
of the 461 Fifth Avenue Borrower and/or ownership interests greater than 49% in
the 461 Fifth Avenue Borrower without lender's prior consent.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the 461 Fifth Avenue Property and other
encumbrances are prohibited by the 461 Fifth Avenue Financing Documents. The 461
Fifth Avenue Financing Documents do not prohibit the 461 Fifth Avenue Borrower
from incurring unsecured indebtedness.
PURCHASE OPTION
---------------
Pursuant to the Ground Lease, 461 Fifth Avenue Associates has the right to
purchase the 461 Fifth Avenue Property for $30,000,000 upon written notice to
the 461 Fifth Avenue Borrower not less than 6 months and not more than 18 months
prior to the Ground Lease expiration date, which is June 30, 2006. The Ground
Lease provides that payment of the purchase price shall first be applied to pay
off the balance of the 461 Fifth Avenue Loan.
THE PROPERTY
------------
The 461 Fifth Avenue Property consists of a 0.262 acre (11,423 square feet)
parcel of land located in the Grand Central office market of Midtown Manhattan,
New York, New York. The 461 Fifth Avenue Property underlies a 26 story office
building constructed in 1988. The 461 Fifth Avenue Borrower has ground leased
the 461 Fifth Avenue Property. There are three separate 21 year options and one
final 15 year option to extend the ground lease.
ESCROWS/RESERVES
----------------
There are no existing escrows or reserves relating to the 461 Fifth Avenue Loan.
Lender has the right, however, to establish, upon an event of default under the
461 Fifth Avenue Loan, monthly escrow deposits for insurance and taxes.
III-31
<PAGE>
Loan No. 14 -- Bird Ludlam Shopping Center Loan and Property
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $11,974,433 Property Type: Retail
Loan Type: Principal & Location: South Miami, FL
Interest; Fully
Amortizing
Year Built/Renovated: 1987/NA
Origination Date: 2/13/1997 Square Footage: 192,282
Maturity Date: 2/15/2015 Cut-Off Date Balance/Sq. Ft.: $62.28
Mortgage Rate: 7.680% Appraisal Value: $24,200,000
Annual Debt Service: $1,375,982.40 Cut-Off Date LTV: 49.5%
DSCR: 1.57x Balloon LTV: 0.5%
Implied DSCR: 2.01x
Underwritten Cash Flow: $2,165,548 Percentage Leased: 100.0%
Balance at Maturity: $113,940 Percentage Leased as of Date: 3/31/2000
---------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
--------
The Bird Ludlam Shopping Center Loan (the "Bird Ludlam Shopping Center Loan") is
secured by a first mortgage on a one story shopping center building and a two
story shopping center building comprising a total of 192,282 square feet located
in Miami, Florida (the "Bird Ludlam Shopping Center Property"). The Bird Ludlam
Shopping Center Loan was originated by Principal Life Insurance Company on
February 13, 1997.
THE BORROWER
------------
The borrower is Equity One (Delta), Inc., a Florida corporation (the "Bird
Ludlam Shopping Center Borrower"). Equity One, Inc., a Maryland corporation,
owns 100% of the Bird Ludlam Shopping Center Borrower.
SECURITY
--------
The Bird Ludlam Shopping Center Loan is secured by a Mortgage and Security
Agreement, Assignment of Rents and Leases, and certain additional security
documents (the "Bird Ludlam Shopping Center Financing Documents"). The Mortgage
and Security Agreement is a first lien on the Bird Ludlam Shopping Center
Borrower's fee interest in the Bird Ludlam Shopping Center Property. The Bird
Ludlam Shopping Center Loan is non-recourse to the Bird Ludlam Shopping Center
Borrower, subject to certain limited exceptions. Equity One, Inc., a Maryland
corporation, has executed a guaranty of the Bird Ludlam Shopping Center
Borrower's recourse obligations with respect to fraud, misrepresentation and
environmental matters.
PAYMENT TERMS
-------------
The mortgage interest rate is fixed at 7.680% per annum. The Bird Ludlam
Shopping Center Loan requires monthly payments of principal and interest of
$114,665.20 until February 15, 2015, at which time all unpaid principal and
accrued but unpaid interest is due. The Bird Ludlam Shopping Center Loan accrues
interest computed on the basis of a 360-day year comprised of twelve 30-day
months.
PREPAYMENT
----------
The Bird Ludlam Shopping Center Loan may be prepaid in whole, but not in part,
on any business day during the term of the Bird Ludlam Shopping Center Loan,
with at least 60 days prior written notice. Prepayment is conditioned upon
payment of a make whole premium equal to the greater of (i) 1% of the amount
prepaid or (ii) such amount calculated by reference to U.S. Treasury
obligations.
III-32
<PAGE>
LATE FEES AND DEFAULT INTEREST
------------------------------
There is a 4% late fee on overdue installments. The Bird Ludlam Shopping Center
Loan accrues interest at the mortgage interest rate plus 4% per annum while the
Bird Ludlam Shopping Center Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER
--------------------------------------------
The Bird Ludlam Shopping Center Loan provides that it will become immediately
due and payable upon the transfer of the Bird Ludlam Shopping Center Property or
any ownership interest in the Bird Ludlam Shopping Center Borrower, except in
connection with any permitted transfer described below.
The Bird Ludlam Shopping Center Financing Documents permit the following
transfers:
(i) the sale, transfer or conveyance of the Bird Ludlam
Shopping Center Borrower to, and subsequent assumption of the obligations of the
Bird Ludlam Shopping Center Borrower by Equity One, Inc. or a wholly owned
subsidiary thereof, under the Bird Ludlam Shopping Center Financing Documents.
Such transfer, sale or conveyance is subject to lender's approval of the
proposed purchaser, which approval shall be conditioned upon, but not limited
to, the proposed purchaser's creditworthiness, financial strength and real
estate management expertise. The Bird Ludlam Shopping Center Borrower shall pay
to lender a reasonable fee for the handling of each transaction, not to exceed
$2,500.00 for each transaction; and
(ii) a one time sale, transfer or conveyance of the Bird
Ludlam Shopping Center Property and subsequent assumption of the obligations of
the Bird Ludlam Shopping Center Borrower under the Bird Ludlam Shopping Center
Financing Documents. Such transfer, sale or conveyance is subject to lender's
approval of the proposed purchaser which approval shall be conditioned upon but
not limited to, the proposed purchaser's creditworthiness, financial strength
and real estate management expertise and subject to the payment of an assumption
fee in the amount of 1% of the then outstanding principal balance of the Note to
lender. The Bird Ludlam Shopping Center Borrower shall pay to lender a
reasonable fee for the handling of the transaction, and the Bird Ludlam Shopping
Center Borrower shall pay all costs, documentary stamp and intangible taxes,
recording fees and other expenses due lender in connection with any such
assumption.
SUBORDINATED/OTHER DEBT
-----------------------
Subordinate indebtedness secured by the Bird Ludlam Shopping Center Property and
other encumbrances are prohibited by the Bird Ludlam Shopping Center Financing
Documents. The Bird Ludlam Shopping Center Financing Documents do not prohibit
the Bird Ludlam Borrower from incurring unsecured indebtedness.
THE PROPERTY
------------
The Bird Ludlam Shopping Center Property consists of a one story shopping center
building and a two story shopping center building comprising a total of 192,282
square feet located in Dade County, Florida along Bird (SW 40th Street) and
Ludlam (SW 67th Street) in Miami, Florida. The Bird Ludlam Shopping Center
Property is situated one mile east of the Palmetto Expressway. The Bird Ludlam
Shopping Center Property was constructed in 1987. Parking is provided at a ratio
of 4.7 spaces per 1,000 square feet. The Bird Ludlam Shopping Center Property's
buildings are concrete block structures.
As of March 31, 2000, 100% of the net rentable space of the Bird Ludlam Shopping
Center Property was leased. The two largest tenants of the Bird Ludlam Shopping
Center Property are Winn Dixie Stores (23.1% of net rentable space) under a
lease which expires on December 31, 2007 and Variety Childrens' Hospital (6.6%
of net rentable space), under a lease which expires on December 31, 2000.
III-33
<PAGE>
ESCROWS/RESERVES
----------------
The Bird Ludlam Shopping Center Financing Documents require monthly escrow
deposits in amounts sufficient to pay taxes when due, and upon an event of
default under the Bird Ludlam Shopping Center Loan monthly escrow deposits are
required for insurance premiums.
III-34
<PAGE>
------------------------------------------------------------------------------
| MORGAN STANLEY DEAN WITTER | [MORGAN STANLEY | September 7, 2000 |
| Securitized Products Group | DEAN WITTER LOGO] | |
------------------------------------------------------------------------------
CMBS NEW ISSUE
TERM SHEET
--------------------------
EXPECTED PRICING DATE: SEPTEMBER 14, 2000
--------------------------
$557,621,000
(APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
AS DEPOSITOR
PRINCIPAL LIFE INSURANCE COMPANY
AS MORTGAGE LOAN SELLER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
--------------------------
MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO.
--------------------------------------------------------------------------------
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
TRANSACTION FEATURES
--------------------
>> Seller:
--------------------------------------------------------------------------
NO. OF CUT-OFF DATE % OF
LOANS BALANCE POOL
--------------------------------------------------------------------------
Principal Life Insurance Company 102 $597,985,115 100.0%
--------------------------------------------------------------------------
>> Loan Pool:
o Average Cut-off Date Balance: $5,862,599
o Largest loan by Cut-off Date Balance: $30,500,000 (5.1% of pool)
o Five largest and ten largest loans (including crossed loans): 19.5% and
32.3% of pool, respectively
>> Seasoning:
o Weighted average seasoning of 45 months. The seasoning ranges from 9 to
144 months
>> Credit Statistics:
o Weighted average Debt Service Coverage Ratio of 1.50x at an actual
constant of 9.61%
o Weighted average Implied Debt Service Coverage Ratio of 1.74x at a
constant of 9.00%
o Weighted average Cut-off Date Loan-To-Value Ratio of 57.5%; weighted
average Balloon Loan-To-Value Ratio of 21.6%
o Fully amortizing loans: 49.9%; Balloon loans: 50.1%
>> Property Types:
o Retail, industrial, office and other (leased fee) properties comprise
100.0% of pool
[PIE CHART]
Other 2.9%
Office 25.0%
Industrial 27.0%
Retail 45.1%
(Anchored Retail 38.9%/
Single Tenant Retail 6.2%)
>> Call Protection:
o Lockout and/or yield maintenance: 100.0%
>> Collateral Information Updates: Updated loan information is expected to be
part of the monthly Certificateholder Reports available from the trustee in
addition to detailed payment and delinquency information. Information
provided by the trustee is expected to be available at www.lnbabs.com.
Updated property operating and occupancy information, to the extent
delivered by borrowers, is expected to be available to Certificateholders
from the master servicer
>> Bond Information: Cash flows are expected to be modeled by TREPP, CONQUEST
and INTEX and are expected to be available on BLOOMBERG
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
OFFERED CERTIFICATES
--------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
INITIAL EXPECTED FINAL INITIAL
CERTIFICATE SUBORDINATION RATINGS AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
CLASS BALANCE(1) LEVELS (S&P/MOODY'S) LIFE(2) WINDOW(2)(3) DATE(2) RATE(4)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1(6) $56,100,000 13.00% AAA/Aaa 2.99 1-67 4/23/06 TBD(5)
---------------------------------------------------------------------------------------------------------------------------------
A-2(6) $160,600,000 13.00% AAA/Aaa 5.69 1-104 5/23/09 TBD(5)
---------------------------------------------------------------------------------------------------------------------------------
A-3(6) $104,500,000 13.00% AAA/Aaa 7.14 67-104 5/23/09 TBD(5)
---------------------------------------------------------------------------------------------------------------------------------
A-4(6) $199,047,000 13.00% AAA/Aaa 10.66 104-172 1/23/15 TBD(5)
---------------------------------------------------------------------------------------------------------------------------------
B $17,939,000 10.00% AA/Aa2 14.76 172-183 12/23/15 TBD(5)
---------------------------------------------------------------------------------------------------------------------------------
C $19,435,000 6.75% A/A3 15.84 183-198 3/23/17 TBD(5)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PRIVATE CERTIFICATES (7)
------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
INITIAL AGGREGATE
CERTIFICATE EXPECTED FINAL INITIAL
BALANCE OR SUBORDINATION RATINGS AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
CLASS NOTIONAL AMOUNT(1) LEVELS (S&P/MOODY'S) LIFE(2) WINDOW(2)(3) DATE(2) RATE(4)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
D $10,464,000 5.00% BBB/Baa2 16.95 198-207 12/23/17 TBD(5)
---------------------------------------------------------------------------------------------------------------------------------
E $4,485,000 4.25% BBB-/Baa3 17.24 207-207 12/23/17 TBD(5)
---------------------------------------------------------------------------------------------------------------------------------
F-M $25,415,115 --- --- --- --- --- TBD(5)
---------------------------------------------------------------------------------------------------------------------------------
X $597,985,115(8) --- AAA/Aaa --- --- 7/23/23 Variable(9)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) As of September 1, 2000. In the case of each such Class, subject
to a permitted variance of plus or minus 5%.
(2) Based on the Structuring Assumptions described in the Prospectus
Supplement (including a settlement date of September 26, 2000) and
assuming 0% CPR.
(3) Principal window is the period (expressed in terms of months and
commencing in October 2000) during which distributions of
principal are expected to be made to the holders of each
designated Class in accordance with the Structuring Assumptions,
assuming 0% CPR.
(4) The Class A-1, A-2, A-3, A-4, F, G, H, J, K, L and M Certificates
will accrue interest at a fixed rate. The Class B, C, D, E and X
Certificates will accrue interest at a variable rate.
(5) The Pass-Through Rates on the Class A-1, A-2, A-3, A-4, B, C, D,
E, F, G, H, J, K, L and M Certificates will be determined at
pricing.
(6) The final Certificate Balance of the Class A-1, A-2, A-3 and A-4
Certificates offered will be determined by relative demand for
each such Class.
(7) Certificates are not offered hereby and are to be placed privately
pursuant to Rule 144A.
(8) Class X Notional Amount is equal to the sum of all Principal
Balance Certificates outstanding from time to time.
(9) The Pass-Through Rate on the Class X Certificates on each
Distribution Date will equal, in general, the Weighted Average Net
Mortgage Rate ("NWAC") minus the weighted average of the
Pass-Through Rates of the Classes of Certificates that have
principal amounts.
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
I. ISSUE CHARACTERISTICS
---------------------
Issue Type: Public: Class A-1, A-2, A-3, A-4, B and C (the
"Offered Certificates")
Private (Rule 144A): Class X, D, E, F, G, H, J, K,
L and M
Securities Offered: $557,621,000 monthly pay, multi-class,
sequential pay commercial mortgage REMIC
Pass-Through Certificates, including four
fixed-rate principal and interest classes (A-1,
A-2, A-3 and A-4) and two variable-rate principal
and interest classes (B and C)
Collateral: The collateral consists of a $597,985,115 pool of
102 fixed-rate, seasoned commercial Mortgage Loans
Seller: Principal Life Insurance Company
Lead Manager: Morgan Stanley & Co. Incorporated
Co-Manager: Goldman, Sachs & Co.
Master Servicer: Wells Fargo Bank, National Association
Primary Servicer: Principal Capital Management, LLC
Special Servicer: Principal Capital Management, LLC
Trustee/Fiscal Agent: LaSalle Bank National Association/ABN AMRO Bank
N.V.
Pricing Date: On or about September 14, 2000
Closing Date: On or about September 26, 2000
Distribution Dates: The 23rd of each month, commencing October 23, 2000
Cut-off Date: September 1, 2000 for any Mortgage Loan that has a
due date on the first day of each month. The
Cut-off date for any Mortgage Loan that has a due
date on a date other than the first day of each
month shall be deemed to be September 1, 2000. For
purposes of the information contained in this Term
Sheet we present those loans as if their scheduled
payments due in September 2000 were due on
September 1, 2000, not the actual day which such
scheduled payments were due.
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 Clearstream, same day funds,
with accrued interest
Legal/Regulatory Status: Class A-1, A-2, A-3 and A-4 Certificates are
expected to be eligible for exemptive relief under
ERISA. The Class A-1, A-2, A-3, A-4 and B
Certificates are 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-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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
II. STRUCTURE CHARACTERISTICS
-------------------------
The Class A-1, A-2, A-3 and A-4 Certificates are fixed-rate, monthly pay,
multi-class, sequential pay REMIC Pass-Through Certificates. The Class B and C
Certificates are variable rate, monthly pay, multi-class, sequential pay REMIC
Pass-Through Certificates. All Classes of Certificates derive their cash flows
from the entire pool of Mortgage Loans.
[BAR GRAPH]
Notes: (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) To be offered privately pursuant to Rule 144A.
(3) The final Certificate Balance of the Class A-1, A-2, A-3 and A-4
Certificates offered will be determined by relative demand for
each such Class.
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
[BAR GRAPH]
Notes: (1) The Class A-1, A-2, A-3, A-4 and X Certificates will be paid
interest on a pro rata basis.
(2) The above analysis is based on the Structuring Assumptions and a
0% CPR as described in the Prospectus Supplement.
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
Interest Distributions: Each Class of Certificates (other than the Class R-I
and Class R-II Certificates) will be entitled on each
Distribution Date to interest accrued at its
Pass-Through Rate on the outstanding Certificate
Balance of such Class, as applicable.
Principal Distributions: Principal will be distributed on each Distribution
Date, together to the Class A-1 and A-3 Certificates,
and to the Class A-2 Certificates, pro rata. The pro
rata principal distribution to the Class A-1 and A-3
Certificates (determined in the preceding sentence)
will be paid entirely to the Class A-1 Certificates
until reduced to zero and then entirely to the Class
A-3 Certificates until reduced to zero. The Class A-4
certificates will be distributed principal once the
Class A-1, A-2 and A-3 Certificate Balances have been
reduced to zero. Each remaining Class of Principal
Balance Certificates will be paid in sequential
order. If, due to losses, the Certificate Balances of
the Class B through Class M 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, A-2, A-3 and
A-4 Certificates will be made on a pro rata basis.
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
Yield Maintenance
Allocation: Any yield maintenance collected with respect to a Mortgage
Loan during any particular Collection Period will be
distributed to the holders of each Class of Principal
Balance Certificates (other than an excluded class as
defined below) then entitled to distributions of principal
on such distribution date (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) in an amount equal to the
lesser of (a) such yield maintenance payment and (b) the
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 four 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.
The portion, if any, of the yield maintenance 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 Class E Certificates and below are the
excluded classes.
The following is an example of the yield maintenance
allocation under (b) above based on the information
contained herein and the following assumptions:
o Two Classes of Certificates: Class A-1 and X
o The characteristics of the Mortgage Loan being prepaid
are as follows:
- Loan Balance: $10,000,000
- Mortgage Rate: 8.00%
- Maturity Date: 10 years (September 1, 2010)
o The Discount Rate is equal to 5.75%
o The Class A-1 Pass-Through Rate is equal to 7.00%
CLASS A-1 CLASS X
METHOD CERTIFICATES CERTIFICATES
--------------------------------------------- ------------- ----------------
(Class A-1 Pass Through Rate - Discount Rate) (7.00%-5.75%) (100.00%-55.56%)
--------------------------------------------- -------------
(Mortgage Rate - Discount Rate) (8.00%-5.75%)
------------- ----------------
Yield Maintenance Allocation 55.56% 44.44%
Credit Enhancement: Each Class of Certificates (other than Classes A-1, A-2,
A-3, A-4 and X) will be subordinate to all other Classes
with an earlier alphabetical Class designation.
Advancing: The master servicer, the trustee and the fiscal agent (in
that order) will each be obligated to make P&I Advances
and Servicing Advances, including delinquent property
taxes and insurance, but only to the extent that such
Advances are deemed recoverable.
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
Special Advancing: Payments on 31 of the mortgage loans, after expiration of
grace periods, are due after the Determination Date in
each month. The master servicer will advance the scheduled
payment for each of those loans on the Master Servicer
Remittance Date, but only to the extent deemed
recoverable; however, the master servicer will not be
entitled to receive interest on any such advance until the
related payment is delinquent.
Realized Losses and
Expense Losses: Realized Losses and Expense Losses, if any, will be
allocated to 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 pro rata to Classes
A-1, A-2, A-3 and A-4 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
Shortfalls: For any Distribution Date, any Net Aggregate Prepayment
Interest Shortfall not offset by the Master 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
("Appraisal Reduction Amount"). The Appraisal Reduction
Amount will reduce proportionately the amount of advances
for such loan, which reduction will result, in general, in
a reduction of interest distributable to the most
subordinate Class of Principal Balance Certificates
outstanding.
An Appraisal Reduction Amount 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.
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
25% of the initial Certificate Balance of such Class, the
next most subordinate Class of Principal Balance
Certificates.
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
Special Servicer: In general, the special servicer has the right to modify
the terms of a Specially Serviced Mortgage Loan if it
determines that such modification would increase the net
present value of the proceeds to the Trust, provided that
the special servicer generally may not (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 twenty
(20) years prior to the expiration of the ground lease.
Optional Termination: The seller, the special servicer, the Primary Servicer,
the master servicer, the depositor, and the holder of the
majority interest in the Class R-I Certificates, in that
order, 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 Rates less the
Master 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 un-reimbursed Advances, with
interest thereon at the Advance Rate and the fair market
value of any other property remaining in the Trust Fund.
Reports to
Certificateholders: The trustee will prepare and deliver monthly
Certificateholder Reports. The special servicer will
prepare and deliver to the trustee a monthly Special
Servicer Report summarizing the status of each Specially
Serviced Mortgage Loan. The 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.lnbabs.com.
The foregoing terms and structural characteristics of the Certificates are in
all respects subject to the more detailed description thereof in the Prospectus,
Prospectus Supplement and Pooling and Servicing Agreement.
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
III. SELLER Principal Life Insurance Company ("Principal Life")
------ ---------------------------------------------------
The Mortgage Pool consists of 102 Mortgage Loans, which were
originated and underwritten by Principal Life and/or its
affiliates.
Principal Life had 1999 statutory assets of $76 billion.
Principal Life and its affiliates have been originating
commercial mortgages since the 1950s and currently have over
$20 billion in commercial real estate debt and equity assets
under management. Principal Life is the flagship and largest
member of Principal Financial Group, a diversified family of
companies offering a wide range of financial products and
services for businesses, groups and individuals. The
Principal Financial Group currently has more than $117
billion in assets under management. Principal Life is
headquartered at 801 Grand Street, in Des Moines, Iowa 50392.
Principal Life's phone number is (515) 248-3944.
IV. COLLATERAL DESCRIPTION
----------------------
Summary: The Mortgage Pool consists of a $597,985,115 pool of 102
fixed-rate, seasoned mortgage loans secured by first liens on
commercial properties located throughout 23 states. As of the
Cut-off Date, the Mortgage Loans have a weighted average
mortgage rate of 7.856% and a weighted average remaining term
to maturity of 151 months. See the Appendices to the
Prospectus Supplement for more detailed collateral
information.
V. CERTAIN DEFINED TERMS
---------------------
DEBT SERVICE COVERAGE RATIO is calculated based on a loan's
actual mortgage constant.
IMPLIED DEBT SERVICE COVERAGE RATIO is calculated based on an
assumed mortgage loan constant of 9.0%. CUT-OFF DATE
LOAN-TO-VALUE RATIO(1) is calculated based upon a loan's
underwritten net operating income, a capitalization rate
determined by a third party market study or internal property
valuation and the loan balance as of the Cut-off Date.
BALLOON LOAN-TO-VALUE RATIO(1) is calculated based upon a
loan's underwritten net operating income, a capitalization
rate determined by a third party market study or internal
property valuation and the loan balance as of the loan's
maturity date.
The foregoing terms are in all respects subject to the more detailed description
thereof in the Prospectus Supplement.
Note: (1) One Mortgage Loan's Cut-off Date Loan-To-Value Ratio and Balloon
Loan-To-Value Ratio is calculated based on the estimate of value
from a third party appraisal.
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
TEN LARGEST LOANS
-----------------
<TABLE>
<CAPTION>
PROPERTY CUT-OFF DATE
LOAN NO. PROPERTY NAME CITY STATE TYPE BALANCE
-------- ------------- ---- ----- ---- -------
<S> <C> <C> <C> <C> <C>
1 Lighton Plaza Tower, I, & II Overland Park KS Office $30,500,000
2 Woodmen Retail Colorado Springs CO Retail $23,662,833
3 7799 Leesburg Pike McLean VA Office $23,601,958
4 Liberty Square Shopping Center Burlington NJ Retail $20,184,323
5 1860-2159 Landings Drive Mountain View CA Office $18,675,046
6 3555 Monte Villa Parkway(1) Bothell WA Office $5,542,604
14520 NE 87th Street(1) Redmond WA Office $3,876,893
26755 SW 95th Avenue(1) Wilsonville OR Industrial $3,093,689
14500 NE 87th Street(1) Redmond WA Office $3,038,177
14560 NE 87th Street(1) Redmond WA Office $2,335,814
----------
SUBTOTAL $17,887,177
7 Sun Center Phase I Columbus OH Retail $16,410,896
8 North Point Village Center Reston VA Retail $15,203,993
9 461 Fifth Avenue New York NY Other $15,000,000
10 Bird Ludlam Shopping Center South Miami FL Retail $11,974,433
</TABLE>
<TABLE>
<CAPTION>
CUT-OFF
SQUARE LOAN PER ACTUAL IMPLIED DATE BALLOON
LOAN NO. FEET SF DSCR DSCR LTV LTV
-------- ---- -- ---- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
1 475,804 $64.10 2.22 1.78 45.7% 43.2%
2 284,427 $83.19 1.49 1.33 70.6% 61.4%
3 354,018 $66.67 2.07 2.23 35.9% 28.3%
4 346,338 $58.28 1.26 1.35 71.6% 28.7%
5 238,551 $78.29 2.37 2.72 33.9% 0.3%(2)
6 78,000 $71.06 1.16 1.88 46.0% 0.6%(2)
59,565 $65.09 1.16 1.88 46.0% 0.6%(2)
165,810 $18.66 1.16 1.88 46.0% 0.6%(2)
60,000 $50.64 1.16 1.88 46.0% 0.6%(2)
35,760 $65.32 1.16 1.88 46.0% 0.6%(2)
7 216,470 $75.81 1.24 1.42 71.0% 49.4%
8 131,504 $115.62 1.44 1.85 50.8% 0.5%(2)
9 201,152 $74.57 1.81 1.52 61.9% 61.9%
10 192,282 $62.28 1.57 2.01 49.5% 0.5%(2)
</TABLE>
Note: (1) These loans are cross-collateralized and cross-defaulted.
(2) Loans with less than one percent Balloon LTV are fully amortizing.
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
GEOGRAPHIC DISTRIBUTION
-----------------------
[MAP OF U.S.]
WA 3.8%
OR 1.2%
Northern CA 15.9%
Southern CA 8.7%
AZ 0.4%
CO 4.0%
KS 5.1%
TX 7.5%
MN 1.3%
IA 0.9%
MO 0.7%
IN 0.4%
TN 0.5%
OH 6.0%
NY 2.9%
PA 0.8%
VA 9.1%
NC 3.5%
GA 5.3%
FL 7.7%
MA 1.3%
CT 1.9%
NJ 8.7%
MD 2.4%
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
CUT-OFF DATE
BALANCE ($)
--------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
--------------------------------------------------------------
1,000,001 - 2,000,000 1 1,998,635 0.33
2,000,001 - 3,000,000 25 64,523,137 10.79
3,000,001 - 4,000,000 21 74,212,769 12.41
4,000,001 - 5,000,000 18 79,087,921 13.23
5,000,001 - 6,000,000 8 42,964,212 7.18
6,000,001 - 7,000,000 5 31,898,243 5.33
7,000,001 - 8,000,000 8 60,633,388 10.14
8,000,001 - 9,000,000 2 17,011,257 2.84
9,000,001 - 10,000,000 2 19,019,803 3.18
10,000,001 - 15,000,000 5 58,396,700 9.77
15,000,001 - 20,000,000 3 50,289,936 8.41
20,000,001 - 25,000,000 3 67,449,115 11.28
25,000,001 >= 1 30,500,000 5.10
--------------------------------------------------------------
TOTAL: 102 597,985,115 100.00
--------------------------------------------------------------
Min: 1,998,635 Max: 30,500,000 Average: 5,862,599
--------------------------------------------------------------
STATE
-------------------------------------------------------------
AGGREGATE
NO. OF CUT-OFF
MORTGAGE DATE % OF
LOANS BALANCE ($) POOL
-------------------------------------------------------------
California 26 147,287,221 24.63
Virginia 6 54,293,690 9.08
New Jersey 9 51,840,182 8.67
Florida 9 45,850,005 7.67
Texas 9 45,128,538 7.55
Ohio 4 36,150,118 6.05
Georgia 9 31,537,703 5.27
Kansas 1 30,500,000 5.10
Colorado 1 23,662,833 3.96
Washington 6 22,629,089 3.78
Other 22 109,105,736 18.25
-------------------------------------------------------------
TOTAL: 102 $597,985,115 100.00
-------------------------------------------------------------
PROPERTY TYPE
--------------------------------------------------------------
AGGREGATE
NO. OF CUT-OFF
MORTGAGE DATE % OF
LOANS BALANCE ($) POOL
--------------------------------------------------------------
Retail 45 269,496,465 45.07
Industrial 36 161,606,800 27.03
Office 19 149,415,566 24.99
Other 2 17,466,284 2.92
--------------------------------------------------------------
TOTAL: 102 597,985,115 100.00
--------------------------------------------------------------
SEASONING (MOS)
-------------------------------------------------------------
NUMBER AGGREGATE
OF CURRENT % OF
LOANS BALANCE POOL
-------------------------------------------------------------
1-12 2 13,105,024 2.19
13-24 16 98,085,710 16.40
25-36 14 118,477,322 19.81
37-48 31 191,053,646 31.95
49-60 14 67,593,764 11.30
61-84 19 82,083,088 13.73
85-120 2 12,007,206 2.01
121-180 4 15,579,357 2.61
-------------------------------------------------------------
TOTAL: 102 597,985,115 100.00
-------------------------------------------------------------
Min: 9 Max: 144 Wtd Avg: 45
-------------------------------------------------------------
MORTGAGE RATE (%)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE %OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
6.501 - 7.000 4 34,325,462 5.74
7.001 - 7.500 24 158,565,706 26.52
7.501 - 8.000 36 217,065,543 36.30
8.001 - 8.500 24 126,961,794 21.23
8.501 - 9.000 10 41,562,686 6.95
9.001 - 9.500 1 3,253,507 0.54
9.501 - 10.000 2 10,149,739 1.70
10.001 - 10.500 1 6,100,679 1.02
------------------------------------------------------------
TOTAL: 102 597,985,115 100.00
------------------------------------------------------------
Min: 6.8 Max: 10.250 Wtd Avg: 7.856
------------------------------------------------------------
ORIGINAL TERM TO STATED MATURITY (MOS)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
61 - 120 18 158,083,884 26.44
121 - 180 26 131,147,524 21.93
181 - 240 47 237,353,354 39.69
241 - 300 11 71,400,353 11.94
------------------------------------------------------------
TOTAL: 102 597,985,115 100.00
------------------------------------------------------------
Min: 105 Max: 300 Wtd Avg: 195
------------------------------------------------------------
REMAINING TERM TO STATED MATURITY (MOS)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
61 - 120 31 235,418,834 39.37
121 - 180 34 144,801,599 24.21
181 - 240 30 177,691,306 29.72
241 - 300 7 40,073,376 6.70
------------------------------------------------------------
TOTAL: 102 597,985,115 100.00
------------------------------------------------------------
Min: 68 Max: 274 Wtd Avg: 151
------------------------------------------------------------
DEBT SERVICE COVERAGE RATIO (x)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
1.01 - 1.15 11 48,371,691 8.09
1.16 - 1.25 28 148,006,568 24.75
1.26 - 1.35 20 102,748,665 17.18
1.36 - 1.50 15 106,799,785 17.86
1.51 - 1.75 9 52,564,067 8.79
1.76 - 2.00 11 51,168,204 8.56
2.01 >= 8 88,326,136 14.77
------------------------------------------------------------
TOTAL: 102 597,985,115 100.00
------------------------------------------------------------
Min: 1.02 Max: 4.05 Wtd Avg: 1.50
------------------------------------------------------------
IMPLIED DEBT SERVICE COVERAGE RATIO (x)
---------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CURRENT % OF
LOANS BALANCE ($) POOL
---------------------------------------------------------
1.16 -1.25 5 33,066,859 5.53
1.26 - 1.35 6 66,954,096 11.20
1.36 - 1.50 25 136,136,256 22.77
1.51 - 1.75 24 123,847,832 20.71
1.76 - 2.00 22 121,333,744 20.29
2.01 >= 20 116,646,329 19.51
---------------------------------------------------------
TOTAL: 102 597,985,115 100.00
---------------------------------------------------------
Min: 1.18 Max: 5.12 Wtd Avg: 1.74
---------------------------------------------------------
*AT A 9% CONSTANT
CUT-OFF DATE LOAN-TO-VALUE RATIO (%)
---------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE %OF
LOANS BALANCE ($) POOL
---------------------------------------------------------
10.1 - 20.0 1 2,509,337 0.42
20.1 - 30.0 2 5,551,887 0.93
30.1 - 40.0 9 68,184,915 11.40
40.1 - 50.0 20 111,906,258 18.71
50.1 - 60.0 24 106,499,981 17.81
60.1 - 70.0 27 148,320,924 24.80
70.1 - 80.0 18 150,982,436 25.25
80.1 - 90.0 1 4,029,378 0.67
---------------------------------------------------------
TOTAL: 102 597,985,115 100.00
---------------------------------------------------------
Min: 18.6 Max: 80.6 Wtd Avg: 57.5
---------------------------------------------------------
BALLOON LOAN-TO-VALUE RATIO (%)
---------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
---------------------------------------------------------
=< 0.0 1 8,093,312 1.35
0.1 - 10.0 65 297,197,199 49.70
10.1 - 20.0 4 19,019,665 3.18
20.1 - 30.0 5 54,443,957 9.10
30.1 - 40.0 9 44,703,117 7.48
40.1 - 50.0 6 68,428,435 11.44
50.1 - 60.0 6 37,311,924 6.24
60.1 - 70.0 6 68,787,505 11.50
---------------------------------------------------------
TOTAL: 102 597,985,115 100.00
---------------------------------------------------------
Min: 0.0 Max: 64.1 Wtd Avg: 21.6
---------------------------------------------------------
ALL NUMERICAL INFORMATION 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 THE
CUT-OFF DATE. GENERALLY, FOR THE PURPOSES OF THE PRESENTATION OF MORTGAGE POOL
INFORMATION, CROSS-COLLATERALIZED AND CROSS-DEFAULTED LOANS ARE CALCULATED ON A
COMBINED BASIS.
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
$557,621,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-PRIN
<TABLE>
<CAPTION>
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT RESTRICTION (%)
----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS SEP 00 SEP 01 SEP 02 SEP 03 SEP 04 SEP 05
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Locked Out 11.36% 9.50% 8.66% 8.75% 3.81% 3.82%
Yield Maintenance Total 88.64% 90.50% 91.34% 91.25% 96.19% 96.18%
Penalty Points:
5.00% and greater 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
3.00% to 3.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2.00% to 2.99% 0.00% 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% 0.00%
Open 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
----------------------------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
----------------------------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding 597,985,115.14 581,280,737.04 562,996,122.08 543,096,011.17 521,548,562.67 498,216,401.86
% of Initial Pool Balance 100.00% 97.21% 94.15% 90.82% 87.22% 83.32%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT RESTRICTION (%) - CONTINUED
-----------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS SEP 06 SEP 07 SEP 08 SEP 09 SEP 10
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out 3.99% 1.07% 1.09% 1.49% 1.62%
Yield Maintenance Total 96.01% 98.93% 98.91% 98.51% 98.38%
Penalty Points:
5.00% and greater 0.00% 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.00% 0.00% 0.00% 0.00% 0.00%
3.00% to 3.99% 0.00% 0.00% 0.00% 0.00% 0.00%
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% 0.00% 0.00%
-----------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
-----------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding 453,547,318.73 378,479,466.92 342,697,900.04 228,159,335.30 187,864,249.88
% of Initial Pool Balance 75.85% 63.29% 57.31% 38.15% 31.42%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) The above analysis is based on Structuring Assumptions and a 0%
CPR as discussed in the Prospectus Supplement.
(2) See Footnote No. 16 in Appendix II for a description of the yield
maintenance.
T-15
--------------------------------------------------------------------------------
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 and Goldman,
Sachs & Co. (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
transactions 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, and by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
Ltd. 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>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
135 S. LaSalle Street Suite 1625 SERIES 2000-PRIN Prior Payment: N/A
Chicago, IL 60603 Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
Administrator: Analyst:
Roxane Ellwanger 312-904-8975 REPORTING PACKAGE TABLE OF CONTENTS Thomas Helms 714-282-3980(203)
[email protected] [email protected]
<CAPTION>
====================================================================================================================================
================================================ ================================================= ==============================
<S> <C> <C>
Page(s)
-------
Issue Id: MS00PRIN REMIC Certificate Report Closing Date:
ASAP #: 520 Bond Interest Reconciliation First Payment Date: 10/23/2000
Monthly Data File Name: Cash Reconciliation Summary Assumed Final Payment Date:
15 Month Historical Loan Status Summary
================================================ 15 Month Historical Payoff/Loss Summary ==============================
Historical Collateral Level
Prepayment Report
Delinquent Loan Detail
Mortgage Loan Characteristics
Loan Level Detail
Specially Serviced Report
Modified Loan Detail
Realized Loss Detail
Appraisal Reduction Detail
=================================================
==================================================================================================================
CONTACT INFORMATION
------------------------------------------------------------------------------------------------------------------
ISSUER: Morgan Stanley Dean Witter Capital I Trust 2000-PRIN
DEPOSITOR: Morgan Stanley Dean Witter Capital I Inc.
UNDERWRITER: Morgan Stanley & Co. Incorporated / Goldman Sachs & Co.
MASTER SERVICER: Wells Fargo National Association
SPECIAL SERVICER: Principal Capital Management LLC
RATED AGENCY: Moody's / Standard & Poors
==================================================================================================================
=====================================================================
---------------------------------------------------------------------
INFORMATION IS AVAILABLE FOR THIS ISSUE FROM THE FOLLOWING SOURCES
---------------------------------------------------------------------
LaSalle Web Site www.lnbabs.com
LaSalle Bulletin Board (714) 282-3990
LaSalle "ASAP" Fax Back System (714) 282-5518
LaSalle Factor Line (800) 246-5761
=====================================================================
====================================================================================================================================
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
====================================================================================================================================
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS FACE VALUE (1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT ADJUSTMENT RATE (2)
CUSIP Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Next Rate (3)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
Total P&I Payment 0.00
=========================
</TABLE>
Notes: (1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred
Interest equals Accrual
(3) Estimated
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
BOND INTEREST RECONCILIATION
<CAPTION>
====================================================================================================================================
Deductions Additions
---------------------------------------- ------------------------------------------
Accrual Accrued Add. Deferred & Prior Prepay- Other
------------ Certificate Allocable Trust Accretion Interest Int. Short- ment Interest
Class Method Days Interest PPIS Expense(1) Interest Losses falls Due Penalties Proceeds(2)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
</TABLE>
===============================================================================
Remaining
Distributable Interest Outstanding Credit Support
Certificate Payment Interest ---------------------
Interest Amount Shortfalls Original Current(3)
-------------------------------------------------------------------------------
-----------------------------------------
0.00 0.00 0.00
===============================================================================
(1) Additional Trust Expenses are fees allocated directly to the bond resulting
in a deduction to accrued interest and not carried as an outstanding
shortfall.
(2) Other Interest Proceeds include default interest, PPIE and Recoveries of
Interest.
(3) Determined as follows: (A) the ending balance of all the classes less (B)
the sum of (i) the ending balance of the class and (ii) the ending balance
of all classes which are not subordinate to the class divided by (A).
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
CASH RECONCILIATION SUMMARY
====================================================================================================================================
<S> <C> <C>
------------------------------------ -------------------------------------- -----------------------------------------------
INTEREST SUMMARY SERVICING FEE SUMMARY PRINCIPAL SUMMARY
----------------------------- ------------------------------ --------------------------------------
Current Scheduled Interest Current Servicing Fees SCHEDULED PRINCIPAL:
Less Deferred Interest Plus Fees Advanced for PPIS Current Scheduled Principal
Plus Advance Interest Less Reduction for PPIS Advanced Scheduled Principal
Plus Unscheduled Interest Plus Unscheduled Servicing Fees -----------------------------------------------
PPIS Reducing Scheduled Interest -------------------------------------- Scheduled Principal Distribution
Less Total Fees Paid To Servicer Total Servicing Fees Paid -----------------------------------------------
Plus Fees Advanced for PPIS -------------------------------------- UNSCHEDULED PRINCIPAL:
Less Fee Strips Paid by Servicer ----------------------
Less Misc. Fees & Expenses -------------------------------------- Curtailments
Less Non Recoverable Advances PPIS SUMMARY Prepayments in Full
------------------------------------ -------------------------------------- Liquidation Proceeds
Interest Due Trust Gross PPIS Repurchase Proceeds
------------------------------------ Reduced by PPIE Other Principal Proceeds
Less Trustee Fee Reduced by Shortfalls in Fees -----------------------------------------------
Less Fee Strips Paid by Trust Reduced by Other Amounts Unscheduled Principal Distribution
Less Misc. Fees Paid by Trust -------------------------------------- -----------------------------------------------
------------------------------------ PPIS Reducing Scheduled Interest Remittance Principal
Remittance Interest -------------------------------------- -----------------------------------------------
------------------------------------ PPIS Reducing Servicing Fee
-------------------------------------- ------------------------------------------------
PPIS Due Certificate Servicer Wire Amount
-------------------------------------- -----------------------------------------------
--------------------------------------------------------
POOL BALANCE SUMMARY
--------------------------------------------------------
Balance Count
--------------------------------------------------------
Beginning Pool
Scheduled Principal Distribution
Unscheduled Principal Distribution
Deferred Interest
Liquidations
Repurchases
Ending Pool
--------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------
ADVANCES
--------
PRIOR OUTSTANDING CURRENT PERIOD RECOVERED ENDING OUTSTANDING
Principal Interest Principal Interest Principal Interest Principal Interest
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
ASSET BACKED FACTS ~15 MONTH HISTORICAL LOAN STATUS SUMMARY
============== ======================================================================= ============================================
Delinquency Aging Categories Special Event Categories(1)
Distribution Delinq 1 Month Delinq 2 Months Delinq 3+ Months Foreclosure REO Modifications Specially Serviced Bankruptcy
Date # Balance # Balance # Balance # Balance # Balance # Balance # Balance # Balance
-------------- ----------------------------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/23/00
-------------- ----------------------------------------------------------------------- --------------------------------------------
-------------- ----------------------------------------------------------------------- --------------------------------------------
-------------- ----------------------------------------------------------------------- --------------------------------------------
-------------- ----------------------------------------------------------------------- --------------------------------------------
-------------- ----------------------------------------------------------------------- --------------------------------------------
-------------- ----------------------------------------------------------------------- --------------------------------------------
-------------- ----------------------------------------------------------------------- --------------------------------------------
-------------- ----------------------------------------------------------------------- --------------------------------------------
-------------- ----------------------------------------------------------------------- --------------------------------------------
-------------- ----------------------------------------------------------------------- --------------------------------------------
-------------- ----------------------------------------------------------------------- --------------------------------------------
============== ======================================================================= ============================================
</TABLE>
(1) Note: Modification, Specially Serviced & Bankruptcy Totals are Included in
the Appropriate Delinquency Aging Category
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
ASSET BACKED FACTS ~15 MONTH HISTORICAL PAYOFF/LOSS SUMMARY
====================================================================================================================================
Distribution Ending Pool(1) Payoffs(2) Penalties Appraisal Reduct.(2) Liquidations(2) Realized Losses(2)
Date # Balance # Balance # Amount # Balance # Balance # Amount
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10/23/00
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
=====================================
Remaining Term Curr Weighted Avg.
Life Amort. Coupon Remit
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
=====================================
(1) Percentage based on pool as of cutoff.
(2) Percentage based on pool as of beginning of period.
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
HISTORICAL COLLATERAL LEVEL PREPAYMENT REPORT
============ =============================================== ===================== ================== ==============================
Remaining Term
Disclosure Distribution Initial Payoff Penalty Prepayment Maturity Property -------------- Note
Control # Date Balance Code Amount Amount Date Date Type State DSCR Life Amort. Rate
------------ ----------------------------------------------- --------------------- ------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
============ =============================================== ===================== ================== ==============================
CUMULATIVE 0 0
==================
</TABLE>
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
DELINQUENT LOAN DETAIL
====================================================================================================================================
Paid Outstanding Out. Property Special
Disclosure Doc Thru Current P&I P&I Protection Advance Servicer Foreclosure Bankruptcy REO
Control # Date Advance Advances** Advances Description(1) Transfer Date Date Date Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
A. P&I Advance - Loan in Grace Period
B. P&I Advance - Late Payment but less than one month delinq
1. P&I Advance - Loan delinquent 1 month
2. P&I Advance - Loan delinquent 2 months
3. P&I Advance - Loan delinquent 3 months or More
4. Matured Balloon/Assumed Scheduled Payment
====================================================================================================================================
</TABLE>
** Outstanding P&I Advances include the current period P&I Advance
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
</TABLE>
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF PRINCIPAL BALANCES
==========================================================================
Weighted Average
Current Scheduled # of Scheduled % of --------------------------
Balances Loans Balance Balance Term Coupon DSCR
==========================================================================
==========================================================================
0 0 0.00%
==========================================================================
Average Scheduled Balance
Maximum Scheduled Balance
Minimum Scheduled Balance
DISTRIBUTION OF REMAINING TERM (FULLY AMORTIZING)
===========================================================================
Weighted Average
Fully Amortizing # of Scheduled % of ------------------------
Mortgage Loans Loans Balance Balance Term Coupon DSCR
===========================================================================
===========================================================================
0 0 0.00%
===========================================================================
Minimum Remaining Term
Maximum Remaining Term
DISTRIBUTION OF MORTGAGE INTEREST RATES
==========================================================================
Weighted Average
Current Mortgage # of Scheduled % of ---------------------------
Interest Rate Loans Balance Balance Term Coupon DSCR
==========================================================================
==========================================================================
0 0 0.00%
==========================================================================
Minimum Mortgage Interest Rate 10.0000%
Maximum Mortgage Interest Rate 10.0000%
DISTRIBUTION OF REMAINING TERM (BALLOON)
==========================================================================
Weighted Average
Balloon # of Scheduled % of -------------------------
Mortgage Loans Loans Balance Balance Term Coupon DSCR
==========================================================================
0 to 60
61 to 120
121 to 180
181 to 240
241 to 360
==========================================================================
0 0 0.00%
==========================================================================
Minimum Remaining Term 0
Maximum Remaining Term 0
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
</TABLE>
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF DSCR (CURRENT)
================================================================================
Debt Service # of Scheduled % of
Coverage Ratio Loans Balance Balance WAMM WAC DSCR
================================================================================
================================================================================
0 0 0.00%
================================================================================
Maximum DSCR
Minimum DSCR
DISTRIBUTION OF DSCR (CUTOFF)
================================================================================
Debt Service # of Scheduled % of
Coverage Ratio Loans Balance Balance WAMM WAC DSCR
================================================================================
================================================================================
0 0 0.00%
================================================================================
Maximum DSCR 0.00
Minimum DSCR 0.00
GEOGRAPHIC DISTRIBUTION
================================================================================
# of Scheduled % of
State Loans Balance Balance WAMM WAC DSCR
================================================================================
================================================================================
0 0.00%
================================================================================
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
</TABLE>
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF PROPERTY TYPES
================================================================================
# of Scheduled % of
Property Types Loans Balance Balance WAMM WAC DSCR
================================================================================
================================================================================
0 0 0.00%
================================================================================
DISTRIBUTION OF AMORTIZATION TYPE
================================================================================
Current Scheduled # of Scheduled % of
Balances Loans Balance Balance WAMM WAC DSCR
================================================================================
================================================================================
================================================================================
DISTRIBUTION OF LOAN SEASONING
================================================================================
# of Scheduled % of
Number of Years Loans Balance Balance WAMM WAC DSCR
================================================================================
================================================================================
0 0 0.00%
================================================================================
DISTRIBUTION OF YEAR LOANS MATURING
================================================================================
# of Scheduled % of
Year Loans Balance Balance WAMM WAC DSCR
================================================================================
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 & Longer
================================================================================
0 0 0.00%
================================================================================
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
LOAN LEVEL DETAIL
====================================================================================================================================
Operating Ending Spec. Loan
Disclosure Property Statement Maturity Principal Note Scheduled Mod. Serv ASER Status
Control # Grp Type State DSCR NOI Date Date Balance Rate P&I Flag Flag Flag Code(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
W/Avg 0.00 0 0 0
====================================================================================================================================
</TABLE>
Prepayment
==================================
Amount Penalty Date
==================================
==================================
0 0
==================================
================================================================================
* NOI and DSCR, if available and reportable under the terms of the Pooling
and Servicing Agreement, are based on information obtained from the related
borrower, and no other party to the agreement shall be held liable for the
accuracy or methodology used to determine such figures.
--------------------------------------------------------------------------------
(1) Legend:
A. P&I Adv - in Grace Period
B. P&I Adv - less than one month delinq
1. P&I Adv - delinquent 1 month
2. P&I Adv - delinquent 2 months
3. P&I Adv - delinquent 3+ months
4. Mat. Balloon/Assumed P&I
5. Prepaid in Full
6. Specially Serviced
7. Foreclosure
8. Bankruptcy
9. REO
10. DPO
11. Modification
================================================================================
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
SPECIALLY SERVICED (PART I) ~ LOAN DETAIL
====================================================================================================================================
Disclosure Transfer Balance Note Maturity Remaining Term Property NOI
Control # Date Scheduled Actual Rate Date Life Amort. Type State NOI DSCR Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
SPECIALLY SERVICED LOAN DETAIL (PART II) ~ SERVICER COMMENTS
====================================================================================================================================
Disclosure Resolution
Control # Strategy Comments
====================================================================================================================================
<S> <C> <C>
====================================================================================================================================
</TABLE>
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
MODIFIED LOAN DETAIL
====================================================================================================================================
Disclosure Modification Modification Modification
Control # Date Code Description
====================================================================================================================================
<S> <C> <C> <C>
====================================================================================================================================
</TABLE>
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
REALIZED LOSS DETAIL
====================================================================================================================================
Beginning Gross Proceeds Aggregate Net Net Proceeds
Distribution Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation Liquidation as a % of Realized
Period Control # Date Value Balance Proceeds Sched Principal Expenses * Proceeds Sched. Balance Loss
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
CURRENT TOTAL 0.00 0.00 0.00 0.00 0.00
CUMULATIVE 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
</TABLE>
* Aggregate liquidation expenses also include outstanding P&I advances and
unpaid servicing fees, unpaid trustee fees, etc..
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I INC. Statement Date: 10/23/2000
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date: 10/23/2000
SERIES 2000-PRIN Prior Payment: N/A
Next Payment: 11/24/2000
Record Date: 09/29/2000
ABN AMRO ACCT: XX-XXXX-XX-X
<CAPTION>
APPRAISAL REDUCTION DETAIL
======================= ====================== ================================== ======================= ======= ==================
Remaining Term Appraisal
Disclosure Appraisal Scheduled Reduction Note Maturity ---------------- Property ------------------
Control # Red. Date Balance Amount Rate Date Life Amort. Type State DSCR Value Date
======================= ====================== ================================== ======================= ======= ==================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
======================= ====================== ================================== ======================= ======= ==================
</TABLE>
09/06/2000 - 09:34 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
<PAGE>
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<PAGE>
PROSPECTUS
MORGAN STANLEY DEAN WITTER CAPITAL I INC.,
(FORMERLY KNOWN AS MORGAN STANLEY CAPITAL I INC.)
DEPOSITOR
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES BY SEPARATE TRUSTS)
---------------
Morgan Stanley Dean Witter Capital I Inc. will periodically offer
certificates in one or more series and each series of certificates will
represent beneficial ownership interests in a different trust fund.
EACH TRUST FUND WILL CONSIST PRIMARILY OF ONE OR MORE SEGREGATED POOLS
OF:
1) multifamily or commercial mortgage loans;
2) mortgage participations, mortgage pass-through certificates or
mortgage-backed securities;
3) direct obligations of the United States or other governmental
agencies; or
4) any combination of the 1-3, above, as well as other property as
described in the accompanying prospectus supplement.
The certificates of any series may consist of one or more classes. A
given class may:
o provide for the accrual of interest based on fixed, variable or
adjustable rates;
o be senior or subordinate to one or more other classes in respect
of distributions;
o be entitled to principal distributions, with disproportionately
low, nominal or no interest distributions;
o be entitled to interest distributions, with disproportionately
low, nominal or no principal distributions;
o provide for distributions of accrued interest commencing only
following the occurrence of certain events, such as the
retirement of one or more other classes;
o provide for sequential distributions of principal;
o provide for distributions based on a combination of any of the
foregoing characteristics; or any combination of the above.
INVESTING IN THE CERTIFICATES OFFERED TO YOU INVOLVES RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 17 IN THIS PROSPECTUS AND ON PAGE S-__ OF THE RELATED
PROSPECTUS SUPPLEMENT.
This prospectus may be used to offer and sell any series of
certificates only if accompanied by the prospectus supplement for that series.
The information in this prospectus is not complete and may be changed. This
prospectus is not an offer to sell these securities in any state where the offer
or sale is not permitted.
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved of the certificates to be offered to you or
determined if this prospectus or the accompanying prospectus supplement are
truthful or complete. Any representation to the contrary is a criminal offense.
-------------------------------------------
MORGAN STANLEY DEAN WITTER
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the certificates being offered to you is contained in
two separate documents that progressively provide more detail: (a) this
prospectus, which provides general information, some of which may not apply to a
particular series of certificates; and (b) the accompanying prospectus
supplement, which describes the specific terms of your series of certificates,
including:
o the timing of interest and principal payments;
o applicable interest rates;
o information about the trust fund's assets;
o information about any credit support or cash flow agreement;
o the rating for each class of certificates;
o information regarding the nature of any subordination;
o any circumstance in which the trust fund may be subject to early
termination;
o whether any elections will be made to treat the trust fund or a
designated portion thereof as a "real estate mortgage investment
conduit" for federal income tax purposes;
o the aggregate principal amount of each class of certificates;
o information regarding any master servicer, sub-servicer or
special servicer; and
o whether the certificates will be initially issued in definitive
or book entry form.
IF THE TERMS OF THE CERTIFICATES OFFERED TO YOU VARY BETWEEN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE
INFORMATION IN THE PROSPECTUS SUPPLEMENT. Further, you should rely only on the
information contained in this prospectus and the accompanying prospectus
supplement. Morgan Stanley Dean Witter Capital I Inc. has not authorized anyone
to provide you with information that is different.
Distributions on the certificates will be made only from the assets of
the related trust fund. The certificates of each series will not be an
obligation of Morgan Stanley Dean Witter Capital I Inc. or any of its
affiliates. Neither the certificates nor any assets in the related trust fund
will be insured or guaranteed by any governmental agency or instrumentality or
any other person unless the related prospectus supplement so provides.
This prospectus and the accompanying prospectus supplement include
cross references to sections in these materials where you can find further
related discussions. The tables of contents in this prospectus and the
prospectus supplement identify the pages where these sections are located.
Morgan Stanley Dean Witter Capital I Inc.'s principal executive office
is located at 1585 Broadway, 37th Floor, New York, New York 10036, and the
telephone number is (212) 761-4700.
----------------------------------------
Until 90 days after the date of each prospectus supplement, all dealers
that buy, sell or trade the certificates offered by that prospectus supplement,
whether or not participating in the offering, may be
<PAGE>
required to deliver a prospectus supplement and this 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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Important Notice About Information Presented In This Prospectus And The Accompanying Prospectus Supplement........2
Summary Of Prospectus.............................................................................................1
Risk Factors.....................................................................................................11
Assets.......................................................................................................30
Mortgage Loans...............................................................................................30
Mortgage Backed Securities...................................................................................37
Government Securities........................................................................................38
Accounts.....................................................................................................39
Credit Support...............................................................................................39
Cash Flow Agreements.........................................................................................39
Use Of Proceeds..................................................................................................39
Yield Considerations.............................................................................................40
General......................................................................................................40
Pass-Through Rate............................................................................................40
Timing of Payment of Interest................................................................................40
Payments of Principal; Prepayments...........................................................................41
Prepayments--Maturity and Weighted Average Life..............................................................42
Other Factors Affecting Weighted Average Life................................................................44
The Depositor....................................................................................................45
Description Of The Certificates..................................................................................45
General......................................................................................................45
Distributions................................................................................................46
Available Distribution Amount................................................................................46
Distributions of Interest on the Certificates................................................................47
Distributions of Principal of the Certificates...............................................................48
Components...................................................................................................49
Distributions on the Certificates of Prepayment Premiums or in Respect of Equity Participations..............49
Allocation of Losses and Shortfalls..........................................................................49
Advances in Respect of Delinquencies.........................................................................49
Reports to Certificateholders................................................................................50
Termination..................................................................................................54
Book-Entry Registration and Definitive Certificates..........................................................55
Description Of The Agreements....................................................................................56
Assignment of Assets; Repurchases............................................................................57
Representations and Warranties; Repurchases..................................................................59
Certificate Account and Other Collection Accounts............................................................61
Collection and Other Servicing Procedures....................................................................65
Subservicers.................................................................................................66
Special Servicers............................................................................................67
Realization Upon Defaulted Whole Loans.......................................................................67
</TABLE>
i
<PAGE>
<TABLE>
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PAGE
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<S> <C>
Hazard Insurance Policies....................................................................................70
Rental Interruption Insurance Policy.........................................................................72
Fidelity Bonds and Errors and Omissions Insurance............................................................72
Due-on-Sale and Due-on-Encumbrance Provisions................................................................73
Retained Interest; Servicing Compensation and Payment of Expenses............................................73
Evidence as to Compliance....................................................................................74
Matters Regarding a Master Servicer and the Depositor........................................................74
Events of Default............................................................................................76
Rights Upon Event of Default.................................................................................76
Amendment....................................................................................................77
The Trustee..................................................................................................78
Duties of the Trustee........................................................................................78
Matters Regarding the Trustee................................................................................79
Resignation and Removal of the Trustee.......................................................................79
Description Of Credit Support....................................................................................80
General......................................................................................................80
Subordinate Certificates.....................................................................................81
Cross-Support Provisions.....................................................................................81
Insurance or Guarantees for the Whole Loans..................................................................81
Letter of Credit.............................................................................................81
Insurance Policies and Surety Bonds..........................................................................82
Reserve Funds................................................................................................82
Credit Support for MBS.......................................................................................83
Legal Aspects Of The Mortgage Loans And The Leases...............................................................83
General......................................................................................................83
Types of Mortgage Instruments................................................................................84
Interest in Real Property....................................................................................84
Leases and Rents.............................................................................................85
Personality..................................................................................................86
Foreclosure..................................................................................................86
Bankruptcy Laws..............................................................................................92
Junior Mortgages; Rights of Senior Lenders or Beneficiaries..................................................95
Environmental Legislation....................................................................................97
Due-on-Sale and Due-on-Encumbrance..........................................................................100
Subordinate Financing.......................................................................................101
Default Interest, Prepayment Premiums and Prepayments.......................................................101
Acceleration on Default.....................................................................................102
Applicability of Usury Laws.................................................................................102
Laws and Regulations; Types of Mortgaged Properties.........................................................103
Americans With Disabilities Act.............................................................................103
Soldiers' and Sailors' Civil Relief Act of 1940.............................................................104
Forfeitures in Drug and RICO Proceedings....................................................................104
Federal Income Tax Consequences.................................................................................105
General.....................................................................................................105
Grantor Trust Funds.........................................................................................105
REMICs......................................................................................................117
</TABLE>
ii
<PAGE>
<TABLE>
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<S> <C>
Prohibited Transactions and Other Taxes.....................................................................135
Liquidation and Termination.................................................................................136
Administrative Matters......................................................................................137
Tax-Exempt Investors........................................................................................137
Residual Certificate Payments--Non-U.S. Persons.............................................................137
Tax Related Restrictions on Transfers of REMIC Residual Certificates........................................138
State Tax Considerations........................................................................................141
ERISA Considerations............................................................................................141
General.....................................................................................................141
Prohibited Transactions.....................................................................................141
Review by Plan Fiduciaries..................................................................................144
Legal Investment................................................................................................144
Plan Of Distribution............................................................................................147
Legal Matters...................................................................................................149
Financial Information...........................................................................................149
Rating..........................................................................................................149
Incorporation Of Information By Reference.......................................................................149
Glossary Of Terms...............................................................................................151
</TABLE>
iii
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<PAGE>
SUMMARY OF PROSPECTUS
This summary highlights selected information from this prospectus. It does not
contain all of the information you need to consider in making your investment
decision. TO UNDERSTAND ALL OF THE TERMS OF AN OFFERING OF CERTIFICATES, READ
THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT CAREFULLY.
WHAT YOU WILL OWN
<TABLE>
<S> <C>
TITLE OF CERTIFICATES................... Mortgage Pass-Through Certificates, issuable in series.
MORTGAGE POOL........................... Each trust fund will consist primarily of one or more segregated pools of:
1) multifamily or commercial mortgage loans;
2) mortgage participations, mortgage pass-through certificates or
mortgage-backed securities;
3) direct obligations of the United States or other governmental agencies; or
4) any combination of 1-3 above, as well as other property as described in the
accompanying prospectus supplement.
5) as to some or all of the mortgage loans, assignments of the leases of the
related mortgaged properties or assignments of the rental payments due
under those leases.
Each trust fund for a series of certificates may also include:
o letters of credit, insurance policies, guarantees, reserve funds or other
types of credit support; and
o currency or interest rate exchange agreements and other financial assets.
RELEVANT PARTIES AND DATES
ISSUER.................................. Morgan Stanley Dean Witter Capital I 199__-__ Trust.
DEPOSITOR............................... Morgan Stanley Dean Witter Capital I Inc., a wholly-owned subsidiary of
Morgan Stanley Group Inc.
MASTER SERVICER......................... The master servicer, if any, for each series of certificates will be named
in the related prospectus supplement. The master servicer may be an
affiliate of Morgan Stanley Dean Witter Capital I Inc.
- 1 -
<PAGE>
SPECIAL SERVICER........................ The special servicer, if any, for each series of certificates will be
named, or the circumstances in accordance with which a special servicer
will be appointed will be described, in the related prospectus supplement.
The special servicer may be an affiliate of Morgan Stanley Dean Witter
Capital I Inc.
TRUSTEE................................. The trustee for each series of certificates will be named in the related
prospectus supplement.
ORIGINATOR.............................. The originator or originators of the mortgage loans will be named in the
related prospectus supplement. An originator may be an affiliate of Morgan
Stanley Dean Witter Capital I Inc.. Morgan Stanley Dean Witter Capital I
Inc. will purchase the mortgage loans or the mortgage backed securities or
both, on or before the issuance of the related series of certificates.
INFORMATION ABOUT THE MORTGAGE POOL
THE TRUST FUND 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 loans and the mortgage backed securities, or one or the other,
with respect to each series of certificates will consist of a pool of:
o multifamily or commercial mortgage loans or both;
o mortgage participations, mortgage pass-through certificates or other
mortgage-backed securities evidencing interests in or secured by mortgage
loans; or
o a combination of mortgage loans and mortgage backed securities.
The mortgage loans will not be guaranteed or insured by:
o Morgan Stanley Dean Witter Capital I Inc. or any of its affiliates; or
o unless the prospectus supplement so provides, any governmental agency or
instrumentality or other person.
The mortgage loans will be secured by first liens or junior liens
- 2 -
<PAGE>
on, or security interests in:
o residential properties consisting of five or more rental or
cooperatively-owned dwelling units; or
o 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
commercial properties or other types of commercial properties.
Unless otherwise provided in the prospectus supplement, the mortgage loans:
o will be secured by properties located in any of the fifty states, the
District of Columbia or the Commonwealth of Puerto Rico;
o will have individual principal balances at origination of at least $25,000;
o will have original terms to maturity of not more than 40 years; and
o will be originated by persons other than Morgan Stanley Dean Witter Capital
I Inc.
Each mortgage loan may provide for the following payment terms:
o Each mortgage loan may provide for no accrual of interest or for accrual of
interest at a fixed or adjustable rate or at a rate that may be converted
from adjustable to fixed, or vice versa, from time to time at the
borrower's election. Adjustable mortgage rates may be based on one or more
indices.
o Each mortgage loan may provide for scheduled payments to maturity or
payments that adjust from time to time to accommodate changes in the
interest rate or to reflect the occurrence of certain events.
o Each mortgage loan may provide for negative
- 3 -
<PAGE>
amortization or accelerated amortization.
o Each mortgage loan may be fully amortizing or require a balloon payment due
on the loan's stated maturity date.
o Each mortgage loan may contain prohibitions on prepayment or require
payment of a premium or a yield maintenance penalty in connection with a
prepayment.
o Each mortgage loan may provide for payments of principal, interest or both,
on due dates that occur monthly, quarterly, semi-annually or at another
interval as specified in the related prospectus supplement.
(B) GOVERNMENT SECURITIES...... If the related prospectus supplement so specifies, the trust fund may include
direct obligations of the United States, agencies of the United States
or agencies created by government entities which provide for payment of
interest or principal or both.
(C) COLLECTION ACCOUNTS........ Each trust fund will include one or more accounts established and
maintained on behalf of the certificateholders. The person(s) designated
in the related prospectus supplement will, to the extent described in this
prospectus and the prospectus supplement, deposit into this account all
payments and collections received or advanced with respect to the trust
fund's assets. The collection account may be either interest bearing or
non-interest bearing, and funds may be held in the account as cash or
invested in short-term, investment grade obligations.
(D) CREDIT SUPPORT............. If the related prospectus supplement so specifies, one or more classes of
certificates may be provided with partial or full protection against
certain defaults and losses on a trust fund's mortgage loans and mortgage
backed securities.
This protection may be provided by one or more of the following means:
o subordination of one or more other classes of certificates,
o letter of credit,
o insurance policy,
o guarantee,
- 4 -
<PAGE>
o reserve fund or
o another type of credit support, or a combination thereof.
The related prospectus supplement will describe the amount and types of
credit support, the entity providing the credit support, if applicable, and
related information. If a particular trust fund includes mortgage backed
securities, the related prospectus supplement will describe any similar
forms of credit support applicable to those mortgage backed securities.
(E) CASH FLOW AGREEMENTS....... If the related prospectus supplement so provides, the trust fund may
include guaranteed investment contracts pursuant to which moneys held in
the collection accounts will be invested at a specified rate. The trust
fund also may include agreements designed to reduce the effects of interest
rate or currency exchange rate fluctuations on the trust fund's assets or
on one or more classes of certificates.
Agreements of this sort may include:
o interest rate exchange agreements,
o interest rate cap or floor agreements,
o currency exchange agreements or similar agreements. Currency exchange
agreements might be included in a trust fund if some or all of the mortgage
loans or mortgage backed securities, such as mortgage loans secured by
mortgaged properties located outside the United States, are denominated in
a non-United States currency.
The related prospectus supplement will describe the principal terms of any
guaranteed investment contract or other agreement and provide
information with respect to the obligor. If a particular trust fund
includes mortgage backed securities, the related prospectus supplement will
describe any guaranteed investment contract or other agreements
applicable to those mortgage backed securities.
DISTRIBUTIONS ON CERTIFICATES........... Each series of certificates will have the following characteristics:
o if the certificates evidence an interest in a trust fund that includes
mortgage loans, the certificates
- 5 -
<PAGE>
will be issued pursuant to a pooling agreement;
o if the certificates evidence an interest in a trust fund that does not
include mortgage loans, the certificates will be issued pursuant to a trust
agreement;
o each series of certificates will include one or more classes of
certificates;
o each series of certificates, including any class or classes not offered by
this prospectus, will represent, in the aggregate, the entire beneficial
ownership interest in the related trust fund;
o each class of certificates being offered to you, other than certain
stripped interest certificates, will have a stated principal amount;
o each class of certificates being offered to you, other than certain
stripped principal certificates, will accrue interest based on a fixed,
variable or adjustable interest rate.
The related prospectus supplement will specify the principal amount, if any,
and the interest rate, if any, for each class of certificates. In the
case of a variable or adjustable interest rate, the related prospectus
supplement will specify the method for determining the rate.
The certificates will not be guaranteed or insured by Morgan
Stanley Dean Witter Capital I Inc. or any of its affiliates. The
certificates also will not be guaranteed or insured by any governmental
agency or instrumentality or by any other person, unless the related
prospectus supplement so provides.
(A) INTEREST................... Each class of certificates offered to you, other than stripped principal
certificates and certain classes of stripped interest certificates, will
accrue interest at the rate indicated in the prospectus supplement.
Interest will be distributed to you as provided in the related prospectus
supplement.
Interest distributions:
o on stripped interest certificates may be made on the basis of the notional
amount for that class, as described in the related prospectus supplement;
- 6 -
<PAGE>
o may be reduced to the extent of certain delinquencies, losses, prepayment
interest shortfalls, and other contingencies described in this prospectus
and the related prospectus supplement.
(B) PRINCIPAL.................. The certificates of each series initially will have an aggregate principal
balance no greater than the outstanding principal balance of the trust
fund's assets as of the close of business on the first day of the month
during which the trust fund is formed, after application of scheduled
payments due on or before that date, whether or not received. The related
prospectus supplement may provide that the principal balance of the trust
fund's assets will be determined as of a different date. The principal
balance of a certificate at a given time represents the maximum amount that
the holder is then entitled to receive of principal from future cash flow
on the assets in the related trust fund.
Unless the prospectus supplement provides otherwise, distributions of
principal:
o will be made on each distribution date to the holders of the class or
classes of certificates entitled to principal distributions, until the
principal balances of those certificates have been reduced to zero; and
o will be made on a pro rata basis among all of the certificates of a given
class or by random selection, as described in the prospectus supplement or
otherwise established by the trustee.
Stripped interest or interest-only certificates will not have a principal
balance and will not receive distributions of principal.
ADVANCES................................ Unless the related prospectus supplement otherwise provides, if a scheduled
payment on a mortgage loan is delinquent and the master servicer determines
that an advance would be recoverable, the master servicer will, in most
cases, be required to advance the shortfall. Neither Morgan Stanley Dean
Witter Capital I Inc. nor any of its affiliates will have any
responsibility to make those advances.
The master servicer:
- 7 -
<PAGE>
o will be reimbursed for advances from subsequent recoveries from the
delinquent mortgage loan or from other sources, as described in this
prospectus and the related prospectus supplement; and
o will be entitled to interest on advances, if specified in the related
prospectus supplement.
If a particular trust fund includes mortgage backed securities, the
prospectus supplement will describe any advance obligations applicable to
those mortgage backed securities.
TERMINATION............................. The related prospectus supplement may provide for the optional early
termination of the series of certificates through repurchase of the trust
fund's assets by a specified party, under specified circumstances.
The related prospectus supplement may provide for the early termination of
the series of certificates in various ways including:
o optional early termination where a party identified in the prospectus
supplement could repurchase the trust fund assets pursuant to circumstances
specified in the prospectus supplement;
o termination through the solicitation of bids for the sale of all or a
portion of the trust fund assets in the event the principal amount of a
specified class or classes declines by a specified percentage amount on or
after a specified date.
REGISTRATION OF CERTIFICATES............ If the related prospectus supplement so provides, one or more classes of
the certificates being offered to you will initially be represented by one
or more certificates registered in the name of Cede & Co., as the nominee
of Depository Trust Company. If the certificate you purchase is registered
in the name of Cede & Co., you will not be entitled to receive a definitive
certificate, except under the limited circumstances described in this
prospectus.
TAX STATUS OF THE CERTIFICATES.......... The certificates of each series will constitute either:
o regular interests and residual interests in a trust treated as a real
estate mortgage investment conduit--known as a REMIC--under
- 8 -
<PAGE>
Sections 860A through 860G of the Internal Revenue Code; or
o interests in a trust treated as a grantor trust under applicable provisions
of the Internal Revenue Code.
(A) REMIC...................... The regular certificates of the REMIC generally will be treated as debt
obligations of the applicable REMIC for federal income tax purposes. Some
of the regular certificates of the REMIC may be issued with original issue
discount for federal income tax purposes.
A portion or, in certain cases, all of the income from REMIC residual certificates:
o may not be offset by any losses from other activities of the holder of
those certificates;
o may be treated as unrelated business taxable income for holders of the
residual certificates of the REMIC that are subject to tax on unrelated
business taxable income, as defined in Section 511 of the Internal Revenue
Code; and
o may be subject to foreign withholding rules.
To the extent described in this prospectus and the related prospectus
supplement, the certificates offered to you will be treated as:
o assets described in section 7701(a)(19)(C) of the Internal Revenue Code;
and
o "real estate assets" within the meaning of section 856(c)(4)(A) of the
Internal Revenue Code.
(B) GRANTOR TRUST.............. If no election is made to treat the trust fund relating to a series of
certificates as a 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. If the trust fund is a grantor trust, you will be treated as
an owner of an undivided pro rata interest 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 "Federal
Income Tax Consequences" in this prospectus and the
- 9 -
<PAGE>
related prospectus supplement.
ERISA CONSIDERATIONS.................... If you are subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended--also known as ERISA, or Section 4975 of the
Internal Revenue Code, you should carefully review with your legal advisors
whether the purchase or holding of certificates could give rise to a
transaction that is prohibited or is not otherwise permissible under either
statute.
In general, the related prospectus supplement will specify that some of
the classes of certificates may not be transferred unless the trustee and
Morgan Stanley Dean Witter Capital I Inc. receive a letter of
representations or an opinion of counsel to the effect that:
o the transfer will not result in a violation of the prohibited transaction
provisions of ERISA or the Internal Revenue Code;
o the transfer will not cause the assets of the trust fund to be deemed "plan
assets" for purposes of ERISA or the Internal Revenue Code; and
o the transfer will not subject any of the trustee, Morgan Stanley Dean
Witter Capital I Inc. or any servicer to additional obligations.
LEGAL INVESTMENT........................ The related prospectus supplement will specify whether any classes of the
offered certificates will constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as
amended. If your investment authority is subject to legal restrictions,
you should consult your legal advisors to determine whether any
restrictions apply to an investment in these certificates.
RATING.................................. At the date of issuance, each class of certificates of each series that are
offered to you will be rated not lower than investment grade by one or more
nationally recognized statistical rating agencies.
</TABLE>
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<PAGE>
RISK FACTORS
You should carefully consider the risks involved in owning a
certificate before purchasing a certificate. In particular, the timing and
payments you receive 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 under Risk Factors,
together with those described in the related prospectus supplement under Risk
Factors, summarize the material risks relating to your certificates.
THE LACK OF A SECONDARY
MARKET MAY MAKE IT
DIFFICULT FOR YOU TO RESELL
YOUR CERTIFICATES Secondary market considerations may make
your certificates difficult to resell or
less valuable than you anticipated for a
variety of reasons, including:
o there may not be a secondary market
for the certificates;
o if a secondary market develops, we
cannot assure you that it will
continue or will provide you with
the liquidity of investment you may
have anticipated. Lack of liquidity
could result in a substantial
decrease in the market value of
your certificates;
o the market value of your
certificates will fluctuate with
changes in interest rates;
o the secondary market for
certificates backed by residential
mortgages may be more liquid than
the secondary market for
certificates backed by multifamily
and commercial mortgages so if your
liquidity assumptions were based on
the secondary market for
certificates backed by residential
mortgages, your assumptions may not
be correct;
o certificateholders have no
redemption rights; and
o secondary market purchasers are
limited to this prospectus, the
related prospectus supplement and
to the reports delivered to
certificateholders for information
concerning the certificates.
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<PAGE>
Morgan Stanley & Co. Incorporated currently
expects to make a secondary market in your
certificates, but it has no obligation
to do so.
THE TRUST FUND'S ASSETS
MAY BE INSUFFICIENT TO
ALLOW FOR REPAYMENT IN
FULL ON YOUR CERTIFICATES Unless the related prospectus supplement so
specifies, the sole source of payment on
your certificates will be proceeds from the
assets included in the trust fund for each
series of certificates and any form of
credit enhancement specified in the related
prospectus supplement. You will not have any
claim against, or security interest in, the
trust fund for any other series. In
addition, in general, there is no recourse
to Morgan Stanley Dean Witter Capital I Inc.
or any other entity, and neither the
certificates nor the underlying mortgage
loans are guaranteed or insured by any
governmental agency or instrumentality or
any other entity. Therefore, if the trust
fund's assets are insufficient to pay you
your expected return, in most situations you
will not receive payment from any other
source. Exceptions include:
o loan repurchase obligations in
connection with a breach of certain
of the representations and
warranties; and
o advances on delinquent loans, to
the extent the master servicer
deems the advance will be
recoverable.
Because some of the representations and
warranties with respect to the mortgage
loans or mortgage backed securities may have
been made or assigned in connection with
transfers of the mortgage loans or mortgage
backed securities prior to the closing date,
the rights of the trustee and the
certificateholders with respect to those
representations or warranties will be
limited to their rights as assignees. Unless
the related prospectus supplement so
specifies, neither Morgan Stanley Dean
Witter Capital I Inc., the master servicer
nor any affiliate thereof will have any
obligation with respect to representations
or warranties made by any other entity.
There may be accounts, as described in the
related prospectus supplement, maintained as
credit support. The amounts in these
accounts may be withdrawn, under conditions
described in the related prospectus
supplement. Any withdrawn amounts will not
be available for the future payment of
principal or interest on the certificates.
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<PAGE>
If a series of certificates consists of one
or more classes of subordinate certificates,
the amount of any losses or shortfalls in
collections of assets on any distribution
date will be borne first by one or more
classes of the subordinate certificates, as
described in the related prospectus
supplement. Thereafter, those losses or
shortfalls will be borne by the remaining
classes of certificates, in the priority and
manner and subject to the limitations
specified in the related prospectus
supplement.
PREPAYMENTS AND
REPURCHASES MAY REDUCE
THE YIELD ON YOUR
CERTIFICATES The yield on your certificates may be
reduced by prepayments on the mortgage loans
or mortgage backed securities because
prepayments affect the average life of the
certificates. Prepayments can be voluntary,
if permitted, and involuntary, such as
prepayments resulting from casualty or
condemnation, defaults and liquidations or
repurchases upon breaches of representations
and warranties. The investment performance
of your certificates may vary materially and
adversely from your expectation if the
actual rate of prepayment is higher or lower
than you anticipated.
Voluntary prepayments may require the
payment of a yield maintenance or prepayment
premium. Nevertheless, we cannot assure you
that the existence of the prepayment premium
will cause a borrower to refrain from
prepaying its mortgage loan nor can we
assure you of the rate at which prepayments
will occur. Morgan Stanley Mortgage Capital
Inc., under certain circumstances, may be
required to repurchase a mortgage loan from
the trust fund if there has been a breach of
a representation or warranty. The repurchase
price paid will be passed through to you, as
a certificateholder, with the same effect as
if the mortgage loan had been prepaid in
part or in full, except that no prepayment
premium or yield maintenance charge would be
payable. Such a repurchase may therefore
adversely affect the yield to maturity on
your certificates.
In a pool of mortgage loans, the rate of
prepayment is unpredictable as it is
influenced by a variety of factors
including:
o the terms of the mortgage loans;
o the length of any prepayment
lockout period;
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<PAGE>
o the prevailing interest rates;
o the availability of mortgage
credit;
o the applicable yield maintenance
charges or prepayment premiums;
o the servicer's ability to enforce
those yield maintenance charges or
prepayment premiums; o the
occurrence of casualties or natural
disasters; and o economic,
demographic, tax, legal or other
factors.
There can be no assurance that the rate of
prepayments will conform to any model
described in this prospectus or in the
related prospectus supplement.
Some of the certificates may be more
sensitive to prepayments than other
certificates and in certain cases, the
certificateholder holding these certificates
may fail to recoup its original investment.
You should carefully consider the specific
characteristics of the certificates you
purchase, as well as your investment
approach and strategy. For instance, if you
purchase a certificate at a premium, a
prepayment may reduce the stream of interest
payments you are entitled to receive on your
certificate and your actual yield may be
lower than your anticipated yield.
Similarly, if you purchase a certificate
which provides for the payment of interest
only, or a certificate which provides for
the payment of interest only after the
occurrence of certain events, such as the
retirement of one or more other classes of
certificates of a series, you will probably
be extremely sensitive to prepayments
because a prepayment may reduce the stream
of interest payments you are entitled to
receive on your certificate.
IF PREPAYMENT PREMIUMS
ARE NOT ENFORCED, YOUR
CERTIFICATES MAY BE
ADVERSELY AFFECTED The yield on your certificates may be less
than anticipated because the prepayment
premium or yield maintenance required under
certain prepayment scenarios may not be
enforceable in some states or under federal
bankruptcy laws.
o Some courts may consider the
prepayment premium to be usurious.
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<PAGE>
o Even if the prepayment premium is
enforceable, we cannot assure you
that foreclosure proceeds will be
sufficient to pay the prepayment
premium.
o Although the collateral
substitution provisions related to
defeasance are not suppose to be
treated as a prepayment and should
not affect your certificates, we
cannot assure you that a court will
not interpret the defeasance
provisions as requiring a
prepayment premium; nor can we
assure you that if it is treated as
a prepayment premium, the court
will find the defeasance income
stream enforceable.
THE TIMING OF MORTGAGE
LOAN AMORTIZATION MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES As principal payments or prepayments are
made on a mortgage loan, the mortgage pool
will be exposed to concentration risks with
respect to the diversity of mortgaged
properties, types of mortgaged properties
and number of borrowers. Classes that have a
later sequential designation or a lower
payment priority are more likely to be
exposed to these concentration risks than
are classes with an earlier sequential
designation or higher priority. This is so
because principal on the certificates will
be payable in sequential order, and no class
entitled to a distribution of principal will
receive its principal until the principal
amount of the preceding class or classes
entitled to receive principal have been
reduced to zero.
RATINGS DO NOT GUARANTY
PAYMENT Any rating assigned by a rating agency to a
class of certificates reflects the rating
agency's assessment of the likelihood that
holders of the class of certificates will
receive the payments to which they are
entitled.
o The ratings do not assess the
likelihood that you will receive
timely payments on your
certificates.
o The ratings do not assess the
likelihood of prepayments,
including those caused by defaults.
o The ratings do not assess the
likelihood of early optional
termination of the certificates.
Each rating agency rating classes of a
particular series will determine the amount,
type and nature of credit support required
for that series. This determination may be
based
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<PAGE>
on an actuarial analysis of the behavior of
mortgage loans in a larger group taking into
account the appraised value of the real
estate and the commercial and multifamily
real estate market.
o We cannot assure you that the
historical data supporting the
actuarial analysis will accurately
reflect or predict the rate of
delinquency, foreclosure or loss
that will be experienced by the
mortgage loans in a particular
series.
o We cannot assure you that the
appraised value of any property
securing a mortgage loan in a
particular series will remain
stable throughout the life of your
certificate.
o We cannot assure you that the real
estate market will not experience
an overall decline in property
values nor can we assure you that
the outstanding balance of any
mortgage loan in a particular
series will always be less than the
market value of the property
securing the mortgage loan.
RATINGS DO NOT GUARANTY VALUE If one or more rating agencies downgrade
certificates of a series, your certificate
will decrease in value. Because none of
Morgan Stanley Dean Witter Capital I Inc.,
the seller, the master servicer, the trustee
or any affiliate has any obligation to
maintain a rating of a class of
certificates, you will have no recourse if
your certificate decreases in value.
CASH FLOW FROM THE
PROPERTIES MAY BE VOLATILE
AND INSUFFICIENT TO ALLOW
TIMELY PAYMENT ON
YOUR CERTIFICATES Repayment of a commercial or multifamily
mortgage loan is dependent on the income
produced by the property. Therefore, the
borrower's ability to repay a mortgage loan
depends primarily on the successful
operation of the property and the net
operating income derived from the property.
Net operating income can be volatile and may
be adversely affected by factors such as:
o economic conditions causing plant
closings or industry slowdowns;
o an oversupply of available retail
space, office space or multifamily
housing;
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<PAGE>
o changes in consumer tastes and
preferences;
o decrease in consumer confidence;
o retroactive changes in building
codes;
o the age, design and construction
quality of the property, including
perceptions regarding the
attractiveness, convenience or
safety of the property;
o the age, design, construction
quality and proximity of competing
properties;
o increases in operating expenses due
to external factors such as
increases in heating or electricity
costs;
o increases in operating expenses due
to maintenance or improvements
required at the property;
o a decline in the financial
condition of a major tenant;
o a decline in rental rates as leases
are renewed or entered into with
new tenants;
o the concentration of a particular
business type in a building;
o the length of tenant leases;
o the creditworthiness of tenants;
and
o the property's "operating
leverage."
Operating leverage refers to the percentage
of total property expenses in relation to
revenue, the ratio of fixed operating
expenses to those that vary with revenue and
the level of capital expenditures required
to maintain the property and retain or
replace tenants.
If a commercial property is designed for a
specific tenant, net operating income may be
adversely affected if that tenant defaults
under its obligations because properties
designed for a specific tenant often require
substantial renovation before it is suitable
for a new tenant. As a result, the proceeds
from liquidating this type of property
following foreclosure might be insufficient
to cover the principal and interest due
under the loan.
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
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<PAGE>
unenforceable. Therefore, if a borrower
defaults, recourse may be had only against
the specific property and any other assets
that have been pledged to secure the related
mortgage loan.
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 or
yields required by investors in
income producing commercial
properties.
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 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.
A good property manager, by controlling
costs, providing appropriate service to
tenants and 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 long term
viability of an income producing property.
Properties deriving revenues primarily from
short-term sources are
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<PAGE>
generally more management intensive than
properties leased to creditworthy tenants
under long-term leases.
Morgan Stanley Dean Witter Capital I Inc.
makes no representation or warranty as to
the skills of any present or future
managers. Additionally, Morgan Stanley Dean
Witter Capital I Inc. 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.
YOU SHOULD CONSIDER THE
NUMBER OF MORTGAGE
LOANS IN THE POOL Assuming pools of equal aggregate unpaid
principal balances, the concentration of
default, foreclosure and loss in a trust
fund containing fewer mortgage loans will
generally be higher than that in trust fund
containing more mortgage loans.
YOUR INVESTMENT IS NOT
INSURED OR GUARANTEED
AND YOUR SOURCE FOR
REPAYMENTS IS LIMITED Payments under the mortgage loans are
generally not insured or guaranteed by any
person or entity.
In general, the borrowers under the mortgage
loans will be entities created to own or
purchase the related commercial property.
The borrowers are set up this way, in
significant part, to isolate the property
from the debts and liabilities of the person
creating the entity. Unless otherwise
specified, the loan will represent a
nonrecourse obligation of the related
borrower secured by the lien of the related
mortgage and the related lease assignments.
Even if the loan is recourse, the borrower
generally will not have any significant
assets other than the property or properties
and the related leases, which will be
pledged to the trustee. Therefore, payments
on the loans and, in turn, payments of
principal and interest on your certificates,
will depend primarily or solely on rental
payments by the lessees. Those rental
payments will, in turn, depend on continued
occupancy by, or the creditworthiness of,
those lessees. Both continued occupancy and
creditworthiness may be adversely affected
by a general economic downturn or an adverse
change in the lessees' financial conditions.
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<PAGE>
BORROWER MAY BE UNABLE
TO REPAY THE REMAINING
PRINCIPAL BALANCE ON ITS
MATURITY DATE WHICH
WOULD ADVERSELY AFFECT
PAYMENT ON YOUR CERTIFICATES Some of the mortgage loans may not be fully
amortizing over their terms to maturity and
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 a borrower's ability to make a
balloon payment typically will depend upon
its ability either to timely refinance the
loan or to timely sell the mortgaged
property. However, refinancing a loan or
selling the property will be affected by a
number of factors, including:
o interest rates;
o the borrower's equity in the
property;
o the financial condition and
operating history of the borrower
and the property;
o tax laws;
o renewability of operating licenses;
o prevailing economic conditions and
the availability of credit for
commercial and multifamily
properties;
o with respect to certain multifamily
properties and mobile home parks,
rent control laws; and
o with respect to hospitals, nursing
homes and convalescent homes,
reimbursement rates from private
and public coverage providers.
YOUR CERTIFICATES WILL BEAR
LOSSES IF INSUFFICIENT FUNDS
ARE AVAILABLE TO SATISFY
ANY JUNIOR MORTGAGE LOANS If the prospectus supplement so specifies,
some of the mortgage loans may be secured
primarily by junior mortgages. In the event
of a liquidation, satisfaction of a mortgage
loan secured by a junior mortgage will be
subordinate to the satisfaction of the
related senior mortgage loan. If the
proceeds are insufficient to satisfy the
junior mortgage and the related senior
mortgage, the junior mortgage loan in the
trust fund would suffer a loss and the class
of certificate you own may bear that loss.
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<PAGE>
Therefore, any risks of deficiencies
associated with first mortgage loans will be
even greater in the case of junior mortgage
loans. See "--Risks Factors."
OBLIGOR DEFAULT MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES If the related prospectus supplement so
specifies, 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. Any
ability to extend or modify may apply, in
particular, to whole loans with 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, those whole loans.
While any entity granting this type of
extension or modification generally will be
required to determine that the extension or
modification is reasonably likely to produce
a greater recovery on a present value basis
than liquidation, there is no assurance this
will be the case. Additionally, if the
related prospectus supplement so specifies,
some of the mortgage loans included in the
mortgage pool may have been subject to
workouts or similar arrangements following
prior periods of delinquency and default.
TENANT BANKRUPTCY MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES The bankruptcy or insolvency of a major
tenant, or of a number of smaller tenants
may adversely affect the income produced by
a mortgaged property. Under the Bankruptcy
Code, a tenant has the option of assuming or
rejecting any unexpired lease. If the tenant
rejects the lease, the landlord's claim
would be a general unsecured claim against
the tenant, absent collateral securing the
claim. The claim would be limited to the
unpaid rent reserved for the periods prior
to the bankruptcy petition or the earlier
surrender of the leased premises, which are
unrelated to the rejection, plus the greater
of one year's rent or 15% of the remaining
rent reserved under the lease, but not more
than three years' rent to cover any
rejection related claims.
BORROWER BANKRUPTCY MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES Under the Bankruptcy Code, the filing of a
petition in bankruptcy by or against a
borrower will stay the sale of the real
property owned by that borrower, as well as
the
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<PAGE>
commencement or continuation of a
foreclosure action. In addition, if a court
determines that the value of the mortgaged
property is less than the principal balance
of the mortgage loan it secures, the court
may prevent a lender from foreclosing on the
mortgaged property, subject to certain
protections available to the lender. As part
of a restructuring plan, a court also may
reduce the amount of secured indebtedness to
the then-value of the mortgaged property.
Such an action would make the lender a
general unsecured creditor for the
difference between the then-value and the
amount of its outstanding mortgage
indebtedness. A bankruptcy court also may:
o grant a debtor a reasonable time to
cure a payment default on a
mortgage loan;
o reduce monthly payments due under a
mortgage loan; o change the rate of
interest due on a mortgage loan; or
o otherwise alter the mortgage loan's
repayment schedule.
Moreover, the filing of a petition in
bankruptcy by, or on behalf of, a junior
lienholder may stay the senior lienholder
from taking action to foreclose on the
mortgaged property in a manner that would
substantially diminish the position of the
junior lien. Additionally, the borrower's
trustee or the borrower, as
debtor-in-possession, has certain special
powers to avoid, subordinate or disallow
debts. In certain circumstances, the claims
of the trustee may be subordinated to
financing obtained by a debtor-in-possession
subsequent to its bankruptcy.
Under the Bankruptcy Code, the lender will
be stayed from enforcing a borrower's
assignment of rents and leases. The
Bankruptcy Code also may interfere with the
lender's ability to enforce lockbox
requirements. The legal proceedings
necessary to resolve these issues can be
time consuming and may significantly delay
the receipt of rents. Rents also may escape
an assignment to the extent they are used by
the borrower to maintain the mortgaged
property or for other court authorized
expenses.
As a result of the foregoing, the lender's
recovery with respect to borrowers in
bankruptcy proceedings may be significantly
delayed, and the aggregate amount ultimately
collected may be substantially less than the
amount owed.
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<PAGE>
SOPHISTICATION OF THE
BORROWER MAY ADVERSELY
AFFECT PAYMENT ON YOUR
CERTIFICATES In general, the mortgage loans will be made
to partnerships, corporations or other
entities rather than individuals. This may
entail greater risks of loss from
delinquency and foreclosure than do single
family mortgage loans. In addition, the
borrowers under commercial mortgage loans
may be more sophisticated than the average
single family home borrower. This may
increase the likelihood of protracted
litigation or the likelihood of bankruptcy
in default situations.
CREDIT SUPPORT MAY NOT
COVER LOSSES OR RISKS
WHICH COULD ADVERSELY
AFFECT PAYMENT ON YOUR
CERTIFICATES Although the prospectus supplement for a
series of certificates will describe the
credit support for the related trust fund,
the credit support will be limited in amount
and coverage and may not cover all potential
losses or risks. Use of credit support will
be subject to the conditions and limitations
described in the prospectus and in the
related prospectus supplement. Moreover, any
applicable credit support may not cover all
potential losses or risks. For example,
credit support 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 certificates being offered
to you. Although subordination is intended
to reduce the senior certificateholders'
risk of delinquent distributions or ultimate
losses, the amount of subordination will be
limited and may decline under certain
circumstances. In addition, if principal
payments are made in a specified order of
priority, and limits exist with respect to
the aggregate amount of claims under any
related credit support, the credit support
may be exhausted before the principal of the
certificate classes with lower priority has
been repaid. Significant losses and
shortfalls on the assets consequently may
fall primarily upon classes of certificates
having a lower payment priority. Moreover,
if a form of credit support covers more than
one series of certificates, holders of
certificates evidencing an interest in a
covered series will be subject to the risk
that the credit support will be exhausted by
the claims of other covered series.
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<PAGE>
The amount of any credit support supporting
one or more classes of certificates being
offered to you, including the subordination
of one or more classes will be determined on
the basis of criteria established by each
pertinent rating agency. Those criteria will
be based on an assumed level of defaults,
delinquencies, other losses or other
factors. However, the loss experience on the
related mortgage loans or mortgage backed
securities may exceed the assumed levels.
See "Description of Credit Support."
Regardless of the form of any credit
enhancement, the amount of coverage will be
limited and, in most cases, will be subject
to periodic reduction, in accordance with a
schedule or formula. The master servicer
generally will 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
ratings will not be adversely affected. A
rating agency may lower the ratings of any
series of certificates if the obligations of
any credit support provider are downgraded.
The ratings also may be lowered if losses on
the related mortgage loans or MBS
substantially exceed the level contemplated
by the rating agency at the time of its
initial rating analysis. Neither Morgan
Stanley Dean Witter Capital I Inc., the
master servicer nor any of their affiliates
will have any obligation to replace or
supplement any credit enhancement, or to
take any other action to maintain any
ratings of any series of certificates.
INVESTORS IN SUBORDINATE
CLASSES OF CERTIFICATES MAY
BE SUBJECT TO DELAYS IN
PAYMENT AND MAY NOT
RECOVER THEIR INITIAL
INVESTMENTS To the extent described in this prospectus,
the subordinate certificateholders' rights
to receive distributions with respect to the
assets to which they would otherwise be
entitled will be subordinate to the rights
of the senior certificateholders and of the
master servicer, if the master servicer is
paid its servicing fee, including any unpaid
servicing fees with respect to one or more
prior periods, and is reimbursed for certain
unreimbursed advances and unreimbursed
liquidation expenses. As a result, investors
in subordinate certificates must be prepared
to bear the risk that they may be subject to
delays in payment and may not recover their
initial investments.
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<PAGE>
The yields on the subordinate certificates
may be extremely sensitive to the loss
experience of the assets and the timing of
any losses. If the actual rate and amount of
losses experienced by the assets exceed the
rate and amount assumed by an investor, the
yields to maturity on the subordinate
certificates may be lower than anticipated.
DIFFICULTIES IN ENFORCEMENT
OF LOAN PROVISIONS MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES The mortgage loans may contain due-on-sale
clauses, which permit a lender to accelerate
the maturity of the mortgage loan if the
borrower sells, transfers or conveys the
related mortgaged property or its interest
in the mortgaged property and
debt-acceleration clauses, which permit a
lender to accelerate the loan upon a
monetary or non-monetary default by the
borrower. These clauses are generally
enforceable. The courts of all states will
enforce clauses providing for acceleration
in the event of a material payment default.
The equity courts, however, may refuse to
enforce these clauses if acceleration of the
indebtedness would be inequitable, unjust or
unconscionable.
If the related prospectus supplement so
specifies, the mortgage loans will be
secured by an assignment of leases and
rents. Pursuant to those assignments, the
borrower typically assigns its right, title
and interest as landlord under the leases on
the related mortgaged property and the
income derived from the leases to the lender
as further security for the related mortgage
loan, while retaining a license to collect
rents as long as there is no default. If the
borrower defaults, the license terminates
and the lender is entitled to collect rents.
These 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 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 borrower, the lender's ability to
collect the rents may be adversely affected.
See "Legal Aspects of the Mortgage Loans and
the Leases--Leases and Rents."
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<PAGE>
ENVIRONMENTAL ISSUES AT
THE MORTGAGED PROPERTIES
MAY ADVERSELY AFFECT
PAYMENT ON YOUR CERTIFICATES Real property pledged as security for a
mortgage loan may be subject to
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, this type of lien has priority over
the lien of an existing mortgage against the
property. Moreover, the presence of
hazardous or toxic substances, or the
failure to remediate the property, may
adversely affect the owner or operator's
ability to borrow using the property as
collateral. In addition, under the laws of
some states and under 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 borrower. Liability
may be imposed even if the environmental
damage or threat was caused by a prior
owner.
Under certain circumstances, a lender also
risks this type of liability on foreclosure
of the mortgage. Unless the related
prospectus supplement specifies otherwise,
neither the master servicer, the
sub-servicer nor the special servicer may
acquire title to a mortgaged property 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:
o the mortgaged property is in
compliance with applicable
environmental laws, and there are
no circumstances present at the
mortgaged property for which
investigation, testing, monitoring,
containment, clean-up or
remediation could be required under
any federal, state or local law or
regulation; or
o if the mortgaged property is not in
compliance with applicable
environmental laws or circumstances
requiring any of the foregoing
actions are present, that it would
be in the best economic interest of
the trust fund to acquire title to
the mortgaged property and take the
actions as would be necessary and
appropriate to effect compliance or
respond to those circumstances.
See "Legal Aspects of the Mortgage Loans and
Leases--Environmental Legislation."
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IF YOU ARE SUBJECT TO
ERISA, YOU MAY NOT BE
ELIGIBLE TO PURCHASE
CERTIFICATES Generally, ERISA applies to investments made
by employee benefit plans and transactions
involving the assets of those plans. Due to
the complexity of regulations governing
those 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.
THE INCOME TAX
CONSIDERATIONS SHOULD
IMPACT YOUR DECISION TO
PURCHASE A REMIC
RESIDUAL CERTIFICATE Except as provided in the prospectus
supplement, REMIC residual certificates 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 those expenses
will be deductible only as itemized
deductions, and will be subject to all the
limitations applicable to itemized
deductions, by holders of REMIC residual
certificates that are individuals.
Accordingly, investment in the REMIC
residual certificates generally will 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
restrictions on transfer. Finally,
prospective purchasers of a REMIC residual
Certificate should be aware that final
Treasury Department regulations do not
permit certain REMIC residual interests to
be marked to market.
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<PAGE>
REQUIRED CONSENT IN
CONNECTION WITH SERVICING
THE PROPERTIES MAY EFFECT
THE TIMING OF PAYMENTS
ON YOUR CERTIFICATES Under certain circumstances, the consent or
approval of the holders of a specified
percentage of the aggregate principal
balance of all outstanding certificates of a
series or a similar means of allocating
decision-making will be required to direct
certain actions. The actions may include
directing the special servicer or the master
servicer regarding measures to be taken with
respect to some of the mortgage loans and
real estate owned properties and amending
the relevant pooling agreement or trust
agreement. The consent or approval of these
holders will be sufficient to bind all
certificateholders of the relevant series.
See "Description of the Agreements--Events
of Default," "--Rights Upon Event of
Default," and "--Amendment."
LITIGATION ARISING OUT OF
ORDINARY BUSINESS MAY
ADVERSELY AFFECT PAYMENT
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 this type of litigation would not
have a material adverse effect on your
certificates.
COMPLIANCE WITH THE
AMERICANS WITH DISABILITIES
ACT OF 1990 MAY BE
EXPENSIVE AND MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES Under the Americans with Disabilities Act of
1990, all public accommodations are required
to meet federal requirements related to
access and use by disabled persons.
Borrowers may incur costs complying with the
Americans with Disabilities Act of 1990. In
addition, noncompliance could result in the
imposition of fines by the federal
government or an award of damages to private
litigants. These costs of complying with the
Americans with Disabilities Act of 1990 and
the possible imposition of fines for
noncompliance would result in additional
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<PAGE>
expenses on the mortgaged properties, which
could have an adverse effect on your
certificates.
IF YOUR CERTIFICATE IS
BOOK-ENTRY, YOU WILL NOT
BE RECOGNIZED AS A
CERTIFICATEHOLDER BY THE TRUSTEE If the prospectus supplement so provides,
one or more classes of the certificates
offered to you will be initially represented
by one or more certificates for each class
registered in the name of Cede & Co., the
nominee for the Depository Trust Company. If
you purchase this type of certificate:
o your certificate will not be
registered in your name or the name
of your nominee;
o you will not be recognized by the
trustee as a certificateholder; and
o you will be able to exercise your
right as a certificateholder only
through the Depository Trust
Company and its participating
organizations.
You will be recognized as a
certificateholder only if and when
definitive certificates are issued. See
"Description of the Certificates--Book-Entry
Registration and Definitive Certificates."
-------------------------------------------------
This prospectus also contains forward-looking statements that involve risks and
uncertainties. Actual results could differ from those anticipated in these
forward-looking statements as a result of a variety of factors, including the
risks described above under "Risk Factors" and elsewhere in this prospectus.
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<PAGE>
DESCRIPTION OF THE TRUST FUNDS
Capitalized terms are defined in the "Glossary of Terms" beginning on
page 116.
ASSETS
Each series of certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund. The primary assets of each trust
fund will include:
o multifamily mortgage loans, commercial mortgage loans or both;
o 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;
o direct obligations of the United States, agencies of the United
States or agencies created by government entities 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; or
o a combination of mortgage loans, mortgage backed securities and
government securities.
Neither the mortgage loans nor the mortgage backed securities will be
guaranteed or insured by Morgan Stanley Dean Witter Capital I Inc. or any of its
affiliates or, unless otherwise provided in the prospectus supplement, by any
government agency or instrumentality or by any other person. Each asset will be
selected by Morgan Stanley Dean Witter Capital I Inc. for inclusion in a trust
fund from among those purchased, either directly or indirectly, from a prior
holder thereof, which may be an affiliate of Morgan Stanley Dean Witter Capital
I Inc. and, with respect to mortgage loans or mortgage backed securities, which
prior holder may or may not be the originator of the mortgage loan or the issuer
of the mortgage backed securities.
Unless otherwise specified in the related prospectus supplement, the
certificates of any series 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 Morgan Stanley Dean Witter Capital
I Inc. 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:
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o Multifamily Properties which are residential properties
consisting of five or more rental or cooperatively-owned dwelling
units in high-rise, mid-rise or garden apartment buildings; or
o Commercial Properties which are 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.
The mortgaged properties will be located in any one of the fifty states, the
District of Columbia or the Commonwealth of Puerto Rico, or, in another
location, if specified in the related prospectus supplement. The mortgage loans
in the mortgage pool will be evidenced by promissory notes secured by first or
junior mortgages or deeds of trust or other similar security instruments
creating a first or junior lien on the mortgaged property. Multifamily
Properties may include mixed commercial and residential structures and may
include apartment buildings owned by private cooperative housing corporations.
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 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 other than Morgan Stanley Dean Witter Capital I Inc. The
related prospectus supplement will indicate if any originator or a mortgage loan
is an affiliate of Morgan Stanley Dean Witter Capital I Inc., mortgage loans
will generally also be secured by an assignment of leases and rents and
operating or other cash flow guarantees relating to the mortgage loan.
LEASES
If specified in the related prospectus supplement, some or all of the
mortgage loans will include assignments of the leases of the related mortgaged
properties and assignments of the rental payments due from lessee to lessor
under the 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 the properties. Pursuant to an assignment of a lease, the
related borrower may assign its rights, title and interest as lessor under each
lease and the income derived from the lease to the related lender, while
retaining a license to collect the rents for so long as there is no default. If
the borrower defaults, the license terminates and the lender or its agent is
entitled to collect the rents from the related lessee or lessees for application
to the monetary obligations of the borrower. State law may limit or restrict the
enforcement of the lease assignments by a lender until it takes possession of
the related mortgaged property or a receiver is appointed. See "Legal Aspects of
the Mortgage Loans and the Leases--Leases and Rents". Alternatively, if
specified in the related prospectus supplement, the borrower and the lender may
agree that payments under leases are to be made directly to the master servicer.
If 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. In
some cases, the leases may require the lessees to pay their pro rata share of
the operating expenses, insurance premiums and real estate taxes associated with
the mortgaged properties. Some of the leases may require the borrower to bear
costs associated with structural repairs or the maintenance of the exterior or
other portions of the
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<PAGE>
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 borrowers under the
leases. In those cases where payments under the leases, net of any operating
expenses payable by the borrowers are insufficient to pay all of the scheduled
principal and interest on the related mortgage loans, the borrowers 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 these cases,
absent the availability of other funds, the borrower must rely entirely on rent
paid by the lessee in order for the borrower to pay all of the scheduled
principal and interest on the related mortgage loan. To the extent specified in
the related prospectus supplement, some of the leases may expire prior to the
stated maturity of the related mortgage loan. In these cases, upon expiration of
the leases the borrowers 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 these mortgage loans unless the lease is renewed. As specified
in the related prospectus supplement, some 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 borrower, as lessor, is able
to cause the mortgaged property to be restored within a specified period of
time. Some 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. Some 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 the 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 lender may look only to the Net Operating
Income from the property for repayment of the mortgage debt, and not to any
other of the borrower's assets, in the event of the borrower'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 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, to the extent set forth in the related prospectus
supplement, the total operating revenues derived from a mortgaged property
during that period, minus the total operating expenses incurred in respect of
the mortgaged property during that period other than:
o non-cash items such as depreciation and amortization;
o capital expenditures; and
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o 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 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 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 borrower or single tenant, as applicable, may have a
disproportionately greater effect on the Net Operating Income from the 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 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 borrower, 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 "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.
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.
However, that 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 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 these 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 because other factors may outweigh a high Debt
Service Coverage Ratio. For instance, where a mortgage loan requires substantial
principal payments at the stated maturity, the risk of default if the balloon
payment cannot be refinanced at maturity is significant, even though the related
Debt Service Coverage Ratio may be high.
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<PAGE>
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 borrower.
Appraised values for income-producing properties may be based on:
o the recent resale value of comparable properties at the date of
the appraisal;
o the cost of replacing the property;
o a projection of value based upon the property's projected net
cash flow; or
o a selection from or interpolation of the values derived from the
methods listed here.
Each of these appraisal methods presents analytical challenges for the
following reasons:
o it is often difficult to find truly comparable properties that
have recently been sold;
o the replacement cost of a property may have little to do with its
current market value;
o income capitalization is inherently based on inexact projections
of income and expense and the selection of an appropriate
capitalization rate;
o more than one of the appraisal methods may be used and each may
produce significantly different results; and
o if a high Loan-to-Value Ratio accompanies a high Debt Service
Coverage Ratio or vice versa, the analysis of default and loss
risks is difficult.
While Morgan Stanley Dean Witter Capital I Inc. 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 these factors will in fact have been considered by the
originators of the multifamily and commercial loans, or that, for any of the
mortgage loans, they are complete or relevant. See "Risk Factors--Borrower May
Be Unable To Repay The Remaining Principal Balance On Its Maturity Date Which
Would Adversely Affect Payment On Your Certificates," "--Your Certificates Will
Bear Losses If Insufficient Funds Are Available to Satisfy Any Junior Mortgage
Loans," and "--Obligor Default May Adversely Affect Payment on Your
Certificates."
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
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o the appraised value determined in an appraisal obtained by the
originator at origination of that loan and
o the sales price for that property.
Refinance Loans are loans made to refinance existing loans. Unless the related
prospectus supplement provides otherwise, the Value of the mortgaged property
securing a Refinance Loan is the appraised value determined in an appraisal
obtained at the time of origination of the Refinance Loan. The Value of a
mortgaged property as of the date of initial issuance of the related series of
certificates may be less than the Value at origination and will fluctuate from
time to time based upon changes in economic conditions and the real estate
market.
MORTGAGE LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS
Each prospectus supplement will contain information, as of the date of
that prospectus supplement or the Cut-off Date, if applicable and specifically
known to Morgan Stanley Dean Witter Capital I Inc., with respect to the mortgage
loans, including:
o the aggregate outstanding principal balance and the largest,
smallest and average outstanding principal balance of the
mortgage loans, unless the related prospectus supplement provides
otherwise, the close of business on the Cut-off Date, which is a
day of the month of formation of the related trust fund, as
designated in the prospectus supplement;
o the type of property securing the mortgage loans, e.g.,
multifamily property or commercial property and the type of
property in each category;
o the weighted average, by principal balance, of the original and
remaining terms to maturity of the mortgage loans;
o the earliest and latest origination date and maturity date of the
mortgage loans;
o the weighted average, by principal balance, of the Loan-to-Value
Ratios at origination of the mortgage loans;
o the mortgage rates or range of mortgage rates and the weighted
average mortgage rate borne by the mortgage loans;
o the state or states in which most of the mortgaged properties are
located;
o information with respect to the prepayment provisions, if any, of
the mortgage loans;
o the weighted average Retained Interest, if any;
o with respect to mortgage loans with adjustable mortgage rates,
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
adjustable rate loan and the frequency of monthly payment
adjustments;
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o the Debt Service Coverage Ratio either at origination or as of a
more recent date, or both; and
o 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 Morgan Stanley Dean Witter Capital I Inc. 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 "--Default and Loss
Considerations with Respect to the Mortgage Loans" above. If specific
information respecting the mortgage loans is not known to Morgan Stanley Dean
Witter Capital I Inc. at the time certificates are initially offered, more
general information of the nature described in the bullet points in this section
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 the initial issuance.
PAYMENT PROVISIONS OF THE MORTGAGE LOANS
Unless otherwise specified in the related prospectus supplement, all of
the mortgage loans will:
o have individual principal balances at origination of not less
than $25,000;
o have original terms to maturity of not more than 40 years; and
o provide for payments of principal, interest or both, on due dates
that occur monthly, quarterly or semi-annually or at another
interval as specified in the related prospectus supplement.
Each mortgage loan may provide for no accrual of interest or for
accrual of interest thereon at a mortgage rate. 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 a Lockout Period and Lockout Date, the date of
expiration of the Lockout Period, or require payment of 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 the offered
certificates in this prospectus supplement 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 these amounts
will be allocated. A mortgage loan may also contain provisions entitling the
lender to a share of profits realized from the operation or disposition of the
mortgaged property, 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
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Equity Participation, the related prospectus supplement will specify the
terms and provisions of the Equity Participation and the method or methods by
which distributions in respect thereof will be allocated among the certificates.
MORTGAGE BACKED SECURITIES
Any MBS will have been issued pursuant to an MBS Agreement. A seller,
the MBS issuer, or the servicer of the underlying mortgage loans or Underlying
MBS, or a combination of those entities, will have entered into the MBS
Agreement with an 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 the credit support, if any, will be a
function of certain characteristics of the mortgage loans or Underlying MBS
evidenced by or securing the MBS and other factors and generally will have been
established for the MBS on the basis of requirements of 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 assets that include MBS will specify, to the extent available:
o 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;
o the original and remaining term to stated maturity of the MBS, if
applicable;
o whether the MBS is entitled only to interest payments, only to
principal payments or to both;
o the pass-through or bond rate of the MBS or formula for
determining the rates, if any;
o the applicable payment provisions for the MBS, including, but not
limited to, any priorities, payment schedules and subordination
features;
o the MBS issuer, MBS servicer and MBS trustee, as applicable;
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o 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 the MBS;
o the terms on which the MBS or the related Underlying Mortgage
Loans or Underlying MBS may, or are required to, be purchased
prior to their maturity;
o the terms on which mortgage loans or Underlying MBS may be
substituted for those originally underlying the MBS;
o the servicing fees payable under the MBS Agreement;
o 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;
o the characteristics of any cash flow agreements that are included
as part of the trust fund evidenced or secured by the MBS, and
o 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.
If specified in the prospectus supplement for a series of certificates,
a trust fund may contain one or more MBS issued by Morgan Stanley Dean Witter
Capital I Inc. that each represent an interest in one or more Underlying
Mortgage Loans. The prospectus supplement for a series will contain the
disclosure concerning the MBS described in the preceding paragraph and, in
particular, will disclose the Underlying Mortgage Loans appropriately in light
of the percentage of the aggregate principal balance of all assets represented
by the principal balance of the MBS.
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:
o 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;
o the original and remaining terms to stated maturity of the
government securities;
o whether the government securities are entitled only to interest
payments, only to principal payments or to both;
o the interest rates of the government securities or the formula to
determine the rates, if any;
o the applicable payment provisions for the government securities;
and
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o to what extent, if any, the obligation evidenced by the related
series of certificates is backed by the full faith and credit of
the United States.
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 in
this prospectus and in the related 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 in that account may be held as cash
or invested in 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."
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 the 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. 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 May Not Cover Losses Or Risks Which Could Adversely
Affect Payment On Your Certificates."
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 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 loans or MBS, 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 guaranteed investment contract or other
agreement, including, without limitation, provisions relating to the timing,
manner and amount of payments and provisions relating to termination, will be
described in the prospectus supplement for the related series. In addition, the
related prospectus supplement will provide information with respect to the
obligor under any Cash Flow Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the certificates will
be applied by Morgan Stanley Dean Witter Capital I Inc. to the purchase of
assets and to pay for certain
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expenses incurred in connection with the 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 Morgan Stanley Dean
Witter Capital I Inc., 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 will accrue interest thereon based on a 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."
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
o the pass-through rate for each class of certificates or, in the
case of a variable or adjustable pass-through rate, the method of
determining the pass-through rate;
o the effect, if any, of the prepayment of any mortgage loan or MBS
on the pass-through rate of one or more classes of certificates;
and
o 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 the certificate because, while interest
may accrue on each asset during a certain period, the distribution of 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 will have a stated
principal amount in addition to the certificate Balance of a class of Accrual
Certificates, and will be distributed to certificateholders as provided in the
related prospectus supplement and will include interest accrued during the
Interest Accrual Period for that Distribution Date. As indicated in this
prospectus under "--Pass-Through Rate" above, 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 the certificates may be lower than the yield that
would result if the Interest Accrual Period ended on that Distribution Date. In
addition, if so specified in the related prospectus supplement, interest
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accrued for an Interest Accrual Period for one or more classes of certificates
may be calculated on the assumption that distributions of principal, 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 that Distribution Date. This 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 borrowers and involuntary
liquidations. These payments may be directly dependent upon the payments on
leases underlying the 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, the mortgage
loans are likely to be the subject of higher principal prepayments than if
prevailing rates remain at or above the rates borne by the mortgage loans. In
this regard, it should be noted that 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
the underlying mortgage loans. The rate of principal payments on some or all of
the classes of certificates of a series
o will correspond to the rate of principal payments on the assets
in the related trust fund;
o is likely to be affected by the existence of Lockout Periods and
Prepayment Premium provisions of the mortgage loans underlying or
comprising the assets; and
o is likely to be affected to the extent the servicer of any
mortgage loan is able to enforce the Lockout Period and
Prepayment Premium provisions.
Mortgage loans with a Lockout 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 these
provisions, with shorter Lockout 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 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
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yield on one or more classes of the certificates of the 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 these
classes.
When a full prepayment is made on a mortgage loan, the borrower 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 the partial
prepayment is received. As a result, to the extent set forth 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 the 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
loans or MBS may significantly affect an investor's actual yield to maturity,
even if the average rate of distributions of principal is consistent with an
investor's expectation. In general, the earlier a principal payment is received
on the mortgage loans or the MBS and distributed on a certificate, the greater
the effect on the 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 a series. Prepayments on the mortgage loans comprising or
underlying the mortgage loans or MBS 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 that series set forth in the related prospectus
supplement.
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
the 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 loans or
MBS is
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paid to that class, which may be in the form of scheduled amortization or
prepayments which include 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 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 the 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 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 the
loans.
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 loans, the MBS or both. 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 loans or the MBS for any series will not conform to any
particular level of CPR.
Morgan Stanley Dean Witter Capital I Inc. 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 the series and the percentage of
the initial certificate Balance of each class that would be outstanding on
specified Distribution Dates. The information in these tables will be based on
the assumptions stated in the 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 other rates
specified in the prospectus supplement. These 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 loans or MBS for any series will
conform to any particular level of CPR or any other rate specified in the
related prospectus supplement.
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OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
TYPE OF MORTGAGE ASSET
A number of mortgage loans may have balloon payments due at maturity.
Because the ability of a borrower to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
mortgaged property, there is a risk that mortgage loans having balloon payments
may default at maturity, or that the servicer may extend the maturity of this
type of 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
borrower 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. This would lengthen 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 loans or MBS 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 loans or MBS 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 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 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 servicer, on behalf of the
trust fund, will be required to exercise--or waive its right to exercise--any
rights that the trustee may have as lender to accelerate payment of the Whole
Loan in a manner consistent with the Servicing Standard. See "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."
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THE DEPOSITOR
Morgan Stanley Dean Witter Capital I Inc., the depositor, formerly
known as Morgan Stanley Capital I Inc., 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 Morgan Stanley Dean Witter
Capital I Inc. are located at 1585 Broadway, 37th Floor, New York, New York
10036. Its telephone number is (212) 761-4700.
Morgan Stanley Dean Witter Capital I Inc. 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 by this prospectus, 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:
o provide for the accrual of interest thereon based on fixed,
variable or adjustable rates;
o be senior or subordinate to one or more other classes of
certificates in respect of distributions on the certificates;
o be entitled to principal distributions, with disproportionately
low, nominal or no interest distributions;
o be entitled to interest distributions, with disproportionately
low, nominal or no principal distributions;
o provide for distributions of accrued interest thereon commencing
only following the occurrence of events, such as the retirement
of one or more other classes of certificates of the series;
o provide for payments of principal sequentially, based on
specified payment schedules, from only a portion of the assets in
the trust fund or based on specified calculations, to the extent
of available funds, in each case as described in the related
prospectus supplement;
o 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; or
o do all or any combination of the above.
Any of the foregoing may be included in the certificates being offered to you.
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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 these certificates may be exchanged without
the payment of any service charge payable in connection with the registration of
transfer or exchange. However Morgan Stanley Dean Witter Capital I Inc. or the
trustee or any of its agents 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 or in book-entry form, as provided in
the related prospectus supplement. See "Risk Factors--If Your Certificate Is
Book-Entry, You Will Not Be Recognized As Certificateholder By The Trustee."
Under limited circumstances, 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.
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 the series and
the 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 on 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. All distributions
with respect to each class of certificates on each Distribution Date will be
allocated pro rata among the outstanding certificates in the 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 to receive payments by wire transfer, if the
certificateholder has so notified the trustee or other person required to make
the 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 in the related prospectus
supplement, or by check mailed to the address of the person entitled to receive
payments as it appears on the Certificate Register. However, 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 the 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
in this paragraph, 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:
1. the total amount of all cash on deposit in the related
Certificate Account as of the corresponding Determination Date,
exclusive of:
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o all scheduled payments of principal and interest collected
but due on a date subsequent to the related Due Period;
o 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
o all amounts in the Certificate Account that are due or
reimbursable to Morgan Stanley Dean Witter Capital I Inc.,
the trustee, an asset seller, a subservicer, 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;
2. 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;
3. all advances made by a master servicer or any other entity as
specified in the related prospectus supplement with respect to the
Distribution Date;
4. 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
5. 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 the
Distribution Date.
The entire Available Distribution Amount will be distributed among the
related certificates, including any certificates not offered hereby, on each
Distribution Date, and accordingly will be released from the trust fund and will
not be available for any future distributions.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of certificates, other than classes of Stripped Principal
Certificates that have no pass-through rate, may have a different pass-through
rate, which will be a fixed, variable or adjustable rate at which interest will
accrue on the class or a component thereof. 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.
In general, distributions of interest in respect of the certificates of
any class will be made on each Distribution Date based on the Accrued
Certificate Interest for the class and the
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Distribution Date, subject to the sufficiency of the portion of the
Available Distribution Amount allocable to the class on the Distribution Date.
Accrual Certificates, however, will be entitled to distributions of accrued
interest commencing only on the Distribution Date, or under the circumstances,
specified in the related prospectus supplement. In addition, any class of
Stripped Principal Certificates are not entitled to any distributions of
interest. Prior to the time interest is distributable on any class of Accrual
Certificates, the amount of Accrued Certificate Interest otherwise distributable
on the class will be added to the Certificate Balance thereof on each
Distribution Date. 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 in the next paragraph.
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 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. Prepayment interest shortfalls are shortfalls in
collections of interest for a full accrual period resulting from prepayments
prior to the due date in the accrual period on the mortgage loans comprising or
underlying the mortgage loans or MBS in the trust fund for the series. The
particular manner in which these 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 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 loans or MBS in the related trust fund. Similarly, with respect to
Accrual Certificates, the related prospectus supplement will describe the extent
to which the amount of Accrued Certificate Interest that may be added to the
Certificate Balance of a Class of Offered Certificates may be reduced. 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 the class of a portion of any
deferred interest on the mortgage loans comprising or underlying the mortgage
loans or MBS in the related trust fund will result in a corresponding increase
in the Certificate Balance of the class. See "Risk Factors--Prepayments And
Repurchases May Reduce The Yield On Your Certificates," and "--If Prepayment
Premiums Are Not Enforced, Your Certificates May Be Adversely Affected," 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. The Certificate Balance
will equal the maximum principal amount that the holder will be entitled to
receive out of future cash flow on the assets in the trust fund. The outstanding
Certificate Balance of a certificate will be reduced to the extent of
distributions of principal 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. The outstanding Certificate Balance may be increased in respect
of deferred interest on the related mortgage loans
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to the extent provided in the related prospectus supplement. The
outstanding Certificate Balance may be increased in the case of Accrual
Certificates, prior to the Distribution Date on which distributions of interest
are required to commence, 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 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 the prospectus supplement until the Certificate Balance of that
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 the 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 a class of certificates. In this case, references to
Certificate Balance and pass-through rate refer to the principal balance, if
any, of any component and the pass-through rate, if any, on any 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 loans or MBS in the related trust fund will be distributed on each
Distribution Date to the class or classes of certificates entitled thereto in
accordance with the provisions described in the 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 loans or MBS or both have been incurred, the amount of losses or
shortfalls will be borne first by a class of Subordinate Certificates in the
priority and manner and subject to the limitations specified in the 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 loans or MBS comprising the 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 in the prospectus supplement 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 the Distribution Date.
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The master servicer or other entity required to make advances will do so, 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 the trust fund during the related Due Period
and were delinquent on the related Determination Date. The master servicer or
other entity required to make advances will advance, subject to that entity's
good faith determination that the advances will be reimbursable from Related
Proceeds. 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 the delinquencies necessary to make the required
distributions on one or more classes of Senior Certificates and may be subject
to the master servicer's or another entity's good faith determination that the
advances will be reimbursable not only from Related Proceeds but also from
collections on other assets otherwise distributable on one or more classes of
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.
Advances do not guaranty 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 Proceeds and, if so
provided in the prospectus supplement, out of any amounts otherwise
distributable on one or more classes of Subordinate Certificates of the series.
However, advances will be reimbursable from amounts in the Certificate Account
prior to distributions being made on the certificates, to the extent that the
master servicer or another entity shall determine in good faith that the advance
is a Nonrecoverable Advance. If advances have been made by the master servicer
from excess funds in the Certificate Account, the master servicer is required to
replace the funds in the Certificate Account on any future Distribution Date to
the extent that funds in the Certificate Account on the Distribution Date are
less than payments required to be made to certificateholders on that 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 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 in the prospectus supplement on its outstanding advances and
will be entitled to pay itself 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 the 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 the 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 holder, to Morgan Stanley
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Dean Witter Capital I Inc. and to the other parties as may be specified in
the related Agreement, a statement setting forth, in each case to the extent
applicable and available:
(1) the amount of the distribution to holders of certificates of that
class applied to reduce the Certificate Balance thereof;
(2) the amount of the distribution to holders of certificates of that
class allocable to Accrued Certificate Interest;
(3) the amount of the distribution allocable to
(a) prepayment premiums and
(b) payments on account of Equity Participations;
(4) 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 subservicer and any other customary
information as that master servicer or trustee deem necessary or
desirable, or that a certificateholder reasonably requests, to
enable certificateholders to prepare their tax returns;
(5) the aggregate amount of advances included in that distribution,
and the aggregate amount of unreimbursed advances at the close of
business on that Distribution Date;
(6) the aggregate principal balance of the assets at the close of
business on that Distribution Date;
(7) the number and aggregate principal balance of Whole Loans in
respect of which:
o one scheduled payment is delinquent,
o two scheduled payments are delinquent,
o three or more scheduled payments are delinquent and
o foreclosure proceedings have been commenced;
(8) with respect to each Whole Loan that is delinquent two or more
months:
o the loan number thereof,
o the unpaid balance thereof,
o whether the delinquency is in respect of any balloon
payment,
o the aggregate amount of unreimbursed servicing expenses and
unreimbursed advances in respect thereof,
o if applicable, the aggregate amount of any interest accrued
and payable on related servicing expenses and related
advances assuming the mortgage loan is subsequently
liquidated through foreclosure,
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o whether a notice of acceleration has been sent to the
borrower and, if so, the date of the notice,
o whether foreclosure proceedings have been commenced and, if
so, the date so commenced and
o if the mortgage loan is more than three months delinquent
and foreclosure has not been commenced, the reason therefor;
(9) with respect to any Whole Loan liquidated during the related Due
Period other than by payment in full:
o the loan number thereof,
o the manner in which it was liquidated and
o the aggregate amount of liquidation proceeds received;
(10) with respect to any Whole Loan liquidated during the related Due
Period,
o the portion of the liquidation proceeds payable or
reimbursable to the master servicer, or any other entity, in
respect of the mortgage loan and
o the amount of any loss to certificateholders;
(11) 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,
o the loan number of the related mortgage loan and
o the date of acquisition;
(12) 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:
o the book value,
o the principal balance of the related mortgage loan
immediately following the Distribution Date, calculated as
if the mortgage loan were still outstanding taking into
account certain limited modifications to the terms thereof
specified in the Agreement,
o the aggregate amount of unreimbursed servicing expenses and
unreimbursed advances in respect thereof and
o if applicable, the aggregate amount of interest accrued and
payable on related servicing expenses and related advances;
(13) with respect to any REO Property sold during the related Due
Period
o the loan number of the related mortgage loan,
o the aggregate amount of sale proceeds,
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o the portion of sales proceeds payable or reimbursable to the
master servicer or a special servicer in respect of the REO
Property or the related mortgage loan and
o the amount of any loss to certificateholders in respect of
the related mortgage loan;
(14) 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 the
Distribution Date, separately identifying any reduction in the
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 the balance;
(15) the aggregate amount of principal prepayments made during the
related Due Period;
(16) the amount deposited in the reserve fund, if any, on the
Distribution Date;
(17) the amount remaining in the reserve fund, if any, as of the close
of business on the Distribution Date;
(18) the aggregate unpaid Accrued Certificate Interest, if any, on each
class of certificates at the close of business on the
Distribution Date;
(19) in the case of certificates with a variable pass-through rate, the
pass-through rate applicable to the Distribution Date, and, if
available, the immediately succeeding Distribution Date, as
calculated in accordance with the method specified in the related
prospectus supplement;
(20) in the case of certificates with an adjustable pass-through rate,
for statements to be distributed in any month in which an
adjustment date occurs, the adjustable pass-through rate
applicable to the Distribution Date and the immediately succeeding
Distribution Date as calculated in accordance with the method
specified in the related prospectus supplement;
(21) as to any series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included in the
Series as of the close of business on the Distribution Date; and
(22) the aggregate amount of payments by the borrowers of:
o default interest,
o late charges and
o assumption and modification fees collected during the
related Due Period.
In the case of information furnished pursuant to subclauses (1)-(4)
above, the amounts generally will be expressed as a dollar amount per minimum
denomination of certificates. In addition, in the case of information furnished
pursuant to subclauses (1), (2), (14), (18) and (19) above, the amounts shall
also be provided with respect to each component, if any, of a class of
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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
Morgan Stanley Dean Witter Capital I Inc. and to any 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 the
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 (1)-(4) above, aggregated for the calendar year or the
applicable portion thereof during which the person was a certificateholder. This
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 the Agreement
following the earlier of
o 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
o the purchase of all of the assets of the trust fund by the
party entitled to effect the termination, under the
circumstances and in the manner set forth in the related
prospectus supplement.
In no event, however, will the trust fund 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 in the prospectus
supplement, under the circumstances and in the manner set forth in the
prospectus supplement. 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 in the
prospectus supplement will solicit bids for the purchase of all assets of the
trust fund, or of a sufficient portion of the assets to retire the class or
classes or purchase the 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 in the prospectus supplement.
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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 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 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
Participants and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in their
accounts, 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 other
organizations. Indirect access to the DTC system also is available to 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, these 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, as nominee for DTC, on each Distribution Date, DTC will forward the
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 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 the 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 the interest.
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DTC has advised Morgan Stanley Dean Witter Capital I Inc. that it will
take any action permitted to be taken by a certificateholder under the 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 as definitive
certificates, rather than to DTC or its nominee only if
o Morgan Stanley Dean Witter Capital I Inc. 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 Morgan Stanley Dean Witter
Capital I Inc. is unable to locate a qualified successor, or
o Morgan Stanley Dean Witter Capital I Inc., 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 the instructions the definitive certificates to which they are entitled, and
thereafter the trustee will recognize the holders of the definitive certificates
as certificateholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
The certificates will be offered pursuant to a Pooling Agreement or a
Trust Agreement.
o A Pooling Agreement will be used where the trust fund
includes Whole Loans. The parties to a Pooling Agreement
will be Morgan Stanley Dean Witter Capital I Inc., a
trustee, a master servicer and any special servicer
appointed as of the date of the Pooling Agreement. If a
master servicer is not appointed, a servicer, with,
generally, the same obligations as described in this
prospectus with respect to the master servicer, unless
otherwise specified in the prospectus supplement, will be
appointed. This servicer will service all or a significant
number of Whole Loans directly without a subservicer.
References in this prospectus to master servicer and its
rights and obligations, to the extent set forth in the
related prospectus supplement, shall be deemed to also be
references to any servicer servicing Whole Loans directly.
o A Trust Agreement will be used where the trust fund does not
include Whole Loans. The parties to a Trust Agreement will
be Morgan Stanley Dean Witter Capital I Inc. and a trustee.
A manager or administrator may be appointed pursuant to the
Trust Agreement for any trust fund to administer the 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 Agreement
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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 Agreement filed herewith, but will not contain provisions with respect
to the servicing and maintenance of Whole Loans. The following summaries
describe some of the provisions that may appear in each Agreement. The
prospectus supplement for a series of certificates will describe any provision
of the Agreement relating to a 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 the provisions in the related prospectus supplement. Morgan
Stanley Dean Witter Capital I Inc. 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 a series addressed to Morgan Stanley
Dean Witter 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, Morgan Stanley
Dean Witter Capital I Inc. 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 the 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
the assignment, deliver the certificates to Morgan Stanley Dean Witter Capital I
Inc. in exchange for the assets and the other assets comprising the trust fund
for the series. Each mortgage loan and MBS will be identified in a schedule
appearing as an exhibit to the related Agreement. Unless otherwise provided in
the related prospectus supplement, the schedule will include detailed
information
o 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 the 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
o 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 the 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, Morgan Stanley Dean Witter Capital I
Inc. will deliver or cause to be delivered to the trustee or to the custodian,
certain loan documents, which to the extent set forth 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 Morgan Stanley Dean Witter Capital I Inc. delivers
to the trustee or the custodian a copy or a duplicate
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original of the mortgage note, together with an affidavit certifying that
the original thereof has been lost or destroyed. With respect to these 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, this type of 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 Morgan
Stanley Dean Witter Capital I Inc. or another party specified in the Agreement
to promptly cause each assignment of mortgage to be recorded in the appropriate
public office for real property records. However, in the State of California or
in other states where, in the opinion of counsel acceptable to the trustee,
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 Morgan Stanley Dean Witter Capital I Inc., the master servicer, the
relevant asset seller or any other prior holder of the Whole Loan, the
assignment of mortgage for each related Whole Loan may not be recorded.
The trustee or a custodian will review the Whole Loan documents within
a specified period of days after receipt thereof, and the trustee or a custodian
will hold the documents in trust for the benefit of the certificateholders.
Unless otherwise specified in the related prospectus supplement, if any of these
documents are found to be missing or defective in any material respect, the
trustee or custodian shall immediately notify the master servicer and Morgan
Stanley Dean Witter Capital I Inc., 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 notice, then to the
extent set forth in the related prospectus supplement, the asset seller will be
obligated, within a specified number of days of receipt of notice, to repurchase
the related Whole Loan from the trustee at the Purchase Price or substitute the
mortgage loan. There can be no assurance that an asset seller will fulfill this
repurchase or substitution obligation, and neither the master servicer nor
Morgan Stanley Dean Witter Capital I Inc. will be obligated to repurchase or
substitute the 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 the asset, the asset seller may agree to cover
any losses suffered by the trust fund as a result of this type of breach or
defect.
If so provided in the related prospectus supplement, Morgan Stanley
Dean Witter Capital I Inc. 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,
Morgan Stanley Dean Witter Capital I Inc. will deliver or cause to be delivered
to the trustee or the custodian the
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original certificate or other definitive evidence of the Government
Security or MBS, as applicable, together with bond power or other instruments,
certifications or documents required to transfer fully the 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,
Morgan Stanley Dean Witter Capital I Inc. and the trustee will cause the
Government Security or MBS to be registered directly or on the books of the
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
Morgan Stanley Dean Witter Capital I Inc. 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 Morgan
Stanley Dean Witter Capital I Inc. will, with respect to each Whole Loan, make
or assign certain representations and warranties, as of a specified date
covering, by way of example, the following types of matters:
o the accuracy of the information set forth for the Whole Loan
on the schedule of assets appearing as an exhibit to the
related Agreement;
o the existence of title insurance insuring the lien priority
of the Whole Loan;
o the authority of the Warrantying Party to sell the Whole
Loan;
o the payment status of the Whole Loan and the status of
payments of taxes, assessments and other charges affecting
the related mortgaged property;
o 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
o the existence of hazard and extended perils insurance
coverage on the mortgaged property.
Any Warrantying Party, if other than Morgan Stanley Dean Witter Capital
I Inc., shall be an asset seller or an affiliate thereof or another person
acceptable to Morgan Stanley Dean Witter Capital I Inc. 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 the date on which the representations
are made and the date of initial issuance of the related series of certificates
evidencing an interest in the Whole Loan. Unless otherwise specified in the
related prospectus supplement, in the event of a breach of any representation or
warranty, the Warrantying Party will be obligated to reimburse the trust fund
for losses caused by the breach or either cure the breach or repurchase or
replace the affected Whole Loan as described in the next paragraph. 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
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reimbursement, cure, repurchase or substitution obligation in connection with a
breach of a representation and warranty only if the relevant event that causes
such breach occurs prior to the date on which they were made. The Warranting
Party would have no obligations if the relevant event that causes the breach
occurs after that date.
Unless otherwise provided in the related prospectus supplement, each
Agreement will provide that the master servicer or trustee, or both, 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 the Whole Loan or the interests in the Whole
Loan of the certificateholders. If the Warrantying Party cannot cure the breach
within a specified period following the date on which the party was notified of
the breach, then
o the Warrantying Party will be obligated to repurchase the
Whole Loan from the trustee within a specified period from
the date on which the Warrantying Party was notified of the
breach, at the Purchase Price; or
o if so provided in the prospectus supplement for a series,
the Warrantying Party, will have the option, within a
specified period after initial issuance of such series of
certificates, to cause the Whole Loan to be removed 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; or.
o if so provided in the prospectus supplement for a series,
the Warrantying Party, will have the option to reimburse the
trust fund or the certificateholders for any losses caused
by the 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 Morgan Stanley Dean Witter Capital I Inc., 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 their 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 the government securities or MBS, covering
o the accuracy of the information set forth therefor on the
schedule of assets appearing as an exhibit to the related
Agreement and
o the authority of the Warrantying Party to sell the assets.
The related prospectus supplement will describe the remedies for a breach
thereof.
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A master servicer will make representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
related Agreement. A breach of any of these representations which materially and
adversely affects the interests of the certificateholders and which continues
unremedied for thirty days after the giving of written notice of the breach to
the master servicer, the trustee or Morgan Stanley Dean Witter Capital I Inc.
will constitute an Event of Default under the Agreement. See "--Events of
Default" and "--Rights Upon Event of Default," below.
CERTIFICATE ACCOUNT AND OTHER COLLECTION ACCOUNTS
GENERAL
The master servicer or the trustee or both will, as to each trust fund,
establish and maintain or cause to be established and maintained, the
Certificate Account, which must be either
o an account or accounts the deposits in which are insured by
the Bank Insurance Fund or the Savings Association Insurance
Fund of the 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
the 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
o 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 the series.
The collateral eligible to secure amounts in the Certificate Account is limited
to Permitted Investments. A Certificate Account may be maintained as an interest
bearing or a non-interest bearing account and the funds held in the account may
be invested pending each succeeding Distribution Date in 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 the 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
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or before the Cut-off Date, and exclusive of any amounts representing a
Retained Interest, all payments on account of principal, including principal
prepayments, on the assets;
1) 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 subservicer or a
special servicer as its servicing compensation and net of any
Retained Interest;
2) 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 the proceeds are not applied to the restoration of
the property or released to the borrower in accordance with
normal servicing procedures and all Insurance Proceeds and all
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;
3) 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";
4) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
5) any amounts representing prepayment premiums;
6) any amounts paid under any Cash Flow Agreement, as described
under "Description of the Trust Funds--Cash Flow Agreements";
7) all proceeds of any asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by Morgan Stanley
Dean Witter Capital I Inc., any asset seller or any other
specified person as described above under "--Assignment of
Assets; Repurchases" and "--Representations and Warranties;
Repurchases," all proceeds of any defaulted mortgage loan
purchased as described below under "--Realization Upon Defaulted
Whole Loans," and all proceeds of any asset purchased as
described above under "Description of the
Certificates--Termination";
8) 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";
9) to the extent that any 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 loans or MBS or both;
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10) all payments required to be deposited in the Certificate Account
with respect to any deductible clause in any blanket insurance
policy described below under "--Hazard Insurance Policies";
11) 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
12) 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:
(1) to make distributions to the certificateholders on each
Distribution Date;
(2) to reimburse a master servicer for unreimbursed amounts advanced
as described above under "Description of the
Certificates--Advances in Respect of Delinquencies," the
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
those Whole Loans;
(3) 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
the fees were earned or the expenses were incurred or out of
amounts drawn under any form of Credit Support with respect to
such Whole Loans and properties;
(4) to reimburse a master servicer for any advances described in
clause (2) above and any servicing expenses described in clause
(3) above which, in the master servicer's good faith judgment,
will not be recoverable from the amounts described in clauses
(2) and (3), respectively, the 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;
(5) if and to the extent described in the related prospectus
supplement, to pay a master servicer interest accrued on the
advances described in clause (2) above and the
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servicing expenses described in clause (3) above while these
amounts remain outstanding and unreimbursed;
(6) 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 below under "--Realization
Upon Defaulted Whole Loans";
(7) to reimburse a master servicer, Morgan Stanley Dean Witter
Capital I Inc., 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 below under "--Matters Regarding a Master Servicer and
the Depositor";
(8) 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;
(9) 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 below under "--Matters Regarding the Trustee";
(10) 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;
(11) 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;
(12) 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,
these payments to be made out of income received on this type of
property;
(13) 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 below under
"Federal Income Tax Consequences--REMICs--Prohibited
Transactions Tax and Other Taxes";
(14) 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 the defaulted
Whole Loan or property;
(15) to pay for the cost of various opinions of counsel obtained
pursuant to the related Agreement for the benefit of
certificateholders;
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(16) to pay for the costs of recording the related Agreement if
recordation materially and beneficially affects the interests of
certificateholders, provided that the 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;
(17) 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;
(18) to make any other withdrawals permitted by the related Agreement
and described in the related prospectus supplement; and
(19) 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 the master servicer or any related subservicer 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 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 collection account. The prospectus supplement
will set forth any restrictions with respect to any collection account,
including investment restrictions and any restrictions with respect to financial
institutions with which any collection account may be maintained.
COLLECTION AND OTHER SERVICING PROCEDURES
The master servicer, directly or through subservicers, is required to
make reasonable efforts to collect all scheduled payments under the Whole Loans
and will follow or cause to be followed the 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 the procedures are consistent with 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 the following:
o maintaining, or causing the borrower 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 in this prospectus
and in any related prospectus supplement, and filing and
settling claims thereunder;
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o maintaining escrow or impoundment accounts of borrowers for
payment of taxes, insurance and other items required to be
paid by any borrower pursuant to the Whole Loan;
o 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;
o supervising foreclosures;
o inspecting and managing mortgaged properties under certain
circumstances; and
o 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
o affect the amount or timing of any scheduled payments of
principal or interest on the Whole Loan or
o 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,
o in its judgment, a material default on the Whole Loan has
occurred or a payment default is imminent and
o in its judgment, that 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.
SUBSERVICERS
A master servicer may delegate its servicing obligations in respect of
the Whole Loans to subservicer, but the master servicer will remain obligated
under the related Agreement. Each subservicing 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
the capacity of master servicer, the trustee or any successor master servicer
may assume the master servicer's rights and obligations under the subservicing
agreement.
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Unless otherwise provided in the related prospectus supplement, the
master servicer will be solely liable for all fees owed by it to any
subservicer, irrespective of whether the master servicer's compensation pursuant
to the related Agreement is sufficient to pay those fees. However, a subservicer
may be entitled to a Retained Interest in certain Whole Loans. Each subservicer
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" below.
SPECIAL SERVICERS
To the extent so specified in the related prospectus supplement, a
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 borrower'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 the borrower'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:
o monitor any Whole Loan which is in default,
o contact the borrower concerning the default,
o evaluate whether the causes of the default can be cured over
a reasonable period without significant impairment of the
value of the mortgaged property,
o initiate corrective action in cooperation with the borrower
if cure is likely,
o inspect the mortgaged property, and o take any 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 the 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 borrower, 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
"Legal Aspects of the Mortgage Loans and the Leases."
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Any Agreement relating to a trust fund that includes Whole Loans may
grant to the master servicer or the holder or holders of certain classes of
certificates, or both, a right of first refusal to purchase from the trust fund
at a predetermined purchase price any 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 this 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 sale of this
type 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 the 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 the defaulted mortgage loan as
described in the paragraphs 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.
If a default on a Whole Loan has occurred or, in the master servicer's
judgment is imminent, and the action is consistent with the servicing standard,
the master servicer, on behalf of the trustee, may at any time:
o institute foreclosure proceedings,
o exercise any power of sale contained in any mortgage,
o obtain a deed in lieu of foreclosure, or o otherwise acquire
title to a mortgaged property securing the Whole Loan.
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 that mortgaged property within the meaning of 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:
o 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
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o 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 the actions as would
be necessary and appropriate to effect the compliance and
respond to the 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 the mortgaged property by the
trust fund, unless
o the Internal Revenue Service grants an extension of time to
sell the property or
o the trustee receives an opinion of independent counsel to
the effect that the holding of the property by the trust
fund subsequent to that 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
o solicit bids for any mortgaged property so acquired by the
trust fund as will be reasonably likely to realize a fair
price for the property and
o 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 the 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 that property. Unless otherwise
specified in the related prospectus supplement, any 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 "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 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 that difference. The master
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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 the Liquidation Proceeds to
certificateholders, amounts representing its normal servicing compensation on
the Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan.
If any property securing a defaulted Whole Loan is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient to
restore the damaged property to a condition sufficient to permit recovery under
the related instrument of Credit Support, if any, the master servicer is not
required to expend its own funds to restore the damaged property unless it
determines
o that the restoration will increase the proceeds to
certificateholders on liquidation of the Whole Loan after
reimbursement of the master servicer for its expenses and
o that the 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 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 those proceeds, prior to distribution thereof 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. 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 borrower on each Whole Loan to maintain a hazard insurance
policy providing for the coverage required under the related mortgage or, if any
mortgage permits the holder thereof to dictate to the borrower the insurance
coverage to be maintained on the related mortgaged property, then the coverage
that is consistent with the Servicing Standard. Unless otherwise specified in
the related prospectus supplement, the coverage will be in general in an amount
equal to the lesser of the principal balance owing on the 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 in this
section, or upon the extent to which information in this regard is
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furnished by borrowers. All amounts collected by the master servicer under
any policy, except for amounts to be applied to the restoration or repair of the
mortgaged property or released to the borrower 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 borrower to maintain a hazard insurance policy by the
master servicer's maintaining a blanket policy insuring against hazard losses on
the Whole Loans. If the 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 in the Certificate Account but for that 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 of these 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 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 recover the full amount of any partial
loss. If the insured's coverage falls below this specified percentage, the
co-insurance clause generally provides that the insurer's liability in the event
of partial loss does not exceed the lesser of
o the replacement cost of the improvements less physical
depreciation and
o the proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full
replacement cost of the improvements.
Each Agreement for a trust fund that includes Whole Loans will require
the master servicer to cause the borrower on each Whole Loan, or, in certain
cases, the related lessee, to maintain all 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 borrower 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, subservicer or special
servicer to maintain public liability insurance with respect to any REO
Properties. Any cost incurred by the master servicer in maintaining any
insurance policy will be added to the amount owing under the mortgage loan where
the terms of the mortgage loan so permit;
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provided, however, that the addition of this cost will not be taken into
account for purposes of calculating the distribution to be made to
certificateholders. These costs may be recovered by the master servicer,
subservicer 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, borrowers 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 these claims is
dependent upon the extent to which information in this regard is furnished to
the master servicer by borrowers.
RENTAL INTERRUPTION INSURANCE POLICY
If so specified in the related prospectus supplement, the master
servicer or the borrowers will maintain rental interruption insurance policies
in full force and effect with respect to some or all of the leases. Although the
terms of these 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, the 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 the 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. However, if the cost of
any replacement policy is greater than the cost of the terminated rental
interruption policy, the amount of coverage under the replacement policy will,
to the extent set forth 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 criteria set forth in the Agreement are met.
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DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Some of the Whole Loans may contain clauses requiring the consent of
the lender to any sale or other transfer of the related mortgaged property, or
due-on-sale clauses entitling the lender to accelerate payment of the Whole Loan
upon any sale or other transfer of the related mortgaged property. Some of the
Whole Loans may contain clauses requiring the consent of the lender to the
creation of any other lien or encumbrance on the mortgaged property or
due-on-encumbrance clauses entitling the lender 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 lender to accelerate payment of the 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 "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.
Unless otherwise specified in the related prospectus supplement, the
master servicer's and a subservicer'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, these 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
subservicers may retain all or a portion of assumption fees, modification fees,
late payment charges or prepayment premiums collected from borrowers and any
interest or other income which may be earned on funds held in the Certificate
Account or any account established by a subservicer 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 in the related prospectus supplement, and
the fees of any special servicer, may be borne by the trust fund.
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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 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 that 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, the servicing by or on behalf of the master
servicer of mortgage loans under pooling 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 that firm
may rely, as to matters relating to the direct servicing of mortgage loans by
subservicers, upon comparable statements 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 that statement, of firms of independent public accountants
with respect to the related subservicer.
Each 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 annual accountants' statement and 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.
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 servicer may be an
affiliate of Morgan Stanley Dean Witter Capital I Inc. and may have other normal
business relationships with Morgan Stanley Dean Witter Capital I Inc. or Morgan
Stanley Dean Witter Capital I Inc.'s affiliates. Reference 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 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 another activity carried on by it that
was performed by the master servicer on the date of the Agreement. No
resignation will become effective until the trustee or a successor servicer has
assumed the master servicer's obligations and duties under the Agreement.
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Unless otherwise specified in the related prospectus supplement, each
Agreement will further provide that neither any master servicer, Morgan Stanley
Dean Witter Capital I Inc. nor any director, officer, employee, or agent of a
master servicer or Morgan Stanley Dean Witter Capital I Inc. 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. However, neither a master servicer, Morgan Stanley Dean Witter
Capital I Inc. nor any director, officer, employee, or agent of a master
servicer or Morgan Stanley Dean Witter Capital I Inc. will be protected against
any breach of a representation, warranty or covenant made in the Agreement, or
against any liability specifically imposed by the Agreement, 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, Morgan Stanley Dean Witter Capital I
Inc. and any director, officer, employee or agent of a master servicer or Morgan
Stanley Dean Witter Capital I Inc. 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 the indemnification will not extend
to any loss, liability or expense:
o specifically imposed by the 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 loss,
liability or expense shall be otherwise reimbursable
pursuant to the Agreement;
o incurred in connection with any breach of a representation,
warranty or covenant made in the Agreement;
o 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 its
obligations or duties;
o incurred in connection with any violation of any state or
federal securities law; or
o imposed by any taxing authority if the 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
Morgan Stanley Dean Witter Capital I Inc. 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. The master servicer or Morgan Stanley
Dean Witter Capital I Inc. may, however, in its discretion undertake any 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 this event, the legal expenses and costs of
the action and any liability resulting therefrom will be expenses, costs and
liabilities of the certificateholders, and the master servicer or Morgan Stanley
Dean Witter Capital I Inc., as the case may be, will be entitled to be
reimbursed therefor and to charge the Certificate Account.
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Any person into which the master servicer or Morgan Stanley Dean Witter
Capital I Inc. may be merged or consolidated, or any person resulting from any
merger or consolidation to which the master servicer or Morgan Stanley Dean
Witter Capital I Inc. is a party, or any person succeeding to the business of
the master servicer or Morgan Stanley Dean Witter Capital I Inc., will be the
successor of the master servicer or Morgan Stanley Dean Witter Capital I Inc.,
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:
(1) 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;
(2) 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 the failure has been given to the master servicer by the
trustee or Morgan Stanley Dean Witter Capital I Inc., or to the master
servicer, Morgan Stanley Dean Witter Capital I Inc. and the trustee by
the holders of certificates evidencing not less than 25% of the Voting
Rights;
(3) 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 that breach has been given to the
master servicer by the trustee or Morgan Stanley Dean Witter Capital I
Inc., or to the master servicer, Morgan Stanley Dean Witter Capital I
Inc. and the trustee by the holders of certificates evidencing not
less than 25% of the Voting Rights; and
(4) 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 Morgan Stanley Dean Witter Capital I Inc. and all certificateholders of the
applicable series notice of the occurrence, unless the default shall have been
cured or waived.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under an Agreement remains unremedied,
Morgan Stanley Dean Witter Capital I Inc. 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
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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 the 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 appointment of at least $15,000,000 to act as
successor to the master servicer under the Agreement. Pending appointment, the
trustee is obligated to act in the capacity of master servicer. The trustee and
any 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 that Event of Default; provided, however, that
an Event of Default involving a failure to distribute a required payment to
certificateholders described in clause (1) under "--Events of Default" may be
waived only by all of the certificateholders. Upon any waiver of an Event of
Default, the Event of Default shall cease to exist and shall be deemed to have
been remedied for every purpose under the Agreement.
No certificateholder will have the right under any Agreement to
institute any proceeding with respect thereto unless the 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 the 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 proceeding. The
trustee, however, is under no obligation to
o exercise any of the powers vested in it by any Agreement;
o make any investigation of matters arising under any Agreement; or
o institute, conduct or defend any litigation under any Agreement
or related to any Agreement.
If any of the holders of certificates request, order or direct the trustee to
take any action, the trustee may require reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred.
AMENDMENT
Each Agreement may be amended by the parties to the Agreement without
the consent of any of the holders of certificates covered by the Agreement:
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(1) to cure any ambiguity;
(2) to correct, modify or supplement any provision in the Agreement which
may be inconsistent with any other provision in the Agreement;
(3) to make any other provisions with respect to matters or questions
arising under the Agreement which are not inconsistent with the
provisions thereof; or
(4) to comply with any requirements imposed by the Code;
provided that the amendment--other than an amendment for the purpose specified
in clause (4) above--will not, as evidenced by an opinion of counsel to that
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 Morgan Stanley Dean Witter Capital I Inc., the
master servicer, if any, and the trustee, with the consent of the holders of
certificates affected evidencing not less than 51% of the Voting Rights, for any
purpose. However, to the extent set forth in the related prospectus supplement,
no amendment may:
(1) 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
that certificate;
(2) adversely affect in any material respect the interests of the holders
of any class of certificates in a manner other than as described in
(1), without the consent of the holders of all certificates of that
class; or
(3) modify the provisions of the Agreement described in this paragraph
without the consent of the holders of all certificates covered by the
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 the
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 Morgan Stanley Dean Witter Capital I Inc. 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
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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 the documents
and to determine whether they conform to the requirements of the Agreement.
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, judgments and amounts paid in settlement,
incurred in connection with the trustee's:
o 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;
o defending or prosecuting any legal action in respect of the
related Agreement or series of certificates;
o being the lender 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
o 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 a higher percentage as is specified in the
related Agreement with respect to any particular matter of the
Voting Rights for the series. However, the 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 the
obligations or duties, or as may arise from a breach of any
representation, warranty or covenant of the trustee made in the
related Agreement.
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 Morgan Stanley Dean
Witter Capital I Inc., the master servicer, if any, and all certificateholders.
Upon receiving the notice of resignation, Morgan Stanley Dean Witter Capital I
Inc. 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 the notice of
resignation, the resigning trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
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If at any time the trustee shall cease to be eligible to continue as
trustee 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 Morgan Stanley
Dean Witter Capital I Inc. 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 that 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 in the
prospectus supplement.
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, holders of certificates evidencing interests in any of the
trusts will be subject to the risk that the Credit Support will be exhausted by
the claims of other trusts prior to the trust fund receiving any of its intended
share of 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:
(1) the nature and amount of coverage under the Credit Support;
(2) any conditions to payment thereunder not otherwise described in this
prospectus;
(3) the conditions, if any, under which the amount of coverage under the
Credit Support may be reduced and under which the Credit Support may
be terminated or replaced;
(4) the material provisions relating to the Credit Support; and
(5) information regarding the obligor under any instrument of Credit
Support, including:
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o a brief description of its principal business activities;
o its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do
business;
o if applicable, the identity of regulatory agencies that exercise
primary jurisdiction over the conduct of its business; and
o 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 May Not Cover Losses or Risks Which Could
Adversely Affect Payment On Your Certificates."
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
the 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 the 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
loans or MBS prior to distributions on Subordinate Certificates evidencing
interests in a different group of mortgage loans or MBS within the trust fund.
The prospectus supplement for a series that includes a cross-support provision
will describe the manner and conditions for applying these provisions.
INSURANCE OR GUARANTEES FOR 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
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 the certificates or
certain classes thereof will be covered by one or
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more letters of credit, issued by the letter of credit bank. Under a letter
of credit, the letter of credit 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 loans or MBS or both 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 letter of credit 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 letter of credit for a series will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed within 15
days of issuance of the certificates of the related series.
INSURANCE POLICIES AND SURETY BONDS
If so provided in the prospectus supplement for a series of
certificates, deficiencies in amounts otherwise payable on the certificates or
certain classes thereof will be covered by insurance policies or surety bonds
provided by one or more insurance companies or sureties. The instruments may
cover, with respect to one or more classes of certificates of the related
series, timely distributions of interest 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 the 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 the prospectus
supplement. The reserve funds for a series may also be funded over time by
depositing in the reserve funds 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 in the reserve fund may be released from the reserve fund under
the conditions and to the extent specified in the related prospectus supplement
and will not be available for further application to the certificates.
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Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related prospectus supplement.
Unless otherwise specified in the related prospectus supplement, any
reinvestment income or other gain from these investments will be credited to the
related Reserve Fund for the series, and any loss resulting from the investments
will be charged to the Reserve Fund. However, the 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 to
the extent set forth 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 the Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which the required balance will decrease over time, the manner of funding the
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 FOR MBS
If so provided in the prospectus supplement for a series of
certificates, the MBS in the related trust fund or the mortgage loans underlying
the MBS may be covered by one or more of the types of Credit Support described
in this prospectus. The related prospectus supplement will specify as to each
form of Credit Support the information indicated above under "Description of
Credit Support--General," to the extent the information is material and
available.
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. The legal aspects are governed by applicable state
law, which laws may differ substantially. As such, the summaries DO NOT:
o purport to be complete;
o purport to reflect the laws of any particular state; or
o purport to encompass the laws of all states in which the security
for the mortgage loans is situated.
The summaries are qualified in their entirety by reference to the applicable
federal and state laws governing the mortgage loans. See "Description of the
Trust Funds--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. The
instrument granting a security interest may be a mortgage, deed of trust,
security deed or deed to secure debt, depending upon the prevailing practice and
law in the state in which the mortgaged property is located. Any of the
foregoing types of mortgages will create a lien upon, or grant a title interest
in, the subject property. The priority of the mortgage will depend on the terms
of the particular security
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instrument, as well as separate, recorded, contractual arrangements with
others holding interests in the mortgaged property, the knowledge of the parties
to the 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--
o a borrower--the borrower and usually the owner of the subject
property, and
o a mortgagee--the lender.
In contrast, a deed of trust is a three-party instrument, among
o a trustor--the equivalent of a mortgagor or borrower,
o a trustee to whom the mortgaged property is conveyed, and
o a beneficiary--the lender--for whose benefit the conveyance is
made.
Under a deed of trust, the borrower 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 the time that the underlying debt is repaid, generally with a power of
sale as security for the indebtedness evidenced by the related mortgage note. If
a borrower 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 borrower. At origination of a mortgage loan
involving a land trust, the borrower executes a separate undertaking to make
payments on the mortgage note. The lender'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, the mortgage, or other instrument, may encumber other interests in real
property such as:
o a tenant's interest in a lease of land or improvements, or both,
and
o the leasehold estate created by the lease.
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A mortgage, or other instrument, covering an interest in real property other
than the fee estate requires special provisions in the instrument creating the
interest to protect the lender against termination of the interest before the
note secured by the mortgage, deed of trust, security deed or deed to secure
debt is paid. Unless otherwise specified in the prospectus supplement, Morgan
Stanley Dean Witter Capital I Inc. or the asset seller will make representations
and warranties in the Agreement with respect to the mortgage loans which are
secured by an interest in a leasehold estate. The representations 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. Typically, under an assignment of rents and
leases:
o the borrower assigns its right, title and interest as landlord
under each lease and the income derived from each lease to the
lender, and
o the borrower retains a revocable license to collect the rents for
so long as there is no default under the loan documents.
The manner of perfecting the lender's interest in rents may depend on whether
the borrower's assignment was absolute or one granted as security for the loan.
Failure to properly perfect the lender's interest in rents may result in the
loss of substantial pool of funds, which could otherwise serve as a source of
repayment for the loan. If the borrower 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 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 borrower, which remains entitled to collect
the revenues absent a default, or pledged by the borrower, 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 the 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. The risks include liability for environmental clean-up costs and
other risks inherent in property ownership. See "--Environmental Legislation"
below.
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PERSONALITY
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.
The property is generally pledged or assigned as security to the lender under
the UCC. In order to perfect its security interest in the property, the lender
generally must file UCC financing statements and, to maintain perfection of the
security interest, file continuation statements generally every five years.
FORECLOSURE
GENERAL
Foreclosure is a legal procedure that allows the lender to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the borrower defaults in payment or performance of its obligations
under the note or mortgage, the lender 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
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.
The 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 lender in connection with
foreclosure. These equitable principles are generally designed to relieve the
borrower from the legal effect of mortgage defaults, to the extent that the
effect is perceived as harsh or unfair. Relying on these 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 borrower's default and the likelihood that the
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borrower 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 borrowers
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 borrower failed to maintain the mortgaged
property adequately or the borrower 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 borrower
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 borrower.
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, 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 that the sale occurred while the
borrower was insolvent or the borrower was rendered insolvent as a result of the
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
borrower 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 borrower 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 borrower 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 borrower 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,
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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.
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 the 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
borrower'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 the 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 the 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 the 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 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 lender 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 lender 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.
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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 borrower is in default. Any additional
proceeds are generally payable to the borrower. 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 these 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 subservicer or the
special servicer, on behalf of the 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:
o the Internal Revenue Service grants an REO Extension, or
o 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
Agreement to fail to qualify as a REMIC under the Code.
Subject to the foregoing, the master servicer or any related subservicer or the
special servicer will generally be required to solicit bids for any mortgaged
property so acquired in a manner as will be reasonably likely to realize a fair
price for the property. The master servicer or any related subservicer 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 subservicer or the special servicer
of its obligations with respect to the REO Property.
In general, the master servicer or any related subservicer or the
special servicer or an independent contractor employed by the master servicer or
any related subservicer 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 the property. After the master
servicer or any related subservicer or the special servicer reviews the
operation of the 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 the property, the master
servicer or any related subservicer 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 the property in a manner that would avoid the imposition of 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
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to consult their tax advisors regarding the possible imposition of REO
Taxes in connection with the operation of commercial REO Properties by REMICs.
See "Federal Income Tax Consequences" in this prospectus and "Federal Income Tax
Consequences" in the prospectus supplement.
RIGHTS OF REDEMPTION
The purposes of a foreclosure action are to enable the lender to
realize upon its security and to bar the borrower, 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 lender 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 the 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 or non-statutory right which
exists prior to completion of the foreclosure, is not waivable by the borrower,
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 borrower 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 borrower 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 the property or
independent counsel renders an opinion to the effect that holding the property
for such additional period is permissible under the REMIC Provisions.
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
borrower. Even if a mortgage loan by its terms
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provides for recourse to the borrower, some states impose prohibitions or
limitations on recourse to the borrower. For example, statutes in some states
limit the right of the lender to obtain a deficiency judgment against the
borrower following foreclosure or sale under a deed of trust. A deficiency
judgment would be a personal judgment against the former borrower 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 borrower. In
certain other states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting the security; however,
in some of these states, the lender, following judgment on a 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 borrower. Finally, other statutory provisions limit any
deficiency judgment against the former borrower following a judicial sale to the
excess of the outstanding debt over the fair market value of the property at the
time of the public sale. The purpose of these statutes is generally to prevent a
lender from obtaining a large deficiency judgment against the former borrower 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 borrower. The most significant of these
risks is that the ground lease creating the leasehold estate could terminate,
leaving the leasehold lender 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 lender, 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:
(1) the right of the leasehold lender to receive notices from the ground
lessor of any defaults by the borrower;
(2) the right to cure those defaults, with adequate cure periods;
(3) if a default is not susceptible of cure by the leasehold lender, the
right to acquire the leasehold estate through foreclosure or
otherwise;
(4) the ability of the ground lease to be assigned to and by the leasehold
lender or purchaser at a foreclosure sale and for the concomitant
release of the ground lessee's liabilities thereunder;
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(5) the right of the leasehold lender 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;
(6) a ground lease or leasehold mortgage that prohibits 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; and
(7) a leasehold mortgage that provides for the assignment of the
debtor-ground lessee's right to reject a lease pursuant to Section 365
of the Bankruptcy Code.
Without the protections described in (1) - (7) above, a leasehold
lender may lose the collateral securing its leasehold mortgage. However, the
enforceability of clause (7) has not been established. 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 lender 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 to enforce a deficiency
judgment. For example, under the Bankruptcy Code, virtually all actions,
including foreclosure actions and deficiency judgment proceedings, are
automatically stayed upon the filing of the bankruptcy petition, and, usually,
no interest or principal payments are made during the course of the bankruptcy
case. The delay and the consequences thereof caused by an 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 the 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 or the alteration of the repayment schedule with or without
affecting the unpaid principal balance of the loan, 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.
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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 remedies for a related series of certificates in the event
that a related lessee or a related borrower becomes the subject of a proceeding
under the Bankruptcy Code. For example, a lender would be stayed from enforcing
a lease assignment by a borrower related to a mortgaged property if the related
borrower 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,
o assume the lease and retain it or assign it to a third party or
o 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. These remedies may
be insufficient, however, as the lessor may be forced to continue under the
lease with a lessee that is a poor credit risk or an unfamiliar tenant if the
lease was assigned, and any assurances provided to the lessor may, in fact, be
inadequate. If the lease is rejected, the 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 the
rejected lease, such as the borrower, as lessor under a lease, would have only
an unsecured claim against the debtor for damages resulting from the 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 the lease as terminated by the rejection or, in the alternative, the
lessee may remain in possession of the leasehold for the balance of the term and
for any renewal or extension of the term that is enforceable by the lessee under
applicable nonbankruptcy law. The Bankruptcy Code provides that if a lessee
elects to remain in
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possession after 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 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 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 borrower, action may be
taken seeking the recovery, as a preferential transfer or on other grounds, of
any payments made by the borrower, 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 borrower 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 some 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 lender 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, some of
the Borrowers may be partnerships. The laws governing limited partnerships in
some 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, some
of the limited partnership agreements of the Borrowers 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
o 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
o 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.
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In addition, the laws governing general partnerships in some 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 the partnership, the winding up of its affairs and the distribution of its
assets. The state laws, however, may not be enforceable or effective in a
bankruptcy case. The dissolution of a Borrower, 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 Borrower that
is a partnership may provide the opportunity for a trustee in bankruptcy for the
general partner, such general partner as a debtor-in-possession, or a creditor
of the general partner to obtain an order from a court consolidating the assets
and liabilities of the general partner with those of the Borrower 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 the bankrupt general partner. Not only would the
mortgaged property be available to satisfy the claims of creditors of the
general partner, but an automatic stay would apply to any attempt by the trustee
to exercise remedies with respect to the mortgaged property. However, such an
occurrence should not affect the trustee's status as a secured creditor with
respect to the Borrower or its security interest in the mortgaged property.
JUNIOR MORTGAGES; RIGHTS OF SENIOR LENDERS 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 lender under a junior mortgage, are subordinate to those of the lender or
beneficiary under the senior mortgage or deed of trust, including the prior
rights of the senior lender or beneficiary:
o to receive rents, hazard insurance and condemnation proceeds, and
o to cause the mortgaged property securing the mortgage loan to be
sold upon default of the Borrower or trustor. This would
extinguish the junior lender's or junior beneficiary's lien.
However, the master servicer or special servicer, as applicable,
could assert its subordinate interest in the mortgaged property
in foreclosure litigation or satisfy the defaulted senior loan.
In many states a junior lender 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 lender unless otherwise required by law.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the lender 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 the proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in
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such order as the lender 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 lender 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 some states may
limit the ability of lenders to apply the proceeds of hazard insurance and
partial condemnation awards to the secured indebtedness. In these states, the
borrower must be allowed to use the proceeds of hazard insurance to repair the
damage unless the security of the lender has been impaired. Similarly, in
certain states, the lender 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 borrower by the lender
are to be secured by the mortgage or deed of trust. While this type of 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 lender 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 lender or beneficiary had actual
knowledge of the intervening junior mortgages or deeds of trust and other liens
at the time of the advance. Where the lender 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 borrower 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 lender or beneficiary under the
mortgage or deed of trust. Upon a failure of the borrower to perform any of
these obligations, the lender or beneficiary is given the right under the
mortgage or deed of trust to perform the obligation itself, at its election,
with the borrower agreeing to reimburse the lender on behalf of the borrower.
All sums so expended by the lender 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 borrower to obtain the consent of the lender 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
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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 lender 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 lender or beneficiary may refuse to consent to matters approved by a
junior lender 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 lender
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. These environmental liabilities may give rise
to:
o a diminution in value of property securing any mortgage loan;
o limitation on the ability to foreclose against the property; or
o in certain circumstances, 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 the
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, the 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 a superlien.
The presence of hazardous or toxic substances, or the failure to
remediate the 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 when these
asbestos containing materials are in poor condition or when a property with
asbestos containing materials is undergoing repair, renovation or demolition.
These laws could also be used to impose liability upon owners and operators of
real properties for release of asbestos containing materials 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 and under other federal law and the law of some
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
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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 the facility 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 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, 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 Conservation 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, 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 these tanks are accorded protections similar to the
protections accorded to lenders under CERCLA. It should be noted, however, that
liability
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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 these 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 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 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:
o 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
o 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 actions as would be
necessary and appropriate to effect compliance 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 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
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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, Morgan
Stanley Dean Witter Capital I Inc. 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 pool of mortgage loans
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. In the event that, following
a default in payment on a mortgage loan that continues for 60 days,
o 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
o 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 the 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 Borrower,
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.
"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
Some 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 borrower sells or otherwise transfers
or encumbers the related mortgaged property. Some of these clauses may provide
that, upon an attempted sale, transfer or encumbrance of the related
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mortgaged property by the borrower of an otherwise non-recourse loan, the
borrower 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 some of the 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
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 lender to accelerate
payment of any 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 a bankruptcy proceeding.
SUBORDINATE FINANCING
Where a borrower encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risks including:
o the borrower may have difficulty servicing and repaying multiple
loans;
o if the junior loan permits recourse to the borrower--as junior
loans often do--and the senior loan does not, a borrower may be
more likely to repay sums due on the junior loan than those on
the senior loan.
o 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 borrower and
the senior lender agree to an increase in the principal amount of
or the interest rate payable on the senior loan, the senior
lender may lose its priority to the extent any existing junior
lender is harmed or the borrower is additionally burdened;
o if the borrower defaults on the senior loan 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; and
o the bankruptcy of a junior lender may operate to stay foreclosure
or similar proceedings by the senior lender.
DEFAULT INTEREST, PREPAYMENT PREMIUMS AND PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the borrower 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 prepayment for a specified period. In certain states, there are
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or may be specific limitations upon the late charges which a lender may
collect from a borrower for delinquent payments. Certain states also limit the
amounts that a lender may collect from a borrower 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 the 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 pool of mortgage loans for a series will
include a "debt-acceleration" clause, which permits the lender to accelerate the
full debt upon a monetary or nonmonetary default of the Borrower. The courts of
all states will enforce clauses providing for acceleration in the event of a
material payment default--as long as appropriate notices are given. 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 borrower may avoid foreclosure and reinstate an accelerated
loan by paying only the defaulted amounts and the costs and attorneys' fees
incurred by the lender in collecting the defaulted payments.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, enacted in March 1980, 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 or to limit discount
points or other charges.
Morgan Stanley Dean Witter Capital I Inc. 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 mortgage loans, any such limitation
under the state's usury law would not apply to the 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 the state action will be eligible for
inclusion in a trust fund unless the mortgage loan provides:
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o for the interest rate, discount points and charges as are
permitted in that state, or
o that the terms of the loan shall be construed in accordance with
the laws of another state under which the interest rate, discount
points and charges would not be usurious, and the borrower's
counsel has rendered an opinion that the 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 borrower 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, permitting the borrower to cancel the recorded mortgage or deed of
trust without any payment or prohibiting the lender from foreclosing.
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 a failure could result in a material decrease in the
value of a mortgaged property which could, together with the possibility of
limited alternative uses for a particular mortgaged property--e.g., a nursing or
convalescent home or hospital--result in a failure to realize the full principal
amount of the related mortgage loan. Mortgages on mortgaged properties which are
owned by the borrower under a condominium form of ownership are subject to the
declaration, by-laws and other rules and regulations of the condominium
association. Mortgaged properties which are hotels or motels may present
additional risk. Hotels and motels are typically operated pursuant to franchise,
management and operating agreements which may be terminable by the operator. In
addition, 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. Moreover,
mortgaged properties which are multifamily residential properties may be subject
to rent control laws, which could impact the future cash flows of these
properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and
rules promulgated thereunder, 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, the altered portions are
readily accessible to and usable by disabled individuals. The "readily
achievable" standard takes into account, among other factors, the financial
resources of the affected site, owner, landlord or other applicable person. In
addition to imposing a possible financial burden on the Borrower in its capacity
as owner or landlord, the ADA may also impose these types of requirements on a
foreclosing lender who succeeds to the interest of the Borrower as owner of
landlord. Furthermore, since the "readily achievable" standard may vary
depending on the financial condition of the owner or landlord, a
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foreclosing lender who is financially more capable than the Borrower of
complying with the requirements of the ADA may be subject to more stringent
requirements than those to which the Borrower is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended, a borrower who enters military service after the origination of a
mortgage loan, including a borrower 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 the
borrower's active duty status, unless a court orders otherwise upon application
of the lender. The Relief Act applies to borrowers 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 borrowers 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, to the extent set forth
in the related prospectus supplement, any form of Credit Support provided in
connection with the 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 borrower's period of active duty status, and,
under certain circumstances, during an additional three month period thereafter.
Thus, in the event that an affected mortgage loan goes into default, there may
be delays and losses occasioned as a result of the Relief Act.
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 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 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:
o its mortgage was executed and recorded before commission of the
crime upon which the forfeiture is based, or
o 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.
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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 Morgan Stanley Dean Witter Capital I Inc..
This summary is based on laws, regulations, including 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.
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 one or more
REMIC elections 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
the 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 in this section of the
prospectus.
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 loans and MBS in the pool. Any amounts received
by a grantor trust certificateholder in lieu of amounts due with respect to any
mortgage loan or MBS 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 the 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, OID, if any, prepayment fees, assumption fees,
any gain recognized upon an assumption and late payment charges received by the
master servicer. Under
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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 the 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 these
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
o 3% of the excess of adjusted gross income over the applicable
amount and
o 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 the 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 the amounts are
paid or the certificateholder would otherwise be entitled to claim the
deductions had it held the mortgage loans or MBS 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 the amounts are paid or the
certificateholder otherwise would be entitled to claim the deductions had it
held the mortgage loans or MBS directly. If the servicing fees paid to the
master servicer are deemed to exceed reasonable servicing compensation, the
amount of the 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 loans and MBS. The mortgage loans and MBS would then be subject to
the "coupon stripping" rules of the Code discussed below under "--Stripped Bonds
and Coupons."
Unless otherwise specified in the related prospectus supplement or
otherwise provided below in this section of the prospectus, as to each series of
certificates, counsel to Morgan Stanley Dean Witter Capital I Inc. will have
advised Morgan Stanley Dean Witter Capital I Inc. that:
o 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 loans or MBS 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 loans or
MBS represented by that grantor trust certificate are of a
type described in that Code section;
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o a grantor trust certificate owned by a real estate
investment trust representing an interest in mortgage loans
or MBS will be considered to represent "real estate assets"
within the meaning of Code Section 856(c)(4)(A), and
interest income on the mortgage loans or MBS 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 loans or MBS
represented by that grantor trust certificate are of a type
described in that Code section; and
o 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).
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, these
assets would be subject to the stripped bond provisions of the Code. Under these
rules, these 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 the holder's undivided interest in each mortgage loan or
MBS based on each asset's relative fair market value, so that the holder's
undivided interest in each asset will have its own tax basis. A grantor trust
certificateholder that acquires an interest in mortgage loans or MBS at a
premium may elect to amortize the premium under a constant interest method,
provided that the underlying mortgage loans with respect to the mortgage loans
or MBS 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 loan or MBS 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 loan or MBS acquired at a premium should recognize a loss
if a mortgage loan or an Underlying Mortgage
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Loan with respect to an 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 the 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.
The Internal Revenue Service has issued Amortizable Bond Premium
Regulations. 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 to
the extent set forth in the related prospectus supplement, the trustee will
account for amortizable bond premium in the manner described in this section.
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 in this prospectus, the OID
Regulations will be applicable to a grantor trust certificateholder's interest
in those mortgage loans or MBS 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 borrowers 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 loans or MBS may be subject to the market
discount rules of Code Sections 1276 through 1278 to the extent an undivided
interest in the 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 the mortgage loan or MBS allocable to the
holder's undivided interest over the 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
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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
o the total remaining market discount and
o 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
o the total remaining market discount and
o 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 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 the 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 the 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 this election were to be made with respect to a grantor trust
certificate
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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" in this prospectus. 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 loan, MBS, 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.
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
principal balance of the assets in the trust fund, 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 an asset by asset basis, which
could result in some mortgage loans or MBS 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".
Although not entirely clear, a Stripped Bond Certificate generally
should be treated as an interest in mortgage loans or MBS issued on the day the
certificate is purchased for purposes of calculating any OID. Generally, if the
discount on a mortgage loan or MBS 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". However, a purchaser of a Stripped Bond
Certificate will be required to account for any discount on the mortgage loans
or MBS as market discount rather than OID if either
o the amount of OID with respect to the mortgage loans or MBS is
treated as zero under the OID de minimis rule when the
certificate was stripped or
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o no more than 100 basis points, including any Excess Servicing, is
stripped off of the trust fund's mortgage loans or MBS.
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 loan or MBS. Unless
otherwise specified in the related prospectus supplement, all payments from a
mortgage loan or MBS 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 the mortgage loan or MBS would be included in the stated
redemption price at maturity for the mortgage loan or MBS for purposes of
calculating income on the certificate under the OID rules of the Code.
It is unclear under what circumstances, if any, the prepayment of
mortgage loans or MBS will give rise to a loss to the holder of a Stripped Bond
Certificate purchased at a premium or a Stripped Coupon Certificate. If the
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 the 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 the
certificate is treated as an interest in discrete mortgage loans or MBS, or if
no prepayment assumption is used, then when a mortgage loan or MBS is prepaid,
the holder of the certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of the certificate that is allocable to the
mortgage loan or MBS.
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 loans or MBS 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 loans or MBS. 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, to the extent set forth 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 loans
or MBS and interest on such mortgage loans or MBS qualify for such treatment.
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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.
Unless otherwise specified in the related prospectus supplement, 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 Adjustable Rate Loans
The original issue discount rules of Code Sections 1271 through 1275
will be applicable to a certificateholder's interest in those mortgage loans or
MBS 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 borrowers -- 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 on the mortgage loans or MBS. 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 loans or MBS
other than adjustable rate 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 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 loans or MBS should be used, or, in the case of Stripped Bond
Certificates or Stripped Coupon Certificates, the date such certificates are
first 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 loans or MBS 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 loan or MBS is generally the amount lent to the borrower, which may be
adjusted to take into account certain loan origination fees. The stated
redemption price at maturity of a mortgage loan or MBS is the sum of all
payments to be made on these assets 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, to the extent set forth in
the
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related prospectus supplement, utilize 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.
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 in this section, of the OID on the grantor trust certificate
for each day on which it owns the 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 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
o adding (1) 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
(2) any payments included in the stated redemption price at
maturity received during such accrual period, and
o 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 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 the mortgage loans or MBS acquired by a certificateholder are purchased at a
price equal to the then unpaid principal
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amount of the asset, no original issue discount attributable to the
difference between the issue price and the original principal amount of the
asset--i.e., points--will be includible by the holder. Other original issue
discount on the mortgage loans or MBS--e.g., that arising from a "teaser"
rate--would still need to be accrued.
3. Grantor Trust Certificates Representing Interests in Adjustable
Rate Loans
The OID Regulations do not address the treatment of instruments, such
as the grantor trust certificates, which represent interests in adjustable rate
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 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
Adjustable Rate 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 Deferred Interest to the principal balance of an adjustable rate
loan may require the inclusion of the amount in the income of the grantor trust
certificateholder when the 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, except
to the extent described above with respect to market discount, 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 twelve months or less 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:
o the holder entered the contract to sell the grantor trust
certificate substantially contemporaneously with acquiring the
grantor trust certificate;
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o the grantor trust certificate is part of a straddle;
o the grantor trust certificate is marketed or sold as producing
capital gain; or
o 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.
D. NON-U.S. PERSONS
Generally, to the extent that a grantor trust certificate evidences
ownership in underlying mortgage loans or MBS 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
o an owner that is not a U.S. Person or
o 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 loans or MBS 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 the grantor trust certificateholder is not a U.S.
Person and providing the name and address of the 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 loans or MBS, or the 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 loans or MBS where the borrower 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, the certificateholder
will be taxed on the net gain under the graduated U.S. federal income tax rates
applicable to U.S. Persons and, with
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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 loan or MBS 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.
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, the information as may be deemed
necessary or desirable to assist certificateholders in preparing their federal
income tax returns, or to enable holders to make the 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
o the broker determines that the seller is a corporation or other
exempt recipient, or
o the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Person, certifies that
the seller is a Non-U.S. Person, and other conditions are met.
Such a sale must also be reported by the broker to the IRS, unless either
o the broker determines that the seller is an exempt recipient or
o the seller certifies its non-U.S. Person status and 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 some 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
the recipient's federal income tax liability.
On October 6, 1997, the Treasury Department issued 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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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 and Other Taxes" 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 the year and thereafter. In that event, the entity may be
taxable as a separate corporation, and the REMIC Certificates may not be
accorded the status or given the tax treatment described below in this section.
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 the regulations have been issued. Any 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 Agreement, the trust fund
will qualify as a REMIC, and the related certificates will be considered to be
REMIC Regular Certificates or a sole class of REMIC Residual Certificates. 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 includes 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,
o 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);
o certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Code
Section 856(c)(4)(A); and
o 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.
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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 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 Morgan Stanley Dean Witter Capital I Inc.,
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 REMIC or REMICs, respectively, will be
considered REMIC Regular Certificates or 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:
o "real estate assets" within the meaning of Section 856(c)(4)(A)
of the Code;
o "loans secured by an interest in real property" under Section
7701(a)(19)(C) of the Code; and
o whether the income on the 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, the 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 the 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. Holders
of REMIC Regular Certificates 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 the discount where the actual
prepayment rate differs from the Prepayment Assumption. Under the Code, the
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Prepayment Assumption must be determined in the manner prescribed by
regulations, which regulations have not yet been issued. 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 Closing Date, the issue price for that class will be treated as
the fair market value of that 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 the distributions constitute "qualified stated interest."
Qualified stated interest generally means interest payable at a single fixed
rate or qualified variable rate provided that the 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 will accrue will not constitute qualified
stated interest payments, and the stated redemption price at maturity of the
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 in this section. 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
certificate's stated redemption price at maturity. REMIC Regular Certificates
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 the 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
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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 the 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 the 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
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, including interest-only 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 loans or MBS 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 Morgan Stanley Dean Witter Capital I Inc. 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 (other than interest-only 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 "--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.
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,
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such REMIC Regular Certificate generally should not be treated as a Super-
Premium Certificate and the rules described below under "--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" 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
o adding (1) 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 (2) any payments included in the stated redemption
price at maturity received during such accrual period, and
o 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
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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:
(1) 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
(2) 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 qualifying variable rate. Interest based on
a variable rate will constitute qualified stated interest and not contingent
interest for OID purposes if, generally:
o the interest is unconditionally payable at least annually;
o the issue price of the debt instrument does not exceed the total
noncontingent principal payments; and
o 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 the REMIC Regular Certificates.
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 at the rate applicable on the date they are issued. Appropriate
adjustments are made for the actual variable rate.
Although unclear at present, Morgan Stanley Dean Witter Capital I Inc.
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. No guidance is
currently available as to how OID would be determined for debt instruments
subject to Code Section 1272(a)(6) that provide for contingent interest. The
treatment of REMIC Regular Certificates as contingent payment debt instruments
may affect the timing of income accruals on the REMIC Regular Certificates.
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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
"--Premium" below. 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 (1) 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 (2) 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, the election
will apply to all market discount bonds acquired by the certificateholder on or
after the first day of the first taxable year to which the 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 the REMIC Regular Certificate's stated redemption price at
maturity multiplied by the 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 the 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 the payment. The amount of accrued market discount for
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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 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
1) the total remaining market discount and
2) 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
1) the total remaining market discount and
2) 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 the 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 the 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
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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 the
interest payment. The Amortizable Bond Premium Regulations 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
adjustable rate 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 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 and by any amortized premium.
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.
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.
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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 the gain does not exceed the excess, if any, of
o the amount that would have been includible in the 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
o 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 capital 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. 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: the holder entered the contract to
sell the REMIC Regular Certificate substantially contemporaneously with
acquiring the REMIC Regular Certificate; the REMIC Regular Certificate is part
of a straddle; the REMIC Regular Certificate is marketed or sold as producing
capital gains; or other transactions to be specified in Treasury regulations
that have not yet been issued. 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.
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 this
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. Payment Lag Certificates may provide for
payments of interest based on a period that corresponds to the interval between
Distribution Dates but that ends prior to each Distribution Date. The period
between the Closing Date for Payment Lag Certificates and their first
Distribution Date may or may not exceed the interval. Purchasers of Payment Lag
Certificates for which the period between the Closing Date and the first
Distribution Date does not exceed the interval could pay upon purchase of the
REMIC Regular
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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 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 the 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 Certificates 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 loans or MBS,
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 the Subordinated Certificates attributable to
defaults and delinquencies on the mortgage loans or MBS, except to the extent
that it can be established that the 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 the 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 loans or MBS.
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
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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. These taxpayers are advised to consult
their tax advisors regarding the treatment of losses on certificates.
Non-U.S. Persons. Generally, payments of interest on the REMIC Regular
Certificates, including any payment with respect to accrued OID, 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:
o the 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;
o the REMIC Regular Certificateholder is not a controlled foreign
corporation, within the meaning of Code Section 957, related to
the issuer; and
o the REMIC Regular Certificateholder complies with identification
requirements, including delivery of a statement, signed by the
REMIC Regular certificateholder under penalties of perjury,
certifying that the REMIC Regular certificateholder is a foreign
person and providing the name and address of the REMIC Regular
certificateholder.
If a REMIC Regular Certificateholder is not exempt from withholding,
distributions of interest to the 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
REMIC Residual Certificateholders who are not U.S. Persons and persons related
to such holders 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 Borrower, and foreign
corporations that are "controlled foreign corporations" as to the United States
of which such a Borrower 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 Borrower.
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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 that year, the 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 the information available to beneficial
owners or financial intermediaries that hold the 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:
o the broker determines that the seller is a corporation or other
exempt recipient, or
o the seller provides, in the required manner, identifying
information and, in the case of a non-U.S. Person, certifies that
such seller is a Non-U.S. Person, and other conditions are met.
o A sale of a REMIC Regular Certificate to, or through, a broker
must also be reported by the broker to the IRS, unless either:
o the broker determines that the seller is an exempt recipient, or
o the seller certifies its non-U.S. Person status and 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.
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 the 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
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of the taxable income of the REMIC for each day will be based on the
portion of the outstanding REMIC Residual Certificates that the 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 loans
or MBS 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 the 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 the REMIC Residual Certificateholder owns
the 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 the
REMIC Residual Certificate at a price greater than or less than the adjusted
basis the 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 the 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
o the income from the mortgage loans or MBS and the REMIC's other
assets and
o 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.
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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:
o the limitations on deductibility of investment interest expense
and expenses for the production of income do not apply;
o all bad loans will be deductible as business bad debts; and
o 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 loans
or MBS may differ from the time of the actual loss on the assets. 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 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. The
aggregate basis will be allocated among the mortgage loans or MBS and other
assets of the REMIC in proportion to their respective fair market value. A
mortgage loan or MBS will be deemed to have been acquired with discount or
premium to the extent that the REMIC's basis in the mortgage loan or MBS 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 the 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 loans or MBS. Premium on any mortgage loan or MBS to
which the election applies would be amortized under a constant yield method. It
is not clear whether the yield of a mortgage loan or MBS 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.
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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 the REMIC Residual Certificate to the
holder and the adjusted basis the 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. The 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 the
net loss exceeds the holder's adjusted basis in the REMIC Residual Certificate.
Any net loss that is not currently deductible by reason of this limitation may
only be used by the 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 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:
o 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 debt for federal
income tax purposes, or
o 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.
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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 applicable amount
will be reduced by the lesser of
o 3% of the excess of the individual's adjusted gross income over
the applicable amount or
o 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 subject to the
alternative minimum tax other than corporations 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:
o may not, except as described below, be offset by any unrelated
losses, deductions or loss carryovers of a REMIC Residual
Certificateholder;
o 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, as discussed under "--Tax-Exempt Investors" below; and
o 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, as discussed under "--Residual Certificate
Payments--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 (1) the income of such REMIC Residual
Certificateholder for that calendar quarter from its REMIC Residual Certificate
over (2) the sum of the "daily accruals" for all days during the calendar
quarter on which the REMIC Residual Certificateholder holds a REMIC Residual
Certificate. For this purpose, the daily accruals with respect to a REMIC
Residual Certificate are determined
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by allocating to each day in the calendar quarter its ratable portion of
the product of the "adjusted issue price" 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 the 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 the 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 the 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 the shareholder.
Regulated investment companies, common trust funds and certain cooperatives are
subject to similar rules.
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 the 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 the REMIC Residual Certificate. To the extent a distribution
exceeds the 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
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Certificate except that the recognition of loss may be limited under the
"wash sale" rules described in the next paragraph. A holder's adjusted basis in
a REMIC Residual Certificate generally equals the cost of the REMIC Residual
Certificate to the REMIC Residual Certificateholder, increased by the taxable
income of the REMIC that was included in the income of the REMIC Residual
Certificateholder with respect to the REMIC Residual Certificate, and decreased
-- but not below zero -- by the net losses that have been allowed as deductions
to the REMIC Residual Certificateholder with respect to the REMIC Residual
Certificate and by the distributions received thereon by the REMIC Residual
Certificateholder. In general, any the gain or loss will be capital gain or loss
provided the REMIC Residual Certificate is held as a capital asset. The 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". In general, subject to certain specified
exceptions, a prohibited transaction means:
o the disposition of a mortgage loan or MBS,
o the receipt of income from a source other than a mortgage loan or
MBS or certain other permitted investments,
o the receipt of compensation for services, or
o gain from the disposition of an asset purchased with the payments
on the mortgage loans or MBS for temporary investment pending
distribution on 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.
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In addition, certain contributions to a trust fund as to which an
election has been made to treat the trust fund as a REMIC made after the day on
which the trust fund issues all of its interests could result in the imposition
of the Contributions Tax. No 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 the 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
o 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
o Morgan Stanley Dean Witter Capital I Inc.'s obligation to
repurchase a mortgage loan,
such tax will be borne by Morgan Stanley Dean Witter Capital I Inc.
In the event that the servicer, trustee or depositor, as the case may be, fails
to pay or is not required to pay any Prohibited Transactions Tax, Contributions
Tax, tax on net income from foreclosure property or state or local income or
franchise tax, the tax will be payable out of the trust fund for the series and
will result in a reduction in amounts available to be distributed to the
certificateholders of the 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.
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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. 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.
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
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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
the entity are not held by "disqualified organizations". 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 (B) 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" 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 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
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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:
o a regulated investment company, real estate investment trust or
common trust fund;
o a partnership, trust or estate; and
o 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 consent
to a proposed transfer only if it receives the following:
o 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
o 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 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,
o 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
o 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.
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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:
o the transferor conducted a reasonable investigation of the
transferee, and
o 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.
Under Regulations proposed by the IRS on February 4, 2000, which, if
finalized are effective as of that date, a transferor will be presumed not to
have such knowledge only if the above two conditions are satisfied, and the
present value of the anticipated tax liability of the transferee associated with
holding the residual interest does not exceed the sum of the consideration paid
to the transferee to acquire the interest, the present value of expected future
distributions from the interest, and the present value of anticipated future tax
losses from the interest. In making this determination, it will be assumed that
the transferee is subject to tax at the highest corporate rate, and the discount
rate to be used will be the applicable federal rate under Code Section 1274
(compounded semiannually) unless the transferee demonstrates a lower cost of
funds.
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 the 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 expects 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 Agreement will provide that no record or beneficial ownership
interest in a REMIC Residual Certificate may be transferred, directly or
indirectly, to a non-U.S. Person unless the person provides the trustee with a
duly completed IRS Form 4224 or applicable successor form adopted by the IRS for
such purpose and the trustee consents to the transfer in writing.
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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
"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.
ERISA CONSIDERATIONS
GENERAL
Title I of ERISA and Section 4975 of the Code impose restrictions on
ERISA Plans, certain other Plans and on persons who are parties in interest or
disqualified persons with respect to ERISA Plans. 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 those plans may be invested in the certificates without regard to the
ERISA considerations described in this section, 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, regulatory 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 excise taxes on similar transactions between Plans, subject thereto
and disqualified persons with respect to such.
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The United States Department of Department of 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 some 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 exceptions apply.
Under the terms of the regulation, the trust fund 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 fund. In such an event, Morgan Stanley Dean Witter Capital I
Inc., the master servicer, any subservicer, the trustee, any insurer of the
mortgage loans or MBS and other persons, in providing services with respect to
the assets of the trust fund, 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, regulatory 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 25% or more of the value of any class of equity interest,
excluding from the calculation, the value of 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. To fit
within the safe harbor benefit plan, investors must own less than 25% of 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
DOL 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:
o 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
o 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.
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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 fund 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 fund with respect to
the right to receive payment in the event of default or
delinquencies in the underlying assets of the trust fund;
(3) The certificates acquired by the Plan have received a rating at
the time of the acquisition that is in one of the three highest
generic rating categories from any of Fitch, Inc., Moody's
Investors Service, Inc. and Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.;
(4) The trustee is not an affiliate of 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
the 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 fund represents not more than the fair market value of
the mortgage loans; the sum of all payments made to and retained
by any servicer represent not more than reasonable compensation
for the servicer's services under the Agreement and reimbursement
of the servicer's reasonable expenses in connection therewith;
and
(6) The Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of
1933 as amended.
The trust fund must also meet the following requirements:
o the corpus of the trust fund must consist solely of assets of the
type that have been included in other investment pools;
o certificates evidencing interests in other investment pools must
have been rated in one of the three highest rating categories of
a Rating Agency for at least one year prior to the Plan's
acquisition of the Securities; and
o certificates evidencing interests in other investment pools must
have been purchased by investors other than Plans for at least
one year prior to any Plan's acquisition of the Securities.
Moreover, the Exemption provides relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
any person who has discretionary authority or
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renders investment advice with respect to the investment of plan assets
causes a Plan to acquire certificates in a trust fund, provided that, among
other requirements:
o the person or its affiliate is an obligor with respect to five
percent or less of the fair market value of the obligations or
receivables contained in the trust fund;
o the Plan is not a plan with respect to which any member of the
Restricted Group is the "plan sponsor" as defined in Section
3(16)(B) of ERISA;
o in the case of an acquisition in connection with the initial
issuance of certificates, at least fifty percent of each class of
certificates in which Plans have invested is acquired by persons
independent of the Restricted Group and at least fifty percent of
the aggregate interest in the trust fund is acquired by persons
independent of the Restricted Group;
o a Plan's investment in certificates of any class does not exceed
twenty-five percent of all of the certificates of that class
outstanding at the time of the acquisition; and
o immediately after the acquisition, no more than twenty-five
percent of the assets of any Plan with respect to which the
person has discretionary authority or renders investment advice
are invested in certificates representing an interest in one or
more trusts containing assets sold or serviced by the same
entity.
The Exemption does not apply to Plans sponsored by the Restricted Group
Before purchasing a certificate in reliance on the Exemption, a
fiduciary of a Plan should itself confirm
o that the certificates constitute "certificates" for purposes of
the Exemption and
o 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 by the related prospectus supplement.
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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 SMMEA. Generally, only those
classes of offered certificates that
o are rated in one of the two highest rating categories by one or
more Rating Agencies and
o are part of a series representing interests in a trust fund
consisting of mortgage loans or MBS, provided that the 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 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 cut off, 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" 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 without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. ss. 24 (Seventh),
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subject in each case to such regulations as the applicable federal
regulatory authority may prescribe. In this connection, 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 in 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 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 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
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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 the 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 in this
section 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. 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
acting as underwriter with other underwriters, if any, named in the prospectus
supplement. 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 Morgan
Stanley Dean Witter Capital I Inc.. In connection with the sale of offered
certificates, underwriters may receive compensation from Morgan Stanley Dean
Witter Capital I Inc. or from purchasers of offered certificates in the form of
discounts, concessions or commissions. The prospectus supplement will describe
any such compensation paid by Morgan Stanley Dean Witter Capital I Inc..
Alternatively, the prospectus supplement may specify that offered
certificates will be distributed by Morgan Stanley & Co. Incorporated 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 & Co.
Incorporated acts as agent in the sale of offered certificates, Morgan Stanley &
Co. Incorporated 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
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exact percentage for each series of certificates will be disclosed in the
related prospectus supplement. To the extent that Morgan Stanley & Co.
Incorporated elects to purchase offered certificates as principal, Morgan
Stanley & Co. Incorporated 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 Morgan Stanley Dean Witter Capital I Inc.
and purchasers of offered certificates of such series.
Morgan Stanley Dean Witter Capital I Inc. will indemnify Morgan Stanley
& Co. Incorporated and any underwriters against certain civil liabilities,
including liabilities under the Securities Act of 1933, or will contribute to
payments Morgan Stanley & Co. Incorporated and any underwriters may be required
to make.
In the ordinary course of business, Morgan Stanley & Co. Incorporated
and Morgan Stanley Dean Witter Capital I Inc. may engage in various securities
and financing transactions, including repurchase agreements to provide interim
financing of Morgan Stanley Dean Witter Capital I Inc.'s mortgage loans pending
the sale of such mortgage loans or interests in the mortgage loans, 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 the 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.
If specified in the prospectus supplement relating to certificates of a
particular series offered hereby, Morgan Stanley Dean Witter Capital I Inc., any
affiliate thereof or any other person or persons specified in the prospectus
supplement may purchase some or all of the certificates of any series from
Morgan Stanley & Co. Incorporated and any other underwriters thereof. This
purchaser may thereafter from time to time offer and sell, pursuant to this
prospectus and the related prospectus supplement, some or all of the
certificates so purchased, directly, through one or more underwriters to be
designated at the time of the offering of the certificates, through dealers
acting as agent or principal or in such other manner as may be specified in the
related prospectus supplement. The offering may be restricted in the manner
specified in the prospectus supplement. The transactions may be effected at
market prices prevailing at the time of sale, at negotiated prices or at fixed
prices. Any underwriters and dealers participating in the purchaser's offering
of the certificates may receive compensation in the form of underwriting
discounts or commissions from such purchaser and such dealers may receive
commissions from the investors purchasing the certificates for whom they may act
as agent (which discounts or commissions will not exceed those customary in
those types of transactions involved). Any dealer that participates in the
distribution of the certificates may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any commissions and discounts received by
such dealer and any profit on the resale or such certificates by such dealer
might be deemed to be underwriting discounts and commissions under the
Securities Act.
All or part of any Class of certificates may be reacquired by Morgan
Stanley Dean Witter Capital I Inc. or acquired by an affiliate of Morgan Stanley
Dean Witter Capital I Inc. in a secondary market transaction or from an
affiliate, including Morgan Stanley & Co. Incorporated.
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Such certificates may then be included in a trust fund, the beneficial
ownership of which will be evidenced by one or more classes of mortgage-backed
certificates, including subsequent series of certificates offered pursuant to
this prospectus and a prospectus supplement.
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 Morgan Stanley Dean
Witter Capital I Inc., and may be sold by Morgan Stanley Dean Witter Capital I
Inc. 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 Morgan Stanley
Dean Witter Capital I Inc. by Cadwalader, Wickersham & Taft or Latham & Watkins,
or Brown & Wood LLP 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 borrowers 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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INCORPORATION OF INFORMATION BY REFERENCE
Morgan Stanley Dean Witter Capital I Inc., as depositor, will file, or
cause to be filed, with the Commission, the periodic reports with respect to
each trust fund required under the Exchange Act and the rules and regulations of
the Commission.
All documents and reports filed, or caused to be filed, by Morgan
Stanley Dean Witter Capital I Inc. 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 certificates are incorporated in this prospectus by reference.
Each person to whom this prospectus is delivered may obtain, without charge,
from Morgan Stanley Dean Witter Capital I Inc. a copy of any documents or
reports relating to the certificates being offered. (Exhibits to those documents
may only be obtained if they are specifically incorporated by reference in those
documents.) Requests for this information should be directed in writing to
Morgan Stanley Dean Witter 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. Morgan Stanley Dean
Witter Capital I Inc. has determined that its financial statements are not
material to the offering of any certificates.
Morgan Stanley Dean Witter Capital I Inc. has filed with the Securities
and Exchange 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 accompanying prospectus supplement
do not contain all of the information set forth in the registration statement.
For further information regarding the documents referred to in this prospectus
and the accompanying prospectus supplement, you should refer to the registration
statement and the exhibits thereto. The 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.
If some or all of the mortgage loans owned by a trust fund are secured
by an assignment of lessors' rights in one or more leases, rental payments due
from the lessees may be a significant source (or even the sole source) of
distributions on the certificates. In these circumstances, reference should be
made to the related prospectus supplement for information concerning the lessees
and whether any of those lessees are subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended.
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GLOSSARY OF TERMS
The certificates will be issued pursuant to the Agreement. The
following Glossary of Terms is not complete. You should also refer to the
prospectus supplement and the Agreement for additional or more complete
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 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.
"Accrual Certificates" means certificates which provide for
distributions of accrued interest commencing only following the occurrence of
certain events, such as the retirement of one or more other classes of
certificates of such series.
"Accrued Certificate Interest" means, with respect to each class of
certificates and each Distribution Date, other than certain classes of Stripped
Interest Certificates, the amount equal to the interest accrued for a specified
period on the outstanding Certificate Balance immediately prior to the
Distribution Date, at the applicable pass-through rate, as described in
"Distributions of Interest on the Certificates" in this prospectus.
"Agreement" means the Pooling Agreement or the Trust Agreement, as
applicable.
"Amortizable Bond Premium Regulations" means final regulations issued
by the IRS which deal with the amortizable bond premium.
"Assets" means the primary assets included in a trust fund.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
(Title 11 of the United States Code).
"Book-Entry Certificates" means Certificates which are in book-entry
form.
"Cash Flow Agreements" means guaranteed investment contracts or 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.
"Cede" means Cede & Company.
"CERCLA" means Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Certificate Account" means one or more separate accounts for the
collection of payments on the related assets.
"Certificate Balance" equals the maximum amount that a holder of a
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.
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"Certificate Owners" means, with respect to a book-entry certificate,
the person who is the beneficial owner of such book-entry certificate, as may be
reflected on the books of the clearing agency, or on the books of a Person
maintaining an account with such clearing agency, directly or as an indirect
participant, in accordance with the rules of such clearing agency.
"Certificateholder" means, unless otherwise provided in the related
prospectus supplement, Cede, as nominee of DTC.
"Certificates" means any of the certificates issued, in one or more
series, by Morgan Stanley Dean Witter Capital I Inc.
"Closing Date" means the date the REMIC Regular Certificates were
initially issued.
"Commercial Loans" means the loans relating to the Commercial
Properties.
"Commercial Properties" means 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.
"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.
"Contributions Tax" means a tax on the trust fund equal to 100% of the
value of the contributed property.
"Credit Support" means subordination of one or more other classes of
certificates in a 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.
"Crime Control Act" means the Comprehensive Crime Control Act of 1984.
"Cut-off Date" means a day in the month of formation of the related
trust fund, as defined in the prospectus supplement.
"Debt Service Coverage Ratio" means, with respect to a mortgage loan at
any given time, the ratio of the Net Operating Income for a twelve-month period
to the annualized scheduled payments on the mortgage loan.
"Deferred Interest" means interest deferred by reason of negative
amortization.
"Definitive Certificate" means a fully registered physical certificate.
"Depositor" means Morgan Stanley Dean Witter Capital I Inc.
"Determination Date" means the close of business on the date specified
in the related prospectus supplement.
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"Disqualifying Condition" means a condition, existing as a result of,
or arising from, the presence of Hazardous Materials 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.
"Distribution Date" means each of the dates on which distributions to
certificateholders are to be made.
"DOL" means the United States Department of Department of Labor.
"DTC" means the Depository Trust Company.
"Due Period" means the period which 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.
"Environmental Hazard Condition" means any condition or circumstance
that may give rise to an environmental claim.
"Equity Participations" means provisions entitling the lender to a
share of profits realized from the operation or disposition of a mortgaged
property, as described in the related prospectus supplement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plans" means employee benefit plans subject to ERISA.
"Events of Default" means, with respect to the master servicer under
the Pooling Agreement, any one of the following events:
o 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;
o any failure by the master servicer duly to observe or perform in
any material respect any of its other covenants or obligations
under the Pooling Agreement which continues unremedied for thirty
days after written notice of such failure has been given to the
master servicer by the trustee or Morgan Stanley Dean Witter
Capital I Inc., or to the master servicer, Morgan Stanley Dean
Witter Capital I Inc. and the trustee by the holders of
certificates evidencing not less than 25% of the Voting Rights;
o any breach of a representation or warranty made by the master
servicer under the Pooling 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
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Morgan Stanley Dean Witter Capital I Inc., or to the master
servicer, Morgan Stanley Dean Witter Capital I Inc. and the
trustee by the holders of certificates evidencing not less than
25% of the Voting Rights; and
o 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.
"Excess Servicing" means servicing fees in excess of reasonable
servicing fees.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"FNMA" means the Federal National Mortgage Association.
"Government Securities" means 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.
"Index" means the source for determination of an interest rate, to be
defined, if applicable, in the related prospectus supplement.
"Indirect Participants" means entities, such as banks, brokers,
dealers and trust companies, that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly.
"Insurance Proceeds" means 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 casualty events.
"Liquidation Proceeds" means all other amounts received and retained
in connection with the liquidation of defaulted mortgage loans in the trust
fund, by foreclosure or otherwise.
"Loan to Value Ratio" or "LTV" means
"Lockout Date" means the expiration of the Lockout Period.
"Lockout Period" means a period during which prepayments on a mortgage
loan are prohibited.
"Market-to-Market Regulations" means the finalized IRS regulations
which provide that a REMIC Residual Certificate acquired after January 3, 1995
cannot be marked to market.
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"Master Servicer" means an entity as named in the prospectus
supplement.
"MBS" means 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 Agreement" means any participation and servicing agreement,
pooling agreement, trust agreement, an indenture or similar agreement with
respect to the MBS.
"Mortgage" means a mortgage, deed of trust or other similar security
instrument.
"Mortgage Loans" means the multifamily mortgage loans or the
commercial mortgage loans or both included in a trust fund. As used in this
prospectus, mortgage loans refers to both whole mortgage loans and mortgage
loans underlying MBS.
"Mortgage Note" means a promissory note evidencing a respective
mortgage loan.
"Mortgage Rate" means the interest rate for a mortgage loan which
provides for no accrual of interest or for accrual of interest thereon at an
interest 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.
"Multifamily Loans" means the loans relating to the Multifamily
Properties.
"Multifamily Properties" means residential properties consisting of
five or more rental or cooperatively-owned dwelling units in high-rise,
mid-rise or garden apartment buildings.
"NCUA" means the National Credit Union Administration.
"Net Operating Income" means, for any given period, to the extent set
forth in the related prospectus supplement, the total operating revenues
derived from a mortgaged property during that period, minus the total operating
expenses incurred in respect of the mortgaged property during that period
other than:
o non-cash items such as depreciation and amortization;
o capital expenditures; and
o debt service on loans secured by the mortgaged property.
"New Regulations" means the regulations issued by the Treasury
Department on October 6, 1997.
"Nonrecoverable Advance" means an advance that is not ultimately
recoverable from Related Proceeds or from collections on other assets otherwise
distributable on Subordinate Certificates.
"Notional Amount" means [the aggregate Certificate Balance of each of
the Class [ ], Class [ ], Class [ ] and Class [ ] Certificates outstanding from
time to time, plus the amount of
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any unpaid interest shortfall on these classes] or [the sum of the balance
of components which correspond to the Certificate Balance of the Class [ ],
Class [ ], Class [ ] and Class [ ] Certificates].
"OCC" means the Office of the Comptroller of the Currency.
"OID" means original issue discount.
"OID Regulations" means the special rules of the Code relating to OID
(currently Code Sections 1271 through 1273 and 1275) and Treasury regulations
issued on January 27, 1994.
"OTS" means the Office of Thrift Supervision.
"Participants" means the participating organizations of DTC.
"Pass-Through Rate" means the fixed, variable or adjustable rate per
annum at which any class of certificates accrues interest.
"Payment Lag Certificates" means certain of the REMIC Regular
Certificates.
"Permitted Investments" means United States government securities and
other investment grade obligations specified in the Pooling Agreement.
"Plans" means ERISA Plans and other relevant plans and consequences,
including but not limited to individual retirement accounts and annuities.
"Pooling Agreement" means the Agreement under which certificates of a
series evidencing interests in a trust fund including Whole Loans will be
issued.
"Pre-Issuance Accrued Interest" means interest that has accrued prior
to the issue date.
"Prepayment Assumption" means 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.
"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.
"Prohibited Transactions Tax" means the tax the Code imposes on REMICs
equal to 100% of the net income derived from "prohibited transactions."
"Purchase Price" means, with respect to any Whole Loan and to the
extent set forth in the related prospectus supplement, the amount that is equal
to the sum of the unpaid principal balance, plus unpaid accrued interest 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.
"Rating Agency" means any of Duff & Phelps Credit Rating Co., Fitch
IBCA, Inc., Moody's Investors Service, Inc. and Standard & Poor's Ratings
Services.
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"RCRA" means the Resource Conservation and Recovery Act.
"Record Date" means the last business day of the month immediately
preceding the month in which the Distribution Date for a class of certificates
occurs.
"Refinance Loans" means mortgage loans made to refinance existing
loans.
"Related Proceeds" means related recoveries on the mortgage loans,
including amounts received under any form of Credit Support, for which advances
were made.
"Relief Act" means the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"REMIC Certificates" means a certificate issued by a trust fund
relating to a series of certificate where an election is made to treat the
trust fund as a REMIC.
"REMIC Provisions" means provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of Subchapter M of Chapter 1 of the Internal Revenue Code of
1986, as amended from time to time, and related provisions, and regulations
(including any proposed regulations) and rulings promulgated thereunder, as the
foregoing may be in effect from time to time.
"REMIC Regular Certificates" means REMIC Certificates issued by the
trust fund that qualify as REMIC Certificates and are considered to be regular
interests.
"REMIC Regular Certificateholders" means holders of REMIC Regular
Certificates.
"REMIC Regulations" means the REMIC regulations promulgated by the
Treasury Department.
"REMIC Residual Certificates" means the sole class of residual
interests in the REMIC.
"REMIC Residual Certificateholders" means holders of REMIC Regular
Certificates.
"REO Extension" means the extension of time the IRS grants to sell the
mortgaged property.
"REO Tax" means a tax on "net income from foreclosure property,"
within the meaning of Section 857(b)(4)(B) of the Code.
"Restricted Group" means the Seller, depositor, any underwriter, any
servicer, the trustee, any insurer of the mortgage loans or MBS, 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 fund, or
any of their respective affiliates.
"Retained Interest" means an interest in an asset which represents a
specified portion of the interest payable. The Retained Interest will be
deducted from borrower payments as received and will not be part of the related
trust fund.
"RICO" means the Racketeer Influenced and Corrupt Organizations
statute.
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"Senior Certificates" means certificates which are senior to one or
more other classes of certificates in respect of certain distributions on the
certificates.
"Servicing Standard" means:
A. the standard for servicing the servicer must follow as defined by
the terms of the related Pooling 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 as described in this
prospectus under "Description of Credit Support" and in the
prospectus supplement;
B. applicable law; and
C. the general servicing standard specified in the related
prospectus supplement or, if no such standard is so specified,
its normal servicing practices.
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
"SMMEA Certificates" means "mortgage related securities" for purposes
of SMMEA.
"Special Servicer" means an entity as named in the prospectus
supplement.
"Stripped ARM Obligations" means OID on grantor trust certificates
attributable to adjustable rate loans
"Stripped Bond Certificates" means a class of grantor trust
certificates that represents the right to principal and interest, or principal
only, on all or a portion of the mortgage loans or MBS, if a trust fund is
created with two classes of grantor trust certificates.
"Stripped Coupon Certificates" means a class of grantor trust
certificates that represents the right to some or all of the interest on a
portion of the mortgage loans or MBS, if a trust fund is created with two
classes of grantor trust certificates.
"Stripped Interest Certificates" means certificates which are entitled
to interest distributions with disproportionately low, nominal or no principal
distributions.
"Stripped Principal Certificates" means certificates which are entitled
to principal distributions with disproportionately low, nominal or no interest
distributions.
"Subordinate Certificates" means certificates which are subordinate to
one or more other classes of certificates in respect of certain distributions on
the certificates.
"Subservicer" means third-party servicers.
"Subservicing Agreement" means a sub-servicing agreement between a
master servicer and a Subservicer.
"Super-Premium Certificates" means certain REMIC Regular Certificates
to be issued at prices significantly exceeding their principal amounts or based
on notional principal balances.
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"Title V" means Title V of the depository Institutions Deregulation and
Monetary Control Act of 1980.
"Trust Agreement" means the Agreement under certificates of a series
evidencing interests in a trust fund not including Whole Loans will be issued.
"Trust Fund" means the trust fund created by the Agreement consisting
primarily of:
o mortgage Loans
o MBS
o 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) government securities, or
o a combination of mortgage loans, MBS and government securities.
"Underlying MBS" means any mortgage participations, pass-through
certificates or other asset-backed certificates in which an MBS evidences an
interest or which secure an MBS.
"Underlying Mortgage Loans" means the mortgage loans that secure, or
the interests in which are evidenced by, MBS.
"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 included 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.
"Value" means,
(a) with respect to any mortgaged property other than a mortgaged
property securing a Refinance Loan, generally the lesser of
o the appraised value determined in an appraisal obtained by the
originator at origination of that loan, and
o the sales price for that property; and
(b) with respect to any Refinance Loan, unless otherwise specified in
the related prospectus supplement, the appraised value determined in an
appraisal obtained at the time of origination of the Refinance Loan.
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"Warranting Party" means the person making representations and
warranties.
"Whole Loans" means the mortgage loans that are not Underlying Mortgage
Loans.
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