<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-45884
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 6, 2000)
$633,061,304 (APPROXIMATE)
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION
DEPOSITOR
GENERAL ELECTRIC CAPITAL CORPORATION, THE CHASE MANHATTAN BANK
AND BEAR, STEARNS FUNDING, INC.
MORTGAGE LOAN SELLERS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-1
GE Capital Commercial Mortgage Corporation is offering certain classes of
the Series 2000-1 Commercial Mortgage Pass-Through Certificates, which
represent the beneficial ownership interests in a trust. The trust's assets
will primarily be 102 mortgage loans secured by first liens on 113
commercial, multifamily and manufactured housing community properties and are
generally the sole source of payments on the certificates. The Series 2000-1
certificates are not obligations of GE Capital Commercial Mortgage
Corporation, the mortgage loan sellers or any of their respective affiliates,
and neither the certificates nor the underlying mortgage loans are insured or
guaranteed by any governmental agency or any other person or entity.
Certain characteristics of the offered certificates include:
<TABLE>
<CAPTION>
INITIAL CLASS CERTIFICATE INITIAL PASS- ASSUMED FINAL EXPECTED
BALANCE OR PASS- THROUGH RATE DISTRIBUTION RATINGS RATED FINAL
NOTIONAL AMOUNT (1) THROUGH RATE DESCRIPTION DATE (5) (MOODY'S/FITCH) DISTRIBUTION DATE
----------- ------------------------- -------------- -------------- ------------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 .. $111,957,000 6.3200% Fixed May 15, 2010 Aaa/AAA January 15, 2033
----------- ------------------------- -------------- -------------- ------------------- --------------- -----------------
Class A-2 .. $429,151,265 6.4960% Fixed December 15, 2010 Aaa/AAA January 15, 2033
----------- ------------------------- -------------- -------------- ------------------- --------------- -----------------
Class X .... $707,331,066 1.6518%(2) WAC/IO December 15, 2020 Aaa/AAA January 15, 2033
----------- ------------------------- -------------- -------------- ------------------- --------------- -----------------
Class B .... $ 28,293,243 6.5880% Fixed(3) December 15, 2010 Aa2/AA January 15, 2033
----------- ------------------------- -------------- -------------- ------------------- --------------- -----------------
Class C .... $ 31,829,898 6.7340% Fixed(3) December 15, 2010 A2/A January 15, 2033
----------- ------------------------- -------------- -------------- ------------------- --------------- -----------------
Class D .... $ 8,841,638 6.8620% Fixed(3) December 15, 2010 A3/A- January 15, 2033
----------- ------------------------- -------------- -------------- ------------------- --------------- -----------------
Class E .... $ 22,988,260 7.1699% Variable(4) December 15, 2010 Baa2/BBB January 15, 2033
----------- ------------------------- -------------- -------------- ------------------- --------------- -----------------
</TABLE>
------------
(Footnotes to table on page S-6)
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved of the offered certificates or determined if
this prospectus supplement or the accompanying prospectus are truthful or
complete. Any representation to the contrary is a criminal offense.
GE Capital Commercial Mortgage Corporation will not list the offered
certificates on any securities exchange or on any automated quotation system
of any securities association such as NASDAQ.
INVESTING IN THE OFFERED CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-34 IN THIS PROSPECTUS SUPPLEMENT AND PAGE 14 OF THE
PROSPECTUS.
The underwriters, Chase Securities Inc., Bear, Stearns & Co. Inc.,
Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Salomon Smith
Barney Inc., will purchase the offered certificates from GE Capital
Commercial Mortgage Corporation and will offer them to the public at
negotiated prices, plus accrued interest, determined at the time of
sale. Chase Securities Inc. and Bear, Stearns & Co. Inc. are acting as
co-lead managers and Chase Securities Inc. is sole bookrunner for the
offering. The underwriters also expect to deliver the offered certificates to
purchasers in book-entry form only through the facilities of The Depository
Trust Company against payment in New York, New York on or about December 21,
2000. We expect to receive from this offering approximately 112.285% of the
initial principal amount of the offered certificates, plus accrued interest
from December 1, 2000, before deducting expenses payable by us.
CHASE SECURITIES INC. BEAR, STEARNS & CO. INC.
Book Running Manager
DEUTSCHE BANC ALEX. BROWN J.P. MORGAN & CO. SALOMON SMITH BARNEY INC.
DECEMBER 18, 2000
<PAGE>
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION
Commercial Mortgage Pass-Through Certificates, Series 2000-1
WASHINGTON DELAWARE
3 Properties 1 Property
$11,958,997 $6,320,000
1.69% of total 0.89% of total
MISSOURI MARYLAND
1 Property 7 Properties
$2,377,800 $33,078,234
0.34% of total 4.68% of total
IOWA DISTRICT OF COLUMBIA
3 Properties 2 Properties
$20,840,379 $14,846,450
2.95% of total 2.10% of total
WISCONSIN NORTH CAROLINA
1 Property 1 Property
$4,844,714 $1,645,270
0.68% of total 0.23% of total
INDIANA VIRGINIA
1 Property 4 Properties
$4,494,961 $18,351,402
0.64% of total 2.59% of total
MICHIGAN GEORGIA
1 Property 1 Property
$2,345,994 $10,518,051
0.33% of total 1.49% of total
OHIO SOUTH CAROLINA
1 Property 1 Property
$1,269,000 $2,547,541
0.18% of total 0.36% of total
PENNSYLVANIA NEVADA
1 Property 3 Properties
$4,244,900 $12,442,872
0.60% of total 1.76% of total
WEST VIRGINIA CALIFORNIA
1 Property 21 Properties
$3,287,400 $133,987,169
0.46% of total 18.94% of total
NEW YORK ARIZONA
8 Properties 5 Properties
$30,403,951 $30,710,477
4.30% of total 4.34% of total
MASSACHUSETTS COLORADO
2 Properties 3 Properties
$18,834,017 $21,180,046
2.66% of total 2.99% of total
CONNECTICUT NEW MEXICO
1 Property 1 Property
$8,800,000 $4,396,863
1.24% of total 0.62% of total
NEW JERSEY TEXAS
2 Properties 24 Properties
$8,280,819 $132,449,784
1.17% of total 18.73% of total
OKLAHOMA
2 Properties
$28,749,772
4.06% of total
ARKANSAS
3 Properties
$19,456,641
2.75% of total
LOUISIANA
2 Properties
$38,559,478
5.45% of total
TENNESSEE
4 Properties
$55,658,097
7.87% of total
FLORIDA
3 Properties
$20,449,988
2.89% of total
GEOGRAPHIC OVERVIEW OF MORTGAGE POOL
[ ] (less than or equal to) 1.00% [ ] 5.01 - 10.00%
of Initial Pool Balance of Initial Pool Balance
[ ] 1.01 - 5.00% [ ] Greater than 10.00%
of Initial Pool Balance of Initial Pool Balance
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply
to the offered certificates; and (b) this prospectus supplement, which
describes the specific terms of the offered certificates. If the terms of the
offered certificates vary between this prospectus supplement and the
accompanying prospectus, you should rely on the information in this
prospectus supplement.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus. The information in this prospectus
supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement begins with several introductory sections
describing the Series 2000-1 certificates and the trust in abbreviated form:
Summary of Certificates, commencing on page S-6 of this prospectus
supplement, which sets forth important statistical information relating to
the certificates;
Summary of Terms, commencing on page S-7 of this prospectus supplement,
which gives a brief introduction of the key features of the Series 2000-1
certificates and a description of the mortgage loans; and
Risk Factors, commencing on page S-34 of this prospectus supplement, which
describe risks that apply to the Series 2000-1 certificates which are in
addition to those described in the prospectus with respect to the securities
issued by the trust generally.
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.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered certificates and this offering. The capitalized terms used in this
prospectus supplement are defined on the pages indicated under the caption
"Index of Principal Definitions" beginning on page S-138 in this prospectus
supplement. The capitalized terms used in the prospectus are defined on the
pages indicated under the caption "Index of Principal Definitions" beginning
on page 109 in the prospectus.
In this prospectus supplement, the terms "Depositor," "we," "us" and"our"
refer to GE Capital Commercial Mortgage Corporation.
S-3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SUMMARY OF CERTIFICATES........................... S-6
SUMMARY OF TERMS.................................. S-7
RISK FACTORS...................................... S-34
Geographic Concentration Entails Risks ......... S-34
Risks Relating to Loan Concentrations............ S-34
Cross-Collateralized Mortgage Loans Entail Risks. S-36
Ability to Incur Other Borrowings Entails Risk .. S-37
Borrower May Be Unable to Repay Remaining
Principal Balance on Maturity Date or
Anticipated Prepayment Date..................... S-38
Commercial, Multifamily and Manufactured Housing
Community Lending Is Dependent Upon Net
Operating Income................................ S-39
Tenant Concentration Entails Risk................ S-40
Certain Additional Risks Relating to Tenants .... S-40
Mortgaged Properties Leased to Multiple Tenants
Also Have Risks................................. S-41
Tenant Bankruptcy Entails Risks.................. S-41
Mortgage Loans Are Nonrecourse and Are Not
Insured or Guaranteed........................... S-41
Office Properties Have Special Risks............. S-41
Retail Properties Have Special Risks............. S-42
Multifamily Properties Have Special Risks ....... S-43
Hotel Properties Have Special Risks.............. S-43
Risks Relating to Affiliation with a Franchise
or Hotel Management Company..................... S-44
Industrial Properties Have Special Risks ........ S-44
Manufactured Housing Community Properties Have
Special Risks................................... S-45
Self-Storage Properties Have Special Risks ...... S-45
Credit Tenant Lease Properties Have Special
Risks........................................... S-46
Lack of Skillful Property Management Entails
Risks........................................... S-46
Some Mortgaged Properties May Not Be Readily
Convertible to Alternative Uses................. S-46
Mortgage Loans Secured By Leasehold Interests
May Expose Investors to Greater Risks of
Default and Loss................................ S-47
Limitations of Appraisals........................ S-47
Your Lack of Control Over Trust Fund Can Create
Risks........................................... S-47
Potential Conflicts of Interest.................. S-47
Directing Certificateholder May Direct Special
Servicer Actions................................ S-48
Bankruptcy Proceedings Entail Certain Risks ..... S-48
Risks Relating to Prepayments and Repurchases ... S-49
Risks Relating to Enforceability of Yield
Maintenance Charges or Defeasance Provisions ... S-50
Risks Relating to Borrower Default............... S-50
Risks Relating to Certain Payments............... S-51
Risks of Limited Liquidity and Market Value ..... S-51
Different Timing of Mortgage Loan Amortization
Poses Certain Risks............................. S-51
Subordination of Subordinate Offered
Certificates.................................... S-52
Environmental Risks Relating to the Mortgaged
Properties...................................... S-52
Tax Considerations Relating to Foreclosure ...... S-53
Risks Associated with One Action Rules........... S-53
Property Insurance............................... S-53
Zoning Compliance and Use Restrictions........... S-53
Risks Relating to Costs of Compliance with
Applicable Laws and Regulations................. S-54
No Reunderwriting of the Mortgage Loans ......... S-54
Litigation....................................... S-54
Book-Entry Registration.......................... S-54
Risks of Inspections Relating to Properties ..... S-54
Other Risks...................................... S-55
DESCRIPTION OF THE MORTGAGE POOL.................. S-56
General.......................................... S-56
Affiliated Borrower Concentrations............... S-57
Significant Mortgage Loans....................... S-58
APD Loans........................................ S-59
Credit Tenant Lease Loans........................ S-59
Certain Terms and Conditions of the Mortgage
Loans........................................... S-60
Prepayment Provisions........................... S-60
Defeasance; Collateral Substitution............. S-61
Substitution; EII Portfolio I Loan.............. S-62
Performance Escrows............................. S-62
"Due-on-Sale" and "Due-on-Encumbrance"
Provisions..................................... S-62
Additional Mortgage Loan Information............. S-63
Underwritten Net Cash Flow....................... S-71
Revenue......................................... S-71
Expenses........................................ S-72
Replacement Reserves............................ S-72
Assessments of Property Condition................ S-72
Property Inspections............................ S-72
Appraisals...................................... S-72
S-4
<PAGE>
PAGE
---------
Environmental Reports........................... S-72
Building Condition Reports...................... S-73
Earthquake Analyses............................. S-73
The Mortgage Loan Sellers........................ S-73
Underwriting Standards........................... S-73
GECC's Underwriting Standards.................... S-73
General......................................... S-73
Loan Analysis................................... S-73
Loan Approval................................... S-74
Debt Service Coverage Ratio and LTV Ratio ...... S-74
Escrow Requirements............................. S-74
Chase's Underwriting Standards................... S-75
General......................................... S-75
Loan Analysis................................... S-75
Loan Approval................................... S-75
Debt Service Coverage Ratio and LTV Ratio ...... S-76
Escrow Requirements............................. S-76
BSFI's Underwriting Standards.................... S-77
General......................................... S-77
Loan Analysis................................... S-77
Loan Approval................................... S-77
Debt Service Coverage Ratio and LTV Ratio ...... S-77
Escrow Requirements............................. S-77
Representations and Warranties; Repurchases and
Substitutions................................... S-78
Lock Box Accounts................................ S-84
DESCRIPTION OF THE CERTIFICATES................... S-85
General.......................................... S-85
Paying Agent, Certificate Registrar and
Authenticating Agent............................ S-86
Book-Entry Registration and Definitive
Certificates.................................... S-86
General......................................... S-86
Definitive Certificates......................... S-88
Distributions.................................... S-88
Method, Timing and Amount....................... S-88
Priority........................................ S-90
Pass-Through Rates.............................. S-93
Interest Distribution Amount.................... S-94
Principal Distribution Amount................... S-95
Certain Calculations with Respect to Individual
Mortgage Loans................................. S-95
Excess Interest................................. S-96
Allocation of Yield Maintenance Charges ........ S-96
Assumed Final Distribution Date; Rated Final
Distribution Date............................... S-96
Subordination; Allocation of Collateral Support
Deficit......................................... S-97
Advances......................................... S-99
Appraisal Reductions............................. S-100
Reports to Certificateholders; Certain Available
Information..................................... S-102
Voting Rights.................................... S-105
Termination; Retirement of Certificates ......... S-106
The Trustee...................................... S-107
SERVICING OF THE MORTGAGE LOANS................... S-108
General.......................................... S-108
The Master Servicer.............................. S-110
The Primary Servicers............................ S-110
The Special Servicer............................. S-111
Replacement of the Special Servicer.............. S-111
Servicing and Other Compensation and Payment of
Expenses........................................ S-111
Maintenance of Insurance......................... S-113
Modifications, Waiver and Amendments............. S-114
Directing Certificateholder...................... S-115
Limitation on Liability of Directing
Certificateholder............................... S-115
Realization Upon Defaulted Mortgage Loans ....... S-116
Inspections; Collection of Operating
Information..................................... S-118
Certain Matters Regarding the Master Servicer,
the Special Servicer and the Depositor.......... S-118
Events of Default................................ S-119
Rights Upon Event of Default..................... S-120
Amendment........................................ S-121
YIELD AND MATURITY CONSIDERATIONS................. S-123
Yield Considerations............................. S-123
General......................................... S-123
Pass-Through Rate............................... S-123
Rate and Timing of Principal Payments........... S-123
Losses and Shortfalls........................... S-124
Certain Relevant Factors........................ S-124
Delay in Payment of Distributions............... S-125
Unpaid Distributable Certificate Interest ...... S-125
Weighted Average Life............................ S-125
Yield Sensitivity of the Offered Certificates ... S-129
Yield Sensitivity of the Class X Certificates ... S-130
CERTAIN FEDERAL INCOME TAX CONSEQUENCES........... S-132
METHOD OF DISTRIBUTION............................ S-133
LEGAL MATTERS..................................... S-134
RATINGS........................................... S-134
LEGAL INVESTMENT.................................. S-135
ERISA CONSIDERATIONS.............................. S-135
INDEX OF PRINCIPAL DEFINITIONS.................... S-138
</TABLE>
S-5
<PAGE>
SUMMARY OF CERTIFICATES
<TABLE>
<CAPTION>
INITIAL
CLASS INITIAL
CERTIFICATE PASS- ASSUMED PASS- WEIGHTED PRINCIPAL OR
BALANCE OR APPROXIMATE THROUGH FINAL THROUGH AVERAGE EXPECTED NOTIONAL
NOTIONAL CREDIT RATE DISTRIBUTION RATE LIFE RATINGS PRINCIPAL
CLASS AMOUNT (1) SUPPORT DESCRIPTION DATE (5) (APPROX.) (YRS.)(6) CUSIP NO. (MOODY'S/FITCH) WINDOW (6)
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 $111,957,000 23.500% Fixed 5/10 6.3200% 5.70 36158YAA7 Aaa/AAA 1/01 -5/10
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
A-2 $429,151,265 23.500% Fixed 12/10 6.4960% 9.78 36158YAB5 Aaa/AAA 5/10 -12/10
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
Variable
Interest
X $707,331,066 N/A Only (2) 12/20 1.6518% 9.23 36158YAC3 Aaa/AAA 1/01 -12/20
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
B $ 28,293,243 19.500% Fixed (3) 12/10 6.5880% 9.98 36158YAD1 Aa2/AA 12/10 -12/10
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
C $ 31,829,898 15.000% Fixed (3) 12/10 6.7340% 9.98 36158YAE9 A2/A 12/10 -12/10
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
D $ 8,841,638 13.750% Fixed (3) 12/10 6.8620% 9.98 36158YAF6 A3/A- 12/10 -12/10
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
E $ 22,988,260 10.500% Variable (4) 12/10 7.1699% 9.98 36158YAG4 Baa2/BBB 12/10 -12/10
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
F $ 8,841,638 9.250% Variable (4) N/A 7.5199% N/A N/A N/A N/A
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
G $ 23,872,424 5.875% Fixed (3) N/A 6.1310% N/A N/A N/A N/A
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
H $ 6,189,147 5.000% Fixed (3) N/A 6.1310% N/A N/A N/A N/A
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
I $ 5,304,983 4.250% Fixed (3) N/A 6.1310% N/A N/A N/A N/A
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
J $ 7,073,310 3.250% Fixed (3) N/A 6.1310% N/A N/A N/A N/A
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
K $ 6,189,147 2.375% Fixed (3) N/A 6.1310% N/A N/A N/A N/A
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
L $ 6,189,147 1.500% Fixed (3) N/A 6.1310% N/A N/A N/A N/A
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
M $ 10,609,966 0.00% Fixed (3) N/A 6.1310% N/A N/A N/A N/A
------- ------------- ----------------------------------------- --------- ---------- ----------- --------------- ---------------
</TABLE>
(1) Approximate, subject to a permitted variance of plus or minus 10%.
(2) The pass-through rate on the Class X certificates will be equal to the
excess, if any, of (1) the weighted average of the net interest rates
on the mortgage loans determined without regard to any reductions in
the interest rate resulting from modification of the mortgage loans (in
each case converted to a rate expressed on the basis of a 360-day year
consisting of twelve 30-day months), over (2) the weighted average of
the pass-through rates of the other certificates (other than the
residual certificates and the Class S certificates) as described in
this prospectus supplement.
(3) For any distribution date, if the weighted average of the net interest
rates on the mortgage loans determined without regard to any reductions
in the interest rate resulting from modification of the mortgage loans
(in each case converted to a rate expressed on the basis of a 360-day
year consisting of twelve 30-day months) as of the first day of the
related due period is less than the rate specified for the Class B,
Class C, Class D, Class G, Class H, Class I, Class J, Class K, Class L
and Class M certificates with respect to the distribution date, then
the pass-through rate for that class of certificates on that
distribution date will equal such weighted average net mortgage
interest rate.
(4) It is anticipated that the pass-through rate applicable to the Class E
and Class F certificates on each distribution date will be equal to the
weighted average of the net interest rates on the mortgage loans
determined without regard to any reductions in the interest rate
resulting from modification of the mortgage loans (in each case
converted to a rate expressed on the basis of a 360-day year consisting
of twelve 30-day months) minus 0.97% and 0.62% per annum, respectively.
(5) The assumed final distribution dates set forth in this prospectus
supplement have been determined on the basis of the assumptions
described in "Description of the Certificates--Assumed Final
Distribution Date; Rated Final Distribution Date" in this prospectus
supplement. The rated final distribution date for each class of
certificates is January 15, 2033. See "Description of the
Certificates--Assumed Final Distribution Date; Rated Final Distribution
Date" in this prospectus supplement.
(6) The weighted average life and period during which distributions of
principal would be received (or applied in the case of the notional
amount of Class X certificates) set forth in the foregoing table with
respect to each class of certificates is based on the assumptions set
forth under "Yield and Maturity Considerations--Weighted Average Life"
in this prospectus supplement and on the assumptions that there are no
prepayments (other than on each anticipated prepayment date, if any) or
losses on the mortgage loans and that there are no extensions of
maturity dates of mortgage loans.
The Class F, Class G, Class H, Class I, Class J, Class K, Class L and
Class M certificates are not offered by this prospectus supplement. The Class
S, Class R and Class LR certificates are not offered by this prospectus
supplement or represented in this table.
S-6
<PAGE>
SUMMARY OF TERMS
This summary highlights selected information from this prospectus
supplement. It does not contain all of the information you need to consider
in making your investment decision. To understand all of the terms of the
offering of the offered certificates, read this entire document and the
accompanying prospectus carefully.
RELEVANT PARTIES AND DATES
Depositor ..................... GE Capital Commercial Mortgage Corporation,
a Delaware corporation. The principal
executive offices of the depositor are
located at 292 Long Ridge Road, Stamford,
Connecticut 06927 and its telephone number
is (203) 357-4000. The depositor is a
wholly-owned subsidiary of General Electric
Capital Corporation. All outstanding common
stock of General Electric Capital
Corporation is owned by General Electric
Capital Services, Inc., the common stock of
which is in turn wholly owned directly or
indirectly by The General Electric Company.
See "The Depositor" in the prospectus.
Master Servicer ............... GE Capital Loan Services, Inc., a Delaware
corporation. The master servicer's principal
address is 363 North Sam Houston Parkway
East, Suite 140, Houston, Texas 77060, and
its telephone number is (281) 405-7000. See
"Servicing of the Mortgage Loans--The Master
Servicer" in this prospectus supplement.
Primary Servicers ............. The Chase Manhattan Bank, a New York banking
corporation, will act as the primary
servicer of the mortgage loans sold to the
depositor by The Chase Manhattan Bank
pursuant to a subservicing agreement between
the master servicer and The Chase Manhattan
Bank. On September 13, 2000, The Chase
Manhattan Corporation and J.P. Morgan & Co.
Incorporated announced their agreement to
merge. The merger is anticipated to occur no
later than the first quarter of 2001. The
Chase Manhattan Bank is a subsidiary of The
Chase Manhattan Corporation. GE Capital Loan
Services, Inc., as master servicer, will be
responsible for the primary servicing of the
mortgage loans sold to the depositor by
General Electric Capital Corporation and
Bear, Stearns Funding, Inc. Under the
pooling and servicing agreement and the
subservicing agreements, the primary
servicers are permitted to hire subservicers
with respect to their primary servicing
duties, and each of The Chase Manhattan Bank
and GE Capital Loan Services, Inc. has
informed the depositor that it intends to
use one or more subservicers on certain of
the mortgage loans. See "Servicing of the
Mortgage Loans--The Primary Servicers" in
this prospectus supplement.
Special Servicer .............. Lend Lease Asset Management, L.P., a Texas
limited partnership. The special servicer's
address is 700 North Pearl Street, Suite
2400, Dallas, Texas 75201, and its telephone
number is (214) 758-5800. See "Servicing of
the Mortgage Loans--The Special Servicer" in
this prospectus supplement.
S-7
<PAGE>
Trustee ...................... Wells Fargo Bank Minnesota, N.A., a national
banking association. The trustee's address
is 11000 Broken Land Parkway, Columbia,
Maryland 21044-3562, and its telephone
number is (410) 884-2000. See "Description
of the Certificates--The Trustee" in this
prospectus supplement.
Paying Agent .................. The Chase Manhattan Bank. The Chase
Manhattan Bank will also act as the
certificate registrar and authenticating
agent. The paying agent's address is 450
West 33rd Street, 14th Floor, New York, New
York 10001, and its telephone number is
(212) 946-3200. See "Description of the
Certificates--Paying Agent, Certificate
Registrar and Authenticating Agent" in this
prospectus supplement.
Mortgage Loan Sellers ......... General Electric Capital Corporation, a New
York corporation, which is contributing
approximately 66.96% of the mortgage loans
by aggregate principal balance as of the
cut-off date, The Chase Manhattan Bank,
which is contributing approximately 18.96%
of the mortgage loans by aggregate principal
balance as of the cut-off date, and Bear,
Stearns Funding, Inc., a Delaware
corporation, which is contributing
approximately 14.09% of the mortgage loans
by aggregate principal balance as of the
cut-off date. General Electric Capital
Corporation is an affiliate of the master
servicer and the parent of the depositor.
The Chase Manhattan Bank is also a primary
servicer, the paying agent and an affiliate
of Chase Securities Inc., one of the
underwriters. Bear, Stearns Funding, Inc. is
an affiliate of Bear, Stearns & Co. Inc.,
one of the underwriters. See "Description of
the Mortgage Pool--The Mortgage Loan
Sellers" in this prospectus supplement.
Cut-off Date .................. December 10, 2000.
Closing Date .................. On or about December 21, 2000.
Distribution Date ............. The 15th day of the month or, if that day is
not a business day, the next business day,
beginning in January 2001, provided that the
distribution date will be no earlier than
the fourth business day following the
related determination date.
Interest Accrual Period ....... Interest will accrue on the offered
certificates during the calendar month prior
to the related distribution date and will be
calculated assuming that each month has 30
days and each year has 360 days.
Due Period .................... The period commencing on the second day of
the month preceding the month in which the
related distribution date occurs and ending
on the first day of the month in which the
related distribution date occurs, or, with
respect to 16 mortgage loans, representing
approximately 18.96% of the aggregate
principal balance of the pool of mortgage
loans as of the cut-off
S-8
<PAGE>
date, the period commencing on the 11th day
of the month preceding the month in which
the related distribution date occurs and
ending on the 10th day of the month in which
the related distribution date occurs.
Determination Date ............ The 11th day of the month in which the
related distribution date occurs, or if the
11th day is not a business day, then the
immediately following business day.
OFFERED SECURITIES
General ....................... We are offering the following seven classes
of commercial mortgage pass-through
certificates as part of Series 2000-1:
o Class A-1
o Class A-2
o Class X
o Class B
o Class C
o Class D
o Class E
Series 2000-1 will consist of a total of 18
classes, the following eleven of which are
not being offered through this prospectus
supplement and the accompanying prospectus:
Class F, Class G, Class H, Class I, Class J,
Class K, Class L, Class M, Class S, Class R
and Class LR.
The Series 2000-1 certificates will
collectively represent beneficial ownership
interests in a trust created by GE Capital
Commercial Mortgage Corporation. The trust's
assets will primarily be 102 mortgage loans
secured by first liens on 113 commercial,
multifamily and manufactured housing
community properties.
Certificate Principal Amounts
and Notional Amount .......... Your certificates will have the approximate
aggregate initial principal amount or
notional amount set forth below, subject to
a variance of plus or minus 10%:
<TABLE>
<CAPTION>
<S> <C> <C>
Class A-1 .. $111,957,000 principal amount
Class A-2 .. $429,151,265 principal amount
Class X..... $707,331,066 notional amount
Class B..... $ 28,293,243 principal amount
Class C..... $ 31,829,898 principal amount
Class D..... $ 8,841,638 principal amount
Class E..... $ 22,988,260 principal amount
</TABLE>
The notional amount of the Class X
certificates will generally be equal to the
aggregate principal amount of the
certificates having principal balances as of
the preceding distribution date after giving
effect to the distribution of principal on
that distribution date or, in the case of
the first distribution date, the closing
date.
See "Description of the
Certificates--General" in this prospectus
supplement.
S-9
<PAGE>
Pass-Through Rates
A. Offered Certificates
(Other Than Class E and
Class X) ............... Your certificates will accrue interest at an
annual rate called a pass-through rate which
is set forth below for each class other than
the Class E and Class X certificates:
<TABLE>
<CAPTION>
<S> <C>
Class A-1 .. 6.3200%
Class A-2 .. 6.4960%
Class B..... 6.5880%(1)
Class C..... 6.7340%(1)
Class D..... 6.8620%(1)
</TABLE>
(1) For any distribution date, if the
weighted average of the net interest
rates on the mortgage loans
determined without regard to any
reductions in the interest rate
resulting from modification of the
mortgage loans (in each case
converted to a rate expressed on the
basis of a 360-day year consisting of
twelve 30-day months and net of all
servicing and trustee fees) as of the
first day of the related due period
is less than the rate specified for
the Class B, Class C or Class D
certificates with respect to the
distribution date, then the
pass-through rate for that class of
certificates on that distribution
date will equal such weighted average
net mortgage interest rate.
B. Class E and Class X
Certificates ........... If you invest in the Class E certificates,
your pass-through rate will be equal to the
weighted average interest rate of the
mortgage loans (in each case converted to a
rate expressed on the basis of a 360-day
year consisting of twelve 30-day months and
net of all servicing and trustee fees), less
0.97% per annum.
If you invest in the Class X certificates,
your pass-through rate will be equal to the
excess, if any, of (1) the weighted average
interest rate of the mortgage loans (in each
case converted to a rate expressed on the
basis of a 360-day year consisting of twelve
30-day months and net of all servicing and
trustee fees) over (2) the weighted average
of the pass-through rates of the other
certificates (other than the Class S, Class
R and Class LR certificates) as described in
this prospectus supplement. The weighting
will be based upon the respective principal
amounts of those classes.
C. Interest Rate
Calculation
Convention ............. Interest on your certificates will be
calculated based on a 360-day year
consisting of twelve 30-day months (i.e., a
30/360 basis).
For purposes of calculating the limit on the
pass-through rates on the Class B, Class C,
Class D and Class E and the pass-through
rate on the Class X and non-offered
certificates, the mortgage loan interest
rates will not reflect any default interest
rate, any rate increase occurring after an
anticipated prepayment date, any loan term
modifications agreed to by the special
servicer or any modifications resulting from
a borrower's bankruptcy or insolvency. In
addition, all of the mortgage loans accrue
interest
S-10
<PAGE>
based on a 360-day year and the actual
number of days elapsed, also known as an
actual/360 basis. The interest rate for each
mortgage loan will be recalculated so that
the amount of interest that would accrue at
that rate in that month, calculated on a
30/360 basis, will equal the amount of
interest that is required to be paid on that
mortgage loan in that month, subject to
certain adjustments as described in
"Description of the Certificates--
Distributions--Pass-Through Rates" in this
prospectus supplement. See "Description of the
Certificates--Distributions--Pass-Through
Rates" and "Description of the
Certificates--Distributions--Interest
Distribution Amount" in this prospectus
supplement.
Distributions
A. Amount and Order of
Distributions .......... On each distribution date, funds available
for distribution from the mortgage loans,
net of specified trust expenses, will be
distributed in the following amounts and
order of priority:
First/Class A-1, Class A-2 and Class X: To
interest on Class A-1, Class A-2 and Class
X, pro rata, in accordance with their
interest entitlements.
Second/Class A-1 and Class A-2: To the
extent of funds allocated to principal, to
principal on Class A-1 and Class A-2, in
that order, until reduced to zero. If the
principal amount of each class of
certificates other than Class A-1 and Class
A-2 has been reduced to zero, funds
available for principal will be distributed
to Class A-1 and Class A-2, pro rata, rather
than sequentially.
Third/Class A-1 and Class A-2: After the
principal amount of each class of
certificates other than Class A-1 and Class
A-2 has been reduced to zero, to reimburse
Class A-1 and Class A-2, pro rata, for any
previously unreimbursed losses on the
mortgage loans allocable to principal that
were previously borne by those classes,
together with interest.
Fourth/Class B: To Class B as follows: (a)
to interest on Class B in the amount of its
interest entitlement; (b) to the extent of
funds allocated to principal remaining after
distributions in respect of principal to
each Class with a higher priority (in this
case, Class A-1 and Class A-2), to principal
on Class B until 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.
Fifth/Class C: To Class C in a manner
analogous to the Class B allocations of
priority Fourth above.
Sixth/Class D: To Class D in a manner
analogous to the Class B allocations of
priority Fourth above.
Seventh/Class E: To Class E in a manner
analogous to the Class B allocations of
priority Fourth above.
Eighth/Non-offered Certificates: In the
amounts and order of priority described in
"Description of the
Certificates--Distributions--Priority" in
this prospectus supplement.
S-11
<PAGE>
B. Interest and Principal
Entitlements ........... A description of each class's interest
entitlement can be found in "Description of
the Certificates--Distributions--Interest
Distribution Amount" in this prospectus
supplement.
A description of the amount of principal
required to be distributed to the classes
entitled to principal on a particular
distribution date also can be found in
"Description of the Certificates--
Distributions--Principal Distribution Amount"
in this prospectus supplement.
C. Yield Maintenance
Charges ................ Yield maintenance charges with respect to
the related mortgage loan will be allocated
between the Class A through Class F
certificates and the Class X certificates by
using the Base Interest Fraction, as defined
herein.
For an explanation of the calculation of
yield maintenance charges, see "Description
of the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans--Prepayment
Provisions" in this prospectus supplement.
See "Description of the
Certificates--Allocation of Yield
Maintenance Charges" in this prospectus
supplement.
Subordination
A. General ................ The chart below describes the manner in
which the payment rights of certain classes
will be senior or subordinate, as the case
may be, to the payment rights of other
classes. The chart shows the entitlement to
receive principal and interest (other than
excess interest) on any distribution date in
descending order (beginning with the Class
A-1, Class A-2 and Class X certificates). It
also shows the manner in which mortgage loan
losses are allocated in ascending order
(beginning with the other Series 2000-1
certificates that are not being offered by
this prospectus supplement). However, no
principal payments or loan losses will be
allocated to the Class X certificates,
although loan losses will reduce the
notional amount of the Class X certificates
and, therefore, the amount of interest they
accrue.
S-12
<PAGE>
Class A-1, Class A-2,
Class X*
Class B
Class C
Class D
Class E
private
certificates**
* The Class X certificates are
interest-only certificates.
** Other than the Class S, Class R and
Class LR certificates.
No other form of credit enhancement will be
available for the benefit of the holders of
the offered certificates.
Any allocation of a loss to a class of
certificates will reduce the principal
amount of that class.
See "Description of the Certificates" in
this prospectus supplement.
B. Shortfalls in
Available Funds ........ The following types of shortfalls in
available funds will reduce distributions to
the classes of certificates with the lowest
payment priorities: shortfalls resulting
from additional compensation, other than the
servicing fee, which the master servicer or
the special servicer is entitled to receive;
shortfalls resulting from interest on
advances made by the master servicer, the
special servicer or the trustee (to the
extent not covered by
S-13
<PAGE>
default interest and late charges paid by
the borrower as described herein);
shortfalls resulting from extraordinary
expenses of the trust; and shortfalls
resulting from a modification of a mortgage
loan's interest rate or principal balance or
from other unanticipated or default-related
expenses of the trust.
See "Description of the Certificates--
Distributions--Priority" in this prospectus
supplement.
Advances
A. P&I Advances ........... The master servicer is required to advance
delinquent periodic mortgage loan payments
if it determines that the advance will be
recoverable. The master servicer will not be
required to advance balloon payments due at
maturity in excess of a regular periodic
payment, interest in excess of a mortgage
loan's regular interest rate or yield
maintenance charges. The master servicer
also is not required to advance amounts
deemed non-recoverable. There may be other
circumstances in which the master servicer
will not be required to advance one full
month of principal and/or interest. If the
master servicer fails to make a required
advance, the trustee will be required to
make the advance. See "Description of the
Certificates--Advances" in this prospectus
supplement. If an interest advance is made,
the master servicer will not advance its
servicing fee, but will advance the
trustee's fee.
B. Property Protection
Advances ............... The master servicer or, in certain
instances, the special servicer, may be
required to make advances to pay delinquent
real estate taxes, assessments and hazard
insurance premiums and similar expenses
necessary to protect and maintain the
mortgaged property, to maintain the lien on
the mortgaged property or enforce the
related mortgage loan documents. If the
master servicer fails to make a required
advance of this type, the trustee is
required to make this advance. None of the
master servicer, the special servicer nor
the trustee is required to advance amounts
deemed non-recoverable. See "Description of
the Certificates--Advances" in this
prospectus supplement.
C. Interest on Advances ... The master servicer, the special servicer
and the trustee, as applicable, will be
entitled to interest on these advances,
compounded monthly, at the "Prime Rate" as
published in The Wall Street Journal as
described in this prospectus supplement;
provided, however, that with respect to
advances for periodic mortgage loan payments
made prior to the expiration of any grace
period for such mortgage loan, interest on
such advances will only accrue from and
after the expiration of such grace period.
Interest accrued on outstanding advances may
result in reductions in amounts otherwise
payable on the certificates.
See "Description of the
Certificates--Advances" and
"--Subordination; Allocation of Collateral
Support Deficit" in this prospectus
supplement and "Description of the
Certificates--Advances in Respect of
Delinquencies" and "Description of the
Pooling Agreements--Certificate Account" in
the prospectus.
S-14
<PAGE>
Reports to Certificateholders
............................... On each distribution date, the following
reports, among others, will be available to
Certificateholders and will contain the
information described under "Description of
the Offered Certificates--Reports to
Certificateholders; Certain Available
Information" in this prospectus supplement:
o Delinquent Loan Status Report,
o Historical Liquidation Report,
o Historical Loan Modification Report,
o REO Status Report,
o Servicer Watch List, and
o Comparative Financial Status Report.
Upon reasonable prior notice,
Certificateholders may also review at the
paying agent's offices during normal
business hours a variety of information and
documents that pertain to the pooled
mortgage loans and the mortgaged properties
securing those loans. We expect that the
available information and documents will
include borrower operating statements, rent
rolls and property inspection reports to the
extent received by the paying agent.
See "Description of the Offered
Certificates--Reports to Certificateholders;
Certain Available Information" in this
prospectus supplement.
THE MORTGAGE LOANS
The Mortgage Pool ............. The trust's primary assets will be 102 fixed
rate mortgage loans, each evidenced by one
or more promissory notes secured by first
mortgages, deeds of trust or similar
security instruments on the fee and/or
leasehold estate of the related borrower in
113 commercial, multifamily and manufactured
housing community properties.
The following tables set forth certain
anticipated characteristics of the mortgage
loans as of the later of the cut-off date or
the origination date. The sum in any column
may not equal the indicated total due to
rounding. Unless otherwise indicated, all
figures presented in this summary section
are calculated as described under
"Description of the Mortgage
Pool--Additional Mortgage Loan Information"
in this prospectus supplement and all
percentages represent the indicated
percentage of the aggregate principal
balance of the pool of mortgage loans as of
the later of the cut-off date or the
origination date. The principal balance of
each mortgage loan as of the later of the
cut-off date or the origination date assumes
the timely receipt of principal scheduled to
be paid in December 2000 on each mortgage
loan and no defaults, delinquencies or
prepayments on any mortgage loan as of the
cut-off date.
S-15
<PAGE>
The mortgage loans will have the following
approximate characteristics as of the later
of the origination date and the cut-off
date:
<TABLE>
<CAPTION>
<S> <C>
Aggregate principal balance (1)......... $707,331,067
Number of mortgage loans................ 102
Number of mortgaged properties.......... 113
Number of balloon mortgage loans (2) .. 95
Number of mortgage loans with
anticipated prepayment dates........... 2
Number of fully amortizing mortgage
loans.................................. 5
Range of mortgage loan principal
balances............................... $1,165,000 to $36,600,000
Average mortgage loan principal
balance................................ $6,934,618
Range of mortgage rates................. 7.70% to 9.00%
Weighted average mortgage rate.......... 8.198%
Range of original terms to maturity
(3)(4)................................. 60 to 240 months
Weighted average original term to
maturity (3)(4)........................ 119 months
Range of remaining terms to maturity
(3)(4)................................. 58 months to 240 months
Weighted average remaining term to
maturity (3)(4)........................ 117 months
Range of original amortization terms
(5).................................... 218 months to 360 months
Weighted average original amortization
term (5)............................... 346 months
Range of remaining amortization terms
(5).................................... 216 months to 360 months
Weighted average remaining amortization
term (5)............................... 345 months
Range of loan-to-value ratios as of the
later of the origination date and the
cut-off date (6)....................... 34.83% to 80.91%
Weighted average loan-to-value ratio as
of the later of the origination date
and the cut-off date (6)............... 71.34%
S-16
<PAGE>
Range of loan-to-value ratios as of the
maturity date (3)(6)................... 28.76% to 74.42%
Weighted average loan-to-value ratio as
of the maturity date (3)(6)............ 63.59%
Range of occupancy rates (7)............ 75.58% to 100.0%
Weighted average occupancy
rate (7)............................... 96.72%
Range of debt service coverage ratios
(6)(8)................................. 1.05x to 2.42x
Weighted average debt service coverage
ratio (6)(8)........................... 1.36x
</TABLE>
(1) Subject to a permitted variance of
plus or minus 10%.
(2) Includes one mortgage loan that pays
interest-only for its entire term,
representing approximately 0.78% of
the aggregate principal balance of
the pool of mortgage loans as of the
cut-off date, and another mortgage
loan, representing approximately
1.95% of the aggregate principal
balance of the mortgage loans as of
the cut-off date, that pays
interest-only for the first 24 months
of its term.
(3) In the case of 2 mortgage loans, the
anticipated prepayment date.
(4) For the 9 mortgage loans with a first
payment date of either 2/1/01 or
2/10/01, representing 5.05% of the
aggregate principal balance of the
pool of mortgage loans as of the
cut-off date, the "Original Term to
Maturity" and the "Remaining Term to
Maturity" are calculated as the term
between the first payment date and
the maturity date.
(5) Excludes the 1 mortgage loan that
pays interest-only for its entire
term.
(6) Excludes 5 credit tenant lease loans,
representing approximately 1.04% of
the aggregate principal balance of
the pool of the mortgage loans as of
the cut-off date; if the credit
tenant lease loans are included, the
range of loan-to-value ratios as of
the cut-off date is 34.83% to 89.62%,
the weighted average loan-to-value
ratio is 71.49%, the weighted average
loan-to-value ratio as of the
maturity date is 62.94%, the range of
debt service coverage ratio is 1.04x
to 2.42x and the weighted average
debt service coverage ratio is 1.35x.
(7) Excludes 12 hotel properties,
representing approximately 14.24% of
the aggregate principal balance of
the pool of mortgage loans as of the
cut-off date, which have occupancy
rates that generally range from
54.60% to 80.20%; if the mortgage
loans secured by hotel properties are
included, the range of occupancy
rates of all the mortgaged properties
is 54.60% to 100.00% and the weighted
average occupancy rate of all the
mortgaged properties is 92.96%.
(8) Includes 1 mortgage loan with a debt
service coverage ratio of 1.05x,
representing approximately 2.22% of
the aggregate principal balance of
the pool of mortgage loans as of the
cut-off date, which has a cash
escrow, as described below in
"--Significant Mortgage
Loans--Parkway Tower Loan." No other
mortgage loan has a debt service
coverage ratio less than 1.20x except
for the credit tenant lease loans.
S-17
<PAGE>
SELLERS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PRINCIPAL
MORTGAGE BALANCE OF THE % OF INITIAL
LOANS/MORTGAGED MORTGAGE POOL
SELLER PROPERTIES LOANS BALANCE
------------------------ --------------- -------------- --------------
<S> <C> <C> <C>
General Electric Capital
Corporation............. 73/81 $473,607,116 66.96%
The Chase Manhattan Bank 16/16 134,084,206 18.96
Bear, Stearns Funding,
Inc. ................... 13/16 99,639,745 14.09
--------------- -------------- --------------
Total.................... 102/113 $707,331,067 100.00%
=============== ============== ==============
</TABLE>
CURRENT USES OF THE MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGED MORTGAGE POOL
CURRENT USE PROPERTIES LOANS BALANCE
------------------------ ------------ -------------- --------------
<S> <C> <C> <C>
Office .................. 23 $168,959,544 23.89%
Multifamily.............. 19 151,204,259 21.38
Anchored Retail ......... 20 116,468,413 16.47
Industrial .............. 9 69,263,590 9.79
Full-Service Hotel ...... 3 64,125,305 9.07
Unanchored Retail ....... 14 49,230,246 6.96
Limited-Service Hotel ... 9 36,600,000 5.17
Manufactured Housing .... 5 23,051,303 3.26
Self-Storage ............ 6 21,068,959 2.98
Credit Tenant Lease (1) 5 7,359,448 1.04
------------ -------------- --------------
Total.................... 113 $707,331,067 100.00%
============ ============== ==============
</TABLE>
(1) Tenants are subsidiaries of CVS
Corporation, which is rated "A" by
Standard & Poor's Ratings Services
and "A3" by Moody's Investors
Service, Inc., and which guarantees
the credit lease obligations of its
subsidiaries.
S-18
<PAGE>
PROPERTY TYPE
Anchored Retail 16.47%
Industrial 9.79%
Full-Service Hotel 9.07%
Unanchored Retail 6.96%
Limited-Service Hotel 5.17%
Manufactured Housing 3.26%
Self-Storage 2.98%
Credit Tenant Lease 1.04%
Office 23.89%
Multifamily 21.38%
The mortgaged properties are located in 30
states and the District of Columbia. The
following table lists the states which have
concentrations of mortgaged properties above
5%:
GEOGRAPHIC DISTRIBUTION (1)
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGED MORTGAGE POOL
STATE PROPERTIES LOANS BALANCE
--------------- ------------ -------------- --------------
<S> <C> <C> <C>
California...... 20 $133,987,169 18.94%
Texas .......... 24 132,449,784 18.73
Tennessee....... 4 55,658,097 7.87
Louisiana....... 2 38,559,478 5.45
Other States .. 63 346,676,539 49.01
------------ -------------- --------------
Total........... 113 $707,331,067 100.00%
============ ============== ==============
</TABLE>
(1) Because this table presents
information relating to the mortgaged
properties and not the mortgage
loans, the information for mortgage
loans secured by more than one
mortgaged property is based on
allocated loan amounts (generally
allocating the mortgage loan
principal amount to each of those
properties by the appraised values of
the mortgaged properties and/or each
mortgaged property's underwritten net
cash flow if not otherwise specified
in the related loan agreement).
S-19
<PAGE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PRINCIPAL
MORTGAGE BALANCE OF THE % OF INITIAL
LOANS/MORTGAGED MORTGAGE POOL
RANGE OF MORTGAGE RATES PROPERTIES LOANS BALANCE
----------------------- --------------- -------------- --------------
<S> <C> <C> <C>
7.700% to 7.899%........ 8/8 $ 53,691,597 7.59%
7.900% to 8.099% ....... 29/32 217,116,515 30.70
8.100% to 8.199%........ 14/14 79,173,653 11.19
8.200% to 8.399%........ 36/44 249,831,654 35.32
8.400% to 8.599% ....... 9/9 58,709,969 8.30
8.600% to 8.799% ....... 5/5 44,026,859 6.22
8.800% to 9.000% ....... 1/1 4,780,819 0.68
--------------- -------------- --------------
Total................... 102/113 $707,331,067 100.00%
=============== ============== ==============
</TABLE>
RANGE OF PRINCIPAL BALANCES
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PRINCIPAL
MORTGAGE BALANCE OF THE % OF INITIAL
RANGE OF CUT-OFF DATE LOANS/MORTGAGED MORTGAGE POOL
BALANCES PROPERTIES LOANS BALANCE
--------------------- --------------- -------------- --------------
<S> <C> <C> <C>
$1,165,000 to
$3,000,000........... 30/30 $ 63,959,343 9.04%
$3,000,001 to
$5,000,000 .......... 22/24 88,733,757 12.54
$5,000,001 to
$9,000,000 .......... 25/25 174,294,933 24.64
$9,000,001 to
$15,000,000 ......... 16/17 184,935,977 26.15
$15,000,001 to
$20,000,000.......... 5/5 82,789,249 11.70
$20,000,001 to
$30,000,000.......... 2/2 43,551,572 6.16
$30,000,001 to
$36,600,000.......... 2/10 69,066,236 9.76
--------------- -------------- --------------
Total................. 102/113 $707,331,067 100.00%
=============== ============== ==============
</TABLE>
S-20
<PAGE>
RANGE OF DSCRS (1)
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PRINCIPAL
MORTGAGE BALANCE OF THE % OF INITIAL
LOANS/MORTGAGED MORTGAGE POOL
RANGE OF DSCRS PROPERTIES LOANS BALANCE
-------------------- --------------- -------------- --------------
<S> <C> <C> <C>
1.050x to 1.199x
(2)................. 1/1 $ 15,683,486 2.22%
1.200x to 1.229x ... 20/20 165,560,543 23.41
1.230x to 1.259x ... 18/18 137,088,125 19.38
1.260x to 1.299x ... 22/22 98,862,935 13.98
1.300x to 1.369x ... 14/14 83,611,205 11.82
1.370x to 1.499x ... 15/15 122,526,036 17.32
1.500x to 2.420x ... 7/18 76,639,289 10.83
--------------- -------------- --------------
Total................ 97/108 $699,971,619 98.96%
=============== ============== ==============
</TABLE>
(1) Excludes 5 credit tenant lease loans,
representing approximately 1.04% of
the aggregate principal balance of
the pool of mortgage loans as of the
cut-off date.
(2) Includes 1 mortgage loan with a debt
service coverage ratio of 1.05x,
representing approximately 2.22% of
the aggregate principal balance of
the pool of mortgage loans as of the
cut-off date, which has a cash
escrow, as described below in
"--Significant Mortgage
Loans--Parkway Tower Loan."
RANGE OF LTV RATIOS (1)
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PRINCIPAL
MORTGAGE BALANCE OF THE % OF INITIAL
LOANS/MORTGAGED MORTGAGE POOL
RANGE OF LTV RATIOS PROPERTIES LOANS BALANCE
------------------- --------------- -------------- --------------
<S> <C> <C> <C>
34.83% to 59.99% ... 9/20 $ 84,466,237 11.94%
60.00% to 64.99% .. 7/7 24,487,963 3.46
65.00% to 68.99% .. 14/14 80,748,438 11.42
69.00% to 72.99% .. 18/18 148,923,303 21.05
73.00% to 76.99% .. 23/23 167,633,174 23.70
77.00% to 79.99% .. 21/21 152,520,454 21.56
80.00% to 80.91% .. 5/5 41,192,051 5.82
--------------- -------------- --------------
Total............... 97/108 $699,971,619 98.96%
=============== ============== ==============
</TABLE>
(1) Excludes 5 credit tenant lease loans,
representing approximately 1.04% of
the aggregate principal balance of
the pool of mortgage loans as of the
cut-off date.
S-21
<PAGE>
RANGE OF REMAINING TERM TO MATURITY DATE
OR ANTICIPATED PREPAYMENT DATE (1)
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PRINCIPAL
MORTGAGE BALANCE OF THE % OF INITIAL
RANGE OF REMAINING LOANS/MORTGAGED MORTGAGE POOL
TERMS (MOS.) PROPERTIES LOANS BALANCE
------------------ --------------- -------------- --------------
<S> <C> <C> <C>
58 to 79........... 3/3 $ 19,932,906 2.82%
80 to 99 .......... 1/1 9,350,000 1.32
100 to 115 ........ 6/6 53,204,165 7.52
116 to 118 ........ 43/43 308,569,818 43.62
119 to 120 ........ 44/55 308,914,730 43.67
121 to 220 ........ 1/1 1,645,270 0.23
221 to 240......... 4/4 5,714,178 0.81
--------------- -------------- --------------
Total.............. 102/113 $707,331,067 100.00%
=============== ============== ==============
</TABLE>
(1) For the 9 mortgage loans with a first
payment date of either 2/1/01 or
2/10/01, representing 5.05% of the
aggregate principal balance of the
pool of mortgage loans as of the
cut-off date, the "Remaining Term to
Maturity Date or Anticipated
Prepayment Date" is calculated as the
term between the first payment date
and the maturity date.
All of the mortgage loans bear interest at
fixed rates.
The mortgage loans require the borrowers to
make scheduled payments of principal and/or
interest on the following days of each month
(in some cases, subject to the indicated
grace periods described below): 86 of the
mortgage loans, representing approximately
81.04% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off
date, provide for scheduled payments of
principal and/or interest due on the 1st day
of each month, and 16 mortgage loans,
representing approximately 18.96% of the
aggregate principal balance of the pool of
the mortgage loans as of the cut-off date,
provide for scheduled payments of principal
and/or interest due on the 10th day of each
month. Except with respect to 2 mortgage
loans, representing approximately 1.52% of
the aggregate principal balance of the pool
of mortgage loans as of the cut-off date,
all of the mortgage loans whose due date is
the 1st day of each month provide for a
grace period of five days. One mortgage
loan, whose due date is the first day of
each month, representing 1.26% of the
aggregate principal of the pool of mortgage
loans as of the cut-off date provides for a
grace period of 10 days. One mortgage loan
whose due date is the first day of each
month, representing approximately 0.27% of
the aggregate principal balance of the pool
of mortgage loans as of the cut-off date,
has a grace period which extends beyond the
determination date. To the extent any
payment on that mortgage loan is not
received by the determination date, the
master servicer will make an administrative
advance. No interest will accrue on such
advance until the expiration of the related
grace period. See "Description of the
Mortgage Pool--Certain Terms and Conditions
of the Mortgage Loans" in this prospectus
supplement.
All of the mortgage loans accrue interest on
an actual/360 basis.
S-22
<PAGE>
See "Description of the Mortgage
Pool--Certain Terms and Conditions of the
Mortgage Loans" in this prospectus
supplement.
AMORTIZATION TYPES
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF PRINCIPAL
MORTGAGE BALANCE OF THE % OF INITIAL
LOANS/MORTGAGED MORTGAGE POOL
TYPE OF AMORTIZATION PROPERTIES LOANS BALANCE
------------------------ --------------- -------------- --------------
<S> <C> <C> <C>
Balloon Loans (1)........ 94/97 $643,166,388 90.93%
APD Loans ............... 2/10 51,305,230 7.25
Fully Amortizing Loans . 5/5 7,359,448 1.04
Interest-only Loans (2) 1/1 5,500,000 0.78
--------------- -------------- --------------
Total.................... 102/113 $707,331,067 100.00%
=============== ============== ==============
</TABLE>
(1) Excludes the 1 mortgage loan that
pays interest-only for the life of
the loan and the 2 mortgage loans
with anticipated prepayment dates.
(2) This mortgage loan provides for
monthly payments of interest-only
over the entire term of the mortgage
loan and the payment of the entire
principal amount of the mortgage loan
at maturity.
2 mortgage loans, representing approximately
7.25% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off
date, provide for an increase in the related
interest rate after a certain date, the
anticipated prepayment date. The interest
accrued in excess of the original rate,
together with any interest on that accrued
interest, will be deferred and will not be
paid until the principal balance of the
related mortgage loan has been paid. Any
amount received in respect of that deferred
interest will be distributed to the holders
of the Class S certificates.
In addition, after the anticipated
prepayment date, cash flow in excess of that
required for debt service and certain
budgeted expenses with respect to the
related mortgaged property will be applied
towards the payment of principal (without
payment of a yield maintenance charge) of
the related mortgage loan until its
principal balance has been reduced to zero.
A substantial principal payment would be
required to pay off these mortgage loans on
their anticipated prepayment dates. The
remaining amortization term of these
mortgage loans are the same as the remaining
term to maturity if the mortgage loans are
not prepaid on their anticipated prepayment
dates.
S-23
<PAGE>
See "Description of the Mortgage
Pool--Additional Mortgage Loan Information"
and "Description of the Mortgage
Pool--Certain Terms and Conditions of the
Mortgage Loans" in this prospectus
supplement.
The following table contains general
information regarding the prepayment
provisions of the mortgage loans.
OVERVIEW OF PREPAYMENT PROTECTION
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGE MORTGAGE POOL
PREPAYMENT PROTECTION LOANS LOANS BALANCE
----------------------- ----------- -------------- --------------
<S> <C> <C> <C>
Lockout period followed
by defeasance.......... 101/112 $695,342,972 98.31%
Lockout period followed
by yield maintenance .. 1/1 11,988,095 1.69
----------- -------------- --------------
Total................... 102/113 $707,331,067 100.00%
=========== ============== ==============
</TABLE>
Defeasance permits the related borrower to
substitute direct non-callable U.S. Treasury
obligations or other government securities
for the related mortgaged property as
collateral for the mortgage loan.
1 mortgage loan (identified as Loan No. 30
on Annex A to this prospectus supplement),
representing approximately 1.69% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date,
permits voluntary prepayment upon payment of
a yield maintenance charge following the
23rd scheduled payment of principal and
interest.
90 of the mortgage loans, representing
approximately 87.98% of the aggregate
principal balance of the pool of mortgage
loans as of the cut-off date, specify a
period of time immediately prior to the
stated maturity date or anticipated
prepayment date, as applicable, during which
there are no restrictions on voluntary
prepayment. 88 of the mortgage loans
representing approximately 83.50% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date,
permit voluntary prepayment without the
payment of a yield maintenance charge on or
after the date occurring approximately 90
days or less prior to the stated maturity
date or anticipated prepayment date, as
applicable. 1 mortgage loan (identified as
loan No. 51 on Annex A to this prospectus
supplement), representing approximately
2.08% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off
date, permits voluntary prepayment without
payment of a yield maintenance charge on or
after the date occurring approximately 180
days prior to the stated maturity date or
anticipated prepayment date, as applicable.
1 mortgage loan (identified as Loan No. 44
on Annex A to this prospectus supplement),
representing approximately 2.40% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date,
permits voluntary prepayment without payment
of a yield maintenance charge on or after
the date
S-24
<PAGE>
occurring approximately 120 days prior to
the stated maturity date or anticipated
prepayment date, as applicable.
All of the mortgage loans that permit
prepayments require that the prepayment be
made on the due date or, if on a different
date, that any prepayment be accompanied by
the interest that would be due on the next
due date.
See "Description of the Mortgage
Pool--Additional Mortgage Loan Information,"
"Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage Loans"
and "--Defeasance; Collateral Substitution"
in this prospectus supplement.
S-25
<PAGE>
SIGNIFICANT LOANS
TEN LARGEST MORTGAGE LOANS OR CROSS-COLLATERALIZED GROUPS
<TABLE>
<CAPTION>
NUMBER % OF STATED LTV
NUMBER OF OF CUT-OFF INITIAL REMAINING CUT-OFF RATIO AT
MORTGAGE MORTGAGED DATE POOL MORTGAGE TERM DATE LTV MATURITY
PROPERTY NAME LOANS PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR RATIO (1)
---------------------- ------------------- ------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Synergy Business Park
I and Synergy
Business Park II 2 2 $ 39,600,000 5.60% 7.98% 120 1.24x 73.81% 66.06%
EII Portfolio I 1 9 36,600,000 5.17 8.25% 120 2.18x 54.71% 44.40%
Embassy Suites-New
Orleans 1 1 32,466,236 4.59 8.77% 113 1.38x 69.08% 58.66%
The Links at Oklahoma
City 1 1 23,451,572 3.32 8.34% 116 1.22x 73.29% 66.27%
University Park Tech I
and University Park
Tech II 2 2 19,080,240 2.70 8.30% 118 1.22x 78.84% 71.17%
Holiday Inn-Mansfield 1 1 16,953,839 2.40 8.45% 117 1.46x 69.20% 58.04%
Parkway Tower 1 1 15,683,486 2.22 8.24% 118 1.05x 78.42% 70.69%
Laguna Oaks Apartments 1 1 15,451,925 2.18 7.85% 118 1.22x 78.80% 70.39%
Greenway Park Plaza 1 1 15,200,000 2.15 8.09% 120 1.34x 80.00% 71.79%
Le Montrose 1 1 14,705,230 2.08 8.08% 116 1.91x 57.67% 49.74%
------------------- ------------- -------- -------- -------- -------- -------- --------
Total/Weighted Average 12 20 $229,192,527 32.40% 8.26% 118 1.46x 70.14% 61.35%
=================== ============= ======== ======== ======== ======== ======== ========
</TABLE>
------------
(1) Calculated with respect to the Anticipated Prepayment Date.
Synergy Business Park I and
Synergy Business Park II
Loans ......................... The Synergy Business Park I loan (identified
as Loan No. 88 on Annex A to this prospectus
supplement) and the Synergy Business Park II
loan (identified as Loan No. 89 on Annex A
to this prospectus supplement) are secured
by a first lien on each of eight
multi-tenanted office buildings comprising
the Synergy Business Park, formerly known as
the Koger Business Center, located in
Brentwood, Tennessee, eight miles from
downtown Nashville. The Synergy Business
Park contains 491,800 square feet of net
rentable area in the aggregate. The four
buildings securing the Synergy Business Park
I loan contain approximately 243,691 square
feet of net rentable area, three of the four
buildings were built between 1984 and 1987
and one building was built in 1863 and most
recently renovated in 1985. As of November
2000, the buildings were approximately 97.2%
occupied and leased to 73 tenants. The four
buildings securing the Synergy Business Park
II loan contain approximately 248,109 square
feet of net rentable area and were built
between 1983 and 1998. As of November 2000,
the buildings were approximately 90.4%
occupied and leased to 97 tenants. The
Synergy Business Park I loan required an up
front $500,000 rollover reserve and an up
front $720,000 capital improvement reserve.
The Synergy Business Park I loan also
required a $219,960 annual rollover reserve
(commencing when the $500,000 up front
rollover reserve is depleted), a $46,440
annual replacement reserve, and tax and
insurance escrows, each funded monthly. The
Synergy Business Park II loan required an up
front $500,000 rollover reserve and an up
front $244,750 capital improvement reserve.
The Synergy Business Park II loan also
required a $221,520 annual rollover reserve
(commencing when the $500,000 up front
rollover reserve is depleted), a $44,340
annual replacement reserve, and tax and
insurance escrows, each funded monthly.
S-26
<PAGE>
The sponsor of the borrowers is Jordan E.
Slone. Mr. Slone is the Chairman and CEO of
Harbor Group International. Harbor Group
International controls approximately
2,000,000 square feet of office space,
2,300,000 square feet of retail space and
6,900 apartment units.
The Synergy Business Park loans are
cross-collateralized and cross-defaulted
with each other. Under the terms of the
Synergy Business Park loans, partial
releases within each loan are not permitted.
See "Risk Factors--Cross-Collateralized
Mortgage Loans Entail Risks" in this
prospectus supplement.
EII Portfolio I Loan .......... The EII Portfolio I loan (identified as Loan
No. 32 on Annex A to this prospectus
supplement) is secured by a first lien on
each of eight limited-service Hampton Inn
hotels and one limited-service Residence Inn
hotel in Scranton, Pennsylvania; Colonie,
New York; Glen Burnie, Maryland; Norfolk,
Virginia; Chattanooga, Tennessee; Aurora,
Colorado; Beckley, West Virginia; Maryland
Heights, Missouri; and Oklahoma City,
Oklahoma. The hotels have a total of 1,181
rooms. As of June 2000, the occupancy rate
of the hotels, in the aggregate, for the
prior 12-month period was approximately
69.0%, with a $71.93 underwritten average
daily rate and $49.62 underwritten revenue
per available room. The EII Portfolio I loan
required a 4.0% reserve for furniture,
fixtures and equipment, on a spend or accrue
basis, as well as funded tax and insurance
escrows. The borrower was also required to
fund a $500,000 improvement plan reserve at
closing. The sponsor of the borrower is
Equity Inns Inc., a NYSE traded
self-administered real estate investment
trust. Equity Inns Inc. commenced operations
in March 1994. As of June 2000, Equity Inns
Inc. held a portfolio of 96 hotels
comprising 12,284 rooms, located in 34
states and operating predominantly as
limited-service and extended-stay hotels.
The hotels are currently operated under the
terms of operating leases with Interstate
Hotels Corporation. Under the terms of a
master lease termination agreement, it is
anticipated that the operating leases will
be terminated on January 1, 2001, following
which Interstate Hotels Corporation will
continue to manage the properties under
management contracts, with the exception of
the Hampton Inn in Chattanooga, where a
management contract is being negotiated with
another party. The individual liens that
constitute the EII Portfolio I loan are
cross-defaulted and cross-collateralized
with each other. Under the terms of the EII
Portfolio I Loan, partial releases are
permitted provided that, among other
conditions, the borrower defeases 125% of
the allocated loan amount of the property or
properties to be released. See "Risk
Factors--Cross-Collateralized Mortgage Loans
Entail Risks" in this prospectus supplement.
Embassy Suites-New Orleans Loan
............................... The Embassy Suites-New Orleans loan
(identified as Loan No. 34 on Annex A to
this prospectus supplement) is secured by a
first lien on a full-service hotel located
in New Orleans, Louisiana. The hotel
contains approximately 372 suites and is
comprised of two properties. 315 Julia Steet
is a 16-story property which contains
S-27
<PAGE>
approximately 282 suites and was built in
1984 and renovated in 1996. 727 South Peters
Street is a 7-story building, which contains
approximately 90 suites. 727 South Peters
Street was originally built in 1909 as an
office building and renovated into a hotel
in 1999. As of August 2000, the occupancy
rate of the mortgaged property for the prior
12 months was approximately 68.1% with a
$141.50 underwritten average daily rate and
a $99.05 underwritten revenue per available
room. The sponsor of the borrower is FelCor
Lodging Trust, Incorporated. FelCor Lodging
Trust, Incorporated is a publicity traded
Dallas-based real estate investment trust.
As of December, 1999, FelCor Lodging Trust,
Incorporated's portfolio consisted of
approximately 188 hotels with nearly 50,000
rooms.
The Links at Oklahoma City
Loan .......................... The Links at Oklahoma City loan (identified
as Loan No. 92 on Appendix A to this
prospectus supplement) is secured by a first
lien on a 49 building 588 unit class "A"
apartment complex, located in Oklahoma City,
Oklahoma. The complex was built in phases
from 1997 to 2000, is surrounded by a
nine-hole golf course (the land of which is
encumbered by the loan) and contains 196
one-bedroom units and 392 two-bedroom units.
Amenities include golf, a swimming pool, a
tennis court, a basketball court, a sand
volleyball court and a fitness center. As of
July 2000 the mortgaged property was
approximately 98.0% occupied. As of July
2000, average rents at the property were
$473 for a one-bedroom unit and $608 for a
two-bedroom unit. The Links at Oklahoma City
loan requires a $200 per unit annual
replacement reserve, and monthly-funded tax
and insurance escrows . The sponsor of the
borrower is a partnership formed by Mr.
James Lindsey. Mr. Lindsey has controlling
interests in various real estate development
and management companies, with ownership or
management of over 16,000 apartments under
management.
University Park Tech I and
University Park Tech II Loans . The University Park Tech I loan (identified
as Loan No. 97 on Annex A to this prospectus
supplement) and the University Park Tech II
loan (identified as Loan No. 98 on Annex A
to this prospectus supplement) are each
secured by a first lien on an
industrial/office flex space building in San
Antonio, Texas. The two buildings contain
six tenants and 190,762 square feet of net
rentable area in the aggregate. The building
securing the University Park Tech I loan
contains approximately 106,237 square feet
of net rentable area and was built in 1999.
As of August 2000, the building was
approximately 100% occupied. The building
securing the University Park Tech II loan
contains approximately 84,525 square feet of
net rentable area and was built in 1999. As
of August 2000, the building was
approximately 100% occupied. The University
Park Tech I loan required an up front
$200,000 replacement and rollover reserve,
which is required to be replenished if used.
The University Park Tech II loan required a
$42,687 rollover reserve annually, capped at
$125,000. The borrower was also required to
escrow $700,000 of
S-28
<PAGE>
rent deposits in connection with two leases
to be released after such tenants have
occupied the space for 5 years or have been
acquired by investment grade companies that
guaranty the lease. The University Park Tech
loans each require funded tax and insurance
escrows. The sponsor of the borrower is Eric
Brauss. Mr. Brauss is President of Today
Realty Advisors, Inc., which owns and
manages over 20 commercial and multifamily
properties.
The University Park Tech loans are
cross-collateralized and cross-defaulted
with each other. Under the terms of the
University Park Tech loans, partial releases
are not permitted. See "Risk
Factors--Cross-Collateralized Mortgage Loans
Entail Risks" in this prospectus supplement.
Holiday Inn-Mansfield Loan .... The Holiday Inn-Mansfield loan (identified
as Loan No. 44 on Annex A to this prospectus
supplement) is secured by a first lien on a
full-service hotel located in Mansfield,
Massachusetts. The two-and three-story hotel
contains 202 units and approximately 14,800
square feet of banquet and conference area,
including 7,740 square feet of ballroom area
and 1,700 square feet of amphitheater space.
Amenities at the property include two
restaurants, a lounge, an indoor heated
pool, two racquetball courts, two tennis
courts, a volleyball and basketball court
and a professionally operated health club.
The hotel was built in 1979 and fully
renovated from 1997 to 2000. As of September
2000, the occupancy rate of the mortgaged
property for the prior 12-month period was
approximately 72.5% with a $96.53
underwritten average daily rate and $73.37
underwritten revenue per available room. The
Holiday Inn-Mansfield loan requires a
replacement reserve funded monthly in the
amount of $30,546 and a $184,980 annual tax
reserve, funded monthly. The sponsor of the
borrower is Gerald S. Fineberg. The property
is managed by Fine Hotels, Inc., a
sponsor-related entity. As of December 1999,
the Fine Hotels, Inc. portfolio consisted of
12 hotels in four states.
Parkway Tower Loan ............ The Parkway Tower loan (identified as Loan
No. 73 on Annex A to this prospectus
supplement) is secured by a five-story,
multi-tenant office building in Santa Clara,
California. The building contains
approximately 71,570 square feet of net
rentable area and was built in 1982. As of
June 2000, the mortgaged property was 100%
occupied. The Parkway Tower loan requires a
replacement reserve, funded monthly in the
amount of $1,585 and a $181,344 annual tax
escrow and a $27,972 annual insurance
escrow, each funded monthly. Additionally,
the borrower funded an escrow upon
origination in the amount of $1,970,000,
which will either be released to the
borrower upon the re-leasing of certain
tenant space, or will be used to partially
defease the mortgage loan after the
expiration of the lockout period. The
sponsor of the borrower is Maskatiya, Suri &
Company.
S-29
<PAGE>
Laguna Oaks Apartments Loan .. The Laguna Oaks Apartments loan (identified
as Loan No. 50 on Annex A to the prospectus
supplement) is secured by a first lien on a
25-building, 201-unit class "A" apartment
complex located in Elk Grove, Sacramento
County, California, approximately 12 miles
from Sacramento. The complex was built in
1999 and contains 48 one-bedroom units, 105
two-bedroom units and 48 three-bedroom
units. Amenities include an outdoor swimming
pool, a fitness center, a sauna and 405
parking spaces. As of September 2000, the
mortgaged property was approximately 99.0%
occupied. As of September 2000, average
rents at the property were $812 a month for
a one-bedroom unit, $1,106 a month for a
two-bedroom unit and $1,156 a month for a
three-bedroom unit. The Laguna Oaks
Apartments loan requires a $204.18 per unit
annual replacement reserve, and funded tax
and insurance escrows, each payable monthly.
The sponsors of the borrower are Sanford
Gallanter and Edwin Sacks. Mr. Gallanter has
developed over 2,000 housing units and
currently manages 600 housing units.
Greenway Park Plaza Loan ...... The Greenway Park Plaza loan (identified as
Loan No. 38 on Annex A to this prospectus
supplement) is secured by a first lien on a
single story, neighborhood retail shopping
center located in Phoenix, Arizona. The
building contains approximately 205,848
square feet of net rentable area and was
constructed in 1989. As of October 2000, the
shopping center was approximately 96.3%
occupied. The borrower was required to fund
a $6,500 initial replacement reserve at
origination. The sponsors of the borrower
are Ron Barness and Alex Papakyriakou, who
are the principals and owners of Retail
Brokers, Inc. Retail Brokers, Inc. was
founded by Mr. Barness in 1995.
Le Montrose Loan .............. The Le Montrose loan (identified as Loan No.
51 on Annex A to this prospectus supplement)
is secured by a first lien on a full-service
hotel located in West Hollywood, California.
The hotel has 132 bedrooms, an outdoor
swimming pool, a tennis court, a sauna and
an exercise room. The property was
originally built as an apartment building in
1975 and converted to a hotel in 1989. As of
August 2000, the occupancy rate of the
mortgaged property for the prior 12-month
period was approximately 71.0%, with a
$163.40 underwritten average daily rate and
$117.65 underwritten revenue per available
room. The Le Montrose loan required a 4.0%
reserve for furniture, fixtures and
equipment payable upon a 1.40x DSCR trigger
and a reserve equal to six months of
estimated taxes and insurance premiums. The
sponsor of the borrower is LaSalle Hotel
Properties, a publicly traded REIT which
commenced operations in April 1998. As of
September 2000, the company owned interests
in 13 hotels, with approximately 5,300
rooms, located in 11 states.
S-30
<PAGE>
ADDITIONAL ASPECTS OF CERTIFICATES
Denominations ................. The offered certificates (other than the
Class X certificates) will be offered in
minimum denominations of $10,000 initial
principal amount. The Class X certificates
will be offered in minimum denominations of
$1,000,000 initial notional amount.
Investments in excess of the minimum
denominations may be made in multiples of
$1.
Registration, Clearance and
Settlement ................... Each class of offered certificates will be
registered in the name of Cede & Co., as
nominee of The Depository Trust Company, or
DTC.
You may hold your offered certificates
through: (1) DTC in the United States; or
(2) Clearstream Banking, societe anonyme or
The Euroclear System in Europe. Transfers
within DTC, Clearstream Banking, societe
anonyme or The Euroclear System will be made
in accordance with the usual rules and
operating procedures of those systems.
We may elect to terminate the book-entry
system through DTC with respect to all or
any portion of any class of the offered
certificates.
See "Description of the
Certificates--Book-Entry Registration and
Definitive Certificates" in this prospectus
supplement and in the prospectus.
Information Available to
Certificateholders ........... On each distribution date, the paying agent
will prepare and make available to each
certificateholder of record, initially
expected to be Cede & Co., a statement as to
the distributions being made on that date.
Additionally, under certain circumstances,
certificateholders of record may be entitled
to certain other information regarding the
trust.
See "Description of the
Certificates--Reports to Certificateholders;
Certain Available Information" in this
prospectus supplement.
Deal Information/Analytics .... Certain information concerning the mortgage
loans and the offered certificates will be
available to you through the following
services:
o Bloomberg, L.P. and
o the paying agent's website at
www.chase.com/sfa.
Optional Termination .......... On any distribution date on which the
aggregate principal balance of the pool of
mortgage loans remaining in the trust is
less than 1% of the aggregate unpaid balance
of the mortgage loans as of the cut-off
date, certain entities specified in this
prospectus supplement will have the option
to purchase all of the remaining mortgage
loans at the price specified in this
prospectus supplement (and all property
acquired through
S-31
<PAGE>
exercise of remedies in respect of any
mortgage loan). Exercise of this option will
terminate the trust and retire the then
outstanding certificates.
See "Description of the
Certificates--Termination; Retirement of
Certificates" in this prospectus supplement
and "Description of the
Certificates--Termination" in the
prospectus.
Tax Status .................... An election will be made to treat designated
portions of the trust (exclusive of interest
that is deferred after the anticipated
prepayment date on the mortgage loans that
have anticipated prepayment dates and the
related distribution account for this
deferred interest) as two separate REMICs--a
Lower-Tier REMIC and an Upper-Tier
REMIC--for federal income tax purposes. The
portion of the trust representing the
deferred interest described above will be
treated as a grantor trust for federal
income tax purposes. In the opinion of
counsel, the portions of the trust referred
to above will qualify for this treatment.
Pertinent federal income tax consequences of
an investment in the offered certificates
include:
o Each class of offered certificates
(and the Class F, Class G, Class H,
Class I, Class J, Class K, Class L and
Class M certificates) will represent
"regular interests" in the Upper-Tier
REMIC.
o The offered certificates will be
treated as newly originated debt
instruments for federal income tax
purposes.
o You will be required to report income
on the regular interests represented
by your certificates using the accrual
method of accounting.
o The Class X certificates will, and one
or more other classes of offered
certificates may, be issued with
original issue discount.
o The Class S certificates will
represent interests in a grantor trust
with respect to interest that is
deferred after the anticipated
prepayment date on the mortgage loans
that have anticipated prepayment
dates.
See "Certain Federal Income Tax
Consequences" in this prospectus supplement
and in the accompanying prospectus.
ERISA Considerations .......... Subject to important considerations
described under "ERISA Considerations" in
this prospectus supplement and "Certain
ERISA Considerations" in the accompanying
prospectus, the offered certificates are
eligible for purchase by persons investing
assets of employee benefit plans or
individual retirement accounts.
Legal Investment .............. The offered certificates will not constitute
"mortgage related securities" within the
meaning of the Secondary Mortgage Market
Enhancement Act of 1984, as amended.
See "Legal Investment" in this prospectus
supplement and in the accompanying
prospectus.
S-32
<PAGE>
Ratings ...................... The offered certificates will not be issued
unless each of the offered classes receives
the following ratings from Moody's Investors
Service, Inc. and Fitch:
<TABLE>
<CAPTION>
MOODY'S FITCH
----------- ---------
<S> <C> <C>
Class A-1..... Aaa AAA
Class A-2..... Aaa AAA
Class X....... Aaa AAA
Class B....... Aa2 AA
Class C....... A2 A
Class D....... A3 A-
Class E....... Baa2 BBB
</TABLE>
A rating agency may downgrade, qualify or
withdraw a security rating at any time. A
rating agency not requested to rate the
offered certificates may nonetheless issue a
rating and, if one does, it may be lower
than those stated above. The security
ratings do not address the frequency of
prepayments (whether voluntary or
involuntary) of mortgage loans, the degree
to which prepayments might differ from those
originally anticipated, the likelihood of
collection of excess interest, default
interest or yield maintenance charges, or
the tax treatment of the certificates. Even
though the Class X certificates will be
rated "Aaa/AAA," it is still possible that
you may fail to recover your full initial
investment due to a rapid rate of
prepayments, defaults or liquidations. See
"Yield and Maturity Considerations" in this
prospectus supplement, "Risk Factors" and
"Ratings" in this prospectus supplement and
"Rating" and "Yield and Maturity
Considerations" in the prospectus.
See "Ratings" in this prospectus supplement
and "Rating" in the prospectus for a
discussion of the basis upon which ratings
are given and the conclusions that may not
be drawn from a rating.
S-33
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. In particular, distributions on your certificates will
depend on payments received on and other recoveries with respect to the
mortgage loans. Therefore, you should carefully consider the risk factors
relating to the mortgage loans and the mortgaged properties.
The risks and uncertainties described below (in addition to those risks
described in the prospectus under "Risk Factors") are not the only ones
relating to your certificates. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also impair
your investment.
If any of the following risks actually occur, your investment could be
materially and adversely affected.
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 certain
factors, including the risks described below and elsewhere in this prospectus
supplement.
GEOGRAPHIC CONCENTRATION ENTAILS RISKS
Mortgaged properties located in California, Texas, Tennessee and Louisiana
represent approximately 18.94%, 18.73%, 7.87% and 5.45%, respectively, by
allocated loan amounts, of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date. Concentrations of mortgaged properties
in geographic areas may increase the risk that adverse economic or other
developments or natural disasters affecting a particular region of the
country could increase the frequency and severity of losses on mortgage loans
secured by those properties. In recent periods, several regions of the United
States have experienced significant real estate downturns. Regional economic
declines or conditions in regional real estate markets could adversely affect
the income from, and market value of, the mortgaged properties. Other
regional factors--e.g., earthquakes, floods or hurricanes or changes in
governmental rules or fiscal policies--also may adversely affect the
mortgaged properties. For example, mortgaged properties located in California
may be more susceptible to certain hazards (such as earthquakes) than
properties in other parts of the country.
RISKS RELATING TO LOAN CONCENTRATIONS
The effect of mortgage pool loan losses will be more severe if the losses
relate to loans that account for a disproportionately large percentage of the
pool's aggregate principal balance. In this regard:
o The largest mortgage loan or group of cross-collateralized loans
represents approximately 5.60% of the aggregate principal balance
of the pool of mortgage loans as of the cut-off date. See
"Description of the Mortgage Pool--Significant Mortgage Loans" in
this prospectus supplement.
o The 5 largest mortgage loans or group of cross-collateralized
loans represent, in the aggregate, approximately 21.38% of the
aggregate principal balance of the pool of mortgage loans as of
the cut-off date.
o The 10 largest mortgage loans or group of cross-collateralized
loans represent, in the aggregate, approximately 32.40% of the
aggregate principal balance of the pool of mortgage loans as of
the cut-off date.
Each of the other mortgage loans or group of cross-collateralized loans
not described above represents less than 2.07% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date.
A concentration of mortgaged property types or of mortgage loans with the
same borrower or related borrowers also can pose increased risks. In that
regard, the following table lists the property type concentrations in excess
of 5% of the aggregate principal balance of the pool of mortgage loans as of
the cut-off date:
S-34
<PAGE>
PROPERTY TYPE CONCENTRATIONS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING LTV RATIO
MORTGAGED CUT-OFF DATE POOL MORTGAGE TERM CUT-OFF DATE AT MATURITY
PROPERTY TYPE PROPERTIES BALANCE BALANCE RATE (MOS.)(1) OCCUPANCY DSCR LTV RATIO (1)
------------- ------------------------- ----------- -------------------- ----------- -------------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Office ...... 23 $168,959,544 23.89% 8.13% 112 96% 1.29x 70.78% 63.77%
Retail (2) .. 34 $165,698,659 23.43% 8.20% 118 97% 1.33x 71.73% 64.65%
Multifamily.. 19 $151,204,259 21.38% 8.04% 115 97% 1.25x 75.94% 68.52%
Hotel (3).... 12 $100,725,305 14.24% 8.43% 117 70% 1.76x 62.21% 52.07%
Industrial .. 9 $ 69,263,590 9.79% 8.23% 119 100% 1.24x 75.41% 67.64%
</TABLE>
------------
(1) Calculated with respect to the anticipated prepayment date for the
mortgage loans with anticipated prepayment dates.
(2) 20 of such mortgage loans, representing approximately 16.77% of the
aggregate principal balance of the pool of mortgage loans as of the
cut-off date, are considered by the applicable mortgage loan seller to
be "anchored" retail mortgaged properties.
(3) 3 of the mortgage loans, representing 9.07% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, are
considered by the applicable mortgage loan seller to be full-service
hotel mortgaged properties.
A concentration of mortgage loans secured by the same mortgaged property
types can increase the risk that a decline in a particular industry or
business would have a disproportionately large impact on the pool of mortgage
loans.
The following table lists the related borrower concentrations of two or
more mortgage loans in excess of 5% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date:
MORTGAGE LOANS WITH RELATED BORROWERS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
--------------------------------------------------------------
NUMBER OF
MORTGAGE % STATED
LOANS/ AGGREGATE OF INITIAL REMAINING
MORTGAGED CUT-OFF DATE POOL MORTGAGE TERM CUT-OFF DATE LTV RATIO
SPONSOR PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR LTV RATIO AT MATURITY (1)
---------------- ------------ -------------- ------------ ---------- ----------- ------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James E.
Lindsey......... 4/4 $42,908,213 6.07% 8.14% 117 1.22x 74.03% 66.58%
Jordan E. Slone 2/2 $39,600,000 5.60% 7.98% 120 1.24x 73.81% 66.06%
</TABLE>
------------
(1) Calculated with respect to the anticipated prepayment date for the
mortgage loans with anticipated prepayment dates.
See "Description of the Mortgage Pool--Affiliated Borrower Concentrations"
in this prospectus supplement.
o In addition to those described above, 7 groups of mortgage loans
have borrowers related to each other, but none of these groups of
mortgage loans represent more than 4.51% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off
date.
o 3 groups, each consisting of 2 mortgage loans, representing
approximately 5.60%, 2.70% and 1.17%, respectively, of the
aggregate principal balance of the pool of mortgage loans as of
the cut-off date, are cross-collateralized or cross-defaulted. See
"Risk Factors--Cross-Collateralized Mortgage Loans Entail Risks"
in this prospectus supplement.
o 3 mortgage loans, representing approximately 6.90% of the
aggregate principal balance of the pool of mortgage loans as of
the cut-off date, are secured by more than one mortgaged property.
S-35
<PAGE>
See "Description of the Mortgage Pool--Additional Mortgage Loan
Information" in this prospectus supplement.
Mortgaged properties owned by related borrowers are likely to:
o have common management, increasing the risk that financial or
other difficulties experienced by the property manager could have
a greater impact on the pool of mortgage loans; and
o have common general partners, which could increase the risk that a
financial failure or bankruptcy filing would have a greater impact
on the pool of mortgage loans.
Except as described below, the terms of the mortgage loans generally
require that the borrowers covenant to be single-purpose entities, although
in many cases the borrowers have previously owned property other than the
related mortgaged property or may not otherwise be required to observe all
covenants and conditions which typically are required in order for them to be
viewed under standard rating agency criteria as "special purpose entities."
In general, the borrowers' organizational documents or the terms of the
mortgage loans limit their activities to the ownership of only the related
mortgaged property or properties and limit the borrowers' ability to incur
additional indebtedness. These provisions are designed to mitigate the
possibility that the borrower's financial condition would be adversely
impacted by factors unrelated to the mortgaged property and the mortgage loan
in the pool. However, we cannot assure you that the related borrowers will
comply with these requirements. In addition, the terms of 4 mortgage loans
(identified as Loan No. 4, 17, 61 and 80 on Annex A to this prospectus
supplement), representing approximately 3.51% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, do not require
the related borrower to be a single-purpose entity. See "Certain Legal
Aspects of Mortgage Loans--Bankruptcy Laws" in the prospectus.
CROSS-COLLATERALIZED MORTGAGE LOANS ENTAIL RISKS
3 groups, each consisting of 2 mortgage loans (identified as Loan No. 31
and 54, 88 and 89 and 97 and 98 on Annex A to this prospectus supplement),
representing approximately 5.60%, 2.70% and 1.17%, respectively, of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, are cross-collateralized or cross-defaulted. In addition, 1 mortgage
loan (identified as Loan No. 32 on Annex A to this prospectus supplement),
representing 5.17% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date provides that the individual liens that
constitute the loan are cross-collateralized and cross-defaulted with each
other. These arrangements seek to reduce the risk that the inability of a
mortgaged property securing each such mortgage loan to generate net operating
income sufficient to pay debt service will result in defaults and ultimate
losses. However, to the extent any property is released through prepayment or
defeasance, such cross-collateralization may not provide sufficient credit
enhancement, even if the prepaid or defeased loan provided for a release
price greater than the allocated loan amount.
Cross-collateralization arrangements involving more than one borrower
could be challenged as a fraudulent conveyance by creditors of a borrower or
by the representative of the bankruptcy estate of a borrower if a borrower
were to become a debtor in a bankruptcy case. Generally, under federal and
most state fraudulent conveyance statutes, the incurring of an obligation or
the transfer of property by a person will be subject to avoidance under
certain circumstances if the person did not receive fair consideration or
reasonably equivalent value in exchange for such obligation or transfer and
(i) was insolvent or was rendered insolvent by such obligation or transfer,
(ii) was engaged in business or a transaction, or was about to engage in
business or a transaction, for which any property remaining with the person
was an unreasonably small capital or (iii) intended to, or believed that it
would, incur debts that would be beyond the person's ability to pay as such
debts matured. Accordingly, a lien granted by a borrower to secure repayment
of another borrower's mortgage loan could be avoided if a court were to
determine that (i) such borrower was insolvent at the time of granting the
lien, was rendered insolvent by the granting of the lien, or was left with
inadequate capital, or was not able to pay its debts as they matured and (ii)
the borrower did not, when it allowed its mortgaged property to be encumbered
by a lien securing the entire
S-36
<PAGE>
indebtedness represented by the other mortgage loan, receive fair
consideration or reasonably equivalent value for pledging such mortgaged
property for the equal benefit of the other borrower. If the lien is avoided,
the lender would lose the benefits afforded by such lien.
ABILITY TO INCUR OTHER BORROWINGS ENTAILS RISK
The mortgage loans generally prohibit the borrower from incurring any
additional debt secured by the mortgaged property without the consent of the
lender. As of the cut-off date, the mortgage loan sellers have informed us
that they are aware of the following indebtedness with respect to the
mortgage loans.
o The terms of 1 mortgage loan (identified as Loan No. 55 on Annex A
to this prospectus supplement), representing approximately 0.78%
of the aggregate principal balance of the pool of mortgage loans
as of the cut-off date, permits the related borrower to incur (1)
unsecured debt for the purpose of constructing tenant improvements
pursuant to certain leases approved by the mortgagee that,
together with trade payables, does not exceed 4% of the
outstanding principal amount of the mortgage loan and (2)
unsecured subordinate debt that matures at least 367 days after
the maturity of the mortgage loan, is subject to an intercreditor
agreement acceptable to the mortgagee and does not exceed,
together with trade payables, the unsecured debt for the purpose
of constructing tenant improvements and the outstanding balance of
the mortgage loan, $6,825,000.
o With respect to 1 mortgage loan (identified as Loan No. 44 on
Annex A to this prospectus supplement), representing approximately
2.40% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, the related borrower has unsecured
debt payable to an affiliate in an amount not to exceed
$4,040,000, which is subject to the terms of an affiliate advance
subordination agreement.
o The Mortgaged Property securing 1 mortgage loan (identified as
Loan No. 34 on Annex A to this prospectus supplement),
representing approximately 4.59% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, also
secures a loan payable to the related borrower by an affiliate
which owns the fee interest in the related Mortgaged Property. At
the origination of the mortgage loan the debt was $7,765,655, and
has been subordinated to the mortgage loan and assigned to the
mortgagee by the borrower.
o The terms of certain loans permit or require the borrowers to post
letters of credit and/or surety bonds for the benefit of the
mortgage loan, which may constitute a contingent reimbursement
obligation of the related borrower or an affiliate. The issuing
bank or surety will not typically agree to subordination and
standstill protection benefiting the mortgagee.
Substantially all of the mortgage loans permit the related borrower to
incur limited indebtedness in the ordinary course of business that is not
secured by the related mortgaged property. Moreover, in general, any borrower
that does not meet single-purpose entity criteria may not be restricted from
incurring unsecured debt.
Additionally, although the mortgage loans generally restrict the pledging
of general partnership and managing member equity interests in a borrower
subject to certain exceptions, the terms of the mortgages generally permit,
subject to certain limitations, the transfer or pledge of less than a certain
specified portion of the limited partnership or non-managing membership
equity interests in a borrower. Moreover, in general, the parent entity of
any borrower that does not meet single purpose entity criteria may not be
restricted in any way from incurring mezzanine or other debt not secured by
the related mortgaged property.
When a mortgage loan borrower (or its constituent members) also has one or
more other outstanding loans (even if they are subordinated loans), the trust
is subjected to additional risk. The borrower may have difficulty servicing
and repaying multiple loans. The existence of another loan will generally
also make it more difficult for the borrower to obtain refinancing of the
mortgage loan and may thereby jeopardize repayment of the mortgage loan.
Moreover, the need to service additional debt may reduce the cash flow
available to the borrower to operate and maintain the mortgaged property.
S-37
<PAGE>
Additionally, if the borrower (or its constituent members) defaults on
the mortgage loan and/or any other loan, actions taken by other lenders such
as a foreclosure or an involuntary petition for bankruptcy against the
borrower could impair the security available to the trust, including the
mortgaged property, or stay the trust's ability to foreclose during the
course of the bankruptcy case. The bankruptcy of another lender also may
operate to stay foreclosure by the trust. The trust may also be subject to
the costs and administrative burdens of involvement in foreclosure or
bankruptcy proceedings or related litigation.
See "Description of the Mortgage Pool--General" in this prospectus
supplement and "Certain Legal Aspects of Mortgage Loans--Subordinate
Financing" in the prospectus.
BORROWER MAY BE UNABLE TO REPAY REMAINING PRINCIPAL BALANCE ON MATURITY DATE
OR ANTICIPATED PREPAYMENT DATE
97 of the mortgage loans (including 1 mortgage loan, representing
approximately 0.78% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date, which pays interest only over its term
and 1 mortgage loan, representing 1.95% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date, which pays interest only
for the first 24 months of its term), representing approximately 98.96% of
the aggregate principal balance of the pool of mortgage loans as of the
cut-off date, are expected to have substantial remaining principal balances
as of their respective anticipated prepayment dates or stated maturity dates.
95 of these mortgage loans, representing approximately 91.71% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date (including 1 mortgage loan, representing approximately 0.78% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date which pays interest-only until the maturity date), require balloon
payments at their stated maturity, and the remaining 2 mortgage loans,
representing approximately 7.25% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date, will have a substantial
balance outstanding at their anticipated prepayment dates. 85 of the mortgage
loans, representing approximately 89.93% of the aggregate principal balance
of the pool of mortgage loans as of the cut-off date, mature in the year
2010. Mortgage loans with substantial remaining principal balances at their
stated maturity (i.e., "balloon loans") involve greater risk than fully
amortizing loans. This is because the borrower may be unable to repay the
loan at that time.
A borrower's ability to repay a loan on its stated maturity date or
anticipated prepayment 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 the prevailing interest rates;
o the fair market value of the related properties;
o the borrower's equity in the related properties;
o the borrower's financial condition;
o the operating history and occupancy level of the property;
o reductions in government assistance/rent subsidy programs;
o the tax laws; and
o the prevailing general and regional economic conditions.
The availability of funds in the credit markets fluctuates over time.
We cannot assure you that each borrower will have the ability to repay the
remaining principal balances on the pertinent date.
See "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans" in this prospectus supplement and "Risk Factors--Borrowers
May Be Unable to Make Balloon Payments" in the prospectus.
S-38
<PAGE>
COMMERCIAL, MULTIFAMILY AND MANUFACTURED HOUSING COMMUNITY LENDING IS
DEPENDENT UPON NET OPERATING INCOME
The mortgage loans are secured by various income-producing commercial,
multifamily and/or manufactured housing community properties. Commercial,
multifamily and manufactured housing community lending are generally thought
to expose a lender to greater risk than residential one-to-four family
lending because they typically involve larger loans to a single borrower or
groups of related borrowers.
The repayment of a commercial, multifamily or manufactured housing
community loan is typically dependent upon the ability of the applicable
property to produce cash flow through the collection of rents. Even the
liquidation value of a commercial property is determined, in substantial
part, by the capitalization of the property's cash flow. However, net
operating income can be volatile and may be insufficient to cover debt
service on the loan at any given time.
The net operating incomes and property values of the mortgaged properties
may be adversely affected by a large number of factors. Some of these factors
relate to the properties themselves, such as:
o the adequacy of the property's management and maintenance;
o the age, design and construction quality of the properties;
o management's ability to convert an unsuccessful property to an
alternate use;
o perceptions regarding the safety, convenience and attractiveness
of the properties;
o the proximity and attractiveness of competing properties;
o new construction of competing properties in the same market;
o the adequacy of the property's management and maintenance;
o increases in operating expenses;
o dependence on tenant(s) in a particular business or industry;
o an increase in the capital expenditures needed to maintain the
properties or make improvements;
o a decline in the financial condition of a major tenant;
o rent control laws;
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 retail
space, office space or multifamily housing;
o demographic factors;
o consumer confidence;
o 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;
S-39
<PAGE>
o in the case of rental properties, the rate at which new rentals
occur; and
o the property's "operating leverage" which is generally 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, such as short-term or
month-to-month leases, and may lead to higher rates of delinquency or
defaults.
TENANT CONCENTRATION ENTAILS RISK
A deterioration in the financial condition of a tenant can be particularly
significant if a mortgaged property is leased to a single tenant or if any
tenant represents a significant portion of the rental income. Mortgaged
properties leased to a single tenant or a tenant that represents a
significant portion of the rental income also are more susceptible to
interruptions of cash flow if such tenant fails to renew its lease. This is
so because the financial effect of the absence of rental income may be
severe; more time may be required to re-lease the space; and substantial
capital costs may be incurred to make the space appropriate for replacement
tenants. In this respect, in addition to the credit tenant lease loans, 4
mortgage loans, representing approximately 4.31% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, are secured by
mortgaged properties leased to a single tenant. Most of the leases for each
of these single tenants extend beyond the stated maturity date of the
mortgage loans. Additionally, the underwriting of certain of these mortgage
loans leased to single tenants may have taken into account the
creditworthiness of the tenants under the related leases and consequently may
have higher loan-to-value ratios and lower debt service coverage ratios than
other types of mortgage loans.
Retail and office properties also may be adversely affected if there is a
concentration of particular tenants among the mortgaged properties or of
tenants in a particular business or industry. In this regard, see "--Retail
Properties Have Special Risks" and "--Office Properties Have Special Risks"
below.
CERTAIN ADDITIONAL RISKS RELATING TO TENANTS
The income from, and market value of, the mortgaged properties leased to
various tenants would be adversely affected if:
o space in the mortgaged properties could not be leased or
re-leased;
o tenants were unable to meet their lease obligations;
o a significant tenant were to become a debtor in a bankruptcy case;
or
o rental payments could not be collected for any other reason.
Repayment of the mortgage loans secured by retail, office and industrial
properties will be affected by the expiration of leases and the ability of
the respective borrowers to renew the leases or re-let the space on
comparable terms. Additionally, mortgage loans may have concentrations of
leases expiring at varying rates in varying percentages.
Even if vacated space is successfully relet, the costs associated with
reletting, including tenant improvements and leasing commissions, could be
substantial and could reduce cash flow from the mortgaged properties.
Moreover, if a tenant defaults in its obligations to a borrower, the borrower
may incur substantial costs and experience significant delays associated with
enforcing its rights and protecting its investment, including costs incurred
in renovating and re-letting the property.
Additionally, in certain jurisdictions, if tenant leases are subordinated
to the liens created by the mortgage but do not contain attornment provisions
(provisions requiring the tenant to recognize a successor owner following
foreclosure as landlord under the lease), the leases may terminate at
tenant's option upon the transfer of the property to a foreclosing lender or
purchaser at foreclosure. Accordingly, if a mortgaged property is located in
such a jurisdiction and is leased to one or more desirable tenants under
S-40
<PAGE>
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.
Additionally, with respect to certain of the mortgage loans, the related
borrower has given to certain tenants a right of first refusal in the event a
sale is contemplated or purchase option to purchase all or a portion of the
mortgaged property. Such provisions, if not waived, may impede the
mortgagee's ability to sell the related mortgaged property at foreclosure.
MORTGAGED PROPERTIES LEASED TO MULTIPLE TENANTS ALSO HAVE RISKS
If a mortgaged property has multiple tenants, re-leasing expenditures may
be more frequent than in the case of mortgaged properties with fewer tenants,
thereby reducing the cash flow available for debt service payments.
Multi-tenanted mortgaged properties also may experience higher continuing
vacancy rates and greater volatility in rental income and expenses.
TENANT BANKRUPTCY ENTAILS RISKS
The bankruptcy or insolvency of a major tenant, or a number of smaller
tenants, in retail, office and industrial properties may adversely affect the
income produced by a mortgaged property. Under the federal bankruptcy code a
tenant has the option of assuming 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 reserved under the
lease for the periods prior to the bankruptcy petition (or earlier surrender
of the leased premises) which are unrelated to the rejection, plus the
greater of one year's rent or 15% of the remaining reserved rent (but not
more than three years' rent).
MORTGAGE LOANS ARE NONRECOURSE AND ARE NOT INSURED OR GUARANTEED
The mortgage loans are not insured or guaranteed by any person or entity,
governmental or otherwise.
Each mortgage loan is a nonrecourse loan, except with respect to
liabilities resulting from certain matters such as fraud or misappropriation
of funds. If a default occurs, recourse generally may be had only against the
specific properties and other assets that have been pledged to secure the
loan. Payment prior to maturity is consequently dependent primarily on the
sufficiency of the net operating income of the mortgaged property. Payment at
maturity is primarily dependent upon the market value of the mortgaged
property or the borrower's ability to refinance the property.
OFFICE PROPERTIES HAVE SPECIAL RISKS
Office properties secure 22 of the mortgage loans representing
approximately 23.89% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date.
A large number of factors may adversely affect the value of office
properties, including:
o the quality of an office building's tenants;
o the physical attributes of the building in relation to competing
buildings (e.g., age, condition, design, access to transportation
and ability to offer certain amenities, such as sophisticated
building systems);
o the failure of federal, state and local government-sponsored
tenants to sustain relevant appropriations, resulting in such
tenants terminating their leases;
o a decline in the business of tenants, resulting in tenants ceasing
operations, not renewing their leases or filing for bankruptcy;
o the desirability of the area as a business location; and
o the strength and nature of the local economy, including labor
costs and quality, tax environment and quality of life for
employees.
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Moreover, the cost of refitting office space for a new tenant is often
higher than the cost of refitting other types of property for new tenants.
See "--Risks Relating to Loan Concentrations" above.
Technology and internet start-up companies have recently experienced a
variety of factors that tend to make their businesses relatively volatile.
Many of those companies have little or no operating history, their owners and
management are often inexperienced and such companies may be heavily
dependent on obtaining venture capital financing. In addition, technology and
internet start-up companies often require significant build-out related to
special technology which may adversely affect the ability of the landlord to
relet the properties. The relative instability of these tenants may have an
adverse impact on certain of the properties.
RETAIL PROPERTIES HAVE SPECIAL RISKS
Retail properties secure 32 of the mortgage loans representing
approximately 23.43% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date.
The quality and success of a retail property's tenants significantly
affect the property's value. For example, if the sales revenues of retail
tenants were to decline, rents tied to a percentage of gross sales revenues
may decline and those tenants may be unable to pay their rent or other
occupancy costs.
The presence or absence of an "anchor tenant" in a shopping center also
can be important because anchors play a key role in generating customer
traffic and making a center desirable for other tenants. An "anchor tenant"
is usually proportionately larger in size and is important in attracting
customers to a retail property, whether or not it is located on the related
mortgaged property. 20 of the mortgage loans, representing approximately
16.77% of the aggregate principal balance of the pool of mortgage loans as of
the cut-off date, are secured by retail properties that are considered by the
applicable mortgage loan seller to be "anchored" and 12 of the mortgage
loans, representing approximately 6.65% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date, are secured by retail
properties that are considered by the applicable mortgage loan seller to be
"unanchored".
If anchor stores in a mortgaged property were to close, the related
borrower may be unable to replace those anchors in a timely manner or without
suffering adverse economic consequences. Certain of the tenants or anchor
stores at the retail properties may have co-tenancy clauses and/or operating
covenants in their leases or operating agreements which permit those tenants
or anchor stores to cease operating under certain conditions including
without limitation certain other stores not being open for business at the
mortgaged property or a subject store not meeting the minimum sales
requirement under its lease. We cannot assure you that such space will be
occupied or that the related mortgaged property will not suffer adverse
economic consequences.
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 pool of mortgage loans, as well as the income from, and market value of,
the mortgaged properties.
Moreover, additional competing retail properties may be built in the areas
where the retail properties are located.
In addition, various factors may affect the economic performance of retail
properties, including:
o local competitive conditions;
o adverse changes in consumer spending;
o quality of management;
o need to make major improvements to satisfy tenants; and
o a decline in the business of tenants, resulting in tenants ceasing
operations, not renewing their leases, going dark or filing for
bankruptcy.
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MULTIFAMILY PROPERTIES HAVE SPECIAL RISKS
Multifamily properties secure 19 of the mortgage loans representing
approximately 21.38% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date. A large number of factors may
adversely affect the value and successful operation of a multifamily
property, including:
o the physical attributes of the apartment building such as its age,
appearance and construction quality;
o local employer relocations and military base closings;
o the location of the property, for example, a change in the
neighborhood over time;
o capability of management in renting units;
o the ability of management to provide adequate maintenance and
insurance;
o the types of services or amenities that the property provides;
o the property's reputation;
o the level of mortgage interest rates, which may encourage tenants
to purchase rather than lease housing;
o in the case of student housing facilities, the reliance on the
financial well-being of the colleges or universities to which they
relate, as well as physical layouts which may not be readily
convertible to traditional multifamily use;
o the presence of competing properties;
o the tenant mix, such as the tenant population being predominantly
students or being heavily dependent on workers from a particular
business or personnel from a local military base;
o local competitive conditions;
o quality of management;
o dependence upon governmental programs that provide rent subsidies
to tenants pursuant to tenant voucher programs, which vouchers may
be used at other properties and influence tenant mobility;
o adverse local or national economic conditions, which may limit the
amount of rent that may be charged and may result in a reduction
of timely rent payments or a reduction in occupancy levels; and
o state and local regulations, which may affect the building owner's
ability to increase rent to market rent for an equivalent
apartment.
HOTEL PROPERTIES HAVE SPECIAL RISKS
Hotel properties secure 4 of the mortgage loans representing approximately
14.24% of the aggregate principal balance of the pool of mortgage loans as of
the cut-off date.
Various factors may adversely affect the economic performance of a hotel,
including:
o adverse economic and social conditions, either local, regional or
national (which may limit the amount that can be charged for a
room and reduce occupancy levels);
o the construction of competing hotels or resorts;
o continuing expenditures for modernizing, refurbishing and
maintaining existing facilities prior to the expiration of their
anticipated useful lives;
o a deterioration in the financial strength or managerial
capabilities of the owner and operator of a hotel; and
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o changes in travel patterns caused by changes in access, energy
prices, strikes, relocation of highways, the construction of
additional highways or other factors.
Because hotel rooms generally are rented for short periods of time, the
financial performance of hotels tends to be affected by adverse economic
conditions and competition more quickly than other commercial properties.
Moreover, the hotel and lodging industry is generally seasonal in nature
and different seasons affect different hotels depending on type and location.
This seasonality can be expected to cause periodic fluctuations in a hotel
property's room and restaurant revenues, occupancy levels, room rates and
operating expenses.
The liquor licenses for most of the mortgaged properties are held by
affiliates of the mortgagors, unaffiliated managers and operating lessees.
The laws and regulations relating to liquor licenses generally prohibit the
transfer of such licenses to any person. In the event of a foreclosure of a
hotel property that holds a liquor license, the trustee or a purchaser in a
foreclosure sale would likely have to apply for a new license, which might
not be granted or might be granted only after a delay which could be
significant. There can be no assurance that a new license could be obtained
promptly or at all. The lack of a liquor license in a full-service hotel
could have an adverse impact on the revenue from the related mortgaged
property or on the hotel's occupancy rate.
RISKS RELATING TO AFFILIATION WITH A FRANCHISE OR HOTEL MANAGEMENT COMPANY
The 4 mortgage loans secured by hotel properties, representing
approximately 14.24% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date, are affiliated with a franchise or
hotel management company through a franchise or management agreement. The
performance of a hotel property affiliated with a franchise or hotel
management company depends in part on:
o the continued existence and financial strength of the franchisor
or hotel management company;
o the public perception of the franchise or hotel chain service
mark; and
o the duration of the franchise licensing or management agreements.
Any provision in a franchise agreement or management agreement providing
for termination because of a bankruptcy of a franchisor or manager generally
will not be enforceable. Replacement franchises may require significantly
higher fees.
The transferability of franchise license agreements is restricted. In the
event of a foreclosure, the lender or its agent would not have the right to
use the franchise license without the franchisor's consent. Conversely, in
the case of certain mortgage loans, the lender may be unable to remove a
franchisor or a hotel management company that it desires to replace following
a foreclosure.
INDUSTRIAL PROPERTIES HAVE SPECIAL RISKS
Industrial properties secure 9 of the mortgage loans representing
approximately 9.79% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date. Significant factors determining the
value of industrial properties are:
o the quality of tenants;
o building design and adaptability; and
o the location of the property.
Concerns about the quality of tenants, particularly major tenants, are
similar in both office properties and industrial properties, although
industrial properties are more frequently dependent on a single or few
tenants.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment
(for example, a decline in defense spending), and a particular
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industrial or warehouse property that suited the needs of its original
tenant may be difficult to relet to another tenant or may become functionally
obsolete relative to newer properties. In addition, lease terms with respect
to industrial properties are generally for shorter periods of time and may
result in a substantial percentage of leases expiring in the same year at any
particular industrial property.
Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics which are generally desirable to a
warehouse/industrial property include high clear ceiling heights, wide column
spacing, a large number of bays (loading docks) and large bay depths,
divisibility, large minimum truck turning radii and overall functionality and
accessibility.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
MANUFACTURED HOUSING COMMUNITY PROPERTIES HAVE SPECIAL RISKS
5 of the mortgage loans, representing approximately 3.26% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, are
secured by manufactured housing community properties. Loans secured by liens
on manufactured housing community properties pose risks not associated with
loans secured by liens on other types of income producing real estate.
The successful operation of a manufactured housing community property may
depend upon the number of other competing residential developments in the
local market, such as:
o other manufactured housing communities;
o apartment buildings; and
o site built single family homes.
Other factors may also include:
o the physical attributes of the community, including its age and
appearance;
o location of the manufactured housing community;
o the ability of management to provide adequate maintenance and
insurance;
o the type of services or amenities it provides;
o the property's reputation; and
o state and local regulations, including rent control and rent
stabilization.
The manufactured housing community properties are "special purpose"
properties that could not be readily converted to general residential, retail
or office use. Thus, if the operation of any of the manufactured housing
community properties becomes unprofitable due to competition, age of the
improvements or other factors such that the borrower becomes unable to meet
its obligations on the related mortgage loan, the liquidation value of that
manufactured housing community property may be substantially less, relative
to the amount owing on the related mortgage loan, than would be the case if
the manufactured housing community property were readily adaptable to other
uses.
SELF-STORAGE PROPERTIES HAVE SPECIAL RISKS
Self-storage properties secure 6 of the mortgage loans, representing
approximately 2.98% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date. Self-storage properties are considered
vulnerable to competition, because both acquisition costs and break-even
occupancy are relative low. The conversion of self-storage facilities to
alternative uses would generally require substantial capital expenditures,
Thus, if the operation of any of the self-storage mortgaged properties
becomes unprofitable due to:
o decreased demand;
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o competition;
o lack of proximity to apartment complexes or commercial users;
o apartment tenants moving to single-family homes;
o decline in services rendered, including security;
o dependence on business activity ancillary to renting units;
o age of improvements; or
o other factors so that the borrower becomes unable to meet its
obligations on the related mortgage loan, the liquidation value of
that self-storage mortgage property may be substantially less,
relative to the amount owing on the mortgage loan, than if the
self-storage mortgaged property were readily adaptable to other
uses.
Tenant privacy, anonymity and efficient access may heighten environmental
risks. No environmental assessment of a mortgaged property included an
inspection of the contents of the self-storage units included in the
self-storage mortgaged properties and there is no assurance that all of the
units included in the self-storage mortgaged properties are free from
hazardous substances or other pollutants or contaminants or will remain so in
the future.
CREDIT TENANT LEASE PROPERTIES HAVE SPECIAL RISKS
Credit tenant lease properties secure 5 of the mortgage loans,
representing approximately 1.04% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date. The credit tenant lease loans
are secured by mortgaged properties subject to credit lease obligations of
certain tenants which are subject to certain offset and other rights for
landlord defaults. Such properties are leased to subsidiaries of CVS
Corporation (whose long term unsecured debt is rated "A" by S&P and "A3" by
Moody's), the lease obligations of which are guaranteed by CVS Corporation.
Such rating reflects the rating agency's assessment of the long-term
unsecured obligations of such entity only, and do not imply an assessment of
the likelihood that the credit tenant leases will not be terminated or such
loans repaid.
LACK OF SKILLFUL PROPERTY MANAGEMENT ENTAILS RISKS
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.
Properties deriving revenues primarily from short-term sources, such as
short-term or month-to-month leases, are generally more management intensive
than properties leased to creditworthy tenants under long-term leases.
We make no representation or warranty as to the skills of any present or
future managers. In many cases, the property manager is an affiliate of the
borrower and may not manage properties for non-affiliates. Additionally, we
cannot assure you that the property managers will be in a financial condition
to fulfill their management responsibilities throughout the terms of their
respective management agreements.
SOME MORTGAGED PROPERTIES MAY NOT BE READILY CONVERTIBLE TO ALTERNATIVE USES
Some of the mortgaged properties may not be readily convertible to
alternative uses if those properties were to become unprofitable for any
reason. Converting commercial properties to alternate uses generally
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requires substantial capital expenditures. The liquidation value of a
mortgaged property consequently may be substantially less than would be the
case if the property were readily adaptable to other uses.
Zoning or other restrictions also may prevent alternative uses. See
"--Zoning Compliance and Use Restrictions" below.
MORTGAGE LOANS SECURED BY LEASEHOLD INTERESTS MAY EXPOSE INVESTORS TO GREATER
RISKS OF DEFAULT AND LOSS
6 of the mortgage loans, representing approximately 12.12% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, are secured by liens on the related borrower's leasehold interest in
all or a portion of the related real property, but not by the corresponding
ownership interest in the property that is subject to the ground lease. 1 of
these mortgage loans, representing 5.17% of the initial pool balance,
consists of nine properties, 7 of which (representing 76.07% of the loan's
allocated balance) are secured by a fee simple estate and 2 of which
(representing 23.93% of the loan's allocated balance) are secured by a
leasehold estate in the commercial property. Because of the possible
termination of the related ground lease, lending on a leasehold interest in a
real property may be riskier than lending on a fee ownership interest in that
property. See "Certain Legal Aspects of the Mortgage
Loans--Foreclosure--Leasehold Risks" in the prospectus.
LIMITATIONS OF APPRAISALS
Appraisals were obtained with respect to each of the mortgaged properties
at or about the time of the origination of the applicable mortgage loan. In
general, appraisals represent the analysis and opinion of qualified
appraisers and are not guarantees of present or future value. One appraiser
may reach a different conclusion than the conclusion that would be reached if
a different appraiser were appraising that property. Moreover, appraisals
seek to establish the amount a typically motivated buyer would pay a
typically motivated seller and, in certain cases, may have taken into
consideration the purchase price paid by the borrower. That amount could be
significantly higher than the amount obtained from the sale of a mortgaged
property under a distress or liquidation sale. We cannot assure you that the
information set forth in this prospectus supplement regarding appraised
values or loan-to-value ratios accurately reflects past, present or future
market values of the mortgaged properties.
YOUR LACK OF CONTROL OVER THE TRUST FUND CAN CREATE RISKS
You and other certificateholders generally do not have a right to vote and
do not have the right to make decisions with respect to the administration of
the trust. See "Servicing of the Mortgage Loans--General" in this prospectus
supplement. Those decisions are generally made, subject to the express terms
of the pooling and servicing agreement, by the master servicer, the trustee
or the special servicer, as applicable. Any decision made by one of those
parties in respect of the trust, even if that decision is determined to be in
your best interests by that party, may be contrary to the decision that you
or other certificateholders would have made and may negatively affect your
interests.
POTENTIAL CONFLICTS OF INTEREST
An affiliate of the special servicer intends to purchase a portion of the
Series 2000-1 non-offered certificates. Additionally, affiliates of General
Electric Capital Corporation and the master servicer may purchase a portion
of the Series 2000-1 offered and non-offered certificates. This could cause a
conflict between the special servicer's or master servicer's duties to the
trust under the pooling and servicing agreement or subservicing agreement, as
applicable, and its interest as a holder of a certificate. However, the
pooling and servicing agreement provides that the mortgage loans are required
to be administered in accordance with the servicing standards without regard
to ownership of any certificate by a servicer or any of their affiliates. See
"Servicing of the Mortgage Loans--General" in this prospectus supplement.
In addition, any of those parties may, especially if it or an affiliate
holds Series 2000-1 non-offered certificates, or has financial interests in
or other financial dealings with a borrower under any of the mortgage loans,
have interests when dealing with the mortgage loans that are in conflict with
those of holders of the offered certificates. For instance, a special
servicer that holds Series 2000-1 non-offered
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certificates could seek to reduce the potential for losses allocable to
those certificates from a troubled mortgage loan by deferring acceleration in
hope of maximizing future proceeds. However, that action could result in less
proceeds to the trust than would be realized if earlier action had been
taken. In general, a servicer is not required to act in a manner more
favorable to the offered certificates or any particular class of offered
certificates than to Series 2000-1 non-offered certificates.
In addition, each servicer services and will, in the future, service, in
the ordinary course of its business, existing and new loans for third
parties, including portfolios of loans similar to the loans that will be
included in the trust. The real properties securing these other loans may be
in the same markets as, and compete with, certain of the real properties
securing the loans that will be included in the trust. Consequently,
personnel of any of the servicers may perform services, on behalf of the
trust, with respect to the mortgage loans at the same time as they are
performing services, on behalf of other persons, with respect to other
mortgage loans secured by properties that compete with the real properties
securing the mortgage loans. This may pose inherent conflicts for the master
servicer, special servicer or a primary servicer.
In addition, certain of the mortgage loans included in the trust may have
been refinancings of debt previously held by a mortgage loan seller or an
affiliate of a mortgage loan seller and the mortgage loan sellers or their
affiliates may have or have had equity investments in the borrowers or
properties under certain of the mortgage loans included in the trust. Each of
the mortgage loan sellers and their affiliates have made and/or may make
loans to, or equity investments in, affiliates of the borrowers under the
mortgage loans. Additionally, in the case of 1 mortgage loan (identified as
Loan No. 17 on Annex A to this prospectus supplement), representing
approximately 0.26% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date, the respective mortgage loan seller
has other loans to the same borrowing entity that are not part of the pool of
mortgage loans.
The managers of the mortgaged properties and the borrowers may experience
conflicts of interest in the management and/or ownership of the mortgaged
properties because:
o a substantial number of the mortgaged properties are managed by
property managers affiliated with the respective borrowers;
o these property managers also may manage and/or franchise
additional properties, including properties that may compete with
the mortgaged properties; and
o affiliates of the managers and/or the borrowers, or the managers
and/or the borrowers themselves, also may own other properties,
including competing properties.
DIRECTING CERTIFICATEHOLDER MAY DIRECT SPECIAL SERVICER ACTIONS
In connection with the servicing of the specially serviced mortgage loans,
the special servicer may, at the direction of the directing
certificateholder, take actions with respect to the specially serviced
mortgage loans that could adversely affect the holders of some or all of the
classes of offered certificates. The directing certificateholder will be
controlled by the controlling class certificateholders, which may have
interests in conflict with those of the certificateholders of the classes of
offered certificates. As a result, it is possible that the directing
certificateholder may direct the special servicer to take actions which
conflict with the interests of certain classes of the offered certificates.
However, the special servicer is not permitted to take actions which are
prohibited by law or violate the servicing standards. See "Servicing of the
Mortgage Loans--General" in this prospectus supplement.
BANKRUPTCY PROCEEDINGS ENTAIL CERTAIN RISKS
Under federal bankruptcy law, the filing of a petition in bankruptcy by or
against a borrower will stay the sale of the mortgaged property owned by that
borrower, as well as the commencement or continuation of a foreclosure
action. In addition, even 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-current value of
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the mortgaged property, which 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: (1) grant
a debtor a reasonable time to cure a payment default on a mortgage loan; (2)
reduce periodic payments due under a mortgage loan; (3) change the rate of
interest due on a mortgage loan; or (4) 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 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.
Additionally, pursuant to subordination agreements for certain of the
mortgage loans, the subordinate lenders may have agreed that they will not
take any direct actions with respect to the related subordinated debt,
including any actions relating to the bankruptcy of the borrower, and that
the holder of the mortgage loan will have all rights to direct all such
actions. There can be no assurance that in the event of the borrower's
bankruptcy, a court will enforce such restrictions against a subordinated
lender.
In its recent decision in In re 203 North LaSalle Street Partnership, 246
B.R. 325 (Bankr. N.D. Ill. March 10, 2000), the United States Bankruptcy
Court for the Northern District of Illinois refused to enforce a provision of
a subordination agreement that allowed a first mortgagee to vote a second
mortgagee's claim with respect to a Chapter 11 reorganization plan on the
grounds that prebankruptcy contracts cannot override rights expressly
provided by the Bankruptcy Code. This holding, which one court has already
followed, potentially limits the ability of a senior lender to accept or
reject a reorganization plan or to control the enforcement of remedies
against a common borrower over a subordinated lender's objections.
Under federal bankruptcy law, the lender will be stayed from enforcing a
borrower's assignment of rents and leases. Federal bankruptcy law also may
interfere with the master servicer's or special servicer's ability to enforce
lockbox requirements. The legal proceedings necessary to resolve these issues
can be time consuming and costly and may significantly delay or diminish 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 trustee'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.
RISKS RELATING TO PREPAYMENTS AND REPURCHASES
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, defaults and liquidations or repurchases upon
breaches of representations and warranties. BECAUSE THE NOTIONAL AMOUNT OF
THE CLASS X CERTIFICATES IS BASED UPON THE OUTSTANDING PRINCIPAL BALANCE OF
ALL OTHER CLASSES OF CERTIFICATES (OTHER THAN THE CLASS S CERTIFICATES AND
THE RESIDUAL CERTIFICATES), THE YIELD TO MATURITY ON THE CLASS X CERTIFICATES
WILL BE EXTREMELY SENSITIVE TO THE RATE AND TIMING OF PREPAYMENTS OF
PRINCIPAL, LIQUIDATIONS AND PRINCIPAL LOSSES. ALSO, A RAPID RATE OF PRINCIPAL
PREPAYMENTS, LIQUIDATIONS AND/OR PRINCIPAL LOSSES COULD RESULT IN THE FAILURE
TO RECOUP THE INITIAL INVESTMENT IN THE CLASS X CERTIFICATES.
The yield on the Class X, Class B, Class C, Class D and Class E
Certificates could also be adversely affected if mortgage loans with higher
interest rates pay faster than the mortgage loans with lower interest rates,
since those classes bear interest at a rate limited by the weighted average
net mortgage rate of the mortgage loans. The pass-through rates on those
classes of certificates may be limited by the weighted average of the net
interest rates on the mortgage loans even if principal prepayments do not
occur.
The investment performance of your certificates may vary materially and
adversely from your expectations if the actual rate of prepayment on the
mortgage loans is higher or lower than you anticipate.
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Any changes in the weighted average lives of your certificates may
adversely affect your yield. Prepayments resulting in a shortening of
weighted average lives of your certificates may be made at a time of low
interest rates when you may be unable to reinvest the resulting payment of
principal on your certificates at a rate comparable to the effective yield
anticipated by you in making your investment in the certificates, while
delays and extensions resulting in a lengthening of those weighted average
lives may occur at a time of high interest rates when you may have been able
to reinvest principal payments that would otherwise have been received by you
at higher rates.
Although all of the mortgage loans have prepayment protection in the form
of lockout periods with defeasance provisions or with yield maintenance
provisions, we cannot assure you that the related borrowers will refrain from
prepaying their mortgage loans due to the existence of yield maintenance
charges or prepayment provisions or 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 lock-out period;
o the level of prevailing interest rates;
o the availability of mortgage credit;
o the applicable yield maintenance charges;
o the master servicer's or special servicer's ability to enforce
those charges or premiums;
o the failure to meet certain requirements for the release of
escrows;
o the occurrence of casualties or natural disasters; and
o economic, demographic, tax, legal or other factors.
The mortgage loans do not require a yield maintenance charge for
prepayments in connection with a casualty or condemnation unless, in the case
of most of the mortgage loans, an event of default has occurred and is
continuing. Certain shortfalls in interest as a result of involuntary
prepayments may reduce the available distribution amount. In addition, if a
mortgage loan seller repurchases any mortgage loan from the trust due to
breaches of representations or warranties, 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, and no yield
maintenance charge would be payable. A repurchase may adversely affect the
yield to maturity on your certificates.
RISKS RELATING TO ENFORCEABILITY OF YIELD MAINTENANCE CHARGES OR DEFEASANCE
PROVISIONS
Provisions requiring yield maintenance charges or lockout periods may not
be enforceable in some states and under federal bankruptcy law. Provisions
requiring yield maintenance charges also may be interpreted as constituting
the collection of interest for usury purposes. Accordingly, we cannot assure
you that the obligation to pay any yield maintenance charge will be
enforceable. Also, we cannot assure you that foreclosure proceeds will be
sufficient to pay an enforceable yield maintenance charge.
Additionally, although the collateral substitution provisions related to
defeasance do not have the same effect on the certificateholders as
prepayment, we cannot assure you that a court would not interpret those
provisions as requiring a yield maintenance charge. In certain jurisdictions,
those collateral substitution provisions might be deemed unenforceable under
applicable law or public policy, or usurious.
RISKS RELATING TO BORROWER DEFAULT
The rate and timing of delinquencies or defaults on the mortgage loans
will affect:
o the aggregate amount of distributions on the offered certificates;
o their yield to maturity;
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o the rate of principal payments; and
o their weighted average life.
If losses on the mortgage loans exceed the aggregate principal amount of
the classes of certificates subordinated to a particular class, that class
will suffer a loss equal to the full amount of the excess (up to the
outstanding principal amount of that class).
If you calculate your anticipated yield based on assumed rates of defaults
and losses that are lower than the default rate and losses actually
experienced, and those losses are allocated to your certificates, your actual
yield to maturity will be lower than the assumed yield. Under certain extreme
scenarios, that yield could be negative. In general, the earlier a loss borne
by you on 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 lead to your
certificates having a higher percentage ownership interest in the trust and
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 delinquency or
default.
Additionally, the courts of any state may refuse the foreclosure of a
mortgage or deed of trust when an acceleration of the indebtedness would be
inequitable or unjust or the circumstances would render the action
unconscionable. See "Certain Legal Aspects of the Mortgage
Loans--Foreclosure" in the prospectus.
RISKS RELATING TO CERTAIN PAYMENTS
To the extent described in this prospectus supplement, the master
servicer, the special servicer or the trustee, as applicable, will be
entitled to receive interest on unreimbursed advances, compounded monthly, at
the "Prime Rate" as published in The Wall Street Journal as described in this
prospectus supplement. This interest will generally accrue from the date on
which the related advance is made or the related expense is incurred through
the date of reimbursement. In addition, under certain circumstances,
including delinquencies in the payment of principal and/or interest, a
mortgage loan will be specially serviced and the special servicer is entitled
to compensation for special servicing activities. The right to receive
interest on advances or special servicing compensation is senior to the
rights of certificateholders to receive distributions on the offered
certificates. The payment of interest on advances and the payment of
compensation to the special servicer may lead to shortfalls in amounts
otherwise distributable on your certificates.
RISKS OF LIMITED LIQUIDITY AND MARKET VALUE
Your certificates will not be listed on any national securities exchange
or traded on any automated quotation systems of any registered securities
association, and there is currently no secondary market for your
certificates. While the underwriters currently intend to make a secondary
market in the offered certificates, they are not obligated to do so.
Additionally, one or more purchasers may purchase substantial portions of one
or more classes of offered certificates. Accordingly, you may not have an
active or liquid secondary market for your certificates. Lack of liquidity
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 the then-prevailing interest rates.
DIFFERENT TIMING OF MORTGAGE LOAN AMORTIZATION POSES CERTAIN RISKS
As principal payments or prepayments are made on a mortgage loan that is
part of a pool of mortgage loans, the pool will be subject to more
concentration risks with respect to the diversity of mortgaged
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properties, types of mortgaged properties and number of borrowers, as
described above. Classes that have a later sequential designation or a lower
payment priority are more likely to be exposed to this concentration risk
than are classes with an earlier sequential designation or a higher priority.
This is so because principal on the offered certificates is generally payable
in sequential order, and no class entitled to distribution of principal
generally receives principal until the principal amount of the preceding
class or classes entitled to receive principal have been reduced to zero.
SUBORDINATION OF SUBORDINATE OFFERED CERTIFICATES
As described in this prospectus supplement, unless your certificates are
Class A-1, Class A-2 or Class X certificates, your rights to receive
distributions of amounts collected or advanced on or in respect of the
mortgage loans will be subordinated to those of the holders of the offered
certificates with an earlier alphabetical designation.
See "Description of the Certificates--Distributions--Priority" and
"Description of the Certificates--Subordination; Allocation of Collateral
Support Deficit" in this prospectus supplement.
ENVIRONMENTAL RISKS RELATING TO THE MORTGAGED PROPERTIES
The trust could become liable for a material adverse environmental
condition at an underlying real property. Any such potential liability could
reduce or delay payments on the offered certificates.
All of the mortgaged properties were subject to environmental site
assessments at or about the time of origination of the mortgage loans,
including Phase I site assessments or updates of previously performed Phase I
site assessments. In some cases, Phase II site assessments have also been
performed. Although those assessments involved site visits and other types of
review, we cannot assure you that all environmental conditions and risks were
identified.
Except as described below, none of the environmental assessments revealed
any material adverse environmental condition or circumstance at any mortgaged
property except for those:
o which will be remediated or abated in all material respects by the
closing date;
o for which an escrow for the remediation was established;
o for which an environmental insurance policy was obtained from a
third party insurer;
o for which the consultant recommended an operations and maintenance
plan or periodic monitoring of nearby properties, which
recommendations are consistent with industry practice;
o for which the principal of the borrower or another financially
responsible party is required to take, or is liable for the
failure to take, such actions, if any, with respect to such
matters as have been required by the applicable governmental
authority or recommended by the environmental assessments; or
o for which such conditions or circumstances were investigated
further and the environmental consultant recommended no further
action or remediation.
In certain cases, the identified condition related to the presence of
asbestos-containing materials, lead-based paint and/or radon. Where these
substances were present, the environmental consultant generally recommended,
and the related loan documents required, the establishment of an operation
and maintenance plan to address the issue or, in the case of
asbestos-containing materials and lead-based paint, an abatement or removal
program. Other identified conditions could, for example, include leaks from
storage tanks and on-site spills. Corrective action, as required by the
regulatory agencies, has been or is currently being undertaken and, in some
cases, the related borrowers have made deposits into environmental reserve
accounts. However, we cannot assure you that any environmental indemnity,
insurance or reserve amounts will be sufficient to remediate the
environmental conditions or that all environmental conditions have been
identified or that operation and maintenance plans will be put in place
and/or followed. Additionally, we cannot assure you that actions of tenants
at mortgaged properties will not adversely affect the environmental condition
of the mortgaged properties.
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See "Servicing of the Mortgage Loans--Realization Upon Defaulted Mortgage
Loans" in this prospectus supplement and "Risk Factors--Environmental Risks"
and "Certain Legal Aspects of Mortgage Loans--Environmental Risks" in the
prospectus.
TAX CONSIDERATIONS RELATING TO FORECLOSURE
If the trust acquires a mortgaged property pursuant to a foreclosure or
deed in lieu of foreclosure, the special servicer must retain an independent
contractor to operate the property. Any net income from the operation of the
property (other than qualifying "rents from real property"), any rental
income based on the net profits of a tenant or sub-tenant or any income from
a non-customary service, will subject the Lower-Tier REMIC to federal tax
(and possibly state or local tax) on that income at the highest marginal
corporate tax rate (currently 35%). In that event, the net proceeds available
for distribution to certificateholders will be reduced. The special servicer
may permit the Lower-Tier REMIC to earn "net income from foreclosure
property" that is subject to tax if it determines that the net after-tax
benefit to certificateholders is greater than under another method of
operating or net leasing the mortgaged property.
RISKS ASSOCIATED WITH ONE ACTION RULES
Several states (including California) have laws that prohibit more than
one "judicial action" to enforce a mortgage obligation, and some courts have
construed the term "judicial action" broadly. Accordingly, the special
servicer is required to obtain advice of counsel prior to enforcing any of
the trust fund's rights under any of the mortgage loans that include
mortgaged properties where the rule could be applicable. See "Certain Legal
Aspects of Mortgage Loans--Foreclosure" in the prospectus.
PROPERTY INSURANCE
All of the mortgage loans require the related borrower to maintain, or
cause to be maintained, property insurance. However, the mortgaged properties
may suffer casualty losses due to risks which were not covered by insurance
or for which insurance coverage is inadequate. In addition, approximately
18.94%, 18.73% and 2.89% of the mortgaged properties, by aggregate principal
balance of the pool of mortgage loans as of the cut-off date, are located in
California, Texas and Florida, respectively, states that have historically
been at greater risk regarding acts of nature (such as earthquakes, floods
and hurricanes) than other states. We cannot assure you that borrowers will
be able to maintain adequate insurance. Moreover, if reconstruction or any
major repairs are required, changes in laws may materially affect the
borrower's ability to effect any reconstruction or major repairs or may
materially increase the costs of the reconstruction or repairs.
As a result of any of the foregoing, the amount available to make
distributions on your certificates could be reduced.
ZONING COMPLIANCE AND USE RESTRICTIONS
Certain of the mortgaged properties may not comply with current zoning
laws, including density, use, parking and set back requirements, due to
changes in zoning requirements after such mortgaged properties were
constructed. These properties, as well as those for which variances or
special permits were issued, are considered to be a "legal non-conforming
use" and/or the improvements are considered to be "legal non-conforming
structures". This means that the borrower is not required to alter its
structure to comply with the existing or new law; however, the borrower may
not be able to rebuild the premises "as is" in the event of a substantial
casualty loss. This may adversely affect the cash flow of the property
following the loss. If a substantial casualty were to occur, we cannot assure
you that insurance proceeds would be available to pay the mortgage loan in
full. In addition, if the property were repaired or restored in conformity
with the current law, the value of the property or the revenue-producing
potential of the property may not be equal to that before the casualty.
In addition, certain of the mortgaged properties which are non-conforming
may be in violation of applicable zoning laws although the mortgage loan
sellers are not aware of any such violations that are material. The failure
of a mortgaged property to comply with zoning laws or to be a "legal
non-conforming
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use" or "legal non-conforming structure" may adversely affect market value
of the mortgaged property or the borrower's ability to continue to use it in
the manner it is currently being used, or subject the borrower to other
penalties prescribed by applicable zoning laws.
In addition, certain of the mortgaged properties may be subject to certain
use restrictions imposed pursuant to reciprocal easement agreements or
operating agreements. Such use restrictions could include, for example,
limitations on the character of the improvements or the properties,
limitations affecting noise and parking requirements, and limitations on the
borrowers' right to operate certain types of facilities within a prescribed
radius, among other things. These limitations could adversely affect the
ability of the related borrower to lease the mortgaged property on favorable
terms, thus adversely affecting the borrower's ability to fulfill its
obligations under the related mortgage loan.
RISKS RELATING TO COSTS OF COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS
A borrower may be required to incur costs to comply with various existing
and future federal, state or local laws and regulations applicable to the
related mortgaged property, for example, zoning laws and the Americans with
Disabilities Act of 1990, as amended, which requires all public
accommodations to meet certain federal requirements related to access and use
by disabled persons. See "Certain Legal Aspects of Mortgage Loans--Americans
with Disabilities Act" in the prospectus. The expenditure of these costs or
the imposition of injunctive relief, penalties or fines in connection with
the borrower's noncompliance could negatively impact the borrower's cash flow
and, consequently, its ability to pay its mortgage loan.
NO REUNDERWRITING OF THE MORTGAGE LOANS
We have not reunderwritten the mortgage loans. Instead, we have relied on
the representations and warranties made by the mortgage loan sellers, and the
applicable mortgage loan seller's obligation to repurchase, substitute or
cure a mortgage loan in the event that a representation or warranty was not
true when made. These representations and warranties do not cover all of the
matters that we would review in underwriting a mortgage loan and you should
not view them as a substitute for reunderwriting the mortgage loans. If we
had reunderwritten the mortgage loans, it is possible that the reunderwriting
process may have revealed problems with a mortgage loan not covered by a
representation or warranty. In addition, we can give no assurance that the
applicable mortgage loan seller will be able to repurchase a mortgage loan if
a representation or warranty has been breached. See "Description of the
Mortgage Pool--Representations and Warranties; Repurchases and Substitutions"
in this prospectus supplement.
LITIGATION
There may be pending or threatened legal proceedings against the borrowers
and managers of the mortgaged properties and their respective affiliates
arising out of the ordinary business of the borrowers, managers and
affiliates. We cannot assure you that litigation will not have a material
adverse effect on your investment.
BOOK-ENTRY REGISTRATION
Your certificates will be initially represented by one or more
certificates registered in the name of Cede & Co., as the nominee for DTC,
and will not be registered in your name. As a result, you will not be
recognized as a certificateholder, or holder of record of your certificates.
See "Risk Factors--Book-Entry System for Certain Classes May Decrease
Liquidity and Delay Payment" in the prospectus for a discussion of important
considerations relating to not being a certificateholder of record.
RISKS OF INSPECTIONS RELATING TO PROPERTIES
Licensed engineers or consultants inspected the mortgaged properties at or
about the time of the origination of the mortgage loans to assess items such
as structural integrity of the buildings and other improvements on the
mortgaged properties, including exterior walls, roofing, interior
construction,
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mechanical and electrical systems and general condition of the site,
buildings and other improvements. However, we cannot assure you that all
conditions requiring repair or replacement were identified. No additional
property inspections were conducted in connection with the issuance of the
offered certificates.
OTHER RISKS
See "Risk Factors" in the prospectus for a description of certain other
risks and special considerations that may be applicable to your certificates.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
All percentages of the mortgage loans and mortgaged properties, or of any
specified group of mortgage loans and mortgaged properties, referred to in
this prospectus supplement without further description are approximate
percentages by Initial Pool Balance. The trust will consist primarily of 102
mortgage loans secured by 113 commercial, multifamily and manufactured
housing community mortgaged properties with an aggregate principal balance of
approximately $707,331,067 (the "Initial Pool Balance") as of the later of
the cut-off date or the origination date. The "Cut-off Date Balance" of any
mortgage loan will be the unpaid principal balance of that mortgage loan as
of the later of the cut-off date or the origination date, after application
of all payments due on or before that date, whether or not received. Each
mortgage loan is evidenced by a promissory note (a "Mortgage Note") and
secured by a mortgage, deed of trust or other similar security instrument (a
"Mortgage") that creates a first mortgage lien:
(1) on a fee simple estate in one or more commercial, multifamily or
manufactured housing community properties;
(2) with respect to 1 mortgage loan (identified as Loan No. 34 on Annex A
to this prospectus supplement), representing approximately 4.59% of the
Initial Pool Balance, the fee simple and leasehold estates in all of the
commercial property plus a leasehold interest on air rights above an
adjacent parcel; and
(3) with respect to 1 mortgage loan (identified as Loan No. 32 on Annex A
to this prospectus supplement), representing approximately 5.17% of the
Initial Pool Balance, seven of the properties are secured by the fee
simple estate and two of such properties are secured by a leasehold estate
in the commercial property; or
(4) with respect to 4 mortgage loans (identified as Loan No. 5, 22, 26
and 29 on Annex A to this prospectus supplement), representing
approximately 2.35% of the Initial Pool Balance, a leasehold estate in a
commercial property (each of clauses (1) through (4), a "Mortgaged
Property").
The term of any ground lease securing any mortgage loan that is not also
secured by the related fee interest extends at least 10 years beyond the
stated maturity of that mortgage loan (including extensions at the lender's
option). Mortgage loans secured by ground leases present certain bankruptcy
and foreclosure risks not present with mortgage loans secured by fee simple
estates. See "Certain Legal Aspects of Mortgage Loans--Foreclosure--Leasehold
Risks" and "Certain Legal Aspects of Mortgage Loans--Bankruptcy Laws" in the
prospectus.
On or about December 21, 2000 (the "Closing Date"), GE Capital Commercial
Mortgage Corporation (the "Depositor") will acquire the mortgage loans from
General Electric Capital Corporation ("GECC"), The Chase Manhattan Bank
("Chase") and Bear, Stearns Funding, Inc. ("BSFI" and, collectively with GECC
and Chase, the "Mortgage Loan Sellers") pursuant to three mortgage loan
purchase agreements, each dated as of the cut-off date (the "Purchase
Agreements"), between the Depositor and the applicable Mortgage Loan Seller.
The Depositor will then assign its interests in the mortgage loans, without
recourse, to Wells Fargo Bank Minnesota, N.A., as trustee (the "Trustee") for
the benefit of the holders of the certificates (the "Certificateholders").
See "--The Mortgage Loan Sellers" below and "Description of the Pooling
Agreements--Assignment of Mortgage Loans; Repurchases" in the prospectus. For
purposes of the prospectus, each of the Mortgage Loan Sellers constitutes a
Mortgage Asset Seller.
The mortgage loans were originated in the period between April 2000 and
December 2000.
The mortgage loans are not insured or guaranteed by the Mortgage Loan
Sellers or any other person or entity. You should consider all of the
mortgage loans to be nonrecourse loans as to which recourse in the case of
default will be limited to the specific property and other assets, if any,
pledged to secure a mortgage loan.
As of the cut-off date, the applicable Mortgage Loan Sellers have informed
us that they are aware of the following indebtedness with respect to the
mortgage loans:
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o The terms of 1 mortgage loan (identified as Loan No. 55 on Annex
A to this prospectus supplement), representing approximately
0.78% of the Initial Pool Balance, permit the related borrower
to incur (1) unsecured debt (the "TI Debt") for the purpose of
constructing tenant improvements pursuant to certain leases
approved by the mortgagee that, together with trade payables,
may not exceed 4% of the outstanding principal amount of the
mortgage loan and (2) unsecured subordinate debt that matures at
least 367 days after the maturity of the mortgage loan, is
subject to an intercreditor agreement acceptable to the
mortgagee and does not exceed, together with trade payables, the
TI Debt and the outstanding balance of the mortgage loan,
$6,825,000.
o Additionally, with respect to 1 mortgage loan (identified as
Loan No. 44 on Annex A to this prospectus supplement),
representing approximately 2.40% of the Initial Pool Balance,
the related borrower has unsecured debt payable to an affiliate
in an amount not to exceed $4,040,000, which is subject to the
terms of an affiliate advance subordination agreement.
o The Mortgaged Property securing 1 mortgage loan (identified as
Loan No. 34 on Annex A to this prospectus supplement),
representing approximately 4.59% of the Initial Pool Balance,
also secures a loan payable to the related borrower by an
affiliate which owns a fee interest in a portion of the related
Mortgaged Property. At the origination of the mortgage loan, the
debt was $7,765,655, and has been subordinated to the mortgage
loan and assigned to the mortgagee by the borrower.
o The terms of certain of the mortgage loans permit or require the
borrowers to post letters of credit and/or surety bonds for the
benefit of the mortgage loan, which may constitute a contingent
reimbursement obligation of the related borrower or an
affiliate. The issuing bank or surety will not typically agree
to subordination and standstill protection benefiting the
mortgagee.
In addition, substantially all of the mortgage loans permit the related
borrower to incur limited indebtedness in the ordinary course of business
that is not secured by the related mortgaged property. Moreover, in general,
any borrower that does not meet single-purpose entity criteria may not be
restricted from incurring unsecured debt.
In addition, although the mortgage loans generally restrict the transfer
or pledging of general partnership and managing member equity interests in a
borrower, subject to certain exceptions, the terms of the mortgage generally
permit, subject to certain limitations, the pledging of a less than a
controlling portion of the limited partnership or non-managing membership
equity interests in a borrower. Moreover, in general, the parent entity of
any borrower that does not meet single purpose entity criteria may not be
restricted in any way from incurring mezzanine or other debt not secured by
the related mortgaged property.
Certain risks relating to additional debt are described in "Risk
Factors--Ability to Incur Other Borrowings Entails Risk" in this prospectus
supplement and "Certain Legal Aspects of Mortgage Loans--Subordinate
Financing" in the prospectus.
AFFILIATED BORROWER CONCENTRATIONS
Set forth below is a description of each concentration of those
non-cross-collateralized mortgage loans which have affiliated borrowers and
with an aggregate outstanding principal balance as of the cut-off date which
exceeds 5% of the Initial Pool Balance.
The James Lindsey Concentration. The James Lindsey Concentration
(identified as Loan No. 35, 84, 85 and 92 on Annex A to this prospectus
supplement) consists of four mortgage loans (the "Lindsey Loans"), each
secured by a multifamily property, representing, in the aggregate,
approximately 6.07% of the Initial Pool Balance, with an aggregate Cut-off
Date Balance of approximately $42,908,213. The related Mortgaged Properties
are located in Oklahoma City, Oklahoma (588 units); Fayetteville, Arkansas
(228 units); Russellville, Arkansas (252 units); and Siloam Springs, Arkansas
(144 units). The sponsor of the borrowers is a partnership formed by Mr.
James Lindsey. Mr. Lindsey has controlling interests in various real estate
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development and management companies, with ownership or management of over
16,000 apartments. The Lindsey Loans are not cross-collateralized or
cross-defaulted.
SIGNIFICANT MORTGAGE LOANS
Set forth below is a description of the 2 mortgage loans or group of
cross-collateralized mortgage loans with outstanding principal balances as of
the cut-off date which exceed 5% of the Initial Pool Balance.
Synergy Business Park I and Synergy Business Park II Loans. Each of the
Synergy Business Park I loan (identified as Loan No. 91 on Annex A to this
prospectus supplement) and the Synergy Business Park II loan (identified as
Loan No. 92 on Annex A to this prospectus supplement) is secured by a first
lien on four of the eight multi-tenanted office buildings comprising the
former Koger Business Center, now known as Synergy Business Park located in
Brentwood, Tennessee, eight miles from downtown Nashville. The Synergy
Business Park contains 491,800 square feet of net rentable area, in the
aggregate. The four buildings securing the Synergy Business Park I loan
contain approximately 243,691 square feet of net rentable area, three of
which were built between 1984 and 1987 and one of which was built in 1863 and
renovated in 1985. As of November 2000, the buildings were approximately
97.2% occupied and leased to 73 tenants. The four buildings securing the
Synergy Business Park II loan contain approximately 248,109 square feet of
net rentable area and were built between 1983 and 1998. As of November 2000,
the buildings were approximately 90.4% occupied and leased to 97 tenants. The
Synergy Business Park I Loan required an up front $500,000 rollover reserve
and an up front $720,000 capital improvement reserve. The loan also requires
a $219,960 annual rollover reserve (commencing when the $500,000 up front
reserve is depleted), a $46,440 annual replacement reserve and tax and
insurance escrows, each funded monthly. The Synergy Business Park II loan
required an up front $500,000 rollover reserve and an up front $244,750
capital improvement reserve. The loan also requires a $221,520 annual
rollover reserve (commencing when the $500,000 up front reserve is depleted),
a $44,340 annual replacement reserve and tax and insurance escrows, each
funded monthly.
The sponsor of the borrowers is Jordan E. Slone. Jordan Slone is the
Chairman and CEO of Harbor Group International ("HGI"). HGI controls
approximately 2,000,000 square feet of office space, 2,300,000 square feet of
retail space and 6,900 apartment units.
As of the Cut-off Date, the Synergy Business Park I and II loans had a
combined LTV Ratio of approximately 73.81% and a combined DSCR of
approximately 1.24x.
The Synergy Business Park loans are cross-collateralized and
cross-defaulted with each other. Under the terms of the Synergy Business Park
loans, partial releases within each loan are not permitted. See "Risk
Factors--Cross-Collateralized Mortgage Loans Entail Risks" in this prospectus
supplement.
The EII Portfolio I Loan. The EII Portfolio I loan (identified as Loan No.
33 on Annex A to this prospectus supplement) is secured by first liens on fee
interest in six limited-service Hampton Inns hotels in Scranton,
Pennsylvania; Colonie, New York; Chattanooga, Tennessee; Aurora, Colorado;
Beckley, West Virginia and Maryland Heights, Missouri; leasehold interests in
two limited-service Hampton Inns hotels in Glen Burnie, Maryland and Norfolk,
Virginia; and a fee interest in one limited-service Residence Inn hotel in
Oklahoma City, Oklahoma. The hotels have a total of 1,181 rooms. As of June
2000, the occupancy rate of the hotels, in the aggregate, for the prior
12-month period was approximately 69.0%, with a $71.93 underwritten average
daily rate and $49.62 underwritten revenue per available room. The EII
Portfolio I loan requires a 4.0% reserve for furniture, fixtures and
equipment, on a spend or accrue basis, as well as funded tax and insurance
escrows. The borrower was also required to fund a $500,000 improvement plan
reserve at closing. The sponsor of the borrower is Equity Inns Inc. ("EII"),
a NYSE traded self-administered real estate investment trust. EII commenced
operations in March 1994. As of June 2000, EII held a portfolio of 96 hotels
comprising 12,284 rooms, located in 34 states and operating predominantly as
limited-service and extended-stay hotels. The hotels are currently operated
under the terms of operating leases with Interstate Hotels Corporation
("IHC"). Under the terms of a master lease termination agreement, it is
anticipated that the operating leases will be terminated on January 1, 2001,
following which IHC will continue to manage the properties under management
contracts, with the exception of the Hampton Inn in Chattanooga, where a
management contract is being negotiated with another party.
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As of the Cut-off Date, the EII Portfolio I loan had an LTV Ratio of
approximately 54.71% and a DSCR of approximately 2.18x. Out of the total
balance of the EII Portfolio I loan, $31,607,200, representing the allocated
loan amount with respect to 8 properties securing the EII Portfolio I loan,
amortizes on a 25-year amortization schedule. The remaining $4,992,800,
representing the allocated loan amount with respect to 1 property securing
the EII Portfolio I loan amortizes on a 19-year amortization schedule.
The individual liens that constitute the EII Portfolio I loan are
cross-defaulted and cross-collateralized with each other. Under the terms of
the EII Portfolio I Loan, partial releases are permitted provided that, among
other conditions, the borrower defeases 125% of the allocated loan amount of
the property or properties to be released. See "Risk Factors--Cross
Collateralized Mortgage Loans Entail Risks" in this prospectus supplement.
APD LOANS
2 mortgage loans (identified as Loan No. 32 and 51 on Annex A to this
prospectus supplement) (the "APD Loans"), representing approximately 7.25% of
the Initial Pool Balance, provide that if, after a certain date (each, an
"Anticipated Prepayment Date"), the borrower has not prepaid the respective
APD Loan in full, any principal outstanding on that date will accrue interest
at an increased interest rate (the "Revised Rate") rather than the stated
Mortgage Rate (the "Initial Rate"). The Anticipated Prepayment Date for each
APD Loan is 120 months after the first due date for the APD Loans. The
Revised Rate for each of the APD Loans is equal to the Initial Rate, plus 2%
per annum. After the Anticipated Prepayment Date, the APD Loans further
require that all cash flow available from the related Mortgaged Property
after payment of the constant periodic payment required under the terms of
the related loan documents and all escrows and property expenses required
under the related loan documents be used to accelerate amortization of
principal on the respective APD Loan. While interest at the Initial Rate
continues to accrue and be payable on a current basis on the APD Loans after
their Anticipated Prepayment Dates, the payment of interest at the excess of
the Revised Rate over the Initial Rate for the APD Loans will be deferred and
will be required to be paid, with interest, only after the outstanding
principal balance of the respective APD Loan has been paid in full.
Additionally, the terms of the APD Loans provide that the springing lockbox
accounts established on or about origination into which the related property
manager and/or tenants are required to directly deposit rents or other
revenues from the related Mortgaged Property become hard lock boxes. See
"--Lock Box Accounts" below. The foregoing features, to the extent
applicable, are designed to increase the likelihood that the APD Loans will
be prepaid by the respective borrower on or about their Anticipated
Prepayment Dates.
CREDIT TENANT LEASE LOANS
5 mortgage loans (identified as Loan No. 22, 23, 24, 25 and 26 on Annex A
to this prospectus supplement), representing approximately 1.04% of the
Initial Pool Balance, are credit tenant lease loans. The mortgage loans are
secured by Mortgages on Mortgaged Properties that are subject to leases
(each, a "Credit Lease") to subsidiaries of CVS Corporation, which guarantees
the Credit Lease obligations and possesses a long term unsecured debt rating
of "A" from S&P and a rating of "A3" from Moody's. The related tenant's
obligations under each Credit Lease are subject to offset rights or other
remedies if the landlord fails to perform certain repairs, maintenance or
other obligations under the Credit Lease. Scheduled monthly rent payments
(the "Monthly Rental Payments") under the Credit Leases were determined in
underwriting to be sufficient to pay in full and on a timely basis all
interest and principal scheduled to be paid with respect to the credit tenant
lease loans. The Credit Leases have a primary lease term that expires after
the scheduled final maturity date of the related credit tenant lease loan.
The credit tenant lease loans had DSCRs at origination of approximately
1.04x to 1.14x and LTV Ratios as of the later of the origination date and the
cut-off date (on an as leased basis) ranging from approximately 81.75% to
89.62%.
In the event of a casualty of a material portion of the related Mortgaged
Property or a condemnation of a material portion of the related Mortgaged
Property, the Trustee on behalf of the Certificateholders will have the
benefit of a non-cancelable credit lease enhancement insurance policy
obtained to cover certain
S-59
<PAGE>
risks of lease termination relating to casualty and condemnation issued by
Chubb Custom Insurance Company ("Chubb"). As of the Cut-off Date, Chubb was
rated "AA+" and "Aa3" by S&P and Moody's, respectively.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
86 of the mortgage loans, representing approximately 81.04% of the Initial
Pool Balance, have due dates that occur on the 1st day of each month, and 16
mortgage loans, representing approximately 18.96% of the Initial Pool
Balance, have due dates that occur on the tenth day of each month. Except
with respect to 2 of the mortgage loans, representing approximately 1.52% of
the Initial Pool Balance, all of the mortgage loans whose due dates are the
1st day of each month provide for grace periods of five days. One of such
mortgage loans, representing approximately 0.27% of the Initial Pool Balance,
has a grace period which extends beyond the determination date. The servicer
will make an administrative advance on that loan to the extent the payment is
not received from the borrower by the determination date, however interest on
such advance will not accrue interest until the expiration of the related
grace period. All of the mortgage loans bear interest at fixed rates. All of
the mortgage loans accrue interest on the basis of the actual number of days
in a month, assuming a 360-day year ("Actual/360 Basis"). 95 mortgage loans
(including the 1 interest-only loan described in this paragraph),
representing approximately 91.71% of the Initial Pool Balance, provide for
monthly payments of principal based on amortization schedules significantly
longer than the remaining terms of the related mortgage loans. 1 of these
mortgage loans, representing approximately 0.78% of the Initial Pool Balance,
provides for periodic payments of interest-only over its term and the payment
of the entire principal amount at maturity. 1 of these mortgage loans,
representing approximately 1.95% of the Initial Pool Balance, initially
provides for monthly payments of interest-only for the first 24 months of the
term of the mortgage loan and payments which would amortize a portion of the
principal balance of the mortgage loan during the remaining term of the
mortgage loan. Thus, those mortgage loans will have balloon payments due at
their stated maturity dates. In addition, the 2 APD Loans, representing
approximately 7.25% of the Initial Pool Balance, provide for monthly payments
of principal that will result in a substantial principal payment at their
Anticipated Prepayment Dates if the related borrower prepays the mortgage
loan on that date. The 5 credit tenant lease loans, representing
approximately 1.04% of the Initial Pool Balance, provide for monthly payments
that increase as credit lease payments increase, which results in more rapid
amortization of the principal balance than that which would occur if monthly
payments were level.
Prepayment Provisions. Each mortgage loan prohibits any prepayments (or
defeasance) for a specified period of time after its date of origination (a
"Lock-out Period"). In addition, each mortgage loan restricts voluntary
prepayments in one of the following ways:
(1) 12 of the mortgage loans, representing approximately 12.02% of the
Initial Pool Balance, are locked out through maturity.
(2) 89 of the mortgage loans, representing approximately 86.28% of the
Initial Pool Balance, permit only defeasance after the expiration of the
Lock-out Period. In the case of certain loans that are secured by multiple
properties or are cross-collateralized with other loans, partial defeasance
is permitted.
(3) 1 of the mortgage loans, representing approximately 1.69% of the
Initial Pool Balance, requires that any principal prepayment made during a
specified period of time after the Lockout Period (a "Yield Maintenance
Period"), be accompanied by a Yield Maintenance Charge (as defined below).
"Yield Maintenance Charge" will be the greater of (i) 1% of the principal
amount being prepaid or (ii) the excess, if any, of (a) the sum of the
present values of all remaining scheduled payments, including the balloon
payment, discounted at a rate, which, when compounded monthly, equals the
U.S. Securities Rate over (b) the principal amount being prepaid. U.S.
Securities Rate means as of the date five business days prior to the
scheduled date of prepayment, the rate published in the "Treasury Bonds,
Notes and Bills" section of The Wall Street Journal, or if not published
therein the rate published by the Federal Reserve System in its "Statistical
Release H.15(519), Selected Interest Rates", for the most recently issued
U.S. Treasury Security with a term closest to, but not exceeding, that
remaining on the related mortgage note on the date of the prepayment.
S-60
<PAGE>
Yield Maintenance Charges are distributable as described in this
prospectus supplement under "Description of the Certificates--Allocation of
Yield Maintenance Charges."
90 of the mortgage loans, representing approximately 87.98% of the Initial
Pool Balance, specify a period of time immediately prior to the stated
maturity date or Anticipated Prepayment Date, as applicable, during which
there are no restrictions on voluntary prepayment. 88 of the mortgage loans,
representing approximately 83.50% of the Initial Pool Balance, permit
voluntary prepayment without the payment of a yield maintenance charge on or
after the date occurring approximately 90 days or less prior to the stated
maturity date or Anticipated Prepayment Date as applicable. 1 mortgage loan
(identified as Loan No. 51 on Annex A to this prospectus supplement),
representing approximately 2.08% of the Initial Pool Balance, permits
voluntary prepayment without payment of a yield maintenance charge on or
after the date occurring approximately 180 days prior to the stated maturity
date or the Anticipated Prepayment Date as applicable. 1 mortgage loan
(identified as Loan No. 44 on Annex A to this prospectus supplement),
representing approximately 2.40% of the Initial Pool Balance, permits
voluntary prepayment without payment of a yield maintenance charge on or
after the date occurring approximately 120 days prior to the stated maturity
date or Anticipated Prepayment Date, as applicable.
Certain state laws limit the amounts that a lender may collect from a
borrower as an additional charge in connection with the prepayment of a
mortgage loan. Provided no event of default exists, none of the mortgage
loans require the payment of yield maintenance charges in connection with a
prepayment of the related mortgage loan as a result of a total casualty or
condemnation. Certain of the mortgage loans may require the payment of yield
maintenance charges in connection with an acceleration of the related
mortgage loan (such yield maintenance charges, "Yield Maintenance Charges").
There can be no assurances that the related borrowers will pay the Yield
Maintenance Charges. See "Risk Factors--Risks Relating to Enforceability of
Yield Maintenance Charges or Defeasance Provisions" in this prospectus
supplement and "Certain Legal Aspects of Mortgage Loans--Default Interest and
Limitations on Prepayments" in the prospectus.
Defeasance; Collateral Substitution. Except with respect to 1 mortgage
loan (identified as Loan No. 30 on Annex A to this prospectus supplement),
representing approximately 1.69% of the Initial Pool Balance, the terms of
all of the mortgage loans permit the applicable borrower on any due date
after a specified period (the "Defeasance Lock-out Period") to obtain a
release of a Mortgaged Property from the lien of the related Mortgage (a
"Defeasance Option"). The Defeasance Lock-out Period is at least two years
from the Closing Date, provided no event of default exists. The release is
subject to certain conditions, including, among other conditions, that the
borrower:
(a) pays or delivers to the Master Servicer on any due date (the "Release
Date") (1) all interest accrued and unpaid on the principal balance of the
Mortgage Note to and including the Release Date, (2) all other sums due
under the mortgage loan and all other loan documents executed in
connection with the related mortgage loan, (3) direct non-callable
obligations of the United States of America or other government securities
providing payments (x) on or prior to all successive scheduled payment
dates from the Release Date to the related maturity date including the
balloon payment (or the anticipated prepayment date), assuming, in the
case of each APD Loan, that the loan prepays on the related Anticipated
Prepayment Date and (y) in amounts at least equal to the scheduled
payments due on those dates under the mortgage loan or the related
defeased amount of the mortgage loan in the case of a partial defeasance
(including any balloon payment), and (4) any costs and expenses incurred
in connection with the purchase of the U.S. government obligations; and
(b) delivers a security agreement granting the trust fund a first
priority lien on the U.S. government obligations purchased as substitute
collateral and an opinion of counsel relating to the enforceability of
such security interest.
The related borrower or, if the borrower is not required to do so under
the mortgage loan documents, the Master Servicer, will be responsible for
purchasing the U.S. government obligations on behalf of the borrower at the
borrower's expense. Simultaneously with these actions, the related Mortgaged
Property will be released from the lien of the mortgage loan and the pledged
U.S. government obligations (together with any Mortgaged Property not
released, in the case of a partial defeasance) will be substituted as the
collateral securing the mortgage loan.
S-61
<PAGE>
In general, a successor borrower established or designated by the related
borrower (or, if the borrower is not required to do so under the mortgage
loan documents, the Master Servicer) will assume all of the defeased
obligations of a borrower exercising a Defeasance Option under a mortgage
loan and the borrower will be relieved of all of the defeased obligations
under the mortgage loan.
Although the collateral substitution provisions related to defeasance are
not intended to be, and do not have the same effect on the Certificateholders
as, a prepayment of the related mortgage loan, a court could interpret these
provisions as being equivalent to an unenforceable yield maintenance charge
or prepayment premium. We make no representation as to the enforceability of
the defeasance provisions of any mortgage loan.
Substitution; EII Portfolio I Loan. Provided no potential default or event
of default exists, the borrower under the EII Portfolio I loan (the "EII
Portfolio I Borrower") has the right to replace up to two of the properties
that secure the EII Portfolio I loan (each, an "EII Portfolio I Substituted
Property" and, collectively, the "EII Portfolio I Substituted Properties")
with substitute hotel properties of like kind and quality (each, an "EII
Portfolio I Substitute Property" and, collectively, the "EII Portfolio I
Substitute Properties") acquired by the EII Portfolio I Borrower. Such right
of substitution is subject to, among other things, the following conditions:
(a) the EII Portfolio I Borrower shall not replace, in the aggregate, more
than two of the properties that secure the EII Portfolio I loan; (b) the
portion of the EII Portfolio I loan allocated to the EII Portfolio I
Substituted Properties in the aggregate shall not comprise more than 25% of
the entire EII Portfolio I loan; (c) the fair market value of the EII
Portfolio I Substitute Property is not less than 105% of the greater of (i)
the fair market value of the EII Portfolio I Substituted Property as of the
date of origination of the EII Portfolio I loan and (ii) the fair market
value of the EII Portfolio I Substituted Property as of the date immediately
preceding the substitution; (d) after giving effect to the substitution, the
debt service coverage ratio for the EII Portfolio I loan for all of the
properties (excluding the EII Portfolio I Substituted Property and including
the EII Portfolio I Substitute Property) is not less than the debt service
coverage ratio for the EII Portfolio I loan for all of the properties that
secure the EII Portfolio I loan as of the date of origination of the EII
Portfolio I loan and as of the date immediately preceding the substitution;
(e) the net operating income and debt service coverage ratio (for the 12
month period immediately preceding the substitution) for the EII Portfolio I
Substitute Property is greater than 105% of the net operating income and debt
service coverage ratio (for the 12 month period immediately preceding the
substitution) for the EII Portfolio I Substituted Property; and (f) the
Rating Agencies must provide written confirmation that such substitution will
not result in the downgrade, withdrawal or qualification of the ratings then
in effect for the Certificates.
Performance Escrows. In connection with the origination of 1 of the
mortgage loans, representing approximately 2.22% of the Initial Pool Balance,
the borrower was required to escrow funds for various reasons generally
relating to performance objectives. Such funds are required either to be
released to the related borrower upon the satisfaction of certain conditions
or be applied to partially defease the related mortgage loan after the
defeasance lockout period. See "Summary--Significant Mortgage Loans--The
Parkway Towers Loan" in this prospectus supplement.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. The mortgage loans
contain "due-on-sale" and "due-on-encumbrance" provisions that in each case,
with limited exceptions, 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 without the consent of
the holder of the Mortgage; provided, however, under the terms of certain of
the mortgage loans, this consent must be granted if certain conditions are
met. Certain of the Mortgaged Properties have been, or may become, subject to
additional financing. See "--General" above. The Master Servicer with respect
to mortgage loans that are not Specially Serviced Mortgage Loans and the
Special Servicer with respect to Specially Serviced Mortgage Loans will be
required to exercise (or waive its right to exercise, provided that a
confirmation that such waiver would not result in the downgrade, withdrawal
or qualification of the then-current ratings on any class of outstanding
Certificates has been obtained from Moody's and Fitch with respect to certain
mortgage loans) any right it may have with respect to a mortgage loan
containing a "due-on-sale" clause (1) to accelerate the payments on those
mortgage loans, or (2) to withhold its consent to any sale or transfer,
consistent with the Servicing Standards. With respect to a mortgage loan with
a "due-on-encumbrance" clause, the Master Servicer with
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<PAGE>
respect to mortgage loans that are not Specially Serviced Mortgage Loans and
the Special Servicer with respect to Specially Serviced Mortgage Loans will
be required to exercise (or waive its right to exercise, provided that a
confirmation that such waiver would not result in the downgrade, withdrawal
or qualification of the then-current ratings on any class of outstanding
Certificates has been obtained from Moody's and Fitch) any right it may have
with respect to a mortgage loan containing a due-on-encumbrance clause (1) to
accelerate the payments thereon, or (2) to withhold its consent to the
creation of any additional lien or other encumbrance, consistent with the
Servicing Standards.
Notwithstanding the foregoing, the existence of any additional
indebtedness may increase the difficulty of refinancing the related mortgage
loan at maturity or the anticipated prepayment date and the possibility that
reduced cash flow could result in deferred maintenance. Also, if the holder
of the additional debt has filed for bankruptcy or been placed in involuntary
receivership, foreclosure of the related mortgage loan could be delayed. See
"Certain Legal Aspects of Mortgage Loans--Due-on-Sale and Due-on-Encumbrance"
and "--Subordinate Financing" in the prospectus.
ADDITIONAL MORTGAGE LOAN INFORMATION
The following tables set forth certain anticipated characteristics of the
mortgage loans as of the later of the cut-off date or the origination date.
The sum in any column may not equal the indicated total due to rounding. The
descriptions in this prospectus supplement of the mortgage loans and the
Mortgaged Properties are based upon the pool of mortgage loans as it is
expected to be constituted as of the close of business on the Closing Date,
assuming that (1) all scheduled principal and/or interest payments due on or
before the cut-off date will be made, and (2) there will be no principal
prepayments on or before the cut-off date.
For the 9 mortgage loans with a first payment date of either 2/1/01 or
2/10/01, representing 5.05% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date, the "Stated Remaining Term" is
calculated as the term between the first payment date and the maturity date.
Prior to the issuance of the Certificates, one or more mortgage loans
(including mortgage loans specifically described in this prospectus
supplement) may be removed from the pool of mortgage loans as a result of
prepayments, delinquencies, incomplete documentation or for any other reason,
if the Depositor or a Mortgage Loan Seller deems the removal necessary,
appropriate or desirable. A limited number of other mortgage loans may be
included in the pool of mortgage loans prior to the issuance of the
Certificates, unless including those mortgage loans would materially alter
the characteristics of the pool of mortgage loans as described in this
prospectus supplement. The Depositor believes that the information set forth
in this prospectus supplement will be representative of the characteristics
of the pool of mortgage loans as it will be constituted at the time the
Certificates are issued, although the range of mortgage rates and maturities
as well as other characteristics of the mortgage loans described in this
prospectus supplement may vary.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates on or shortly after the Closing Date
and will be filed, together with the Pooling and Servicing Agreement, with
the Securities and Exchange Commission within 15 days after the initial
issuance of the Offered Certificates. If mortgage loans are removed from or
added to the pool of mortgage loans as set forth in the preceding paragraph,
the removal or addition will be noted in the Form 8-K.
For a detailed presentation of certain characteristics of the mortgage
loans and the Mortgaged Properties on an individual basis, see Annex A.
S-63
<PAGE>
TYPE OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
CUT-OFF
AGGREGATE DATE
NUMBER OF CUT-OFF NUMBER OF BALANCE OF
MORTGAGED DATE % OF INITIAL UNITS OR UNITS PER
PROPERTY TYPE PROPERTIES BALANCE POOL BALANCE NRA (1) NRA (1)
---------------------- ---------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Office................. 23 $168,959,544 23.89% 1,929,603 87.56
Multifamily............ 19 151,204,259 21.38 3,743 40,396.54
Anchored Retail........ 20 116,468,413 16.47 1,638,555 71.08
Industrial............. 9 69,263,590 9.79 1,208,555 57.31
Full-Service Hotel .... 3 64,125,305 9.07 706 90,829.04
Unanchored Retail...... 14 49,230,246 6.96 525,215 93.73
Limited-Service Hotel . 9 36,600,000 5.17 1,181 30,990.69
Manufactured Housing . 5 23,051,303 3.26 776 29,705.29
Self-Storage........... 6 21,068,959 2.98 382,470 55.09
Credit Tenant Lease ... 5 7,359,448 1.04 52.185 141.03
---------- ------------ ------------
Total/Weighted
Average............... 113 $707,331,067 100.00%
========== ============ ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------------
STATED CUT-OFF
REMAINING DATE
MORTGAGE TERM OCCUPANCY DSCR LTV RATIO LTV RATIO AT
PROPERTY TYPE RATE (MOS.)(2) (3) (4) (4) MATURITY (4)
---------------------- -------- --------- ----------- ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Office................. 8.13% 112 96% 1.29x 70.78% 63.77%
Multifamily............ 8.04% 115 97% 1.25x 75.94% 68.52%
Anchored Retail........ 8.18% 118 97% 1.31x 72.99% 65.94%
Industrial............. 8.23% 119 100% 1.24x 75.41% 67.64%
Full-Service Hotel .... 8.53% 115 70% 1.52x 66.50% 56.45%
Unanchored Retail...... 8.27% 118 96% 1.37x 68.74% 61.60%
Limited-Service Hotel . 8.25% 120 71% 2.18x 54.71% 44.40%
Manufactured Housing . 8.23% 118 98% 1.35x 71.40% 62.37%
Self-Storage........... 8.52% 117 89% 1.34x 69.80% 61.48%
Credit Tenant Lease ... 8.26% 230 100% N/A N/A N/A
Total/Weighted
Average............... 8.20% 117 97% 1.36x 71.34% 63.59%
</TABLE>
------------
(1) "NRA" means net rentable area and is applicable with respect to retail,
office, industrial, self-storage and credit tenant lease properties.
(2) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
(3) Excludes 12 hotel properties, representing approximately 14.24% of the
Initial Pool Balance, which have occupancy rates that generally range
from 54.60% to 80.20%; if the mortgage loans secured by hotel
properties are included, the weighted average occupancy rates of the
Mortgaged Properties is 92.96%.
(4) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
S-64
<PAGE>
RANGE OF MORTGAGE RATES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------
NUMBER OF STATED
LOANS/ AGGREGATE % OF REMAINING CUT-OFF LTV RATIO AT
RANGE OF MORTGAGE MORTGAGED CUT-OFF DATE INITIAL POOL MORTGAGE TERM DATE LTV MATURITY
RATES PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR (2) RATIO (2) (1)(2)
------------------- ------------ -------------- -------------- ---------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7.700% to 7.899% ... 8/8 $ 53,691,597 7.59% 7.85% 119 1.36x 71.80% 64.68%
7.900% to 8.099% ... 29/32 217,116,515 30.70 8.01% 120 1.34x 72.52% 64.66%
8.100% to 8.199% ... 14/14 79,173,653 11.19 8.14% 113 1.30x 72.48% 65.60%
8.200% to 8.399% ... 36/44 249,831,654 35.32 8.29% 119 1.39x 70.80% 62.91%
8.400% to 8.599% ... 9/9 58,709,969 8.30 8.44% 108 1.36x 70.82% 63.54%
8.600% to 8.799% ... 5/5 44,026,859 6.22 8.76% 114 1.37x 68.02% 58.83%
8.800% to 9.000% ... 1/1 4,780,819 0.68 9.00% 114 1.41x 59.02% 50.31%
------------ -------------- --------------
Total/Weighted
Average ........... 102/113 $707,331,067 100.00% 8.20% 117 1.36x 71.34% 63.59%
============ ============== ==============
</TABLE>
------------
(1) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
(2) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
S-65
<PAGE>
MORTGAGED PROPERTIES BY STATE (1)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------
% OF STATED
AGGREGATE INITIAL REMAINING CUT-OFF LTV RATIO AT
NUMBER OF CUT-OFF DATE POOL MORTGAGE TERM DATE LTV MATURITY
STATE PROPERTIES BALANCE BALANCE RATE (MOS.)(2) DSCR (3) RATIO (3) (2)(3)
-------------- ------------ -------------- --------- ---------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CA............. 20 $133,987,169 18.94% 8.21% 117 1.35x 70.44% 62.85%
TX............. 24 132,449,784 18.73 8.20% 110 1.31x 74.42% 67.74%
TN............. 4 55,658,097 7.87 8.03% 120 1.30x 73.69% 65.71%
LA............. 2 38,559,478 5.45 8.66% 114 1.36x 70.59% 60.54%
MD............. 7 33,078,234 4.68 8.19% 120 1.52x 68.55% 60.72%
AZ............. 5 30,710,477 4.34 8.19% 119 1.28x 76.46% 68.80%
NY............. 8 30,403,951 4.30 8.19% 129 1.49x 68.44% 60.37%
OK............. 2 28,749,772 4.06 8.32% 117 1.40x 69.87% 62.24%
CO............. 3 21,180,046 2.99 8.11% 118 1.31x 69.63% 62.09%
IA............. 3 20,840,379 2.95 7.97% 120 1.36x 69.50% 60.38%
FL............. 3 20,449,988 2.89 8.09% 118 1.29x 73.27% 67.14%
AR............. 3 19,456,641 2.75 7.89% 119 1.23x 74.93% 66.94%
MA............. 2 18,834,017 2.66 8.44% 128 1.46x 69.20% 58.04%
VA............. 4 18,351,402 2.59 8.02% 119 1.53x 65.00% 56.07%
DC............. 2 14,846,450 2.10 8.19% 97 1.32x 65.59% 60.72%
NV............. 3 12,442,872 1.76 8.22% 117 1.27x 75.53% 68.09%
WA............. 3 11,958,997 1.69 8.39% 117 1.24x 68.60% 62.05%
GA............. 1 10,518,051 1.49 7.96% 118 1.24x 80.91% 72.47%
CT............. 1 8,800,000 1.24 8.09% 120 1.35x 67.69% 59.14%
NJ............. 2 8,280,819 1.17 8.72% 117 1.35x 64.57% 56.57%
DE............. 1 6,320,000 0.89 7.93% 120 1.26x 80.00% 71.52%
WI............. 1 4,844,714 0.68 8.11% 118 1.28x 74.53% 66.99%
IN............. 1 4,494,961 0.64 8.01% 118 1.21X 74.92% 67.18%
NM............. 1 4,396,863 0.62 7.70% 119 1.55X 62.81% 55.86%
PA............. 1 4,244,900 0.60 8.25% 120 2.18x 54.71% 44.40%
WV............. 1 3,287,400 0.46 8.25% 120 2.18x 54.71% 44.40%
SC............. 1 2,547,541 0.36 8.55% 118 1.26x 66.17% 60.06%
MO............. 1 2,377,800 0.34 8.25% 120 2.18x 54.71% 44.40%
MI............. 1 2,345,994 0.33 7.99% 118 1.46x 57.57% 48.60%
NC............. 1 1,645,270 0.23 8.47% 216 N/A N/A N/A
OH............. 1 1,269,000 0.18 8.02% 229 N/A N/A N/A
------------ -------------- ---------
Total/Weighted
Average....... 113 $707,331,067 100.00% 8.20% 117 1.36x 71.34% 63.59%
============ ============== =========
</TABLE>
------------
(1) Because this table is presented at the Mortgaged Property level,
balances and weighted averages are based on allocated loan amounts
(generally allocated by the appraised value and/or underwritten net
cash flow for the Mortgaged Property if not otherwise specified in the
related loan agreement) for mortgage loans secured by more than one
Mortgaged Property. As a result, the weighted averages presented in
this table may deviate slightly from weighted averages presented at the
mortgage loan level in other tables in this prospectus supplement.
(2) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
(3) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
S-66
<PAGE>
RANGE OF REMAINING TERMS TO MATURITY DATE OR ANTICIPATED PREPAYMENT DATE IN
MONTHS (1)(2)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF LTV RATIO AT
RANGE OF REMAINING LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV MATURITY
TERMS (MOS.)(1) PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR (3) RATIO (3) (1)(3)
---------------------- ------------ -------------- --------- ---------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
58 to 79............... 3/3 $ 19,932,906 2.82% 8.32% 58 1.37x 69.32% 66.70%
80 to 99............... 1/1 9,350,000 1.32 8.19% 84 1.25x 69.26% 65.02%
100 to 115............. 6/6 53,204,165 7.52 8.73% 114 1.37x 68.21% 59.18%
116 to 118............. 43/43 308,569,818 43.62 8.21% 117 1.30x 73.04% 65.44%
119 to 120............. 44/55 308,914,730 43.67 8.08% 120 1.41x 70.37% 62.26%
121 to 220............. 1/1 1,645,270 0.23 8.47% 216 N/A N/A N/A
------------ -------------- ---------
221 to 240 ............ 4/4 5,714,178 0.81 8.19% 233 N/A N/A N/A
Total/Weighted
Average............... 102/113 $707,331,067 100.00% 8.20% 117 1.36x 71.34% 63.59%
============ ============== =========
</TABLE>
------------
(1) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
(2) For the 9 mortgage loans with a first payment date of either 2/1/01 or
2/10/01, representing 5.05% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date, the "Remaining Term to
Maturity Date or Anticipated Prepayment Date" is calculated as the term
between the First Payment Date and the Maturity Date.
(3) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
YEARS OF MATURITY (1)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF LTV RATIO AT
LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV MATURITY
YEARS OF MATURITY PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR (2) RATIO (2) (1)(2)
---------------------- ------------ -------------- --------- ---------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2005................... 3/3 $ 19,932,906 2.82% 8.32% 58 1.37x 69.32% 66.70%
2007................... 1/1 9,350,000 1.32 8.19% 84 1.25x 69.26% 65.02%
2010................... 85/96 636,118,713 89.93 8.20% 118 1.36x 71.26% 63.31%
2011................... 8/8 34,570,000 4.89 8.06% 120 1.37x 74.53% 66.57%
2018................... 1/1 1,645,270 0.23 8.47% 216 N/A N/A N/A
2019................... 1/1 1,880,178 0.27 8.38% 228 N/A N/A N/A
2020................... 3/3 3,834,000 0.54 8.10% 236 N/A N/A N/A
------------ -------------- ---------
Total/Weighted
Average............... 102/113 $707,331,067 100.00% 8.20% 117 1.36x 71.34% 63.59%
============ ============== =========
</TABLE>
------------
(1) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
(2) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
TEN LARGEST MORTGAGE LOANS AND CROSS-COLLATERALIZED GROUPS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------
% OF STATED CUT-OFF
NUMBER OF CUT-OFF INITIAL REMAINING DATE
MORTGAGED DATE POOL MORTGAGE TERM LTV LTV RATIO AT
PROPERTY NAME PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR RATIO MATURITY (1)
------------------------ ------------ -------------- --------- ---------- ----------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Synergy Business Park I
& II (3)............... 2 $ 39,600,000 5.60% 7.98% 120 1.24x 73.81% 66.06%
EII Portfolio I......... 9 36,600,000 5.17 8.25% 120 2.18x 54.71% 44.40%
Embassy Suites-New
Orleans................ 1 32,466,236 4.59 8.77% 113 1.38x 69.08% 58.66%
The Links at Oklahoma
City................... 1 23,451,572 3.32 8.34% 116 1.22x 73.29% 66.27%
University Park Tech I &
II (3)................. 2 19,080,240 2.70 8.30% 118 1.22x 78.84% 71.17%
Holiday Inn-Mansfield... 1 16,953,839 2.40 8.45% 117 1.46x 69.20% 58.04%
Parkway Tower........... 1 15,683,486 2.22 8.24% 118 1.05x(2) 78.42% 70.69%
Laguna Oaks Apartments.. 1 15,451,925 2.18 7.85% 118 1.22x 78.80% 70.39%
Greenway Park Plaza .... 1 15,200,000 2.15 8.09% 120 1.34x 80.00% 71.79%
Le Montrose ............ 1 14,705,230 2.08 8.08% 116 1.91x 57.67% 49.74%
------------ -------------- ---------
Total/Weighted Average.. 20 $229,192,527 32.40% 8.26% 118 1.46x 70.14% 61.35%
============ ============== =========
</TABLE>
------------
(1) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
(2) This mortgage loan has a cash escrow, as described in
"Summary--Significant Mortgage Loans--Parkway Tower Loan" in this
prospectus supplement.
(3) Represent 2 loans.
S-67
<PAGE>
The following table sets forth a range of Debt Service Coverage Ratios for
the mortgage loans as of the cut-off date. The "Debt Service Coverage Ratio"
or "DSCR" for any mortgage loan is the ratio of (1) Underwritten Net Cash
Flow produced by the related Mortgaged Property or Mortgaged Properties to
(2) the aggregate amount of the scheduled payments of principal and/or
interest (the "Periodic Payments") due for the 12-month period immediately
following the cut-off date, except with respect to:
o 1 mortgage loan, representing approximately 1.95% of the Initial Pool
Balance, where Periodic Payments are interest-only for a period of the
first 24 months after origination, after which date the mortgage loans
amortize based upon a 30-year amortization schedule, and
o 1 mortgage loan, representing approximately 0.78% of the aggregate
principal balance of all the mortgage loans as of the cut-off date,
where periodic payments are interest-only over the term of the mortgage
loan.
See "--Certain Terms and Conditions of the Mortgage Loans" above.
RANGE OF DEBT SERVICE COVERAGE RATIOS AS OF THE CUT-OFF DATE (1)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF
RANGE OF DEBT SERVICE LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV LTV RATIO AT
COVERAGE RATIOS PROPERTIES BALANCE BALANCE RATE (MOS.)(2) DSCR RATIO MATURITY (2)
---------------------- ------------ -------------- --------- ---------- ----------- ------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.050 to 1.199......... 1/1 $ 15,683,486 2.22% 8.24% 118 1.05x 78.42% 70.69%
1.200 to 1.229......... 20/20 165,560,543 23.45 8.18% 118 1.21x 75.23% 67.71%
1.230 to 1.259......... 18/18 137,088,125 19.38 8.08% 117 1.24x 74.75% 67.03%
1.260 to 1.299......... 22/22 98,862,935 13.98 8.19% 114 1.27x 75.03% 67.65%
1.300 to 1.369......... 14/14 83,611,205 11.82 8.15% 119 1.33x 72.67% 65.23%
1.370 to 1.499......... 15/15 122,526,036 17.32 8.43% 111 1.42x 67.18% 59.10%
1.500 to 2.420......... 7/18 76,639,289 10.83 8.12% 119 1.99x 55.81% 47.23%
------------ -------------- ---------
Total/Weighted
Average............... 97/108 $699,971,619 98.96% 8.20% 116 1.36x 71.34% 63.59%
============ ============== =========
</TABLE>
------------
(1) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
(2) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
The following two tables set forth the range of LTV Ratios of the mortgage
loans as of the cut-off date and the stated maturity dates or Anticipated
Prepayment Date of the mortgage loans. An "LTV Ratio" for any mortgage loan,
as of any date of determination, is a fraction, expressed as a percentage,
the numerator of which is the scheduled principal balance of the mortgage
loan as of that date (assuming no defaults or prepayments on the mortgage
loan prior to that date), and the denominator of which is the appraised value
of the related Mortgaged Property or Mortgaged Properties as determined by an
appraisal of the property obtained in connection with the origination of the
mortgage loan. The LTV Ratio as of the mortgage loan maturity date or
Anticipated Prepayment Date, as the case may be, described below was
calculated based on the principal balance of the related mortgage loan on the
maturity date or Anticipated Prepayment Date, as the case may be, assuming
all principal payments required to be made on or prior to the mortgage loan's
maturity date or Anticipated Prepayment Date, as the case may be (not
including the balloon payment), are made. In addition, because it is based on
the value of a Mortgaged Property determined as of loan origination, the
information set forth in the table below is not necessarily a reliable
measure of the related borrower's current equity in each Mortgaged Property.
In a declining real estate market, the appraised value of a Mortgaged
Property could have decreased from the appraised value determined at
origination and the current actual loan-to-value ratio of a mortgage loan may
be higher than its LTV Ratio at origination even after taking into account
amortization since origination.
S-68
<PAGE>
RANGE OF LTV RATIOS AS OF THE CUT-OFF DATE (1)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------
% OF STATED
RANGE OF LTV RATIOS NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF
AS OF LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV LTV RATIO AT
THE CUT-OFF DATE PROPERTIES BALANCE BALANCE RATE (MOS.)(2) DSCR RATIO MATURITY (2)
-------------------- ------------ -------------- --------- ---------- ----------- ------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
34.83% to 59.99%.... 9/20 $ 84,466,237 11.94% 8.20% 118 1.92x 55.44% 46.96%
60.00% to 64.99%.... 7/7 24,487,963 3.46 8.14% 116 1.43x 63.40% 56.29%
65.00% to 68.99%.... 14/14 80,748,438 11.42 8.23% 109 1.34x 67.04% 60.52%
69.00% to 72.99%.... 18/18 148,923,303 21.05 8.35% 115 1.33x 70.40% 62.48%
73.00% to 76.99%.... 23/23 167,633,174 23.70 8.15% 119 1.24x 74.58% 67.00%
77.00% to 79.99%.... 21/21 152,520,454 21.56 8.14% 116 1.22x 78.60% 70.67%
80.00% to 80.91%.... 5/5 41,192,051 5.82 8.01% 119 1.28x 80.33% 71.96%
------------ -------------- ---------
Total/Weighted
Average............ 97/108 $699,971,619 98.96% 8.20% 116 1.36x 71.34% 63.59%
============ ============== =========
</TABLE>
------------
(1) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
(2) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
RANGE OF LTV RATIOS AS OF MORTGAGE LOAN MATURITY DATES (1)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------
% OF STATED
RANGE OF LTV RATIOS NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF
AS OF MORTGAGE LOAN LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV LTV RATIO AT
MATURITY DATES PROPERTIES BALANCE BALANCE RATE (MOS.)(2) DSCR RATIO MATURITY (2)
-------------------- ------------ -------------- --------- ---------- ----------- ------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
28.76% to 44.99%.... 2/12 $ 39,700,000 5.61% 8.23% 120 2.20x 53.16% 43.18%
45.00% to 57.49%.... 13/14 66,608,134 9.42 8.15% 118 1.59x 59.43% 52.05%
57.50% to 62.49%.... 17/17 123,120,455 17.41 8.39% 116 1.36x 68.10% 59.52%
62.50% to 66.99%.... 26/26 199,669,849 28.23 8.18% 113 1.27x 71.83% 65.12%
67.00% to 69.99%.... 17/17 100,236,738 14.17 8.17% 119 1.25x 76.22% 68.25%
70.00% to 72.99%.... 21/21 163,890,882 23.17 8.11% 118 1.23x 79.16% 71.12%
73.00% to 74.42%.... 1/1 6,745,562 0.95 8.10% 59 1.28x 77.54% 74.42%
------------ -------------- ---------
Total/Weighted
Average............ 97/108 $699,971,619 98.96% 8.20% 116 1.36x 71.34% 63.59%
============ ============== =========
</TABLE>
------------
(1) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
(2) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
RANGE OF CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF LTV RATIO AT
RANGE OF LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV MATURITY
CUT-OFF DATE BALANCES PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR (2) RATIO (2) (1)(2)
-------------------------- ------------ -------------- --------- ---------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,165,000 to $3,000,000 .. 30/30 $ 63,959,343 9.04% 8.27% 130 1.29x 70.18% 62.66%
$3,000,001 to $5,000,000 .. 22/24 88,733,757 12.54 8.23% 118 1.37x 69.26% 61.84%
$5,000,001 to $9,000,000 .. 25/25 174,294,933 24.64 8.12% 116 1.30x 73.35% 66.02%
$9,000,001 to $15,000,000 . 16/17 184,935,977 26.15 8.16% 113 1.33x 71.96% 64.88%
$15,000,001 to
$20,000,000............... 5/5 82,789,249 11.70 8.12% 119 1.26x 75.81% 67.15%
$20,000,001 to
$30,000,000............... 2/2 43,551,572 6.16 8.17% 118 1.23x 73.53% 66.17%
$30,000,001 to
$36,600,000............... 2/10 69,066,236 9.76 8.50% 117 1.80x 61.46% 51.10%
------------ -------------- ---------
Total/Weighted Average .... 102/113 $707,331,067 100.00% 8.20% 117 1.36x 71.34% 63.59%
============ ============== =========
</TABLE>
------------
(1) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
(2) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
S-69
<PAGE>
RANGE OF CURRENT OCCUPANCY RATES (1)(2)(3)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------
% OF STATED
AGGREGATE INITIAL REMAINING CUT-OFF LTV RATIO AT
RANGE OF CURRENT NUMBER OF CUT-OFF DATE POOL MORTGAGE TERM DATE LTV MATURITY
OCCUPANCY RATES PROPERTIES BALANCE BALANCE RATE (MOS.)(4) DSCR (5) RATIO (5) (4)(5)
---------------------- ------------ -------------- --------- ---------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
75.58% to 79.99%....... 2 $ 3,704,000 0.52% 8.24% 120 1.63x 62.11% 55.21%
80.00% to 89.99%....... 9 33,506,409 4.74 8.31% 117 1.43x 65.11% 58.57%
90.00% to 94.99%....... 20 130,348,836 18.43 8.08% 116 1.27x 73.60% 66.24%
95.00% to 97.99%....... 14 83,709,882 11.83 8.12% 114 1.30x 74.89% 67.57%
98.00% to 99.99%....... 13 125,111,245 17.69 8.10% 118 1.27x 73.08% 65.69%
100.00% to 100.00% .... 43 230,225,389 32.55 8.23% 119 1.28x 72.91% 65.47%
------------ -------------- ---------
Total/Weighted
Average............... 101 $606,605,762 85.76% 8.16% 117 1.29x 72.87% 65.53%
============ ============== =========
</TABLE>
------------
(1) Current occupancy rates have been calculated in this table based upon
rent rolls made available to the applicable Mortgage Loan Sellers by
the related borrowers as of the dates set forth on Annex A to this
prospectus supplement.
(2) Because this table is presented at the Mortgaged Property level,
balances and weighted averages are based on allocated loan amounts
(generally allocated by the appraised value and/or underwritten net
cash flow for the Mortgaged Property if not otherwise specified in the
related loan agreement) for mortgage loans secured by more than one
Mortgaged Property. As a result, the weighted averages presented in
this table may deviate slightly from weighted averages presented at the
mortgage loan level in other tables in this prospectus supplement.
(3) Excludes 12 hotel properties, representing approximately 14.24% of the
Initial Pool Balance, which have occupancy rates that generally range
from 54.60% to 80.20%; if the mortgage loans secured by hotel
properties are included, the weighted average occupancy rate of the
Mortgaged Properties is 92.96%.
(4) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
(5) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
RANGE OF YEARS BUILT/RENOVATED (1)(2)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------
% OF STATED CUT-OFF
AGGREGATE INITIAL REMAINING DATE LTV RATIO AT
RANGE OF YEARS NUMBER OF CUT-OFF DATE POOL MORTGAGE TERM LTV MATURITY
BUILT/RENOVATED (1) PROPERTIES BALANCE BALANCE RATE (MOS.)(3) DSCR (4) RATIO (4) (3)(4)
---------------------- ------------ -------------- --------- ---------- ----------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prior to 1965.......... 1 $ 9,350,000 1.32% 8.19% 84 1.25x 69.26% 65.02%
1966 to 1970........... 3 18,574,012 2.63 8.07% 119 1.31x 75.57% 66.09%
1971 to 1980........... 8 42,887,872 6.06 8.04% 119 1.26x 75.44% 67.35%
1981 to 1985........... 8 46,859,442 6.62 8.25% 116 1.18x 73.75% 66.59%
1986 to 1990........... 12 73,823,047 10.44 8.11% 119 1.39x 70.65% 62.60%
1991 to 1995........... 11 36,532,317 5.16 8.28% 119 1.56x 66.30% 58.64%
1996 to 2000........... 70 479,304,377 67.76 8.22% 117 1.37x 71.09% 63.36%
------------ -------------- ---------
Total/Weighted
Average............... 113 $707,331,067 100.00% 8.20% 117 1.36x 71.34% 63.59%
============ ============== =========
</TABLE>
------------
(1) Range of Years Built/Renovated references the later of the year built
or the year of the most recent renovations with respect to each
Mortgaged Property.
(2) Because this table is presented at the Mortgaged Property level,
balances and weighted averages are based on allocated loan amounts
(generally allocated by the appraised value and/or underwritten net
cash flow for the Mortgaged Property if not otherwise specified in the
related loan agreement) for mortgage loans secured by more than one
Mortgaged Property. As a result, the weighted averages presented in
this table may deviate slightly from weighted averages presented at the
mortgage loan level in other tables in this prospectus supplement.
(3) Calculated with respect to the respective Anticipated Prepayment Date
for the APD Loans.
(4) Excludes 5 credit tenant lease loans, representing approximately 1.04%
of the Initial Pool Balance.
S-70
<PAGE>
PREPAYMENT PROTECTION AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
REMAINING STATED
NUMBER OF AGGREGATE REMAINING LOCKOUT PLUS REMAINING
MORTGAGE CUT-OFF DATE % OF INITIAL LOCKOUT YM PERIOD TERM
PREPAYMENT PROVISION LOANS BALANCE POOL BALANCE TERM (MOS.) (MOS.) (MOS.)(1)
-------------------------- ----------- -------------- -------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lockout with Defeasance ... 101 $695,342,972 98.31% 115 115 118
Lockout Period Followed by
Yield Maintenance ........ 1 11,988,095 1.69 21 56 58
----------- -------------- -------------- ----------- -------------- -----------
Total/Weighted Average .... 102 $707,331,067 100.00% 114 114 117
=========== ============== ============== =========== ============== ===========
</TABLE>
------------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
The foregoing characteristics, along with certain additional
characteristics of the mortgage loans presented on a loan-by-loan basis, are
set forth in Annex A to this prospectus supplement. Certain additional
information regarding the mortgage loans is set forth in this prospectus
supplement below under "--Underwriting Standards" and "--Representations and
Warranties; Repurchases and Substitutions" and in the prospectus under
"Description of the Trust Funds--Mortgage Loans" and "Certain Legal Aspects
of Mortgage Loans".
UNDERWRITTEN NET CASH FLOW
The "Underwritten Net Cash Flow" for a Mortgaged Property is generally the
estimated stabilized annual revenue derived from the use and operation of the
Mortgaged Property (consisting primarily of rental income and reimbursement
of expenses where applicable) after an allowance for vacancies and credit
losses, less estimated stabilized annual expenses, including operating
expenses (such as utilities, administrative expenses, repairs and
maintenance, tenant improvement costs, leasing commissions, management fees
and advertising), fixed expenses (such as insurance, real estate taxes and,
if applicable, ground lease payments) reserves for capital expenditures,
including tenant improvement costs, leasing commissions and replacement
reserves. In calculating Underwritten Net Cash Flow, certain non-operating
items such as depreciation, amortization, partnership distributions, interest
expense, financing fees and capital expenditures other than applicable
reserves, are not included as expenses.
Underwritten Net Cash Flow reflects the calculations and adjustments used
by the Mortgage Loan Sellers for their underwriting process and any updates
thereof and may or may not reflect the amounts calculated and adjusted by
Moody's and Fitch for their own analysis. In addition, Underwritten Net Cash
Flow and the DSCRs derived therefrom are not a substitute for cash flow as
determined in accordance with generally accepted accounting principles as a
measure of the results of the property's operation or a substitute for cash
flows from operating activities determined in accordance with generally
accepted accounting principles as a measure of liquidity.
Revenue. In determining potential gross revenue for each Mortgaged
Property, the Mortgage Loan Sellers generally relied on the most recent rent
roll supplied by the borrower as of the date of such determination and, where
the actual vacancy shown on the rent roll and other unaudited financial
information and the market vacancy was less than 5.0%, assumed a 5.0% vacancy
in determining revenue from rents, except that in the case of certain
Mortgaged Properties which are not secured by multifamily properties, space
occupied by the anchor or single tenants or other large creditworthy tenants
may have been disregarded in performing the vacancy adjustment due to the
length of the related leases or creditworthiness of the tenants, in
accordance with the respective Mortgage Loan Seller's underwriting standards.
Where the actual or market vacancy was not less than 5.0%, the Mortgage Loan
Sellers determined revenue from rents by generally relying on the most recent
rent roll supplied by the borrower as of the date of such determination and
the greater of (a) actual vacancy at the related Mortgaged Property, (b)
vacancy at comparable properties in the same market as the related Mortgaged
Property, and (c) 5.0%. In determining rental revenue for multifamily,
manufactured housing community and self-storage properties, the Mortgage Loan
Sellers generally either reviewed rental revenue shown on the rolling
12-month operating statements or annualized the rental revenue and
reimbursement of expenses shown on rent rolls or operating statements with
respect to the prior one to twelve month periods. For the other rental
S-71
<PAGE>
properties, the Mortgage Loan Sellers generally annualized rental revenue
shown on the most recent rent roll (as applicable), after applying the
vacancy factor. In the case of hotel properties, gross receipts were
generally determined based upon the average occupancy not to exceed 80.0% and
daily rates achieved during the prior two to three year annual reporting
period. In general, any non-recurring items and non-property related revenue
were eliminated from the calculation. Rents under some leases were adjusted
downward to reflect market rent for similar properties if actual rent was
significantly higher than market rent. For newly constructed properties with
little or no historical operating information, revenue was based on
information in appraisals, rent rolls and other borrower supplied
information.
Expenses. In determining expenses for each Mortgaged Property, the related
Mortgage Loan Seller generally relied on rolling 12-month operating
statements and/or full-year or year-to-date financial statements supplied by
the borrower. Notwithstanding the foregoing, (a) if tax or insurance expense
information more current than that reflected in the financial statements was
available, the newer information was used, (b) property management fees were
generally assumed to be 3.0% to 5.0% of effective gross revenue (except with
respect to single tenant properties, where a minimum of 3.0% of gross
receipts was generally assumed, with respect to full-service hotel
properties, where a minimum of 3.5% of gross receipts was generally assumed,
with respect to limited-service hotel properties, where a minimum of 4.0% of
gross receipts was generally assumed) and with respect to self-storage
properties, where a minimum of 5% of gross receipts was generally assumed (c)
assumptions were made with respect to reserves for leasing commissions,
tenant improvement expenses and capital expenditures and (d) expenses were
assumed to include annual replacement reserves. In some cases historical
expenses were increased for underwriting purposes.
Replacement Reserves. Replacement reserves, if any, are reserves escrowed
for ongoing items such as repairs and replacements, including, in the case of
hospitality properties, reserves for furniture, fixtures and equipment. In
certain cases, however, the subject reserve will be subject to a maximum
amount, and once that maximum amount is reached the subject reserve will not
be funded except, in some cases, to the extent it is drawn upon.
No assurances are given with respect to the accuracy of information
provided by borrowers or the adequacy of procedures used by the related
Mortgage Loan Seller in determining the operating information presented.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspections. All of the Mortgaged Properties were inspected at or
about the time of the origination or acquisition of the related mortgage loan
to assess their general condition. No inspection revealed any patent
structural deficiency or any deferred maintenance considered material and
adverse to the interest of the holders of the offered certificates or for
which adequate reserves have not been established.
Appraisals. All of the Mortgaged Properties were appraised at or about the
time of the origination of the related mortgage loans. All of these
appraisals stated that they were performed in compliance with the Code of
Professional Ethics and Standards of Professional Conduct of the Appraisal
Institute and the Uniform Standards of Professional Appraisal Practice as
adopted by the Appraisal Standards Board of the Appraisal Foundation and
accepted and incorporated into the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, as amended ("FIRREA").
The purpose of each appraisal was to provide an opinion as to the market
value of the related Mortgaged Property and are not guarantees of, and may
not be indicative of, present or future value. We cannot assure you that
another appraiser would have arrived at the same opinion of market value.
Appraised value is the appraiser's estimated amount a typically motivated
buyer would pay a typically motivated seller and may be significantly higher
than the amount obtained from the sale of a Mortgaged Property in a
distressed or liquidation sale.
Environmental Reports. A "Phase I" environmental site assessment was
performed with respect to each Mortgaged Property and, in some cases, a
"Phase II" environmental site assessment or other additional testing was
performed. See "--Representations and Warranties; Repurchases and
Substitutions" below.
S-72
<PAGE>
Building Condition Reports. At or about the time of the origination of
all mortgage loans, a licensed engineer or consultant inspected each related
Mortgaged Property to assess the condition of the structure, exterior walls,
roofing, interior structure, mechanical and electrical systems and site
improvements. The resulting reports indicated deferred maintenance items on
certain Mortgaged Properties and recommended certain capital improvements for
which escrows were generally established at origination and the reports were
used in determining underwritten net cash flow and capital reserves, if any.
Generally, with respect to the majority of the Mortgaged Properties, the
related borrowers were required to deposit with the lender an amount equal to
at least 125% of the licensed engineer's estimated cost of the recommended
repairs, corrections or replacements to assure their completion. In addition,
the building condition reports provided a projection of necessary
replacements and repair of structural and mechanical systems over the life of
the related mortgage loans.
Earthquake Analyses. An architectural and engineering consultant performed
an analysis on 19 Mortgaged Properties, securing mortgage loans representing
approximately 15.58% of the Initial Pool Balance, located primarily in the
State of California in order to evaluate the structural and seismic condition
of the property and to assess, based primarily on statistical information,
the probable maximum loss for the property in an earthquake scenario. 5 of
the 19 Mortgaged Properties described above (identified as Loan No. 1, 28,
51, 75 and 102 on Annex A to this prospectus supplement), representing
approximately 5.23% of the Initial Pool Balance, are covered by earthquake
insurance in an amount at least equal to the lesser of the replacement cost
of the improvements on such Mortgaged Property and the outstanding principal
balance of the related mortgage loan. Seismic reports were generally not done
for manufactured housing community properties.
THE MORTGAGE LOAN SELLERS
The Mortgage Loan Sellers are GECC, Chase and BSFI. GECC is an affiliate
of GE Capital Loan Services, Inc., the Master Servicer and the parent
corporation of the Depositor. See "The Depositor" in the prospectus. Chase is
a primary servicer and an affiliate of Chase Securities Inc., one of the
Underwriters. BSFI is an affiliate of Bear, Stearns & Co. Inc., one of the
Underwriters. GECC directly originated (generally, in accordance with the
underwriting criteria described below) all of the mortgage loans acquired by
the Depositor from GECC. Chase directly originated (generally, in accordance
with the underwriting criteria described below) all of the mortgage loans
acquired by the Depositor from Chase. BSFI directly originated (generally, in
accordance with the underwriting criteria described below) all of the
mortgage loans acquired by the Depositor from BSFI.
The information set forth in this prospectus supplement concerning the
Mortgage Loan Sellers and their underwriting standards have been provided by
the Mortgage Loan Sellers, and neither the Depositor nor the Underwriters
make any representation or warranty as to the accuracy or completeness of
that information.
UNDERWRITING STANDARDS
GECC'S UNDERWRITING STANDARDS
General. Through its GE Capital Real Estate business, GECC has been
lending and investing in the commercial real estate industry for over 25
years and has a portfolio of approximately $20 billion of assets. GE Capital
Real Estate originates commercial mortgage loans through approximately 15
offices located throughout the United States. The risk-management (loan
underwriting) function is separate from loan origination.
Loan Analysis. All GECC credit underwriting is performed by GECC
employees. GECC performs both a credit analysis and a collateral analysis
with respect to each loan. The credit analysis of the borrower includes a
review of historical tax returns, third party credit reports, judgment, lien,
bankruptcy and pending litigation searches and, if applicable, the loan
payment history of the borrower. The collateral analysis includes an analysis
of the historical property operating statements, rent rolls and a projection
of future performance and a review of tenant leases. Historical cash flow
verification is performed in most
S-73
<PAGE>
cases by staff of a "big five" accounting firm and reviewed by GECC
underwriting staff. GECC also performs a qualitative analysis which generally
incorporates independent credit checks, periodical searches, industry
research and published debt and equity information with respect to certain
principals of the borrower as well as the borrower itself. Generally,
borrowers are required to be single-purpose entities. A member of the loan
underwriting team also conducts a site inspection to confirm the occupancy
rate of the Mortgaged Property, analyze the market and assess the utility of
the Mortgaged Property within the market. GECC requires third party
appraisals, as well as environmental reports, building condition reports and
seismic reports, if applicable. Each report is reviewed for acceptability by
a GECC staff member for compliance with program standards and the staff
member approves or rejects the report. The results of these reviews are
incorporated into the underwriting report.
Loan Approval. Prior to commitment, all mortgage loans must be approved by
GE Capital Real Estate's credit committee (the make-up of which varies by
loan size) in accordance with its credit policies. The credit committee may
approve a mortgage loan as recommended, request additional due diligence,
modify the loan terms or decline a loan transaction.
Debt Service Coverage Ratio and LTV Ratio. GECC's underwriting standards
generally require the following minimum debt service coverage ratios for each
of the indicated property types:
<TABLE>
<CAPTION>
PROPERTY TYPE DSCR GUIDELINE LTV RATIO GUIDELINE
-------------------- -------------- -------------------
<S> <C> <C>
Multifamily.......... 1.20x 80%
Anchored Retail...... 1.20x 80%
Unanchored Retail ... 1.25x 80%
Office............... 1.20x 80%
Industrial/Warehouse. 1.20x 80%
Hotel................ 1.40x 70%
Manufactured
Housing............. 1.20x 80%
Self-Storage......... 1.25x 75%
</TABLE>
The debt service coverage ratio guidelines listed above are calculated
based on Underwritten Net Cash Flow. In addition, GECC's underwriting
guidelines generally permit a maximum amortization period of 30 years.
However, notwithstanding the foregoing, in certain circumstances the actual
debt service coverage ratios and loan-to-value ratios for the mortgage loans
originated by GECC may vary from these guidelines and not all of these
guidelines apply to the credit tenant lease loans which had a DSCR at
origination of approximately 1.04x to 1.14x and an LTV at origination of
82.12% to 89.62%. See "Description of the Mortgage Pool" in this prospectus
supplement and Annex A to this prospectus supplement.
Escrow Requirements. Except with respect to certain low leverage loans or
where tenants are required in their leases to pay for the covered expenses,
GECC generally requires most borrowers to fund various escrows for taxes and
insurance, capital expenses and/or replacement reserves. In some cases, the
borrower is permitted to post a letter of credit in lieu of funding a given
reserve or escrow. Generally, the required escrows for mortgage loans
originated by GECC are as follows:
o Taxes--Typically an initial deposit and monthly escrow deposits
equal to 1/12th of the annual property taxes (based on the most
recent property assessment and the current millage rate) are
required to provide GECC with sufficient funds to satisfy all taxes
and assessments at least one month prior to their respective due
dates.
o Insurance--If the property is insured under an individual policy
(i.e., the property is not covered by a blanket policy), typically
an initial deposit and monthly escrow deposits equal to 1/12th of
the annual property insurance premium are required to provide GECC
with sufficient funds to pay all insurance premiums at least one
month prior to their respective due dates. If the property is
covered by a blanket policy of insurance, GECC reserves the right in
the mortgage to require a separate insurance policy and insurance
escrows in certain circumstances.
o Replacement Reserves--Replacement reserves are calculated in
accordance with the expected useful life of the components of the
property during the term of the mortgage loan.
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<PAGE>
Notwithstanding the actual level of escrowed reserves, the following
minimum replacement reserve levels were generally assumed by GECC in
determining Underwritten Net Cash Flow:
<TABLE>
<CAPTION>
<S> <C>
Multifamily..............$250 per unit
Retail................... $0.15 per square foot
Office................... $0.20 per square foot
Industrial/Warehouse .... $0.10-0.15 per square foot
Hotel.................... 4-5% of gross revenue
Manufactured Housing .... $50-100 per pad
</TABLE>
o Completion Repair/Environmental Remediation--Typically, a completion
repair or remediation reserve is required if so indicated by the
building condition report. An initial deposit, upon funding of the
mortgage loan generally in an amount equal to at least 125% of the
estimated costs of repairs or replacements to be completed within
the first year of the mortgage loan pursuant to the building
condition report is generally required.
o Re-tenanting--In most cases, major tenants and a significant number
of smaller tenants have lease
expirations within the mortgage loan term. To mitigate this risk,
reserves for loans secured by commercial properties may be required
to be funded either at closing of the mortgage loan and/or during
the mortgage loan term to cover certain anticipated leasing
commissions or tenant improvement costs which might be associated
with releasing the space occupied by the tenants.
CHASE'S UNDERWRITING STANDARDS
General. Chase's commercial mortgage banking group has, among other
things, the authority to originate fixed-rate, first lien mortgage loans for
securitization. Chase's commercial mortgage banking operation is a vertically
integrated entity, staffed by real estate professionals, many of whom have
completed the credit training programs of Chase or one of its predecessor
banks. The loan underwriting group is an integral component of the commercial
mortgage banking group which also includes distinct groups responsible for
loan origination, closing and servicing mortgage loans.
Loan Analysis. All of the mortgage loans sold by Chase to the Depositor
were underwritten by Chase employees. In some cases, Chase may have employed
a third party contractor to assist in preparation of due diligence materials.
Upon receipt of a loan package, Chase's loan underwriters commence an
extensive review of the borrower's financial condition and creditworthiness
and the real estate which will secure the loan. Chase performs both a credit
analysis and collateral analysis with respect to a loan applicant. The credit
analysis of the borrower performed by Chase includes a review of historical
financial statements, including operating statements and rent rolls
(generally unaudited), historical tax returns, third party credit reports
and, if applicable, the loan payment history of the borrower. Chase also
performs a qualitative analysis which incorporates independent credit checks,
periodical searches, industry research and published debt and equity
information with respect to certain principals of the borrower as well as the
borrower itself. Generally, borrowers are required to be single-purpose
entities. The collateral analysis includes an analysis of the historical
property operating statements, rent rolls, leases, service contracts, utility
bills and a projection of future performance. A member of the loan
underwriting team also conducts a site inspection to (1) confirm the
occupancy rate of the mortgaged property, (2) analyze the market, and (3)
assess the utility of the mortgaged property within the market. Chase
requires third party appraisals, environmental reports, building condition
reports and seismic reports, where appropriate. Each environmental, building
condition and seismic report is reviewed for acceptability by a staff member
of Chase's Technical Services Unit for compliance with program standards and
that staff member approves or rejects the report. Appraisals are reviewed by
a member of Chase's in-house appraisal staff and that staff member approves
or rejects the appraisal. The results of these reviews are incorporated into
the underwriting report.
Loan Approval. Prior to commitment, all mortgage loans must be approved by
Chase's credit committee in accordance with its credit policies. The credit
committee may approve a mortgage loan as recommended, modify the loan terms
or decline a loan transaction.
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<PAGE>
Debt Service Coverage Ratio and LTV Ratio. Chase's underwriting standards
generally require the following minimum debt service coverage ratios for each
of the indicated property types:
<TABLE>
<CAPTION>
PROPERTY TYPE DSCR GUIDELINE LTV RATIO GUIDELINE
----------------- -------------- -------------------
<S> <C> <C>
Anchored Retail .. 1.20x 80%
Multifamily....... 1.20x 80%
Unanchored
Retail........... 1.30x 75%
Office............ 1.20x 80%
Industrial........ 1.20x 80%
Hotel............. 1.35x 70%
</TABLE>
The debt service coverage ratio guidelines listed above are calculated
based on Underwritten Net Cash Flow at the time of origination. In addition,
Chase's underwriting guidelines generally require a maximum amortization
period of 30 years. However, notwithstanding the foregoing, in certain
circumstances the actual debt service coverage ratios, loan-to-value ratios
and amortization periods for the mortgage loans originated by Chase may vary
from these guidelines. See "Description of the Mortgage Pool" in this
prospectus supplement and Annex A to this prospectus supplement.
Escrow Requirements. Chase requires substantially all borrowers to fund
various escrows for taxes and insurance, capital expenses and replacement
reserves. Generally, the required escrows for mortgage loans originated by
Chase are as follows:
o Taxes--Typically an initial deposit and monthly escrow deposits
equal to 1/12th of the annual property taxes (based on the most
recent property assessment and the current millage rate) are
required.
o Insurance--If the property is insured under an individual policy
(i.e., the property is not covered by a blanket policy), typically
an initial deposit and monthly escrow deposits equal to 1/12th of
the annual property insurance premium are required. If the property
is covered by a blanket policy of insurance, insurance escrows are
not required. However, Chase reserves the right in the mortgage to
require a separate insurance policy and insurance escrows in certain
circumstances.
o Replacement Reserves--Replacement reserves are calculated in
accordance with the expected useful life of the components of the
property during the term of the mortgage loan, as estimated in the
engineering report.
Notwithstanding the actual level of escrowed reserves, the following
minimum annual replacement reserve levels were generally assumed by Chase in
determining Underwritten Net Cash Flow:
<TABLE>
<CAPTION>
<S> <C>
Retail..........$0.15 per square foot
Multifamily..... $250 per unit
Office.......... $0.20 per square foot
Industrial...... $0.10 per square foot
Hotel........... 5% of gross revenue
</TABLE>
o Completion Repair/Environmental Remediation--Typically, a completion
repair reserve is required and, if necessary, an environmental
remediation reserve may be established. An initial deposit, upon
funding of the mortgage loan, in an amount generally equal to at
least 125% of the estimated costs of repairs or replacements to be
completed within the first year of the mortgage loan pursuant to the
building condition report is generally required.
o Re-tenanting/Debt Service Coverage--In some cases, tenants may have
lease expirations within or shortly after the mortgage loan term. To
mitigate this risk, special reserves may be established to be funded
either at closing of the mortgage loan and/or during the mortgage
loan term to cover certain anticipated leasing commissions or tenant
improvement costs which might be associated with releasing the space
occupied by those tenants.
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<PAGE>
BSFI'S UNDERWRITING STANDARDS
General. All of the mortgage loans sold to the Depositor by BSFI were
originated by BSFI, in each case, generally in accordance with the
underwriting criteria described herein. BSFI originates loans secured by
retail, office, industrial, multifamily, self-storage and hotel properties as
well as manufactured housing communities located in the United States. BSFI
and its affiliates originate and underwrite loans through four offices
located throughout the United States. BSFI's loan origination and
underwriting professionals, who are all full-time BSFI employees, are
compensated based on loan performance.
Loan Analysis. The BSFI credit underwriting team for each mortgage loan
was comprised of Bear Stearns real estate professionals. The underwriting
team for each loan is required to conduct an extensive review of the related
mortgaged property, including an analysis of the appraisal, engineering
report, environmental report, historical property operating statements, rent
rolls, current and historical real estate taxes, and a review of tenant
leases. The credit of the borrower and certain key principals of the borrower
are examined for financial strength and character prior to approval of the
loan. This analysis includes a review of historical financial statements
(which are generally unaudited), historical income tax returns of the
borrower and its principals, third-party credit reports, judgment, lien,
bankruptcy and pending litigation searches. Borrowers generally are required
to be special purpose entities. The credit of key tenants is also examined as
part of the underwriting process. A member of the BSFI underwriting team
visits the property for a site inspection to confirm the occupancy rates of
the property, analyze the property's market and the utility of the property
within the market.
Loan Approval. Prior to commitment, all mortgage loans must be approved by
a loan committee comprised of senior real estate professionals from BSFI and
its affiliates. The loan committee may either approve a mortgage loan as
recommended, request additional due diligence, modify the terms, or reject, a
mortgage loan.
Debt Service Coverage Ratio and LTV Ratio. BSFI's underwriting standards
generally require the following minimum debt service coverage ratios and loan
to value ratios for each of the indicated property types:
<TABLE>
<CAPTION>
PROPERTY TYPE DSCR GUIDELINE LTV RATIO GUIDELINE
------------------------------ -------------- -------------------
<S> <C> <C>
Anchored Retail................ 1.20x 80%
Unanchored Retail.............. 1.30x 75%
Multifamily.................... 1.20x 80%
Industrial..................... 1.25x 75%
Office......................... 1.25x 75%
Hotel.......................... 1.40x 70%
Manufactured Housing
Community..................... 1.25x 80%
Self-Storage................... 1.30x 75%
</TABLE>
The debt service coverage ratio guidelines listed above are calculated
based on anticipated Underwritten Net Cash Flow at the time of origination.
Therefore, the debt service coverage ratio for each mortgage loan as reported
elsewhere in this Prospectus Supplement may differ from the amount calculated
at the time of origination.
Escrow Requirements. BSFI generally requires a borrower to fund various
escrows for taxes and insurance, replacement reserves and capital expenses.
Generally, the required escrows for mortgage loans originated by BSFI are as
follows:
o Taxes and Insurance--Typically, a pro rated initial deposit and
monthly deposits equal to 1/12 of the annual property taxes (based
on the most recent property assessment and the current millage rate)
and annual property insurance premium.
o Replacement Reserves--Monthly deposits generally based on the
greater of the amount recommended pursuant to a building condition
report prepared for BSFI or the following minimum amounts:
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Retail.............................$0.15 per square foot
Multifamily........................ $250 per unit
Industrial......................... $0.10-$0.15 per square foot
Office............................. $0.20 per square foot
Hotel.............................. 5% of gross revenue
Manufactured Housing Community .... $50 per pad
Self-Storage....................... $0.15 per square foot
</TABLE>
o Deferred Maintenance/Environmental Remediation--An initial deposit,
upon funding of the mortgage loan, in an amount equal to at least
125% of the estimated costs the recommended substantial repairs or
replacements pursuant to the building condition report completed by
a licensed engineer and the estimated cost of environmental
remediation expenses as recommended by an independent environmental
assessment.
o Re-tenanting--In some cases major leases expire within the mortgage
loan term. To mitigate this risk, special reserves may be
established to be funded either at closing and/or during the
mortgage loan term to cover certain anticipated leasing commissions
or tenant improvement costs which may be associated with re-leasing
the space occupied by these tenants.
REPRESENTATIONS AND WARRANTIES; REPURCHASES AND SUBSTITUTIONS
In each Purchase Agreement, the applicable Mortgage Loan Seller will
represent and warrant with respect to each mortgage loan (subject to certain
exceptions specified in the related Purchase Agreement) sold by the Mortgage
Loan Seller, as of the Closing Date, or as of another date specifically
provided in the representation and warranty, among other things, that:
(a) the information set forth in the schedule of mortgage loans attached
to the applicable Purchase Agreement (which contains certain of the
information set forth in Annex A) is true and correct in all material
respects as of the cut-off date;
(b) as of the date of its origination, the mortgage loan complied in all
material respects with, or was exempt from, all requirements of federal,
state or local law relating to the origination, funding and servicing of
the mortgage loan;
(c) immediately prior to the sale, transfer and assignment to the
Depositor, the applicable Mortgage Loan Seller had good and indefeasible
title to, and was the sole owner of, each mortgage loan, and is
transferring the mortgage loan free and clear of any and all liens,
pledges, charges or security interests or any other ownership interests of
any nature encumbering the mortgage loan and the applicable Mortgage Loan
Seller has validly and effectively conveyed to the Depositor all legal and
beneficial interest in and to such mortgage loan;
(d) the proceeds of the mortgage loan have been fully disbursed and there
is no requirement for future advances thereunder;
(e) each of the related Mortgage Note, related Mortgage, related
assignment of leases, if any, and other agreements executed in connection
with the mortgage loan are the legal, valid and binding obligations of the
related mortgagor (subject to any nonrecourse provisions therein and any
state anti-deficiency legislation), enforceable in accordance with their
terms, except with respect to provisions relating to default interest,
yield maintenance charges or prepayment premiums and except as the
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally, and by general principles of equity (regardless of
whether the enforcement is considered in a proceeding in equity or at
law);
(f) as of the date of its origination, there was no valid offset,
defense, counterclaim or right to rescission with respect to any of the
related Mortgage Note, Mortgage(s) or other agreements executed in
connection therewith, and, as of the closing date, to the applicable
Mortgage Loan Seller's knowledge there is no valid offset, defense,
counterclaim or right to rescission with respect to the Mortgage Note,
Mortgage(s) or other agreements;
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<PAGE>
(g) the assignment of the related Mortgage and assignment of leases in
favor of the Trustee has been duly authorized, executed and delivered in
recordable form by the applicable Mortgage Loan Seller and constitutes the
legal, valid, binding and enforceable assignment of the Mortgage to the
Trustee (subject to customary limitations). Each related Mortgage and
assignment of leases is freely assignable upon notice to the mortgagor;
(h) the related Mortgage is a legal, valid and enforceable first lien on
the related Mortgaged Property subject only to the following title
exceptions (each exception, a "Title Exception") (A) the liens for current
real property taxes, ground rents, water charges, sewer rents and
assessments not yet due and payable, (B) covenants, conditions and
restrictions, rights of way, easements and other matters of public record,
none of which, individually or in the aggregate, materially interferes
with the current use of the Mortgaged Property or the security intended to
be provided by the Mortgage or with the borrower's ability to pay its
obligations when they become due or materially and adversely affects the
value of the Mortgaged Property and (C) the exceptions (general and
specific) set forth in the mortgage policy of title insurance issued with
respect to the mortgage loan, none of which, individually or in the
aggregate, materially interferes with the current use or operation of the
Mortgaged Property or the security intended to be provided by the Mortgage
or with the borrower's ability to pay its obligations when they become due
or materially and adversely affects the value of the Mortgaged Property
and none of which is a mortgage lien that is pari passu or senior to the
mortgage loan and the Mortgaged Property is free and clear of any
mechanics' and materialmen's liens which are prior to or equal with the
lien of the related Mortgage, except those which are insured against by a
lender's title insurance policy as described above;
(i) all taxes and governmental assessments that prior to the closing date
became due and owing in respect of the related Mortgaged Property have
been paid or, if in dispute, an escrow of funds in an amount sufficient to
cover the payments has been established and such taxes and assessments
shall not be considered delinquent or unpaid until the date on which
interest or penalties may first be payable thereon;
(j) to the applicable Mortgage Loan Seller's knowledge, after conducting
due diligence consistent with the practice of institutional lenders
generally for properties of the same type as the related Mortgaged
Property as of origination, and to the applicable Mortgage Loan Seller's
actual knowledge as of the closing date was free and clear of any material
damage (other than deferred maintenance for which escrows were established
at origination in an amount equal to at least 125% of the amount estimated
to effect the necessary repairs, or such other amount as a prudent
commercial lender would deem appropriate under the circumstances) that
would affect materially and adversely the value of the Mortgaged Property
as security for the mortgage loan and there was no proceeding pending and
the applicable Mortgage Loan Seller has not received notice of any
threatened proceeding, for the total or partial condemnation of the
Mortgaged Property;
(k) as of the date of the origination of each mortgage loan, the related
Mortgaged Property was insured by all insurance coverage required under
each related Mortgage, which insurance covered those risks as were
customarily acceptable to prudent commercial and multifamily mortgage
lending institutions lending on the security of property comparable to the
related Mortgaged Property in the jurisdiction in which the Mortgaged
Property is located; each Mortgaged Property was covered by a fire and
extended perils insurance policy, was in an amount (subject to a customary
deductible) at least equal to the replacement cost of improvements located
on the Mortgaged Property, with no deduction for depreciation or an amount
at least equal to the initial principal balance of the mortgage loan and
in any event, the amount necessary to avoid the operation of any
co-insurance provisions; each Mortgaged Property was covered by business
interruption or rental loss insurance, in an amount at least equal to 12
months of operations of the related Mortgaged Property; and each Mortgaged
Property was covered by comprehensive general liability insurance against
claims for personal and bodily injury, death or property damage occurring
on, in or about the related Mortgaged Property in an amount customarily
required by prudent institutional lenders; such insurance was in full
force and effect with respect to each related Mortgaged Property at
origination; and, as of the cut-off date, to the best knowledge of the
applicable Mortgage Loan Seller, all insurance coverage required under
each
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<PAGE>
Mortgage was in full force and effect with respect to each related
Mortgaged Property; and no notice of termination or cancellation with
respect to any such insurance policy has been received by the applicable
Mortgage Loan Seller; and except for certain amounts not greater than
amounts which would be considered prudent by an institutional commercial
mortgage lender with respect to a similar mortgage loan and which are set
forth in the related Mortgage, any insurance proceeds in respect of a
casualty loss, will be applied either to (1) the repair or restoration of
the related Mortgaged Property with mortgagee or a third party custodian
acceptable to mortgagee having the right to hold and disburse the proceeds
as the repair or restoration progresses other than with respect to amounts
that are customarily acceptable to commercial and multifamily mortgage
lending institutions, or (2) the reduction of the outstanding principal
balance of the Mortgage Loan. The insurer with respect to each policy is
qualified to write insurance in the relevant jurisdiction to the extent
required. The insurance policies contain a standard mortgagee clause
naming mortgagee, its successors and assigns as loss payees in the case of
property insurance policies and additional insureds in the case of
liability insurance policies and provide that they are not terminable and
may not be reduced below replacement cost without 30 days prior written
notice to the mortgagee (or, with respect to non-payment, 10 days prior
written notice to the mortgagee) or such lesser period as prescribed by
applicable law. Each Mortgage requires that the mortgagor maintain
insurance as described above or permits the mortgagee to require insurance
as described above, and permits the mortgagee to purchase such insurance
at the mortgagor's expense if the mortgagor fails to do so;
(l) the mortgage loan is not, and since the date of origination has not
been, 30 days or more past due in respect of any scheduled payment;
(m) one or more Phase I environmental site assessments or updates thereof
(each "Phase I") meeting ASTM requirements were performed by an
environmental consulting firm experienced in environmental matters and
properly licensed, if applicable, and independent of the applicable
Mortgage Loan Seller and that Mortgage Loan Seller's affiliates with
respect to each related Mortgaged Property within the 18 months prior to
the Closing Date and the applicable Mortgage Loan Seller, having made no
independent inquiry other than to review the report(s) prepared in
connection with the assessment(s) referenced herein, has no knowledge and
has received no notice of any material and adverse environmental condition
or circumstance affecting the Mortgaged Property that was not disclosed in
those report(s). With respect to any material and adverse environmental
matters disclosed in the Phase I environmental site report either (i) the
same have been remediated in all material respects prior to the Closing
Date, (ii) sufficient funds have been escrowed for purposes of effecting
such remediation, (iii) the related mortgagor or other responsible party
is currently taking or required to take such actions, if any, with respect
to such matters as have been recommended by the report or required by the
applicable governmental authority, (iv) an operations and maintenance plan
has been or will be implemented, or (v) environmental insurance has been
obtained with respect to such matters, subject to customary limitations.
All such environmental assessments that were in the possession of the
applicable Mortgage Loan Seller and that relate to a Mortgaged Property
which is insured by an environmental insurance policy have been delivered
to or disclosed to the environmental insurance carrier issuing such policy
prior to the issuance of such policy. Each mortgage loan requires the
related mortgagor to comply with all applicable federal, state and local
environmental laws and regulations;
(n) the lien of each related Mortgage as a first priority lien in the
original principal amount of the mortgage loan (as set forth on the
mortgage loan schedule) is insured by an ALTA lender's title insurance
policy (or a binding commitment therefor), or its equivalent as adopted in
the applicable jurisdiction, insuring the Mortgage Loan Seller, its
successors and assigns, subject only to the Title Exceptions; the Mortgage
Loan Seller or its successors or assigns is the sole named insured of that
policy; the policy is assignable without the consent of the insurer and
will inure to the benefit of the Trustee as mortgagee of record and is in
full force and effect upon the consummation of the transactions
contemplated by the applicable Purchase Agreement and all premiums have
been paid; no claims have been made under the policy, no prior holder of
the related Mortgage nor the Mortgage Loan Seller has done anything, by
act or omission, and the Mortgage Loan Seller has no knowledge of any
matter, which would impair or diminish the coverage of that policy; the
insurer issuing such policy
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is qualified to do business in the jurisdiction in which the related
Mortgaged Property is located to the extent required; such policy contains
no exclusions for or affirmatively insures (other than in jurisdictions in
which affirmative insurance is unavailable) (a) access to public roads,
(b) that there are no encroachments of any part of the building thereon
over easements and (c) that the area shown on the survey is the same as
the property described in the Mortgage;
(o) except with respect to the APD Loans, which provide that the rate at
which interest accrues on each APD Loan increases after its respective
Anticipated Prepayment Date, the Mortgage Rate (exclusive of any default
interest, late charges or prepayment premiums) of the mortgage loan is a
fixed rate;
(p) other than payments due but not yet 30 days or more delinquent, there
is, to the Mortgage Loan Seller's knowledge, (A) no material default or
breach, existing under the related Mortgage Note or each related Mortgage,
(B) since the date of origination of such mortgage loan, there has been no
declaration by the Mortgage Loan Seller of an event of acceleration under
the related Mortgage or mortgage note; (C) to the applicable Mortgage Loan
Seller's knowledge there has been no material default or breach under the
related Mortgage, mortgage note or assignment of leases since origination
and (D) the applicable Mortgage Loan Seller has not received notice of any
event which, with the passage of time or with notice and the expiration of
any grace or cure period, would constitute a material default, breach,
violation or event of acceleration under any of the documents, except with
respect to 1 mortgage loan (identified as Loan No. 34 on Annex A to this
prospectus supplement), representing approximately 4.59% of the Initial
Pool Balance, for which not all licenses have been transferred to the
newly-formed single purpose entities; the Mortgage Loan Seller has not
waived any other material default, breach, violation or event of
acceleration under any of those documents; and under the terms of each
mortgage loan, each related Mortgage Note, each related Mortgage and the
other loan documents in the related mortgage file, no person or party
other than the mortgagee may declare an event of default or accelerate the
related indebtedness under that mortgage loan, Mortgage Note or Mortgage;
(q) each mortgage loan is directly secured by a Mortgage on a commercial,
multifamily residential or manufactured housing community property, and
either (1) substantially all of the proceeds of the mortgage loan were
used to acquire, improve or protect the portion of the commercial,
multifamily residential or manufactured housing community property that
consists of an interest in real property (within the meaning of Treasury
Regulations Sections 1.856-3(c) and 1.856-3(d)) and the interest in real
property was the only security for the mortgage loan as of the Testing
Date (as defined below), or (2) the fair market value of the interest in
real property which secures the mortgage loan was at least equal to 80% of
the principal amount of the mortgage loan (a) as of the Testing Date, or
(b) as of the closing date. For purposes of the previous sentence, (1) the
fair market value of the referenced interest in real property shall first
be reduced by (a) the amount of any lien on the interest in real property
that is senior to the mortgage loan, and (b) a proportionate amount of any
lien on the interest in real property that is on a parity with the
mortgage loan, and (2) the "Testing Date" shall be the date on which the
referenced mortgage loan was originated unless (a) the mortgage loan was
modified after the date of its origination in a manner that would cause
"significant modification" of the mortgage loan within the meaning of
Treasury Regulations Section 1.1001-3, and (b) the "significant
modification" did not occur at a time when the mortgage loan was in
default or when default with respect to the mortgage loan was reasonably
foreseeable, in which case the "Testing Date" shall be the date of the
last such modification;
(r) each mortgage loan is a whole loan, contains no equity participation
by the lender or shared appreciation feature and does not provide for any
contingent or additional interest in the form of participation in the cash
flow of the related Mortgaged Property or provide for negative
amortization (other than the APD Loans) and the applicable Mortgage Loan
Seller holds no preferred equity interest in any mortgagor;
(s) subject to certain exceptions, which are customarily acceptable to
prudent commercial and multifamily mortgage lending institutions lending
on the security of property comparable to the related
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Mortgaged Property, each Mortgage or loan agreement contains provisions
for the acceleration of the payment of the unpaid principal balance of the
mortgage loan if, without complying with the requirements of the Mortgage
or loan agreement, the related Mortgaged Property, or any controlling
interest in the related mortgagor, is directly transferred or sold or
encumbered in connection with subordinate financing by a lien or security
interest against the related Mortgaged Property, other than any existing
permitted additional debt (see "Risk Factors--Ability to Incur Other
Borrowings Entails Risk" in this prospectus supplement), and the related
Mortgage requires the related mortgagor to pay all of the reasonable fees
and expenses of Mortgagee relating to obtaining consent and approval of
such transfer or encumbrance including the cost of any REMIC opinion
required under the related Mortgage Loan Documents;
(t) each Mortgaged Property was inspected by or on behalf of the related
originator within the 12 months prior to the Closing Date;
(u) since origination, no material portion of the related Mortgaged
Property has been released from the lien of the related Mortgage, in each
case, in any manner which materially and adversely affects the value of
the mortgage loan or materially interferes with the security intended to
be provided by the Mortgage, and, except with respect to the mortgage
loans which permit defeasance by means of substituting for the Mortgaged
Property (or, in the case of a mortgage loan secured by multiple Mortgaged
Properties, one or more of the Mortgaged Properties) U.S. Treasury
obligations sufficient to pay the mortgage loans in accordance with their
terms, and with respect to mortgage loans which permit the related
mortgagor to substitute a replacement property, the terms of the related
Mortgage do not provide for release of any material portion of the
Mortgaged Property from the lien of the Mortgage except (a) in
consideration of payment therefor equal to not less than the allocated
loan amount of such Mortgaged Property or (b) payment in full of such
mortgage loan, except with respect to 1 mortgage loan (identified as Loan
No. 33 on Annex A to this prospectus supplement), representing
approximately 1.3o% of the Initial Pool Balance which provides for a
release without consideration of a portion of the property which was not
valued for underwriting purposes;
(v) to the Mortgage Loan Seller's knowledge, as of the date of
origination of the mortgage loan, based on due diligence customary in the
industry, and, to the Mortgage Loan Seller's knowledge, as of the closing
date, (i) there are no violations of any applicable zoning ordinances,
building codes and land laws applicable to the Mortgaged Property or the
use and occupancy thereof which would have a material adverse effect on
the value, operation or net operating income of the Mortgaged Property,
except with respect to 5 mortgage loans (identified as Loan No. 19, 38,
69, 73 and 82 on Annex A to this prospectus supplement) representing
approximately 7.53% of the Initial Pool Balance which are missing certain
tenant certificates of occupancy (Loan No. 19, 73 and 82) or do not have
the required number of parking spaces striped (Loan No. 69) or for which
there is a minor encroachment for which law and ordinance insurance has
been obtained (Loan No. 38) and except with respect to 1 mortgage loan
(identified as Loan No. 6 in Annex A to this prospectus supplement)
representing approximately 1.26% of the Initial Pool Balance, which
Mortgaged Property operates under a temporary certificate of occupancy (it
is anticipated that a permanent certificate of occupancy will be issued
upon the completion of a parking garage providing additional parking
required under the related zoning ordinance, provided that the related
borrower commences construction by December 31, 2000; in addition, the
related Mortgage Loan Seller has reserved adequate sums to pay for the
cost of completing such parking garage) and (ii) any non-conformity with
zoning laws constitutes a legal non-conforming use or structure which, in
the event of casualty or destruction, may be restored or repaired to the
full extent of the use or structure at the time of such casualty, or for
which law and ordinance insurance coverage has been obtained in amounts
customarily required by prudent commercial lenders, or such non-conformity
does not materially and adversely affect the use, operation or value of
the Mortgaged Property;
(w) all escrow deposits and payments required pursuant to the mortgage
loan are in the possession, or under the control, of the applicable
Mortgage Loan Seller or its agent and there are no deficiencies in
connection therewith and all such escrows, deposits and payments will be
conveyed by the applicable Mortgage Loan Seller to the depositor and
identified as such with appropriate detail on the Closing Date.
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If a Mortgage Loan Seller has been notified of a material breach of any
of the foregoing representations and warranties and if the respective
Mortgage Loan Seller cannot cure the breach within a period of 90 days
following the earlier of its receipt of that notice or its discovery of the
breach, then the respective Mortgage Loan Seller will be obligated pursuant
to the respective Purchase Agreement (the relevant rights under which will be
assigned, together with its interests in the mortgage loans, to the Trustee)
to (a) repurchase the affected mortgage loan as well as, if such affected
mortgage loan is cross-collateralized with one or more other mortgage loans
in the pool of mortgage loans, the other mortgage loans in such
cross-collateralized group of mortgage loans, within the 90-day period at a
price (the "Purchase Price") equal to the sum of (1) the outstanding
principal balance of the mortgage loan or mortgage loans as of the date of
purchase, (2) all accrued and unpaid interest on the mortgage loan or
mortgage loans at the related mortgage rates, in effect from time to time, to
but not including the due date in the Due Period of purchase, (3) all related
unreimbursed Servicing Advances plus accrued and unpaid interest on related
Advances at the Reimbursement Rate, and unpaid Special Servicing Fees
allocable to the mortgage loan or mortgage loans and (4) all reasonable
out-of-pocket expenses reasonably incurred or to be incurred by the Special
Servicer, the Depositor and the Trustee in respect of the breach giving rise
to the repurchase obligation, including any expenses arising out of the
enforcement of the repurchase obligation or (b) substitute, within two years
of the start-up date of the REMIC trust, a Qualified Substitute Mortgage Loan
and pay any shortfall amount equal to the excess of the Purchase Price of the
mortgage loan calculated as of the date of substitution over the stated
principal balance of the Qualified Substitute Mortgage Loan as of the date of
substitution; provided, that the applicable Mortgage Loan Seller generally
has an additional 90-day period to cure the breach if it is diligently
proceeding with that cure, and has delivered to Moody's, Fitch and the
Trustee an officer's certificate that describes the reasons that a cure was
not effected within the first 90-day cure period and the actions it proposes
to take to effect the cure and which states that it anticipates the cure will
be effected within the additional 90-day period. Notwithstanding the
foregoing, the actions specified in (a) or (b) of the preceding sentence must
be taken within 90 days following the earlier of the Mortgage Loan Seller's
receipt of notice or discovery of a breach, with no extension, if such breach
would cause the mortgage loan not to be a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code.
A "Qualified Substitute Mortgage Loan" is a mortgage loan which must, on
the date of substitution: (a) have an outstanding principal balance, after
application of all scheduled payments of principal and/or interest due during
or prior to the month of substitution, not in excess of the outstanding
principal balance of the deleted mortgage loan as of the due date in the
calendar month during which the substitution occurs; (b) have a Mortgage Rate
not less than the Mortgage Rate of the deleted mortgage loan; (c) have the
same due date as the deleted mortgage loan; (d) accrue interest on the same
basis as the deleted mortgage loan (for example, on the basis of a 360-day
year and the actual number of days elapsed); (e) have a remaining term to
stated maturity not greater than, and not more than two years less than, the
remaining term to stated maturity of the deleted mortgage loan; (f) have an
original loan-to-value ratio not higher than that of the deleted mortgage
loan and a current loan-to-value ratio not higher than the then-current
loan-to-value ratio of the deleted mortgage loan; (g) materially comply as of
the date of substitution with all of the representations and warranties set
forth in the applicable Purchase Agreement; (h) have an environmental report
with respect to the related Mortgaged Property that indicates no material
adverse environmental conditions with respect to the related Mortgaged
Property and which will be delivered as a part of the related mortgage file;
(i) have an original debt service coverage ratio not less than the original
debt service coverage ratio of the deleted mortgage loan; (j) be determined
by an opinion of counsel to be a "qualified replacement mortgage" within the
meaning of Section 860G(a)(4) of the Code; (k) not have a maturity date after
the date two years prior to the Rated Final Distribution Date; (l) not be
substituted for a deleted mortgage loan unless the Trustee has received prior
confirmation in writing by each of Moody's and Fitch that the substitution
will not result in the withdrawal, downgrade, or qualification of the then
current rating assigned by either of Moody's or Fitch to any class of
Certificates then rated by Moody's or Fitch, respectively, (the cost, if any,
of obtaining the confirmation to be paid by the applicable Mortgage Loan
Seller); (m) has been approved by the Directing Certificateholder in its
reasonable discretion; provided, that the Directing Certificateholder will
cease to have the right to approve the substitution of a Qualified Substitute
Mortgage Loan for a deleted mortgage loan after the aggregate of the
outstanding principal
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balance of all Qualified Substitute Mortgage Loans which were previously
substituted for deleted mortgage loans exceeds 10% of the aggregate
outstanding principal balance of all the mortgage loans as of the cut-off
date; and (n) not be substituted for a deleted mortgage loan if it would
result in the termination of the REMIC status of either REMIC or the
imposition of tax on either REMIC other than a tax on income expressly
permitted or contemplated to be received by the terms of the Pooling and
Servicing Agreement. In the event that one or more mortgage loans are
substituted for one or more deleted mortgage loans simultaneously, then the
amounts described in clause (a) are required to be determined on the basis of
aggregate principal balances and the rates described in clause (b) above and
the remaining term to stated maturity referred to in clause (e) above are
required to be determined on a weighted average basis. When a Qualified
Substitute Mortgage Loan is substituted for a deleted mortgage loan, the
applicable Mortgage Loan Seller will be required to certify that the mortgage
loan meets all of the requirements of the above definition and send the
certification to the Trustee.
The foregoing repurchase or substitution obligation will constitute the
sole remedy available to the Certificateholders and the Trustee for any
breach of any Mortgage Loan Seller's representations and warranties regarding
the mortgage loans. The respective Mortgage Loan Seller will be the sole
warranting party in respect of the mortgage loans sold by that Mortgage Loan
Seller to the Depositor, and none of the Depositor, the Master Servicer, the
Special Servicer, the Trustee, the Underwriters or any of their affiliates
(other than the respective Mortgage Loan Seller) will be obligated to
repurchase any affected mortgage loan in connection with a breach of the
Mortgage Loan Seller's representations and warranties if the Mortgage Loan
Seller defaults on its obligation to do so. However, the Depositor will not
include any mortgage loan in the pool of mortgage loans if anything has come
to the Depositor's attention prior to the Closing Date that causes it to
believe that the representations and warranties made by a Mortgage Loan
Seller regarding the mortgage loan will not be correct in all material
respects when made. See "Description of the Pooling Agreements--Representations
and Warranties; Repurchases" in the prospectus.
LOCK BOX ACCOUNTS
With respect to 9 mortgage loans (the "Lock Box Loans"), representing
approximately 10.47% of the Initial Pool Balance, one or more accounts
(collectively, the "Lock Box Accounts") have been or may be established into
which the related property manager and/or tenants directly deposits rents or
other revenues from the Mortgaged Property. Pursuant to the terms of 5 Lock
Box Loans (identified as Loan No. 22, 23, 24, 25 and 26 on Annex A to this
prospectus supplement), representing approximately 1.04% of the Initial Pool
Balance, the related Lock Box Accounts were required to be established on the
origination dates of the related mortgage loans. With respect to two such
mortgage loans (identified as Loan No. 32 and 51 on Annex A to this
prospectus supplement), a cash management account is required to be
established on or about the origination date of the mortgage loan into which
the tenants are required to deposit rents directly. Should the DSCR of the
mortgage loan drop to or below 1.45x in the case of one mortgage loan
(identified as Loan No. 32 in Annex A to this prospectus supplement), or in
the case of the other mortgage loan (identified as Loan No. 51 in Annex A to
this prospectus supplement), 1.40x (or 1.20x during the restoration period
after a condemnation or casualty), the borrower will no longer have the right
to withdraw any amounts deposited in the cash management account. The Lock
Box Accounts will not be assets of either REMIC.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to a pooling and servicing
agreement, among the Depositor, the Master Servicer, the Special Servicer and
the Trustee (the "Pooling and Servicing Agreement") and will represent in the
aggregate the entire beneficial ownership interest in the trust fund
consisting of: (1) the mortgage loans and all payments under and proceeds of
the mortgage loans received after the cut-off date (exclusive of payments of
principal and/or interest due on or before the cut-off date); (2) any REO
Property; (3) those funds or assets as from time to time are deposited in the
Certificate Account, the Distribution Accounts, the Interest Reserve Account,
the Excess Interest Distribution Account, and the REO Account, if
established; (4) the rights of the mortgagee under all insurance policies
with respect to the mortgage loans; and (5) certain rights of the Depositor
under the Purchase Agreements relating to mortgage loan document delivery
requirements and the representations and warranties of each Mortgage Loan
Seller regarding the mortgage loans.
The Depositor's Commercial Mortgage Pass-Through Certificates, Series
2000-1 (the "Certificates") will consist of the following 18 classes: the
Class A-1 and Class A-2 Certificates (collectively, the "Class A
Certificates") and the Class X, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class I, Class J, Class K, Class L, Class M, Class S, Class
R and Class LR Certificates. The Class A Certificates and the Class X
Certificates are referred to collectively as the "Senior Certificates" in
this prospectus supplement. The Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class I, Class J, Class K, Class L and Class M Certificates
are referred to collectively as the "Subordinate Certificates" in this
prospectus supplement. The Class B, Class C, Class D and Class E Certificates
are referred to collectively as the "Subordinate Offered Certificates" in
this prospectus supplement. The Class R and Class LR Certificates are
referred to collectively as the "Residual Certificates" in this prospectus
supplement.
Only the Class A, Class X, Class B, Class C, Class D and Class E
Certificates are offered hereby (collectively, the "Offered Certificates").
The Class F, Class G, Class H, Class I, Class J, Class K, Class L, Class M,
Class S, Class R and Class LR Certificates (collectively, the "Non-Offered
Certificates") have not been registered under the Securities Act of 1933 and
are not offered hereby.
The "Certificate Balance" of any class of Certificates (other than the
Class X, Class S and Residual Certificates) outstanding at any time
represents the maximum amount which its holders are entitled to receive as
distributions allocable to principal from the cash flow on the mortgage loans
and the other assets in the trust fund. On each distribution date, the
Certificate Balance of each class of Certificates will be reduced by any
distributions of principal actually made on, and any Collateral Support
Deficit actually allocated to, that class of Certificates on that
distribution date. The initial Certificate Balance of each class of Offered
Certificates (other than the Class X Certificates) is expected to be the
balance set forth on the cover of this prospectus supplement. The Class X,
Class S and Residual Certificates will not have Certificate Balances or
entitle their holders to distributions of principal.
The Class X Certificates will, however, represent the right to receive
distributions of interest accrued as described in this prospectus supplement
on a notional amount (the "Notional Amount"). The Notional Amount of the
Class X Certificates will be equal to the aggregate of the Certificate
Balances of the other Certificates as of the prior distribution date (after
giving effect to the distribution of principal on that distribution date) or,
prior to the first distribution date, the cut-off date. The Notional Amount
of the Class X Certificates is used solely for purposes of describing the
amounts of interest payable on the Class X Certificates and does not
represent an interest in principal payments on the mortgage loans. The Class
F, Class G, Class H, Class I, Class J, Class K, Class L and Class M
Certificates will have an aggregate initial Certificate Balance of
approximately $74,269,762.
The Offered Certificates will be maintained and transferred in book-entry
form and issued in denominations of $10,000 initial Certificate Balance, or
in the case of the Class X Certificates, $1,000,000 initial Notional Amount,
and integral multiples of $1 in excess of that amount. The "Percentage
Interest" evidenced by any Certificate (other than the Class S and Residual
Certificates) is equal to its initial denomination as of the Closing Date,
divided by the initial Certificate Balance or Notional Amount of the class to
which it belongs.
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The 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"). The Depositor has been informed by DTC that DTC's
nominee will be Cede & Co. No person acquiring an interest in the Offered
Certificates (this person, a "Certificate Owner") will be entitled to receive
an Offered Certificate in fully registered, certificated form, a definitive
certificate, representing its interest in that class, except as set forth
under "--Book-Entry Registration and Definitive Certificates" below. Unless
and until definitive certificates are issued, all references to actions by
holders of the Offered Certificates will refer to actions taken by DTC upon
instructions received from Certificate Owners through its participating
organizations (together with Clearstream Banking, societe anonyme
("Clearstream, Luxembourg") and the Euroclear System ("Euroclear")
participating organizations (the "Participants"), and all references in this
prospectus supplement 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 Certificate Owners through its Participants
in accordance with DTC procedures. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates" in the
prospectus.
Until definitive certificates are issued, interests in any class of
Offered Certificates will be transferred on the book-entry records of DTC and
its Participants.
PAYING AGENT, CERTIFICATE REGISTRAR AND AUTHENTICATING AGENT
The Chase Manhattan Bank, 450 West 33rd Street, Capital Markets Fiduciary
Services (CMBS), 14th Floor, New York, New York 10001 will serve as paying
agent (in that capacity, the "Paying Agent"). In addition, The Chase
Manhattan Bank will initially serve as registrar (in that capacity, the
"Certificate Registrar") for the 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 that capacity, the
"Authenticating Agent").
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
General. Certificate Owners may hold their Certificates through DTC (in
the United States) or Clearstream, Luxembourg or Euroclear (in Europe) if
they are Participants of that system, or indirectly through organizations
that are Participants in those systems. Clearstream, Luxembourg and Euroclear
will hold omnibus positions on behalf of the Clearstream, Luxembourg
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in Clearstream, Luxembourg's and Euroclear's names on the
books of their respective depositories (collectively, the "Depositories")
which in turn will hold those positions in customers' securities accounts in
the Depositories' names on the books of DTC. DTC is a limited purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to
Section 17A of the Securities Exchange Act of 1934, as amended. DTC was
created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants
through electronic computerized book-entries, thereby eliminating the need
for physical movement of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations
("Direct Participants"). Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Clearstream, Luxembourg Participants and Euroclear
Participants will occur in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through Clearstream, Luxembourg
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depository; however, these cross-market transactions
will require delivery of instructions to
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the relevant European international clearing system by the counterparty in
that system in accordance with its rules and procedures. If the transaction
complies with all relevant requirements, Euroclear or Clearstream,
Luxembourg, as the case may be, will then deliver instructions to the
Depository to take action to effect final settlement on its behalf.
Because of time-zone differences, credits of securities in Clearstream,
Luxembourg or Euroclear as a result of a transaction with a DTC Participant
will be made during the subsequent securities settlement processing, dated
the business day following the DTC settlement date, and those credits or any
transactions in those securities settled during those processing will be
reported to the relevant Clearstream, Luxembourg Participant or Euroclear
Participant on that business day. Cash received in Clearstream, Luxembourg or
Euroclear as a result of sales of securities by or through a Clearstream,
Luxembourg Participant or a Euroclear Participant to a DTC Participant will
be received with value on the DTC settlement date but will be available in
the relevant Clearstream, Luxembourg or Euroclear cash account only as of the
business day following settlement in DTC.
Certificate Owners that are not Direct or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
the Offered Certificates may do so only through Direct and Indirect
Participants. In addition, Certificate Owners will receive all distributions
of principal of and interest on the Offered Certificates from the Paying
Agent through DTC and its Direct and Indirect Participants. Accordingly,
Certificate Owners may experience delays in their receipt of payments, since
those payments will be forwarded by the Paying Agent to Cede & Co., as
nominee of DTC. DTC will forward those payments to its Participants, which
thereafter will forward them to Indirect Participants or beneficial owners of
Offered Certificates. Except as otherwise provided under "--Reports to
Certificateholders; Certain Available Information" below, Certificate Owners
will not be recognized by the Paying Agent, the Certificate Registrar, the
Trustee, the Special Servicer or the Master Servicer as holders of record of
Certificates and Certificate Owners will be permitted to receive information
furnished to Certificateholders and to exercise the rights of
Certificateholders only indirectly through DTC and its Direct and Indirect
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Offered Certificates among Participants and to receive and transmit
distributions of principal of, and interest on, the Offered Certificates.
Direct and Indirect Participants with which Certificate Owners have accounts
with respect to the Offered Certificates similarly are required to make
book-entry transfers and receive and transmit the distributions on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess physical certificates evidencing their interests in the
Offered Certificates, the Rules provide a mechanism by which Certificate
Owners, through their Direct and Indirect Participants, will receive
distributions and will be able to transfer their interests in the Offered
Certificates.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of
Certificateholders to pledge the Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to the
Certificates, may be limited due to the lack of a physical certificate for
the Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose accounts
with DTC the Offered Certificates are credited. DTC may take conflicting
actions with respect to other undivided interests to the extent that those
actions are taken on behalf of Participants whose holdings include the
undivided interests.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related operating procedures of the Euroclear System and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within the Euroclear
system, withdrawal of securities and cash from the Euroclear system, and
receipts of payments with respect to securities in the Euroclear system.
Although DTC, Euroclear and Clearstream, Luxembourg have implemented the
foregoing procedures in order to facilitate transfers of interests in global
Certificates among Participants of DTC, Euroclear and Clearstream,
Luxembourg, they are under no obligation to perform or to continue to comply
with the foregoing procedures, and the foregoing procedures may be
discontinued at any time.
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None of the Depositor, the Master Servicer, the Paying Agent, the
Certificate Registrar, the Underwriters, the Special Servicer or the Trustee
will have any liability for any actions taken by DTC, Euroclear or
Clearstream, Luxembourg, their respective Direct or Indirect Participants or
their nominees, including, without limitation, actions for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Offered Certificates held by Cede & Co., as nominee for DTC,
or for maintaining, supervising or reviewing any records relating to that
beneficial ownership interest. The information in this prospectus supplement
concerning DTC, Clearstream, Luxembourg and Euroclear and their book-entry
systems has been obtained from sources believed to be reliable, but the
Depositor takes no responsibility for the accuracy or completeness of the
information.
Definitive Certificates. Definitive certificates will be issued to
Certificate Owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions set forth in the prospectus under
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates."
Upon the occurrence of an event described in the prospectus in the second
to last paragraph under "Description of the Certificates--Book-Entry
Registration and Definitive Certificates", the Paying Agent is required to
notify, through DTC, Direct Participants who have ownership of Offered
Certificates as indicated on the records of DTC of the availability of
definitive certificates. Upon surrender by DTC of the global certificates
representing the Offered Certificates and upon receipt of instructions from
DTC for re-registration, the Certificate Registrar and the Authenticating
Agent will reissue the Offered Certificates as definitive certificates issued
in the respective Certificate Balances or Notional Amounts, as applicable,
owned by individual Certificate Owners, and thereafter the Paying Agent, the
Certificate Registrar, the Trustee, the Special Servicer and the Master
Servicer will recognize the holders of those definitive certificates as
Certificateholders under the Pooling and Servicing Agreement.
For additional information regarding DTC and Certificates maintained on
the book-entry records of DTC, see "Description of the
Certificates--Book-Entry Registration and Definitive Certificates" in the
prospectus.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates are required
to be made by the Paying Agent, to the extent of available funds, on the 15th
day of each month or, if the 15th day is not a business day, then on the next
succeeding business day (but in no event earlier than the fourth business day
following the related Determination Date), commencing in January 2001 (each,
a "Distribution Date"). All distributions (other than the final distribution
on any Certificate) are required to be made to the Certificateholders in
whose names the Certificates are registered at the close of business on each
Record Date. With respect to any Distribution Date, the "Record Date" will be
the last business day of the month preceding the month in which that
Distribution Date occurs. These distributions are required to 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 the Certificateholder has provided the Paying Agent with written
wiring instructions no less than five business days prior to the related
Record Date (which wiring instructions may be in the form of a standing order
applicable to all subsequent distributions) and is the registered owner of
Certificates with an aggregate initial Certificate Balance or Notional
Amount, as the case may be, of at least $5,000,000, or otherwise by check
mailed to the Certificateholder. The final distribution on any Certificate is
required to be made in like manner, but only upon presentation and surrender
of the Certificate at the location that will be specified in a notice of the
pendency of the final distribution. All distributions made with respect to a
class of Certificates will be allocated pro rata among the outstanding
Certificates of that class based on their respective Percentage Interests.
The Master Servicer is required to establish and maintain, or cause to be
established and maintained, one or more accounts (collectively, the
"Certificate Account") as described in the Pooling and Servicing Agreement.
The Master Servicer is required to deposit in the Certificate Account on a
daily basis (and in no event later than the business day following receipt in
available funds) all payments and collections due after the cut-off date and
other amounts received or advanced with respect to the mortgage loans
(including, without limitation, all proceeds received under any hazard, title
or other insurance policy that provides coverage with respect to a Mortgaged
Property or the related mortgage loan or in connection with the full or
partial condemnation of a Mortgaged Property (the "Insurance and Condemnation
Proceeds") and other
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amounts received and retained in connection with the liquidation of
defaulted mortgage loans or property acquired by foreclosure or otherwise
(the "Liquidation Proceeds")), and will be permitted to make withdrawals
therefrom as set forth in the Pooling and Servicing Agreement.
The Paying Agent is required to establish and maintain an account (the
"Lower-Tier Distribution Account"), and a second account (the "Upper-Tier
Distribution Account" and, together with the Lower-Tier Distribution Account,
the "Distribution Accounts") in the name of the Paying Agent and for the
benefit of the Certificateholders. On each Distribution Date, the Paying
Agent is required to apply amounts on deposit in the Upper-Tier Distribution
Account (which will include all funds that were remitted by the Master
Servicer from the Certificate Account plus, among other things, any P&I
Advances less amounts, if any, distributable to the Class LR Certificates as
set forth in the Pooling and Servicing Agreement) generally to make
distributions of interest and principal from the Available Distribution
Amount to the Certificateholders as described in this prospectus supplement.
Each of the Certificate Account and the Distribution Accounts will conform to
certain eligibility requirements set forth in the Pooling and Servicing
Agreement.
The Paying Agent is required to establish and maintain an "Interest
Reserve Account" in the name of the Paying Agent for the benefit of the
holders of the Certificates. On each Servicer Remittance Date occurring in
February and on any Servicer Remittance Date occurring in any January which
occurs in a year that is not a leap year, the Paying Agent will be required
to deposit into the Interest Reserve Account during the related interest
period, in respect of each mortgage loan, an amount equal to one day's
interest at the Mortgage Rate for each mortgage loan on its Stated Principal
Balance as of the Distribution Date in the month preceding the month in which
the related Servicer Remittance Date occurs, to the extent a Periodic Payment
or P&I Advance is made in respect of the mortgage loans (all amounts so
deposited in any consecutive January (if applicable) and February, "Withheld
Amounts"). On each Servicer Remittance Date occurring in March, the Paying
Agent will be required to withdraw from the Interest Reserve Account an
amount equal to the Withheld Amounts from the preceding January (if
applicable) and February, if any, and deposit that amount into the Lower-Tier
Distribution Account.
The Master Servicer is authorized but not required to direct the
investment of funds held in the Certificate Account in U.S. government
securities and other obligations that are acceptable to each of Moody's and
Fitch ("Permitted Investments"), and the Master Servicer will be entitled to
retain any interest or other income earned on the funds. The Master Servicer
will be required to bear any losses resulting from the investment of the
funds, other than losses which result from the insolvency of any financial
institution which was an eligible institution under the terms of the Pooling
and Servicing Agreement.
The Paying Agent is required to establish and maintain an "Excess Interest
Distribution Account" in the name of the Paying Agent for the benefit of the
Class S Certificateholders. Prior to the applicable Distribution Date, the
Master Servicer is required to remit to the Paying Agent for deposit into the
Excess Interest Distribution Account an amount equal to the Excess Interest
received during the related Due Period.
The aggregate amount available for distribution to Certificateholders on
each Distribution Date (the "Available Distribution Amount") will, in
general, equal the sum of the following amounts (without duplication):
(x) the total amount of all cash received on the mortgage loans and any
REO Properties that is on deposit in the Certificate Account and the
Lower-Tier Distribution Account as of the business day preceding the
related Servicer Remittance Date, exclusive of (without duplication):
(1) all Periodic Payments and balloon payments collected but due on a
due date subsequent to the related Due Period;
(2) all principal prepayments, Liquidation Proceeds, Insurance and
Condemnation Proceeds and other unscheduled recoveries received
subsequent to the related Due Period;
(3) all amounts in the Certificate Account and Lower-Tier
Distribution Account that are due or reimbursable to any person other
than the Certificateholders;
(4) with respect to each mortgage loan and any Distribution Date
occurring in each February and in any January occurring in a year that
is not a leap year, the related Withheld Amount to the extent those
funds are collected or advanced and are required to be deposited in
the Interest Reserve Account;
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(5) Excess Interest;
(6) all Yield Maintenance Charges; and
(7) all amounts deposited in the Certificate Account and Lower-Tier
Distribution Account in error;
(y) all P&I Advances made by the Master Servicer or the Trustee, as
applicable, with respect to the Distribution Date (net of certain amounts
that are due or reimbursable to persons other than the
Certificateholders). See "Description of the Pooling
Agreements--Certificate Account" in the prospectus; and
(z) for the Distribution Date occurring in each March, the related
Withheld Amounts required to be deposited in the Lower-Tier Distribution
Account pursuant to the Pooling and Servicing Agreement.
The "Due Period" for each Distribution Date will be the period commencing
on the second day of the month preceding the month in which that Distribution
Date occurs and ending on the first day of the month in which that
Distribution Date occurs (or, with respect to 16 mortgage loans, representing
approximately 18.96% of the Initial Pool Balance, the period commencing on
the 11th day of the month preceding the month in which that Distribution Date
occurs and ending on the 10th day of the month in which that Distribution
Date occurs). Notwithstanding the foregoing, in the event that the last day
of a Due Period (or applicable grace period) is not a business day, any
payments received with respect to the mortgage loans relating to the related
Due Period on the business day immediately following that day will be deemed
to have been received during that Due Period and not during any other Due
Period.
Priority. On each Distribution Date, for so long as the Certificate
Balances of the Certificates have not been reduced to zero, the Paying Agent
is required to apply amounts on deposit in the Upper-Tier Distribution
Account, to the extent of the Available Distribution Amount, in the following
order of priority:
first, to the Class A-1, Class A-2 and Class X Certificates, pro rata
(based upon their respective entitlements to interest for that Distribution
Date), in respect of interest, up to an amount equal to the aggregate
Interest Distribution Amount for those classes;
second, (1) to the Class A-1 Certificates, in reduction of its Certificate
Balance, an amount equal to the Principal Distribution Amount until the
Certificate Balance of that class is reduced to zero and (2) following
reduction of the Certificate Balance of the Class A-1 Certificates to zero,
to the Class A-2 Certificates, in reduction of its Certificate Balance, an
amount equal to the Principal Distribution Amount (or the portion of it
remaining after distributions on the Class A-1 Certificates on that
Distribution Date) until the Certificate Balance of that class is reduced to
zero;
third, to the Class A-1 and Class A-2 Certificates, pro rata (based upon
the aggregate unreimbursed Collateral Support Deficit allocated to that
class), until all amounts of Collateral Support Deficit previously allocated
to those classes, but not previously reimbursed, have been reimbursed in
full;
fourth, to the Class B Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
fifth, following reduction of the Certificate Balances of the Class A
Certificates to zero, to the Class B Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A Certificates
on that Distribution Date), until the Certificate Balance of that class is
reduced to zero;
sixth, to the Class B Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class B Certificates, but not
previously reimbursed, have been reimbursed in full;
seventh, to the Class C Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
eighth, following reduction of the Certificate Balances of the Class A and
Class B Certificates to zero, to the Class C Certificates, in reduction of
its Certificate Balance, an amount equal to the Principal Distribution Amount
(or the portion of it remaining after distributions on the Class A and Class
B Certificates on that Distribution Date), until the Certificate Balance of
that class is reduced to zero;
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ninth, to the Class C Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class C Certificates, but not
previously reimbursed, have been reimbursed in full;
tenth, to the Class D Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
eleventh, following reduction of the Certificate Balances of the Class A,
Class B and Class C Certificates to zero, to the Class D Certificates, in
reduction of its Certificate Balance, an amount equal to the Principal
Distribution Amount (or the portion of it remaining after distributions on
the Class A, Class B and Class C Certificates on that Distribution Date),
until the Certificate Balance of that class is reduced to zero;
twelfth, to the Class D Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class D Certificates, but not
previously reimbursed, have been reimbursed in full;
thirteenth, to the Class E Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
fourteenth, following reduction of the Certificate Balances of the Class
A, Class B, Class C and Class D Certificates to zero, to the Class E
Certificates, in reduction of its Certificate Balance, an amount equal to the
Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C and Class D Certificates on
that Distribution Date), until the Certificate Balance of that class is
reduced to zero;
fifteenth, to the Class E Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class E Certificates, but not
previously reimbursed, have been reimbursed in full;
sixteenth, to the Class F Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
seventeenth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D and Class E Certificates to zero, to the Class F
Certificates, in reduction of its Certificate Balance, an amount equal to the
Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C, Class D and Class E
Certificates on that Distribution Date), until the Certificate Balance of
that class is reduced to zero;
eighteenth, to the Class F Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class F Certificates, but not
previously reimbursed, have been reimbursed in full;
nineteenth, to the Class G Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that class;
twentieth, following reduction of the Certificate Balances of the Class A,
Class B, Class C, Class D, Class E and Class F Certificates to zero, to the
Class G Certificates, in reduction of its Certificate Balance, an amount
equal to the Principal Distribution Amount (or the portion of it remaining
after distributions on the Class A, Class B, Class C, Class D, Class E and
Class F Certificates on that Distribution Date), until the Certificate
Balance of that class is reduced to zero;
twenty-first, to the Class G Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class G Certificates, but not
previously reimbursed, have been reimbursed in full;
twenty-second, to the Class H Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
twenty-third, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F and Class G Certificates to
zero, to the Class H Certificates, in reduction of its Certificate Balance,
an amount equal to the Principal Distribution Amount (or the portion of it
remaining after distributions on the Class A, Class B, Class C, Class D,
Class E, Class F and Class G Certificates on that Distribution Date), until
the Certificate Balance of that class is reduced to zero;
twenty-fourth, to the Class H Certificates, until all amounts of
Collateral Support Deficit previously allocated to the Class H Certificates,
but not previously reimbursed, have been reimbursed in full;
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twenty-fifth, to the Class I Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
twenty-sixth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G and Class H
Certificates to zero, to the Class I Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A, Class B,
Class C, Class D, Class E, Class F, Class G and Class H Certificates on that
Distribution Date), until the Certificate Balance of that class is reduced to
zero;
twenty-seventh, to the Class I Certificates, until all amounts of
Collateral Support Deficit previously allocated to the Class I Certificates,
but not previously reimbursed, have been reimbursed in full;
twenty-eighth, to the Class J Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
twenty-ninth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G, Class H and Class I
Certificates to zero, to the Class J Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A, Class B,
Class C, Class D, Class E, Class F, Class G, Class H and Class I Certificates
on that Distribution Date), until the Certificate Balance of that class is
reduced to zero;
thirtieth, to the Class J Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class J Certificates, but not
previously reimbursed, have been reimbursed in full;
thirty-first, to the Class K Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
thirty-second, following reduction of the Certificate Balances of the
Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class
I and Class J Certificates to zero, to the Class K Certificates, in reduction
of its Certificate Balance, an amount equal to the Principal Distribution
Amount (or the portion of it remaining after distributions on the Class A,
Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class I and
Class J Certificates on that Distribution Date), until the Certificate
Balance of that class is reduced to zero;
thirty-third, to the Class K Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class K Certificates, but not
previously reimbursed, have been reimbursed in full;
thirty-fourth, to the Class L Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
thirty-fifth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class I,
Class J and Class K Certificates to zero, to the Class L Certificates, in
reduction of its Certificate Balance, an amount equal to the Principal
Distribution Amount (or the portion of it remaining after distributions on
the Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H,
Class I, Class J and Class K Certificates on that Distribution Date), until
the Certificate Balance of that class is reduced to zero;
thirty-sixth, to the Class L Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class L Certificates, but not
previously reimbursed, have been reimbursed in full;
thirty-seventh, to the Class M Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that class;
thirty-eighth, following reduction of the Certificate Balances of the
Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class
I, Class J, Class K and Class L Certificates to zero, to the Class M
Certificates, in reduction of its Certificate Balance, an amount equal to the
Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class I, Class J, Class K and Class L Certificates on that
Distribution Date), until the Certificate Balance of that class is reduced to
zero;
thirty-ninth, to the Class M Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class M Certificates, but not
previously reimbursed, have been reimbursed in full; and
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fortieth, to the Class R and Class LR Certificates, the amount, if any,
of the Available Distribution Amount remaining in the Upper-Tier Distribution
Account and the Lower-Tier Distribution Account, respectively, with respect
to that Distribution Date.
Reimbursement of previously allocated Collateral Support Deficit will not
constitute distributions of principal for any purpose and will not result in
an additional reduction in the Certificate Balance of the class of
Certificates in respect of which a reimbursement is made.
Notwithstanding the distribution priority second set forth above, on and
after the Distribution Date on which the Certificate Balances of the
Subordinate Certificates have all been reduced to zero (that date, the
"Cross-Over Date"), the Principal Distribution Amount will be distributed,
pro rata (based upon their respective Certificate Balances), among the
classes of Class A Certificates without regard to the priorities set forth
above.
Pass-Through Rates. The interest rate (the "Pass-through Rate") applicable
to each class of Certificates (other than the Class S and Residual
Certificates) for any Distribution Date will equal the rates set forth below.
The Pass-through Rate on the Class A-1 Certificates is a per annum rate
equal to 6.3200%.
The Pass-through Rate on the Class A-2 Certificates is a per annum rate
equal to 6.4960%.
The Pass-through Rate on the Class B Certificates is a per annum rate
equal to 6.5880%, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class C Certificates is a per annum rate
equal to 6.7340%, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class D Certificates is a per annum rate
equal to 6.8620%, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class E Certificates is a per annum rate
equal to the WAC Rate less 0.97% per annum.
The Pass-through Rate on the Class F Certificates is a per annum rate
equal to the WAC Rate less 0.62% per annum.
The Pass-through Rate on the Class G Certificates is a per annum rate
equal to 6.1310%, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class H Certificates is a per annum rate
equal to 6.1310%, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class I Certificates is a per annum rate
equal to 6.1310%, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class J Certificates is a per annum rate
equal to 6.1310%, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class K Certificates is a per annum rate
equal to 6.1310%, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class L Certificates is a per annum rate
equal to 6.1310%, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate on the Class M Certificates is a per annum rate
equal to 6.1310%, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-through Rate for the Class X Certificates for any Distribution
Date will equal the excess, if any, of (a) the WAC Rate for the related
Distribution Date, over (b) the weighted average of the Pass-through Rates on
all of the other Certificates (other than the Class S and Residual
Certificates) weighted on the basis of their respective Certificate Balances
immediately prior to that Distribution Date.
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The Class S Certificates will not have a Pass-through Rate or be entitled
to distributions in respect of interest other than Excess Interest.
The Pass-through Rate on each class of Offered Certificates for the first
Distribution Date is expected to be as set forth on page S-6 of this
prospectus supplement.
The "WAC Rate" with respect to any Distribution Date is equal to the
weighted average of the applicable Net Mortgage Rates for the mortgage loans
weighted on the basis of their respective Stated Principal Balances as of the
preceding Distribution Date (after giving effect to the distribution of
principal on the related Distribution Date) or, in the case of the first
Distribution Date, the cut-off date.
The "Net Mortgage Rate" for each mortgage loan is equal to the related
Mortgage Rate in effect from time to time less the related Administrative
Cost Rate; provided, however, that for purposes of calculating Pass-through
Rates, the Net Mortgage Rate for any mortgage loan will be determined without
regard to any modification, waiver or amendment of the terms of the mortgage
loan, whether agreed to by the Master Servicer or resulting from a
bankruptcy, insolvency or similar proceeding involving the related borrower.
"Administrative Cost Rate" as of any date of determination will be equal
to the sum of the Servicing Fee Rate and the Trustee Fee Rate.
The "Mortgage Rate" with respect to any mortgage loan is the per annum
rate at which interest accrues on the mortgage loan as stated in the related
Mortgage Note in each case without giving effect to any default rate or an
increased interest rate. For purposes of calculating the Pass-through Rate on
the Certificates, the Mortgage Rate of each mortgage loan for any one-month
period preceding a related due date will be the annualized rate at which
interest would have to accrue in respect of the mortgage loan on the basis of
a 360-day year consisting of twelve 30-day months in order to produce the
aggregate amount of interest actually required to be paid in respect of the
mortgage loan during the one-month period at the related Mortgage Rate;
provided, however, that with respect to each mortgage loan, the Mortgage Rate
for the one month period (1) prior to the due dates in January and February
in any year which is not a leap year or in February in any year which is a
leap year, and (2) prior to the due date in March, will be the per annum rate
stated in the related Mortgage Note.
"Excess Interest" with respect to the APD Loans is the interest accrued at
an increased interest rate in respect of each APD Loan in excess of the
interest accrued at the initial interest rate, plus any related interest, to
the extent permitted by applicable law.
A "Prepayment Interest Shortfall" with respect to any Mortgage Loan that
was subject to a principal prepayment in full or in part and which did not
include a full month's interest, or as to which insurance or condemnation
proceeds were received by the Master Servicer, the amount of interest that
would have accrued at the Net Mortgage Rate for such Mortgage Loan on the
amount of such principal prepayment, insurance proceeds or condemnation
proceeds during the period commencing on the date as of which such amounts
were applied to the unpaid balance of such Mortgage Loan and ending on the
day preceding the next Due Date.
Interest Distribution Amount. Interest will accrue for each class of
Certificates (other than the Class S and Residual Certificates) during the
related Interest Accrual Period. The "Interest Distribution Amount" of any
class of Certificates (other than the Class S and Residual Certificates) for
any Distribution Date is an amount equal to all Distributable Certificate
Interest in respect of that class for that Distribution Date and, to the
extent not previously paid, for all prior Distribution Dates.
The "Distributable Certificate Interest" in respect of each class of
Certificates (other than Class S and the Residual Certificates) for each
Distribution Date is equal to one month's interest at the Pass-through Rate
applicable to that class of Certificates for that Distribution Date accrued
for the related Interest Accrual Period on the related Certificate Balance or
Notional Amount, as the case may be, outstanding immediately prior to that
Distribution Date.
Shortfalls in the Available Distribution Amount resulting from Uncovered
Prepayment Interest Shortfalls will generally be allocated to all classes of
Certificates (other than the Class X, Class S and Residual Certificates). In
each case, such allocations will be made pro rata to such classes on the
basis of their Interest Distribution Amount and will reduce such classes'
respective interest entitlements.
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An "Uncovered Prepayment Interest Shortfall" is any Prepayment Interest
Shortfall in excess of the first 0.02% of the Servicing Fee attributable to
such Mortgage Loan (other than a Specially Serviced Mortgage Loan) due to the
Master Servicer for the Due Period in which a prepayment was accepted by the
Master Servicer which contravenes the terms of such mortgage loan to the
following Determination Date.
Principal Distribution Amount. The "Principal Distribution Amount" for any
Distribution Date is an amount equal to the sum of (a) the Principal
Shortfall for that Distribution Date, (b) the Scheduled Principal
Distribution Amount for that Distribution Date and (c) the Unscheduled
Principal Distribution Amount for that Distribution Date.
The "Scheduled Principal Distribution Amount" for each Distribution Date
will equal the aggregate of the principal portions of (a) all Periodic
Payments (excluding balloon payments and Excess Interest) due during or, if
and to the extent not previously received or advanced and distributed to
Certificateholders on a preceding Distribution Date, prior to the related Due
Period and all Assumed Scheduled Payments for the related Due Period, in each
case to the extent paid by the related borrower as of the business day
preceding the related Servicer Remittance Date or advanced by the Master
Servicer or the Trustee, as applicable, and (b) all balloon payments to the
extent received during the related Due Period or any applicable grace period,
and to the extent not included in clause (a) above. The Scheduled Principal
Distribution Amount from time to time will include all late payments of
principal made by a borrower, including late payments in respect of a
delinquent balloon payment, regardless of the timing of those late payments,
except to the extent those late payments are otherwise reimbursable to the
Master Servicer, the Special Servicer or the Trustee, as the case may be, for
prior Advances.
The "Unscheduled Principal Distribution Amount" for each Distribution Date
will equal the aggregate of (a) all voluntary prepayments of principal
received on the mortgage loans during the related Due Period; and (b) any
other collections (exclusive of payments by borrowers) received on the
mortgage loans and any REO Properties during the related Due Period, whether
in the form of Liquidation Proceeds, Insurance and Condemnation Proceeds, net
income, rents, and profits from REO Property or otherwise, that were
identified and applied by the Master Servicer as recoveries of previously
unadvanced principal of the related mortgage loan.
The "Assumed Scheduled Payment" for any Due Period and with respect to any
mortgage loan that is delinquent in respect of its balloon payment (including
any REO Loan as to which the balloon payment would have been past due), is an
amount equal to the sum of (a) the principal portion of the Periodic Payment
that would have been due on that mortgage loan on the related due date based
on the constant payment required by the related Mortgage Note or the original
amortization schedule of the mortgage loan (as calculated with interest at
the related Mortgage Rate), if applicable, assuming the related balloon
payment has not become due, after giving effect to any modification, and (b)
interest on the Stated Principal Balance of that mortgage loan at its
Mortgage Rate (net of the applicable rate at which the Servicing Fee is
calculated).
For purposes of the foregoing definition of Principal Distribution Amount,
the term "Principal Shortfall" for any Distribution Date means the amount, if
any, by which (1) the Principal Distribution Amount for the prior
Distribution Date, exceeds (2) the aggregate amount distributed in respect of
principal on the Class A, Class B, Class C, Class D, Class E, Class F, Class
G, Class H, Class I, Class J, Class K, Class L and Class M Certificates on
the preceding Distribution Date. There will be no Principal Shortfall on the
first Distribution Date.
Certain Calculations with Respect to Individual Mortgage Loans. The Stated
Principal Balance of each mortgage loan outstanding at any time represents
the principal balance of the mortgage loan ultimately due and payable to the
Certificateholders. The "Stated Principal Balance" of each mortgage loan will
initially equal its Cut-off Date Balance and, on each Distribution Date, will
be reduced by the portion of the Principal Distribution Amount for that date
that is attributable to that mortgage loan, including the principal portion
of any P&I Advances. The Stated Principal Balance of a mortgage loan may also
be reduced in connection with any forced reduction of its actual unpaid
principal balance imposed by a court presiding over a bankruptcy proceeding
in which the related borrower is the debtor or by modification of the
mortgage loans. See "Certain Legal Aspects of Mortgage Loans--Bankruptcy
Laws" in the prospectus. If any mortgage loan is
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paid in full or the mortgage loan (or any Mortgaged Property acquired in
respect of the mortgage loan) is otherwise liquidated, then, as of the first
Distribution Date that follows the end of the Due Period in which that
payment in full or liquidation occurred and notwithstanding that a loss may
have occurred in connection with any liquidation, the Stated Principal
Balance of the mortgage loan will be zero.
For purposes of calculating distributions on, and allocations of
Collateral Support Deficit to, the Certificates, as well as for purposes of
calculating the Servicing Fee and Trustee Fee payable each month, each REO
Property will be treated as if there exists with respect thereto an
outstanding mortgage loan (an "REO Loan"), and all references to mortgage
loan, mortgage loans and pool of mortgage loans in this prospectus supplement
and in the prospectus, when used in that context, will be deemed to also be
references to or to also include, as the case may be, any REO Loans. Each REO
Loan will generally be deemed to have the same characteristics as its actual
predecessor mortgage loan, including the same fixed Mortgage Rate (and,
accordingly, the same Net Mortgage Rate) and the same unpaid principal
balance and Stated Principal Balance. Amounts due on the predecessor mortgage
loan, including any portion of it payable or reimbursable to the Master
Servicer, will continue to be "due" in respect of the REO Loan; and amounts
received in respect of the related REO Property, net of payments to be made,
or reimbursement to the Master Servicer or the Special Servicer for payments
previously advanced, in connection with the operation and management of that
property, generally will be applied by the Master Servicer as if received on
the predecessor mortgage loan.
Excess Interest. On each Distribution Date, the Paying Agent is required
to distribute from the Excess Interest Distribution Account any Excess
Interest received with respect to mortgage loans during the related Due
Period to the Class S Certificates.
ALLOCATION OF YIELD MAINTENANCE CHARGES
On any Distribution Date, Yield Maintenance Charges collected during the
related Due Period will be required to be distributed by the Paying Agent to
the holders of the Class A through Class F Certificates in the following
manner: The holders of the Class A through Class F Certificates will receive
the product of (a) a fraction whose numerator is the amount of principal
distributed to such Class on such Distribution Date and whose denominator is
the total amount of principal distributed to all of the Certificates on such
Distribution Date, (b) the Base Interest Fraction for the related principal
prepayment and such Class of Certificates and (c) the Yield Maintenance
Charges collected on such principal prepayment during the related Due Period.
Any Yield Maintenance Charges collected during the related Due Period
remaining after such distributions shall be distributed to the holders of the
Class X Certificates. No Yield Maintenance Charges will be distributed to
holders of any other Class of Certificates.
The "Base Interest Fraction" for any principal prepayment on any mortgage
loan and for any of the Class A through Class F Certificates, will be a
fraction (not greater than 1) (a) whose numerator is the greater of zero and
the amount, if any, by which (i) the Pass-Through Rate on such Class of
Certificates exceeds (ii) the yield rate (as provided by the master servicer)
used in calculating the Yield Maintenance Charge with respect to such
principal prepayment and (b) whose denominator is the amount, if any, by
which the (i) Mortgage Rate on such mortgage loan exceeds (ii) the yield rate
(as provided by the Servicer) used in calculating the Yield Maintenance
Charge with respect to such principal prepayment; provided, however, that if
such yield rate is greater than or equal to the Mortgage Rate on such
mortgage loan then the Base Interest Fraction will be zero.
For a description of Yield Maintenance Charges, see "Description of the
Mortgage Pool--Certain Terms and Conditions of the Mortgage Loans--Prepayment
Provisions" in this prospectus supplement. See also "Risk Factors--Risks
Relating to Enforceability of Yield Maintenance Charges" in this prospectus
supplement and "Certain Legal Aspects of Mortgage Loans--Default Interest and
Limitations on Prepayments" in the prospectus regarding the enforceability of
yield maintenance charges.
ASSUMED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The "Assumed Final Distribution Date" with respect to any class of Offered
Certificates is the Distribution Date on which the aggregate Certificate
Balance or Notional Amount, as the case may be, of that class of Certificates
would be reduced to zero based on the assumptions set forth below. The
Assumed Final Distribution Date will in each case be as follows:
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<TABLE>
<CAPTION>
ASSUMED FINAL
CLASS DESIGNATIONS DISTRIBUTION DATE
---------------------- ---------------------
<S> <C>
Class A-1.............. May 15, 2010
Class A-2.............. December 15, 2010
Class X................ December 15, 2020
Class B................ December 15, 2010
Class C................ December 15, 2010
Class D................ December 15, 2010
Class E................ December 15, 2010
</TABLE>
THE ASSUMED FINAL DISTRIBUTION DATES SET FORTH ABOVE WERE CALCULATED
WITHOUT REGARD TO ANY DELAYS IN THE COLLECTION OF BALLOON PAYMENTS AND
WITHOUT REGARD TO A REASONABLE LIQUIDATION TIME WITH RESPECT TO ANY MORTGAGE
LOANS THAT MAY BECOME DELINQUENT. ACCORDINGLY, IN THE EVENT OF DEFAULTS ON
THE MORTGAGE LOANS, THE ACTUAL FINAL DISTRIBUTION DATE FOR ONE OR MORE
CLASSES OF THE OFFERED CERTIFICATES MAY BE LATER, AND COULD BE SUBSTANTIALLY
LATER, THAN THE RELATED ASSUMED FINAL DISTRIBUTION DATE(S).
In addition, the Assumed Final Distribution Dates set forth above were
calculated on the basis of a 0% CPR and assuming the APD Loans are prepaid in
full on their respective Anticipated Prepayment Dates. Since the rate of
payment (including prepayments) of the mortgage loans may exceed the
scheduled rate of payments, and could exceed the scheduled rate by a
substantial amount, the actual final Distribution Date for one or more
classes of the Offered Certificates may be earlier, and could be
substantially earlier, than the related Assumed Final Distribution Date(s).
The rate of payments (including prepayments) on the mortgage loans will
depend on the characteristics of the mortgage loans, as well as on the
prevailing level of interest rates and other economic factors, and we cannot
assure you as to actual payment experience. Finally, the Assumed Final
Distribution Dates were calculated assuming that there would not be an early
termination of the trust fund.
The "Rated Final Distribution Date" for each class of Offered Certificates
will be January 15, 2033, the first Distribution Date after the 24th month
following the end of the stated amortization term for the mortgage loan that,
as of the cut-off date, will have the longest remaining amortization term.
SUBORDINATION; ALLOCATION OF COLLATERAL SUPPORT DEFICIT
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 in this prospectus supplement, to the
rights of holders of the Senior Certificates. Moreover, to the extent
described in this prospectus supplement:
o the rights of the holders of the Class M Certificates will be
subordinated to the rights of the holders of the Class L
Certificates,
o the rights of the holders of the Class L and Class M Certificates
will be subordinated to the rights of the holders of the Class K
Certificates,
o the rights of the holders of the Class K, Class L and Class M
Certificates will be subordinated to the rights of the holders of
the Class J Certificates,
o the rights of the holders of the Class J, Class K, Class L and
Class M Certificates will be subordinated to the rights of the
holders of the Class I Certificates,
o the rights of the holders of the Class I, Class J, Class K, Class
L and Class M Certificates will be subordinated to the rights of
the holders of the Class H Certificates,
o the rights of the holders of the Class H, Class I, Class J, Class
K, Class L and Class M Certificates will be subordinated to the
rights of the holders of the Class G Certificates,
o the rights of the holders of the Class G, Class H, Class I, Class
J, Class K, Class L and Class M Certificates will be subordinated
to the rights of the holders of the Class F Certificates,
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o the rights of the holders of the Class F, Class G, Class H, Class
I, Class J, Class K, Class L and Class M Certificates will be
subordinated to the rights of the holders of the Class E
Certificates,
o the rights of the holders of the Class E, Class F, Class G, Class
H, Class I, Class J, Class K, Class L and Class M Certificates
will be subordinated to the rights of the holders of the Class D
Certificates,
o the rights of the holders of the Class D, Class E, Class F, Class
G, Class H, Class I, Class J, Class K, Class L and Class M
Certificates will be subordinated to the rights of the holders of
the Class C Certificates,
o the rights of the holders of the Class C, Class D, Class E, Class
F, Class G, Class H, Class I, Class J, Class K, Class L and Class
M Certificates will be subordinated to the rights of the holders
of the Class B Certificates, and
o the rights of the holders of the Class B, Class C, Class D, Class
E, Class F, Class G, Class H, Class I, Class J, Class K, Class L
and Class M Certificates will be subordinated to the rights of the
holders of the Senior Certificates.
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 the Class A Certificates of principal
in an amount equal to, in each case, the entire Certificate Balance of the
Class A Certificates. Similarly, but to decreasing degrees, this
subordination is also intended to enhance the likelihood of timely receipt by
the holders of the Class B Certificates, the holders of the Class C
Certificates, the holders of the Class D Certificates and the holders of the
Class E Certificates of the full amount of interest payable in respect of
those classes of Certificates on each Distribution Date, and the ultimate
receipt by the holders of the Class B Certificates, the holders of the Class
C Certificates, the holders of the Class D Certificates and the holders of
the Class E Certificates of principal equal to, in each case, the entire
Certificate Balance of each of those classes of Certificates.
The protection afforded to the holders of the Class E Certificates by
means of the subordination of the Non-Offered Certificates that are
Subordinate Certificates (the "Non-Offered Subordinate Certificates"), to the
holders of the Class D Certificates by means of the subordination of the
Class E Certificates and the Non-Offered Subordinate Certificates, to the
holders of the Class C Certificates by means of the subordination of the
Class D and Class E Certificates and the Non-Offered Subordinate
Certificates, to the holders of the Class B Certificates by means of the
subordination of the Class C, Class D and Class E Certificates and the
Non-Offered Subordinate Certificates and to the holders of the Senior
Certificates by means of the subordination of the Subordinate Certificates,
will be accomplished by the application of the Available Distribution Amount
on each Distribution Date in accordance with the order of priority described
under "--Distributions" above and by the allocation of Collateral Support
Deficits in the manner described below. No other form of credit support will
be available for the benefit of the holders of the Offered Certificates.
Allocation to the Class A Certificates (unless the Cross-Over Date has
occurred, first to the Class A-1 Certificates until the Certificate Balance
thereof has been reduced to zero and then to the Class A-2 Certificates until
the Certificate Balance thereof has been reduced to zero), for so long as
they are outstanding, of the entire Principal Distribution Amount for each
Distribution Date will have the effect of reducing the aggregate Certificate
Balance of the Class A Certificates at a proportionately faster rate than the
rate at which the aggregate Stated Principal Balance of the pool of mortgage
loans will reduce. Thus, as principal is distributed to the holders of the
Class A Certificates, the percentage interest in the trust fund evidenced by
the Class A Certificates will be decreased (with a corresponding increase in
the percentage interest in the trust fund evidenced by the Subordinate
Certificates), thereby increasing, relative to their respective Certificate
Balances, the subordination afforded the Class A Certificates by the
Subordinate Certificates.
Following retirement of the Class A Certificates, the successive
allocation on each Distribution Date of the remaining Principal Distribution
Amount to the Class B Certificates, the Class C Certificates, the Class D
Certificates and the Class E Certificates, in that order, in each case for so
long as they are outstanding, will
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provide a similar benefit to each of those classes of Certificates as to the
relative amount of subordination afforded by the outstanding classes of
Certificates (other than the Class X, Class S and the Residual Certificates)
with later alphabetical Class designations.
On each Distribution Date, immediately following the distributions to be
made to the Certificateholders on that date, the Paying Agent is required to
calculate the amount, if any, by which (1) the aggregate Stated Principal
Balance of the mortgage loans expected to be outstanding immediately
following that Distribution Date is less than (2) the aggregate Certificate
Balance of the Certificates after giving effect to distributions of principal
on that Distribution Date (any deficit, "Collateral Support Deficit"). The
Paying Agent will be required to allocate any Collateral Support Deficit
among the respective classes of Certificates as follows: to the Class M,
Class L, Class K, Class J, Class I, Class H, Class G, Class F, Class E, Class
D, Class C and Class B Certificates in that order, and in each case in
respect of and until the remaining Certificate Balance of that class has been
reduced to zero. Following the reduction of the Certificate Balances of all
classes of Subordinate Certificates to zero, the Paying Agent will be
required to allocate the Collateral Support Deficit between the classes of
Class A Certificates, pro rata (based upon their respective Certificate
Balances), until the remaining Certificate Balances of the Class A
Certificates have been reduced to zero. Any Collateral Support Deficit
allocated to a class of Certificates will be allocated among respective
Certificates of the class in proportion to the Percentage Interests evidenced
by those Certificates.
In general, Collateral Support Deficits could result from the occurrence
of: (1) losses and other shortfalls on or in respect of the mortgage loans,
including as a result of defaults and delinquencies on the mortgage loans,
Nonrecoverable Advances made in respect of the mortgage loans, the payment to
the Special Servicer of any compensation as described in "Servicing of the
Mortgage Loans--Servicing and Other Compensation and Payment of Expenses" in
this prospectus supplement, and the payment of interest on Advances and
certain servicing expenses; and (2) certain unanticipated, non-mortgage loan
specific expenses of the trust fund, including certain reimbursements to the
Trustee as described under "Description of the Pooling Agreements--Certain
Matters Regarding the Trustee" in the prospectus, certain reimbursements to
the Master Servicer and the Depositor as described under "Description of the
Pooling Agreements--Certain Matters Regarding the Master Servicer and the
Depositor" in the prospectus, and certain federal, state and local taxes, and
certain tax-related expenses, payable out of the trust fund as described
under "Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates--Taxes That May Be Imposed on the REMIC
Pool" in the prospectus. Accordingly, the allocation of Collateral Support
Deficits as described above will constitute an allocation of losses and other
shortfalls experienced by the trust fund.
A class of Offered Certificates will be considered outstanding until its
Certificate Balance or Notional Amount, as the case may be, is reduced to
zero. However, reimbursement of any previously allocated Collateral Support
Deficit is required thereafter to be made to that class in accordance with
the payment priorities set forth in "--Distributions--Priority" above.
ADVANCES
On the business day immediately preceding each Distribution Date (the
"Servicer Remittance Date"), the Master Servicer will be obligated, subject
to the recoverability determination described below, to make advances (each,
a "P&I Advance") out of its own funds or, subject to the replacement of those
funds as provided in the Pooling and Servicing Agreement, certain funds held
in the Certificate Account that are not required to be part of the Available
Distribution Amount for that Distribution Date, in an amount equal to (but
subject to reduction as described in the following paragraph) the aggregate
of: (1) all Periodic Payments (net of any applicable Servicing Fees), other
than balloon payments, which were due on the mortgage loans during the
related Due Period and delinquent (or not advanced by any sub-servicer) as of
the business day preceding the related Servicer Remittance Date; and (2) in
the case of each mortgage loan delinquent in respect of its balloon payment
as of the end of the related Due Period (including any applicable grace
period and including any REO Loan as to which the balloon payment would have
been past due), an amount equal to its Assumed Scheduled Payment. The Master
Servicer's obligations to make P&I Advances in respect of any mortgage loan
or REO Property will continue through liquidation of the mortgage loan or
disposition of the REO Property, as the case may be. To the extent that the
Master Servicer fails to
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make a P&I Advance that it is required to make under the Pooling and
Servicing Agreement, the Trustee will make the required P&I Advance in
accordance with the terms of the Pooling and Servicing Agreement.
The amount required to be advanced in respect of delinquent Periodic
Payments or Assumed Scheduled Payments on a mortgage loan with respect to any
Distribution Date that has been subject to an Appraisal Reduction Event will
equal the amount that would be required to be advanced by the Master Servicer
without giving effect to the Appraisal Reduction less any Appraisal Reduction
Amount with respect to the mortgage loan for that Distribution Date. Neither
the Master Servicer nor the Trustee will be required to make a P&I Advance
for default interest, yield maintenance charges or Excess Interest.
In addition to P&I Advances, the Master Servicer or, on an emergency
basis, the Special Servicer, will be obligated (subject to the limitations
described in this prospectus supplement) to make advances ("Servicing
Advances" and, collectively with P&I Advances, "Advances") in connection with
the servicing and administration of any mortgage loan in respect of which a
default, delinquency or other unanticipated event has occurred or is
reasonably foreseeable or in connection with the servicing and administration
of any Mortgaged Property or REO Property, to pay delinquent real estate
taxes, assessments and hazard insurance premiums and to cover other similar
costs and expenses necessary to preserve the priority of or enforce the
related mortgage loan documents or to protect, lease, manage and maintain the
related Mortgaged Property. To the extent that the Master Servicer fails to
make a Servicing Advance that it is required to make under the Pooling and
Servicing Agreement and the Trustee has notice of this failure, the Trustee
will make the required Servicing Advance in accordance with the terms of the
Pooling and Servicing Agreement.
The Master Servicer, the Special Servicer or the Trustee, as applicable,
will be entitled to recover (after payment of any outstanding Special
Servicing Fees due) any Advance made out of its own funds from any amounts
collected in respect of the mortgage loan as to which that Advance was made,
whether in the form of late payments, Insurance and Condemnation Proceeds,
Liquidation Proceeds or otherwise from the mortgage loan ("Related
Proceeds"). Notwithstanding the foregoing, none of the Master Servicer, the
Special Servicer nor the Trustee will be obligated to make any Advance that
it determines in its reasonable good faith judgment would, if made, not be
recoverable (including interest on the Advance) out of Related Proceeds (a
"Nonrecoverable Advance"), and the Master Servicer, the Special Servicer or
the Trustee will be entitled to recover any Advance that it so determines to
be a Nonrecoverable Advance out of general funds on deposit in the
Certificate Account. The Trustee will be entitled to rely conclusively on any
non-recoverability determination of the Master Servicer. Nonrecoverable
Advances will represent a portion of the losses to be borne by the
Certificateholders. See "Description of the Certificates--Advances in Respect
of Delinquencies" and "Description of the Pooling Agreements--Certificate
Account" in the prospectus.
In connection with its recovery of any Advance, each of the Master
Servicer, the Special Servicer and the Trustee will be entitled to be paid,
out of any amounts then on deposit in the Certificate Account, interest at
the Prime Rate (the "Reimbursement Rate") accrued on the amount of the
Advance from the date made to but not including the date of reimbursement,
compounded monthly; provided, however, that with respect to any P&I Advance
paid prior to the expiration of the related grace period, interest will
accrue only from and after the expiration of such grace period. The "Prime
Rate" will be the prime rate, for any day, set forth in The Wall Street
Journal, New York edition.
Each Statement to Certificateholders furnished or made available by the
Paying Agent to the Certificateholders will contain information relating to
the amounts of Advances made with respect to the related Distribution Date.
See "Description of the Certificates--Reports to Certificateholders; Certain
Available Information" in this prospectus supplement and "Description of the
Certificates--Reports to Certificateholders" in the prospectus.
APPRAISAL REDUCTIONS
After an Appraisal Reduction Event has occurred, an Appraisal Reduction is
required to be calculated. An "Appraisal Reduction Event" will occur on the
earliest of:
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(1) the third anniversary of the date on which an extension of the
maturity date of a mortgage loan becomes effective as a result of a
modification of the related mortgage loan by the Special Servicer, which
extension does not change the amount of Periodic Payments on the mortgage
loan;
(2) 120 days after an uncured delinquency (without regard to the
application of any grace period) occurs in respect of a mortgage loan;
(3) the date on which a reduction in the amount of Periodic Payments on a
mortgage loan, or a change in any other material economic term of the
mortgage loan (other than an extension of its maturity), becomes effective
as a result of a modification of the related mortgage loan by the Special
Servicer;
(4) the date on which a receiver has been appointed;
(5) 60 days after a borrower declares bankruptcy;
(6) 60 days after the date on which an involuntary petition of bankruptcy
is filed with respect to the borrower;
(7) 30 days after an uncured delinquency occurs in respect of a balloon
payment for a mortgage loan if the borrower has not delivered to the
Master Servicer on the related maturity date a written refinancing
commitment reasonably satisfactory in form and substance to the Master
Servicer which provides that such refinancing will occur within 60 days;
and
(8) immediately after a mortgage loan becomes an REO Loan.
No Appraisal Reduction Event may occur at any time when the aggregate
Certificate Balance of all classes of Certificates (other than the Class A
Certificates) has been reduced to zero.
Within 90 days after the Appraisal Reduction Event, the Special Servicer
will be required to receive an appraisal or valuation; provided, however,
that with respect to an Appraisal Reduction Event described in clause (2)
above, the Special Servicer will be required to receive an appraisal or
valuation within the 120-day period set forth in such clause (2). On the
first Determination Date occurring on or after the delivery of the MAI
appraisal, the Special Servicer will be required to calculate and report to
the Master Servicer and the Master Servicer will be required to report to the
Paying Agent, the Appraisal Reduction to take into account the appraisal. In
the event that the Special Servicer has not received the MAI appraisal or
conducted the valuation within the timeframe described above (or, in the case
of an appraisal in connection with an Appraisal Reduction Event described in
clause (2), within the 120-day period set forth in clause (2)), the amount of
the Appraisal Reduction will be deemed to be an amount equal to 25% of the
current Stated Principal Balance of the related mortgage loan until the MAI
appraisal is received. The "Determination Date" for each Distribution Date is
the 11th day of the month in which the Distribution Date occurs or, if the
11th day is not a business day, then the immediately succeeding business day.
The "Appraisal Reduction" for any Distribution Date and for any mortgage
loan as to which any Appraisal Reduction Event has occurred will be an amount
calculated by the Special Servicer on the first Determination Date following
the date the Special Servicer receives or performs such appraisal equal to
the excess of (a) the outstanding Stated Principal Balance of that mortgage
loan over (b) the excess of (i) the sum of (A) 90% of the appraised value of
the related Mortgaged Property as determined (1) by one or more independent
Appraisal Institute ("MAI") appraisals with respect to any mortgage loan with
an outstanding principal balance equal to or in excess of the lesser of (x)
$2,000,000 or (y) 2% of the aggregate Stated Principal Balance of the
mortgage loans (the costs of which will be paid by the Master Servicer as an
Advance), or (2) by an internal valuation performed by the Special Servicer
with respect to any mortgage loan with an outstanding principal balance less
than the lesser of (x) $2,000,000 or (y) 2% of the aggregate Stated Principal
Balance of the mortgage loans, and (B) all escrows, letters of credit and
reserves in respect of such mortgage loan as of the date of calculation over
(ii) the sum as of the due date occurring in the month of that Distribution
Date of (A) to the extent not previously advanced by the Master Servicer or
the Trustee, all unpaid interest on that mortgage loan at a per annum rate
equal to the Mortgage Rate, (B) all unreimbursed Advances and interest on
those Advances at the Reimbursement Rate in respect of that
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mortgage loan and (C) all currently due and unpaid real estate taxes and
assessments, insurance premiums and ground rents and all other amounts due
and unpaid under the mortgage loan (which tax, premiums, ground rents and
other amounts have not been the subject of an Advance by the Master Servicer,
the Special Servicer or Trustee, as applicable).
As a result of calculating one or more Appraisal Reductions, the amount of
any required P&I Advance will be reduced by an amount equal to the Appraisal
Reduction Amount, which will have the effect of reducing the amount of
interest available to the most subordinate class of Certificates then
outstanding (i.e., first to the Class M Certificates, then to the Class L
Certificates, then to the Class K Certificates, then to the Class J
Certificates, then to the Class I Certificates, then to the Class H
Certificates, then to the Class G Certificates, then to the Class F
Certificates, then to the Class E Certificates, then to the Class D
Certificates, then to the Class C Certificates and then to the Class B
Certificates). See "--Advances" above. The "Appraisal Reduction Amount" for
any Distribution Date will equal the product of (1) the applicable per annum
Pass-through Rate (i.e., for any month, one twelfth of the Pass-through Rate)
on the class of Certificates to which the Appraisal Reduction is allocated,
and (2) the sum of all Appraisal Reductions with respect to the related
Distribution Date. See "Servicing of the Mortgage Loans--General" in this
prospectus supplement.
With respect to each mortgage loan as to which an Appraisal Reduction has
occurred (unless the mortgage loan has remained current for three consecutive
Periodic Payments, and with respect to which no other Appraisal Reduction
Event has occurred with respect thereto during the preceding twelve months),
the Special Servicer is required, (1) within 30 days of each anniversary of
the related Appraisal Reduction Event, (2) at such time as the Special
Servicer has knowledge of a material change in the condition of the related
Mortgaged Property or (3) in the event the Special Servicer becomes aware of
a material defect in the Appraisal or valuation, to order an appraisal (which
may be an update of a prior appraisal), the cost of which will be a Servicing
Advance, or to conduct an internal valuation, as applicable. Based upon the
appraisal or valuation, the Special Servicer is required to redetermine and
report to the Paying Agent the amount of the Appraisal Reduction with respect
to the mortgage loan. Notwithstanding the foregoing, the Special Servicer
will not be required to obtain an appraisal or valuation with respect to a
mortgage loan which is the subject of an Appraisal Reduction Event to the
extent the Special Servicer has obtained an appraisal or valuation with
respect to the related Mortgaged Property within the 12-month period prior to
the occurrence of the Appraisal Reduction Event. Instead, the Special
Servicer may use the prior appraisal or valuation in calculating any
Appraisal Reduction with respect to the mortgage loan, provided that the
Special Servicer is not aware of any material change to the Mortgaged
Property that has occurred that would affect the validity of the appraisal or
valuation.
Any mortgage loan previously subject to an Appraisal Reduction which
becomes current and remains current for three consecutive Periodic Payments,
and with respect to which no other Appraisal Reduction Event has occurred and
is continuing, will no longer be subject to an Appraisal Reduction.
REPORTS TO CERTIFICATEHOLDERS; CERTAIN AVAILABLE INFORMATION
On each Distribution Date, the Paying Agent will be required to furnish or
make available to each holder of a Certificate, the Trustee, the Master
Servicer, the Underwriters, the Special Servicer, Chase, GECC, BSFI and a
financial market publisher (which is anticipated to initially be Bloomberg,
L.P.), if any, a statement (a "Statement to Certificateholders") based upon
information provided by the Master Servicer in accordance with Commercial
Mortgage Securities Association guidelines setting forth, among other things:
(1) the amount of the distribution on the Distribution Date to the
holders of the class of Certificates in reduction of the Certificate
Balance of the Certificates;
(2) the amount of the distribution on the Distribution Date to the
holders of the class of Certificates allocable to Distributable
Certificate Interest;
(3) the aggregate amount of Advances made in respect of the Distribution
Date;
(4) the aggregate amount of compensation paid to the Trustee and
servicing compensation paid to the Master Servicer and the Special
Servicer during the Due Period for the Distribution Date;
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(5) the aggregate Stated Principal Balance of the mortgage loans and any
REO Loans outstanding immediately before and immediately after the
Distribution Date;
(6) the number, aggregate principal balance, weighted average remaining
term to maturity and weighted average mortgage rate of the mortgage loans
as of the end of the related Due Period for the Distribution Date;
(7) the number and aggregate principal balance of mortgage loans (A)
delinquent 30-59 days, (B) delinquent 60-89 days, (C) delinquent 90 days
or more and (D) current but specially serviced or in foreclosure but not
an REO Property;
(8) the value of any REO Property included in the trust fund as of the
end of the related Due Period for the Distribution Date, on a loan-by-loan
basis, based on the most recent appraisal or valuation;
(9) the Available Distribution Amount for the Distribution Date;
(10) the amount of the distribution on the Distribution Date to the
holders of any Class of Certificates allocable to Yield Maintenance
Charges;
(11) the Pass-through Rate for the class of Certificates for the
Distribution Date and the next succeeding Distribution Date;
(12) the Scheduled Principal Distribution Amount and the Unscheduled
Principal Distribution Amount for the Distribution Date;
(13) the Certificate Balance or Notional Amount, as the case may be, of
each class of Certificates immediately before and immediately after the
Distribution Date, separately identifying any reduction in these amounts
as a result of the allocation of any Collateral Support Deficit on the
Distribution Date;
(14) the fraction, expressed as a decimal carried to eight places, the
numerator of which is the then related Certificate Balance, and the
denominator of which is the related initial aggregate Certificate Balance,
for each class of Certificates (other than the Class S and Residual
Certificates) immediately following the Distribution Date;
(15) the amount of any Appraisal Reductions effected in connection with
the Distribution Date on a loan-by-loan basis, the total Appraisal
Reduction effected in connection with the Distribution Date and the total
Appraisal Reduction Amounts as of that Distribution Date;
(16) the number and related principal balances of any mortgage loans
extended or modified during the related Due Period on a loan-by-loan
basis;
(17) the amount of any remaining unpaid interest shortfalls for the class
as of the Distribution Date;
(18) a loan-by-loan listing of each mortgage loan which was the subject
of a principal prepayment during the related Due Period and the amount and
the type of principal prepayment occurring;
(19) a loan-by-loan listing of any mortgage loan which was defeased
during the related Due Period;
(20) all deposits into, withdrawals from, and the balance of the Interest
Reserve Account on the related Servicer Remittance Dates;
(21) the amount of the distribution on the Distribution Date to the
holders of each class of Certificates in reimbursement of Collateral
Support Deficit;
(22) the aggregate unpaid principal balance of the pool of mortgage loans
outstanding as of the close of business on the related Determination Date;
(23) with respect to any mortgage loan as to which a liquidation occurred
during the related due period (other than a payment in full), (A) the loan
number thereof, (B) the aggregate of all Liquidation
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Proceeds which are included in the available distribution amount and
other amounts received in connection with the liquidation (separately
identifying the portion thereof allocable to distributions on the
Certificates), and (C) the amount of any realized loss in connection with
the liquidation;
(24) with respect to any REO Property included in the trust as to which
the Special Servicer determined, in accordance with accepted servicing
standards, that all payments or recoveries with respect to the Mortgaged
Property have been ultimately recovered during the related Due Period, (A)
the loan number of the related mortgage loan, (B) the aggregate of all
Liquidation Proceeds and other amounts received in connection with that
determination (separately identifying the portion thereof allocable to
distributions on the Certificates), and (C) the amount of any realized
loss in respect of the related REO Loan in connection with that
determination;
(25) the aggregate amount of interest on P&I Advances paid to the Master
Servicer and the Trustee during the related Due Period;
(26) the aggregate amount of interest on Servicing Advances paid to the
Master Servicer, the Special Servicer and the Trustee during the related
Due Period;
(27) the original and then current credit support levels for each class
of Certificates;
(28) the original and then current ratings for each class of
Certificates; and
(29) the amount of the distribution on the Distribution Date to the
holders of the Class S and Residual Certificates.
The Paying Agent will make available the Statements to Certificateholders
through its corporate trust home page on the internet, which is located at
"www.chase.com/sfa". In addition, the Paying Agent may make certain other
information and reports related to the mortgage loans available, to the
extent the Paying Agent receives such information, through its home page.
In addition, to the extent not provided for above, the following reports
will be available to Certificateholders on the Distribution Date:
(a) Delinquent Loan Status Report,
(b) Historical Liquidation Report,
(c) Historical Loan Modification Report,
(d) REO Status Report,
(e) Servicer Watch List, and
(f) Comparative Financial Status Report.
In the case of information furnished pursuant to clauses (1), (2), (17)
and (21) above, the amounts will be expressed as a dollar amount in the
aggregate for all Certificates of each applicable class and per definitive
certificate.
In addition, within a reasonable period of time after the end of each
calendar year, the Paying Agent is required to furnish to each person or
entity who at any time during the calendar year was a holder of a Certificate
and, upon request, to the Trustee, a statement containing the information set
forth in clauses (1), (2) and (10) above as to the applicable class,
aggregated for the related calendar year or applicable partial year during
which that person was a Certificateholder, together with any other
information as the Paying Agent deems necessary or desirable, or that a
Certificateholder or Certificate Owner reasonably requests, to enable
Certificateholders to prepare their tax returns for that calendar year. This
obligation of the Paying Agent will be deemed to have been satisfied to the
extent that substantially comparable information will be provided by the
Paying Agent pursuant to any requirements of the Code as from time to time
are in force.
The Paying Agent will be required to provide a financial market publisher,
which is anticipated to initially be Bloomberg, L.P., quarterly with certain
current information with respect to the Mortgaged Properties, including
current and original net operating income, debt service coverage ratios based
upon borrowers' annual operating statements and occupancy rates, to the
extent it has received the information from the borrowers pursuant to the
related loan documents.
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The Pooling and Servicing Agreement requires that the Paying Agent (or
the Trustee with respect to clause (6) only) make available at its offices
primarily responsible for administration of the trust fund, during normal
business hours upon prior written request, for review by any holder of an
Offered Certificate, the Mortgage Loan Sellers, the Depositor, the Special
Servicer, the Master Servicer, Moody's, Fitch or any other person to whom the
Paying Agent (or the Trustee, if applicable) believes the disclosure is
appropriate, originals or copies of, among other things, the following items:
(1) the Pooling and Servicing Agreement and any amendments to that
agreement;
(2) all Statements to Certificateholders made available to holders of the
relevant class of Offered Certificates since the Closing Date;
(3) all officer's certificates delivered to the Paying Agent since the
Closing Date as described under "Description of the Pooling
Agreements--Evidence as to Compliance" in the prospectus;
(4) all accountants' reports delivered to the Paying Agent since the
Closing Date as described under "Description of the Pooling
Agreements--Evidence as to Compliance" in the prospectus;
(5) the most recent property inspection report prepared by or on behalf
of the Master Servicer or the Special Servicer and delivered to the Paying
Agent in respect of each Mortgaged Property;
(6) copies of the mortgage loan documents;
(7) any and all modifications, waivers and amendments of the terms of a
mortgage loan entered into by the Master Servicer or the Special Servicer
and delivered to the Paying Agent; and
(8) any and all statements and reports delivered to, or collected by, the
Master Servicer or the Special Servicer, from the borrowers, including the
most recent annual property operating statements, rent rolls and borrower
financial statements, but only to the extent the statements and reports
have been delivered to the Paying Agent.
Copies of any and all of the foregoing items will be available to
Certificateholders from the Paying Agent (or the Trustee with respect to
clause (6) only) upon request; however, the Paying Agent (or the Trustee, as
applicable) will be permitted to require payment of a sum sufficient to cover
the reasonable costs and expenses of providing the copies. Pursuant to the
Pooling and Servicing Agreement, the Master Servicer will be responsible for
enforcing all provisions of the mortgage loan documents relating to the
submission of financial and property information.
The Pooling and Servicing Agreement will require the Master Servicer and
the Paying Agent, subject to certain restrictions set forth in the Pooling
and Servicing Agreement, to provide certain of the reports or, in the case of
the Master Servicer, access to the reports available to Certificateholders
set forth above, as well as certain other information received by the Master
Servicer or the Paying Agent, as the case may be, to any Certificateholder,
the Underwriters, the Mortgage Loan Sellers, any Certificate Owner or any
prospective investor so identified by a Certificate Owner or an Underwriter,
that requests reports or information; provided that the Paying Agent and the
Master Servicer will be permitted to require payment of a sum sufficient to
cover the reasonable costs and expenses of providing copies of these reports
or information. Except as otherwise set forth in this paragraph, until the
time definitive certificates are issued, notices and statements required to
be mailed to holders of Certificates will be available to Certificate Owners
of Offered Certificates only to the extent they are forwarded by or otherwise
available through DTC and its Participants. Conveyance of notices and other
communications by DTC to Participants, and by Participants to 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. Except as
otherwise set forth in this paragraph, the Master Servicer, the Special
Servicer, the Trustee, the Depositor, the Paying Agent and the Certificate
Registrar are required to recognize as Certificateholders only those persons
in whose names the Certificates are registered on the books and records of
the Certificate Registrar. The initial registered holder of the Offered
Certificates will be Cede & Co., as nominee for DTC.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, the
voting rights for the Certificates (the "Voting Rights") will be allocated
among the respective classes of Certificateholders as
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follows: (1) 4% in the case of the Class X Certificates, and (2) in the case
of any other class of Certificates (other than the Class S and Residual
Certificates), a percentage equal to the product of 96% and a fraction, the
numerator of which is equal to the aggregate Certificate Balance of the
class, in each case, determined as of the prior Distribution Date, and the
denominator of which is equal to the aggregate Certificate Balance of all
classes of Certificates, each determined as of the prior Distribution Date.
None of the Class S, the Class R nor the Class LR Certificates will be
entitled to any Voting Rights. For purposes of determining Voting Rights, the
Certificate Balance of each class will not be reduced by the amount allocated
to that class of any Appraisal Reductions related to mortgage loans as to
which Liquidation Proceeds or other final payment has not yet been received.
Voting Rights allocated to a class of Certificateholders will be allocated
among the Certificateholders in proportion to the Percentage Interests
evidenced by their respective Certificates. Solely for purposes of giving any
consent, approval or waiver pursuant to the Pooling and Servicing Agreement,
neither the Master Servicer, the Special Servicer nor the Depositor will be
entitled to exercise any Voting Rights with respect to any Certificates
registered in its name, if the consent, approval or waiver would in any way
increase its compensation or limit its obligations in that capacity under the
Pooling and Servicing Agreement; provided, however, that the restrictions
will not apply to the exercise of the Special Servicer's rights, if any, as a
member of the Controlling Class. Appraisal Reduction Amounts will not be
applied to reduce Voting Rights.
TERMINATION; RETIREMENT OF CERTIFICATES
The obligations created by the Pooling and Servicing Agreement will
terminate upon payment (or provision for payment) to all Certificateholders
of all amounts held by or on behalf of the Trustee and required to be paid
following the earlier of (1) the final payment (or related advance) or other
liquidation of the last mortgage loan or REO Property subject thereto or (2)
the purchase of all of the assets of the trust fund by the holders of the
Controlling Class, the Special Servicer, the Master Servicer or the holders
of the Class LR Certificates. Written notice of termination of the Pooling
and Servicing Agreement will be given to each Certificateholder, and the
final distribution will be made only upon surrender and cancellation of the
Certificates at the office of the Certificate Registrar or other location
specified in the notice of termination.
The holders of the Controlling Class, the Special Servicer, the Master
Servicer and the holders of the Class LR Certificates (in that order) will
have the right to purchase all of the assets of the trust fund. This purchase
of all the mortgage loans and other assets in the trust fund is required to
be made at a price equal to the sum of (1) the aggregate Purchase Price of
all the mortgage loans (exclusive of REO Loans) then included in the trust
fund and (2) the aggregate fair market value of all REO Properties then
included in the trust fund (which fair market value for any REO Property may
be less than the Purchase Price for the corresponding REO Loan), as
determined by an appraiser selected and mutually agreed upon by the Master
Servicer and the Trustee, and approved by more than 50% of the Voting Rights
of the classes of Certificates then outstanding, other than the Controlling
Class, unless the Controlling Class is the only class of Certificates
outstanding, plus the reasonable out-of-pocket expenses of the Master
Servicer related to such purchase, unless the Master Servicer is the
purchaser. This purchase will effect early retirement of the then outstanding
Offered Certificates, but the rights of the holders of the Controlling Class,
the Special Servicer, the Master Servicer or the holders of the Class LR
Certificates to effect the termination is subject to the requirement that the
then aggregate Stated Principal Balance of the pool of mortgage loans be less
than 1% of the Initial Pool Balance.
On the final Distribution Date, the aggregate amount paid by the holders
of the Controlling Class, the Special Servicer, the Master Servicer or the
holders of the Class LR Certificates, as the case may be, for the mortgage
loans and other assets in the trust fund (if the trust fund is to be
terminated as a result of the purchase described in the preceding paragraph),
together with all other amounts on deposit in the Certificate Account and not
otherwise payable to a person other than the Certificateholders (see
"Description of the Pooling Agreements--Certificate Account" in the
prospectus), will be applied generally as described under
"--Distributions--Priority" above.
Any optional termination by the holders of the Controlling Class, the
Special Servicer, the Master Servicer, the Depositor or the holders of the
Class LR Certificates would result in prepayment in full of the Certificates
and would have an adverse effect on the yield of the Class X Certificates
because a termination
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would have an effect similar to a principal prepayment in full of the
mortgage loans and, as a result, investors in the Class X Certificates and
any other Certificates purchased at a premium might not fully recoup their
initial investment. See "Yield and Maturity Considerations" in this
prospectus supplement.
THE TRUSTEE
Wells Fargo Bank Minnesota, N.A. (formerly known as Norwest Bank
Minnesota, National Association), a national banking association, will serve
as Trustee under the Pooling and Servicing Agreement pursuant to which the
Certificates are being issued (in such capacity, the "Trustee"). The
corporate trust office of the Trustee responsible for administration of the
Trust is located at 11000 Broken Land Parkway, Columbia, Maryland 21044-3562,
Attention: Corporate Trust Services, GE Capital Commercial Mortgage
Corporation, Commercial Mortgage Pass-Through Certificates, Series 2000-1. As
of December 31, 1999, the Trustee had assets in excess of $100,000,000. As
compensation for the performance of its routine duties, the Trustee will be
paid a fee (the "Trustee Fee"). The Trustee Fee will be payable monthly from
amounts received in respect of the mortgage loans and will accrue at a rate
(the "Trustee Fee Rate"), calculated on the basis of a 360-day year
consisting of twelve 30-day months equal to .0016% per annum, and will be
computed on the basis of the Stated Principal Balance of the related mortgage
loan as of the preceding Distribution Date. In addition, the Trustee will be
entitled to recover from the trust fund all reasonable unanticipated expenses
and disbursements incurred or made by the Trustee in accordance with any of
the provisions of the Pooling and Servicing Agreement, but not including
routine expenses incurred in the ordinary course of performing its duties as
Trustee under the Pooling and Servicing Agreement, and not including any
expense, disbursement or advance as may arise from its willful misfeasance,
negligence or bad faith. See "Description of the Pooling Agreements--The
Trustee," "--Duties of the Trustee," "--Certain Matters Regarding the
Trustee" and "--Resignation and Removal of the Trustee" in the prospectus.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The servicing of the mortgage loans and any REO Properties will be
governed by the Pooling and Servicing Agreement. The following summaries
describe certain provisions of the Pooling and Servicing Agreement relating
to the servicing and administration of the mortgage loans and any REO
Properties. The summaries do not purport to be complete and are subject, and
qualified in their entirety by reference, to the provisions of the Pooling
and Servicing Agreement. Reference is made to the prospectus for additional
information regarding the terms of the Pooling and Servicing Agreement
relating to the servicing and administration of the mortgage loans and any
REO Properties, provided that the information in this prospectus supplement
supersedes any contrary information set forth in the prospectus. See
"Description of the Pooling Agreements" in the prospectus.
Each of the Master Servicer (directly or through one or more
sub-servicers) and the Special Servicer will be required to service and
administer the mortgage loans for which it is responsible. The Master
Servicer will appoint The Chase Manhattan Bank ("Chase") as sub-servicer with
respect to the mortgage loans sold by Chase to the Depositor. In addition to
the sub-servicing by Chase of the mortgage loans, the Master Servicer may
delegate and/or assign some or all of its servicing obligations and duties
with respect to some or all of the mortgage loans to one or more affiliates
so long as delegation and/or assignment, in and of itself, does not cause the
qualification, withdrawal or downgrading of the then-current ratings assigned
to any class of Certificates as confirmed in writing by each of Moody's and
Fitch. Each primary servicer will be permitted to appoint sub-servicers with
respect to their servicing obligations and duties and each of Chase and GE
Capital intends to use one or more subservicers with respect to certain of
the mortgage loans sold to the Depositor by Chase or GECC and BSFI,
respectively. Except in certain limited circumstances set forth in the
Pooling and Servicing Agreement, the Special Servicer will not be permitted
to appoint sub-servicers with respect to any of its servicing obligations and
duties.
The Master Servicer and the Special Servicer will be required to service
and administer the mortgage loans for which each is responsible in the best
interests of and for the benefit of the Certificateholders (as determined by
the Master Servicer or the Special Servicer in the exercise of its good faith
and reasonable judgment) in accordance with applicable law, the terms of the
Pooling and Servicing Agreement and the mortgage loans and, to the extent
consistent with the foregoing, in accordance with the higher of the following
standards of care: (1) 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 the customary
and usual standards of practice of prudent institutional commercial and
multifamily mortgage lenders servicing their own mortgage loans and (2) the
same care, skill, prudence and diligence with which the Master Servicer or
the Special Servicer, as the case may be, services and administers commercial
and multifamily mortgage loans owned by the Master Servicer or the Special
Servicer, as the case may be, with a view to the maximization of timely
recovery of principal and interest on the mortgage loans or Specially
Serviced Mortgage Loans, as applicable, and the best interests of the Trust
and the Certificateholders, as determined by the Master Servicer or the
Special Servicer, as the case may be, in its reasonable judgment, but without
regard to: (A) any relationship that the Master Servicer or the Special
Servicer, as the case may be, or any affiliate of either, may have with the
related borrower, any Mortgage Loan Seller or any other party to the Pooling
and Servicing Agreement; (B) the ownership of any Certificate by the Master
Servicer or the Special Servicer, as the case may be, or any affiliate of
either; (C) the Master Servicer's or Special Servicer's, as applicable,
obligation to make Advances; (D) the Master Servicer's or the Special
Servicer's, as the case may be, right to receive compensation for its
services under the Pooling and Servicing Agreement or with respect to any
particular transaction; (E) the ownership, servicing or management for others
of any other mortgage loans or mortgaged properties by the Master Servicer or
Special Servicer; and (F) any obligation of the Master Servicer or any of its
affiliates (in their capacity as a Mortgage Loan Seller) to cure a breach of
a representation or warranty or repurchase the mortgage loan (the foregoing,
collectively referred to as the "Servicing Standards").
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Except as otherwise described under "--Inspections; Collection of
Operating Information" below, the Master Servicer initially will be
responsible for the servicing and administration of the entire pool of
mortgage loans. With respect to any mortgage loan (1) as to which a payment
default has occurred at its original maturity date, or, if the original
maturity date has been extended, at its extended maturity date or, in the
case of a balloon payment, such payment is more than 60 days delinquent and
the borrower has not delivered to the Master Servicer on the related maturity
date a written refinancing commitment reasonably satisfactory in form and
substance to the Master Servicer which provides that such refinancing will
occur within 60 days, provided that if such refinancing does not occur, at
such time the related mortgage loan will become a Specially Serviced Mortgage
Loan, (2) as to which any Periodic Payment (other than a balloon payment) is
more than 60 days delinquent, (3) as to which the borrower has entered into
or consented to bankruptcy, appointment of a receiver or conservator or a
similar insolvency proceeding, or the borrower has become the subject of a
decree or order for that proceeding (provided that if the appointment, decree
or order is stayed or discharged, or the case dismissed within 60 days that
mortgage loan will not be considered a Specially Serviced Mortgage Loan
during that period), or the related borrower has admitted in writing its
inability to pay its debts generally as they become due, (4) as to which the
Master Servicer or Special Servicer has received notice of the foreclosure or
proposed foreclosure of any other lien on the Mortgaged Property, (5) as to
which, in the judgment of the Master Servicer or Special Servicer, a payment
default is imminent and is not likely to be cured by the borrower within 60
days, or (6) as to which a default of which the Master Servicer or Special
Servicer has notice (other than a failure by the related borrower to pay
principal or interest) and which materially and adversely affects the
interests of the Certificateholders has occurred and remains unremediated for
the applicable grace period specified in the mortgage loan (or if no grace
period is specified, 60 days), the Master Servicer will be required to
transfer its servicing responsibilities to the Special Servicer, but will be
required to continue to receive payments on the mortgage loan (including
amounts collected by the Special Servicer), to make certain calculations with
respect to the mortgage loan and to make remittances and prepare certain
reports to the Certificateholders with respect to the mortgage loan. If the
related Mortgaged Property is acquired in respect of any mortgage loan (upon
acquisition, an "REO Property") whether through foreclosure, deed-in-lieu of
foreclosure or otherwise, the Special Servicer will continue to be
responsible for its operation and management. The mortgage loans serviced by
the Special Servicer and any mortgage loans that have become REO Properties
are referred to in this prospectus supplement as the "Specially Serviced
Mortgage Loans". The Master Servicer will have no responsibility for the
performance by the Special Servicer of its duties under the Pooling and
Servicing Agreement.
If any Specially Serviced Mortgage Loan, in accordance with its original
terms or as modified in accordance with the Pooling and Servicing Agreement,
becomes a performing mortgage loan for at least three Periodic Payments
(provided no additional event of default is foreseeable in the reasonable
judgment of the Special Servicer), the Special Servicer will be required to
return servicing of that mortgage loan (a "Corrected Mortgage Loan") to the
Master Servicer.
The Special Servicer will be required to prepare a report (an "Asset
Status Report") for each mortgage loan which becomes a Specially Serviced
Mortgage Loan not later than 30 days after the servicing of the mortgage loan
is transferred to the Special Servicer. Each Asset Status Report will be
delivered to the Directing Certificateholder (as defined below), the Mortgage
Loan Sellers, Moody's and Fitch, provided however, the Special Servicer will
not be required to deliver an Asset Status Report to the Directing
Certificateholder if they are the same entity. If the Directing
Certificateholder does not disapprove an Asset Status Report within 10
business days, the Special Servicer will be required to implement the
recommended action as outlined in the Asset Status Report. The Directing
Certificateholder may object to any Asset Status Report within 10 business
days of receipt; provided, however, that the Special Servicer will be
required to implement the recommended action as outlined in the Asset Status
Report if it makes a determination in accordance with the Servicing Standards
that the objection is not in the best interests of all the
Certificateholders. If the Directing Certificateholder disapproves the Asset
Status Report and the Special Servicer has not made the affirmative
determination described above, the Special Servicer will be required to
revise the Asset Status Report as soon as practicable thereafter, but in no
event later than 30 days after the disapproval. The Special Servicer will be
required to revise the Asset Status Report until the Directing
Certificateholder fails to disapprove the revised Asset Status Report as
described above or until the Special
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Servicer makes a determination that the objection is not in the best
interests of all the Certificateholders; provided, however, in the event that
the Directing Certificateholder and the Special Servicer have not agreed upon
an Asset Status Report with respect to a Specially Serviced Mortgage Loan
within 90 days of the Directing Certificateholder's receipt of the initial
Asset Status Report with respect to such Specially Serviced Mortgage Loan,
the Special Servicer will implement the actions described in the most recent
Asset Status Report submitted to the Directing Certificateholder by the
Special Servicer.
The "Directing Certificateholder" will be the Controlling Class
Certificateholder selected by more than 50% of the Controlling Class
Certificateholders, by Certificate Balance, as certified by the Certificate
Registrar from time to time; provided, however, that (1) absent that
selection, or (2) until a Directing Certificateholder is so selected or (3)
upon receipt of a notice from a majority of the Controlling Class
Certificateholders, by Certificate Balance, that a Directing
Certificateholder is no longer designated, the Controlling Class
Certificateholder that owns the largest aggregate Certificate Balance of the
Controlling Class will be the Directing Certificateholder.
A "Controlling Class Certificateholder" is each holder (or Certificate
Owner, if applicable) of a Certificate of the Controlling Class as certified
to the Certificate Registrar from time to time by the holder (or Certificate
Owner).
The "Controlling Class" will be as of any time of determination the most
subordinate class of Certificates then outstanding that has a Certificate
Balance at least equal to 25% of the initial Certificate Balance of that
Class. For purposes of determining identity of the Controlling Class, the
Certificate Balance of each Class will not be reduced by the amount allocated
to that class of any Appraisal Reductions. The Controlling Class as of the
Closing Date will be the Class M Certificates.
The Special Servicer will not be required to take or refrain from taking
any action pursuant to instructions from the Directing Certificateholder that
would cause it to violate applicable law, the Pooling and Servicing
Agreement, including the Servicing Standards, or the REMIC Provisions.
THE MASTER SERVICER
GE Capital Loan Services, Inc. will act as servicer (in that capacity, the
"Master Servicer") and in that capacity will be responsible for servicing the
mortgage loans. The principal offices of the Master Servicer are located at
363 North Sam Houston Parkway East, Suite 200, Houston, Texas 77060. As of
August 31, 2000, the Master Servicer had a total commercial and multifamily
mortgage loan servicing portfolio of approximately $28.5 billion. The Master
Servicer will appoint The Chase Manhattan Bank as sub-servicer with respect
to the mortgage loans sold by The Chase Manhattan Bank to the Depositor, and
the Master Servicer will act as sub-servicer with respect to the mortgage
loans sold by BSFI to the Depositor and each of Chase and GE Capital intends
to use one or more subservicers with respect to certain of the mortgage loans
serviced by it.
THE PRIMARY SERVICERS
The Chase Manhattan Bank ("Chase") will act as servicer of the mortgage
loans sold by Chase to the Depositor pursuant to a subservicing agreement,
dated as of the cut-off date, between Chase and the Master Servicer. In such
capacity, Chase will be responsible for servicing the mortgage loans sold to
the Depositor by Chase and performing the duties of the Master Servicer in
accordance with the terms of the subservicing agreement which incorporates
the servicing terms of the Pooling and Servicing Agreement. Chase's principal
offices are located at 270 Park Avenue, New York, New York 10017. As of June
1, 2000, Chase was the servicer of a portfolio of multifamily and commercial
mortgage loans, secured by properties located throughout the United States
and totaling approximately $8.8 billion in aggregate outstanding principal
amounts. The Master Servicer will be responsible for the primary servicing of
the mortgage loans sold to the Depositor by General Electric Capital
Corporation ("GECC") and Bear, Stearns Funding, Inc. ("BSFI"). Each of the
Master Servicer and Chase may elect to subservice some or all of its primary
servicing duties with respect to each of the mortgage loans sold by GECC and
BSFI or Chase, respectively, to the
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Depositor. The Master Servicer, Chase and each of their respective
affiliates own and are in the business of acquiring assets similar in type to
the assets of the Trust Fund. Accordingly, their assets may compete with the
Mortgaged Properties for tenants, purchasers, financing and other parties and
services relevant to the business of acquiring similar assets.
THE SPECIAL SERVICER
Lend Lease Asset Management, L.P., a Texas limited partnership (the
"Special Servicer"), will initially be appointed as special servicer of the
Mortgage Loans. The principal servicing offices of the Special Servicer are
located at 700 North Pearl Street, Suite 2400, Dallas, Texas 75201, and its
telephone number is (214) 758-5800. As of September 30, 2000, the Special
Servicer was actively servicing, as special servicer, 203 commercial and
multifamily loans and REO properties with a principal balance of
approximately $543 million. The Special Servicer is named as special servicer
on 41 CMBS transactions totaling approximately $15.3 billion in aggregate
outstanding principal amount representing approximately 4,100 assets. The
Special Servicer 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 in this prospectus supplement concerning the
Special Servicer has been provided by the Special Servicer, and neither the
Depositor nor the Underwriters make any representation or warranty as to the
accuracy or completeness of that information.
REPLACEMENT OF THE SPECIAL SERVICER
The Special Servicer may be removed, and a successor Special Servicer
appointed, at any time by the holders of Certificates representing more than
50% of the aggregate Certificate Balance of the Controlling Class, provided
that each of Moody's and Fitch confirms in writing that the replacement of
the Special Servicer, in and of itself, will not cause a qualification,
withdrawal or downgrading of the then-current ratings assigned to any class
of Certificates.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The fee of the Master Servicer (the "Servicing Fee") will be payable
monthly from amounts received in respect of the mortgage loans, and will
accrue at a rate (the "Servicing Fee Rate"), calculated on a basis of a
360-day year consisting of twelve 30-day months equal to a per annum rate
ranging from 0.050% to 0.100%. As of the cut-off date the weighted average
Servicing Fee Rate will be 0.057% per annum. In addition to the Servicing
Fee, the Master Servicer will be entitled to retain, as additional servicing
compensation, (1) certain assumption, extension and modification fees with
respect to mortgage loans which are not Specially Serviced Mortgage Loans as
set forth in the Pooling and Servicing Agreement, and (2) late payment
charges and default interest paid by the borrowers (other than on Specially
Serviced Mortgage Loans), but only to the extent the amounts are not needed
to pay interest on Advances or the costs of certain opinions not otherwise
reimbursed by a borrower to the extent provided in the Pooling and Servicing
Agreement. The Master Servicer also is authorized but not required to invest
or direct the investment of funds held in the Certificate Account in
Permitted Investments, and the Master Servicer will be entitled to retain any
interest or other income earned on those funds and will bear any losses
resulting from the investment of these funds, except as set forth in the
Pooling and Servicing Agreement. The Master Servicer also is entitled to
retain any interest earned on any servicing escrow account to the extent the
interest is not required to be paid to the related borrowers.
The principal compensation to be paid to the Special Servicer in respect
of its special servicing activities will be the Special Servicing Fee, the
Workout Fee and the Liquidation Fee.
The "Special Servicing Fee" will accrue with respect to each Specially
Serviced Mortgage Loan at a rate equal to 0.25% per annum (the "Special
Servicing Fee Rate") calculated on the basis of the Stated Principal Balance
of the related Specially Serviced Mortgage Loans and on the basis of a
360-day year consisting of twelve 30-day months, and will be payable monthly
from the trust fund.
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The "Workout Fee" will generally be payable with respect to each Corrected
Mortgage Loan and will be calculated by application of a "Workout Fee Rate"
of 1% to each collection of interest and principal (including scheduled
payments, prepayments, balloon payments, and payments at maturity) received
on the respective mortgage loan for so long as it remains a Corrected
Mortgage Loan. The Workout Fee with respect to any Corrected Mortgage Loan
will cease to be payable if the Corrected Mortgage Loan again becomes a
Specially Serviced Mortgage Loan but will become payable again if and when
the mortgage loan again becomes a Corrected Mortgage Loan.
If the Special Servicer is terminated (other than for cause) or resigns,
it shall retain the right to receive any and all Workout Fees payable in
respect to mortgage loans that became Corrected Mortgage Loans during the
period that it acted as special servicer and remained Corrected Mortgage
Loans at the time of that termination or resignation but such fee will cease
to be payable if the Corrected Mortgage Loan again becomes a Specially
Serviced Mortgage Loan. The successor special servicer will not be entitled
to any portion of those Workout Fees.
A "Liquidation Fee" will be payable with respect to each Specially
Serviced Mortgage Loan as to which the Special Servicer obtains a full or
discounted payoff (or unscheduled partial payment to the extent such
prepayment is required by the Special Servicer as a condition to a workout)
from the related borrower and, except as otherwise described below, with
respect to any Specially Serviced Mortgage Loan or REO Property as to which
the Special Servicer receives any Liquidation Proceeds attributable to
principal. The Liquidation Fee for each Specially Serviced Mortgage Loan will
be payable from, and will be calculated by application of a "Liquidation Fee
Rate" of 1% to the amount of the related payment or proceeds. Notwithstanding
anything to the contrary described above, no Liquidation Fee will be payable
based on, or out of, Liquidation Proceeds received in connection with the
repurchase of any mortgage loan by a Mortgage Loan Seller for a breach of
representation or warranty or for defective or deficient mortgage loan
documentation, the purchase of any Specially Serviced Mortgage Loan by the
majority holder of the Controlling Class, the Special Servicer or the Master
Servicer, or the purchase of all of the mortgage loans and REO Properties in
connection with an optional termination of the trust fund. If, however,
Liquidation Proceeds are received with respect to any Corrected Mortgage Loan
and the Special Servicer is properly entitled to a Workout Fee, the Workout
Fee will be payable based on and out of the portion of the Liquidation
Proceeds that constitutes principal and/or interest. No Liquidation Fee will
be payable if the mortgage loan becomes a corrected mortgage loan.
Liquidation Proceeds do not include condemnation awards or insurance
proceeds.
The Special Servicer will also be entitled to additional servicing
compensation in the form of all assumption, extension and modification fees
with respect to Specially Serviced Mortgage Loans. The Special Servicer will
also be entitled to late payment charges and default interest paid by the
borrowers on Specially Serviced Mortgage Loans, but only to the extent those
amounts are not needed to pay interest on Advances to the extent provided in
the Pooling and Servicing Agreement or the costs of certain inspections. The
Special Servicer will not be entitled to retain any portion of Excess
Interest paid on the APD Loans.
Although the Master Servicer and the Special Servicer are each required to
service and administer the pool of mortgage loans in accordance with the
Servicing Standards above and, accordingly, without regard to its right to
receive compensation under the Pooling and Servicing Agreement, additional
servicing compensation in the nature of assumption and modification fees may
under certain circumstances provide the Master Servicer or the Special
Servicer, as the case may be, with an economic disincentive to comply with
this standard.
As and to the extent described in this prospectus supplement under
"Description of the Certificates
-- Advances," the Master Servicer and the Special Servicer, as applicable,
will be entitled to receive interest on Advances, which will be paid
contemporaneously with the reimbursement of the related Advance.
Each of the Master Servicer and the Special Servicer generally will be
required to pay all expenses incurred by it in connection with its servicing
activities under the Pooling and Servicing Agreement and will not be entitled
to reimbursement for any expense of this type except as expressly provided in
the Pooling and Servicing Agreement. The Master Servicer will be responsible
for all fees of any sub-servicers. See "Description of the
Certificates--Distributions--Method, Timing and Amount" in this prospectus
supplement and "Description of the Pooling Agreements--Certificate Account"
and "--Servicing Compensation and Payment of Expenses" in the prospectus.
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MAINTENANCE OF INSURANCE
To the extent permitted by the related mortgage loan and required by the
Servicing Standards, the Master Servicer will be required to use its
reasonable best efforts to (1) cause each borrower to maintain, and if the
borrower does not maintain, will be required to (2) itself maintain to the
extent available at commercially reasonable rates (as determined by the
Master Servicer in accordance with the Servicing Standards), a fire and
hazard insurance policy with extended coverage covering the related Mortgaged
Property. The coverage of that kind of policy will be in an amount that is
not less than the lesser of the full replacement cost of the improvements
securing that mortgage loan or the outstanding principal balance owing on
that mortgage loan, but in any event, in an amount sufficient to avoid the
application of any co-insurance clause unless otherwise noted in the related
mortgage loan documents. After the Master Servicer determines that a
Mortgaged Property is located in an area identified as a federally designated
special flood hazard area (and flood insurance has been made available), the
Master Servicer will be required to use its reasonable best efforts to (1)
cause each borrower to maintain (to the extent required by the related
mortgage loan), and if the borrower does not so maintain, will be required to
(2) itself maintain to the extent available at commercially reasonable rates
(as determined by the Master Servicer in accordance with the Servicing
Standards) a flood insurance policy in an amount representing coverage not
less than the lesser of (1) the outstanding principal balance of the related
mortgage loan and (2) the maximum amount of insurance which is available
under the National Flood Insurance Act of 1968, as amended, but only to the
extent that the related mortgage loan permits the lender to require the
coverage and maintaining coverage is consistent with the Servicing Standards.
The Special Servicer will be required to maintain (or cause to be
maintained), fire and hazard insurance on each REO Property, to the extent
obtainable, in an amount which is at least equal to the lesser of (1) the
full replacement cost of the improvements on REO Property, or (2) the
outstanding principal balance owing on the related mortgage loan and in any
event, the amount necessary to avoid the operation of any co-insurance
provisions. In addition, while the REO Property is located in an area
identified as a federally designated special flood hazard area, the Special
Servicer will be required to cause to be maintained, to the extent available
at commercially reasonable rates (as determined by the Special Servicer in
accordance with the Servicing Standards), a flood insurance policy meeting
the requirements of the current guidelines of the Federal Insurance
Administration in an amount representing coverage not less than the maximum
amount of insurance which is available under the National Flood Insurance Act
of 1968, as amended.
The Pooling and Servicing Agreement provides that the Master Servicer and
the Special Servicer may satisfy their respective obligations to cause each
borrower to maintain a hazard insurance policy by maintaining a blanket or
master single interest policy insuring against hazard losses on the mortgage
loans and REO Properties. Any losses incurred with respect to mortgage loans
or REO Properties due to uninsured risks (including earthquakes, mudflows and
floods) or insufficient hazard insurance proceeds may adversely affect
payments to Certificateholders. Any cost incurred by the Master Servicer or
Special Servicer in maintaining that kind of insurance policy if the borrower
defaults on its obligation to do so will be advanced by the Master Servicer
or the Special Servicer as a Servicing Advance and will be charged to the
related borrower. Generally, no borrower is required by the mortgage loan
documents to maintain earthquake insurance on any Mortgaged Property and the
Special Servicer will not be required to maintain earthquake insurance on any
REO Properties. Any cost of maintaining that kind of required insurance or
other earthquake insurance obtained by the Special Servicer will be paid out
of a segregated custodial account created and maintained by the Special
Servicer on behalf of the Trustee in trust for the Certificateholders (the
"REO Account") or advanced by the Master Servicer or the Special Servicer as
a Servicing Advance.
The costs of the insurance may be recovered by the Master Servicer,
Special Servicer or Trustee, as applicable, from reimbursements received from
the borrower or, if the borrower does not pay those amounts, as a Servicing
Advance as set forth in the Pooling and Servicing Agreement.
No pool insurance policy, special hazard insurance policy, bankruptcy
bond, repurchase bond or certificate guarantee insurance will be maintained
with respect to the mortgage loans, nor will any mortgage loan be subject to
FHA insurance.
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MODIFICATIONS, WAIVER AND AMENDMENTS
The Master Servicer, (except as provided in the Pooling and Servicing
Agreement), may agree to extend the maturity date of a mortgage loan that is
not a Specially Serviced Mortgage Loan; except that any extension entered
into by the Master Servicer will not extend the maturity date beyond the
earlier of (1) two years prior to the Rated Final Distribution Date and (2)
in the case of a mortgage loan secured by a leasehold estate and not the
related fee interest, the date ten years prior to the expiration of the
leasehold estate; provided that, if the extension would extend the maturity
date of a mortgage loan for more than twelve months from and after the
original maturity date of the mortgage loan, the Master Servicer must obtain
the opinion of counsel described in the next sentence. Except as otherwise
set forth in this paragraph, neither the Master Servicer nor the Special
Servicer may waive, modify or amend (or consent to waive, modify or amend)
any provision of a mortgage loan which is not in default or as to which
default is not reasonably foreseeable except for (1) the waiver of any
due-on-sale clause or due-on-encumbrance clause to the extent permitted in
the Pooling and Servicing Agreement, and (2) any waiver, modification or
amendment that would not be a "significant modification" of the mortgage loan
within the meaning of Treasury Regulations Section 1.860G-2(b) and as to
which the Master Servicer or the Special Servicer, as applicable, has
provided the Trustee with an opinion of counsel that the waiver, modification
or amendment will not constitute a "significant modification."
If, but only if, the Special Servicer determines that a modification,
waiver or amendment (including the forgiveness or deferral of interest or
principal or the substitution or release of collateral or the pledge of
additional collateral) of the terms of a Specially Serviced Mortgage Loan
with respect to which a payment default or other material default has
occurred or a payment default or other material default is, in the Special
Servicer's judgment, reasonably foreseeable, is reasonably likely to produce
a greater recovery on a net present value basis (the relevant discounting to
be performed at the related Mortgage Rate) than liquidation of the Specially
Serviced Mortgage Loan, then the Special Servicer may, but is not required
to, agree to a modification, waiver or amendment of the Specially Serviced
Mortgage Loan, subject to the restrictions and limitations described below.
The Special Servicer will use its best efforts to the extent possible to
fully amortize a modified mortgage loan prior to the Rated Final Distribution
Date.
The Special Servicer may not agree to a modification, waiver or amendment
of any term of any Specially Serviced Mortgage Loan if that modification,
waiver or amendment would:
(1) extend the maturity date of the Specially Serviced Mortgage Loan to a
date occurring later than the earlier of (A) two years prior to the Rated
Final Distribution Date and (B) if the Specially Serviced Mortgage Loan is
secured by a leasehold estate and not the related fee interest, the date
ten years prior to the expiration of the leasehold; or
(2) reduce the related Net Mortgage Rate to less than the lesser of (A)
the original Net Mortgage Rate and (B) the highest Pass-through Rate on
any class of Certificates (other than the Class X Certificates); or
(3) provide for the deferral of interest unless (A) interest accrues on
the mortgage loan, generally, at the related Mortgage Rate and (B) the
aggregate amount of deferred interest does not exceed 10% of the unpaid
principal balance of the Specially Serviced Mortgage Loan.
In the event of a modification which creates a deferral of interest, the
Pooling and Servicing Agreement will provide that the amount of deferred
interest will be allocated to reduce the Distributable Certificate Interest
of the class or classes (other than the Class X Certificates) with the latest
alphabetical designation then outstanding, and to the extent so allocated,
will be added to the Certificate Balance of the class or classes.
The Special Servicer or the Master Servicer, as the case may be, will be
required to notify each other, the Mortgage Loan Sellers, Moody's, Fitch, and
the Trustee of any modification, waiver or amendment of any term of any
mortgage loan and will be required to deliver to the Trustee for deposit in
the related mortgage file, an original counterpart of the agreement related
to the modification, waiver or amendment, promptly following the execution.
Copies of each agreement whereby the modification, waiver or amendment of any
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term of any mortgage loan is effected are required to be available for
review during normal business hours at the offices of the Trustee. See
"Description of the Certificates--Reports to Certificateholders; Certain
Available Information" in this prospectus supplement.
DIRECTING CERTIFICATEHOLDER
The Directing Certificateholder will be entitled to advise the Special
Servicer with respect to the following actions of the Special Servicer with
respect to any Specially Serviced Mortgage Loan, and except as otherwise
described below, the Special Servicer will not be permitted to take any of
the following actions as to which the Directing Certificateholder has
objected in writing within 10 business days of having been notified thereof
(provided that if such written notice has not been received by the Special
Servicer within the 10 business day period, the Directing Certificateholder
will be deemed to have waived its right to object):
(i) any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties securing
such of the Specially Serviced Mortgage Loans as come into and continue in
default;
(ii) any modification of a monetary term of a Specially Serviced Mortgage
Loan;
(iii) any proposed sale of a defaulted mortgage loan or REO Property
(other than in connection with the termination of the trust as described
under "Description of Certificates--Termination; Retirement of
Certificates" in this prospectus supplement) for less than the applicable
Purchase Price;
(iv) any determination to bring an REO Property into compliance with
applicable environmental laws or to otherwise address hazardous material
located at an REO Property;
(v) any acceptance of substitute or additional collateral for a Specially
Serviced Mortgage Loan (other than in accordance with its terms);
(vi) any waiver of a "due-on-sale" or "due-on-encumbrance" clause with
respect to a Specially Serviced Mortgage Loan; and
(vii) any acceptance of an assumption agreement releasing a borrower from
liability under a Specially Serviced Mortgage Loan other than in
accordance with its terms;
provided that, in the event that the Special Servicer determines that
immediate action is necessary to protect the interests of the
Certificateholders (as a collective whole), the Special Servicer may take any
such action without waiting for the Directing Certificateholder's response.
In addition, the Directing Certificateholder may direct the Special
Servicer to take, or to refrain from taking, other actions with respect to a
Specially Serviced Mortgage Loan as the Directing Certificateholder may deem
advisable; provided that no such direction may require or cause the Special
Servicer to violate any provision of the Pooling and Servicing Agreement or
the Servicing Standards.
Any costs and expenses incurred by the Special Servicer in obtaining such
consent will be borne by the Directing Certificateholder. In the event the
Special Servicer determines that a refusal to consent by the Directing
Certificateholder or any advice from the Directing Certificateholder would
cause the Special Servicer to violate the terms of the Pooling and Servicing
Agreement, including without limitation, the Servicing Standards, the Special
Servicer will be required to disregard such refusal to consent or advice and
notify the Directing Certificateholder, the Trustee, Moody's and Fitch.
LIMITATION ON LIABILITY OF DIRECTING CERTIFICATEHOLDER
The Directing Certificateholder will not be liable to the trust fund or
the Certificateholders for any action taken, or for refraining from the
taking of any action, in good faith pursuant to the Pooling and Servicing
Agreement, or for errors in judgment; provided, however, that the Directing
Certificateholder will not be protected against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations or duties. Each Certificateholder acknowledges and agrees, by its
acceptance of its Certificates, that the Directing Certificateholder may have
special relationships and interests that conflict with those of holders of
one or
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more classes of certificates, that the Directing Certificateholder may act
solely in the interests of the holders of the Controlling Class, that the
Directing Certificateholder does not have any duties to the holders of any
class of certificates other than the Controlling Class, that the Directing
Certificateholder may take actions that favor the interests of the holders of
the Controlling Class over the interests of the holders of one or more other
classes of certificates, that the Directing Certificateholder, absent willful
misfeasance, bad faith or negligence, will not be deemed to have been
negligent or reckless, or to have acted in bad faith or engaged in willful
misconduct, by reason of its having acted solely in the interests of the
Controlling Class, and that the Directing Certificateholder will have no
liability whatsoever for having so acted and that no Certificateholder may
take any action whatsoever against the Directing Certificateholder or any
director, officer, employee, agent or principal of the Directing
Certificateholder for having so acted.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
Pursuant to the Pooling and Servicing Agreement, if a default on a
mortgage loan has occurred or, in the Special Servicer's judgment, a payment
default is imminent, the Special Servicer, on behalf of the Trustee, may at
any time institute foreclosure proceedings, exercise any power of sale
contained in the related Mortgage, obtain a deed in lieu of foreclosure or
otherwise acquire title to the related Mortgaged Property, by operation of
law or otherwise. The Special Servicer is not permitted, however, to acquire
title to any Mortgaged Property or take any other action with respect to any
Mortgaged Property that would cause the Trustee, for the benefit of the
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 the Mortgaged Property within the meaning of certain federal
environmental laws, unless the Special Servicer has previously received a
report prepared by a person who regularly conducts environmental audits
(which report will be paid for by the Master Servicer as a Servicing Advance)
and either:
(1) the report indicates that (a) the Mortgaged Property is in compliance
with applicable environmental laws and regulations and (b) there are no
circumstances or conditions present at the Mortgaged Property that have
resulted in any contamination for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under
any applicable environmental laws and regulations; or
(2) the Special Servicer, based solely (as to environmental matters and
related costs) on the information set forth in the report, determines that
taking those actions as are necessary to bring the Mortgaged Property into
compliance with applicable environmental laws and regulations and/or
taking the actions contemplated by clause (1)(b) above, is reasonably
likely to produce a greater recovery, taking into account the time value
of money, than not taking those actions. See "Certain Legal Aspects of
Mortgage Loans--Environmental Risks" in the prospectus.
The Pooling and Servicing Agreement grants to the majority holder of the
Controlling Class, the Special Servicer and the Master Servicer, in that
order, a right of first refusal to purchase from the trust fund, at the
Purchase Price, any mortgage loan as to which a specified number of scheduled
payments are delinquent. In addition, the Special Servicer may offer to sell
any defaulted mortgage loan if and when the Special Servicer determines,
consistent with the Servicing Standards, that the sale would produce a
greater recovery, taking into account the time value of money, than would
liquidation of the related Mortgaged Property. In the absence of the sale,
the Special Servicer will generally be required to proceed against the
related Mortgaged Property, subject to the discussion above.
If title to any Mortgaged Property is acquired by the trust fund, the
Special Servicer, on behalf of the trust fund, will be required to sell the
Mortgaged Property prior to the close of the third calendar year beginning
after the year of acquisition, unless (1) the Internal Revenue Service (the
"IRS") grants an extension of time to sell the property or (2) the Trustee
receives an opinion of independent counsel to the effect that the holding of
the property by the trust fund longer than the above-referenced three year
period will not result in the imposition of a tax on either the Upper-Tier
REMIC or the Lower-Tier REMIC or cause the trust fund (or either the
Upper-Tier REMIC or the Lower-Tier REMIC) to fail to qualify as a REMIC under
the Code at any time that any Certificate is outstanding. Subject to the
foregoing and any other tax-related limitations, pursuant to the Pooling and
Servicing Agreement, the Special Servicer will generally be required to
attempt to sell any Mortgaged Property so acquired on the same terms and
conditions it would if it were
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the owner. The Special Servicer will also be required to ensure that any
Mortgaged Property acquired by the trust fund is administered so that it
constitutes "foreclosure property" within the meaning of Code Section
860G(a)(8) at all times, that the sale of the property does not result in the
receipt by the trust fund of any income from nonpermitted assets as described
in Code Section 860F(a)(2)(B). If the trust fund acquires title to any
Mortgaged Property, the Special Servicer, on behalf of the trust fund, will
retain, at the expense of the trust fund, an independent contractor to manage
and operate the property. The independent contractor generally will be
permitted to perform construction (including renovation) on a foreclosed
property only if the construction was at least 10% completed at the time
default on the related mortgage loan became imminent. The retention of an
independent contractor, however, will not relieve the Special Servicer of its
obligation to manage the Mortgaged Property as required under the Pooling and
Servicing Agreement.
Generally, neither the Upper-Tier REMIC nor the Lower-Tier REMIC will be
taxable on income received with respect to a Mortgaged Property acquired by
the trust fund to the extent that it constitutes "rents from real property,"
within the meaning of Code Section 856(c)(3)(A) and Treasury regulations
under the Code. Rents from real property include fixed rents and rents based
on the receipts or sales of a tenant but do not include the portion of any
rental based on the net income or profit 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 income
with respect to a Mortgaged Property owned by the trust fund attributable to
any non-qualifying services, would not constitute rents from real property,
or that all income would not qualify if no separate charge was stated for the
non-customary services or they were not performed by an independent
contractor. Rents from real property also do not include income from the
operation of a trade or business on the Mortgaged Property, such as a hotel.
Any of the foregoing types of income may instead constitute "net income from
foreclosure property," which would be taxable to the Lower-Tier REMIC at the
highest marginal federal corporate rate (currently 35%) and may also be
subject to state or local taxes. The Pooling and Servicing Agreement provides
that the Special Servicer will be permitted to cause the Lower-Tier REMIC to
earn "net income from foreclosure property" that is subject to tax if it
determines that the net after-tax benefit to Certificateholders is greater
than another method of operating or net leasing the Mortgaged Property.
Because these sources of income, if they exist, are already in place with
respect to the Mortgaged Properties, it is generally viewed as beneficial to
Certificateholders to permit the trust fund to continue to earn them if it
acquires a Mortgaged Property, even at the cost of this tax. These taxes
would be chargeable against the related income for purposes of determining
the proceeds available for distribution to holders of Certificates. See
"Certain Federal Income Tax Consequences--Federal Income Tax Consequences for
REMIC Certificates--Taxes That May Be Imposed on the REMIC Pool" in the
prospectus.
To the extent that Liquidation Proceeds collected with respect to any
mortgage loan are less than the sum of: (1) the outstanding principal balance
of the mortgage loan, (2) interest accrued on the mortgage loan and (3) the
aggregate amount of outstanding reimbursable expenses (including any
unreimbursed Servicing Advances and unpaid and accrued interest on those
Servicing Advances) incurred with respect to the mortgage loan, then the
trust fund will realize a loss in the amount of the shortfall. The Trustee,
the Master Servicer and/or the Special Servicer will be entitled to
reimbursement out of the Liquidation Proceeds recovered on any mortgage loan,
prior to the distribution of those Liquidation Proceeds to
Certificateholders, of any and all amounts that represent unpaid servicing
compensation in respect of the related mortgage loan, certain unreimbursed
expenses incurred with respect to the mortgage loan and any unreimbursed
Advances made with respect to the mortgage loan. In addition, amounts
otherwise distributable on the Certificates will be further reduced by
interest payable to the Master Servicer, the Special Servicer or Trustee on
these Advances.
If any Mortgaged Property suffers damage and the proceeds, if any, of the
related hazard insurance policy are insufficient to restore fully the damaged
property, the Master Servicer will not be required to
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advance the funds to effect the restoration unless (1) the Special Servicer
determines that the restoration will increase the proceeds to
Certificateholders on liquidation of the mortgage loan after reimbursement of
the Special Servicer or the Master Servicer, as the case may be, for its
expenses and (2) the Master Servicer determines that the expenses will be
recoverable by it from related Insurance and Condemnation Proceeds and
Liquidation Proceeds.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Master Servicer will be required to perform or cause to be performed
(at its own expense), physical inspections of each Mortgaged Property
securing a Mortgage Note with a Stated Principal Balance of (A) $2,000,000 or
more at least once every 12 months and (B) less than $2,000,000 at least once
every 24 months, in each case commencing in calendar year 2001; provided,
however, that if any scheduled payment becomes more than 60 days delinquent
on the related mortgage loan, the Special Servicer is required to inspect the
related Mortgaged Property as soon as practicable after the mortgage loan
becomes a Specially Serviced Mortgage Loan and annually thereafter for so
long as the mortgage loan remains a Specially Serviced Mortgage Loan (the
cost of which inspection will be an expense of the trust fund to the extent
not reimbursable out of penalty charges recovered on the Specially Serviced
Mortgage Loan). The Special Servicer or the Master Servicer, as applicable,
will be required to prepare a written report of the inspection describing,
among other things, the condition of and any damage to the Mortgaged Property
and specifying the existence of any material vacancies in the Mortgaged
Property of which it has knowledge, of any sale, transfer or abandonment of
the Mortgaged Property, of any material change in the condition of the
Mortgaged Property, or of any waste committed on the Mortgaged Property.
With respect to each mortgage loan that requires the borrower to deliver
those statements, the Special Servicer or the Master Servicer, as applicable,
is also required to collect and review the annual operating statements of the
related Mortgaged Property. Most of the Mortgages obligate the related
borrower to deliver annual property operating statements. However, we cannot
assure you that any operating statements required to be delivered will in
fact be delivered, nor is the Special Servicer or the Master Servicer likely
to have any practical means of compelling the delivery in the case of an
otherwise performing mortgage loan.
Copies of the inspection reports and operating statements referred to
above are to be available for review by Certificateholders during normal
business hours at the offices of the Paying Agent. See "Description of the
Certificates--Reports to Certificateholders; Certain Available Information"
in this prospectus supplement.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE SPECIAL SERVICER AND THE
DEPOSITOR
The Pooling and Servicing Agreement permits the Master Servicer and the
Special Servicer to resign from their respective obligations only upon (a) in
the case of the Master Servicer only, the appointment of, and the acceptance
of the appointment by, a successor and receipt by the Trustee of written
confirmation from each of Moody's and Fitch that the resignation and
appointment will, in and of itself, not cause a downgrade, withdrawal or
qualification of the then-current rating assigned by Moody's or Fitch to any
class of certificates; provided that with respect to the resignation of the
Master Servicer, Chase will have been offered the opportunity to accept the
appointment and Chase and the Master Servicer have been unable to agree upon
terms or Chase has declined or otherwise been unable to accept that
appointment, or (b) a determination that their respective obligations are no
longer permissible with respect to the Master Servicer or the Special
Servicer, as the case may be, under applicable law. No resignation will
become effective until the Trustee or other successor has assumed the
obligations and duties of the resigning Master Servicer or Special Servicer,
as the case may be, under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement will provide that none of the Master
Servicer, the Special Servicer, the Depositor or any director, officer,
employee or agent of any of them will be under any liability to the trust
fund or the Certificateholders for any action taken, or not taken, in good
faith pursuant to the Pooling and Servicing Agreement or for errors in
judgment; provided, however, that none of the Master Servicer, the Special
Servicer, the Depositor or similar person will be protected against any
liability that
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would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of obligations or duties under the Pooling and
Servicing Agreement or by reason of negligent disregard of the obligations
and duties. The Pooling and Servicing Agreement will also provide that the
Master Servicer, the Special Servicer, the Depositor and any general partner
of the foregoing and any director, officer, employee or agent of any of them
will be entitled to indemnification by the trust fund against any loss,
liability or expense incurred in connection with any legal action or claim
that relates to the Pooling and Servicing Agreement or the Certificates;
provided, however, that the indemnification will not extend to any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of obligations or duties under the Pooling and
Servicing Agreement, by reason of negligent disregard of the obligations or
duties, or in the case of the Depositor and any of its directors, officers,
members, managers, employees and agents, any violation by any of them of any
state or federal securities law.
In addition, the Pooling and Servicing Agreement will provide that none of
the Master Servicer, the Special Servicer or the Depositor will be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its respective responsibilities under the Pooling and Servicing
Agreement or that in its opinion may involve it in any expense or liability
not reimbursed by the trust fund. However, each of the Master Servicer, the
Special Servicer and the Depositor will be permitted, in the exercise of its
discretion, to undertake any action that it may deem necessary or desirable
with respect to the enforcement and/or protection of the rights and duties of
the parties to the Pooling and Servicing Agreement and the interests of the
Certificateholders under the Pooling and Servicing Agreement. In that 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, the Special Servicer or the Depositor, as the case
may be, will be entitled to charge the Certificate Account for the expenses.
Pursuant to the Pooling and Servicing Agreement, the Master Servicer and
Special Servicer will each be required to maintain a fidelity bond and errors
and omissions policy or their equivalent that provides coverage against
losses that may be sustained as a result of an officer's or employee's
misappropriation of funds or errors and omissions, subject to certain
limitations as to amount of coverage, deductible amounts, conditions,
exclusions and exceptions permitted by the Pooling and Servicing Agreement.
Notwithstanding the foregoing, the Master Servicer will be allowed to
self-insure with respect to an errors and omission policy and a fidelity bond
so long as certain conditions set forth in the Pooling and Servicing
Agreement are met.
Any person into which the Master Servicer, the Special Servicer or the
Depositor may be merged or consolidated, or any person resulting from any
merger or consolidation to which the Master Servicer, the Special Servicer or
the Depositor is a party, or any person succeeding to the business of the
Master Servicer, the Special Servicer or the Depositor, will be the successor
of the Master Servicer, the Special Servicer or the Depositor, as the case
may be, under the Pooling and Servicing Agreement. The Master Servicer and
the Special Servicer may have other normal business relationships with the
Depositor or the Depositor's affiliates.
EVENTS OF DEFAULT
"Events of Default" under the Pooling and Servicing Agreement with respect
to the Master Servicer or the Special Servicer, as the case may be, will
include, without limitation:
(a) (A) any failure by the Master Servicer to make a required deposit to
the Certificate Account on the day such deposit was first required to be
made, which failure is not remedied within one business day, or (B) any
failure by the Master Servicer to deposit into, or remit to the Paying
Agent for deposit into, the Distribution Account any amount required to be
so deposited or remitted, which failure is not remedied by 10:00 a.m. (New
York City time) on the relevant Distribution Date;
(b) any failure by the Special Servicer to deposit into the REO Account
on the day such deposit is required to be made, or to remit to the Master
Servicer for deposit in the Certificate Account any such remittance
required to be made by the Special Servicer on the day such remittance is
required to be made under the Pooling and Servicing Agreement;
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(c) any failure by the Master Servicer or the Special Servicer duly to
observe or perform in any material respect any of its other covenants or
obligations under the Pooling and Servicing Agreement, which failure
continues unremedied for 30 days (10 days in the case of a failure to make
a Servicing Advance or 15 days in the case of a failure to pay the premium
for any insurance policy required to be maintained under the Pooling and
Servicing Agreement) after written notice of the failure has been given to
the Master Servicer or the Special Servicer, as the case may be, by any
other party to the Pooling and Servicing Agreement, or to the Master
Servicer or the Special Servicer, as the case may be, with a copy to each
other party to the related Pooling and Servicing Agreement, by
Certificateholders of any class, evidencing, as to that class, percentage
interests aggregating not less than 25%; provided, however, if that
failure is capable of being cured and the Master Servicer or Special
Servicer, as applicable, is diligently pursuing that cure, that 30-day
period will be extended an additional 30 days;
(d) any breach on the part of the Master Servicer or the Special Servicer
of any representation or warranty in the Pooling and Servicing Agreement
which materially and adversely affects the interests of any class of
Certificateholders and which continues unremedied for a period of 30 days
after the date on which notice of that breach, requiring the same to be
remedied, will have been given to the Master Servicer or the Special
Servicer, as the case may be, by the Depositor or the Trustee, or to the
Master Servicer, the Special Servicer, the Depositor and the Trustee by
the holders of Certificates of any class evidencing, as to that class,
percentage interests aggregating not less than 25%; provided, however, if
that breach is capable of being cured and the Master Servicer or Special
Servicer, as applicable, is diligently pursuing that cure, that 30-day
period will be extended an additional 30 days;
(e) certain events of insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings in respect of or relating to
the Master Servicer or the Special Servicer, and certain actions by or on
behalf of the Master Servicer or the Special Servicer indicating its
insolvency or inability to pay its obligations; and
(f) the Trustee has received written notice from Moody's or Fitch that
the continuation of the Master Servicer or the Special Servicer in that
capacity would result, or has resulted, in a downgrade or withdrawal of
any rating then assigned by Moody's or Fitch to any class of Certificates;
provided that the publication of a ratings watch due to the continuation
of the Special Servicer with respect to the Certificates will be deemed
notice for purposes of this section (f).
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the Master Servicer or the
Special Servicer under the Pooling and Servicing Agreement, then, so long as
the Event of Default remains unremedied, the Depositor or the Trustee will be
authorized, and at the direction of Certificateholders entitled to not less
than 51% of the Voting Rights, the Trustee will be required, to terminate all
of the rights and obligations of the defaulting party as Master Servicer or
Special Servicer, as applicable, under the Pooling and Servicing Agreement.
If the Master Servicer is terminated due to certain Events of Default,
subject to the rights of Chase, as described below, the Trustee will solicit
bids for such servicing rights and deliver the net proceeds of any resulting
sale to the Master Servicer. If the Master Servicer is terminated, Chase will
be offered the opportunity to accept the appointment. If Chase and the Master
Servicer have been unable to agree upon terms or Chase has declined or
otherwise been unable to accept that appointment, then subject to the bid
process described above, the Trustee will succeed to all of the
responsibilities, duties and liabilities of the Master Servicer as described
below. The Trustee, or the Master Servicer with respect to a termination of
the Special Servicer, will then succeed to all of the responsibilities,
duties and liabilities of the defaulting party as Master Servicer or Special
Servicer, as applicable, under the Pooling and Servicing Agreement and will
be entitled to similar compensation arrangements. If the Trustee is unwilling
or unable so to act, it may (or, at the written request of Certificateholders
entitled to not less than 51% of the Voting Rights, it will be required to)
appoint, or petition a court of competent jurisdiction to appoint, a loan
servicing institution or other entity that would not result in the
downgrading, qualification or withdrawal of the ratings assigned to any class
of Certificates by either of Moody's or Fitch to act as successor to the
Master Servicer or Special Servicer, as the case may be, under the Pooling
and Servicing Agreement.
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No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Certificates or the
Pooling and Servicing Agreement unless the holder previously has given to the
Trustee written notice of default and the continuance of the default and
unless the holders of Certificates of any class evidencing not less than 25%
of the aggregate Percentage Interests constituting the class have made
written request upon the Trustee to institute a proceeding in its own name
(as Trustee) and have offered to the Trustee reasonable indemnity, and the
Trustee for 60 days after receipt of the request and indemnity has neglected
or refused to institute the proceeding. However, the Trustee will be under no
obligation to exercise any of the trusts or powers vested in it by the
Pooling and Servicing Agreement or to institute, conduct or defend any
related litigation at the request, order or direction of any of the
Certificateholders, unless the Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred as a result.
AMENDMENT
The Pooling and Servicing Agreement may be amended by the parties thereto,
without the consent of any of the holders of Certificates:
(a) to cure any ambiguity;
(b) to correct or supplement any of its provisions which may be
inconsistent with any other provisions or to correct any error;
(c) to change the timing and/or nature of deposits in the Certificate
Account, the Distribution Accounts or the REO Account, provided that (A)
the Servicer Remittance Date shall in no event be later than the related
Distribution Date, (B) the change would not adversely affect in any
material respect the interests of any Certificateholder, as evidenced by
an opinion of counsel (at the expense of the party requesting the
amendment) and (C) the change would not result in the downgrading,
qualification or withdrawal of the then-current ratings assigned to any
class of Certificates by either of Moody's or Fitch, as evidenced by a
letter from each of Moody's and Fitch;
(d) to modify, eliminate or add to any of its provisions (A) to the
extent as will be necessary to maintain the qualification of either the
Upper-Tier REMIC or Lower-Tier REMIC as a REMIC, to maintain the grantor
trust portion of the trust fund as a grantor trust or to avoid or minimize
the risk of imposition of any tax on the trust fund, provided that the
Trustee has received an opinion of counsel (at the expense of the party
requesting the amendment) to the effect that (1) the action is necessary
or desirable to maintain qualification or to avoid or minimize the risk
and (2) the action will not adversely affect in any material respect the
interests of any holder of the Certificates or (B) to restrict the
transfer of the Residual Certificates, provided that the Depositor has
determined that the amendment will not give rise to any tax with respect
to the transfer of the Residual Certificates to a non-permitted
transferee. See "Certain Federal Income Tax Consequences--Federal Income
Tax Consequences for REMIC Certificates--Taxation of Residual
Certificates--Tax-Related Restrictions on Transfer of Residual
Certificates" in the prospectus;
(e) to make any other provisions with respect to matters or questions
arising under the Pooling and Servicing Agreement or any other change,
provided that the required action will not adversely affect in any
material respect the interests of any Certificateholder (unless the
affected Certificateholder consents in writing to such amendment), as
evidenced by an opinion of counsel and written confirmation that the
change would not result in the downgrading, qualification or withdrawal of
the ratings assigned to any class of Certificates by either of Moody's or
Fitch; or
(f) to amend or supplement any provision of the Pooling and Servicing
Agreement to the extent necessary to maintain the ratings assigned to each
class of Certificates by each of Moody's and Fitch, as evidenced by
written confirmation that the change would not result in the downgrading,
qualification or withdrawal of the then-current ratings assigned to any
class of Certificates by either of Moody's or Fitch.
The Pooling and Servicing Agreement may also be amended by the parties
thereto with the consent of the holders of Certificates of each class
affected thereby evidencing, in each case, not less than 66 2/3% of
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the aggregate Percentage Interests constituting the class for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement or of modifying in any
manner the rights of the holders of the Certificates, except that the
amendment may not (1) reduce in any manner the amount of, or delay the timing
of, payments received on the mortgage loans which are required to be
distributed on a Certificate of any class without the consent of the holder
of that Certificate, (2) reduce the aforesaid percentage of Certificates of
any class the holders of which are required to consent to the amendment
without the consent of the holders of all Certificates of that class then
outstanding, (3) adversely affect the Voting Rights of any class of
Certificates or (4) amend the Servicing Standards without the consent of the
holders of all Certificates of the classes then outstanding.
Notwithstanding the foregoing, the Trustee will not be required to consent
to any amendment to the Pooling and Servicing Agreement without having first
received an opinion of counsel (at the trust fund's expense) to the effect
that the amendment is permitted under the Pooling and Servicing Agreement and
that the amendment or the exercise of any power granted to the Master
Servicer, the Special Servicer, the Depositor, the Trustee or any other
specified person in accordance with the amendment, will not result in the
imposition of a tax on any portion of the trust fund or cause either the
Upper-Tier REMIC or Lower-Tier REMIC to fail to qualify as a REMIC or cause
the grantor trust portion of the trust fund to fail to qualify as a grantor
trust.
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on: (1) the
Pass-through Rate for the Certificate; (2) the price paid for the Certificate
and, if the price was other than par, the rate and timing of payments of
principal on the Certificate; (3) the aggregate amount of distributions on
the Certificate; and (4) the aggregate amount of Collateral Support Deficit
amounts allocated to a class of Offered Certificates.
Pass-Through Rate. The Pass-through Rate applicable to each class of
Offered Certificates for any Distribution Date will equal the rate set forth
on the cover of this prospectus supplement. See "Description of the
Certificates" in this prospectus supplement.
Rate and Timing of Principal Payments. The yield to holders of Offered
Certificates that are purchased at a discount or premium will be affected by
the rate and timing of principal payments on the mortgage loans (including
principal prepayments on the mortgage loans resulting from both voluntary
prepayments by the mortgagors and involuntary liquidations). The rate and
timing of principal payments on the mortgage loans will in turn be affected
by their amortization schedules, Lockout Periods, Yield Maintenance Charges,
the dates on which balloon payments are due, any extensions of maturity dates
by the Master Servicer or the Special Servicer and the rate and timing of
principal prepayments and other unscheduled collections on the mortgage loans
(including for this purpose, collections made in connection with liquidations
of mortgage loans due to defaults, casualties or condemnations affecting the
Mortgaged Properties, or purchases of mortgage loans out of the trust fund).
In addition, although the borrowers under the APD Loans may have certain
incentives to prepay the APD Loans on their Anticipated Prepayment Dates, we
cannot assure you that the borrowers will be able to prepay the APD Loans on
their Anticipated Prepayment Dates. The failure of a borrower to prepay an
APD Loan on its Anticipated Prepayment Date will not be an event of default
under the terms of the APD Loans, and pursuant to the terms of the Pooling
and Servicing Agreement, neither the Master Servicer nor the Special Servicer
will be permitted to take any enforcement action with respect to a borrower's
failure to pay Excess Interest, other than requests for collection, until the
scheduled maturity of the respective APD Loan; provided, that the Master
Servicer or the Special Servicer, as the case may be, may take action to
enforce the trust fund's right to apply excess cash flow to principal in
accordance with the terms of the APD Loan documents. See "Risk
Factors--Borrower May Be Unable to Repay Remaining Principal Balance on
Maturity Date or Anticipated Prepayment Date" in this prospectus supplement.
Prepayments and, assuming the respective stated maturity dates for the
mortgage loans have not occurred, liquidations and purchases of the mortgage
loans, will result in distributions on the Offered Certificates of amounts
that would otherwise be distributed over the remaining terms of the mortgage
loans. Defaults on the mortgage loans, particularly at or near their stated
maturity dates, may result in significant delays in payments of principal on
the mortgage loans (and, accordingly, on the Offered Certificates) while
work-outs are negotiated or foreclosures are completed. See "Servicing of the
Mortgage Loans--Modifications, Waiver and Amendments" and "--Realization Upon
Defaulted Mortgage Loans" in this prospectus supplement and "Certain Legal
Aspects of Mortgage Loans--Foreclosure" in the prospectus. In general, the
Class X Certificates will be extremely sensitive to the rate of principal
prepayments and principal losses. Because the rate of principal payments on
the mortgage loans will depend on future events and a variety of factors (as
described below), we cannot assure you as to the rate of payments or the rate
of principal prepayments in particular. We are not aware of any relevant
publicly available or authoritative statistics with respect to the historical
prepayment experience of a large group of mortgage loans comparable to the
mortgage loans.
The extent to which the yield to maturity of any class of Offered
Certificates may vary from the anticipated yield will depend upon the degree
to which the Certificates are purchased at a discount or premium and when,
and to what degree, payments of principal on the mortgage loans are in turn
distributed on the Certificates. An investor should consider, in the case of
any Offered Certificate purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the mortgage loans will result in
an actual yield to the investor that is lower than the anticipated yield and,
in the case of any Offered Certificate purchased at a premium, particularly
the Class X Certificates, the risk that a faster than
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anticipated rate of principal payments on the mortgage loans will result in
an actual yield to the investor that is lower than the anticipated yield. In
general, the earlier a payment of principal is distributed on an Offered
Certificate purchased at a discount or premium, the greater will be the
effect on an investor's yield to maturity. As a result, the effect on an
investor's yield of principal payments distributed on an investor's Offered
Certificates occurring at a rate higher (or lower) than the rate anticipated
by the investor during any particular period would not be fully offset by a
subsequent like reduction (or increase) in the rate of principal payments.
Principal payments (whether resulting from differences in amortization
terms, prepayments following expirations of the respective prepayment
Lock-out Periods or otherwise) on the mortgage loans will affect the
Pass-through Rate of the Class X and Class E Certificates and, to the extent
the weighted average Net Mortgage Rate would be reduced below the fixed
Pass-through Rate on those classes, the Class A, Class B, Class C and Class D
Certificates, for one or more future periods and therefore will also affect
the yield on those classes.
The yield on the Class X, Class B, Class C, Class D and Class E
Certificates could be adversely affected if mortgage loans with higher
interest rates pay faster than the mortgage loans with lower interest rates,
since those classes bear interest at a rate limited by the weighted average
Net Mortgage Rate of the mortgage loans. The pass-through rates on those
classes of certificates may be limited by the weighted average of the net
interest rates on the mortgage loans even if principal prepayments do not
occur.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which the holders are required to bear the
effects of any losses or shortfalls on the mortgage loans. Losses and other
shortfalls on the mortgage loans will generally be borne by the holders of
the Class M, Class L, Class K, Class J, Class I, Class H, Class G, Class F,
Class E, Class D, Class C and Class B Certificates, in that order, and in
each case to the extent of amounts otherwise distributable in respect of the
class of Certificates. In the event of the reduction of the Certificate
Balances of all those classes of Certificates to zero, the resulting losses
and shortfalls will then be borne, pro rata, by the Class A-1 and Class A-2
Certificates (and Class X Certificates with respect to shortfalls of
interest).
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on the mortgage loans may be affected by
a number of factors, including, without limitation, prevailing interest
rates, the terms of the mortgage loans (for example, due-on-sale clauses or
Lock-out Periods 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
properties in those 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" and "Description
of the Mortgage Pool" in this prospectus supplement and "Risk Factors" and
"Yield and Maturity Considerations--Yield and Prepayment Considerations" in
the prospectus.
The rate of prepayment on the pool of mortgage loans is likely to be
affected by prevailing market interest rates for mortgage loans of a
comparable type, term and risk level as the mortgage loans. When the
prevailing market interest rate is below a mortgage coupon, a borrower may
have an increased incentive to refinance its mortgage loan. However, under
all of the mortgage loans, voluntary prepayments are subject to Lock-out
Periods and Yield Maintenance Periods. See "Description of the Mortgage
Pool--Certain Terms and Conditions of the Mortgage Loans--Prepayment
Provisions" in this prospectus supplement.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity in the Mortgaged
Property, 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.
The Depositor makes no representation as to the particular factors that
will affect the rate and timing of prepayments and defaults on the mortgage
loans, as to the relative importance of those factors, as to the percentage
of the principal balance of the mortgage loans that will be prepaid or as to
which a default will have occurred as of any date or as to the overall rate
of prepayment or default on the mortgage loans.
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Delay in Payment of Distributions. Because each monthly distribution is
made on each Distribution Date, which is at least 15 days after the end of
the related Interest Accrual Period, the effective yield to the holders of
the Offered Certificates will be lower than the yield that would otherwise be
produced by the applicable Pass-through Rates and purchase prices (assuming
the prices did not account for the delay).
Unpaid Distributable Certificate Interest. As described under "Description
of the Certificates-- Distributions--Priority" in this prospectus supplement, if
the portion of the Available Distribution Amount distributable in respect of
interest on any class of Offered Certificates on any Distribution Date is less
than the Distributable Certificate Interest then payable for that class, the
shortfall will be distributable to holders of that class of Certificates on
subsequent Distribution Dates, to the extent of available funds. The shortfall
will not bear interest, however, so it will negatively affect the yield to
maturity of the class of Certificates for so long as it is outstanding.
WEIGHTED AVERAGE LIFE
The weighted average life of an Offered Certificate (other than the Class
X Certificates) refers to the average amount of time that will elapse from
the date of its issuance until each dollar allocable to principal of the
Certificate is distributed to the investor. The weighted average life of an
Offered Certificate will be influenced by, among other things, the rate at
which principal on the mortgage loans is paid or otherwise collected, which
may be in the form of scheduled amortization, voluntary prepayments,
Insurance and Condemnation Proceeds and Liquidation Proceeds.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this prospectus supplement is the "Constant
Prepayment Rate" or "CPR" model. The CPR model represents an assumed constant
annual rate of prepayment each month, expressed as a per annum percentage of
the then-scheduled principal balance of the pool of mortgage loans. As used
in each of the following tables, the column headed "0% CPR" assumes that none
of the mortgage loans is prepaid before maturity or the Anticipated
Prepayment Date, as the case may be. The columns headed "3% CPR", "6% CPR",
"9% CPR" and "12% CPR" assume that prepayments on the mortgage loans are made
at those levels of CPR following the expiration of any Lock-out Period. We
cannot assure you, however, that prepayments of the mortgage loans will
conform to any level of CPR, and no representation is made that the mortgage
loans will prepay at the levels of CPR shown or at any other prepayment rate.
The following tables indicate the percentage of the initial Certificate
Balance of each class of the Offered Certificates (other than the Class X
Certificates) that would be outstanding after each of the dates shown at
various CPRs and the corresponding weighted average life of each class of
Certificates. The tables have been prepared on the basis of the following
assumptions, among others:
(a) scheduled periodic payments of principal and/or interest on the
mortgage loans (or, with respect to 1 mortgage loan, representing
approximately 0.78% of the Initial Pool Balance, periodic payments of
interest-only over the term of the mortgage loan and the payment of the
entire principal amount of the mortgage loan at maturity, and with respect
to 1 mortgage loan, representing approximately 1.95% of the Initial Pool
Balance, scheduled periodic payments of interest-only over the first 24
months of its term and then principal and interest in accordance with the
amortization schedule) will be received on a timely basis and will be
distributed on each Distribution Date, beginning in January 2001;
(b) the Mortgage Rate in effect for each mortgage loan as of the cut-off
date will remain in effect to maturity or the Anticipated Prepayment Date,
as the case may be, and will be adjusted as required pursuant to the
definition of Mortgage Rate;
(c) the periodic principal and/or interest payment due for each mortgage
loan on the first due date following the cut-off date will continue to be
due on each due date until maturity or the Anticipated Prepayment Date, as
the case may be;
(d) any principal prepayments on the mortgage loans will be received on
their respective due dates after the expiration of any applicable Lock-out
Period, defeasance period and/or Yield Maintenance Period at the
respective levels of CPR set forth in the tables;
S-125
<PAGE>
(e) No Mortgage Loan Seller will be required to repurchase any mortgage
loan, and none of the Master Servicer, the Special Servicer, the holders
of the Controlling Class or the holders of the Class LR Certificates will
exercise its option to purchase all the mortgage loans and thereby cause
an early termination of the trust fund;
(f) the Closing Date is December 21, 2000;
(g) the APD Loans prepay on their Anticipated Prepayment Dates; and
(h) the Pass-through Rates and initial Certificate Balances of the
respective classes of Certificates are as described in this Prospectus
Supplement.
To the extent that the mortgage loans have characteristics that differ
from those assumed in preparing the tables set forth below, a class of
Offered Certificates (other than the Class X Certificates) may mature earlier
or later than indicated by the tables. It is highly unlikely that the
mortgage loans will prepay at any constant rate until maturity or that all
the mortgage loans will prepay at the same rate. 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 weighted average lives) shown in the following tables. These
variations may occur even if the average prepayment experience of the
mortgage loans were to equal any of the specified CPR percentages. Investors
are urged to conduct their own analyses of the rates at which the mortgage
loans may be expected to prepay. Based on the foregoing assumptions, the
following tables indicate the resulting weighted average lives of each class
of Offered Certificates (other than the Class X Certificates) and set forth
the percentage of the initial Certificate Balance of the class of the Offered
Certificate that would be outstanding after each of the dates shown at the
indicated CPRs.
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS A-1 CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
----------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Initial Percent..................... 100 100 100 100 100
December 15, 2001................... 95 95 95 95 95
December 15, 2002................... 90 90 90 90 90
December 15, 2003 .................. 84 84 84 84 84
December 15, 2004 .................. 78 78 78 78 78
December 15, 2005 .................. 54 54 54 54 54
December 15, 2006 .................. 46 46 46 46 46
December 15, 2007 .................. 30 30 30 30 30
December 15, 2008 .................. 22 22 22 22 22
December 15, 2009 .................. 12 12 12 12 12
December 15, 2010 .................. 0 0 0 0 0
Weighted Average Life (Years)(1) .. 5.70 5.70 5.70 5.70 5.70
Estimated Month of First Principal 1/15/01 1/15/01 1/15/01 1/15/01 1/15/01
Estimated Month of Maturity......... 5/15/10 5/15/10 5/15/10 5/15/10 5/15/10
</TABLE>
------------
(1) The weighted average life of the Class A-1 Certificates is determined
by (a) multiplying the amount of each principal distribution on it by
the number of years from the date of issuance of the Class A-1
Certificates to the related Distribution Date, (b) summing the results
and (c) dividing the sum by the aggregate amount of the reductions in
the principal balance of the Class A-1 Certificates.
S-126
<PAGE>
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS A-2 CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
----------------------------------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Initial Percent..................... 100 100 100 100 100
December 15, 2001................... 100 100 100 100 100
December 15, 2002................... 100 100 100 100 100
December 15, 2003................... 100 100 100 100 100
December 15, 2004................... 100 100 100 100 100
December 15, 2005................... 100 100 100 100 100
December 15, 2006................... 100 100 100 100 100
December 15, 2007................... 100 100 100 100 100
December 15, 2008................... 100 100 100 100 100
December 15, 2009................... 100 100 100 100 100
December 15, 2010................... 0 0 0 0 0
Weighted Average Life (Years)(1) .. 9.78 9.78 9.78 9.78 9.78
Estimated Month of First Principal 5/15/10 5/15/10 5/15/10 5/15/10 5/15/10
Estimated Month of Maturity ....... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
</TABLE>
------------
(1) The weighted average life of the Class A-2 Certificates is determined
by (a) multiplying the amount of each principal distribution on it by
the number of years from the date of issuance of the Class A-2
Certificates to the related Distribution Date, (b) summing the results
and (c) dividing the sum by the aggregate amount of the reductions in
the principal balance of the Class A-2 Certificates.
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS B CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
----------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percent..................... 100 100 100 100 100
December 15, 2001................... 100 100 100 100 100
December 15, 2002................... 100 100 100 100 100
December 15, 2003................... 100 100 100 100 100
December 15, 2004................... 100 100 100 100 100
December 15, 2005................... 100 100 100 100 100
December 15, 2006................... 100 100 100 100 100
December 15, 2007................... 100 100 100 100 100
December 15, 2008................... 100 100 100 100 100
December 15, 2009................... 100 100 100 100 100
December 15, 2010................... 0 0 0 0 0
Weighted Average Life (Years)(1) ... 9.98 9.98 9.98 9.98 9.98
Estimated Month of First Principal 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Estimated Month of Maturity......... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
</TABLE>
------------
(1) The weighted average life of the Class B Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class B Certificates
to the related Distribution Date, (b) summing the results and (c)
dividing the sum by the aggregate amount of the reductions in the
principal balance of the Class B Certificates.
S-127
<PAGE>
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS C CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
----------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percent..................... 100 100 100 100 100
December 15, 2001................... 100 100 100 100 100
December 15, 2002................... 100 100 100 100 100
December 15, 2003................... 100 100 100 100 100
December 15, 2004................... 100 100 100 100 100
December 15, 2005................... 100 100 100 100 100
December 15, 2006................... 100 100 100 100 100
December 15, 2007................... 100 100 100 100 100
December 15, 2008................... 100 100 100 100 100
December 15, 2009................... 100 100 100 100 100
December 15, 2010................... 0 0 0 0 0
Weighted Average Life (Years)(1) ... 9.98 9.98 9.98 9.98 9.98
Estimated Month of First Principal 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Estimated Month of Maturity......... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
</TABLE>
------------
(1) The weighted average life of the Class C Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class C Certificates
to the related Distribution Date, (b) summing the results and (c)
dividing the sum by the aggregate amount of the reductions in the
principal balance of the Class C Certificates.
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS D CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
----------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percent..................... 100 100 100 100 100
December 15, 2001................... 100 100 100 100 100
December 15, 2002................... 100 100 100 100 100
December 15, 2003................... 100 100 100 100 100
December 15, 2004................... 100 100 100 100 100
December 15, 2005................... 100 100 100 100 100
December 15, 2006................... 100 100 100 100 100
December 15, 2007................... 100 100 100 100 100
December 15, 2008................... 100 100 100 100 100
December 15, 2009................... 100 100 100 100 100
December 15, 2010................... 0 0 0 0 0
Weighted Average Life (Years)(1) ... 9.98 9.98 9.98 9.98 9.98
Estimated Month of First Principal 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Estimated Month of Maturity ....... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
</TABLE>
------------
(1) The weighted average life of the Class D Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class D Certificates
to the related Distribution Date, (b) summing the results and (c)
dividing the sum by the aggregate amount of the reductions in the
principal balance of the Class D Certificates.
S-128
<PAGE>
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS E CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
----------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percent..................... 100 100 100 100 100
December 15, 2001................... 100 100 100 100 100
December 15, 2002................... 100 100 100 100 100
December 15, 2003................... 100 100 100 100 100
December 15, 2004................... 100 100 100 100 100
December 15, 2005................... 100 100 100 100 100
December 15, 2006................... 100 100 100 100 100
December 15, 2007................... 100 100 100 100 100
December 15, 2008................... 100 100 100 100 100
December 15, 2009................... 100 100 100 100 100
December 15, 2010................... 0 0 0 0 0
Weighted Average Life (Years)(1) ... 9.98 9.98 9.98 9.98 9.98
Estimated Month of First Principal 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Estimated Month of Maturity ....... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
</TABLE>
------------
(1) The weighted average life of the Class E Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class E Certificates
to the related Distribution Date, (b) summing the results and (c)
dividing the sum by the aggregate amount of the reductions in the
principal balance of the Class E Certificates.
YIELD SENSITIVITY OF THE OFFERED CERTIFICATES
The tables beginning on page C-1 (the "Yield Tables") indicate the
sensitivity of the pre-tax corporate bond equivalent yields to maturity of
the Class A-1, Class A-2, Class B, Class C, Class D and Class E Certificates
at various prices and constant prepayment rates. The allocations and
calculations do not take account of any Yield Maintenance Charges. The Yield
Tables have been prepared based on the assumption that distributions are made
in accordance with "Description of the Certificates" in this prospectus
supplement, the assumptions described in clauses (a) through (h) on pages
S-125 and S-126 and, where applicable, the specified assumed purchase prices
(which prices do not include accrued interest). Assumed purchase prices are
expressed in 32nds (i.e., 100/04 means 100 4/32%) as a percentage of the
initial Certificate Balance of each class of Offered Certificates.
The yields set forth in the Yield Tables were calculated by determining
the monthly discount rates which, when applied to the assumed stream of cash
flows to be paid on each class of Offered Certificates, would cause the
discounted present value of the assumed stream of cash flows to equal the
assumed purchase prices, plus accrued interest from and including December 1,
2000 to, but excluding December 20, 2000, and by converting the monthly rates
to semi-annual corporate bond equivalent rates. This calculation does not
take into account variations that may occur in the interest rates at which
investors may be able to reinvest funds received by them as distributions on
the Offered Certificates and consequently does not purport to reflect the
return on any investment in the classes of Offered Certificates when the
reinvestment rates are considered. For purposes of the Yield Tables (except
in the case of the Class X Certificates), "modified duration" has been
calculated using the modified Macaulay Duration as specified in the "PSA
Standard Formulas". The Macaulay Duration is calculated as the present value
weighted average time to receive future payments of principal and/or
interest, and the PSA Standard Formula modified duration is calculated by
dividing the Macaulay Duration by the appropriate semi-annual compounding
factor. The duration of a security may be calculated according to various
methodologies; accordingly, no representation is made by the Depositor or any
other person that the "modified duration" approach used in this prospectus
supplement is appropriate. Duration, like yield, will be affected by the
prepayment rate of the
S-129
<PAGE>
mortgage loans and extensions in respect of balloon payments that actually
occur during the life of the Class A-1, Class A-2, Class B, Class C, Class D
and Class E Certificates and by the actual performance of the mortgage loans,
all of which may differ, and may differ significantly, from the assumptions
used in preparing the Yield Tables.
The characteristics of the mortgage loans differ in certain respects from
those assumed in preparing the Yield Tables, and the Yield Tables are
presented for illustrative purposes only. In particular, none of the mortgage
loans permit voluntary partial prepayments. Thus neither the pool of mortgage
loans nor any mortgage loan will prepay at any constant rate, and it is
unlikely that the mortgage loans will prepay in a manner consistent with the
designated Scenario for the Yield Tables. In addition, it is unlikely that
the mortgage loans will prepay at any of the specified percentages of CPR
until maturity or that all the mortgage loans will so prepay at the same
rate, that the actual pre-tax yields on, or any other payment characteristics
of, any class of Offered Certificates will correspond to any of the
information shown in the Yield Tables, or that the aggregate purchase prices
of the Offered Certificates will be as assumed. Accordingly, investors must
make their own decisions as to the appropriate assumptions (including
prepayment assumptions) to be used in deciding whether to purchase the
Offered Certificates.
YIELD SENSITIVITY OF THE CLASS X CERTIFICATES
The yield to maturity on the Class X Certificates will be extremely
sensitive to the rate and timing of principal payments (including
prepayments), principal losses and to other factors set forth above.
Investors should fully consider the associated risks, including the risk that
a rapid rate of principal payments or principal losses on the pool of
mortgage loans could result in the failure by investors in the Class X
Certificates to fully recoup their initial investments.
ANY OPTIONAL TERMINATION BY THE SPECIAL SERVICER, THE MASTER SERVICER, THE
HOLDERS OF THE CONTROLLING CLASS, THE DEPOSITOR OR THE HOLDERS OF THE CLASS
LR CERTIFICATES WOULD RESULT IN PREPAYMENT IN FULL OF THE CERTIFICATES AND
WOULD HAVE AN ADVERSE EFFECT ON THE YIELD OF THE CLASS X CERTIFICATES BECAUSE
A TERMINATION WOULD HAVE AN EFFECT SIMILAR TO A PRINCIPAL PREPAYMENT IN FULL
OF THE MORTGAGE LOANS AND, AS A RESULT, INVESTORS IN THE CLASS X CERTIFICATES
AND ANY OTHER CERTIFICATES PURCHASED AT PREMIUM MIGHT NOT FULLY RECOUP THEIR
INITIAL INVESTMENT. SEE "DESCRIPTION OF THE CERTIFICATES--TERMINATION;
RETIREMENT OF CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT.
The table below indicates the sensitivity of the pre-tax corporate bond
equivalent yields to maturity of the Class X Certificates at various prices
and constant prepayment rates. The yields set forth in the table were
calculated by determining the monthly discount rates that, when applied to
the assumed stream of cash flows to be paid on the Class X Certificates,
would cause the discounted present value of the assumed stream of cash flows
to equal the assumed purchase prices plus accrued interest of the respective
class of Certificates and converting the monthly rates to corporate bond
equivalent rates. These calculations do not take into account variations that
may occur in the interest rates at which investors may be able to reinvest
funds received by them as distributions on the Class X Certificates and
consequently do not purport to reflect the return on any investment in the
class of Certificates when the reinvestment rates are considered.
The table below has been prepared based on the assumption that
distributions are made in accordance with "Description of the Certificates"
in this prospectus supplement and on the assumptions described in clauses (a)
through (h) on pages S-125 and S-126 and with the assumed respective purchase
prices (as a percentage of the initial Notional Amount of the Class X
Certificates) of the Class X Certificates set forth in the table, plus
accrued interest on it from December 1, 2000 to the Closing Date.
S-130
<PAGE>
SENSITIVITY TO PRINCIPAL PREPAYMENTS OF THE PRE-TAX
YIELDS TO MATURITY OF THE CLASS X CERTIFICATES
<TABLE>
<CAPTION>
ASSUMED PURCHASE PRICE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
---------------------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
10.50 9.755 9.754 9.753 9.752 9.751
10.75 9.157 9.156 9.155 9.154 9.152
11.00 8.581 8.580 8.578 8.577 8.576
</TABLE>
We cannot assure you that the mortgage loans will prepay at any of the
rates shown in the table or at any other particular rate, that the cash flows
on the Class X Certificates will correspond to the cash flows assumed for
purposes of the above table or that the aggregate purchase price of the Class
X Certificates will be as assumed. In addition, it is unlikely that the
mortgage loans will prepay at any of the specified percentages of CPR until
maturity or that all the mortgage loans will so prepay at the same rate.
Timing of changes in the rate of prepayments may significantly affect the
actual yield to maturity to investors, even if the average rate of principal
prepayments is consistent with the expectations of investors. Investors must
make their own decisions as to the appropriate prepayment assumption to be
used in deciding whether to purchase the Class X Certificates.
S-131
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Certificates, Cadwalader, Wickersham & Taft,
special counsel to the Depositor, will deliver its opinion that, assuming (1)
the making of appropriate elections, (2) compliance with the provisions of
the Pooling and Servicing Agreement and (3) compliance with applicable
changes in the Internal Revenue Code of 1986, as amended (the "Code"),
including the REMIC Provisions, for federal income tax purposes, the trust
fund, exclusive of the Excess Interest and the Excess Interest Distribution
Account, will qualify as two separate real estate mortgage investment
conduits (the "Upper-Tier REMIC" and the "Lower-Tier REMIC", respectively,
and each a "REMIC") within the meaning of Sections 860A through 860G (the
"REMIC Provisions") of the Code, and (1) the Class A-1, Class A-2, Class X,
Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class I, Class
J, Class K, Class L and Class M Certificates will evidence the "regular
interests" in the Upper-Tier REMIC and (2) the Class R and Class LR
Certificates will be the sole classes of "residual interests" in the
Upper-Tier REMIC and Lower-Tier REMIC, respectively, within the meaning of
the REMIC Provisions in effect on the date of this prospectus supplement. The
Offered Certificates are "Regular Certificates" as defined in the prospectus.
In addition, in the opinion of Cadwalader, Wickersham & Taft, the portion of
the trust fund consisting of the Excess Interest and the Excess Interest
Distribution Account will be treated as a grantor trust for federal income
tax purposes under subpart E, Part I of subchapter J of the Code.
Because they represent regular interests, each class of Offered
Certificates generally will be treated as newly originated debt instruments
for federal income tax purposes. Holders of the classes of Offered
Certificates will be required to include in income all interest on the
regular interests represented by their Certificates in accordance with the
accrual method of accounting, regardless of a Certificateholder's usual
method of accounting. It is anticipated that the Class A-1, Class A-2, Class
B, Class C, Class D and Class E Certificates will be issued at a premium for
federal income tax purposes. The prepayment assumption that will be used in
determining the rate of accrual of original issue discount ("OID") or whether
the OID is de minimis and that may be used to amortize premium, if any, for
federal income tax purposes will be based on the assumption that subsequent
to the date of any determination the mortgage loans will prepay at a rate
equal to a CPR of 0%; provided, that it is assumed that the APD Loans prepay
on their Anticipated Prepayment Dates (the "Prepayment Assumption"). No
representation is made that the mortgage loans will prepay at that rate or at
any other rate. See "Certain Federal Income Tax Consequences--Federal Income
Tax Consequences for REMIC Certificates--Taxation of Regular Certificates" in
the prospectus.
Although unclear for federal income tax purposes, it is anticipated that
the regular interests represented by the Class X Certificates will be
considered to be issued with OID in an amount equal to the excess of all
distributions of interest expected to be received on it (assuming the
weighted average of the Pass-through Rates changes in accordance with the
Prepayment Assumption) over their issue price (including accrued interest).
Any "negative" amounts of OID on the Class X Certificates attributable to
rapid prepayments with respect to the mortgage loans will not be deductible
currently, but may be offset against future positive accruals of OID, if any.
Finally, a holder of a Class X Certificate may be entitled to a loss
deduction to the extent it becomes certain that the holder will not recover a
portion of its basis in its Certificate, assuming no further prepayments. In
the alternative, it is possible that rules similar to the "noncontingent bond
method" of the contingent interest rules in the OID Regulations, as amended
on June 12, 1996, may be promulgated with respect to the Class X
Certificates. See "Certain Federal Income Tax Consequences--Federal Income
Tax Consequences for REMIC Certificates--Taxation of Regular
Certificates--Original Issue Discount" in the prospectus.
Yield Maintenance Charges actually collected will be distributed to the
Offered Certificates as described under "Description of the
Certificates--Allocation of Yield Maintenance Charges" in this prospectus
supplement. It is not entirely clear under the Code when the amount of Yield
Maintenance Charges so allocated should be taxed to the holder of a Class X
Certificate, but it is not expected, for federal income tax reporting
purposes, that Yield Maintenance Charges will be treated as giving rise to
any income to the holder of an Offered Certificate prior to the Master
Servicer's actual receipt of a Yield Maintenance Charge. Yield Maintenance
Charges, if any, may be treated as ordinary income, although authority exists
for treating such amounts as capital gain if they are treated as paid upon
retirement or partial retirement of a Certificate. Certificateholders should
consult their own tax advisers concerning the treatment of Yield Maintenance
Charges.
S-132
<PAGE>
The Offered Certificates will be treated as "real estate assets" within
the meaning of Section 856(c)(4)(A) of the Code, and interest (including OID,
if any) on the Offered Certificates will be interest described in Section
856(c)(3)(B) of the Code to the extent of the percentage of the trust fund
assets meeting such requirements. Moreover, the Offered Certificates will be
"qualified mortgages" for another REMIC within the meaning of Section
860G(a)(3) of the Code and "permitted assets" for a "financial asset
securitization investment trust" within the meaning of Section 860L(c) of the
Code. The Offered Certificates will be treated as "loans . . . secured by an
interest in real property which is . . . residential real property" for a
domestic building and loan association under Section 7701(a)(19)(C) of the
Code, to the extent the loans are secured by multifamily properties and
manufactured housing community properties. As of the Cut-off Date, 19 and 5
mortgage loans representing approximately 21.38% and 3.26% of the Initial
Pool Balance are secured by multifamily properties and manufactured housing
community properties, respectively. The Offered Certificates will qualify for
treatment under Sections 856(c)(4)(A), 856(c)(3)(B) and 7701(a)(19)(C) in
their entirety if at least 95% of the assets or income of the trust fund meet
such requirements. A mortgage loan that has been defeased with U.S.
government securities does not qualify under the foregoing sections. See
"Certain Federal Income Tax Consequences--Federal Income Tax Consequences for
REMIC Certificates--Status of REMIC Certificates" in the prospectus.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates" in the prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting
agreement, dated as of the date of this prospectus supplement (the
"Underwriting Agreement"), among Chase Securities Inc., Bear, Stearns & Co.
Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Salomon
Smith Barney Inc. (collectively, the "Underwriters") and the Depositor, the
Depositor has agreed to sell to the Underwriters, and the Underwriters have
severally but not jointly agreed to purchase from the Depositor the
respective Certificate Balances, or Notional Amounts, as applicable, of each
class of Offered Certificates set forth below subject in each case to a
variance of 10%.
<TABLE>
<CAPTION>
CHASE BEAR, DEUTSCHE BANK SALOMON SMITH
CLASS SECURITIES INC. STEARNS & CO. INC. SECURITIES INC. J.P. MORGAN SECURITIES INC. BARNEY INC.
------------ --------------- ------------------ --------------- --------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Class A-1 .. $ 61,957,000 $30,000,000 $10,000,000 $ $10,000,000
Class A-2.... $279,151,265 $70,000,000 $40,000,000 $ $40,000,000
Class X...... $707,331,066 $ $ $ $
Class B...... $ 28,293,243 $ $ $ $
Class C...... $ 31,829,898 $ $ $ $
Class D...... $ 8,841,638 $ $ $ $
Class E...... $ 22,988,260 $ $ $ $
</TABLE>
In the Underwriting Agreement, the Underwriters have severally but not
jointly agreed, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase all of the Offered Certificates if any
Offered Certificates are purchased. In the event of a default by any
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the non-defaulting Underwriter may be
increased or the Underwriting Agreement may be terminated. Further, the
Depositor has agreed to indemnify the Underwriters and the Mortgage Loan
Sellers, and the Underwriters have agreed to indemnify the Depositor, against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
The Depositor has been advised by the Underwriters that they propose to
offer the Offered Certificates to the public from time to time in one or more
negotiated transactions, or otherwise, at varying prices to be determined at
the time of sale. Proceeds to the Depositor from the sale of Offered
Certificates before deducting expenses payable by the Depositor estimated to
be approximately $2,500,000, will be 112.285% of the initial aggregate
Certificate Balance of the Offered Certificates, plus accrued interest on the
Offered Certificates from December 1, 2000. The Underwriters may effect the
transactions by selling the Offered
S-133
<PAGE>
Certificates to or through dealers, and the dealers may receive compensation
in the form of underwriting discounts, concessions or commissions from the
Underwriters. In connection with the purchase and sale of the Offered
Certificates offered hereby, the Underwriters may be deemed to have received
compensation from the Depositor in the form of underwriting discounts.
Chase Securities Inc. is an affiliate of Chase, one of the Mortgage Loan
Sellers and a primary servicer. Bear, Stearns & Co. Inc. is an affiliate of
BSFI, one of the Mortgage Loan Sellers.
We cannot assure you that a secondary market for the Offered Certificates
will develop or, if it does develop, that it will continue. The Underwriters
expect to make, but are not obligated to make, a secondary market in the
Offered Certificates. The primary source of ongoing information available to
investors concerning the Offered Certificates will be the monthly statements
discussed in the prospectus under "Description of the Certificates--Reports
to Certificateholders," which will include information as to the outstanding
principal balance of the Offered Certificates and the status of the
applicable form of credit enhancement. Except as described in this prospectus
supplement under "Description of the Certificates--Reports to
Certificateholders; Certain Available Information," we cannot assure you that
any additional information regarding the Offered Certificates will be
available through any other source. In addition, we are not aware of any
source through which price information about the Offered Certificates will be
generally available on an ongoing basis. The limited nature of that
information regarding the Offered Certificates may adversely affect the
liquidity of the Offered Certificates, even if a secondary market for the
Offered Certificates becomes available.
If and to the extent required by applicable law or regulation, this
prospectus supplement and the prospectus will be used by Chase Securities
Inc. in connection with offers and sales related to market-making
transactions in the Offered Certificates with respect to which Chase
Securities Inc. acts as principal. Chase Securities Inc. may also act as
agent in those transactions. Sales may be made at negotiated prices
determined at the time of sale.
LEGAL MATTERS
The validity of the Certificates will be passed upon for the Depositor by
Cadwalader, Wickersham & Taft, New York, New York, and for the Underwriters
by Winston & Strawn, Chicago, Illinois. In addition, certain federal income
tax matters will be passed upon for the Depositor by Cadwalader, Wickersham &
Taft.
RATINGS
It is a condition to issuance that the Offered Certificates be rated not
lower than the following ratings by Moody's Investors Service, Inc.
("Moody's") and Fitch:
<TABLE>
<CAPTION>
CLASS MOODY'S FITCH
--------- ----------- ---------
<S> <C> <C>
A-1....... Aaa AAA
A-2....... Aaa AAA
X......... Aaa AAA
B......... Aa2 AA
C......... A2 A
D......... A3 A-
E......... Baa2 BBB
</TABLE>
A securities rating on mortgage pass-through certificates addresses the
likelihood of the timely receipt by their holders of interest and the
ultimate repayment of principal to which they are entitled by the Rated Final
Distribution Date. The rating takes into consideration the credit quality of
the pool of mortgage loans, structural and legal aspects associated with the
certificates, and the extent to which the payment stream from the pool of
mortgage loans is adequate to make payments required under the certificates.
The ratings on the Offered Certificates do not, however, constitute a
statement regarding the likelihood, timing or frequency of prepayments
(whether voluntary or involuntary) on the mortgage loans or the degree to
which the payments might differ from those originally contemplated. In
addition, a rating does not address the
S-134
<PAGE>
likelihood or frequency of voluntary or mandatory prepayments of mortgage
loans, payment of Excess Interest, yield maintenance charges or net default
interest. As described in this prospectus supplement, the amounts payable
with respect to the Class X Certificates consist only of interest. If the
entire pool were to prepay in the initial month, with the result that the
Class X Certificateholders receive only a single month's interest and thus
suffer a nearly complete loss of their investment, all amounts "due" to those
holders will nevertheless have been paid, and the result is consistent with
the rating received on the Class X Certificates. Accordingly, the ratings of
the Class X Certificates should be evaluated independently from similar
ratings on other types of securities.
We cannot assure you as to whether any rating agency not requested to rate
the Offered Certificates will nonetheless issue a rating to any class of
Offered Certificates and, if so, what the rating would be. A rating assigned
to any class of Offered Certificates by a rating agency that has not been
requested by the Depositor to do so may be lower than the rating assigned
thereto by Moody's or Fitch.
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency.
LEGAL INVESTMENT
The Certificates will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
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 the Offered Certificates under applicable legal
investment restrictions. These uncertainties may adversely affect the
liquidity of the Offered Certificates. Accordingly, all institutions whose
investment activities are subject to legal investment laws and regulations,
regulatory capital requirements or review by regulatory authorities should
consult with their own legal advisors in determining whether and to what
extent the Offered Certificates constitute a legal investment or are subject
to investment, capital or other restrictions. See "Legal Investment" in the
prospectus.
ERISA CONSIDERATIONS
A fiduciary of any retirement plan or other employee benefit plan or
arrangement, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which those
plans, annuities, accounts or arrangements are invested, including insurance
company general accounts, that is subject to the fiduciary responsibility
rules of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code (an "ERISA Plan") or which is a
governmental plan, as defined in Section 3(32) of ERISA, subject to any
federal, state or local law ("Similar Law") which is, to a material extent,
similar to the foregoing provisions of ERISA or the Code (collectively, with
an ERISA Plan, a "Plan") should review with its legal advisors whether the
purchase or holding of Offered Certificates could give rise to a transaction
that is prohibited or is not otherwise permitted either under ERISA, the Code
or Similar Law or whether there exists any statutory or administrative
exemption applicable thereto. Moreover, each Plan fiduciary should determine
whether an investment in the Offered 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.
The U.S. Department of Labor has issued individual prohibited transaction
exemptions to Chase Securities Inc., PTE 90-33, 55 Fed. Reg. 23,151 (June 6,
1990) (the "Chase Exemption") and to Bear, Stearns Co., Inc., PTE 90-30, 55
Ped. Reg. 21, 461 (May 24, 1990 (the "Bear, Stearns Exemption" and together
with the Chase Exemption, the "Exemption"), each as subsequently amended. The
Exemption generally exempts from the application of the prohibited
transaction provisions of Sections 406 and 407 of ERISA, and the excise taxes
imposed on the prohibited transactions pursuant to Sections 4975(a) and (b)
of the Code, certain transactions, among others, relating to the servicing
and operation of the pools of mortgage loans, such as the pool of mortgage
loans, and the purchase, sale and holding of mortgage pass-through
certificates, such as the Offered Certificates, underwritten by the
respective Underwriter, provided that certain conditions set forth in the
Exemption are satisfied.
S-135
<PAGE>
The Exemption sets forth five general conditions which must be satisfied
for a transaction involving the purchase, sale and holding of the Offered
Certificates to be eligible for exemptive relief. First, the acquisition of
the Offered Certificates by a Plan must be on terms that are at least as
favorable to the Plan as they would be in an arm's-length transaction with an
unrelated party. Second, the Offered Certificates at the time of acquisition
by the Plan must be rated in one of the four highest generic rating
categories by Standard & Poor's Ratings Services ("S&P"), Moody's or Fitch.
Third, the Trustee cannot be an affiliate of any other member of the
"Restricted Group" which consists of any Underwriter, the Depositor, the
Trustee, the Master Servicer, the Special Servicer, any sub-servicer, any
entity that provides insurance or other credit support to the trust fund 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 the Offered Certificates, and any affiliate of any of
the foregoing entities. Fourth, the sum of all payments made to and retained
by the Underwriters must represent not more than reasonable compensation for
underwriting the Offered Certificates, the sum of all payments made to and
retained by the Depositor pursuant to the assignment of the mortgage loans to
the trust fund must represent not more than the fair market value of
obligations and 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 that person's services under the Pooling and
Servicing Agreement and reimbursement of the person's reasonable expenses in
connection therewith. Fifth, the investing Plan must be 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.
It is a condition of the Offered Certificates that they be rated not lower
than the ratings set forth on the cover page hereof. As of the Closing Date,
the third general condition set forth above will be satisfied with respect to
the Offered Certificates. A fiduciary of a Plan contemplating purchasing an
Offered Certificate in the secondary market must make its own determination
that, at the time of purchase, that the Offered Certificates continue to
satisfy the second and third general conditions set forth above. A fiduciary
of a Plan contemplating purchasing an Offered Certificate, whether in the
initial issuance of the Offered Certificates or in the secondary market, must
make its own determination that the first, fourth and fifth general
conditions set forth above will be satisfied with respect to the related
Offered Certificate.
The Exemption also requires that the trust fund meet the following
requirements: (1) the trust fund must consist solely of assets of the type
that have been included in other investment pools; (2) certificates in those
other investment pools must have been rated in one of the four highest
categories of S&P, Moody's or Fitch for at least one year prior to the Plan's
acquisition of Offered Certificates; and (3) certificates in those other
investment pools must have been purchased by investors other than Plans for
at least one year prior to any Plan's acquisition of Offered Certificates.
If the general conditions of the Exemption are satisfied, the Exemption
may provide an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA (as well as the excise taxes imposed by Sections 4975(a) and
(b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code)
in connection with (1) the direct or indirect sale, exchange or transfer of
Offered Certificates in the initial issuance of Certificates between the
Depositor or the Underwriters and a Plan when the Depositor, any of the
Underwriters, the Trustee, the Master Servicer, the Special Servicer, a
sub-servicer or a borrower is a Party in Interest with respect to the
investing Plan, (2) the direct or indirect acquisition or disposition in the
secondary market of the Offered Certificates by a Plan and (3) the holding of
Offered Certificates by a Plan. However, no exemption is provided from the
restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the
acquisition or holding of an Offered Certificate on behalf of an "Excluded
Plan" or any person who has discretionary authority or renders investment
advice with respect to the assets of the Excluded Plan. For purposes of this
prospectus supplement, an "Excluded Plan" is a Plan sponsored by any member
of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(c)(1)(E)
of the Code in connection with (1) the direct or indirect sale, exchange or
transfer of Offered Certificates in the initial issuance of Certificates
between the Depositor or the Underwriters and a Plan when the person who has
discretionary authority or renders investment advice with respect to the
S-136
<PAGE>
investment of Plan assets in those Certificates is (a) a borrower with
respect to 5% or less of the fair market value of the mortgage loans or (b)
an affiliate of that person, (2) the direct or indirect acquisition or
disposition in the secondary market of Offered Certificates by a Plan and (3)
the holding of Offered Certificates by a Plan.
Further, if certain specific conditions of the Exemption are satisfied,
the Exemption may provide an exemption from the restrictions imposed by
Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code
for transactions in connection with the servicing, management and operation
of the pool of mortgage loans.
Before purchasing an Offered Certificate, a fiduciary of a Plan should
itself confirm that (1) the Offered Certificates constitute "certificates"
for purposes of the Exemption and (2) the specific and general conditions and
the other requirements set forth in the Exemption would be satisfied. In
addition to making its own determination as to the availability of the
exemptive relief provided in the Exemption, the Plan fiduciary should
consider the availability of any other prohibited transaction exemptions,
including with respect to governmental plans, any exemptive relief afforded
under Similar Law. See "Certain ERISA Considerations" in the prospectus. A
purchaser of an Offered Certificate should be aware, however, that even if
the conditions specified in one or more exemptions are satisfied, the scope
of relief provided by an exemption may not cover all acts which might be
construed as prohibited transactions.
The sale of Offered Certificates to a Plan is in no respect a
representation by the Depositor or any of the Underwriters that this
investment meets all relevant legal requirements with respect to investments
by Plans generally or any particular Plan, or that this investment is
appropriate for Plans generally or any particular Plan.
S-137
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
-------------
<S> <C>
Actual/360 Basis ............................. S-60
Administrative Cost Rate ..................... S-94
Advances ..................................... S-100
Anticipated Prepayment Date .................. S-59
APD Loans .................................... S-59
Appraisal Reduction .......................... S-101
Appraisal Reduction Amount ................... S-102
Appraisal Reduction Event .................... S-100
Asset Status Report .......................... S-109
Assumed Final Distribution Date .............. S-96
Assumed Scheduled Payment .................... S-95
Authenticating Agent ......................... S-86
Available Distribution Amount ................ S-89
Base Interest Fraction ....................... S-96
BSFI ......................................... S-56, S-110
Certificate Account .......................... S-88
Certificate Balance .......................... S-85
Certificate Owner ............................ S-86
Certificate Registrar ........................ S-86
Certificateholders ........................... S-56
Certificates ................................. S-85
Chase ........................................ S-56, S-108,
S-110
Chase Exemption .............................. S-135
Chubb ........................................ S-60
Class A Certificates ......................... S-85
Clearstream, Luxembourg ...................... S-86
Closing Date ................................. S-56
Code ......................................... S-132
Collateral Support Deficit ................... S-99
Controlling Class ............................ S-110
Controlling Class Certificateholder ......... S-110
Corrected Mortgage Loan ...................... S-109
Credit Lease ................................. S-59
Cross-Over Date .............................. S-93
Cut-off Date Balance ......................... S-56
Debt Service Coverage Ratio .................. S-68
Defeasance Lock-out Period ................... S-61
Defeasance Option ............................ S-61
Depositor .................................... S-56
Depositories ................................. S-86
Determination Date ........................... S-101
Direct Participants .......................... S-86
Directing Certificateholder .................. S-110
Distributable Certificate Interest ........... S-94
Distribution Accounts ........................ S-89
Distribution Date ............................ S-88
DSCR ......................................... S-68
DTC .......................................... S-86
Due Period ................................... S-90
EII .......................................... S-58
EII Portfolio I Borrower ..................... S-62
EII Portfolio I Substitute Properties ....... S-62
EII Portfolio I Substitute Property ......... S-62
EII Portfolio I Substituted Properties ...... S-62
EII Portfolio I Substituted Property ........ S-62
ERISA ........................................ S-135
ERISA Plan ................................... S-135
Euroclear .................................... S-86
Events of Default ............................ S-119
Excess Interest .............................. S-94
Excess Interest Distribution Account ........ S-89
Excluded Plan ................................ S-136
FIRREA ....................................... S-72
Form 8-K ..................................... S-63
GECC ......................................... S-56, S-110
HGI .......................................... S-58
IHC .......................................... S-58
Indirect Participants ........................ S-86
Initial Pool Balance ......................... S-56
Initial Rate ................................. S-59
Insurance and Condemnation Proceeds ......... S-88
Interest Distribution Amount ................. S-94
Interest Reserve Account ..................... S-89
IRS .......................................... S-116
Lindsey Loans ................................ S-57
Liquidation Fee .............................. S-112
Liquidation Fee Rate ......................... S-112
Liquidation Proceeds ......................... S-89
Lock Box Accounts ............................ S-84
Lock Box Loans ............................... S-84
Lock-out Period .............................. S-60
Lower-Tier Distribution Account .............. S-89
Lower-Tier REMIC ............................. S-132
LTV Ratio .................................... S-68
MAI .......................................... S-101
Master Servicer .............................. S-110
Monthly Rental Payments ...................... S-59
Moody's ...................................... S-134
Mortgage ..................................... S-56
Mortgage Loan Sellers ........................ S-56
Mortgage Note ................................ S-56
Mortgage Rate ................................ S-94
Mortgaged Property ........................... S-56
net income from foreclosure property ........ S-117
Net Mortgage Rate ............................ S-94
Non-Offered Certificates ..................... S-85
Non-Offered Subordinate Certificates ........ S-98
Nonrecoverable Advance ....................... S-100
Notional Amount .............................. S-85
Offered Certificates ......................... S-85
P&I Advance .................................. S-99
Participants ................................. S-86
S-138
<PAGE>
PAGE
-------------
Pass-through Rate ............................ S-93
Paying Agent ................................. S-86
Percentage Interest .......................... S-85
Periodic Payments ............................ S-68
Permitted Investments ........................ S-89
Plan ......................................... S-135
Pooling and Servicing Agreement .............. S-85
Prepayment Assumption ........................ S-132
Prepayment Interest Shortfall ................ S-94
Prime Rate ................................... S-100
Principal Distribution Amount ................ S-95
Principal Shortfall .......................... S-95
Purchase Agreements .......................... S-56
Purchase Price ............................... S-83
Qualified Substitute Mortgage Loan ........... S-83
Rated Final Distribution Date ................ S-97
Record Date .................................. S-88
Reimbursement Rate ........................... S-100
Related Proceeds ............................. S-100
Release Date ................................. S-61
REMIC ........................................ S-132
REMIC Provisions ............................. S-132
rents from real property ..................... S-117
REO Account .................................. S-113
REO Loan ..................................... S-96
REO Property ................................. S-109
Residual Certificates ........................ S-85
Restricted Group ............................. S-136
Revised Rate ................................. S-59
Rules ........................................ S-87
S&P .......................................... S-136
Scheduled Principal Distribution Amount ..... S-95
Senior Certificates .......................... S-85
Servicer Remittance Date ..................... S-99
Servicing Advances ........................... S-100
Servicing Fee ................................ S-111
Servicing Fee Rate ........................... S-111
Servicing Standards .......................... S-108
Similar Law .................................. S-135
Special Servicer ............................. S-111
Special Servicing Fee ........................ S-111
Special Servicing Fee Rate ................... S-111
Specially Serviced Mortgage Loans ............ S-109
Stated Principal Balance ..................... S-95
Statement to Certificateholders .............. S-102
Subordinate Certificates ..................... S-85
Subordinate Offered Certificates ............. S-85
Terms and Conditions ......................... S-87
Testing Date ................................. S-81
TI Debt ...................................... S-57
Title Exception .............................. S-79
Trustee ...................................... S-56, S-107
Trustee Fee .................................. S-107
Trustee Fee Rate ............................. S-107
U.S. Securities Rate ......................... S-60
Uncovered Prepayment Interest Shortfall ..... S-95
Underwriters ................................. S-133
Underwriting Agreement ....................... S-133
Underwritten Net Cash Flow ................... S-71
Unscheduled Principal Distribution Amount .... S-95
Upper-Tier Distribution Account .............. S-89
Upper-Tier REMIC ............................. S-132
Voting Rights ................................ S-105
WAC Rate ..................................... S-94
Withheld Amounts ............................. S-89
Workout Fee .................................. S-112
Workout Fee Rate ............................. S-112
Yield Maintenance Charge ..................... S-60
Yield Maintenance Charges .................... S-61
Yield Maintenance Period ..................... S-60
Yield Tables .................................
</TABLE>
S-139
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<TABLE>
<CAPTION>
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION, SERIES 2000-1
ANNEX A - CERTAIN CHARACTERISTICS OF THE MORTGAGED LOANS AND MORTGAGED PROPERTIES
---------------------------------------------------------------------------------
% OF MORTGAGE CUT-OFF GENERAL
INITIAL POOL # OF LOAN ORIGINAL DATE PROPERTY
ID PROPERTY NAME BALANCE PROPERTIES SELLER (1) BALANCE BALANCE TYPE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1000 Corporate Pointe 0.40% 1 BSFI 2,800,000 2,797,365 Office
2 139 Fifth Avenue 0.68% 1 BSFI 4,800,000 4,800,000 Office
3 1634 Eye Street 1.32% 1 BSFI 9,350,000 9,350,000 Office
4 16522 Hunters Green Parkway 2.04% 1 BSFI 14,400,000 14,400,000Industrial
5 1712 Eye Street, Northwest 0.78% 1 BSFI 5,500,000 5,496,450 Office
----------------------------------------------------------------------------------------------------------------------------------
6 2221 Park Place 1.26% 1 BSFI 8,900,000 8,900,000 Office
7 33-51 Main Street 1.24% 1 BSFI 8,800,000 8,800,000 Retail
8 6518, 6520, 6522 South McCarran Boulevard 0.19% 1 CMB 1,315,000 1,314,228 Office
9 655 Fifth Avenue & 251 19th Street 0.40% 1 GECC 2,820,000 2,818,092 Multifamily
10 96th Street Building 0.93% 1 GECC 6,560,000 6,555,713 Office
----------------------------------------------------------------------------------------------------------------------------------
11 Amazing Spaces 0.32% 1 GECC 2,298,000 2,293,973 Self Storage
12 Arrowhead Lakes Marketplace-Phase II 0.27% 1 CMB 1,891,000 1,891,000 Office
13 Ashley Creek Apartments 1.29% 1 GECC 9,148,000 9,137,702 Multifamily
14 Avenues Crossing 0.29% 1 GECC 2,055,000 2,052,921 Retail
15 Blakesley Comstock Building 0.17% 1 GECC 1,200,000 1,199,249 Office
----------------------------------------------------------------------------------------------------------------------------------
16 Carlsbad Self Storage 0.74% 1 GECC 5,265,000 5,259,732 Self Storage
17 Centreport Tech Center (4) 0.26% 1 GECC 1,824,361 1,824,361 Industrial
18 Circuit City Center 0.65% 1 GECC 4,600,000 4,597,067 Retail
19 Clear Lake Office Building 0.35% 1 CMB 2,500,000 2,500,000 Office
20 Crossbridge Apartments 0.43% 1 GECC 3,064,000 3,064,000 Multifamily
----------------------------------------------------------------------------------------------------------------------------------
21 Custer Court Retail 0.31% 1 GECC 2,200,000 2,197,718 Retail
22 CVS - Babylon (5) 0.16% 1 GECC 1,165,000 1,165,000 CTL
23 CVS - Bryan (6) 0.18% 1 GECC 1,269,000 1,269,000 CTL
24 CVS - Cornelius (7) 0.23% 1 GECC 1,649,689 1,645,270 CTL
25 CVS - Poughkeepsie (8) 0.20% 1 GECC 1,400,000 1,400,000 CTL
----------------------------------------------------------------------------------------------------------------------------------
26 CVS - Shrewsbury (9) 0.27% 1 GECC 1,888,855 1,880,178 CTL
27 Cypress Point 1.59% 1 GECC 11,229,000 11,221,587Office
28 Del Norte Plaza 0.34% 1 GECC 2,400,000 2,398,510 Retail
29 Del Prado Estates Mobile Home Park 1.14% 1 GECC 8,100,000 8,087,149 Manufactured Housing
30 Dell Business Park 1.69% 1 BSFI 12,000,000 11,988,095Office
----------------------------------------------------------------------------------------------------------------------------------
31 Duck Creek Village Townhomes 0.46% 1 GECC 3,250,000 3,244,296 Multifamily
32 EII Portfolio I 5.17% 9 GECC 36,600,000 36,600,000Hotel
32a Hampton Inn - Aurora 0.28% GECC 1,972,500 1,972,500 Hotel
32b Hampton Inn - Beckley 0.46% GECC 3,287,400 3,287,400 Hotel
32c Hampton Inn - Chattanooga 0.52% GECC 3,666,200 3,666,200 Hotel
----------------------------------------------------------------------------------------------------------------------------------
32d Hampton Inn - Colonie 0.99% GECC 6,994,000 6,994,000 Hotel
32e Hampton Inn - Glen Burnie 0.71% GECC 4,992,800 4,992,800 Hotel
32f Hampton Inn - Maryland Heights 0.34% GECC 2,377,800 2,377,800 Hotel
32g Hampton Inn - Norfolk 0.53% GECC 3,766,200 3,766,200 Hotel
32h Hampton Inn - Scranton 0.60% GECC 4,244,900 4,244,900 Hotel
----------------------------------------------------------------------------------------------------------------------------------
32i Residence Inn by Marriott - Oklahoma City 0.75% GECC 5,298,200 5,298,200 Hotel
33 El Paseo 1.30% 1 CMB 9,200,000 9,194,073 Retail
34 Embassy Suites-New Orleans 4.59% 1 CMB 32,650,000 32,466,236Hotel
35 Fairpark Apartments 1.13% 1 GECC 8,000,000 7,994,511 Multifamily
36 First American Office Building 0.21% 1 GECC 1,500,000 1,499,028 Office
----------------------------------------------------------------------------------------------------------------------------------
37 Forbes Building 0.40% 1 CMB 2,795,000 2,795,000 Industrial
38 Greenway Park Plaza 2.15% 1 CMB 15,200,000 15,200,000Retail
39 Guylane Plaza 0.48% 1 CMB 3,400,000 3,400,000 Retail
40 Haltom Village Shopping Center 0.25% 1 GECC 1,800,000 1,796,291 Retail
41 Hamilton Square 0.49% 1 BSFI 3,500,000 3,500,000 Retail
----------------------------------------------------------------------------------------------------------------------------------
42 Happy Canyon Shopping Center 1.13% 1 GECC 8,000,000 7,985,959 Retail
43 Harrington Midway Plaza 0.89% 1 GECC 6,320,000 6,320,000 Retail
44 Holiday Inn - Mansfield 2.40% 1 CMB 17,000,000 16,953,839Hotel
45 Iron Gate Plaza 0.36% 1 GECC 2,550,000 2,547,541 Retail
46 Jason's Self Storage 0.68% 1 BSFI 4,788,479 4,780,819 Self Storage
----------------------------------------------------------------------------------------------------------------------------------
47 Keystone Plaza Shopping Center 0.64% 1 GECC 4,500,000 4,494,961 Retail
48 Kohl's Pic n' Save Shopping Center 0.68% 1 GECC 4,850,000 4,844,714 Retail
49 La Reina Fashion Plaza 0.94% 1 GECC 6,700,000 6,683,719 Retail
50 Laguna Oaks Apartments 2.18% 1 GECC 15,470,000 15,451,925Multifamily
51 Le Montrose 2.08% 1 GECC 14,750,000 14,705,230Hotel
----------------------------------------------------------------------------------------------------------------------------------
52 Leesburg Airpark I 0.68% 1 CMB 4,800,000 4,795,034 Industrial
53 Lions Gate Self Storage 0.25% 1 GECC 1,750,000 1,750,000 Self Storage
54 Londonderry Oaks Apartments 0.71% 1 GECC 5,040,000 5,040,000 Multifamily
55 Lone Star Pavilion Shopping Center 0.78% 1 CMB 5,500,000 5,500,000 Retail
56 Longview Plaza 1.66% 1 GECC 11,788,000 11,776,173Retail
----------------------------------------------------------------------------------------------------------------------------------
57 Marina Dunes RV Park 0.40% 1 GECC 2,800,000 2,795,073 Manufactured Housing
58 Market at Valley Parkway 0.42% 1 GECC 3,000,000 2,996,704 Retail
59 Mason Village Shopping Center 0.43% 1 GECC 3,040,000 3,040,000 Retail
60 Mercado Fiesta Village 1.11% 1 GECC 7,900,000 7,883,720 Retail
61 Mercantile Row Shopping Center 0.78% 1 GECC 5,522,000 5,522,000 Retail
----------------------------------------------------------------------------------------------------------------------------------
62 Millicent Crossing 0.86% 1 GECC 6,100,000 6,093,243 Multifamily
63 Moon Valley Self Storage 0.35% 1 GECC 2,489,000 2,489,000 Self Storage
64 Nankin Professional Center 0.33% 1 GECC 2,350,000 2,345,994 Office
65 NorthChase Atrium 0.38% 1 CMB 2,700,000 2,700,000 Office
66 Nova Libby Lake Apartments 1.13% 1 GECC 7,995,000 7,986,239 Multifamily
----------------------------------------------------------------------------------------------------------------------------------
67 Nova Virginia Village Apartments 0.45% 1 GECC 3,175,000 3,171,706 Multifamily
68 Orchard Plaza 0.42% 1 GECC 2,976,000 2,967,772 Retail
69 Park Mall Plaza 0.69% 1 CMB 4,870,000 4,870,000 Retail
70 Park Ten I & II 1.81% 1 GECC 12,800,000 12,786,757Industrial
71 Parkway Lakes RV Park 0.45% 1 GECC 3,200,000 3,196,816 Manufactured Housing
----------------------------------------------------------------------------------------------------------------------------------
72 Parkway Retail Center 1.23% 1 CMB 8,750,000 8,731,310 Retail
73 Parkway Tower (10) 2.22% 1 CMB 15,700,000 15,683,486Office
74 Quarry Hill Estates Mobile Home Park 0.65% 1 GECC 4,583,000 4,575,401 Manufactured Housing
75 Regency Plaza Shopping Center 0.63% 1 GECC 4,491,000 4,481,259 Retail
76 River Point Office Buildings 1.29% 2 BSFI 9,150,000 9,140,379 Office
----------------------------------------------------------------------------------------------------------------------------------
76a 401 Southwest 7th Street 0.31% BSFI 2,217,045 2,214,714 Office
76b 405-525 Southwest 5th Street 0.98% BSFI 6,932,955 6,925,665 Office
77 Royal Crest Manufactured Housing Community 0.62% 1 GECC 4,400,000 4,396,863 Manufactured Housing
78 RPS (FedEx Ground Delivery) Distribution Cen1.06% 1 GECC 7,500,000 7,492,198 Industrial
79 Shaw Butte Shopping Center 0.46% 1 GECC 3,250,000 3,246,758 Retail
----------------------------------------------------------------------------------------------------------------------------------
80 Shirlen Company Properties 0.44% 3 BSFI 3,100,000 3,100,000 Retail
80a 2108 Emmorton Road 0.14% BSFI 965,000 965,000 Retail
80b 6612 Baltimore National Pike 0.13% BSFI 920,000 920,000 Retail
80c 8725 & 8727 Loch Raven Boulevard 0.17% BSFI 1,215,000 1,215,000 Retail
81 Smoky Crossing Apartments 1.75% 1 GECC 12,400,000 12,391,897Multifamily
----------------------------------------------------------------------------------------------------------------------------------
82 Southlawn Industrial Center 0.86% 1 CMB 6,090,000 6,090,000 Industrial
83 Southpark Crossing Shopping Center 0.99% 1 GECC 7,000,000 6,995,168 Retail
84 Spring Lake Apartments 1.01% 1 GECC 7,170,000 7,165,081 Multifamily
85 Spring Valley Apartments 0.61% 1 GECC 4,300,000 4,297,050 Multifamily
86 Staples - Rotterdam 0.30% 1 GECC 2,100,000 2,095,744 Retail
----------------------------------------------------------------------------------------------------------------------------------
87 Sunflower Apartments 0.91% 1 GECC 6,436,000 6,436,000 Multifamily
88 Synergy Business Park - Nashville I 2.76% 1 GECC 19,500,000 19,500,000Office
89 Synergy Business Park - Nashville II 2.84% 1 GECC 20,100,000 20,100,000Office
90 The Equitable Building 1.65% 1 GECC 11,700,000 11,700,000Office
91 The Habitat Apartments 0.95% 1 GECC 6,750,000 6,745,562 Multifamily
----------------------------------------------------------------------------------------------------------------------------------
92 The Links at Oklahoma City 3.32% 1 GECC 23,500,000 23,451,572Multifamily
93 The Shops on Woodway 0.61% 1 GECC 4,346,000 4,341,578 Retail
94 Timonium Self-Storage Plus 0.64% 1 GECC 4,500,000 4,495,434 Self Storage
95 Town East Tower 0.80% 1 GECC 5,700,000 5,690,335 Office
96 University Club Apartments 1.95% 1 GECC 13,800,000 13,800,000Multifamily
----------------------------------------------------------------------------------------------------------------------------------
97 University Park Tech I 1.45% 1 GECC 10,250,000 10,239,396Industrial
98 University Park Tech II 1.25% 1 GECC 8,850,000 8,840,844 Industrial
99 Versailles Apartments 0.34% 1 GECC 2,400,000 2,397,334 Multifamily
100 Walden Chase Apartments 1.49% 1 GECC 10,530,000 10,518,051Multifamily
101 Washington and Allen Retail Center 0.30% 1 GECC 2,137,000 2,137,000 Retail
102 Washington Place 1.78% 1 BSFI 12,600,000 12,586,637Office
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DETAILED INTEREST ORIGINAL TERM TO STATED REMAINING ORIGINAL
PROPERTY MORTGAGE ADMINISTRATIVE ACCRUAL MATURITY OR APD TERM TO MATURITY AMORTIZATION
TYPE RATE FEE RATE BASIS (MOS.) OR APD (MOS.) TERM (MOS.)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Office 8.635% 0.0516% ACT/360 120 118 360
Office 8.100% 0.0516% ACT/360 120 120 360
Office 8.185% 0.0516% ACT/360 84 84 360
Office/Warehouse 8.250% 0.0516% ACT/360 120 120 360
Office 8.190% 0.0516% ACT/360 120 119 360
------------------------------------------------------------------------------------------------------------------
Office 8.190% 0.0516% ACT/360 120 120 360
Unanchored 8.085% 0.0516% ACT/360 120 120 336
Office 8.650% 0.0866% ACT/360 120 119 360
Conventional 7.960% 0.0516% ACT/360 120 119 360
Office 8.130% 0.0516% ACT/360 120 119 360
------------------------------------------------------------------------------------------------------------------
Self Storage 8.370% 0.0516% ACT/360 120 118 300
Office 7.750% 0.0866% ACT/360 120 120 360
Conventional 7.990% 0.0516% ACT/360 120 118 360
Unanchored 8.380% 0.0516% ACT/360 120 118 360
Office 8.340% 0.0516% ACT/360 60 59 360
------------------------------------------------------------------------------------------------------------------
Self Storage 8.420% 0.0516% ACT/360 120 118 360
Office/Warehouse 8.230% 0.0516% ACT/360 113 113 353
Anchored 8.250% 0.0516% ACT/360 120 119 360
Office 8.250% 0.1016% ACT/360 120 120 360
Conventional 7.930% 0.0516% ACT/360 120 120 360
------------------------------------------------------------------------------------------------------------------
Unanchored 8.290% 0.0516% ACT/360 120 118 360
CTL 8.140% 0.0516% ACT/360 239 239 239
CTL 8.020% 0.0516% ACT/360 229 229 229
CTL 8.470% 0.0516% ACT/360 218 216 218
CTL 8.150% 0.0516% ACT/360 240 240 240
------------------------------------------------------------------------------------------------------------------
CTL 8.380% 0.0516% ACT/360 233 228 233
Office 8.080% 0.0516% ACT/360 120 119 360
Unanchored 8.380% 0.0516% ACT/360 120 119 360
Manufactured Housing 8.330% 0.0516% ACT/360 120 118 312
Office 8.450% 0.0516% ACT/360 60 58 360
------------------------------------------------------------------------------------------------------------------
Conventional 8.110% 0.0516% ACT/360 120 117 360
Limited-Service 8.250% 0.0516% ACT/360 120 120 287
Limited-Service
Limited-Service
Limited-Service
------------------------------------------------------------------------------------------------------------------
Limited-Service
Limited-Service
Limited-Service
Limited-Service
Limited-Service
------------------------------------------------------------------------------------------------------------------
Limited-Service
Anchored (2) 8.200% 0.0866% ACT/360 120 119 360
Full-Service 8.774% 0.0866% ACT/360 120 113 300
Conventional 7.890% 0.0516% ACT/360 120 119 360
Office 8.170% 0.0516% ACT/360 120 119 360
------------------------------------------------------------------------------------------------------------------
Office/Warehouse 8.000% 0.0866% ACT/360 120 120 360
Anchored 8.090% 0.0816% ACT/360 120 120 360
Anchored 8.375% 0.0866% ACT/360 120 120 360
Anchored (2) 8.340% 0.0516% ACT/360 120 116 360
Unanchored 8.330% 0.0516% ACT/360 120 120 360
------------------------------------------------------------------------------------------------------------------
Anchored (2) 8.110% 0.0516% ACT/360 120 117 360
Anchored 7.930% 0.0516% ACT/360 120 120 360
Full-Service 8.450% 0.0866% ACT/360 120 117 300
Unanchored 8.550% 0.0516% ACT/360 120 118 360
Self Storage 9.000% 0.0516% ACT/360 116 114 296
------------------------------------------------------------------------------------------------------------------
Anchored 8.010% 0.0516% ACT/360 120 118 360
Anchored 8.110% 0.0516% ACT/360 120 118 360
Unanchored 8.390% 0.0516% ACT/360 120 115 360
Conventional 7.850% 0.0516% ACT/360 120 118 360
Full-Service 8.080% 0.0516% ACT/360 120 116 324
------------------------------------------------------------------------------------------------------------------
Office/Warehouse 8.100% 0.0866% ACT/360 120 119 300
Self Storage 8.260% 0.0516% ACT/360 120 120 300
Conventional 7.950% 0.0516% ACT/360 120 120 360
Anchored 7.815% 0.0866% ACT/360 120 117 0
Anchored 8.410% 0.0516% ACT/360 120 118 360
------------------------------------------------------------------------------------------------------------------
Manufactured Housing 8.350% 0.0516% ACT/360 120 118 300
Anchored 8.080% 0.0516% ACT/360 120 118 360
Unanchored 8.040% 0.0516% ACT/360 120 120 360
Anchored 8.340% 0.0516% ACT/360 120 116 360
Anchored 8.250% 0.0516% ACT/360 120 120 360
------------------------------------------------------------------------------------------------------------------
Conventional 8.050% 0.0516% ACT/360 120 118 360
Self Storage 8.370% 0.0516% ACT/360 120 120 360
Office 7.990% 0.0516% ACT/360 120 118 312
Office 8.250% 0.1016% ACT/360 120 120 360
Conventional 8.090% 0.0516% ACT/360 120 118 360
------------------------------------------------------------------------------------------------------------------
Conventional 8.290% 0.0516% ACT/360 120 118 360
Anchored (2) 8.760% 0.0516% ACT/360 120 114 360
Unanchored 7.960% 0.0866% ACT/360 120 120 360
Office 8.300% 0.0516% ACT/360 120 118 360
Manufactured Housing 8.440% 0.0516% ACT/360 120 118 360
------------------------------------------------------------------------------------------------------------------
Anchored 8.210% 0.0866% ACT/360 120 116 360
Office 8.240% 0.0866% ACT/360 120 118 360
Manufactured Housing 8.340% 0.0516% ACT/360 120 117 360
Unanchored 8.760% 0.0516% ACT/360 120 115 360
Office 8.000% 0.0516% ACT/360 120 119 300
------------------------------------------------------------------------------------------------------------------
Office
Office
Manufactured Housing 7.700% 0.0516% ACT/360 120 119 360
Industrial 8.280% 0.0516% ACT/360 120 118 360
Anchored 8.430% 0.0516% ACT/360 120 118 360
------------------------------------------------------------------------------------------------------------------
Various 7.975% 0.0516% ACT/360 120 120 300
Unanchored
Anchored
Unanchored
Conventional 8.130% 0.0516% ACT/360 120 119 360
------------------------------------------------------------------------------------------------------------------
Office/Manufacturing 8.000% 0.0866% ACT/360 120 120 360
Anchored 7.860% 0.0516% ACT/360 120 119 360
Conventional 7.890% 0.0516% ACT/360 120 119 360
Conventional 7.890% 0.0516% ACT/360 120 119 360
Anchored 8.400% 0.0516% ACT/360 120 116 360
------------------------------------------------------------------------------------------------------------------
Conventional 7.930% 0.0516% ACT/360 120 120 360
Office 7.980% 0.0516% ACT/360 120 120 360
Office 7.980% 0.0516% ACT/360 120 120 360
Office 7.940% 0.0516% ACT/360 120 120 360
Conventional 8.100% 0.0516% ACT/360 60 59 360
------------------------------------------------------------------------------------------------------------------
Conventional 8.340% 0.0516% ACT/360 120 116 360
Unanchored 8.360% 0.0516% ACT/360 120 118 360
Self Storage 8.370% 0.0516% ACT/360 120 118 360
Office 8.250% 0.0516% ACT/360 120 117 360
Student Housing 7.990% 0.0516% ACT/360 120 118 360
------------------------------------------------------------------------------------------------------------------
Office 8.300% 0.0516% ACT/360 120 118 360
Office 8.300% 0.0516% ACT/360 120 118 360
Conventional 8.040% 0.0516% ACT/360 120 118 360
Conventional 7.960% 0.0516% ACT/360 120 118 360
Unanchored 8.010% 0.0516% ACT/360 120 120 360
Office 8.210% 0.0516% ACT/360 120 118 360
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REMAINING FIRST MATURITY ANNUAL MONTHLY REMAINING
AMORTIZATION PAYMENT DATE DEBT DEBT INTEREST-ONLY
TERM (MOS.) DATE OR APD SERVICE SERVICE (3) PERIOD (MOS.) LOCKBOX
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
358 11/1/00 10/1/10 261,576 21,798 -
360 1/1/01 12/1/10 426,671 35,556 -
360 1/1/01 12/1/07 837,800 69,817 -
360 1/1/01 12/1/10 1,298,189 108,182 -
359 12/1/00 11/1/10 493,055 41,088 -
------------------------------------------------------------------------------------------------------------
360 2/1/01 1/1/11 797,852 66,488 -
336 1/1/01 12/1/10 794,725 66,227 -
359 12/10/00 11/10/10 123,016 10,251 -
359 12/1/00 11/1/10 247,363 20,614 -
359 12/1/00 11/1/10 584,769 48,731 -
------------------------------------------------------------------------------------------------------------
298 11/1/00 10/1/10 219,639 18,303 -
360 2/10/01 1/10/11 162,568 13,547 -
358 11/1/00 10/1/10 804,732 67,061 -
358 11/1/00 10/1/10 187,521 15,627 -
359 12/1/00 11/1/05 109,095 9,091 -
------------------------------------------------------------------------------------------------------------
358 11/1/00 10/1/10 482,222 40,185 -
353 1/1/01 5/1/10 164,967 13,747 -
359 12/1/00 11/1/10 414,699 34,558 -
360 1/10/01 12/10/10 225,380 18,782 -
360 2/1/01 1/1/11 267,999 22,333 -
------------------------------------------------------------------------------------------------------------
358 11/1/00 10/1/10 199,077 16,590 -
239 2/1/01 12/1/20 110,063 9,172 - Hard
229 1/1/01 1/1/20 123,859 10,322 - Hard
216 11/1/00 12/1/18 168,487 14,041 - Hard
240 1/1/01 12/1/20 123,629 10,302 - Hard
------------------------------------------------------------------------------------------------------------
228 8/1/00 12/1/19 181,998 15,167 - Hard
359 12/1/00 11/1/10 996,258 83,022 -
359 12/1/00 11/1/10 219,003 18,250 -
310 11/1/00 10/1/10 762,854 63,571 -
358 11/1/00 10/1/05 1,102,137 91,845 - Springing Hard
------------------------------------------------------------------------------------------------------------
357 10/1/00 9/1/10 289,164 24,097 -
287 1/1/01 12/1/10 3,511,678 292,640 Springing Hard (Set-Up-at Closing)
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
359 12/10/00 11/10/10 825,521 68,793 -
293 6/10/00 5/10/10 3,227,550 268,963 -
359 12/1/00 11/1/10 697,066 58,089 -
359 12/1/00 11/1/10 134,217 11,185 -
------------------------------------------------------------------------------------------------------------
360 1/10/01 12/10/10 246,105 20,509 -
360 1/10/01 12/10/10 1,349,848 112,487 -
360 1/10/01 12/10/10 310,110 25,842 - Springing Hard
356 9/1/00 8/1/10 163,642 13,637 -
360 1/1/01 12/1/10 317,897 26,491 -
------------------------------------------------------------------------------------------------------------
357 10/1/00 9/1/10 711,789 59,316 -
360 1/1/01 12/1/10 552,791 46,066 -
297 10/10/00 9/10/10 1,635,795 136,316 -
358 11/1/00 10/1/10 236,373 19,698 -
294 11/1/00 6/1/10 483,963 40,330 -
------------------------------------------------------------------------------------------------------------
358 11/1/00 10/1/10 396,609 33,051 -
358 11/1/00 10/1/10 431,522 35,960 -
355 8/1/00 7/1/10 611,950 50,996 -
358 11/1/00 10/1/10 1,342,799 111,900 -
320 9/1/00 8/1/10 1,344,675 112,056 Springing Hard (Set-Up-at Closing)
------------------------------------------------------------------------------------------------------------
299 12/10/00 11/10/10 448,389 37,366 -
300 2/1/01 1/1/11 165,715 13,810 -
360 1/1/01 12/1/10 441,675 36,806 -
0 10/10/00 9/10/10 435,795 36,316 117
358 11/1/00 10/1/10 1,078,665 89,889 -
------------------------------------------------------------------------------------------------------------
298 11/1/00 10/1/10 267,168 22,264 -
358 11/1/00 10/1/10 266,166 22,180 -
360 1/1/01 12/1/10 268,695 22,391 -
356 9/1/00 8/1/10 718,208 59,851 -
360 2/1/01 1/1/11 497,819 41,485 -
------------------------------------------------------------------------------------------------------------
358 11/1/00 10/1/10 539,669 44,972 -
360 1/1/01 12/1/10 226,913 18,909 -
310 11/1/00 10/1/10 214,864 17,905 -
360 1/10/01 12/10/10 243,410 20,284 -
358 11/1/00 10/1/10 710,002 59,167 -
------------------------------------------------------------------------------------------------------------
358 11/1/00 10/1/10 287,305 23,942 -
354 7/1/00 6/1/10 281,202 23,433 -
360 2/10/01 1/10/11 427,184 35,599 -
358 11/1/00 10/1/10 1,159,349 96,612 -
358 11/1/00 10/1/10 293,631 24,469 -
------------------------------------------------------------------------------------------------------------
356 9/10/00 8/10/10 785,879 65,490 -
358 11/10/00 10/10/10 1,414,062 117,839 -
357 10/1/00 9/1/10 416,651 34,721 -
355 8/1/00 7/1/10 424,354 35,363 -
299 12/1/00 11/1/10 847,454 70,621 -
------------------------------------------------------------------------------------------------------------
359 12/1/00 11/1/10 376,443 31,370 -
358 11/1/00 10/1/10 678,039 56,503 -
358 11/1/00 10/1/10 297,944 24,829 -
------------------------------------------------------------------------------------------------------------
300 1/1/01 12/1/10 286,500 23,875 -
359 12/1/00 11/1/10 1,105,357 92,113 -
------------------------------------------------------------------------------------------------------------
360 1/10/01 12/10/10 536,235 44,686 -
359 12/1/00 11/1/10 608,184 50,682 -
359 12/1/00 11/1/10 624,746 52,062 -
359 12/1/00 11/1/10 374,673 31,223 -
356 9/1/00 8/1/10 191,983 15,999 -
------------------------------------------------------------------------------------------------------------
360 2/1/01 1/1/11 562,937 46,911 -
360 1/1/01 12/1/10 1,713,748 142,812 -
360 1/1/01 12/1/10 1,766,478 147,207 -
360 1/1/01 12/1/10 1,024,339 85,362 -
359 12/1/00 11/1/05 600,006 50,000 -
------------------------------------------------------------------------------------------------------------
356 9/1/00 8/1/10 2,136,441 178,037 -
358 11/1/00 10/1/10 395,841 32,987 -
358 11/1/00 10/1/10 410,248 34,187 -
357 10/1/00 9/1/10 513,866 42,822 -
360 11/1/00 10/1/10 1,213,960 101,163 22
------------------------------------------------------------------------------------------------------------
358 11/1/00 10/1/10 928,385 77,365 -
358 11/1/00 10/1/10 801,581 66,798 -
358 11/1/00 10/1/10 212,128 17,677 -
358 11/1/00 10/1/10 923,664 76,972 -
360 2/1/01 1/1/11 188,345 15,695 -
358 11/1/00 10/1/10 1,131,666 94,306 -
------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CROSSED CUT-OFF LTV
APD WITH GRACE PAYMENT APPRAISED DATE LTV RATIO AT
(YES/NO) OTHER LOANS DSCR PERIOD DATE VALUE RATIO MATURITY
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
No No 1.46 5 1 5,400,000 51.8% 47.1%
No No 1.35 5 1 7,600,000 63.2% 56.7%
No No 1.25 5 1 13,500,000 69.3% 65.0%
No No 1.26 5 1 19,300,000 74.6% 67.2%
No No 1.45 5 1 9,260,000 59.4% 53.4%
-------------------------------------------------------------------------------------
No No 1.49 10 1 12,400,000 71.8% 64.5%
No No 1.35 5 1 13,000,000 67.7% 59.1%
No No 1.28 0 10 1,900,000 69.2% 62.9%
No No 1.27 5 1 4,100,000 68.7% 61.5%
No No 1.22 5 1 8,200,000 79.9% 71.8%
-------------------------------------------------------------------------------------
No No 1.29 5 1 3,100,000 74.0% 61.9%
No No 1.30 0 10 2,470,000 76.6% 68.1%
No No 1.26 5 1 11,450,000 79.8% 71.5%
No No 1.25 5 1 2,740,000 74.9% 67.8%
No No 1.26 5 1 1,850,000 64.8% 62.4%
-------------------------------------------------------------------------------------
No No 1.26 5 1 7,050,000 74.6% 67.5%
No No 1.28 5 1 2,350,000 77.6% 70.1%
No No 1.26 5 1 5,950,000 77.3% 69.6%
No No 1.26 0 10 3,400,000 73.5% 66.2%
No No 1.27 5 1 3,830,000 80.0% 71.5%
-------------------------------------------------------------------------------------
No No 1.34 5 1 2,800,000 78.5% 70.8%
No No 1.08 5 1 1,300,000 89.6% 0.9%
No No 1.07 5 1 1,450,000 87.5% 0.8%
No No 1.04 5 1 1,900,000 86.6% 0.8%
No No 1.11 5 1 1,600,000 87.5% 0.9%
-------------------------------------------------------------------------------------
No No 1.14 15 1 2,300,000 81.7% 0.8%
No No 1.22 5 1 16,000,000 70.1% 62.9%
No No 1.26 5 1 3,400,000 70.5% 63.7%
No No 1.25 5 1 10,280,000 78.7% 67.0%
No No 1.43 5 1 18,400,000 65.2% 62.8%
-------------------------------------------------------------------------------------
No Yes a 1.25 5 1 4,090,000 79.7% 71.5%
Yes No 2.18 5 1 66,900,000 54.7% 44.4%
3,600,000
6,000,000
6,600,000
-------------------------------------------------------------------------------------
12,400,000
8,200,000
5,800,000
6,600,000
7,200,000
-------------------------------------------------------------------------------------
10,500,000
No No 1.23 0 10 13,750,000 66.9% 60.2%
No No 1.38 0 10 47,000,000 69.1% 58.7%
No No 1.22 5 1 10,250,000 78.0% 69.7%
No No 1.21 5 1 2,225,000 67.4% 60.6%
-------------------------------------------------------------------------------------
No No 1.22 0 10 3,800,000 73.6% 65.9%
No No 1.34 0 10 19,000,000 80.0% 71.8%
No No 1.39 0 10 5,350,000 63.6% 57.4%
No No 1.23 5 1 2,350,000 76.4% 69.1%
No No 1.27 5 1 4,850,000 72.2% 65.1%
-------------------------------------------------------------------------------------
No No 1.21 5 1 11,000,000 72.6% 65.3%
No No 1.26 5 1 7,900,000 80.0% 71.5%
No No 1.46 0 10 24,500,000 69.2% 58.0%
No No 1.26 5 1 3,850,000 66.2% 60.1%
No No 1.41 5 1 8,100,000 59.0% 50.3%
-------------------------------------------------------------------------------------
No No 1.21 5 1 6,000,000 74.9% 67.2%
No No 1.28 5 1 6,500,000 74.5% 67.0%
No No 1.34 5 1 10,000,000 66.8% 60.6%
No No 1.22 5 1 19,610,000 78.8% 70.4%
Yes No 1.91 5 1 25,500,000 57.7% 49.7%
-------------------------------------------------------------------------------------
No No 1.36 0 10 7,400,000 64.8% 53.7%
No No 1.40 5 1 2,600,000 67.3% 56.0%
No Yes a 1.25 5 1 6,300,000 79.7% 71.5%
No No 1.96 0 10 10,500,000 52.4% 52.4%
No No 1.20 5 1 15,200,000 77.5% 70.1%
-------------------------------------------------------------------------------------
No No 1.28 5 1 4,060,000 68.8% 57.5%
No No 1.31 5 1 4,000,000 74.9% 67.3%
No No 1.32 5 1 4,060,000 74.9% 67.1%
No No 1.20 5 1 11,100,000 71.0% 64.2%
No No 1.31 5 1 7,200,000 76.7% 69.0%
-------------------------------------------------------------------------------------
No No 1.28 5 1 7,750,000 78.6% 70.6%
No No 1.25 5 1 3,300,000 75.4% 68.1%
No No 1.46 5 1 4,075,000 57.6% 48.6%
No No 1.38 0 10 4,500,000 60.0% 54.0%
No No 1.24 5 1 12,250,000 65.2% 58.6%
-------------------------------------------------------------------------------------
No No 1.22 5 1 4,400,000 72.1% 65.1%
No No 1.30 5 1 4,465,000 66.5% 60.7%
No No 1.38 0 10 6,700,000 72.7% 65.0%
No No 1.20 5 1 16,800,000 76.1% 68.7%
No No 1.61 5 1 4,945,000 64.6% 58.5%
-------------------------------------------------------------------------------------
No No 1.28 0 10 11,490,000 76.0% 68.5%
No No 1.05 0 10 20,000,000 78.4% 70.7%
No No 1.22 5 1 6,260,000 73.1% 66.1%
No No 1.35 5 1 6,300,000 71.1% 65.0%
No No 1.54 5 1 15,250,000 59.9% 49.6%
-------------------------------------------------------------------------------------
3,350,000
11,900,000
No No 1.55 5 1 7,000,000 62.8% 55.9%
No No 1.22 5 1 10,750,000 69.7% 62.9%
No No 1.21 5 1 4,400,000 73.8% 66.8%
-------------------------------------------------------------------------------------
No No 2.42 5 1 8,900,000 34.8% 28.8%
2,600,000
2,400,000
3,900,000
No No 1.23 5 1 15,700,000 78.9% 70.9%
-------------------------------------------------------------------------------------
No No 1.23 0 10 7,550,000 80.7% 72.2%
No No 1.43 5 1 10,400,000 67.3% 60.1%
No No 1.23 5 1 9,750,000 73.5% 65.7%
No No 1.24 5 1 6,000,000 71.6% 64.0%
No No 1.23 5 1 2,625,000 79.8% 72.3%
-------------------------------------------------------------------------------------
No No 1.32 5 1 8,200,000 78.5% 70.1%
No Yes c 1.24 5 1 25,350,000 73.8% 66.1%
No Yes c 1.24 5 1 28,300,000 73.8% 66.1%
No No 1.22 5 1 15,200,000 77.0% 68.8%
No No 1.28 5 1 8,700,000 77.5% 74.4%
-------------------------------------------------------------------------------------
No No 1.22 5 1 32,000,000 73.3% 66.3%
No No 1.28 5 1 6,250,000 69.5% 62.8%
No No 1.41 5 1 6,300,000 71.4% 64.5%
No No 1.25 5 1 7,300,000 77.9% 70.3%
No No 1.31 5 1 19,250,000 71.7% 66.2%
-------------------------------------------------------------------------------------
No Yes b 1.22 5 1 13,000,000 78.8% 71.2%
No Yes b 1.22 5 1 11,200,000 78.8% 71.2%
No No 1.21 5 1 3,100,000 77.3% 69.4%
No No 1.24 5 1 13,000,000 80.9% 72.5%
No No 1.26 5 1 3,100,000 68.9% 61.7%
No No 1.39 5 1 18,300,000 68.8% 62.0%
-------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR YEAR
ADDRESS CITY STATE ZIP CODE BUILT RENOVATED
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1000 Corporate Pointe Culver City CA 90230 1984 1999
139 Fifth Avenue New York NY 10010 1900 1996
1634 Eye Street Washington DC 20006 1962
16522 Hunters Green Parkway Hagerstown MD 21740 2000
1712 Eye Street, Northwest Washington DC 20006 1960 2000
------------------------------------------------------------------------------------------------------------------------------------
2221 Park Place El Segundo CA 90245 1966 2000
33-51 Main Street Westport CT 06880 1900 1990
6518, 6520, 6522 South McCarran Boulevard Reno NV 89509 1999
655 Fifth Avenue & 251 19th Street Brooklyn NY 11211 1903 1999
743-749 Amsterdam Avenue New York NY 10025 1926 2000
------------------------------------------------------------------------------------------------------------------------------------
10830 West Road Houston TX 77064 1999
20359 North 59th Avenue Glendale AZ 85308 2000
9855 Shadow Way Dallas TX 75243 1979
10290 Phillips Highway Jacksonville FL 32256 1996
321 12th Street Manhattan Beach CA 90266 1984
------------------------------------------------------------------------------------------------------------------------------------
1910 Palomar Oaks Way Carlsbad CA 92008 1998
4100 Amon Carter Boulevard Fort Worth TX 76155 1984 1998
4300-4380 Cleveland Avenue Ft. Myers FL 33901 1991 2000
16821 & 16903 Buccaneer Lane & 1115 Gemini Avenue Houston TX 77058 1965 1995
8850 Fair Oaks Crossing Dallas TX 75243 1979
------------------------------------------------------------------------------------------------------------------------------------
2300 McDermott Drive Plano TX 75025 1999
204 Great East Neck Road West Babylon NY 11704 2000
341 West High Street Bryan OH 43506 1960 1999
19305 West Catawba Avenue Cornelius NC 28031 1998
Route 44 Poughkeepsie NY 12603 2000
------------------------------------------------------------------------------------------------------------------------------------
197 Boston Turnpike Shrewsbury MA 01545 1999
3801 East Florida Avenue Denver CO 80210 1980
11299 San Pablo Avenue El Cerrito CA 94530 1980
8200 Bolsa Avenue Midway City CA 92655 1970
12234 North Interstate Highway 35 Austin TX 78753 2000
------------------------------------------------------------------------------------------------------------------------------------
1801 West Walnut Street Garland TX 75042 1984
Various Various Various Various Various Various
1500 South Abilene Street Aurora CO 80012 1985 1999
110 Harper Park Drive Beckley WV 25801 1992
7013 Shallowford Road Chattanooga TN 37421 1988 1996
------------------------------------------------------------------------------------------------------------------------------------
10 Ulenski Drive Colonie NY 12205 1986 1997
6617 Governor Ritchie Highway Glen Burnie MD 21061 1990 1999
2454 Old Dorsett Road Maryland Heights MO 63043 1987 1999
8501 Hampton Boulevard Norfolk VA 23505 1990
22 Montage Mountain Road Scranton PA 18507 1994
------------------------------------------------------------------------------------------------------------------------------------
4361 West Reno Avenue Oklahoma City OK 73107 1982 1998
808-814 State Street Santa Barbara CA 93101 1920 1997
315 Julia Street and 727 South Peters Street New Orleans LA 70130 1909 1999
2655 North Althea Drive Fayetteville AR 72704 2000
3888 Northwest Randall Way Silverdale WA 98383 1996
------------------------------------------------------------------------------------------------------------------------------------
8000 Forbes Road Springfield VA 22151 1971
3202 East Greenway Parkway Phoenix AZ 85032 1989
1400 Dumas Avenue Dumas TX 79029 1985
4613 Denton Highway Haltom City TX 76117 1997
140 Franklin Turnpike Waldwick NJ 07463 1995
------------------------------------------------------------------------------------------------------------------------------------
4992-5082 East Hampden Avenue Denver CO 80222 1961 1984
2004 Midway Drive Harrington DE 19952 1999
31 Hampshire Street Mansfield MA 02048 1979 2000
1150 Hungryneck Boulevard Mount Pleasant SC 29464 1999
2990 Route 66 Neptune NJ 07753 1999
------------------------------------------------------------------------------------------------------------------------------------
5200 North Keystone Avenue Indianapolis IN 46220 1957 1981
699 South Green Bay Road Neenah WI 54956 1990
14622 Ventura Boulevard Sherman Oaks CA 91403 1938 1988
5201 Laguna Oaks Drive Elk Grove CA 95758 1999
900 Hammond Street West Hollywood CA 90069 1975 2000
------------------------------------------------------------------------------------------------------------------------------------
751 Miller Drive Leesburg VA 22075 1988
777 East Channel Islands Boulevard Oxnard CA 93033 1999
1721 Teasley Lane Denton TX 76205 1971 1974
711 Texas Avenue South College Station TX 77840 1997
422 West Loop 281 Longview TX 75605 1992 2000
------------------------------------------------------------------------------------------------------------------------------------
3330 Dunes Drive Marina CA 93933 1979
1071 & 1079 West FM 3040 Lewisville TX 75067 2000
2944 South Mason Katy TX 77450 2000
1457 West Southern Avenue Mesa AZ 85202 1981 1985
2108-2236 East El Monte Way Dinuba CA 93618 1991
------------------------------------------------------------------------------------------------------------------------------------
8700 Millicent Way Shreveport LA 71115 1983 2000
13845 North 7th Street Phoenix AZ 85022 1997
35150-35360 Nankin Boulevard Westland MI 48185 1989
16416 Northchase Drive Houston TX 77060 1979 1995
502-530 Calle Montecito Oceanside CA 92057 1984 1998
------------------------------------------------------------------------------------------------------------------------------------
501 East Virginia Way Barstow CA 92311 1993 2000
20910 108th Avenue Southeast Kent WA 98031 1985
1170 Park Boulevard Plano TX 75074 1970 1995
6550 First Park Ten San Antonio TX 78213 1999
100 Ogier Avenue Morgan Hill CA 95037 1987
------------------------------------------------------------------------------------------------------------------------------------
7501-7585 West Washington Avenue Las Vegas NV 89128 2000
4800 Great America Parkway Santa Clara CA 95054 1982
11789 Main Street Akron NY 14001 1973 1986
548-550 Contra Costa Boulevard Pleasant Hill CA 94523 1978 1991
Various Des Moines IA 50309 Various
------------------------------------------------------------------------------------------------------------------------------------
401 Southwest 7th Street Des Moines IA 50309 2000
405-525 Southwest 5th Street Des Moines IA 50309 1993 1998
2025 East Jemez Road Los Alamos NM 87544 1969
3702 C Street Northeast Auburn WA 98002 2000
13216-13240 North 7th Street Phoenix AZ 85022 1981 1995
------------------------------------------------------------------------------------------------------------------------------------
Various Various MD Various Various
2108 Emmorton Road Bel Air MD 21015 1968 1995
6612 Baltimore National Pike Catonsville MD 21228 1965 1990
8725 & 8727 Loch Raven Boulevard Towson MD 21286 1972 1995
101 Smoky Crossing Way Seymour TN 37865 2000
------------------------------------------------------------------------------------------------------------------------------------
1301-1327 East Gude Drive and 689-713 Lofstrand Lane Rockville MD 20850 1970
1142 Temple Avenue Colonial Heights VA 23834 1990
922 North Sidney Avenue Russellville AR 72801 1998
751 Arkansas Highway 16 East Siloam Springs AR 72761 1999
1400 Altamont Avenue Rotterdam NY 12303 1999
------------------------------------------------------------------------------------------------------------------------------------
8401 Skillman Street Dallas TX 75231 1978
7101 Executive Center Drive, 278 Franklin Road, 7000 Executive Drive & 7100 ExeBrentwoodive TN 37027 1984 1997
214-216 Centerview Drive & 7003 Chadwick Drive Brentwood TN 37027 1983 1998
604 Locust Street Des Moines IA 50309 1924 1990
900 Frances Way Richardson TX 75081 1979 1999
------------------------------------------------------------------------------------------------------------------------------------
700 Northeast 122nd Street Oklahoma City OK 73114 1997 2000
5709 Woodway Houston TX 77057 2000
16 West Aylesbury Road Timonium MD 21093 1998
18601 LBJ Freeway Mesquite TX 75150 1976 1999
228 Dixie Drive Tallahassee FL 32304 2000
------------------------------------------------------------------------------------------------------------------------------------
5800 Northwest Parkway San Antonio TX 78249 1999
6000 Northwest Parkway San Antonio TX 78249 1999
2651 Clark Towers Court Las Vegas NV 89102 1999
7840 Moon Road Columbus GA 31909 1999
1830 East Washington Boulevard Pasadena CA 91104 2000
520-550 Washington Street & 30 Hotaling Place San Francisco CA 94111 1852 1998
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NET UNITS LOAN PER NET PREPAYMENT
RENTABLE OF RENTABLE AREA PROVISIONS
AREA SF/UNITS MEASURE SF/UNITS (# OF PAYMENTS)
------------------------------------------------------------------
<S> <C> <C> <C>
23,529 Sq. Ft. 118.89 L(47),D(72),O(1)
26,000 Sq. Ft. 184.62 L(47),D(72),O(1)
65,735 Sq. Ft. 142.24 L(48),D(34),O(2)
487,000 Sq. Ft. 29.57 L(47),D(72),O(1)
50,462 Sq. Ft. 108.92 L(47),D(72),O(1)
------------------------------------------------------------------
55,055 Sq. Ft. 161.66 L(47),D(72),O(1)
17,892 Sq. Ft. 491.84 L(48),D(71),O(1)
11,277 Sq. Ft. 116.54 L(25),D(91),O(4)
19 Units 148,320.65 L(25),D(92),O(3)
26,780 Sq. Ft. 244.80 L(25),D(92),O(3)
------------------------------------------------------------------
55,390 Sq. Ft. 41.41 L(26),D(91),O(3)
13,942 Sq. Ft. 135.63 L(23),D(93),O(4)
292 Units 31,293.50 L(26),D(91),O(3)
18,160 Sq. Ft. 113.05 L(26),D(91),O(3)
7,388 Sq. Ft. 162.32 L(25),D(32),O(3)
------------------------------------------------------------------
71,420 Sq. Ft. 73.65 L(26),D(91),O(3)
30,029 Sq. Ft. 60.75 L(24),D(86),O(3)
50,650 Sq. Ft. 90.76 L(25),D(92),O(3)
69,993 Sq. Ft. 35.72 L(24),D(92),O(4)
160 Units 19,150.00 L(23),D(94),O(3)
------------------------------------------------------------------
13,007 Sq. Ft. 168.96 L(26),D(91),O(3)
10,125 Sq. Ft. 115.06 L(23),D(213),O(3)
10,765 Sq. Ft. 117.88 L(24),D(202),O(3)
10,125 Sq. Ft. 162.50 L(26),D(189),O(3)
10,125 Sq. Ft. 138.27 L(24),D(213),O(3)
------------------------------------------------------------------
11,045 Sq. Ft. 170.23 L(29),D(201),O(3)
153,040 Sq. Ft. 73.32 L(25),D(92),O(3)
25,682 Sq. Ft. 93.39 L(25),D(92),O(3)
189 Units 42,789.15 L(26),D(91),O(3)
185,485 Sq. Ft. 64.63 L(23),YMor1%(35),O(2)
------------------------------------------------------------------
84 Units 38,622.57 L(27),D(90),O(3)
1,181 Units 30,990.69 L(24),D(93),O(3)
132 Units 14,943.18
108 Units 30,438.89
167 Units 21,953.29
------------------------------------------------------------------
154 Units 45,415.58
115 Units 43,415.65
122 Units 19,490.16
119 Units 31,648.74
129 Units 32,906.20
------------------------------------------------------------------
135 Units 39,245.93
57,501 Sq. Ft. 159.89 L(25),D(91),O(4)
372 Units 87,274.83 L(31),D(85),O(4)
228 Units 35,063.65 L(25),D(92),O(3)
15,361 Sq. Ft. 97.59 L(25),D(92),O(3)
------------------------------------------------------------------
60,304 Sq. Ft. 46.35 L(24),D(92),O(4)
205,848 Sq. Ft. 73.84 L(24),D(92),O(4)
152,286 Sq. Ft. 22.33 L(24),D(92),O(4)
17,400 Sq. Ft. 103.24 L(28),D(89),O(3)
25,600 Sq. Ft. 136.72 L(47),D(72),O(1)
------------------------------------------------------------------
69,179 Sq. Ft. 115.44 L(27),D(90),O(3)
90,988 Sq. Ft. 69.46 L(24),D(93),O(3)
202 Units 83,929.90 L(27),D(88),O(5)
23,400 Sq. Ft. 108.87 L(26),D(91),O(3)
94,450 Sq. Ft. 50.62 L(47),D(68),O(1)
------------------------------------------------------------------
92,233 Sq. Ft. 48.73 L(26),D(91),O(3)
74,038 Sq. Ft. 65.44 L(26),D(91),O(3)
46,411 Sq. Ft. 144.01 L(29),D(88),O(3)
201 Units 76,875.25 L(26),D(91),O(3)
132 Units 111,403.26 L(28),D(86),O(6)
------------------------------------------------------------------
84,354 Sq. Ft. 56.84 L(25),D(91),O(4)
46,501 Sq. Ft. 37.63 L(23),D(94),O(3)
161 Units 31,304.35 L(24),D(93),O(3)
106,922 Sq. Ft. 51.44 L(27),D(89),O(4)
153,260 Sq. Ft. 76.84 L(26),D(91),O(3)
------------------------------------------------------------------
65 Units 43,001.13 L(26),D(91),O(3)
24,566 Sq. Ft. 121.99 L(26),D(91),O(3)
26,355 Sq. Ft. 115.35 L(24),D(93),O(3)
71,473 Sq. Ft. 110.30 L(28),D(89),O(3)
98,520 Sq. Ft. 56.05 L(23),D(94),O(3)
------------------------------------------------------------------
240 Units 25,388.51 L(26),D(91),O(3)
48,575 Sq. Ft. 51.24 L(24),D(93),O(3)
42,601 Sq. Ft. 55.07 L(26),D(91),O(3)
61,091 Sq. Ft. 44.20 L(24),D(92),O(4)
150 Units 53,241.59 L(26),D(91),O(3)
------------------------------------------------------------------
144 Units 22,025.74 L(26),D(91),O(3)
39,009 Sq. Ft. 76.08 L(30),D(87),O(3)
126,225 Sq. Ft. 38.58 L(23),D(93),O(4)
126,143 Sq. Ft. 101.37 L(26),D(91),O(3)
120 Units 26,640.14 L(26),D(91),O(3)
------------------------------------------------------------------
135,592 Sq. Ft. 64.39 L(28),D(88),O(4)
71,570 Sq. Ft. 219.13 L(26),D(90),O(4)
220 Units 20,797.28 L(47),D(70),O(3)
36,264 Sq. Ft. 123.57 L(29),D(88),O(3)
195,790 Sq. Ft. 46.68 L(47),D(72),O(1)
------------------------------------------------------------------
38,197 Sq. Ft. 57.98
157,593 Sq. Ft. 43.95
182 Units 24,158.59 L(25),D(92),O(3)
108,924 Sq. Ft. 68.78 L(26),D(91),O(3)
25,040 Sq. Ft. 129.66 L(26),D(91),O(3)
------------------------------------------------------------------
155,638 Sq. Ft. 19.92 L(47),D(72),O(1)
26,518 Sq. Ft. 36.39
20,000 Sq. Ft. 46.00
109,120 Sq. Ft. 11.13
180 Units 68,843.87 L(25),D(92),O(3)
------------------------------------------------------------------
121,039 Sq. Ft. 50.31 L(24),D(92),O(4)
130,050 Sq. Ft. 53.79 L(25),D(92),O(3)
252 Units 28,432.86 L(25),D(92),O(3)
144 Units 29,840.62 L(25),D(92),O(3)
24,000 Sq. Ft. 87.32 L(28),D(89),O(3)
------------------------------------------------------------------
248 Units 25,951.61 L(23),D(94),O(3)
243,691 Sq. Ft. 80.02 L(24),D(93),O(3)
248,109 Sq. Ft. 81.01 L(24),D(93),O(3)
217,638 Sq. Ft. 53.76 L(24),D(93),O(3)
200 Units 33,727.81 L(25),D(34),O(1)
------------------------------------------------------------------
588 Units 39,883.63 L(28),D(89),O(3)
21,900 Sq. Ft. 198.25 L(26),D(91),O(3)
66,134 Sq. Ft. 67.97 L(26),D(91),O(3)
90,000 Sq. Ft. 63.23 L(27),D(90),O(3)
152 Units 90,789.47 L(26),D(91),O(3)
------------------------------------------------------------------
106,237 Sq. Ft. 96.38 L(26),D(91),O(3)
84,525 Sq. Ft. 104.59 L(26),D(91),O(3)
64 Units 37,458.35 L(26),D(91),O(3)
236 Units 44,568.01 L(26),D(91),O(3)
8,681 Sq. Ft. 246.17 L(23),D(94),O(3)
55,066 Sq. Ft. 228.57 L(47),D(72),O(1)
------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACTUAL,
ANNUALIZED, OR
ACTUAL TTM 1999/ UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN
1998 NOI 2000 NOI NOI REVENUE EGI EXPENSES NET CASH FLOW RESERVES
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
98,841 184,431 408,747 579,327 605,726 196,979 381,107 6,305
366,689 622,406 843,297 843,297 220,891 575,277 8,100
1,165,162 1,131,255 1,763,802 1,800,971 669,716 1,044,969 13,147
1,721,418 1,790,620 2,085,209 363,791 1,629,639 48,700
562,966 602,973 800,487 1,378,757 1,400,789 600,302 714,458 10,114
---------------------------------------------------------------------------------------------------------------------------
1,199,251 1,314,775 1,353,275 154,024 1,190,993 8,258
690,330 885,959 1,102,170 1,130,464 1,290,004 187,834 1,072,440 2,684
168,005 191,866 220,149 52,144 157,500 1,692
396,562 318,248 462,741 462,741 144,493 313,498 4,750
448,457 728,268 865,240 926,835 198,567 710,861 4,017
---------------------------------------------------------------------------------------------------------------------------
270,019 290,688 450,979 464,979 174,291 282,378 8,310
229,734 315,870 335,296 105,562 211,223 2,788
933,537 1,046,976 1,086,886 1,947,676 2,067,376 980,490 1,012,603 74,283
250,222 306,488 249,837 241,611 299,563 49,726 233,540 2,724
173,802 202,752 146,736 159,668 214,813 68,077 137,261 4,045
---------------------------------------------------------------------------------------------------------------------------
485,385 616,306 797,320 813,005 196,699 605,593 10,713
207,357 247,784 244,421 352,589 362,589 118,168 211,329 4,504
371,641 373,581 559,817 561,117 709,136 149,319 522,445 7,598
125,723 148,328 381,300 705,333 755,114 373,814 284,024 13,999
303,691 394,593 379,370 873,402 930,746 551,376 339,870 39,500
---------------------------------------------------------------------------------------------------------------------------
283,805 293,281 364,581 80,776 266,502 1,951
120,814 300,814 345,292 224,478 119,295 1,519
134,343 134,343 134,343 0 132,265 2,078
176,745 176,745 176,745 0 175,226 1,519
139,725 139,725 139,725 0 137,092 2,633
---------------------------------------------------------------------------------------------------------------------------
208,825 386,575 400,825 192,000 207,168 1,657
1,155,970 1,444,362 1,375,094 2,163,584 2,420,431 1,045,337 1,216,964 30,608
302,591 338,376 302,205 329,435 434,259 132,054 275,585 5,000
1,007,457 1,062,896 961,650 1,537,143 1,649,824 688,174 952,200 9,450
1,639,552 1,639,552 2,258,066 618,514 1,578,916 27,823
---------------------------------------------------------------------------------------------------------------------------
412,795 372,577 694,650 714,650 342,073 353,313 19,264
9,676,813 8,892,854 8,549,303 22,237,603 22,237,603 13,688,300 7,659,799 889,504
795,606 509,139 481,518 1,754,717 1,754,717 1,273,199 411,329 70,189
1,014,721 776,884 764,261 1,930,179 1,930,179 1,165,918 687,054 77,207
1,057,550 884,009 882,771 2,642,695 2,642,695 1,759,924 777,063 105,708
---------------------------------------------------------------------------------------------------------------------------
1,678,726 1,612,296 1,537,438 3,471,071 3,471,071 1,933,633 1,398,595 138,843
1,113,999 1,221,505 1,164,111 2,732,311 2,732,311 1,568,200 1,054,819 109,292
626,107 559,220 541,226 1,742,836 1,742,836 1,201,610 471,513 69,713
904,572 977,973 918,428 2,294,324 2,294,324 1,375,896 826,655 91,773
1,138,995 1,111,236 1,073,365 2,594,196 2,594,196 1,520,831 969,597 103,768
---------------------------------------------------------------------------------------------------------------------------
1,346,537 1,240,592 1,186,185 3,075,274 3,075,274 1,889,089 1,063,174 123,011
1,043,746 1,148,608 1,118,323 1,132,963 1,522,315 403,992 1,019,468 13,095
4,291,124 5,663,215 5,227,232 13,449,009 15,413,073 10,185,841 4,456,578 770,654
266,444 907,162 1,202,938 1,249,938 342,776 850,162 57,000
51,800 174,192 189,838 205,996 290,187 100,349 162,212 5,676
---------------------------------------------------------------------------------------------------------------------------
325,375 357,534 344,993 440,865 456,416 111,423 300,796 13,267
1,686,969 1,914,856 1,942,575 2,069,736 2,721,107 778,532 1,808,283 36,800
546,054 596,159 562,346 666,817 738,455 176,109 431,346 41,000
116,171 217,599 231,472 303,640 86,041 201,933 2,610
302,085 276,434 432,889 461,093 605,564 172,675 405,241 3,840
---------------------------------------------------------------------------------------------------------------------------
903,304 1,023,013 940,351 977,752 1,239,678 299,327 861,215 18,678
571,351 730,869 768,217 912,301 181,432 695,791 13,648
2,463,330 2,698,688 2,852,731 5,409,275 9,163,903 6,311,172 2,394,536 458,195
67,318 321,432 335,866 401,971 80,539 297,722 3,510
281,713 691,963 694,763 1,008,912 1,048,428 353,665 680,595 14,168
---------------------------------------------------------------------------------------------------------------------------
501,232 585,148 536,837 590,659 730,819 193,982 479,857 15,680
661,180 657,925 597,840 614,150 806,327 208,487 551,231 10,584
677,588 780,628 900,477 1,001,584 1,361,778 461,301 818,186 16,484
1,431,147 1,674,894 2,357,338 2,405,353 730,459 1,633,890 41,004
3,005,355 2,765,981 2,855,112 7,159,415 7,159,415 4,304,303 2,574,119 280,993
---------------------------------------------------------------------------------------------------------------------------
449,214 701,502 724,989 925,260 966,781 241,792 610,258 21,932
157,600 238,908 386,057 406,057 167,149 231,950 6,958
506,986 624,484 606,612 1,101,481 1,137,106 530,494 558,137 48,475
558,303 873,955 895,617 983,259 1,227,433 331,816 854,363 16,038
745,671 1,358,251 1,403,784 1,725,068 366,817 1,295,414 22,989
---------------------------------------------------------------------------------------------------------------------------
349,260 345,380 661,500 721,511 376,131 343,105 2,275
201,509 372,767 412,115 493,334 120,567 348,915 3,685
193,611 381,854 399,100 521,320 139,466 355,331 3,953
1,020,467 931,228 980,430 1,275,679 344,451 861,834 16,051
779,195 700,967 760,078 952,387 251,420 651,842 16,748
---------------------------------------------------------------------------------------------------------------------------
672,619 757,078 1,318,695 1,388,002 630,924 689,078 68,000
85,729 282,543 290,992 445,295 463,295 172,303 283,706 7,286
450,416 374,835 459,881 570,257 195,422 314,304 11,623
83,756 190,845 397,097 707,312 711,630 314,533 335,974 12,218
885,139 932,281 1,381,107 1,445,738 513,457 878,980 53,301
---------------------------------------------------------------------------------------------------------------------------
349,312 379,410 749,150 770,007 390,597 350,034 29,376
385,407 427,584 415,502 416,598 578,305 162,803 365,666 9,943
727,674 673,522 707,797 896,178 222,656 588,325 18,934
1,479,088 1,520,155 1,987,655 508,567 1,395,322 18,921
506,699 597,470 477,001 719,149 884,149 407,148 471,768 5,233
---------------------------------------------------------------------------------------------------------------------------
1,039,722 1,080,302 1,492,696 452,974 1,002,406 6,965
1,649,092 1,632,803 2,207,669 2,368,797 735,994 1,485,816 19,025
477,291 532,053 517,340 746,472 752,472 235,132 510,318 7,022
571,446 618,030 618,736 628,778 781,692 162,956 574,984 17,717
1,049,042 1,208,819 1,461,527 1,461,606 2,389,406 927,879 1,301,598 29,369
---------------------------------------------------------------------------------------------------------------------------
344,469 344,599 528,613 184,144 313,268 5,730
1,049,042 1,208,819 1,117,058 1,117,007 1,860,793 743,735 988,330 23,639
565,911 636,257 593,809 763,629 818,629 224,820 583,518 10,291
870,358 898,560 1,064,461 194,103 825,727 16,303
222,680 269,985 393,765 416,045 529,655 135,890 361,320 5,759
---------------------------------------------------------------------------------------------------------------------------
702,471 882,182 771,698 1,019,966 1,198,241 426,543 693,075 23,354
301,211 343,132 228,769 253,385 313,592 84,823 214,666 3,986
178,053 234,956 217,276 240,000 279,098 61,822 204,548 3,000
223,207 304,094 325,653 526,581 605,551 279,898 273,861 16,368
559,325 1,394,534 1,671,210 1,847,890 453,356 1,358,534 36,000
---------------------------------------------------------------------------------------------------------------------------
690,911 773,063 732,501 855,303 911,556 179,055 660,002 18,156
916,841 1,076,268 961,394 1,018,540 1,258,738 297,344 867,447 19,508
844,405 822,333 1,126,227 1,178,091 355,758 765,633 56,700
434,743 492,329 697,580 709,580 217,251 463,529 28,800
252,291 239,660 256,080 366,660 127,000 236,060 3,600
---------------------------------------------------------------------------------------------------------------------------
693,058 826,053 804,012 1,463,521 1,521,581 717,569 742,012 62,000
2,402,485 2,548,617 3,843,523 3,888,523 1,339,906 2,144,509 46,421
2,419,432 2,669,381 3,953,198 3,974,606 1,305,225 2,181,630 44,302
2,080,159 1,408,990 1,488,798 2,634,750 3,132,202 1,643,404 1,250,868 43,348
598,777 816,753 812,190 1,548,500 1,568,500 756,310 767,704 44,486
---------------------------------------------------------------------------------------------------------------------------
2,199,827 2,732,182 3,768,470 3,951,489 1,219,307 2,614,582 117,600
537,245 554,932 722,432 185,187 506,098 3,285
49,705 528,318 587,636 815,218 847,718 260,082 577,562 10,074
599,296 721,066 746,793 1,218,597 1,324,697 577,904 644,505 18,000
1,637,687 2,348,158 2,764,049 1,126,362 1,592,087 45,600
---------------------------------------------------------------------------------------------------------------------------
1,191,880 1,211,102 1,566,715 374,835 1,133,429 15,956
1,034,644 1,051,810 1,366,855 332,211 979,278 12,679
66,861 269,677 414,971 428,971 159,294 256,877 12,800
946,991 1,189,133 1,703,675 1,797,842 608,709 1,141,933 47,200
306,187 253,742 267,612 322,587 68,845 236,913 1,300
1,495,959 1,656,975 1,865,134 2,114,718 457,743 1,572,218 8,260
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LEASE LEASE
LARGEST TENANT SF EXPIRATION 2ND LARGEST TENANT SF EXPIRATION
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MPR Health Systems, Inc. 5,778 7/31/03 Netune Communications 5,296 3/31/05
Haute Decore 4,500 3/31/05 Webcast Solutions 4,500 7/31/02
Benton Foundation 7,188 5/31/03 Help Unlimited 5,248 12/31/03
Petsmart 252,000 8/15/05 Lippincott, Williams & Wilkins 235,000 6/14/10
Arthur-Alan, Inc. 2,812 12/31/09 Michael Suddath, DDS 2,356 MTM
--------------------------------------------------------------------------------------------------------------------
Digital Media Campus 55,055 11/9/08
Gap Kids 9,300 1/31/10 R&S Westport, LLC 4,050 9/30/06
First Independent Bank 5,454 8/31/14 Sam Frankovich 3,006 4/30/10
CVS 10,140 9/30/13 Claremont School 10,140 9/30/20
--------------------------------------------------------------------------------------------------------------------
Realty Executives 6,674 4/30/05 West Family Dental 2,610 6/30/10
Norwalk Furniture 6,750 11/30/06 Hobby Super Store 5,079 7/31/02
CC&A Development Co. 4,552 3/31/12 James Eckhart, D.D.S. 1,370 12/31/05
--------------------------------------------------------------------------------------------------------------------
URS Greiner Woodward-Clyde Intl 8,219 6/30/01 Healix Infusion Therapy, Inc. 5,484 7/31/04
Circuit City 31,200 12/1/11 Third Federal Savings 7,000 7/31/05
Cimarron Software 18,219 4/14/10 Boeing 11,927 12/31/00
--------------------------------------------------------------------------------------------------------------------
Crest Cleaners 2,189 1/31/07 Eric Bess, DDS 2,175 7/31/05
CVS 10,125 1/31/21
CVS 10,765 1/31/20
CVS 10,125 1/31/19
CVS 10,125 1/31/21
--------------------------------------------------------------------------------------------------------------------
CVS 11,045 1/31/20
Carl Systems 17,396 1/31/02 Jaywell Enterprises, Inc. 17,396 8/31/01
Blockbuster Video 5,657 5/31/04 Kragen's Automotive 4,800 5/31/05
Dell USA, LP 185,485 4/30/05
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
El Paseo Restaurant 7,627 6/30/03 Wine Cask 7,503 12/1/06
First American Title Ins. Co. 5,376 9/30/08 Prudential NW Real Estate 3,350 1/31/02
--------------------------------------------------------------------------------------------------------------------
Bell Atlantic 24,125 2/28/07 N.V.C.C. 13,338 10/31/03
Food City 51,585 1/14/09 Goodwill Industries 25,000 10/30/05
Wal-Mart Stores, Inc. 50,968 7/15/05 United Supermarket, Inc. 33,652 10/31/05
Hoffbrau Steakhouse 6,980 4/30/05 Super Cleaners 2,500 7/31/02
NY Golf 7,300 5/31/03 All Seasons 6,440 7/30/05
--------------------------------------------------------------------------------------------------------------------
Bova Scandinavian Furniture 11,700 5/31/02 Ace Hardware 5,960 10/12/01
Food Lion 33,108 5/25/19 Best Hardware 12,000 1/14/11
Las Vegas Golf 7,200 11/17/04 Computer Renaissance 2,400 1/14/05
--------------------------------------------------------------------------------------------------------------------
LoBill's Supermarket 30,800 1/31/04 ABC Beauty 7,500 10/31/07
Kohl's Foods 47,610 9/30/10 Fashion Bug 7,600 1/31/06
Virtual Zone, Inc. 7,557 12/31/03 Satnem Gifts 4,667 3/31/04
--------------------------------------------------------------------------------------------------------------------
Watco 7,197 9/30/05 Quality Strategies, Inc. 7,088 10/31/03
Office Depot 31,015 6/30/12 Best Buy 30,007 1/31/15
Best Buy 30,000 1/31/15 The TJX Companies, Inc. 30,000 4/30/10
--------------------------------------------------------------------------------------------------------------------
Hollywood Video 4,575 5/3/10 Hobbytown USA 2,500 9/30/07
Must Be Heaven 3,741 12/30/05 Ritz Cleaners 3,000 12/4/04
Book Stop, Inc. 14,847 2/18/08 Pier I Imports 9,589 6/30/08
Save Mart 35,724 1/31/16 Thrifty Payless 31,456 1/31/16
--------------------------------------------------------------------------------------------------------------------
Amerigard Development Corp. 4,900 10/31/03 Dr. N. Krinsky 4,800 3/31/04
NHCC 42,000 1/31/03 Airborne 14,048 10/12/07
--------------------------------------------------------------------------------------------------------------------
Home Video Express 8,064 10/25/01 Sports Galaxy 5,292 11/30/04
Plano Sports Center 36,000 7/31/06 Locke Supply 25,610 7/31/09
Nextlink 60,245 9/30/07 Colo.com 34,898 7/31/10
--------------------------------------------------------------------------------------------------------------------
Kmart Corporation 106,512 2/28/25 Trader Joe's Company 10,680 6/14/10
Arsin Corporation 11,663 4/30/05 Netscaler 10,718 12/31/03
Lamps Plus, Inc. 13,250 8/1/06 Post Tool, Inc. 6,640 3/1/03
--------------------------------------------------------------------------------------------------------------------
Iowa Department of Natural Resources 13,183 11/30/05 Iowa Department of Revenue & Finance 8,848 6/30/05
Wells Fargo Home Mortgage 129,593 1/31/01 Diversified Management Services 6,400 4/30/04
FedEx Ground Package System, Inc. 108,924 8/31/10
Realty Executives 3,300 5/31/05 Win Technologies, DB 2,800 12/31/06
--------------------------------------------------------------------------------------------------------------------
Furniture Station Express 8,908 10/18/03 Burger King 3,500 3/27/16
Garon's Ethan Allen 20,000 9/30/09
Nelson C. White 22,443 7/22/08 Garon's Ethan Allen 20,000 9/30/09
--------------------------------------------------------------------------------------------------------------------
BAE Systems Applied Tech 42,556 10/31/01 Light Truck Service Co 12,443 3/31/04
JC Penneys Home Store 49,394 1/31/06 Marshalls 29,322 8/31/05
Staples, Inc. 24,000 9/24/14
--------------------------------------------------------------------------------------------------------------------
GE Information Services, Inc. 59,440 4/1/08 Hart Freeland 23,600 11/30/05
General Motors AC 23,110 7/31/03 PMT Services, Inc. 19,908 12/31/00
Wells Fargo Financial 45,360 7/31/04 Wellmark, Inc. 41,587 2/28/02
--------------------------------------------------------------------------------------------------------------------
Mikado Japanese Grill & Sushi Bar 4,281 6/30/05 Mission Burritos 4,000 6/14/10
National Credit Consultants 7,644 7/31/04 Ted Lyon 5,425 10/31/01
--------------------------------------------------------------------------------------------------------------------
Clark American Checks, Inc. 68,000 8/31/10 SBC Telecom, Inc. 38,237 12/31/07
Columbia/HCA Health Services 38,675 3/31/10 American Telesource International 23,100 7/30/08
Blockbuster Video 3,480 2/28/10 Radio Shack 2,587 3/31/10
Hart and Howerton 13,474 9/30/03 Text 100 Corporation 7,011 9/30/04
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OCCUPANCY UPFRONT
LEASE OCCUPANCY RATE ACTUAL REPLACEMENT
3RD LARGEST TENANT SF EXPIRATION RATE AS OF DATE RESERVES
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United International Mortgage 3,872 4/30/01 100% 6/29/00 525
Omnitech 4,500 7/22/06 100% 10/5/00 450
The Ericsson Corporation 5,248 7/31/02 94% 12/1/00 1,096
100% 10/2/00 4,058
Robert S. Beale, Jr., MD 2,281 7/31/07 91% 9/26/00 843
-------------------------------------------------------------------------------------------------------------------
100% 9/9/00 688
Gymboree 1,550 11/4/06 100% 10/17/00 107
Paul & Jody Allard 2,817 10/31/09 100% 10/26/00 -
95% 9/12/00 -
West Side One Stop 6,500 8/31/13 100% 9/1/00 -
-------------------------------------------------------------------------------------------------------------------
81% 9/12/00 -
Security Title 2,596 4/30/05 100% 12/1/00 -
91% 6/16/00 -
Leather Center 4,525 12/7/01 100% 8/1/00 -
Leland G. Whitson 1,299 8/31/01 100% 10/5/00 -
-------------------------------------------------------------------------------------------------------------------
92% 10/15/00 -
Jon Pierce, Inc. 4,884 8/31/01 100% 8/31/00 -
Medical Managers 4,250 4/30/05 100% 7/3/00 -
Muniz Engineering, Inc 7,583 10/4/04 95% 9/28/00 -
94% 9/7/00 -
-------------------------------------------------------------------------------------------------------------------
Mail Boxes, Etc. 1,778 12/31/04 100% 10/10/00 15,000
100% 8/23/00 -
100% 8/18/00 -
100% 8/10/00 -
100% 9/6/00 -
-------------------------------------------------------------------------------------------------------------------
100% 5/9/00 -
Aerotek, Inc. 17,396 3/9/04 91% 10/12/00 -
Carrows Restaurant 4,725 5/31/05 100% 6/1/00 -
100% 8/1/00 -
100% 8/31/00 2,319
-------------------------------------------------------------------------------------------------------------------
94% 10/1/00 -
69% 6/30/00 -
55% 6/30/00
74% 6/30/00
70% 6/30/00
-------------------------------------------------------------------------------------------------------------------
68% 6/30/00
80% 6/30/00
55% 6/30/00
73% 6/30/00
72% 6/30/00
-------------------------------------------------------------------------------------------------------------------
75% 6/30/00
Davies Communication 4,784 5/31/01 100% 8/28/00 -
68% 8/31/00 -
100% 9/1/00 -
Ahrens, Edward, CPA 1,680 9/30/02 87% 8/31/00 -
-------------------------------------------------------------------------------------------------------------------
Conservation Resources 9,987 10/31/02 100% 8/31/00 110,000
Pure Fitness Athletic Center 15,000 1/31/07 96% 11/13/00 6,500
JC Penneys Co., Inc. 22,204 1/31/06 100% 4/24/00 19,864
Telcom, Inc. 1,560 6/30/03 91% 7/1/00 -
Empire Video 5,000 11/30/04 100% 10/10/00 320
-------------------------------------------------------------------------------------------------------------------
Vitamin Cottage 5,045 11/27/01 100% 9/1/00 -
Happy Harrys 10,000 5/25/19 94% 9/8/00 -
73% 9/30/00 -
Affordables 2,400 4/30/03 82% 8/1/00 -
85% 8/16/00 1,181
-------------------------------------------------------------------------------------------------------------------
Rent Way 6,875 6/30/04 97% 7/18/00 -
Valley Bank 3,475 6/30/05 100% 7/27/00 -
Moby Disc 3,273 6/17/03 94% 8/10/00 -
99% 9/20/00 -
71% 8/31/00 -
-------------------------------------------------------------------------------------------------------------------
Esprit Homecare 6,384 3/31/03 98% 8/9/00 -
98% 9/27/00 -
96% 10/1/00 -
Barnes & Noble 24,900 1/31/13 89% 5/1/00 -
Old Navy (East), LP 24,960 11/30/05 100% 8/14/00 -
-------------------------------------------------------------------------------------------------------------------
100% 8/7/00 -
The Floor Store 2,336 9/30/06 95% 7/31/00 -
Gymboree 2,500 3/31/05 96% 9/22/00 -
Sherman Clay & Co./Washburn Piano Co. 7,480 2/28/02 86% 8/1/00 256,500
Blockbuster Video 5,400 3/31/01 99% 9/19/00 -
-------------------------------------------------------------------------------------------------------------------
99% 10/12/00 550,000 LOC
76% 9/7/00 -
Dr. V. Turkish 3,200 12/31/04 90% 9/5/00 -
Xerox 2,181 12/31/03 95% 11/16/00 16,000
99% 11/1/00 -
-------------------------------------------------------------------------------------------------------------------
95% 9/25/00 -
Sunsational Tan 3,000 8/31/03 90% 9/1/00 -
Collin County Appraisal District 24,682 7/31/07 100% 9/30/00 -
Tab Products Company 31,000 4/14/05 100% 8/1/00 -
98% 6/1/00 -
-------------------------------------------------------------------------------------------------------------------
Superpawn 5,000 3/17/10 97% 5/1/00 -
Speedera Networks 10,603 10/31/03 100% 6/15/00 -
99% 10/1/00 -
Bedtime Stores, Inc. 5,000 1/1/03 100% 6/12/00 -
100% 10/26/00 -
-------------------------------------------------------------------------------------------------------------------
Iowa Department of Gen. Svcs./Technology Dept. 6,351 12/31/05 100% 10/26/00
Polk County Iowa 4,950 8/31/03 100% 10/26/00
95% 8/15/00 -
100% 8/9/00 -
Blockbuster Video 2,500 1/31/05 97% 9/25/00 -
-------------------------------------------------------------------------------------------------------------------
80% 11/20/00 1,946
Eagle Cleaners 2,371 5/31/05 82% 11/20/00
100% 11/20/00
Beltway Fine Wines (TFWS) 19,124 12/31/16 76% 11/20/00
99% 9/28/00 -
-------------------------------------------------------------------------------------------------------------------
Famous Pawn, Inc. 11,100 11/30/01 100% 8/31/00 -
Pier I Imports 9,000 3/31/04 99% 10/10/00 -
100% 9/1/00 -
99% 9/1/00 -
100% 5/8/00 -
-------------------------------------------------------------------------------------------------------------------
95% 9/5/00 -
Hospital Affiliate 12,986 4/30/04 97% 11/4/00 720,000
Vanderbilt University 10,263 10/31/06 90% 11/4/00 244,750
Iowa Student Loan Liquidity 33,931 12/31/01 90% 8/14/00 -
96% 9/1/00 -
-------------------------------------------------------------------------------------------------------------------
98% 7/7/00 -
Le Bon Cleaners 3,000 6/14/05 91% 8/7/00 -
98% 8/31/00 -
Mabry & Mabry 4,423 5/31/05 89% 9/1/00 -
98% 8/31/00 -
-------------------------------------------------------------------------------------------------------------------
100% 8/4/00 -
GlobalScape 14,700 6/30/08 100% 8/4/00 -
95% 9/12/00 -
94% 10/11/00 -
Starbucks Coffee 1,371 2/28/10 100% 9/14/00 -
VISIGY 6,277 9/30/04 99% 8/8/00 688
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ONGOING UPFRONT ENVIRONMENTAL
ACTUAL REPLACEMENT TI/LC TI/LC TAX INSURANCE ENG. REPORT
RESERVES UPFRONT ONGOING ESCROW ESCROW RESERVE DATE
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
525 3,333 3,333 3,156 745 - 3/10/00
450 3,300 3,300 8,191 1,245 24,000 10/11/00
1,096 - - 11,673 - 26,625 11/17/00
4,058 - - 15,000 3,147 - 9/27/00
843 60,000 - 7,795 - - 10/27/00
------------------------------------------------------------------------------------------------------------
688 500,000 & 1,200,000 LOC - 8,067 - 14,625 9/5/00
107 150,000 2,083 6,851 670 - 10/23/00
114 - - 1,848 - - 1/29/00
395 - - 5,828 - - 9/1/00
335 - 1,115 8,637 - - 8/31/00
------------------------------------------------------------------------------------------------------------
695 - - 4,589 727 - 8/14/00
167 - 833 3,519 658 - 10/19/00
6,180 - - 20,512 1,963 38,750 8/14/00
230 - 1,250 1,675 323 - 8/30/00
- - 455 1,021 104 1,513 4/4/00
------------------------------------------------------------------------------------------------------------
895 - - 3,709 302 - 9/12/00
- 120,000 - 4,378 292 8,750 9/29/00
635 - 1,500 2,616 576 3,425 7/19/00
1,925 - 3,470 6,417 - 4,000 11/9/00
3,295 - - 7,262 1,508 13,391 9/14/00
------------------------------------------------------------------------------------------------------------
- 47,850 - 2,961 - - 7/14/00
1,130 - - 4,250 - - 9/20/00
175 - - - - 500 8/9/00
127 - - - - - 7/17/00
220 - - - - - 10/18/00
------------------------------------------------------------------------------------------------------------
- - - - - 2,063 4/26/00
2,544 - 10,627 23,095 905 34,625 9/27/00
420 - 1,900 3,231 168 7,125 11/19/99
787 - - 2,801 - - 9/19/00
2,319 - - 19,337 1,986 - 8/15/00
------------------------------------------------------------------------------------------------------------
1,605 - - 5,797 1,023 101,629 7/10/00
4% of gross revenue - - 79,681 - 86,407 Various
8/24/00
8/24/00
8/23/00
------------------------------------------------------------------------------------------------------------
8/24/00
8/23/00
8/24/00
8/24/00
8/22/00
------------------------------------------------------------------------------------------------------------
8/22/00
333 - - 9,852 - 1,875 8/4/00
- - - 59,236 - - 4/17/00
4,799 - - 206 1,508 - 9/14/00
475 - 2,085 2,667 291 54,500 9/18/00
------------------------------------------------------------------------------------------------------------
1,106 - 2,578 3,449 - 9,281 11/1/00
- - - 30,423 - - 10/3/00
3,417 296,345 7,500 6,258 - - 5/2/00
220 - 1,285 2,268 519 125 4/13/00
320 2,083 2,083 7,274 507 2,750 10/6/00
------------------------------------------------------------------------------------------------------------
1,557 - 5,041 7,822 725 11,750 4/7/00
1,140 - 1,885 4,907 974 - 7/5/00
30,546 - - 15,415 - - 8/9/00
295 - 1,950 1,917 390 1,500 6/14/00
1,181 - - 7,500 523 - 6/7/00
------------------------------------------------------------------------------------------------------------
1,345 - 2,800 6,667 1,452 66,661 6/27/00
885 75,000 - 10,204 963 5,645 7/20/00
1,365 - 5,655 9,760 601 243,246 5/17/00
3,420 - - 22,821 1,273 - 9/11/00
- - - - - 20,500 6/28/00
------------------------------------------------------------------------------------------------------------
2,083 - - 6,099 287 27,115 8/31/00
580 - - 1,648 237 - 9/28/00
4,040 - - 9,908 1,343 5,562 10/13/00
- - - - - - 3/31/00
1,860 LOC 1,112,749 3,840 LOC 16,667 LOC 1,667 LOC - 7/21/00
------------------------------------------------------------------------------------------------------------
190 - - 3,652 1,216 20,625 8/9/00
- 101,812 - 3,169 - - 9/7/00
330 137,220 2,170 6,712 632 - 4/13/00
917 51,773 4,445 15,233 622 18,500 6/22/00
1,396 120,480 2,500 7,500 758 40,730 7/17/00
------------------------------------------------------------------------------------------------------------
5,670 - - 16,127 2,931 29,820 8/2/00
610 - - 3,867 528 - 9/14/00
700 - 1,500 6,450 661 - 8/21/00
833 - 5,417 5,215 - 6,250 6/27/00
4,445 - - 4,394 1,026 119,781 8/17/00
------------------------------------------------------------------------------------------------------------
2,448 - - 2,302 985 1,313 8/18/00
829 - 3,324 4,750 1,667 7,500 4/14/00
1,578 - 2,833 10,962 - - 11/27/00
- - 5,625 18,523 853 - 8/11/00
- - - 2,417 737 - 7/26/00
------------------------------------------------------------------------------------------------------------
580 - - 2,563 - - 6/14/00
1,585 - - 15,112 2,331 5,625 8/28/00
- - - 10,583 - - 3/9/00
1,460 - 2,295 6,106 1,284 30,196 2/22/00
2,447 - - 22,981 - - 9/20/00
------------------------------------------------------------------------------------------------------------
9/20/00
9/20/00
860 - - 3,982 469 5,375 8/28/00
1,360 - 2,835 - 658 - 7/27/00
490 80,000 2,224 3,858 333 - 8/9/00
------------------------------------------------------------------------------------------------------------
1,946 - - 6,992 1,368 9,283 8/23/00
8/23/00
8/23/00
8/23/00
3,000 - - 4,725 1,650 - 8/4/00
------------------------------------------------------------------------------------------------------------
1,513 - 4,529 9,101 - 28,780 11/8/00
1,553 - 6,667 8,287 1,653 6,438 9/7/00
4,200 - - 3,825 1,458 27,063 9/14/00
2,400 - - 2,199 933 - 9/14/00
300 - - 2,083 - - 11/29/99
------------------------------------------------------------------------------------------------------------
5,170 - - 15,214 2,377 6,313 9/14/00
3,870 500,000 - 21,808 1,431 26,250 9/18/00
3,695 500,000 - 24,550 1,042 9,000 9/18/00
3,615 300,000 LOC 16,215 31,250 2,479 24,125 9/14/00
4,170 - - 13,548 1,787 61,816 9/13/00
------------------------------------------------------------------------------------------------------------
9,800 - - 13,314 4,012 - 4/14/00
275 - 2,325 7,939 458 - 6/19/00
840 - - 3,247 442 - 7/3/00
1,500 14,696 6,995 11,250 1,263 67,450 7/18/00
3,167 - - 19,127 4,227 - 8/15/00
------------------------------------------------------------------------------------------------------------
- 200,000 - 21,554 749 - 8/11/00
- - 3,557 18,523 586 - 8/11/00
1,070 - - 2,426 565 - 7/21/00
3,935 - - 13,225 2,154 2,975 7/31/00
110 - 650 3,647 203 - 9/13/00
688 5,417 5,417 10,750 3,385 - 9/26/00
------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENGINEERING APPRAISAL
REPORT DATE REPORT DATE SPONSOR
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7/27/00 7/6/00 Richman Bry, Jr.
11/9/00 9/20/00 Allen Shapolsky
10/26/00 11/2/00 Charles A. Gravely
9/27/00 10/1/00 Jeffery C. Camp
10/27/00 7/25/00 Charles A. Gravely
-------------------------------------------------------------------------------------------------------------------
10/3/00 8/1/00 Richard M. Pachulski
10/23/00 10/16/00 David A. Waldman, Drew Friedman
1/31/00 1/27/00 Johnny A. Ribeiro, Johnny R. Ribeiro
9/7/00 8/29/00 Martin Joffe, Paul Joffe
8/31/00 8/25/00 Mitchell B. Rutter, John J. Cuticelli Jr.
-------------------------------------------------------------------------------------------------------------------
8/3/00 7/27/00 Amazing Spaces, Inc., Kathleen V. Tautenhahn, Scott Tautenhahn
10/12/00 10/12/00 Lewis Patrick
8/29/00 8/21/00 Gould Investors LP
8/30/00 8/21/00 Necdet Senhart, Little Harbour Plaza, Inc.
4/5/00 4/7/00 Robert W. Comstock
-------------------------------------------------------------------------------------------------------------------
9/11/00 8/28/00 Palomar, LLC, John Minar
9/21/00 9/25/00 Harkinson Investment Corp., Jeff Harkinson, 12 Limited Partners
7/20/00 9/18/00 Andrew J. Saluan
9/19/00 11/10/00 Old Vine Investment Corporation
9/26/00 9/6/00 Robert P. Breunig, J. Kirk Williams
-------------------------------------------------------------------------------------------------------------------
7/13/00 7/3/00 Custer Court GP, Inc., PCP-Custer, Ltd., S&D Investments 98-1, JV, Syd Hurley
9/21/00 9/18/00 Oscar Plotkin, Timothy Traynor
8/9/00 8/8/00 Walter Zaremba
7/14/00 7/25/00 Maurice Hull
10/2/00 11/8/00 Patrick J. Ransley, Joseph T. Kirchhoff, Susan Kirchhoff
-------------------------------------------------------------------------------------------------------------------
4/26/00 4/26/00 Robert W. Basile
9/13/00 9/21/00 Alan C. Fox, Cottage Estates, LP, Newport VII, LLC
11/19/99 11/15/99 Manfred Zojer
9/18/00 9/11/00 Thomas T. Tatum, Jeffrey A. Kaplan
9/14/00 8/9/00 James P. Foster
-------------------------------------------------------------------------------------------------------------------
7/7/00 7/5/00 Daniel Haspert, James Bishop, Charles M. Cover
Various Various Equity Inns Inc.
10/19/00 8/3/00
10/30/00 8/9/00
10/13/00 8/10/00
-------------------------------------------------------------------------------------------------------------------
10/19/00 8/15/00
10/19/00 8/14/00
10/19/00 8/21/00
10/19/00 8/7/00
10/19/00 8/14/00
-------------------------------------------------------------------------------------------------------------------
10/19/00 8/21/00
8/3/00 7/11/00 SIMA Corporation
4/7/00 3/22/00 FelCor Lodging Trust, Inc.
8/25/00 8/28/00 Lindsey Investments, LP, Roy Stanley, Fairground Apartments Management Co.
9/8/00 9/14/00 SLS Enterprises, Inc., Samuel L. Savidge, Jr.
-------------------------------------------------------------------------------------------------------------------
11/6/00 10/20/00 Richard Cohen
9/23/00 9/9/00 Ron Barness, Alex Papakyriakou
5/2/00 4/11/00 Trademark Acquisitions and Development, Inc.
4/11/00 5/1/00 Sanford P. Aron
10/3/00 9/18/00 Dan Kosky
-------------------------------------------------------------------------------------------------------------------
8/7/00 7/31/00 Alan C. Fox
6/30/00 8/3/00 Michael Zimmerman, Alan Levin
8/9/00 7/1/00 Gerald Fineberg
6/13/00 10/1/00 Shawn Howell, Ellen J. Hoffman
4/14/00 4/11/00 Victor Chemtob
-------------------------------------------------------------------------------------------------------------------
6/28/00 7/1/00 Action Mortgage Corporation, Donald Schefmeyer
7/17/00 7/11/00 David Spatz, Kitty Jacobs
7/14/00 5/19/00 Michael Pashaie, David Taban
9/8/00 8/31/00 The Aspen Group, Inc., Sanford Gallanter, Edwin Sacks
7/19/00 7/1/00 LaSalle Hotel Operating Partnership
-------------------------------------------------------------------------------------------------------------------
8/31/00 8/15/00 Richard E. Ward
9/25/00 9/30/00 Raznick Trust of 1980, Raznick Family Trust 1982, Raznick & Sons, Inc., Deborah J. Raznick
10/12/00 10/9/00 Daniel Haspert, James Bishop, Charles M. Cover
8/1/00 7/21/00 Weingarten Realty Investors/Weingarten Realty Mgmt.
7/27/00 7/25/00 Walter Northcutt, John Thomas, Johnny Vaughn
-------------------------------------------------------------------------------------------------------------------
8/7/00 8/7/00 Robert Rieger, Jon Halpern, Asset Investors Corporation, JAH Realties, L.P., Rieger Homes, Inc.
9/1/00 10/1/00 Valley Parkway GP, Inc., S&D Investments 99-2, J.V., Lewisville No. 6 J.V.
4/11/00 11/1/00 Paul Mitchell Trust, Sanford P. Aron
8/7/00 6/1/00 Alan C. Fox
9/18/00 7/15/00 William O. Passo, Lindell Community Trust, William G. Sloan, Ganzalo Tejada
-------------------------------------------------------------------------------------------------------------------
7/27/00 7/26/00 U.L. Coleman III, William M. Comegys III, William Jefferson Cole
9/7/00 9/7/00 Gene Cox
8/11/00 9/8/00 Richard Shapack, Scott Marcus
6/27/00 10/4/00 Old Vine Investment Corporation
8/18/00 8/1/00 Coastal Funding Partners, HSC Partners #4, Steadfast LL, LLC
-------------------------------------------------------------------------------------------------------------------
8/21/00 8/11/00 Rodney F. Emery, V V Investors
4/7/00 4/5/00 Stephen & Min-Min Wong, Robert & Brenda Hardy, Dallas & Jean Bublitz
11/27/00 11/3/00 Henry Horowitz
8/17/00 8/3/00 Eric Brauss
7/20/00 7/18/00 Steven Mutnick, Barbara Epis
-------------------------------------------------------------------------------------------------------------------
6/14/00 3/1/00 Laurich Properties, Inc.
9/5/00 8/25/00 Maskatiya, Suri & Company
3/8/00 7/1/00 Joe Wolf
2/21/00 2/15/00 John Tsern, Rebecca Y. Tsern, Gayle Tsern Strang, Ely Tsern
11/6/00 8/9/00 James W. Hubbell III, R. Michael Hayes
-------------------------------------------------------------------------------------------------------------------
11/6/00 8/9/00
11/6/00 8/9/00
8/26/00 8/17/00 Randall Rowe, Barry McCabe, Vincent McBrien, Hometown America, LLC
8/9/00 7/31/00 Roger William Norman, Don Roger Norman
8/10/00 8/7/00 SBC Partners, LLC, Horizon Acquisitions, LLC, Gestio, Inc, Neil D. Ginsburg
-------------------------------------------------------------------------------------------------------------------
8/23/00 8/17/00 George W. Cox
8/23/00 8/17/00
8/23/00 8/17/00
8/23/00 8/17/00
8/7/00 8/2/00 Walt Dickson
-------------------------------------------------------------------------------------------------------------------
11/6/00 10/25/00 Richard Cohen
9/15/00 9/23/00 Faison Enterprises, Inc.
8/25/00 8/16/00 Spring Lake Management Co., Inc, J.E. Lindsey Family Ltd. Partnership, James E. Lindsey, Roy E. Stanley
8/25/00 8/16/00 James E. Lindsey, J.E. Lindsey Family LP, Rutledge Properties, ALP
11/18/99 11/9/99 Stanley Peck
-------------------------------------------------------------------------------------------------------------------
9/15/00 9/6/00 Robert P. Breunig, J. Kirk Williams
9/26/00 9/1/00 Jordan E. Slone, Herbert K. Bangel
9/26/00 9/1/00 Jordan E. Slone, Herbert K. Bangel
9/14/00 10/1/00 Garrett G. Alcock
9/8/00 9/14/00 Barry S. Nussbaum
-------------------------------------------------------------------------------------------------------------------
4/3/00 7/7/00 GP-The Links at OKC Mgmt Co, LP, James E. Lindsey, J.E. Lindsey Family, LP, John R. Rutledge
6/7/00 10/1/00 KDI Investments, Inc.
7/3/00 7/12/00 Stephen J. Garchik, Nancy Gunning
7/14/00 7/12/00 St. Joseph Holdings Co, Inc.
8/14/00 8/10/00 Thomas C. Proctor, Sr., Walton H. McMichael, Thomas C. Proctor, Jr.
-------------------------------------------------------------------------------------------------------------------
8/17/00 8/3/00 Eric Brauss
8/18/00 8/3/00 Eric Brauss
7/21/00 7/13/00 Robert K. Ostengaard
7/26/00 8/2/00 Henry P. Persons, III, Bryan B. Persons, David S. Hathaway, Roy B. Walden, III
9/18/00 9/14/00 David W. De Pierro, Susan L. De Pierro
8/31/00 8/18/00 Joseph Blum
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) CMB - Chase Manhattan Bank, GECC - General Electric Capital Corporation,
BSFI - Bear, Stearns Funding, Inc.
(2) Denotes Shadow Anchored Retail Properties
(3) Monthly Debt Service Payments for loans with interest only periods on an
Actual/360 basis have been disclosed as 1/12 of the annual debt service
amount.
(4) The Centreport Tech Center loan Original Balance and First Payment Date
were $1,590,000 and 6/1/00, respectively. An additional funding of $240,000
was made on December 15, 2000. The Original Balance and First Payment Date
shown above are subsequent to the additional funding. The first Monthly
Debt Service payment will be $13,601.55 and the remaining Monthly Debt
Service payments will be $13,747.26, which is shown above.
(5) The CVS - Babylon loan information above represents the monthly base rent,
ground lease payments, and debt service for the first 53 periods of the
loan. As the base rent in the Lease Agreement increases, ground lease and
debt service payments increases such that the loan is fully amortized at
maturity. The first Debt Service payment occurs on February 1, 2001 (Base
Rent $25,067.81/Ground Rent $15,000.00/Debt Service $9,171.89). Steps in
Base Rent, Ground Rent, and Debt Service, respectively, occur on 7/1/2005
($28,075.95/$17,250.00/$9,871.35), 7/1/2010
($31,445.06/$19,837.50/$10,592.48), and 7/1/2015
($35,218.47/$22,813.17/$11,328.48).
(6) The CVS - Bryan loan information above represents the monthly base rent and
debt service for the first 48 periods of the loan. As the base rent in the
Lease Agreement increases, the debt service increases such that the loan is
fully amortized at maturity. The first Debt Service payment occurs on
January 1, 2001 (Base Rent $11,195.21/Debt Service $10,321.57). Steps in
Base Rent and Debt Service, respectively, occur on 1/1/2005
($11,754.97/$10,845.75), 1/1/2010 ($12,342.72/$11,396.15), and 1/1/2015
($12,959.86/$11,974.07).
(7) The CVS - Cornelius loan information above represents the monthly base rent
and debt service for the first 33 periods of the loan. As the base rent in
the Lease Agreement increases, the debt service increases such that the
loan is fully amortized at maturity. The first Debt Service payment occurs
on November 1, 2000 (Base Rent $14,728.75/Debt Service $14,040.56). Steps
in Base Rent and Debt Service, respectively, occur on 8/1/2003
($15,488.13/$14,770.74), 8/1/2008 ($16,247.50/$15,500.90), and 8/1/2013
($17,006.92/$16,231.11).
(8) The CVS - Poughkeepsie loan information above represents the monthly base
rent and debt service for the first 56 periods of the loan. As the base
rent in the Lease Agreement increases, the debt service increases such that
the loan is fully amortized at maturity. The first Debt Service payment
occurs on January 1, 2001 (Base Rent $11,643.75/Debt Service $10,302.45).
Steps in Base Rent and Debt Service, respectively, occur on 9/1/2005
($13,390.31/$11,877.50), 9/1/2010 ($15,398.86/$13,688.80), and 9/1/2015
($16,332.79/$14,521.99).
(9) The CVS - Shrewsbury loan information above represents the monthly base
rent, ground lease payments, and debt service for the first 49 periods of
the loan. As the base rent in the Lease Agreement increases, ground lease
and debt service payments increases such that the loan is fully amortized
at maturity. The first Debt Service payment occurs on August 1, 2000 (Base
Rent $32,214.58/Ground Rent $16,000.00/Debt Service $15,166.53). Steps in
Base Rent, Ground Rent, and Debt Service, respectively, occur on 9/1/2004
($35,113.90/$17,600.00/$16,392.30), 9/1/2009
($38,274.15/$19,360.00/$17,713.29), and 9/1/2014
($41,718.82/$21,296.00/$19,136.56).
(10) At closing, lender held back $1,970,000. This holdback will be released
and/or applied to the loan balance (by partially defeasing the loan) no
later than October 2, 2001. The escrow will be released subject to the
following conditions: a) certain spaces renewed or relet; b) the actual
debt service coverage is at a minimum of 1.20x.
<PAGE>
[CHASE LOGO]
THE RIGHT RELATIONSHIP IS EVERYTHING.(R)
ANNEX B
NEW ISSUE TERM SHEET
ANY INVESTMENT DECISION WTH RESPECT TO THE SECURITIES SHOULD BE MADE BY YOU
BASED UPON THE INFORMATION CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND
PROSPECTUS RELATNG TO THE SECURITIES. THE INFORMATION HEREIN WILL BE SUPERSEDED
IN ITS ENTIRETY BY THE INFORMATION CONTAINED IN THE FINAL PROSPECTUS
SUPPLEMENT AND PROSPECTUS.
THE INFORMATION CONTAINED HEREIN SUPERSEDES THE INFORMATION IN ALL PRIOR TERM
SHEETS, IF ANY.
-------------------------------
$633,061,304(APPROXIMATE)
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-1
-------------------------------
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION--DEPOSITOR
GE CAPITAL LOAN SERVICES, INC.--MASTER SERVICER
LEND LEASE ASSET MANAGEMENT, L.P.--SPECIAL SERVICER
GENERAL ELECTRIC CAPITAL CORPORATION--MORTGAGE LOAN SELLER
THE CHASE MANHATTAN BANK--MORTGAGE LOAN SELLER
BEAR, STEARNS FUNDING, INC. --MORTGAGE LOAN SELLER
-------------------------------
FOR FURTHER INFORMATION CONTACT:
Scott Davidson
Managing Director
Chase Securities Inc.
212-834-3813
CHASE SECURITIES INC. BEAR, STEARNS & CO. INC.
Book Running Manager
DEUTSCHE BANC ALEX. BROWN J.P. MORGAN & CO. SALOMON SMITH BARNEY INC.
The analyses in this report are based upon information provided by General
Electric Capital Corporation, The Chase Manhattan Bank and Bear, Stearns
Funding, Inc. (the "Sellers"). Chase Securities Inc., Bear, Stearns & Co. Inc.,
Deutsche Bank Securities Inc., J.P. Morgan Securities Inc., and Salomon Smith
Barney Inc. (the "Underwriters") make no representations as to the accuracy or
completeness of the information contained herein. The information contained
herein is qualified in its entirety by the information in the Prospectus and
Prospectus Supplement for the securities referred to herein (the "Securities").
The information contained herein is preliminary as of the date hereof,
supersedes any previous information delivered to you by the Underwriters and
will be superseded by the applicable final Prospectus and Prospectus Supplement
and any other information subsequently filed with the Securities and Exchange
Commission. These materials are subject to change, completion, or amendment from
time to time without notice, and the Underwriters are under no obligation to
keep you advised of such changes. These materials are not intended as an offer
or solicitation with respect to the purchase or sale of any Security. Any
investment decision with respect to the Securities should be made by you based
upon the information contained in the final Prospectus Supplement and Prospectus
relating to the Securities. You should consult your own counsel, accountant, and
other advisors as to the legal, tax, business, financial and related aspects of
a purchase of the Securities.
The attached information contains certain tables and other statistical analyses
(the "Computational Materials") which have been prepared in reliance upon
information furnished by the Sellers. They may not be provided to any third
party other than the addressee's legal, tax, financial and/or accounting
advisors for the purposes of evaluating said material. Numerous assumptions were
used in preparing the Computational Materials which may or may not be reflected
therein. As such, no assurance can be given as to the Computational Materials'
accuracy, appropriateness or completeness in any particular context; nor as to
whether the Computational Materials and/or the assumptions upon which they are
based reflect present market conditions or future market performance. These
Computational Materials should not be construed as either projections or
predictions or as legal, tax, financial or accounting advice. Any weighted
average lives, yields and principal payment periods shown in the Computational
Materials are based on prepayment assumptions, and changes in such prepayment
assumptions may dramatically affect such weighted average lives, yields and
principal payment periods. In addition, it is possible that prepayments on the
underlying assets will occur at rates slower or faster than the rates shown in
the attached Computational Materials. Furthermore, unless otherwise provided,
the Computational Materials assume no losses on the underlying assets and no
interest shortfalls. The specific characteristics of the Securities may differ
from those shown in the Computational Materials due to differences between the
actual underlying assets and the hypothetical underlying assets used in
preparing the Computational Materials. The principal amount and designation of
any Security described in the Computational Materials are subject to change
prior to issuance. Neither the Underwriters nor any of their affiliates make any
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. THIS
INFORMATION IS FURNISHED TO YOU SOLELY BY THE UNDERWRITERS AND NOT BY THE ISSUER
OF THE SECURITIES OR ANY OF ITS AFFILIATES. THE UNDERWRITERS ARE NOT ACTING AS
AGENT FOR THE ISSUER OR ITS AFFILIATES IN CONNECTION WITH THE PROPOSED
TRANSACTION.
DECEMBER 2000
<PAGE>
[CHASE LOGO]
THE RIGHT RELATIONSHIP IS EVERYTHING.(R)
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
SUMMARY OF CERTIFICATES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
INITIAL PASS- ASSUMED INITIAL WEIGHTED PRINCIPAL
CLASS THROUGH FINAL PASS-THROUGH AVERAGE EXPECTED OR
CERTIFICATE APPROXIMATE RATE DISTRIBUTION RATE LIFE RATINGS NOTIONAL
CLASS BALANCE OR CREDIT DESCRIPTION DATE (5) (APPROX.) (YEARS) (6) (MOODY'S PRINCIPAL
NOTIONAL SUPPORT /FITCH) WINDOW (6)
AMOUNT (1)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 $111,957,000 23.500% Fixed 5/10 6.3200% 5.70 Aaa/AAA 1/01-5/10
A-2 $429,151,265 23.500% Fixed 12/10 6.4960% 9.78 Aaa/AAA 5/10-12/10
X $707,331,066 N/A WAC (I/O) (2) 12/20 1.6518% 9.23 Aaa/AAA 1/01-12/20
B $28,293,243 19.500% Fixed (3) 12/10 6.5880% 9.98 Aa2/AA 12/10-12/10
C $31,829,898 15.000% Fixed (3) 12/10 6.7340% 9.98 A2/A 12/10-12/10
D $8,841,638 13.750% Fixed (3) 12/10 6.8620% 9.98 A3/A- 12/10-12/10
E $22,988,260 10.500% Variable (4) 12/10 7.1699% 9.98 Baa2/BBB 12/10-12/10
F $8,841,638 9.250% Variable (4) N/A 7.5199% N/A N/A N/A
G $23,872,424 5.875% Fixed (3) N/A 6.1310% N/A N/A N/A
H $6,189,147 5.000% Fixed (3) N/A 6.1310% N/A N/A N/A
I $5,304,983 4.250% Fixed (3) N/A 6.1310% N/A N/A N/A
J $7,073,310 3.250% Fixed (3) N/A 6.1310% N/A N/A N/A
K $6,189,147 2.375% Fixed (3) N/A 6.1310% N/A N/A N/A
L $6,189,147 1.500% Fixed (3) N/A 6.1310% N/A N/A N/A
M $10,609,966 0.00% Fixed (3) N/A 6.1310% N/A N/A N/A
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Approximate, subject to a permitted variance of plus or minus 10%.
(2) The pass-through rate on the Class X certificates will be equal to the
excess, if any, of (1) the weighted average of the net interest rates on
the mortgage loans determined without regard to any reductions in the
interest rate resulting from modification of the mortgage loans (in each
case converted to a rate expressed on the basis of a 360-day year
consisting of twelve 30-day months), over (2) the weighted average of the
pass-through rates of the other certificates (other than the residual
certificates and the Class S certificates).
(3) For any distribution date, if the weighted average of the net interest
rates on the mortgage loans determined without regard to any reductions in
the interest rate resulting from modification of the mortgage loans (in
each case converted to a rate expressed on the basis of a 360-day year
consisting of twelve 30-day months) as of the first day of the related due
period is less than the rate specified for the Class B, Class C, Class D,
Class G, Class H, Class I, Class J, Class K, Class L and Class M
certificates with respect to the distribution date, then the pass-through
rate for that class of certificates on that distribution date will equal
the weighted average net mortgage interest rate.
(4) It is anticipated that the pass-through rate applicable to the Class E and
Class F certificates on each distribution date will be equal to the
weighted average of the net interest rates on the mortgage loans
determined without regard to any reductions in the interest rate resulting
from modification of the mortgage loans (in each case converted to a rate
expressed on the basis of a 360-day year consisting of twelve 30-day
months) minus 0.97% for Class E and minus 0.62% for Class F per annum.
(5) The assumed final distribution dates set forth have been determined on the
basis of the assumptions described in "Description of the
Certificates--Assumed Final Distribution Date; Rated Final Distribution
Date" in the prospectus supplement. The rated final distribution date for
each class of certificates is January 15, 2033. See "Description of the
Certificates--Assumed Final Distribution Date; Rated Final Distribution
Date" in the prospectus supplement.
(6) The weighted average life and period during which distributions of
principal would be received (or applied in the reduction of the notional
amount in the case of Class X certificates) set forth in the foregoing
table with respect to each class of certificates is based on the
assumptions set forth under "Yield and Maturity Considerations--Weighted
Average Life" and on the assumptions that there are no prepayments (other
than on each anticipated prepayment date, if any) or losses on the
mortgage loans and that there are no extensions of maturity dates of
mortgage loans.
The Class F, Class G, Class H, Class I, Class J, Class K, Class L and Class M
are not offered by this prospectus supplement. The Class S, Class R and Class LR
certificates are not offered by the prospectus supplement or represented in this
table.
COLLATERAL OVERVIEW:
--------------------
Aggregate Principal Balance: $707,331,067
Number of Mortgage Loans: 102
Number of Mortgaged Properties: 113
Average Cut-Off Date Balance: $6,934,618
Weighted Average Current Mortgage Rate: 8.198%
Weighted Average Underwritten DSCR: 1.36x (1)
Weighted Average Cut-off Date LTV: 71.34% (1)
Weighted Average Original Term to Maturity (months): 119
Weighted Average Remaining Term to Maturity (months): 117
Weighted Average Original Amortization Term (months): 346
Balloon Loans as a % of Total: 90.93%
APD Loans as a % of Total: 7.25%
Interest-only Loans as a % of Total: 0.78%
Fully Amortizing Loans as a % of Total: 1.04%
Single Largest Loan as a % of Total: 5.60%
Five Largest Loans as a % of Total: 21.38%
Ten Largest Loans as a % of Total: 32.40%
(1) Exclude 5 credit tenant lease loans, representing 1.04% of the aggregate
principal balance of all mortgage loans as of the cut-off date.
<TABLE>
<CAPTION>
AGGREGATE
TEN LARGEST LOAN SUMMARY CUT-OFF DATE % OF IPB LOAN PER CUT-OFF DSCR PROPERTY
BALANCE SF/UNIT LTV TYPE
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Synergy Business Park I & II $39,600,000 5.60% $80.52 73.81% 1.24x Office
EII Portfolio I (Baa2/BBB-) 36,600,000 5.17 $30,990.69 54.71% 2.18x Hotel
Embassy Suites - New Orleans 32,466,236 4.59 $87,274.83 69.08% 1.38x Hotel
The Links at Oklahoma City 23,451,572 3.32 $39,883.63 73.29% 1.22x Multifamily
University Park Tech I & II 19,080,240 2.70 $100.02 78.84% 1.22x Industrial
Holiday Inn - Mansfield 16,953,839 2.40 $83,929.90 69.20% 1.46x Hotel
Parkway Tower 15,683,486 2.22 $219.13 78.42% 1.05x* Office
Laguna Oaks Apartments 15,451,925 2.18 $76,875.25 78.80% 1.22x Multifamily
Greenway Park Plaza 15,200,000 2.15 $73.84 80.00% 1.34x Retail
Le Montrose 14,705,230 2.08 $111,403.26 57.67% 1.91x Hotel
TOTAL/WEIGHTED AVERAGE $229,192,527 32.40% 70.14% 1.46x
-------------------------------------------------------------------------------------------------------
</TABLE>
*Reverse earnout - please refer to the footnote on page 13.
<TABLE>
<CAPTION>
STATE NUMBER OF MORTGAGED AGGREGATE CUT-OFF DATE % OF INITIAL POOL
PROPERTIES BALANCE BALANCE
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California 20 $133,987,169 18.94%
Texas 24 132,449,784 18.73
Tennessee 4 55,658,097 7.87
Louisiana 2 38,559,478 5.45
Maryland 7 33,078,234 4.68
Other States 56 313,598,305 44.33
TOTAL 113 $707,331,067 100.00%
---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE CUT-OFF
PREPAYMENT PROVISIONS NUMBER OF DATE % OF INITIAL
MORTGAGE LOANS BALANCE POOL BALANCE
------------------------------------------------- ----------------- ----------------------- ----------------
<S> <C> <C> <C>
Lockout period followed by defeasance 101 $695,342,972 98.31%
Lockout period followed by yield maintenance 1 11,988,095 1.69
TOTAL 102 $707,331,067 100.00%
------------------------------------------------- ----------------- ----------------------- ----------------
</TABLE>
KEY CHARACTERISTICS:
--------------------
<TABLE>
<CAPTION>
<S> <C>
Lead Manager: Chase Securities Inc. (book and co-lead); Bear, Stearns & Co. Inc. (co-lead)
Master Servicer: GE Capital Loan Services, Inc.
Special Servicer: Lend Lease Asset Management, L.P.
Trustee: Wells Fargo Bank Minnesota, N.A.
Mortgage Loan Sellers: General Electric Capital Corporation (67%)
The Chase Manhattan Bank (19%)
Bear, Stearns Funding, Inc. (14%)
Closing: On or about December 20, 2000
Cut-off Date: December 10, 2000
Distribution Date: 15th day of each month or following business day
ERISA Eligible: Classes A1, A2, B, C, D, E and X are expected to be ERISA eligible
SMMEA Eligible: No classes are eligible
Structure: Sequential Pay
Day Count: 30/360, payable monthly
Tax Treatment: REMIC
Rated Final Distribution Date: January 15, 2033
Minimum Denominations: $10,000 initial principal amount for the publicly offered
certificates and $1,000,000 initial notional amount for the
Class X certificates. Each certificate will be offered in
multiples of 1 in excess of the minimum denomination.
Delivery: DTC, Clearstream Banking, Euroclear
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE CUT-OFF
CURRENT USE OF ALL MORTGAGED DATE % OF INITIAL POOL
MORTGAGED PROPERTIES PROPERTIES BALANCE BALANCE
--------------------------- -------------------- ----------------------- ---------------------
<S> <C> <C> <C>
Office 23 $168,959,544 23.89%
Multifamily 19 151,204,259 21.38
Anchored Retail 20 116.468,413 16.47
Industrial 9 69,263,590 9.79
Full-Service Hotel 3 64,125,305 9.07
Unanchored Retail 14 49,230,246 6.96
Limited-Service Hotel 9 36,600,000 5.17
Manufactured Housing 5 23,051,303 3.26
Self Storage 6 21,068,959 2.98
CTL* 5 7,359,448 1.04
TOTAL 113 $707,331,067 100.00%
--------------------------- -------------------- ----------------------- ---------------------
</TABLE>
*All with subsidiaries of CVS as a tenant, rated A by S&P and A3 by Moody's
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE CUT-OFF
PROPERTY TYPE (1) MORTGAGED DATE % OF INITIAL POOL
PROPERTIES BALANCE BALANCE
--------------------------- -------------------- ----------------------- ---------------------
<S> <C> <C> <C>
Office 23 $168,959,544 23.89%
Retail 34 165,698,659 23.43
Multifamily 19 151,204,259 21.38
Hotel 12 100,725,305 14.24
Industrial 9 69,263,590 9.79
TOTAL 97 $655,851,357 92.73%
--------------------------- -------------------- ----------------------- ---------------------
</TABLE>
(1) Represents the property type concentrations in excess of 5% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date.
Page 2 of 16
<PAGE>
[CHASE LOGO]
THE RIGHT RELATIONSHIP IS EVERYTHING.(R)
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
COLLATERAL STATISTICS
<TABLE>
<CAPTION>
RANGE OF DSCR (1) NUMBER OF MORTGAGE AGGREGATE CUT-OFF % OF INITIAL POOL
LOANS/PROPERTIES DATE BALANCE BALANCE
------------------------------------ -------------------------- ------------------------ -----------------------------
<S> <C> <C> <C>
1.050x to 1.199x (2) 1/1 $15,683,486 2.22%
1.200x to 1.229x 20/20 165,560,543 23.41
1.230x to 1.259x 18/18 137,088,125 19.38
1.260x to 1.299x 22/22 98,862,935 13.98
1.300x to 1.369x 14/14 83,611,205 11.82
1.370x to 1.499x 15/15 122,526,036 17.32
1.500x to 2.420x 7/18 76,639,289 10.83
TOTAL 97/108 $699,971,619 98.96%
------------------------------------ -------------------------- ------------------------ ----------------------------
</TABLE>
(1) Excludes 5 credit tenant lease loans, representing 1.04% of the aggregate
principal balance of all mortgage loans as of the cut-off date.
(2) Reverse earnout - please refer to the footnote on page 13.
<TABLE>
<CAPTION>
RANGE OF LTV AS OF THE NUMBER OF MORTGAGE AGGREGATE CUT-OFF % OF INITIAL POOL
CUT-OFF DATE (1) LOANS/PROPERTIES DATE BALANCE BALANCE
------------------------------------ --------------------------- ----------------------- -----------------------------
<S> <C> <C> <C>
34.83% to 59.99% 9/20 $84,466,237 11.94%
60.00% to 64.99% 7/7 24,487,963 3.46
65.00% to 68.99% 14/14 80,748,438 11.42
69.00% to 72.99% 18/18 148,923,303 21.05
73.00% to 76.99% 23/23 167,633,174 23.70
77.00% to 79.99% 21/21 152,520,454 21.56
80.00% to 80.91% 5/5 41,192,051 5.82
TOTAL 97/108 $699,971,619 98.96%
------------------------------------ --------------------------- ----------------------- -----------------------------
</TABLE>
(1) Excludes 5 credit tenant lease loans, representing 1.04% of the aggregate
principal balance of all mortgage loans as of the cut-off date.
<TABLE>
<CAPTION>
RANGE OF PRINCIPAL NUMBER OF MORTGAGE AGGREGATE CUT-OFF % OF INITIAL POOL
CUT-OFF DATE BALANCES LOANS/PROPERTIES DATE BALANCE BALANCE
------------------------------------ --------------------------- ----------------------- -----------------------------
<S> <C> <C> <C>
$1,165,000 to 3,000,000 30/30 $63,959,343 9.04%
3,000,001 to 5,000,000 22/24 88,733,757 12.54
5,000,001 to 9,000,000 25/25 174,294,933 24.64
9,000,001 to 15,000,000 16/17 184,935,977 26.15
15,000,001 to 20,000,000 5/5 82,789,249 11.70
20,000,001 to 30,000,000 2/2 43,551,572 6.16
30,000,001 to 36,600,000 2/10 69,066,236 9.76
TOTAL 102/113 $707,331,067 100.00%
------------------------------------ --------------------------- ----------------------- -----------------------------
</TABLE>
<TABLE>
<CAPTION>
RANGE OF REMAINING TERM TO NUMBER OF MORTGAGE AGGREGATE CUT-OFF % OF INITIAL POOL
MATURITY OR APD (MONTHS) (1) LOANS/PROPERTIES DATE BALANCE BALANCE
------------------------------------ --------------------------- ----------------------- -----------------------------
<S> <C> <C> <C>
58 to 79 3/3 $19,932,906 2.82%
80 to 99 1/1 9,350,000 1.32
100 to 115 6/6 53,204,165 7.52
116 to 118 43/43 308,569,818 43.62
119 to 120 44/55 308,914,730 43.67
121 to 220 1/1 1,645,270 0.23
221 to 240 4/4 5,714,178 0.81
TOTAL 102/113 $707,331,067 100.00%
------------------------------------ --------------------------- ----------------------- -----------------------------
</TABLE>
(1) For the 9 mortgage loans with a first payment date of either 2/1/01 or
2/10/01, representing 5.05% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, the "Remaining Term to Maturity
Date or Anticipated Prepayment Date" is calculated as the term between the
First Payment Date and the Maturity Date.
<TABLE>
<CAPTION>
RANGE OF MORTGAGE RATES NUMBER OF MORTGAGE AGGREGATE CUT-OFF % OF INITIAL POOL
LOANS/PROPERTIES DATE BALANCE BALANCE
------------------------------------ --------------------------- ----------------------- -----------------------------
<S> <C> <C> <C>
7.700% to 7.899% 8/8 $53,691,597 7.59%
7.900% to 8.099% 29/32 217,116,515 30.70
8.100% to 8.199% 14/14 79,173,653 11.19
8.200% to 8.399% 36/44 249,831,654 35.32
8.400% to 8.599% 9/9 58,709,969 8.30
8.600% to 8.799% 5/5 44,026,859 6.22
8.800% to 9.000% 1/1 4,780,819 0.68
TOTAL 102/113 $707,331,067 100.00%
------------------------------------ --------------------------- ----------------------- -----------------------------
</TABLE>
<TABLE>
<CAPTION>
AMORTIZATION TYPES NUMBER OF MORTGAGE LOANS AGGREGATE CUT-OFF % OF INITIAL POOL
DATE BALANCE BALANCE
------------------------------------ --------------------------- ----------------------- -----------------------------
<S> <C> <C> <C>
Balloon Loans (1) 94 $643,166,389 90.93%
APD Loans 2 51,305,230 7.25
Fully Amortizing Loans 5 7,359,448 1.04
Interest-only Loans (2) 1 5,500,000 0.78
TOTAL 102 $707,331,067 100.00%
------------------------------------ --------------------------- ----------------------- -----------------------------
</TABLE>
(1) Excludes APD loans and the mortgage loan that pays interest-only for the
life of its terms. Includes 1 loan that pays interest-only for 24 months.
(2) This mortgage loan provides monthly payments of interest-only over the
entire term of the mortgage loan and the payment of the entire principal
amount of the mortgage loan at maturity.
<TABLE>
<CAPTION>
BASIS FOR ACCRUAL OF INTEREST NUMBER OF AGGREGATE CUT-OFF % OF INITIAL POOL
MORTGAGE LOANS DATE BALANCE BALANCE
------------------------------------ --------------------------- ----------------------- -----------------------------
<S> <C> <C> <C>
Actual/360 102 $707,331,067 100.00%
TOTAL 102 $707,331,067 100.00%
------------------------------------ --------------------------- ----------------------- -----------------------------
</TABLE>
Page 3 of 16
<PAGE>
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
SUMMARY OF ISSUE
ISSUE TYPE: Sequential pay multi-class commercial mortgage REMIC
OFFERED SECURITIES: Classes A-1, A-2, X, B, C, D, and E
COLLATERAL: Approximately $707,331,067 pool of 102 fixed-rate
commercial, multifamily and manufactured housing
community mortgage loans
LOAN SELLERS: General Electric Capital Corporation, The Chase
Manhattan Bank and Bear, Stearns Funding, Inc.
DEPOSITOR: GE Capital Commercial Mortgage Corporation
UNDERWRITERS: Chase Securities Inc.--Book Running Manager, Co-Lead;
Bear, Stearns & Co. Inc.--Co-Lead;
Deutsche Bank Securities Inc.;
J.P. Morgan Securities Inc.;
Salomon Smith Barney Inc.
MASTER SERVICER: GE Capital Loan Services, Inc.
PRIMARY SERVICERS: GE Capital Loan Services, Inc., The Chase Manhattan
Bank
SPECIAL SERVICER: Lend Lease Asset Management, L.P.
TRUSTEE: Wells Fargo Bank Minnesota, N.A.
PAYING AGENT: The Chase Manhattan Bank
RATING AGENCIES: Moody's and Fitch
CUT-OFF DATE: December 10, 2000
CLOSING DATE: On or about December 21, 2000
DISTRIBUTION DATE: The 15th day of the month or, if that day is not a
business day, the next business day, beginning in
January 2001, provided that the distribution date
will be no earlier than the fourth business day after
the related determination date.
DETERMINATION DATE: The 11th day of the month in which the related
distribution date occurs, or if the 11th day is not a
business day, then the immediately following business
day.
DENOMINATIONS: The offered certificates (other than the Class X
certificates) will be offered in minimum
denominations of $10,000 initial principal amount;
the Class X certificates will be offered in minimum
denominations of $1,000,000 initial notional amount.
ERISA CONSIDERATIONS: All offered certificates are expected to be ERISA
eligible
SMMEA ELIGIBILITY: No certificates are eligible.
CERTIFICATE REGISTRATION: Certificate owners may hold their certificates
through DTC (in the United States) or Clearstream
Banking, societe anonyme or The Euroclear System (in
Europe) if they are participants of that system, or
indirectly through organizations that are
participants in those systems.
Page 4 of 16
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ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
STRUCTURAL CHARACTERISTICS
INTEREST ACCRUAL PERIOD: Interest will accrue on the offered certificates
during the calendar month prior to the related
distribution date and will be calculated assuming
that each month has 30 days and each year has 360
days.
PASS-THROUGH RATES: Certificates will accrue interest at an annual rate
called a pass-through rate which is set forth below
for each class other than the Class E and Class X
certificates:
Class A-1 6.320%
Class A-2 6.496%
Class B 6.588% (1)
Class C 6.734% (1)
Class D 6.862% (1)
(1) For any distribution date, if the weighted
average of the net interest rates on the
mortgage loans determined without regard to
any reductions in the interest rate resulting
from modification of the mortgage loans (in
each case converted to a rate expressed on
the basis of a 360-day year consisting of
twelve 30-day months and net of all servicing
and trustee fees) as of the first day of the
related due period is less than the rate
specified for the Class B, Class C or Class D
certificates with respect to the distribution
date, then the pass-through rate for that
class of certificates on that distribution
date will equal such weighted average net
mortgage interest rate.
If you invest in certain offered mezzanine classes
(anticipated to include Class E), your pass-through
rate will be equal to the weighted average interest
rate of the mortgage loans (in each case converted to
a rate expressed on the basis of a 360-day year
consisting of twelve 30-day months and net of all
servicing and trustee fees), less 0.97% per annum for
Class E.
If you invest in the Class X certificates, your
pass-through rate will be equal to the excess, if
any, of (1) the weighted average interest rate of the
mortgage loans (in each case adjusted, if necessary
to accrue on the basis of a 360-day year consisting
of twelve 30-day months and net of all servicing and
trustee fees) over (2) the weighted average of the
pass-through rates of the other certificates (other
than the Class S, Class R and Class LR certificates)
as described in the prospectus supplement. The
weighting will be based upon the respective principal
amounts of those classes.
PRINCIPAL DISTRIBUTIONS: On each distribution date, funds available for
distribution from the mortgage loans, net of
specified trust expenses, will be distributed to the
class of certificates outstanding, with the earliest
alphabetical/numerical Class designation, until its
certificate balance is reduced to zero. If the
principal amount of each class of certificates other
than Class A-1 and Class A-2 has been reduced to
zero, funds available for principal will be
distributed to Class A-1 and Class A-2, pro rata,
rather than sequentially.
Page 5 of 16
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
STRUCTURAL CHARACTERISTICS (continued)
INTEREST DISTRIBUTIONS: Each class of offered certificates (other than the
Class X certificates) will be entitled on each
distribution date to interest accrued at its
pass-through rate on the outstanding certificate
balance of such class during the prior calendar month
(on a 30/360 day basis). The Class X certificates
will be entitled on each distribution date to the
interest accrued at the related pass-through rate on
its notional amount during the prior calendar month.
PREPAYMENT Each mortgage loan prohibits any prepayments or
PROVISIONS: defeasance for a specified period of time after its
date of origination (a "Lockout Period"). In
addition, the mortgage loans generally have open
prepayment periods 3 months prior to maturity. Each
mortgage loan restricts voluntary prepayments in one
of the following ways:
(1) 101 of the mortgage loans, representing
approximately 98.31% of the Initial Pool Balance,
permit only defeasance after the expiration of the
Lockout Period; and
(2) 1 of the mortgage loans, representing
approximately 1.69% of the Initial Pool Balance,
requires that any principal prepayment made during a
specified period of time after the Lockout Period (a
"yield maintenance period"), be accompanied by a
Yield Maintenance Charge.
YIELD MAINTENANCE CHARGES: On any Distribution Date, yield maintenance charges
collected during the related Due Period will be
required to be distributed by the Paying Agent and
allocated between the Class A through F Certificates
and the Class X Certificates.
REPRESENTATIONS General Electric Capital Corporation, The Chase
AND WARRANTIES: Manhattan Bank, and Bear, Stearns Funding, Inc. will
make certain representations and warranties with
respect to each mortgage loan sold by General
Electric Capital Corporation, The Chase Manhattan
Bank, and Bear, Stearns Funding, Inc., respectively.
Page 6 of 16
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ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
SYNERGY BUSINESS PARK I & II
--------------------------------------------------------------------------------
LOAN INFORMATION
--------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE:
SYNERGY BUSINESS PARK I: $19,500,000 $19,500,000
SYNERGY BUSINESS PARK II: $20,100,000 $20,100,000
--------------------------------------
TOTAL: $39,600,000 $39,600,000
% OF POOL BY IPB: 5.60%
ORIGINATOR: GECC
LOAN DATE: 11/03/00
INTEREST RATE: 7.980%
REMAINING AMORTIZATION: 360 months
MATURITY DATE: 12/1/10
SPONSOR: Jordan E. Slone
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: Yes
RESERVES: SYNERGY BUSINESS PARK I LOAN:
Upfront TI/LC Reserve: $500,000
Monthly TI/LC Reserve: $18,330 (to replenish
upfront reserves after depletion)
Upfront Capital Improvement Reserves: $720,000
Monthly Replacement Reserve: $3,870
SYNERGY BUSINESS PARK II LOAN:
Upfront TI/LC Reserve: $500,000
Monthly TI/LC Reserve: $18,460 (to replenish
upfront reserves after depletion)
Upfront Capital Improvement Reserve: $244,750
Monthly Replacement Reserve: $3,695
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Portfolio
PROPERTY TYPE: Office
LOCATION: Brentwood, TN
YEAR BUILT: 1983
COLLATERAL: Eight multi-tenanted office buildings comprising
the former Koger Business Center. The four
buildings securing the Synergy Business Park I
Loan contain approximately 243,691 square feet
of net leaseable area, three of which were built
between 1984 and 1987 and one of which was built
in 1863 and renovated in 1985. The four
buildings securing the Synergy Business Park II
loan contain approximately 248,109 square feet
of net leasable area and were built between 1983
and 1998.
MAJOR TENANTS (% OF TOTAL SF): GE Information Services, Inc. (12.09%)
Hart Freeland (4.80%)
General Motors AC (4.70%)
CURRENT OCCUPANCY: 93.74%
UWNCF: $4,326,139 (total)
APPRAISED VALUE: $53,650,000 (total)
APPRAISAL DATE: 9/1/00
CUT-OFF DATE LOAN/SF: $80.52
CUT-OFF DATE LTV: 73.81%
BALLOON LTV: 66.06%
UWNCF DSCR: 1.24x
--------------------------------------------------------------------------------
[SYNERGY BUSINESS PARK I & II PICTURE OMITTED]
Page 7 of 16
<PAGE>
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CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
EII PORTFOLIO I
--------------------------------------------------------------------------------
LOAN INFORMATION
--------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $36,600,000 $36,600,000
SHADOW RATING: Baa2 (Moody's), BBB- (Fitch)
% OF POOL BY IPB: 5.17%
ORIGINATOR: GECC
LOAN DATE: 11/07/00
INTEREST RATE: 8.250%
REMAINING AMORTIZATION: 287 months*
APD: 12/1/10
SPONSOR: Equity Inns Inc. (NYSE - ENN)
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
LOCK BOX: Springing hard at 1.45x DSCR(set up at closing)
RESERVES: Upfront Improvement Plan Reserve: $500,000
Monthly Replacement Reserve: 4% of gross revenue
* weighted average based on 300 months for 8 properties and 228 months for
1 property
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Portfolio
PROPERTY TYPE: Limited-Service Hotel
LOCATION: Various
YEAR BUILT: Various
COLLATERAL: Eight limited-service Hampton Inn hotels in
Scranton, Pennsylvania; Colonie, New York; Glen
Burnie, Maryland; Norfolk, Virginia;
Chattanooga, Tennessee; Aurora, Colorado;
Beckley, West Virginia and Maryland Heights,
Missouri; and one limited-service Residence Inn
hotel in Oklahoma City, Oklahoma. The hotels
have a total of 1,181 rooms.
CURRENT OCCUPANCY: 69.98%
UNDERWRITTEN ADR: $71.93
UNDERWRITTEN REVPAR: $49.62
UWNCF: $7,659,799
APPRAISED VALUE: $66,900,000
APPRAISAL DATE: 8/3/00-8/21/00
CUT-OFF DATE LOAN/ROOM: $30,990.69
CUT-OFF DATE LTV: 54.71%
BALLOON LTV: 44.40%
UWNCF DSCR: 2.18x
--------------------------------------------------------------------------------
[EII PORTFOLIO I PICTURE OMITTED]
Page 8 of 16
<PAGE>
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THE RIGHT RELATIONSHIP IS EVERYTHING.(R)
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
EMBASSY SUITES - NEW ORLEANS
--------------------------------------------------------------------------------
LOAN INFORMATION
--------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $32,650,000 $32,466,236
% OF POOL BY IPB: 4.59%
ORIGINATOR: CMB
LOAN DATE: 5/2/00
INTEREST RATE: 8.774%
REMAINING AMORTIZATION: 293 months
MATURITY DATE: 5/10/10
BORROWER/SPONSOR: Felcor Lodging Trust, Inc.
CALL PROTECTION: Lockout followed by defeasance
RESERVES: Debt Service Reserve: $537,925
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Full-Service Hotel
LOCATION: New Orleans, LA
YEAR BUILT/YEAR RENOVATED: 1909/1999
COLLATERAL: The hotel contains approximately 372 suites
and is comprised of two properties. 315
Julia Street is a 16-story property which
contains approximately 282 suites and was
built in 1984 and renovated in 1996. 727
South Peters Street is a 7-story building,
which contains approximately 90 suites. 727
South Peters Street was originally built in
1909 as an office building, renovated into a
hotel in 1999.
CURRENT OCCUPANCY: 68.10%
UNDERWRITTEN ADR: $141.50
UNDERWRITTEN REVPAR: $99.05
UWNCF: $4,456,578
APPRAISED VALUE: $47,000,000
APPRAISAL DATE: 3/22/00
CUT-OFF DATE LOAN/UNIT: $87,274.83
CUT-OFF DATE LTV: 69.08%
BALLOON LTV: 58.66%
UWNCF DSCR: 1.38x
--------------------------------------------------------------------------------
[EMBASSY SUITES - NEW ORLEANS PICTURE OMITTED]
Page 9 of 16
<PAGE>
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CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
THE LINKS AT OKLAHOMA CITY
--------------------------------------------------------------------------------
LOAN INFORMATION
--------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $23,500,000 $23,451,572
% OF POOL BY IPB: 3.32%
ORIGINATOR: GECC
LOAN DATE: 7/31/00
INTEREST RATE: 8.340%
REMAINING AMORTIZATION: 356 months
MATURITY DATE: 8/1/10
SPONSOR: James E. Lindsey
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
RESERVES: Monthly Replacement Reserve: $9,800
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Multifamily
LOCATION: Oklahoma City, OK
YEAR BUILT: 1997 to 2000
COLLATERAL: A 49 building 588 unit apartment complex, located
in Oklahoma City, Oklahoma. The complex includes
a 9-hole golf course and contains 196 one-bedroom
units and 392 two-bedroom units. Amenities
include a 9-hole golf course, a swimming pool, a
tennis court, a basketball court, a sand
volleyball court and a fitness center.
CURRENT OCCUPANCY: 98.00%
UWNCF: $2,614,582
APPRAISED VALUE: $32,000,000
APPRAISAL DATE: 7/7/00
CUT-OFF DATE LOAN/UNIT: $39,883.63
CUT-OFF DATE LTV: 73.29%
BALLOON LTV: 66.27%
UWNCF DSCR: 1.22x
--------------------------------------------------------------------------------
[THE LINKS AT OKLAHOMA CITY PICTURE OMITTED]
Page 10 of 16
<PAGE>
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THE RIGHT RELATIONSHIP IS EVERYTHING.(R)
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
UNIVERSITY PARK TECH I & II
--------------------------------------------------------------------------------
LOAN INFORMATION
--------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE:
UNIVERSITY PARK TECH I: $10,250,000 $10,239,396
UNIVERSITY PARK TECH II: $8,850,000 $8,840,844
--------------------------------------
TOTAL: $19,100,000 $19,080,240
% OF POOL BY IPB: 2.70%
ORIGINATOR: GECC
LOAN DATE: 9/20/00
INTEREST RATE: 8.300%
REMAINING AMORTIZATION: 358 months
MATURITY DATE: 10/1/10
SPONSOR: Eric Brauss
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: Yes
RESERVES: THE UNIVERSITY PARK TECH I LOAN:
Upfront TI/LC Reserve: $200,000
Monthly TI/LC Reserve: $3,545 (to replenish upfront
reserves after depletion)
THE UNIVERSITY PARK TECH II LOAN:
Monthly TI/LC Reserve: $3,557, capped at $125,000
Specific Tenant Security/Leasing Escrows: $700,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Portfolio
PROPERTY TYPE: Industrial/Office
LOCATION: San Antonio, TX
YEAR BUILT: 1999
COLLATERAL: The building securing the University Park Tech I
Loan contains approximately 106,237 square feet
of net leasable area and was built in 1999. The
building securing the University Park Tech II
Loan contains approximately 84,525 square feet
of net leasable area and was built in 1999.
MAJOR TENANTS (% OF TOTAL SF): Clark American Checks, Inc. (35.65%)
Columbia/HCA Health Services (20.27%)
SBC Telecom, Inc. (20.04%)
CURRENT OCCUPANCY: 100.00%
UWNCF: $2,112,707 (total)
APPRAISED VALUE: $24,200,000 (total)
APPRAISAL DATE: 8/3/00
CUT-OFF DATE LOAN/SF: $100.02
CUT-OFF DATE LTV: 78.84%
BALLOON LTV: 71.17%
UWNCF DSCR: 1.22x
--------------------------------------------------------------------------------
[UNIVERSITY PARK TECH I & II PICTURE OMITTED]
Page 11 of 16
<PAGE>
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
HOLIDAY INN - MANSFIELD
--------------------------------------------------------------------------------
LOAN INFORMATION
--------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $17,000,000 $16,953,839
% OF POOL BY IPB: 2.40%
ORIGINATOR: CMB
LOAN DATE: 9/1/00
INTEREST RATE: 8.450%
REMAINING AMORTIZATION: 297 months
MATURITY DATE: 9/10/10
SPONSOR: Gerald Fineberg
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
RESERVES: Monthly Replacement Reserve: $30,546
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Full-Service Hotel
LOCATION: Mansfield, MA
YEAR BUILT/YEAR RENOVATED: 1979/2000
COLLATERAL: A full-service hotel located in Mansfield,
Massachusetts. The two- and three-story hotel
contains 202 units. The hotel was built in 1979
and renovated in 2000.
CURRENT OCCUPANCY: 72.50%
UNDERWRITTEN ADR: $96.53
UNDERWRITTEN REVPAR: $73.37
UWNCF: $2,394,536
APPRAISED VALUE: $24,500,000
APPRAISAL DATE: 7/1/00
CUT-OFF DATE LOAN/ROOM: $83,929.90
CUT-OFF DATE LTV: 69.20%
BALLOON LTV: 58.04%
UWNCF DSCR: 1.46x
--------------------------------------------------------------------------------
[HOLIDAY INN - MANSFIELD PICTURE OMITTED]
Page 12 of 16
<PAGE>
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THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
PARKWAY TOWER
--------------------------------------------------------------------------------
LOAN INFORMATION
--------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $15,700,000 $15,683,486
% OF POOL BY IPB: 2.22%
ORIGINATOR: CMB
LOAN DATE: 10/5/00
INTEREST RATE: 8.240%
REMAINING AMORTIZATION: 358 months
MATURITY DATE: 10/10/10
SPONSOR: Maskatiya, Suri & Company
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
RESERVES: Monthly Replacement Reserve: $1,585
Upfront Leasing Reserve: $1,970,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Office
LOCATION: Santa Clara, CA
YEAR BUILT: 1982
COLLATERAL: One multi-tenanted office building located in
the financial district of Santa Clara.
MAJOR TENANTS (% OF TOTAL SF): Arsin Corporation (16.30%)
Netscaler (14.98%)
Speedera Network (14.81%)
CURRENT OCCUPANCY: 100.00%
UWNCF: $1,485,816*
APPRAISED VALUE: $20,000,000
APPRAISAL DATE: 8/25/00
CUT-OFF DATE LOAN/SF: $219.13
CUT-OFF DATE LTV: 78.42%
BALLOON LTV: 70.69%
UWNCF DSCR: 1.05x*
* At closing, lender held back $1,970,000. This hold back will be released
and/or applied to the loan balance (by partially defeasing the loan) no
later than October 2, 2001. The escrow will be released subject to the
following conditions: a) certain spaces renewed or relet; b) the actual
debt service coverage is at a minimum of 1.20x.
--------------------------------------------------------------------------------
[PARKWAY TOWER PICTURE OMITTED]
Page 13 of 16
<PAGE>
[CHASE LOGO]
THE RIGHT RELATIONSHIP IS EVERYTHING.(R)
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
LAGUNA OAKS APARTMENTS
--------------------------------------------------------------------------------
LOAN INFORMATION
--------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $15,470,000 $15,451,925
% OF POOL BY IPB: 2.18%
ORIGINATOR: GECC
LOAN DATE: 9/21/00
INTEREST RATE: 7.850%
REMAINING AMORTIZATION: 358 months
MATURITY DATE: 10/1/10
SPONSOR: The Aspen Group, Inc., Sanford Gallanter,
Edwin Sacks
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
RESERVES: Monthly Replacement Reserve: $3,420
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Multifamily
LOCATION: Elk Grove, CA
YEAR BUILT: 1999
COLLATERAL: 25 building 201 unit class "A" apartment
complex approximately 12 miles from
Sacramento. The complex contains 48
one-bedroom units, 105 two-bedroom units and
48 three-bedroom units. Amenities include an
outdoor swimming pool, a fitness center, a
sauna and 405 parking spaces.
CURRENT OCCUPANCY: 99.00%
UWNCF: $1,633,890
APPRAISED VALUE: $19,610,000
APPRAISAL DATE: 8/31/00
CUT-OFF DATE LOAN/UNIT: $76,875.25
CUT-OFF DATE LTV: 78.80%
BALLOON LTV: 70.39%
UWNCF DSCR: 1.22x
--------------------------------------------------------------------------------
[LAGUNA OAKS APARTMENTS PICTURE OMITTED]
Page 14 of 16
<PAGE>
[CHASE LOGO]
THE RIGHT RELATIONSHIP IS EVERYTHING.(R)
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
GREENWAY PARK PLAZA
--------------------------------------------------------------------------------
LOAN INFORMATION
--------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $15,200,000 $15,200,000
% OF POOL BY IPB: 2.15%
ORIGINATOR: CMB
LOAN DATE: 11/9/00
INTEREST RATE: 8.090%
REMAINING AMORTIZATION: 360 months
MATURITY DATE: 12/10/10
BORROWER/SPONSOR: Ron Barness, Alex Papakyriakou
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
RESERVES: Upfront Capital Improvement Reserve: $6,500
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Anchored Retail
LOCATION: Phoenix, AZ
YEAR BUILT: 1989
COLLATERAL: A single story, neighborhood retail shopping
center anchored by a Food City. The property
is comprised of ten buildings, and six of
these are included in the collateral.
MAJOR TENANTS (% OF TOTAL SF): Food City (25.06%)
Goodwill Industries (12.14%)
Pure Fitness Athletic Center (7.29%)
CURRENT OCCUPANCY: 96.28%
UWNCF: $1,808,283
APPRAISED VALUE: $19,000,000
APPRAISAL DATE: 9/9/00
CUT-OFF DATE LOAN/SF: $73.84
CUT-OFF DATE LTV: 80.00%
BALLOON LTV: 71.79%
UWNCF DSCR: 1.34x
--------------------------------------------------------------------------------
[GREENWAY PARK PLAZA PICTURE OMITTED]
Page 15 of 16
<PAGE>
[CHASE LOGO]
THE RIGHT RELATIONSHIP IS EVERYTHING.(R)
THE INFORMATION HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PAGE MUST BE
ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE
CONTACT YOUR SALES REPRESENTATIVE.
LE MONTROSE
--------------------------------------------------------------------------------
LOAN INFORMATION
--------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $14,750,000 $14,705,230
% OF POOL BY IPB: 2.08%
ORIGINATOR: GECC
LOAN DATE: 7/27/00
INTEREST RATE: 8.080%
REMAINING AMORTIZATION: 320 months
MATURITY DATE: 8/1/10
BORROWER/SPONSOR: LaSalle Hotel Properties, ("LHO" on the NYSE)
CALL PROTECTION: Lockout followed by defeasance
CROSS-COLLATERALIZATION: No
LOCK BOX: Springing hard at 1.40x DSCR (set up at closing)
RESERVES: 4% FF&E upon a 1.40x DSCR trigger
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPERTY INFORMATION
--------------------------------------------------------------------------------
SINGLE ASSET/ PORTFOLIO: Single Asset
PROPERTY TYPE: Full-Service Hotel
LOCATION: West Hollywood, CA
YEAR BUILT / RENOVATED: 1975/2000
COLLATERAL: A full-service hotel located 2 blocks south
of Sunset Strip in West Hollywood, CA. The
hotel has 132 bedrooms, an outdoor swimming
pool, tennis court, sauna and exercise room.
The property was originally built in 1975 and
converted to a hotel in 1989.
CURRENT OCCUPANCY: 71.00%
UNDERWRITTEN ADR: $163.40
UNDERWRITTEN REVPAR: $117.65
UWNCF: $2,574,119
APPRAISED VALUE: $25,500,000
APPRAISAL DATE: 7/1/00
CUT-OFF DATE LOAN/UNIT: $111,403.26
CUT-OFF DATE LTV: 57.67%
BALLOON LTV: 49.74%
UWNCF DSCR: 1.91x
--------------------------------------------------------------------------------
[LE MONTROSE PICTURE OMITTED]
Page 16 of 16
<PAGE>
ANNEX C
WEIGHTED AVERAGE LIFE, PRINCIPAL WINDOW
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF THE A-1 CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE OR PENALTY -OTHERWISE AT
INDICATED CPR
<TABLE>
<CAPTION>
0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
PRICE (32NDS) CBE YIELD CBE YIELD CBE YIELD CBE YIELD CBE YIELD
----------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
99-28............. 6.377 6.377 6.377 6.377 6.377
99-30............. 6.363 6.363 6.363 6.363 6.363
100-00............ 6.349 6.349 6.349 6.349 6.349
100-02............ 6.336 6.336 6.336 6.336 6.336
100-04............ 6.322 6.322 6.322 6.322 6.322
100-06............ 6.308 6.308 6.308 6.308 6.308
100-08............ 6.294 6.294 6.294 6.294 6.294
100-10............ 6.281 6.281 6.281 6.281 6.280
100-12............ 6.267 6.267 6.267 6.267 6.267
100-14............ 6.253 6.253 6.253 6.253 6.253
100-16............ 6.239 6.239 6.239 6.239 6.239
100-18............ 6.226 6.226 6.226 6.226 6.226
100-20............ 6.212 6.212 6.212 6.212 6.212
Weighted Average
Life (yrs.)...... 5.700 5.698 5.697 5.695 5.690
First Principal
Payment Date..... 1/15/01 1/15/01 1/15/01 1/15/01 1/15/01
Last Principal
Payment Date..... 5/15/10 5/15/10 5/15/10 5/15/10 5/15/10
Modified Duration
@ 100-08......... 4.520 4.519 4.519 4.517 4.515
</TABLE>
C-1
<PAGE>
WEIGHTED AVERAGE LIFE, PRINCIPAL WINDOW
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF THE A-2 CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE OR PENALTY -OTHERWISE AT
INDICATED CPR
<TABLE>
<CAPTION>
0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
PRICE (32NDS) CBE YIELD CBE YIELD CBE YIELD CBE YIELD CBE YIELD
----------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
100-04............ 6.531 6.531 6.531 6.531 6.531
100-06............ 6.522 6.522 6.522 6.522 6.522
100-08............ 6.513 6.513 6.513 6.513 6.513
100-10............ 6.504 6.504 6.504 6.504 6.504
100-12............ 6.496 6.496 6.496 6.496 6.496
100-14............ 6.487 6.487 6.487 6.487 6.487
100-16............ 6.478 6.478 6.478 6.478 6.478
100-18............ 6.469 6.469 6.469 6.469 6.469
100-20............ 6.460 6.460 6.460 6.460 6.460
100-22............ 6.452 6.452 6.452 6.452 6.451
100-24............ 6.443 6.443 6.443 6.443 6.443
100-26............ 6.434 6.434 6.434 6.434 6.434
100-28............ 6.425 6.425 6.425 6.425 6.425
Weighted Average
Life (yrs.)...... 9.782 9.779 9.776 9.772 9.762
First Principal
Payment Date..... 5/15/10 5/15/10 5/15/10 5/15/10 5/15/10
Last Principal
Payment Date..... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Modified Duration
@ 100-16......... 7.040 7.038 7.037 7.035 7.030
</TABLE>
C-2
<PAGE>
WEIGHTED AVERAGE LIFE, PRINCIPAL WINDOW
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF THE B CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE OR PENALTY -OTHERWISE AT
INDICATED CPR
<TABLE>
<CAPTION>
0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
PRICE (32NDS) CBE YIELD CBE YIELD CBE YIELD CBE YIELD CBE YIELD
----------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
99-20............. 6.696 6.696 6.696 6.696 6.696
99-22............. 6.687 6.687 6.687 6.687 6.687
99-24............. 6.678 6.678 6.678 6.678 6.678
99-26............. 6.669 6.669 6.669 6.669 6.669
99-28............. 6.661 6.661 6.661 6.661 6.661
99-30............. 6.652 6.652 6.652 6.652 6.652
100-00............ 6.643 6.643 6.643 6.643 6.643
100-02............ 6.634 6.634 6.634 6.634 6.634
100-04............ 6.626 6.626 6.626 6.626 6.626
100-06............ 6.617 6.617 6.617 6.617 6.617
100-08............ 6.608 6.608 6.608 6.608 6.608
100-10............ 6.599 6.599 6.599 6.599 6.599
100-12............ 6.591 6.591 6.591 6.591 6.591
Weighted Average
Life (yrs.)...... 9.983 9.983 9.983 9.983 9.983
First Principal
Payment Date..... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Last Principal
Payment Date..... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Modified Duration
@ 100-00......... 7.102 7.102 7.102 7.102 7.102
</TABLE>
C-3
<PAGE>
WEIGHTED AVERAGE LIFE, PRINCIPAL WINDOW
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF THE C CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE OR PENALTY -OTHERWISE AT
INDICATED CPR
<TABLE>
<CAPTION>
0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
PRICE (32NDS) CBE YIELD CBE YIELD CBE YIELD CBE YIELD CBE YIELD
----------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
99-20............. 6.845 6.845 6.845 6.845 6.845
99-22............. 6.836 6.836 6.836 6.836 6.836
99-24............. 6.827 6.827 6.827 6.827 6.827
99-26............. 6.819 6.819 6.819 6.819 6.819
99-28............. 6.810 6.810 6.810 6.810 6.810
99-30............. 6.801 6.801 6.801 6.801 6.801
100-00............ 6.792 6.792 6.792 6.792 6.792
100-02............ 6.783 6.783 6.783 6.783 6.783
100-04............ 6.774 6.774 6.774 6.774 6.774
100-06............ 6.766 6.766 6.766 6.766 6.766
100-08............ 6.757 6.757 6.757 6.757 6.757
100-10............ 6.748 6.748 6.748 6.748 6.748
100-12............ 6.739 6.739 6.739 6.739 6.739
Weighted Average
Life (yrs.)...... 9.983 9.983 9.983 9.983 9.983
First Principal
Payment Date..... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Last Principal
Payment Date..... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Modified Duration
@ 100-00......... 7.051 7.051 7.051 7.051 7.051
</TABLE>
C-4
<PAGE>
WEIGHTED AVERAGE LIFE, PRINCIPAL WINDOW
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF THE D CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE OR PENALTY -OTHERWISE AT
INDICATED CPR
<TABLE>
<CAPTION>
0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
PRICE (32NDS) CBE YIELD CBE YIELD CBE YIELD CBE YIELD CBE YIELD
----------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
99-20............. 6.976 6.976 6.976 6.976 6.976
99-22............. 6.967 6.967 6.967 6.967 6.967
99-24............. 6.958 6.958 6.958 6.958 6.958
99-26............. 6.949 6.949 6.949 6.949 6.949
99-28............. 6.941 6.941 6.941 6.941 6.941
99-30............. 6.932 6.932 6.932 6.932 6.932
100-00............ 6.923 6.923 6.923 6.923 6.923
100-02............ 6.914 6.914 6.914 6.914 6.914
100-04............ 6.905 6.905 6.905 6.905 6.905
100-06............ 6.896 6.896 6.896 6.896 6.896
100-08............ 6.887 6.887 6.887 6.887 6.887
100-10............ 6.878 6.878 6.878 6.878 6.878
100-12............ 6.870 6.870 6.870 6.870 6.870
Weighted Average
Life (yrs.)...... 9.983 9.983 9.983 9.983 9.983
First Principal
Payment Date..... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Last Principal
Payment Date..... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Modified Duration
@ 100-00......... 7.008 7.008 7.008 7.008 7.008
</TABLE>
C-5
<PAGE>
WEIGHTED AVERAGE LIFE, PRINCIPAL WINDOW
PRE-TAX YIELD TO MATURITY AND MODIFIED DURATION OF THE E CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE OR PENALTY -OTHERWISE AT
INDICATED CPR
<TABLE>
<CAPTION>
0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
PRICE (32NDS) CBE YIELD CBE YIELD CBE YIELD CBE YIELD CBE YIELD
----------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
99-20............. 7.408 7.408 7.408 7.408 7.408
99-22............. 7.399 7.399 7.399 7.399 7.399
99-24............. 7.390 7.390 7.390 7.390 7.390
99-26............. 7.381 7.381 7.381 7.381 7.381
99-28............. 7.372 7.372 7.372 7.372 7.372
99-30............. 7.363 7.363 7.363 7.363 7.363
100-00............ 7.354 7.354 7.354 7.353 7.353
100-02............ 7.344 7.344 7.344 7.344 7.344
100-04............ 7.335 7.335 7.335 7.335 7.335
100-06............ 7.326 7.326 7.326 7.326 7.326
100-08............ 7.317 7.317 7.317 7.317 7.317
100-10............ 7.308 7.308 7.308 7.308 7.308
100-12............ 7.299 7.299 7.299 7.299 7.299
Weighted Average
Life (yrs.) ..... 9.983 9.983 9.983 9.983 9.983
First Principal
Payment Date ... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Last Principal
Payment Date ... 12/15/10 12/15/10 12/15/10 12/15/10 12/15/10
Modified Duration
@ 100-00......... 6.866 6.866 6.866 6.866 6.866
</TABLE>
C-6
<PAGE>
DATED DECEMBER 6, 2000
PROSPECTUS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION
(DEPOSITOR)
GE Capital Commercial Mortgage Corporation from time to time will offer
commercial mortgage pass-through certificates in separate series. We will
offer the certificates through this prospectus and a separate prospectus
supplement for each series.
For each series we will establish a trust fund consisting primarily of a
segregated pool of various types of multifamily or commercial mortgage loans,
mortgage-backed securities that evidence interests in, or that are secured by
pledges of, one or more of various types of multifamily or commercial
mortgage loans, or a combination of mortgage loans and mortgage-backed
securities.
If specified in the related prospectus supplement, the trust fund for a
series of certificates may include letters of credit, insurance policies,
guarantees, reserve funds or other types of credit support, interest rate
exchange agreements, interest rate cap or floor agreements or currency
exchange agreements as described in this prospectus.
The certificates of a series will evidence beneficial ownership interests in
the trust fund. We may divide the certificates of a series into two or more
classes which may have different interest rates and which may receive
principal payments in differing proportions and at different times. In
addition, your rights as holders of certain classes may be subordinate to the
rights of holders of other classes to receive principal and interest.
No series of certificates will represent an obligation of or interest in GE
Capital Commercial Mortgage Corporation, the Mortgage Asset Seller, the
Underwriter or any of their affiliates. Neither the certificates of any
series nor the assets in any trust fund will be guaranteed or insured by any
governmental agency or instrumentality or by any other person, unless
otherwise provided in the related prospectus supplement. The assets in each
trust fund will be held in trust for the benefit of the holders of the
related series of certificates, as more fully described in this prospectus.
No secondary market will exist for a series of certificates prior to its
offering. We cannot assure you that a secondary market will develop for the
certificates of any series, or, if it does develop, that it will continue.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 14 OF THIS
PROSPECTUS AND IN THE RELATED PROSPECTUS SUPPLEMENT.
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of the offered certificates or notes or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
We may offer certain of the certificates of any series through one or more
different methods, including offerings through underwriters, as more fully
described in this prospectus under "Method of Distribution" and in the
related prospectus supplement. We may retain or hold for sale one or more
classes of a series of certificates. Offerings of certain classes of the
certificates, if so specified in the related prospectus supplement, may be
made in one or more transactions exempt from the registration requirements of
the Securities Act of 1933, as amended. Those offerings are not being made
pursuant to this prospectus or the related registration statement.
This prospectus may not be used to consummate sales of the certificates of
any series unless accompanied by the prospectus supplement for that series.
The date of this Prospectus is December 6, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Important Notice About Information Presented in this Prospectus and Each Accompanying
Prospectus Supplement ...................................................................... 5
SUMMARY OF PROSPECTUS ....................................................................... 6
RISK FACTORS................................................................................. 14
Limited Liquidity of Your Certificates...................................................... 14
Limited Assets of Each Trust Fund........................................................... 14
Prepayment Considerations; Variability in Average Life of Offered Certificates; Special
Yield Considerations....................................................................... 15
Limited Nature of Ratings................................................................... 16
Risks Associated with Certain Mortgage Loans and Mortgaged Properties....................... 16
Borrowers May Be Unable to Make Balloon Payments............................................ 18
Credit Support Limitations.................................................................. 19
Leases and Rents............................................................................ 19
Environmental Risks......................................................................... 20
Special Hazard Losses....................................................................... 20
Some Certificates May Not Be Appropriate for ERISA Plans.................................... 21
Certain Federal Tax Considerations Regarding Residual Certificates.......................... 21
Certain Federal Tax Considerations Regarding Original Issue Discount........................ 21
Bankruptcy Proceedings Entail Certain Risks................................................. 21
Book-Entry System for Certain Classes May Decrease Liquidity and Delay Payment ............. 22
Delinquent and Non-Performing Mortgage Loans................................................ 23
DESCRIPTION OF THE TRUST FUNDS .............................................................. 24
General..................................................................................... 24
Mortgage Loans.............................................................................. 24
MBS......................................................................................... 27
Certificate Accounts........................................................................ 28
Credit Support.............................................................................. 29
Cash Flow Agreements........................................................................ 29
YIELD AND MATURITY CONSIDERATIONS ........................................................... 30
General..................................................................................... 30
Pass-Through Rate........................................................................... 30
Payment Delays.............................................................................. 30
Certain Shortfalls in Collections of Interest............................................... 30
Yield and Prepayment Considerations......................................................... 31
Weighted Average Life and Maturity.......................................................... 32
Controlled Amortization Classes and Companion Classes....................................... 33
Other Factors Affecting Yield, Weighted Average Life and Maturity........................... 34
THE DEPOSITOR ............................................................................... 36
USE OF PROCEEDS.............................................................................. 36
DESCRIPTION OF THE CERTIFICATES.............................................................. 37
General..................................................................................... 37
Distributions............................................................................... 37
Distributions of Interest on the Certificates............................................... 38
Distributions of Principal on the Certificates.............................................. 39
Distributions on the Certificates in Respect of Prepayment Premiums or in Respect of Equity
Participations............................................................................. 39
Allocation of Losses and Shortfalls......................................................... 39
Advances in Respect of Delinquencies........................................................ 40
2
<PAGE>
Reports to Certificateholders............................................................... 41
Voting Rights............................................................................... 42
Termination................................................................................. 42
Book-Entry Registration and Definitive Certificates......................................... 43
DESCRIPTION OF THE POOLING AGREEMENTS ....................................................... 45
General..................................................................................... 45
Assignment of Mortgage Loans; Repurchases................................................... 45
Representations and Warranties; Repurchases................................................. 46
Collection and Other Servicing Procedures................................................... 47
Sub-Servicers............................................................................... 47
Special Servicers........................................................................... 48
Certificate Account......................................................................... 48
Modifications, Waivers and Amendments of Mortgage Loans..................................... 51
Realization Upon Defaulted Mortgage Loans................................................... 51
Hazard Insurance Policies................................................................... 53
Due-on-Sale and Due-on-Encumbrance Provisions............................................... 54
Servicing Compensation and Payment of Expenses.............................................. 54
Evidence as to Compliance................................................................... 54
Certain Matters Regarding the Master Servicer and the Depositor............................. 55
Events of Default........................................................................... 56
Rights Upon Event of Default................................................................ 56
Amendment................................................................................... 57
List of Certificateholders.................................................................. 57
The Trustee................................................................................. 58
Duties of the Trustee....................................................................... 58
Certain Matters Regarding the Trustee....................................................... 58
Resignation and Removal of the Trustee...................................................... 58
DESCRIPTION OF CREDIT SUPPORT ............................................................... 60
General..................................................................................... 60
Subordinate Certificates.................................................................... 60
Cross-Support Provisions.................................................................... 60
Insurance or Guarantees with Respect to Mortgage Loans...................................... 61
Letter of Credit............................................................................ 61
Certificate Insurance and Surety Bonds...................................................... 61
Reserve Funds............................................................................... 61
Credit Support with Respect to MBS.......................................................... 62
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS ..................................................... 63
General..................................................................................... 63
Types of Mortgage Instruments............................................................... 63
Leases and Rents............................................................................ 63
Personalty.................................................................................. 64
Foreclosure................................................................................. 64
Bankruptcy Laws............................................................................. 67
Environmental Risks......................................................................... 70
Due-on-Sale and Due-on-Encumbrance.......................................................... 71
Subordinate Financing....................................................................... 72
Default Interest and Limitations on Prepayments............................................. 72
Applicability of Usury Laws................................................................. 72
Soldiers' and Sailors' Civil Relief Act of 1940............................................. 73
Type of Mortgaged Property.................................................................. 73
3
<PAGE>
Americans with Disabilities Act............................................................. 73
Forfeitures In Drug and RICO Proceedings.................................................... 74
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ..................................................... 75
Federal Income Tax Consequences for REMIC Certificates...................................... 75
Taxation of Regular Certificates............................................................ 78
Taxation of Residual Certificates........................................................... 84
Taxes That May Be Imposed on the REMIC Pool................................................. 91
Liquidation of the REMIC Pool............................................................... 92
Administrative Matters...................................................................... 92
Limitations on Deduction of Certain Expenses................................................ 92
Taxation of Certain Foreign Investors....................................................... 93
Backup Withholding.......................................................................... 94
Reporting Requirements...................................................................... 94
Federal Income Tax Consequences for Certificates as to Which No REMIC Election Is Made .... 96
Standard Certificates....................................................................... 96
Stripped Certificates....................................................................... 99
Reporting Requirements and Backup Withholding............................................... 101
Taxation of Certain Foreign Investors....................................................... 102
STATE AND OTHER TAX CONSIDERATIONS .......................................................... 102
CERTAIN ERISA CONSIDERATIONS................................................................. 103
General..................................................................................... 103
Plan Asset Regulations...................................................................... 103
Administrative Exemptions................................................................... 104
Insurance Company General Accounts.......................................................... 104
Unrelated Business Taxable Income; Residual Certificates.................................... 105
LEGAL INVESTMENT ............................................................................ 105
METHOD OF DISTRIBUTION....................................................................... 107
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................................ 108
LEGAL MATTERS................................................................................ 108
FINANCIAL INFORMATION........................................................................ 108
RATING....................................................................................... 109
INDEX OF PRINCIPAL DEFINITIONS............................................................... 110
</TABLE>
4
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND EACH ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the offered certificates 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 the offered
certificates; and (b) the accompanying prospectus supplement for each series,
which describes the specific terms of the offered certificates. IF THE TERMS
OF THE OFFERED CERTIFICATES VARY BETWEEN THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE PROSPECTUS
SUPPLEMENT.
You should rely only on the information contained in this prospectus and
the accompanying prospectus supplement. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus and the related prospectus supplement. The information in this
prospectus is accurate only as of the date of this prospectus.
Certain capitalized terms are defined and used in this prospectus to
assist you in understanding the terms of the offered certificates and this
offering. The capitalized terms used in this prospectus are defined on the
pages indicated under the caption "Index of Principal Definitions" beginning
on page 106 in this prospectus.
In this prospectus, the terms "Depositor," "we," "us" and "our" refer to
GE Capital Commercial Mortgage Corporation.
If you require additional information, the mailing address of our
principal executive offices is GE Capital Commercial Mortgage Corporation,
292 Long Ridge Road, Stamford, Connecticut 06927, and telephone number is
(203) 357-4000.
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SUMMARY OF PROSPECTUS
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES
NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING AN
INVESTMENT DECISION. PLEASE READ THIS ENTIRE PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AS WELL AS THE TERMS AND PROVISIONS OF THE RELATED
POOLING AND SERVICING AGREEMENT CAREFULLY TO UNDERSTAND ALL OF THE TERMS OF A
SERIES OF CERTIFICATES. AN INDEX OF PRINCIPAL DEFINITIONS IS INCLUDED AT THE
END OF THIS PROSPECTUS.
TITLE OF CERTIFICATES ......... Mortgage pass-through certificates, issuable
in series.
DEPOSITOR ..................... GE Capital Commercial Mortgage Corporation
is a wholly-owned subsidiary of General
Electric Capital Corporation. All
outstanding common stock of General Electric
Capital Corporation is owned by General
Electric Capital Services, Inc., the common
stock of which is in turn wholly owned
directly or indirectly by the General
Electric Company.
MASTER SERVICER ............... The master servicer, if any, for a series of
certificates will be named in the related
prospectus supplement. The master servicer
for any series of certificates may be an
affiliate of the Depositor or a special
servicer.
SPECIAL SERVICER .............. One or more special servicers, if any, for a
series of certificates will be named, or the
circumstances under which a special servicer
will be appointed will be described, in the
related prospectus supplement. A special
servicer for any series of certificates may
be an affiliate of the Depositor or the
master servicer.
TRUSTEE ....................... The trustee for each series of certificates
will be named in the related prospectus
supplement.
THE TRUST ASSETS .............. Each series of certificates will represent
in the aggregate the entire beneficial
ownership interest in a trust fund
consisting primarily of:
A. MORTGAGE ASSETS ............ The mortgage assets with respect to each
series of certificates will, in general,
consist of a pool of loans secured by liens
on, or security interests in:
o residential properties consisting of
five or more rental or
cooperatively-owned dwelling units or
by shares allocable to a number of
those units and the related leases; or
o office buildings, shopping centers,
retail stores and establishments,
hotels or motels, nursing homes,
hospitals or other health-care related
facilities, manufactured housing
properties, warehouse facilities,
mini-warehouse facilities,
self-storage facilities, industrial
plants, parking lots, mixed use or
various other types of
income-producing properties described
in this prospectus or unimproved land.
Mortgage loans may be secured by properties
backed by credit lease obligations of a
tenant or net lease obligations guaranteed
6
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by another entity. Either the tenant or the
guarantor will have a credit rating form a
rating agency as described in the prospectus
supplement. If so specified in the related
prospectus supplement, a trust fund may
include mortgage loans secured by liens on
real estate projects under construction. No
one will guarantee the mortgage loans,
unless otherwise provided in the related
prospectus supplement. If so specified in
the related prospectus supplement, some
mortgage loans may be delinquent. In no
event will delinquent mortgage loans
comprise 20 percent or more of the trust
fund at the time the mortgage loans are
transferred to the trust fund.
As described in the related prospectus
supplement, a mortgage loan:
o may provide for no accrual of interest
or for accrual of interest at a
mortgage interest rate that is fixed
over its term or that adjusts from
time to time, or that the borrower may
elect to convert from an adjustable to
a fixed mortgage interest rate, or
from a fixed to an adjustable mortgage
interest rate;
o may provide for level payments to
maturity or for payments that adjust
from time to time to accommodate
changes in the mortgage interest rate
or to reflect the occurrence of
certain events, and may permit
negative amortization;
o may be fully amortizing or partially
amortizing or non-amortizing, with a
balloon payment due on its stated
maturity date;
o may prohibit prepayments over its term
or for a certain period and/or require
payment of a premium or a yield
maintenance penalty in connection with
certain prepayments;
o may permit defeasance with
non-callable U.S. Treasury securities
or securities issued by government
agencies; and
o may provide for payments of principal,
interest or both, on due dates that
occur monthly, quarterly,
semi-annually or at another interval
specified in the related prospectus
supplement.
Some or all of the mortgage loans in any
trust fund may have been originated by an
affiliate of the Depositor. See "Description
of the Trust Funds--Mortgage Loans" in this
prospectus.
If specified in the related prospectus
supplement, the mortgage assets with respect
to a series of certificates may also
include, or consist of,
o private mortgage participations,
mortgage pass-through certificates or
other mortgage-backed securities, or
o certificates insured or guaranteed by
any of the Federal Home Loan Mortgage
Corporation, the Federal National
Mortgage Association, the Governmental
National Mortgage Association or the
Federal Agricultural Mortgage
Corporation.
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Each of the above mortgage assets will
evidence an interest in, or will be secured
by a pledge of, one or more mortgage loans
that conform to the descriptions of the
mortgage loans contained in this prospectus.
See "Description of the Trust Funds--MBS" in
this prospectus.
B. CERTIFICATE ACCOUNT ........ Each trust fund will include one or more
certificate accounts established and
maintained on behalf of the
certificateholders. The person or persons
designated in the related prospectus
supplement will be required to, to the
extent described in this prospectus and in
that prospectus supplement, deposit all
payments and other collections received or
advanced with respect to the mortgage assets
and other assets in the trust fund into the
certificate accounts. A certificate account
may be maintained as an interest bearing or
a non-interest bearing account, and its
funds may be held as cash or invested in
certain obligations acceptable to the rating
agencies rating one or more classes of the
related series of offered certificates. See
"Description of the Trust Funds--Certificate
Accounts" and "Description of the Pooling
Agreements--Certificate Account" in this
prospectus.
C. CREDIT SUPPORT ............. If so provided in the related prospectus
supplement, partial or full protection
against certain defaults and losses on the
mortgage assets in the related trust fund
may be provided to one or more classes of
certificates of the related series in the
form of subordination of one or more other
classes of certificates of that series,
which other classes may include one or more
classes of offered certificates, or by one
or more other types of credit support, such
as a letter of credit, insurance policy,
guarantee, reserve fund or another type of
credit support described in this prospectus,
or a combination of these features. The
amount and types of any credit support, the
identification of any entity providing it
and related information will be set forth in
the prospectus supplement for a series of
offered certificates. See "Risk
Factors--Credit Support Limitations",
"Description of the Trust Funds--Credit
Support" and "Description of Credit Support"
in this prospectus.
D. CASH FLOW AGREEMENTS ....... If so provided in the related prospectus
supplement, a trust fund may include
guaranteed investment contracts pursuant to
which moneys held in the funds and accounts
established for the related series will be
invested at a specified rate. The trust fund
may also include interest rate exchange
agreements, interest rate cap or floor
agreements, or currency exchange agreements,
all of which are designed to reduce the
effects of interest rate or currency
exchange rate fluctuations on the mortgage
assets or on one or more classes of
certificates. The principal terms of that
guaranteed investment contract or other
agreement, including, without limitation,
provisions relating to the timing, manner
and amount of any corresponding payments and
provisions relating to their termination,
will be described in the prospectus
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supplement for the related series. In
addition, the related prospectus supplement
will contain certain information that
pertains to the obligor under any cash flow
agreements of this type. See "Description of
the Trust Funds--Cash Flow Agreements" in
this prospectus.
DESCRIPTION OF CERTIFICATES ... We will offer certificates in one or more
classes of a series of certificates issued
pursuant to a pooling and servicing
agreement or other agreement specified in
the related prospectus supplement. The
certificates will represent in the aggregate
the entire beneficial ownership interest in
the trust fund created by that agreement.
As described in the related prospectus
supplement, the certificates of each series,
may consist of one or more classes of
certificates that, among other things:
o are senior or subordinate to one or
more other classes of certificates in
entitlement to certain distributions
on the certificates;
o are principal-only certificates
entitled to distributions of
principal, with disproportionately
small, nominal or no distributions of
interest;
o are interest-only certificates
entitled to distributions of interest,
with disproportionately small, nominal
or no distributions of principal;
o provide for distributions of interest
on, or principal of, the certificates
that begin only after the occurrence
of certain events, such as the
retirement of one or more other
classes of certificates of that
series;
o provide for distributions of principal
of the certificates to be made, from
time to time or for designated
periods, at a rate that is faster, or
slower than the rate at which payments
or other collections of principal are
received on the mortgage assets in the
related trust fund;
o provide for controlled distributions
of principal to be made based on a
specified schedule or other
methodology, subject to available
funds; or
o provide for distributions based on
collections of prepayment premiums,
yield maintenance penalties or equity
participations on the mortgage assets
in the related trust fund.
Each class of certificates, other than
interest-only certificates and residual
certificates which are only entitled to a
residual interest in the trust fund, will
have a stated principal balance. Each class
of certificates, other than principal-only
certificates and residual certificates, will
accrue interest on its stated principal
balance or, in the case of interest-only
certificates, on a notional amount. Each
class of certificates entitled to interest
will accrue interest
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<PAGE>
based on a fixed, variable or adjustable
pass-through interest rate. The related
prospectus supplement will specify the
principal balance, notional amount and/or
fixed pass-through interest rate, or, in the
case of a variable or adjustable
pass-through interest rate, the method for
determining that rate, as applicable, for
each class of offered certificates.
The certificates will not be guaranteed or
insured by anyone, unless otherwise provided
in the related prospectus supplement. See
"Risk Factors--Limited Assets of Each Trust
Fund" and "Description of the Certificates"
in this prospectus.
DISTRIBUTIONS OF INTEREST ON
THE CERTIFICATES ............. Interest on each class of offered
certificates, other than certain classes of
principal-only certificates and certain
classes of residual certificates, of each
series will accrue at the applicable fixed,
variable or adjustable pass-through interest
rate on the principal balance or, in the
case of certain classes of interest-only
certificates, on the notional amount,
outstanding from time to time. Interest will
be distributed to you as provided in the
related prospectus supplement on specified
distribution dates. Distributions of
interest with respect to one or more classes
of accrual certificates may not begin until
the occurrence of certain events, such as
the retirement of one or more other classes
of certificates, and interest accrued with
respect to a class of accrual certificates
before the occurrence of that event will
either be added to its principal balance or
otherwise deferred. Distributions of
interest with respect to one or more classes
of certificates may be reduced to the extent
of certain delinquencies, losses and other
contingencies described in this prospectus
and in the related prospectus supplement.
See "Risk Factors--Prepayment
Considerations; Variability in Average Life
of Offered Certificates; Special Yield
Considerations", "Yield and Maturity
Considerations" and "Description of the
Certificates--Distributions of Interest on
the Certificates" in this prospectus.
DISTRIBUTIONS OF PRINCIPAL OF
THE CERTIFICATES ............. Each class of certificates of each series,
other than certain classes of interest-only
certificates and certain classes of residual
certificates, will have a principal balance.
The principal balance of a class of
certificates will represent the maximum
amount that you are entitled to receive as
principal from future cash flows on the
assets in the related trust fund.
Distributions of principal with respect to
one or more classes of certificates may:
o be made at a rate that is faster, and,
in some cases, substantially faster,
than the rate at which payments or
other collections of principal are
received on the mortgage assets in the
related trust fund;
10
<PAGE>
o or may be made at a rate that is
slower, and, in some cases,
substantially slower, than the rate at
which payments or other collections of
principal are received on the mortgage
assets in the related trust fund;
o not commence until the occurrence of
certain events, such as the retirement
of one or more other classes of
certificates of the same series;
o be made, subject to certain
limitations, based on a specified
principal payment schedule resulting
in a controlled amortization class of
certificates; or
o be contingent on the specified
principal payment schedule for a
controlled amortization class of the
same series and the rate at which
payments and other collections of
principal on the mortgage assets in
the related trust fund are received.
Unless otherwise specified in the related
prospectus supplement, distributions of
principal of any class of offered
certificates will be made on a pro rata
basis among all of the certificates of that
class. See "Description of the
Certificates--Distributions of Principal on
the Certificates" in this prospectus.
ADVANCES ...................... If provided in the related prospectus
supplement, if a trust fund includes
mortgage loans, the master servicer, a
special servicer, the trustee, any provider
of credit support and/or any other specified
person may be obligated to make, or have the
option of making, certain advances with
respect to delinquent scheduled payments of
principal and/or interest on those mortgage
loans. Any of the advances of principal and
interest made with respect to a particular
mortgage loan will be reimbursable from
subsequent recoveries from the related
mortgage loan and otherwise to the extent
described in this prospectus and in the
related prospectus supplement. If provided
in the prospectus supplement for a series of
certificates, any entity making these
advances may be entitled to receive interest
on those advances while they are
outstanding, payable from amounts in the
related trust fund. If a trust fund includes
mortgage participations, pass-through
certificates or other mortgage-backed
securities, any comparable advancing
obligation will be described in the related
prospectus supplement. See "Description of
the Certificates--Advances in Respect of
Delinquencies" in this prospectus.
TERMINATION ................... If so specified in the related prospectus
supplement, the mortgage assets in the
related trust fund may be sold, causing an
early termination of a series of
certificates in the manner set forth in the
prospectus supplement. If so provided in the
related prospectus supplement, upon the
reduction of the principal balance of a
specified class or classes of certificates
by a specified percentage or amount, the
party specified in the prospectus supplement
may be authorized or required to bid for
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<PAGE>
or solicit bids for the purchase of all of
the mortgage assets of the related trust
fund, or of a sufficient portion of the
mortgage assets to retire the class or
classes, as described in the related
prospectus supplement. See "Description of
the Certificates--Termination" in this
prospectus.
REGISTRATION OF BOOK-ENTRY
CERTIFICATES ................. If so provided in the related prospectus
supplement, one or more classes of the
offered certificates of any series will be
book-entry certificates offered through the
facilities of The Depository Trust Company.
Each class of book-entry certificates will
be initially represented by one or more
certificates registered in the name of a
nominee of The Depository Trust Company. No
person acquiring an interest in a class of
book-entry certificates will be entitled to
receive definitive certificates of that
class in fully registered form, except under
the limited circumstances described in this
prospectus. See "Risk Factors--Book-Entry
System for Certain Classes May Decrease
Liquidity and Delay Payment" and
"Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in
this prospectus.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES ................. The federal income tax consequences to
certificateholders will vary depending on
whether one or more elections are made to
treat the trust fund or specified portions
of the trust fund as one or more "real
estate mortgage investment conduits" (each,
a "REMIC") under the provisions of the
Internal Revenue Code. The prospectus
supplement for each series of certificates
will specify whether one or more REMIC
elections will be made. See "Certain Federal
Income Tax Consequences" in this prospectus.
CERTAIN ERISA CONSIDERATIONS .. If you are a fiduciary of any employee
benefit plans or certain other retirement
plans and arrangements, including individual
retirement accounts, annuities, Keogh plans,
and collective investment funds and
insurance company general and separate
accounts in which those plans, accounts,
annuities or arrangements are invested, that
are subject to ERISA or Section 4975 of the
Internal Revenue Code or materially similar
provisions of applicable federal, state or
local law, you should carefully review with
your legal advisors whether the purchase or
holding of offered certificates could give
rise to a transaction that is prohibited or
is not otherwise permissible under ERISA,
the Internal Revenue Code or applicable
similar law. See "Certain ERISA
Considerations" in this prospectus and
"ERISA Considerations" in the related
prospectus supplement.
LEGAL INVESTMENT .............. The applicable prospectus supplement will
specify whether 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 own legal advisors to determine
if the offered certificates constitute legal
investments for you. See "Legal Investment"
in this prospectus and in the related
prospectus supplement.
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<PAGE>
RATING ........................ At their dates of issuance, each class of
offered certificates will be rated at least
investment grade by one or more nationally
recognized statistical rating agencies. See
"Rating" in this prospectus and "Ratings" in
the related prospectus supplement.
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<PAGE>
RISK FACTORS
You should carefully consider the following risks and the risks described
under "RISK FACTORS" in the prospectus supplement for the applicable series
of certificates before making an investment decision. In particular,
distributions on your certificates will depend on payments received on and
other recoveries with respect to the mortgage loans. Thus, you should
carefully consider the risk factors relating to the mortgage loans and the
mortgaged properties.
LIMITED LIQUIDITY OF YOUR CERTIFICATES
We cannot assure you that a secondary market for the certificates will
develop or, if it does develop, that it will provide you with liquidity of
investment or will continue for the life of your certificates. The prospectus
supplement for any series of offered certificates may indicate that an
underwriter intends to make a secondary market in those offered certificates;
however, no underwriter will be obligated to do so. Any resulting secondary
market may provide you with less liquidity than any comparable market for
certificates that evidence interests in single-family mortgage loans.
The primary source of ongoing information regarding the offered
certificates of any series, including information regarding the status of the
related mortgage assets and any credit support for your certificates, will be
the periodic reports delivered to you. See "Description of the
Certificates--Reports to Certificateholders" in this prospectus. We cannot
assure you that any additional ongoing information regarding your
certificates will be available through any other source. The limited nature
of the available information in respect of a series of offered certificates
may adversely affect its liquidity, even if a secondary market for those
certificates does develop.
Even if a secondary market does develop with respect to any series or
class of certificates, the market value of those certificates will be
affected by several factors, including:
o The perceived liquidity of the certificates;
o The anticipated cash flow of the certificates, which may vary widely
depending upon the prepayment and default assumptions applied in
respect of the underlying mortgage loans and prevailing interest
rates;
o The price payable at any given time in respect of certain classes of
offered certificates may be extremely sensitive to small
fluctuations in prevailing interest rates, particularly, for a class
with a relatively long average life, a companion class to a
controlled amortization class, a class of interest-only certificates
or principal-only certificates; and
o The relative change in price for an offered certificate in response
to an upward or downward movement in prevailing interest rates may
not equal the relative change in price for that certificate in
response to an equal but opposite movement in those rates.
Accordingly, the sale of your certificates in any secondary market
that may develop may be at a discount from the price you paid.
We are not aware of any source through which price information about the
offered certificates will be generally available on an ongoing basis.
Except to the extent described in this prospectus and in the related
prospectus supplement, you will have no redemption rights, and the
certificates of each series will be subject to early retirement only under
certain specified circumstances described in this prospectus and in the
related prospectus supplement. See "Description of the
Certificates--Termination" in this prospectus.
LIMITED ASSETS OF EACH TRUST FUND
Unless otherwise specified in the related prospectus supplement,
o The certificates of any series and the mortgage assets in the
related trust fund will not be guaranteed or insured by the
Depositor or any of its affiliates, by any governmental agency or
instrumentality or by any other person or entity; and
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<PAGE>
o The certificate of any series will not represent a claim against or
security interest in the trust funds for any other series.
Accordingly, if the related trust fund has insufficient assets to make
payments on a series of offered certificates, no other assets will be
available to make those payments. Additionally, certain amounts on deposit
from time to time in certain funds or accounts constituting part of a trust
fund may be withdrawn under certain conditions, as described in the related
prospectus supplement, for purposes other than the payment of principal of or
interest on the related series of certificates. If so provided in the
prospectus supplement for a series of certificates consisting of one or more
classes of subordinate certificates, if losses or shortfalls in collections
have occurred with respect to any distribution date, all or a portion of the
amount of these losses or shortfalls will be borne first by one or more
classes of the subordinate certificates, and, thereafter, by the remaining
classes of certificates in the priority and manner and subject to the
limitations specified in the prospectus supplement.
PREPAYMENT CONSIDERATIONS; VARIABILITY IN AVERAGE LIFE OF OFFERED
CERTIFICATES; SPECIAL YIELD CONSIDERATIONS
As a result of, among other things, prepayments on the mortgage loans in
any trust fund, the amount and timing of distributions of principal and/or
interest on the offered certificates of the related series may be highly
unpredictable. Prepayments on the mortgage loans in any trust fund will
result in a faster rate of principal payments on one or more classes of the
related series of certificates than if payments on those mortgage loans were
made as scheduled. Thus, the prepayment experience on the mortgage loans in a
trust fund may affect the average life of one or more classes of offered
certificates of the related series.
The rate of principal payments on pools of mortgage loans varies among
pools and from time to time is influenced by a variety of economic,
demographic, geographic, social, tax, legal and other factors. For example,
if prevailing interest rates fall significantly below the mortgage interest
rates of the mortgage loans included in a trust fund, then, subject to, among
other things, the particular terms of the mortgage loans and the ability of
borrowers to get new financing, principal prepayments on those mortgage loans
are likely to be higher than if prevailing interest rates remain at or above
the rates on those mortgage loans. Conversely, if prevailing interest rates
rise significantly above the mortgage interest rates of the mortgage loans
included in a trust fund, then principal prepayments on those mortgage loans
are likely to be lower than if prevailing interest rates remain at or below
the rates on those mortgage loans. We cannot assure you as to the actual rate
of prepayment on the mortgage loans in any trust fund or that the rate of
prepayment will conform to any model described in this prospectus or in any
prospectus supplement. As a result, depending on the anticipated rate of
prepayment for the mortgage loans in any trust fund, the retirement of any
class of certificates of the related series could occur significantly earlier
or later than expected.
The extent to which prepayments on the mortgage loans in any trust fund
ultimately affect the average life of your certificates will depend on the
terms of your certificates.
o A class of certificates that entitles the holders of those
certificates to a disproportionately large share of the prepayments
on the mortgage loans in the related trust fund increases the "call
risk" or the likelihood of early retirement of that class if the
rate of prepayment is relatively fast; and
o A class of certificates that entitles the holders of the
certificates to a disproportionately small share of the prepayments
on the mortgage loans in the related trust fund increases the
likelihood of "extension risk" or an extended average life of that
class if the rate of prepayment is relatively slow.
As described in the related prospectus supplement, the respective
entitlements of the various classes of certificate of any series to receive
payments, especially prepayments, of principal of the mortgage loans in the
related trust fund may vary based on the occurrence of certain events such as
the retirement of one or more classes of certificates of that series, or
subject to certain contingencies such as the rate of prepayments and defaults
with respect to those mortgage loans.
A series of certificates may include one or more controlled amortization
classes, which will entitle you to receive principal distributions according
to a specified principal payment schedule. Although prepayment risk cannot be
eliminated entirely for any class of certificates, a controlled amortization
class will generally provide a relatively stable cash flow so long as the
actual rate of prepayment on the mortgage loans in the
15
<PAGE>
related trust fund remains relatively constant at the rate, or within the
range of rates, of prepayment used to establish the specific principal
payment schedule for those certificates. Prepayment risk with respect to a
given pool of mortgage assets does not disappear, however, and the stability
afforded to a controlled amortization class comes at the expense of one or
more companion classes of the same series, any of which companion classes may
also be a class of offered certificates. In general, and as more specifically
described in the related prospectus supplement, a companion class may entitle
you to a disproportionately large share of prepayments on the mortgage loans
in the related trust fund when the rate of prepayment is relatively fast, or
may entitle you to a disproportionately small share of prepayments on the
mortgage loans in the related trust fund when the rate of prepayment is
relatively slow. As described in the related prospectus supplement, a
companion class absorbs some (but not all) of the "call risk" and/or
"extension risk" that would otherwise belong to the related controlled
amortization class if all payments of principal of the mortgage loans in the
related trust fund were allocated on a pro rata basis.
A series of certificates may include one or more classes of offered
certificates offered at a premium or discount. Yields on those classes of
certificates will be sensitive, and in some cases extremely sensitive, to
prepayments on the mortgage loans in the related trust fund. Where the amount
of interest payable with respect to a class is disproportionately large, as
compared to the amount of principal, as with certain classes of interest-only
certificates, you might fail to recover your original investment under some
prepayment scenarios. The extent to which the yield to maturity of any class
of offered certificates may vary from the anticipated yield will depend upon
the degree to which they are purchased at a discount or premium and the
amount and timing of distributions on those certificates. You should
consider, in the case of any offered 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 that is lower than the
anticipated yield and, in the case of any offered certificate purchased at a
premium, the risk that a faster than anticipated rate of principal payments
could result in an actual yield that is lower than the anticipated yield. See
"Yield and Maturity Considerations" in this prospectus.
LIMITED NATURE OF RATINGS
Any rating assigned to a class of offered certificates by a rating agency
will only reflect its assessment of the probability that you will receive
payments to which you are entitled. This rating will not constitute an
assessment of the probability:
o that principal prepayments on the related mortgage loans will be
made;
o of the degree to which the rate of prepayments might differ from the
rate of prepayments that was originally anticipated; or
o of the likelihood of early optional termination of the related trust
fund.
Furthermore, the rating will not address the possibility that prepayment
of the related mortgage loans at a higher or lower rate than you anticipated
may cause you to experience a lower than anticipated yield or that if you
purchase a certificate at a significant premium you might fail to recover
your initial investment under certain prepayment scenarios.
The amount, type and nature of credit support, if any, provided with
respect to a series of certificates will be determined on the basis of
criteria established by each rating agency rating classes of the certificates
of that series. These criteria are sometimes based upon analysis of the
behavior of mortgage loans in a larger group. However, we cannot assure you
that the historical data supporting that analysis will accurately reflect
future experience, or that the data derived from a large pool of mortgage
loans will accurately predict the delinquency, foreclosure or loss experience
of any particular pool of mortgage loans. In other cases, the criteria may be
based upon determinations of the values of the mortgaged properties that
provide security for the mortgage loans in the related trust fund. However,
we cannot assure you that those values will not decline in the future. See
"Description of Credit Support" and "Rating" in this prospectus.
RISKS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND MORTGAGED PROPERTIES
A description of risks associated with investments in mortgage loans is
included under "Certain Legal Aspects of Mortgage Loans" in this prospectus.
Commercial and multifamily lending generally exposes the
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lender to a greater risk of loss than one-to four-family residential lending.
Commercial and multifamily lending typically involves larger loans to single
borrowers or groups of related borrowers than residential one-to four-family
mortgage loans. Further, the repayment of loans secured by income producing
properties is typically dependent upon the successful operation of the
related real estate project. If the cash flow from the project is reduced
(for example, if leases are not obtained or renewed), the borrower's ability
to repay the loan may be impaired. Commercial and multifamily real estate can
be affected significantly by the supply and demand in the market for the type
of property securing the loan and, therefore, may be subject to adverse
economic conditions. Market values may vary as a result of economic events or
governmental regulations outside the control of the borrower or lender that
impact the cash flow of the property. For example, some laws, such as the
Americans with Disabilities Act, may require modifications to properties, and
rent control laws may limit rent collections in the case of multifamily
properties. A number of the mortgage loans may be secured by liens on
owner-occupied mortgaged properties or on mortgaged properties leased to a
single tenant or a small number of significant tenants. Accordingly, a
decline in the financial condition of the borrower or a significant tenant,
as applicable, may have a disproportionately greater effect on the net
operating income from those mortgaged properties than would be the case with
respect to mortgaged properties with multiple tenants.
Furthermore, the value of any mortgaged property may be adversely affected
by risks generally incident to interests in real property, including:
o Changes in general or local economic conditions and/or specific
industry segments;
o Declines in real estate values;
o Declines in rental or occupancy rates;
o Increases in interest rates, real estate tax rates and other
operating expenses;
o Changes in governmental rules, regulations and fiscal policies,
including environmental legislation;
o Acts of God; and
o Other factors beyond the control of a master servicer.
The type and use of a particular mortgaged property may present additional
risk. For instance:
o Mortgaged properties that operate as hospitals and nursing homes may
present special risks to lenders due to the significant governmental
regulation of the ownership, operation, maintenance and financing of
health care institutions.
o Hotel and motel properties are often operated pursuant to franchise,
management or operating agreements that may be terminable by the
franchisor or operator. Moreover, the transferability of a hotel's
operating, liquor and other licenses upon a transfer of the hotel,
whether through purchase or foreclosure, is subject to local law
requirements.
o The ability of a borrower to repay a mortgage loan secured by shares
allocable to one or more cooperative dwelling units may depend on
the ability of the dwelling units to generate sufficient rental
income, which may be subject to rent control or stabilization laws,
to cover both debt service on the loan as well as maintenance
charges to the cooperative. Further, a mortgage loan secured by
cooperative shares is subordinate to the mortgage, if any, on the
cooperative apartment building.
The economic performance of mortgage loans that are secured by full
service hotels, limited service hotels, hotels associated with national
franchise chains, hotels associated with regional franchise chains and hotels
that are not affiliated with any franchise chain but may have their own brand
identity, are affected by various factors, including:
o Adverse economic and social conditions, either local, regional or
national (which may limit the amount that can be charged for a room
and reduce occupancy levels);
o Construction of competing hotels or resorts;
o Continuing expenditures for modernizing, refurbishing, and
maintaining existing facilities prior to the expiration of their
anticipated useful lives;
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o Deterioration in the financial strength or managerial capabilities
of the owner and operator of a hotel; and
o Changes in travel patterns caused by changes in access, energy
prices, strikes, relocation of highways, the construction of
additional highways or other factors.
Additionally, the hotel and lodging industry is generally seasonal in
nature and this seasonality can be expected to cause periodic fluctuations in
room and other revenues, occupancy levels, room rates and operating expenses.
The demand for particular accommodations may also be affected by changes in
travel patterns caused by changes in energy prices, strikes, relocation of
highways, the construction of additional highways and other factors.
The viability of any hotel property that is the franchisee of a national
or regional chain depends in part on the continued existence and financial
strength of the franchisor, the public perception of the franchise service
mark and the duration of the franchise licensing agreements. The
transferability of franchise license agreements may be restricted and, in the
event of a foreclosure on that hotel property, the property would not have
the right to use the franchise license without the franchisor's consent.
Conversely, a lender may be unable to remove a franchisor that it desires to
replace following a foreclosure. Further, in the event of a foreclosure on a
hotel property, it is unlikely that the trustee (or servicer or special
servicer) or purchaser of that hotel property would be entitled to the rights
under any existing liquor license for that hotel property. It is more likely
that those persons would have to apply for new licenses. We cannot assure you
that a new license could be obtained or that it could be obtained promptly.
Other multifamily properties, hotels, retail properties, office buildings,
manufactured housing properties, nursing homes and self-storage facilities
located in the areas of the mortgaged properties compete with the mortgaged
properties to attract residents and customers. The leasing of real estate is
highly competitive. The principal means of competition are price, location
and the nature and condition of the facility to be leased. A borrower under a
mortgage loan competes with all lessors and developers of comparable types of
real estate in the area in which the mortgaged property is located. Those
lessors or developers could have lower rentals, lower operating costs, more
favorable locations or better facilities. While a borrower under a mortgage
loan may renovate, refurbish or expand the mortgaged property to maintain it
and remain competitive, that renovation, refurbishment or expansion may
itself entail significant risk. Increased competition could adversely affect
income from and market value of the mortgaged properties. In addition, the
business conducted at each mortgaged property may face competition from other
industries and industry segments.
It is anticipated that some or all of the mortgage loans included in any
trust fund will be nonrecourse loans or loans for which recourse may be
restricted or unenforceable. As to that mortgage loan, recourse in the event
of borrower default will be limited to the specific real property and other
assets, if any, that were pledged to secure the mortgage loan. However, even
with respect to those mortgage loans that provide for recourse against the
borrower and its assets generally, we cannot assure you that enforcement of
those recourse provisions will be practicable, or that the assets of the
borrower will be sufficient to permit a recovery in respect of a defaulted
mortgage loan in excess of the liquidation value of the related mortgaged
property. See "Certain Legal Aspects of Mortgage Loans--Foreclosure" in this
prospectus.
Further, the concentration of default, foreclosure and loss risks in
individual mortgage loans in a particular trust fund will generally be
greater than for pools of single-family loans because mortgage loans in a
trust fund will generally consist of a smaller number of higher balance loans
than would a pool of single-family loans of comparable aggregate unpaid
principal balance.
BORROWERS MAY BE UNABLE TO MAKE BALLOON PAYMENTS
Certain of the mortgage loans included in a trust fund may be
non-amortizing or only partially amortizing over their terms to maturity and,
thus, will require substantial principal payments (that is, balloon payments)
at their stated maturity. Mortgage loans of this type involve a greater
degree of risk than self-amortizing loans because the ability of a borrower
to make a balloon payment typically will depend upon its ability either to
refinance the loan or to sell the related mortgaged property. The ability of
a borrower to accomplish either of these goals will be affected by:
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o The value of the related mortgaged property;
o The level of available mortgage interest rates at the time of sale
or refinancing;
o The borrower's equity in the related mortgaged property;
o The financial condition and operating history of the borrower and
the related mortgaged property;
o Tax laws, rent control laws, with respect to certain residential
properties;
o Medicaid and Medicare reimbursement rates, with respect to hospitals
and nursing homes;
o Prevailing general economic conditions; and
o The availability of credit for loans secured by multifamily or
commercial real properties generally.
Neither the Depositor nor any of its affiliates will be required to
refinance any mortgage loan.
If described in this prospectus and in the related prospectus supplement,
to maximize recoveries on defaulted mortgage loans, the master servicer or a
special servicer may, within prescribed limits, extend and modify mortgage
loans that are in default or as to which a payment default is reasonably
foreseeable. While a master servicer or a special servicer generally will be
required to determine that any extension or modification is reasonably likely
to produce a greater recovery, taking into account the time value of money,
than liquidation, we cannot assure you that any extension or modification
will in fact increase the present value of receipts from or proceeds of the
affected mortgage loans.
CREDIT SUPPORT LIMITATIONS
The prospectus supplement for a series of certificates will describe any
credit support provided for those certificates. Any use of credit support
will be subject to the conditions and limitations described in this
prospectus and in the related prospectus supplement, and may not cover all
potential losses or risks. For example, it may or may not cover fraud or
negligence by a mortgage loan originator or other parties.
A series of certificates may include one or more classes of subordinate
certificates, if so provided in the related prospectus supplement. Although
subordination is intended to reduce the risk to holders of senior
certificates of delinquent distributions or ultimate losses, the amount of
subordination will be limited and may decline under certain circumstances
described in the related prospectus supplement. In addition, if principal
payments on one or more classes of certificates of a series are made in a
specified order of priority, any limits with respect to the aggregate amount
of claims under any related credit support may be exhausted before the
principal of the later paid classes of certificates of that series has been
repaid in full. As a result, the impact of losses and shortfalls experienced
with respect to the mortgage assets may fall primarily upon those subordinate
classes of certificates. Moreover, if a form of credit support covers more
than one series of certificates, holders of certificates of one series will
be subject to the risk that the credit support will be exhausted by the
claims of the holders of certificates of one or more other series.
The amount of any applicable credit support supporting one or more classes
of offered certificates, including the subordination of one or more classes
of certificates, will be determined on the basis of criteria established by
each rating agency rating those classes of certificates. Such criteria will
be based on an assumed level of defaults, delinquencies and losses on the
underlying mortgage assets and certain other factors. However, we cannot
assure you that the default, delinquency or loss experience on the related
mortgage assets will not exceed the assumed levels. See "--Limited Nature of
Ratings", "Description of the Certificates" and "Description of Credit
Support" in this prospectus.
LEASES AND RENTS
Each mortgage loan included in any trust fund secured by mortgaged
property that is subject to leases typically will be secured by an assignment
of leases and rents pursuant to which the borrower assigns to the lender its
right, title and interest as landlord under the leases of the related
mortgaged property, and the income derived from those leases, as further
security for the related mortgage loan, while retaining a license to collect
rents for so long as there is no default. If the borrower defaults, the
license terminates and
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the lender is entitled to collect rents. Some state laws may require that the
lender take possession of the mortgaged property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect
of the borrower, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of Mortgage Loans--Leases and Rents" in
this prospectus.
ENVIRONMENTAL RISKS
Under federal law and the laws of certain states, contamination of real
property may give rise to a lien on the property to assure or reimburse the
costs of cleanup. In several states, that lien has priority over an existing
mortgage lien on that property. In addition, under various federal, state and
local laws, ordinances and regulations, an owner or operator of real estate
may be liable for the costs of removal or remediation of hazardous substances
or toxic substances on, in or beneath the property. This liability may be
imposed without regard to whether the owner knew of, or was responsible for,
the presence of those hazardous or toxic substances. The costs of any
required remediation and the owner or operator's liability for them as to any
property are generally not limited under these laws, ordinances and
regulations and could exceed the value of the mortgaged property and the
aggregate assets of the owner or operator. In addition, as to the owners or
operators of mortgaged properties that generate hazardous substances that are
disposed of at "off-site" locations, the owners or operators may be held
strictly, jointly and severally liable if there are releases or threatened
releases of hazardous substances at the off-site locations where that
person's hazardous substances were disposed. Two methods to attempt to reduce
the trust's potential exposure to cleanup costs are to establish reserves for
cleanup costs when they can be anticipated and estimated, or to designate the
trust as the named insured in specialized environmental insurance that is
designed for secured lenders. However, there can be no assurance that
reserves or environmental insurance will in fact be applicable or adequate to
cover all costs and any other liabilities that may eventually be incurred.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended,
as well as some state laws, a secured lender (such as the trust) may be
liable as an "owner" or "operator" for the costs of dealing with hazardous
substances affecting a borrower's property, if agents or employees of the
lender have participated in the management of the borrower's property. This
liability could exist even if a previous owner caused the environmental
damage. The trust's potential exposure to liability for cleanup costs may
increase if the trust actually takes possession of a borrower's property, or
control of its day-to-day operations, as for example through the appointment
of a receiver. See "Certain Legal Aspects of the Mortgage Loans--Environmental
Risks" in this prospectus.
SPECIAL HAZARD LOSSES
Unless otherwise specified in a prospectus supplement, the master servicer
for the related trust fund will be required to cause the borrower on each
mortgage loan in that trust fund to maintain the insurance coverage in
respect of the related mortgaged property required under the related
mortgage, including hazard insurance. The master servicer may satisfy its
obligation to cause hazard insurance to be maintained with respect to any
mortgaged property through acquisition of a blanket policy.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by:
o fire;
o lightning;
o explosion;
o smoke;
o windstorm and hail; and
o riot, strike and civil commotion.
Each policy is subject to the conditions and exclusions specified in that
policy.
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The policies covering the mortgaged properties will be underwritten by
different insurers under different state laws, and therefore will not contain
identical terms and conditions. However, most policies do not typically cover
any physical damage resulting from war, revolution, governmental actions,
floods and other water-related causes, earth movement, including earthquakes,
landslides and mudflows, wet or dry rot, vermin, domestic animals and certain
other kinds of risks. Unless the related mortgage specifically requires the
mortgagor to insure against physical damage arising from those causes, those
losses may be borne, at least in part, by the holders of one or more classes
of offered certificates of the related series, to the extent they are not
covered by any available credit support. See "Description of the Pooling
Agreements--Hazard Insurance Policies" in this prospectus.
SOME CERTIFICATES MAY NOT BE APPROPRIATE FOR ERISA PLANS
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of those plans. Due to the complexity of
regulations that govern those plans, if you are subject to ERISA you are
urged to consult your own counsel regarding consequences under ERISA of
acquisition, ownership and disposition of the offered certificates of any
series. See "Certain ERISA Considerations" in this prospectus.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING RESIDUAL CERTIFICATES
If you hold certain classes of certificates that constitute a residual
interest in a "real estate mortgage investment conduit" for federal income
tax purposes, you will be required to report on your federal income tax
returns as ordinary income your pro rata share of the taxable income of the
REMIC, regardless of the amount or timing of your receipt of cash payments,
as described in "Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates" in this prospectus. Accordingly, under
certain circumstances, if you hold residual certificates you may have taxable
income and tax liabilities arising from your investment during a taxable year
in excess of the cash received during that period. The requirement to report
your pro rata share of the taxable income and net loss of the REMIC will
continue until the principal balances of all classes of certificates of the
related series have been reduced to zero, even though you have received full
payment of their stated interest and principal. A portion, or, in certain
circumstances, all, of your share of the REMIC taxable income may be treated
as "excess inclusion" income to you, which:
o generally, will not be subject to offset by losses from other
activities;
o if you are a tax-exempt holder, will be treated as unrelated
business taxable income; and
o if you are a foreign holder, will not qualify for exemption from
withholding tax.
If you are an individual and you hold a class of residual certificates,
you may be limited in your ability to deduct servicing fees and other
expenses of the REMIC. In addition, classes of residual certificates are
subject to certain restrictions on transfer. Because of the special tax
treatment of classes of residual certificates, the taxable income arising in
a given year on a class of residual certificates will not be equal to the
taxable income associated with investment in a corporate bond or stripped
instrument having similar cash flow characteristics and pre-tax yield. As a
result, the after-tax yield on the classes of residual certificates may be
significantly less than that of a corporate bond or stripped instrument
having similar cash flow characteristics.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING ORIGINAL ISSUE DISCOUNT
Certain classes of certificates of a series may be issued with "original
issue discount" for federal income tax purposes, which generally will result
in recognition of some taxable income in advance of the receipt of cash
attributable to that income. See "Certain Federal Income Tax Consequences--
Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular
Certificates" in this prospectus.
BANKRUPTCY PROCEEDINGS ENTAIL CERTAIN RISKS
Under the federal bankruptcy code, the filing of a petition in bankruptcy
by or against a borrower will stay the sale of the mortgaged property owned
by that borrower, as well as the commencement or
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continuation of a foreclosure action. In addition, even 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-current value of the
mortgaged property. This 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.
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 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 federal 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 trustee's ability to enforce lockbox
requirements. The legal proceedings necessary to resolve these issues can be
time consuming and costly and may significantly delay or diminish 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 trustee'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.
BOOK-ENTRY SYSTEM FOR CERTAIN CLASSES MAY DECREASE LIQUIDITY AND DELAY
PAYMENT
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. Each class of book-entry certificates will be initially
represented by one or more certificates registered in the name of a nominee
for The Depository Trust Company, or DTC. Since transactions in the classes
of book-entry certificates of any series generally can be effected only
through The Depository Trust Company, and its participating organizations:
o the liquidity of book-entry certificates in secondary trading market
that may develop may be limited because investors may be unwilling
to purchase certificates for which they cannot obtain physical
certificates;
o your ability to pledge certificates to persons or entities that do
not participate in the DTC system, or otherwise to take action in
respect of the certificates, may be limited due to lack of a
physical security representing the certificates;
o your access to information regarding the certificates may be limited
since conveyance of notices and other communications by The
Depository Trust Company to its participating organizations, and
directly and indirectly through those participating organizations to
you, will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect at that
time; and
o you may experience some delay in receiving distributions of interest
and principal on your certificates because distributions will be
made by the trustee to DTC and DTC will then be required to credit
those distributions to the accounts of its participating
organizations and only then will they be credited to your account
either directly or indirectly through DTC's participating
organizations.
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See "Description of the Certificates--Book-Entry Registration and
Definitive Certificates" in this prospectus.
DELINQUENT AND NON-PERFORMING MORTGAGE LOANS
If so provided in the related prospectus supplement, the trust fund for a
particular series of certificates may include mortgage loans that are past
due. In no event will the mortgage loans that are past due comprise 20
percent or more of the trust fund at the time the mortgage loans are
transferred to the trust fund. None of the mortgage loans will be
non-performing (i.e., more than 90 days delinquent or in foreclosure) at the
time the mortgage loans are transferred by the Depositor to a trust fund for
a series. If so specified in the related prospectus supplement, a special
servicer may perform the servicing of delinquent mortgage loans or mortgage
loans that become non-performing after the time they are transferred to a
trust fund. Credit support provided with respect to a particular series of
certificates may not cover all losses related to those delinquent or
non-performing mortgage loans. You should consider the risk that the
inclusion of those mortgage loans in the trust fund may adversely affect the
rate of defaults and prepayments on the mortgage assets in the trust fund and
the yield on your certificates of that series. See "Description of the Trust
Funds--Mortgage Loans--General" in this prospectus.
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DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each trust fund will consist of (1) various types of
multifamily or commercial mortgage loans, (2) mortgage participations,
pass-through certificates or other mortgage-backed securities ("MBS") that
evidence interests in, or that are secured by pledges of, one or more of
various types of multifamily or commercial mortgage loans or (3) a
combination of mortgage loans and MBS. GE Capital Commercial Mortgage
Corporation (the "Depositor") will establish each trust fund. Each mortgage
asset will be selected by the Depositor for inclusion in a trust fund from
among those purchased, either directly or indirectly, from a prior holder of
the mortgage asset (a "Mortgage Asset Seller"), which prior holder may or may
not be the originator of that mortgage loan or the issuer of that MBS and may
be our affiliate. The mortgage assets will not be guaranteed or insured by
the Depositor, the Mortgage Asset Seller, the Underwriters or any of their
affiliates or, unless otherwise provided in the related prospectus
supplement, by any governmental agency or instrumentality or by any other
person. The discussion under the heading "--Mortgage Loans" below, unless
otherwise noted, applies equally to mortgage loans underlying any MBS
included in a particular trust fund.
MORTGAGE LOANS
General. The mortgage loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages, deeds of trust or similar security
instruments (the "Mortgages") that create liens on fee or leasehold estates
in properties (the "Mortgaged Properties") consisting of:
o Residential properties consisting of five or more rental or
cooperatively-owned dwelling units in high-rise, mid-rise or garden
apartment buildings or other residential structures; or
o Office buildings, retail stores and establishments, hotels or
motels, nursing homes, assisted living facilities, continuum care
facilities, day care centers, schools, hospitals or other healthcare
related facilities, manufactured housing properties, warehouse
facilities, mini-warehouse facilities, self-storage facilities,
distribution centers, transportation centers, industrial plants,
parking facilities, entertainment and/or recreation facilities,
mixed use properties and/or unimproved land.
The multifamily properties may include mixed commercial and residential
structures, apartment buildings owned by private cooperative housing
corporations ("Cooperatives"), and shares of the Cooperative allocable to one
or more dwelling units occupied by non-owner tenants or to vacant units. Each
Mortgage will create a first priority or junior priority mortgage lien on a
borrower's fee estate in a Mortgaged Property. If a Mortgage creates a lien
on a borrower's leasehold estate in a property, then, unless otherwise
specified in the related prospectus supplement, the term of that leasehold
will exceed the term of the Mortgage Note by at least two years. Unless
otherwise specified in the related prospectus supplement, a person other than
the Depositor will have originated each mortgage loan, and the originator may
be or may have been an affiliate of the Depositor.
If so specified in the related prospectus supplement, mortgage assets for
a series of certificates may include mortgage loans made on the security of
real estate projects under construction. In that case, the related prospectus
supplement will describe the procedures and timing for making disbursements
from construction reserve funds as portions of the related real estate
project are completed. In addition, the mortgage assets for a particular
series of certificates may include mortgage loans that are delinquent or
non-performing as of the date those certificates are issued. In that case,
the related prospectus supplement will set forth, as to those mortgage loans,
available information as to the period of the delinquency or non-performance
of those loans, any forbearance arrangement then in effect, the condition of
the related Mortgaged Property and the ability of the Mortgaged Property to
generate income to service the mortgage debt.
Default and Loss Considerations with Respect to the Mortgage
Loans. Mortgage loans secured by liens on income-producing properties are
substantially different from loans made on the security of owner-occupied
single-family homes. The repayment of a loan secured by a lien on an
income-producing
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property is typically dependent upon the successful operation of that
property (that is, its ability to generate income). Moreover, some or all of
the mortgage loans included in a particular trust fund may be non-recourse
loans, which means that, absent special facts, recourse in the case of
default will be limited to the Mortgaged Property and those other assets, if
any, that were pledged to secure repayment of the mortgage loan.
Lenders typically look to the Debt Service Coverage Ratio of a loan
secured by income-producing property as an important factor in evaluating the
risk of default on that loan. Unless otherwise defined in the related
prospectus supplement, the "Debt Service Coverage Ratio" of a mortgage loan
at any given time is the ratio of (1) the Net Operating Income derived from
the related Mortgaged Property for a twelve-month period or an annualized
rent roll to (2) the annualized scheduled payments on the mortgage loan and
any other loans senior thereto that are secured by the related Mortgaged
Property. Unless otherwise defined in the related prospectus supplement, "Net
Operating Income" means, for any given period, the total operating revenues
derived from a Mortgaged Property during that period, minus the total
operating expenses incurred in respect of that Mortgaged Property during that
period other than
o non-cash items such as depreciation and amortization,
o capital expenditures, and
o debt service on the related mortgage loan or on any other loans that
are secured by that Mortgaged Property.
The Net Operating Income of a Mortgaged Property will fluctuate over time
and may or may not be sufficient to cover debt service on the related
mortgage loan at any given time. As the primary source of the operating
revenues of a non-owner occupied, income-producing property, rental income
(and, with respect to a mortgage loan secured by a Cooperative apartment
building, maintenance payments from tenant-stockholders of a Cooperative) may
be affected by the condition of the applicable real estate market and/or area
economy. In addition, properties typically leased, occupied or used on a
short-term basis, such as certain healthcare-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
typically leased for longer periods, such as warehouses, retail stores,
office buildings and industrial plants. Commercial properties may be
owner-occupied or leased to a small number of tenants. Thus, the Net
Operating Income of a commercial property may depend substantially on the
financial condition of the borrower or a tenant, and mortgage loans secured
by liens on those properties may pose greater risks than loans secured by
liens on multifamily properties or on multi-tenant commercial properties.
Increases in operating expenses due to the general economic climate or
economic conditions in a locality or industry segment, such as increases in
interest rates, real estate tax rates, energy costs, labor costs and other
operating expenses, and/or to changes in governmental rules, regulations and
fiscal policies, may also affect the risk of default on a 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/landlord, is responsible for payment of operating expenses ("Net
Leases"). However, the existence of these "net of expense" provisions will
result in stable Net Operating Income to the borrower/landlord only to the
extent that the lessee is able to absorb operating expense increases while
continuing to make rent payments.
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a
factor in evaluating risk of loss if a property must be liquidated following
a default. Unless otherwise defined in the related prospectus supplement, the
"Loan-to-Value RatioLoan-to-Value Ratio" of a mortgage loan at any given time
is the ratio (expressed as a percentage) of
o the then outstanding principal balance of the mortgage loan and any
other loans senior thereto that are secured by the related Mortgaged
Property to
o the Value of the related Mortgaged Property.
The "Value" of a Mortgaged Property is generally its fair market value
determined in an appraisal or market study obtained by the originator at the
origination of that loan. The lower the Loan-to-Value Ratio, the greater the
percentage of the borrower's equity in a Mortgaged Property, and thus
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(a) the greater the incentive of the borrower to perform under the terms
of the related mortgage loan (in order to protect its equity); and
(b) the greater the cushion provided to the lender against loss on
liquidation following a default.
Loan-to-Value Ratios will not necessarily constitute an accurate measure
of the risk of liquidation loss in a pool of mortgage loans. For example, 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 determined at loan
origination, and will likely continue to fluctuate from time to time based
upon changes in economic conditions, the real estate market and other factors
described in this prospectus. Moreover, even when current, an appraisal is
not necessarily a reliable estimate of value. Appraised values of
income-producing properties are generally based on
o the market comparison method (which compares recent resale value of
comparable properties at the date of the appraisal),
o the cost replacement method which calculates the cost of replacing
the property at that date,
o the income capitalization method which projects value based upon the
property's projected net cash flow, or
o upon a selection from or interpolation of the values derived from
those methods.
Each of these appraisal methods can present analytical difficulties. It is
often difficult to find truly comparable properties that have recently been
sold; the replacement cost of a property may have little to do with its
current market value; and income capitalization is inherently based on
inexact projections of income and expense and the selection of an appropriate
capitalization rate and discount rate. Where more than one of these appraisal
methods are used and provide significantly different results, an accurate
determination of value and, correspondingly, a reliable analysis of default
and loss risks, is even more difficult.
While we believe that the foregoing considerations are important factors
that generally distinguish loans secured by liens on income-producing real
estate from single-family mortgage loans, we cannot assure you that all of
these factors will in fact have been prudently considered by the originators
of the mortgage loans, or that, for a particular mortgage loan, they are
complete or relevant. See "Risk Factors--Risks Associated with Certain
Mortgage Loans and Mortgaged Properties" and "--Borrowers May Be Unable to
Make Balloon Payments" in this prospectus.
Payment Provisions of the Mortgage Loans. In general, each mortgage loan
o will provide for scheduled payments of principal, interest or both,
to be made on specified dates ("Due Dates") that occur monthly,
quarterly, semi-annually or annually,
o may provide for no accrual of interest or for accrual of interest at
an interest rate that is fixed over its term or that adjusts from
time to time, or that may be converted at the borrower's election
from an adjustable to a fixed interest rate, or from a fixed to an
adjustable interest rate,
o may provide for level payments to maturity or for payments that
adjust from time to time to accommodate changes in the interest rate
or to reflect the occurrence of certain events, and may permit
negative amortization,
o may be fully amortizing or partially amortizing or non-amortizing,
with a balloon payment due on its stated maturity date, and
o may prohibit over its term or for a certain period prepayments (the
period of that prohibition, a "Lock-out Period" and its date of
expiration, a "Lock-out Date") and/or require payment of a premium
or a yield maintenance penalty (a "Prepayment Premium") in
connection with certain prepayments, in each case as described in
the related prospectus supplement.
A mortgage loan may also contain a provision that entitles the lender to a
share of appreciation of the related Mortgaged Property, or profits realized
from the operation or disposition of that Mortgaged Property or the benefit,
if any, resulting from the refinancing of the mortgage loan (this provision,
an "Equity
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Participation"), as described in the related prospectus supplement. If
holders of any class or classes of offered certificates of a series will be
entitled to all or a portion of an Equity Participation in addition to
payments of interest on and/or principal of those offered certificates, the
related prospectus supplement will describe the Equity Participation and the
method or methods by which distributions will be made to holders of those
certificates.
Mortgage Loan Information in Prospectus Supplements. Each prospectus
supplement will contain certain information pertaining to the mortgage loans
in the related trust fund, which will generally be current as of a date
specified in the related prospectus supplement and which, to the extent then
applicable and specifically known to the Depositor, will include the
following:
o the aggregate outstanding principal balance and the largest,
smallest and average outstanding principal balance of the mortgage
loans,
o the type or types of property that provide security for repayment of
the mortgage loans,
o the earliest and latest origination date and maturity date of the
mortgage loans,
o the original and remaining terms to maturity of the mortgage loans,
or the respective ranges of remaining terms to maturity, and the
weighted average original and remaining terms to maturity of the
mortgage loans,
o the original Loan-to-Value Ratios of the mortgage loans, or the
range of the Loan-to-Value Ratios, and the weighted average original
Loan-to-Value Ratio of the mortgage loans,
o the interest rates borne by the mortgage loans, or range of the
interest rates, and the weighted average interest rate borne by the
mortgage loans,
o with respect to mortgage loans with adjustable mortgage interest
rates ("ARM Loans"), the index or indices upon which those
adjustments are based, the adjustment dates, the range of gross
margins and the weighted average gross margin, and any limits on
mortgage interest rate adjustments at the time of any adjustment and
over the life of the ARM Loan,
o information regarding the payment characteristics of the mortgage
loans, including, without limitation, balloon payment and other
amortization provisions, Lock-out Periods and Prepayment Premiums,
o the Debt Service Coverage Ratios of the mortgage loans (either at
origination or as of a more recent date), or the range of the Debt
Service Coverage Ratios, and the weighted average of the Debt
Service Coverage Ratios, and
o the geographic distribution of the Mortgaged Properties on a
state-by-state basis.
In appropriate cases, the related prospectus supplement will also contain
certain information available to the Depositor that pertains to the
provisions of leases and the nature of tenants of the Mortgaged Properties.
If we are unable to tabulate the specific information described above at the
time offered certificates of a series are initially offered, we will provide
more general information of the nature described above in the related
prospectus supplement, and specific information will be set forth in a report
which we will make available to purchasers of those certificates at or before
the initial issuance of the certificates and will be filed as part of a
Current Report on Form 8-K with the Securities and Exchange Commission within
fifteen days following that issuance.
MBS
MBS may include:
o private (that is, not guaranteed or insured by the United States or
any agency or instrumentality of the United States) mortgage
participations, mortgage pass-through certificates or other
mortgage-backed securities, or
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o certificates insured or guaranteed by the Federal Home Loan Mortgage
Corporation ("FHLMC"), the Federal National Mortgage Association
("FNMA"), the Governmental National Mortgage Association ("GNMA") or
the Federal Agricultural Mortgage Corporation ("FAMC") provided
that, unless otherwise specified in the related prospectus
supplement, each MBS will evidence an interest in, or will be
secured by a pledge of, mortgage loans that conform to the
descriptions of the mortgage loans contained in this prospectus.
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar
agreement (an "MBS Agreement"). The issuer of the MBS (the "MBS Issuer")
and/or the servicer of the underlying mortgage loans (the "MBS Servicer")
will have entered into the MBS Agreement, generally with a trustee (the "MBS
Trustee") or, in the alternative, with the original purchaser or purchasers
of the MBS.
The MBS may have been issued in one or more classes with characteristics
similar to the classes of certificates described in this prospectus. The MBS
Issuer, the MBS Servicer or the MBS Trustee will make distributions in
respect of the MBS on the dates specified in the related prospectus
supplement. 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.
Reserve funds, subordination or other credit support similar to that
described for the certificates under "Description of Credit Support" may have
been provided with respect to the MBS. The type, characteristics and amount
of credit support, if any, will be a function of the characteristics of the
underlying mortgage loans and other factors and generally will have been
established on the basis of the requirements of any rating agency that may
have assigned a rating to the MBS, or by the initial purchasers of the MBS.
The prospectus supplement for a series of certificates that evidence
interests in MBS will specify, to the extent available:
o the aggregate approximate initial and outstanding principal amount
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 the pass-through or bond rate of the MBS or the formula for
determining the rates,
o the payment characteristics of the MBS,
o the MBS Issuer, MBS Servicer and MBS Trustee, as applicable,
o a description of the credit support, if any,
o the circumstances under which the related underlying mortgage loans,
or the MBS themselves, may be purchased prior to their maturity,
o the terms on which mortgage loans may be substituted for those
originally underlying the MBS,
o the type of mortgage loans underlying the MBS and, to the extent
available to the Depositor and appropriate under the circumstances,
the other information in respect of the underlying mortgage loans
described under "--Mortgage Loans--Mortgage Loan Information in
Prospectus Supplements" above, and
o the characteristics of any cash flow agreements that relate to the
MBS.
CERTIFICATE ACCOUNTS
Each trust fund will include one or more certificate 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 that prospectus supplement, deposit all
payments and collections received or advanced with respect to the mortgage
assets and other assets in the trust fund.
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A certificate account may be maintained as an interest bearing or a
non-interest bearing account, and funds held in a certificate account may be
held as cash or invested in certain obligations acceptable to each rating
agency rating one or more classes of the related series of offered
certificates.
CREDIT SUPPORT
If so provided in the prospectus supplement for a series of certificates,
partial or full protection against certain defaults and losses on the
mortgage assets in the related trust fund may be provided to one or more
classes of certificates of that series in the form of subordination of one or
more other classes of certificates of that series or by one or more other
types of credit support, such as letters of credit, overcollateralization,
insurance policies, guarantees, surety bonds or reserve funds, or a
combination of them. The amount and types of credit support, the
identification of the entity providing it (if applicable) and related
information with respect to each type of credit support, if any, will be set
forth in the prospectus supplement for a series of certificates. See "Risk
Factors--Credit Support Limitations" and "Description of Credit Support" in
this prospectus.
CASH FLOW AGREEMENTS
If so provided in the prospectus supplement for a series of certificates,
the related trust fund may include guaranteed investment contracts pursuant
to which moneys held in the funds and accounts established for those series
will be invested at a specified rate. The trust fund may also include
interest rate exchange agreements, interest rate cap or floor agreements, or
currency exchange agreements, which agreements are designed to reduce the
effects of interest rate or currency exchange rate fluctuations on the
mortgage assets on one or more classes of certificates. The principal terms
of a guaranteed investment contract or other agreement (any of these
agreements, a "Cash Flow Agreement"), and the identity of the Cash Flow
Agreement obligor, will be described in the prospectus supplement for a
series of certificates.
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YIELD AND MATURITY CONSIDERATIONS
GENERAL
The yield on any offered certificate will depend on the price you paid,
the fixed, variable or adjustable pass-through interest rate of the
certificate and the amount and timing of distributions on the certificate.
See "Risk Factors--Prepayment Considerations; Variability in Average Life of
Offered Certificates; Special Yield Considerations" in this prospectus. The
following discussion contemplates a trust fund that consists solely of
mortgage loans. While the characteristics and behavior of mortgage loans
underlying an MBS can generally be expected to have the same effect on the
yield to maturity and/or weighted average life of a class of certificates as
will the characteristics and behavior of comparable mortgage loans, the
effect may differ due to the payment characteristics of the MBS. If a trust
fund includes MBS, the related prospectus supplement will discuss the effect
that the MBS payment characteristics may have on the yield to maturity and
weighted average lives of the offered certificates of the related series.
PASS-THROUGH RATE
The certificates of any class within a series may have a fixed, variable
or adjustable pass-through interest rate, which may or may not be based upon
the interest rates borne by the mortgage loans in the related trust fund. The
prospectus supplement with respect to any series of certificates will specify
the pass-through interest rate for each class of offered certificates of that
series or, in the case of a class of offered certificates with a variable or
adjustable pass-through interest rate, the method of determining the
pass-through interest rate; the effect, if any, of the prepayment of any
mortgage loan on the pass-through interest rate of one or more classes of
offered certificates; and whether the distributions of interest on the
offered certificates of any class will be dependent, in whole or in part, on
the performance of any obligor under a Cash Flow Agreement.
PAYMENT DELAYS
With respect to any series of certificates, a period of time will elapse
between the date upon which payments on the mortgage loans in the related
trust fund are due and the distribution date on which those payments are
passed through to certificateholders. That delay will effectively reduce the
yield that would otherwise be produced if payments on those mortgage loans
were distributed to certificateholders on or near the date they were due.
CERTAIN SHORTFALLS IN COLLECTIONS OF INTEREST
When a principal prepayment in full or in part is made on a mortgage loan,
the borrower is generally charged interest on the amount of that prepayment
only through the date of prepayment, instead of through the Due Date for the
next succeeding scheduled payment. However, interest accrued on any series of
certificates and distributable on them on any distribution date will
generally correspond to interest accrued on the mortgage loans to their
respective Due Dates during the related Due Period. Unless otherwise
specified in the prospectus supplement for a series of certificates, a "Due
Period" is a specified time period generally corresponding in length to the
time period between distribution dates, and all scheduled payments on the
mortgage loans in the related trust fund that are due during a given Due
Period will, to the extent received by a specified date (the "Determination
Date") or otherwise advanced by the related master servicer or other
specified person, be distributed to the holders of the certificates of that
series on the next succeeding distribution date. Consequently, if a
prepayment on any mortgage loan is distributable to certificateholders on a
particular distribution date, but that prepayment is not accompanied by
interest on it to the Due Date for that mortgage loan in the related Due
Period, then the interest charged to the borrower (net of servicing and
administrative fees) may be less (that shortfall, a "Prepayment Interest
Shortfall") than the corresponding amount of interest accrued and otherwise
payable on the certificates of the related series. If that shortfall is
allocated to a class of offered certificates, their yield will be adversely
affected. The prospectus supplement for each series of certificates will
describe the manner in which those shortfalls will be allocated among the
classes of those certificates. If so specified in the prospectus supplement
for a series of certificates, the master servicer for that series will be
required to apply some or all of its servicing
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compensation for the corresponding period to offset the amount of those
shortfalls. The related prospectus supplement will also describe any other
amounts available to offset those shortfalls. See "Description of the Pooling
Agreements--Servicing Compensation and Payment of Expenses" in this
prospectus.
YIELD AND PREPAYMENT CONSIDERATIONS
A certificate's yield to maturity will be affected by the rate of
principal payments on the mortgage loans in the related trust fund and the
allocation of principal to reduce the principal balance (or notional amount,
if applicable) of that certificate. The rate of principal payments on the
mortgage loans in any trust fund will in turn be affected by the amortization
schedules of the mortgage loans (which, in the case of ARM Loans, may change
periodically to accommodate adjustments to their mortgage interest rates),
the dates on which any balloon payments are due, and the rate of principal
prepayments on them (including for this purpose, prepayments resulting from
liquidations of mortgage loans due to defaults, casualties or condemnations
affecting the Mortgaged Properties, or purchases of mortgage loans out of the
related trust fund). Because the rate of principal prepayments on the
mortgage loans in any trust fund will depend on future events and a variety
of factors (as described more fully below), we cannot assure you as to that
rate.
The extent to which the yield to maturity of a class of offered
certificates of any series may vary from the anticipated yield will depend
upon the degree to which they are purchased at a discount or premium and
when, and to what degree, payments of principal on the mortgage loans in the
related trust fund are in turn distributed on those certificates, or, in the
case of a class of interest-only certificates, result in the reduction of its
notional amount. An investor should consider, in the case of any offered
certificate purchased at a discount, the risk that a slower than anticipated
rate of principal payments on the mortgage loans in the related trust fund
could result in an actual yield to that investor that is lower than the
anticipated yield and, in the case of any offered certificate purchased at a
premium, the risk that a faster than anticipated rate of principal payments
on those mortgage loans could result in an actual yield to that investor that
is lower than the anticipated yield. In addition, if an investor purchases an
offered certificate at a discount (or premium), and principal payments are
made in reduction of the principal balance or notional amount of that
investor's offered certificates at a rate slower (or faster) than the rate
anticipated by the investor during any particular period, the consequent
adverse effects on that investor's yield would not be fully offset by a
subsequent like increase (or decrease) in the rate of principal payments.
A class of certificates, including a class of offered certificates, may
provide that on any distribution date the holders of those certificates are
entitled to a pro rata share of the prepayments on the mortgage loans in the
related trust fund that are distributable on that date, to a
disproportionately large share (which, in some cases, may be all) of those
prepayments, or to a disproportionately small share (which, in some cases,
may be none) of those prepayments. As described in the related prospectus
supplement, the respective entitlements of the various classes of
certificates of any series to receive distributions in respect of payments
(and, in particular, prepayments) of principal of the mortgage loans in the
related trust fund may vary based on the occurrence of certain events, such
as, the retirement of one or more classes of certificates of that series, or
subject to certain contingencies, such as, prepayment and default rates with
respect to those mortgage loans.
In general, the notional amount of a class of interest-only certificates
will either (1) be based on the principal balances of some or all of the
mortgage assets in the related trust fund or (2) equal the principal balances
of one or more of the other classes of certificates of the same series.
Accordingly, the yield on those interest-only certificates will be inversely
related to the rate at which payments and other collections of principal are
received on those mortgage assets or distributions are made in reduction of
the principal balances of those classes of certificates, as the case may be.
Consistent with the foregoing, if a class of certificates of any series
consists of interest-only certificates or principal-only certificates, a
lower than anticipated rate of principal prepayments on the mortgage loans in
the related trust fund will negatively affect the yield to investors in
principal-only certificates, and a higher than anticipated rate of principal
prepayments on those mortgage loans will negatively affect the yield to
investors in interest-only certificates. If the offered certificates of a
series include those certificates, the related prospectus supplement will
include a table showing the effect of various assumed levels of prepayment on
yields on those certificates. Those tables will be intended to illustrate the
sensitivity of
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yields to various assumed prepayment rates and will not be intended to
predict, or to provide information that will enable investors to predict,
yields or prepayment rates.
We are not aware of any relevant publicly available or authoritative
statistics with respect to the historical prepayment experience of a group of
multifamily or commercial mortgage loans. However, the extent of prepayments
of principal of the mortgage loans in any trust fund may be affected by a
factors such as:
o the availability of mortgage credit,
o the relative economic vitality of the area in which the Mortgaged
Properties are located,
o the quality of management of the Mortgaged Properties,
o the servicing of the mortgage loans,
o possible changes in tax laws and other opportunities for investment,
o the existence of Lock-out Periods,
o requirements that principal prepayments be accompanied by Prepayment
Premiums, and
o by the extent to which these provisions may be practicably enforced.
The rate of prepayment on a pool of mortgage loans is also 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 loan's interest rate, a borrower may have an increased incentive to
refinance its mortgage loan. Even in the case of ARM Loans, as prevailing
market interest rates decline, and without regard to whether the mortgage
interest rates on the ARM Loans decline in a manner consistent therewith, the
related borrowers may have an increased incentive to refinance for purposes
of either (1) converting to a fixed rate loan and thereby "locking in" that
rate or (2) taking advantage of a different index, margin or rate cap or
floor on another adjustable rate mortgage loan.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity in the Mortgaged
Properties, 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. We will make no representation as to
the particular factors that will affect the prepayment of the mortgage loans
in any trust fund, as to the relative importance of those factors, as to the
percentage of the principal balance of the mortgage loans that will be paid
as of any date or as to the overall rate of prepayment on the mortgage loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the mortgage loans in
any trust fund will affect the ultimate maturity and the weighted average
life of one or more classes of the certificates of that series. Weighted
average life refers to the average amount of time that will elapse from the
date of issuance of an instrument until each dollar allocable as principal of
that instrument is repaid to the investor.
The weighted average life and maturity of a class of certificates of any
series will be influenced by the rate at which principal on the related
mortgage loans, whether in the form of scheduled amortization or prepayments
(for this purpose, the term "prepayment" includes voluntary prepayments,
liquidations due to default and purchases of mortgage loans out of the
related trust fund), is paid to that class. Prepayment rates on loans are
commonly measured relative to a prepayment standard or model, such as the
Constant Prepayment Rate ("CPR") prepayment model or the Standard Prepayment
Assumption ("SPA") prepayment model. CPR represents an assumed constant rate
of prepayment each month (expressed as an annual percentage) relative to the
then outstanding principal balance of a pool of loans for the life of those
loans. SPA represents an assumed variable rate of prepayment each month
(expressed as an annual percentage) relative to the then outstanding
principal balance of a pool of loans, with different prepayment assumptions
often expressed as percentages of SPA. For example, a prepayment assumption
of 100% of SPA assumes prepayment rates of 0.2% per annum of the then
outstanding principal balance of the loans in the first
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month of the life of the loans and an additional 0.2% per annum in each month
thereafter until the thirtieth month. Beginning in the thirtieth month, and
in each month thereafter during the life of the loans, 100% of SPA assumes a
constant prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of
the anticipated rate of prepayment of any particular pool of loans. Moreover,
the CPR and SPA models were developed based upon historical prepayment
experience for single-family loans. Thus, it is unlikely that the prepayment
experience of the mortgage loans included in any trust fund will conform to
any particular level of CPR or SPA.
The prospectus supplement with respect to each series of certificates will
contain tables, if applicable, setting forth the projected weighted average
life of each class of offered certificates of those series and the percentage
of the initial principal balance of each class that would be outstanding on
specified distribution dates based on the assumptions stated in that
prospectus supplement, including assumptions that prepayments on the related
mortgage loans are made at rates corresponding to various percentages of CPR
or SPA, or at other rates specified in that prospectus supplement. Those
tables and assumptions will illustrate the sensitivity of the weighted
average lives of the certificates to various assumed prepayment rates and
will not be intended to predict, or to provide information that will enable
investors to predict, the actual weighted average lives of the certificates.
CONTROLLED AMORTIZATION CLASSES AND COMPANION CLASSES
A series of certificates may include one or more controlled amortization
classes, which will entitle the holders of those certificates to receive
principal distributions according to a specified principal payment schedule,
which schedule is supported by creating priorities, as described in the
related prospectus supplement, to receive principal payments from the
mortgage loans in the related trust fund. Unless otherwise specified in the
related prospectus supplement, each controlled amortization class will either
be a planned amortization class or a targeted amortization class. In general,
a planned amortization class has a "prepayment collar", that is, a range of
prepayment rates that can be sustained without disruption, that determines
the principal cash flow of those certificates. That prepayment collar is not
static, and may expand or contract after the issuance of the planned
amortization class depending on the actual prepayment experience for the
underlying mortgage loans. Distributions of principal on a planned
amortization class would be made in accordance with the specified schedule so
long as prepayments on the underlying mortgage loans remain at a relatively
constant rate within the prepayment collar and, as described below, companion
classes exist to absorb "excesses" or "shortfalls" in principal payments on
the underlying mortgage loans. If the rate of prepayment on the underlying
mortgage loans from time to time falls outside the prepayment collar, or
fluctuates significantly within the prepayment collar, especially for any
extended period of time, that event may have material consequences in respect
of the anticipated weighted average life and maturity for a planned
amortization class. A targeted amortization class is structured so that
principal distributions generally will be payable on it in accordance with
its specified principal payments schedule so long as the rate of prepayments
on the related mortgage assets remains relatively constant at the particular
rate used in establishing that schedule. A targeted amortization class will
generally afford the holders of those certificates some protection against
early retirement or some protection against an extended average life, but not
both.
Although prepayment risk cannot be eliminated entirely for any class of
certificates, a controlled amortization class will generally provide a
relatively stable cash flow so long as the actual rate of prepayment on the
mortgage loans in the related trust fund remains relatively constant at the
rate, or within the range of rates, of prepayment used to establish the
specific principal payment schedule for those certificates. Prepayment risk
with respect to a given pool of mortgage assets does not disappear, however,
and the stability afforded to a controlled amortization class comes at the
expense of one or more companion classes of the same series, any of which
companion classes may also be a class of offered certificates. In general,
and as more particularly described in the related prospectus supplement, a
companion class will entitle the holders of those certificates to a
disproportionately large share of prepayments on the mortgage loans in the
related trust fund when the rate of prepayment is relatively fast, and will
entitle the holders of those certificates to a disproportionately small share
of prepayments on the
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mortgage loans in the related trust fund when the rate of prepayment is
relatively slow. A class of certificates that entitles the holders of those
certificates to a disproportionately large share of the prepayments on the
mortgage loans in the related trust fund enhances the risk of early
retirement of that class, or call risk, if the rate of prepayment is
relatively fast; while a class of certificates that entitles the holders of
those certificates to a disproportionately small share of the prepayments on
the mortgage loans in the related trust fund enhances the risk of an extended
average life of that class, or extension risk, if the rate of prepayment is
relatively slow. Thus, as described in the related prospectus supplement, a
companion class absorbs some (but not all) of the "call risk" and/or
"extension risk" that would otherwise belong to the related controlled
amortization class if all payments of principal of the mortgage loans in the
related trust fund were allocated on a pro rata basis.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
Balloon Payments; Extensions of Maturity. Some or all of the mortgage
loans included in a particular trust fund may require that balloon payments
be made 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 that require balloon payments may default at maturity, or that the
maturity of that mortgage loan may be extended 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 master servicer or a special servicer, to the extent and under the
circumstances set forth in this prospectus and in the related prospectus
supplement, may be authorized 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 may delay
distributions of principal on a class of offered certificates and thereby
extend the weighted average life of your certificates and, if those
certificates were purchased at a discount, reduce your yield.
Negative Amortization. The weighted average life of a class of
certificates can be affected by mortgage loans that permit negative
amortization to occur. A mortgage loan that provides for the payment of
interest calculated at a rate lower than the rate at which interest accrues
on it would be expected during a period of increasing interest rates to
amortize at a slower rate (and perhaps not at all) than if interest rates
were declining or were remaining constant. This slower rate of mortgage loan
amortization would correspondingly be reflected in a slower rate of
amortization for one or more classes of certificates of the related series.
In addition, negative amortization on one or more mortgage loans in any trust
fund may result in negative amortization on the certificates of the related
series. The related prospectus supplement will describe, if applicable, the
manner in which negative amortization in respect of the mortgage loans in any
trust fund is allocated among the respective classes of certificates of the
related series. The portion of any mortgage loan negative amortization
allocated to a class of certificates may result in a deferral of some or all
of the interest payable on them, which deferred interest may be added to the
principal balance of the certificates. Accordingly, the weighted average
lives of mortgage loans that permit negative amortization and that of the
classes of certificates to which the negative amortization would be allocated
or that would bear the effects of a slower rate of amortization on those
mortgage loans, may increase as a result of that feature.
Negative amortization also may occur in respect of an ARM Loan that limits
the amount by which its scheduled payment may adjust in response to a change
in its mortgage interest rate, provides that its scheduled payment will
adjust less frequently than its mortgage interest rate or provides for
constant scheduled payments notwithstanding adjustments to its mortgage
interest rate. Accordingly, during a period of declining interest rates, the
scheduled payment on that mortgage loan may exceed the amount necessary to
amortize the loan fully over its remaining amortization schedule and pay
interest at the then applicable mortgage interest rate, thereby resulting in
the accelerated amortization of that mortgage loan. This acceleration in
amortization of its principal balance will shorten the weighted average life
of that mortgage loan and, correspondingly, the weighted average lives of
those classes of certificates entitled to a portion of the principal payments
on that mortgage loan.
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The extent to which the yield on any offered certificate will be affected
by the inclusion in the related trust fund of mortgage loans that permit
negative amortization, will depend upon (1) whether that offered certificate
was purchased at a premium or a discount and (2) the extent to which the
payment characteristics of those mortgage loans delay or accelerate the
distributions of principal on that certificate or, in the case of an
interest-only certificate, delay or accelerate the amortization of the
notional amount of that certificate. See "--Yield and Prepayment
Considerations" above.
Foreclosures and Payment Plans. The number of foreclosures and the
principal amount of the mortgage loans 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 lives of those mortgage
loans and, accordingly, the weighted average lives of and yields on the
certificates of the related series. 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 lives of and yields on the
certificates of the related series.
Losses and Shortfalls on the Mortgage Assets. The yield on your
certificates will directly depend on the extent to which you are required to
bear the effects of any losses or shortfalls in collections arising out of
defaults on the mortgage loans in the related trust fund and the timing of
those losses and shortfalls. In general, the earlier that any loss or
shortfall occurs, the greater will be the negative effect on yield for any
class of certificates that is required to bear the effects of the shortfall.
The amount of any losses or shortfalls in collections on the mortgage
assets in any trust fund, to the extent not covered or offset by draws on any
reserve fund or under any instrument of credit support, will be allocated
among the respective classes of certificates of the related series in the
priority and manner, and subject to the limitations, specified in the related
prospectus supplement. As described in the related prospectus supplement,
those allocations may be effected by a reduction in the entitlements to
interest and/or principal balances of one or more classes of certificates, or
by establishing a priority of payments among those classes of certificates.
The yield to maturity on a class of Subordinate Certificates may be
extremely sensitive to losses and shortfalls in collections on the mortgage
loans in the related trust fund.
Additional Certificate Amortization. In addition to entitling the holders
of one or more classes of a series of certificates to a specified portion,
which may during specified periods range from none to all, of the principal
payments received on the mortgage assets in the related trust fund, one or
more classes of certificates of any series, including one or more classes of
offered certificates of those series, may provide for distributions of
principal of those certificates from (1) amounts attributable to interest
accrued but not currently distributable on one or more classes of accrual
certificates, (2) Excess Funds or (3) any other amounts described in the
related prospectus supplement. Unless otherwise specified in the related
prospectus supplement, "Excess Funds" will, in general, represent that
portion of the amounts distributable in respect of the certificates of any
series on any distribution date that represent (1) interest received or
advanced on the mortgage assets in the related trust fund that is in excess
of the interest currently accrued on the certificates of that series, or (2)
Prepayment Premiums, payments from Equity Participations or any other amounts
received on the mortgage assets in the related trust fund that do not
constitute interest on, or principal of, those certificates.
The amortization of any class of certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of those
certificates and, if those certificates were purchased at a premium, reduce
the yield on those certificates. The related prospectus supplement will
discuss the relevant factors to be considered in determining whether
distributions of principal of any class of certificates out of those sources
would have any material effect on the rate at which those certificates are
amortized.
Optional Early 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 mortgage assets in the related
trust fund by the party or parties specified in the related prospectus
supplement, under the
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circumstances and in the manner set forth in the prospectus supplement. If so
provided in the related prospectus supplement, upon the reduction of the
principal balance of a specified class or classes of certificates by a
specified percentage or amount, the specified party may be authorized or
required to solicit bids for the purchase of all of the mortgage assets of
the related trust fund, or of a sufficient portion of those mortgage assets
to retire that class or classes, as set forth in the related prospectus
supplement. In the absence of other factors, any early retirement of a class
of offered certificates would shorten the weighted average life of those
certificates and, if those certificates were purchased at premium, reduce the
yield on those certificates.
THE DEPOSITOR
GE Capital Commercial Mortgage Corporation, the Depositor, is a Delaware
corporation organized on September 6, 2000. The Depositor is a wholly-owned
subsidiary of General Electric Capital Corporation. All outstanding common
stock of General Electric Capital Corporation is owned by General Electric
Capital Services, Inc., the common stock of which is in turn wholly owned
directly or indirectly by General Electric Company. The Depositor maintains
its principal office at 292 Long Ridge Road, Stamford, Connecticut 06927. Its
telephone number is (203) 357-4000. The Depositor does not have, nor is it
expected in the future to have, any significant assets.
USE OF PROCEEDS
We will apply the net proceeds to be received from the sale of the
certificates of any series to the purchase of Trust Assets or use the net
proceeds for general corporate purposes. We expect to sell the certificates
from time to time, but the timing and amount of offerings of certificates
will depend on a number of factors, including the volume of mortgage assets
we have acquired, prevailing interest rates, availability of funds and
general market conditions.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
Each series of certificates will represent the entire beneficial ownership
interest in a trust fund. As described in the related prospectus supplement,
the certificates of each series, including the offered certificates of that
series, may consist of one or more classes of certificates that, among other
things:
o provide for the accrual of interest on the certificates at a fixed,
variable or adjustable rate;
o are senior (collectively, "Senior Certificates") or subordinate
(collectively, "Subordinate Certificates") to one or more other
classes of certificates in entitlement to certain distributions on
the certificates;
o are principal-only certificates entitled to distributions of
principal, with disproportionately small, nominal or no
distributions of interest;
o are interest-only certificates entitled to distributions of
interest, with disproportionately small, nominal or no distributions
of principal;
o provide for distributions of interest on, or principal of, those
certificates that commence only after the occurrence of certain
events, such as the retirement of one or more other classes of
certificates of that series;
o provide for distributions of principal of those certificates to be
made, from time to time or for designated periods, at a rate that is
faster, and, in some cases, substantially faster, or slower, and, in
some cases, substantially slower, than the rate at which payments or
other collections of principal are received on the mortgage assets
in the related trust fund;
o provide for controlled distributions of principal of those
certificates to be made based on a specified payment schedule or
other methodology, subject to available funds; or
o provide for distributions based on collections of Prepayment
Premiums and Equity Participations on the mortgage assets in the
related trust fund.
Each class of offered certificates of a series will be issued in minimum
denominations corresponding to the principal balances or, in case of certain
classes of interest-only certificates or residual certificates, notional
amounts or percentage interests, specified in the related prospectus
supplement. As provided in the related prospectus supplement, one or more
classes of offered certificates of any series may be issued in fully
registered, definitive form (those certificates, "Definitive Certificates")
or may be offered in book-entry format (those certificates, "Book-Entry
Certificates") through the facilities of The Depository Trust Company
("DTC"). The offered certificates of each series (if issued as Definitive
Certificates) may be transferred or exchanged, subject to any restrictions on
transfer described in the related prospectus supplement, at the location
specified in the related prospectus supplement, without the payment of any
service charges, other than any tax or other governmental charge payable in
connection therewith. Interests in a class of Book-Entry Certificates will be
transferred on the book-entry records of DTC and its participating
organizations. See "Risk Factors--Limited Liquidity of Your Certificates" and
"--Book-Entry System for Certain Classes May Decrease Liquidity and Delay
Payment" in this prospectus.
DISTRIBUTIONS
Distributions on the certificates of each series will be made on each
distribution date as specified in the related prospectus supplement from the
Available Distribution Amount for that series and that distribution date.
Unless otherwise provided in the related prospectus supplement, the
"Available Distribution Amount" for any series of certificates and any
distribution date will refer to the total of all payments or other
collections on or in respect of the mortgage assets and any other assets
included in the related trust fund that are available for distribution to the
holders of certificates of that series on that date. The particular
components of the Available Distribution Amount for any series on each
distribution date will be more specifically described in the related
prospectus supplement.
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Except as otherwise specified in the related prospectus supplement,
distributions on the certificates of each series, other than the final
distribution in retirement of that certificate, will be made to the persons
in whose names those certificates are registered at the close of business on
the last business day of the month preceding the month in which the
applicable distribution date occurs (the "Record Date"), and the amount of
each distribution will be determined as of the close of business on the
Determination 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 that
class. Payments will be made either by wire transfer in immediately available
funds to your account at a bank or other entity having appropriate facilities
for the transfer, if you have provided the person required to make those
payments with wiring instructions no later than the date specified in the
related prospectus supplement (and, if so provided in the related prospectus
supplement, that you hold certificates in the amount or denomination
specified in the prospectus supplement), or by check mailed to the address of
that certificateholder as it appears on the certificate register; provided,
however, that the final distribution in retirement of any class of
certificates (whether Definitive Certificates or Book-Entry Certificates)
will be made only upon presentation and surrender of those certificates at
the location specified in the notice to certificateholders of the final
distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of certificates of each series, other than certain classes of
principal-only certificates and residual certificates ("Residual
Certificates") that have no pass-through interest rate, may have a different
pass-through interest rate, which in each case may be fixed, variable or
adjustable. The related prospectus supplement will specify the pass-through
interest rate or, in the case of a variable or adjustable pass-through
interest rate, the method for determining the pass-through interest rate, for
each class. Unless otherwise specified in the related prospectus supplement,
interest on the certificates of each series will be calculated on the basis
of a 360-day year consisting of twelve 30-day months.
Distributions of interest in respect of any class of certificates (other
than certain classes of certificates that will be entitled to distributions
of accrued interest commencing only on the distribution date, or under the
circumstances, specified in the related prospectus supplement ("Accrual
Certificates"), and other than any class of principal-only certificates or
Residual Certificates which are not entitled to distributions of interest)
will be made on each distribution date based on the Accrued Certificate
Interest for that class and that distribution date, subject to the
sufficiency of the portion of the Available Distribution Amount allocable to
that class on that distribution date. Prior to the time interest is
distributable on any class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on that class will be added to
the principal balance of those certificates on each distribution date. With
respect to each class of certificates, other than certain classes of
interest-only certificates and certain classes of residual certificates, the
"Accrued Certificate Interest" for each distribution date will be equal to
interest at the applicable pass-through interest rate accrued for a specified
time period generally corresponding in length to the time period between
distribution dates, on the outstanding principal balance of that class of
certificates immediately prior to that distribution date.
Unless otherwise provided in the related prospectus supplement, the
Accrued Certificate Interest for each distribution date on a class of
interest-only certificates will be similarly calculated except that it will
accrue on a notional amount that is either (1) based on the principal
balances of some or all of the mortgage assets in the related trust fund, (2)
equal to the principal balances of one or more other classes of certificates
of the same series or (3) an amount or amounts specified in the applicable
prospective supplement. Reference to a notional amount with respect to a
class of interest-only certificates is solely for convenience in making
certain calculations and does not represent the right to receive any
distributions of principal. If so specified in the related prospectus
supplement, the amount of Accrued Certificate Interest that is otherwise
distributable on, or, in the case of Accrual Certificates, that may otherwise
be added to the principal balance of, one or more classes of the certificates
of a series will be reduced to the extent that any Prepayment Interest
Shortfalls, as described under "Yield and Maturity Considerations--Certain
Shortfalls in Collections of Interest" in this prospectus, exceed the amount
of any sums that are applied to offset the amount of those shortfalls. The
particular manner in which those shortfalls will be allocated among some or
all of the classes of certificates of that series will be specified in the
related prospectus supplement. The
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related prospectus supplement will also describe the extent to which the
amount of Accrued Certificate Interest that is otherwise distributable on
(or, in the case of Accrual Certificates, that may otherwise be added to the
principal balance of) a class of offered certificates may be reduced as a
result of any other contingencies, including delinquencies, losses and
deferred interest on or in respect of the mortgage assets in the related
trust fund. Unless otherwise provided in the related prospectus supplement,
any reduction in the amount of Accrued Certificate Interest otherwise
distributable on a class of certificates by reason of the allocation to that
class of a portion of any deferred interest on or in respect of the mortgage
assets in the related trust fund will result in a corresponding increase in
the principal balance of that class. See "Risk Factors--Prepayment
Considerations; Variability in Average Life of Offered Certificates; Special
Yield Considerations" and "Yield and Maturity Considerations" in this
prospectus.
DISTRIBUTIONS OF PRINCIPAL ON THE CERTIFICATES
Each class of certificates of each series, other than certain classes of
interest-only certificates and Residual Certificates, will have a principal
balance which, at any time, will equal the then maximum amount that the
holders of certificates of that class will be entitled to receive in respect
of principal out of the future cash flow on the mortgage assets and other
assets included in the related trust fund. The outstanding principal balance
of a class of certificates will be reduced by distributions of principal made
on the certificates from time to time and, if so provided in the related
prospectus supplement, further by any losses incurred in respect of the
related mortgage assets allocated thereto from time to time. In turn, the
outstanding principal balance of a class of certificates may be increased as
a result of any deferred interest on or in respect of the related mortgage
assets being allocated to that class from time to time, and will be
increased, in the case of a class of Accrual Certificates prior to the
distribution date on which distributions of interest on the certificates are
required to commence, by the amount of any Accrued Certificate Interest in
respect of those certificates (reduced as described above). The initial
principal balance of each class of a series of certificates will be specified
in the related prospectus supplement. As described in the related prospectus
supplement, distributions of principal with respect to a series of
certificates will be made on each distribution date to the holders of the
class or classes of certificates of that series entitled thereto until the
principal balances of those certificates have been reduced to zero.
Distributions of principal with respect to one or more classes of
certificates may be made at a rate that is faster, and, in some cases,
substantially faster, than the rate at which payments or other collections of
principal are received on the mortgage assets in the related trust fund.
Distributions of principal with respect to one or more classes of
certificates may not commence until the occurrence of certain events,
including the retirement of one or more other classes of certificates of the
same series, or may be made at a rate that is slower, and, in some cases,
substantially slower, than the rate at which payments or other collections of
principal are received on the mortgage assets in the related trust fund.
Distributions of principal with respect to one or more classes of
certificates may be made, subject to available funds, based on a specified
principal payment schedule. Distributions of principal with respect to one or
more classes of certificates may be contingent on the specified principal
payment schedule for another class of the same series and the rate at which
payments and other collections of principal on the mortgage assets in the
related trust fund are received. Unless otherwise specified in the related
prospectus supplement, distributions of principal of any class of offered
certificates will be made on a pro rata basis among all of the certificates
of that class.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT 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 received on or in connection
with the mortgage assets in any trust fund will be distributed on each
distribution date to the holders of the class of certificates of the related
series entitled thereto in accordance with the provisions described in that
prospectus supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the mortgage
assets in any trust fund, to the extent not covered or offset by draws on any
reserve fund or under any instrument of credit support, will be allocated
among the respective classes of certificates of the related series in the
priority and manner, and
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subject to the limitations, specified in the related prospectus supplement.
As described in the related prospectus supplement, those allocations may be
effected by a reduction in the entitlements to interest and/or principal
balances of one or more classes of certificates, or by establishing a
priority of payments among those classes of certificates.
ADVANCES IN RESPECT OF DELINQUENCIES
If provided in the related prospectus supplement, if a trust fund includes
mortgage loans, the master servicer, a special servicer, the trustee, any
provider of credit support and/or any other specified person may be obligated
to advance, or have the option of advancing, on or before each distribution
date, from its or their own funds or from excess funds held in the related
certificate account that are not part of the Available Distribution Amount
for the related series of certificates for that distribution date, an amount
up to the aggregate of any payments of principal, other than any balloon
payments, and interest that were due on or in respect of those mortgage loans
during the related Due Period and were delinquent on the related
Determination Date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of certificates
entitled thereto, rather than to guarantee or insure against losses.
Accordingly, all advances made out of a specific entity's own funds will be
reimbursable out of related recoveries on the mortgage loans, including
amounts received under any instrument of credit support, respecting which
those advances were made (as to any mortgage loan, "Related Proceeds") and
those other specific sources as may be identified in the related prospectus
supplement, including in the case of a series that includes one or more
classes of Subordinate Certificates, collections on other mortgage loans in
the related trust fund that would otherwise be distributable to the holders
of one or more classes of those Subordinate Certificates. No advance will be
required to be made by a master servicer, special servicer or trustee if, in
the good faith judgment of the master servicer, special servicer or trustee,
as the case may be, that advance would not be recoverable from Related
Proceeds or another specifically identified source (each, a "Nonrecoverable
Advance"); and, if previously made by a master servicer, special servicer or
trustee, a Nonrecoverable Advance will be reimbursable to the advancing party
from any amounts in the related certificate account prior to any
distributions being made to the related series of certificateholders.
If advances have been made by a master servicer, special servicer, trustee
or other entity from excess funds in a certificate account, the advancing
party will be required to replace those funds in that certificate account on
any future distribution date to the extent that funds in that certificate
account on that distribution date are less than payments required to be made
to the related series of certificateholders on that date. If so specified in
the related prospectus supplement, the obligation of a master servicer,
special servicer, trustee or other entity to make advances may be secured by
a cash advance reserve fund or a surety bond. If applicable, information
regarding the characteristics of a surety bond, and the identity of any
obligor on that surety bond, will be set forth in the related prospectus
supplement.
If so provided in the related prospectus supplement, any entity making
advances will be entitled to receive interest on those advances for the
period that those advances are outstanding at the rate specified in that
prospectus supplement, and that entity will be entitled to payment of that
interest periodically from general collections on the mortgage loans in the
related trust fund prior to any payment to the related series of
certificateholders or as otherwise 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 comparable
advancing obligation.
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REPORTS TO CERTIFICATEHOLDERS
On each distribution date, together with the distribution to the holders
of each class of the offered certificates of a series, a master servicer or
trustee, as provided in the related prospectus supplement, will forward to
each holder a statement (a "Distribution Date Statement") that, unless
otherwise provided in the related prospectus supplement, will set forth,
among other things, in each case to the extent applicable:
o the amount of that distribution to holders of that class of offered
certificates that was applied to reduce the principal balance of
those certificates, expressed as a dollar amount per minimum
denomination of the relevant class of offered certificates or per a
specified portion of that minimum denomination;
o the amount of that distribution to holders of that class of offered
certificates that is allocable to Accrued Certificate Interest,
expressed as a dollar amount per minimum denomination of the
relevant class of offered certificates or per a specified portion of
that minimum denomination;
o the amount, if any, of that distribution to holders of that class of
offered certificates that is allocable to (A) Prepayment Premiums
and (B) payments on account of Equity Participations, expressed as a
dollar amount per minimum denomination of the relevant class of
offered certificates or per a specified portion of that minimum
denomination;
o the amount, if any, by which that distribution is less than the
amounts to which holders of that class of offered certificates are
entitled;
o if the related trust fund includes mortgage loans, the aggregate
amount of advances included in that distribution;
o if the related trust fund includes mortgage loans, the amount of
servicing compensation received by the related master servicer (and,
if payable directly out of the related trust fund, by any special
servicer and any sub-servicer) and other customary information as
the reporting party deems necessary or desirable, or that a
certificateholder reasonably requests, to enable certificateholders
to prepare their tax returns;
o information regarding the aggregate principal balance of the related
mortgage assets on or about that distribution date;
o if the related trust fund includes mortgage loans, information
regarding the number and aggregate principal balance of those
mortgage loans that are delinquent in varying degrees;
o if the related trust fund includes mortgage loans, information
regarding the aggregate amount of losses incurred and principal
prepayments made with respect to those mortgage loans during the
specified period, generally equal in length to the time period
between distribution dates, during which prepayments and other
unscheduled collections on the mortgage loans in the related trust
fund must be received in order to be distributed on a particular
distribution date;
o the principal 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 that distribution date,
separately identifying any reduction in that principal balance or
notional amount due to the allocation of any losses in respect of
the related mortgage assets, any increase in that principal balance
or notional amount due to the allocation of any negative
amortization in respect of the related mortgage assets and any
increase in the principal balance of a class of Accrual
Certificates, if any, in the event that Accrued Certificate Interest
has been added to that balance;
o if the class of offered certificates has a variable pass-through
interest rate or an adjustable pass-through interest rate, the
pass-through interest rate applicable to that class for that
distribution date and, if determinable, for the next succeeding
distribution date;
o the amount deposited in or withdrawn from any reserve fund on that
distribution date, and the amount remaining on deposit in that
reserve fund as of the close of business on that distribution date;
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o if the related trust fund includes one or more instruments of credit
support, like a letter of credit, an insurance policy and/or a
surety bond, the amount of coverage under that instrument as of the
close of business on that distribution date; and
o to the extent not otherwise reflected through the information
furnished as described above, the amount of credit support being
afforded by any classes of Subordinate Certificates.
The prospectus supplement for each series of certificates may describe
additional information to be included in reports to the holders of the
offered certificates of that series.
Within a reasonable period of time after the end of each calendar year,
the master servicer or trustee for a series of certificates, as the case may
be, will be required to furnish to each person who at any time during the
calendar year was a holder of an offered certificate of that series a
statement containing the information set forth in the first three categories
described above, aggregated for that calendar year or the applicable portion
of that year during which that person was a certificateholder. This
obligation will be deemed to have been satisfied to the extent that
substantially comparable information is provided pursuant to any requirements
of the Internal Revenue Code of 1986, as amended (the "Code"), as are from
time to time in force. See, however, "Description of the
Certificates--Book-Entry Registration and Definitive Certificates" in this
prospectus.
If the trust fund for a series of certificates includes MBS, the ability
of the related master servicer or trustee, as the case may be, to include in
any Distribution Date Statement information regarding the mortgage loans
underlying that MBS will depend on the reports received with respect to that
MBS. In those cases, the related prospectus supplement will describe the
loan-specific information to be included in the distribution date statements
that will be forwarded to the holders of the offered certificates of that
series in connection with distributions made to them.
VOTING RIGHTS
The voting rights evidenced by each series of certificates will be
allocated among the respective classes of that series in the manner described
in the related prospectus supplement.
Certificateholders will generally not have a right to vote, except with
respect to required consents to certain amendments to the agreement pursuant
to which the certificates are issued and as otherwise specified in the
related prospectus supplement. See "Description of the Pooling
Agreements--Amendment" in this prospectus. The holders of specified amounts
of certificates of a particular series will have the right to act as a group
to remove the related trustee and also upon the occurrence of certain events
which if continuing would constitute an event of default on the part of the
related master servicer. See "Description of the Pooling Agreements--Events
of Default", "--Rights Upon Event of Default" and "--Resignation and Removal
of the Trustee" in this prospectus.
TERMINATION
The obligations created by the pooling and servicing or other agreement
creating a series of certificates will terminate following:
o the final payment or other liquidation of the last mortgage asset
underlying the series or the disposition of all property acquired
upon foreclosure of any mortgage loan underlying the series, and
o the payment to the certificateholders of the series of all amounts
required to be paid to them.
Written notice of termination will be given to each certificateholder of
the related series, and the final distribution will be made only upon
presentation and surrender of the certificates of that series 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 mortgage assets in the related trust fund by the party or
parties specified in the prospectus supplement, in the manner set forth in
the prospectus supplement. If so
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provided in the related prospectus supplement, upon the reduction of the
principal balance of a specified class or classes of certificates by a
specified percentage or amount, a party designated in the prospectus
supplement may be authorized or required to bid for or solicit bids for the
purchase of all the mortgage assets of the related trust fund, or of a
sufficient portion of those mortgage assets to retire those class or classes,
in the manner set forth in the prospectus supplement.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the prospectus supplement for a series of certificates,
one or more classes of the offered certificates of that series will be
offered in book-entry format through the facilities of The Depository Trust
Company, and that class will be represented by one or more global
certificates registered in the name of DTC or its nominee.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking corporation" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entry
changes in their accounts, thereby eliminating the need for physical movement
of securities certificates. "Direct Participants", which maintain accounts
with DTC, include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the DTC system also is
available to others like banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants").
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the
Book-Entry Certificates on DTC's records. The ownership interest of each
actual purchaser of a Book-Entry Certificate (a "Certificate Owner") is in
turn to be recorded on the Direct and Indirect Participants' records.
Certificate Owners will not receive written confirmation from DTC of their
purchases, but Certificate Owners are expected to receive written
confirmations providing details of those transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which each Certificate Owner entered into the transaction. Transfers of
ownership interest in the Book-Entry Certificates are to be accomplished by
entries made on the books of Participants acting on behalf of Certificate
Owners. Certificate Owners will not receive certificates representing their
ownership interests in the Book-Entry Certificates, except in the event that
use of the book-entry system for the Book-Entry Certificates of any series is
discontinued as described below.
DTC has no knowledge of the actual Certificate Owners of the Book-Entry
Certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts those certificates are credited, which may or
may not be the Certificate Owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to 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.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related
distribution date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
that date. Disbursement of those distributions by Participants to Certificate
Owners will be governed by standing instructions and customary practices, as
is the case with securities held for the accounts of customers in bearer form
or registered in "street name", and will be the responsibility of that
Participant (and not of DTC, the Depositor or any trustee or master
servicer), subject to any statutory or regulatory requirements as may be in
effect from time to time. Under a book-entry system, Certificate Owners may
receive payments after the related distribution date.
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Unless otherwise provided in the related prospectus supplement, the only
certificateholder of record will be the nominee of DTC, and the Certificate
Owners will not be recognized as certificateholders under the agreement
pursuant to which the certificates are issued. Certificate Owners will be
permitted to exercise the rights of certificateholders under that agreement
only indirectly through the Participants who in turn will exercise their
rights through DTC. The Depositor is informed that DTC will take action
permitted to be taken by a certificateholder under that agreement only at the
direction of one or more Participants to whose account with DTC interests in
the Book-Entry Certificates are credited.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain Certificate Owners, the ability
of a Certificate Owner to pledge its interest in 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 Book-Entry Certificates, may be
limited due to the lack of a physical certificate evidencing that interest.
Unless otherwise specified in the related prospectus supplement,
certificates initially issued in book-entry form will be issued as Definitive
Certificates to Certificate Owners or their nominees, rather than to DTC or
its nominee, only if
o the Depositor advises the trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as
depository with respect to those certificates and the Depositor is
unable to locate a qualified successor, or
o the Depositor, at its option, elects to terminate the book-entry
system through DTC with respect to those certificates.
Upon the occurrence of either of the events described above, DTC will be
required to notify all Participants of the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the certificate or
certificates representing a class of Book-Entry Certificates, together with
instructions for registration, the trustee for the related series or other
designated party will be required to issue to the Certificate Owners
identified in those instructions the Definitive Certificates to which they
are entitled, and thereafter the holders of those Definitive Certificates
will be recognized as certificateholders of record under the related
agreement pursuant to which the certificates are issued.
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DESCRIPTION OF THE POOLING AGREEMENTS
GENERAL
The certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the related prospectus
supplement (in either case, a "Pooling Agreement"). In general, the parties
to a Pooling Agreement will include the Depositor, a trustee, a master
servicer and, in some cases, a special servicer appointed as of the date of
the Pooling Agreement. However, a Pooling Agreement may include a Mortgage
Asset Seller as a party, and a Pooling Agreement that relates to a trust fund
that consists solely of MBS may not include a master servicer or other
servicer as a party. All parties to each Pooling Agreement under which
certificates of a series are issued will be identified in the related
prospectus supplement. If so specified in the related prospectus supplement,
an affiliate of the Depositor, or the Mortgage Asset Seller or an affiliate
of the Mortgage Asset Seller, may perform the functions of master servicer or
special servicer. Any party to a Pooling Agreement may own certificates.
A form of a Pooling Agreement has been filed as an exhibit to the
Registration Statement of which this prospectus is a part. However, the
provisions of each Pooling Agreement will vary depending upon the nature of
the certificates to be issued and the nature of the related trust fund. The
following summaries describe certain provisions that may appear in a Pooling
Agreement under which certificates that evidence interests in mortgage loans
will be issued. The prospectus supplement for a series of certificates will
describe any provision of the related Pooling Agreement that materially
differs from the description contained in this prospectus and, if the related
trust fund includes MBS, will summarize all of the material provisions of the
related Pooling Agreement. The summaries in this prospectus 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 Pooling Agreement for each series
of certificates and the description of those provisions in the related
prospectus supplement. We will provide a copy of the Pooling Agreement
(without exhibits) that relates to any series of certificates without charge
upon written request of a holder of a certificate of that series addressed to
GE Capital Commercial Mortgage Corporation, 292 Long Ridge Road, Stamford,
Connecticut 06927, Attention: President.
ASSIGNMENT OF MORTGAGE LOANS; REPURCHASES
At the time of issuance of any series of certificates, we will assign (or
cause to be assigned) to the designated trustee the mortgage loans to be
included in the related trust fund. The trustee will, concurrently with the
assignment, deliver the certificates to or at the direction of the Depositor
in exchange for the mortgage loans and the other assets to be included in the
trust fund for that series. Each mortgage loan will be identified in a
schedule. That schedule generally will include detailed information that
pertains to each mortgage loan included in the related trust fund, which
information will typically include the address of the related Mortgaged
Property and type of that property; the mortgage interest rate and, if
applicable, the applicable index, gross margin, adjustment date and any rate
cap information; the original and remaining term to maturity; the original
amortization term; and the original and outstanding principal balance.
With respect to each mortgage loan to be included in a trust fund, we will
deliver (or cause to be delivered) to the related trustee (or to a custodian
appointed by the trustee) certain loan documents which, unless otherwise
specified in the related prospectus supplement, will include the original
Mortgage Note endorsed, without recourse, to the order of the trustee, the
original Mortgage, or a certified copy, in each case with evidence of
recording indicated on it and an assignment of the Mortgage to the trustee in
recordable form. Unless otherwise provided in the prospectus supplement for a
series of certificates, the related Pooling Agreement will require us or
another party to the agreement to promptly cause each assignment of Mortgage
to be recorded in the appropriate public office for real property records.
The trustee (or a custodian appointed by the trustee) for a series of
certificates will be required to review the mortgage loan documents delivered
to it within a specified period of days after receipt of the mortgage loan
documents, and the trustee (or that custodian) will hold those documents in
trust for the benefit of the certificateholders of that series. Unless
otherwise specified in the related prospectus supplement, if that document is
found to be missing or defective, and that omission or defect, as the case
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may be, materially and adversely affects the interests of the
certificateholders of the related series, the trustee (or that custodian)
will be required to notify the master servicer and the Depositor, and one of
those persons will be required to notify the relevant Mortgage Asset Seller.
In that case, and if the Mortgage Asset Seller cannot deliver the document or
cure the defect within a specified number of days after receipt of that
notice, then, except as otherwise specified below or in the related
prospectus supplement, the Mortgage Asset Seller will be obligated to
repurchase the related mortgage loan from the trustee at a price that will be
specified in the related prospectus supplement. If so provided in the
prospectus supplement for a series of certificates, a Mortgage Asset Seller,
in lieu of repurchasing a mortgage loan as to which there is missing or
defective loan documentation, will have the option, exercisable upon certain
conditions and/or within a specified period after initial issuance of that
series of certificates, to replace those mortgage loans with one or more
other mortgage loans, in accordance with standards that will be described in
the prospectus supplement. Unless otherwise specified in the related
prospectus supplement, this repurchase or substitution obligation will
constitute the sole remedy to holders of the certificates of any series or to
the related trustee on their behalf for missing or defective loan
documentation and neither the Depositor nor, unless it is the Mortgage Asset
Seller, the master servicer will be obligated to purchase or replace a
mortgage loan if a Mortgage Asset Seller defaults on its obligation to do so.
Notwithstanding the foregoing, if a document has not been delivered to the
related trustee (or to a custodian appointed by the trustee) because that
document has been submitted for recording, and neither that document nor a
certified copy, in either case with evidence of recording on it, can be
obtained because of delays on the part of the applicable recording office,
then, unless otherwise specified in the related prospectus supplement, the
Mortgage Asset Seller will not be required to repurchase or replace the
affected mortgage loan on the basis of that missing document so long as it
continues in good faith to attempt to obtain that document or that certified
copy.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the prospectus supplement for a series of
certificates, the Depositor will, with respect to each mortgage loan in the
related trust fund, make or assign, or cause to be made or assigned, certain
representations and warranties (the person making those representations and
warranties, the "Warranting Party") covering, by way of example:
o the accuracy of the information set forth for that mortgage loan
on the schedule of mortgage loans delivered upon initial issuance
of the certificates;
o the enforceability of the related Mortgage Note and Mortgage and
the existence of title insurance insuring the lien priority of the
related Mortgage;
o the Warranting Party's title to the mortgage loan and the
authority of the Warranting Party to sell the mortgage loan; and
o the payment status of the mortgage loan.
It is expected that in most cases the Warranting Party will be the
Mortgage Asset Seller; however, the Warranting Party may also be an affiliate
of the Mortgage Asset Seller, the Depositor or an affiliate of the Depositor,
the master servicer, a special servicer or another person acceptable to the
Depositor. The Warranting Party, if other than the Mortgage Asset Seller,
will be identified in the related prospectus supplement.
Unless otherwise provided in the related prospectus supplement, each
Pooling Agreement will provide that the master servicer and/or trustee will
be required to notify promptly any Warranting Party of any breach of any
representation or warranty made by it in respect of a mortgage loan that
materially and adversely affects the interests of the certificateholders of
the related series. If that Warranting Party cannot cure that breach within a
specified period following the date on which it was notified of the breach,
then, unless otherwise provided in the related prospectus supplement, it will
be obligated to repurchase that mortgage loan from the trustee at a price
that will be specified in the related prospectus supplement. If so provided
in the prospectus supplement for a series of certificates, a Warranting
Party, in lieu of repurchasing a mortgage loan as to which a breach has
occurred, will have the option, exercisable upon certain conditions and/or
within a specified period after initial issuance of that series of
certificates, to
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replace that mortgage loan with one or more other mortgage loans, in
accordance with standards that will be described in the prospectus
supplement. Unless otherwise specified in the related prospectus supplement,
this repurchase or substitution obligation will constitute the sole remedy
available to holders of the certificates of any series or to the related
trustee on their behalf for a breach of representation and warranty by a
Warranting Party and neither the Depositor nor the master servicer, in either
case unless it is the Warranting Party, will be obligated to purchase or
replace a mortgage loan if a Warranting Party defaults on its obligation to
do so.
In some cases, representations and warranties will have been made in
respect of a mortgage loan as of a date prior to the date upon which the
related series of certificates is issued, and thus may not address events
that may occur following the date as of which they were made. However, we
will not include any mortgage loan in the trust fund for any series of
certificates if anything has come to our attention that would cause us to
believe that the representations and warranties made in respect of that
mortgage loan will not be accurate in all material respects as of the date of
issuance. The date as of which the representations and warranties regarding
the mortgage loans in any trust fund were made will be specified in the
related prospectus supplement.
COLLECTION AND OTHER SERVICING PROCEDURES
The master servicer for any trust fund, directly or through sub-servicers,
will be required to make reasonable efforts to collect all scheduled payments
under the mortgage loans in that trust fund, and will be required to follow
the same collection procedures as it would follow with respect to mortgage
loans that are comparable to the mortgage loans in that trust fund and held
for its own account, provided those procedures are consistent with (1) the
terms of the related Pooling Agreement and any related instrument of credit
support included in that trust fund, (2) applicable law and (3) the servicing
standard specified in the related Pooling Agreement and prospectus supplement
(the "Servicing Standard").
The master servicer for any trust fund, directly or through sub-servicers,
will also be required to perform as to the mortgage loans in that trust fund
various other customary functions of a servicer of comparable loans,
including maintaining escrow or impound accounts, if required under the
related Pooling Agreement, for payment of taxes, insurance premiums, ground
rents and similar items, or otherwise monitoring the timely payment of those
items; attempting to collect delinquent payments; supervising foreclosures;
negotiating modifications; conducting property inspections on a periodic or
other basis; managing (or overseeing the management of) Mortgaged Properties
acquired on behalf of that trust fund through foreclosure, deed-in-lieu of
foreclosure or otherwise (each, an "REO Property"); and maintaining servicing
records relating to those mortgage loans. Unless otherwise specified in the
related prospectus supplement, the master servicer will be responsible for
filing and settling claims in respect of particular mortgage loans under any
applicable instrument of credit support. See "Description of Credit Support"
in this prospectus.
SUB-SERVICERS
A master servicer may delegate its servicing obligations in respect of the
mortgage loans serviced thereby to one or more third-party servicers;
provided that, unless otherwise specified in the related prospectus
supplement, the master servicer will remain obligated under the related
Pooling Agreement. A sub-servicer for any series of certificates may be an
affiliate of the Depositor or master servicer. Unless otherwise provided in
the related prospectus supplement, each sub-servicing agreement between a
master servicer and a sub-servicer (a "Sub-Servicing Agreement") will provide
that, if for any reason the master servicer is no longer acting in that
capacity, the trustee or any successor master servicer may assume the master
servicer's rights and obligations under that Sub-Servicing Agreement. A
master servicer will be required to monitor the performance of sub-servicers
retained by it and will have the right to remove a sub-servicer retained by
it at any time it considers removal to be in the best interests of
certificateholders.
Unless otherwise provided in the related prospectus supplement, a master
servicer will be solely liable for all fees owed by it to any sub-servicer,
irrespective of whether the master servicer's compensation pursuant to the
related Pooling Agreement is sufficient to pay those fees. Each sub-servicer
will be
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reimbursed by the master servicer that retained it for certain expenditures
which it makes, generally to the same extent the master servicer would be
reimbursed under a Pooling Agreement. See "--Certificate Account" and
"--Servicing Compensation and Payment of Expenses" in this prospectus.
SPECIAL SERVICERS
To the extent so specified in the related prospectus supplement, one or
more special servicers may be a party to the related Pooling Agreement or may
be appointed by the master servicer or another specified party. A special
servicer for any series of certificates may be an affiliate of the Depositor
or the master servicer. A special servicer may be entitled to any of the
rights, and subject to any of the obligations, described in this prospectus
in respect of a master servicer. The related prospectus supplement will
describe the rights, obligations and compensation of any special servicer for
a particular series of certificates. The master servicer will not be liable
for the performance of a special servicer.
CERTIFICATE ACCOUNT
General. The master servicer, the trustee and/or a special servicer will,
as to each trust fund that includes mortgage loans, establish and maintain or
cause to be established and maintained one or more separate accounts for the
collection of payments on or in respect of those mortgage loans, which will
be established so as to comply with the standards of each rating agency that
has rated any one or more classes of certificates of the related series. A
certificate account may be maintained as an interest-bearing or a
non-interest-bearing account and the funds held in a certificate account may
be invested pending each succeeding distribution date in United States
government securities and other obligations that are acceptable to each
rating agency that has rated any one or more classes of certificates of the
related series ("Permitted Investments"). Unless otherwise provided in the
related prospectus supplement, any interest or other income earned on funds
in a certificate account will be paid to the related master servicer, trustee
or any special servicer as additional compensation. A certificate account may
be maintained with the related master servicer, special servicer or Mortgage
Asset Seller or with a depository institution that is an affiliate of any of
the foregoing or of the Depositor, provided that it complies with applicable
rating agency standards. If permitted by the applicable 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 representing payments
on mortgage loans owned by the related master servicer or any special
servicer or serviced by either on behalf of others.
Deposits. Unless otherwise provided in the related Pooling Agreement and
described in the related prospectus supplement, a master servicer, trustee or
special servicer will be required to deposit or cause to be deposited in the
certificate account for each trust fund that includes mortgage loans, within
a certain period following receipt (in the case of collections on or in
respect of the mortgage loans) or otherwise as provided in the related
Pooling Agreement, the following payments and collections received or made by
the master servicer, the trustee or any special servicer subsequent to the
cut-off date (other than payments due on or before the cut-off date):
1. all payments on account of principal, including principal
prepayments, on the mortgage loans;
2. all payments on account of interest on the mortgage loans,
including any default interest collected, in each case net of any
portion retained by the master servicer or any special servicer as
its servicing compensation or as compensation to the trustee;
3. all proceeds received under any hazard, title or other insurance
policy that provides coverage with respect to a Mortgaged Property
or the related mortgage loan or in connection with the full or
partial condemnation of a Mortgaged Property (other than proceeds
applied to the restoration of the property or released to the
related borrower in accordance with the customary servicing
practices of the master servicer (or, if applicable, a special
servicer) and/or the terms and conditions of the related Mortgage)
(collectively, "Insurance and Condemnation Proceeds") and all
other amounts received and retained in connection with the
liquidation of defaulted mortgage
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loans or property acquired by foreclosure or otherwise
("Liquidation Proceeds"), together with the net operating income
(less reasonable reserves for future expenses) derived from the
operation of any Mortgaged Properties acquired by the trust fund
through foreclosure or otherwise;
4. 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" in this
prospectus;
5. any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies" in this
prospectus;
6. any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements" in this
prospectus;
7. all proceeds of the purchase of any mortgage loan, or property
acquired in respect of a mortgage loan, by the Depositor, any
Mortgage Asset Seller or any other specified person as described
under "--Assignment of Mortgage Loans; Repurchases" and
"--Representations and Warranties; Repurchases" in this
prospectus, all proceeds of the purchase of any defaulted mortgage
loan as described under "--Realization Upon Defaulted Mortgage
Loans" in this prospectus, and all proceeds of any mortgage asset
purchased as described under "Description of the
Certificates--Termination" in this prospectus (all of the
foregoing, also "Liquidation Proceeds");
8. any amounts paid by the master servicer to cover Prepayment
Interest Shortfalls arising out of the prepayment of mortgage
loans as described under "--Servicing Compensation and Payment of
Expenses" in this prospectus;
9. to the extent that this item does not constitute additional
servicing compensation to the master servicer or a special
servicer, any payments on account of modification or assumption
fees, late payment charges, Prepayment Premiums or Equity
Participations with respect to the mortgage loans;
10. all payments required to be deposited in the certificate account
with respect to any deductible clause in any blanket insurance
policy described under "--Hazard Insurance Policies" in this
prospectus;
11. any amount required to be deposited by the 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 Pooling Agreement and described
in the related prospectus supplement.
Withdrawals. Unless otherwise provided in the related Pooling Agreement
and described in the related prospectus supplement, a master servicer,
trustee or special servicer may make withdrawals from the certificate account
for each trust fund that includes mortgage loans for any of the following
purposes:
1. to make distributions to the certificateholders on each
distribution date;
2. to pay the master servicer, the trustee or a special servicer any
servicing fees not previously retained by them out of payments on
the particular mortgage loans as to which those fees were earned;
3. to reimburse the master servicer, a special servicer, the trustee
or any other specified person for any unreimbursed amounts
advanced by it as described under "Description of the
Certificates--Advances in Respect of Delinquencies" in this
prospectus, the reimbursement to be made out of amounts received
that were identified and applied by the master servicer or a
special servicer, as applicable, as late collections of interest
on and principal of the particular mortgage loans with respect to
which the advances were made or out of amounts drawn under any
form of credit support with respect to those mortgage loans;
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4. to reimburse the master servicer, the trustee or a special
servicer for unpaid servicing fees earned by it and certain
unreimbursed servicing expenses incurred by it with respect to
mortgage loans in the trust fund and properties acquired in
respect of the mortgage loans, the reimbursement to be made out of
amounts that represent Liquidation Proceeds and Insurance and
Condemnation Proceeds collected on the particular mortgage loans
and properties, and net income collected on the particular
properties, with respect to which those fees were earned or those
expenses were incurred or out of amounts drawn under any form of
credit support with respect to those mortgage loans and
properties;
5. to reimburse the master servicer, a special servicer, the trustee
or other specified person for any advances described in clause (3)
above made by it and/or any servicing expenses referred to in
clause (4) above incurred by it that, in the good faith judgment
of the master servicer, special servicer, trustee or other
specified person, as applicable, will not be recoverable from the
amounts described in clauses (3) and (4), respectively, the
reimbursement to be made from amounts collected on other mortgage
loans in the same trust fund or, if so provided by the related
Pooling Agreement and described in the related prospectus
supplement, only from that portion of amounts collected on those
other mortgage loans that is otherwise distributable on one or
more classes of Subordinate Certificates of the related series;
6. if described in the related prospectus supplement, to pay the
master servicer, a special servicer, the trustee or any other
specified person interest accrued on the advances described in
clause (3) above made by it and the servicing expenses described
in clause (4) above incurred by it while they remain outstanding
and unreimbursed;
7. to pay for costs and expenses incurred by the trust fund for
environmental site assessments performed with respect to Mortgaged
Properties that constitute security for defaulted mortgage loans,
and for any containment, clean-up or remediation of hazardous
wastes and materials present on those Mortgaged Properties, as
described under "--Realization Upon Defaulted Mortgage Loans" in
this prospectus;
8. to reimburse the master servicer, the special servicer, the
Depositor, or any of their respective directors, officers,
employees and agents, as the case may be, for certain expenses,
costs and liabilities incurred thereby, as described under
"--Certain Matters Regarding the Master Servicer and the
Depositor" in this prospectus;
9. if described in the related prospectus supplement, to pay the fees
of the trustee;
10. 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 described under
"--Certain Matters Regarding the Trustee" in this prospectus;
11. if described in the related prospectus supplement, to pay the fees
of any provider of credit support;
12. if described in the related prospectus supplement, to reimburse
prior draws on any form of credit support;
13. to pay the master servicer, a special servicer or the trustee, as
appropriate, interest and investment income earned in respect of
amounts held in the certificate account as additional
compensation;
14. to pay (generally from related income) for costs incurred in
connection with the operation, management and maintenance of any
Mortgaged Property acquired by the trust fund by foreclosure or
otherwise;
15. if one or more elections have been made to treat the trust fund or
designated portions of the trust fund as a REMIC, to pay any
federal, state or local taxes imposed on the trust fund or its
assets or transactions, as described under "Certain Federal Income
Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxes That May Be Imposed on the REMIC Pool" in this
prospectus;
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16. 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 mortgage loan or a property acquired in respect a
defaulted mortgage loan in connection with the liquidation of that
mortgage loan or property;
17. to pay for the cost of various opinions of counsel obtained
pursuant to the related Pooling Agreement for the benefit of
certificateholders;
18. to make any other withdrawals permitted by the related Pooling
Agreement and described in the related prospectus supplement; and
19. to clear and terminate the certificate account upon the
termination of the trust fund.
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
A master servicer may agree to modify, waive or amend any term of any
mortgage loan serviced by it in a manner consistent with the applicable
Servicing Standard; provided that, unless otherwise set forth in the related
prospectus supplement, the modification, waiver or amendment (1) will not
affect the amount or timing of any scheduled payments of principal or
interest on the mortgage loan, (2) will not, in the judgment of the master
servicer, materially impair the security for the mortgage loan or reduce the
likelihood of timely payment of amounts due on them and (3) will not
adversely affect the coverage under any applicable instrument of credit
support. Unless otherwise provided in the related prospectus supplement, a
master servicer also may agree to any other modification, waiver or amendment
if, in its judgment, (1) a material default on the mortgage loan has occurred
or a payment default is reasonably foreseeable, (2) the modification, waiver
or amendment is reasonably likely to produce a greater recovery with respect
to the mortgage loan, taking into account the time value of money, than would
liquidation and (3) the modification, waiver or amendment will not adversely
affect the coverage under any applicable instrument of credit support.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
A borrower's failure to make required mortgage loan payments may mean that
operating income is insufficient to service the mortgage debt, or may reflect
the diversion of that income from the servicing of the mortgage debt. In
addition, a borrower that is unable to make mortgage loan payments may also
be unable to make timely payment of taxes and insurance premiums and to
otherwise maintain the related Mortgaged Property. In general, the master
servicer or the special servicer, if any, for a series of certificates will
be required to monitor any mortgage loan in the related trust fund that is in
default, evaluate whether the causes of the default can be corrected over a
reasonable period without significant impairment of the value of the related
Mortgaged Property, initiate corrective action in cooperation with the
borrower if cure is likely, inspect the related Mortgaged Property and take
any other actions as are consistent with the Servicing Standard. A
significant period of time may elapse before the servicer is able to assess
the success of the corrective action or the need for additional initiatives.
The time within which the servicer can make the initial determination of
appropriate action, evaluate the success of corrective action, develop
additional initiatives, institute foreclosure proceedings and actually
foreclose (or accept a deed to a Mortgaged Property in lieu of foreclosure)
on behalf of the certificateholders may vary considerably depending on the
particular mortgage loan, the Mortgaged Property, the borrower, the presence
of an acceptable party to assume the mortgage loan and the laws of the
jurisdiction in which the Mortgaged Property is located. If a borrower files
a bankruptcy petition, the master servicer may not be permitted to accelerate
the maturity of the related mortgage loan or to foreclose on the related
Mortgaged Property for a considerable period of time, and that mortgage loan
may be restructured in the resulting bankruptcy proceedings. See "Certain
Legal Aspects of Mortgage Loans" in this prospectus.
A Pooling Agreement may grant to the master servicer, a special servicer,
a provider of credit support and/or the holder or holders of certain classes
of the related series of certificates a right of first refusal to purchase
from the trust fund, at a predetermined purchase price (which, if
insufficient to fully fund the entitlements of certificateholders to
principal and interest on the certificates, will be specified in the related
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prospectus supplement), any mortgage loan as to which a specified number of
scheduled payments are delinquent. In addition, unless otherwise specified in
the related prospectus supplement, a servicer may offer to sell any defaulted
mortgage loan if and when the master servicer determines, consistent with the
applicable Servicing Standard, that a sale would produce a greater recovery,
taking into account the time value of money, than would liquidation of the
related Mortgaged Property. Unless otherwise provided in the related
prospectus supplement, the related Pooling Agreement will require that the
servicer accept the highest cash bid received from any person (including
itself, the Depositor or any affiliate of either of them or any
certificateholder) that constitutes a fair price for that defaulted mortgage
loan. In the absence of any bid determined in accordance with the related
Pooling Agreement to be fair, the master servicer will generally be required
to proceed against the related Mortgaged Property, subject to the discussion
below.
If a default on a mortgage loan has occurred or, in the servicer's
judgment, a payment default is imminent, the servicer, on behalf of the
trustee, may at any time institute foreclosure proceedings, exercise any
power of sale contained in the related Mortgage, obtain a deed in lieu of
foreclosure, or otherwise acquire title to the related Mortgaged Property, by
operation of law or otherwise, if that action is consistent with the
Servicing Standard. Unless otherwise specified in the related prospectus
supplement, the servicer may not, however, acquire title to any Mortgaged
Property, have a receiver of rents appointed with respect to any Mortgaged
Property or take any other action with respect to any Mortgaged Property that
would cause the trustee, for the benefit of the related series 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 certain federal
environmental laws, unless the master servicer has previously determined,
based on a report prepared by a person who regularly conducts environmental
audits (which report will be an expense of the trust fund), that:
1. the Mortgaged Property is in compliance with applicable
environmental laws and regulations or, if not, that taking those
actions as are necessary to bring the Mortgaged Property into
compliance therewith is reasonably likely to produce a greater
recovery, taking into account the time value of money, than not
taking those actions; and
2. there are no circumstances or conditions present at the Mortgaged
Property that have resulted in any contamination for which
investigation, testing, monitoring, containment, clean-up or
remediation could be required under any applicable environmental
laws and regulations or, if those circumstances or conditions are
present for which that action could be required, taking those
actions with respect to the Mortgaged Property is reasonably
likely to produce a greater recovery, taking into account the time
value of money, than not taking those actions. See "Certain Legal
Aspects of Mortgage Loans--Environmental Risks" in this
prospectus.
Unless otherwise provided in the related prospectus supplement, if title
to any Mortgaged Property is acquired by a trust fund as to which one or more
REMIC elections have been made, the 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, unless (1) the
Internal Revenue Service grants an extension of time to sell that property or
(2) the trustee receives an opinion of independent counsel to the effect that
the holding of the property by the trust fund beyond that period will not
result in the imposition of a tax on the trust fund or cause the trust fund
(or any designated portion) to fail to qualify as a REMIC under the Code at
any time that any certificate is outstanding. Subject to the foregoing, the
servicer will generally be required to solicit bids for any Mortgaged
Property so acquired in that manner as will be reasonably likely to realize a
fair price for that property. If the trust fund acquires title to any
Mortgaged Property, the servicer, on behalf of the trust fund, generally must
retain an independent contractor to manage and operate that property. The
retention of an independent contractor, however, will not relieve the
servicer of its obligation to manage that Mortgaged Property in a manner
consistent with the Servicing Standard.
If Liquidation Proceeds collected with respect to a defaulted mortgage
loan are less than the outstanding principal balance of the defaulted
mortgage loan plus interest accrued on the mortgage loan plus the aggregate
amount of reimbursable expenses incurred by the servicer in connection with
that mortgage loan, the trust fund will realize a loss in the amount of that
shortfall. The servicer will be entitled to reimbursement out of the
Liquidation Proceeds recovered on any defaulted mortgage loan, prior to the
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distribution of those Liquidation Proceeds to certificateholders, amounts
that represent unpaid servicing compensation in respect of the mortgage loan,
unreimbursed servicing expenses incurred with respect to the mortgage loan
and any unreimbursed advances of delinquent payments made with respect to the
mortgage loan.
If any Mortgaged Property suffers damage so that the proceeds, if any, of
the related hazard insurance policy are insufficient to restore fully the
damaged property, the servicer will not be required to expend its own funds
to effect that restoration unless (and to the extent not otherwise provided
in the related prospectus supplement) it determines (1) that the restoration
will increase the proceeds to certificateholders on liquidation of the
mortgage loan after reimbursement of the servicer for its expenses and (2)
that the expenses will be recoverable by it from related Insurance and
Condemnation Proceeds or Liquidation Proceeds.
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related prospectus supplement, each
Pooling Agreement will require the master servicer to cause each mortgage
loan borrower to maintain a hazard insurance policy that provides for the
coverage required under the related Mortgage or, if the Mortgage permits the
mortgagee to dictate to the borrower the insurance coverage to be maintained
on the related Mortgaged Property, the coverage consistent with the
requirements of the Servicing Standard. Unless otherwise specified in the
related prospectus supplement, the coverage generally will be in an amount
equal to the lesser of the principal balance owing on that mortgage loan and
the replacement cost of the related Mortgaged Property. The ability of a
master servicer to assure that hazard insurance proceeds are appropriately
applied may be dependent upon its being named as an additional insured under
any hazard insurance policy and under any other insurance policy referred to
below, or upon the extent to which information concerning covered losses is
furnished by borrowers. All amounts collected by a master servicer under that
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 and/or to the terms and conditions of
the related Mortgage and Mortgage Note) will be deposited in the related
certificate account. The Pooling Agreement may provide that the master
servicer may satisfy its obligation to cause each borrower to maintain a
hazard insurance policy by maintaining a blanket policy insuring against
hazard losses on all of the mortgage loans in a trust fund. If the blanket
policy contains a deductible clause, the master servicer will be required, in
the event of a casualty covered by the blanket policy, to deposit in the
related certificate account all sums that would have been deposited in that
certificate account but for that deductible 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 covering the Mortgaged Properties 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, most policies typically do not cover any
physical damage resulting from war, revolution, governmental actions, floods
and other water-related causes, earth movement (including earthquakes,
landslides and mudflows), wet or dry rot, vermin, domestic animals and
certain other kinds of risks. Accordingly, a Mortgaged Property may not be
insured for losses arising from that cause unless the related Mortgage
specifically requires, or permits the mortgagee to require, that coverage.
The hazard insurance policies covering the Mortgaged Properties will
typically contain co-insurance clauses that in effect require an 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, those clauses generally provide that the
insurer's liability in the event of partial loss does not exceed the lesser
of (1) the replacement cost of the improvements less physical depreciation
and (2) that proportion of the loss as the amount of insurance carried bears
to the specified percentage of the full replacement cost of those
improvements.
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DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the mortgage loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the mortgage loan upon any sale
or other transfer of the related Mortgaged Property made without the lender's
consent. Certain of the mortgage loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the mortgage
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 will determine whether to exercise any right the trustee may
have under that provision in a manner consistent with the Servicing Standard.
Unless otherwise specified in the related prospectus supplement, the master
servicer will be entitled to retain as additional servicing compensation any
fee collected in connection with the permitted transfer of a Mortgaged
Property. See "Certain Legal Aspects of Mortgage Loans--Due-on-Sale and
Due-on-Encumbrance" in this prospectus.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related prospectus supplement, a master
servicer's primary servicing compensation with respect to a series of
certificates will come from the periodic payment to it of a specified portion
of the interest payments on each mortgage loan in the related trust fund.
Because that compensation is generally based on a percentage of the principal
balance of each mortgage loan outstanding from time to time, it will decrease
in accordance with the amortization of the mortgage loans. The prospectus
supplement with respect to a series of certificates may provide that, as
additional compensation, the master servicer may retain all or a portion of
late payment charges, Prepayment Premiums, modification fees and other fees
collected from borrowers and any interest or other income that may be earned
on funds held in the certificate account. Any sub-servicer will receive a
portion of the master servicer's compensation as its sub-servicing
compensation.
In addition to amounts payable to any sub-servicer, a master servicer may
be required, to the extent provided in the related prospectus supplement, to
pay from amounts that represent its servicing compensation certain expenses
incurred in connection with the administration of the related trust fund,
including, without limitation, payment of the fees and disbursements of
independent accountants and payment of expenses incurred in connection with
distributions and reports to certificateholders. Certain other expenses,
including certain expenses related to mortgage loan defaults and liquidations
and, to the extent so provided in the related prospectus supplement, interest
on those expenses at the rate specified in the prospectus supplement, and the
fees of any special servicer, may be required to be borne by the trust fund.
If provided in the related prospectus supplement, a master servicer may be
required to apply a portion of the servicing compensation otherwise payable
to it in respect of any period to Prepayment Interest Shortfalls. See "Yield
and Maturity Considerations--Certain Shortfalls in Collections of Interest"
in this prospectus.
EVIDENCE AS TO COMPLIANCE
Unless otherwise provided in the related prospectus supplement, each
Pooling Agreement will require, on or before a specified date in each year,
the master servicer to cause a firm of independent public accountants to
furnish to the trustee a statement to the effect that, on the basis of the
examination by that firm conducted substantially in compliance with either
the Uniform Single Audit Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FHLMC, the servicing by or on behalf of the master
servicer of mortgage loans under pooling and servicing agreements
substantially similar to each other (which may include that Pooling
Agreement) was conducted through the preceding calendar year or other
specified twelve month period in compliance with the terms of those
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 Audit Program for Mortgage
Bankers, requires it to report.
Each Pooling Agreement will also require, on or before a specified date in
each year, the master servicer to furnish to the trustee a statement signed
by one or more officers of the master servicer to the
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effect that the master servicer has fulfilled its material obligations under
that Pooling Agreement throughout the preceding calendar year or other
specified twelve month period.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The entity serving as master servicer under a Pooling Agreement may be an
affiliate of the Depositor and may have other normal business relationships
with the Depositor or the Depositor's affiliates. Unless otherwise specified
in the prospectus supplement for a series of certificates, the related
Pooling Agreement will permit the master servicer to resign from its
obligations under the Pooling Agreement only upon (a) the appointment of, and
the acceptance of that appointment by, a successor master servicer and
receipt by the trustee of written confirmation from each applicable rating
agency that the resignation and appointment will not have an adverse effect
on the rating assigned by that rating agency to any class of certificates of
that series or (b) a determination that those obligations 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. This resignation
will not become effective until the trustee or a successor servicer has
assumed the master servicer's obligations and duties under the Pooling
Agreement. Unless otherwise specified in the related prospectus supplement,
the master servicer for each trust fund will be required to maintain a
fidelity bond and errors and omissions policy or their equivalent that
provides coverage against losses that may be sustained as a result of an
officer's or employee's misappropriation of funds or errors and omissions,
subject to certain limitations as to amount of coverage, deductible amounts,
conditions, exclusions and exceptions permitted by the related Pooling
Agreement.
Unless otherwise specified in the related prospectus supplement, each
Pooling Agreement will further provide that none of the master servicer, the
Depositor or any director, officer, employee or agent of either of them will
be under any liability to the related trust fund or certificateholders for
any action taken, or not taken, in good faith pursuant to the Pooling
Agreement or for errors in judgment. However, neither the master servicer nor
the Depositor will be protected against any breach of a representation,
warranty or covenant made in the Pooling Agreement, or against any expense or
liability that they are specifically required to bear pursuant to the terms
of the Pooling Agreement, or against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence in
the performance of their obligations or duties or by reason of reckless
disregard of those obligations and duties. Unless otherwise specified in the
related prospectus supplement, each Pooling Agreement will further provide
that the master servicer, the Depositor and any director, officer, employee
or agent of either of them will be entitled to indemnification by the related
trust fund against any loss, liability or expense incurred in connection with
any legal action that relates to the Pooling Agreement or the related series
of certificates. However, the indemnification will not extend to any loss,
liability or expense
o that one or both of them are specifically required to bear
pursuant to the terms of the Pooling Agreement, or is incidental
to the performance of their obligations and duties and is not
otherwise reimbursable pursuant to the Pooling Agreement;
o incurred in connection with any breach of a representation,
warranty or covenant made in the Pooling Agreement;
o incurred by reason of misfeasance, bad faith or negligence in the
performance of their obligations or duties under that the Pooling
Agreement, or by reason of negligent disregard of those
obligations or duties; or
o incurred in connection with any violation of any state or federal
securities law.
In addition, each Pooling Agreement will provide that neither the master
servicer nor the Depositor will be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its respective
responsibilities under the Pooling Agreement and that in its opinion may
involve it in any expense or liability. However, each of the master servicer
and the Depositor will be permitted, in the exercise of its discretion, to
undertake any action that it may deem necessary or desirable with respect to
the enforcement and/or protection of the rights and duties of the parties to
the Pooling Agreement and the interests of the related series of
certificateholders. In that event, the legal expenses and costs of that
action, and any liability resulting from that action, will be expenses, costs
and liabilities of the related
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series of certificateholders, and the master servicer or the Depositor, as
the case may be, will be entitled to charge the related certificate account
for those legal costs and expenses. Any person into which the master servicer
or the Depositor may be merged or consolidated, or any person resulting from
any merger or consolidation to which the master servicer or the Depositor is
a party, or any person succeeding to the business of the master servicer or
the Depositor, will be the successor of the master servicer or the Depositor,
as the case may be, under the related Pooling Agreement.
EVENTS OF DEFAULT
Unless otherwise provided in the prospectus supplement for a series of
certificates, "Events of Default" under the related Pooling Agreement will
include
o any failure by the master servicer to distribute or cause to be
distributed to the certificateholders of that series, or to remit
to the trustee for distribution to those certificateholders, any
amount required to be so distributed or remitted, which failure
continues unremedied for five days after written notice of the
failure has been given to the master servicer by the trustee or
the Depositor, or to the master servicer, the Depositor and the
trustee by certificateholders entitled to not less than 25% (or
other percentage specified in the related prospectus supplement)
of the voting rights for that series;
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 related Pooling Agreement, which failure continues
unremedied for sixty days after written notice has been given to
the master servicer by the trustee or the Depositor, or to the
master servicer, the Depositor and the trustee by
certificateholders entitled to not less than 25% (or other
percentage specified in the related prospectus supplement) of the
voting rights for that series; and
o certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings in respect of or
relating to the master servicer 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 add
to them or shorten cure periods or eliminate notice requirements) will be
specified in the related prospectus supplement.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the master servicer under a
Pooling Agreement, then, in each and every case, so long as the Event of
Default remains unremedied, the Depositor or the trustee will be authorized,
and at the direction of certificateholders of the related series entitled to
not less than 51% (or other percentage specified in the related prospectus
supplement) of the voting rights for that series, the trustee will be
required, to terminate all of the rights and obligations of the master
servicer as master servicer under the Pooling Agreement. Upon termination,
the trustee will succeed to all of the responsibilities, duties and
liabilities of the master servicer under the Pooling Agreement (except that
if the master servicer is required to make advances regarding delinquent
mortgage loans, but the trustee is prohibited by law from obligating itself
to do so, or if the related prospectus supplement so specifies, the trustee
will not be obligated to make those advances) and will be entitled to similar
compensation arrangements. Unless otherwise specified in the related
prospectus supplement, if the trustee is unwilling or unable so to act, it
may (or, at the written request of certificateholders of the related series
entitled to not less than 51% (or other percentage specified in the related
prospectus supplement) of the voting rights for that series, it will be
required to) appoint, or petition a court of competent jurisdiction to
appoint, a loan servicing institution that (unless otherwise provided in the
related prospectus supplement) is acceptable to each applicable rating agency
to act as successor to the master servicer under the Pooling Agreement.
Pending that appointment, the trustee will be obligated to act in that
capacity.
No certificateholder will have the right under any Pooling Agreement to
institute any proceeding with respect to the Pooling Agreement unless that
holder previously has given to the trustee written notice of default and
unless certificateholders of the same series entitled to not less than 25%
(or other percentage
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specified in the related prospectus supplement) of the voting rights for that
series shall have made written request upon the trustee to institute that
proceeding in its own name as trustee and shall have offered to the trustee
reasonable indemnity, and the trustee for sixty days (or other period
specified in the related prospectus supplement) shall have neglected or
refused to institute that proceeding. The trustee, however, will be under no
obligation to exercise any of the trusts or powers vested in it by any
Pooling Agreement or to make any investigation of matters arising under the
Pooling Agreement or to institute, conduct or defend any litigation under the
Pooling Agreement or in relation to it at the request, order or direction of
any of the holders of certificates of the related series, unless those
certificateholders have offered to the trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
by that action.
AMENDMENT
Each Pooling Agreement may be amended, without the consent of any of the
holders of the related series of certificates,
1. to cure any ambiguity,
2. to correct a defective provision in the Pooling Agreement or to
correct, modify or supplement any of its provisions that may be
inconsistent with any other of its provisions,
3. to add any other provisions with respect to matters or questions
arising under the Pooling Agreement that are not inconsistent with
its provisions,
4. to comply with any requirements imposed by the Code, or
5. for any other purpose;
provided that the amendment (other than an amendment for the specific purpose
referred to in clause (4) above) may not (as evidenced by an opinion of
counsel to an effect satisfactory to the trustee) adversely affect in any
material respect the interests of any holder; and provided further that the
amendment (other than an amendment for one of the specific purposes referred
to in clauses (1) through (4) above) must be acceptable to each applicable
rating agency.
Unless otherwise specified in the related prospectus supplement, each
Pooling Agreement may also be amended, with the consent of the holders of the
related series of certificates entitled to not less than 51% (or other
percentage specified in the related prospectus supplement) of the voting
rights for that series allocated to the affected classes, for any purpose.
However, unless otherwise specified in the related prospectus supplement,
that amendment may not (1) reduce in any manner the amount of, or delay the
timing of, payments received or advanced on mortgage loans that are required
to be distributed in respect of 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 clause (1), without the consent of the holders of all
certificates of that class or (3) modify the amendment provisions of the
Pooling Agreement described in this paragraph without the consent of the
holders of all certificates of the related series. Unless otherwise specified
in the related prospectus supplement, the trustee will be prohibited from
consenting to any amendment of a Pooling Agreement pursuant to which one or
more REMIC elections are to be or have been made unless the trustee 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, or the designated portion, to fail to qualify as a
REMIC at any time that the related certificates are outstanding.
LIST OF CERTIFICATEHOLDERS
Unless otherwise specified in the related prospectus supplement, upon
written request of three or more certificateholders of record made for
purposes of communicating with other holders of certificates of the same
series with respect to their rights under the related Pooling Agreement, the
trustee or other specified person will afford those certificateholders access
during normal business hours to the most recent list of certificateholders of
that series held by that person. If that list is of a date more than 90 days
prior to
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the date of receipt of that certificateholder's request, then that person, if
not the registrar for that series of certificates, will be required to
request from that registrar a current list and to afford those requesting
certificateholders access thereto promptly upon receipt.
THE TRUSTEE
The trustee under each Pooling Agreement will be named in the related
prospectus supplement. The commercial bank, national banking association,
banking corporation or trust company that serves as trustee may have typical
banking relationships with the Depositor and its affiliates and with any
master servicer or special servicer and its affiliates.
DUTIES OF THE TRUSTEE
The trustee for each series of certificates will make no representation as
to the validity or sufficiency of the related Pooling Agreement, the
certificates or any underlying mortgage loan or related document and will not
be accountable for the use or application by or on behalf of the master
servicer for that series of any funds paid to the master servicer or any
special servicer in respect of the certificates or the underlying mortgage
loans, or any funds deposited into or withdrawn from the certificate account
or any other account for that series by or on behalf of the master servicer
or any special servicer. If no Event of Default has occurred and is
continuing, the trustee for each series of certificates will be required to
perform only those duties specifically required under the related Pooling
Agreement. However, upon receipt of any of the various certificates, reports
or other instruments required to be furnished to it pursuant to the related
Pooling Agreement, a trustee will be required to examine those documents and
to determine whether they conform to the requirements of that agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
As described in the related prospectus supplement, the fees and normal
disbursements of any trustee may be the expense of the related master
servicer or other specified person or may be required to be borne by the
related trust fund.
Unless otherwise specified in the related prospectus supplement, the
trustee for each series of certificates will be entitled to indemnification,
from amounts held in the certificate account for that series, for any loss,
liability or expense incurred by the trustee in connection with the trustee's
acceptance or administration of its trusts under the related Pooling
Agreement. However, the indemnification will not extend to any loss,
liability or expense that constitutes a specific liability imposed on the
trustee pursuant to the related Pooling Agreement, or to any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or gross
negligence on the part of the trustee in the performance of its obligations
and duties under the Pooling Agreement, or by reason of its reckless
disregard of those obligations or duties, or as may arise from a breach of
any representation, warranty or covenant of the trustee made in the Pooling
Agreement.
Unless otherwise specified in the related prospectus supplement, the
trustee for each series of certificates will be entitled to execute any of
its trusts or powers under the related Pooling Agreement or perform any of
its duties under that Pooling Agreement either directly or by or through
agents or attorneys, and the trustee will not be relieved of any of its
duties or obligations by virtue of the appointment of any agents or
attorneys.
RESIGNATION AND REMOVAL OF THE TRUSTEE
A trustee will be permitted at any time to resign from its obligations and
duties under the related Pooling Agreement by giving written notice to the
Depositor, the servicer, the special servicer and to all certificateholders.
Upon receiving this notice of resignation, the Depositor, or other person as
may be specified in the related prospectus supplement, will be required to
use its best efforts to promptly appoint a successor trustee. If no successor
trustee shall have accepted an appointment within a specified period after
the giving of notice of resignation, the resigning trustee may petition any
court of competent jurisdiction to appoint a successor trustee.
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If at any time a trustee ceases to be eligible to continue as trustee
under the related Pooling Agreement, or if at any time the trustee becomes
incapable of acting, or if certain events of, or proceedings in respect of,
bankruptcy or insolvency occur with respect to the trustee, the Depositor
will be authorized to remove the trustee and appoint a successor trustee. In
addition, holders of the certificates of any series entitled to at least 51%
(or other percentage specified in the related prospectus supplement) of the
voting rights for that series may at any time, with or without cause, remove
the trustee under the related Pooling Agreement and appoint a successor
trustee.
Any resignation or removal of a trustee and appointment of a successor
trustee will not become effective until acceptance of appointment by the
successor trustee.
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DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit support may be provided with respect to one or more classes
of the certificates of any series, or with respect to the related
mortgage assets. Credit support may be in the form of letters of credit,
overcollateralization, the subordination of one or more classes of certificates,
insurance policies, surety bonds, guarantees or reserve funds, or any
combination of the foregoing. If so provided in the related prospectus
supplement, any form of credit support may provide credit enhancement for more
than one series of certificates to the extent described in that 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 payment to certificateholders of all amounts to which they are
entitled under the related Pooling Agreement. If losses or shortfalls occur
that exceed the amount covered by the related credit support or that are not
covered by that 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 of one series will be
subject to the risk that the credit support will be exhausted by the claims
of the holders of certificates of one or more other series before the former
receive their intended share of that coverage.
If credit support is provided with respect to one or more classes of
certificates of a series, or with respect to the related mortgage assets, the
related prospectus supplement will include a description of
o the nature and amount of coverage under the credit support,
o any conditions to payment under the credit support not otherwise
described in this prospectus,
o any conditions under which the amount of coverage under the credit
support may be reduced and under which that credit support may be
terminated or replaced and
o the material provisions relating to the credit support.
Additionally, the related prospectus supplement will set forth certain
information with respect to the obligor under any instrument of credit
support, including
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' equity or policyholders'
surplus, if applicable, as of a date that will be specified in the
prospectus supplement. See "Risk Factors--Credit Support
Limitations" in this prospectus.
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 from the certificate
account on any distribution date will be subordinated to the corresponding
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
method and amount of subordination provided by a class or classes of
Subordinate Certificates in a series and the circumstances under which that
subordination will be available.
CROSS-SUPPORT PROVISIONS
If the mortgage assets in any trust fund are divided into separate groups,
each supporting a separate class or classes of certificates of the related
series, credit support may be provided by cross-support
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provisions requiring that distributions be made on Senior Certificates
evidencing interests in one group of mortgage assets prior to distributions
on Subordinate Certificates evidencing interests in a different group of
mortgage assets within the trust fund. The prospectus supplement for a series
that includes a cross-support provision will describe the manner and
conditions for applying those provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
If so provided in the prospectus supplement for a series of certificates,
mortgage loans included in the related trust fund will be covered for certain
default risks by insurance policies or guarantees. To the extent deemed by
the Depositor to be material, a copy of that instrument will accompany the
Current Report on Form 8-K to be filed with the SEC 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 those certificates or certain
classes of those certificates will be covered by one or more letters of
credit, issued by a bank or financial institution specified in the prospectus
supplement (the "L/C Bank"). Under a letter of credit, the L/C Bank will be
obligated to honor draws under a letter of credit in an aggregate fixed
dollar amount, net of unreimbursed payments, generally equal to a percentage
specified in the related prospectus supplement of the aggregate principal
balance of the mortgage assets on the related cut-off date or of the initial
aggregate principal balance of one or more classes of certificates. If so
specified in the related prospectus supplement, the letter of credit may
permit draws only in the event of 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 under the letter of credit and may
otherwise be reduced as described in the related prospectus supplement. The
obligations of the L/C Bank under the letter of credit for each series of
certificates will expire at the earlier of the date specified in the related
prospectus supplement or the termination of the trust fund. A copy of that
letter of credit will accompany the Current Report on Form 8-K to be filed
with the SEC within 15 days of issuance of the certificates of the related
series.
CERTIFICATE INSURANCE AND SURETY BONDS
If so provided in the prospectus supplement for a series of certificates,
insurance policies and/or surety bonds provided by one or more insurance
companies or sureties of the insurance companies will cover deficiencies in
amounts otherwise payable on those certificates or certain classes. Those
instruments may cover, with respect to one or more classes of certificates of
the related series, timely distributions of interest and/or full
distributions of principal on the basis of a schedule of principal
distributions set forth in or determined in the manner specified in the
related prospectus supplement. The related prospectus supplement will
describe any limitations on the draws that may be made under that instrument.
A copy of that instrument will accompany the Current Report on Form 8-K to be
filed with the SEC 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 those certificates or certain
classes of those certificates will be covered, to the extent of available
funds, by one or more reserve funds in which cash, a letter of credit,
short-term debt obligations, a demand note or a combination of those features
will be deposited, in the amounts specified in the prospectus supplement. If
so specified in the related prospectus supplement, the reserve fund for a
series may also be funded over time by a specified amount of the collections
received on the related mortgage assets.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income on those amounts, if any, will be applied for the
purposes, in the manner, specified in the related prospectus supplement. If
so specified in the related prospectus supplement, reserve funds may be
established to
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provide protection only against 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 that reserve fund may be released from it
under the conditions specified in the related prospectus supplement.
If so specified in the related prospectus supplement, amounts deposited in
any reserve fund will be invested in short-term debt obligations. Unless
otherwise specified in the related prospectus supplement, any reinvestment
income or other gain from those investments will be credited to the related
reserve fund for that series, and any loss resulting from those investments
will be charged to that reserve fund. However, that income may be payable to
any related master servicer or another service provider as additional
compensation for its services. The reserve fund, if any, for a series will
not be a part of the trust fund unless otherwise specified in the related
prospectus supplement.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the prospectus supplement for a series of certificates,
any MBS included in the related trust fund and/or the related underlying
mortgage loans 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 with
respect to the credit support for each series, to the extent that information
is material and available.
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CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential
properties. Because those legal aspects are governed by applicable state law,
which laws may differ substantially, the summaries do not purport to be
complete, to reflect the laws of any particular state, or to encompass the
laws of all states in which the security for the mortgage loans, or mortgage
loans underlying any MBS, is situated. Accordingly, the summaries are
qualified in their entirety by reference to the applicable laws of those
states. See "Description of the Trust Funds--Mortgage Loans" in this
prospectus.
GENERAL
Each mortgage loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the
prevailing practice and law in the state in which the related Mortgaged
Property is located. Mortgages, deeds of trust and deeds to secure debt are
in this prospectus collectively referred to as "mortgages". A mortgage
creates a lien upon, or grants a title interest in, the real property covered
thereby, and represents the security for the repayment of the indebtedness
customarily evidenced by a promissory note. The priority of the lien created
or interest granted will depend on the terms of the mortgage and, in some
cases, on the terms of separate subordination agreements or intercreditor
agreements with others that hold interests in the real property, the
knowledge of the parties to the mortgage and, generally, the order of
recordation of the mortgage in the appropriate public recording office.
However, the lien of a recorded mortgage will generally be subordinate to
later-arising liens for real estate taxes and assessments and other charges
imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor who is the borrower and
usually the owner of the subject property, and a mortgagee, who is the
lender. In contrast, a deed of trust is a three-party instrument, among a
trustor who is the equivalent of a borrower, a trustee to whom the real
property is conveyed, and a beneficiary, who is the lender, for whose benefit
the conveyance is made. Under a deed of trust, the trustor grants the
property, irrevocably until the debt is paid, in trust and generally with a
power of sale, to the trustee to secure repayment of the indebtedness
evidenced by the related note. A deed to secure debt typically has two
parties. The grantor (the borrower) conveys title to the real property to the
grantee (the lender) generally with a power of sale, until the time the debt
is repaid. In a case where the borrower is a land trust, there would be an
additional party because a land trustee holds legal title to the property
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 mortgagee's authority
under a mortgage, the trustee's authority under a deed of trust and the
grantee's authority under a deed to secure debt are governed by the express
provisions of the related instrument, 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 deed of trust
transactions, the directions of the beneficiary.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the borrower assigns to the
lender the borrower's right, title and interest as landlord under each lease
and the income derived therefrom, while, unless rents are to be paid directly
to the lender, retaining a revocable license to collect the rents for so long
as there is no default. 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/or obtain a court-appointed
receiver before becoming entitled to collect the rents.
In most states, hotel and motel room rates are considered accounts
receivable under the Uniform Commercial Code, also known as the UCC, in cases
where hotels or motels constitute loan security, the
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borrower as additional security for the loan generally pledges the rates. In
general, the lender must file financing statements in order to perfect its
security interest in the rates and must file continuation statements,
generally every five years, to maintain perfection of that security interest.
Even if the lender's security interest in room rates is perfected under the
UCC, it may be required to commence a foreclosure action or otherwise take
possession of the property in order to collect the room rates following a
default. See "--Bankruptcy Laws" below.
PERSONALTY
In the case of certain types of mortgaged properties, for instance hotels,
motels and nursing homes, personal property (to the extent owned by the
borrower and not previously pledged) may constitute a significant portion of
the property's value as security. The creation and enforcement of liens on
personal property are governed by the UCC. Accordingly, if a borrower pledges
personal property as security for a mortgage loan, the lender generally must
file UCC financing statements in order to perfect its security interest in
that personal property, and must file continuation statements, generally
every five years, to maintain that perfection.
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 real property at
public auction to satisfy the indebtedness.
Foreclosure procedures vary from state to state. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and non-judicial foreclosure pursuant to a power of sale granted in the
mortgage instrument. Other foreclosure procedures are available in some
states, but they are either infrequently used or available only in limited
circumstances.
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 requires several years to complete. Moreover, as discussed below,
even 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 sale
occurred while the borrower was insolvent and within a specified period prior
to the borrower's filing for bankruptcy protection.
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. Those 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 lenders in foreclosure actions. These
principles are generally designed to relieve borrowers from the effects of
mortgage defaults perceived as harsh or unfair. Relying on those 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 actions to
determine the cause of the borrower's default and the likelihood that the
borrower will be able to reinstate the loan. In some cases, courts have
substituted their judgment for the lenders 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 in the case of a
non-monetary default, such as a failure to adequately maintain the mortgaged
property or an impermissible further encumbrance of the
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mortgaged property. Finally, some courts have addressed 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 trigger constitutional protections.
Non-Judicial Foreclosure/Power of Sale. Foreclosure of a deed of trust is
generally accomplished by a non-judicial trustee's sale pursuant to a power
of sale typically granted in the deed of trust. A power of sale may also be
contained in any other type of mortgage instrument if applicable law so
permits. A power of sale under a deed of trust 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 default by the
borrower and after notice of sale is given in accordance with the terms of
the mortgage and applicable state law. In some states, prior to that sale,
the trustee under the 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 regard to the acceleration of
the indebtedness), plus the lender's 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, state law governs
the procedure for public sale, the parties entitled to notice, the method of
giving notice and the applicable time periods.
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 that property at the time of sale, due to, among other things, redemption
rights which may exist and the possibility of physical deterioration of the
property during the foreclosure proceedings. Potential buyers may be
reluctant to purchase property at a foreclosure sale as a result of the 1980
decision of the United States Court of Appeals for the Fifth Circuit in
Durrett v. Washington National Insurance Company and other decisions that
have followed its reasoning. The court in Durrett held that even a
non-collusive, regularly conducted foreclosure sale was a fraudulent transfer
under the federal bankruptcy code, as amended from time to time (11 U.S.C.)
(the "Bankruptcy Code") and, thus, could be rescinded in favor of the
bankrupt's estate, if (1) the foreclosure sale was held while the debtor was
insolvent and not more than one year prior to the filing of the bankruptcy
petition and (2) the price paid for the foreclosed property did not represent
"fair consideration", which is "reasonably equivalent value" under the
Bankruptcy Code. Although the reasoning and result of Durrett in respect of
the Bankruptcy Code was rejected by the United States Supreme Court in May
1994, the case could nonetheless be persuasive to a court applying a state
fraudulent conveyance law which has provisions similar to those construed in
Durrett. For these reasons, it is common for the lender to purchase the
mortgaged property for an amount equal to the lesser of fair market value and
the underlying debt and accrued and unpaid interest plus the expenses of
foreclosure. Generally, state law controls the amount of foreclosure costs
and expenses which may be recovered by a lender. Thereafter, subject to the
mortgagor's right in some states to remain in possession during a redemption
period, if applicable, the lender will become the owner of the property and
have both the benefits and burdens of ownership of the mortgaged property.
For example, the lender will have the obligation to pay debt service on any
senior mortgages, to pay taxes, obtain casualty insurance and to make those
repairs at its own expense as are necessary to render the property suitable
for sale. Frequently, the lender employs a third party management company to
manage and operate the property. The costs of operating and maintaining a
commercial or multifamily residential property may be significant and may be
greater than the income derived from that property. The costs of management
and operation of those mortgaged properties which are hotels, motels or
restaurants or nursing or convalescent homes or hospitals may be particularly
significant because of the expertise, knowledge and, with respect to nursing
or convalescent homes or hospitals, regulatory compliance, required to run
those 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 those 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
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upon market conditions, the ultimate proceeds of the sale of the property may
not equal the amount of the mortgage against the property. Moreover, a lender
commonly incurs substantial legal fees and court costs in acquiring a
mortgaged property through contested foreclosure and/or bankruptcy
proceedings. Furthermore, a few states require that any environmental
contamination at certain types of properties be cleaned up before a property
may be resold. In addition, a lender may be responsible under federal or
state law for the cost of cleaning up a mortgaged property that is
environmentally contaminated. See "--Environmental Risks" below. Generally
state law controls the amount of foreclosure expenses and costs, including
attorneys' fees, that may be recovered by a lender.
The holder of a junior mortgage that forecloses on a mortgaged property
does so subject to senior mortgages and any other prior liens, and may be
obliged to keep senior mortgage loans current in order to avoid foreclosure
of its interest in the property. In addition, if the foreclosure of a junior
mortgage triggers the enforcement of a "due-on-sale" clause contained in a
senior mortgage, the junior mortgagee could be required to pay the full
amount of the senior mortgage indebtedness or face foreclosure.
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 interests in the property that are subordinate to that of
the foreclosing lender, from exercise of their "equity of redemption". The
doctrine of equity of redemption provides that, until the property encumbered
by a mortgage has been sold in accordance with a properly conducted
foreclosure and foreclosure sale, those having interests that are subordinate
to that of the foreclosing lender have an equity of redemption and may redeem
the property by paying the entire debt with interest. 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 terminated.
The equity of redemption is a common-law (non-statutory) right which
should be distinguished from 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. In some states, statutory redemption
may occur only upon payment of the foreclosure sale price. In other states,
redemption may be permitted 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 because the exercise of
a right of redemption would defeat the title of any purchaser through a
foreclosure. 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.
Anti-Deficiency Legislation. Some or all of the mortgage loans may be
nonrecourse loans, as to which recourse in the case of default will be
limited to the Mortgaged Property and those other assets, if any, that were
pledged to secure the mortgage loan. However, even if a mortgage loan by its
terms provides for recourse to the borrower's other assets, a lender's
ability to realize upon those assets may be limited by state law. For
example, in some states a lender cannot obtain a deficiency judgment against
the borrower following foreclosure or sale under a deed of trust. A
deficiency judgment is a personal judgment against the former borrower equal
to the difference between the net amount realized upon the public sale of the
real property and the amount due to the lender. Other statutes may require
the lender to exhaust the security afforded under a mortgage 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 that security; however, in some of those states, the
lender, following judgment on that personal action, may be deemed to have
elected a remedy and thus may be precluded from foreclosing upon the
security. Consequently, lenders in those states where an election of remedy
provision exists will usually proceed first against the security. Finally,
other statutory provisions, designed to protect borrowers from exposure to
large deficiency judgments that might result from bidding at below-market
values at the foreclosure sale, limit any deficiency judgment to the excess
of the outstanding debt over the fair market value of the property at the
time of the sale.
Leasehold Risks. Mortgage loans may be secured by a mortgage on the
borrower's leasehold interest in a ground lease. Leasehold mortgage loans are
subject to certain risks not associated with mortgage loans
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secured by a lien on the fee estate of the borrower. The most significant of
these risks is that if the borrower's leasehold were to be terminated upon a
lease default, the leasehold mortgagee would lose its security. This risk may
be lessened if the ground lease requires the lessor to give the leasehold
mortgagee notices of lessee defaults and an opportunity to cure them, permits
the leasehold estate to be assigned to and by the leasehold mortgagee or the
purchaser at a foreclosure sale, and contains certain other protective
provisions typically included in a "mortgageable" ground lease.
Cooperative Shares. Mortgage loans may be secured by a security interest
on the borrower's ownership interest in shares, and the proprietary leases
appurtenant thereto, allocable to cooperative dwelling units that may be
vacant or occupied by non-owner tenants. Those loans are subject to certain
risks not associated with mortgage loans secured by a lien on the fee estate
of a borrower in real property. This kind of loan typically is subordinate to
the mortgage, if any, on the Cooperative's building which, if foreclosed,
could extinguish the equity in the building and the proprietary leases of the
dwelling units derived from ownership of the shares of the Cooperative.
Further, transfer of shares in a Cooperative are subject to various
regulations as well as to restrictions under the governing documents of the
Cooperative, and the shares may be cancelled in the event that associated
maintenance charges due under the related proprietary leases are not paid.
Typically, a recognition agreement between the lender and the Cooperative
provides, among other things, the lender with an opportunity to cure a
default under a proprietary lease.
Under the laws applicable in many states, "foreclosure" on Cooperative
shares is accomplished by a sale in accordance with the provisions of Article
9 of the UCC and the security agreement relating to the shares. Article 9 of
the UCC requires that a sale be conducted in a "commercially reasonable"
manner, which may be dependent upon, among other things, the notice given the
debtor and the method, manner, time, place and terms of the sale. Article 9
of the UCC provides that the proceeds of the sale will be applied first to
pay the costs and expenses of the sale and then to satisfy the indebtedness
secured by the lender's security interest. A recognition agreement, however,
generally provides that the lender's right to reimbursement is subject to the
right of the Cooperative to receive sums due under the proprietary leases.
BANKRUPTCY LAWS
The Bankruptcy Code and related state laws may interfere with or affect
the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings)
are automatically stayed upon the filing 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 of a delay 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 a 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 the value and
the outstanding balance of the loan. Other modifications may include the
reduction in the amount of each scheduled payment, which reduction may result
from a reduction in the rate of interest and/or the alteration of the
repayment schedule (with or without affecting the unpaid principal balance of
the loan), and/or an extension (or reduction) of the final maturity date.
Some courts with federal bankruptcy jurisdiction have approved plans, based
on the particular facts of the reorganization case, that effected the curing
of a mortgage loan default by paying arrearages over a number of years. Also,
under federal bankruptcy law, a bankruptcy court may permit a debtor through
its rehabilitative plan to de-accelerate a secured loan and to reinstate the
loan even though the lender accelerated the mortgage loan and final judgment
of foreclosure had been entered in state court (provided no sale of the
property had yet occurred) prior to the filing of the debtor's petition. This
may be done even if the full amount due under the original loan is never
repaid.
The Bankruptcy Code has been amended to provide that a lender's perfected
pre-petition security interest in leases, rents and hotel revenues continues
in the post-petition leases, rents and hotel revenues,
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unless a bankruptcy court orders to the contrary "based on the equities of
the case." Thus, unless a court orders otherwise, revenues from a mortgaged
property generated after the date the bankruptcy petition is filed will
constitute "cash collateral" under the Bankruptcy Code. Debtors may only use
cash collateral upon obtaining the lender's consent or a prior court order
finding that the lender's interest in the mortgaged property and the cash
collateral is "adequately protected" as the term is defined and interpreted
under the Bankruptcy Code. It should be noted, however, that the court may
find that the lender has no security interest in either pre-petition or
post-petition revenues if the court finds that the loan documents do not
contain language covering accounts, room rents, or other forms of personalty
necessary for a security interest to attach to hotel revenues.
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
because of a provision in the lease to that effect or because of certain
other similar events. This prohibition on so-called "ipso facto clauses"
could limit the ability of the trustee to exercise certain contractual
remedies with respect to the leases on any mortgaged property. 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 those remedies in the event
that a lessee becomes the subject of a proceeding under the Bankruptcy Code.
For example, a mortgagee would be stayed from enforcing an assignment of the
lease 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 related 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 if the assignment
is not fully perfected under state law prior to commencement of the
bankruptcy proceeding.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the
lease and retain it or assign it to a third party or (b) reject the lease. If
the lease is assumed, the trustee in bankruptcy on behalf of the lessee, or
the lessee as debtor-in-possession, or the assignee, if applicable, must cure
any defaults under the lease, compensate the lessor for its losses and
provide the lessor with "adequate assurance" of future performance. 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 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 percent, 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 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 the related renewal or
extension of the lease, any damages occurring after that date caused by the
nonperformance of any obligation of the lessor under the lease after that
date.
On the bankruptcy of a lessor or a lessee under a ground lease, the debtor
entity has the right to assume (continue) or reject (terminate) the ground
lease. Pursuant to Section 365(h) of the Bankruptcy Code, as it is presently
in effect, a ground lessee whose ground lease is rejected by a debtor ground
lessor
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has the right to remain in possession of its leased premises under the rent
reserved in the lease for the term (including renewals) of the ground lease,
but is not entitled to enforce the obligation of the ground lessor to provide
any services required under the ground lease. In the event a ground
lessee/borrower in bankruptcy rejects any/or all of its ground leases, the
leasehold mortgagee would have the right to succeed to the ground
lessee/borrower's position under the lease only if the ground lessor had
specifically granted the mortgagee such right. In the event of concurrent
bankruptcy proceedings involving the ground lessor and the ground
lessee/borrower, the Trustee may be unable to enforce the ground
lessee/borrower's obligation to refuse to treat a ground lease rejected by a
bankrupt ground lessor as terminated. In such circumstances, a ground lease
could be terminated notwithstanding lender protection provisions contained
herein or in the mortgage. A lender could lose its security unless the
borrower holds a fee mortgage or the bankruptcy court, as a court of equity,
allows the lender to assume the ground lessee's obligations under the ground
lease and succeed to the position of a leasehold mortgagor. Although
consistent with the Bankruptcy Code, such position may not be adopted by a
bankruptcy court.
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 certain states also give priority to certain
tax liens over the lien of a mortgage or deed of trust. Under the Bankruptcy
Code, if the court finds that actions of the mortgagee have been
unreasonable, the lien of the related mortgage may be subordinated to the
claims of unsecured creditors.
Certain of the borrowers may be partnerships. The laws governing limited
partnerships in certain states provide that the commencement of a case under
the Bankruptcy Code with respect to a general partner will cause a person to
cease to be a general partner of the limited partnership, unless otherwise
provided in writing in the limited partnership agreement. This provision may
be construed as an "ipso facto" clause and, in the event of the general
partner's bankruptcy, may not be enforceable. Certain 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 (i) at the time there was
at least one other general partner and the written provisions of the limited
partnership permit the business of the limited partnership to be carried on
by the remaining general partner and that general partner does so or (ii) the
written provisions of the limited partnership agreement permit the limited
partners to agree within a specified time frame (often 60 days) after the
withdrawal to continue the business of the limited partnership and to the
appointment of one or more general partners and the limited partners do so.
In addition, the laws governing general partnerships in certain states
provide that the commencement of a case under the Bankruptcy Code or state
bankruptcy laws with respect to a general partner of the partnerships
triggers the dissolution of the partnership, the winding up of its affairs
and the distribution of its assets. Those 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 the borrower's mortgage
loan, which may reduce the yield on the notes in the same manner as a
principal prepayment.
In addition, the bankruptcy of the general or limited partner of a
borrower that is a partnership, or the bankruptcy of a member of a borrower
that is a limited liability company or the bankruptcy of a shareholder of a
borrower that is a corporation may provide the opportunity in the bankruptcy
case of the partner, member or shareholder to obtain an order from a court
consolidating the assets and liabilities of the
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partner, member or shareholder with those of the mortgagor pursuant to the
doctrines of substantive consolidation or piercing the corporate veil. In
such a case, the respective mortgaged property, for example, would become
property of the estate of the bankrupt partner, member or shareholder. Not
only would the mortgaged property be available to satisfy the claims of
creditors of the partner, member or shareholder, 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 mortgagor or its
security interest in the mortgaged property.
ENVIRONMENTAL RISKS
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under federal law, including the Comprehensive
Environmental Response and Liability Act of 1980, as amended (also known as
CERCLA) and the laws of certain states, failure to perform the remediation
required or demanded by the state or federal government of any condition or
circumstance that
o may pose an imminent or substantial endangerment to the public
health or welfare or the environment,
o may result in a release or threatened release of any hazardous
material, or
o may give rise to any environmental claim or demand,
may give rise to a lien on the property to ensure the reimbursement of
remedial costs incurred by the federal or state government. In several
states, the lien has priority over the lien of an existing mortgage against
the property. Of particular concern may be those mortgaged properties which
are, or have been, the site of manufacturing, industrial or disposal
activity. Those environmental risks may give rise to (a) a diminution in
value of property securing a mortgage note or the inability to foreclose
against the property or (b) in certain circumstances as more fully described
below, liability for clean-up costs or other remedial actions, which
liability could exceed the value of the property, the aggregate assets of the
owner or operator, or the principal balance of the related indebtedness.
The state of the law is currently unclear as to whether and under what
circumstances cleanup costs, or the obligation to take remedial actions,
could be imposed on a secured lender. Under the laws of some states and under
CERCLA, a lender may become liable as an "owner" or an "operator" of a
contaminated mortgaged property for the costs of remediation of releases or
threatened releases of hazardous substances at the mortgaged property. The
liability may attach if the lender or its agents or employees have
participated in the management of the operations of the borrower, even though
the environmental damage or threat was caused by a prior owner, operator, or
other third party.
Excluded from CERCLA's definition of "owner or operator" is any person
"who, without participating in the management of a facility, holds indicia of
ownership primarily to protect his security interest" (the "secured-creditor
exemptionsecured-creditor exemption"). This exemption for holders of a
security interest such as a secured lender applies only in circumstances when
the lender seeks to protect its security interest in the contaminated
facility or property. Thus, if a lender's activities encroach on the actual
management of that 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), under
some circumstances the lender may incur potential CERCLA liability.
Recent amendments to CERCLA list 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. Additionally, the amendments provide certain
protections from CERCLA liability as an "owner or operator" to a lender who
forecloses on contaminated property, as long as it seeks to divest itself of
the facility at the earliest practicable commercially reasonable time on
commercially reasonable terms. The amendments also limit the liability of
lenders under the federal Solid Waste Disposal Act for costs of responding to
leaking underground storage tanks. However, the protections afforded lenders
under the amendments are subject to terms and conditions that have not been
clarified by the courts. Moreover, the CERCLA secured-creditor exemption does
not necessarily affect the potential for
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liability in actions under other federal or state laws which may impose
liability on "owners or operators" but do not incorporate the
secured-creditor exemption. Furthermore, the secured-creditor exemption does
not protect lenders from other bases of CERCLA liability, such as that
imposed on "generators" or "transporters" of hazardous substances.
Environmental clean-up costs may be substantial. It is possible that those
costs could become a liability of the Trust and occasion a loss to
certificateholders if those remedial costs were incurred.
In a few states, transfers of some types of properties are conditioned
upon clean-up of contamination prior to transfer. It is possible that a
property securing a mortgage loan could be subject to these transfer
restrictions. If this occurs, and if the lender becomes the owner upon
foreclosure, the lender may be required to clean up the contamination before
selling the property.
The cost of remediating hazardous substance contamination at a property
can be substantial. If a lender is or becomes liable, it can bring an action
for contribution against the owner or operator that created the environmental
hazard, but that person or entity may be without substantial assets.
Accordingly, it is possible that these costs could become a liability of a
trust fund and occasion a loss to certificateholders of the related series.
To reduce the likelihood of this kind of loss, and unless otherwise
provided in the related prospectus supplement, the related Pooling Agreement
will provide that the master servicer may not, on behalf of the trust fund,
acquire title to a Mortgaged Property or take over its operation unless the
master servicer, based on a report prepared by a person who regularly
conducts environmental site assessments, has made the determination that it
is appropriate to do so, as described under "Description of the Pooling
Agreements--Realization Upon Defaulted Mortgage Loans" in this prospectus.
Even when a lender is not directly liable for cleanup costs on property
securing loans, if a property securing a loan is contaminated, the value of
the security is likely to be affected. In addition, a lender bears the risk
that unanticipated cleanup costs may jeopardize the borrower's repayment.
Neither of these two issues is likely to pose risks exceeding the amount of
unpaid principal and interest of a particular loan secured by a contaminated
property, particularly if the lender declines to foreclose on a mortgage
secured by the property.
If a lender forecloses on a mortgage secured by a property the operations
of which are subject to environmental laws and regulations, the lender will
be required to operate the property in accordance with those laws and
regulations. Compliance may entail substantial expense.
In addition, a lender may be obligated to disclose environmental
conditions on a property to government entities and/or to prospective buyers,
including prospective buyers at a foreclosure sale or following foreclosure.
That disclosure may decrease the amount that prospective buyers are willing
to pay for the affected property and thereby lessen the ability of the lender
to recover its investment in a loan upon foreclosure.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the mortgage loans may contain "due-on-sale" and
"due-on-encumbrance" clauses that purport to permit the lender to accelerate
the maturity of the loan if the borrower transfers or encumbers the related
Mortgaged Property. In recent years, court decisions and legislative actions
placed substantial restrictions on the right of lenders to enforce those
clauses in many states. By virtue, however, of the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn Act"), effective October 15, 1982, which
purports to preempt state laws that prohibit the enforcement of due-on-sale
clauses by providing among other matters, that "due-on-sale" clauses in
certain loans made after the effective date of the Garn Act are enforceable,
within certain limitations as set forth in the Garn Act, a master servicer
may nevertheless have the right to accelerate the maturity of a mortgage loan
that contains a "due-on-sale" provision upon transfer of an interest in the
property, regardless of the master servicer's ability to demonstrate that a
sale threatens its legitimate security interest.
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SUBORDINATE FINANCING
Certain of the mortgage loans may not restrict the ability of the borrower
to use the Mortgaged Property as security for one or more additional loans.
Where a borrower encumbers a mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the borrower
may have difficulty servicing and repaying multiple loans. Moreover, if the
subordinate financing permits recourse to the borrower, as is frequently the
case, and the senior loan does not, a borrower may have more incentive to
repay sums due on the subordinate loan. Second, acts of the senior lender
that prejudice the junior lender or impair the junior lender's security may
create a superior equity in favor of the junior lender. For example, if the
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. Third, if the borrower defaults on the
senior loan and/or any junior loan or loans, the existence of junior loans
and actions taken by junior lenders can impair the security available to the
senior lender and can interfere with or delay the taking of action by the
senior lender. Moreover, the bankruptcy of a junior lender may operate to
stay foreclosure or similar proceedings by the senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and
in some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges which a lender may collect from a borrower
for delinquent payments. Certain states also limit the amounts that a lender
may collect from a borrower as an additional charge if the loan is prepaid.
In addition, the enforceability of provisions that provide for prepayment
fees or penalties upon an involuntary prepayment is unclear under the laws of
many states.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("Title V") provides that state usury limitations shall not apply
to certain types of residential, including multifamily but not commercial,
first mortgage loans originated by certain lenders after March 31, 1980. A
similar Federal statute was in effect with respect to mortgage loans made
during the first three months of 1980. The statute authorized any state to
reimpose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision that expressly rejects application of the federal
law. In addition, even where Title V is not so rejected, any state is
authorized by the law to adopt a provision limiting discount points or other
charges on mortgage loans covered by Title V. Certain states have taken
action to reimpose interest rate limits and/or to limit discount points or
other charges.
In any state in which application of Title V has been expressly rejected
or a provision limiting discount points or other charges has been adopted, no
mortgage loan originated after the date of that state action will (if
originated after that rejection or adoption) be eligible for inclusion in a
trust fund unless (1) the mortgage loan provides for an interest rate,
discount points and charges as are permitted in that state or (2) the
mortgage loan provides that the terms are to 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, thereby permitting the borrower to cancel
the recorded mortgage or deed of trust without any payment or prohibiting the
lender from foreclosing.
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SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of that borrower's 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 that borrower's active duty status,
unless a court orders otherwise upon application of the lender. The Relief
Act applies to individuals 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 individuals 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 with
individuals as borrowers that may be affected by the Relief Act. Application
of the Relief Act would adversely affect, for an indeterminate period of
time, the ability of any servicer to collect full amounts of interest on
certain of the mortgage loans. Any shortfalls in interest collections
resulting from the application of the Relief Act would result in a reduction
of the amounts distributable to the holders of the related series of
certificates, and would not be covered by advances or, unless otherwise
specified in the related prospectus supplement, any form of credit support
provided in connection with those 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.
TYPE OF MORTGAGED PROPERTY
The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or convalescent homes may present special
risks to lenders in large part due to significant governmental regulation of
the operation, maintenance, control and financing of health care
institutions. Mortgages on Mortgaged Properties which are owned by the
borrower under a condominium form of ownership are subject to the
declaration, by-laws and other rules and regulations of the condominium
association. Mortgaged Properties which are hotels or motels may present
additional risk to the lender in that:
1. hotels and motels are typically operated pursuant to franchise,
management and operating agreements which may be terminable by the
operator; and
2. the transferability of the hotel's operating, liquor and other
licenses to the entity acquiring the hotel either through purchase
or foreclosure is subject to the vagaries of local law
requirements.
In addition, Mortgaged Properties which are multifamily properties or
cooperatively owned multifamily properties may be subject to rent control
laws, which could impact the future cash flows of those properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 (the
"ADA"), in order to protect individuals with disabilities, public
accommodations (such as hotels, restaurants, shopping centers, hospitals,
schools and social service center establishments) must remove architectural
and communication barriers which are structural in nature from existing
places of public accommodation to the extent "readily achievable." In
addition, under the ADA, alterations to a place of public accommodation or a
commercial facility are to be made so that, to the maximum extent feasible,
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 requirements on a foreclosing lender who succeeds to the
interest of the borrower as owner or landlord. Furthermore, since the
"readily achievable" standard may vary depending on the financial condition
of the owner or landlord, a foreclosing lender who is financially more
capable than the borrower of complying with the requirements of the ADA may
be subject to more stringent requirements than those to which the borrower is
subject.
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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, also known as "RICO", can be seized by the
government if the property was used in, or purchased with the proceeds of,
those 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
established that: (1) its mortgage was executed and recorded before
commission of the crime upon which the forfeiture is based, or (2) 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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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of
certificates. The discussion below does not purport to address all federal
income tax consequences that may be applicable to particular categories of
investors, some of which may be subject to special rules. The authorities on
which this discussion is based are subject to change or differing
interpretations, and any change or interpretation could apply retroactively.
This discussion reflects the applicable provisions of the Code as well as
regulations (the "REMIC Regulations") promulgated by the U.S. Department of
Treasury (the "Treasury"). Investors should consult their own tax advisors in
determining the federal, state, local and other tax consequences to them of
the purchase, ownership and disposition of certificates.
For purposes of this discussion, (1) references to the mortgage loans
include references to the mortgage loans underlying MBS included in the
mortgage assets and (2) where the applicable prospectus supplement provides
for a fixed retained yield with respect to the mortgage loans underlying a
series of certificates, references to the mortgage loans will be deemed to
refer to that portion of the mortgage loans held by the trust fund which does
not include the Retained Interest. References to a "holder" or
"certificateholder" in this discussion generally mean the beneficial owner of
a certificate.
FEDERAL INCOME TAX CONSEQUENCES FOR REMIC CERTIFICATES
General
With respect to a particular series of certificates, an election may be
made to treat the trust fund or one or more segregated pools of assets in the
trust fund as one or more REMICs within the meaning of Code Section 860D. A
trust fund or a portion of a trust fund as to which a REMIC election will be
made will be referred to as a "REMIC Pool". For purposes of this discussion,
certificates of a series as to which one or more REMIC elections are made are
referred to as "REMIC Certificates" and will consist of one or more classes
of "Regular Certificates" and one class of Residual Certificates in the case
of each REMIC Pool. Qualification as a REMIC requires ongoing compliance with
certain conditions. With respect to each series of REMIC Certificates,
Cadwalader, Wickersham & Taft, counsel to the Depositor, has advised the
Depositor that in the firm's opinion, assuming (1) the making of an election,
(2) compliance with the Pooling Agreement and (3) compliance with any changes
in the law, including any amendments to the Code or applicable Treasury
regulations under the Code, each REMIC Pool will qualify as a REMIC. In that
case, the Regular Certificates will be considered to be "regular interests"
in the REMIC Pool and generally will be treated for federal income tax
purposes as if they were newly originated debt instruments, and the Residual
Certificates will be considered to be "residual interests" in the REMIC Pool.
The prospectus supplement for each series of certificates will indicate
whether one or more REMIC elections with respect to the related trust fund
will be made, in which event references to "REMIC" or "REMIC Pool" below
shall be deemed to refer to that REMIC Pool. If so specified in the
applicable prospectus supplement, the portion of a trust fund as to which a
REMIC election is not made may be treated as a grantor trust for federal
income tax purposes. See "--Federal Income Tax Consequences for Certificates
as to Which No REMIC Election Is Made" below.
Status of REMIC Certificates
REMIC Certificates held by a domestic building and loan association will
constitute "a regular or residual interest in a REMIC" within the meaning of
Code Section 7701(a)(19)(C)(xi), but only in the same proportion that the
assets of the REMIC Pool would be treated as "loans . . . secured by an
interest in real property which is . . . residential real property" (such as
single family or multifamily properties, but not commercial properties)
within the meaning of Code Section 7701(a)(19)(C)(v) or as other assets
described in Code Section 7701(a)(19)(C), and otherwise will not qualify for
that treatment. REMIC Certificates held by a real estate investment trust
will constitute "real estate assets" within the meaning of Code Section
856(c)(4)(A), and interest on the Regular Certificates and income with
respect to Residual Certificates will be considered "interest on obligations
secured by mortgages on real property or on interests in real property"
within the meaning of Code Section 856(c)(3)(B) in the same proportion that,
for both purposes, the assets of the REMIC Pool would be so treated. If at
all times 95% or more of the assets of the REMIC Pool qualify for each of the
foregoing respective treatments, the REMIC Certificates will qualify for the
corresponding status
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in their entirety. For purposes of Code Section 856(c)(4)(A), payments of
principal and interest on the mortgage loans that are reinvested pending
distribution to holders of REMIC Certificates qualify for that treatment.
Where two REMIC Pools are a part of a tiered structure they will be treated
as one REMIC for purposes of the tests described above respecting asset
ownership of more or less than 95%. Regular Certificates will be "qualified
mortgages" for another REMIC for purposes of Code Section 860(G)(a)(3) and
"permitted assets" for a financial asset securitization investment trust for
purposes of Section 860(L)(c). REMIC Certificates held by a regulated
investment company will not constitute "Government Securities" within the
meaning of Code Section 851(b)(3)(A)(i). REMIC Certificates held by certain
financial institutions will constitute an "evidence of indebtedness" within
the meaning of Code Section 582(c)(1). The Small Business Job Protection Act
of 1996 (the "SBJPA of 1996") repealed the reserve method for bad debts of
domestic building and loan associations and mutual savings banks, and thus
has eliminated the asset category of "qualifying real property loans" in
former Code Section 593(d) for taxable years beginning after December 31,
1995. The requirement in the SBJPA of 1996 that those institutions must
"recapture" a portion of their existing bad debt reserves is suspended if a
certain portion of their assets are maintained in "residential loans" under
Code Section 7701(a)(19)(C)(v), but only if those loans were made to acquire,
construct or improve the related real property and not for the purpose of
refinancing. However, no effort will be made to identify the portion of the
mortgage loans of any Series meeting this requirement, and no representation
is made in this regard.
Qualification as a REMIC
In order for the REMIC Pool to qualify as a REMIC, there must be ongoing
compliance on the part of the REMIC Pool with the requirements set forth in
the Code. The REMIC Pool must fulfill an asset test, which requires that no
more than a de minimis portion of the assets of the REMIC Pool, as of the
close of the third calendar month beginning after the "Startup Day" (which
for purposes of this discussion is the date of issuance of the REMIC
Certificates) and at all times thereafter, may consist of assets other than
"qualified mortgages" and "permitted investments". The REMIC Regulations
provide a safe harbor pursuant to which the de minimis requirement is met if
at all times the aggregate adjusted basis of the nonqualified assets is less
than 1% of the aggregate adjusted basis of all the REMIC Pool's assets. An
entity that fails to meet the safe harbor may nevertheless demonstrate that
it holds no more than a de minimis amount of nonqualified assets. A REMIC
also must provide "reasonable arrangements" to prevent its residual interest
from being held by "disqualified organizations" and must furnish applicable
tax information to transferors or agents that violate this requirement. The
Pooling Agreement for each series will contain a provision designed to meet
this requirement. See "--Taxation of Residual Certificates--Tax-Related
Restrictions on Transfer of Residual Certificates--Disqualified
Organizations" below.
A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC Pool on
the Startup Day or is purchased by the REMIC Pool within a three-month period
thereafter pursuant to a fixed price contract in effect on the Startup Day.
Qualified mortgages include whole mortgage loans, such as the mortgage loans,
certificates of beneficial interest in a grantor trust that holds mortgage
loans, including certain of the MBS, regular interests in another REMIC, such
as MBS in a trust as to which a REMIC election has been made, loans secured
by timeshare interests and loans secured by shares held by a tenant
stockholder in a cooperative housing corporation, provided, in general, (1)
the fair market value of the real property security (including buildings and
structural components) is at least 80% of the principal balance of the
related mortgage loan or mortgage loan underlying the mortgage certificate
either at origination or as of the Startup Day (an original loan-to-value
ratio of not more than 125% with respect to the real property security) or
(2) substantially all the proceeds of the mortgage loan or the underlying
mortgage loan were used to acquire, improve or protect an interest in real
property that, at the origination date, was the only security for the
mortgage loan or underlying mortgage loan. If the mortgage loan has been
substantially modified other than in connection with a default or reasonably
foreseeable default, it must meet the loan-to-value test in (1) of the
preceding sentence as of the date of the last modification or at closing. A
qualified mortgage includes a qualified replacement mortgage, which is any
property that would have been treated as a qualified mortgage if it were
transferred to the REMIC Pool on the Startup Day and that is received either
(1) in exchange for any qualified mortgage within a three-month period
thereafter or (2) in exchange for a "defective obligation" within a two-year
period thereafter. A "defective obligation" includes
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o a mortgage in default or as to which default is reasonably
foreseeable,
o a mortgage as to which a customary representation or warranty made
at the time of transfer to the REMIC Pool has been breached,
o a mortgage that was fraudulently procured by the mortgagor, and
o a mortgage that was not in fact principally secured by real
property (but only if the mortgage is disposed of within 90 days
of discovery).
Permitted investments include cash flow investments, qualified reserve
assets, and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding 13
months, until the next scheduled distribution to holders of interests in the
REMIC Pool. A qualified reserve asset is any intangible property held for
investment that is part of any reasonably required reserve maintained by the
REMIC Pool to provide for payments of expenses of the REMIC Pool or amounts
due on the regular or residual interests in the event of defaults (including
delinquencies) on the qualified mortgages, lower than expected reinvestment
returns, prepayment interest shortfalls and certain other contingencies. The
reserve fund will be disqualified if more than 30% of the gross income from
the assets in the fund for the year is derived from the sale or other
disposition of property held for less than three months, unless required to
prevent a default on the regular interests caused by a default on one or more
qualified mortgages. A reserve fund must be reduced "promptly and
appropriately" as payments on the mortgage loans are received. Foreclosure
property is real property acquired by the REMIC Pool in connection with the
default or imminent default of a qualified mortgage, provided the Depositor
had no knowledge that the mortgage loan would go into default at the time it
was transferred to the REMIC Pool. Foreclosure property generally must be
disposed of prior to the close of the third calendar year following the
acquisition of the property by the REMIC Pool, with an extension that may be
granted by the IRS.
In addition to the foregoing requirements, the various interests in a
REMIC Pool also must meet certain requirements. All of the interests in a
REMIC Pool must be either of the following: (1) one or more classes of
regular interests or (2) a single class of residual interests on which
distributions, if any, are made pro rata. A regular interest is an interest
in a REMIC Pool that is issued on the Startup Day with fixed terms, is
designated as a regular interest, and unconditionally entitles the holder to
receive a specified principal amount (or other similar amount), and provides
that interest payments (or other similar amounts), if any, at or before
maturity either are payable based on a fixed rate or a qualified variable
rate, or consist of a specified, nonvarying portion of the interest payments
on qualified mortgages. The specified portion may consist of a fixed number
of basis points, a fixed percentage of the total interest, or a fixed or
qualified variable or inverse variable rate on some or all of the qualified
mortgages minus a different fixed or qualified variable rate. The specified
principal amount of a regular interest that provides for interest payments
consisting of a specified, nonvarying portion of interest payments on
qualified mortgages may be zero. A residual interest is an interest in a
REMIC Pool other than a regular interest that is issued on the Startup Day
and that is designated as a residual interest. An interest in a REMIC Pool
may be treated as a regular interest even if payments of principal with
respect to that interest are subordinated to payments on other regular
interests or the residual interest in the REMIC Pool, and are dependent on
the absence of defaults or delinquencies on qualified mortgages or permitted
investments, lower than reasonably expected returns on permitted investments,
unanticipated expenses incurred by the REMIC Pool or prepayment interest
shortfalls. Accordingly, the Regular Certificates of a series will constitute
one or more classes of regular interests, and the Residual Certificates for
each REMIC Pool of that series will constitute a single class of residual
interests on which distributions are made pro rata.
If an entity, such as the REMIC Pool, fails to comply with one or more of
the ongoing requirements of the Code for REMIC status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for
that year and thereafter. In this event, an entity with multiple classes of
ownership interests may be treated as a separate association taxable as a
corporation under Treasury regulations, and the Regular Certificates may be
treated as equity interests in the REMIC Pool. The Code, however, authorizes
the Treasury Department to issue regulations that address situations where
failure to meet one or more of the requirements for REMIC status occurs
inadvertently and in good faith, and disqualification of the REMIC Pool
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would occur absent regulatory relief. Investors should be aware, however,
that the Conference Committee Report to the Tax Reform Act of 1986 (the
"Reform Act") indicates that the relief may be accompanied by sanctions, such
as the imposition of a corporate tax on all or a portion of the REMIC Pool's
income for the period of time in which the requirements for REMIC status are
not satisfied.
TAXATION OF REGULAR CERTIFICATES
General
In general, interest, original issue discount and market discount on a
Regular Certificate will be treated as ordinary income to a holder of the
Regular Certificate (the "Regular Certificateholder") as they accrue, and
principal payments on a Regular Certificate will be treated as a return of
capital to the extent of the Regular Certificateholder's basis in the Regular
Certificate allocable thereto. Regular Certificateholders must use the
accrual method of accounting with regard to Regular Certificates, regardless
of the method of accounting otherwise used by those Regular
Certificateholders.
Original Issue Discount
Accrual Certificates and principal-only certificates will be, and other
classes of Regular Certificates may be, issued with "original issue discount"
within the meaning of Code Section 1273(a). Holders of any class of Regular
Certificates having original issue discount generally must include original
issue discount in ordinary income for federal income tax purposes as it
accrues, in accordance with the constant yield method that takes into account
the compounding of interest, in advance of receipt of the cash attributable
to that income. The following discussion is based in part on temporary and
final Treasury regulations issued on February 2, 1994, as amended on June 14,
1996 (the "OID Regulations") under Code Sections 1271 through 1273 and 1275
and in part on the provisions of the Reform Act. Regular Certificateholders
should be aware, however, that the OID Regulations do not adequately address
certain issues relevant to prepayable securities, such as the Regular
Certificates. To the extent those issues are not addressed in those
regulations, the Depositor intends to apply the methodology described in the
Conference Committee Report to the Reform Act. We cannot assure you that the
IRS will not take a different position as to those matters not currently
addressed by the OID Regulations. Moreover, the OID Regulations include an
anti-abuse rule allowing the IRS to apply or depart from the OID Regulations
where necessary or appropriate to ensure a reasonable tax result in light of
the applicable statutory provisions. A tax result will not be considered
unreasonable under the anti-abuse rule in the absence of a substantial effect
on the present value of a taxpayer's tax liability. Investors are advised to
consult their own tax advisors as to the discussion in this prospectus and
the appropriate method for reporting interest and original issue discount
with respect to the Regular Certificates.
Each Regular Certificate, except to the extent described below with
respect to a Regular Certificate on which principal is distributed by random
lot ("Random Lot Certificates"), will be treated as a single installment
obligation for purposes of determining the original issue discount includible
in a Regular Certificateholder's income. The total amount of original issue
discount on a Regular Certificate is the excess of the "stated redemption
price at maturity" of the Regular Certificate over its "issue price". The
issue price of a class of Regular Certificates offered pursuant to this
prospectus generally is the first price at which a substantial amount of
Regular Certificates of that class is sold to the public (excluding bond
houses, brokers and underwriters). Although unclear under the OID
Regulations, the Depositor intends to treat the issue price of a class as to
which there is no substantial sale as of the issue date or that is retained
by the Depositor as the fair market value of that class as of the issue date.
The issue price of a Regular Certificate also includes the amount paid by an
initial Regular Certificateholder for accrued interest that relates to a
period prior to the issue date of the Regular Certificate, unless the Regular
Certificateholder elects on its federal income tax return to exclude that
amount from the issue price and to recover it on the first distribution date.
The stated redemption price at maturity of a Regular Certificate always
includes the original principal amount of the Regular Certificate, but
generally will not include distributions of stated interest if those interest
distributions constitute "qualified stated interest". Under the OID
Regulations, qualified stated interest generally means interest payable at a
single fixed rate or a qualified variable rate (as described below) provided
that those interest payments are unconditionally payable at intervals of one
year or less during the entire term of the Regular Certificate. Because there
is no penalty or default remedy
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in the case of nonpayment of interest with respect to a Regular Certificate,
it is possible that no interest on any class of Regular Certificates will be
treated as qualified stated interest. However, except as provided in the
following three sentences or in the applicable prospectus supplement, because
the underlying mortgage loans provide for remedies in the event of default,
we intend to treat interest with respect to the Regular Certificates as
qualified stated interest. Distributions of interest on an Accrual
Certificate, or on other Regular Certificates with respect to which deferred
interest will accrue, will not constitute qualified stated interest, in which
case the stated redemption price at maturity of the Regular Certificates
includes all distributions of interest as well as principal on those Regular
Certificates. Likewise, we intend to treat an "interest only" class, or a
class on which interest is substantially disproportionate to its principal
amount, a so-called "super-premium" class, as having no qualified stated
interest. Where the interval between the issue date and the first
distribution date on a Regular Certificate is shorter than the interval
between subsequent distribution dates, the interest attributable to the
additional days will be included in the stated redemption price at maturity.
Under a de minimis rule, original issue discount on a Regular Certificate
will be considered to be zero if the original issue discount is less than
0.25% of the stated redemption price at maturity of the Regular Certificate
multiplied by the weighted average maturity of the Regular Certificate. For
this purpose, the weighted average maturity of the Regular Certificate is
computed as the sum of the amounts determined by multiplying the number of
full years (i.e., rounding down partial years) from the issue date until each
distribution is scheduled to be made by a fraction, the numerator of which is
the amount of each distribution included in the stated redemption price at
maturity of the Regular Certificate and the denominator of which is the
stated redemption price at maturity of the Regular Certificate. The
Conference Committee Report to the Reform Act provides that the schedule of
distributions should be determined in accordance with the assumed rate of
prepayment of the mortgage loans (the "Prepayment Assumption") and the
anticipated reinvestment rate, if any, relating to the Regular Certificates.
The Prepayment Assumption with respect to a Series of Regular Certificates
will be set forth in the related prospectus supplement. Holders generally
must report de minimis original issue discount pro rata as principal payments
are received, and that income will be capital gain if the Regular Certificate
is held as a capital asset. However, under the OID Regulations, Regular
Certificateholders may elect to accrue all de minimis original issue discount
as well as market discount and market premium under the constant yield
method. See "--Election to Treat All Interest Under the Constant Yield
Method" below.
A Regular Certificateholder generally must include in gross income for any
taxable year the sum of the "daily portions," as defined below, of the
original issue discount on the Regular Certificate accrued during an accrual
period for each day on which it holds the Regular Certificate, including the
date of purchase but excluding the date of disposition. We intend to treat
the monthly period ending on the day before each distribution date as the
accrual period. With respect to each Regular Certificate, a calculation will
be made of the original issue discount that accrues during each successive
full accrual period, or shorter period from the date of original issue, that
ends on the day before the related distribution date on the Regular
Certificate. The Conference Committee Report to the Reform Act states that
the rate of accrual of original issue discount is intended to be based on the
Prepayment Assumption. Other than as discussed below with respect to a Random
Lot Certificate, the original issue discount accruing in a full accrual
period would be the excess, if any, of
1. the sum of (a) the present value of all of the remaining
distributions to be made on the Regular Certificate as of the end
of that accrual period that are included in the Regular
Certificate's stated redemption price at maturity and (b) the
distributions made on the Regular Certificate during the accrual
period that are included in the Regular Certificate's stated
redemption price at maturity, over
2. the adjusted issue price of the Regular Certificate at the
beginning of the accrual period.
The present value of the remaining distributions referred to in the
preceding sentence is calculated based on (1) the yield to maturity of the
Regular Certificate at the issue date, (2) events (including actual
prepayments) that have occurred prior to the end of the accrual period and
(3) the Prepayment Assumption. For these purposes, the adjusted issue price
of a Regular Certificate at the beginning of any accrual period
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equals the issue price of the Regular Certificate, increased by the aggregate
amount of original issue discount with respect to the Regular Certificate
that accrued in all prior accrual periods and reduced by the amount of
distributions included in the Regular Certificate's stated redemption price
at maturity that were made on the Regular Certificate in those prior periods.
The original issue discount accruing during any accrual period (as determined
in this paragraph) will then be divided by the number of days in the period
to determine the daily portion of original issue discount for each day in the
period. With respect to an initial accrual period shorter than a full accrual
period, the daily portions of original issue discount must be determined
according to an appropriate allocation under any reasonable method.
Under the method described above, the daily portions of original issue
discount required to be included in income by a Regular Certificateholder
generally will increase to take into account prepayments on the Regular
Certificates as a result of prepayments on the mortgage loans that exceed the
Prepayment Assumption, and generally will decrease, but not below zero for
any period, if the prepayments are slower than the Prepayment Assumption. An
increase in prepayments on the mortgage loans with respect to a Series of
Regular Certificates can result in both a change in the priority of principal
payments with respect to certain classes of Regular Certificates and either
an increase or decrease in the daily portions of original issue discount with
respect to those Regular Certificates.
In the case of a Random Lot Certificate, we intend to determine the yield
to maturity of that certificate based upon the anticipated payment
characteristics of the class as a whole under the Prepayment Assumption. In
general, the original issue discount accruing on each Random Lot Certificate
in a full accrual period would be its allocable share of the original issue
discount with respect to the entire class, as determined in accordance with
the preceding paragraph. However, in the case of a distribution in retirement
of the entire unpaid principal balance of any Random Lot Certificate, or
portion of that unpaid principal balance, (a) the remaining unaccrued
original issue discount allocable to that certificate (or to that portion)
will accrue at the time of that distribution, and (b) the accrual of original
issue discount allocable to each remaining certificate of the class (or the
remaining unpaid principal balance of a partially redeemed Random Lot
Certificate after a distribution of principal has been received) will be
adjusted by reducing the present value of the remaining payments on that
class and the adjusted issue price of that class to the extent attributable
to the portion of the unpaid principal balance of the class that was
distributed. We believe that the foregoing treatment is consistent with the
"pro rata prepayment" rules of the OID Regulations, but with the rate of
accrual of original issue discount determined based on the Prepayment
Assumption for the class as a whole. You are advised to consult your tax
advisors as to this treatment.
Acquisition Premium
A purchaser of a Regular Certificate at a price greater than its adjusted
issue price but less than its stated redemption price at maturity will be
required to include in gross income the daily portions of the original issue
discount on the Regular Certificate reduced pro rata by a fraction, the
numerator of which is the excess of its purchase price over the adjusted
issue price and the denominator of which is the excess of the remaining
stated redemption price at maturity over the adjusted issue price.
Alternatively, a subsequent purchaser may elect to treat all of the
acquisition premium under the constant yield method, as described below under
the heading "--Election to Treat All Interest Under the Constant Yield
Method" below.
Variable Rate Regular Certificates
Regular Certificates may provide for interest based on a variable rate.
Under the OID Regulations, interest is treated as payable at a variable rate
if, generally, (1) the issue price does not exceed the original principal
balance by more than a specified amount and (2) the interest compounds or is
payable at least annually at current values of (a) one or more "qualified
floating rates", (b) a single fixed rate and one or more qualified floating
rates, (c) a single "objective rate", or (d) a single fixed rate and a single
objective rate that is a "qualified inverse floating rate". A floating rate
is a qualified floating rate if variations in the rate can reasonably be
expected to measure contemporaneous variations in the cost of newly borrowed
funds, where the rate is subject to a fixed multiple that is greater than
0.65, but not more than 1.35. The rate may also be increased or decreased by
a fixed spread or subject to a fixed cap or floor, or a cap or floor that is
not reasonably expected as of the issue date to affect the yield of the
instrument significantly. An objective rate (other than a qualified floating
rate) is a rate that is determined using a single fixed formula
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and that is based on objective financial or economic information, provided
that the information is not (1) within the control of the issuer or a related
party or (2) unique to the circumstances of the issuer or a related party. A
qualified inverse floating rate is a rate equal to a fixed rate minus a
qualified floating rate that inversely reflects contemporaneous variations in
the cost of newly borrowed funds; an inverse floating rate that is not a
qualified floating rate may nevertheless be an objective rate. A class of
Regular Certificates may be issued under this prospectus that does not have a
variable rate under the OID Regulations, for example, a class that bears
different rates at different times during the period it is outstanding so
that it is considered significantly "front-loaded" or "back-loaded" within
the meaning of the OID Regulations. It is possible that a class of this type
may be considered to bear "contingent interest" within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of
contingent interest, are by their terms not applicable to Regular
Certificates. However, if final regulations dealing with contingent interest
with respect to Regular Certificates apply the same principles as the OID
Regulations, those regulations may lead to different timing of income
inclusion than would be the case under the OID Regulations. Furthermore,
application of those principles could lead to the characterization of gain on
the sale of contingent interest Regular Certificates as ordinary income.
Investors should consult their tax advisors regarding the appropriate
treatment of any Regular Certificate that does not pay interest at a fixed
rate or variable rate as described in this paragraph.
Under the REMIC Regulations, a Regular Certificate (1) bearing a rate that
qualifies as a variable rate under the OID Regulations that is tied to
current values of a variable rate (or the highest, lowest or average of two
or more variable rates), including a rate based on the average cost of funds
of one or more financial institutions, or a positive or negative multiple of
a rate (plus or minus a specified number of basis points), or that represents
a weighted average of rates on some or all of the mortgage loans, including a
rate that is subject to one or more caps or floors, or (2) bearing one or
more of these variable rates for one or more periods or one or more fixed
rates for one or more periods, and a different variable rate or fixed rate
for other periods qualifies as a regular interest in a REMIC. Accordingly,
unless otherwise indicated in the applicable prospectus supplement, we intend
to treat Regular Certificates that qualify as regular interests under this
rule in the same manner as obligations bearing a variable rate for original
issue discount reporting purposes.
The amount of original issue discount with respect to a Regular
Certificate bearing a variable rate of interest will accrue in the manner
described above under "--Original Issue Discount" with the yield to maturity
and future payments on that Regular Certificate generally to be determined by
assuming that interest will be payable for the life of the Regular
Certificate based on the initial rate (or, if different, the value of the
applicable variable rate as of the pricing date) for the relevant class.
Unless otherwise specified in the applicable prospectus supplement, we intend
to treat variable interest as qualified stated interest, other than variable
interest on an interest-only or super-premium class, which will be treated as
non-qualified stated interest includible in the stated redemption price at
maturity. Ordinary income reportable for any period will be adjusted based on
subsequent changes in the applicable interest rate index.
Although unclear under the OID Regulations, unless required otherwise by
applicable final regulations, we intend to treat Regular Certificates bearing
an interest rate that is a weighted average of the net interest rates on
mortgage loans or Mortgage Certificates having fixed or adjustable rates, as
having qualified stated interest, except to the extent that initial "teaser"
rates cause sufficiently "back-loaded" interest to create more than de
minimis original issue discount. The yield on those Regular Certificates for
purposes of accruing original issue discount will be a hypothetical fixed
rate based on the fixed rates, in the case of fixed rate mortgage loans, and
initial "teaser rates" followed by fully indexed rates, in the case of
adjustable rate mortgage loans. In the case of adjustable rate mortgage
loans, the applicable index used to compute interest on the mortgage loans in
effect on the pricing date (or possibly the issue date) will be deemed to be
in effect beginning with the period in which the first weighted average
adjustment date occurring after the issue date occurs. Adjustments will be
made in each accrual period either increasing or decreasing the amount of
ordinary income reportable to reflect the actual pass-through interest rate
on the Regular Certificates.
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Deferred Interest
Under the OID Regulations, all interest on a Regular Certificate as to
which there may be deferred interest is includible in the stated redemption
price at maturity thereof. Accordingly, any deferred interest that accrues
with respect to a class of Regular Certificates may constitute income to the
holders of such Regular Certificates prior to the time distributions of cash
with respect to such deferred interest are made.
Market Discount
A purchaser of a Regular Certificate also may be subject to the market
discount rules of Code Section 1276 through 1278. Under these Code sections
and the principles applied by the OID Regulations in the context of original
issue discount, "market discount" is the amount by which the purchaser's
original basis in the Regular Certificate (1) is exceeded by the then-current
principal amount of the Regular Certificate or (2) in the case of a Regular
Certificate having original issue discount, is exceeded by the adjusted issue
price of that Regular Certificate at the time of purchase. The purchaser
generally will be required to recognize ordinary income to the extent of
accrued market discount on the Regular Certificate as distributions
includible in the stated redemption price at maturity of the Regular
Certificate are received, in an amount not exceeding that distribution. The
market discount would accrue in a manner to be provided in Treasury
regulations and should take into account the Prepayment Assumption. The
Conference Committee Report to the Reform Act provides that until regulations
are issued, the market discount would accrue either (1) on the basis of a
constant interest rate or (2) in the ratio of stated interest allocable to
the relevant period to the sum of the interest for that period plus the
remaining interest as of the end of that period, or in the case of a Regular
Certificate issued with original issue discount, in the ratio of original
issue discount accrued for the relevant period to the sum of the original
issue discount accrued for that period plus the remaining original issue
discount as of the end of that period. You also generally will be required to
treat a portion of any gain on a sale or exchange of the Regular Certificate
as ordinary income to the extent of the market discount accrued to the date
of disposition under one of the foregoing methods, less any accrued market
discount previously reported as ordinary income as partial distributions in
reduction of the stated redemption price at maturity were received. You will
be required to defer deduction of a portion of the excess of the interest
paid or accrued on indebtedness incurred to purchase or carry a Regular
Certificate over the interest distributable on those Regular Certificates.
The deferred portion of an interest expense in any taxable year generally
will not exceed the accrued market discount on the Regular Certificate for
that year. The deferred interest expense is, in general, allowed as a
deduction not later than the year in which the related market discount income
is recognized or the Regular Certificate is disposed of. As an alternative to
the inclusion of market discount in income on the foregoing basis, you may
elect to include market discount in income currently as it accrues on all
market discount instruments you acquired in that taxable year or thereafter,
in which case the interest deferral rule will not apply. See "--Election to
Treat All Interest Under the Constant Yield Method" below regarding an
alternative manner in which that election may be deemed to be made.
Market discount with respect to a Regular Certificate will be considered
to be zero if the market discount is less than 0.25% of the remaining stated
redemption price at maturity of the Regular Certificate multiplied by the
weighted average maturity of the Regular Certificate (determined as described
above in the third paragraph under "Original Issue Discount") remaining after
the date of purchase. It appears that de minimis market discount would be
reported in a manner similar to de minimis original issue discount. See
"--Original Issue Discount" above. Treasury regulations implementing the
market discount rules have not yet been issued, and therefore investors
should consult their own tax advisors regarding the application of these
rules. You should also consult Revenue Procedure 92-67 concerning the
elections to include market discount in income currently and to accrue market
discount on the basis of the constant yield method.
Premium
A Regular Certificate purchased at a cost greater than its remaining
stated redemption price at maturity generally is considered to be purchased
at a premium. If you hold a Regular Certificate as a "capital asset" within
the meaning of Code Section 1221, you may elect under Code Section 171 to
amortize that premium under the constant yield method. Final regulations with
respect to amortization of bond premium do not by their terms apply to
prepayable obligations such as the Regular Certificates. However, the
Conference
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Committee Report to the Reform Act indicates a Congressional intent that the
same rules that will apply to the accrual of market discount on installment
obligations will also apply to amortizing bond premium under Code Section 171
on installment obligations such as the Regular Certificates, although it is
unclear whether the alternatives to the constant yield method described above
under "Market Discount" are available. Amortizable bond premium will be
treated as an offset to interest income on a Regular Certificate rather than
as a separate deduction item. See "--Election to Treat All Interest Under the
Constant Yield Method" below regarding an alternative manner in which the
Code Section 171 election may be deemed to be made.
Election to Treat All Interest Under the Constant Yield Method
A holder of a debt instrument such as a Regular Certificate may elect to
treat all interest that accrues on the instrument using the constant yield
method, with none of the interest being treated as qualified stated interest.
For purposes of applying the constant yield method to a debt instrument
subject to an election, (1) "interest" includes stated interest, original
issue discount, de minimis original issue discount, market discount and de
minimis market discount, as adjusted by any amortizable bond premium or
acquisition premium and (2) the debt instrument is treated as if the
instrument were issued on the holder's acquisition date in the amount of the
holder's adjusted basis immediately after acquisition. It is unclear whether,
for this purpose, the initial Prepayment Assumption would continue to apply
or if a new prepayment assumption as of the date of the holder's acquisition
would apply. A holder generally may make an election on an instrument by
instrument basis or for a class or group of debt instruments. However, if the
holder makes an election with respect to a debt instrument with amortizable
bond premium or with market discount, the holder is deemed to have made
elections to amortize bond premium or to report market discount income
currently as it accrues under the constant yield method, respectively, for
all debt instruments acquired by the holder in the same taxable year or
thereafter. The election is made on the holder's federal income tax return
for the year in which the debt instrument is acquired and is irrevocable
except with the approval of the IRS. You should consult their own tax
advisors regarding the advisability of making an election.
Sale or Exchange of Regular Certificates
If you sell or exchange a Regular Certificate, you will recognize gain or
loss equal to the difference, if any, between the amount received and its
adjusted basis in the Regular Certificate. The adjusted basis of a Regular
Certificate generally will equal the cost of the Regular Certificate to the
seller, increased by any original issue discount or market discount
previously included in the seller's gross income with respect to the Regular
Certificate and reduced by amounts included in the stated redemption price at
maturity of the Regular Certificate that were previously received by the
seller, by any amortized premium and by previously recognized losses.
Except as described above with respect to market discount, and except as
provided in this paragraph, any gain or loss on the sale or exchange of a
Regular Certificate realized by an investor who holds the Regular Certificate
as a capital asset will be capital gain or loss and will be long-term or
short-term depending on whether the Regular Certificate has been held for the
applicable holding period (described below). That gain will be treated as
ordinary income
1. if a Regular Certificate is held as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount
of interest that would have accrued on the Regular
Certificateholder's net investment in the conversion transaction
at 120% of the appropriate applicable Federal rate under Code
Section 1274(d) in effect at the time the taxpayer entered into
the transaction minus any amount previously treated as ordinary
income with respect to any prior distribution of property that was
held as a part of that transaction,
2. in the case of a non-corporate taxpayer, to the extent the
taxpayer has made an election under Code Section 163(d)(4) to have
net capital gains taxed as investment income at ordinary rates, or
3. to the extent that the gain does not exceed the excess, if any, of
(a) the amount that would have been includible in the gross income
of the holder if its yield on the Regular Certificate were 110% of
the applicable Federal rate as of the date of purchase, over (b)
the amount of income actually includible in the gross income of
that holder with respect to the Regular Certificate.
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In addition, gain or loss recognized from the sale of a Regular
Certificate by certain banks or thrift institutions will be treated as
ordinary income or loss pursuant to Code Section 582(c). Long-term capital
gains of certain non-corporate taxpayers generally are subject to a lower
maximum tax rate (20%) than ordinary income or short-term capital gains of
those taxpayers (39.6%) for property held for more than one year. The maximum
tax rate for corporations is the same with respect to both ordinary income
and capital gains.
Treatment of Losses
Holders of Regular Certificates will be required to report income with
respect to Regular Certificates on the accrual method of accounting, without
giving effect to delays or reductions in distributions attributable to
defaults or delinquencies on the mortgage loans allocable to a particular
class of Regular Certificates, except to the extent it can be established
that those losses are uncollectible. Accordingly, the holder of a Regular
Certificate may have income, or may incur a diminution in cash flow as a
result of a default or delinquency, but may not be able to take a deduction
(subject to the discussion below) for the corresponding loss until a
subsequent taxable year. In this regard, investors are cautioned that while
they may generally cease to accrue interest income if it reasonably appears
that the interest will be uncollectible, the IRS may take the position that
original issue discount must continue to be accrued in spite of its
uncollectibility until the debt instrument is disposed of in a taxable
transaction or becomes worthless in accordance with the rules of Code Section
166.
Under Code Section 166, it appears that holders of Regular Certificates
that are corporations or that otherwise hold the Regular Certificates in
connection with a trade or business should in general be allowed to deduct,
as an ordinary loss, a loss sustained during the taxable year on account of
those Regular Certificates becoming wholly or partially worthless, and that,
in general, holders of Regular Certificates that are not corporations and do
not hold the Regular Certificates in connection with a trade or business will
be allowed to deduct as a short-term capital loss any loss with respect to
principal sustained during the taxable year on account of a portion of any
class or subclass of those Regular Certificates becoming wholly worthless.
Although the matter is not free from doubt, non-corporate holders of Regular
Certificates should be allowed a bad debt deduction at that time as the
principal balance of any class or subclass of those Regular Certificates is
reduced to reflect losses resulting from any liquidated mortgage loans. The
IRS, however, could take the position that non-corporate holders will be
allowed a bad debt deduction to reflect those losses only after all mortgage
loans remaining in the trust fund have been liquidated or that class of
Regular Certificates has been otherwise retired. The IRS could also assert
that losses on the Regular Certificates are deductible based on some other
method that may defer those deductions for all holders, such as reducing
future cash flow for purposes of computing original issue discount. This may
have the effect of creating "negative" original issue discount which would be
deductible only against future positive original issue discount or otherwise
upon termination of the class. You are urged to consult your own tax advisors
regarding the appropriate timing, amount and character of any loss sustained
with respect to the Regular Certificates. While losses attributable to
interest previously reported as income should be deductible as ordinary
losses by both corporate and non-corporate holders, the IRS may take the
position that losses attributable to accrued original issue discount may only
be deducted as short-term capital losses by non-corporate holders not engaged
in a trade or business. Special loss rules are applicable to banks and thrift
institutions, including rules regarding reserves for bad debts. Banks and
thrift institutions are advised to consult their tax advisors regarding the
treatment of losses on Regular Certificates.
TAXATION OF RESIDUAL CERTIFICATES
Taxation of REMIC Income
Generally, the "daily portions" of REMIC taxable income or net loss will
be includible as ordinary income or loss in determining the federal taxable
income of holders of certain classes of Residual Certificates ("Residual
Certificateholders"), and will not be taxed separately to the REMIC Pool. The
daily portions of REMIC taxable income or net loss of a Residual
Certificateholder are determined by allocating the REMIC Pool's taxable
income or net loss for each calendar quarter ratably to each day in that
quarter and by allocating that daily portion among the Residual
Certificateholders in proportion to their respective holdings of certain
classes of Residual Certificates in the REMIC Pool on that day. REMIC taxable
income is
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generally determined in the same manner as the taxable income of an
individual using the accrual method of accounting, except that (1) the
limitations on deductibility of investment interest expense and expenses for
the production of income do not apply, (2) all bad loans will be deductible
as business bad debts and (3) the limitation on the deductibility of interest
and expenses related to tax-exempt income will apply. The REMIC Pool's gross
income includes interest, original issue discount income and market discount
income, if any, on the mortgage loans, reduced by amortization of any premium
on the mortgage loans, plus income from amortization of issue premium, if
any, on the Regular Certificates, plus income on reinvestment of cash flows
and reserve assets, plus any cancellation of indebtedness income upon
allocation of realized losses to the Regular Certificates. The REMIC Pool's
deductions include interest and original issue discount expense on the
Regular Certificates, servicing fees on the mortgage loans, other
administrative expenses of the REMIC Pool and realized losses on the mortgage
loans. The requirement that Residual Certificateholders report their pro rata
share of taxable income or net loss of the REMIC Pool will continue until
there are no certificates of any class of the related series outstanding.
The taxable income recognized by a Residual Certificateholder in any
taxable year will be affected by, among other factors, the relationship
between the timing of recognition of interest and original issue discount or
market discount income or amortization of premium with respect to the
mortgage loans, on the one hand, and the timing of deductions for interest
(including original issue discount) on the Regular Certificates or income
from amortization of issue premium on the Regular Certificates, on the other
hand. In the event that an interest in the mortgage loans is acquired by the
REMIC Pool at a discount, and one or more of those mortgage loans is prepaid,
the Residual Certificateholder may recognize taxable income without being
entitled to receive a corresponding amount of cash because (1) the prepayment
may be used in whole or in part to make distributions in reduction of
principal on the Regular Certificates and (2) the discount on the mortgage
loans which is includible in income may exceed the deduction allowed upon
those distributions on those Regular Certificates on account of any unaccrued
original issue discount relating to those Regular Certificates. When there is
more than one class of Regular Certificates that distribute principal
sequentially, this mismatching of income and deductions is particularly
likely to occur in the early years following issuance of the Regular
Certificates when distributions in reduction of principal are being made in
respect of earlier classes of Regular Certificates to the extent that those
classes are not issued with substantial discount. If taxable income
attributable to that kind of mismatching is realized, in general, losses
would be allowed in later years as distributions on the later classes of
Regular Certificates are made. Taxable income may also be greater in earlier
years than in later years as a result of the fact that interest expense
deductions, expressed as a percentage of the outstanding principal amount of
that series of Regular Certificates, may increase over time as distributions
in reduction of principal are made on the lower yielding classes of Regular
Certificates, whereas to the extent that the REMIC Pool includes fixed rate
mortgage loans, interest income with respect to any given mortgage loan will
remain constant over time as a percentage of the outstanding principal amount
of that loan. Consequently, Residual Certificateholders must have sufficient
other sources of cash to pay any federal, state or local income taxes due as
a result of that mismatching or unrelated deductions against which to offset
that income, subject to the discussion of "excess inclusions" below under
"--Limitations on Offset or Exemption of REMIC Income". The timing of that
mismatching of income and deductions described in this paragraph, if present
with respect to a series of certificates, may have a significant adverse
effect upon the Residual Certificateholder's after-tax rate of return. In
addition, a Residual Certificateholder's taxable income during certain
periods may exceed the income reflected by that Residual Certificateholder
for those periods in accordance with generally accepted accounting
principles. You should consult their own accountants concerning the
accounting treatment of your investment in Residual Certificates.
Basis and Losses
The amount of any net loss of the REMIC Pool that you may take into
account is limited to the adjusted basis of the Residual Certificate as of
the close of the quarter (or time of disposition of the Residual Certificate
if earlier), determined without taking into account the net loss for the
quarter. The initial adjusted basis of a purchaser of a Residual Certificate
is the amount paid for that Residual Certificate. The adjusted basis will be
increased by the amount of taxable income of the REMIC Pool reportable by the
Residual Certificateholder and will be decreased (but not below zero), first,
by a cash distribution from the REMIC
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Pool and, second, by the amount of loss of the REMIC Pool reportable by the
Residual Certificateholder. Any loss that is disallowed on account of this
limitation may be carried over indefinitely with respect to the Residual
Certificateholder as to whom that loss was disallowed and may be used by that
Residual Certificateholder only to offset any income generated by the same
REMIC Pool.
You will not be permitted to amortize directly the cost of your Residual
Certificate as an offset to its share of the taxable income of the related
REMIC Pool. However, that taxable income will not include cash received by
the REMIC Pool that represents a recovery of the REMIC Pool's basis in its
assets. That recovery of basis by the REMIC Pool will have the effect of
amortization of the issue price of the Residual Certificates over their life.
However, in view of the possible acceleration of the income of Residual
Certificateholders described under "--Taxation of REMIC Income" above, the
period of time over which the issue price is effectively amortized may be
longer than the economic life of the Residual Certificates.
A Residual Certificate may have a negative value if the net present value
of anticipated tax liabilities exceeds the present value of anticipated cash
flows. The REMIC Regulations appear to treat the issue price of a residual
interest as zero rather than a negative amount for purposes of determining
the REMIC Pool's basis in its assets. The preamble to the REMIC Regulations
states that the IRS may provide future guidance on the proper tax treatment
of payments made by a transferor of a residual interest to induce the
transferee to acquire the interest, and you should consult your own tax
advisors in this regard.
Further, to the extent that the initial adjusted basis of a Residual
Certificateholder (other than an original holder) in the Residual Certificate
is greater that the corresponding portion of the REMIC Pool's basis in the
mortgage loans, the Residual Certificateholder will not recover a portion of
that basis until termination of the REMIC Pool unless future Treasury
regulations provide for periodic adjustments to the REMIC income otherwise
reportable by that holder. The REMIC Regulations currently in effect do not
so provide. See "--Treatment of Certain Items of REMIC Income and
Expense--Market Discount" below regarding the basis of mortgage loans to the
REMIC Pool and "--Sale or Exchange of a Residual Certificate" below regarding
possible treatment of a loss upon termination of the REMIC Pool as a capital
loss.
Treatment of Certain Items of REMIC Income and Expense
Although we intend to compute REMIC income and expense in accordance with
the Code and applicable regulations, the authorities regarding the
determination of specific items of income and expense are subject to
differing interpretations. We make no representation as to the specific
method that will be used for reporting income with respect to the mortgage
loans and expenses with respect to the Regular Certificates, and different
methods could result in different timing of reporting of taxable income or
net loss to you or differences in capital gain versus ordinary income.
Original Issue Discount and Premium. Generally, the REMIC Pool's
deductions for original issue discount and income from amortization of issue
premium will be determined in the same manner as original issue discount
income on Regular Certificates as described under "--Taxation of Regular
Certificates--Original Issue Discount" and "--Variable Rate Regular
Certificates", without regard to the de minimis rule described in that
section, and "--Premium" above.
Deferred Interest. Any deferred interest that accrues with respect to any
adjustable rate mortgage loans held by the REMIC Pool will constitute income
to the REMIC Pool and will be treated in a manner similar to the deferred
interest that accrues with respect to Regular Certificates as described under
"--Taxation of Regular Certificates--Deferred Interest" above.
Market Discount. The REMIC Pool will have market discount income in
respect of mortgage loans if, in general, their unpaid principal balances
exceed the basis of the REMIC Pool allocable to those mortgage loans. The
REMIC Pool's basis in those mortgage loans is generally the fair market value
of the mortgage loans immediately after the transfer of the mortgage loans to
the REMIC Pool. The REMIC Regulations provide that the basis is equal in the
aggregate to the issue prices of all regular and residual interests in the
REMIC Pool (or the fair market value at the Closing Date, in the case of a
retained class). In respect of mortgage loans that have market discount to
which Code Section 1276 applies, the accrued portion of the market discount
would be recognized currently as an item of ordinary income in a manner
similar to original issue discount. Market discount income generally should
accrue in the manner described under "--Taxation of Regular Certificates
--Market Discount" above.
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Premium. Generally, if the basis of the REMIC Pool in the mortgage loans
exceeds the unpaid principal balances of the mortgage loans, the REMIC Pool
will be considered to have acquired those mortgage loans at a premium equal
to the amount of that excess. As stated above, the REMIC Pool's basis in
mortgage loans is the fair market value of the mortgage loans, based on the
aggregate of the issue prices (or the fair market value of retained classes)
of the regular and residual interests in the REMIC Pool immediately after the
transfer of the mortgage loans to the REMIC Pool. In a manner analogous to
the discussion above under "--Taxation of Regular Certificates--Premium", a
REMIC Pool that holds a mortgage loan as a capital asset under Code Section
1221 may elect under Code Section 171 to amortize premium on whole mortgage
loans or mortgage loans underlying MBS that were originated after September
27, 1985 or MBS that are REMIC regular interests under the constant yield
method. Amortizable bond premium will be treated as an offset to interest
income on the mortgage loans, rather than as a separate deduction item. To
the extent that the mortgagors with respect to the mortgage loans are
individuals, Code Section 171 will not be available for premium on mortgage
loans, including underlying mortgage loans, originated on or prior to
September 27, 1985. Premium with respect to those mortgage loans may be
deductible in accordance with a reasonable method regularly employed by the
related holder. The allocation of the premium pro rata among principal
payments should be considered a reasonable method; however, the IRS may argue
that the premium should be allocated in a different manner, such as
allocating the premium entirely to the final payment of principal.
Limitations on Offset or Exemption of REMIC Income
A portion or all of the REMIC taxable income includible in determining
your federal income tax liability will be subject to special treatment. That
portion, referred to as the "excess inclusion", is equal to the excess of
REMIC taxable income for the calendar quarter allocable to a Residual
Certificate over the daily accruals for that quarterly period of (1) 120% of
the long-term applicable Federal rate that would have applied to the Residual
Certificate if it were a debt instrument, on the Startup Day under Code
Section 1274(d), multiplied by (2) the adjusted issue price of such Residual
Certificate at the beginning of that quarterly period. For this purpose, the
adjusted issue price of a Residual Certificate at the beginning of a quarter
is the issue price of the Residual Certificate, plus the amount of those
daily accruals of REMIC income described in this paragraph for all prior
quarters, decreased by any distributions made with respect to that Residual
Certificate prior to the beginning of that quarterly period. Accordingly, the
portion of the REMIC Pool's taxable income that will be treated as excess
inclusions will be a larger portion of that income as the adjusted issue
price of the Residual Certificates diminishes.
The portion of your REMIC taxable income consisting of the excess
inclusions generally may not be offset by other deductions, including net
operating loss carryforwards, on that Residual Certificateholder's return.
However, net operating loss carryovers are determined without regard to
excess inclusion income. Further, if you are an organization subject to the
tax on unrelated business income imposed by Code Section 511, the excess
inclusions will be treated as unrelated business taxable income of that
Residual Certificateholder for purposes of Code Section 511. In addition,
REMIC taxable income is subject to 30% withholding tax with respect to
certain persons who are not U.S. Persons, as defined below under
"--Tax-Related Restrictions on Transfer of Residual Certificates--Foreign
Investors" below, and that portion attributable to excess inclusions is not
eligible for any reduction in the rate of withholding tax, by treaty or
otherwise. See "--Taxation of Certain Foreign Investors--Residual
Certificates" below. Finally, if a real estate investment trust or a
regulated investment company owns a Residual Certificate, a portion
(allocated under Treasury regulations yet to be issued) of dividends paid by
the real estate investment trust or a regulated investment company could not
be offset by net operating losses of its shareholders, would constitute
unrelated business taxable income for tax-exempt shareholders, and would be
ineligible for reduction of withholding to certain persons who are not U.S.
Persons. The SBJPA of 1996 has eliminated the special rule permitting Section
593 institutions ("thrift institutions") to use net operating losses and
other allowable deductions to offset their excess inclusion income from
Residual Certificates that have "significant value" within the meaning of the
REMIC Regulations, effective for taxable years beginning after December 31,
1995, except with respect to Residual Certificates continuously held by
thrift institutions since November 1, 1995.
In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on your alternative minimum taxable income of a
Residual Certificateholder. First, your alternative minimum taxable income is
determined without regard to the special rule, discussed above, that taxable
income
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cannot be less than excess inclusions. Second, your alternative minimum
taxable income for a taxable year cannot be less than the excess inclusions
for the year. Third, the amount of any alternative minimum tax net operating
loss deduction must be computed without regard to any excess inclusions.
These rules are effective for taxable years beginning after December 31,
1996, unless you elect to have those rules apply only to taxable years
beginning after August 20, 1996.
Tax-Related Restrictions on Transfer of Residual Certificates
Disqualified Organizations. If any legal or beneficial interest in a
Residual Certificate is transferred to a Disqualified Organization (as
defined below), a tax would be imposed in an amount equal to the product of
(1) the present value of the total anticipated excess inclusions with respect
to that Residual Certificate for periods after the transfer and (2) the
highest marginal federal income tax rate applicable to corporations. The
REMIC Regulations provide that the anticipated excess inclusions are based on
actual prepayment experience to the date of the transfer and projected
payments based on the Prepayment Assumption. The present value rate equals
the applicable Federal rate under Code Section 1274(d) as of the date of the
transfer for a term ending with the last calendar quarter in which excess
inclusions are expected to accrue. The tax generally would be imposed on the
transferor of the Residual Certificate, except that where the transfer is
through an agent, including a broker, nominee or other middleman, for a
Disqualified Organization, the tax would instead be imposed on that agent.
However, a transferor of a Residual Certificate would in no event be liable
for the tax with respect to a transfer if the transferee furnishes to the
transferor an affidavit that the transferee is not a Disqualified
Organization and, as of the time of the transfer, the transferor does not
have actual knowledge that the affidavit is false. The tax also may be waived
by the Treasury Department if the Disqualified Organization promptly disposes
of the residual interest and the transferor pays income tax at the highest
corporate rate on the excess inclusions for the period the Residual
Certificate is actually held by the Disqualified Organization.
In addition, if a "Pass-Through Entity" (as defined below) has excess
inclusion income with respect to a Residual Certificate during a taxable year
and a Disqualified Organization is the record holder of an equity interest in
that entity, then a tax is imposed on the entity equal to the product of (1)
the amount of excess inclusions on the Residual Certificate that are
allocable to the interest in the Pass-Through Entity during the period the
interest is held by the Disqualified Organization, and (2) the highest
marginal federal corporate income tax rate. This tax would be deductible from
the ordinary gross income of the Pass-Through Entity for the taxable year.
The Pass-Through Entity would not be liable for the tax if it has received an
affidavit from the record holder that it is not a Disqualified Organization
or stating the holder's taxpayer identification number and, during the period
that person is the record holder of the Residual Certificate, the
Pass-Through Entity does not have actual knowledge that the affidavit is
false.
For taxable years beginning on or after January 1, 1998, if an "electing
large partnership" holds a Residual Certificate, all interests in the
electing large partnership are treated as held by Disqualified Organizations
for purposes of the tax imposed upon a Pass-Through Entity by section 860E(c)
of the Code. An exception to this tax, otherwise available to a Pass-Through
Entity that is furnished certain affidavits by record holders of interests in
the entity and that does not know the affidavits are false, is not available
to an electing partnership.
For these purposes, (1) "Disqualified Organization" means the United
States, any state or one of their political subdivisions, any foreign
government, any international organization, any agency or instrumentality of
any of the foregoing (provided, that the term does not include an
instrumentality if all of its activities are subject to tax and a majority of
its board of directors is not selected by one of those governmental
entities), any cooperative organization furnishing electric energy or
providing telephone service to persons in rural areas as described in Code
Section 1381(a)(2)(C), and any organization (other than a farmers'
cooperative described in Code Section 521) that is exempt from taxation under
the Code unless that organization is subject to the tax on unrelated business
income imposed by Code Section 511, (2) "Pass-Through Entity" means any
regulated investment company, real estate investment trust, common trust
fund, partnership, trust or estate and certain corporations operating on a
cooperative basis. Except as may be provided in Treasury regulations, any
person holding an interest in a Pass-Through Entity as a
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nominee for another will, with respect to that interest, be treated as a
Pass-Through Entity, and (3) an "electing large partnership" means any
partnership having more than 100 members during the preceding tax year (other
than certain service partnerships and commodity pools), which elect to apply
simplified reporting provisions under the Code.
The Pooling Agreement with respect to a series of certificates will
provide that no legal or beneficial interest in a Residual Certificate may be
transferred unless (1) the proposed transferee provides to the transferor and
the trustee an affidavit providing its taxpayer identification number and
stating that the transferee is the beneficial owner of the Residual
Certificate, is not a Disqualified Organization and is not purchasing the
Residual Certificates on behalf of a Disqualified Organization (i.e., as a
broker, nominee or other middleman), and (2) the transferor provides a
statement in writing to the Depositor and the trustee that it has no actual
knowledge that the affidavit is false. Moreover, the Pooling Agreement will
provide that any attempted or purported transfer in violation of these
transfer restrictions will be null and void and will vest no rights in any
purported transferee. Each Residual Certificate with respect to a series will
bear a legend referring to the restrictions on transfer, and each Residual
Certificateholder will be deemed to have agreed, as a condition of ownership
of the Residual Certificates, to any amendments to the related Pooling
Agreement required under the Code or applicable Treasury regulations to
effectuate the foregoing restrictions. Information necessary to compute an
applicable excise tax must be furnished to the IRS and to the requesting
party within 60 days of the request, and the Depositor or the trustee may
charge a fee for computing and providing that information.
Noneconomic Residual Interests. The REMIC Regulations would disregard
certain transfers of Residual Certificates, in which case the transferor
would continue to be treated as the owner of the Residual Certificates and
thus would continue to be subject to tax on its allocable portion of the net
income of the REMIC Pool. Under the REMIC Regulations, a transfer of a
"noneconomic residual interest" (as defined below) to a Residual
Certificateholder (other than a Residual Certificateholder who is not a U.S.
Person, as defined under "--Foreign Investors" below) is disregarded for all
federal income tax purposes if a significant purpose of the transferor is to
impede the assessment or collection of tax. A residual interest in a REMIC,
including a residual interest with a positive value at issuance, is a
"noneconomic residual interest" unless, at the time of the transfer, (1) the
present value of the expected future distributions on the residual interest
at least equals the product of the present value of the anticipated excess
inclusions and the highest corporate income tax rate in effect for the year
in which the transfer occurs, and (2) the transferor reasonably expects that
the transferee will receive distributions from the REMIC at or after the time
at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. The anticipated excess inclusions
and the present value rate are determined in the same manner as set forth
under "--Disqualified Organizations" above. The REMIC Regulations explain
that a significant purpose to impede the assessment or collection of tax
exists if the transferor, at the time of the transfer, either knew or should
have known that the transferee would be unwilling or unable to pay taxes due
on its share of the taxable income of the REMIC. A safe harbor is provided if
(1) the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and found that the
transferee historically had paid its debts as they came due and found no
significant evidence to indicate that the transferee would not continue to
pay its debts as they came due in the future, and (2) the transferee
represents to the transferor that it understands that, as the holder of the
noneconomic residual interest, the transferee may incur tax liabilities in
excess of cash flows generated by the interest and that the transferee
intends to pay taxes associated with holding the residual interest as they
become due. The Pooling Agreement with respect to each series of certificates
will require the transferee of a Residual Certificate to certify to the
matters in the preceding sentence as part of the affidavit described under
the heading "--Disqualified Organizations" above. The transferor must have no
actual knowledge or reason to know that those statements are false.
In addition to the two conditions set forth above for the transferor of a
noneconomic residual interest to be presumed not to have knowledge that the
transferee would be unwilling or unable to pay taxes due on its share of the
taxable income of the REMIC, recently proposed Treasury regulations would add
a third condition for the transferor to be presumed to lack such knowledge.
This third condition would require that the present value of the anticipated
tax liabilities associated with holding the noneconomic residual interest not
exceed the sum of:
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(i) the present value of any consideration given to the transferee to
acquire the interest;
(ii) the present value of the expected future distributions on the
interest; and
(iii) the present value of the anticipated tax savings associated with
holding the interest as the REMIC generates losses.
For purposes of the computations under this third condition, the transferee
is assumed to pay tax at the highest corporate rate of tax specified in
Section 11(b)(1) of the Code (currently 35%). Further, present values
generally are computed using a discount rate equal to the applicable Federal
rate set forth in Section 1274(d) of the Code compounded semiannually.
However, a lower rate may be used if the transferee can demonstrate that it
regularly borrows, in the course of its trade or business, substantial funds
at such lower rate from unrelated third parties. In some situations, to
satisfy this third condition, the transferor of a noneconomic residual
interest may have to pay more consideration to the transferee than would
otherwise be the case if the proposed regulations were not applicable. If
adopted, the proposed regulations would apply to the transfer of a
noneconomic residual interest made on or after February 4, 2000. Prospective
investors should consult their own tax advisors as to the applicability and
effect of the proposed regulations.
Foreign Investors. The REMIC Regulations provide that the transfer of a
Residual Certificate that has "tax avoidance potential" to a "foreign person"
will be disregarded for all federal tax purposes. This rule appears intended
to apply to a transferee who is not a "U.S. Person" (as defined below),
unless the transferee's income is effectively connected with the conduct of a
trade or business within the United States. A Residual Certificate is deemed
to have tax avoidance potential unless, at the time of the transfer, (1) the
future value of expected distributions equals at least 30% of the anticipated
excess inclusions after the transfer, and (2) the transferor reasonably
expects that the transferee will receive sufficient distributions from the
REMIC Pool at or after the time at which the excess inclusions accrue and
prior to the end of the next succeeding taxable year for the accumulated
withholding tax liability to be paid. If the non-U.S. Person transfers the
Residual Certificates back to a U.S. Person, the transfer will be disregarded
and the foreign transferor will continue to be treated as the owner unless
arrangements are made so that the transfer does not have the effect of
allowing the transferor to avoid tax on accrued excess inclusions.
The prospectus supplement relating to a series of certificates may provide
that a Residual Certificate may not be purchased by or transferred to any
person that is not a U.S. Person or may describe the circumstances and
restrictions pursuant to which a transfer may be made. The term "U.S. Person"
means a citizen or resident of the United States, a corporation, or
partnership (except to the extent provided in applicable Treasury
regulations) created or organized in or under the laws of the United States,
any state, or the District of Columbia, or their political subdivisions,
including any entity treated as a corporation or partnership for federal
income tax purposes, an estate that is subject to United States federal
income tax regardless of the source of its income, or a trust if a court
within the United States is able to exercise primary supervision over the
administration of that trust, and one or more such U.S. Persons have the
authority to control all substantial decisions of that trust (or, to the
extent provided in applicable Treasury regulations, certain trusts in
existence on August 20, 1996 which are eligible to elect to be treated as
U.S. Persons).
Sale or Exchange of a Residual Certificate
Upon the sale or exchange of a Residual Certificate, you will recognize
gain or loss equal to the excess, if any, of the amount realized over your
adjusted basis, as described under "--Taxation of Residual
Certificates--Basis and Losses" above, in the Residual Certificate at the
time of the sale or exchange. In addition to reporting the taxable income of
the REMIC Pool, you will have taxable income to the extent that any cash
distribution to it from the REMIC Pool exceeds the adjusted basis on that
distribution date. That income will be treated as gain from the sale or
exchange of the Residual Certificates. It is possible that the termination of
the REMIC Pool may be treated as a sale or exchange of Residual Certificates,
in which case, you have an adjusted basis in the Residual Certificates
remaining when its interest in the REMIC Pool terminates, and if you hold the
Residual Certificate as a capital asset under Code Section 1221, then you
will recognize a capital loss at that time in the amount of the remaining
adjusted basis.
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Any gain on the sale of Residual Certificates will be treated as ordinary
income (1) if you hold the Residual Certificates as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on your net investment in the conversion transaction
at 120% of the appropriate applicable Federal rate in effect at the time the
taxpayer entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior disposition of property that was
held as a part of that transaction or (2) if you are a non-corporate
taxpayer, to the extent that you have made an election under Code Section
163(d)(4) to have net capital gains taxed as investment income at ordinary
income rates. In addition, gain or loss recognized from the sale of a
Residual Certificate by certain banks or thrift institutions will be treated
as ordinary income or loss pursuant to Code Section 582(c).
The Conference Committee Report to the Reform Act provides that, except as
provided in Treasury regulations yet to be issued, the wash sale rules of
Code Section 1091 will apply to dispositions of Residual Certificates where
the seller of those certificates, during the period beginning six months
before the sale or disposition of the Residual Certificate and ending six
months after the sale or disposition, acquires (or enters into any other
transaction that results in the application of Section 1091) any residual
interest in any REMIC or any interest in a "taxable mortgage pool" (such as a
non-REMIC owner trust) that is economically comparable to a Residual
Certificate.
Mark to Market Regulations
The IRS has issued regulations, the "Mark to Market Regulations", under
Code Section 475 relating to the requirement that a securities dealer mark to
market securities held for sale to customers. This mark-to-market requirement
applies to all securities of a dealer, except to the extent that the dealer
has specifically identified a security as held for investment. The Mark to
Market Regulations provide that, for purposes of this mark-to-market
requirement, a Residual Certificate is not treated as a security and thus may
not be marked to market. The Mark to Market Regulations apply to all Residual
Certificates acquired on or after January 4, 1995.
TAXES THAT MAY BE IMPOSED ON THE REMIC POOL
Prohibited Transactions
Income from certain transactions by the REMIC Pool, called prohibited
transactions, will not be part of the calculation of income or loss
includible in the federal income tax returns of Residual Certificateholders,
but rather will be taxed directly to the REMIC Pool at a 100% rate.
Prohibited transactions generally include
1. the disposition of a qualified mortgage other than for (a)
substitution within two years of the Startup Day for a defective
(including a defaulted) obligation (or repurchase in lieu of
substitution of a defective (including a defaulted) obligation at
any time) or for any qualified mortgage within three months of the
Startup Day, (b) foreclosure, default or imminent default of a
qualified mortgage, (c) bankruptcy or insolvency of the REMIC Pool
or (d) a qualified (complete) liquidation,
2. the receipt of income from assets that are not the type of
mortgages or investments that the REMIC Pool is permitted to hold,
3. the receipt of compensation for services or
4. the receipt of gain from disposition of cash flow investments
other than pursuant to a qualified liquidation.
Notwithstanding (1) and (4) it is not a prohibited transaction to sell
REMIC Pool property to prevent a default on Regular Certificates as a result
of a default on qualified mortgages or to facilitate a clean-up call,
generally, an optional termination to save administrative costs when no more
than a small percentage of the certificates is outstanding. The REMIC
Regulations indicate that the modification of a mortgage loan generally will
not be treated as a disposition if it is occasioned by a default or
reasonably foreseeable default, an assumption of the mortgage loan, the
waiver of a due-on-sale or due-on-encumbrance clause or the conversion of an
interest rate by a mortgagor pursuant to the terms of a convertible
adjustable rate mortgage loan.
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Contributions to the REMIC Pool After the Startup Day
In general, the REMIC Pool will be subject to a tax at a 100% rate on the
value of any property contributed to the REMIC Pool after the Startup Day.
Exceptions are provided for cash contributions to the REMIC Pool (1) during
the three months following the Startup Day, (2) made to a qualified reserve
fund by a Residual Certificateholder, (3) in the nature of a guarantee, (4)
made to facilitate a qualified liquidation or clean-up call and (5) as
otherwise permitted in Treasury regulations yet to be issued.
Net Income from Foreclosure Property
The REMIC Pool will be subject to federal income tax at the highest
corporate rate on "net income from foreclosure property", determined by
reference to the rules applicable to real estate investment trusts.
Generally, property acquired by deed in lieu of foreclosure would be treated
as "foreclosure property" for a period ending with the third calendar year
following the year of acquisition of that property, with a possible
extension. Net income from foreclosure property generally means gain from the
sale of a foreclosure property that is inventory property and gross income
from foreclosure property other than qualifying rents and other qualifying
income for a real estate investment trust.
It is not anticipated that the REMIC Pool will receive income or
contributions subject to tax under the preceding three paragraphs, except as
described in the applicable prospectus supplement with respect to net income
from foreclosure property on a commercial or multifamily residential property
that secured a mortgage loan. In addition, unless otherwise disclosed in the
applicable prospectus supplement, it is not anticipated that any material
state income or franchise tax will be imposed on a REMIC Pool.
LIQUIDATION OF THE REMIC POOL
If a REMIC Pool adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC Pool's final tax return a date on which that adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on the date of the adoption of the plan of liquidation, the REMIC
Pool will not be subject to the prohibited transaction rules on the sale of
its assets, provided that the REMIC Pool credits or distributes in
liquidation all of the sale proceeds plus its cash (other than amounts
retained to meet claims) to holders of Regular Certificates and Residual
Certificateholders within the 90-day period.
ADMINISTRATIVE MATTERS
The REMIC Pool will be required to maintain its books on a calendar year
basis and to file federal income tax returns for federal income tax purposes
in a manner similar to a partnership. The form for that income tax return is
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return.
The trustee will be required to sign the REMIC Pool's returns. Treasury
regulations provide that, except where there is a single Residual
Certificateholder for an entire taxable year, the REMIC Pool will be subject
to the procedural and administrative rules of the Code applicable to
partnerships, including the determination by the IRS of any adjustments to,
among other things, items of REMIC income, gain, loss, deduction or credit in
a unified administrative proceeding. The Residual Certificateholder owning
the largest percentage interest in the Residual Certificates will be
obligated to act as "tax matters person", as defined in applicable Treasury
regulations, with respect to the REMIC Pool. Each Residual Certificateholder
will be deemed, by acceptance of the Residual Certificates, to have agreed
(1) to the appointment of the tax matters person as provided in the preceding
sentence and (2) to the irrevocable designation of the master servicer as
agent for performing the functions of the tax matters person.
LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES
An investor who is an individual, estate or trust will be subject to
limitation with respect to certain itemized deductions described in Code
Section 67, to the extent that those itemized deductions, in the aggregate,
do not exceed 2% of the investor's adjusted gross income. In addition, Code
Section 68 provides that itemized deductions otherwise allowable for a
taxable year of an individual taxpayer will be reduced by the lesser of (1)
3% of the excess, if any, of adjusted gross income over $128,950 for 2000
($64,475 in the
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case of a married individual filing a separate return) (subject to annual
adjustments for inflation) or (2) 80% of the amount of itemized deductions
otherwise allowable for that year. In the case of a REMIC Pool, those
deductions may include deductions under Code Section 212 for the servicing
fee and all administrative and other expenses relating to the REMIC Pool, or
any similar expenses allocated to the REMIC Pool with respect to a regular
interest it holds in another REMIC. Those investors who hold REMIC
Certificates either directly or indirectly through certain pass-through
entities may have their pro rata share of those expenses allocated to them as
additional gross income, but may be subject to those limitation on
deductions. In addition, those expenses are not deductible at all for
purposes of computing the alternative minimum tax, and may cause those
investors to be subject to significant additional tax liability. Temporary
Treasury regulations provide that the additional gross income and
corresponding amount of expenses generally are to be allocated entirely to
the holders of Residual Certificates in the case of a REMIC Pool that would
not qualify as a fixed investment trust in the absence of a REMIC election.
However, that additional gross income and limitation on deductions will apply
to the allocable portion of those expenses to holders of Regular
Certificates, as well as holders of Residual Certificates, where those
Regular Certificates are issued in a manner that is similar to pass-through
certificates in a fixed investment trust. In general, that allocable portion
will be determined based on the ratio that a REMIC Certificateholder's
income, determined on a daily basis, bears to the income of all holders of
Regular Certificates and Residual Certificates with respect to a REMIC Pool.
As a result, individuals, estates or trusts holding REMIC Certificates
(either directly or indirectly through a grantor trust, partnership, S
corporation, REMIC, or certain other pass-through entities described in the
foregoing temporary Treasury regulations) may have taxable income in excess
of the interest income at the pass-through rate on Regular Certificates that
are issued in a single class or otherwise consistently with fixed investment
trust status or in excess of cash distributions for the related period on
Residual Certificates. Unless otherwise indicated in the applicable
prospectus supplement, all those expenses will be allocable to the Residual
Certificates.
TAXATION OF CERTAIN FOREIGN INVESTORS
Regular Certificates
Interest, including original issue discount, distributable to Regular
Certificateholders who are non-resident aliens, foreign corporations, or
other Non-U.S. Persons (as defined below), will be considered "portfolio
interest" and, therefore, generally will not be subject to 30% United States
withholding tax, provided that the Non-U.S. Person (1) is not a "10-percent
shareholder" within the meaning of Code Section 871(h)(3)(B) or a controlled
foreign corporation described in Code Section 881(c)(3)(C) and (2) provides
the trustee, or the person who would otherwise be required to withhold tax
from those distributions under Code Section 1441 or 1442, with an appropriate
statement, signed under penalties of perjury, identifying the beneficial
owner and stating, among other things, that the beneficial owner of the
Regular Certificate is a Non-U.S. Person. If that statement, or any other
required statement, is not provided, 30% withholding will apply unless
reduced or eliminated pursuant to an applicable tax treaty or unless the
interest on the Regular Certificate is effectively connected with the conduct
of a trade or business within the United States by the Non-U.S. Person. In
the latter case, the Non-U.S. Person will be subject to United States federal
income tax at regular rates. Prepayment Premiums distributable to Regular
Certificateholders who are Non-U.S. Persons may be subject to 30% United
States withholding tax. Investors who are Non-U.S. Persons should consult
their own tax advisors regarding the specific tax consequences to them of
owning a Regular Certificate. The term "Non-U.S. Person" means any person who
is not a U.S. Person.
The IRS has issued final regulations (the "New Regulations") which provide
new procedures for satisfying the beneficial ownership certification
requirement described above. The New Regulations are effective January 1,
2001. A new series of withholding certificates must be used after December
31, 2000 or the due date of expiration of the certificate under the rules as
currently in effect. The New Regulations require, in the case of Regular
Certificates held by a foreign partnership, that (1) the certification
described above be provided by the partners rather than by the foreign
partnership and (2) the partnership provide certain information, including a
United States taxpayer identification number in certain circumstances. A
look-through rule would apply in the case of tiered partnerships. Non-U.S.
Persons should consult their own tax advisors concerning the application of
the certification requirements in the New Regulations.
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Residual Certificates
The Conference Committee Report to the Reform Act indicates that amounts
paid to Residual Certificateholders who are Non-U.S. Persons are treated as
interest for purposes of the 30% (or lower treaty rate) United States
withholding tax. Treasury regulations provide that amounts distributed to
Residual Certificateholders may qualify as "portfolio interest", subject to
the conditions described in "Regular Certificates" above, but only to the
extent that (1) the mortgage loans (including mortgage loans underlying MBS)
were issued after July 18, 1984 and (2) the trust fund or segregated pool of
assets in the trust fund (as to which a separate REMIC election will be
made), to which the Residual Certificate relates, consists of obligations
issued in "registered form" within the meaning of Code Section 163(f)(1).
Generally, whole mortgage loans will not be, but MBS and regular interests in
another REMIC Pool will be, considered obligations issued in registered form.
Furthermore, a Residual Certificateholder will not be entitled to any
exemption from the 30% withholding tax (or lower treaty rate) to the extent
of that portion of REMIC taxable income that constitutes an "excess
inclusion". See "--Taxation of Residual Certificates--Limitations on Offset
or Exemption of REMIC Income" above. If the amounts paid to Residual
Certificateholders who are Non-U.S. Persons are effectively connected with
the conduct of a trade or business within the United States by Non-U.S.
Persons, 30% (or lower treaty rate) withholding will not apply. Instead, the
amounts paid to Non-U.S. Persons will be subject to United States federal
income tax at regular rates. If 30% (or lower treaty rate) withholding is
applicable, those amounts generally will be taken into account for purposes
of withholding only when paid or otherwise distributed (or when the Residual
Certificate is disposed of) under rules similar to withholding upon
disposition of debt instruments that have original issue discount. See
"--Tax-Related Restrictions on Transfer of Residual Certificates--Foreign
Investors" above concerning the disregard of certain transfers having "tax
avoidance potential". Investors who are Non-U.S. Persons should consult their
own tax advisors regarding the specific tax consequences to them of owning
Residual Certificates.
BACKUP WITHHOLDING
Distributions made on the Regular Certificates, and proceeds from the sale
of the Regular Certificates to or through certain brokers, may be subject to
a "backup" withholding tax under Code Section 3406 of 31% on "reportable
payments" (including interest distributions, original issue discount, and,
under certain circumstances, principal distributions) unless the Regular
Certificateholder complies with certain reporting and/or certification
procedures, including the provision of its taxpayer identification number to
the trustee, its agent or the broker who effected the sale of the Regular
Certificate, or that certificateholder is otherwise an exempt recipient under
applicable provisions of the Code. Any amounts to be withheld from
distribution on the Regular Certificates would be refunded by the IRS or
allowed as a credit against the Regular Certificateholder's federal income
tax liability. The New Regulations change certain of the rules relating to
certain presumptions currently available relating to information reporting
and backup withholding. Non-U.S. Persons are urged to contact their own tax
advisors regarding the application to them of backup and withholding and
information reporting.
REPORTING REQUIREMENTS
Reports of accrued interest, original issue discount and information
necessary to compute the accrual of any market discount on the Regular
Certificates will be made annually to the IRS and to individuals, estates,
non-exempt and non-charitable trusts, and partnerships who are either holders
of record of Regular Certificates or beneficial owners who own Regular
Certificates through a broker or middleman as nominee. All brokers, nominees
and all other non-exempt holders of record of Regular Certificates (including
corporations, non-calendar year taxpayers, securities or commodities dealers,
real estate investment trusts, investment companies, common trust funds,
thrift institutions and charitable trusts) may request that information for
any calendar quarter by telephone or in writing by contacting the person
designated in IRS Publication 938 with respect to a particular series of
Regular Certificates. Holders through nominees must request that information
from the nominee.
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The IRS' Form 1066 has an accompanying Schedule Q, Quarterly Notice to
Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation.
Treasury regulations require that Schedule Q be furnished by the REMIC Pool
to each Residual Certificateholder by the end of the month following the
close of each calendar quarter (41 days after the end of a quarter under
proposed Treasury regulations) in which the REMIC Pool is in existence.
Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual
Certificateholders, furnished annually, if applicable, to holders of Regular
Certificates, and filed annually with the IRS concerning Code Section 67
expenses, see "--Limitations on Deduction of Certain Expenses" above,
allocable to those holders. Furthermore, under those regulations, information
must be furnished quarterly to Residual Certificateholders, furnished
annually to holders of Regular Certificates, and filed annually with the IRS
concerning the percentage of the REMIC Pool's assets meeting the qualified
asset tests described under "--Status of REMIC Certificates" above.
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FEDERAL INCOME TAX CONSEQUENCES FOR CERTIFICATES AS
TO WHICH NO REMIC ELECTION IS MADE
STANDARD CERTIFICATES
General
In the event that no election is made to treat a trust fund (or a
segregated pool of assets in the trust fund) with respect to a series of
certificates that are not designated as "Stripped Certificates", as described
below, as a REMIC (certificates of that kind of series are referred to as
"Standard Certificates"), in the opinion of Cadwalader, Wickersham & Taft the
trust fund will be classified as a grantor trust under subpart E, Part 1 of
subchapter J of the Code and not as an association taxable as a corporation
or a "taxable mortgage pool" within the meaning of Code Section 7701(i).
Where there is no fixed retained yield with respect to the mortgage loans
underlying the Standard Certificates, the holder of a Standard Certificate (a
"Standard Certificateholder") in that series will be treated as the owner of
a pro rata undivided interest in the ordinary income and corpus portions of
the trust fund represented by its Standard Certificate and will be considered
the beneficial owner of a pro rata undivided interest in each of the mortgage
loans, subject to the discussion under "--Recharacterization of Servicing
Fees" below. Accordingly, the holder of a Standard Certificate of a
particular series will be required to report on its federal income tax return
its pro rata share of the entire income from the mortgage loans represented
by its Standard Certificate, including interest at the coupon rate on those
mortgage loans, original issue discount (if any), prepayment fees, assumption
fees, and late payment charges received by the master servicer, in accordance
with that Standard Certificateholder's method of accounting. A Standard
Certificateholder generally will be able to deduct its share of the servicing
fee and all administrative and other expenses of the trust fund in accordance
with its method of accounting, provided that those amounts are reasonable
compensation for services rendered to that trust fund. However, investors who
are individuals, estates or trusts who own Standard Certificates, either
directly or indirectly through certain pass-through entities, will be subject
to limitation with respect to certain itemized deductions described in Code
Section 67, including deductions under Code Section 212 for the servicing fee
and all the administrative and other expenses of the trust fund, to the
extent that those deductions, in the aggregate, do not exceed two percent of
an investor's adjusted gross income. In addition, Code Section 68 provides
that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of (1) 3% of the excess, if
any, of adjusted gross income over $128,950 for 2000 ($64,475 in the case of
a married individual filing a separate return) (subject to annual adjustments
for inflation), or (2) 80% of the amount of itemized deductions otherwise
allowable for that year. As a result, those investors holding Standard
Certificates, directly or indirectly through a pass-through entity, may have
aggregate taxable income in excess of the aggregate amount of cash received
on those Standard Certificates with respect to interest at the pass-through
rate on those Standard Certificates. In addition, those expenses are not
deductible at all for purposes of computing the alternative minimum tax, and
may cause the investors to be subject to significant additional tax
liability. Moreover, where there is fixed retained yield with respect to the
mortgage loans underlying a series of Standard Certificates or where the
servicing fee is in excess of reasonable servicing compensation, the
transaction will be subject to the application of the "stripped bond" and
"stripped coupon" rules of the Code, as described under "--Stripped
Certificates" and "--Recharacterization of Servicing Fees", below.
Tax Status
In the opinion of Cadwalader, Wickersham & Taft, Standard Certificates
will have the following status for federal income tax purposes:
1. Standard Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) will
be considered to represent "loans . . . secured by an interest in
real property which is . . . residential real property" within the
meaning of Code Section 7701(a)(19)(C)(v), provided that the real
property securing the mortgage loans represented by that Standard
Certificate is of the type described in that section of the Code.
2. Standard Certificate owned by a real estate investment trust will
be considered to represent "real estate assets" within the meaning
of Code Section 856(c)(4)(A) to the extent that the assets of the
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related trust fund consist of qualified assets, and interest
income on those assets will be considered "interest on obligations
secured by mortgages on real property" to such extent within the
meaning of Code Section 856(c)(3)(B).
3. Standard Certificate owned by a REMIC will be considered to
represent an "obligation . . . which is principally secured by an
interest in real property" within the meaning of Code Section
860G(a)(3)(A) to the extent that the assets of the related trust
fund consist of "qualified mortgages" within the meaning of Code
Section 860G(a)(3).
4. Standard Certificate owned by a financial asset securitization
investment trust will be considered to represent "permitted
assets" within the meaning of Code Section 860(L)(c).
Premium and Discount
Standard Certificateholders are advised to consult with their tax advisors
as to the federal income tax treatment of premium and discount arising either
upon initial acquisition of Standard Certificates or thereafter.
Premium. The treatment of premium incurred upon the purchase of a Standard
Certificate will be determined generally as described under "--Federal Income
Tax Consequences for REMIC Certificates--Taxation of Residual Certificates--
Treatment of Certain Items of REMIC Income and Expense--Premium" above.
Original Issue Discount. The original issue discount rules will be
applicable to a Standard Certificateholder's interest in those mortgage loans
as to which the conditions for the application of those sections are met.
Rules regarding periodic inclusion of original issue discount income are
applicable to mortgages of corporations originated after May 27, 1969,
mortgages of noncorporate mortgagors (other than individuals) originated
after July 1, 1982, and mortgages of individuals originated after March 2,
1984. Under the OID Regulations, the original issue discount could arise by
the charging of points by the originator of the mortgages in an amount
greater than a statutory de minimis exception, including a payment of points
currently deductible by the borrower under applicable Code provisions or,
under certain circumstances, by the presence of "teaser rates" on the
mortgage loans.
Original issue discount must generally be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest, in advance of the cash attributable to that
income. Unless indicated otherwise in the applicable prospectus supplement,
no prepayment assumption will be assumed for purposes of that accrual.
However, Code Section 1272 provides for a reduction in the amount of original
issue discount includible in the income of a holder of an obligation that
acquires the obligation after its initial issuance at a price greater than
the sum of the original issue price and the previously accrued original issue
discount, less prior payments of principal. Accordingly, if the mortgage
loans acquired by a Standard Certificateholder are purchased at a price equal
to the then unpaid principal amount of the mortgage loans, no original issue
discount attributable to the difference between the issue price and the
original principal amount of the mortgage loans (i.e., points) will be
includible by that holder.
Market Discount. Standard Certificateholders also will be subject to the
market discount rules to the extent that the conditions for application of
those sections are met. Market discount on the mortgage loans will be
determined and will be reported as ordinary income generally in the manner
described under "--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Market Discount" above,
except that the ratable accrual methods described there will not apply and it
is unclear whether a Prepayment Assumption would apply. Rather, the holder
will accrue market discount pro rata over the life of the mortgage loans,
unless the constant yield method is elected. Unless indicated otherwise in
the applicable prospectus supplement, no prepayment assumption will be
assumed for purposes of that accrual.
Recharacterization of Servicing Fees
If the servicing fee paid to the master servicer were deemed to exceed
reasonable servicing compensation, the amount of that excess would represent
neither income nor a deduction to
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certificateholders. In this regard, there are no authoritative guidelines for
federal income tax purposes as to either the maximum amount of servicing
compensation that may be considered reasonable in the context of this or
similar transactions or whether, in the case of the Standard Certificate, the
reasonableness of servicing compensation should be determined on a weighted
average or loan-by-loan basis. If a loan-by-loan basis is appropriate, the
likelihood that the amount would exceed reasonable servicing compensation as
to some of the mortgage loans would be increased. IRS guidance indicates that
a servicing fee in excess of reasonable compensation ("excess servicing")
will cause the mortgage loans to be treated under the "stripped bond" rules.
That guidance provides safe harbors for servicing deemed to be reasonable and
requires taxpayers to demonstrate that the value of servicing fees in excess
of those amounts is not greater than the value of the services provided.
Accordingly, if the IRS' approach is upheld, a servicer who receives a
servicing fee in excess of those amounts would be viewed as retaining an
ownership interest in a portion of the interest payments on the mortgage
loans. Under the rules of Code Section 1286, the separation of ownership of
the right to receive some or all of the interest payments on an obligation
from the right to receive some or all of the principal payments on the
obligation would result in treatment of those mortgage loans as "stripped
coupons" and "stripped bonds". Subject to the de minimis rule discussed under
"--Stripped Certificates" below, each stripped bond or stripped coupon could
be considered for this purpose as a non-interest bearing obligation issued on
the date of issue of the Standard Certificates, and the original issue
discount rules of the Code would apply to that holder. While Standard
Certificateholders would still be treated as owners of beneficial interests
in a grantor trust for federal income tax purposes, the corpus of the trust
could be viewed as excluding the portion of the mortgage loans the ownership
of which is attributed to the master servicer, or as including that portion
as a second class of equitable interest. Applicable Treasury regulations
treat that arrangement as a fixed investment trust, since the multiple
classes of trust interests should be treated as merely facilitating direct
investments in the trust assets and the existence of multiple classes of
ownership interests is incidental to that purpose. In general, a
recharacterization should not have any significant effect upon the timing or
amount of income reported by a Standard Certificateholder, except that the
income reported by a cash method holder may be slightly accelerated. See
"--Stripped Certificates" below for a further description of the federal
income tax treatment of stripped bonds and stripped coupons.
Sale or Exchange of Standard Certificates
Upon sale or exchange of a Standard Certificate, a Standard
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its aggregate adjusted basis in the
mortgage loans and the other assets represented by the Standard Certificate.
In general, the aggregate adjusted basis will equal the Standard
Certificateholder's cost for the Standard Certificate, increased by the
amount of any income previously reported with respect to the Standard
Certificate and decreased by the amount of any losses previously reported
with respect to the Standard Certificate and the amount of any distributions
received on those Standard Certificates. Except as provided above with
respect to market discount on any mortgage loans, and except for certain
financial institutions subject to the provisions of Code Section 582(c), that
gain or loss would be capital gain or loss if the Standard Certificate was
held as a capital asset. However, gain on the sale of a Standard Certificate
will be treated as ordinary income (1) if a Standard Certificate is held as
part of a "conversion transaction" as defined in Code Section 1258(c), up to
the amount of interest that would have accrued on the Standard
Certificateholder's net investment in the conversion transaction at 120% of
the appropriate applicable Federal rate in effect at the time the taxpayer
entered into the transaction minus any amount previously treated as ordinary
income with respect to any prior disposition of property that was held as a
part of that transaction or (2) in the case of a non-corporate taxpayer, to
the extent the taxpayer has made an election under Code Section 163(d)(4) to
have net capital gains taxed as investment income at ordinary income rates.
Long-term capital gains of certain non-corporate taxpayers generally are
subject to a lower maximum tax rate (20%) than ordinary income or short-term
capital gains of those taxpayers (39.6%) for property held for more than one
year. The maximum tax rate for corporations is the same with respect to both
ordinary income and capital gains.
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STRIPPED CERTIFICATES
General
Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the principal payments on an obligation from ownership
of the right to receive some or all of the interest payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of this discussion,
certificates that are subject to those rules will be referred to as "Stripped
Certificates". Stripped Certificates include interest-only certificates
entitled to distributions of interest, with disproportionately small, nominal
or no distributions of principal and principal-only certificates entitled to
distributions of principal, with disproportionately small, nominal or no
distributions of interest as to which no REMIC election is made.
The certificates will be subject to those rules if (1) we or any of our
affiliates retain, for our own account or for purposes of resale, in the form
of fixed retained yield or otherwise, an ownership interest in a portion of
the payments on the mortgage loans, (2) the master servicer is treated as
having an ownership interest in the mortgage loans to the extent it is paid,
or retains, servicing compensation in an amount greater than reasonable
consideration for servicing the mortgage loans (see "--Standard
Certificates--Recharacterization of Servicing Fees" above) and (3)
certificates are issued in two or more classes or subclasses representing the
right to non-pro-rata percentages of the interest and principal payments on
the mortgage loans.
In general, a holder of a Stripped Certificate will be considered to own
"stripped bonds" with respect to its pro rata share of all or a portion of
the principal payments on each mortgage loan and/or "stripped coupons" with
respect to its pro rata share of all or a portion of the interest payments on
each mortgage loan, including the Stripped Certificate's allocable share of
the servicing fees paid to the master servicer, to the extent that those fees
represent reasonable compensation for services rendered. See discussion under
"--Standard Certificates--Recharacterization of Servicing Fees" above.
Although not free from doubt, for purposes of reporting to Stripped
Certificateholders, the servicing fees will be allocated to the Stripped
Certificates in proportion to the respective entitlements to distributions of
each class, or subclass, of Stripped Certificates for the related period or
periods. The holder of a Stripped Certificate generally will be entitled to a
deduction each year in respect of the servicing fees, as described under
"--Standard Certificates--General" above, subject to the limitation described
there.
Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued at an original issue discount on the date that the stripped
interest is purchased. Although the treatment of Stripped Certificates for
federal income tax purposes is not clear in certain respects at this time,
particularly where the Stripped Certificates are issued with respect to a
Mortgage Pool containing variable-rate mortgage loans, in the opinion of
Cadwalader, Wickersham & Taft (1) the trust fund will be treated as a grantor
trust under subpart E, Part 1 of subchapter J of the Code and not as an
association taxable as a corporation or a "taxable mortgage pool" within the
meaning of Code Section 7701(i), and (2) each Stripped Certificate should be
treated as a single installment obligation for purposes of calculating
original issue discount and gain or loss on disposition. This treatment is
based on the interrelationship of Code Section 1286, Code Sections 1272
through 1275, and the OID Regulations. While under Code Section 1286
computations with respect to Stripped Certificates arguably should be made in
one of the ways described under "--Taxation of Stripped Certificates--Possible
Alternative Characterizations" below, the OID Regulations state, in general,
that two or more debt instruments issued by a single issuer to a single investor
in a single transaction should be treated as a single debt instrument for
original issue discount purposes. The Pooling Agreement requires that the
trustee make and report all computations described below using this aggregate
approach, unless substantial legal authority requires otherwise.
Furthermore, Treasury regulations issued December 28, 1992 provide for the
treatment of a Stripped Certificate as a single debt instrument issued on the
date it is purchased for purposes of calculating any original issue discount.
In addition, under these regulations, a Stripped Certificate that represents
a right to payments of both interest and principal may be viewed either as
issued with original issue discount or market discount, as described below,
at a de minimis original issue discount, or, presumably, at a premium. This
treatment suggests that the interest component of that Stripped Certificate
would be treated as qualified stated interest under the OID Regulations.
Further, these final regulations provide that the
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purchaser of a Stripped Certificate will be required to account for any
discount as market discount rather than original issue discount if either (1)
the initial discount with respect to the Stripped Certificate was treated as
zero under the de minimis rule, or (2) no more than 100 basis points in
excess of reasonable servicing is stripped off the related mortgage loans.
This market discount would be reportable as described under "--Federal Income
Tax Consequences for REMIC Certificates--Taxation of Regular Certificates--
Market Discount" above, without regard to the de minimis rule there, assuming
that a prepayment assumption is employed in that computation.
Status of Stripped Certificates
No specific legal authority exists as to whether the character of the
Stripped Certificates, for federal income tax purposes, will be the same as
that of the mortgage loans. Although the issue is not free from doubt, in the
opinion of Cadwalader, Wickersham & Taft Stripped Certificates owned by
applicable holders should be considered to represent "real estate assets"
within the meaning of Code Section 856(c)(4)(A), "obligation[s] principally
secured by an interest in real property" within the meaning of Code Section
860G(a)(3)(A), and "loans . . . secured by an interest in real property which
is . . . residential real property" within the meaning of Code Section
7701(a)(19)(C)(v), and interest (including original issue discount) income
attributable to Stripped Certificates should be considered to represent
"interest on obligations secured by mortgages on real property" within the
meaning of Code Section 856(c)(3)(B), provided that in each case the mortgage
loans and interest on those mortgage loans qualify for that treatment.
Taxation of Stripped Certificates
Original Issue Discount. Except as described under "--General" above, each
Stripped Certificate will be considered to have been issued at an original
issue discount for federal income tax purposes. Original issue discount with
respect to a Stripped Certificate must be included in ordinary income as it
accrues, in accordance with a constant interest method that takes into
account the compounding of interest, which may be prior to the receipt of the
cash attributable to that income. Based in part on the OID Regulations and
the amendments to the original issue discount sections of the Code made by
the Reform Act, the amount of original issue discount required to be included
in the income of a holder of a Stripped Certificate (referred to in this
discussion as a "Stripped Certificateholder") in any taxable year likely will
be computed generally as described under "--Federal Income Tax Consequences
for REMIC Certificates--Taxation of Regular Certificates--Original Issue
Discount" and "--Variable Rate Regular Certificates" above. However, with the
apparent exception of a Stripped Certificate qualifying as a market discount
obligation, as described under "--General" above, the issue price of a
Stripped Certificate will be the purchase price paid by each holder of the
Stripped Certificate, and the stated redemption price at maturity will
include the aggregate amount of the payments, other than qualified stated
interest to be made on the Stripped Certificate to that Stripped
Certificateholder, presumably under the Prepayment Assumption.
If the mortgage loans prepay at a rate either faster or slower than that
under the Prepayment Assumption, a Stripped Certificateholder's recognition
of original issue discount will be either accelerated or decelerated and the
amount of the original issue discount will be either increased or decreased
depending on the relative interests in principal and interest on each
mortgage loan represented by that Stripped Certificateholder's Stripped
Certificate. While the matter is not free from doubt, the holder of a
Stripped Certificate should be entitled in the year that it becomes certain,
assuming no further prepayments, that the holder will not recover a portion
of its adjusted basis in that Stripped Certificate to recognize an ordinary
loss equal to that portion of unrecoverable basis.
As an alternative to the method described above, the fact that some or all
of the interest payments with respect to the Stripped Certificates will not
be made if the mortgage loans are prepaid could lead to the interpretation
that the interest payments are "contingent" within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of
contingent interest, are by their terms not applicable to prepayable
securities such as the Stripped Certificates. However, if final regulations
dealing with contingent interest with respect to the Stripped Certificates
apply the same principles as the OID Regulations, those regulations may lead
to different timing of income inclusion that would be the case under the OID
Regulations. Furthermore, application of those principles could lead to the
characterization of gain on the sale of contingent interest Stripped
Certificates as ordinary income. Investors should consult their tax advisors
regarding the appropriate tax treatment of Stripped Certificates.
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Sale or Exchange of Stripped Certificates. Sale or exchange of a Stripped
Certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in that Stripped Certificate, as described
under "--Federal Income Tax Consequences for REMIC Certificates--Taxation of
Regular Certificates--Sale or Exchange of Regular Certificates" above. To the
extent that a subsequent purchaser's purchase price is exceeded by the
remaining payments on the Stripped Certificates, that subsequent purchaser
will be required for federal income tax purposes to accrue and report that
excess as if it were original issue discount in the manner described above.
It is not clear for this purpose whether the assumed prepayment rate that is
to be used in the case of a Stripped Certificateholder other than an original
Stripped Certificateholder should be the Prepayment Assumption or a new rate
based on the circumstances at the date of subsequent purchase.
Purchase of More Than One Class of Stripped Certificates. Where an
investor purchases more than one class of Stripped Certificates, it is
currently unclear whether for federal income tax purposes those classes of
Stripped Certificates should be treated separately or aggregated for purposes
of the rules described above.
Possible Alternative Characterizations. The characterizations of the
Stripped Certificates discussed above are not the only possible
interpretations of the applicable Code provisions. For example, the Stripped
Certificateholder may be treated as the owner of
1. one installment obligation consisting of that Stripped
Certificate's pro rata share of the payments attributable to
principal on each mortgage loan and a second installment
obligation consisting of that Stripped Certificate's pro rata
share of the payments attributable to interest on each mortgage
loan,
2. as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each mortgage loan or
3. a separate installment obligation for each mortgage loan,
representing the Stripped Certificate's pro rata share of payments
of principal and/or interest to be made with respect thereto.
Alternatively, the holder of one or more classes of Stripped Certificates
may be treated as the owner of a pro rata fractional undivided interest in
each mortgage loan to the extent that the Stripped Certificate, or classes of
Stripped Certificates in the aggregate, represent the same pro rata portion
of principal and interest on that mortgage loan, and a stripped bond or
stripped coupon (as the case may be), treated as an installment obligation or
contingent payment obligation, as to the remainder. Final regulations issued
on December 28, 1992 regarding original issue discount on stripped
obligations make the foregoing interpretations less likely to be applicable.
The preamble to those regulations states that they are premised on the
assumption that an aggregation approach is appropriate for determining
whether original issue discount on a stripped bond or stripped coupon is de
minimis, and solicits comments on appropriate rules for aggregating stripped
bonds and stripped coupons under Code Section 1286.
Because of these possible varying characterizations of Stripped
Certificates and the resultant differing treatment of income recognition,
Stripped Certificateholders are urged to consult their own tax advisors
regarding the proper treatment of Stripped Certificates for federal income
tax purposes.
REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The trustee will furnish, within a reasonable time after the end of each
calendar year, to each Standard Certificateholder or Stripped
Certificateholder at any time during that year, the information, prepared on
the basis described above, as the trustee deems to be necessary or desirable
to enable those certificateholders to prepare their federal income tax
returns. The information will include the amount of original issue discount
accrued on certificates held by persons other than certificateholders
exempted from the reporting requirements. The amounts required to be reported
by the trustee may not be equal to the proper amount of original issue
discount required to be reported as taxable income by a certificateholder,
other than an original certificateholder that purchased at the issue price.
In particular, in the case of Stripped Certificates, unless provided
otherwise in the applicable prospectus supplement, the reporting will be
based upon a representative initial offering price of each class of Stripped
Certificates. The trustee will also file the
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original issue discount information with the IRS. If a certificateholder
fails to supply an accurate taxpayer identification number or if the
Secretary of the Treasury determines that a certificateholder has not
reported all interest and dividend income required to be shown on his federal
income tax return, 31% backup withholding may be required in respect of any
reportable payments, as described under "--Federal Income Tax Consequences
for REMIC Certificates--Backup Withholding" above.
TAXATION OF CERTAIN FOREIGN INVESTORS
To the extent that a certificate evidences ownership in mortgage loans
that are issued on or before July 18, 1984, interest or original issue
discount paid by the person required to withhold tax under Code Section 1441
or 1442 to nonresident aliens, foreign corporations, or other Non-U.S.
Persons generally will be subject to 30% United States withholding tax, or a
lower rate as may be provided for interest by an applicable tax treaty.
Accrued original issue discount recognized by the Standard Certificateholder
or Stripped Certificateholder on the sale or exchange of that certificate and
attributable to such mortgage loans also will be subject to federal income
tax withholding at the same rate.
Treasury regulations provide that interest or original issue discount paid
by the trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in mortgage loans issued after July 18, 1984 will be
"portfolio interest" and will be treated in the manner, and those persons
will be subject to the same certification requirements, described under
"--Federal Income Tax Consequences for REMIC Certificates--Taxation of
Certain Foreign Investors--Regular Certificates" above.
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences" above, you should consider the state and
local tax consequences of the acquisition, ownership, and disposition of the
offered certificates. State tax law may differ substantially from the
corresponding federal law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other jurisdiction. Thus,
you should consult your own tax advisors with respect to the various tax
consequences of investments in the offered certificates.
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CERTAIN ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended, or ERISA,
and the Code impose certain requirements on retirement plans, and on certain
other employee benefit plans and arrangements, including individual
retirement accounts and annuities, Keogh plans, collective investment funds,
insurance company separate accounts and some insurance company general
accounts in which those plans, accounts or arrangements are invested that are
subject to the fiduciary responsibility provisions of ERISA and Section 4975
of the Code (all of which are referred to as "Plans"), and on persons who are
fiduciaries with respect to Plans, in connection with the investment of Plan
assets. Certain employee benefit plans, such as governmental plans (as
defined in ERISA Section 3(32)), and, if no election has been made under
Section 410(d) of the Code, church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements. Accordingly, assets of those
plans may be invested in offered certificates without regard to the ERISA
considerations described below, subject to the provisions of other applicable
federal, state or local law. Any of these plans which are qualified and
exempt from taxation under Sections 401(a) and 501(a) of the Code, however,
are subject to the prohibited transaction rules set forth in Section 503 of
the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and
the requirement that a Plan's investments be made in accordance with the
documents governing the Plan. In addition, ERISA and the Code prohibit a
broad range of transactions involving assets of a Plan and persons ("Parties
in Interest") who have certain specified relationships to the Plan, unless a
statutory or administrative exemption is available. Certain Parties in
Interest that participate in a prohibited transaction may be subject to an
excise tax imposed pursuant to Section 4975 of the Code, unless a statutory
or administrative exemption is available. These prohibited transactions
generally are set forth in Section 406 of ERISA and Section 4975 of the Code.
Special caution should be exercised before the assets of a Plan are used to
purchase a certificate if, with respect to those assets, the Depositor, the
master servicer or the trustee or one of their affiliates, either: (a) has
investment discretion with respect to the investment of those assets of that
Plan; or (b) has authority or responsibility to give, or regularly gives,
investment advice with respect to those assets for a fee and pursuant to an
agreement or understanding that the advice will serve as a primary basis for
investment decisions with respect to those assets and that the advice will be
based on the particular investment needs of the Plan.
Before purchasing any offered certificates, a Plan fiduciary should
consult with its counsel and determine whether there exists any prohibition
to that purchase under the requirements of ERISA, whether any prohibited
transaction class-exemption or any individual administrative prohibited
transaction exemption (as described below) applies, including whether the
appropriate conditions set forth in those exemptions would be met, or whether
any statutory prohibited transaction exemption is applicable, and further
should consult the applicable prospectus supplement relating to that series
of certificates.
PLAN ASSET REGULATIONS
A Plan's investment in certificates may cause the Trust Assets to be
deemed Plan assets. Section 2510.3-101 of the regulations of the United
States Department of Labor ("DOL") provides that when a Plan acquires an
equity interest in an entity, the Plan's assets include both the equity
interest and an undivided interest in each of the underlying assets of the
entity, unless certain exceptions not applicable to this discussion apply, or
unless the equity participation in the entity by "benefit plan investors"
(that is, Plans and certain employee benefit plans not subject to ERISA) is
not "significant". For this purpose, in general, equity participation in a
trust fund will be "significant" on any date if, immediately after the most
recent acquisition of any certificate, 25% or more of any class of
certificates is held by benefit plan investors.
Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides
investment advice with respect to those assets for a fee, is a fiduciary of
the investing Plan. If the Trust Assets constitute Plan assets, then any
party exercising management or discretionary control regarding those assets,
such as a master servicer, a special servicer or any sub-servicer, may be
deemed to be a Plan "fiduciary" with respect to the investing Plan, and thus
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subject to the fiduciary responsibility provisions and prohibited transaction
provisions of ERISA and the Code. In addition, if the Trust Assets constitute
Plan assets, the purchase of certificates by a Plan, as well as the operation
of the trust fund, may constitute or involve a prohibited transaction under
ERISA and the Code.
ADMINISTRATIVE EXEMPTIONS
Several underwriters of mortgage-backed securities have applied for and
obtained individual administrative ERISA prohibited transaction exemptions
(the "Exemptions") which can only apply to the purchase and holding of
mortgage-backed securities which, among other conditions, are sold in an
offering with respect to which that underwriter serves as the sole or a
managing underwriter, or as a selling or placement agent. If that exemption
might be applicable to a series of certificates, the related prospectus
supplement will refer to the possibility, as well as provide a summary of the
conditions to the applicability.
INSURANCE COMPANY GENERAL ACCOUNTS
Sections I and III of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60") exempts from the application of the prohibited transaction provisions
of Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transaction in connection with the servicing, management and operation of a
trust (such as the trust fund) in which an insurance company general account
has an interest as a result of its acquisition of certificates issued by the
trust, provided that certain conditions are satisfied. If these conditions
are met, insurance company general accounts would be allowed to purchase
certain classes of certificates which do not meet the requirements of the
Exemptions solely because they (1) are subordinated to other classes of
certificates issued by the trust fund and/or (2) have not received a rating
at the time of the acquisition in one of the three highest rating categories
from Standard & Poor's Ratings Services, a division of The McGraw Hill
Companies, Inc., Moody's Investors Service, Inc. or Fitch IBCA, Inc. All
other conditions of the Exemptions would have to be satisfied in order for
PTCE 95-60 to be available. Before purchasing that class of certificates, an
insurance company general account seeking to rely on Sections I and III of
PTCE 95-60 should itself confirm that all applicable conditions and other
requirements have been satisfied.
The Small Business Job Protection Act of 1996 added a new Section 401(c)
to ERISA, which provides certain exemptive relief from the provisions of Part
4 of Title I of ERISA and Section 4975 of the Code, including the prohibited
transaction restrictions imposed by ERISA and the related excise taxes
imposed by the Code, for transactions involving an insurance company general
account. Pursuant to Section 401(c) of ERISA, the DOL was required to issue
regulations ("401(c) Regulations") to provide guidance for the purpose of
determining, in cases where insurance policies supported by an insured's
general account are issued to or for the benefit of a Plan on or before
December 31, 1998, which general account assets constitute Plan assets. On
January 5, 2000, the DOL published the 401(c) Regulations. Section 401(c) of
ERISA generally provides that, until the date which is 18 months after the
401(c) Regulations become final, no person shall be subject to liability
under Part 4 of Title I of ERISA and Section 4975 of the Code on the basis of
a claim that the assets of an insurance company general account constitute
Plan assets, unless (1) as otherwise provided by the Secretary of Labor in
the 401(c) Regulations to prevent avoidance of the regulations or (2) an
action is brought by the Secretary of Labor for certain breaches of fiduciary
duty which would also constitute a violation of federal or state criminal
law. Any assets of an insurance company general account which support
insurance policies issued to a Plan after December 31, 1998 or issued to
Plans on or before December 31, 1998 for which the insurance company does not
comply with the 401(c) Regulations may be treated as Plan assets. In
addition, because Section 401(c) does not relate to insurance company
separate accounts, separate account assets are still treated as Plan assets
of any Plan invested in that separate account. Insurance companies
contemplating the investment of general account assets in the offered
certificates should consult with their legal counsel with respect to the
applicability of Section 401(c) of ERISA, including the general account's
ability to continue to hold the offered certificates after the date which is
18 months after the date the 401(c) Regulations became final.
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UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation under Code
Section 501(a), including most varieties of Plans, may give rise to
"unrelated business taxable income" as described in Code Sections 511-515 and
860E. Further, prior to the purchase of Residual Certificates, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing a Residual Certificate on behalf of, a
"Disqualified Organization," which term as defined above includes certain
tax-exempt entities not subject to Code Section 511 including certain
governmental plans, as discussed above under the caption "Certain Federal
Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Residual Certificates--Tax-Related Restrictions on
Transfer of Residual Certificates--Disqualified Organizations."
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important
that potential investors who are Plan fiduciaries consult with their counsel
regarding the consequences under ERISA of their acquisition and ownership of
certificates.
The sale of certificates to an employee benefit plan is in no respect a
representation by the Depositor or the underwriter that this investment meets
all relevant legal requirements with respect to investments by plans
generally or by any particular plan, or that this investment is appropriate
for plans generally or for any particular plan.
LEGAL INVESTMENT
The offered certificates will constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended
("SMMEA"), only if so specified in the related prospectus supplement. The
appropriate characterization of those certificates not qualifying as
"mortgage related securities" ("Non-SMMEA Certificates") under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase those certificates, may be subject to significant
interpretive uncertainties. Accordingly, investors whose investment authority
is subject to legal restrictions should consult their own legal advisors to
determine whether and to what extent the Non-SMMEA Certificates constitute
legal investments for them.
Generally, only classes of offered certificates that (1) are rated in one
of the two highest rating categories by one or more rating agencies and (2)
are part of a series evidencing interests in a trust fund consisting of loans
secured by first liens and originated by certain types of originators as
specified in SMMEA, will be "mortgage related securities" for purposes of
SMMEA. As "mortgage related securities," those classes will constitute legal
investments for persons, trusts, corporations, partnerships, associations,
business trusts and business entities, including 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 of its agencies or instrumentalities constitute legal
investments for those entities.
Under SMMEA, a number of states enacted legislation, on or prior to the
October 3, 1991 cut-off for those enactments, limiting to various extents the
ability of certain entities (in particular, insurance companies) to invest in
"mortgage related securities" secured by liens on residential, or mixed
residential and commercial properties, in most cases by requiring the
affected investors to rely solely upon existing state law, and not SMMEA.
Pursuant to Section 347 of the Riegle Community Development and Regulatory
Improvement Act of 1994, which amended the definition of "mortgage related
security" to include, in relevant part, offered certificates satisfying the
rating and qualified originator requirements for "mortgage related
securities," but evidencing interests in a trust fund consisting, in whole or
in part, of first liens on one or more parcels of real estate upon which are
located one or more commercial structures, states were authorized to enact
legislation, on or before September 23, 2001, specifically referring to
Section 347 and prohibiting or restricting the purchase, holding or
investment by state-regulated entities in those types of offered
certificates. Section 347 also provides that the enactment by a state of any
of those legislative restrictions shall not affect the validity of any
contractual commitment to purchase, hold or invest in
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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 that state legislation.
Accordingly, the investors affected by any of that kind of state legislation,
when and if enacted, will be authorized to invest in offered certificates
qualifying as "mortgage related securities" only to the extent provided in
that 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 those securities,
and national banks may purchase those securities for their own account
without regard to the limitations generally applicable to investment
securities set forth in 12 U.S.C. Section 24 (Seventh), subject in each case
to those regulations as the applicable federal regulatory authority may
prescribe. In this connection, the Office of the Comptroller of the Currency
(the "OCC") has amended 12 C.F.R. Part 1 to authorize national banks to
purchase and sell for their own account, without limitation as to a
percentage of the bank's capital and surplus (but subject to compliance with
certain general standards in 12 C.F.R. Section 1.5 concerning "safety and
soundness" and retention of credit information), certain "Type IV
securities," defined in 12 C.F.R. Section 1.2(1) to include certain
"commercial mortgage-related securities" and "residential mortgage-related
securities." As so defined, "commercial mortgage-related security" and
"residential mortgage-related security" mean, in relevant part, "mortgage
related security" within the meaning of SMMEA, provided that, in the case of
a "commercial mortgage-related security," it "represents ownership of a
promissory note or certificate of interest or participation that is directly
secured by a first lien on one or more parcels of real estate upon which one
or more commercial structures are located and that is fully secured by
interests in a pool of loans to numerous obligors." In the absence of any
rule or administrative interpretation by the OCC defining the term "numerous
obligors," no representation is made as to whether any class of offered
certificates will qualify as "commercial mortgage-related securities," and
thus as "Type IV securities," for investment by national banks. The National
Credit Union Administration (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. Section 703.140. The Office
of Thrift Supervision (the "OTS") has issued Thrift Bulletin 13a (December 1,
1998), "Management of Interest Rate Risk, Investment Securities, and
Derivative Activities," which thrift institutions subject to the jurisdiction
of the OTS should consider before investing in any of the offered
certificates.
All depository institutions considering an investment in the offered
certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" (the "1998 Policy Statement")
of the Federal Financial Institutions Examination Council, which has been
adopted by the Board of Governors of the Federal Reserve System, the OCC, the
Federal Deposit Insurance Corporation 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 those authorities before purchasing any offered
certificates, as certain classes may be deemed unsuitable investments, or may
otherwise be restricted, under those rules, policies or guidelines (in
certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not
limited to, "prudent investor" provisions, percentage-of-assets limits,
provisions which may restrict or prohibit investment in securities which are
not "interest bearing" or "income paying," and, with regard to any offered
certificates issued in book-entry form, provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
106
<PAGE>
Except as to the status of certain classes of offered certificates as
"mortgage related securities," no representations are made as to the proper
characterization of offered certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase offered certificates under
applicable legal investment restrictions. The uncertainties described above
(and any unfavorable future determinations concerning legal investment or
financial institution regulatory characteristics of the offered certificates)
may adversely affect the liquidity of the offered certificates.
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 that investor.
METHOD OF DISTRIBUTION
The offered certificates offered by this prospectus and by the related
prospectus supplements will be offered in series through one or more of the
methods described below. The prospectus supplement prepared for each series
will describe the method of offering being utilized for that series and will
state our net proceeds from that sale.
We intend that offered certificates will be offered through the following
methods from time to time and that offerings may be made concurrently through
more than one of these methods or that an offering of a particular series of
certificates may be made through a combination of two or more of these
methods. Those methods are as follows:
1. by negotiated firm commitment underwriting and public offering by
one or more underwriters specified in the related prospectus
supplement;
2. by placements through one or more placement agents specified in
the related prospectus supplement primarily with institutional
investors and dealers; and
3. through direct offerings by the Depositor.
If underwriters are used in a sale of any offered certificates (other than
in connection with an underwriting on a best efforts basis), those
certificates will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices
to be determined at the time of sale or at the time of commitment. The
managing underwriter or underwriters with respect to the offer and sale of a
particular series of certificates will be set forth in the cover of the
prospectus supplement relating to that series and the members of the
underwriting syndicate, if any, will be named in that prospectus supplement.
In connection with the sale of the offered certificates, underwriters may
receive compensation from us or from purchasers of the offered certificates
in the form of discounts, concessions or commissions. Underwriters and
dealers participating in the distribution of the offered certificates may be
deemed to be underwriters in connection with those offered certificates, and
any discounts or commissions received by them from us and any profit on the
resale of offered certificates by them may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933, as amended (the
"Securities Act").
It is anticipated that the underwriting agreement pertaining to the sale
of any series of certificates will provide that the obligations of the
underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all offered certificates if any
are purchased (other than in connection with an underwriting on a best
efforts basis) and that we will indemnify the several underwriters, and each
person, if any, who controls that underwriter within the meaning of Section
15 of the Securities Act, against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments required
to be made in respect of these liabilities.
The prospectus supplement with respect to any series offered by placements
through dealers will contain information regarding the nature of that
offering and any agreements to be entered into between us and purchasers of
offered certificates of that series.
107
<PAGE>
We anticipate that the offered certificates offered by this prospectus and
the related prospectus supplement will be sold primarily to institutional
investors. Purchasers of offered certificates, including dealers, may,
depending on the facts and circumstances of those purchases, be deemed to be
"underwriters" within the meaning of the Securities Act in connection with
reoffers and sales by them of offered certificates. You should consult with
your legal advisors in this regard prior to any similar reoffer or sale.
As to each series of certificates, only those classes rated in an
investment grade rating category by any rating agency will be offered by this
prospectus. We may initially retain any unrated class and we may sell it at
any time to one or more institutional investors.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
With respect to each series of certificates offered by this prospectus,
there are incorporated in this prospectus and in the related prospectus
supplement by reference all documents and reports filed or caused to be filed
by the Depositor with respect to a trust fund pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, that relate
specifically to the related series of certificates. The Depositor will
provide or cause to be provided without charge to each person to whom this
prospectus is delivered in connection with the offering of one or more
classes of offered certificates, upon written or oral request of that person,
a copy of any or all documents or reports incorporated in this prospectus by
reference, in each case to the extent the documents or reports relate to one
or more of the classes of offered certificates, other than the exhibits to
those documents (unless the exhibits are specifically incorporated by
reference in those documents). Requests to the Depositor should be directed
in writing to its principal executive offices at 292 Long Ridge Road,
Stamford, Connecticut 06927, Attention: President, or by telephone at (203)
357-4000. The Depositor has determined that its financial statements will not
be material to the offering of any Offered Certificates.
The Depositor filed a registration statement (the "Registration
Statement") relating to the certificates with the Securities and Exchange
Commission. This prospectus is part of the Registration Statement, but the
Registration Statement includes additional information.
Copies of the Registration Statement may be obtained from the Public
Reference Section of the Securities and Exchange Commission, Washington, D.C.
20549, upon payment of the prescribed charges, or may be examined free of
charge at the Securities and Exchange Commission's offices, 450 Fifth Street
N.W., Washington, D.C. 20549 or at the regional offices of the Securities and
Exchange Commission located at Suite 1300, 7 World Trade Center, New York,
New York 10048 and Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661-2511. The Securities and Exchange Commission also
maintains a site on the World Wide Web at "http://www.sec.gov" at which you
can view and download copies of reports, proxy and information statements and
other information filed electronically through the Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system. The Depositor has filed the
Registration Statement, including all exhibits thereto, through the EDGAR
system, so the materials should be available by logging onto the Securities
and Exchange Commission's Web site. The Securities and Exchange Commission
maintains computer terminals providing access to the EDGAR system at each of
the offices referred to above.
LEGAL MATTERS
The validity of the certificates of each series and certain federal income
tax matters will be passed upon for us by Cadwalader, Wickersham & Taft, New
York, New York.
FINANCIAL INFORMATION
A new trust fund will be formed with respect to each series of
certificates, and no trust fund will engage in any business activities or
have any assets or obligations prior to the issuance of the related series of
certificates. Accordingly, no financial statements with respect to any trust
fund will be included in this prospectus or in the related prospectus
supplement.
108
<PAGE>
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 at least one rating agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders of those certificates of all collections on the
underlying mortgage assets to which those holders are entitled. These ratings
address the structural, legal and issuer-related aspects associated with
those certificates, the nature of the underlying mortgage assets 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 those prepayments might
differ from those originally anticipated. As a result, you 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.
109
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1998 Policy Statement ................... 106
401(c) Regulations ...................... 104
Accrual Certificates .................... 38
ADA ..................................... 73
ARM Loans ............................... 27
Bankruptcy Code ......................... 65
Cash Flow Agreement ..................... 29
Certificate Owner ....................... 43
Code .................................... 42
Cooperatives ............................ 24
CPR ..................................... 32
Definitive Certificates ................. 37
Depositor ............................... 5, 24
Determination Date ...................... 30
Disqualified Organization ............... 88, 105
Distribution Date Statement ............. 41
DOL ..................................... 103
DTC ..................................... 37
Due Dates ............................... 26
EDGAR ................................... 108
Equity Participation .................... 26
Events of Default ....................... 56
Exemptions .............................. 104
FAMC .................................... 28
FHLMC ................................... 28
FNMA .................................... 28
Garn Act ................................ 71
GNMA .................................... 28
Government Securities ................... 76
Indirect Participants ................... 43
Insurance and Condemnation Proceeds .... 48
L/C Bank ................................ 61
Liquidation Proceeds .................... 49
Mark to Market Regulations .............. 91
MBS ..................................... 24
MBS Agreement ........................... 28
MBS Issuer .............................. 28
MBS Servicer ............................ 28
MBS Trustee ............................. 28
Mortgage Asset Seller ................... 24
Mortgage Notes .......................... 24
Mortgaged Properties .................... 24
Mortgages ............................... 24
NCUA .................................... 106
Net Leases .............................. 25
New Regulations ......................... 93
Non-SMMEA Certificates .................. 105
Non-U.S. Person ......................... 93
Nonrecoverable Advance .................. 40
OCC ..................................... 106
OID Regulations ......................... 78
OTS ..................................... 106
Participants ............................ 43
Parties in Interest ..................... 103
Pass-Through Entity ..................... 88
Permitted Investments ................... 48
Plans ................................... 103
Pooling Agreement ....................... 45
Prepayment Assumption ................... 79
Prepayment Interest Shortfall ........... 30
Prepayment Premium ...................... 26
PTCE 95-60 .............................. 104
Random Lot Certificates ................. 78
Record Date ............................. 38
Reform Act .............................. 78
Registration Statement .................. 108
Regular Certificateholder ............... 78
Regular Certificates .................... 75
Related Proceeds ........................ 40
Relief Act .............................. 73
REMIC ................................... 12, 75
REMIC Certificates ...................... 75
REMIC Pool .............................. 75
REMIC Regulations ....................... 75
REO Property ............................ 47
Residual Certificateholders ............. 84
Residual Certificates ................... 38
RICO .................................... 74
SBJPA of 1996 ........................... 76
Securities Act .......................... 107
Senior Certificates ..................... 37
Servicing Standard ...................... 47
SMMEA ................................... 105
SPA ..................................... 32
Standard Certificateholder .............. 96
Standard Certificates ................... 96
Startup Day ............................. 76
Stripped Certificateholder .............. 100
Stripped Certificates ................... 96
Sub-Servicing Agreement ................. 47
Subordinate Certificates ................ 37
thrift institutions ..................... 87
Title V ................................. 72
Treasury ................................ 75
Type IV securities ...................... 106
U.S. Person ............................. 90
Warranting Party ........................ 46
</TABLE>
110
<PAGE>
YOU SHOULD RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
We are not offering these certificates in any state where the offer is not
permitted.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
<S> <C>
Summary of Certificates ................ S-6
Summary of Terms........................ S-7
Risk Factors............................ S-34
Description of the Mortgage Pool ....... S-56
Description of the Certificates......... S-85
Servicing of the Mortgage Loans ....... S-108
Yield and Maturity Considerations ...... S-123
Certain Federal Income Tax
Consequences........................... S-132
Method of Distribution.................. S-133
Legal Matters .......................... S-134
Ratings................................. S-134
Legal Investment........................ S-135
ERISA Considerations.................... S-135
Index of Principal Definitions.......... S-138
PROSPECTUS
Summary of Prospectus................... 6
Risk Factors............................ 14
Description of the Trust Funds.......... 24
Yield and Maturity Considerations ...... 30
The Depositor........................... 36
Use of Proceeds ........................ 36
Description of the Certificates......... 37
Description of the Pooling Agreements . 45
Description of Credit Support .......... 60
Certain Legal Aspects of Mortgage Loans. 63
Certain Federal Income Tax
Consequences........................... 75
State and Other Tax Considerations ..... 102
Certain ERISA Considerations ........... 103
Legal Investment........................ 105
Method of Distribution ................. 107
Incorporation of Certain Information By
Reference ............................. 108
Legal Matters .......................... 108
Financial Information................... 108
Rating.................................. 109
Index of Principal Definitions.......... 110
</TABLE>
DEALERS WILL BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS
WHEN ACTING AS UNDERWRITERS OF THESE CERTIFICATES AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THESE
CERTIFICATES WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL MARCH
18, 2001.
$633,061,304 (APPROXIMATE)
GE CAPITAL COMMERCIAL
MORTGAGE CORPORATION
(DEPOSITOR)
COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2000-1
<TABLE>
<CAPTION>
<S> <C>
CLASS A-1
CERTIFICATES.......... $111,957,000
CLASS A-2
CERTIFICATES.......... $429,151,265
CLASS X CERTIFICATES .. $707,331,066
CLASS B CERTIFICATES .. $ 28,293,243
CLASS C CERTIFICATES .. $ 31,829,898
CLASS D CERTIFICATES .. $ 8,841,638
CLASS E CERTIFICATES .. $ 22,988,260
</TABLE>
PROSPECTUS SUPPLEMENT
CHASE SECURITIES INC.
BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
J.P. MORGAN & CO.
SALOMON SMITH BARNEY INC.
DECEMBER 18, 2000
GE CAPITAL COMMERCIAL MORTGAGE CORPORATION Commercial Mortgage Pass-Through
Certificates, Series 2000-1, December 2000
