<PAGE> 1
Pursuant to Rule 424(b)(5)
Registration No. 333-45467
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 9, 1998)
$1,143,843,000 (Approximate)
MORGAN STANLEY CAPITAL I INC.
as Depositor
HELLER FINANCIAL CAPITAL FUNDING, INC. and
MORGAN STANLEY MORTGAGE CAPITAL INC.
as Mortgage Loan Sellers
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-HF1
-------------------
The Series 1998-HF1 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will consist of 16 classes (each, a "Class") of Certificates:
(i) the Class A1 and Class A2 Certificates (collectively, the "Class A
Certificates"); (ii) the Class X Certificates (the "Class X Certificates" or the
"Interest Only Certificates" and, collectively with the Class A Certificates,
the "Senior Certificates"); (iii) the Class B, Class C, Class D, Class E, Class
F, Class G, Class H, Class J, Class K and Class L Certificates (collectively,
the "Subordinate Certificates" and, collectively with the Senior Certificates,
the "REMIC Regular Certificates"); and (iv) the Class R-I, Class R-II and Class
R-III Certificates (collectively, the "REMIC Residual Certificates"). Only the
Senior Certificates and the Class B, Class C, Class D and Class E Certificates
(collectively, the "Offered Certificates") are offered hereby. It is a condition
to their issuance that the respective Classes of Offered Certificates be
assigned ratings by Duff & Phelps Credit Rating Co. ("DCR") and/or by Standard &
Poor's Ratings Services ("S&P" and, together with DCR, the "Rating Agencies") as
set forth in the table below. Each Class of Offered Certificates will be issued
with the aggregate principal balance (the aggregate "Certificate Balance") or
aggregate notional amount (the aggregate "Notional Amount"), and will accrue
interest (initially, in the case of the Interest Only Certificates and the Class
E Certificates) at the per annum rate (the "Pass-Through Rate"), set forth in
the table below.
The Certificates will evidence the entire beneficial ownership interest
in a trust fund (the "Trust Fund") to be established by Morgan Stanley Capital I
Inc. (the "Depositor") pursuant to a Pooling and Servicing Agreement, to be
dated as of March 1, 1998 (the "Pooling and Servicing Agreement"), among the
Depositor, AMRESCO Services, L.P., as master servicer (the "Master Servicer"),
Lennar Partners, Inc., as special servicer (the "Special Servicer"), LaSalle
National Bank, as trustee (the "Trustee") and ABN AMRO Bank N.V., as fiscal
agent (the "Fiscal Agent"). Distributions on the Certificates will be payable
solely from the assets transferred to the Trust Fund for the benefit of the
holders of the Certificates (the "Certificateholders"). The Certificates do not
constitute obligations of the Depositor, the Sellers (as defined herein), the
Master Servicer, the Special Servicer, the Trustee, the Fiscal Agent or any of
their respective affiliates. Neither the Certificates nor the Mortgage Loans (as
defined herein) will be insured or guaranteed by any governmental agency or
instrumentality or by the Depositor, the Sellers, the Master Servicer, the
Special Servicer, the Trustee, the Fiscal Agent, any of their respective
affiliates or any other person.
SEE "RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS" BEGINNING ON PAGE
S-41 HEREIN AND "RISK FACTORS" BEGINNING ON PAGE 13 IN THE PROSPECTUS FOR
CERTAIN FACTORS TO BE CONSIDERED IN PURCHASING THE OFFERED CERTIFICATES.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
(cover continued on page S-3)
<TABLE>
<CAPTION>
INITIAL AGGREGATE CERTIFICATE
BALANCE OR INITIAL FINAL SCHEDULED RATINGS
NOTIONAL AMOUNT(1) PASS-THROUGH RATE(2) DISTRIBUTION DATE(3) (DCR/S&P)(4)
------------------ -------------------- -------------------- ------------
<S> <C> <C> <C> <C>
Class A1 $225,000,000 6.19% 01/15/07 AAA/AAA
Class A2 $697,143,000 6.52% 01/15/08 AAA/AAA
Class X $1,285,217,765 1.22% 02/15/18 AAA/AAAr
Class B $67,474,000 6.58% 01/15/08 AA/AA
Class C $64,261,000 6.75% 01/15/08 A/A
Class D $64,261,000 7.10% 02/15/08 BBB/BBB
Class E $25,704,000 7.60% 02/15/08 BBB-/BBB-
</TABLE>
- -----------------------
(Footnotes to table on page S-3)
-----------------------
The Offered Certificates will be purchased from the Depositor by Morgan
Stanley & Co. Incorporated ("Morgan Stanley") and by Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch" and, together, with Morgan Stanley,
the "Underwriters") and will be offered by the Underwriters from time to time to
the public in negotiated transactions or otherwise at varying prices to be
determined at the time of sale. Proceeds to the Depositor from the sale of the
Offered Certificates, before deducting issuance expenses payable by the
Depositor, will be approximately $1,244,647,860 plus accrued interest. For
further information with respect to the plan of distribution and any discounts,
commissions and profits on resale that may be deemed underwriting discounts or
commissions, see "Plan of Distribution" herein.
The Offered Certificates are offered by the Underwriters when, as and
if issued by the Depositor, delivered to and accepted by the Underwriters and
subject to its right to reject orders in whole or in part. It is expected that
delivery of the Offered Certificates will be made in book-entry form through the
facilities of the Depository Trust Company ("DTC") in the United States and may
be made in book-entry form through Cedel Bank, S.A. ("Cedel") and the Euroclear
System ("Euroclear"), as participants of DTC, in Europe, against payment
therefor on or about March 27, 1998 (the "Closing Date").
-------------------
MORGAN STANLEY DEAN WITTER MERRILL LYNCH & CO.
The date of this Prospectus Supplement is March 18, 1998
<PAGE> 2
[MAP OF U.S.]
<PAGE> 3
The footnotes to the table on the cover page are as follows:
(1) The table sets forth: in the case of the Class of Interest
Only Certificates, the initial aggregate Notional Amount
thereof; and, in the case of each other Class of Offered
Certificates, the initial aggregate Certificate Balance
thereof. The Interest Only Certificates will not have
Certificate Balances and will not entitle the holders thereof
to distributions of principal. The initial aggregate
Certificate Balance or Notional Amount of each Class of
Offered Certificates is subject to a permitted variance of
plus or minus 5%.
(2) The Pass-Through Rates for the Class A1, Class A2, Class B,
Class C and Class D Certificates for each Distribution Date
are fixed at the respective per annum rates set forth in the
table; provided that in each case such Pass-Through Rate will
not exceed the WAC Rate (as defined herein) for such
Distribution Date. The Pass-Through Rates for the Class X
Certificates and the Class E Certificates are variable and,
subsequent to the initial Distribution Date (as defined
herein), will be determined as described under "Description of
the Certificates -- Pass-Through Rates" herein. The
Pass-Through Rates for the Class X Certificates and the Class
E Certificates as set forth in the table are the approximate
initial Pass-Through Rates.
(3) The Final Scheduled Distribution Date with respect to any
Class of Offered Certificates is the Distribution Date (as
defined herein) on which the final distribution would occur
for such Class based on the assumption that no Mortgage Loan
is prepaid in whole or in part and otherwise based on the
Maturity Assumptions (as described herein). The actual
performance and experiences of the Mortgage Loans will likely
differ from such assumptions. As described herein under
"Ratings", the Final Rated Distribution Date for those Classes
of Offered Certificates entitled to distributions of principal
will be the Distribution Date in March 2030.
(4) See "Ratings" herein.
(cover continued from second preceding page)
Initially, the assets of the Trust Fund will consist primarily of a
segregated pool (the "Mortgage Pool") of 352 fixed-rate commercial and
multifamily mortgage loans (the "Mortgage Loans"). The Cut-off Date is March 1,
1998 and, as of such date, the Mortgage Loans had an aggregate principal balance
(the "Initial Pool Balance") of $1,285,217,765, after application of all
payments of principal due on or before such date, whether or not received, and
subject to a variance of plus or minus 5%. The Mortgage Loans are further
described under "DESCRIPTION OF THE MORTGAGE POOL" herein and in Appendix I and
Appendix II hereto.
The Depositor will acquire the Mortgage Loans from the following
sellers (each, a "Seller"): Heller Financial Capital Funding, Inc. (306 Mortgage
Loans, representing 84.3% of the Initial Pool Balance); and Morgan Stanley
Mortgage Capital Inc. (46 Mortgage Loans, representing 15.7% of the Initial Pool
Balance).
Distributions on the Certificates will be made, to the extent of
available funds, on the 15th day of each month or, if any such 15th day is not a
business day, then on the next business day, beginning in April 1998 (each, a
"Distribution Date"). As described herein, distributions of interest on each
Class of Offered Certificates will be made on each Distribution Date based on
the Pass-Through Rate then applicable to such Class and the aggregate
Certificate Balance or Notional Amount, as the case may be, of such Class
outstanding immediately prior to such Distribution Date. Distributions allocable
to principal of the respective Classes of Certificates with Certificate Balances
(the "Principal Balance Certificates") will be made in the amounts and in
accordance with the priorities described herein until the Certificate Balance of
each such Class is reduced to zero. The Interest Only Certificates will not have
Certificate Balances and will not entitle the holders thereof to receive
distributions of principal. As described herein, any prepayment premiums,
penalties or fees actually collected on the Mortgage Loans will be
S-3
<PAGE> 4
distributed among certain of the Classes of Certificates in the amounts and in
accordance with the priorities described herein. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" herein.
As and to the extent described herein, the Subordinate Certificates
will be subordinate to the Senior Certificates; and each Class of Subordinate
Certificates will further be subordinate to each other class of Subordinate
Certificates, if any, with an earlier alphabetical Class designation. The REMIC
Residual Certificates will be subordinate to the REMIC Regular Certificates. See
"DESCRIPTION OF THE CERTIFICATES--Distributions" and "--Subordination;
Allocation of Losses and Certain Expenses" herein.
The yield to maturity of each Class of Offered Certificates will depend
on, among other things, the rate and timing of principal payments (including by
reason of prepayments, loan extensions, repurchases, defaults and liquidations)
and losses on or in respect of the Mortgage Loans that result in a reduction of
the aggregate Certificate Balance or Notional Amount of such Class. THE YIELD TO
MATURITY OF THE INTEREST ONLY CERTIFICATES WILL BE HIGHLY SENSITIVE TO THE RATE
AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING BY REASON OF PREPAYMENTS, LOAN
EXTENSIONS, REPURCHASES, DEFAULTS AND LIQUIDATIONS) AND LOSSES ON OR IN RESPECT
OF THE MORTGAGE LOANS, WHICH RATE AND TIMING OF PRINCIPAL PAYMENTS AND LOSSES
MAY FLUCTUATE SIGNIFICANTLY FROM TIME TO TIME. A rate of principal prepayments
on the Mortgage Loans that is more rapid than expected by investors will have a
material negative effect on the yield to maturity of the Interest Only
Certificates. Investors in the Interest Only Certificates should consider the
associated risks, including the risk that a rapid rate of principal prepayments
on the Mortgage Loans could result in the failure of investors in such
Certificates to recover fully their initial investments. See "RISK FACTORS AND
OTHER SPECIAL CONSIDERATIONS--Certain Yield Considerations" and "MATURITY
CONSIDERATIONS" herein and "Yield Considerations" and "Risk Factors--Average
Life of Certificates; Prepayments; Yields" in the Prospectus.
As described herein, three separate real estate mortgage investment
conduit ("REMIC") elections will be made with respect to the Trust Fund for
federal income tax purposes (the REMICs formed thereby being herein referred to
as "REMIC I", "REMIC II" and "REMIC III", respectively). The Offered
Certificates will constitute "regular interests" in REMIC III. See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES" herein and in the Prospectus.
See "Index of Principal Definitions" in this Prospectus Supplement or
in the Prospectus for the location of meanings of capitalized terms used but not
defined herein.
There is currently no secondary market for the Offered Certificates.
Each Underwriter intends to make a secondary market in the Offered Certificates,
but is not obligated to do so. There can be no assurance that a secondary market
for the Offered Certificates will develop or, if it does develop, that it will
continue. The Offered Certificates will not be listed on any securities
exchange.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THIS PROSPECTUS SUPPLEMENT IS NOT INTENDED TO FURNISH LEGAL,
REGULATORY, TAX OR ACCOUNTING ADVICE TO ANY PROSPECTIVE PURCHASER OF THE OFFERED
CERTIFICATES. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS SHOULD BE REVIEWED
BY EACH PROSPECTIVE PURCHASER AND ITS LEGAL, REGULATORY, TAX AND
S-4
<PAGE> 5
ACCOUNTING ADVISORS. EACH PROSPECTIVE PURCHASER MUST RELY ON ITS OWN EXAMINATION
OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
INVESTORS WHOSE INVESTMENT AUTHORITY IS SUBJECT TO LEGAL RESTRICTIONS
SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT
THE OFFERED CERTIFICATES CONSTITUTE LEGAL INVESTMENTS FOR THEM.
THE OFFERED CERTIFICATES WILL NOT CONSTITUTE "MORTGAGE RELATED
SECURITIES" FOR PURPOSES OF THE SECONDARY MORTGAGE MARKET ENHANCEMENT ACT OF
1984, AS AMENDED.
EACH UNDERWRITER MAY SELL OFFERED CERTIFICATES TO ITS AFFILIATES OR
ENTITIES OVER WHICH ITS AFFILIATES HAVE DISCRETIONARY AUTHORITY IN ACCORDANCE
WITH APPLICABLE LAW.
THE OFFERED CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT
CONSTITUTE PART OF A SEPARATE SERIES OF CERTIFICATES ISSUED BY THE DEPOSITOR AND
ARE BEING OFFERED PURSUANT TO ITS PROSPECTUS DATED MARCH 9, 1998, OF WHICH THIS
PROSPECTUS SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS
SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS
OFFERING WHICH IS NOT CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO
READ THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE OFFERED
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
UNTIL JUNE 16, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Offered Certificates. This Prospectus Supplement
and the related Prospectus, which form a part of the Registration Statement,
omit certain information contained in such Registration Statement pursuant to
the Rules and Regulations of the Commission. Such Registration Statement and
exhibits thereto can be inspected and copied at prescribed rates at the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 and the Commission's regional offices at Seven World Trade Center, Suite
1300, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Depositor, that file
electronically with the Commission.
FORWARD-LOOKING STATEMENTS
IF AND WHEN INCLUDED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS OR IN DOCUMENTS INCORPORATED HEREIN OR THEREIN BY REFERENCE, THE
WORDS "EXPECTS," "INTENDS," "ANTICIPATES," "ESTIMATES" AND ANALOGOUS EXPRESSIONS
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ANY SUCH STATEMENTS, WHICH
MAY INCLUDE STATEMENTS CONTAINED IN "RISK FACTORS," INHERENTLY ARE SUBJECT TO A
S-5
<PAGE> 6
VARIETY OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE PROJECTED. SUCH RISKS AND UNCERTAINTIES INCLUDE, AMONG
OTHERS, GENERAL ECONOMIC AND BUSINESS CONDITIONS, COMPETITION, CHANGES IN
FOREIGN, POLITICAL, SOCIAL AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND
COMPLIANCE WITH GOVERNMENTAL REGULATIONS, CUSTOMER PREFERENCES AND VARIOUS OTHER
EVENTS, CONDITIONS AND CIRCUMSTANCES, MANY OF WHICH ARE BEYOND THE DEPOSITOR'S
CONTROL. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS
PROSPECTUS SUPPLEMENT. THE DEPOSITOR EXPRESSLY DISCLAIMS ANY OBLIGATION OR
UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING
STATEMENT CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE DEPOSITOR'S EXPECTATIONS
WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON
WHICH ANY SUCH STATEMENT IS BASED.
REPORTS TO CERTIFICATEHOLDERS
The Trustee will mail or otherwise make available monthly reports
concerning the Certificates to all Certificateholders of record.
No dealer, salesperson or other individual has been authorized to give
any information or to make any representations not contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Depositor or the Underwriters. This Prospectus Supplement and the Prospectus do
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus Supplement and the Prospectus nor any sale made hereunder shall,
under any circumstances, create an implication that the information herein or
therein is correct as of any time subsequent to the date hereof or that there
has been no change in the affairs of the Depositor since such date.
S-6
<PAGE> 7
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-7
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION...........................................................................................S-5
FORWARD-LOOKING STATEMENTS......................................................................................S-5
REPORTS TO CERTIFICATEHOLDERS...................................................................................S-6
TRANSACTION OVERVIEW...........................................................................................S-10
SUMMARY........................................................................................................S-11
RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS..................................................................S-41
The Certificates............................................................................................S-41
The Mortgage Loans..........................................................................................S-43
DESCRIPTION OF THE CERTIFICATES................................................................................S-48
General.....................................................................................................S-48
Registration; Denominations.................................................................................S-49
Book-Entry Registration.....................................................................................S-49
Certificate Balances and Notional Amounts...................................................................S-50
Pass-Through Rates..........................................................................................S-51
Distributions...............................................................................................S-52
Appraisal Reductions........................................................................................S-56
Subordination; Allocation of Losses and Certain Expenses....................................................S-57
Prepayment Interest Shortfalls..............................................................................S-58
Optional Termination........................................................................................S-58
Advances....................................................................................................S-59
Reports to Certificateholders; Available Information........................................................S-61
Book-Entry Certificates.....................................................................................S-63
Example of Distributions....................................................................................S-63
Voting Rights...............................................................................................S-64
The Trustee and the Fiscal Agent............................................................................S-64
MATURITY CONSIDERATIONS........................................................................................S-65
YIELD CONSIDERATIONS...........................................................................................S-69
General.....................................................................................................S-69
Rate and Timing of Principal Payments.......................................................................S-69
Losses and Shortfalls.......................................................................................S-70
Certain Relevant Factors....................................................................................S-70
Delay in Payment of Distributions...........................................................................S-70
Yield Sensitivity of the Interest Only Certificates.........................................................S-70
DESCRIPTION OF THE MORTGAGE POOL...............................................................................S-72
General.....................................................................................................S-72
Certain Terms and Characteristics of the Mortgage Loans.....................................................S-73
Assessments of Property Value and Condition.................................................................S-77
Additional Mortgage Loan Information........................................................................S-78
Standard Hazard Insurance...................................................................................S-80
The Sellers.................................................................................................S-80
Assignment of the Mortgage Loans............................................................................S-81
Representations and Warranties..............................................................................S-81
Repurchases and Other Remedies..............................................................................S-83
Changes in Mortgage Pool Characteristics....................................................................S-83
</TABLE>
S-8
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C>
SERVICING OF THE MORTGAGE LOANS................................................................................S-84
General.....................................................................................................S-84
The Master Servicer.........................................................................................S-86
The Special Servicer........................................................................................S-86
Sub-Servicers...............................................................................................S-87
Servicing and Other Compensation and Payment of Expenses....................................................S-87
The Operating Adviser.......................................................................................S-88
Mortgage Loan Modifications.................................................................................S-89
Sale of Defaulted Mortgage Loans and REO Properties.........................................................S-90
REO Properties..............................................................................................S-90
Inspections; Collection of Operating Information............................................................S-91
Maintenance of Master Servicer/Special Servicer Acceptability...............................................S-91
CERTAIN FEDERAL INCOME TAX CONSEQUENCES........................................................................S-91
General.....................................................................................................S-91
Original Issue Discount and Premium.........................................................................S-92
Additional Considerations...................................................................................S-94
ERISA CONSIDERATIONS...........................................................................................S-94
Plan Asset Regulation.......................................................................................S-94
Individual Exemption........................................................................................S-95
Other Exemptions............................................................................................S-96
Insurance Company Purchasers................................................................................S-97
LEGAL INVESTMENT...............................................................................................S-97
USE OF PROCEEDS................................................................................................S-97
PLAN OF DISTRIBUTION...........................................................................................S-97
LEGAL MATTERS..................................................................................................S-98
RATINGS........................................................................................................S-99
INDEX OF PRINCIPAL DEFINITIONS................................................................................S-100
APPENDIX I - MORTGAGE POOL INFORMATION........................................................................I-1
APPENDIX II - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS...................................................II-1
APPENDIX III - ADDITIONAL INFORMATION REGARDING THE MULTI-FAMILY LOANS........................................III-1
TERM SHEET......................................................................................................T-1
</TABLE>
S-9
<PAGE> 10
TRANSACTION OVERVIEW
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and in the Prospectus relating to the Offered Certificates in making
their investment decision. The following Transaction Overview does not include
all relevant information relating to the securities and underlying assets
described herein, particularly with respect to the risks and special
considerations involved with an investment in such securities, and is qualified
in its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and in the Prospectus. Prior to making an investment
decision, a prospective investor should carefully review this Prospectus
Supplement and the Prospectus in its entirety.
<TABLE>
<CAPTION>
=================================================================================================================================
INITIAL
AGGREGATE
CERTIFICATE
BALANCE OR RATINGS DESCRIPTION INITIAL
NOTIONAL (DCR/ WEIGHTED PRINCIPAL OF PASS- PASS-THROUGH
CLASS AMOUNT (1) S&P) (2) AVG. LIFE (3) WINDOW (3) THROUGH RATE RATE (4)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A1 $225,000,000 AAA/AAA 5.44 1-106 Fixed Rate 6.19%
- ---------------------------------------------------------------------------------------------------------------------------------
A2 $697,143,000 AAA/AAA 9.54 106-118 Fixed Rate 6.52%
- ---------------------------------------------------------------------------------------------------------------------------------
X $1,285,217,765 (a) AAA/AAAr N/A N/A Variable Rate I/O 1.22%
- ---------------------------------------------------------------------------------------------------------------------------------
B $67,474,000 AA/AA 9.80 118-118 Fixed Rate 6.58%
- ---------------------------------------------------------------------------------------------------------------------------------
C $64,261,000 A/A 9.80 118-118 Fixed Rate 6.75%
- ---------------------------------------------------------------------------------------------------------------------------------
D $64,261,000 BBB/BBB 9.87 118-119 Fixed Rate 7.10%
- ---------------------------------------------------------------------------------------------------------------------------------
E $25,704,000 BBB-/BBB- 9.88 119-119 Variable Rate 7.60%
- ---------------------------------------------------------------------------------------------------------------------------------
F(b) $51,409,000 NR/BB+ 10.24 119-141 Fixed Rate 7.18%
- ---------------------------------------------------------------------------------------------------------------------------------
G(b) $19,278,000 NR/BB 12.71 141-169 Fixed Rate 7.18%
- ---------------------------------------------------------------------------------------------------------------------------------
H(b) $12,852,000 NR/BB- 14.44 169-175 Fixed Rate 6.19%
- ---------------------------------------------------------------------------------------------------------------------------------
J(b) $25,705,000 NR/B 14.67 175-177 Fixed Rate 6.19%
- ---------------------------------------------------------------------------------------------------------------------------------
K(b) $9,639,000 NR/B- 14.77 177-179 Fixed Rate 6.19%
- ---------------------------------------------------------------------------------------------------------------------------------
L(b) $22,491,765 NR/NR 16.71 179-239 Fixed Rate 6.19%
=================================================================================================================================
</TABLE>
(1) In each case, subject to a variance of plus or minus 5%.
(2) See "Ratings" herein.
(3) The weighted average life (expressed in years) and the period
(expressed in months following the Closing Date and commencing
with the month of the first Distribution Date) during which
distributions of principal would be received (the "Principal
Window") set forth in the foregoing table is based on the
Maturity Assumptions (as defined herein) and a pricing speed
of 0% CPR (as defined herein) applied to each Mortgage Loan
during any period that it permits voluntary prepayments of
principal without imposing a Yield Maintenance Premium (as
defined herein) in connection therewith. See "YIELD
CONSIDERATIONS" and "MATURITY CONSIDERATIONS" herein.
(4) The Pass-Through Rates for the Class A1, Class A2, Class B,
Class C, Class D, Class F, Class G, Class H, Class J, Class K
and Class L Certificates for each Distribution Date will be
equal to the fixed rates per annum set forth in the table;
provided that in each case such Pass-Through Rate will not
exceed the WAC Rate for such Distribution Date. The initial
Pass-Through Rates for the Interest Only Certificates and the
Class E Certificates set forth in the table are approximate.
The Pass-Through Rates for the Interest Only Certificates and
the Class E Certificates are variable and, subsequent to the
initial Distribution Date, will be determined as described
under "DESCRIPTION OF THE CERTIFICATES -- Pass-Through Rates"
herein.
- ---------------
(a) Aggregate Notional Amount.
(b) Not offered hereby.
S-10
<PAGE> 11
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary are
defined elsewhere in this Prospectus Supplement or the Prospectus. An "INDEX OF
PRINCIPAL DEFINITIONS" is included at the end of this Prospectus Supplement and
the Prospectus.
<TABLE>
<CAPTION>
<S> <C>
DEPOSITOR.................................................. Morgan Stanley Capital I Inc., a Delaware corporation
(the "Depositor"). The Depositor's principal offices are
located at 1585 Broadway, New York, New York 10036,
telephone (212) 761-4700.
THE CERTIFICATES........................................... The Series 1998-HF1 Commercial Mortgage Pass-Through
Certificates (the "Certificates") will be issued
in 16 classes (each, a "Class") designated as: (i) the
Class A1 and Class A2 Certificates (collectively, the
"Class A Certificates"); (ii) the Class X Certificates (the
"Interest Only Certificates" or the "Class X Certificates"
and, collectively with the Class A Certificates, the
"Senior Certificates"); (iii) the Class B, Class C, Class
D, Class E, Class F, Class G, Class H, Class J, Class K
and Class L Certificates (collectively, the "Subordinate
Certificates" and, collectively with the Senior
Certificates, the "REMIC Regular Certificates"); and
(iv) the Class R-I, Class R-II and Class R-III Certificates
(collectively, the "REMIC Residual Certificates").
The Certificates will evidence beneficial ownership
interests in a trust fund (the "Trust Fund") to be formed
by the Depositor pursuant to a Pooling and Servicing
Agreement to be dated as of the Cut-off Date (the
"Pooling and Servicing Agreement"), among the Depositor,
the Master Servicer, the Special Servicer, the Trustee
and the Fiscal Agent. Initially, the assets of the
Trust Fund will consist primarily of 352 fixed-rate
mortgage loans (each, a "Mortgage Loan"). Each
Mortgage Loan is secured by a first mortgage lien on the
related borrower's fee and/or leasehold interest in a
commercial or multifamily real property (each, a
"Mortgaged Property" and collectively, the "Mortgaged
Properties"). As of the Cut-off Date, the Mortgage
Loans had an aggregate principal balance (the "Initial
Pool Balance") of $1,285,217,765, after application of
all payments due on or before such date, whether or not
received, and subject to a variance of plus or minus 5%.
The Trust Fund will also hold (i) any Mortgaged
Property acquired by foreclosure or deed in lieu of
foreclosure in respect of a Mortgage Loan that becomes
defaulted (any such property upon acquisition, an "REO
Property") and (ii) certain other related property, as
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described herein. The Certificates collectively
represent the entire interest in the Trust Fund.
Only the Senior Certificates and the Class B, Class C, Class D, and
Class E Certificates (collectively, the "Offered Certificates") are
offered hereby. The Class F, Class G, Class H, Class J, Class K,
Class L, Class R-I, Class R-II and Class R-III Certificates
(collectively, the "Private Certificates") have not been registered
under the Securities Act of 1933, as amended, and are not offered
hereby. Accordingly, to the extent this Prospectus Supplement contains
information regarding the terms of the Certificates, such information
is provided solely because of its potential relevance to a
prospective purchaser of an Offered Certificate.
SELLERS.................................................... Heller Financial Capital Funding, Inc. ("Heller"), as to
306 Mortgage Loans, representing 84.3% of the Initial
Pool Balance; and Morgan Stanley Mortgage Capital
Inc. ("MSMC" and, collectively with Heller, the
"Sellers"), as to 46 Mortgage Loans, representing 15.7%
of the Initial Pool Balance. Each Seller will sell its
Mortgage Loans on the Closing Date pursuant to an
agreement (each, a "Mortgage Loan Purchase Agreement"), which will be
assigned in relevant part to the Trustee. See "DESCRIPTION OF THE
MORTGAGE POOL -- The Sellers" herein.
MASTER SERVICER............................................ AMRESCO Services, L.P. The Master Servicer will be
obligated to make Advances (as defined herein) with
respect to the Mortgage Loans as described herein. See
"SERVICING OF THE MORTGAGE LOANS" and "DESCRIPTION OF THE
CERTIFICATES -- Advances" herein.
SPECIAL SERVICER........................................... Lennar Partners, Inc. The Special Servicer will be
responsible for performing certain servicing functions
with respect to Mortgage Loans that, in general, are in
default or as to which default is imminent, and for the
management of REO Properties. The Special Servicer
will be required to notify the Operating Adviser before
taking certain actions and to obtain the approval of the
Operating Adviser with respect to each Asset Status
Report (as defined herein), and may be replaced by the
Operating Adviser without cause, as described herein.
See "SERVICING OF THE MORTGAGE LOANS -- The Operating Adviser" and
" -- General" herein.
TRUSTEE.................................................... LaSalle National Bank, a nationally chartered bank. See
"DESCRIPTION OF THE CERTIFICATES -- The Trustee and the Fiscal Agent"
herein. The Trustee will
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be obligated to make Advances with respect to
the Mortgage Loans in certain circumstances
where the Master Servicer or Special Servicer
was required but failed to do so, as described
under "DESCRIPTION OF THE CERTIFICATES -- Advances" herein.
FISCAL AGENT............................................... ABN AMRO Bank N.V., a Netherlands banking
corporation, and the indirect corporate parent of the
Trustee. See "DESCRIPTION OF THE CERTIFICATES --
The Trustee and the Fiscal Agent." The Fiscal Agent
will be obligated to make Advances with respect to the
Mortgage Loans in certain circumstances where the
Master Servicer, Special Servicer and/or Trustee were
required but failed to do so, as described under
"DESCRIPTION OF THE CERTIFICATES -- Advances" herein.
OPERATING ADVISER.......................................... The holders of Certificates representing more than 50%
of the aggregate Certificate Balance of the most
subordinate Class of Principal Balance Certificates
outstanding at any time of determination (or, if the then-
aggregate Certificate Balance of such Class of
Certificates is less than 25% of the initial aggregate
Certificate Balance of such Class, of the next most
subordinate Class of Principal Balance Certificates) (in
any event, the "Controlling Class"), may appoint a
representative (the "Operating Adviser") as described
herein. The Special Servicer will be required to notify
the Operating Adviser before taking certain actions and
to obtain the approval of the Operating Adviser with
respect to each Asset Status Report (as defined herein),
and may be replaced by the Operating Adviser without
cause, as described herein. See "SERVICING OF THE
MORTGAGE LOANS -- The Operating Adviser" and
" -- General" herein.
CUT-OFF DATE............................................... March 1, 1998.
CLOSING DATE............................................... On or about March 27, 1998.
RECORD DATE................................................ With respect to each Class of Offered Certificates and
each Distribution Date, the last business day of the
calendar month immediately preceding the month in
which such Distribution Date occurs.
DISTRIBUTION DATE.......................................... The 15th day of each month or, if such 15th day is not a
business day, the business day immediately following
such 15th day, commencing in April, 1998.
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DETERMINATION DATE......................................... With respect to each Distribution Date, the tenth day of
the month in which such Distribution Date occurs (or, if
such tenth day is not a business day, the business day
immediately preceding such tenth day).
COLLECTION PERIOD.......................................... The "Collection Period" related to each Distribution
Date will begin (a) with respect to Monthly Payments,
on the day after the Determination Date in the month
preceding the month of such Distribution Date (or, in
the case of the first Distribution Date, the Cut-off Date)
and will end on the Determination Date in the month in
which the Distribution Date occurs; and (b) with respect
to all other collections on the Mortgage Loans and REO
Properties, on the day following the last day of the
previous Collection Period for such collections (or, in
the case of the first Distribution Date, the Cut-off Date)
and will end on the earlier of the Determination Date in
the month in which the Distribution Date occurs and the
fourth business day prior to such Distribution Date.
INTEREST ACCRUAL PERIOD.................................... With respect to each Class of Offered Certificates and
each Distribution Date, the calendar month immediately
preceding the month in which such Distribution Date
occurs. Interest payable in respect of each Class of
Offered Certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
REGISTRATION AND DENOMINATIONS............................. The Class A Certificates will initially be issued in book-
entry form in denominations of $5,000 initial Certificate
Balance and in any whole dollar denomination in excess
thereof. The Interest Only, Class B, Class C, Class D
and Class E Certificates will initially be issued in book-
entry form in denominations of $50,000 initial
Certificate Balance or Notional Amount, as applicable,
and in any whole dollar denomination in excess thereof.
Each Class of Offered Certificates will be represented by
one or more Certificates registered in the name of Cede
& Co., as nominee of The Depository Trust Company
("DTC"). No person acquiring an interest in an Offered
Certificate (any such person, a "Certificate Owner") will
be entitled to receive a fully registered physical
certificate (a "Definitive Certificate") representing such
interest, except under the limited circumstances
described herein and in the Prospectus. See "DESCRIPTION OF THE
CERTIFICATES -- General" herein, and "Description Of The Certificates
-- Book-Entry Registration" and "-- Definitive Certificates" in the
Prospectus.
CLEARANCE AND SETTLEMENT................................... Certificateholders must elect to hold their Offered
Certificates in book entry form, delivery of which will be
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made through the facilities of DTC (in the United States) and may be
made through the facilities of Cedel Bank, societe anonyme
("CEDEL") or Euroclear System ("Euroclear") (in Europe). Transfers
within DTC, CEDEL or Euroclear, as the case may be, will be in
accordance with the usual rules and operating procedures of the
relevant system. Crossmarket transfers between persons holding
directly or indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly through CEDEL or
Euroclear, on the other, will be effected in DTC through Citibank,
N.A. or The Chase Manhattan Bank, the relevant depositaries
of CEDEL and Euroclear, respectively.
SUBORDINATION.............................................. Credit enhancement for each Class of Offered
Certificates will be provided by those other Classes of
Certificates that are subordinate thereto with respect to
(a) rights to receive distributions of interest and
principal, to the extent described herein, and (b) the
allocation of Realized Losses (as defined herein)
incurred on the Mortgage Loans and Expense Losses
(also as defined herein), to the extent described herein.
As described herein, the REMIC Residual Certificates
are subordinate to the REMIC Regular Certificates; each
Class of Subordinate Certificates is subordinate to the
Senior Certificates and to each other Class of
Subordinate Certificates with an earlier alphabetical
Class designation (for example, the Class L Certificates
are subordinate to the Class K Certificates); and the
respective Classes of Senior Certificates rank pari passu
in entitlement to distributions of interest. The level of
credit enhancement available to any Class of Offered
Certificates will change over time as a result of (i) the
allocation, as described herein, of principal payments on
the Mortgage Loans (including scheduled payments,
prepayments, liquidations of Mortgage Loans or
associated REO Properties or the sale of defaulted
Mortgage Loans) and (ii) the allocation of any Realized
Losses and Expense Losses to one or more Classes of
Subordinate Certificates in the order of priority
described herein. After the aggregate Certificate
Balance of the Subordinate Certificates has been reduced
to zero, Realized Losses and Expense Losses will be
allocated pro rata among the Class A1 and Class A2
Certificates.
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DESCRIPTION OF THE
CERTIFICATES............................................. The Certificates will have the following characteristics.
A. CERTIFICATE BALANCES
AND NOTIONAL AMOUNTS ................................ Upon initial issuance, the Class A1, Class A2, Class B,
Class C, Class D, Class E, Class F, Class G, Class H,
Class J, Class K and Class L Certificates (collectively,
the "Principal Balance Certificates") will have the
following aggregate Certificate Balances (in each case,
subject to a variance of plus or minus 5%):
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APPROXIMATE
INITIAL APPROXIMATE
AGGREGATE PERCENTAGE OF
CERTIFICATE INITIAL
CLASS BALANCE POOL BALANCE
----- ------- ------------
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Class A1 $225,000,000 17.51%
Class A2 697,143,000 54.24
Class B 67,474,000 5.25
Class C 64,261,000 5.00
Class D 64,261,000 5.00
Class E 25,704,000 2.00
Class F 51,409,000 4.00
Class G 19,278,000 1.50
Class H 12,852,000 1.00
Class J 25,705,000 2.00
Class K 9,639,000 0.75
Class L 22,491,765 1.75
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The "Certificate Balance" of any Principal Balance Certificate
outstanding at any time will equal the then-maximum amount that the
holder will be entitled to receive in respect of principal out of
future cash flow on the Mortgage Loans and other assets included in
the Trust Fund. The initial Certificate Balance of any Principal
Balance Certificate will be set forth on the face thereof. On each
Distribution Date, the Certificate Balance of each Principal Balance
Certificate will be reduced by any distributions of principal
actually made on such Certificate on such Distribution Date and will
be further reduced by any Realized Losses or Expense Losses allocated
to such Certificate on such Distribution Date. See "DESCRIPTION OF
THE CERTIFICATES -- Distributions" and "-- Subordination; Allocation
of Losses and Certain Expenses" herein.
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The Interest Only Certificates will not have
Certificate Balances; each such Certificate will
instead represent the right to receive
distributions of interest accrued as described
herein on a notional principal amount (a
"Notional Amount"). The aggregate Notional
Amount of the Interest Only Certificates will
equal 100% of the aggregate Stated Principal
Balance (as defined herein) of all the Mortgage
Loans outstanding from time to time. The
Notional Amount of each Interest Only
Certificate is used solely for the purpose of
determining the amount of interest to be
distributed on such Certificate and does not
represent the right to receive any distributions
of principal.
The REMIC Residual Certificates will not have
Certificate Balances.
A Class of Offered Certificates will be
considered outstanding until its aggregate
Certificate Balance or Notional Amount, as the
case may be, is reduced to zero; provided,
however, that reimbursements of any previously
allocated Realized Losses and Expense Losses may
thereafter still be made with respect thereto.
See "DESCRIPTION OF THE CERTIFICATES --
Certificate Balances and Notional Amounts" and
"-- Distributions" herein.
B. PASS-THROUGH RATES.................................... The Pass-Through Rates applicable to the Class A1,
Class A2, Class B, Class C and Class D Certificates
will, at all times, be equal to 6.19%, 6.52%, 6.58%,
6.75% and 7.10% per annum, respectively; provided,
however, that each such Pass-Through Rate will not
exceed the WAC Rate for such Distribution Date.
The Pass-Through Rates on the Class E Certificates for
the initial Distribution Date will equal approximately
7.60%. For each subsequent Distribution Date, the
Pass-Through Rate on the Class E Certificates will be a
per annum rate equal to the WAC Rate minus 0.17%.
The Pass-Through Rate applicable to the Interest Only
Certificates for the initial Distribution Date will equal
approximately 1.22% per annum. The Pass-Through
Rate applicable to the Interest Only Certificates for
each subsequent Distribution Date will, in general,
equal the excess, if any, of (i) the WAC Rate, over (ii)
the weighted average of the Pass-Through Rates
applicable to the respective Classes of Principal
Balance Certificates for such Distribution Date, the
relevant weighting to be on the basis of the respective
aggregate Certificate Balances of such Classes of
Certificates
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immediately prior to such Distribution Date.
The "WAC Rate" for any Distribution Date is the
weighted average of the Net Mortgage Rates in
effect for the Mortgage Loans as of their Due
Dates in the month preceding the month in which
such Distribution Date occurs weighted on the
basis of their respective Stated Principal
Balances on such Due Date.
The "Net Mortgage Rate" with respect to any
Mortgage Loan will, in general, be a per annum
rate equal to the related Mortgage Rate in
effect from time to time, minus the applicable
Administrative Cost Rate. However, for purposes
of calculating Pass-Through Rates, the Mortgage
Rate for any Mortgage Loan will be determined
without regard to any post-Closing Date
modification, waiver or amendment of the terms
of such Mortgage Loan. In addition, because the
Certificates accrue interest on the basis of a
360-day year consisting of twelve 30-day months,
when calculating the Pass-Through Rate for each
Class of Certificates for each Distribution
Date, the Mortgage Rate of any Mortgage Loan
that accrues interest other than on the basis of
a 360-day year consisting of twelve 30-day
months (a "Non-30/360 Loan") will be
appropriately adjusted to reflect such
difference. See "DESCRIPTION OF THE CERTIFICATES
-- Pass-Through Rates" and "SERVICING OF THE
MORTGAGE LOANS -- Servicing and Other
Compensation and Payment of Expenses" herein.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL ................... The total of all payments or other collections (or
advances in lieu thereof) on or in respect of the
Mortgage Loans (exclusive of Prepayment Premiums)
that are available for distributions of interest on and
principal of the Certificates on any Distribution Date is
herein referred to as the "Available Distribution
Amount" for such date. See "DESCRIPTION OF THE
CERTIFICATES -- Distributions -- The Available Distribution
Amount" herein.
On each Distribution Date, the Trustee will apply the
Available Distribution Amount for such date for the
following purposes and in the following order of
priority:
(1) to pay interest to the holders of the
respective Classes of Senior Certificates, up to
an amount equal to, and pro rata as among such
Classes in accordance with, Distributable
Certificate Interest in respect of each such
Class of
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Certificates for such Distribution Date;
(2) to pay principal from the Principal
Distribution Amount (as defined below) with
respect to the Mortgage Loans for such
Distribution Date, first to the holders of the
Class A1 Certificates and second to the holders
of the Class A2 Certificates in each case, up to
an amount equal to the lesser of (i) the
then-outstanding aggregate Certificate Balance
of such Class of Certificates and (ii) the
remaining portion of such Principal Distribution
Amount;
(3) to reimburse the holders of the respective
Classes of Class A Certificates, up to an amount
equal to, and pro rata as among such Classes in
accordance with, (a) the respective amounts of
Realized Losses and Expense Losses, if any,
previously allocated to such Classes of
Certificates and for which no reimbursement has
previously been paid, plus (b) all unpaid
interest on such amounts (compounded monthly) at
the respective Pass-Through Rates of such
Classes; and
(4) to make payments on the Subordinate
Certificates and the REMIC Residual Certificates
as contemplated below;
provided that, on each Distribution Date after
the aggregate Certificate Balance of the
Subordinate Certificates has been reduced to
zero, the payments of principal to be made as
contemplated by clause (2) above with respect to
the Class A Certificates will be so made to the
holders of the respective Classes of such
Certificates, up to an amount equal to, and pro
rata as among such Classes in accordance with,
the respective then-outstanding aggregate
Certificate Balances of such Classes of
Certificates.
On each Distribution Date, following the
above-described distributions on the Senior
Certificates, the Trustee will apply the
remaining portion, if any, of the Available
Distribution Amount for such date to make
payments to the holders of each of the
respective Classes of Subordinate Certificates,
in alphabetical order of Class designation, in
each case for the following purposes and in the
following order of priority (i.e., payments
under clauses (1), (2) and (3) below, in that order,
to the holders of the Class B Certificates, then
payments under clauses (1), (2) and
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(3) below, in that order, to the holders of
the Class C Certificates, and in such manner
with respect to the Class D, Class E, Class F,
Class G, Class H, Class J, Class K and
Class L Certificates):
(1) to pay interest to the holders of the
particular Class of Certificates, up to an
amount equal to the Distributable Certificate
Interest in respect of such Class of
Certificates for such Distribution Date;
(2) if the aggregate Certificate Balance of the
Class A Certificates and each Class of
Subordinate Certificates, if any, with an
earlier alphabetical Class designation has been
reduced to zero, to pay principal to the holders
of the particular Class of Certificates, up to
an amount equal to the lesser of (a) the
then-outstanding aggregate Certificate Balance
of such Class of Certificates and (b) the
aggregate of the remaining Principal
Distribution Amount; and
(3) to reimburse the holders of the particular
Class of Certificates, up to an amount equal to
(a) all Realized Losses and Expense Losses, if
any, previously allocated to such Class of
Certificates and for which no reimbursement has
previously been paid, plus (b) all unpaid
interest on such amounts (compounded monthly) at
the respective Pass-Through Rates of such
Classes.
Any portion of the Available Distribution Amount
for any Distribution Date that is not otherwise
payable to the holders of REMIC Regular
Certificates as contemplated above, will be paid
to the holders of the Class R-I Certificates.
Reimbursement of previously allocated Realized
Losses and Expense Losses will not constitute
distributions of principal for any purpose and
will not result in an additional reduction in
the Certificate Balances of the Certificates in
respect of which any such reimbursement is made.
The "Distributable Certificate Interest" in
respect of any Class of REMIC Regular
Certificates for any Distribution Date will
equal the Accrued Certificate Interest in
respect of such Class of Certificates for such
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Distribution Date, reduced (to not less than
zero) by such Class of Certificates' allocable
share (calculated as described herein) of any
Net Aggregate Prepayment Interest Shortfall (as
defined herein) for such Distribution Date, and
increased by any Class Interest Shortfall in
respect of such Class of Certificates for such
Distribution Date. The "Accrued Certificate
Interest" in respect of any Class of REMIC
Regular Certificates for any Distribution Date
will equal the amount of interest for the
applicable Interest Accrual Period accrued at
the applicable Pass-Through Rate on the
aggregate Certificate Balance or Notional
Amount, as the case may be, of such Class of
Certificates outstanding immediately prior to
such Distribution Date. Accrued Certificate
Interest will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
See "-- DESCRIPTION OF THE CERTIFICATES --
Distributions -- Distributable Certificate
Interest" and "-- Prepayment Interest
Shortfalls" herein.
The "Class Interest Shortfall" with respect to
any Class of REMIC Regular Certificates for any
Distribution Date will equal: (a) in the case of
the initial Distribution Date, zero; and (b) in
the case of any subsequent Distribution Date,
the sum of (i) the excess, if any, of (A) all
Distributable Certificate Interest in respect of
such Class of Certificates for the immediately
preceding Distribution Date, over (B) all
distributions of interest made with respect to
such Class of Certificates on the immediately
preceding Distribution Date, plus (ii) to the
extent permitted by applicable law, other than
in the case of the Interest Only Certificates,
one month's interest on any such excess at the
Pass-Through Rate applicable to such Class of
Certificates for the current Distribution Date.
The "Principal Distribution Amount" for each
Distribution Date will, in general, equal the
aggregate of the following:
(a) the principal portions of all Monthly
Payments (other than Balloon Payments (as
defined herein)) and any Assumed Monthly
Payments due or deemed due, as the case may be,
in respect of the Mortgage Loans for their Due
Dates (as defined herein) occurring during the
related Collection Period; and
(b) all payments (including voluntary principal
prepayments and Balloon Payments) and other
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collections received on the Mortgage Loans
during the related Collection Period that were
identified and applied by the Master Servicer as
recoveries of principal thereof, in each case
net of any portion of such amounts that
represents a payment or other recovery of the
principal portion of any Monthly Payment (other
than a Balloon Payment) due, or the principal
portion of any Assumed Monthly Payment deemed
due, in respect of the related Mortgage Loan on
a Due Date during or prior to the related
Collection Period and not previously paid or
recovered.
The "Monthly Payment" for any Mortgage Loan
will, in general, be the scheduled payment of
principal and/or interest due thereon from time
to time (taking into account any waiver,
modification or amendment of the terms of such
Mortgage Loan, whether agreed to by the Master
Servicer or Special Servicer or in connection
with a bankruptcy or similar proceeding
involving the related borrower).
An "Assumed Monthly Payment" is an amount deemed
due in respect of: (i) any Balloon Loan (as
defined herein) that is delinquent in respect of
its Balloon Payment beyond the end of the
Collection Period in which its stated maturity
date occurs; or (ii) any Mortgage Loan as to
which the related Mortgaged Property has become
an REO Property. The Assumed Monthly Payment for
any such Balloon Loan deemed due on its stated
maturity date and on each successive Due Date
that it remains or is deemed to remain
outstanding shall equal the Monthly Payment that
would have been due thereon on such date if the
related Balloon Payment had not come due, but
rather such Mortgage Loan had continued to
amortize in accordance with such loan's
amortization schedule, if any, in effect
immediately prior to maturity and had continued
to accrue interest in accordance with its terms
in effect immediately prior to maturity. The
Assumed Monthly Payment for any such Mortgage
Loan as to which the related Mortgaged Property
has become an REO Property, deemed due on each
Due Date for so long as such REO Property
remains part of the Trust Fund, shall equal the
Monthly Payment (or, in the case of a Balloon
Loan described in the prior sentence, the
Assumed Monthly Payment) due on the last Due
Date prior to the acquisition of such REO
Property.
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DISTRIBUTIONS OF
PREPAYMENT PREMIUMS................................. Any Prepayment Premium collected with respect to a
Mortgage Loan during any particular Collection Period
will be distributed on the following Distribution Date as
follows: The holders of the respective Classes of
Principal Balance Certificates (other than the Class F,
Class G, Class H, Class J, Class K and Class L
Certificates) then entitled to distributions of principal
from the Principal Distribution Amount for such
Distribution Date, will be entitled to an aggregate
amount (allocable among such Classes, if more than
one, as described below) equal to the lesser of (a) such
Prepayment Premium, and (b) such Prepayment
Premium multiplied by a fraction, the numerator of
which is equal to the excess, if any, of the Pass-
Through Rate applicable to the most senior of such
Classes of Certificates then outstanding (or, in the case
of two Classes of Class A Certificates, the one with the
earlier payment priority), over the relevant Discount
Rate (as defined herein), and the denominator of which
is equal to the excess, if any, of the Mortgage Rate for
the prepaid Mortgage Loan, over the relevant Discount
Rate. If there is more than one Class of Principal
Balance Certificates entitled to distributions of
principal from the Principal Distribution Amount for
such Distribution Date, the aggregate amount described
in the preceding sentence shall be allocated among
such Classes on a pro rata basis in accordance with the
relative amounts of such distributions of principal. Any
portion of such Prepayment Premium that is not so
distributed to the holders of such Principal Balance
Certificates will be distributed to the holders of the
Interest Only Certificates. See "Description of the
Certificates -- Distributions -- Distributions of
Prepayment Premiums" herein.
APPRAISAL REDUCTIONS.................................. As soon as reasonably practicable, and in any event
within 60 days, following the earliest of (i) the date 120
days after the occurrence of any delinquency in
payment with respect to a Mortgage Loan if such
delinquency remains uncured, (ii) the date 90 days after
the related borrower files a bankruptcy petition or a
receiver is appointed in respect of the related
Mortgaged Property, provided such petition or
appointment is still in effect, (iii) the effective date of
any modification to the maturity date, Mortgage Rate,
principal balance, amortization term or payment
frequency (each, a "Money Term") of a Mortgage Loan,
other than the extension of the date that a Balloon
Payment is due for a period of less than six
months from the initial maturity date, and (iv)
the date 30 days following the date the related
Mortgaged Property becomes an REO Property
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(each of (i), (ii), (iii) and (iv), an
"Appraisal Event"; and the affected Mortgage
Loan, a "Required Appraisal Loan"), the Special
Servicer will be required to obtain an MAI
appraisal of the related Mortgaged Property or
REO Property, as the case may be (or, at its
discretion, if the Stated Principal Balance of
the particular Required Appraisal Loan is less
than or equal to $1,000,000, to perform an
internal valuation of such property). As a
result of such appraisal or internal valuation,
an "Appraisal Reduction" may be created.
The Appraisal Reduction for any Required
Appraisal Loan, will be an amount, calculated as
of the first Determination Date that is at least
fifteen days after the date on which an
appraisal report or internal valuation is
obtained, equal to the excess, if any, of (a)
the sum of (i) the Stated Principal Balance of
such Mortgage Loan, (ii) to the extent not
previously advanced by the Master Servicer, the
Trustee or the Fiscal Agent, all unpaid interest
on the Mortgage Loan, (iii) all related
unreimbursed Advances and interest on such
Advances at the Advance Rate (as defined herein)
and (iv) all currently due and unpaid real
estate taxes and assessments, insurance premiums
and, if applicable, ground rents in respect of
the related Mortgaged Property or REO Property,
as the case may be (net of any amounts escrowed
for such items), over (b) 90% of the appraised
value (net of any prior mortgage liens) of the
related Mortgaged Property or REO Property as
determined by such appraisal or internal
valuation. An Appraisal Reduction will be
reduced to zero as of the date the related
Mortgage Loan is brought current under the then
current terms of the Mortgage Loan for at least
three consecutive months or is paid in full,
liquidated, repurchased, replaced or otherwise
disposed of.
The existence of an Appraisal Reduction
proportionately reduces the Master Servicer's,
the Trustee's or the Fiscal Agent's, as the case
may be, advancing obligation in respect of
delinquent principal and interest on the related
Mortgage Loan, which may result in a reduction
in current distributions in respect of the
then-most subordinate Class of Principal Balance
Certificates. See "DESCRIPTION OF THE
CERTIFICATES -- Advances--P&I Advances"
herein.
</TABLE>
S-24
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<TABLE>
<CAPTION>
<S> <C>
ALLOCATION OF REALIZED LOSSES AND EXPENSE
LOSSES.............................................. As and to the extent described herein, Realized Losses
and Expense Losses will generally be allocated with
respect to each Distribution Date to the Class L, Class
K, Class J, Class H, Class G, Class F, Class E, Class D,
Class C and Class B Certificates, in that order, and
then to the Class A1 and Class A2 Certificates, pro
rata, in each case by reducing the aggregate Certificate
Balance of such Class of Certificates by the amount so
allocated thereto. See "DESCRIPTION OF
CERTIFICATES -- Subordination; Allocation of Losses
and Certain Expenses" herein.
PREPAYMENT INTEREST SHORTFALLS........................ If a borrower prepays a Mortgage Loan, in whole or in
part, prior to the Determination Date in any calendar
month, the amount of interest at the related Net
Mortgage Rate accrued on such prepayment, in general,
from the beginning of such calendar month to, but not
including, the date of prepayment (or any later date
through which interest accrues) will, to the extent
actually collected, constitute a "Prepayment Interest
Excess". Conversely, if a borrower prepays a Mortgage
Loan, in whole or in part, after the Determination Date
in any calendar month and does not pay interest on
such prepayment through, in general, the end of such
calendar month, then the shortfall in a full month's
interest (net of related Master Servicing Fees and
Trustee Fees) on such prepayment will constitute a
"Prepayment Interest Shortfall".
Prepayment Interest Excesses collected on the
Mortgage Loans during any Collection Period will first
be applied to offset Prepayment Interest Shortfalls,
incurred in respect of the Mortgage Loans during such
Collection Period and, to the extent not needed for such
purposes, will be retained by the Master Servicer as
additional servicing compensation. The Master
Servicer will be obligated to cover, out of its own funds,
without right of reimbursement, to the extent of that
portion of its Master Servicing Fees for the related
Collection Period, any Prepayment Interest Shortfalls in
respect of the Mortgage Loans that are not so offset by
Prepayment Interest Excesses. Any payment so made
by the Master Servicer to cover such shortfalls will
constitute a "Compensating Interest Payment". The
aggregate of all Prepayment Interest Shortfalls incurred
in respect of the Mortgage Loans during any Collection
Period that are neither offset by Prepayment Interest
Excesses collected on the Mortgage Loans during such
Collection Period nor covered by a Compensating
Interest Payment made by the Master Servicer, shall
constitute the "Net
</TABLE>
S-25
<PAGE> 26
<TABLE>
<CAPTION>
<S> <C>
Aggregate Prepayment Interest Shortfall" for the
related Distribution Date.
Any Net Aggregate Prepayment Interest Shortfall
for a Distribution Date will be allocated among
the respective Classes of REMIC Regular
Certificates, on a pro rata basis, in the ratio
that the Accrued Certificate Interest with
respect to any such Class of Certificates for
such Distribution Date, bears to the total of
the Accrued Certificate Interest with respect to
all Classes of REMIC Regular Certificates for
such Distribution Date. The Distributable
Certificate Interest in respect of any Class of
REMIC Regular Certificates will be reduced to
the extent that any Net Aggregate Prepayment
Interest Shortfalls are allocated thereto. See
"SERVICING OF THE MORTGAGE LOANS -- Servicing
and Other Compensation and Payment of Expenses"
herein.
OPTIONAL TERMINATION.................................. The Depositor, the Master Servicer, the Special
Servicer, majority holders of the Controlling Class and
any holder of a majority interest in the Class R-I
Certificates, will each have the option to purchase, in
whole but not in part, the Mortgage Loans and any
other property remaining in the Trust Fund on any
Distribution Date as of which the aggregate Certificate
Balance of all Classes of Principal Balance Certificates
then-outstanding is less than or equal to 1% of the
Initial Pool Balance. Such purchase will be at the price
described herein. See "DESCRIPTION OF THE
CERTIFICATES--Optional Termination" herein.
ADMINISTRATIVE COST RATE.............................. Each of the Master Servicer and the Trustee will be
entitled to receive a monthly fee (a "Master Servicing
Fee" and a "Trustee Fee", respectively) in respect of
each Mortgage Loan (payable out of payments (or
advances in lieu thereof) and other collections of
interest thereon) based upon that portion of the interest
accrued on such Mortgage Loan from time to time.
The administrative costs on each Mortgage Loan will
equal the sum of the related Master Servicing Fee and
the Trustee Fee (collectively, expressed as a per annum
rate, the "Administrative Cost Rate"). With respect to
324 Mortgage Loans, representing 91.4% of the Initial
Pool Balance, the "Administrative Cost Rate" for each
Mortgage Loan will equal .0785% per annum and, with
respect to the remainder of the Mortgage Loans, the
"Administrative Cost Rate" for each Mortgage Loan
will range from .1485% to .1785% per annum, as set
forth in Appendix II hereto. As of the Cut-off Date, the
weighted average Administrative Cost Rate for the
Mortgage Loans was .0861% per annum. The Master
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Servicer will be obligated to pay the fees of
its subservicers out of its Master Servicing
Fees. For a discussion of additional Master
Servicer compensation, as well as Special
Servicer compensation, see "SERVICING OF THE
MORTGAGE LOANS--Servicing and Other Compensation
and Payment of Expenses" herein.
ADVANCES.............................................. As and to the extent described herein, the Master
Servicer, the Trustee and the Fiscal Agent will each be
obligated to make advances ("Advances") in respect of
delinquent payments of principal (other than the
principal portion of Balloon Payments) and/or interest
on the Mortgage Loans (each, a "P&I Advance") and
the Master Servicer, the Special Servicer, the Trustee
and the Fiscal Agent will each be obligated to cover
certain servicing expenses (each, a "Servicing
Advance") in accordance with the provisions set forth
in the Pooling and Servicing Agreement. See
DESCRIPTION OF THE CERTIFICATES -- Advances" herein. If the
Master Servicer fails to make any Advance that it is
obligated to make pursuant to the Pooling and Servicing
Agreement, the Trustee will be required to make such
Advance; if the Trustee fails to make any Advance that
it is obligated to make pursuant to the Pooling
and Servicing Agreement, the Fiscal Agent will be
required to make such Advance.
Each of the Master Servicer, the Special Servicer, the
Trustee and the Fiscal Agent, as applicable, will be
obligated to make Advances only to the extent that it
determines, in its reasonable discretion, that such
Advances are ultimately recoverable from future
payments and other collections on the related Mortgage
Loan or REO Property. Such determination will be
conclusive and binding on the Certificateholders.
The Master Servicer, the Special Servicer, the Trustee
and the Fiscal Agent will each be entitled, with respect
to any Advance made thereby, to receive interest
accrued on the amount of such Advance for so long as
it is outstanding at a rate per annum (the "Advance
Rate") equal to the "prime rate" as published in the
"Money Rates" section of The Wall Street Journal, as
such "prime rate" may change from time to time. Such
interest on any Advance will be payable to the Master
Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as the case may be, first out of default interest
and late payment charges actually collected by the
Master Servicer or the Special Servicer (and not
retainable by any Sub-Servicer) in respect of the
related
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Mortgage Loan and, to the extent such amounts
are insufficient, in connection with or at any
time following the reimbursement of such
Advance, out of any amounts then on deposit in
the Collection Account. To the extent not offset
by default interest and late payment charges
actually collected in respect of any defaulted
Mortgage Loan, interest accrued on outstanding
Advances made in respect thereof will result in
a reduction in amounts payable on the
Certificates. See "DESCRIPTION OF THE
CERTIFICATES--Advances" herein.
CERTAIN YIELD AND PREPAYMENT
CONSIDERATIONS...................................... The yield on the Offered Certificates of each Class
thereof will depend on, among other things, the Pass-
Through Rate for such Certificates.
The yield on any Principal Balance Certificate that is
purchased at a discount or premium will also be
affected by the rate and timing of distributions in
respect of principal on such Certificate, which in turn
will be affected by (i) the rate and timing of principal
payments (including principal prepayments) on the
Mortgage Loans and (ii) the extent to which such
principal payments are applied on any Distribution
Date in reduction of the Certificate Balance of such
Certificate. An investor that purchases any Principal
Balance Certificate at a discount should consider the
risk that a slower than anticipated rate of principal
payments on such Certificate will result in an actual
yield that is lower than such investor's expected yield.
An investor that purchases any Principal Balance
Certificate at a premium should consider the risk that a
faster than anticipated rate of principal payments on
such Certificate will result in an actual yield that is
lower than such investors expected yield. Insofar as an
investor's initial investment in any Principal Balance
Certificate is returned in the form of payments of
principal thereon, there can be no assurance that such
amounts can be reinvested in a comparable alternative
investment with a comparable yield. See
"DESCRIPTION OF THE CERTIFICATES--Distributions -
Application of the Available Distribution Amount" and
"--Distributions--Principal Distribution Amount" herein.
The Interest Only Certificates are interest-only
Certificates and are not entitled to any distributions in
respect of principal. The yield to maturity of the
Interest Only Certificates will be especially sensitive to
the prepayment, repurchase, extension, default and
</TABLE>
S-28
<PAGE> 29
<TABLE>
<CAPTION>
<S> <C>
recovery experience on the Mortgage Loans, which
prepayment, repurchase, default and recovery
experience may fluctuate significantly from time
to time. A rate of principal payments and
liquidations on the Mortgage Loans that is more
rapid than expected by investors will have a
material negative effect on the yield to
maturity of the Interest Only Certificates. See
"YIELD CONSIDERATIONS--Yield Sensitivity of
the Interest Only Certificates" herein.
The actual rate of prepayment of principal on
the Mortgage Loans cannot be predicted. The
investment performance of the Offered
Certificates may vary materially and adversely
from the investment expectations of investors
due to prepayments on the Mortgage Loans being
higher or lower than anticipated by investors.
The actual yield to the holder of an Offered
Certificate may not be equal to the yield
anticipated at the time of purchase of the
Certificate or, notwithstanding that the actual
yield is equal to the yield anticipated at that
time, the total return on investment expected by
the investor or the expected weighted average
life of the Certificate may not be realized. For
a discussion of certain factors affecting
prepayment of the Mortgage Loans, including the
effect of Prepayment Premiums, see "YIELD
CONSIDERATIONS" herein. In deciding whether to
purchase any Offered Certificates, an investor
should make an independent decision as to the
appropriate prepayment assumptions to be used.
CERTIFICATE RATINGS................................... It is a condition of the issuance of the Offered
Certificates that they receive the following credit
ratings from Duff & Phelps Credit Rating Co. ("DCR")
and/or Standard & Poor's Ratings Services ("S&P" and,
together with DCR, the "Rating Agencies"):
</TABLE>
S-29
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class DCR S&P
-----
Class A1............ AAA AAA
Class A2............ AAA AAA
Class X ............ AAA AAAr
Class B ............ AA AA
Class C ............ A A
Class D ............ BBB BBB
Class E ............ BBB- BBB-
In addition, it is a condition of the issuance
of the Private Certificates that the Class F,
Class G, Class H, Class J and Class K
Certificates be rated "BB+", "BB", "BB-", "B",
and "B-", respectively, by S&P. The Class L
Certificates and the REMIC Residual Certificates
will be unrated by S&P, and the Class F, Class
G, Class H, Class J, Class K and Class L
Certificates and the REMIC Residual Certificates
will be unrated by DCR.
A securities rating addresses the likelihood of
the receipt by Certificateholders of
distributions due on their Certificates. The
rating takes into consideration the
characteristics of the Mortgage Loans and the
structural and legal aspects associated with the
Certificates, including, if applicable,
distribution of all principal by the
Distribution Date in March 2030 (the "Final
Rated Distribution Date"). Each security rating
assigned to the Certificates should be evaluated
independently of any other security rating.
The ratings on the Offered Certificates do not
represent any assessment of (i) the likelihood
or frequency of principal prepayments on the
Mortgage Loans or the corresponding effect on
yield to investors, (ii) the degree to which
such prepayments might differ from those
originally anticipated or (iii) whether and to
what extent Prepayment Premiums will be
received. A security rating does not represent
any assessment of the yield to maturity that
investors may experience or the possibility that
the holders of Interest Only Certificates might
not fully recover their investment in the event
of rapid prepayments of the Mortgage Loans
(including both voluntary and involuntary
prepayments). In general, the ratings address
credit risk and not prepayment risk. As
described herein, the amounts payable with
respect to the Interest Only Certificates
consist only of interest and a portion of
Prepayment Premiums actually collected. The
aggregate Notional Amount upon which interest in
respect of the Interest
</TABLE>
S-30
<PAGE> 31
<TABLE>
<CAPTION>
<S> <C>
Only Certificates is calculated may be reduced
by Realized Losses, Expense Losses and
prepayments of principal, whether voluntary or
involuntary. If all of the Mortgage Loans 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 such Certificateholders would
nevertheless have been paid, and such result
will be consistent with the "AAA/AAAr" rating
received on the Interest Only Certificates
because the rating addresses only the obligation
to pay interest timely on the respective
Notional Amounts of such Certificates as so
reduced from time to time. Accordingly, the
ratings of the Interest Only Certificates should
be evaluated independently from similar ratings
on other types of securities.
A credit 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. See "RATINGS" and "RISK
FACTORS AND OTHER SPECIAL CONSIDERATIONS"
herein.
THE MORTGAGE POOL..................................... The Mortgage Pool will consist of 352 Mortgage Loans
with an Initial Pool Balance of $1,285,217,765, subject
to a permitted variance of plus or minus 5%. The Cut-
off Date Balances of the Mortgage Loans (that is, in
each case, its principal balance outstanding as of the
Cut-off Date, after application of all payments of
principal due on or before such date, whether or not
received) range from $498,113 to $32,909,270, and the
Mortgage Loans have an average Cut-off Date Balance
of $3,651,187. All numerical information provided
herein with respect to the Mortgage Loans is provided
on an approximate basis. All weighted average
information regarding the Mortgage Loans reflects
weighting of the Mortgage Loans by Cut-off Date
Balance. For purposes of calculations herein, each
Mortgage Loan is deemed to be secured by a Mortgage
on one Mortgaged Property, whether or not such
Mortgaged Property consists of more than one parcel of
real property. See "DESCRIPTION OF THE
MORTGAGE POOL--Certain Terms and Characteristics of
the Mortgage Loans -- Multiple Mortgaged Properties" herein.
Substantially all of the Mortgage Loans are non-
recourse obligations of the related borrowers, and
prospective investors should consider all of them to be
non-recourse. No Mortgage Loan will be insured or
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
guaranteed by any governmental entity or private
insurer, or by any other person.
Each Mortgage Loan is secured by a first
mortgage lien on the borrower's fee simple (or,
in 14 cases, which represent 4.7% of the Initial
Pool Balance, leasehold or partial leasehold)
estate in an income-producing real property
(each, a Mortgaged Property).
Set forth below are the number of Mortgage
Loans, and the approximate percentage of the
Initial Pool Balance represented by such
Mortgage Loans, that are secured by Mortgaged
Properties operated for each indicated purpose:
</TABLE>
<TABLE>
<CAPTION>
Percentage of Number of
Initial Pool Mortgage Loans
Property Type Balance
------------- ------- --------------
<S> <C> <C> <C>
Multifamily............. 31.68% 96
Retail.................. 20.41% 57
Self-Storage............ 15.64% 86
Manufactured Housing
Communities............. 11.35% 56
Office.................. 9.59% 26
Hospitality............. 5.58% 9
Industrial.............. 4.66% 18
Congregate Care......... 1.09% 4
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
For purposes of the foregoing, Mortgaged
Properties with multiple uses have been
categorized according to their predominant use.
Set forth below are the number of Mortgage
Loans, and the approximate percentage of the
Initial Pool Balance represented by such
Mortgage Loans, that are secured by Mortgaged
Properties located in the three states with the
highest concentrations of Mortgaged Properties.
</TABLE>
S-32
<PAGE> 33
<TABLE>
<CAPTION>
Percentage of Number of
Initial Pool Mortgage
State Balance Loans
----- ------- -----
<S> <C> <C> <C>
California ........ 25.19% 84
Massachusetts ..... 8.86% 24
Arizona ........... 7.15% 28
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
The remaining Mortgaged Properties are located
throughout 33 other states. No other state has a
concentration of Mortgaged Properties that
represents security for more than 5.2% of the
Initial Pool Balance. See Appendix I hereto.
Sixteen separate groups of Mortgage Loans (the
"Cross-Collateralized Mortgage Loans") are,
solely as among the Mortgage Loans in each such
group, cross-collateralized with each other.
Each such group of Mortgage Loans represents
between 1.5% and 0.2% of the Initial Pool
Balance and all such groups of Mortgage Loans
collectively represent 10.1% of the Initial Pool
Balance. See "DESCRIPTION OF THE MORTGAGE POOL
-- Cross-Collateralized Loans" herein and
Appendix II hereto.
Several groups of Mortgage Loans are made to the
same borrower or have related borrowers that are
affiliated with one another through partial or
complete direct or indirect common ownership.
The three largest of these groups represent
3.4%, 2.6% and 2.4%, respectively, of the
Initial Pool Balance. See "DESCRIPTION OF THE
MORTGAGE POOL -- Borrower Concentrations" herein
and Appendix II hereto.
Thirteen additional Mortgage Loans (exclusive of
the Mortgage Loans described in the previous
paragraph) are, in each case, secured by one or
more Mortgages encumbering multiple real
properties. Each such Mortgage Loan represents
between 1.2% and 0.1% of the Initial Pool
Balance, and all such Mortgage Loans
collectively represent 6.1% of the Initial Pool
Balance. See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Terms and Characteristics of
the Mortgage Loans--Multiple Mortgaged
Properties" herein and Appendix II hereto.
In the case of twenty-seven (27) Mortgage Loans,
representing 5.1% of the Initial Pool Balance,
the related Mortgaged Property is 100% leased to
a single tenant. See "DESCRIPTION OF THE MORTGAGE
</TABLE>
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<PAGE> 34
<TABLE>
<CAPTION>
<S> <C>
POOL -- Single-Tenant Mortgage Loans" herein.
All of the Mortgage Loans bear interest at
annualized rates ("Mortgage Rates") that will
remain fixed for the remaining terms of the
Mortgage Loans. No Mortgage Loan permits
negative amortization or the deferral of accrued
interest. See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Terms and Conditions of the
Mortgage Loans--Mortgage Rates; Calculations
of Interest".
Three hundred and thirty-six (336) of the
Mortgage Loans, representing 97.2% of the
Initial Pool Balance, provide for one of the
following: (i) Monthly Payments based on
amortization schedules significantly longer than
their respective terms to maturity (316 of such
Mortgage Loans, representing 87.8% of the
Initial Pool Balance, of which one (1) Mortgage
Loan, representing 0.3% of the Initial Pool
Balance, provides for monthly payments during
the first 48 months of its term of principal in
an amount $5,000 greater than that required to
fully-amortize such Mortgage Loan); or (ii)
Monthly Payments that provide for payment of
interest only for a period and then payments of
interest and principal based on amortization
schedules significantly longer than their
respective terms to maturity (two of such
Mortgage Loans, representing 0.6% of the Initial
Pool Balance); or (iii) increases in the
Mortgage Rate and/or principal amortization at a
date (the "Hyper-Amortization Date") prior to
stated maturity that create an incentive for the
related borrower to prepay the loan (18 of such
Mortgage Loans, representing 8.7% of the Initial
Pool Balance). As a result, such Mortgage Loans
(the "Balloon Loans") will have substantial
payments (each such payment, a "Balloon
Payment") payable on their respective maturity
dates, and anticipated to be paid on their
Hyper-Amortization Dates, as the case may be,
unless prepaid prior thereto. The remaining 16
Mortgage Loans, representing 2.9% of the Initial
Pool Balance, are fully-amortizing. See "RISK
FACTORS AND OTHER SPECIAL CONSIDERATIONS -- The
Mortgage Loans -- Balloon Payments" and
"DESCRIPTION OF THE MORTGAGE POOL -- Certain
Terms and Characteristics of the Mortgage Loans
-- Amortization" herein.
Eleven (11) of the Mortgage Loans, representing
6.7% of the Initial Pool Balance, contain a
defeasance provision, whereby the related
borrower is permitted to substitute direct, non-callable
United States Treasury obligations for the Mortgaged
Property securing the
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Mortgage Loan. See "DESCRIPTION OF THE MORTGAGE
POOL -- Certain Terms and Characteristics of the
Mortgage Loans -- Defeasance" herein.
As of the Cut-off Date, all of the Mortgage
Loans restrict voluntary principal prepayments
as follows: (i) 240 Mortgage Loans, representing
71.2% of the Initial Pool Balance, prohibit
voluntary prepayments for a period (a "Lock-out
Period") ending on a date (generally ranging
from 6 to 179 months from the Cutoff Date)
specified in the related Mortgage Note and, in
most such cases, thereafter impose "Prepayment
Premiums" until a specified date (generally
three to six months) prior to maturity, (ii) one
Mortgage Loan representing 0.2% of the Initial
Pool Balance, requires prepayment premiums
calculated as a fixed percentage of the amount
prepaid for a period ending seven months after
the Cut-off Date, then prohibits voluntary
prepayments for 60 months, and then reverts to a
fixed percentage prepayment premium until its
stated maturity; and (iii) the remaining
Mortgage Loans do not provide for Lock-out
Periods but impose Prepayment Premiums in
connection with voluntary principal prepayments
made prior to a specified date (also generally
three to six months) prior to maturity.
"Prepayment Premiums" are amounts required to be
paid in addition to the amount of a principal
prepayment and are calculated on the basis of
either or both of a yield maintenance formula (a
"Yield Maintenance Premium") or as a percentage
of the amount prepaid, which percentage, in most
such cases, declines over time (a "Percentage
Premium"). See "DESCRIPTION OF THE MORTGAGE POOL
-- Certain Terms and Characteristics of the
Mortgage Loans -- Prepayment Restrictions"
herein. However, four Mortgage Loans,
representing 0.9% of the Initial Pool Balance,
permit, in each such case, voluntary principal
prepayments of up to 10% of the original
principal balance of the Mortgage Loan in any
calendar year without the imposition of a
Prepayment Premium (the "10% Free Prepayment
Loans"). The Master Servicer may not waive the
imposition of a Prepayment Premium or reduce the
amount thereof. The Special Servicer may waive
the imposition of a Prepayment Premium, or
reduce the amount thereof, with respect to a
Specially Serviced Mortgage Loan if such waiver
or reduction is consistent with the Servicing
Standard (as described herein). Neither the
Depositor nor any Seller can provide any
assurance as to the enforceability of
any Mortgage Loan provisions requiring the payment
of a Prepayment Premium or of the collectibility of any
Prepayment
</TABLE>
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<PAGE> 36
<TABLE>
<CAPTION>
<S> <C>
Premium.
As of the Cut-off Date, the Mortgage
Loans will have the following additional
characteristics:
(i) Mortgage Rates ranging from 6.65% per annum
to 9.88% per annum, and a weighted average
Mortgage Rate of 7.68% per annum;
(ii) remaining terms to scheduled maturity
ranging from 53 months to 239 months, and a
weighted average remaining term to scheduled
maturity of 122 months;
(iii) remaining amortization terms ranging from
116 months to 359 months, and a weighted average
remaining amortization term of 324 months (for
the amortizing loans) (assuming that Mortgage
Loans that provide for an increase in their
respective Mortgage Rates and/or principal
amortization on a specified date prior to stated
maturity are prepaid in full on their respective
Hyper-Amortization Dates);
(iv) a weighted average Loan-to-Value Ratio
(calculated as described herein under
"DESCRIPTION OF THE MORTGAGE POOL -- Additional
Mortgage Loan Information") of 71.6%; and
(v) a weighted average Debt Service Coverage
Ratio (calculated as described herein under
"DESCRIPTION OF THE MORTGAGE POOL -- Additional
Mortgage Loan Information") of 1.43x.
On or prior to the Closing Date, the Depositor
will purchase the Mortgage Loans and assign the
Mortgage Loans, without recourse, to the Trustee
for the benefit of the holders of the
Certificates (the "Certificateholders"). Each
Seller will make certain representations and
warranties (or, alternatively, assign certain
representations and warranties made to it by
third parties) regarding the characteristics of
the Mortgage Loans assigned by such Seller; and,
as more particularly described herein, such
Seller will agree (or such third party has
agreed) to cure any material breach thereof or,
in the absence of such a cure, to repurchase or
replace the affected Mortgage Loan. See
"DESCRIPTION OF THE MORTGAGE POOL-- Representations
and Warranties" and " -- Repurchases
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and Other Remedies" herein.
The characteristics of the Mortgage Loans are
more particularly described herein under
"Description of the Mortgage Pool," in the
tables in Appendix I and in the Mortgage Loan
Schedule in Appendix II. In addition, certain
information with respect to Mortgage Loans
secured by Mortgages on multifamily properties
is set forth in Appendix III hereto.
USE OF PROCEEDS....................................... The Depositor will apply the net proceeds of the
offering of the Offered Certificates toward the
simultaneous purchase of the Mortgage Loans.
FEDERAL INCOME
TAX CONSIDERATIONS.................................. Three separate "real estate mortgage investment
conduit" ("REMIC") elections will be made with
respect to the Trust Fund for federal income tax
purposes. The assets of "REMIC I" will consist
primarily of the Mortgage Loans and any properties
acquired on behalf of the Certificateholders. The assets
of "REMIC II" will consist of the separate
uncertificated REMIC I regular interests, and the assets
of "REMIC III" will consist of the separate
uncertificated REMIC II regular interests. For federal
income tax purposes, (i) the REMIC Regular
Certificates will be the "regular interests" in, and
generally will be treated as debt obligations of, REMIC
III, (ii) the Class R-I Certificates will be the sole class
of residual interests in REMIC I, the Class R-II
Certificates will be the sole class of residual interests in
REMIC II, and (iv) the Class R-III Certificates will be
the sole class of residual interests in REMIC III.
The Offered Certificates will be treated as "real estate
assets" under Section 856(c)(4)(A) of the Internal
Revenue Code of 1986, as amended, (the "Code"),
generally in the same proportion that the assets in the
Trust Fund would be so treated. In addition, interest on
the Offered Certificates will be treated as "interest on
obligations secured by mortgages on real property"
under Section 856(c)(3)(B) of the Code generally to the
extent that such Offered Certificates are treated as "real
estate assets" under Section 856(c)(4)(A) of the Code.
The Offered Certificates also will be treated as
"qualified mortgages" under Section 860G(a)(3) of the
Code. Effective September 1, 1997, Offered Certificates
held by a financial asset securitization investment trust
(a "FASIT") will qualify for treatment as "permitted
assets" within the meaning of Code Section 860L(c)(1)(G).
However, the Offered Certificates will
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generally only be considered assets described in
Section 7701(a)(19)(C) of the Code to the extent
that the Mortgage Loans are secured by
residential property and, accordingly, may not
be suitable for certain thrift institutions.
The Interest Only Certificates will, and the
other Classes of Offered Certificates may be
treated for Federal income tax information
reporting purposes as having been issued with
"original issue discount." The prepayment
assumption (the "Prepayment Assumption") that
will be used in determining the rate of accrual
of original issue discount, market discount and
amortizable premium, if any, for federal income
tax purposes will be a 0% CPR (as defined
herein) applied to each Mortgage Loan during any
period that voluntary principal prepayments may
be made thereon without a Yield Maintenance
Premium being required. However, the Depositor
makes no representation that the Mortgage Loans
will in fact only prepay during any such period
or that they will prepay at any particular rate
before or during any such period.
If the method for computing original issue
discount described herein results in a negative
amount for any period with respect to an Offered
Certificate issued with original issue discount
(including an Interest Only Certificate), the
amount of original issue discount allocable to
such period will be zero and the holder of such
a Certificate will be permitted to offset such
negative amount only against future original
issue discount (if any) attributable to such
Certificate. See "CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS" herein and in the Prospectus.
ERISA CONSIDERATIONS.................................. A fiduciary of an employee benefit plan or other
retirement plan or arrangement subject to the Employee
Retirement Income Security Act of 1974, as amended
("ERISA") or Section 4975 of the Code, or an investor
that is an insurance company, should review carefully
with its legal advisors whether the purchase, holding or
sale of the Offered Certificates could constitute or result
in a transaction that is prohibited or is not otherwise
permissible under ERISA or Section 4975 of the Code
and, if prohibited, whether any statutory or
administrative exemption is applicable to any such
purchase, holding or sale.
The United States Department of Labor has issued an
individual prohibited transaction exemption to each
Underwriter that generally exempts from the
application
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of certain of the prohibited transaction
provisions of ERISA and the Code transactions
relating to the purchase, holding and sale of
certain pass-through certificates underwritten
by the Underwriter such as the Senior
Certificates and the servicing and operation of
asset pools such as the Mortgage Pool, provided
that certain conditions are satisfied. These
exemptions are not applicable to the Subordinate
Certificates; however, a class prohibited
transaction exemption granted with respect to
transactions involving insurance company general
accounts may be applicable to the purchase and
holding by insurance companies of such Classes,
provided that the conditions of such exemption
are satisfied. See "ERISA CONSIDERATIONS"
herein.
LEGAL INVESTMENT...................................... The Offered Certificates will not constitute "mortgage
related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 ("SMMEA").
The appropriate characterization of a
Class of Offered Certificates under various legal
investment restrictions, and thus the ability of investors
subject to these restrictions to purchase Offered
Certificates, may be subject to significant interpretive
uncertainties. All investors whose investment authority
is subject to legal restrictions should consult their own
legal advisors to determine whether, and to what
extent, the Offered Certificates will constitute legal
investments for them.
The Depositor makes no representations as to the
proper characterization of the Offered
Certificates for legal investment or financial
institution regulatory purposes, or as to the
ability of particular investors to purchase the
Offered Certificates under applicable legal
investment 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.
See "Legal Investment" in the Prospectus.
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RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS
Investors should consider, among other things, the following risks and
other important factors (as well as the risk factors set forth under "Risk
Factors" in the Prospectus) in connection with a purchase of Offered
Certificates:
THE CERTIFICATES
Limited Liquidity.
There is currently no secondary market for the Offered Certificates.
The Depositor has been advised by each Underwriter that it presently intends to
make a secondary market in the Offered Certificates; however, it has no
obligation to do so and any market making activity may be discontinued at any
time. There can be no assurance that a secondary market for the Offered
Certificates will develop or, if it does develop, that it will provide holders
of Offered Certificates with liquidity of investment or that it will continue
for the life of the Offered Certificates. The Offered Certificates will not be
listed on any securities exchange. Any such secondary market may provide less
liquidity to investors than secondary markets for other securities including,
for example, securities that evidence interests in single-family mortgage loans.
Because one or more Classes of Offered Certificates may be illiquid, a
prospective investor must be prepared to bear the risks of its investment in the
Offered Certificates for an indefinite period of time. See "Risk Factors --
Limited Liquidity" in the Prospectus
Pass-Through Rate Considerations.
The Pass-Through Rates of the Class X and Class E Certificates are
based on the WAC Rate of the Mortgage Loans. In general, Mortgage Loans with
relatively high mortgage interest rates are more likely to prepay than Mortgage
Loans with relatively low mortgage interest rates. Varying rates of principal
payments (whether resulting from differences in amortization terms or
prepayments) on Mortgage Loans having mortgage interest rates above the weighted
average of such rates of the Mortgage Loans will have the effect of reducing the
Pass-Through Rates of such Certificates.
Certain Yield Considerations.
The yield on any Offered Certificate will depend on (x) the price at
which such Certificate is purchased by an investor and (y) the rate, timing and
amount of distributions on such Certificate. The rate, timing and amount of
distributions on any Offered Certificate will, in turn, depend on, among other
things, (a) the Pass-Through Rate for such Certificate, (b) the rate and timing
of principal payments (including principal prepayments) and other principal
collections on or in respect of the Mortgage Loans and the extent to which such
amounts are to be applied or otherwise result in a reduction of the Certificate
Balance or Notional Amount of such Certificate, (c) the rate, timing and
severity of Realized Losses on or in respect of the Mortgage Loans and of
Expense Losses and the extent to which such losses and expenses result in a
reduction of the Certificate Balance or Notional Amount of such Certificate, (d)
the timing and severity of any Net Aggregate Prepayment Interest Shortfalls and
the extent to which such shortfalls are allocated in reduction of the interest
payable on such Certificate, (e) the timing and severity of any Appraisal
Reductions and the extent to which such Appraisal Reductions result in a
reduction or deferral of amounts otherwise payable on such Certificate and (f)
the extent to which Prepayment Premiums are collected and, in turn, distributed
on such Certificate. Except for the Pass-Through Rates on the Principal Balance
Certificates (which are, other than the Class E Certificates, in each case,
fixed), it is impossible to predict with certainty any of the factors described
in the preceding sentence. Accordingly, investors may find it difficult to
analyze the effect that such factors might have on the yield to maturity of any
Class of Offered Certificates. The yield to maturity of the Interest Only
Certificates will be highly sensitive to the rate and timing of principal
payments (including by reason of prepayments, defaults, extensions, repurchases
and liquidations) on or in respect of the Mortgage Loans, and an investor in the
Interest Only Certificates should fully consider the associated risks, including
the risk that an extremely rapid rate of amortization and prepayment of the
aggregate Notional Amount of its Certificates could result in the failure of
such investors to recoup their initial investments. See "DESCRIPTION OF THE
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MORTGAGE POOL", "DESCRIPTION OF THE CERTIFICATES -- Distributions" and --
Subordination; Allocation of Losses and Certain Expenses" herein. See also
"Yield Considerations" and "Risk Factors -- Average Life of Certificates;
Prepayments; Yields" in the Prospectus.
Limited Obligations
The Offered Certificates will represent beneficial ownership interests
solely in the assets of the Trust Fund and will not represent an interest in or
obligation of the Depositor, any Seller, the Master Servicer, the Special
Servicer, the Fiscal Agent, the Trustee or any of their respective affiliates or
any other person. Distributions on any Class of Offered Certificates will depend
solely on the amount and timing of payments and other collections in respect of
the Mortgage Loans. Although amounts, if any, otherwise distributable to the
holders of any Class of Subordinate Certificates on any Distribution Date will
be available, to the extent set forth herein, to make distributions on the
Senior Certificates and the Classes of Subordinate Certificates senior thereto,
if Realized Losses or Expense Losses occur, there can be no assurance that these
amounts, together with other payments and collections in respect of the Mortgage
Loans, will be sufficient to make full and timely distributions on any Class of
Offered Certificates. See "Risk Factors -- Limited Assets" in the Prospectus.
Subordination of Subordinated Certificates.
As described herein, the rights of holders of the Subordinate
Certificates to receive certain payments of principal and interest otherwise
payable on their Certificates will, in the case of each Class of Subordinate
Certificates, be subordinated to such rights of the holders of the Senior
Certificates and the holders of each other Class of Subordinate Certificates, if
any, having an earlier alphabetical Class designation, to the extent set forth
herein. See "DESCRIPTION OF THE CERTIFICATES -- Distributions" herein. Realized
Losses on the Mortgage Loans and Expense Losses will be allocated to the Class
L, Class K, Class J, Class H, Class G, Class F, Class E, Class D, Class C and
Class B Certificates, in that order, reducing amounts payable to each such
Class.
Potential Conflict of Interest in Connection with Specially Serviced Mortgage
Loans.
The Special Servicer is given considerable latitude in determining
whether and in what manner to liquidate or modify defaulted Mortgage Loans. As
described under "SERVICING OF THE MORTGAGE LOANS -- The Operating Adviser," the
Operating Adviser will be empowered to replace the Special Servicer. In
addition, the Special Servicer will generally be required to obtain the approval
of the Operating Adviser with respect to each Asset Status Report (as defined
herein) in connection with the servicing of any Specially Serviced Mortgage
Loans.
See "SERVICING OF THE MORTGAGE LOANS -- General" herein. At any given time, the
Operating Adviser will be controlled generally by the holders of the most
subordinated (or, under certain circumstances as described herein, the next most
subordinated) Class of Principal Balance Certificates (that is, the Controlling
Class as described herein) outstanding from time to time, and such holders may
have interests in conflict with those of the other holders of the other Offered
Certificates. For instance, the holders of Certificates of the Controlling Class
might desire to mitigate the potential for loss to that Class from a troubled
Mortgage Loan by deferring enforcement in the hope of maximizing future
proceeds. However, the interests of the Trust Fund may be better served by
prompt action, since delay followed by a market downturn could result in less
proceeds to the Trust Fund than would have been realized if earlier action had
been taken. The Special Servicer or an affiliate may acquire certain of the most
subordinated REMIC Regular Certificates (including those of the initial
Controlling Class). Under such circumstances, the Special Servicer may have
interests that conflict with the interests of the other holders of the
Certificates.
Book-Entry Certificates.
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Certificates because such
distributions will be forwarded by the Trustee to DTC and DTC will credit such
distributions to the accounts of the DTC Participants which will thereafter
credit them to the accounts of Certificate Owners either directly or indirectly
through Indirect Participants. Such delays will decrease the yield to the
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Certificate Owners from the Certificates. See "DESCRIPTION OF THE
CERTIFICATES -- Book-Entry Registration" herein.
THE MORTGAGE LOANS
Risks of Lending on Income-Producing Properties Generally.
The Mortgaged Properties consist entirely of income-producing real
estate. Lending on the security of income-producing real estate is generally
viewed as exposing a lender to a greater risk of loss than lending on the
security of single-family residences. Multifamily and commercial real estate
lending typically involves larger loans than single-family lending. In addition,
and unlike the case of loans made on the security of single-family residences,
repayment of loans made on the security of income-producing real property
depends upon the ability of that property (i) to generate rental income
sufficient to pay operating expenses, to make necessary repairs, tenant
improvements and capital improvements and to pay debt service and (ii) in the
case of loans that do not fully amortize over their terms, to retain sufficient
value to permit the borrower to pay off the loan at maturity by sale or
refinancing. A number of factors, many beyond the control of the property owner,
can affect the ability of an income-producing real estate project to generate
sufficient net operating income to pay debt service and/or to maintain its
value. Among these factors are economic conditions generally and in the area of
the project, the age, quality and design of the project and the degree to which
it competes with other projects in the area, changes or continued weaknesses in
specific industry segments, increases in operating costs, the willingness and
ability of the owner to provide capable property management and maintenance and
the degree to which the project's revenue is dependent upon a single tenant or
user, a small group of tenants, or tenants concentrated in a particular business
or industry. If leases are not renewed or replaced, if tenants default, if
rental rates fall and/or if operating expenses increase, the borrower's ability
to repay the loan may be impaired and the resale value of the property, which is
substantially dependent upon the property's ability to generate income, may
decline. In addition, there are other factors, including changes in zoning or
tax laws, the availability of credit for financing, and changes in interest rate
levels that may adversely affect the value of a project (and thus the borrower's
ability to sell or refinance) without necessarily affecting the ability to
generate current income. In addition, particular types of income properties are
exposed to particular risks, some of which are summarized below.
Risks Particular to Multifamily Properties.
Ninety-six (96) Mortgage Loans, representing 31.7% of the Initial Pool
Balance, are secured by Mortgages on multifamily properties. Multifamily
projects are part of a market that, in general, is characterized by low barriers
to entry. Thus, a particular apartment market with historically low vacancies
could experience substantial new construction, and a resultant oversupply of
units, in a relatively short period of time. Since multifamily apartment units
are typically leased on a short-term basis, the tenants who reside in a
particular project within such a market may easily move to newer projects with
better amenities. In addition, occupancy and rent levels may be adversely
affected by unfavorable economic conditions generally, local military base or
factory closings and national and local politics, including current or future
rent stabilization and rent control laws and agreements. Further, reduced
mortgage interest rates may encourage renters to purchase single-family housing.
For additional information with respect to Mortgage Loans secured by Mortgages
on multifamily properties, see Appendix III hereto.
Risks Particular to Retail Properties.
Fifty-seven (57) Mortgage Loans, representing 20.4% of the Initial Pool
Balance, are secured by Mortgages on retail properties. In addition to risks
generally associated with real estate, such properties can also be adversely
affected by other factors. For instance, retail properties can be affected
significantly by adverse changes in consumer spending patterns and competition
from alternative forms of retailing (such as direct mail, video shopping
networks, telephone shopping and electronic commerce) that reduce the need for
retail space. In addition, significant tenants at a retail property play an
important part in generating customer traffic and making a retail property a
desirable location for other tenants. Thus, a retail property may be adversely
affected if an anchor or other significant tenant ceases operations (which may
occur at the expiration of a lease term or the term of its
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covenant to operate, the tenant's bankruptcy, its general cessation of business
activities or for other reasons). In addition, certain tenants at retail
properties may be entitled to terminate their leases if one or more anchor
tenants cease operations.
Risks Particular to Self-Storage Facilities.
Eighty-six (86) Mortgage Loans, representing 15.6% of the Initial Pool
Balance, are secured by Mortgages on self-storage properties. Self-storage
properties are considered vulnerable to competition because both acquisition
costs and break-even occupancy are relatively low. In addition, conversion of a
self-storage facility to an alternative use generally requires substantial
capital expenditures. Thus, if the operations of any of the self-storage
Mortgaged Properties becomes unprofitable due to decreased demand, competition,
age of improvements or other factors such that the borrower becomes unable to
meet its obligations on the related Mortgage Loan, the liquidation value of that
Mortgaged Property may be substantially less, relative to the amount owing on
the Mortgage Loan, than would be the case if the Mortgaged Property were readily
adaptable to other uses. User privacy and ease of access to individual storage
space may heighten environmental risks, although lease agreements generally
prohibit users from storing hazardous substances in the units. The environmental
assessments discussed herein did not include an inspection of the contents of
the self-storage units of the self-storage Mortgaged Properties. Accordingly,
there is no assurance that all of the units included in the self-storage
Mortgaged Properties are free from hazardous substances or will remain so in the
future.
Risks Particular to Manufactured Housing Communities.
Fifty-six (56) Mortgage Loans, representing 11.4% of the Initial Pool
Balance, are secured by Mortgages on Mortgaged Properties operated as
manufactured housing communities (the "Manufactured Housing Communities"). Loans
secured by liens on properties of these types 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 will generally depend
upon the number of competing manufactured housing communities and other
residential developments in the local market (such as apartment buildings and
site-built single family homes), as well as upon other factors such as its age,
appearance, reputation, the ability of management to provide adequate
maintenance and insurance, and the types of services it provides. The
Manufactured Housing Communities 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 Communities 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 may be
substantially less, relative to the amount owing on the Mortgage Loan, than
would be the case if the Manufactured Housing Community were readily adaptable
to other uses.
Risks Particular to Office Properties.
Twenty-six (26) Mortgage Loans, representing 9.6% of the Initial Pool
Balance, are secured by Mortgages on office properties. Office properties
generally require their owners to expend significant amounts of cash to pay for
general capital improvements, tenant improvements and costs of re-leasing space.
Office properties that are not equipped to accommodate the needs of modern
businesses may become functionally obsolete and thus non-competitive. In
addition, the success of an office property with a single or dominant tenant may
depend significantly on that tenant's continued occupancy.
Risks Particular to Hospitality Properties.
Nine (9) Mortgage Loans (the "Hospitality Loans"), representing 5.6% of
the Initial Pool Balance, are secured by Mortgages on Mortgaged Properties
operated as hotels. Various factors, including location, quality and franchise
affiliation, if any, affect the economic viability of a hotel. Adverse economic
conditions, either local, regional or national, may limit the amount that can be
charged for a room and may result in a reduction in occupancy levels. The
construction of competing hotels or motels can have similar effects. Because
hotel and
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motel rooms generally are rented for short periods of time, hotels and motels
tend to respond more quickly to adverse economic conditions and competition that
do other commercial properties. Furthermore, the financial strength and
capabilities of the owner and operator of a hotel or motel may have an impact on
such hotel or motel's quality of service and economic viability.
Certain of the Mortgaged Properties securing the Hospitality Loans are
franchisees of national hotel chains. The viability of any hotel or motel
property which is affiliated with a franchise depends in part on the continued
existence and financial strength of the franchisor, the public perception of the
franchise service mark and the duration of the franchise licensing agreements.
The transferability of franchise license agreements may be restricted and, in
the event of a foreclosure on any Mortgaged Property, the purchaser of such
Mortgaged Property would not have the right to use the franchise license without
the franchisor's consent. Further, in the event of a foreclosure on a Mortgaged
Property, it is unlikely that the Trustee (or Master Servicer) or purchaser of
such Mortgaged Property would be entitled to the rights under any liquor
license. Conversely, a lender may be unable to remove a franchisor that it
desires to replace following a foreclosure.
Mortgage Loans Not Insured.
The Mortgage Loans are not insured or guaranteed by any governmental
entity, any private mortgage insurer or any other person. As described herein,
in certain limited circumstances, a Seller may be obligated to repurchase or
replace a Mortgage Loan if its representations and warranties concerning such
Mortgage Loan are breached in a material respect; however, there can be no
assurance that any Seller will be in a financial position to effect such
repurchase or substitution. See "DESCRIPTION OF THE MORTGAGE POOL -- The
Sellers", -- Representations and Warranties" and "-- Repurchases and Other
Remedies" herein.
Non-Recourse Mortgage Loans.
Substantially all of the Mortgage Loans are non-recourse loans as to
which recourse, in the event of a default, will be limited to the related
Mortgaged Property. In those cases where the loan documents permit recourse to
the borrower or a guarantor, the related Seller has not evaluated the financial
condition of such person. Consequently, payment on each Mortgage Loan prior to
maturity is (or should be considered by investors to be) dependent primarily on
the sufficiency of the cash flow of the related Mortgaged Property, and at
maturity (whether at scheduled maturity or, in the event of a default, upon the
acceleration of such maturity) upon the then market value of the related
Mortgaged Property or the ability of the related borrower to refinance the
Mortgaged Property.
Environmental Considerations.
Contamination of real property may give rise to a lien on that property
to assure payment of the cost of clean-up or, in certain circumstances, may
result in liability to the lender for that cost. Such contamination may also
reduce the value of a property. An environmental site assessment (or in some
cases an update of a previous assessment) was performed with respect to each
Mortgaged Property in connection with the origination or acquisition thereof. In
certain cases, the assessment disclosed the existence of or potential for
adverse environmental conditions, such as the existence of, among other things,
asbestos-containing materials, underground storage tanks and soil contamination.
In addition, although each Seller has represented that, having made no
independent inquiry other than reviewing the resulting reports and/or employing
an environmental consultant to perform the assessment referenced therein, it has
no knowledge of any material and adverse environmental conditions or
circumstance affecting any Mortgaged Property that was not disclosed in the
related report, no assurance can be given that the environmental assessments
revealed all existing or potential environmental risks or that all adverse
environmental conditions have been completely remediated. Furthermore, certain
of such environmental assessments are more than a year old. See "DESCRIPTION OF
THE MORTGAGE POOL -- Assessments of Property Value and Condition --
Environmental Assessments" and "Certain Legal Aspects Of The Mortgage Loans And
The Leases -- Environmental Legislation" in the Prospectus.
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The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto or assuming its operation. Such requirement effectively
precludes enforcement of the security of the related Mortgage Note until a
satisfactory environmental site assessment is obtained (or until any required
remedial action is thereafter taken). Furthermore, although such requirement
decreases the likelihood that the Trust Fund will become liable for a material
adverse environmental condition at a Mortgaged Property, there can be no
assurance that the requirements of the Pooling and Servicing Agreement will
effectively insulate the Trust Fund from potential liability for a materially
adverse environmental condition at any Mortgaged Property. See "Certain Legal
Aspects Of The Mortgage Loans And The Leases -- Environmental Legislation" in
the Prospectus.
Balloon Payments.
Three hundred and thirty-six (336) of the Mortgage Loans, representing
97.2% of the Initial Pool Balance, do not fully amortize over their respective
terms to maturity, or provide for increases in the Mortgage Rate and/or
principal amortization at the Hyper-Amortization Date (thereby creating an
incentive for the borrower to prepay). Thus, each such Mortgage Loan will have a
substantial payment (that is, a "Balloon Payment") due at its stated maturity
date or anticipated to be made on its Hyper-Amortization Date, as applicable,
unless prepaid prior thereto. Loans with Balloon Payments involve a greater risk
to a lender than fully-amortizing loans because the ability of a borrower to
make a Balloon Payment typically will depend upon its ability either to fully
refinance the loan or to sell the related Mortgaged Property at a price
sufficient to permit the borrower to make the Balloon Payment. The ability of a
borrower to effect a refinancing or sale will be affected by a number of
factors, including the value of the related Mortgaged Property, the level of
available mortgage rates at the time of sale or refinancing, the borrower's
equity in the Mortgaged Property, the financial condition and operating history
of the borrower and the Mortgaged Property, tax laws, prevailing economic
conditions and the availability of credit for loans secured by multifamily or
commercial, as the case may be, real properties generally. None of the Sellers,
the Master Servicer, the Special Servicer or their respective affiliates is
under any obligation to refinance any Mortgage Loan. See "DESCRIPTION OF THE
MORTGAGE POOL -- Certain Terms and Characteristics of the Mortgage Loans"
herein and "Risk Factors -- Balloon Payments; Obligor Default" in the
Prospectus.
Obligor Default.
In order to maximize recoveries on defaulted Mortgage Loans, the
Special Servicer may modify and/or extend the maturity of Mortgage Loans that
are in material default or as to which a payment default (including the failure
to make a Balloon Payment) is imminent; subject, however, to the limitations
described under "SERVICING OF THE MORTGAGE LOANS -- Modifications, Waivers,
Amendments and Consents" herein. There can be no assurance, however, that any
such extension or modification will increase the present value of recoveries in
a given case. Any delay in collection of a Balloon Payment that would otherwise
be distributed in respect of a Class of Principal Balance Certificates, whether
such delay is due to borrower default or to modification of the related Mortgage
Loan, will likely extend the weighted average life of such Class of
Certificates. See "YIELD CONSIDERATIONS" herein and in the Prospectus.
Geographic Concentration.
Eighty-four (84) of the Mortgage Loans, representing 25.2% of the
Initial Pool Balance, are secured by liens on Mortgaged Properties located in
California. In addition, certain of the Mortgaged Properties are located in the
coastal area of Florida. Concentrations of Mortgaged Properties (in each case
representing security for 8.9% or less of the Initial Pool Balance) also exist
in several other states. In general, a concentration of Mortgaged Properties in
a particular state or region increases the exposure of the Mortgage Pool to any
adverse economic or other developments or acts of nature that may occur in that
state or region. In recent periods, most regions of the United States (including
California and other regions in which the Mortgaged Properties are located) have
experienced downturns in the market value of real estate. In addition,
improvements on Mortgaged Properties located in California may be more
susceptible to certain types of special hazards not covered by insurance (such
as
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earthquakes) than properties located in other parts of the country. The Mortgage
Loans generally do not require any borrowers to maintain earthquake insurance.
Concentrations of Mortgage Loans.
Many of the Mortgage Loans, either individually or together with other
Mortgage Loans with which they are cross-collateralized, have Cut-off Date
Balances that are substantially higher than the $3,651,187 average Cut-off Date
Balance. For instance, the three largest Mortgage Loans constitute 0.9% of the
Mortgage Pool by number but have Cut-off Date Balances that represent, in the
aggregate, approximately 6.0% of the Initial Pool Balance.
Several groups of Mortgage Loans are made to the same borrower or have
related borrowers that are affiliated with one another through partial or
complete direct or indirect common ownership and where, in general, the related
Mortgaged Properties are commonly managed. The three largest of these groups, by
aggregate Cut-off Date Balance of the Mortgage Loans, represent 3.4%, 2.6%, and
2.4% respectively, of the Initial Pool Balance. See "DESCRIPTION OF THE MORTGAGE
POOL -- Certain Terms and Characteristics of the Mortgage Loans" herein and
Appendix II hereto.
In general, concentrations in a pool of mortgage loans with larger than
average principal balances can result in losses that are more severe, relative
to the size of the pool, than would be the case if the aggregate principal
balance of the pool were more evenly distributed. Concentration of borrower
representation in a mortgage loan pool can also pose increased risks. For
instance, Mortgaged Properties that are owned by a group of related borrowers
and are commonly managed create the risk that property management errors or poor
property management, or financial difficulties in respect of any such borrower,
could have a more widespread adverse effect on the Mortgage Pool than would be
the case absent such common ownership and management.
Limitations of Appraisals.
An appraisal or other market analysis was conducted in respect of the
Mortgaged Properties in connection with the origination or acquisition of the
related Mortgage Loan, and the resulting estimates of value are the bases of the
Cut-off Date LTV Ratios referred to herein. However, those estimates represent
the analysis and opinion of the person performing the appraisal or market
analysis and are not guarantees of present or future values. Moreover, the
values of the Mortgaged Properties may have fluctuated significantly since the
appraisal or market study was performed. In addition, appraisals seek to
establish the amount a typically motivated buyer would pay a typically motivated
seller. Such amount could be significantly higher than the amount obtained from
the sale of a Mortgaged Property under a distress or liquidation sale.
Information regarding the values of Mortgaged Properties available to the
Depositor as of the Cut-off Date is presented in Appendix I and Appendix II
hereto for illustrative purposes only. See "DESCRIPTION OF THE MORTGAGE
POOL -- Assessments of Property Value and Condition -- Appraisals" herein.
Property Management.
The successful operation of an income producing property is dependent
on the performance and viability of the property manager. The property manager
is responsible for responding to changes in the local market, planning and
implementing the rental structure, including establishing levels of rent
payments, and ensuring that maintenance and capital improvements are carried out
in a timely fashion. Accordingly, by controlling costs, providing appropriate
service to tenants and seeing to the maintenance of improvements, sound property
management can improve cash flow, reduce vacancy, leasing and repair costs and
preserve building value. On the other hand, management errors can, in some
cases, impair the long term viability of an income producing property. The
Sellers have identified several groups of Mortgage Loans where the related
Mortgaged Properties are owned by related borrowers and which may have the same
or related management. See "-- Concentrations of Mortgage Loans" herein.
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Leasehold Considerations.
Twelve (12) Mortgage Loans representing 2.5% of the Initial Pool
Balance, are secured solely by Mortgages on the borrowers' leasehold interests
under ground leases. In addition, two (2) Mortgage Loans, which represent 2.2%
of the Initial Pool Balance, are secured by a Mortgage on both the borrower's
leasehold interest in a portion of the related Mortgaged Property and the
borrower's fee simple interest in the remainder of the related Mortgaged
Property. See "-- DESCRIPTION OF THE MORTGAGE POOL -- Additional Mortgage Loan
Information -- Ground Leases" herein. Leasehold mortgage loans are subject to
certain risks not associated with mortgage loans secured by a lien on the fee
estate of the borrower. The most significant of these risks is that if the
borrower's leasehold were to be terminated upon a lease default, the leasehold
mortgagee would lose its security. Generally, the related ground lease requires
the lessor to give the leasehold mortgagee notice of lessee defaults and an
opportunity to cure them, permits the leasehold estate to be assigned to the
leasehold mortgagee or the purchaser at a foreclosure sale, and contains certain
other protective provisions typically included in a "mortgageable" ground lease.
Risks of Secured Subordinate Financing.
Two (2) of the Mortgaged Properties, representing security for 1.9% of
the Initial Pool Balance, are known to be encumbered by secured subordinated
debt that is not part of the Mortgage Pool. In one case, the holder of the
subordinated debt has agreed not to foreclose for so long as the related
Mortgage Loan is outstanding and the Trust Fund is not pursuing a foreclosure
action. In the other case, which represents 1.7% of the Initial Pool Balance,
the holder of the subordinated debt has not entered into an agreement not to
foreclose. In addition, in the case of four (4) Mortgage Loans, representing
2.6% of the Initial Pool Balance, Heller or an affiliate holds debt (the
"Mezzanine Debt") secured by a pledge of equity interests in the related
borrower. For a summary of the Mezzanine Debt, see "DESCRIPTION OF THE MORTGAGE
POOL -- Certain Terms and Characteristics of the Mortgage Loans -- Subordinate
Financing" herein. Other than as indicated above, the Sellers and Depositor have
not determined whether any other secured subordinate financing currently
encumbers any Mortgaged Property. See "DESCRIPTION OF THE MORTGAGE POOL --
Certain Terms and Characteristics of the Mortgage Loans -- Subordinate
Financing" herein. The existence of secured subordinate indebtedness may
increase the difficulty of refinancing the related Mortgage Loan at maturity.
Also, if the holder of the secured subordinated debt becomes a debtor in a
bankruptcy proceeding, foreclosure of the Mortgage Loan could be delayed. An
attempt by a lender to foreclose upon Mezzanine Debt may cause the obligor under
the related loan to file for bankruptcy, which could negatively impact the
operation of the Mortgaged Property and such Mortgagor's ability to make
payments in respect of the Mortgage Loan in a timely manner.
Risk of Changes in Concentrations.
As payments in respect of principal (including in the form of voluntary
principal prepayments and liquidation proceeds) are received with respect to the
Mortgage Loans, the Mortgage Pool may exhibit increased concentration with
respect to the type of properties, property characteristics, number of borrowers
and affiliated borrowers and geographic location. Because principal on the
Principal Balance Certificates is payable in sequential order, the Classes
thereof that have a lower priority with respect to the payment of principal are
relatively more likely to be exposed to any risks associated with changes in
concentrations of borrower, loan or property characteristics.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Series 1998-HF1 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will be issued on or about March 27, 1998 (the "Closing Date")
pursuant to a Pooling and Servicing Agreement to be dated as of the Cut-off Date
(the "Pooling and Servicing Agreement"), among the Depositor, the Master
Servicer, the Special Servicer, the Trustee and the Fiscal Agent. Registered
holders of the Certificates are herein referred to as
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"Certificateholders". The Certificates will represent in the aggregate the
entire beneficial ownership interest in a trust fund (the "Trust Fund")
consisting primarily of: (i) the Mortgage Loans and all payments under and
proceeds of the Mortgage Loans received after the Cut-off Date (exclusive of
principal prepayments received prior to the Cut-off Date and scheduled payments
of principal and interest due on or before the Cut-off Date); (ii) any Mortgaged
Property acquired on behalf of the Certificateholders in respect of a defaulted
Mortgage Loan through foreclosure, deed in lieu of foreclosure or otherwise (any
such Mortgaged Property, upon acquisition, an "REO Property"; and (iii) certain
rights of the Depositor under, or assigned to the Depositor pursuant to, each of
the Mortgage Loan Purchase Agreements relating to Mortgage Loan document
delivery requirements and the representations and warranties of the related
Seller regarding its Mortgage Loans.
The Certificates will consist of 16 classes (each, a "Class") thereof,
to be designated as: (i) the Class A1 Certificates and the Class A2 Certificates
(collectively, the "Class A Certificates"); (ii) the Class X Certificates (the
"Interest Only Certificates" or the "Class X Certificates" and, collectively
with the Class A Certificates, the "Senior Certificates"); (iii) the Class B
Certificates, the Class C Certificates, the Class D Certificates, the Class E
Certificates, the Class F Certificates, the Class G Certificates, the Class H
Certificates, the Class J Certificates, the Class K Certificates and the Class L
Certificates (collectively, the "Subordinate Certificates" and, collectively
with the Senior Certificates, the "REMIC Regular Certificates"); and (iv) the
Class R-I Certificates, the Class R-II Certificates and the Class R-III
Certificates (collectively, the "REMIC Residual Certificates").
Only the Senior Certificates and the Class B, Class C, Class D and
Class E Certificates (the "Offered Certificates") are offered hereby. The Class
F, Class G, Class H, Class J and Class K Certificates and the REMIC Residual
Certificates (collectively, the "Private Certificates") have not been registered
under the Securities Act of 1933, as amended, and are not offered hereby.
REGISTRATION; DENOMINATIONS
The Offered Certificates will initially be issued in book-entry format
(the "Book-Entry Certificates"). The Class A Certificates will be issued in
denominations of $5,000 initial Certificate Balance and in any whole dollar
denomination in excess thereof. The Class X, Class B, Class C, Class D and Class
E Certificates will be issued in denominations of $50,000 initial Certificate
Balance or Notional Amount, as applicable, and in any whole dollar denomination
in excess thereof.
BOOK-ENTRY REGISTRATION
Each Class of Offered Certificates will initially be represented by one
or more global Certificates registered in the name of the nominee of The
Depository Trust Company ("DTC"). The Depositor has been informed by DTC that
DTC's nominee initially will be Cede & Co. No person acquiring an interest in
such an Offered Certificate (any such person, a "Certificate Owner") will be
entitled to receive a fully registered physical certificate (a "Definitive
Certificate") representing such interest, except as set forth in the Prospectus
under "Description of the Certificates -- Book-Entry Registration and Definitive
Certificates". Unless and until Definitive Certificates are issued in respect of
any Class of Offered Certificates, all references to actions by holders of such
Offered Certificates will refer to actions taken by DTC upon instructions
received from the related Certificate Owners through DTC's participating
organizations ("Participants"), and all references herein to payments, notices,
reports and statements to holders of such Offered Certificates will refer to
payments, notices, reports and statements to DTC or Cede & Co., as the
registered holder of the Offered Certificates, for distribution to the related
Certificate Owners through DTC's Participants in accordance with DTC procedures.
Until Definitive Certificates are issued in respect of any Class of
Offered Certificates, interests in such Certificates will be transferred on the
book-entry records of DTC (and its Participants). See "Description of the
Certificates -- Book-Entry Registration and Definitive Certificates" in the
Prospectus.
Certificateholders must elect to hold their Offered Certificates
through any of DTC (in the United States) or Cedel Bank, societe anonyme
("CEDEL") or Euroclear System ("Euroclear") (in Europe). Transfers within DTC,
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CEDEL or Euroclear, as the case may be, will be in accordance with the usual
rules and operating procedures of the relevant system. Crossmarket transfers
between persons holding directly or indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly through CEDEL or Euroclear, on the
other, will be effected in DTC through Citibank, N.A. ("Citibank") or The Chase
Manhattan Bank, ("Chase"), the relevant depositories of CEDEL and Euroclear,
respectively.
Because of time-zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a DTC participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or CEDEL participant on such business day. Cash received in CEDEL or
Euroclear as a result of sales of securities by or through a CEDEL participant
or a Euroclear participant to a DTC participant will be received with value on
the DTC settlement date but will be available in the relevant CEDEL or Euroclear
cash account only as of the business day following settlement in DTC.
CERTIFICATE BALANCES AND NOTIONAL AMOUNTS
Upon initial issuance, the Class A1, Class A2, Class B, Class C, Class
D, Class E, Class F, Class G, Class H, Class J, Class K and Class L Certificates
(collectively, the "Principal Balance Certificates") will have the following
aggregate Certificate Balances (in each case, subject to a variance of plus or
minus 5%):
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
INITIAL AGGREGATE PERCENT OF INITIAL PERCENT OF
CLASS CERTIFICATE BALANCE POOL BALANCE CREDIT SUPPORT
----- ------------------- ------------ --------------
<S> <C> <C> <C> <C>
Class A1 $225,000,000 17.51% 28.25%
Class A2 697,143,000 54.24 28.25
Class B 67,474,000 5.25 23.00
Class C 64,261,000 5.00 18.00
Class D 64,261,000 5.00 13.00
Class E 25,704,000 2.00 11.00
Class F 51,409,000 4.00 7.00
Class G 19,278,000 1.50 5.50
Class H 12,852,000 1.00 4.50
Class J 25,705,000 2.00 2.50
Class K 9,639,000 0.75 1.75
Class L 22,491,765 1.75 0.00
</TABLE>
The "Certificate Balance" of any Principal Balance Certificate
outstanding at any time will equal the then-maximum amount that the holder
thereof will be entitled to receive in respect of principal out of future cash
flow on the Mortgage Loans and other assets included in the Trust Fund. The
initial Certificate Balance of any Principal Balance Certificate will be set
forth on the face thereof. On each Distribution Date, the Certificate Balance of
each Principal Balance Certificate will be reduced by any distributions of
principal actually made on such Certificate on such Distribution Date, and will
be further reduced by any Realized Losses and Expense Losses allocated to such
Certificate on such Distribution Date. See "-- Distributions" and
"-- Subordination; Allocation of Losses and Certain Expenses" below.
The Interest Only Certificates will not have Certificate Balances. Each
such Certificate will represent the right to receive distributions of interest
accrued as described herein on a notional principal amount (a "Notional
Amount"). The aggregate Notional Amount of the Interest Only Certificates will
equal 100% of the aggregate Stated Principal Balance of the REMIC II Regular
Interests, which will be the same as the aggregate Stated
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Principal Balance of the Mortgage Loans. The Interest Only Certificates will
have an initial aggregate Notional Amount of $1,285,217,765 (subject to a
variance of plus or minus 5%).
The REMIC Residual Certificates will not have Certificate Balances.
The "Stated Principal Balance" of each Mortgage Loan will generally
equal the unpaid principal balance thereof as of the Cut-off Date (or, in the
case of a Qualifying Substitute Mortgage Loan (as defined herein), as of the
date of substitution), after application of all payments due on or before such
date (whether or not received), reduced (to not less than zero) on each
subsequent Distribution Date by (i) any payments or other collections (or
advances in lieu thereof) of principal of such Mortgage Loan that have been or,
if they had not been applied to cover Additional Trust Fund Expenses, would have
been distributed on the Certificates on such date, and (ii) the principal
portion of any Realized Loss incurred in respect of or allocable to such
Mortgage Loan during the related Collection Period. Notwithstanding the
foregoing, but subject to the discussion under "-- Distribution -- Treatment
of REO Properties" below, if any Mortgage Loan is paid in full, liquidated or
otherwise removed from the Trust Fund, then, commencing as of the first
Distribution Date following the Collection Period during which such event
occurred, the Stated Principal Balance of such Mortgage Loan will be zero.
PASS-THROUGH RATES
The rate per annum at which any Class of Certificates accrues interest
from time to time is herein referred to as its "Pass-Through Rate."
The Pass-Through Rates applicable to the Class A1, Class A2, Class B,
Class C, Class D, Class F, Class G, Class H, Class J, Class K and Class L
Certificates will, at all times, be equal to 6.19%, 6.52%, 6.58%, 6.75%, 7.10%,
7.18%, 7.18%, 6.19%, 6.19%, 6.19% and 6.19% per annum, respectively; provided,
however, that each such Pass-Through Rate will not exceed the WAC Rate for such
Distribution Date.
The Pass-Through Rate on the Class E Certificates for the initial
Distribution Date will equal 7.60%. For each subsequent Distribution Date, the
Pass-Through Rate on the Class E Certificates will be a per annum rate equal to
the WAC Rate minus 0.17%.
The Pass-Through Rate applicable to the Interest Only Certificates for
the initial Distribution Date will equal approximately 1.22% per annum. The
Pass-Through Rate applicable to the Interest Only Certificates for each
subsequent Distribution Date will, in general, equal the excess, if any, of (i)
the WAC Rate, over (ii) the weighted average of the Pass-Though Rates applicable
to the respective Classes of Principal Balance Certificates for such
Distribution Date, the relevant weighting to be on the basis of the respective
aggregate Certificate Balances of such Classes of Certificates immediately prior
to such Distribution Date.
The "WAC Rate" for any Distribution Date is the weighed average of the
Net Mortgage Rates in effect for the Mortgage Loans as of their Due Dates in the
month preceding the month in which such Distribution Date occurs weighted on the
basis of their respective Stated Principal Balances on such Due Date.
The "Net Mortgage Rate" with respect to any Mortgage Loan will, in
general, be a per annum rate equal to the related Mortgage Rate in effect from
time to time, minus the applicable Administrative Cost Rate. However, for
purposes of calculating Pass-Through Rates, the Net Mortgage Rate for any
Mortgage Loan will be determined without regard to any post-Closing Date
modification, waiver or amendment of the terms of such Mortgage Loan. In
addition, because the Certificates accrue interest on the basis of a 360-day
year consisting of twelve 30-day months, when calculating the Pass-Through Rate
for each Class of Certificates for each Distribution Date, the Net Mortgage Rate
of the Mortgage Loan that accrues interest other than on the basis of a 360-day
year consisting of twelve 30-day months (a "Non-30/360 Loan") will be
appropriately adjusted to reflect such difference. See "SERVICING OF THE
MORTGAGE LOANS -- Servicing and Other Compensation and Payment of Expenses"
herein.
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The "Collection Period" related to each Distribution Date will begin
(a) with respect to Monthly Payments, on the day after the Determination Date in
the month preceding the month of such Distribution Date (or, in the case of the
first Distribution Date, the Cut-off Date) and will end on the Determination
Date in the month in which the Distribution Date occurs; and (b) with respect to
all other collections on the Mortgage Loans and REO Properties, on the day
following the last day of the previous Collection Period for such collections
(or, in the case of the first Distribution Date, the Cut-off Date) and will end
on the earlier of the Determination Date in the month in which the Distribution
Date occurs and the fourth business day prior to such Distribution Date.
DISTRIBUTIONS
General.
Distributions on or with respect to the Certificates will be made by
the Trustee, to the extent of available funds, and in accordance with the manner
and priority set forth herein, on the 15th day of each month, or if any such
15th day is not a business day, on the next succeeding business day (each, a
"Distribution Date"), commencing in April, 1998. Except as otherwise described
below, all such distributions will be made to the persons in whose names the
Certificates are registered at the close of business on the related Record Date
and, as to each such person, will be made by wire transfer in immediately
available funds to the account specified by the Certificateholder at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
will have provided the Trustee with wiring instructions on or before the related
Record Date, or otherwise by check mailed to such Certificateholder. The final
distribution on any Certificate (determined without regard to any possible
future reimbursement of any Realized Losses or Expense Losses previously
allocated to such Certificate) will be made in a like manner, but only upon
presentation and surrender of such Certificate at the location that will be
specified in a notice of the pendency of such final distribution. Any
distribution that is to be made with respect to a Certificate in reimbursement
of a Realized Loss or Expense Loss previously allocated thereto, which
reimbursement is to occur after the date on which such Certificate is
surrendered as contemplated by the preceding sentence (the likelihood of any
such distribution being remote), will be made by check mailed to the
Certificateholder that surrendered such Certificate. All distributions made on
or with respect to a Class of Certificates will be allocated pro rata among such
Certificates based on their respective Percentage Interests in such Class.
The "Record Date" with respect to each Class of Offered Certificates
for each Distribution Date will be the last business day of the calendar month
immediately preceding the month in which such Distribution Date occurs. The
"Percentage Interest" evidenced by any Offered Certificate in the Class to which
it belongs will be a fraction, expressed as a percentage, the numerator of which
is equal to the initial Certificate Balance or Notional Amount, as the case may
be, of such Certificate as set forth on the face thereof, and the denominator of
which is equal to the initial aggregate Certificate Balance or Notional Amount,
as the case may be, of such Class.
The Available Distribution Amount.
With respect to any Distribution Date, distributions of interest on and
principal of the Certificates will be made from the Available Distribution
Amount for such Distribution Date. The "Available Distribution Amount" for any
Distribution Date will, in general, equal (a) all amounts on deposit in the
Certificate Account (as described in the Prospectus) as of the close of business
on the related Determination Date, exclusive of any portion thereof that
represents one or more of the following:
(i) Monthly Payments collected but due on a Due Date
subsequent to the related Collection Period;
(ii) Prepayment Premiums (which are separately distributable
on the Certificates as hereinafter described);
(iii) amounts that are payable or reimbursable to any person
other than the Certificateholders (including amounts payable to the
Master Servicer, the Special Servicer or the
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<PAGE> 53
Trustee as compensation or in reimbursement of outstanding Advances and
amounts payable in respect of Additional Trust Fund Expenses); and
(iv) amounts deposited in the Certificate Account in error;
plus (b) to the extent not already included in clause (a), any P&I
Advances and Compensating Interest Payments made with respect to such
Distribution Date.
As used herein, "Certificate Account" includes, on a collective basis,
each collection account established and maintained by the Master Servicer for
the retention of payments and other collections of principal and interest in
respect of the Mortgage Loans and each distribution account established and
maintained by the Trustee for the retention of funds pending distribution on the
Certificates. See "Description of the Agreements -- Certificate Account and
Other Collection Accounts" in the Prospectus.
Application of the Available Distribution Amount.
On each Distribution Date, the Trustee will apply the Available
Distribution Amount for such date for the following purposes and in the
following order of priority:
(1) to pay interest to the holders of the respective Classes
of Senior Certificates, up to an amount equal to, and pro rata as among
such Classes in accordance with, all Distributable Certificate Interest
in respect of each such Class of Certificates for such Distribution
Date;
(2) to pay principal: (a) from the Principal Distribution
Amount for such Distribution Date, first to the holders of the Class A1
Certificates and second to the holders of the Class A2 Certificates, in
each case, up to an amount equal to the lesser of (i) the
then-outstanding aggregate Certificate Balance of such Class of
Certificates and (ii) the remaining portion of such Principal
Distribution Amount;
(3) to reimburse the holders of the respective Classes of
Class A Certificates, up to an amount equal to, and pro rata as among
such Classes in accordance with, (a) the respective amounts of Realized
Losses and Expense Losses, if any, previously allocated to such Classes
of Certificates and for which no reimbursement has previously been
paid, plus (b) all unpaid interest on such amounts (compounded monthly)
at the respective Pass-Through Rates of such Classes; and
(4) to make payments on the Subordinate Certificates and the
REMIC Residual Certificates as contemplated below;
provided that, on each Distribution Date after the aggregate Certificate Balance
of the Subordinate Certificates has been reduced to zero, and in any event on
the final Distribution Date in connection with a termination of the Trust Fund
(see "-- Optional Termination" below), the payments of principal to be made as
contemplated by clause (2) above with respect to the Class A Certificates, will
be so made to the holders of the respective Classes of such Certificates, up to
an amount equal to, and pro rata as among such Classes in accordance with the
respective then-outstanding aggregate Certificate Balances of such Classes of
Certificates.
On each Distribution Date, following the above-described distributions
on the Senior Certificates, the Trustee will apply the remaining portion, if
any, of the Available Distribution Amount for such date to make payments on the
respective Classes of Subordinate Certificates in alphabetical order of Class
designation. On each Distribution Date, the holders of each Class of Subordinate
Certificates will be entitled, to the extent of the Available Distribution
Amount remaining after all required distributions to be made therefrom (as
described under this "-- Distribution -- Application of the Available
Distribution Amount" section) on the Senior Certificates and each other Class of
Subordinate Certificates, if any, with an earlier alphabetical Class
designation: first, to distributions of interest, up to an amount equal to all
Distributable Certificate Interest in respect of such Class of Certificates for
such Distribution Date; second, if the aggregate Certificate Balance of the
Class A Certificates and
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each other Class of Subordinate Certificates, if any, with an earlier
alphabetical Class designation has been reduced to zero, to distributions of
principal, up to an amount equal to the lesser of (a) the then-outstanding
aggregate Certificate Balance of such Class of Certificates and (b) the
aggregate of the remaining Principal Distribution Amounts for such Distribution
Date (or, on the final Distribution Date in connection with the termination of
the Trust Fund, up to an amount equal to the then-outstanding aggregate
Certificate Balance of such Class of Certificates); and, third, to distributions
for purposes of reimbursement, up to an amount equal to (a) all Realized Losses
and Expense Losses, if any, previously allocated to such Class of Certificates
and for which no reimbursement has previously been paid, plus (b) all unpaid
interest on such amounts (compounded monthly) at the Pass-Through Rate for such
Class of Certificates.
On each Distribution, following the above-described distributions on
the REMIC Regular Certificates, the Trustee will pay the remaining portion, if
any, of the Available Distribution Amounts for such date to the holders of the
Class R-I Certificates.
Distributable Certificate Interest.
The "Distributable Certificate Interest" in respect of each Class of
REMIC Regular Certificates for each Distribution Date will be equal to the
Accrued Certificate Interest in respect of such Class of Certificates for such
Distribution Date, reduced (to not less than zero) by such Class of
Certificates' allocable share (calculated as described below) of any Net
Aggregate Prepayment Interest Shortfall for such Distribution Date, and
increased by any Class Interest Shortfall in respect of such Class of
Certificates for such Distribution Date. See "-- Prepayment Interest
Shortfalls" below.
The "Accrued Certificate Interest" in respect of each Class of REMIC
Regular Certificates for each Distribution Date will equal the amount of
interest for the applicable Interest Accrual Period accrued at the applicable
Pass-Through Rate on the aggregate Certificate Balance or Notional Amount, as
the case may be, of such Class of Certificates outstanding immediately prior to
such Distribution Date. Accrued Certificate Interest will be calculated on the
basis of a 360-day year consisting of twelve 30-day months.
The "Class Interest Shortfall" with respect to any Class of REMIC
Regular Certificates for any Distribution Date, will equal: (a) in the case of
the initial Distribution Date, zero; and (b) in the case of any subsequent
Distribution Date, the sum of (i) the excess, if any, of (A) all Distributable
Certificate Interest in respect of such Class of Certificates for the
immediately preceding Distribution Date, over (B) all distributions of interest
made with respect to such Class of Certificates on the immediately preceding
Distribution Date, plus (ii) to the extent permitted by applicable law, other
than in the case of the Interest Only Certificates, one month's interest on any
such excess at the Pass-Through Rate applicable to such Class of Certificates.
The "Interest Accrual Period" for each Class of REMIC Regular
Certificates and each Distribution Date will be the calendar month immediately
preceding the month in which such Distribution Date occurs.
Principal Distribution Amount.
The "Principal Distribution Amount" for any Distribution Date will, in
general, equal the aggregate of the following:
(a) the principal portions of all Monthly Payments (other than
Balloon Payments) and any Assumed Monthly Payments due or deemed due,
as the case may be, in respect of the Mortgage Loans for their
respective Due Dates occurring during the related Collection Period;
and
(b) all payments (including voluntary principal prepayments
and Balloon Payments) and other collections received on the Mortgage
Loans during the related Collection Period that were identified and
applied by the Master Servicer as recoveries of principal thereof, in
each case net of any portion of such amounts that represents a payment
or other recovery of the principal portion of any Monthly Payment
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(other than a Balloon Payment) due, or the principal portion of any
Assumed Monthly Payment deemed due, in respect of the related Mortgage
Loan on a Due Date during or prior to the related Collection Period and
not previously paid or recovered.
If on any Distribution Date the aggregate amount of distributions of
principal made on the Principal Balance Certificates is less than such Principal
Distribution Amount, then the amount of such shortfall will be included in the
Principal Distribution Amount for the next succeeding Distribution Date.
The "Monthly Payment" for any Mortgage Loan will, in general, be the
scheduled payment of principal and/or interest due thereon from time to time
(taking into account any waiver, modification or amendment of the terms of such
Mortgage Loan, whether agreed to by the Master Servicer or Special Servicer or
in connection with a bankruptcy or similar proceeding involving the related
borrower).
An "Assumed Monthly Payment" is an amount deemed due in respect of: (i)
any Balloon Loan that is delinquent in respect of its Balloon Payment beyond the
end of the Collection Period in which its stated maturity date occurs; or (ii)
any Mortgage Loan as to which the related Mortgaged Property has become an REO
Property. The Assumed Monthly Payment for any such Balloon Loan deemed due on
its stated maturity date and on each successive Due Date that it remains or is
deemed to remain outstanding shall equal the Monthly Payment that would have
been due thereon on such date if the related Balloon Payment had not come due,
but rather such Mortgage Loan had continued to amortize in accordance with such
loan's amortization schedule, if any, in effect immediately prior to maturity
and had continued to accrue interest in accordance with its terms in effect
immediately prior to maturity. The Assumed Monthly Payment for any such Mortgage
Loan as to which the related Mortgaged Property has become an REO Property,
deemed due on each Due Date for so long as such REO Property remains part of the
Trust Fund, will equal the Monthly Payment (or, in the case of a Balloon Loan
described in the prior sentence, the Assumed Monthly Payment) due on the last
Due Date prior to the acquisition of such REO Property.
Distributions of Prepayment Premiums.
Any Prepayment Premium collected with respect to a Mortgage Loan during
any particular Collection Period will be distributed on the following
Distribution Date as follows: The holders of the respective Classes of Principal
Balance Certificates (other than the Class F, Class G, Class H, Class J, Class K
and Class L Certificates) then entitled to distributions of principal from the
Principal Distribution Amount for such Distribution Date, will be entitled to an
aggregate amount (allocable among such Classes, if more than one, as described
below) equal to the lesser of (a) such Prepayment Premium, and (b) such
Prepayment Premium multiplied by a fraction, the numerator of which is equal to
the excess, if any, of the Pass-Through Rate applicable to the most senior of
such Classes of Certificates then outstanding (or, in the case of two Classes of
Class A Certificates, the one with the earlier payment priority), over the
relevant Discount Rate (as defined herein), and the denominator of which is
equal to the excess, if any, of the Mortgage Rate for the prepaid Mortgage Loan,
over the relevant Discount Rate. If there is more than one Class of Principal
Balance Certificates entitled to distributions of principal from the Principal
Distribution Amount for such Distribution Date, the aggregate amount described
in the preceding sentence shall be allocated among such Classes on a pro rata
basis in accordance with the relative amounts of such distributions of
principal. Any portion of such Prepayment Premium that is not so distributed to
the holders of such Principal Balance Certificates will be distributed to the
holders of the Interest Only Certificates.
For purposes of the foregoing, the "Discount Rate" is the rate which,
when compounded monthly, is equivalent to the Treasury Rate when compounded
semi-annually. The "Treasury Rate" is the yield calculated by the linear
interpolation of the yields, as reported in Federal Reserve Statistical Release
H.15 -- Selected Interest Rates under the heading "U.S. government
securities/Treasury constant maturities" for the week ending prior to the date
of the relevant principal prepayment, of U.S. Treasury constant maturities with
a maturity date (one longer and one shorter) most nearly approximating the
maturity date (or Hyper-Amortization Date, if applicable) of the Mortgage Loan
prepaid. If Release H.15 is no longer published, the Trustee will select a
comparable publication to determine the Treasury Rate.
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Any Prepayment Premiums distributed to the holders of a Class of
Certificates may not be sufficient to fully compensate such Certificateholders
for any loss in yield attributable to the related Principal Prepayments.
Treatment of REO Properties.
Notwithstanding that any Mortgaged Property may be acquired as part of
the Trust Fund through foreclosure, deed in lieu of foreclosure or otherwise,
the related Mortgage Loan will be treated, for purposes of, among other things,
determining distributions on the Certificates, allocations of Realized Losses
and Expense Losses to the Certificates, and the amount of Master Servicing Fees
and Special Servicing Fees payable under the Pooling and Servicing Agreement, as
having remained outstanding until such REO Property is liquidated. Among other
things, such Mortgage Loan will be taken into account when determining
Pass-Through Rates and the Principal Distribution Amount. In connection
therewith, operating revenues and other proceeds derived from such REO Property
(after application thereof to pay certain costs and taxes, including certain
reimbursements payable to the Master Servicer, the Special Servicer and/or the
Trustee, incurred in connection with the operation and disposition of such REO
Property) will be "applied" by the Master Servicer as principal, interest and
other amounts "due" on such Mortgage Loan, and, subject to the applicable
limitations described under "-- Advances" below, the Master Servicer, the
Trustee and the Fiscal Agent will each be required, to the extent such proceeds
are less than the monthly payments due under such Mortgage Loan, to make P&I
Advances in respect of such Mortgage Loan, in all cases as if such Mortgage Loan
had remained outstanding.
APPRAISAL REDUCTIONS
As soon as reasonably practicable, but in any event within 60 days,
following the earliest of (i) the date 120 days after the occurrence of any
delinquency in payment with respect to a Mortgage Loan if such delinquency
remains uncured, (ii) the date 90 days after the related borrower files a
bankruptcy petition or a receiver is appointed in respect of the related
Mortgaged Property, provided such petition or appointment is still in effect,
(iii) the effective date of any modification to the maturity date, Mortgage
Rate, principal balance, amortization term or payment frequency (each, a "Money
Term") of a Mortgage Loan, other than the extension of the date that a Balloon
Payment is due for a period of less than six months from the initial maturity
date, and (iv) the date 30 days following the date a Mortgaged Property becomes
an REO Property (each of (i), (ii), (iii) and (iv), an "Appraisal Event" and the
affected Mortgage Loan, a "Required Appraisal Loan"), the Special Servicer will
be required to obtain an MAI appraisal of the related Mortgaged Property or REO
Property, as the case may be (or, at its discretion, if the Stated Principal
Balance of the particular Required Appraisal Loan is less than or equal to
$1,000,000, to perform an internal valuation of such property). As a result of
such appraisal or internal valuation, an "Appraisal Reduction" may be created.
The Appraisal Reduction for any Required Appraisal Loan will be an
amount, calculated as of the first Determination Date that is at least fifteen
days after the date on which an appraisal report or internal valuation is
obtained, equal to the excess, if any, of (a) the sum of (i) the Stated
Principal Balance of such Required Appraisal Loan, (ii) to the extent not
previously advanced by the Master Servicer, the Trustee or the Fiscal Agent, all
unpaid interest on the Required Appraisal Loan, (iii) all related unreimbursed
Advances and interest on such Advances at the Advance Rate (as defined herein)
and (iv) all currently due and unpaid real estate taxes and assessments,
insurance premiums and, if applicable, ground rents in respect of the related
Mortgaged Property or REO Property, as the case may be (net of any amounts
escrowed for such items), over (b) 90% of the appraised value (net of any prior
mortgage liens) of the related Mortgaged Property or REO Property as determined
by such appraisal or internal valuation. An Appraisal Reduction will be reduced
to zero as of the date the related Mortgage Loan is brought current under the
then-current terms of the Mortgage Loan for at least three consecutive months or
is paid in full, liquidated, repurchased, replaced or otherwise disposed of.
The existence of an Appraisal Reduction proportionately reduces the
Master Servicer's, the Trustee's or the Fiscal Agent's, as the case may be,
advancing obligation in respect of delinquent principal and interest on the
related Mortgage Loan, which may result in a reduction in distributions in
respect of the then-most subordinate Class of Certificates. See "-- Advances
- -- P&I Advances" below.
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SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
As and to the extent described herein, the rights of holders of
Subordinate Certificates to receive distributions of amounts collected or
advanced on the Mortgage Loans will, in the case of each Class thereof, be
subordinated to the rights of holders of the Senior Certificates and, further,
to the rights of holders of each other Class of Subordinate Certificates, if
any, with an earlier alphabetical Class designation. This subordination is
intended to enhance the likelihood of timely receipt by holders of the
respective Classes of Senior Certificates of the full amount of Distributable
Certificate Interest payable in respect of their Certificates on each
Distribution Date, and the ultimate receipt by holders of the respective Classes
of Class A Certificates of principal equal to, in each such case, the entire
aggregate Certificate Balance of such Class of Certificates. Similarly, but to
decreasing degrees, this subordination is also intended to enhance the
likelihood of timely receipt by holders of the other Classes of Offered
Certificates of the full amount of Distributable Certificate Interest payable in
respect of their Certificates on each Distribution Date, and the ultimate
receipt by holders of such other Classes of Offered Certificates of principal
equal to, in each such case, the entire aggregate Certificate Balance of such
Class of Certificates. The subordination of each Class of Subordinate
Certificates will be accomplished by, among other things, the application of the
Available Distribution Amount on each Distribution Date in the order of priority
described under "-- Distributions -- Application of the Available Distribution
Amount" above. No other form of credit support will be available for the benefit
of holders of Certificates.
If, following the distributions to be made in respect of the
Certificates on any Distribution Date, the aggregate Stated Principal Balance of
the Mortgage Pool that will be outstanding immediately following such
Distribution Date is less than the then-aggregate Certificate Balance of the
Principal Balance Certificates, the respective aggregate Certificate Balances of
the Class L, Class K, Class J, Class H, Class G, Class F, Class E, Class D,
Class C and Class B Certificates will be reduced, sequentially in that order, in
the case of each such Class until such deficit (or the related aggregate
Certificate Balance) is reduced to zero (whichever occurs first). If any portion
of such deficit remains at such time as the aggregate Certificate Balance of all
such Classes of Certificates is reduced to zero, then the respective aggregate
Certificate Balances of the Class A1 and Class A2 Certificates will be reduced,
pro rata in accordance with the relative sizes of the remaining aggregate
Certificate Balances of such Classes of Certificates, until such deficit (or the
aggregate Certificate Balance of each such Class of Certificates) is reduced to
zero. In general, any such deficit will be the result of Realized Losses
incurred in respect of the Mortgage Loans and/or Expense Losses. Accordingly,
the foregoing reductions in the aggregate Certificate Balances of the respective
Classes of Principal Balance Certificates will constitute an allocation of any
such Realized Losses and Expense Losses. Any such allocation of Realized Losses
and/or Expense Losses to a particular Class of Principal Balance Certificates
will be allocated among the Certificates of such Class in proportion to their
respective Percentage Interests in such Class.
"Realized Losses" are losses on or in respect of the Mortgage Loans
arising from the inability of the Master Servicer to collect all amounts due and
owing under any such Mortgage Loan, including by reason of the fraud or
bankruptcy of a borrower or a casualty of any nature at a Mortgaged Property, to
the extent not covered by insurance. The Realized Loss in respect of a
liquidated Mortgage Loan (or related REO Property) is an amount generally equal
to the excess, if any, of (a) the outstanding principal balance of such Mortgage
Loan as of the date of liquidation, together with (i) all accrued and unpaid
interest thereon at the related Mortgage Rate to but not including the Due Date
in the Collection Period in which the liquidation occurred and (ii) all related
unreimbursed Servicing Advances (including interest on any outstanding Advances
at the Advance Rate) and outstanding liquidation expenses, over (b) the
aggregate amount of Liquidation Proceeds (as defined in the Prospectus), if any,
recovered in connection with such liquidation. If any portion of the debt due
under a Mortgage Loan is forgiven, whether in connection with a modification,
waiver or amendment granted or agreed to by the Special Servicer or in
connection with the bankruptcy or similar proceeding involving the related
borrower, the amount so forgiven also will be treated as a Realized Loss.
"Expense Losses" are losses incurred by the Trust Fund by reason of
Additional Trust Fund Expenses being paid out of the Trust Fund that were not of
the type typically subject to a Servicing Advance or were of such type but were
the subject of a determination that such Servicing Advance, if made, would be
nonrecoverable.
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"Additional Trust Fund Expenses" include, among other things, (i) Special
Servicing Fees, Workout Fees and Liquidation Fees, (ii) interest in respect of
Advances not paid out of default interest and late payment charges, (iii) the
cost of various opinions of counsel required or permitted to be obtained in
connection with the servicing of the Mortgage Loans and the administration of
the Trust Fund, (iv) certain unanticipated, non-Mortgage Loan specific expenses
of the Trust Fund, including certain indemnities and reimbursements to the
Trustee (and certain indemnities and reimbursements to the Fiscal Agent
comparable to those for the Trustee) as described under "Description of the
Agreements -- The Trustee" in the Prospectus, certain indemnities and
reimbursements to the Master Servicer and the Depositor (and certain indemnities
and reimbursements to the Special Servicer comparable to those for the Master
Servicer) as described under "Description of the Agreements -- Certain Matters
Regarding a 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 "SERVICING OF THE MORTGAGE LOANS -- REO
Properties" herein and "Certain Federal Income Tax Consequences -- Prohibited
Transactions and Other Taxes" in the Prospectus, (v) any amounts expended on
behalf of the Trust Fund to remediate an adverse environmental condition at any
Mortgaged Property securing a defaulted Mortgage Loan (see "Description of the
Agreements -- Realization Upon Defaulted Whole Loans" in the Prospectus), and
(vi) any other expense of the Trust Fund not specifically included in the
calculation of Realized Loss for which there is no corresponding collection from
a borrower.
PREPAYMENT INTEREST SHORTFALLS
If a borrower prepays a Mortgage Loan, in whole or in part, prior to
the Determination Date in any calendar month, the amount of interest (net of
related Master Servicing Fees and Trustee Fees) accrued on such prepayment, in
general, from the beginning of such calendar month to, but not including, the
date of prepayment (or any later date through which interest accrues) will, to
the extent actually collected, constitute a "Prepayment Interest Excess".
Conversely, if a borrower prepays a Mortgage Loan, in whole or in part, after
the Determination Date in any calendar month and does not pay interest on such
prepayment through, in general, the end of such calendar month, then the
shortfall in a full month's interest (net of related Master Servicing Fees and
Trustee Fees) on such prepayment will constitute a "Prepayment Interest
Shortfall". Prepayment Interest Excesses collected on the Mortgage Loans during
any Collection Period will first be applied to offset Prepayment Interest
Shortfalls incurred in respect of the Mortgage Loans during such Collection
Period and, to the extent not needed for such purposes, will be retained by the
Master Servicer as additional servicing compensation. The Master Servicer will
be obligated to cover, out of its own funds, without right of reimbursement, to
the extent of that portion of its Master Servicing Fees for the related
Collection Period, any Prepayment Interest Shortfalls in respect of the Mortgage
Loans that are not so offset by Prepayment Interest Excesses. Any payment so
made by the Master Servicer to cover such shortfalls will constitute a
"Compensating Interest Payment". The aggregate of all Prepayment Interest
Shortfalls incurred in respect of the Mortgage Loans during any Collection
Period that are neither offset by Prepayment Interest Excesses collected on the
Mortgage Loans during such Collection Period nor covered by a Compensating
Interest Payment made by the Master Servicer, shall constitute the "Net
Aggregate Prepayment Interest Shortfall" for the related Distribution Date.
Any Net Aggregate Prepayment Interest Shortfall for a Distribution Date
will be allocated among the respective Classes of REMIC Regular Certificates, on
a pro rata basis, in the ratio that the Accrued Certificate Interest with
respect to any such Class of Certificates for such Distribution Date, bears to
the total of the Accrued Certificate Interest with respect to all Classes of
REMIC Regular Certificates for such Distribution Date. The Distributable
Certificate Interest in respect of any Class of REMIC Regular Certificates will
be reduced to the extent any Net Aggregate Prepayment Interest Shortfalls are
allocated to such Class of Certificates. See "SERVICING OF THE MORTGAGE
LOANS -- Servicing and Other Compensation and Payment of Expense" herein.
OPTIONAL TERMINATION
The Depositor, the Master Servicer, the Special Servicer, majority
holders of the Controlling Class and any holder of a majority interest in the
Class R-I Certificate, will each have the option to purchase, in whole but not
in part, the Mortgage Loans and any other property remaining in the Trust Fund
on any Distribution Date as of which
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the aggregate Certificate Balance of all Classes of Principal Balance
Certificates then outstanding is less than or equal to 1% of the Initial Pool
Balance. Such purchase will be at a price (the "Termination Price") generally
equal to 100% of the aggregate unpaid principal balance of the Mortgage Loans
(other than any Mortgage Loans as to which the Special Servicer has determined
that all payments or recoveries with respect thereto have been made and other
than any Mortgage Loans as to which the related Mortgaged Property has become an
REO Property), plus accrued and unpaid interest on each such Mortgage Loan at
the related Mortgage Rate to the Due Date for such Mortgage Loan in the
Collection Period with respect to which such purchase occurs, plus related
unreimbursed Servicing Advances, plus interest on any related Advances at the
Advance Rate, plus the fair market value of any other property (including REO
Property) remaining in the Trust Fund. The Termination Price, net of any portion
thereof payable to persons other than the Certificateholders, will constitute
part of the Available Distribution Amount for the final Distribution Date.
ADVANCES
P&I Advances.
With respect to each Distribution Date, unless the Master Servicer, in
its reasonable discretion, determines that the funds therefor would not be
recoverable from subsequent payments or other collections (including Insurance
Proceeds (as defined in the Prospectus), condemnation proceeds and Liquidation
Proceeds) in respect of the related Mortgage Loan (such payments and other
collections, "Related Proceeds") as described in the Prospectus, the Master
Servicer will be obligated to make advances (each, a "P&I Advance") out of its
own funds or, subject to the replacement thereof as provided in the Pooling and
Servicing Agreement, funds held in the Certificate Account that are not required
to be part of the Available Distribution Amount for such Distribution Date, in
an amount generally equal to the aggregate of all Monthly Payments (other than
Balloon Payments) and any Assumed Monthly Payments, in each case net of any
related Workout Fee, that were due or deemed due, as the case may be, in respect
of the Mortgage Loans during the related Collection Period and that were not
paid by or on behalf of the related borrowers or otherwise collected as of the
close of business on the last day of the related Collection Period or other
specified date prior to such Distribution Date. The Master Servicer's
obligations to make P&I Advances (unless the Master Servicer shall determine
that any such Advance would be nonrecoverable) in respect of any Mortgage Loan
will continue through liquidation of such Mortgage Loan or disposition of any
REO Property acquired in respect thereof. Notwithstanding the foregoing, if an
Appraisal Reduction exists with respect to any Mortgage Loan, then, with respect
to the Distribution Date immediately following the date of such determination
and with respect to each subsequent Distribution Date for so long as such
Appraisal Reduction exists, in the event of subsequent delinquencies on such
Mortgage Loan, the amount of the P&I Advance in respect of such Mortgage Loan
will be reduced to equal to the product of (i) the amount of such P&I Advance
that would otherwise be required to be made for such Distribution Date without
regard to this sentence, multiplied by (ii) a fraction (expressed as a
percentage), the numerator of which is equal to the Stated Principal Balance of
such Mortgage Loan, net of the amount of such Appraisal Reduction, and the
denominator of which is equal to the Stated Principal Balance of such Mortgage
Loan. See "Appraisal Reductions" above. In addition, and without duplication,
the Master Servicer will make only one P&I Advance in respect of each Mortgage
Loan for the benefit of the most subordinate Class of Certificates then
outstanding unless the related defaulted Monthly Payment is cured prior to the
following Due Date on any Mortgage Loan. The amount to be advanced by the Master
Servicer, Trustee or Fiscal Agent in respect of any Mortgage Loan on any
Distribution Date will be reduced by the greater of the reduction in respect of
any Appraisal Reduction and the reduction described in the preceding sentence.
If the Master Servicer fails to make a required P&I Advance, the Trustee will be
obligated to make such P&I Advance; and, if the Trustee fails to make a required
P&I Advance, the Fiscal Agent will be obligated to make such P&I Advance. See
"-- The Trustee and the Fiscal Agent" below.
The Master Servicer, the Trustee and the Fiscal Agent will each be
entitled to recover any P&I Advance made by it from Related Proceeds collected
in respect of the Mortgage Loan as to which such P&I Advance was made.
Notwithstanding the foregoing, none of the Master Servicer, the Trustee or the
Fiscal Agent will be obligated to make a P&I Advance that would, if made,
constitute a Nonrecoverable Advance (as defined below). The Master Servicer, the
Trustee and the Fiscal Agent will each be entitled to recover any P&I Advance
previously made by it
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that is, at any time, determined to be a Nonrecoverable Advance, out of general
funds on deposit in the Certificate Account. See "Description of the
Certificates -- Advances in Respect of Delinquencies" and "Description of the
Agreements -- Certificate Account and Other Collection Accounts" in the
Prospectus.
Servicing Advances.
In general, customary, reasonable and necessary "out-of-pocket" costs
and expenses required to be incurred by the Master Servicer or the Special
Servicer, as applicable, in connection with the servicing of a Mortgage Loan
after a default, delinquency or other unanticipated event, or in connection with
the administration of any REO Property, will constitute "Servicing Advances"
(Servicing Advances and P&I Advances, collectively, "Advances") and, in all
cases, will be reimbursable as described below. Notwithstanding the foregoing,
the Master Servicer and the Special Servicer will each be permitted to pay, or
to direct the payment of, certain servicing expenses directly out of the
Certificate Account and at times without regard to the relationship between the
expense and the funds from which it is being paid. Furthermore, if the Special
Servicer is required under the Pooling and Servicing Agreement to make any
Servicing Advance but does not desire to do so, and if the Special Servicer and
the Master Servicer are not the same person, then the Special Servicer may, in
its sole discretion, with limited exception, request that the Master Servicer
make such Advance, such request to be made in writing and in a timely manner
that does not adversely affect the interests of any Certificateholder. The
Master Servicer will be obligated to make any such Servicing Advance that it is
requested by the Special Servicer to so make (unless the Master Servicer shall
determine that any such Advance would be nonrecoverable) within ten (10) days of
the Master Servicer's receipt of such request.
If the Master Servicer or the Special Servicer is required under the
Pooling and Servicing Agreement to make a Servicing Advance, but does not do so
within 15 days after such Servicing Advance is required to be made, then the
Trustee will, if it has actual knowledge of such failure, be required to give
the defaulting party notice of such failure and, if such failure continues for
three (3) more days, the Trustee will be obligated to make such Servicing
Advance (and, if the Trustee fails to make any Servicing Advance required under
the Pooling and Servicing Agreement, the Fiscal Agent will be obligated to make
such Servicing Advance on behalf of the Trustee).
The Master Servicer, the Special Servicer and the Trustee will each be
obligated to make Servicing Advances only to the extent that such Servicing
Advances are, in the reasonable and good faith judgment of such party,
ultimately recoverable from Related Proceeds.
Nonrecoverable Advances.
The determination by the Master Servicer, the Special Servicer (or, if
applicable, the Trustee or Fiscal Agent) that any P&I Advance or Servicing
Advance previously made or proposed to be made would not be recoverable from
Related Proceeds, is to be made in the reasonable and good faith discretion of
such party and is to be accompanied by an officer's certificate delivered to the
Trustee and setting forth the reasons for such determination, together with
copies of appraisals, if any, or other information relevant thereto which
supports such determination. The Master Servicer's or Special Servicer's
determination of nonrecoverability will be conclusive and binding upon the
Certificateholders, the Trustee and the Fiscal Agent with respect to the
obligation of the Trustee or the Fiscal Agent to make any Advance. The Trustee
and the Fiscal Agent shall be entitled to rely conclusively on any determination
by the Master Servicer or Special Servicer of nonrecoverability with respect to
such Advance and shall have no obligation to make a separate determination of
recoverability.
Interest on Advances.
The Master Servicer, the Special Servicer, the Trustee and the Fiscal
Agent will each be entitled, with respect to any Advance made thereby, to
receive interest accrued on the amount of such Advance for so long as it is
outstanding at a rate per annum (the "Advance Rate") equal to the "prime rate"
as published in the "Money Rates" section of The Wall Street Journal, as such
"prime rate" may change from time to time. Such interest on any Advance will be
payable to the Master Servicer, the Special Servicer, the Trustee or the Fiscal
Agent, as the case
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may be, first out of default interest and late payment charges actually
collected by the Master Servicer or the Special Servicer (and not retainable by
any Sub-Servicer) in respect of the related Mortgage Loan or, if such amounts
are insufficient, out of any amounts then on deposit in the Certificate Account.
To the extent not offset by default interest and late payment charges actually
collected in respect of any defaulted Mortgage Loan, interest accrued on
outstanding Advances made in respect thereof will result in a reduction in
amounts payable on the Certificates.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports.
1. Based on information provided in monthly reports prepared by the
Master Servicer and the Special Servicer and delivered to the Trustee, the
Trustee will prepare and forward on each Distribution Date to each
Certificateholder:
(a) A statement setting forth, to the extent applicable: (i)
the amount, if any, of the distributions to the holders of each Class
of Principal Balance Certificates on such Distribution Date applied to
reduce the aggregate Certificate Balance thereof; (ii) the amount of
the distributions to holders of each Class of REMIC Regular
Certificates on such Distribution Date allocable to (A) interest and
(B) Prepayment Premiums; (iii) the number and aggregate Stated
Principal Balance of outstanding Mortgage Loans in the Mortgage Pool;
(iv) the number and aggregate Stated Principal Balance of Mortgage
Loans in the Mortgage Pool (A) delinquent one month, (B) delinquent two
months, (C) delinquent three or more months or (D) as to which
foreclosure proceedings have been commenced; (v) with respect to any
REO Property acquired during the related Collection Period, the Stated
Principal Balance of the related Mortgage Loan as of the date of
acquisition of the REO Property; (vi)(A) the most recent appraised
value of any REO Property as of the related Determination Date, (B) as
to any REO Property sold during the related Collection Period, the date
of the related determination by the Special Servicer that it has
recovered all Related Proceeds that it expects to be finally
recoverable and the amount of the proceeds of such sale deposited into
the Certificate Account, and (C) the aggregate amount of other revenues
collected by the Special Servicer with respect to each REO Property
during the related Collection Period and credited to the Certificate
Account, in each case identifying such REO Property by the loan number
of the related Mortgage Loan; (vii) the aggregate Certificate Balance
or Notional Amount of each Class of REMIC Regular Certificates before
and after giving effect to the distributions, and any allocations of
Realized Losses and Expense Losses, made on such Distribution Date;
(viii) the aggregate amount of principal prepayments made during the
related Collection Period; (ix) the Pass-Through Rate applicable to the
Interest Only Certificates for such Distribution Date; (x) the
aggregate amount of servicing fees retained by or paid to the Master
Servicer and the Special Servicer; (xi) the amount of Realized Losses
or Expense Losses, if any, incurred with respect to the Mortgage Loans
during the related Collection Period; (xii) the aggregate amount of
Servicing Advances and P&I Advances outstanding as of the end of the
prior calendar month that have been made by the Master Servicer, the
Special Servicer, the Trustee and the Fiscal Agent, separately stated;
(xiii) the amount of any Appraisal Reductions effected during the
related Collection Period on a loan-by-loan basis and the total
Appraisal Reductions as of such Distribution Date; and (xiv) such other
information and in such form as shall be specified in the Pooling and
Servicing Agreement. In the case of information furnished pursuant to
subclauses (i) and (ii) above, the amounts shall be expressed as a
dollar amount per $1,000 of original actual or notional principal
amount of the Certificates for all Certificates of each applicable
Class.
(b) A report containing information regarding the Mortgage
Loans as of the end of the related Collection Period, which report will
contain substantially the categories of information regarding the
Mortgage Loans set forth in Appendix I and Appendix II, will be
presented in a tabular format substantially similar to the respective
format utilized in Appendix I and Appendix II and will be updated
within a reasonable period after the requisite underlying information
is available.
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2. For those who have obtained an account number on the Trustee's ASAP
(Automatic Statements Accessed by Phone) System, the foregoing report or a
summary report of bond factors may be obtained from the Trustee via automated
facsimile by placing a telephone call to (312) 904-2200 and following the voice
prompts to request "Statement Number 317." Account numbers on the Trustee's ASAP
System may be obtained by calling the same telephone number and following the
voice prompts for obtaining account numbers. Separately, bond factor information
may be obtained from the Trustee by calling (800) 246-5761. In addition, if the
Depositor so directs the Trustee and on terms acceptable to the Trustee, the
Trustee will make available through its electronic bulletin board system certain
information related to the Mortgage Loans (as presented in the standard CSSA
format) as provided for in the Pooling and Servicing Agreement. The bulletin
board is located at (714) 282-3990. A directory has been set up on the bulletin
board in which an electronic file is stored containing monthly servicer data.
All files are password protected. Passwords to each file will be released by the
Trustee in accordance with the terms of the Pooling and Servicing Agreement.
Those who have an account on the bulletin board may retrieve the loan level data
file for each transaction in the directory. An account number may be obtained by
typing "NEW" upon logging into the bulletin board. The Trustee also intends to
make the information that is available through the bulletin board available on
the Internet at www.lnbabs.com. Such Internet access may require the use of a
password which can be obtained from the Trustee.
3. Unless otherwise reported pursuant to 1(b) above, on an annual
basis, the Master Servicer is required to deliver to the Trustee, who will
deliver such report to the Underwriters, the Certificateholders, the Depositor
and anyone else the Depositor or either Underwriter reasonably designates, a
report setting forth the debt service coverage ratio (and the calculation
thereof) with respect to each Mortgage Loan for which the Master Servicer
obtains operating statements, and such other information, including occupancy,
to the extent available, and substantially in the form set forth in the Pooling
and Servicing Agreement.
Special Servicer Reports.
No later than one business day following each Determination Date, the
Special Servicer will prepare, or provide the Master Servicer with the
information necessary to prepare, reports with respect to Specially Serviced
Mortgage Loans substantially in the form set forth in the Pooling and Servicing
Agreement. Such reports generally will include, among other things, a report
showing loan-by-loan detail on each Specially Serviced Mortgage Loan that is 60
days delinquent, 90 days delinquent, or in the process of foreclosure, an REO
status report for each REO Property and a modification report showing
loan-by-loan detail for each modification closed during the most recent
reporting period. Such reports will be delivered by the Trustee, no later than
the business day prior to each Distribution Date, to the Underwriters, the
Rating Agencies and the Depositor.
Other Information.
The Pooling and Servicing Agreement requires that the Trustee make
available, at its offices primarily responsible for administering the Trust Fund
or at such other office as it may reasonably designate, during normal business
hours, upon reasonable advance notice for review by any holder or prospective
purchaser of a Certificate, originals or copies of, among other things, the
following items (except to the extent not permitted by applicable law or under
any of the Mortgage Loan documents): (i) the Pooling and Servicing Agreement and
any amendments thereto, (ii) all reports or statements delivered by the Trustee
to holders of the relevant Class of Certificates since the Closing Date, (iii)
all accountants' reports delivered to the Trustee since the Closing Date, (iv)
the most recent property inspection report prepared by or on behalf of the
Master Servicer or the Special Servicer in respect of each Mortgaged Property
and delivered to the Trustee, (v) the most recent Mortgaged Property annual
operating statements and rent rolls, if any, collected by or on behalf of the
Master Servicer or the Special Servicer and delivered to the Trustee, (vi) any
and all modifications, waivers and amendments of the terms of a Mortgage Loan
entered into by the Master Servicer and/or the Special Servicer and delivered to
the Trustee, and (vii) any and all officers' certificates and other evidence
delivered to the Trustee to support the Master Servicer's determination that any
Advance was or, if made, would not be, recoverable from Related Proceeds. Copies
of any and all of the foregoing items and any Special Servicer Reports delivered
to the Trustee will be available from the Trustee upon request; provided that
the Trustee will be permitted to require payment of a sum sufficient to cover
the reasonable
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costs and expenses of providing such copies; and provided further that certain
limitations will be imposed on the recipients with respect to the use and
further dissemination of the information to the extent described in the Pooling
and Servicing Agreement.
BOOK-ENTRY CERTIFICATES
Until such time, if any, as Definitive Certificates are issued in
respect of the Offered Certificates, the foregoing information and access will
be available to the related Certificate Owners only to the extent it is
forwarded by, or otherwise available through, DTC and its Participants. The
manner in which notices and other communications are conveyed by DTC to its
Participants, and by such Participants to the Certificate Owners, will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. The Master Servicer, the
Special Servicer, the Trustee and the Depositor are required to recognize as
Certificateholders only those persons in whose names the Certificates are
registered on the books and records of the Trustee; however, any Certificate
Owner that has delivered to the Trustee a written certification, in form and
substance satisfactory to the Trustee, regarding such Certificate Owner's
beneficial ownership of Offered Certificates will be recognized as a
Certificateholder for purposes of obtaining the foregoing information and
access.
EXAMPLE OF DISTRIBUTIONS
The following chart sets forth an example of distributions on the
Certificates for the first month of the Trust Fund's existence, assuming the
Certificates are issued during March 1998:
The close of business on
March 1.............. (A) Cut-off Date.
March 31............. (B) Record Date for all Classes of Certificates.
March 2 - April 10... (C) The Collection Period. The Master Servicer
receives Monthly Payments due after the
Cut-off Date and on or prior to April 10,
the last day of the Collection Period for
scheduled payments due and received, and any
principal prepayments made, after the
Cut-off Date and on or prior to April 9, the
last day of the Collection Period for
unscheduled payments.
April 10............. (D) Determination Date.
April 14............. (E) Master Servicer Remittance Date.
April 15............. (F) Distribution Date.
Succeeding monthly periods follow the pattern of (B) through (F)
(except as described below).
(A) The outstanding principal balance of the Mortgage Loans will be the
aggregate principal balance of the Mortgage Loans at the close of business on
March 1, 1998 (after deducting principal payments due on or before such date).
Those principal payments due on or before such date, and the accompanying
interest payments, are not part of the Trust Fund.
(B) Distributions on the next Distribution Date will be made to those
persons that are Certificateholders of record on this date. Each subsequent
Record Date will be the last business day of the month preceding the related
Distribution Date.
(C) Any Monthly Payments due and collected and Principal Prepayments
collected, after the Cut-off Date and on or prior to the dates set forth above
will be deposited in the Certificate Account. Each subsequent Collection Period
will begin on the day after the Determination Date in the month preceding the
month of the related Distribution Date and will end on the Determination Date in
the month in which the related Distribution Date occurs.
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(D) As of the close of business on the Determination Date, the Master
Servicer will have determined the amounts of principal and interest due and
payable on the Mortgage Loans with respect to the related Collection Period.
(E) The Master Servicer will remit to the Trustee on the business day
preceding the related Distribution Date all amounts held by the Master Servicer
that are payable to Certificateholders on such Distribution Date.
(F) The Trustee will make distributions to Certificateholders on the
15th day of each month or, if any such 15th day is not a business day, the next
succeeding business day.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement,
97% of the voting rights for the Certificates (the "Voting Rights") are to be
allocated among the holders of the respective Classes of Principal Balance
Certificates in proportion to the aggregate Certificate Balances of such
Classes, 2% of the Voting Rights are to be allocated among the holders of the
Class of Interest Only Certificates, and the remaining Voting Rights are to be
allocated equally among the holders of the respective Classes of REMIC Residual
Certificates. Voting Rights allocated to a Class of Certificateholders will be
allocated among such Certificateholders in proportion to the Percentage
Interests in such Class evidenced by their respective Certificates.
THE TRUSTEE AND THE FISCAL AGENT
The Trustee
LaSalle National Bank ("LaSalle") will act as Trustee. LaSalle is a
subsidiary of LaSalle National Corporation which is a subsidiary of the Fiscal
Agent. The Trustee is at all times required to be, and will be required to
resign if it fails to be, (i) an institution insured by the FDIC, (ii) a
corporation, national bank or national banking association, organized and doing
business under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by federal or state authority and (iii) an institution whose
long-term senior unsecured debt (or that of its fiscal agent, if applicable) is
rated not less than "AA" by DCR and "AA" by S&P (or such lower ratings as the
Rating Agencies would permit without an adverse effect on any of the
then-current ratings of the Certificates). The corporate trust office of the
Trustee responsible for administration of the Trust Fund (the "Corporate Trust
Office") is located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois
60674-4107, Attention: Asset-Backed Securities Trust Services Group -Morgan
Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series
1998-HF1. As of June 30, 1997, the Trustee had assets of approximately $15.4
billion. See "SERVICING OF THE MORTGAGE LOANS -- Duties of the Trustee",
"SERVICING OF THE MORTGAGE LOANS--Certain Matters Regarding the Trustee" and
"SERVICING OF THE MORTGAGE LOANS--Resignation and Removal of the Trustee" in the
Prospectus.
The principal compensation to be paid to the Trustee in respect of its
activities as the trustee under the Pooling and Servicing Agreement will be the
Trustee Fee. The "Trustee Fee" will be payable monthly on a loan-by-loan basis
from amounts received in respect of interest on each Mortgage Loan (including
Specially Serviced Mortgage Loans and Mortgage Loans as to which the related
Mortgaged Property has become an REO Property) and will be computed on the basis
of the same principal amount and for the same period respecting which any
related interest payment on the related Mortgage Loan is computed.
The Fiscal Agent
ABN AMRO Bank N.V., a Netherlands banking corporation and the indirect
corporate parent of the Trustee, will act as Fiscal Agent for the Trust Fund and
will be obligated to make any Advance required to be made, and not made, by the
Master Servicer and the Trustee under the Pooling and Servicing Agreement,
provided that the
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Fiscal Agent will not be obligated to make any Advance that it deems to be a
Nonrecoverable Advance. The Fiscal Agent will be entitled (but not obligated) to
rely conclusively on any determination by the Master Servicer, the Special
Servicer (solely in the case of Servicing Advances) or the Trustee that an
Advance, if made, would be a Nonrecoverable Advance. The Fiscal Agent will be
entitled to reimbursement for each Advance made by it in the same manner and to
the same extent as, but prior to, the Master Servicer and the Trustee. See " --
Advances" above. The Fiscal Agent will be entitled to various rights,
protections and indemnities similar to those afforded the Trustee. The Trustee
will be responsible for payment of the compensation of the Fiscal Agent. As of
June 30, 1997, the Fiscal Agent had consolidated assets of approximately $398
billion. In the event that LaSalle shall, for any reason, cease to act as
Trustee under the Pooling Agreement, ABN AMRO Bank N.V. likewise shall no longer
serve in the capacity of Fiscal Agent thereunder.
MATURITY CONSIDERATIONS
The weighted average life of a Principal Balance Certificate refers to
the average amount of time that will elapse from the date of its issuance until
each dollar allocable to principal of such Certificate is distributed to the
investor. For purposes of this Prospectus Supplement, the weighted average life
of a Principal Balance Certificate is determined by (i) multiplying the amount
of each principal distribution thereon by the number of years from the Closing
Date to the related Distribution Date, (ii) summing the results and (iii)
dividing the sum by the aggregate amount of the reductions in the Certificate
Balance of such Certificate. Accordingly, the weighted average life of any such
Certificate will be influenced by, among other things, the rate at which
principal of the Mortgage Loans is paid or otherwise collected or advanced and
the extent to which such payments, collections and/or advances of principal are
in turn applied in reduction of the Certificate Balance of such Certificate.
Prepayments on mortgage loans may be measured by a prepayment standard
or model. The model used in this Prospectus Supplement is the CPR prepayment
model (as described under "Yield Considerations -- Prepayments --Maturity and
Weighted Average Life" in the Prospectus).
As used in each of the following tables, the column headed "0%" assumes
that none of the Mortgage Loans is prepaid before maturity. The columns headed
"3%", "5%", "7%", "10%" and "15%" assume that no prepayments are made on any
Mortgage Loan during such Mortgage Loan's Lock-out Period, if any, or during
such Mortgage Loan's yield maintenance period (unless the prepayment penalty for
such Mortgage Loan is calculated as the lesser of yield maintenance or a fixed
percentage), if any, and are otherwise made on each of the Mortgage Loans at the
indicated CPRs. Such tables and assumptions are intended to illustrate the
sensitivity of weighted average life of the Certificates to various prepayment
rates and are not intended to predict or to provide information that will enable
investors to predict the actual weighted average life of the Certificates. There
is no assurance, however, that prepayments of the Mortgage Loans (whether or not
in a Lock-out Period or a yield maintenance period) will conform to any
particular CPR, and no representation is made that the Mortgage Loans will
prepay in accordance with the assumptions at any of the CPRs shown or at any
other particular prepayment rate, that all the Mortgage Loans will prepay in
accordance with the assumptions at the same rate or that Mortgage Loans that are
in a Lock-out Period or a yield maintenance period will not prepay as a result
of involuntary liquidations upon default or otherwise. A "yield maintenance
period" is any period during which a Mortgage Loan provides that voluntary
prepayments be accompanied by a Yield Maintenance Premium.
The following tables indicate the percentage of the initial aggregate
Certificate Balance of each Class of Offered Certificates (other than the
Interest Only Certificates) that would be outstanding after each of the dates
shown at various CPRs and the corresponding weighted average life of each such
Class of Certificates. The tables have been prepared on the basis of the
following assumptions (collectively, the "Maturity Assumptions"): (i) the
Initial Pool Balance is approximately $1,285,217,765, (ii) the initial aggregate
Certificate Balance or Notional Amount, as the case may be, for each Class of
Offered Certificates is as set forth on the cover page hereof, and the
Pass-Through Rate for each Class of Offered Certificates is as set forth or
otherwise described herein, (iii) the scheduled Monthly Payments for each
Mortgage Loan are as set forth in Appendix II, (iv) all Monthly Payments are due
and timely received on the first day of each month, (v) there are no
delinquencies or losses in respect of the Mortgage Loans, there are no
extensions of maturity in respect of the Mortgage Loans, there are no Appraisal
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Reductions with respect to the Mortgage Loans and there are no casualties or
condemnations affecting the Mortgaged Properties, (vi) (A) prepayments are made
on each of the Mortgage Loans at the indicated CPRs (except that prepayments are
assumed not to be received as to any Mortgage Loan during such Mortgage Loan's
Lock-out Period ("LOP"), if any, or yield maintenance period ("YMP"), if any,
unless the prepayment penalty for such Mortgage Loan is calculated as the lesser
of yield maintenance or a fixed percentage) and (B) Mortgage Loans that provide
for an increase in the respective Mortgage Rate and/or principal amortization on
a specified date prior to stated maturity are prepaid in full on their
respective Hyper-Amortization Dates, (vii) (A) Mortgage Loans that are silent as
to the methodology of interest accrual on such loans are assumed to accrue on
the basis of a 360-day year consisting of twelve 30-day months (a "30/360
basis") and (B) Mortgage Loans that accrue interest on the basis of the actual
number of days elapsed each month in a 360-day year pay principal based on
monthly payments that are calculated on an actual/360 basis, (viii) no party
entitled thereto exercises its right of optional termination described herein
under "Description of the Certificates -- Optional Termination", (ix) no
Mortgage Loan is required to be repurchased or replaced by a Seller or other
party, (x) no Prepayment Interest Shortfalls are incurred, (xi) there are no
Additional Trust Fund Expenses, (xii) distributions on the Certificates are made
on the 15th day of each month, commencing in April, 1998, (xiii) the
Certificates are issued on the Closing Date, (xiv) the prepayment provisions for
each Mortgage Loan are assumed to begin on the first payment date of such
Mortgage Loan and any resulting Prepayment Premiums are allocated as described
under "DESCRIPTION OF THE CERTIFICATES--Distributions -- Distributions of
Prepayment Premiums", and (xv) the open prepayment period, if any, is assumed to
begin on the first day of the respective month prior to the maturity date. To
the extent that the Mortgage Loans have characteristics that differ from those
assumed in preparing the tables set forth below, the Offered Certificates (other
than the Interest Only Certificates) may mature earlier or later than indicated
by the tables. The "Final Scheduled Distribution Date" for each Class of Offered
Certificates set forth on the cover page hereof is the Distribution Date on
which the related aggregate Certificate Balance or Notional Amount, as the case
may be, would be reduced to zero based upon the Maturity Assumptions and a 0%
CPR. It is highly unlikely that the Mortgage Loans will prepay in accordance
with the Maturity Assumptions at any constant rate until maturity or that all
the Mortgage Loans will prepay in accordance with the Maturity Assumptions 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 aggregate Certificate Balances (and weighted average
lives) shown in the following tables. Such variations may occur even if the
average prepayment experience of the Mortgage Loans were to reflect the Maturity
Assumptions and 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 Maturity Assumptions, the following tables indicate the
resulting weighted average lives of the Offered Certificates (other than the
Interest Only Certificates) and set forth the percentage of the initial
Certificate Balance of each Class of such Certificates that would be outstanding
after each of the dates shown under the applicable assumptions at the indicated
CPRs.
PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS A1 CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
Date 0% 3% 5% 7% 10% 15%
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date ... 100% 100% 100% 100% 100% 100%
March 1999 ..... 93 93 92 92 92 91
March 2000 ..... 86 85 84 84 83 81
March 2001 ..... 78 76 75 75 73 71
March 2002 ..... 69 67 66 65 63 61
March 2003 ..... 59 57 55 54 52 50
March 2004 ..... 49 46 44 42 40 37
March 2005 ..... 38 33 31 28 25 21
March 2006 ..... 26 20 17 14 10 4
March 2007 ..... 0 0 0 0 0 0
Weighted Average
Life (years) ... 5.4 5.2 5.1 5.0 4.9 4.7
</TABLE>
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PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE
OF THE CLASS A2 CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
Date 0% 3% 5% 7% 10% 15%
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date ... 100% 100% 100% 100% 100% 100%
March 1999 ..... 100 100 100 100 100 100
March 2000 ..... 100 100 100 100 100 100
March 2001 ..... 100 100 100 100 100 100
March 2002 ..... 100 100 100 100 100 100
March 2003 ..... 100 100 100 100 100 100
March 2004 ..... 100 100 100 100 100 100
March 2005 ..... 100 100 100 100 100 100
March 2006 ..... 100 100 100 100 100 100
March 2007 ..... 99 97 95 94 93 91
March 2008 ..... 0 0 0 0 0 0
Weighted Average
Life (years) ... 9.5 9.5 9.5 9.5 9.5 9.4
</TABLE>
PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS B CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
Date 0% 3% 5% 7% 10% 15%
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date ... 100% 100% 100% 100% 100% 100%
March 1999 ..... 100 100 100 100 100 100
March 2000 ..... 100 100 100 100 100 100
March 2001 ..... 100 100 100 100 100 100
March 2002 ..... 100 100 100 100 100 100
March 2003 ..... 100 100 100 100 100 100
March 2004 ..... 100 100 100 100 100 100
March 2005 ..... 100 100 100 100 100 100
March 2006 ..... 100 100 100 100 100 100
March 2007 ..... 100 100 100 100 100 100
March 2008 ..... 0 0 0 0 0 0
Weighted Average
Life (years) ... 9.8 9.8 9.8 9.8 9.8 9.8
</TABLE>
PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS C CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
Date 0% 3% 5% 7% 10% 15%
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date ... 100% 100% 100% 100% 100% 100%
March 1999 ..... 100 100 100 100 100 100
March 2000 ..... 100 100 100 100 100 100
March 2001 ..... 100 100 100 100 100 100
March 2002 ..... 100 100 100 100 100 100
March 2003 ..... 100 100 100 100 100 100
March 2004 ..... 100 100 100 100 100 100
March 2005 ..... 100 100 100 100 100 100
March 2006 ..... 100 100 100 100 100 100
March 2007 ..... 100 100 100 100 100 100
March 2008 ..... 0 0 0 0 0 0
Weighted Average
Life (years) ... 9.8 9.8 9.8 9.8 9.8 9.8
</TABLE>
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PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS D CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
Date 0% 3% 5% 7% 10% 15%
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date ... 100% 100% 100% 100% 100% 100%
March 1999 ..... 100 100 100 100 100 100
March 2000 ..... 100 100 100 100 100 100
March 2001 ..... 100 100 100 100 100 100
March 2002 ..... 100 100 100 100 100 100
March 2003 ..... 100 100 100 100 100 100
March 2004 ..... 100 100 100 100 100 100
March 2005 ..... 100 100 100 100 100 100
March 2006 ..... 100 100 100 100 100 100
March 2007 ..... 100 100 100 100 100 100
March 2008 ..... 0 0 0 0 0 0
Weighted Average
Life (years) ... 9.9 9.9 9.9 9.9 9.8 9.8
</TABLE>
PERCENTAGES OF THE INITIAL AGGREGATE CERTIFICATE BALANCE OF
THE CLASS E CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
Date 0% 3% 5% 7% 10% 15%
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date ... 100% 100% 100% 100% 100% 100%
March 1999 ..... 100 100 100 100 100 100
March 2000 ..... 100 100 100 100 100 100
March 2001 ..... 100 100 100 100 100 100
March 2002 ..... 100 100 100 100 100 100
March 2003 ..... 100 100 100 100 100 100
March 2004 ..... 100 100 100 100 100 100
March 2005 ..... 100 100 100 100 100 100
March 2006 ..... 100 100 100 100 100 100
March 2007 ..... 100 100 100 100 100 100
March 2008 ..... 0 0 0 0 0 0
Weighted Average
Life (years) ... 9.9 9.9 9.9 9.9 9.9 9.9
</TABLE>
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YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on: (i) the
Pass-Through Rate in effect from time to time for such Certificate; (ii) the
price paid for such Certificate and, if the price was other than par, the rate
and timing of payments of principal on such Certificate; and (iii) the aggregate
amount of distributions on such Certificate.
RATE AND TIMING OF PRINCIPAL PAYMENTS
The yield to holders of the Interest Only Certificates and any other
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 the amortization schedules thereof, the dates on which Balloon Payments are
due and the rate and timing of principal prepayments and other unscheduled
collections thereon (including for this purpose, collections made in connection
with liquidations of Mortgage Loans due to defaults, casualties or condemnations
affecting the Mortgaged Properties, or repurchases of Mortgage Loans out of the
Trust Fund). Prepayments and, assuming the respective stated maturity dates
therefor have not occurred, liquidations and repurchases of the Mortgage Loans,
will result in distributions on the Principal Balance Certificates of amounts
that otherwise would have been distributed (and reductions in the Notional
Amounts of the Interest Only Certificates that would otherwise have occurred)
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
Principal Balance Certificates) while work-outs are negotiated or foreclosures
are completed. See "SERVICING OF THE MORTGAGE LOANS--Modifications, Waivers,
Amendments and Consents" and "SERVICING OF MORTGAGED LOANS--Sale of Defaulted
Mortgage Loans" herein and "Description Of The Agreements -- Realization Upon
Defaulted Whole Loans" and "Certain Legal Aspects Of The Mortgage Loans And
Leases--Foreclosure" in the Prospectus. Because the rate of principal payments
on the Mortgage Loans will depend on future events and a variety of factors (as
described below), no assurance can be given as to such rate or the rate of
principal prepayments in particular. The Depositor is not aware of any relevant
publicly available or authoritative statistics with respect to the historical
prepayment experience of a large group of mortgage loans comparable to the
Mortgage Loans.
The extent to which the yield to maturity of an Offered Certificate may
vary from the anticipated yield will depend upon the degree to which such
Certificate is purchased at a discount or premium and when, and to what degree,
payments of principal on the Mortgage Loans are in turn distributed on or
otherwise result in the reduction of the Certificate Balance or Notional Amount,
as the case may be, of such Certificate. An investor should consider, in the
case of any Principal Balance Certificate purchased at a discount, the risk that
a slower than anticipated rate of principal payments on such Certificate could
result in an actual yield to such investor that is lower than the anticipated
yield and, in the case of any Principal Balance Certificate purchased at a
premium, the risk that a faster than anticipated rate of principal payments on
such Certificate could result in an actual yield to such investor that is lower
than the anticipated yield. In general, the earlier a payment of principal is
made on a Principal Balance 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 on such investor's Principal
Balance 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. The yield to maturity of each Class of Interest Only Certificates will
be highly sensitive to the rate and timing of principal payments (including by
reason of prepayments, repurchases, extensions, defaults and liquidations) on or
in respect of the Mortgage Loans. Investors in the Interest Only Certificates
should fully consider the associated risks, including the risk that an extremely
rapid rate of amortization and prepayment of the Notional Amounts of their
Certificates could result in the failure of such investors to recoup their
initial investments.
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An investor should consider the risk that rapid rates of prepayments on
the Mortgage Loans, and therefore of amounts distributable in reduction of the
principal balance of the Offered Certificates entitled to distributions of
principal may coincide with periods of low prevailing interest rates. During
such periods, the effective interest rates on securities in which an investor
may choose to reinvest amounts distributed in reduction of the principal balance
of such investor's Offered Certificate may be lower than the Pass-Through Rate
applicable thereto. Conversely, slower rates of prepayments on the Mortgage
Loans, and therefore of amounts distributable in reduction of principal balance
of the Offered Certificates entitled to distributions of principal, may coincide
with periods of high prevailing interest rates. During such periods, the amount
of principal distributions resulting from prepayments available to an investor
in such Certificates for reinvestment at such high prevailing interest rates may
be relatively small.
LOSSES AND SHORTFALLS
The yield to holders of the Offered Certificates will also depend on
the extent to which such holders are required to bear the effects of any losses
or shortfalls on the Mortgage Loans. Losses and other shortfalls on the Mortgage
Loans (other than Net Aggregate Prepayment Interest Shortfalls) will generally
be borne: first, by the holders of the respective Classes of Subordinate
Certificates, in reverse alphabetical order of Class designation, to the extent
of amounts otherwise distributable in respect of their Certificates; and then,
by the holders of the Senior Certificates. Net Aggregate Prepayment Interest
Shortfalls will be borne by the holders of the respective Classes of REMIC
Regular Certificates on a pro rata basis as described herein.
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, Prepayment Premiums, 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 comparable residential and/or commercial space
in such areas, the quality of management of the Mortgaged Properties, the
servicing of the Mortgage Loans, possible changes in tax laws and other
opportunities for investment. See "RISK FACTORS AND OTHER SPECIAL
CONSIDERATIONS" and "DESCRIPTION OF THE MORTGAGE POOL" herein and "Risk Factors"
and "Yield Considerations" in the Prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. If a Mortgage Loan is not in a Lock-out Period, the Prepayment Premium, if
any, in respect of such Mortgage Loan may not be sufficient economic
disincentive to prevent the related borrower from voluntarily prepaying the loan
as part of a refinancing thereof. See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Terms and Characteristics of the Mortgage Loans" herein.
DELAY IN PAYMENT OF DISTRIBUTIONS
Because monthly distributions will not be made to Certificateholders
until a date that is scheduled to be at least 15 days following the end of
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.
YIELD SENSITIVITY OF THE INTEREST ONLY CERTIFICATES
The yield to maturity of each Class of Interest Only Certificates will
be especially sensitive to the prepayment and default experience on the Mortgage
Loans, which prepayment, repurchase and default experience may fluctuate
significantly from time to time. A rapid rate of principal payments will have a
material negative effect
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<PAGE> 71
on the yield to maturity of the Interest Only Certificates. There can be no
assurance that the Mortgage Loans will prepay at any particular rate.
Prospective investors in the Interest Only Certificates should fully consider
the associated risks, including the risk that such investors may not fully
recover their initial investment.
The following tables indicate the sensitivity of the pre-tax yield to
maturity on the Interest Only Certificates to various constant rates of
prepayment on the Mortgage Loans by projecting the monthly aggregate payments of
interest on the Interest Only Certificates and computing the corresponding
pre-tax yields to maturity on a corporate bond equivalent basis, based on the
Maturity Assumptions. It was further assumed that the respective aggregate
purchase prices of the Interest Only Certificates are as specified below and the
initial Pass-Through Rate (expressed as a percentage of the initial Notional
Amount) and the initial Notional Amount are as set forth herein. Any differences
between such assumptions and the actual characteristics and performance of the
Mortgage Loans and the Interest Only Certificates may result in yields being
different from those shown in such table. Discrepancies between assumed and
actual characteristics and performance underscore the hypothetical nature of the
table, which is provided only to give a general sense of the sensitivity of
yields in varying prepayment scenarios. For purposes of calculating and
allocating Prepayment Premiums, the yields for U.S. Treasury Securities having a
maturity of up to one year, two years, three years, five years, ten years and
thirty years are approximately 5.33%, 5.48%, 5.48%, 5.53%, 5.55% and 5.89%.
The pre-tax yields set forth in the following tables were calculated by
determining the monthly discount rates that, when applied to the assumed streams
of cash flows to be paid on the Interest Only Certificates, would cause the
discounted present value of such assumed stream of cash flows to equal the
assumed aggregate purchase price thereof, which includes accrued interest, and
by converting such monthly rates to semi-annual corporate bond equivalent rates.
Such calculation does not take into account shortfalls in collection of interest
due to prepayments (or other liquidations) of the Mortgage Loans or the interest
rates at which investors may be able to reinvest funds received by them as
distributions on the Interest Only Certificates (and accordingly does not
purport to reflect the return on any investment in the Interest Only
Certificates when such reinvestment rates are considered).
Notwithstanding the assumed prepayment rates reflected in the following
tables, it is highly unlikely that the Mortgage Loans will be prepaid according
to one particular pattern. For this reason, and because the timing of cash flows
is critical to determining yields, the pre-tax yield to maturity on the Interest
Only Certificates is likely to differ from those shown in the tables, even if
all of the Mortgage Loans prepay at the indicated CPRs over any given time
period or over the entire life of the Certificates.
There can be no assurance that the Mortgage Loans will prepay at any
particular rate or that the yield on Interest Only Certificates will conform to
the yields described herein. Investors are urged to make their investment
decisions based on the determinations as to anticipated rates of prepayment
under a variety of scenarios. Investors in the Interest Only Certificates should
fully consider the risk that a rapid rate of prepayments on the Mortgage Loans
could result in the failure of such investors to fully recover their
investments.
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X CERTIFICATES
<TABLE>
<CAPTION>
ASSUMED AGGREGATE
PURCHASE PRICE PREPAYMENT ASSUMPTION (CPR)
(INCLUDING ACCRUED INTEREST) 0% 3% 5% 7% 10% 15%
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
$ 84,030,263 10.06 9.91 9.82 9.74 9.63 9.49
$ 84,672,872 9.86 9.71 9.62 9.54 9.43 9.29
$ 85,315,481 9.66 9.51 9.43 9.35 9.24 9.09
</TABLE>
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<PAGE> 72
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 352 mortgage loans (each, a "Mortgage
Loan") with an Initial Pool Balance of $1,285,217,765 equal to the aggregate
Cut-off Date Balance of the Mortgage Loans, subject to a permitted variance of
plus or minus 5%. The Cut-off Date Balances of the Mortgage Loans range from
$498,113 to $32,909,270, and the Mortgage Loans have an average Cut-off Date
Balance of $3,651,187. Three hundred and thirty-six (336) of the Mortgage Loans,
representing 97.2% of the Initial Pool Balance, are Balloon Loans. All numerical
information provided herein with respect to the Mortgage Loans is provided on an
approximate basis. For purposes of calculations herein, each Mortgage Loan is
deemed to be secured by a mortgage on one Mortgaged Property, whether or not
such Mortgaged Property consists of more than one parcel of real property.
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 on a fee (or, in
fourteen (14) cases, or 4.7% of the Initial Pool Balance, a leasehold or partial
leasehold) estate in income-producing real property (a "Mortgaged Property").
Thirteen (13) of the Mortgage Loans, each representing not more than 1.2% of the
Initial Pool Balance, are, in each such case, without regard to the
cross-collateralization described below, secured by one or more Mortgages
encumbering multiple properties. The presentation of numerical Mortgage Loan
information herein reflects certain conventions that pertain to those Mortgage
Loans described under "--Certain Terms and Characteristics of the Mortgage
Loans--Multiple Mortgaged Properties" herein.
Ninety-six (96) of the Mortgaged Properties, which represent security
for 31.7% of the Initial Pool Balance, are multifamily apartment properties;
fifty-seven (57) of the Mortgaged Properties, which represent security for 20.4%
of the Initial Pool Balance, are retail properties; eighty-six (86) of the
Mortgaged Properties, which represent security for 15.6% of the Initial Pool
Balance, are self-storage facilities; fifty-six (56) of the Mortgaged
Properties, which represent security for 11.4% of the Initial Pool Balance, are
manufactured housing communities; twenty-six (26) of the Mortgaged Properties,
which represent security for 9.6% of the Initial Pool Balance, are office
properties; nine (9) of the Mortgaged Properties, which represent security for
5.6 % of the Initial Pool Balance, are hospitality properties; eighteen (18) of
the Mortgaged Properties, which represent security for 4.7% of the Initial Pool
Balance, are industrial/warehouse properties; and four (4) of the Mortgaged
Properties, which represent security for 1.1% of the Initial Pool Balance, are
congregate care properties. Mortgaged Properties with multiple uses have been
categorized according to their predominant use. The Mortgaged Properties are
located throughout 36 states, with the largest concentration in the State of
California (84 Mortgaged Properties, which represent security for 25.2% of the
Initial Pool Balance). No other state has a concentration of Mortgaged
Properties that represents security for more than 8.9% of the Initial Pool
Balance. See Appendix II for a more detailed description of the Mortgage Loans.
See Appendix III for additional information with respect to those Mortgage Loans
secured by Mortgages on multifamily apartment properties.
As of the Cut-off Date, none of the Mortgage Loans was 30 days or more
delinquent, or had been 30 days or more delinquent during the 12 calendar months
preceding the Cut-off Date.
Three hundred six (306) of the Mortgage Loans (the "Heller Loans"),
which represent 84.3% of the Initial Pool Balance will, immediately prior to the
issuance of the Certificates, be held by Heller. The Heller Loans were all
originated by Heller Financial, Inc. or an affiliate. Forty-six (46) of the
Mortgage Loans (the "Morgan Stanley Loans"), which represent 15.7% of the
Initial Pool Balance, are currently held by MSMC.
On or prior to the Closing Date, the Depositor will acquire the
Mortgage Loans from the Sellers, in each case pursuant to a mortgage loan
purchase agreement to be entered into between the Depositor and the particular
Seller (each, a "Mortgage Loan Purchase Agreement"). The Depositor will
thereupon assign its interests in the Mortgage Loans, without recourse, to the
Trustee for the benefit of the Certificateholders. See "--The Sellers" and
"--Assignment of Mortgage Loans; Repurchases" below.
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<PAGE> 73
Mortgage Loans were originated between May 31, 1996 and February 14,
1998.
CERTAIN TERMS AND CHARACTERISTICS OF THE MORTGAGE LOANS
Mortgage Rates; Calculations of Interest
One hundred one (101) of the Mortgage Loans accrue interest on the
basis of a 360-day year consisting of twelve 30-day months , and 251 Mortgage
Loans are Non-30/360 Mortgage Loans.
The Mortgage Pool consists of 352 fixed-rate Loans.
The Mortgage Loans have an aggregate Cut-off Date Balance (the "Initial
Pool Balance") of $1,285,217,765 (subject to a variance of plus or minus 5%). As
of the Cut-off Date, the Mortgage Rates of the Mortgage Loans range from 6.65%
to 9.88% per annum, and the weighted average Mortgage Rate of the Mortgage Loans
is 7.68% per annum.
Due Dates
All of the Mortgage Loans have Due Dates (that is, the dates upon which
the related Monthly Payments are due) that occur on the first day of each month.
Amortization
Three hundred sixteen (316) of the Mortgage Loans, representing 87.8%
of the Initial Pool Balance, provide for Monthly Payments of principal and
interest based on amortization schedules significantly longer than their terms
to maturity. One (1) of these Mortgage Loans, representing 0.3% of the Initial
Pool Balance, provides for monthly payments of principal during the first 48
months of its term in an amount $5,000 greater than that required to
fully-amortize such Mortgage Loan. In addition, two (2) Mortgage Loans,
representing 0.6% of the Initial Pool Balance, provide for monthly payments of
interest only for a period and then payments of interest and principal based on
amortization schedules significantly longer than their terms to maturity.
Eighteen (18) additional Mortgage Loans, representing 8.7% of the Initial Pool
Balance are fully amortizing but each provides for, among other things,
significant increases in the Mortgage Rate and/or principal amortization of the
respective Mortgage Loan, thereby providing an increased incentive to prepay the
Mortgage Loan. As a result, such Mortgage Loans (the "Balloon Loans") will have
substantial payments (each such payment, a "Balloon Payment") payable on their
respective maturity dates and anticipated to be paid on their Hyper-Amortization
Dates, as the case may be, unless prepaid prior thereto. See "RISK FACTORS AND
OTHER SPECIAL CONSIDERATIONS--The Mortgage Loans--Balloon Payments" herein. The
remaining 16 Mortgage Loans, representing 2.9% of the Initial Pool Balance, are
fully amortizing without call or hyper-amortization provisions.
Defeasance
For eleven (11) of the Mortgage Loans (the "Defeasance Loans"),
representing 6.7% of the Initial Pool Balance, voluntary prepayment is
prohibited from the origination of the Mortgage Loan until a date that is
generally up to 90 days prior to its scheduled maturity date or
Hyper-Amortization Date, as applicable, but, in lieu of prepayment, the borrower
may, after a period of no fewer than two years from the Closing Date, obtain a
release of the related Mortgaged Property from the lien of such Mortgage Loan by
pledging "Defeasance Collateral" to the holder of the Mortgage Note. In general,
"Defeasance Collateral" is required to consist of direct, non-callable United
States Treasury obligations that provide for payments prior, but as close as
possible, to all successive dates on which a Monthly Payment is due (including
the scheduled maturity date), with each such payment being equal to or greater
than (with any excess to be returned to the borrower) the Monthly Payment
(including, in the case of the scheduled maturity date, any Balloon Payment),
due on such date. A borrower's ability to defease is in each case subject to
certain conditions, including reasonable assurance that acceptance of a pledge
of the Defeasance
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<PAGE> 74
Collateral in lieu of a full prepayment will not result in a qualification,
downgrade or withdrawal of the rating then assigned by each Rating Agency to any
Class of Certificates.
Prepayment Restrictions
As of the Cut-off Date, all of the Mortgage Loans restrict voluntary
principal prepayments as follows: (i) 240 Mortgage Loans, representing 71.2% of
the Initial Pool Balance, prohibit voluntary prepayments for a period (a
"Lock-out Period") ending on a date (generally ranging from 6 to 179 months from
the Cut-off Date) specified in the related Mortgage Note and, in most such
cases, thereafter impose "Prepayment Premiums" until a specified date (generally
three to six months) prior to maturity, (ii) one Mortgage Loan representing 0.2%
of the Initial Pool Balance, requires prepayment premiums calculated as a fixed
percentage of the amount prepaid for a period ending seven months after the
Cut-off Date, then prohibits voluntary prepayments for 60 months, and then
reverts to a fixed percentage prepayment premium until its stated maturity; and
(iii) the remaining Mortgage Loans do not provide for Lock-out Periods but
impose Prepayment Premiums in connection with voluntary principal prepayments
made prior to a specified date (also generally three to six months) prior to
maturity.
With respect to those Mortgage Loans that do not provide for Lock-out
Periods but impose Prepayment Premiums in connection with voluntary principal
prepayments, Prepayment Premiums are calculated on the basis of (i) a yield
maintenance formula ("Yield Maintenance Premium"), payable in the case of 96
Mortgage Loans, or 26.0% of the Initial Pool Balance or (ii) a percentage of the
amount prepaid ("Percentage Premium"), payable in the case of 15 Mortgage Loans,
representing 2.7% of the Initial Pool Balance. Certain of the Mortgage Loans
providing for a Yield Maintenance Premium contain a minimum Yield Maintenance
Premium of 1% of the amount prepaid.
Four (4) Mortgage Loans, representing 0.9% of the Initial Pool Balance,
permit, in each such case, voluntary principal prepayments of up to 10% of the
original principal balance of the Mortgage Loan in any calendar year without the
imposition of a Prepayment Premium (the "10% Free Prepayment Loans"). In the
case of the Mortgage Loans that are subject to a Percentage Premium, such
Percentage Premium generally declines over time (in some cases to zero) until,
in general, a specified date, which is generally three to six months prior to
maturity.
Yield Maintenance Premiums and Percentage Premiums, if and to the
extent collected, will be distributed to the holders of the Certificates as
described herein under "DESCRIPTION OF THE CERTIFICATES -- Distributions
- --Distributions of Prepayment Premiums" herein. The Master Servicer may not
waive the imposition of a Prepayment Premium or reduce the amount thereof. The
Special Servicer may waive the imposition of a Prepayment Premium, or reduce the
amount thereof, with respect to a Specially Serviced Mortgage Loan if such
waiver or reduction is consistent with the Servicing Standard. Neither the
Depositor nor any Seller can provide any assurance as to the enforceability of
any Mortgage Loan provisions requiring the payment of a Prepayment Premium or of
the collectibility of any Prepayment Premium.
Non-recourse Obligations
Substantially all of the Mortgage Loans are non-recourse obligations of
the related borrowers and, upon any such borrower's default in the payment of
any amount due under the related Mortgage Loan, the holder thereof may look only
to the related Mortgaged Property for satisfaction of the borrower's
obligations. In those cases where the loan documents permit recourse to the
borrower or a guarantor, the Depositor has not evaluated the financial condition
of any such person, and prospective investors should thus consider all of the
Mortgage Loans to be non-recourse. None of the Mortgage Loans is insured or
guaranteed by the United States, any government entity or instrumentality or any
other person.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions
The Mortgages contain "Due-on-sale" and "Due-on-encumbrance" clauses
that, in general, permit the holder of the Mortgage to accelerate the maturity
of the related Mortgage Loan if the borrower sells or otherwise
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<PAGE> 75
transfers or encumbers the related Mortgaged Property or that prohibit the
borrower from doing so without the consent of the holder of the Mortgage.
Generally, the Mortgage Loans permit a transfer of the related Mortgaged
Property, subject to the satisfaction of certain conditions, including, in some
cases, approval of the proposed transferee by the Master Servicer or Special
Servicer, as applicable. In addition, certain Mortgage Loans permit the borrower
to transfer the related Mortgaged Property to an affiliate or subsidiary of the
borrower, or an entity of which the borrower is the controlling beneficial
owner, upon the satisfaction of certain limited conditions as determined by the
Master Servicer or Special Servicer, as applicable.
Borrower Concentrations
Several groups of Mortgage Loans are made to the same borrower or have
related borrowers that are affiliated with one another through partial or
complete direct or indirect common ownership. The three largest of these groups
represent 3.4%, 2.6%, and 2.4% respectively, of the Initial Pool Balance.
Cross-Collateralized Mortgage Loans
The Mortgage Pool includes 16 separate sets of Cross-Collateralized
Mortgage Loans, each representing no more than 1.5% of the Initial Pool Balance.
See Appendix II hereto.
Multiple Mortgaged Properties
In 13 cases, or 6.1% of the Initial Pool Balance (not including the 16
cross-collateralized and cross-defaulted Mortgage Loan groups referred to above
in "--Cross-Collateralized Mortgage Loans"), a single Mortgage Note is secured
by a Mortgage or Mortgages on two or more Mortgaged Properties. Accordingly, the
total number of such Mortgage Loans is thirteen and the total number of
Mortgaged Properties related thereto is 46. In Appendix II the Mortgaged
Properties are collectively considered to constitute one Mortgaged Property for
purposes of presenting numerical information herein. In all cases the Debt
Service Coverage Ratios were determined on the basis of the aggregate
Underwritable Cash Flow of all the related Mortgaged Properties and the Cut-off
Date LTVs and the Balloon LTVs were determined on the basis of the aggregate of
the appraised values of the related Mortgaged Properties.
Single-Tenant Mortgage Loans
In the case of twenty-seven (27) Mortgage Loans, representing 5.1% of
the Initial Pool Balance, the related Mortgaged Property is 100% leased to a
single tenant (each such Mortgage Loan, a "Single-Tenant Mortgage Loan"). The
Mortgaged Property securing each such Mortgage Loan is subject to a single space
lease, the majority of which have a primary lease term that expires on or after
the scheduled maturity date or Hyper-Amortization Date of the related Mortgage
Loan and the remainder of which have shorter primary lease terms. The amount of
the monthly rental payments payable by the tenant under the lease is equal to or
greater than the scheduled payment of all principal, interest and other amounts
(other than any Balloon Payment) due each month on the related Mortgage Loan.
The underwriting of the Single-Tenant Mortgage Loans is based primarily
upon the monthly rental payments due from the tenant under the lease of the
related Mortgaged Property, and where the primary lease term expires before the
scheduled maturity date (or Hyper-Amortization Date, where applicable) of the
related Mortgage Loan, the underwriting considered the incentives for the
primary tenant to re-lease the premises and the anticipated rental value of the
premises at the end of the primary lease term. In addition, the loan
underwriting for certain of the Single-Tenant Mortgage Loans takes into account
the creditworthiness of the tenants under the applicable leases. Accordingly,
such Single-Tenant Mortgage Loans may have higher loan-to-value ratios and lower
debt-service-coverage ratios than other types of Mortgage Loans.
Each lease generally provides that the related tenant must pay all real
property taxes and assessments levied or assessed against the related Mortgaged
Property and all charges for utility services, insurance and other operating
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<PAGE> 76
expenses incurred in connection with the operation of the related Mortgaged
Property. Generally, the tenants under such leases are required, at their
expense, to maintain the related Mortgaged Properties in good order and repair.
Release Provisions
Several of the groups of Cross-Collateralized Mortgage Loans and
individual Mortgage Loans secured by multiple properties described under
"--Borrower Concentrations" and "--Multiple Mortgaged Properties", respectively,
above, permit the release of individual real properties from the lien of the
related Mortgage(s), subject to the satisfaction of certain specified
conditions.
Ground Leases
Twelve (12) of the Mortgage Loans, which represent 2.5% of the Initial
Pool Balance, are secured solely by a Mortgage on the borrower's leasehold
interest in the related Mortgaged Property. Two (2) of the Mortgage Loans, which
represent 2.2% of the Initial Pool Balance, is secured by a Mortgage on both the
borrower's leasehold interest in a portion of the Mortgaged Property and the
borrower's fee simple interest in the remainder of the Mortgaged Property. All
of the ground leases expire at least ten years after the stated maturity of the
related Mortgage Loan or, in the case of one of the Mortgage Loans, which
represents 1.2% of the Initial Pool Balance, at least ten years after its
Hyper-Amortization Date. In each such case, the related ground lessor has agreed
to give the holder of the Mortgage Loan notice of, and has granted such holder
the right to cure, any default by the borrower/lessee. See "RISK FACTORS AND
OTHER SPECIAL CONSIDERATIONS--The Mortgage Loans--Leasehold Considerations"
herein.
Subordinate Financing
Two (2) of the Mortgaged Properties, which constitute security for
Mortgage Loans that represent 1.9% of the Initial Pool Balance, are encumbered
by secured subordinated debt that is not part of the Mortgage Pool. In one case,
the holder of the subordinated debt has agreed not to foreclose for so long as
the related Mortgage Loan is outstanding and the Trust Fund is not pursuing a
foreclosure action. In the other case, which represents 1.7% of the Initial Pool
Balance, the holder of the subordinated debt has not entered into an agreement
not to foreclose. All of the Mortgage Loans either prohibit the related borrower
from further encumbering the Mortgaged Property with additional debt or require
the consent of the holder of the Mortgage prior to so encumbering such property.
Other than as indicated above, the Depositor is unaware of any other subordinate
financing that currently encumbers any Mortgaged Property. In addition, in the
case of four (4) Mortgage Loans, representing 2.6% of the Initial Pool Balance,
Heller or an affiliate holds debt ("Mezzanine Debt" ) secured by a pledge of
equity interests in the related borrower as set forth in the table below.
Related borrowers may also have other unsecured indebtedness. See "RISK FACTORS
AND OTHER SPECIAL CONSIDERATIONS--The Mortgage Loans--Risks of Subordinate
Financing" herein and "Certain Legal Aspects Of Mortgage Loans And The
Leases--Subordinate Financing" in the Prospectus.
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<PAGE> 77
MEZZANINE DEBT
<TABLE>
<CAPTION>
APPENDIX II LOAN MADE TO
MORTGAGE MORTGAGE MEZZANINE SPONSOR OR COMBINED
LOAN NUMBER LOAN BALANCE (1) DEBT BALANCE (2) BORROWER FORECLOSEABLE? SECURED(3) LTV (4)
- ----------- ---------------- ---------------- -------- -------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
250 $ 1,867,152 $ 334,806 Sponsor Yes Yes 84.7%
19 $13,477,760 $3,543,000 Borrower Yes Yes 91.5%
9 $ 5,471,164 $ 200,000 Sponsor Yes Yes 76.5%
8 $12,732,891 $ 900,000 Sponsor Yes Yes 65.7%
</TABLE>
- ---------------
(1) As of the Cut-off Date.
(2) Initial principal balance.
(3) As used above, secured means by a pledge of a partnership or other such
interest, rather than an interest in the Mortgaged Property.
(4) "Combined LTV" means "LTV" as defined herein, but adding the original
principal balance of the Mezzanine Debt to the numerator.
ASSESSMENTS OF PROPERTY VALUE AND CONDITION
Appraisals
In connection with the origination or acquisition of most of the
Mortgage Loans, the related Mortgaged Property was appraised by an independent
appraiser who belonged to the Appraisal Institute. In certain cases, however,
the values of the related Mortgaged Properties were estimated internally on the
basis of an analysis of net operating income generated by the applicable
property as well as on the basis of sales and rental information with respect to
comparable properties. The purpose of each appraisal or other estimate of value
was to provide an opinion as to the fair market value of the related Mortgaged
Property as of the date thereof. There can be no assurance that such opinion
represents a reasonable approximation of the amount that could actually be
realized from a sale of the Mortgaged Property. None of the Depositor, any
Seller, the Underwriters, the Trustee, or any of their respective affiliates has
prepared or conducted its own separate appraisal or reappraisal of any Mortgaged
Property. See "RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS--The Mortgage
Loans--Limitations of Appraisal" herein. Not all of the above-described
appraisals, and none of the market value estimates, conformed to the appraisal
guidelines set forth in Title XI of the Federal Financial Institutions Reform,
Recovery and Enforcement Act of 1989.
Environmental Assessments
An environmental site assessment (or an update to a previously
performed environmental site assessment) was performed with respect to Mortgaged
Properties securing 319 Mortgage Loans within one-year of the Cut-Off Date in
connection with the origination of the related Mortgage Loan. With respect to
Mortgaged Properties securing 33 Mortgage Loans representing 7.5% of the Initial
Pool Balance, such assessments were prepared within two years of the Cut-Off
Date. In all cases, the environmental site assessment was a "Phase I"
environmental assessment. In certain cases, the assessment disclosed the
existence of or potential for adverse environmental conditions, such as the
existence of, among other things, asbestos-containing materials, underground
storage tanks and soil contamination. In certain cases, the related borrowers
were required to establish operations and maintenance plans, monitor the
Mortgaged Property or nearby properties, abate or remediate the condition and/or
provide additional security. See "RISK FACTORS AND OTHER SPECIAL
CONSIDERATIONS--The Mortgage Loans--Environmental Considerations", herein.
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<PAGE> 78
Property Condition Assessments
Most of the Mortgaged Properties were inspected, in connection with the
origination or acquisition of the related Mortgage Loan, by an employee of the
related Seller or by a third party professional engaged by the Seller.
Furthermore, in most cases, a licensed engineer or consultant inspected the
related Mortgaged Property, in connection with the origination or acquisition of
the related Mortgage Loan, to assess the structure, exterior walls, roofing,
interior structure and mechanical and electrical systems. In general, where
material deficiencies were observed, the related borrower was required to
establish reserves for replacement or repair or remediate the deficiency.
Zoning and Building Code Compliance.
Each Seller took steps to establish that the use and operation of the
Mortgaged Properties that represent security for its Mortgage Loans were, at
their respective dates of origination, in compliance in all material respects
with applicable zoning, land-use and similar laws and ordinances, but no
assurance can be made that such steps revealed all possible violations. Evidence
of such compliance may have been in the form of legal opinions, certifications
from government officials and/or representations by the related borrower
contained in the related Mortgage Loan documents. Certain violations may exist
at any particular Mortgaged Property, but the related Seller does not consider
any such violations known to it to be material.
ADDITIONAL MORTGAGE LOAN INFORMATION
Each of the tables set forth in Appendix I sets forth certain
characteristics of the Mortgage Pool presented, where applicable, as of the
Cut-off Date. For a detailed presentation of certain of the characteristics of
the Mortgage Loans and the Mortgaged Properties, on an individual basis, see
Appendix II hereto. Certain additional information regarding the Mortgage Loans
is contained herein under "RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS--The
Mortgage Loans", elsewhere in this "DESCRIPTION OF MORTGAGE POOL" section and
under "Certain Legal Aspects Of Mortgage Loans And The Leases" in the
Prospectus.
For purposes of this Prospectus Supplement, including for the tables in
Appendix I and the information set forth in Appendix II:
(1) The "Debt Service Coverage Ratio" or "DSCR" for any Mortgage
Loan (or group of Cross-Collateralized Mortgage Loans) is the
ratio of "Underwritable Cash Flow" estimated to be produced by
the related Mortgaged Property or Properties to the annualized
amount of debt service payable under that Mortgage Loan (or
those Mortgage Loans). "Underwritable Cash Flow" in each case
is an estimate of cash flow available for debt service based
generally on the most recently available property statements.
In general, it is the estimated revenue derived from the use
and operation of a Mortgaged Property (consisting primarily of
rental income) less the sum of (a) estimated operating
expenses (such as utilities, administrative expenses, repairs
and maintenance, management and franchise fees and
advertising), (b) fixed expenses (such as insurance, real
estate taxes and, if applicable, ground lease payments) and
(c) reserves for capital expenditures, including tenant
improvement costs and leasing commissions, where appropriate.
Underwritable Cash Flow generally does not reflect interest
expenses and non-cash items such as depreciation and
amortization. In general, debt service coverage ratios are
used by income property lenders to measure the ratio of (a)
cash currently generated by a property that is available for
debt service to (b) required debt service payments. However,
debt service coverage ratios only measure the current, or
recent, ability of a property to service mortgage debt. If a
property does not possess a stable operating expectancy (for
instance, if it is subject to material leases that are
scheduled to expire during the loan term and that provide for
above-market rents and/or that may be difficult to replace), a
debt service coverage ratio may not be a reliable indicator of
a property's ability to service the mortgage debt over the
entire remaining loan term.
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In determining Underwritable Cash Flow for a Mortgaged
Property, the Sellers generally relied on rent rolls and other
generally unaudited financial information provided by the
respective borrowers. From that information, the Sellers
generally calculated stabilized estimates of cash flow that
took into consideration historical financial statements,
material changes in the operating position of a Mortgaged
Property of which the applicable Seller was aware (e.g., newly
signed leases, expirations of "free rent" periods and market
rent and market vacancy data), and estimated capital
expenditures, including leasing commission and tenant
improvement reserves, where appropriate. In certain cases, the
applicable Seller's estimate of Underwritable Cash Flows
reflected differences from the information contained in the
operating statements obtained from the respective borrowers
(resulting in either an increase or decrease in the estimate
of Underwritable Cash Flow derived therefrom) based upon the
Seller's own analysis of such operating statements and the
assumptions applied by the respective borrowers in preparing
such statements and information. In certain instances, for
example, property management fees and other expenses may have
been included in the calculation of Underwritable Cash Flow
even though such expense may not have been reflected in actual
historic operating statements. In certain cases, only partial
year operating income information was available. In most of
those cases, the information was annualized, with certain
adjustments for items deemed not appropriate to be annualized,
before using it as a basis for the determination of
Underwritable Cash Flow. No assurance can be given with
respect to the accuracy of the information provided by any
borrowers, or the adequacy of the procedures used by the
Sellers in determining the presented operating information.
The Debt Service Coverage Ratios are presented herein for
illustrative purposes only and, as discussed above, are
limited in their usefulness in assessing the current, or
predicting the future, ability of a Mortgaged Property to
generate sufficient cash flow to repay the related Mortgage
Loan. Accordingly, no assurance can be given, and no
representation is made, that the Debt Service Coverage Ratios
accurately reflect that ability.
(2) References to "Loan-to-Value Ratio" or "Cut-off Date LTV" or
"Cut-off Date LTV Ratio" are references to the ratio,
expressed as a percentage, of the Cut-off Date Balance of a
Mortgage Loan (or the aggregate Cut-off Date Balance of a
group of Cross-Collateralized Mortgage Loans) to the value of
the related Mortgaged Property or Properties as determined by
the appraisal or market valuation of such Mortgaged Property
or Properties conducted in connection with the origination of
the Mortgage Loan. References to "Balloon LTV" or "Balloon LTV
Ratio" are references to the ratio, expressed as a percentage
of the principal balance of a Balloon Loan (or the aggregate
principal balance of a group of cross-collateralized Balloon
Loans) anticipated to be outstanding at the date on which the
related Balloon Payment(s) are scheduled to be due (calculated
based on the Maturity Assumptions and a 0% CPR) to the value
of the related Mortgaged Property or Properties as determined
by the most recent appraisal or market valuation of such
Mortgaged Property or Properties available to the Depositor.
No representation is made that any such value would
approximate either the value that would be determined in a
current appraisal of the related Mortgaged Property or the
amount that would be realized upon a sale.
(3) References to "Year Built/Renovated" are references to the
later of the year in which a Mortgaged Property was originally
constructed or the most recent year in which such Mortgaged
Property was substantially renovated.
(4) References to "weighted averages" are references to averages
weighted on the basis of the Cut-off Date Balances of the
related Mortgage Loans.
The sum in any column of any of the tables in Appendix I may not equal
the indicated total due to rounding.
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STANDARD HAZARD INSURANCE
The Pooling and Servicing Agreement will provide that the Master
Servicer or the Special Servicer, as applicable, shall use reasonable efforts to
cause each mortgagor to maintain in respect of the related Mortgaged Property
all insurance coverage (other than earthquake insurance) as is required under
the related Mortgage; provided that if any Mortgage permits the holder thereof
to dictate to the mortgagor the insurance coverage to be maintained on such
Mortgaged Property, the Master Servicer or the Special Servicer, as applicable,
shall impose such insurance requirements as are consistent with the Servicing
Standard. If at any time a Mortgaged Property is located in an area identified
in the Federal Register by the Federal Emergency Management Agency as having
special flood hazards or it becomes located in such area by virtue of remapping
conducted by such agency (and flood insurance has been made available), the
Master Servicer or the Special Servicer, as applicable, shall if and to the
extent that the Mortgage Loan requires the related mortgagor or permits the
related mortgagee to require such mortgagor to do so, use efforts consistent
with the Servicing Standard to cause such mortgagor to maintain a flood
insurance policy meeting the requirements of the current guidelines of the
Federal Insurance Administration in an amount representing coverage of not less
than the least of (i) the unpaid principal balance of the related Mortgage Loan,
(ii) the full insurable value of such Mortgaged Property, (iii) the maximum
amount of insurance coverage available under the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance
Reform Act of 1994, as amended, and (iv) 100% of the replacement cost of the
improvements on such Mortgaged Property. Any losses incurred with respect to
Mortgage Loans due to uninsured risks (including earthquakes, mudflows and
floods) or insufficient hazard insurance proceeds may adversely affect payments
to Certificateholders. If a borrower fails to maintain the foregoing insurance,
the Master Servicer (or, with respect to REO Properties, the Special Servicer)
will be required to obtain such insurance (to the extent available at
commercially reasonable rates) and the cost thereof will be a Servicing Advance.
Each Mortgage generally also requires the related borrower to maintain
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 commercial mortgage lenders.
Each Mortgage other than those relating to Manufactured Housing
Communities generally further requires the related borrower to maintain business
interruption or rent loss insurance in an amount not less than 100% of the
projected rental income from the related Mortgaged Property for not less than
six months.
In general, the Mortgaged Properties are not insured for earthquake
risk.
THE SELLERS
Heller Financial Capital Funding, Inc.
Heller Financial Capital Funding, Inc. ("Heller") is a wholly-owned
subsidiary of Heller Financial, Inc. ("Heller Financial") organized
approximately twelve months ago to acquire and sell loans secured by mortgages
on commercial and multifamily real estate. Heller may also acquire other assets,
such as equipment loans. As of the Closing Date, Heller will have a net worth of
approximately $10 million. Its principal office is located at 500 West Monroe,
Chicago, Illinois 60661, telephone number (312) 441-6700. Each of Heller's
Mortgage Loans was originated and underwritten by Heller Financial or one of its
affiliates through its Heller Express Program. Heller Financial has been a
commercial real estate portfolio lender since 1980. Since 1993, Heller Financial
has securitized over $1 billion of the commercial mortgage loans that it has
originated.
Morgan Stanley Mortgage Capital Inc.
MSMC is a subsidiary of Morgan Stanley & Co. Incorporated formed as a
New York corporation to originate and acquire loans secured by mortgages on
commercial and multifamily real estate. Each of MSMC's Mortgage Loans was
originated by one of the participants in MSMC's commercial and multifamily
mortgage loan conduit program, was originated directly by MSMC or was purchased
in the secondary market. All loans were
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underwritten by MSMC underwriters. The principal offices of MSMC are located at
1585 Broadway, New York, New York 10036. Its telephone number is (212) 761-4700.
ASSIGNMENT OF THE MORTGAGE LOANS
On or prior to the Closing Date, each Seller will assign its Mortgage
Loans, without recourse, to the Depositor, and the Depositor will assign all the
Mortgage Loans, without recourse, to the Trustee for the benefit of the
Certificateholders. In connection with the foregoing, each Seller is required in
accordance with the related Mortgage Loan Purchase Agreement to deliver the
following documents, among others, with respect to each Mortgage Loan so
assigned by it (such documents, collectively as to any Mortgage Loan, a
"Mortgage File") to the Trustee: (a) the original Mortgage Note, endorsed
(without recourse) to the order of Trustee; (b) the original or a certified copy
of the related recorded Mortgage(s), together with originals or certified copies
of intervening assignments of such document(s) conveying the Mortgage to the
Depositor, in each case with evidence of recording thereon (unless such
document(s) have not been returned by the applicable recorder's office); (c) the
original or a copy of any related recorded assignment(s) of rents and leases (if
any such item is a document separate from the Mortgage), together with originals
or copies of intervening assignments of such document(s) conveying the
assignment(s) of rents and leases to the Depositor, in each case with evidence
of recording thereon (unless such document(s) have not been returned by the
applicable recorder's office); (d) an assignment of each related Mortgage in
favor of the Trustee, in recordable form; (e) an assignment of any related
assignment(s) of rents and leases (if any such item is a document separate from
the Mortgage) in favor of the Trustee, in recordable form; (f) an original or
copy of the related lender's title insurance policy (or, if a title insurance
policy has not yet been issued, a commitment for title insurance "marked-up" at
the closing of such Mortgage Loan); and (g) when relevant, the related ground
lease or a certified copy thereof. The Trustee will be required to review the
documents delivered by each Seller with respect to its Mortgage Loans within 90
days following the Closing Date, and the Trustee will hold the related documents
in trust.
Within 45 days following the Closing Date, pursuant to the Pooling and
Servicing Agreement, the assignments with respect to each Mortgage Loan
described in clauses (d) and (e) of the preceding paragraph are to be submitted
for recording in the real property records of the appropriate jurisdictions.
REPRESENTATIONS AND WARRANTIES
In each Mortgage Loan Purchase Agreement, the related Seller has
represented and warranted with respect to each of its Mortgage Loans, as of the
Closing Date, or as of such other date specifically provided in the
representation and warranty, among other things, generally to the effect that
(1) the information set forth in the schedule of the mortgage loans attached to
the related Mortgage Loan Purchase Agreement (which contains certain of the
information set forth in Appendix II) is true and correct in all material
respects; (2) such Seller owns the Mortgage Loan free and clear of any and all
pledges, liens and/or other encumbrances; (3) no scheduled payment of principal
and interest under the Mortgage Loan was 30 days or more past due as of the
Cut-off Date, and the Mortgage Loan has not been 30 days or more delinquent in
the twelve-month period immediately preceding the Cut-off Date; (4) the related
Mortgage constitutes a valid and, subject to certain creditors' rights
exceptions, enforceable first priority mortgage lien (subject to certain
permitted encumbrances) upon the related Mortgaged Property; (5) the assignment
of the related Mortgage in favor of the Trustee constitutes a legal, valid and
binding assignment; (6) the related assignment of leases establishes and creates
a valid and, subject to certain creditors' rights exceptions, enforceable first
priority lien in the related borrower's interest in all leases of the Mortgaged
Property; (7) the Mortgage has not been satisfied, cancelled, rescinded or
subordinated in whole or in material part, and the related Mortgaged Property
has not been released from the lien of such Mortgage, in whole or in material
part; (8) except as set forth in a property inspection report prepared in
connection with the origination of the Mortgage Loan, the related Mortgaged
Property is, to the Seller's knowledge, free and clear of any damage that would
materially and adversely affect its value as security for the Mortgage Loan
(normal wear and tear excepted); (9) to the Seller's knowledge, there is no
proceeding pending for the condemnation of all or any material portion of any
Mortgaged Property; (10) the related Mortgaged Property is covered by an
American Land Title Association (or an equivalent form of) lender's title
insurance policy that insures that the related Mortgage is a valid, first
priority
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lien on such Mortgaged Property, subject only to the exceptions stated therein;
(11) the proceeds of the Mortgage Loan have been fully disbursed and there is no
obligation for future advances with respect thereto; (12) an environmental site
assessment was performed with respect to the Mortgaged Property in connection
with the origination of the related Mortgage Loan, a report of each such
assessment has been delivered to the Depositor, and such Seller has no knowledge
of any material and adverse environmental condition or circumstance affecting
such Mortgaged Property that was not disclosed in such report; (13) each
Mortgage Note, Mortgage and other agreement that evidences or secures the
Mortgage Loan is, subject to certain creditors' rights exceptions and other
exceptions of general application, the legal, valid and binding obligation of
the maker thereof, enforceable in accordance with its terms, and there is no
valid defense, counterclaim or right of offset or rescission available to the
related borrower with respect to such Mortgage Note, Mortgage or other
agreement; (14) the related Mortgaged Property is, and is required pursuant to
the related Mortgage to be, insured by casualty and liability insurance policies
of a type specified in the related Mortgage Loan Purchase Agreement; (15) there
are no delinquent or unpaid taxes, assessments or other outstanding charges
affecting the related Mortgaged Property that are or may become a lien of
priority equal to or higher than the lien of the related Mortgage; (16) the
related borrower is not, to the Seller's knowledge, a debtor in any state or
federal bankruptcy or insolvency proceeding; (17) the related Mortgaged Property
consists of the related borrower's fee simple estate in real estate or, if the
related Mortgage encumbers the interest of a borrower as a lessee under a ground
lease of the Mortgaged Property (a) such ground lease or a memorandum thereof
has been or will be duly recorded and permits the interest of the lessee
thereunder to be encumbered by the related Mortgage; (b) the borrower's interest
in such ground lease is assignable to the Depositor and its successors and
assigns upon notice to, but without the consent of, the lessor thereunder
(except in the case of two leases where the landlord's consent is required to
transfer but the landlord is required to consent to certain qualified
transferees); (c) such ground lease is in full force and effect and, to the
knowledge of the Seller, no material default has occurred thereunder; (d) such
ground lease, or an estoppel letter related thereto, requires the lessor under
such ground lease to give notice of any default by the lessee to the holder of
the Mortgage (provided any required notice of the lien is given to lessor), and
further provides (except for one ground lease) that no notice of termination
given under such ground lease is effective against such holder unless a copy has
been delivered to such holder; (e) the holder of the Mortgage is permitted a
reasonable opportunity (including, where necessary, sufficient time to gain
possession of the interest of the lessee under such ground lease) to cure any
default under such ground lease, which is curable after the receipt of notice of
any such default, before the lessor thereunder may terminate such ground lease;
and (f) such ground lease has an original term (including any extension options
set forth therein) which extends not less than ten years beyond the scheduled
maturity date of the Mortgage Loan; (18) the Mortgage Loan is not
cross-collateralized or cross-defaulted with any loan other than one or more
other Mortgage Loans; (19) no Mortgage requires the holder thereof to release
all or any material portion of the related Mortgaged Property from the lien
thereof except upon payment in full of the Mortgage Loan or defeasement (in the
case of the Defeasance Loans), or in certain cases, upon (a) the satisfaction of
certain legal and underwriting requirements and (b) except where the portion of
the Mortgaged Property permitted to be released was not considered by the Seller
in underwriting the Mortgage Loan, the payment of a release price and prepayment
consideration in connection therewith; and (20) to such Seller's knowledge,
there exists no material default, breach, violation or event of acceleration
(and no event which, with the passage of time or the giving of notice, or both,
would constitute any of the foregoing) under the related Mortgage Note or
Mortgage in any such case to the extent the same materially and adversely
affects the value of the Mortgage Loan and the related Mortgaged Property.
Notwithstanding the foregoing, in lieu of making certain of the
foregoing representations and warranties with respect to seven of the Mortgage
Loans (representing 1.2% of the Initial Pool Balance) sold by it to the
Depositor, MSMC assigned to the Trustee, for the benefit of the
Certificateholders, its right to require General American Life Insurance Company
("GAL") to (i) either cure a material breach of the representations and
warranties made to MSMC in connection with MSMC's acquisition of such Mortgage
Loans, which representations and warranties are substantially similar to those
listed above, or (ii) repurchase the Mortgage Loans affected by any such breach.
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REPURCHASES AND OTHER REMEDIES
If any Mortgage Loan document required to be delivered to the Trustee
by a Seller as described under "--Assignment of the Mortgage Loans" above is not
delivered as and when required, contains information that does not conform to
the corresponding information in the Mortgage Loan Schedule attached to the
related Mortgage Loan Purchase Agreement, is not properly executed or is
defective on its face (any such omission, nonconformity or other defect, a
"Document Defect"), or if there is a breach of any of the representations and
warranties required to be made by a Seller (which term, for purposes of this and
the following two paragraphs, includes GAL) regarding the characteristics of its
Mortgage Loans and/or the related Mortgaged Properties as described under
"--Representations and Warranties" above, and in either case such Document
Defect or breach materially and adversely affects the interests of the holders
of the Certificates (a "Material Document Defect" and a "Material Breach",
respectively), then the Seller will be obligated to cure such Material Document
Defect or Material Breach within the applicable Permitted Cure Period. If any
such Material Document Defect or Material Breach cannot be corrected or cured
within the applicable Permitted Cure Period, the Seller will be obligated, not
later than the last day of such Permitted Cure Period, to (i) repurchase the
affected Mortgage Loan from the Purchaser or its assignee at a price (the
"Purchase Price") at least equal to the unpaid principal balance of such
Mortgage Loan, together with accrued but unpaid interest thereon to but not
including the Due Date in the Collection Period of the repurchase, any related
unreimbursed Servicing Advances and generally, all expenses reasonably incurred
in respect of the Material Document Defect or the Material Breach giving rise to
such repurchase, or (ii) if within the three-month period commencing on the
Closing Date (or within the two-year period commencing on the Closing Date if
the related Mortgage Loan is a "defective obligation" within the meaning of
Section 860G(a)(4)(B)(ii) of the Code and Treasury Regulation Section
1.860G-2(f)), at its option, (A) replace such Mortgage Loan with a mortgage loan
having certain payment terms comparable to the Mortgage Loan to be replaced and
that is acceptable to each Rating Agency (a "Qualifying Substitute Mortgage
Loan") (and in the case of a "defective obligation", satisfying the requirements
of a "qualified replacement mortgage" within the meaning of Section
860G(a)(4)(B) of the Code) and (B) pay an amount (a "Substitution Shortfall
Amount") generally equal to the excess of the applicable Purchase Price for the
Mortgage Loan to be replaced (calculated as if it were to be repurchased instead
of replaced), over the unpaid principal balance of the applicable Qualifying
Substitute Mortgage Loan as of the date of substitution, after application of
all payments due on or before such date, whether or not received.
For purposes of the foregoing, the "Permitted Cure Period" applicable
to any Material Document Defect or Material Breach in respect of any Mortgage
Loan will generally be the 90-day period immediately following the earlier of
the discovery by the related Seller or receipt by the related Seller of notice
of such Material Document Defect or Material Breach, as the case may be.
However, if such Material Document Defect or Material Breach, as the case may
be, cannot be corrected or cured within such 90-day period, but it is
susceptible of cure within 180 days of the earlier of discovery by the related
Seller and receipt by the related Seller of notice of such Material Document
Defect or Material Breach, as the case may be, and the related Seller is
diligently attempting to effect such correction or cure, then the applicable
Permitted Cure Period will, with the consent of the Trustee (which consent may
not be unreasonably withheld), be extended for an additional 90 days.
The foregoing obligations of each Seller to cure a Material Document
Defect or a Material Breach in respect of any of its Mortgage Loans or
repurchase or replace the defective Mortgage Loan, will constitute the sole
remedies of the Trustee and the Certificateholders with respect to such Material
Document Defect or Material Breach; and none of the Depositor, either of the
other Sellers or any other person or entity will be obligated to repurchase or
replace the affected Mortgage Loan if the related Seller defaults on its
obligation to do so.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and
the Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the time the Offered Certificates are issued, as adjusted for the
scheduled principal payments due on or before the Cut-off Date. Prior to the
issuance of the Offered Certificates, a Mortgage Loan may be removed from the
Mortgage Pool if the Depositor deems such removal necessary or appropriate or if
it is prepaid. A limited number of other mortgage loans may be included in the
Mortgage Pool prior
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to the issuance of the Offered Certificates, unless including such Mortgage
Loans would materially alter the characteristics of the Mortgage Pool as
described herein. The information set forth herein is representative of the
characteristics of the Mortgage Pool as it will be constituted at the time the
Offered Certificates are issued, although the range of Mortgage Rates and
maturities and certain other characteristics of the Mortgage Loans in the
Mortgage Pool may vary.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or
through sub-servicers, will each be required to service and administer the
Mortgage Loans in the best interests and for the sole benefit of the
Certificateholders (as determined by the Master Servicer or Special Servicer, as
applicable, in its good faith and reasonable judgment), in accordance with
applicable law, the terms of the Pooling and Servicing Agreement and the terms
of the respective Mortgage Loans and, to the extent consistent with the
foregoing, in accordance with the following standard (the "Servicing Standard"):
(i) with the same care, skill, prudence and diligence as is normal and usual in
its general mortgage servicing and asset management activities on behalf of
third parties or on behalf of itself, whichever is higher, with respect to
mortgage loans that are comparable to those for which it is responsible
hereunder; (ii) with a view to the timely collection of all scheduled payments
of principal and interest under the Mortgage Loans or, if a Mortgage Loan comes
into and continues in default and if, in the good faith and reasonable judgment
of the Special Servicer, no satisfactory arrangements can be made for the
collection of the delinquent payments, the maximization of the recovery on such
Mortgage Loan to the Certificateholders (as a whole) on a net present value
basis; and (iii) without regard to (A) any relationship that the Master Servicer
or the Special Servicer, as the case may be, or any affiliate thereof may have
with the related borrower, the Depositor, either Seller, or other servicer of
the Mortgage Loans; (B) the ownership of any Certificate by the Master Servicer
or the Special Servicer, as the case may be, or any affiliate thereof; (C) the
Master Servicer's obligation to make Advances; (D) the Special Servicer's
obligation to make (or to direct the Master Servicer to make) Servicing
Advances; (E) the right of the Master Servicer or the Special Servicer, as the
case may be, to receive reimbursement of costs, or the sufficiency of any
compensation payable to it under the Pooling and Servicing Agreement or with
respect to any particular transaction; (F) the ownership, servicing or
management for others of any other mortgage loans or mortgaged property; and (G)
any obligation of the Master Servicer or the Special Servicer, as the case may
be (as a seller or an affiliate of a seller of the Mortgage Loans), to pay any
indemnity with respect to, or repurchase, any Mortgage Loan.
In general, the Master Servicer will be responsible for the servicing
and administration of all the Mortgage Loans as to which no Servicing Transfer
Event has occurred and all Corrected Mortgage Loans, and the Special Servicer
will be obligated to service and administer each Mortgage Loan (other than a
Corrected Mortgage Loan) as to which a Servicing Transfer Event has occurred
(each, a "Specially Serviced Mortgage Loan") and each Mortgaged Property
acquired in respect of a defaulted Mortgage Loan on behalf of the
Certificateholders through foreclosure, deed-in-lieu of foreclosure or otherwise
(upon acquisition, an "REO Property"). A "Servicing Transfer Event" with respect
to any Mortgage Loan consists of any of the following events: (i) the related
borrower has failed to make when due a Balloon Payment, which failure has
continued unremedied for 30 days; (ii) the related borrower has failed to make
when due any Monthly Payment (other than a Balloon Payment) or any other payment
required under the related Mortgage Note or the related Mortgage(s), which
failure has continued unremedied for 60 days; (iii) the Master Servicer has
determined, in its good faith and reasonable judgment, that a default in the
making of a Monthly Payment or any other payment required under the related
Mortgage Note or the related Mortgage(s) is likely to occur within 30 days and
is likely to remain unremedied for at least 60 days or, in the case of a Balloon
Payment, for at least 30 days; (iv) there shall have occurred a default under
the related loan documents, other than as described in clause (i) or (ii) above,
that (in the Master Servicer's good faith and reasonable judgment) materially
impairs the value of the related Mortgaged Property as security for the Mortgage
Loan or otherwise materially and adversely affects the interests of
Certificateholders, which default has continued unremedied for the applicable
grace period under the terms of the Mortgage Loan (or, if no grace period is
specified, 60 days); (v) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under any
present or future federal or state bankruptcy, insolvency or similar law or the
appointment of a
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conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the
related borrower and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; (vi) the related borrower
shall have consented to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings of or relating to such borrower or of or
relating to all or substantially all of its property; (vii) the related borrower
shall have admitted in writing its inability to pay its debts generally as they
become due, filed a petition to take advantage of any applicable insolvency or
reorganization statute, made an assignment for the benefit of its creditors, or
voluntarily suspended payment of its obligations; and (viii) the Master Servicer
shall have received notice of the commencement of foreclosure or similar
proceedings with respect to the related Mortgaged Property. The Master Servicer
will continue to collect information and prepare and remit all reports to the
Trustee required under the Pooling Agreement with respect to any Specially
Serviced Mortgage Loans and REO Properties, and to render incidental services
with respect to any Specially Serviced Mortgage Loans and REO Properties as are
specifically provided for in the Pooling and Servicing Agreement. Neither the
Master Servicer nor the Special Servicer shall have any responsibility for the
performance by the other of its duties under the Pooling and Servicing
Agreement.
A Mortgage Loan will cease to be a Specially Serviced Mortgage Loan
(and will become a "Corrected Mortgage Loan" as to which the Master Servicer
will re-assume servicing responsibilities) at such time as such of the following
as are applicable occur with respect to the circumstances identified above that
caused the Mortgage Loan to be characterized as a Specially Serviced Mortgage
Loan (and provided that no other Servicing Transfer Event then exists):
(w) with respect to the circumstances described in clauses (i)
and (ii) of the preceding paragraph, the related borrower has made
three consecutive full and timely Monthly Payments under the terms of
such Mortgage Loan (as such terms may be changed or modified in
connection with a bankruptcy or similar proceeding involving the
related borrower or by reason of a modification, waiver or amendment
granted or agreed to by the Special Servicer);
(x) with respect to the circumstances described in clauses
(iii), (v), (vi) and (vii) of the preceding paragraph, such
circumstances cease to exist in the good faith and reasonable judgment
of the Special Servicer;
(y) with respect to the circumstances described in clause (iv)
of the preceding paragraph, such default is cured; and
(z) with respect to the circumstances described in clause
(viii) of the preceding paragraph, such proceedings are terminated.
The Special Servicer will 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 Transfer Event for such Mortgage Loan.
Each Asset Status Report will be delivered to the Operating Adviser and each
Rating Agency. The Operating Adviser may object to any Asset Status Report
within 10 business days of receipt; provided, however, that the Special Servicer
shall implement the recommended action as outlined in such Asset Status Report
if it makes an affirmative determination that such objection is not in the best
interest of all the Certificateholders. If the Operating Adviser disapproves
such Asset Status Report and the Special Servicer has not made the affirmative
determination described above, the Special Servicer will revise such Asset
Status Report as soon as practicable thereafter, but in no event later than 30
days after such disapproval. The Special Servicer will revise such Asset Status
Report until the Operating Adviser fails to disapprove such revised Asset Status
Report as described above or until the Special Servicer makes a determination
that such objection is not in the best interest of the Certificateholders.
The Master Servicer and Special Servicer will each be required to
service and administer the respective groups of Cross-Collateralized Mortgage
Loans as a single Mortgage Loan as and when it deems necessary and
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appropriate, consistent with the Servicing Standard. If any Cross-Collateralized
Mortgage Loan becomes a Specially Serviced Mortgage Loan, then each other
Mortgage Loan with which it is cross-collateralized shall also become a
Specially Serviced Mortgage Loan. Similarly, no Cross-Collateralized Mortgage
Loan may subsequently become a Corrected Mortgage Loan, unless and until all
Servicing Transfer Events in respect of each other Mortgage Loan in the group
are remediated or otherwise addressed as contemplated above.
THE MASTER SERVICER
AMRESCO Services, L.P., a Delaware limited partnership, will serve as
master servicer (the "Master Servicer") and in such capacity will be responsible
for servicing the Mortgage Loans (other than Specially Serviced Mortgage Loans
and REO Properties). The Master Servicer is a wholly owned subsidiary of
AMRESCO, INC. ("AMRESCO"), a diversified financial services company which is
publicly traded on NASDAQ. The Master Servicer's principal offices are located
at 235 Peachtree Street, NE, Suite 900, Atlanta, Georgia 30303.
As of January 31, 1998, AMRESCO serviced approximately 9,929 commercial
and multifamily loans, totaling approximately $29.5 billion in aggregate
outstanding principal amount, including 5,892 loans representing approximately
$15.6 billion that are currently included in 52 securitized transactions. The
portfolio is significantly diversified both geographically and by product type.
The information set forth herein concerning the Master Servicer has
been provided by the Master Servicer. Neither the Depositor nor any other person
makes any representation or warranty as to the accuracy or completeness of such
information.
The Master Servicer also intends to make certain information related to
the Mortgage Loans available on the Internet at www.amresco.com.
THE SPECIAL SERVICER
Lennar Partners, Inc., a Florida corporation, a subsidiary of LNR
Property Corporation ("LNR"), will serve as the Special Servicer and in such
capacity will be responsible for servicing the Specially Serviced Mortgage
Loans. The principal executive offices of the Special Servicer are located at
760 N.W. 107th Avenue, Miami, Florida 33172, and its telephone number is (305)
485-2000. LNR, its subsidiaries and affiliates are involved in the real estate
investment and management business and engage principally in (i) developing,
acquiring and actively managing commercial and residential multi-family rental
real estate, (ii) acquiring portfolios of commercial mortgage loans and
properties and providing workout, property management and asset sale services
with regard to the portfolio assets, (iii) acting as special servicer with
regard to commercial mortgage pools which are the subject of commercial mortgage
backed securities ("CMBS"), (iv) acquiring unrated and rated CMBS issued with
regard to commercial mortgage pools as to which the Special Servicer acts as
special servicer, and (v) making mortgage loans to companies and individuals
engaged in commercial real estate activities and to developers and builders of
residential communities. The Special Servicer has regional offices located
across the country in Florida, Georgia, and California. As of February 1998, the
Special Servicer and its affiliates were managing a portfolio including over
7,200 assets in most states with an original face value of over $22.8 billion,
most of which are commercial real estate assets. Included in this managed
portfolio are $17.2 billion of commercial real estate assets representing 40
securitization transactions, for which the Special Servicer is the servicer or
special servicer. 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 herein concerning the Special Servicer has
been provided by the Special Servicer, and none of the Depositor, the Master
Servicer or the Underwriters make any representation or warranty as to the
accuracy or completeness of such information.
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SUB-SERVICERS
The Master Servicer and Special Servicer may each delegate its
servicing obligations in respect of the Mortgage Loans serviced thereby to one
or more third-party servicers (each, a "Sub-Servicer"); provided that the Master
Servicer or Special Servicer, as the case may be, will remain obligated under
the Pooling and Servicing Agreement for such delegated duties. Twenty-eight (28)
Mortgage Loans, representing 8.6% of the Initial Pool Balance, are currently
directly serviced by third-party servicers that are entitled to and will become
Sub-Servicers of such loans on behalf of the Master Servicer. Each sub-servicing
agreement between the Master Servicer or Special Servicer, as the case may be,
and a Sub-Servicer (each, a "Sub-Servicing Agreement") must provide that, if for
any reason the Master Servicer or Special Servicer, as the case may be, is no
longer acting in such capacity, the Trustee or any successor to such Master
Servicer or Special Servicer may assume such party's rights and obligations
under such Sub-Servicing Agreement or, in some circumstances, may terminate such
Sub-Servicer. The Master Servicer and Special Servicer will each be required to
monitor the performance of Sub-Servicers retained by it.
The Master Servicer and Special Servicer will each be solely liable for
all fees owed by it to any Sub-Servicer retained thereby, irrespective of
whether its compensation pursuant to the Pooling and Servicing Agreement is
sufficient to pay such fees. Each Sub-Servicer retained thereby will be
reimbursed by the Master Servicer or Special Servicer, as the case may be, for
certain expenditures which it makes, generally to the same extent the Master
Servicer or Special Servicer would be reimbursed under the Pooling and Servicing
Agreement. See "--Servicing and Other Compensation and Payment of Expenses"
herein.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect
of its master servicing activities will be the Master Servicing Fee. The "Master
Servicing Fee" will be payable monthly on a loan-by-loan basis from amounts
received in respect of interest on each Mortgage Loan (including Specially
Serviced Mortgage Loans and Mortgage Loans as to which the related Mortgaged
Property has become an REO Property) and will be computed on the basis of the
same principal amount and for the same period respecting which any related
interest payment on the related Mortgage Loan is computed. The administrative
costs on each Mortgage Loan will equal the sum of the related Master Servicing
Fee and the Trustee Fee (collectively, expressed as a per annum rate, the
"Administrative Cost Rate"). With respect to 324 Mortgage Loans, representing
91.4% of the Initial Pool Balance, the "Administrative Cost Rate" for each
Mortgage Loan will equal .0785% per annum and, with respect to the remainder of
the Mortgage Loans, the "Administrative Cost Rate" for each Mortgage Loan will
range from .1485% to .1785% per annum, as set forth in Appendix II. As of the
Cut-off Date, the weighted average Administrative Cost Rate for the Mortgage
Loans was .0861% per annum. As additional servicing compensation, the Master
Servicer will be entitled to retain 50% of all assumption fees, modification
fees and any similar or ancillary fees, in each case to the extent actually paid
by a borrower with respect to a Mortgage Loan that is not a Specially Serviced
Mortgage Loan. The Master Servicer will also be entitled to: (a) Prepayment
Interest Excesses collected on the Mortgage Loans and not otherwise applied to
cover Prepayment Interest Shortfalls; and (b) any default interest and late
payment charges actually collected on the Mortgage Loans (other than Specially
Serviced Mortgage Loans), but only to the extent that such default interest and
late payment charges are not allocable to cover interest payable to the Master
Servicer, the Special Servicer, the Trustee or the Fiscal Agent with respect to
any Advances made in respect of the related Mortgage Loan. In addition, the
Master Servicer will be authorized to invest or direct the investment of funds
held in any and all accounts maintained by it or the Trustee that constitute
part of the Certificate Account, in certain government securities and other
investment grade obligations specified in the Pooling and Servicing Agreement
("Permitted Investments"), and the Master Servicer will be entitled to retain
any interest or other income earned on such funds, but will be required to cover
any investment losses on such funds from its own funds without any right to
reimbursement. Furthermore, the Master Servicer will also be entitled to any
interest earned on escrow accounts and reserve accounts maintained in respect of
the Mortgage Loans (to the extent not otherwise payable to the 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
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accrue with respect to each Specially Serviced Mortgage Loan and each Mortgage
Loan as to which the related Mortgaged Property has become an REO Property, at a
rate equal to 0.25% per annum (the "Special Servicing Fee Rate"), on the basis
of the same principal amount and for the same period respecting which any
related interest payment due or deemed due on such Mortgage Loan is computed,
and will be payable monthly from general collections on the Mortgage Loans and
any REO Properties held by the Master Servicer from time to time. A "Workout
Fee" will in general be payable with respect to each Corrected Mortgage Loan. As
to each Corrected Mortgage Loan, the Workout Fee will be payable out of, and
will be calculated by application of a "Workout Fee Rate" of 0.50% to, each
collection of interest and principal (including scheduled payments, prepayments,
Balloon Payments and payments at maturity) received on such 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 such loan again becomes
a Specially Serviced Mortgage Loan or if the related Mortgaged Property becomes
an REO Property; provided that a new Workout Fee will become payable if and when
such Mortgage Loan again becomes a Corrected Mortgage Loan. If the Special
Servicer is terminated (other than for cause) or resigns with respect to any or
all of its servicing duties, it shall retain the right to receive any and all
Workout Fees payable with respect to Mortgage Loans that became Corrected
Mortgage Loans during the period that it had responsibility for servicing
Specially Serviced Mortgage Loans and that were still Corrected Mortgage Loans
at the time of such termination or resignation (and the successor Special
Servicer shall not be entitled to any portion of such Workout Fees), in each
case until the Workout Fee for any such loan ceases to be payable in accordance
with the preceding sentence. A "Liquidation Fee" will be payable in an amount
equal to the product of (x) 1.0%, (y) a fraction, the numerator of which is
equal to the Liquidation Proceeds received in connection with a final
disposition of a Specially Serviced Mortgage Loan or REO Property and the
denominator of which is equal to the unpaid principal balance of the related
Mortgage Loan or REO Property and accrued and unpaid interest thereon and (z)
the related Liquidation 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 or replacement
of any Mortgage Loan by a Seller for a breach of representation or warranty or
for defective or deficient Mortgage Loan documentation or in connection with the
purchase of all of the Mortgage Loans and REO Properties by any person entitled
to effect 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, such Workout Fee will be
payable based on and out of the portion of such Liquidation Proceeds that
constitute principal and/or interest. The Special Servicer will be entitled to
additional servicing compensation in the form of 100% of all assumption fees and
modification fees received on or with respect to Specially Serviced Mortgage
Loans and 50% of all assumption fees and modification fees received on or with
respect to Mortgage Loans that are not Specially Serviced Mortgage Loans. The
Special Servicer will also be entitled to any default interest and late payment
charges actually collected on the Specially Serviced Mortgage Loans.
The Master Servicer and the Special Servicer will, in general, each be
required to pay all ordinary expenses incurred by it in connection with its
servicing activities under the Pooling and Servicing Agreement and will not be
entitled to reimbursement therefor except as expressly provided in the Pooling
and Servicing Agreement.
THE OPERATING ADVISER
The Pooling and Servicing Agreement will permit the holder (or holders)
of Certificates representing more than 50% of the aggregate Certificate Balance
of the most subordinate Class of Principal Balance Certificates at any time of
determination (or, if the aggregate Certificate Balance of such Class of
Certificates is less than 25% of the original aggregate Certificate Balance
thereof, of the next most subordinate Class of Principal Balance Certificates)
(in any event, the "Controlling Class") to appoint any person or entity to act
as the representative of the Controlling Class to the extent described below
(such person or entity, in such capacity, the "Operating Adviser").
If the Special Servicer is not the Operating Adviser, the Special
Servicer will notify the Operating Adviser prior to the Special Servicer's
taking any of the following actions: (i) any foreclosure or comparable
conversion (which may include acquisition of an REO Property) of any Mortgaged
Property; (ii) any modification of a Money Term of a Mortgage Loan other than a
modification consisting of the extension of the original maturity of the
Mortgage Loan for two years or less; (iii) any proposed sale of a Defaulted
Mortgage Loan or REO Property (other
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than upon termination of the Trust Fund pursuant to the Pooling and Servicing
Agreement); (iv) any determination to bring an REO Property into compliance with
applicable environmental laws; and (v) any acceptance of substitute or
additional collateral for a Mortgage Loan. In addition, the Special Servicer
will be required to obtain the approval of the Operating Adviser with respect to
each Asset Status Report. See "SERVICING OF THE MORTGAGE LOANS -- General"
herein.
The Operating Adviser may replace the Special Servicer, provided that
such replacement will be subject to, among other things, receipt from the Rating
Agencies of written confirmation that such replacement will not result in a
qualification, downgrade or withdrawal of any of the then-current ratings
assigned to any Class of Certificates.
MORTGAGE LOAN MODIFICATIONS
Subject to any restrictions applicable to REMICs, and to certain
limitations imposed by the Pooling and Servicing Agreement, the Special Servicer
may amend any term, other than a Money Term, of a Mortgage Loan that is not a
Specially Serviced Mortgage Loan. Subject to any restrictions applicable to
REMICs, the Special Servicer will be permitted to enter into a modification,
waiver or amendment of the terms of any Specially Serviced Mortgage Loan,
including any modification, waiver or amendment to (i) reduce the amounts owing
under any Specially Serviced Mortgage Loan by forgiving principal, accrued
interest and/or any Prepayment Premium, (ii) reduce the amount of the Monthly
Payment on any Specially Serviced Mortgage Loan, including by way of a reduction
in the related Mortgage Rate, (iii) forebear in the enforcement of any right
granted under any Mortgage Note or Mortgage relating to a Specially Serviced
Mortgage Loan, (iv) extend the maturity date of any Specially Serviced Mortgage
Loan, and/or (v) accept a principal prepayment during any Lock-out Period;
provided in each case that (x) the related borrower is in default with respect
to the Specially Serviced Mortgage Loan or, in the reasonable judgment of the
Special Servicer, such default is reasonably foreseeable and (y) in the
reasonable judgment of the Special Servicer, such modification, waiver or
amendment would increase the recovery to Certificateholders on a net present
value basis documented to the Trustee.
In no event, however, will the Special Servicer be permitted to (i)
extend the maturity date of a Specially Serviced Mortgage Loan beyond a date
that is two years prior to the Final Rated Distribution Date, (ii) extend the
maturity date of a Specially Serviced Mortgage Loan at an interest rate below
the then-prevailing interest rate for comparable loans, as determined by the
Special Servicer (such limitation of extensions made at a below market rate
shall not limit the ability of the Special Servicer to extend the maturity date
of any Specially Serviced Mortgage Loan at an interest rate at or in excess of
the prevailing rate for comparable loans at the time of such modification),
(iii) if the Specially Serviced Mortgage Loan is secured by a ground lease,
extend the maturity date of such Specially Serviced Mortgage Loan beyond a date
that is ten (10) years prior to the expiration of the term of such ground lease,
(iv) reduce the Mortgage Rate to a rate below the then-prevailing interest rate
for comparable loans, as determined by the Special Servicer or (v) defer
interest due on any Specially Serviced Mortgage Loan in excess of 10% of the
Stated Principal Balance of such Specially Serviced Mortgage Loan or defer the
collection of interest on any Specially Serviced Mortgage Loan without accruing
interest on such deferred interest at a rate at least equal to the Mortgage Rate
of such Specially Serviced Mortgage Loan. Notwithstanding the foregoing, if a
Mortgage Loan is a Balloon Loan that has failed to make the Balloon Payment at
its scheduled maturity, and such Balloon Loan is not a Specially Serviced
Mortgage Loan (other than by reason of failure to make the Balloon Payment) and
has not been delinquent in the preceding 12 months (other than with respect to
the Balloon Payment), then in addition to the other alternatives specified
above, the Special Servicer may make up to three one-year extensions at the
existing Mortgage Rate for such Mortgage Loan; provided that in no event shall
any such extension extend beyond the date that is two years prior to the Final
Rated Distribution Date.
Modifications of a Mortgage Loan that forgive principal or interest
will result in Realized Losses on such Mortgage Loan and such realized losses
will be allocated among the various Classes of Certificates in the manner
described under "DESCRIPTION OF THE CERTIFICATES -- Distributions --
Subordination; Allocation of Losses and Certain Expenses."
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The modification of a Mortgage Loan may tend to reduce prepayments by
avoiding liquidations and therefore may extend the weighted average life of the
Certificates beyond that which might otherwise be the case. See "YIELD
CONSIDERATIONS" and "MATURITY CONSIDERATIONS."
SALE OF DEFAULTED MORTGAGE LOANS AND REO PROPERTIES
The Special Servicer may offer to sell for cash to any person, for an
amount equal to the Purchase Price, any REO Property or any Mortgage Loan that
is in Default or as to which the Special Servicer has made a determination that
Default is imminent (any such Mortgage Loan, a "Defaulted Mortgage Loan"). For
this purpose, "Default" means a default in payment that continues for at least
60 days. The Special Servicer is required (i) to give the Operating Adviser and
the Trustee not less than five days' prior written notice of its intention to
sell any such Defaulted Mortgage Loan or REO Property, (ii) to offer such
Defaulted Mortgage Loan or REO Property for sale in a fair auction or other
manner as is consistent with the Servicing Standard, and (iii) to accept the
highest cash bid received in such auction or other procedures from any person
other than an interested person (as described in the Pooling and Servicing
Agreement) for any Defaulted Mortgage Loan or REO Property in an amount, except
as otherwise provided in the Pooling and Servicing Agreement in the case of REO
Property, at least equal to the Purchase Price.
In the absence of any bid in the amount of the Purchase Price, the
Special Servicer may accept the highest cash bid, if the Special Servicer
determines, consistent with the Servicing Standard, that such sale at such price
is in the best interest of Certificateholders; provided that the Special
Servicer may not accept such bid if made by the Trustee in its individual
capacity, any of its affiliates, or any interested person (as described in the
Pooling and Servicing Agreement).
REO PROPERTIES
If title to any Mortgaged Property is acquired by the Special Servicer
on behalf of the Certificateholders, the Special Servicer, on behalf of such
holders, will be required to attempt to sell the Mortgaged Property for cash by
the close of the third taxable year of the REMIC following the taxable year in
which the Mortgaged Property was acquired (such date, the "REO Sale Deadline"),
unless (i) the Internal Revenue Service grants an extension of time to sell such
property (an "REO Extension") or (ii) the Special Servicer obtains an opinion of
independent counsel generally to the effect that the holding of the property
beyond the REO Sale Deadline will not result in the imposition of a tax on the
Trust Fund or cause any of REMIC I, REMIC II or REMIC III to fail to qualify as
a REMIC under the Code. Subject to the foregoing, the Special Servicer will
generally be required to attempt to sell any Mortgaged Property so acquired in
such a manner as will be reasonably likely to realize a fair price for such
property. The Special Servicer may retain an independent contractor to operate
and manage any REO Property; however, the retention of an independent contractor
will not relieve the Special Servicer of its obligations with respect to such
REO Property.
In general, the Special Servicer will be obligated to, or may contract
with a third party to, operate and manage any Mortgaged Property acquired as REO
Property in a manner that would, to the extent commercially feasible, maximize
the Trust Fund's net after-tax proceeds from such property. After the Special
Servicer reviews the operation of such property and consults with the Trustee to
determine the Trust Fund's federal income tax reporting position with respect to
income it is anticipated that the Trust Fund would derive from such property,
the Special Servicer could determine that it would not be commercially feasible
to manage and operate such property in a manner that would avoid the imposition
of a tax on "net income from foreclosure property" within the meaning of the
REMIC Provisions or a tax on "prohibited transactions" under Section 860F of the
Code (either such tax referred to herein as an "REO Tax"). To the extent that
income the Trust Fund receives from an REO Property is subject to a tax on (i)
"net income from foreclosure property", such income would be subject to federal
tax at the highest marginal corporate tax rate (currently 35%) and (ii)
"prohibited transactions", such income would be subject to federal tax at a 100%
rate. The determination as to whether income from an REO Property would be
subject to an REO Tax will depend on the specific facts and circumstances
relating to the management and operation of each REO Property. Generally, income
from an REO Property that is directly operated by the Special Servicer would be
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apportioned and classified as "service" or "non-service" income. The "service"
portion of such income could be subject to federal tax either at the highest
marginal corporate tax rate or at the 100% rate on "prohibited transactions,"
and the "non-service" portion of such income could be subject to federal tax at
the highest marginal corporate tax rate or, although it appears unlikely, at the
100% rate applicable to "prohibited transactions". Any REO Tax imposed on the
Trust Fund's income from an REO Property would reduce the amount available for
distribution to Certificateholders. Certificateholders are advised to consult
their own tax advisors regarding the possible imposition of REO Taxes in
connection with the operation of commercial REO Properties by REMICs.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Master Servicer is required to, or may contract with a third party
to, perform physical inspections of each Mortgaged Property at least once every
two years (or, if the related Mortgage Loan has a then-current balance greater
than the lesser of $2,000,000 and 3% of the then-aggregate Stated Principal
Balance of the Mortgage Pool, at least once every year). In addition, the
Special Servicer, subject to limitations set forth in the related loan
documents, is required to perform a physical inspection of each Mortgaged
Property as soon as practicable after servicing of the related Mortgage Loan is
transferred thereto, and annually thereafter for so long as it remains a
Specially Serviced Mortgage Loan or if such Mortgaged Property becomes REO
Property. The Special Servicer and the Master Servicer will each be required to
prepare or to contract with a third party to prepare a written report of each
such inspection performed thereby describing the condition of the Mortgaged
Property.
With respect to each Mortgage Loan that requires the borrower to
deliver annual operating statements with respect to the related Mortgaged
Property, the Master Servicer or the Special Servicer, depending on which is
obligated to service such Mortgage Loan, is also required to make reasonable
efforts to collect and review such statements. However, there can be no
assurance that any operating statements required to be delivered will in fact be
delivered, nor is the Master Servicer or the Special Servicer likely to have any
practical means of compelling such delivery in the case of an otherwise
performing Mortgage Loan.
MAINTENANCE OF MASTER SERVICER/SPECIAL SERVICER ACCEPTABILITY
It will be an event of default in respect of the Master Servicer or the
Special Servicer, as applicable, if the Trustee receives notice from either
Rating Agency to the effect that the continuation of the then-current Master
Servicer or Special Servicer, as the case may be, in such capacity would result
in the downgrade, qualification or withdrawal of any rating then assigned by
such Rating Agency to any Class of Certificates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion, when read in conjunction with the discussion
of "Certain Federal Income Tax Consequences" in the Prospectus, describes the
material federal income tax considerations for investors in the Offered
Certificates. However, these two discussions do not purport to deal with all
federal tax consequences applicable to all categories of investors some of which
may be subject to special rules, and do not address state and local tax
considerations. Prospective purchasers should consult their own tax advisers in
determining the federal, state, local and any other tax consequences to them of
the purchase, ownership and disposition of the Offered Certificates.
GENERAL
For United States federal income tax purposes, the Trust Fund will be a
"tiered REMIC structure" described in the Prospectus. See "Certain Federal
Income Tax Consequences -- REMICs -- Tiered REMIC Structures" in the Prospectus.
Three separate REMIC elections will be made with respect to the Trust Fund. Upon
the issuance of the Offered Certificates, Latham & Watkins, counsel to the
Depositor, will deliver its opinion generally to the effect that, assuming (i)
the making of proper elections, (ii) ongoing compliance with all provisions of
the Pooling and Servicing Agreement and (iii) continuing compliance with
applicable provisions of the Code, as it may be amended from time to time, and
applicable Treasury Regulations adopted thereunder, for federal income
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tax purposes, each of REMIC I, REMIC II and REMIC III will qualify as a REMIC
under the Code. For federal income tax purposes, the Class R-I, R-II and R-III
Certificates will represent three separate classes of REMIC residual interests
evidencing the sole class of "residual interests" in each of REMIC I, REMIC II
and REMIC III, respectively; and the REMIC Regular Certificates will evidence
the "regular interests" in, and will be treated as debt instruments of, REMIC
III. See "Certain Federal Income Tax Consequences -- REMICs" in the Prospectus.
The Offered Certificates will be REMIC Regular Certificates issued by REMIC III.
See "Certain Federal Income Tax Consequences -- REMICs -- Taxation of Owners of
Regular Certificates" in the Prospectus for a discussion of the principle
federal income tax consequences of the purchase, ownership and disposition of
the Offered Certificates. References in the Prospectus to the Master REMIC
should be read as references to REMIC III. Each of REMIC I and REMIC II will be
a Subsidiary REMIC as such term is used in the Prospectus.
The Offered Certificates will be "real estate assets" within the
meaning of Section 856(c)(4)(A) (formerly, Section 856(c)(5)(A)) and
856(c)(5)(B) (formerly, Section 856(c)(6)(B)) of the Code in the same proportion
that the assets of the Trust Fund underlying such Certificates would be so
treated. In addition, interest (including original issue discount, if any) on
the Offered Certificates will be interest described in Section 856(c)(3)(B) of
the Code to the extent that such Certificates are treated as "real estate
assets" under Section 856(c)(4)(A) of the Code. Moreover, the Offered
Certificates will be "qualified mortgages" under Section 860G(a)(3) of the Code
if transferred to another REMIC on its start-up day in exchange for regular or
residual interests therein. Offered Certificates also will qualify for treatment
as "permitted assets," within the meaning of Section 860L(c)(1)(G) of the Code,
of a financial asset securitization investment trust (a "FASIT") generally in
the same proportion as the assets of the Trust Fund would be so treated, and
those Offered Certificates held by certain financial institutions will
constitute "evidence of indebtedness" within the meaning of Section 582(c)(1) of
the Code.
The Offered Certificates will be treated as assets described in Section
7701(a)(19)(C)(v) of the Code generally only to the extent that the Mortgage
Loans secured by mortgages on multifamily, nursing home and congregate care
properties are a percentage of the principal balance of the Mortgage Pool. The
percentage of such Mortgage Loans included in the initial principal balance of
the Mortgage Pool (which is subject to change due to changes in principal
balances and prepayments) is initially approximately 32.8%. The Small Business
Job Protection Act of 1996, as part of the repeal of the bad debt reserve method
for thrift institutions, repealed the application of Section 593(d) to any
taxable year beginning after December 31, 1995. See "DESCRIPTION OF THE MORTGAGE
POOL" herein and "Certain Federal Income Tax Consequences -- REMICs" in the
Prospectus.
ORIGINAL ISSUE DISCOUNT AND PREMIUM
The Interest Only Certificates will, and the other Classes of Offered
Certificates may, be treated for Federal income tax reporting purposes as having
been issued with "original issue discount" ("OID"). Certain Classes of Offered
Certificates may be treated as issued with OID not exceeding a de minimis
amount, and certain other Classes of Offered Certificates are expected to be
issued with premium, depending on the price at which such Classes of
Certificates are sold. Based on anticipated prices (including accrued interest),
the assumed Mortgage Loan characteristics and the prepayment assumption
described below, the Classes of Offered Certificates other than the Interest
Only Certificates should not be treated as issued with OID. The prepayment
assumption that will be used in determining the rate of accrual of original
issue discount and amortizable premium, if any, for federal income tax purposes
will be a 0% CPR (as described in the Prospectus) applied to each Mortgage Loan
during any period that voluntary principal prepayments may be made thereon
without a Yield Maintenance Premium being required. For a description of CPR,
see "YIELD CONSIDERATIONS" and "MATURITY CONSIDERATIONS" in this Prospectus
Supplement. However, the Depositor makes no representation that the Mortgage
Loans or any Class of Certificates will only prepay during any such period or
that they will prepay at any particular rate before or during any such period.
The IRS has issued OID Regulations under Sections 1271 to 1275 of the
Code generally addressing the treatment of debt instruments issued with original
issue discount. See "Certain Federal Income Tax Consequences -- REMICs --
Taxation of Owners of REMIC Regular Certificates -- Original Issue Discount and
Premium" in the Prospectus. Purchasers of the Offered Certificates should be
aware that the OID Regulations and Section 1272(a)(6)
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of the Code do not adequately address certain issues relevant to prepayable
securities such as the Offered Certificates. Moreover, the OID Regulations
include an anti-abuse rule allowing the Internal Revenue Service to apply or
depart from the OID Regulations where necessary or appropriate to ensure a
reasonable tax result in light of applicable statutory provisions. No assurance
can be given that the Internal Revenue Service will not take a different
position as to matters respecting accrual of original issue discount in respect
of Offered Certificates. In addition, there is considerable uncertainty
concerning the application of Section 1272(a)(6) of the Code and the OID
Regulations to REMIC Regular Certificates, such as the Interest Only
Certificates, that are Super-Premium Certificates. See "Certain Federal Income
Tax Consequences -- REMICs --Taxation of Owners of REMIC Regular Certificates --
Original Issue Discount and Premium" in the Prospectus. Prospective purchasers
of the Offered Certificates are advised to consult their tax advisors concerning
the tax treatment of such Certificates, and the appropriate method of reporting
interest and original issue discount with respect to Offered Certificates.
If the method for computing OID described in the Prospectus results in
a negative amount for any period with respect to a holder of a Certificate, the
amount of original issue discount allocable to such period would be zero and
such Certificateholder will be permitted to offset such negative amount only
against future original issue discount (if any) attributable to such
Certificate. Although the matter is not free from doubt, a holder may be
permitted to deduct a loss to the extent that his or her respective remaining
basis in such Certificate exceeds the maximum amount of future payments to which
such Certificateholder is entitled, assuming no further prepayments of the
Mortgage Loans. Any such loss might be treated as a capital loss.
Certain Classes of Offered Certificates may be treated for Federal
income tax purposes as having been issued at a premium. Whether any holder of
any such Class of Certificates will be treated as holding a Certificate with
amortizable bond premium will depend on such Certificateholder's purchase price
and the distributions remaining to be made on such Certificate at the time of
its acquisition by such Certificateholder. On December 31, 1997, the IRS
published in the Federal Register final regulations on the amortization of bond
premium. Those regulations (a) do not apply to regular interests in a REMIC
(such as the Offered Certificates), and (b) state that they are intended to
create no inference concerning the amortization of premium on such interests.
Holders of each such Class of Certificates should consult their tax advisors
regarding the possibility of making an election to amortize such premium. See
"Certain Federal Income Tax Consequences -- REMICs --Taxation of Owners of REMIC
Regular Certificates -- Premium" in the Prospectus.
To the extent that any Offered Certificate is purchased in this
offering or in the secondary market at not more than a de minimis discount, as
defined in the Prospectus, a holder who receives a payment that is included in
the stated redemption price at maturity (generally, the principal amount) of
such Certificate will recognize gain equal to the excess, if any, of the amount
of the payment over an allocable portion of the holder's adjusted basis in the
Offered Certificate. Such allocable portion of the holder's adjusted basis will
be based upon the proportion that such payment of stated redemption price bears
to the total remaining stated redemption price at maturity, immediately before
such payment is made, of such Certificate. See "Certain Federal Income Tax
Consequences -- REMICs -- Taxation of Owners of REMIC Regular Certificates --
Original Issue Discount and Premium" and " -- Sale, Exchange or Redemption" in
the Prospectus.
The OID Regulations in some circumstances permit the holder of a debt
instrument to recognize OID under a method that differs from that of the issuer.
Accordingly, it is possible that holders of Offered Certificates issued with OID
may be able to select a method for recognizing original issue discount that
differs from that used by the Trustee in preparing reports to Certificateholders
and the IRS. Prospective purchasers of Offered Certificates issued with OID are
advised to consult their tax advisors concerning the treatment of such
Certificates.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to the holders of each Class of Certificates entitled thereto as
described herein. It is not entirely clear under the Code when the amount of a
Prepayment Premium should be taxed to the holder of a Class of Certificates
entitled to a Prepayment Premium. For federal income tax information reporting
purposes, Prepayment Premiums will be treated as income to the holders of a
Class of Certificates entitled to Prepayment Premiums only after the Master
Servicer's actual receipt of a Prepayment Premium to which such Class of
Certificates is entitled under the terms of the Pooling and Servicing
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Agreement, rather than including projected Prepayment Premiums in the
determination of a Certificateholder's projected constant yield to maturity. It
appears that Prepayment Premiums are treated as ordinary income rather than
capital gain. However, the timing and characterization of such income is not
entirely clear and Certificateholders should consult their tax advisors
concerning the treatment of Prepayment Premiums.
ADDITIONAL CONSIDERATIONS
The Special Servicer is authorized under certain circumstances in which
doing so is consistent with maximizing the Trust Fund's net after-tax proceeds
from an REO Property, to incur taxes on the Trust Fund in connection with the
operation of such REO Property. Any such taxes imposed on the Trust Fund would
reduce the amount distributable to Certificateholders. See "SERVICING OF THE
MORTGAGE LOANS -- REO Properties" herein.
Federal income tax information reporting duties with respect to the
Offered Certificates and REMIC I, REMIC II and REMIC III will be the obligation
of the Trustee, and not of the Master Servicer. See "Certain Federal Income Tax
Consequences -- REMICs -- Information Reporting and Backup Withholding" in the
Prospectus.
For further information regarding the tax consequences of investing in
the Offered Certificates, see "Certain Federal Income Tax Consequences --
REMICs" and "STATE TAX CONSIDERATIONS" in the Prospectus.
ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts, annuities, Keogh plans,
and collective investment funds, separate accounts and general accounts in which
such plans, accounts or arrangements are invested, that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code (each, a "Plan") and any entity whose assets include
assets of such a Plan should carefully review with its legal advisors whether
the purchase or holding of Offered Certificates could give rise to a transaction
that is prohibited or is not otherwise permitted either under ERISA or Section
4975 of the Code or whether there exists any statutory or administrative
exemption applicable thereto.
Certain employee benefit plans, such as governmental plans and church
plans (if no election has been made under section 410(d) of the Code), are not
subject to the restrictions of ERISA, and assets of such plans may be invested
in the Offered Certificates without regard to the ERISA considerations described
below, subject to other applicable federal and state law. However, any such
governmental or church plan which is qualified under section 401(a) of the Code
and exempt from taxation under section 501(a) of the Code is subject to the
prohibited transaction rules set forth in Section 503 of the Code.
PLAN ASSET REGULATION
The United States Department of Labor (the "DOL") has issued a final
regulation (the "Final Regulation") determining when assets of an entity in
which a Plan makes an equity investment will be treated as assets of the
investing Plan. If the Certificates are treated as debt with no substantial
equity features under applicable local law, the assets of the Trust Fund would
not be treated as assets of the Plans that become Certificateholders. In the
absence of treatment of the Certificates as debt, and unless the Final
Regulation provides an exemption from this "plan asset" treatment, an undivided
portion of the assets of the Trust Fund will be treated, for purposes of
applying the fiduciary standards and prohibited transactions rules of ERISA and
Section 4975 of the Code, as an asset of each Plan that acquires and holds the
Offered Certificates.
The Final Regulation provides an exemption from "plan asset" treatment
for securities issued by an entity if, immediately after the most recent
acquisition of any equity interest in the entity, less than 25% of the value of
each Class of equity interests in the entity, excluding interests held by any
person who has discretionary authority or
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control with respect to the assets of the entity (or any affiliate of such a
person), are held by "benefit plan investors" (e.g., Plans, governmental,
foreign and other plans not subject to ERISA and entities holding assets deemed
to be "plan assets"). Because the availability of this exemption to the Trust
Fund depends upon the identity of the holders of the Offered Certificates at any
time, there can be no assurance that any Class of the Offered Certificates will
qualify for this exemption.
INDIVIDUAL EXEMPTION
The U.S. Department of Labor has issued to Morgan Stanley an individual
prohibited transaction exemption, Prohibited Transaction Exemption No. 90-24
(the "Exemption"), which generally exempts from the application of the
prohibited transaction provisions of Section 406 of ERISA, and the excise taxes
imposed on such prohibited transactions pursuant to Sections 4975(a) and (b) of
the Code and Section 502(i) of ERISA, certain transactions, among others,
relating to the servicing and operation of mortgage loans, such as the Mortgage
Loans, and the purchase, sale and holding of mortgage pass-through certificates,
such as the Senior Certificates, underwritten by an "underwriter," provided that
certain conditions set forth in the Exemption are satisfied. For purposes of
this discussion, the term "underwriter" shall include (a) Morgan Stanley & Co.
Incorporated, (b) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Morgan
Stanley & Co. Incorporated, and (c) any member of the underwriting syndicate or
selling group of which a person described in (a) or (b) is a manager or
co-manager with respect to the Senior Certificates, including Merrill Lynch.
The Exemption sets forth six general conditions that must be satisfied
for a transaction involving the purchase, sale and holding of Senior
Certificates to be eligible for exemptive relief thereunder. First, the
acquisition of such 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 rights and interests evidenced by the Senior
Certificates must not be subordinated to the rights and interests evidenced by
the other certificates of the same trust. Third, the Senior Certificates at the
time of acquisition by the Plan must be rated in one of the three highest
generic rating categories by S&P, DCR, Moody's Investors Service Inc. ("Moody's)
or Fitch Investors Service, L.P. ("Fitch"). Fourth, the Trustee cannot be an
affiliate of any other member of the "Restricted Group", which consists of
either Underwriter, the Depositor, the Master Servicer, the Special Servicer,
the Trustee, any sub-servicer, and any mortgagor with respect to a Mortgage Loan
constituting more than 5% of the aggregate unamortized principal balance of the
Mortgage Loans as of the date of initial issuance of the Senior Certificates.
Fifth, the sum of all payments made to and retained by either Underwriter must
represent not more than reasonable compensation for underwriting the Senior
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 such obligations; and the sum
of all payments made to and retained by the Master Servicer, the Special
Servicer or any sub-servicer must represent not more than reasonable
compensation for such person's services under the Pooling and Servicing
Agreement and reimbursement of such person's reasonable expenses in connection
therewith. Sixth, the investing Plan must be an accredited investor as defined
in Rule 501(a)(1) of Regulation D under the Securities Act.
Because the Senior Certificates are not subordinate to any other Class
of Certificates, the second general condition set forth above is satisfied with
respect to such Certificates. It is a condition of the issuance of the Senior
Certificates that they be rated not lower than "AAA" and "AAA" (or, in the case
of the Interest Only Certificates, "AAA" and AAAr") by each of DCR and S&P;
thus, the third general condition set forth above is satisfied with respect to
the Senior Certificates as of the Closing Date. In addition, the fourth general
condition set forth above is also satisfied as of the Closing Date. A fiduciary
of a Plan contemplating purchasing a Senior Certificate in the secondary market
also must make its own determination that, at the time of such purchase, the
Senior Certificates continue to satisfy the third and fourth general conditions
set forth above. A fiduciary of a Plan contemplating the purchase of a Senior
Certificate also must make its own determination that the first, fifth and sixth
general conditions set forth above will be satisfied with respect to such Senior
Certificate as of the date of such purchase.
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The Exemption also requires that the Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the three highest categories of
S&P, DCR, Moody's or Fitch for at least one year prior to the Plan's acquisition
of Senior Certificates; and (iii) certificates in such other investment pools
must have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of Senior Certificates.
Moreover, the Exemption provides relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
any person who has discretionary authority or renders investment advice with
respect to the investment of plan assets causes a Plan to acquire Senior
Certificates, provided that, among other requirements: (i) such person (or its
affiliate) is an obligor with respect to five percent or less of the fair market
value of the obligations or receivables contained in the trust; (ii) the Plan is
not a plan with respect to which any member of the Restricted Group is the "plan
sponsor" (as defined in Section 3(16)(B) of ERISA); (iii) in the case of an
acquisition in connection with the initial issuance of Senior Certificates, at
least fifty percent of such class is acquired by persons independent of the
Restricted Group and at least fifty percent of the aggregate interest in the
trust fund is acquired by persons independent of the Restricted Group; (iv) the
Plan's investment in Senior Certificates does not exceed twenty-five percent of
all of the certificates of that class outstanding at the time of the
acquisition; and (v) immediately after the acquisition, no more than twenty-five
percent of the assets of the Plan with respect to which such person has
discretionary authority or renders investment advice are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity.
Finally, 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 Mortgage Loan.
The Depositor expects that the specific conditions of the Exemption required for
this purpose will be satisfied with respect to the Senior Certificates.
A purchaser of a Senior Certificate should be aware, however, that even
if the conditions specified in one or more parts of the Exemption is satisfied,
the scope of relief provided by the Exemption may not cover all acts that may be
considered prohibited transactions.
Before purchasing a Senior Certificate, a fiduciary of a Plan should
itself confirm that the specific and general conditions of the Exemption 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.
OTHER EXEMPTIONS
The characteristics of each Class of the Subordinate Certificates do
not meet the requirements of the Exemption. Accordingly, Certificates of those
Classes may not be acquired by, on behalf of or with assets of a Plan, unless
such transaction is covered by a Prohibited Transaction Class Exemption ("PTCE")
issued by the U.S. Department of Labor, such as: PTCE 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38, regarding
investments by bank collective investment funds; PTCE 84-14, regarding
transactions effected by "qualified professional asset managers;" and PTCE
96-23, regarding transactions effected by "in-house asset managers." There can
be no assurance that any of these exemptions will apply with respect to any
particular Plan's investment in Offered Certificates or, even if an exemption
were deemed to apply, that any exemption would apply to all prohibited
transactions that may occur in connection with such investment. Before
purchasing Subordinate Certificates based on the availability of any such
exemption, a Plan fiduciary should itself confirm that all applicable conditions
and other requirements set forth in such exemption have been satisfied. Any such
Plan or person to whom a transfer of any such Certificate or interest therein is
made shall be deemed to have represented to the Depositor, the Master Servicer,
the Special Servicer, the Trustee and any sub-servicer that the purchase and
holding of such Certificate is so exempt on the basis of the availability of a
PTCE.
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INSURANCE COMPANY PURCHASERS
Purchasers that are insurance companies should consult their legal
advisors with respect to the applicability of PTCE 95-60, regarding transactions
by insurance company general accounts. In addition to any exemption that may be
available under PTCE 95-60 for the purchase and holding of Certificates by an
insurance company general account, 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. The DOL issued proposed regulations under
Section 401(c) on December 22, 1997, but the required final regulations have not
been issued as of the date hereof. Section 401(c) of ERISA required the DOL to
issue final regulations ("401(c) Regulations") no later than December 31, 1997
to provide guidance for the purpose of determining, in cases where insurance
policies or annuity contracts supported by an insurer's general account are
issued to or for the benefit of a Plan on or before December 31, 1998, which
general account assets constitute plan assets. Section 401(c) of ERISA generally
provides that, until the date that is 18 months after the 401(c) Regulations
become final, no person shall be subject to liability under Part 4 of Title I of
ERISA and Section 4975 of the Code on the basis of a claim that the assets of an
insurance company general account constitute plan assets of any plan, unless (i)
as otherwise provided by the Secretary of Labor in the 401(c) Regulations to
prevent avoidance of the regulations or (ii) 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 that support insurance policies or annuity
contracts 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 such
separate account. Insurance companies contemplating the investment of general
account assets in the Certificates should consult 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 Certificates after the date which is
18 months after the date the 401(c) Regulations become final.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA"). The appropriate characterization of a Class of Offered
Certificates under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase Offered Certificates, may
be subject to significant interpretive uncertainties. All investors whose
investment authority is subject to legal restrictions should consult their own
legal advisors to determine whether, and to what extent, the Offered
Certificates will constitute legal investments for them.
The Depositor makes no representations as to the proper
characterization of the Offered Certificates for legal investment or financial
institution regulatory purposes, or as to the ability of particular investors to
purchase the Offered Certificates under applicable legal investment
restrictions. The uncertainties referred to above (and any unfavorable future
determinations concerning legal investment or financial institution regulatory
characteristics of the Offered Certificates) may adversely affect the liquidity
of the Offered Certificates. See "Legal Investment" in the Prospectus.
USE OF PROCEEDS
The Depositor will apply the net proceeds of the offering of the
Certificates towards the simultaneous purchase of the Mortgage Loans.
PLAN OF DISTRIBUTION
The Depositor has entered into an underwriting agreement (the
"Underwriting Agreement") with Morgan Stanley, an affiliate of the Depositor,
and Merrill Lynch. The Underwriting Agreement provides that the obligations
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of the Underwriters are subject to certain conditions precedent, and that the
Underwriters will be obligated to purchase all of the Offered Certificates if
any are purchased.
Each Underwriter has advised the Depositor that it proposes to offer
the Offered Certificates from time to time for sale in one or more negotiated
transactions or otherwise at prices to be determined at the time of sale. The
Underwriters may effect such transactions by selling such Classes of Offered
Certificates to or through dealers and such dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the
Underwriters and any purchasers of such Classes of Offered Certificates for whom
it may act as agent.
The Offered Certificates are offered by the Underwriters when, as and
if issued by the Depositor, delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Offered Certificates will be made in book-entry form through the
facilities of DTC against payment therefor on or about March 27, 1998, which is
the seventh business day following the date of pricing of the Certificates.
Under Rule 15c6-1 recently adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, trades in the secondary
market generally are required to settle in three business days, unless the
parties to any trade expressly agree otherwise. Accordingly, purchasers who wish
to trade Offered Certificates in the secondary market prior to such delivery
should specify a longer settlement cycle, or should refrain from specifying a
shorter settlement cycle, to the extent that failing to do so would result in a
settlement date that is earlier than the date of delivery of such Offered
Certificates.
Each Underwriter and any dealers that participate with the Underwriters
in the distribution of the Offered Certificates may be deemed to be
underwriters, and any discounts or commissions received by them and any profit
on the resale of such Classes of Offered Certificates by them may be deemed to
be underwriting discounts or commissions, under the Securities Act of 1933, as
amended.
The Depositor has agreed to indemnify the Underwriters against civil
liabilities, including liabilities under the Securities Act of 1933, as amended
or contribute to payments the Underwriters may be required to make in respect
thereof.
Each Underwriter intends to make a secondary market in the Offered
Certificates, but it is not obligated to do so.
LEGAL MATTERS
The legality of the Offered Certificates and the material federal
income tax consequences of investing in the Offered Certificates will be passed
upon for the Depositor by Latham & Watkins, New York, New York. Certain legal
matters with respect to the Offered Certificates will be passed upon for the
Underwriters by Latham & Watkins, New York, New York. Certain legal matters with
respect to the sale of the Mortgage Loans by Heller will be passed upon Katten
Muchin & Zavis, Chicago, Illinois.
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RATINGS
It is a condition of the issuance of the Offered Certificates that they
receive the following credit ratings from DCR and S&P:
<TABLE>
<CAPTION>
CLASS DCR S&P
- ----- --- ---
<S> <C> <C>
Class A1....................................... AAA AAA
Class A2....................................... AAA AAA
Class X........................................ AAA AAAr
Class B........................................ AA AA
Class C........................................ A A
Class D........................................ BBB BBB
Class E........................................ BBB- BBB-
</TABLE>
S&P assigns the additional symbol of "r" to highlight classes of
securities that S&P believes may experience high volatility or high variability
in expected returns due to non-credit risks; however, the absence of an "r"
symbol should not be taken as an indication that a class will exhibit no
volatility or variability in total return.
The ratings of the Offered Certificates address the likelihood of the
timely receipt by holders thereof of all payments of interest to which they are
entitled and the ultimate receipt by holders thereof of all payments of
principal to which they are entitled, if any, by the Distribution Date in March
2030 (the "Final Rated Distribution Date"). The ratings on the Offered
Certificates should be evaluated independently from similar ratings on other
types of securities. A security rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any time by the
assigning rating agency.
The ratings of the Certificates do not represent any assessment of (i)
the likelihood or frequency of principal prepayments on the Mortgage Loans, (ii)
the degree to which such prepayments might differ from those originally
anticipated or (iii) whether and to what extent Prepayment Premiums will be
received. A security rating does not represent any assessment of the yield to
maturity that investors may experience or the possibility that the holders of
the Interest Only Certificates might not fully recover their investment in the
event of rapid prepayments of the Mortgage Loans (including both voluntary and
involuntary prepayments). In general, the ratings thus address credit risk and
not prepayment risk. As described herein, the amounts payable with respect to
the Interest Only Certificates consist only of interest. If all of the Mortgage
Loans were to prepay in the initial month, with the result that the
Certificateholders receive only a single month's interest and thus suffer a
nearly complete loss of their investment, all amounts "due" to such
Certificateholders would nevertheless have been paid, and such result will be
consistent with the "AAA/AAAr" ratings received on the Interest Only
Certificates. The respective aggregate Notional Amounts upon which interest in
respect of the Interest Only Certificates are calculated is reduced by the
allocation of Realized Losses, Expense Losses and prepayments of principal,
whether voluntary or involuntary. The ratings do not address the timing or
magnitude of reductions of such aggregate Notional Amounts, but only the
obligation to pay interest timely on such aggregate Notional Amounts as so
reduced from time to time. Accordingly, the rating of the Interest Only
Certificates should be evaluated independently from similar ratings on other
types of securities.
There can be no assurance as to whether any rating agency not requested
to rate the Offered Certificates will nonetheless issue a rating to any Class
thereof and, if so, what such rating would be. A rating assigned to any Class of
Offered Certificates by a rating agency that has not been requested by the
Depositor to do so may be lower than the ratings assigned thereto at the request
of the Depositor.
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INDEX OF PRINCIPAL DEFINITIONS
10% Free Prepayment Loans............................................S-35, S-74
30/360 basis...............................................................S-66
Accrued Certificate Interest...................................S-20, S-21, S-54
Additional Trust Fund Expenses.............................................S-58
Administrative Cost Rate.............................................S-26, S-87
Advance Rate.........................................................S-27, S-60
Advances.............................................................S-27, S-60
AMRESCO....................................................................S-86
Appraisal Event................................................S-23, S-24, S-56
Appraisal Reduction............................................S-23, S-24, S-56
Asset Status Report........................................................S-85
Assumed Monthly Payment..............................................S-22, S-55
Available Distribution Amount........................................S-18, S-52
Balloon Loans........................................................S-34, S-73
Balloon LTV................................................................S-79
Balloon LTV Ratio..........................................................S-79
Balloon Payment................................................S-34, S-46, S-73
Book-Entry Certificates....................................................S-49
CEDEL.....................................................S-1, S-14, S-15, S-49
Certificate Account........................................................S-53
Certificate Balance.............................................S-1, S-16, S-50
Certificate Owner....................................................S-14, S-49
Certificateholders..............................................S-1, S-36, S-49
Certificates....................................................S-1, S-11, S-48
Chase......................................................................S-50
Citibank...................................................................S-50
Class...........................................................S-1, S-11, S-49
Class A Certificates............................................S-1, S-11, S-49
Class Interest Shortfall.............................................S-21, S-54
Class X Certificates............................................S-1, S-11, S-49
Closing Date..........................................................S-1, S-48
CMBS.......................................................................S-86
Code.......................................................................S-37
Collection Period....................................................S-14, S-52
Commission..................................................................S-5
Compensating Interest Payment........................................S-25, S-58
Controlling Class....................................................S-13, S-88
Corporate Trust Office.....................................................S-64
Corrected Mortgage Loan....................................................S-85
Cross-Collateralized Mortgage Loans........................................S-33
Cut-off Date LTV...........................................................S-79
Cut-off Date LTV Ratio.....................................................S-79
DCR...................................................................S-1, S-29
Debt Service Coverage Ratio................................................S-78
Default....................................................................S-90
Defaulted Mortgage Loan....................................................S-90
Defeasance Collateral......................................................S-73
Defeasance Loans...........................................................S-73
Definitive Certificate...............................................S-14, S-49
Depositor.............................................................S-1, S-11
Discount Rate..............................................................S-55
S-100
<PAGE> 101
Distributable Certificate Interest...................................S-20, S-54
Distribution Date.....................................................S-3, S-52
Document Defect............................................................S-83
DOL........................................................................S-94
DSCR.......................................................................S-78
DTC.............................................................S-1, S-14, S-49
ERISA................................................................S-38, S-94
Euroclear.................................................S-1, S-14, S-15, S-49
Exemption..................................................................S-95
Expense Losses.............................................................S-57
FASIT......................................................................S-92
Final Rated Distribution Date........................................S-30, S-99
Final Regulation...........................................................S-94
Final Scheduled Distribution Date..........................................S-66
Fiscal Agent................................................................S-1
Fitch......................................................................S-95
GAL........................................................................S-82
Heller...............................................................S-12, S-80
Heller Financial...........................................................S-80
Heller Loans...............................................................S-72
Hospitality Loans..........................................................S-44
Hyper-Amortization Date....................................................S-34
Initial Pool Balance............................................S-3, S-11, S-73
Interest Accrual Period....................................................S-54
Interest Only Certificates......................................S-1, S-11, S-49
LaSalle....................................................................S-64
Liquidation Fee............................................................S-88
LNR........................................................................S-86
Loan-to-Value Ratio........................................................S-79
Lock-out Period......................................................S-35, S-74
LOP........................................................................S-66
Manufactured Housing Communities...........................................S-44
Master Servicer.......................................................S-1, S-86
Master Servicing Fee.................................................S-26, S-87
Material Breach............................................................S-83
Material Document Defect...................................................S-83
Maturity Assumptions.......................................................S-65
Merrill Lynch...............................................................S-1
Mezzanine Debt.......................................................S-48, S-76
Money Term...........................................................S-23, S-56
Monthly Payment......................................................S-22, S-55
Moody's....................................................................S-95
Morgan Stanley..............................................................S-1
Morgan Stanley Loans.......................................................S-72
Mortgage...................................................................S-72
Mortgage File..............................................................S-81
Mortgage Loan........................................................S-11, S-72
Mortgage Loan Purchase Agreement.....................................S-12, S-72
Mortgage Loans..............................................................S-3
Mortgage Note..............................................................S-72
Mortgage Pool...............................................................S-3
Mortgage Rates.............................................................S-34
Mortgaged Properties.......................................................S-11
Mortgaged Property...................................................S-11, S-72
MSMC.......................................................................S-12
Net........................................................................S-18
Net Aggregate Prepayment Interest Shortfall................................S-58
Net income from foreclosure property.......................................S-90
Net Mortgage Rate..........................................................S-51
S-101
<PAGE> 102
Non-30/360 Loan......................................................S-18, S-51
Notional Amount.................................................S-1, S-17, S-50
Offered Certificates............................................S-1, S-12, S-49
OID........................................................................S-92
Operating Adviser....................................................S-13, S-88
P&I Advance..........................................................S-27, S-59
Participants...............................................................S-49
Pass-Through Rate.....................................................S-1, S-51
Percentage Interest........................................................S-52
Percentage Premium...................................................S-35, S-74
Permitted Cure Period......................................................S-83
Permitted Investments......................................................S-87
Phase I....................................................................S-77
Plan.......................................................................S-94
Pooling and Servicing Agreement.................................S-1, S-11, S-48
Prepayment Assumption......................................................S-38
Prepayment Interest Excess...........................................S-25, S-58
Prepayment Interest Shortfall........................................S-25, S-58
Prepayment Premium...................................................S-35, S-74
Principal Balance Certificates..................................S-3, S-16, S-50
Principal Distribution Amount........................................S-21, S-54
Principal Window...........................................................S-10
Private Certificates.................................................S-12, S-49
PTCE.......................................................................S-96
Purchase Price.............................................................S-83
Qualifying Substitute Mortgage Loan........................................S-83
Rating Agencies.......................................................S-1, S-29
Realized Losses............................................................S-57
Record Date................................................................S-52
Related Proceeds...........................................................S-59
REMIC.................................................................S-4, S-37
REMIC I...............................................................S-4, S-37
REMIC II..............................................................S-4, S-37
REMIC III.............................................................S-4, S-37
REMIC Regular Certificates......................................S-1, S-11, S-49
REMIC Residual Certificates.....................................S-1, S-11, S-49
REO Extension..............................................................S-90
REO Property...................................................S-11, S-49, S-84
REO Sale Deadline..........................................................S-90
REO Tax....................................................................S-90
Required Appraisal Loan........................................S-23, S-24, S-56
Restricted Group...........................................................S-95
S&P...................................................................S-1, S-29
Seller................................................................S-3, S-12
Senior Certificates.............................................S-1, S-11, S-49
Servicing Advance....................................................S-27, S-60
Servicing Standard.........................................................S-84
Servicing Transfer Event...................................................S-84
Single-Tenant Mortgage Loan................................................S-75
SMMEA................................................................S-39, S-97
Special Servicer............................................................S-1
Special Servicing Fee......................................................S-87
Special Servicing Fee Rate.................................................S-88
Specially Serviced Mortgage Loan...........................................S-84
Stated Principal Balance...................................................S-51
Subordinate Certificates........................................S-1, S-11, S-49
Sub-Servicer...............................................................S-87
Sub-Servicing Agreement....................................................S-87
Substitution Shortfall Amount..............................................S-83
S-102
<PAGE> 103
Termination Price..........................................................S-59
Trust Fund......................................................S-1, S-11, S-49
Trustee.....................................................................S-1
Trustee Fee..........................................................S-26, S-64
Underwritable Cash Flow....................................................S-78
Underwriters................................................................S-1
Underwriting Agreement.....................................................S-97
Voting Rights..............................................................S-64
WAC Rate.............................................................S-18, S-51
Workout Fee................................................................S-88
Workout Fee Rate...........................................................S-88
Year Built/Renovated.......................................................S-79
Yield Maintenance Premium............................................S-35, S-74
YMP........................................................................S-66
S-103
<PAGE> 104
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 105
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 106
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED
NUMBER AGGREGATE WEIGHTED AVERAGE
OF AGGREGATE CUT-OFF DATE AVERAGE REMAINING
MORTGAGE CUT-OFF DATE BALANCE MORTGAGE TERM TO
CUT-OFF DATE BALANCE ($) LOANS BALANCE ($) (%) RATE (%) MATURITY (mos)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 to 1,000,000 24 18,592,341 1.45 7.697 117
1,000,001 to 2,000,000 122 181,494,176 14.12 7.944 124
2,000,001 to 3,000,000 80 197,538,221 15.37 7.796 124
3,000,001 to 4,000,000 38 137,132,455 10.67 7.939 121
4,000,001 to 5,000,000 22 98,621,837 7.67 7.760 121
5,000,001 to 6,000,000 16 88,490,022 6.89 7.621 122
6,000,001 to 7,000,000 7 46,872,958 3.65 7.338 152
7,000,001 to 8,000,000 8 59,596,339 4.64 7.659 123
8,000,001 to 9,000,000 5 41,430,312 3.22 7.775 115
9,000,001 to 10,000,000 4 39,002,845 3.03 7.452 115
10,000,001 to 11,000,000 5 52,932,266 4.12 7.198 117
11,000,001 to 12,000,000 5 57,680,388 4.49 7.613 116
12,000,001 to 13,000,000 4 51,204,983 3.98 7.561 115
13,000,001 to 14,000,000 2 27,020,332 2.10 7.511 147
15,000,001 and above 10 187,608,289 14.60 7.424 120
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 352 $1,285,217,765 100.00% 7.679% 122
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED
WEIGHTED CUT-OFF AVERAGE
AVERAGE DATE BALLOON
CUT-OFF DATE BALANCE ($) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
1 to 1,000,000 1.58 66.2 51.0
1,000,001 to 2,000,000 1.53 66.6 51.3
2,000,001 to 3,000,000 1.46 71.3 56.2
3,000,001 to 4,000,000 1.51 68.8 55.5
4,000,001 to 5,000,000 1.48 69.0 53.5
5,000,001 to 6,000,000 1.43 74.3 63.2
6,000,001 to 7,000,000 1.43 72.9 46.1
7,000,001 to 8,000,000 1.44 70.9 60.6
8,000,001 to 9,000,000 1.33 75.9 66.2
9,000,001 to 10,000,000 1.29 79.3 69.2
10,000,001 to 11,000,000 1.29 78.1 67.9
11,000,001 to 12,000,000 1.35 74.9 64.7
12,000,001 to 13,000,000 1.39 70.5 59.9
13,000,001 to 14,000,000 1.35 76.1 60.8
15,000,001 and above 1.35 73.7 61.9
- -----------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 1.43x 71.6% 58.1%
=============================================================================
</TABLE>
Min: $498,113
Max: $32,909,270
Average: $3,651,187
I-1
<PAGE> 107
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED
NUMBER AGGREGATE WEIGHTED AVERAGE
OF AGGREGATE CUT-OFF DATE AVERAGE REMAINING
MORTGAGE CUT-OFF DATE BALANCE MORTGAGE TERM TO
STATES LOANS BALANCE ($) (%) RATE (%) MATURITY (mos)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
California 84 323,761,654 25.19 7.799 121
Massachusetts 24 113,813,009 8.86 7.167 117
Arizona 28 91,945,288 7.15 7.919 117
Texas 20 66,165,464 5.15 7.754 121
Wisconsin 19 64,046,978 4.98 7.393 117
Colorado 13 63,809,967 4.96 7.475 133
Michigan 11 56,149,664 4.37 7.500 118
Ohio 12 53,959,358 4.20 7.974 115
Illinois 17 50,482,335 3.93 7.358 120
New Jersey 8 42,275,764 3.29 7.784 133
Florida 13 41,546,757 3.23 7.971 114
Washington 12 38,681,415 3.01 7.376 120
Oregon 8 30,616,329 2.38 7.798 135
Georgia 12 30,277,761 2.36 7.719 124
Pennsylvania 7 27,593,447 2.15 8.205 115
New York 8 23,604,521 1.84 7.250 130
Nevada 4 19,430,174 1.51 7.089 117
Oklahoma 2 17,430,048 1.36 7.392 115
Missouri 3 16,642,368 1.29 8.106 132
North Carolina 5 15,451,793 1.20 7.689 132
Maryland 5 14,997,914 1.17 8.067 114
Utah 9 13,153,313 1.02 8.197 115
Virginia 5 12,161,065 0.95 7.685 117
Minnesota 3 11,413,534 0.89 7.277 211
Indiana 3 8,994,692 0.70 7.746 143
Connecticut 2 8,398,703 0.65 7.994 215
Louisiana 2 6,628,099 0.52 8.139 113
New Mexico 3 5,853,242 0.46 8.077 128
Idaho 3 4,053,118 0.32 8.456 114
Maine 1 2,783,847 0.22 7.910 115
Hawaii 1 2,436,447 0.19 8.210 115
New Hampshire 1 1,867,152 0.15 8.970 112
Kentucky 1 1,487,498 0.12 9.620 110
Tennessee 1 1,198,628 0.09 7.480 119
Montana 1 1,112,980 0.09 8.270 210
Alabama 1 993,440 0.08 9.670 112
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 352 $1,285,217,765 100.00% 7.679% 122
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED
WEIGHTED CUT-OFF AVERAGE
AVERAGE DATE BALLOON
STATES DSCR (x) LTV (%) LTV (%)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
California 1.48 70.2 57.9
Massachusetts 1.30 73.3 63.2
Arizona 1.49 69.9 56.4
Texas 1.31 76.9 62.8
Wisconsin 1.41 73.4 60.4
Colorado 1.43 70.2 55.5
Michigan 1.39 77.6 66.5
Ohio 1.29 75.2 63.1
Illinois 1.50 71.8 58.0
New Jersey 1.58 65.4 53.3
Florida 1.40 74.5 59.4
Washington 1.61 68.1 57.0
Oregon 1.50 69.2 54.8
Georgia 1.37 73.0 56.4
Pennsylvania 1.33 77.9 66.3
New York 1.61 63.5 46.8
Nevada 1.61 68.7 57.4
Oklahoma 1.26 73.6 64.4
Missouri 1.23 75.6 54.7
North Carolina 1.40 67.5 54.7
Maryland 1.68 67.9 58.4
Utah 1.80 53.9 40.7
Virginia 1.44 68.2 56.8
Minnesota 1.31 77.4 49.5
Indiana 1.29 68.7 36.9
Connecticut 1.10 84.3 9.6
Louisiana 1.30 74.0 60.6
New Mexico 1.56 70.1 55.3
Idaho 1.36 74.3 61.3
Maine 1.48 73.3 59.7
Hawaii 1.21 74.6 61.3
New Hampshire 1.29 71.8 60.0
Kentucky 1.31 71.9 60.9
Tennessee 1.28 79.9 63.9
Montana 1.26 67.5 3.0
Alabama 1.68 68.5 58.1
- --------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 1.43x 71.6% 58.1%
================================================================================
</TABLE>
I-2
<PAGE> 108
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED
NUMBER AGGREGATE WEIGHTED AVERAGE
OF AGGREGATE CUT-OFF DATE AVERAGE REMAINING
MORTGAGE CUT-OFF DATE BALANCE MORTGAGE TERM TO
PROPERTY TYPE LOANS BALANCE ($) (%) RATE (%) MATURITY (mos)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Multifamily 96 407,168,588 31.68 7.282 121
Retail 57 262,311,122 20.41 7.824 132
Self-Storage 86 201,006,960 15.64 8.049 120
Manufactured Housing 56 145,904,078 11.35 7.875 117
Office 26 123,291,975 9.59 7.764 116
Hospitality 9 71,696,771 5.58 7.609 132
Industrial 18 59,875,089 4.66 7.918 118
Congregate Care 4 13,963,181 1.09 7.766 116
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 352 $1,285,217,765 100.00% 7.679% 122
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED
WEIGHTED CUT-OFF AVERAGE
AVERAGE DATE BALLOON
PROPERTY TYPE DSCR (x) LTV (%) LTV (%)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Multifamily 1.36 74.0 62.3
Retail 1.36 73.2 55.6
Self-Storage 1.66 67.6 54.0
Manufactured Housing 1.48 69.5 57.9
Office 1.37 70.6 59.2
Hospitality 1.53 69.8 51.3
Industrial 1.38 70.5 60.2
Congregate Care 1.50 74.6 60.4
- ----------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 1.43x 71.6% 58.1%
============================================================================
</TABLE>
I-3
<PAGE> 109
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED
NUMBER AGGREGATE WEIGHTED AVERAGE
OF AGGREGATE CUT-OFF DATE AVERAGE REMAINING
MORTGAGE CUT-OFF DATE BALANCE MORTGAGE TERM TO
MORTGAGE RATE (%) LOANS BALANCE ($) (%) RATE (%) MATURITY (mos)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6.501 to 7.000 32 172,267,879 13.40 6.880 125
7.001 to 7.500 113 412,656,647 32.11 7.255 123
7.501 to 8.000 93 351,752,154 27.37 7.762 127
8.001 to 8.500 56 207,024,122 16.11 8.197 118
8.501 to 9.000 36 102,557,300 7.98 8.741 115
9.001 to 9.500 12 22,824,391 1.78 9.228 111
9.501 to 10.000 10 16,135,272 1.26 9.663 106
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 352 $1,285,217,765 100.00% 7.679% 122
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED
WEIGHTED CUT-OFF AVERAGE
AVERAGE DATE BALLOON
MORTGAGE RATE (%) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
6.501 to 7.000 1.40 73.1 60.6
7.001 to 7.500 1.43 72.6 59.2
7.501 to 8.000 1.45 70.7 55.3
8.001 to 8.500 1.45 69.7 58.1
8.501 to 9.000 1.40 71.6 57.7
9.001 to 9.500 1.51 71.5 61.4
9.501 to 10.000 1.45 77.1 64.5
- -----------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 1.43x 71.6% 58.1%
=============================================================================
</TABLE>
Min: 6.650%
Max: 9.880%
Weighted Average: 7.679%
I-4
<PAGE> 110
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED
NUMBER AGGREGATE WEIGHTED AVERAGE
OF AGGREGATE CUT-OFF DATE AVERAGE REMAINING
ORIGINAL TERM TO MORTGAGE CUT-OFF DATE BALANCE MORTGAGE TERM TO
STATED MATURITY (mos) LOANS BALANCE ($) (%) RATE (%) MATURITY (mos)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 to 60 1 2,169,236 0.17 7.850 53
61 to 120 299 1,116,379,027 86.86 7.684 115
121 to 144 16 40,207,457 3.13 7.722 122
145 to 180 26 85,349,556 6.64 7.755 174
181 to 240 10 41,112,490 3.20 7.336 215
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 352 $1,285,217,765 100.00% 7.679% 122
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED
WEIGHTED CUT-OFF AVERAGE
ORIGINAL TERM TO AVERAGE DATE BALLOON
STATED MATURITY (mos) DSCR (x) LTV (%) LTV (%)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 to 60 1.58 80.3 76.7
61 to 120 1.43 71.8 60.6
121 to 144 1.49 70.7 59.4
145 to 180 1.47 67.5 39.9
181 to 240 1.33 76.7 26.1
- --------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 1.43x 71.6% 58.1%
================================================================================
</TABLE>
Min: 60
Max: 240
Weighted Average: 127
I-5
<PAGE> 111
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED
NUMBER AGGREGATE WEIGHTED AVERAGE
OF AGGREGATE CUT-OFF DATE AVERAGE REMAINING
REMAINING TERM TO MORTGAGE CUT-OFF DATE BALANCE MORTGAGE TERM TO
STATED MATURITY (mos) LOANS BALANCE ($) (%) RATE (%) MATURITY (mos)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 to 60 1 2,169,236 0.17 7.850 53
61 to 84 1 897,520 0.07 7.800 81
85 to 120 308 1,142,117,900 88.87 7.685 115
121 to 180 33 112,398,380 8.75 7.658 169
181 to 240 9 27,634,730 2.15 7.504 233
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 352 $1,285,217,765 100.00% 7.679% 122
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED
WEIGHTED CUT-OFF AVERAGE
REMAINING TERM TO AVERAGE DATE BALLOON
STATED MATURITY (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
1 to 60 1.58 80.3 76.7
61 to 84 1.66 64.1 56.9
85 to 120 1.43 71.8 60.6
121 to 180 1.47 68.2 43.8
181 to 240 1.26 78.7 11.7
- -----------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 1.43x 71.6% 58.1%
=============================================================================
</TABLE>
Min: 53
Max: 239
Weighted Average: 122
I-6
<PAGE> 112
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED
NUMBER AGGREGATE WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE CUT-OFF DATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
DEBT SERVICE MORTGAGE CUT-OFF DATE BALANCE MORTGAGE TERM TO AVERAGE DATE BALLOON
COVERAGE RATIO (x) LOANS BALANCE ($) (%) RATE (%) MATURITY (mos) DSCR (x) LTV (%) LTV (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Less than 1.0 1 2,719,519 0.21 7.120 234 0.99 87.2 1.5
1.00 to 1.14 7 18,929,077 1.47 7.994 168 1.07 80.9 32.6
1.15 to 1.24 45 201,615,305 15.69 7.711 117 1.21 74.6 61.1
1.25 to 1.34 86 353,883,084 27.53 7.602 118 1.30 75.9 64.5
1.35 to 1.49 92 355,536,957 27.66 7.634 128 1.41 72.7 58.4
1.50 to 1.74 72 217,054,735 16.89 7.874 122 1.59 67.9 54.3
1.75 to 1.99 26 89,271,665 6.95 7.511 117 1.83 63.9 52.9
2.00 and above 23 46,207,424 3.60 7.798 126 2.30 45.5 36.4
==================================================================================================================================
TOTAL OR WEIGHTED AVERAGE: 352 $1,285,217,765 100.00% 7.679% 122 1.43x 71.6% 58.1%
==================================================================================================================================
</TABLE>
Min: 0.99x
Max: 3.75x
Weighted Average: 1.43x
I-7
<PAGE> 113
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED
NUMBER AGGREGATE WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE CUT-OFF DATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
CUT-OFF DATE LOAN-TO- MORTGAGE CUT-OFF DATE BALANCE MORTGAGE TERM TO AVERAGE DATE BALLOON
VALUE RATIO (%) LOANS BALANCE ($) (%) RATE (%) MATURITY (mos) DSCR (x) LTV (%) LTV (%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30.1 to 40.0 7 12,274,625 0.96 7.290 117 2.29 35.8 28.6
40.1 to 50.0 18 36,156,925 2.81 7.960 119 2.11 45.1 34.8
50.1 to 60.0 30 70,451,852 5.48 7.815 133 1.65 55.7 39.3
60.1 to 70.0 90 295,489,213 22.99 7.725 123 1.53 66.4 52.7
70.1 to 80.0 185 781,882,989 60.84 7.641 121 1.35 75.3 62.9
80.1 to 90.0 19 82,209,496 6.40 7.682 128 1.30 83.7 61.8
90.1 to 100.0 2 4,025,332 0.31 7.286 150 1.10 93.6 56.9
100.1 and above 1 2,727,332 0.21 8.796 109 1.26 102.9 86.8
===============================================================================================================================
TOTAL OR WEIGHTED AVERAGE: 352 $1,285,217,765 100.00% 7.679% 122 1.43x 71.6% 58.1%
===============================================================================================================================
</TABLE>
Min: 31.7%
Max: 102.9%
Weighted Average: 71.6%
I-8
<PAGE> 114
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED
NUMBER AGGREGATE WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE CUT-OFF DATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
BALLOON LOAN-TO- MORTGAGE CUT-OFF DATE BALANCE MORTGAGE TERM TO AVERAGE DATE BALLOON
VALUE RATIO (%) LOANS BALANCE ($) (%) RATE (%) MATURITY (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.1 to 10.0 16 36,569,033 2.85 7.685 205 1.26 71.4 1.1
20.1 to 30.0 8 13,779,271 1.07 7.391 117 2.13 38.3 28.4
30.1 to 40.0 20 42,569,934 3.31 7.775 142 1.95 50.7 36.5
40.1 to 50.0 33 104,381,054 8.12 7.689 138 1.65 61.5 45.3
50.1 to 60.0 117 362,710,640 28.22 7.741 121 1.49 68.5 55.8
60.1 to 70.0 143 667,227,500 51.92 7.623 116 1.34 75.8 65.2
70.1 to 80.0 13 52,450,692 4.08 7.908 112 1.32 82.8 72.6
80.1 to 90.0 2 5,529,641 0.43 8.043 113 1.20 98.1 84.0
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 352 $1,285,217,765 100.00% 7.679% 122 1.43x 71.6% 58.1%
===================================================================================================================================
</TABLE>
Min: 0.5%
Max: 86.8%
Weighted average: 58.1%
I-9
<PAGE> 115
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOANS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED
NUMBER AGGREGATE WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE CUT-OFF DATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE BALANCE MORTGAGE TERM TO AVERAGE DATE BALLOON
BALLOON LOANS LOANS BALANCE ($) (%) RATE (%) MATURITY (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Yes 336 $1,248,648,732 97.15 7.679 120 1.44 71.6 59.8
No 16 36,569,033 2.85 7.685 205 1.26 71.4 1.1
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 352 $1,285,217,765 100.00% 7.679% 122 1.43x 71.6% 58.1%
===================================================================================================================================
</TABLE>
I-10
<PAGE> 116
APPENDIX I
MORTGAGE POOL INFORMATION
PREPAYMENT RESTRICTION ANALYSIS
<TABLE>
<CAPTION>
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION
ASSUMING NO PREPAYMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTION CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO. 96 MO.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 71.21% 71.15% 69.78% 64.91% 60.85% 14.11% 9.35% 7.77% 7.44%
Yield Maintenance 25.96% 25.97% 27.18% 31.91% 35.98% 81.31% 81.33% 82.23% 80.52%
Penalty Points
5.00% and greater 2.40% 0.53% 0.53% 0.15% 0.15% 1.53% 1.37% 0.00% 0.00%
4.00% to 4.99% 0.25% 2.35% 0.24% 0.77% 0.76% 0.23% 2.12% 1.59% 1.51%
3.00% to 3.99% 0.18% 0.00% 2.27% 1.75% 0.00% 0.72% 3.73% 2.59% 0.06%
2.00% to 2.99% 0.00% 0.00% 0.00% 0.51% 1.75% 1.75% 0.00% 3.74% 3.11%
1.00% to 1.99% 0.00% 0.00% 0.00% 0.00% 0.51% 0.34% 2.09% 0.34% 3.58%
Open 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.74% 3.78%
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Mortgage Pool Balance
Outstanding (in millions) $1,285.22 $1,269.81 $1,253.30 $1,235.25 $1,215.77 $1,192.68 $1,170.14 $1,144.84 $1,118.37
% of Initial Pool Balance 100.00% 98.80% 97.52% 96.11% 94.60% 92.80% 91.05% 89.08% 87.02%
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------
<S> <C> <C>
PREPAYMENT RESTRICTION 108 MO. 120 MO.
Locked Out 7.66% 10.85%
Yield Maintenance 73.85% 69.91%
Penalty Points
5.00% and greater 0.00% 0.00%
4.00% to 4.99% 0.15% 0.00%
3.00% to 3.99% 1.46% 15.07%
2.00% to 2.99% 0.30% 2.76%
1.00% to 1.99% 6.13% 0.00%
Open 10.45% 1.42%
- ---------------------------------------------------
TOTALS 100.00% 100.00%
Mortgage Pool Balance
Outstanding (in millions) $1,051.75 $108.16
% of Initial Pool Balance 81.83% 8.42%
</TABLE>
Notes: (1) Four of the Mortgage Loans (0.85% of the Cut-Off Date
Balance) allow 10% annual partial voluntary principal
prepayment without restrictions.
(2) For purposes of the table, Mortgage Loans are considered
to require (i) Yield Maintenance Premiums if Prepayment
Premiums are calculated on the basis of greater of a yield
maintenance formula or a percentage of the amount prepaid or
(ii) Percentage Premiums if Prepayment Premiums are calculated
on the basis of lesser of a yield maintenance formula or a
percentage of the amount prepaid.
I-11
<PAGE> 117
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 118
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE CUT-OFF
LOAN CUT-OFF DATE BAL./ MORTGAGE INTEREST ACCRUAL NOTE
NO. SELLER(1) PROPERTY NAME DATE BALANCE UNIT OR SF(4) RATE METHOD DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 HF Pacific Coast Plaza Shopping Center $32,909,270 $134 7.930% 30/360 10/22/97
2 HF Norwood Gardens $22,266,787 $67,069 6.790% Actual/360 01/08/98
3 HF Rookwood Pavilion $21,679,551 $88 8.240% 30/360 10/16/97
4 HF Skold Self Storage Portfolio (2A) (3A) $15,261,319 $43 6.930% Actual/360 01/27/98
5 HF Affordable Self Storage (2A) $969,131 $43 6.930% Actual/360 01/27/98
6 HF Skold Portfolio - Greenwood Self Storage (2A) $1,823,365 $43 6.930% Actual/360 01/27/98
7 HF Skold Portfolio - Evergreen Mini Storage (2A) $699,373 $43 6.930% Actual/360 01/27/98
8 HF 351 California Street (2B) $12,705,409 $101 8.100% 30/360 08/01/97
9 HF 201 Sansome Street (2B) $5,459,355 $101 8.100% 30/360 07/18/97
10 HF Boulder Marriott $17,931,352 $115,686 7.580% Actual/360 11/25/97
11 HF Beverly Garland Hotel $15,951,465 $62,555 6.860% Actual/360 01/16/98
12 HF Rancho Viejo Apts. $15,654,907 $50,176 6.980% Actual/360 12/04/97
13 HF Lincoln on Memorial Apartments $15,433,946 $42,872 7.290% Actual/360 09/25/97
14 HF Davis Square Center $15,267,975 $147 7.300% Actual/360 12/24/97
15 HF Fleming Portfolio (3B) $15,251,718 $60 7.720% 30/360 09/29/97
16 MS Marymount Manor (2C) $8,149,703 $66,414 7.210% Actual/360 12/04/97
17 MS Marymount Tower (2C) $5,929,979 $66,414 7.210% Actual/360 12/04/97
18 MS Park Place Shopping Center $13,542,572 $54 8.030% Actual/360 10/31/97
19 HF A&P Food Market $13,477,760 $193 6.990% Actual/360 01/12/98
20 HF The First National Bank Building $12,973,444 $43 8.130% 30/360 07/29/97
21 HF Boylston Apartments $12,971,450 $40,791 6.870% Actual/360 01/06/98
22 HF Greenbriar Apartments $12,554,680 $56,048 7.140% Actual/360 12/17/97
23 MS College Station Apartments(3C) $11,929,226 $21,533 7.890% Actual/360 09/30/97
24 HF Kmart Plaza $11,940,152 $63 7.800% 30/360 07/31/97
25 HF Rivershire Apartments $11,389,944 $50,848 7.020% Actual/360 01/28/98
26 HF Haggerty Tech Center $11,248,923 $75 8.290% 30/360 07/25/97
27 HF Village at Chestnut Hill $11,172,143 $191 7.040% Actual/360 01/09/98
28 HF Orland Park Exec. Ctr. (2D) $7,583,935 $106 7.210% Actual/360 12/30/97
29 HF GMAC Building (2D) $3,392,813 $106 7.210% Actual/360 12/30/97
30 HF Ridgecrest Terrace Apartments $10,776,200 $56,420 6.840% Actual/360 01/09/98
31 HF Fountain Square Shopping Center $10,649,746 $88 8.100% 30/360 08/06/97
32 HF 1550 Brickell (7) $10,590,044 $77,868 6.650% Actual/360 02/04/98
32a HF Lafayette Towers $10,490,985 $17,964 7.180% Actual/360 01/22/98
33 MS Lake Village Apartments $10,425,291 $50,855 7.220% Actual/360 11/12/97
34 HF All Aboard Mini Storage Portfolio - Oakland (2E) $4,687,037 $51 7.790% Actual/360 12/23/97
35 HF All Aboard Mini-Storage Portfolio - Ventura (2E) $2,592,829 $51 7.790% Actual/360 12/23/97
36 HF All Aboard Mini Storage Portfolio - Van Nuys (2E) $2,792,277 $51 7.790% Actual/360 12/23/97
37 HF Stor-Mor of Cypress (2F) $2,241,188 $46 7.370% Actual/360 12/10/97
38 HF Stor-Mor - Anaheim (2F) $2,390,601 $46 7.370% Actual/360 12/10/97
39 HF Stor-Mor - Torrance (2F) $5,329,048 $46 7.370% Actual/360 12/10/97
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECTIVE REMAINING AMORT.
LOAN MATURITY MATURITY TERM TERM TERM(6) BALANCE DUE BALLOON
NO. SELLER(1) PROPERTY NAME DATE DATE(5) (mos) (mos) (mos) AT MATURITY LTV(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 HF Pacific Coast Plaza Shopping Center 10/01/07 N/A 119 115 360 $29,005,275 65.8%
2 HF Norwood Gardens 01/01/08 N/A 120 118 360 $19,132,517 66.2%
3 HF Rookwood Pavilion 04/01/06 N/A 102 97 360 $19,734,100 65.8%
4 HF Skold Self Storage Portfolio (2A) (3A) 02/01/08 N/A 120 119 360 $13,154,984 57.8%
5 HF Affordable Self Storage (2A) 02/01/08 N/A 120 119 360 $835,374 57.8%
6 HF Skold Portfolio - Greenwood Self Storage (2A) 02/01/08 N/A 120 119 360 $1,571,709 57.8%
7 HF Skold Portfolio - Evergreen Mini Storage (2A) 02/01/08 N/A 120 119 360 $602,848 57.8%
8 HF 351 California Street (2B) 08/01/07 N/A 120 113 300 $10,393,371 52.9%
9 HF 201 Sansome Street (2B) 08/01/07 N/A 120 113 300 $4,465,902 52.9%
10 HF Boulder Marriott 12/01/22 12/01/12 180 177 300 $11,370,058 43.7%
11 HF Beverly Garland Hotel 01/01/18 01/01/08 120 118 300 $12,603,282 57.8%
12 HF Rancho Viejo Apts. 12/01/07 N/A 120 117 360 $13,525,338 64.4%
13 HF Lincoln on Memorial Apartments 10/01/07 N/A 120 115 360 $13,448,780 64.0%
14 HF Davis Square Center 01/01/18 01/01/08 120 118 360 $13,272,893 63.5%
15 HF Fleming Portfolio (3B) 10/01/17 10/01/07 120 115 300 $12,324,062 65.6%
16 MS Marymount Manor (2C) 01/01/08 N/A 120 118 360 $7,168,106 66.0%
17 MS Marymount Tower (2C) 01/01/08 N/A 120 118 360 $5,215,740 66.0%
18 MS Park Place Shopping Center 11/01/07 N/A 120 116 300 $11,242,930 66.1%
19 HF A&P Food Market 01/31/21 01/31/13 181 179 360 $10,327,009 55.5%
20 HF The First National Bank Building 08/01/07 N/A 120 113 324 $11,019,151 60.7%
21 HF Boylston Apartments 01/01/08 N/A 120 118 360 $11,166,604 60.7%
22 HF Greenbriar Apartments 12/01/07 N/A 120 117 360 $10,886,365 65.4%
23 MS College Station Apartments(3C) 10/01/07 N/A 120 115 300 $9,877,963 63.7%
24 HF Kmart Plaza 08/01/07 N/A 120 113 360 $10,501,219 56.8%
25 HF Rivershire Apartments 02/01/08 N/A 120 119 360 $9,838,670 68.1%
26 HF Haggerty Tech Center 08/01/07 N/A 120 113 360 $9,987,345 68.4%
27 HF Village at Chestnut Hill 01/01/08 N/A 120 118 360 $9,655,594 67.1%
28 HF Orland Park Exec. Ctr. (2D) 01/01/08 N/A 120 118 360 $6,579,743 68.0%
29 HF GMAC Building (2D) 01/01/08 N/A 120 118 360 $2,943,570 68.0%
30 HF Ridgecrest Terrace Apartments 01/01/08 N/A 120 118 360 $9,270,272 68.7%
31 HF Fountain Square Shopping Center 08/01/07 N/A 120 113 360 $9,421,435 67.0%
32 HF 1550 Brickell (7) 02/01/08 N/A 120 119 360 $9,067,244 69.1%
32a HF Lafayette Towers 02/01/08 N/A 120 119 360 $9,095,658 69.2%
33 MS Lake Village Apartments 12/01/07 N/A 120 117 360 $9,180,609 65.6%
34 HF All Aboard Mini Storage Portfolio - Oakland (2E) 01/01/08 N/A 120 118 300 $3,796,222 60.5%
35 HF All Aboard Mini-Storage Portfolio - Ventura (2E) 12/01/07 N/A 119 117 300 $2,106,257 60.5%
36 HF All Aboard Mini Storage Portfolio - Van Nuys (2E) 12/01/07 N/A 119 117 300 $2,268,276 60.5%
37 HF Stor-Mor of Cypress (2F) 12/01/07 N/A 120 117 300 $1,798,105 54.2%
38 HF Stor-Mor - Anaheim (2F) 12/01/07 N/A 120 117 300 $1,917,979 54.2%
39 HF Stor-Mor - Torrance (2F) 12/01/07 N/A 120 117 300 $4,275,493 54.2%
<CAPTION>
- ---------------------------------------------------------------------------------
LOAN SECURITY
NO. SELLER(1) PROPERTY NAME TYPE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
1 HF Pacific Coast Plaza Shopping Center Fee
2 HF Norwood Gardens Fee
3 HF Rookwood Pavilion Fee
4 HF Skold Self Storage Portfolio (2A) (3A) Fee
5 HF Affordable Self Storage (2A) Fee
6 HF Skold Portfolio - Greenwood Self Storage (2A) Fee
7 HF Skold Portfolio - Evergreen Mini Storage (2A) Fee
8 HF 351 California Street (2B) Fee
9 HF 201 Sansome Street (2B) Fee
10 HF Boulder Marriott Fee
11 HF Beverly Garland Hotel Fee/Leasehold
12 HF Rancho Viejo Apts. Fee
13 HF Lincoln on Memorial Apartments Fee
14 HF Davis Square Center Fee
15 HF Fleming Portfolio (3B) Fee
16 MS Marymount Manor (2C) Fee
17 MS Marymount Tower (2C) Fee
18 MS Park Place Shopping Center Fee
19 HF A&P Food Market Fee
20 HF The First National Bank Building Fee
21 HF Boylston Apartments Fee
22 HF Greenbriar Apartments Fee
23 MS College Station Apartments(3C) Fee
24 HF Kmart Plaza Fee/Leasehold
25 HF Rivershire Apartments Fee
26 HF Haggerty Tech Center Fee
27 HF Village at Chestnut Hill Fee
28 HF Orland Park Exec. Ctr. (2D) Fee
29 HF GMAC Building (2D) Fee
30 HF Ridgecrest Terrace Apartments Fee
31 HF Fountain Square Shopping Center Fee
32 HF 1550 Brickell (7) Fee
32a HF Lafayette Towers Fee
33 MS Lake Village Apartments Fee
34 HF All Aboard Mini Storage Portfolio - Oakland (2E) Fee
35 HF All Aboard Mini-Storage Portfolio - Ventura (2E) Fee
36 HF All Aboard Mini Storage Portfolio - Van Nuys (2E) Fee
37 HF Stor-Mor of Cypress (2F) Fee
38 HF Stor-Mor - Anaheim (2F) Fee
39 HF Stor-Mor - Torrance (2F) Fee
</TABLE>
II-1
<PAGE> 119
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE CUT-OFF
LOAN CUT-OFF DATE BAL./ MORTGAGE INTEREST ACCRUAL NOTE
NO. SELLER(1) PROPERTY NAME DATE BALANCE UNIT OR SF(4) RATE METHOD DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
40 HF Cypress Lake Apartments $9,958,020 $46,102 7.380% Actual/360 10/08/97
41 HF Boardwalk Square $9,948,162 $68 8.290% 30/360 05/01/97
42 HF Whispering Lakes Apts. $9,778,329 $53,143 6.810% Actual/360 01/15/98
43 HF Eagle Ridge Retail Shopping Center $9,318,334 $82 7.310% Actual/360 10/31/97
44 MS Holiday Inn and Ramada Inn (3D) $8,660,556 $28,489 8.660% Actual/360 09/29/97
46 HF The Willows at Appleton Square (8) $8,379,266 $59,852 7.460% Actual/360 08/20/97
47 HF Ashley Park Apartments $8,174,151 $28,782 7.740% Actual/360 10/21/97
49 HF Brumby Apartments $8,066,637 $48,303 7.758% 30/360 08/28/97
50 HF Sun Vista RV Resort $7,733,725 $6,288 7.270% Actual/360 12/22/97
51 MS Sunset Mall $7,622,101 $67 7.650% 30/360 09/30/97
52 MS Ramada Hotel Valley Ho Resort $7,574,869 $25,941 7.740% Actual/360 11/19/97
53 MS Wynhaven Apartments $7,483,529 $25,282 7.590% Actual/360 11/10/97
54 HF Claridge Court Apartments $7,276,152 $22,457 8.760% 30/360 10/18/96
55 MS Lake Forest Office (3E) $7,237,842 $58 7.570% Actual/360 12/18/97
56 HF Acorn Self Storage (2G) $3,496,995 $46 7.180% Actual/360 01/27/98
57 HF ACORN III SELF STORAGE (2G) $3,696,796 $46 7.130% Actual/360 01/27/98
58 MS Central Plaza $7,084,187 $41 7.520% Actual/360 11/21/97
59 HF Bend Villa Court $6,979,799 $56,746 7.340% Actual/360 01/09/98
60 HF Danbury Retail Center $6,909,966 $113 7.650% Actual/360 12/05/97
61 MS Rose Apartments $6,858,192 $142,879 7.210% Actual/360 10/15/97
62 HF Rose Medical Plaza $6,673,120 $82 7.180% Actual/360 12/04/97
63 MS Phoenix Inn - Phoenix $6,476,090 $53,967 7.870% Actual/360 12/29/97
64 HF Mesa Verde $6,494,324 $23,530 7.080% Actual/360 01/28/98
65 HF Cedar Ridge Apts. $6,481,468 $36,008 7.030% Actual/360 11/26/97
110 HF Mira Mesa Self Storage (2H) $4,118,641 $36 8.810% 30/360 06/27/97
197 HF Sorrento Mesa SSF (2H) $2,331,685 $36 8.420% 30/360 06/30/97
66 HF Cardinal Crest MHC (2I) $1,238,857 $15,202 7.410% Actual/360 11/05/97
67 HF Harbor Lights Mobile Home Community (2I) $1,492,599 $15,202 7.410% Actual/360 11/05/97
68 HF Meadowview Place MHC (2I) $1,537,376 $15,202 7.410% Actual/360 11/05/97
69 HF Skyview Terrace Mobile Home Park (2I) $2,039,885 $15,202 7.410% Actual/360 11/05/97
71 MS Meadow Park Plaza $5,977,343 $107 8.100% Actual/360 08/14/97
72 MS Lincoln Bank Building $5,914,442 $104 7.190% Actual/360 12/19/97
73 HF Walnut Ridge Apts $5,905,915 $22,371 7.610% Actual/360 10/22/97
74 HF Allsize Commercial Storage $5,762,046 $57 8.090% Actual/360 09/09/97
76 HF Elmwood Distribution Center $5,606,613 $16 7.860% 30/360 08/06/97
77 HF Rt. 18 Mobile Home Comm. Portfolio (9) $5,600,000 $13,592 7.170% Actual/360 01/26/98
78 HF Berrytree Apartments $5,492,879 $22,887 7.010% Actual/360 01/20/98
79 HF Silver Drive Office/Warehouse Buildings $5,485,121 $40 7.390% Actual/360 12/08/97
80 HF Fairfield Place Apartments $5,388,509 $49,894 7.150% Actual/360 12/29/97
81 MS Holly Ravine Shopping Center $5,281,890 $136 7.660% Actual/360 09/22/97
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECTIVE REMAINING AMORT.
LOAN MATURITY MATURITY TERM TERM TERM(6) BALANCE DUE BALLOON
NO. SELLER(1) PROPERTY NAME DATE DATE(5) (mos) (mos) (mos) AT MATURITY LTV(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 HF Cypress Lake Apartments 10/01/07 N/A 120 115 360 $8,694,082 69.6%
41 HF Boardwalk Square 07/01/07 N/A 120 112 360 $8,838,359 64.5%
42 HF Whispering Lakes Apts. 02/01/08 N/A 121 119 360 $8,390,626 73.0%
43 HF Eagle Ridge Retail Shopping Center 11/01/17 11/01/07 120 116 360 $8,117,268 69.7%
44 MS Holiday Inn and Ramada Inn (3D) 10/01/07 N/A 120 115 300 $7,322,030 63.1%
46 HF The Willows at Appleton Square (8) 09/01/07 N/A 120 114 360 $7,356,581 66.0%
47 HF Ashley Park Apartments 11/01/07 N/A 120 116 360 $7,185,916 70.1%
49 HF Brumby Apartments 09/01/07 N/A 120 114 360 $7,104,250 66.1%
50 HF Sun Vista RV Resort 01/01/08 N/A 120 118 360 $6,718,682 61.9%
51 MS Sunset Mall 10/01/12 N/A 180 175 360 $5,818,844 53.9%
52 MS Ramada Hotel Valley Ho Resort 12/01/07 N/A 120 117 300 $6,233,094 52.8%
53 MS Wynhaven Apartments 12/01/07 N/A 120 117 360 $6,650,437 70.7%
54 HF Claridge Court Apartments 09/30/06 N/A 120 103 300 $6,104,958 51.3%
55 MS Lake Forest Office (3E) 01/01/08 N/A 120 118 360 $6,423,159 58.4%
56 HF Acorn Self Storage (2G) 02/01/08 N/A 120 119 360 $3,031,886 60.5%
57 HF ACORN III SELF STORAGE (2G) 02/01/08 N/A 120 119 360 $3,201,445 60.5%
58 MS Central Plaza 12/01/07 N/A 120 117 360 $6,284,869 67.6%
59 HF Bend Villa Court 01/01/08 N/A 120 118 300 $5,587,401 58.8%
60 HF Danbury Retail Center 12/01/17 N/A 240 237 240 $60,902 0.8%
61 MS Rose Apartments 11/01/07 N/A 120 116 360 $6,040,810 65.3%
62 HF Rose Medical Plaza 12/01/07 N/A 120 117 300 $5,326,790 53.3%
63 MS Phoenix Inn - Phoenix 01/01/08 N/A 120 118 240 $4,584,091 45.8%
64 HF Mesa Verde 02/01/08 N/A 120 119 360 $5,617,639 54.0%
65 HF Cedar Ridge Apts. 12/01/17 N/A 240 237 360 $3,778,864 45.5%
110 HF Mira Mesa Self Storage (2H) 07/01/07 N/A 120 112 300 $3,427,715 57.6%
197 HF Sorrento Mesa SSF (2H) 07/01/07 N/A 120 112 300 $1,923,681 57.6%
66 HF Cardinal Crest MHC (2I) 11/01/07 N/A 120 116 300 $996,209 65.9%
67 HF Harbor Lights Mobile Home Community (2I) 11/01/07 N/A 120 116 300 $1,200,251 65.9%
68 HF Meadowview Place MHC (2I) 11/01/07 N/A 120 116 300 $1,236,258 65.9%
69 HF Skyview Terrace Mobile Home Park (2I) 11/01/07 N/A 120 116 300 $1,640,342 65.9%
71 MS Meadow Park Plaza 09/01/12 N/A 180 174 360 $4,825,577 61.9%
72 MS Lincoln Bank Building 01/01/08 N/A 120 118 360 $5,199,442 59.4%
73 HF Walnut Ridge Apts 11/01/07 N/A 120 116 360 $5,177,870 65.5%
74 HF Allsize Commercial Storage 09/01/07 N/A 120 114 300 $4,723,841 66.5%
76 HF Elmwood Distribution Center 08/01/07 N/A 120 113 300 $4,560,018 60.0%
77 HF Rt. 18 Mobile Home Comm. Portfolio (9) 02/01/08 N/A 120 119 360 $4,993,886 78.0%
78 HF Berrytree Apartments 02/01/08 N/A 120 119 300 $4,356,330 53.8%
79 HF Silver Drive Office/Warehouse Buildings 12/01/07 N/A 120 117 360 $4,782,616 68.3%
80 HF Fairfield Place Apartments 01/01/08 N/A 120 118 360 $4,668,713 69.2%
81 MS Holly Ravine Shopping Center 10/01/07 N/A 120 115 360 $4,707,911 65.8%
<CAPTION>
- -------------------------------------------------------------------------------
LOAN SECURITY
NO. SELLER(1) PROPERTY NAME TYPE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
40 HF Cypress Lake Apartments Fee
41 HF Boardwalk Square Fee
42 HF Whispering Lakes Apts. Fee
43 HF Eagle Ridge Retail Shopping Center Fee
44 MS Holiday Inn and Ramada Inn (3D) Fee
46 HF The Willows at Appleton Square (8) Fee
47 HF Ashley Park Apartments Fee
49 HF Brumby Apartments Fee
50 HF Sun Vista RV Resort Fee
51 MS Sunset Mall Fee
52 MS Ramada Hotel Valley Ho Resort Fee
53 MS Wynhaven Apartments Fee
54 HF Claridge Court Apartments Fee
55 MS Lake Forest Office (3E) Fee
56 HF Acorn Self Storage (2G) Fee
57 HF ACORN III SELF STORAGE (2G) Fee
58 MS Central Plaza Fee
59 HF Bend Villa Court Fee
60 HF Danbury Retail Center Leasehold
61 MS Rose Apartments Fee
62 HF Rose Medical Plaza Fee
63 MS Phoenix Inn - Phoenix Fee
64 HF Mesa Verde Fee
65 HF Cedar Ridge Apts. Fee
110 HF Mira Mesa Self Storage (2H) Fee
197 HF Sorrento Mesa SSF (2H) Fee
66 HF Cardinal Crest MHC (2I) Fee
67 HF Harbor Lights Mobile Home Community (2I) Fee
68 HF Meadowview Place MHC (2I) Fee
69 HF Skyview Terrace Mobile Home Park (2I) Fee
71 MS Meadow Park Plaza Fee
72 MS Lincoln Bank Building Fee
73 HF Walnut Ridge Apts Fee
74 HF Allsize Commercial Storage Fee
76 HF Elmwood Distribution Center Fee
77 HF Rt. 18 Mobile Home Comm. Portfolio (9) Fee
78 HF Berrytree Apartments Fee
79 HF Silver Drive Office/Warehouse Buildings Fee
80 HF Fairfield Place Apartments Fee
81 MS Holly Ravine Shopping Center Fee
</TABLE>
II-2
<PAGE> 120
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE CUT-OFF
LOAN CUT-OFF DATE BAL./ MORTGAGE INTEREST ACCRUAL NOTE
NO. SELLER(1) PROPERTY NAME DATE BALANCE UNIT OR SF(4) RATE METHOD DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
82 HF Reeseville Acres (2J) $646,793 $14,464 7.410% Actual/360 11/25/97
83 HF Spring Brook Village MHP (2J) $1,144,326 $14,464 7.410% Actual/360 11/25/97
84 HF Bridgeview Gardens MHC (2J) $3,488,343 $14,464 7.410% Actual/360 11/25/97
85 HF Palm Springs Plaza $5,220,372 $42 8.470% 30/360 05/28/97
86 HF Plaza on the Boulevard $5,100,845 $52 8.445% 30/360 09/04/97
87 HF Burtons Landing $5,035,665 $25,178 7.170% Actual/360 02/06/98
88 MS Comfort Inn - Madison $4,950,676 $32,570 7.360% Actual/360 12/04/97
89 HF 605 Market Street $4,985,467 $96 7.270% Actual/360 01/14/98
90 HF Harford Mobile Village $4,983,705 $12,714 7.540% Actual/360 10/24/97
91 HF 511 East 80th Street $4,925,169 $39,089 7.430% 30/360 09/04/97
93 HF Lakeside Park Mobile Home Park $4,734,520 $13,007 7.540% Actual/360 10/24/97
94 MS Hampton Inn - Elgin $4,681,706 $42,951 7.350% Actual/360 12/29/97
95 HF AAA Chatsworth Self Storage $4,885,743 $50 7.260% Actual/360 01/15/98
96 HF Triton Valley Estates Portfolio (2K) (3F) $2,591,165 $13,641 7.290% Actual/360 11/05/97
97 HF Triton Valley Estates - Derby (2K) $2,033,068 $13,641 7.290% Actual/360 11/05/97
98 HF Stoneridge Apts. $4,556,849 $17,003 7.720% Actual/360 10/14/97
99 HF 29 Dunham Road (2L) $2,826,307 $32 8.970% 30/360 06/03/97
100 HF 35 Dunham Road (2L) $1,586,699 $32 8.970% 30/360 06/03/97
101 HF Pacific View Apartments $4,381,773 $71,832 7.460% Actual/360 10/07/97
102 HF Sonoma Pointe Apartments $4,338,233 $61,975 7.180% Actual/360 12/02/97
103 HF A-1 Self Storage - Anaheim $4,287,578 $46 7.330% Actual/360 12/20/97
104 HF Holiday Ranch & Happy Landings MHC $4,282,072 $16,098 8.650% 30/360 11/01/96
105 MS Pompano Palms Apartments $4,218,764 $15,742 8.970% Actual/360 05/21/97
106 HF Brewery Apartments $4,244,621 $55,125 7.170% Actual/360 01/26/98
107 HF Arbor Woods Mobile Home Community $4,234,562 $17,355 7.670% 30/360 09/22/97
108 HF Gardens at Negley $4,227,152 $28,370 6.870% Actual/360 12/22/97
109 HF Coral Ridge Office Center (10) $4,139,598 $125 8.870% 30/360 07/10/97
111 HF South Street Office Center $4,618,719 $48 8.570% 30/360 06/24/97
112 HF Lake of the Pines (11) $4,062,204 $15,101 7.840% Actual/360 12/16/97
113 HF Alameda Crossing $4,077,049 $49 8.510% 30/360 05/27/97
114 MS 16 Bleeker Street $3,990,641 $22 7.970% Actual/360 12/11/97
115 HF Knox Village $3,987,737 $12,580 6.760% Actual/360 12/30/97
117 HF Monmouth MHP $3,984,764 $14,231 7.590% Actual/360 11/21/97
118 HF American Mini Storage $3,981,963 $35 8.050% Actual/360 11/13/97
119 HF Edison Lock-Up Self Storage $3,973,649 $48 8.810% 30/360 07/29/97
120 HF Saf Keep SSF - San Leandro $3,975,549 $38 9.100% 30/360 04/10/97
121 HF The Oaks Office Building $3,974,688 $56 8.320% 30/360 09/12/97
122 HF Vista Manor Mobile Home Park $3,955,372 $24,877 7.850% 30/360 08/04/97
123 HF Nova Self-Storage $3,882,064 $35 7.910% Actual/360 11/03/97
124 HF Lantern Estates $3,884,705 $17,658 7.790% Actual/360 10/08/97
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECTIVE REMAINING AMORT.
LOAN MATURITY MATURITY TERM TERM TERM(6) BALANCE DUE BALLOON
NO. SELLER(1) PROPERTY NAME DATE DATE(5) (mos) (mos) (mos) AT MATURITY LTV(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
82 HF Reeseville Acres (2J) 11/01/07 N/A 120 116 300 $520,108 64.5%
83 HF Spring Brook Village MHP (2J) 11/01/07 N/A 120 116 300 $920,192 64.5%
84 HF Bridgeview Gardens MHC (2J) 11/01/07 N/A 120 116 360 $3,045,328 64.5%
85 HF Palm Springs Plaza 06/01/27 06/01/07 120 111 360 $4,656,335 60.1%
86 HF Plaza on the Boulevard 09/01/10 N/A 156 150 360 $4,243,950 60.6%
87 HF Burtons Landing 02/01/08 N/A 120 119 360 $4,364,912 69.3%
88 MS Comfort Inn - Madison 01/01/08 N/A 120 118 240 $3,443,406 48.5%
89 HF 605 Market Street 01/01/08 N/A 120 118 300 $3,983,461 58.8%
90 HF Harford Mobile Village 11/01/07 N/A 120 116 360 $4,362,894 39.0%
91 HF 511 East 80th Street 09/01/07 N/A 120 114 348 $4,236,243 46.0%
93 HF Lakeside Park Mobile Home Park 11/01/07 N/A 120 116 360 $4,144,750 59.2%
94 MS Hampton Inn - Elgin 01/01/08 N/A 120 118 240 $3,255,191 48.4%
95 HF AAA Chatsworth Self Storage 01/01/13 N/A 180 178 300 $3,049,608 39.6%
96 HF Triton Valley Estates Portfolio (2K) (3F) 11/01/07 N/A 120 116 360 $2,256,194 62.0%
97 HF Triton Valley Estates - Derby (2K) 11/01/07 N/A 120 116 360 $1,770,245 62.0%
98 HF Stoneridge Apts. 10/01/07 N/A 120 115 360 $4,006,980 69.7%
99 HF 29 Dunham Road (2L) 06/01/07 N/A 120 111 300 $2,362,641 55.5%
100 HF 35 Dunham Road (2L) 06/01/07 N/A 120 111 300 $1,326,394 55.5%
101 HF Pacific View Apartments 10/01/07 N/A 120 115 360 $3,832,156 63.9%
102 HF Sonoma Pointe Apartments 12/01/07 N/A 120 117 360 $3,765,550 57.9%
103 HF A-1 Self Storage - Anaheim 01/01/08 N/A 120 118 300 $3,431,336 54.9%
104 HF Holiday Ranch & Happy Landings MHC 10/31/06 N/A 120 104 300 $3,580,792 64.4%
105 MS Pompano Palms Apartments 06/01/07 N/A 120 111 240 $3,129,209 54.9%
106 HF Brewery Apartments 02/01/08 N/A 120 119 300 $3,381,302 54.5%
107 HF Arbor Woods Mobile Home Community 10/01/08 N/A 132 127 360 $3,628,097 66.0%
108 HF Gardens at Negley 01/01/08 N/A 120 118 300 $3,340,813 63.0%
109 HF Coral Ridge Office Center (10) 07/01/07 N/A 120 112 360 $2,804,395 53.3%
111 HF South Street Office Center 07/01/07 N/A 120 112 300 $3,848,891 58.3%
112 HF Lake of the Pines (11) 12/01/12 N/A 180 177 180 $39,963 0.6%
113 HF Alameda Crossing 06/01/07 N/A 120 111 360 $3,639,151 58.7%
114 MS 16 Bleeker Street 01/01/08 N/A 120 118 300 $3,300,944 42.3%
115 HF Knox Village 01/01/08 N/A 120 118 300 $3,141,892 29.0%
117 HF Monmouth MHP 12/01/07 N/A 120 117 300 $3,215,403 34.6%
118 HF American Mini Storage 11/01/07 N/A 120 116 300 $3,254,375 61.4%
119 HF Edison Lock-Up Self Storage 08/01/07 N/A 120 113 300 $3,303,821 60.1%
120 HF Saf Keep SSF - San Leandro 04/01/07 N/A 120 109 360 $3,588,828 44.3%
121 HF The Oaks Office Building 09/01/07 N/A 120 114 360 $3,528,576 66.6%
122 HF Vista Manor Mobile Home Park 08/01/07 N/A 120 113 360 $3,482,162 69.0%
123 HF Nova Self-Storage 11/01/07 N/A 120 116 300 $3,161,777 63.9%
124 HF Lantern Estates 10/01/07 N/A 120 115 360 $3,420,831 68.4%
<CAPTION>
- -------------------------------------------------------------------------------
LOAN SECURITY
NO. SELLER(1) PROPERTY NAME TYPE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
82 HF Reeseville Acres (2J) Fee
83 HF Spring Brook Village MHP (2J) Fee
84 HF Bridgeview Gardens MHC (2J) Fee
85 HF Palm Springs Plaza Fee
86 HF Plaza on the Boulevard Leasehold
87 HF Burtons Landing Fee
88 MS Comfort Inn - Madison Fee
89 HF 605 Market Street Fee
90 HF Harford Mobile Village Fee
91 HF 511 East 80th Street Fee
93 HF Lakeside Park Mobile Home Park Fee
94 MS Hampton Inn - Elgin Fee
95 HF AAA Chatsworth Self Storage Fee
96 HF Triton Valley Estates Portfolio (2K) (3F) Fee
97 HF Triton Valley Estates - Derby (2K) Fee
98 HF Stoneridge Apts. Fee
99 HF 29 Dunham Road (2L) Fee
100 HF 35 Dunham Road (2L) Fee
101 HF Pacific View Apartments Fee
102 HF Sonoma Pointe Apartments Fee
103 HF A-1 Self Storage - Anaheim Fee
104 HF Holiday Ranch & Happy Landings MHC Fee
105 MS Pompano Palms Apartments Fee
106 HF Brewery Apartments Fee
107 HF Arbor Woods Mobile Home Community Fee
108 HF Gardens at Negley Fee
109 HF Coral Ridge Office Center (10) Fee
111 HF South Street Office Center Fee
112 HF Lake of the Pines (11) Fee
113 HF Alameda Crossing Fee
114 MS 16 Bleeker Street Fee
115 HF Knox Village Fee
117 HF Monmouth MHP Fee
118 HF American Mini Storage Fee
119 HF Edison Lock-Up Self Storage Fee
120 HF Saf Keep SSF - San Leandro Fee
121 HF The Oaks Office Building Fee
122 HF Vista Manor Mobile Home Park Fee
123 HF Nova Self-Storage Fee
124 HF Lantern Estates Fee
</TABLE>
II-3
<PAGE> 121
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE CUT-OFF
LOAN CUT-OFF DATE BAL./ MORTGAGE INTEREST ACCRUAL NOTE
NO. SELLER(1) PROPERTY NAME DATE BALANCE UNIT OR SF(4) RATE METHOD DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
125 MS Harvard Medical Park $3,877,033 $101 7.690% Actual/360 11/10/97
126 HF A American Self Storage $3,865,285 $43 9.220% 30/360 05/13/97
127 MS Commerce Crossing $3,856,891 $65 8.625% 30/360 10/16/97
128 HF Woodshire Mobile Home Park $3,789,823 $14,520 7.460% Actual/360 12/02/97
129 HF Leender's Portfolio (3G) $3,785,023 $30,040 7.760% Actual/360 09/29/97
130 HF Copps Food Market $3,734,039 $45 7.260% Actual/360 12/17/97
131 HF Harbour East MHC $3,681,035 $13,053 8.240% 30/360 09/25/97
132 HF LAGO VISTA MHP $3,683,038 $12,277 8.220% 30/360 08/04/97
133 HF Stor N' Lok (2M) $1,794,863 $28 7.450% Actual/360 01/15/98
134 HF A-American Pico (2M) $1,874,313 $28 8.810% 30/360 12/20/96
135 HF Storage Depot-North SSF (2N) $2,454,087 $28 8.870% 30/360 06/13/97
136 HF Storage Depot-West SSF (2N) $1,143,239 $28 8.540% 30/360 08/26/97
137 HF San Luis Obisbo Self Storage $3,546,070 $35 9.750% 30/360 05/31/96
138 HF West L.A. Self Storage $3,521,192 $51 8.370% 30/360 06/30/97
139 HF Willow Creek Apts. $3,508,854 $35,089 6.930% Actual/360 01/27/98
140 HF Redhill MHP $3,487,064 $8,147 7.830% Actual/360 12/03/97
141 MS Phoenix Inn - Troutdale $3,387,493 $46,404 7.870% Actual/360 12/29/97
142 HF North Valley Self Storage Facility $3,384,364 $48 7.910% Actual/360 11/03/97
143 MS Stone Creek Plaza $3,282,803 $74 7.860% Actual/360 11/21/97
144 HF Everett Portfolio (3H) $3,281,488 $34 8.110% Actual/360 09/26/97
145 HF Sheffield Lofts $3,274,129 $69,662 7.730% 30/360 08/21/97
146 HF Paramount Self Storage $3,271,102 $45 8.650% 30/360 06/18/97
147 MS Allstate Insurance Building $3,183,681 $81 8.100% Actual/360 11/21/97
148 HF Mira Mesa Retirement Community $3,140,810 $56 6.970% Actual/360 12/22/97
149 HF City Gables Apts. $3,140,948 $37,392 7.710% 30/360 11/07/97
150 HF Windsorland MHC $3,105,990 $14,118 8.580% Actual/360 09/10/97
151 HF Budget Mini Storage - Phoenix (2O) $1,894,691 $13 7.660% Actual/360 01/05/98
152 HF ABQ Mini Storage (2O) $1,196,647 $13 7.660% Actual/360 01/05/98
153 HF Safeway Self Storage Facility $3,082,586 $42 8.100% Actual/360 10/16/97
154 HF Southgate Square Apartments $2,998,139 $17,846 7.170% Actual/360 12/31/97
155 HF Palm Shadows Apartments $2,996,469 $19,844 7.300% 30/360 01/23/98
156 HF Park Drive Apts. $2,993,412 $37,418 6.870% Actual/360 01/06/98
157 HF Continental Luxury Apartments $2,988,288 $45,277 7.395% Actual/360 12/03/97
158 HF Dohr Apartments $2,990,480 $26,701 7.700% Actual/360 10/31/97
159 HF Belmont Self Storage $2,986,223 $49 7.920% Actual/360 10/31/97
160 MS Westview Plaza Shopping Center $2,980,662 $32 7.970% 30/360 08/19/97
161 HF Hamilton House $2,973,836 $30,039 7.920% 30/360 07/11/97
162 HF Linkletter Self Storage Facility (2P) $1,894,686 $35 7.650% Actual/360 12/31/97
163 HF Lyndie Office Building (2P) $1,018,015 $35 8.000% Actual/360 12/31/97
164 HF Juanita Bay Office Building $2,885,851 $80 7.490% Actual/360 11/17/97
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECTIVE REMAINING AMORT.
LOAN MATURITY MATURITY TERM TERM TERM(6) BALANCE DUE BALLOON
NO. SELLER(1) PROPERTY NAME DATE DATE(5) (mos) (mos) (mos) AT MATURITY LTV(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
125 MS Harvard Medical Park 12/01/07 N/A 120 117 300 $3,185,718 45.8%
126 HF A American Self Storage 06/01/07 N/A 121 111 300 $3,242,977 69.7%
127 MS Commerce Crossing 11/01/12 N/A 180 176 276 $2,252,544 38.2%
128 HF Woodshire Mobile Home Park 12/01/07 N/A 120 117 360 $3,309,455 66.2%
129 HF Leender's Portfolio (3G) 10/01/07 N/A 120 115 360 $3,331,015 63.4%
130 HF Copps Food Market 12/01/17 12/01/07 119 117 240 $2,547,334 50.9%
131 HF Harbour East MHC 10/01/07 N/A 120 115 300 $3,014,755 52.0%
132 HF LAGO VISTA MHP 08/01/07 N/A 120 113 360 $3,265,688 52.8%
133 HF Stor N' Lok (2M) 01/01/08 N/A 120 118 300 $1,440,997 53.0%
134 HF A-American Pico (2M) 12/31/06 N/A 120 106 300 $1,569,322 53.0%
135 HF Storage Depot-North SSF (2N) 06/01/07 N/A 120 111 300 $2,047,074 60.1%
136 HF Storage Depot-West SSF (2N) 09/01/07 N/A 120 114 300 $943,843 60.1%
137 HF San Luis Obisbo Self Storage 05/31/06 N/A 120 99 300 $3,044,850 75.6%
138 HF West L.A. Self Storage 07/01/07 N/A 120 112 300 $2,901,726 54.7%
139 HF Willow Creek Apts. 02/01/08 N/A 120 119 360 $3,024,570 63.9%
140 HF Redhill MHP 12/01/07 N/A 120 117 300 $2,831,088 61.6%
141 MS Phoenix Inn - Troutdale 01/01/08 N/A 120 118 240 $2,397,832 46.8%
142 HF North Valley Self Storage Facility 11/01/07 N/A 120 116 300 $2,756,421 64.9%
143 MS Stone Creek Plaza 12/01/17 N/A 240 237 240 $163,105 3.6%
144 HF Everett Portfolio (3H) 10/01/07 N/A 120 115 300 $2,688,449 54.9%
145 HF Sheffield Lofts 08/01/07 N/A 120 113 300 $2,654,495 59.5%
146 HF Paramount Self Storage 06/01/07 N/A 120 111 300 $2,715,484 61.7%
147 MS Allstate Insurance Building 12/01/07 N/A 120 117 360 $2,863,424 69.8%
148 HF Mira Mesa Retirement Community 01/01/08 N/A 120 118 300 $2,489,457 56.6%
149 HF City Gables Apts. 11/01/12 N/A 180 176 360 $2,401,122 57.2%
150 HF Windsorland MHC 09/01/07 N/A 120 114 300 $2,575,850 56.0%
151 HF Budget Mini Storage - Phoenix (2O) 01/01/13 N/A 180 178 300 $1,203,535 34.5%
152 HF ABQ Mini Storage (2O) 01/01/13 N/A 180 178 300 $760,127 34.5%
153 HF Safeway Self Storage Facility 10/01/07 N/A 120 115 300 $2,524,883 45.9%
154 HF Southgate Square Apartments 01/01/08 N/A 120 118 360 $2,598,820 49.6%
155 HF Palm Shadows Apartments 02/01/08 N/A 120 119 300 $2,385,920 60.4%
156 HF Park Drive Apts. 01/01/08 N/A 120 118 360 $2,576,909 58.6%
157 HF Continental Luxury Apartments 12/01/12 N/A 180 177 300 $1,879,605 50.1%
158 HF Dohr Apartments 11/01/07 N/A 120 116 360 $2,626,763 67.4%
159 HF Belmont Self Storage 11/01/12 N/A 180 176 300 $1,924,009 32.3%
160 MS Westview Plaza Shopping Center 09/01/07 N/A 120 114 300 $2,428,018 40.8%
161 HF Hamilton House 07/01/07 N/A 120 112 300 $2,424,949 53.9%
162 HF Linkletter Self Storage Facility (2P) 01/01/09 N/A 132 130 300 $1,473,765 59.2%
163 HF Lyndie Office Building (2P) 01/01/08 N/A 120 118 360 $898,158 59.2%
164 HF Juanita Bay Office Building 11/01/07 N/A 120 116 300 $2,325,454 52.9%
<CAPTION>
- -------------------------------------------------------------------------------
LOAN SECURITY
NO. SELLER(1) PROPERTY NAME TYPE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
125 MS Harvard Medical Park Fee
126 HF A American Self Storage Fee
127 MS Commerce Crossing Fee
128 HF Woodshire Mobile Home Park Fee
129 HF Leender's Portfolio (3G) Fee
130 HF Copps Food Market Fee
131 HF Harbour East MHC Fee
132 HF LAGO VISTA MHP Fee
133 HF Stor N' Lok (2M) Fee
134 HF A-American Pico (2M) Fee
135 HF Storage Depot-North SSF (2N) Leasehold
136 HF Storage Depot-West SSF (2N) Leasehold
137 HF San Luis Obisbo Self Storage Fee
138 HF West L.A. Self Storage Leasehold
139 HF Willow Creek Apts. Fee
140 HF Redhill MHP Fee
141 MS Phoenix Inn - Troutdale Fee
142 HF North Valley Self Storage Facility Fee
143 MS Stone Creek Plaza Fee
144 HF Everett Portfolio (3H) Fee
145 HF Sheffield Lofts Fee
146 HF Paramount Self Storage Fee
147 MS Allstate Insurance Building Fee
148 HF Mira Mesa Retirement Community Fee
149 HF City Gables Apts. Fee
150 HF Windsorland MHC Fee
151 HF Budget Mini Storage - Phoenix (2O) Fee
152 HF ABQ Mini Storage (2O) Fee
153 HF Safeway Self Storage Facility Fee
154 HF Southgate Square Apartments Fee
155 HF Palm Shadows Apartments Fee
156 HF Park Drive Apts. Fee
157 HF Continental Luxury Apartments Fee
158 HF Dohr Apartments Fee
159 HF Belmont Self Storage Fee
160 MS Westview Plaza Shopping Center Fee
161 HF Hamilton House Fee
162 HF Linkletter Self Storage Facility (2P) Fee
163 HF Lyndie Office Building (2P) Fee
164 HF Juanita Bay Office Building Fee
</TABLE>
II-4
<PAGE> 122
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE CUT-OFF
LOAN CUT-OFF DATE BAL./ MORTGAGE INTEREST ACCRUAL NOTE
NO. SELLER(1) PROPERTY NAME DATE BALANCE UNIT OR SF(4) RATE METHOD DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
165 HF Fairway Greens Apartments $2,817,201 $35,215 7.250% Actual/360 12/16/97
166 HF Rolling Hills $2,813,734 $7,926 8.130% 30/360 09/10/97
167 HF Barnes & Noble $2,802,309 $112 7.310% Actual/360 12/11/97
168 HF Diamond Grove $2,801,099 $18,308 8.530% 30/360 07/08/97
169 HF Yankee Mobile Home Park $2,783,847 $15,048 7.910% Actual/360 10/08/97
170 HF Skylark Village I Mobile Home Park $2,783,619 $19,883 7.810% Actual/360 10/08/97
171 HF Red Hill Estates $2,784,204 $18,686 9.490% 30/360 03/31/97
172 HF Desert Springs Apartments $2,748,159 $20,357 7.250% Actual/360 10/17/97
173 HF Lake Haven/Tall Pines (3I) $2,727,332 $11,858 8.796% 30/360 03/31/97
174 HF Green Hill MHC $2,724,210 $19,185 8.900% 30/360 05/02/97
175 HF Fenton Walgreens $2,719,519 $180 7.120% Actual/360 02/02/98
176 HF Skylark II Village Mobile Home Park $2,709,058 $23,557 7.810% Actual/360 10/08/97
177 MS Laboratory Building $2,692,510 $187 7.480% Actual/360 11/13/97
178 HF Sorrento Valley Self Storage $3,595,633 $46 7.470% Actual/360 01/26/98
179 HF Westminster Garden $2,694,568 $18,712 6.850% Actual/360 02/14/98
180 MS Hillside Courtyard $2,690,746 $102 7.960% 30/360 09/18/97
181 HF Village Fair Shopping Center $2,644,522 $55 7.060% Actual/360 12/23/97
182 HF Just For Feet $2,513,103 $152 7.310% Actual/360 12/11/97
183 HF Airway Trade Center $2,492,733 $21 7.270% Actual/360 01/14/98
184 HF 989-1001 Watertown Street $2,494,715 $74 7.210% Actual/360 01/30/98
185 HF Kimberly Place $2,497,723 $30,460 6.830% Actual/360 01/30/98
186 HF Casa Del Sol Apartment $2,491,798 $24,918 7.500% Actual/360 10/20/97
187 HF Lake Geneva Apts. $2,485,203 $25,888 7.250% Actual/360 12/16/97
188 HF Austin Commons Industrial Building $2,478,214 $31 8.680% 30/360 06/05/97
189 HF Fairway Executive Center $2,473,001 $75 7.270% Actual/360 12/22/97
190 HF National City Self Storage Facility $2,441,949 $34 7.490% Actual/360 11/05/97
191 HF Kawaihae Harbor Shopping Center $2,436,447 $157 8.210% Actual/360 10/07/97
192 MS Greenbriar Business Park $2,395,962 $39 7.550% Actual/360 12/22/97
193 HF St. Vrain Village MHP $2,389,009 $17,566 7.940% Actual/360 10/17/97
194 HF 2000 E. Irvington Road $2,348,066 $55 7.910% Actual/360 09/29/97
195 HF Safe Space Self Storage $2,357,908 $31 8.265% 30/360 07/28/97
196 HF Arbor Oaks MHC $2,350,528 $14,972 7.650% Actual/360 10/16/97
198 HF Windsor Estates $2,330,367 $45,693 8.940% 30/360 05/28/97
199 HF A-American Self Storage Facility-Palmdale $2,322,136 $29 7.360% Actual/360 01/22/98
200 HF Maple Tree Plaza $1,232,476 $60 8.720% 30/360 06/30/97
201 HF 17th & State Shops $1,066,757 $93 8.720% 30/360 06/30/97
202 MS Oxford Corners $2,495,713 $109 7.430% Actual/360 12/12/97
203 HF Riverwood $2,297,971 $35,906 7.020% Actual/360 01/28/98
204 HF 3500 W. Segerstrom $2,293,949 $28 7.360% Actual/360 12/01/97
205 HF Oakwood MHP $2,291,157 $10,657 7.910% Actual/360 09/26/97
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECTIVE REMAINING AMORT.
LOAN MATURITY MATURITY TERM TERM TERM(6) BALANCE DUE BALLOON
NO. SELLER(1) PROPERTY NAME DATE DATE(5) (mos) (mos) (mos) AT MATURITY LTV(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
165 HF Fairway Greens Apartments 12/01/07 N/A 120 117 360 $2,448,848 68.0%
166 HF Rolling Hills 09/01/07 N/A 120 114 360 $2,488,934 39.8%
167 HF Barnes & Noble 12/01/17 12/01/07 120 117 360 $2,439,131 81.3%
168 HF Diamond Grove 07/01/07 N/A 120 112 360 $2,499,537 71.4%
169 HF Yankee Mobile Home Park 10/01/07 N/A 120 115 300 $2,269,628 59.7%
170 HF Skylark Village I Mobile Home Park 10/01/07 N/A 120 115 300 $2,263,821 55.2%
171 HF Red Hill Estates 04/01/07 N/A 120 109 360 $2,528,918 72.3%
172 HF Desert Springs Apartments 10/01/07 N/A 120 115 360 $2,392,593 52.0%
173 HF Lake Haven/Tall Pines (3I) 04/01/07 N/A 120 109 300 $2,301,354 86.8%
174 HF Green Hill MHC 05/01/07 N/A 120 110 300 $2,276,094 59.1%
175 HF Fenton Walgreens 09/01/17 N/A 235 234 236 $48,332 1.5%
176 HF Skylark II Village Mobile Home Park 10/01/07 N/A 120 115 300 $2,203,184 62.9%
177 MS Laboratory Building 12/01/07 N/A 120 117 330 $2,304,039 59.7%
178 HF Sorrento Valley Self Storage 02/01/08 N/A 120 119 300 $2,887,675 46.0%
179 HF Westminster Garden 02/01/18 N/A 240 239 240 $25,872 0.7%
180 MS Hillside Courtyard 10/01/07 N/A 120 115 360 $2,370,622 40.9%
181 HF Village Fair Shopping Center 01/01/08 N/A 120 118 360 $2,286,840 63.5%
182 HF Just For Feet 12/01/17 12/01/07 120 117 360 $2,187,408 57.1%
183 HF Airway Trade Center 02/01/08 N/A 121 119 300 $1,985,935 52.3%
184 HF 989-1001 Watertown Street 01/01/08 N/A 120 118 360 $2,164,389 63.7%
185 HF Kimberly Place 02/01/08 N/A 120 119 360 $2,147,886 63.2%
186 HF Casa Del Sol Apartment 11/01/07 N/A 120 116 360 $2,179,545 66.2%
187 HF Lake Geneva Apts. 12/01/07 N/A 120 117 240 $1,698,844 51.5%
188 HF Austin Commons Industrial Building 06/01/07 N/A 120 111 300 $2,058,637 61.1%
189 HF Fairway Executive Center 01/01/08 N/A 120 118 300 $1,976,227 63.7%
190 HF National City Self Storage Facility 11/01/07 N/A 120 116 360 $2,135,486 62.8%
191 HF Kawaihae Harbor Shopping Center 10/01/07 N/A 120 115 300 $2,000,934 61.3%
192 MS Greenbriar Business Park 01/01/08 N/A 120 118 360 $2,125,240 60.7%
193 HF St. Vrain Village MHP 10/01/07 N/A 119 115 300 $1,952,878 60.5%
194 HF 2000 E. Irvington Road 10/01/12 N/A 180 175 180 $23,286 0.7%
195 HF Safe Space Self Storage 08/01/07 N/A 120 113 300 $1,936,335 73.1%
196 HF Arbor Oaks MHC 10/01/07 N/A 120 115 360 $2,063,910 62.2%
198 HF Windsor Estates 06/01/07 N/A 120 111 300 $1,946,808 62.3%
199 HF A-American Self Storage Facility-Palmdale 02/01/08 N/A 120 119 300 $1,859,462 60.0%
200 HF Maple Tree Plaza 07/01/07 N/A 120 112 300 $1,023,690 57.7%
201 HF 17th & State Shops 07/01/07 N/A 120 112 300 $886,044 59.1%
202 MS Oxford Corners 01/01/08 N/A 120 118 360 $2,207,213 70.1%
203 HF Riverwood 02/01/08 N/A 120 119 360 $1,984,995 68.4%
204 HF 3500 W. Segerstrom 12/01/09 N/A 144 141 360 $1,906,844 46.1%
205 HF Oakwood MHP 10/01/07 N/A 120 115 360 $2,022,459 44.9%
<CAPTION>
- -------------------------------------------------------------------------------
LOAN SECURITY
NO. SELLER(1) PROPERTY NAME TYPE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
165 HF Fairway Greens Apartments Fee
166 HF Rolling Hills Fee
167 HF Barnes & Noble Fee
168 HF Diamond Grove Fee
169 HF Yankee Mobile Home Park Fee
170 HF Skylark Village I Mobile Home Park Fee
171 HF Red Hill Estates Fee
172 HF Desert Springs Apartments Fee
173 HF Lake Haven/Tall Pines (3I) Fee
174 HF Green Hill MHC Fee
175 HF Fenton Walgreens Fee
176 HF Skylark II Village Mobile Home Park Fee
177 MS Laboratory Building Fee
178 HF Sorrento Valley Self Storage Fee
179 HF Westminster Garden Fee
180 MS Hillside Courtyard Fee
181 HF Village Fair Shopping Center Fee
182 HF Just For Feet Fee
183 HF Airway Trade Center Fee
184 HF 989-1001 Watertown Street Fee
185 HF Kimberly Place Fee
186 HF Casa Del Sol Apartment Fee
187 HF Lake Geneva Apts. Fee
188 HF Austin Commons Industrial Building Fee
189 HF Fairway Executive Center Fee
190 HF National City Self Storage Facility Fee
191 HF Kawaihae Harbor Shopping Center Leasehold
192 MS Greenbriar Business Park Fee
193 HF St. Vrain Village MHP Fee
194 HF 2000 E. Irvington Road Fee
195 HF Safe Space Self Storage Fee
196 HF Arbor Oaks MHC Fee
198 HF Windsor Estates Fee
199 HF A-American Self Storage Facility-Palmdale Fee
200 HF Maple Tree Plaza Fee
201 HF 17th & State Shops Fee
202 MS Oxford Corners Fee
203 HF Riverwood Fee
204 HF 3500 W. Segerstrom Fee
205 HF Oakwood MHP Leasehold
</TABLE>
II-5
<PAGE> 123
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE CUT-OFF
LOAN CUT-OFF DATE BAL./ MORTGAGE INTEREST ACCRUAL NOTE
NO. SELLER(1) PROPERTY NAME DATE BALANCE UNIT OR SF(4) RATE METHOD DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
206 HF Calexico Mobile Home Park $2,290,261 $15,475 8.130% Actual/360 09/10/97
207 HF American Harbor Self Storage $2,286,657 $36 7.870% Actual/360 10/08/97
208 HF Bennett Avenue Apartments $2,286,064 $30,481 7.560% Actual/360 09/26/97
209 HF Friendly Village MHC $2,283,139 $9,096 8.150% 30/360 07/28/97
210 HF Strawberry Hills Apartments $2,278,590 $35,603 7.140% Actual/360 12/17/97
211 HF Worthington Business Center $2,269,693 $33 8.970% 30/360 12/17/96
212 HF Rancho Del Rio MHP $2,258,187 $17,371 8.510% 30/360 07/17/97
213 HF A-1 Self Storage - El Cajon, CA $2,243,553 $29 7.410% Actual/360 12/30/97
214 HF 28308 Industry Drive (12) $2,200,000 $41 7.100% Actual/360 12/17/97
215 HF Belmont Self Storage II $2,191,945 $57 7.905% Actual/360 12/09/97
217 HF Sunland Manor $2,169,236 $30,553 7.850% 30/360 07/31/97
218 HF Storage Solutions $2,131,475 $31 8.750% 30/360 06/18/97
219 HF Craycroft Gardens $2,109,166 $20,883 8.640% 30/360 05/08/97
220 MS Fleming Creek Circle Apartments $2,096,270 $20,963 7.210% Actual/360 12/03/97
221 HF Tyler Mall Mini Storage $2,092,316 $23 7.910% Actual/360 11/21/97
222 HF Alyson Manor Mobile Estates $2,090,205 $16,589 7.810% Actual/360 11/05/97
223 HF Ogden Days Inn $2,082,565 $19,106 8.670% Actual/360 10/15/97
225 HF 99 Brainard Road (3J) $2,075,953 $35,186 7.000% Actual/360 12/31/97
226 HF Securgard Self Storage $2,067,302 $44 9.562% 30/360 06/28/96
227 HF Shattuck Avenue Self Storage Facility $2,064,498 $75 8.170% Actual/360 01/07/98
228 HF Meadowbrook Village $2,059,183 $6,796 8.140% 30/360 08/08/97
229 MS 11959 Canyon Road $2,049,449 $72 8.130% Actual/360 10/20/97
230 MS Walgreens - Monterey $2,132,610 $153 8.500% 30/360 09/25/97
231 HF Southshore Point $2,029,164 $42,274 6.990% Actual/360 11/20/97
232 MS Petcare Superstore $1,993,440 $135 7.790% Actual/360 11/24/97
233 MS Memorial Crossing (3K) $1,996,102 $77 8.180% Actual/360 11/10/97
234 MS Bethany Square $1,993,461 $21 7.810% Actual/360 11/19/97
235 HF Royal Highlander $1,995,754 $7,153 7.170% Actual/360 12/23/97
236 HF 932 N. Rush $1,994,234 $292 7.350% Actual/360 01/15/98
237 HF Fineberg Lancaster Apartments $1,998,230 $46,470 7.000% Actual/360 01/26/98
238 HF Fineberg Beacon Apartments $1,998,230 $54,006 7.000% Actual/360 01/26/98
239 HF Centennial Estates $1,989,293 $10,870 8.130% 30/360 07/16/97
240 HF Armored Self Storage Facility $1,983,793 $47 7.940% 30/360 08/08/97
241 HF Extra Space Self Storage Facility $1,955,232 $21 7.940% Actual/360 11/13/97
242 HF Portgage Green MHP $1,941,267 $24,573 8.120% 30/360 08/28/97
243 HF A-American El Cajon $1,936,424 $30 9.310% 30/360 07/09/97
244 HF 7 Mt. Hood Road $1,908,860 $76,354 7.000% Actual/360 12/31/97
245 MS 370 Diablo Road $1,892,160 $130 7.800% Actual/360 11/18/97
246 HF Ashe Road Bus. Park $1,896,027 $26 7.310% Actual/360 12/30/97
247 HF Gilbert Self Storage $1,882,935 $26 8.770% 30/360 08/07/97
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECTIVE REMAINING AMORT.
LOAN MATURITY MATURITY TERM TERM TERM(6) BALANCE DUE BALLOON
NO. SELLER(1) PROPERTY NAME DATE DATE(5) (mos) (mos) (mos) AT MATURITY LTV(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
206 HF Calexico Mobile Home Park 09/01/07 N/A 120 114 360 $2,031,925 57.2%
207 HF American Harbor Self Storage 10/01/07 N/A 120 115 300 $1,862,435 64.1%
208 HF Bennett Avenue Apartments 10/01/07 N/A 120 115 300 $1,847,483 58.7%
209 HF Friendly Village MHC 08/01/07 N/A 120 113 300 $1,869,881 57.5%
210 HF Strawberry Hills Apartments 12/01/07 N/A 120 117 360 $1,975,802 66.5%
211 HF Worthington Business Center 12/31/06 N/A 120 106 300 $1,906,700 59.6%
212 HF Rancho Del Rio MHP 07/01/07 N/A 119 112 336 $1,966,649 70.2%
213 HF A-1 Self Storage - El Cajon, CA 01/01/08 N/A 120 118 300 $1,799,325 58.0%
214 HF 28308 Industry Drive (12) 12/01/10 N/A 156 153 360 $1,761,395 50.3%
215 HF Belmont Self Storage II 12/01/12 N/A 180 177 300 $1,409,320 36.2%
217 HF Sunland Manor 08/02/02 N/A 60 53 360 $2,071,854 76.7%
218 HF Storage Solutions 06/01/07 N/A 120 111 300 $1,773,329 59.1%
219 HF Craycroft Gardens 05/01/07 N/A 120 110 300 $1,752,308 64.9%
220 MS Fleming Creek Circle Apartments 01/01/08 N/A 120 118 360 $1,843,784 65.8%
221 HF Tyler Mall Mini Storage 11/01/07 N/A 119 116 300 $1,706,743 54.2%
222 HF Alyson Manor Mobile Estates 10/01/07 N/A 119 115 300 $1,703,142 66.8%
223 HF Ogden Days Inn 10/01/17 10/01/07 120 115 240 $1,490,633 51.4%
225 HF 99 Brainard Road (3J) 01/01/08 N/A 120 118 360 $1,792,508 61.8%
226 HF Securgard Self Storage 07/31/06 N/A 121 101 300 $1,767,317 68.0%
227 HF Shattuck Avenue Self Storage Facility 01/01/08 N/A 120 118 300 $1,688,048 55.9%
228 HF Meadowbrook Village 08/01/07 N/A 120 113 345 $1,794,200 40.2%
229 MS 11959 Canyon Road 11/01/12 N/A 180 176 300 $1,385,943 46.2%
230 MS Walgreens - Monterey 10/01/17 N/A 240 235 240 $18,527 0.5%
231 HF Southshore Point 12/01/07 N/A 120 117 360 $1,753,535 67.4%
232 MS Petcare Superstore 12/01/07 N/A 120 117 300 $1,642,668 64.7%
233 MS Memorial Crossing (3K) 12/01/07 N/A 120 117 360 $1,798,587 67.4%
234 MS Bethany Square 12/01/07 N/A 120 117 300 $1,643,618 46.3%
235 HF Royal Highlander 01/01/08 N/A 120 118 360 $1,729,941 38.4%
236 HF 932 N. Rush 02/01/08 N/A 121 119 300 $1,592,220 30.0%
237 HF Fineberg Lancaster Apartments 02/01/08 N/A 120 119 360 $1,725,272 53.2%
238 HF Fineberg Beacon Apartments 02/01/08 N/A 120 119 360 $1,725,272 58.1%
239 HF Centennial Estates 07/01/07 N/A 120 112 360 $1,762,077 36.3%
240 HF Armored Self Storage Facility 08/01/07 N/A 120 113 292 $1,591,136 42.4%
241 HF Extra Space Self Storage Facility 11/01/07 N/A 120 116 120 $24,500 0.6%
242 HF Portgage Green MHP 09/01/07 N/A 120 114 345 $1,689,619 59.3%
243 HF A-American El Cajon 07/01/07 N/A 120 112 300 $1,628,892 63.9%
244 HF 7 Mt. Hood Road 01/01/08 N/A 120 118 360 $1,648,230 63.4%
245 MS 370 Diablo Road 12/01/07 N/A 120 117 270 $1,464,575 54.2%
246 HF Ashe Road Bus. Park 01/01/08 N/A 120 118 360 $1,648,635 60.2%
247 HF Gilbert Self Storage 08/01/12 N/A 180 173 180 $19,072 0.5%
<CAPTION>
- -------------------------------------------------------------------------------
LOAN SECURITY
NO. SELLER(1) PROPERTY NAME TYPE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
206 HF Calexico Mobile Home Park Fee
207 HF American Harbor Self Storage Fee
208 HF Bennett Avenue Apartments Fee
209 HF Friendly Village MHC Fee
210 HF Strawberry Hills Apartments Fee
211 HF Worthington Business Center Fee
212 HF Rancho Del Rio MHP Leasehold
213 HF A-1 Self Storage - El Cajon, CA Fee
214 HF 28308 Industry Drive (12) Fee
215 HF Belmont Self Storage II Fee
217 HF Sunland Manor Fee
218 HF Storage Solutions Fee
219 HF Craycroft Gardens Fee
220 MS Fleming Creek Circle Apartments Fee
221 HF Tyler Mall Mini Storage Fee
222 HF Alyson Manor Mobile Estates Fee
223 HF Ogden Days Inn Fee
225 HF 99 Brainard Road (3J) Fee
226 HF Securgard Self Storage Fee
227 HF Shattuck Avenue Self Storage Facility Fee
228 HF Meadowbrook Village Fee
229 MS 11959 Canyon Road Fee
230 MS Walgreens - Monterey Fee
231 HF Southshore Point Fee
232 MS Petcare Superstore Fee
233 MS Memorial Crossing (3K) Fee
234 MS Bethany Square Fee
235 HF Royal Highlander Fee
236 HF 932 N. Rush Fee
237 HF Fineberg Lancaster Apartments Fee
238 HF Fineberg Beacon Apartments Fee
239 HF Centennial Estates Fee
240 HF Armored Self Storage Facility Fee
241 HF Extra Space Self Storage Facility Fee
242 HF Portgage Green MHP Fee
243 HF A-American El Cajon Fee
244 HF 7 Mt. Hood Road Fee
245 MS 370 Diablo Road Fee
246 HF Ashe Road Bus. Park Fee
247 HF Gilbert Self Storage Fee
</TABLE>
II-6
<PAGE> 124
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE CUT-OFF
LOAN CUT-OFF DATE BAL./ MORTGAGE INTEREST ACCRUAL NOTE
NO. SELLER(1) PROPERTY NAME DATE BALANCE UNIT OR SF(4) RATE METHOD DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
248 HF Lamar Mini Storage $1,882,753 $49 9.100% 30/360 05/14/97
249 HF El Dorado Mobile Home Park $1,868,017 $14,594 8.040% 30/360 08/20/97
250 HF Boston Market/Kinkos $1,867,152 $197 8.970% 30/360 06/26/97
251 MS British Square $1,846,863 $19,859 7.500% Actual/360 12/23/97
252 HF Valencia Gardens $1,841,805 $11,511 8.390% 30/360 08/18/97
253 HF Providence Hill Office Building $1,794,768 $39 7.270% Actual/360 01/14/98
254 HF A-AMERICAN SELF STORAGE-Valencia $1,794,722 $43 8.490% 30/360 12/12/97
255 HF Calhoun Shores Apartments $1,791,118 $42,646 7.410% Actual/360 11/17/97
256 MS Wyncrossing Apartments $1,781,080 $28,271 7.590% Actual/360 11/07/97
257 MS Garcia Apartments $1,759,530 $27,070 7.540% Actual/360 12/29/97
258 HF Stor-N-Lock #11 $1,753,885 $26 8.110% Actual/360 12/09/97
259 MS Sycamore Hill Apartments $1,744,508 $34,890 7.260% Actual/360 10/21/97
260 HF 3400 W. Segerstrom $1,720,320 $32 7.160% Actual/360 12/01/97
261 HF Larkfield Self Storage $1,719,766 $23 8.810% 30/360 11/25/97
262 HF Bellmere Apartments $1,664,647 $27,744 7.640% Actual/360 10/22/97
263 HF Armored Mini Storage - 52nd Street $1,642,444 $37 7.940% Actual/360 11/03/97
264 HF CVS - Decatur $1,633,967 $123 7.100% Actual/360 12/12/97
265 HF Southwest Professional Plaza $1,603,111 $40 8.970% 30/360 07/08/97
266 HF Tanglewood $1,586,785 $89 9.010% 30/360 06/12/97
267 HF Tracy Portfolio (3L) $1,574,645 $30 8.300% Actual/360 12/11/97
268 HF Casa del Rey Apartments $1,549,161 $18,665 7.260% Actual/360 12/19/97
269 HF A-American SSF - National City $1,548,107 $32 7.420% Actual/360 01/27/98
270 HF B&R Mini Storage $1,544,228 $20 7.770% Actual/360 12/09/97
271 HF 3630 West Garry Ave. $1,544,794 $38 7.360% Actual/360 11/04/97
272 HF Twin Oaks Manor $1,540,714 $19,753 7.270% Actual/360 11/25/97
273 HF Etiwanda Self Storage $1,531,634 $21 8.340% Actual/360 10/01/97
274 HF Your Extra Attic - Stockbridge $1,519,221 $31 7.630% Actual/360 12/04/97
275 HF 116 Washington Street $1,515,713 $37,893 7.000% Actual/360 12/31/97
276 HF Eugene Camlu Retirement Center $1,512,205 $24,003 9.580% 30/360 05/02/97
277 HF Newgate Apartments $1,500,625 $15,006 7.270% Actual/360 01/14/98
278 HF Roosevelt Apartments $1,494,111 $37,353 7.350% Actual/360 12/03/97
279 HF Park Place Plaza Shopping Center $1,493,850 $42 7.010% Actual/360 12/09/97
280 HF Quinsigamond Plaza $1,491,008 $48 8.420% 30/360 09/12/97
281 HF Hav-A-Storage Self Storage Facility $1,491,874 $9 8.360% Actual/360 09/23/97
282 HF Brackett Air Business Park $1,491,442 $34 7.990% Actual/360 09/29/97
283 HF Van Buren Self Storage $1,490,062 $26 9.610% 30/360 07/08/97
284 HF 5 Walbridge Street (3M) $1,488,317 $34,612 7.000% Actual/360 12/31/97
285 HF EZ Storage Center Self Storage Facility $1,481,915 $19 7.870% Actual/360 11/14/97
286 HF Bethel Self Storage $1,488,737 $31 9.590% 30/360 05/30/97
287 HF Handi Self Storage $1,487,498 $28 9.620% 30/360 04/21/97
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECTIVE REMAINING AMORT.
LOAN MATURITY MATURITY TERM TERM TERM(6) BALANCE DUE BALLOON
NO. SELLER(1) PROPERTY NAME DATE DATE(5) (mos) (mos) (mos) AT MATURITY LTV(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
248 HF Lamar Mini Storage 05/01/08 N/A 132 122 300 $1,528,487 57.7%
249 HF El Dorado Mobile Home Park 09/01/07 N/A 120 114 300 $1,524,239 64.9%
250 HF Boston Market/Kinkos 07/01/17 07/01/07 120 112 300 $1,559,343 60.0%
251 MS British Square 01/01/08 N/A 120 118 360 $1,636,183 62.9%
252 HF Valencia Gardens 08/01/12 N/A 180 173 360 $1,443,313 55.5%
253 HF Providence Hill Office Building 01/01/08 N/A 120 118 300 $1,434,046 51.2%
254 HF A-AMERICAN SELF STORAGE-Valencia 12/31/07 N/A 121 118 300 $1,471,514 61.3%
255 HF Calhoun Shores Apartments 11/01/12 N/A 180 176 300 $1,129,017 50.2%
256 MS Wyncrossing Apartments 12/01/07 N/A 120 117 360 $1,582,804 63.3%
257 MS Garcia Apartments 01/01/08 N/A 120 118 360 $1,560,339 66.4%
258 HF Stor-N-Lock #11 12/01/07 N/A 120 117 300 $1,434,131 65.2%
259 MS Sycamore Hill Apartments 11/01/07 N/A 120 116 360 $1,538,504 64.1%
260 HF 3400 W. Segerstrom 12/01/09 N/A 144 141 360 $1,422,064 41.7%
261 HF Larkfield Self Storage 12/01/07 N/A 120 117 290 $1,397,556 58.2%
262 HF Bellmere Apartments 11/01/07 N/A 120 116 360 $1,460,357 66.4%
263 HF Armored Mini Storage - 52nd Street 11/01/07 N/A 120 116 300 $1,338,698 50.7%
264 HF CVS - Decatur 12/01/12 N/A 180 177 180 $15,577 0.6%
265 HF Southwest Professional Plaza 07/01/07 N/A 120 112 300 $1,338,829 58.8%
266 HF Tanglewood 06/01/07 N/A 120 111 300 $1,327,601 65.4%
267 HF Tracy Portfolio (3L) 12/01/07 N/A 120 117 300 $1,293,530 60.4%
268 HF Casa del Rey Apartments 01/01/08 N/A 120 118 300 $1,237,634 59.6%
269 HF A-American SSF - National City 02/01/08 N/A 120 119 300 $1,241,632 50.3%
270 HF B&R Mini Storage 12/01/12 N/A 180 177 300 $987,202 31.2%
271 HF 3630 West Garry Ave. 11/01/09 N/A 144 140 360 $1,285,011 58.7%
272 HF Twin Oaks Manor 12/01/07 N/A 120 117 240 $1,053,698 50.2%
273 HF Etiwanda Self Storage 10/01/07 N/A 120 115 300 $1,261,751 47.6%
274 HF Your Extra Attic - Stockbridge 12/01/07 N/A 120 117 300 $1,227,161 52.0%
275 HF 116 Washington Street 01/01/08 N/A 120 118 360 $1,308,762 68.9%
276 HF Eugene Camlu Retirement Center 05/01/07 N/A 120 110 300 $1,281,353 73.2%
277 HF Newgate Apartments 01/01/08 N/A 120 118 300 $1,199,021 49.1%
278 HF Roosevelt Apartments 12/01/12 N/A 180 177 300 $937,919 46.9%
279 HF Park Place Plaza Shopping Center 12/01/07 N/A 120 117 300 $1,186,971 46.5%
280 HF Quinsigamond Plaza 09/01/07 N/A 120 114 300 $1,227,564 58.5%
281 HF Hav-A-Storage Self Storage Facility 10/01/07 N/A 120 115 300 $1,229,576 53.5%
282 HF Brackett Air Business Park 10/01/07 N/A 120 115 300 $1,218,342 62.5%
283 HF Van Buren Self Storage 07/01/07 N/A 120 112 300 $1,261,154 70.1%
284 HF 5 Walbridge Street (3M) 01/01/08 N/A 120 118 360 $1,285,106 27.3%
285 HF EZ Storage Center Self Storage Facility 11/01/07 N/A 120 116 180 $716,402 27.6%
286 HF Bethel Self Storage 06/01/07 N/A 120 111 300 $1,260,616 50.4%
287 HF Handi Self Storage 04/30/07 N/A 120 110 300 $1,261,423 60.9%
<CAPTION>
- -------------------------------------------------------------------------------
LOAN SECURITY
NO. SELLER(1) PROPERTY NAME TYPE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
248 HF Lamar Mini Storage Fee
249 HF El Dorado Mobile Home Park Fee
250 HF Boston Market/Kinkos Fee
251 MS British Square Fee
252 HF Valencia Gardens Fee
253 HF Providence Hill Office Building Fee
254 HF A-AMERICAN SELF STORAGE-Valencia Fee
255 HF Calhoun Shores Apartments Fee
256 MS Wyncrossing Apartments Fee
257 MS Garcia Apartments Fee
258 HF Stor-N-Lock #11 Fee
259 MS Sycamore Hill Apartments Fee
260 HF 3400 W. Segerstrom Fee
261 HF Larkfield Self Storage Leasehold
262 HF Bellmere Apartments Fee
263 HF Armored Mini Storage - 52nd Street Fee
264 HF CVS - Decatur Fee
265 HF Southwest Professional Plaza Fee
266 HF Tanglewood Fee
267 HF Tracy Portfolio (3L) Fee
268 HF Casa del Rey Apartments Fee
269 HF A-American SSF - National City Fee
270 HF B&R Mini Storage Fee
271 HF 3630 West Garry Ave. Fee
272 HF Twin Oaks Manor Fee
273 HF Etiwanda Self Storage Fee
274 HF Your Extra Attic - Stockbridge Fee
275 HF 116 Washington Street Fee
276 HF Eugene Camlu Retirement Center Fee
277 HF Newgate Apartments Fee
278 HF Roosevelt Apartments Fee
279 HF Park Place Plaza Shopping Center Fee
280 HF Quinsigamond Plaza Leasehold
281 HF Hav-A-Storage Self Storage Facility Fee
282 HF Brackett Air Business Park Leasehold
283 HF Van Buren Self Storage Fee
284 HF 5 Walbridge Street (3M) Fee
285 HF EZ Storage Center Self Storage Facility Fee
286 HF Bethel Self Storage Fee
287 HF Handi Self Storage Fee
</TABLE>
II-7
<PAGE> 125
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE CUT-OFF
LOAN CUT-OFF DATE BAL./ MORTGAGE INTEREST ACCRUAL NOTE
NO. SELLER(1) PROPERTY NAME DATE BALANCE UNIT OR SF(4) RATE METHOD DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
288 HF Green Valley Storage (Windmill) $1,470,721 $20 7.290% Actual/360 01/15/98
289 HF Woodgate Mobile Home Village $1,465,897 $10,396 7.670% Actual/360 12/24/97
290 HF Aire Libre Apartments $1,443,334 $18,042 7.960% 30/360 08/29/97
291 MS Shattalon Terrace Apartments $1,437,634 $17,970 7.700% Actual/360 12/23/97
292 HF Brookhaven MHC $1,403,225 $25,513 8.710% 30/360 01/23/97
294 HF Heritage/Gibson Mobile Home Village $1,394,813 $11,433 7.810% Actual/360 12/04/97
295 HF River Point Condos $1,395,490 $41,044 7.610% Actual/360 10/22/97
296 HF Villa Vallejo $1,390,364 $19,583 7.750% Actual/360 09/19/97
297 HF CVS - Austell $1,371,542 $135 7.100% Actual/360 12/12/97
298 MS Crown Ridge Apartments $1,370,746 $34,269 8.150% Actual/360 11/07/97
299 HF 1334 Commonwealth Avenue $1,350,072 $37,502 7.000% Actual/360 12/31/97
300 HF Mini U Novi $1,340,024 $23 8.100% 30/360 08/06/97
301 HF Stor-N-Lock #10 $1,317,770 $21 8.010% Actual/360 12/09/97
302 HF 2nd Garage Self Storage $1,317,332 $27 9.667% 30/360 07/31/96
303 HF Virginia Court Apartments $1,317,072 $25,328 7.650% Actual/360 10/16/97
304 HF Oakview Manor Apartments $1,302,487 $16,487 7.170% Actual/360 12/31/97
305 HF Timberline Forest Apartments $1,296,395 $19,642 7.220% Actual/360 11/24/97
306 HF The Village Plaza $1,292,594 $66 8.000% Actual/360 10/06/97
307 HF 9 Egremont Road $1,292,198 $49,700 7.000% Actual/360 12/31/97
308 HF Affordable Self Storage $1,289,928 $24 9.400% 30/360 06/12/97
309 HF 6630 Baltimore National Pike $1,288,893 $46 9.470% 30/360 05/05/97
310 HF 4 Vinal Street $1,265,256 $42,175 7.000% Actual/360 12/31/97
311 HF Whiskey Bottom Business Center $1,263,464 $38 9.120% 30/360 05/06/97
312 HF Royal Estates MHP $1,246,329 $7,331 7.170% Actual/360 12/23/97
313 HF Pep Boys - Streamwood (13) $1,223,023 $55 7.230% Actual/360 01/29/98
314 HF Orange Avenue Industrial Park $1,211,140 $19 9.880% 30/360 04/07/97
315 HF Men's Warehouse $1,198,628 $200 7.480% 30/360 01/26/98
316 HF Pier 1 - Saginaw $1,195,500 $120 7.530% Actual/360 12/02/97
317 HF Boulevard Apartments $1,195,288 $39,843 7.350% Actual/360 12/03/97
318 HF Stor-N-Lock #8 $1,193,452 $18 8.010% Actual/360 12/09/97
319 HF Park Plaza Retail Center $1,194,877 $43 8.440% Actual/360 10/28/97
320 HF Claremont Self Storage $1,193,660 $31 8.540% Actual/360 04/18/97
321 HF Shamrock MHC $1,193,213 $9,395 8.460% 30/360 05/21/97
322 HF Security Self Storage Facility $1,192,082 $32 8.800% 30/360 08/04/97
323 HF Lock It Up Self Storage Facility $1,182,104 $21 8.040% Actual/360 10/09/97
324 HF CVS - Bethsaida $1,168,534 $115 7.100% Actual/360 12/12/97
325 HF Summer Wind $1,169,531 $7,045 9.240% 30/360 05/15/97
326 HF Victoria Square Apartments $1,146,657 $14,333 7.270% Actual/360 01/14/98
327 HF Foxfire Apartments $1,145,354 $21,210 7.610% Actual/360 10/06/97
328 HF Glen Arbor Apartments $1,133,572 $14,533 9.010% 30/360 04/03/97
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECTIVE REMAINING AMORT.
LOAN MATURITY MATURITY TERM TERM TERM(6) BALANCE DUE BALLOON
NO. SELLER(1) PROPERTY NAME DATE DATE(5) (mos) (mos) (mos) AT MATURITY LTV(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
288 HF Green Valley Storage (Windmill) 02/01/08 N/A 121 119 300 $1,172,283 28.2%
289 HF Woodgate Mobile Home Village 01/01/08 N/A 120 118 300 $1,183,648 64.5%
290 HF Aire Libre Apartments 09/01/07 N/A 120 114 346 $1,252,948 64.3%
291 MS Shattalon Terrace Apartments 01/01/08 N/A 120 118 360 $1,279,829 59.5%
292 HF Brookhaven MHC 01/31/08 N/A 132 119 360 $1,235,873 52.8%
294 HF Heritage/Gibson Mobile Home Village 12/01/07 N/A 120 117 300 $1,131,852 59.0%
295 HF River Point Condos 11/01/07 N/A 120 116 360 $1,223,463 68.5%
296 HF Villa Vallejo 09/01/07 N/A 120 114 300 $1,130,389 56.5%
297 HF CVS - Austell 12/01/12 N/A 180 177 180 $13,076 0.6%
298 MS Crown Ridge Apartments 12/01/07 N/A 120 117 300 $1,140,995 63.4%
299 HF 1334 Commonwealth Avenue 01/01/08 N/A 120 118 360 $1,165,737 68.6%
300 HF Mini U Novi 08/01/07 N/A 120 113 300 $1,096,175 33.4%
301 HF Stor-N-Lock #10 12/01/07 N/A 120 117 240 $922,279 26.0%
302 HF 2nd Garage Self Storage 07/31/06 N/A 120 101 240 $985,746 48.1%
303 HF Virginia Court Apartments 10/01/07 N/A 120 115 300 $1,066,833 59.3%
304 HF Oakview Manor Apartments 01/01/08 N/A 120 118 360 $1,129,010 49.1%
305 HF Timberline Forest Apartments 12/01/17 12/01/07 120 117 360 $1,126,140 69.1%
306 HF The Village Plaza 10/01/07 N/A 120 115 300 $1,056,165 33.0%
307 HF 9 Egremont Road 01/01/08 N/A 120 118 360 $1,115,764 58.7%
308 HF Affordable Self Storage 06/01/07 N/A 120 111 300 $1,088,069 57.3%
309 HF 6630 Baltimore National Pike 05/01/07 N/A 120 110 300 $1,089,722 66.0%
310 HF 4 Vinal Street 01/01/08 N/A 120 118 360 $1,092,502 54.6%
311 HF Whiskey Bottom Business Center 05/01/07 N/A 120 110 300 $1,060,561 63.3%
312 HF Royal Estates MHP 01/01/08 N/A 120 118 300 $993,157 39.7%
313 HF Pep Boys - Streamwood (13) 12/01/16 N/A 226 225 226 $11,233 0.9%
314 HF Orange Avenue Industrial Park 04/01/07 N/A 120 109 240 $899,672 53.9%
315 HF Men's Warehouse 02/01/18 02/01/08 120 119 300 $958,973 63.9%
316 HF Pier 1 - Saginaw 12/01/17 12/01/07 120 117 300 $963,315 60.2%
317 HF Boulevard Apartments 12/01/12 N/A 180 177 300 $750,335 46.2%
318 HF Stor-N-Lock #8 12/01/07 N/A 120 117 240 $835,272 41.8%
319 HF Park Plaza Retail Center 11/01/07 N/A 120 116 300 $985,750 57.3%
320 HF Claremont Self Storage 10/01/07 N/A 120 115 300 $987,939 54.3%
321 HF Shamrock MHC 05/01/07 N/A 119 110 360 $1,065,778 28.7%
322 HF Security Self Storage Facility 08/01/07 N/A 120 113 300 $990,917 54.4%
323 HF Lock It Up Self Storage Facility 10/01/07 N/A 120 115 180 $576,531 32.9%
324 HF CVS - Bethsaida 12/01/12 N/A 180 177 180 $11,139 0.6%
325 HF Summer Wind 05/01/07 N/A 120 110 300 $984,168 57.9%
326 HF Victoria Square Apartments 02/01/08 N/A 121 119 300 $913,529 47.6%
327 HF Foxfire Apartments 10/01/07 N/A 120 115 360 $1,004,855 64.8%
328 HF Glen Arbor Apartments 04/01/07 N/A 119 109 360 $1,022,697 63.9%
<CAPTION>
- -------------------------------------------------------------------------------
LOAN SECURITY
NO. SELLER(1) PROPERTY NAME TYPE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
288 HF Green Valley Storage (Windmill) Fee
289 HF Woodgate Mobile Home Village Fee
290 HF Aire Libre Apartments Fee
291 MS Shattalon Terrace Apartments Fee
292 HF Brookhaven MHC Fee
294 HF Heritage/Gibson Mobile Home Village Fee
295 HF River Point Condos Fee
296 HF Villa Vallejo Fee
297 HF CVS - Austell Fee
298 MS Crown Ridge Apartments Fee
299 HF 1334 Commonwealth Avenue Fee
300 HF Mini U Novi Fee
301 HF Stor-N-Lock #10 Fee
302 HF 2nd Garage Self Storage Fee
303 HF Virginia Court Apartments Fee
304 HF Oakview Manor Apartments Fee
305 HF Timberline Forest Apartments Fee
306 HF The Village Plaza Fee
307 HF 9 Egremont Road Fee
308 HF Affordable Self Storage Fee
309 HF 6630 Baltimore National Pike Fee
310 HF 4 Vinal Street Fee
311 HF Whiskey Bottom Business Center Fee
312 HF Royal Estates MHP Fee
313 HF Pep Boys - Streamwood (13) Fee
314 HF Orange Avenue Industrial Park Fee
315 HF Men's Warehouse Fee
316 HF Pier 1 - Saginaw Fee
317 HF Boulevard Apartments Fee
318 HF Stor-N-Lock #8 Fee
319 HF Park Plaza Retail Center Fee
320 HF Claremont Self Storage Fee
321 HF Shamrock MHC Fee
322 HF Security Self Storage Facility Fee
323 HF Lock It Up Self Storage Facility Fee
324 HF CVS - Bethsaida Fee
325 HF Summer Wind Fee
326 HF Victoria Square Apartments Fee
327 HF Foxfire Apartments Fee
328 HF Glen Arbor Apartments Fee
</TABLE>
II-8
<PAGE> 126
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE CUT-OFF
LOAN CUT-OFF DATE BAL./ MORTGAGE INTEREST ACCRUAL NOTE
NO. SELLER(1) PROPERTY NAME DATE BALANCE UNIT OR SF(4) RATE METHOD DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
329 HF Pier 1- Lewisville $1,124,632 $117 7.680% Actual/360 11/13/97
330 MS Bozeman K-Mart/Applebees $1,112,980 $11 8.270% Actual/360 11/10/97
331 HF Emerald Lakes Mobile Home Park $1,111,684 $10,293 7.050% Actual/360 01/20/98
332 HF Your Extra Attic - Duluth $1,105,846 $28 7.730% Actual/360 12/04/97
333 HF Pier 1 - Canton $1,095,875 $110 7.530% Actual/360 12/02/97
334 HF DeSoto Estates MHP $1,095,081 $7,767 8.110% Actual/360 10/28/97
335 MS McWhorters - Cupertino $1,077,793 $98 8.500% 30/360 06/24/97
336 HF Hide-Away-Hills MHP $1,047,783 $6,760 7.220% Actual/360 12/23/97
337 HF AAA Interstate SSF $1,043,271 $15 8.230% Actual/360 09/10/97
338 HF Your Extra Attic - Winters Chapel $1,026,096 $27 7.630% Actual/360 12/04/97
339 HF ABC Mini Storage $1,021,486 $18 9.670% 30/360 05/05/97
340 HF Pep Boys- Gardena (14) $993,291 $105 7.177% Actual/360 01/07/98
341 HF Eastwood MHP $995,401 $9,759 7.910% Actual/360 10/29/97
342 HF Bama Self Storage $993,440 $25 9.670% 30/360 07/11/97
343 HF Thomas Apartments $962,962 $22,928 8.470% 30/360 06/27/97
345 HF Missouri Self Storage Facility $897,520 $23 7.800% Actual/360 01/20/98
346 HF A-American Self Storage-Bent Avenue $898,901 $22 7.420% Actual/360 01/21/98
347 HF The Pine Garden Apartments $890,463 $16,190 7.960% Actual/360 08/29/97
348 HF Stor-N-Lock #7 $845,362 $14 8.010% Actual/360 12/09/97
349 HF Green Valley Self Storage $822,631 $9 7.390% Actual/360 01/15/98
350 HF 130 Englewood Street $813,236 $67,770 7.000% Actual/360 12/31/97
351 MS Radio Shack - Blockbuster Center $798,013 $114 7.530% Actual/360 12/12/97
352 HF 1375 Commonwealth Avenue $748,377 $29,935 7.000% Actual/360 12/31/97
353 HF Stor-N-Lock #9 $696,180 $15 8.010% Actual/360 12/09/97
354 HF Mid Cajon Apartments $678,023 $27,121 7.270% Actual/360 01/14/98
355 HF Payless Shoe Source $674,216 $211 7.380% 30/360 01/21/98
356 HF Panama City Mobile Home Estates $648,005 $5,838 9.360% Actual/360 11/25/97
357 HF Your Extra Attic - Norcross $647,700 $29 8.180% Actual/360 12/04/97
358 HF Terrace View Center $638,140 $40 7.270% Actual/360 01/14/98
359 HF Village Corner $623,183 $39 7.270% Actual/360 01/14/98
360 HF 1381 Commonwealth Avenue $513,886 $39,530 7.000% Actual/360 12/31/97
361 HF Pinegrove Place $498,113 $35,579 7.660% Actual/360 12/19/97
TOTAL/WEIGHTED AVERAGE: $1,285,217,765 $19,149 7.679%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECTIVE REMAINING AMORT.
LOAN MATURITY MATURITY TERM TERM TERM(6) BALANCE DUE BALLOON
NO. SELLER(1) PROPERTY NAME DATE DATE(5) (mos) (mos) (mos) AT MATURITY LTV(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
329 HF Pier 1- Lewisville 11/01/17 11/01/07 120 116 300 $910,678 62.8%
330 MS Bozeman K-Mart/Applebees 09/01/15 N/A 213 210 213 $49,422 3.0%
331 HF Emerald Lakes Mobile Home Park 01/01/08 N/A 120 118 300 $882,972 59.3%
332 HF Your Extra Attic - Duluth 12/01/07 N/A 120 117 300 $895,545 57.0%
333 HF Pier 1 - Canton 12/01/17 12/01/07 120 117 300 $883,039 60.9%
334 HF DeSoto Estates MHP 11/01/07 N/A 120 116 300 $896,301 54.3%
335 MS McWhorters - Cupertino 07/01/13 N/A 192 184 192 $10,425 0.5%
336 HF Hide-Away-Hills MHP 01/01/08 N/A 120 118 360 $909,249 61.2%
337 HF AAA Interstate SSF 09/01/07 N/A 120 114 300 $858,164 37.3%
338 HF Your Extra Attic - Winters Chapel 12/01/07 N/A 120 117 300 $828,837 54.2%
339 HF ABC Mini Storage 05/01/07 N/A 120 110 300 $867,097 63.8%
340 HF Pep Boys- Gardena (14) 06/01/11 N/A 161 159 161 $9,439 0.8%
341 HF Eastwood MHP 11/01/07 N/A 120 116 300 $810,713 60.7%
342 HF Bama Self Storage 07/01/07 N/A 120 112 300 $841,841 58.1%
343 HF Thomas Apartments 07/01/07 N/A 120 112 360 $858,362 64.1%
345 HF Missouri Self Storage Facility 12/01/04 N/A 83 81 300 $795,952 56.9%
346 HF A-American Self Storage-Bent Avenue 02/01/08 N/A 120 119 300 $720,948 44.8%
347 HF The Pine Garden Apartments 09/01/07 N/A 120 114 240 $625,517 45.2%
348 HF Stor-N-Lock #7 12/01/07 N/A 120 117 240 $591,650 28.9%
349 HF Green Valley Self Storage 01/01/08 N/A 120 118 300 $659,399 31.0%
350 HF 130 Englewood Street 01/01/08 N/A 120 118 360 $702,200 63.8%
351 MS Radio Shack - Blockbuster Center 01/01/08 N/A 120 118 300 $651,829 65.2%
352 HF 1375 Commonwealth Avenue 01/01/08 N/A 120 118 360 $646,195 53.8%
353 HF Stor-N-Lock #9 12/01/07 N/A 120 117 240 $487,242 34.3%
354 HF Mid Cajon Apartments 01/01/08 N/A 120 118 300 $541,751 61.6%
355 HF Payless Shoe Source 02/01/18 02/01/08 120 119 300 $536,361 63.1%
356 HF Panama City Mobile Home Estates 12/01/07 N/A 120 117 300 $545,224 59.9%
357 HF Your Extra Attic - Norcross 12/01/07 N/A 120 117 300 $530,437 54.7%
358 HF Terrace View Center 01/01/08 N/A 120 118 300 $509,883 60.0%
359 HF Village Corner 02/01/08 N/A 121 119 300 $496,483 38.2%
360 HF 1381 Commonwealth Avenue 01/01/08 N/A 120 118 360 $443,721 63.4%
361 HF Pinegrove Place 12/01/07 N/A 120 117 300 $402,664 53.7%
TOTAL/WEIGHTED AVERAGE: 127 122 328 58.1%
<CAPTION>
- -------------------------------------------------------------------------------
LOAN SECURITY
NO. SELLER(1) PROPERTY NAME TYPE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
329 HF Pier 1- Lewisville Fee
330 MS Bozeman K-Mart/Applebees Leasehold
331 HF Emerald Lakes Mobile Home Park Fee
332 HF Your Extra Attic - Duluth Fee
333 HF Pier 1 - Canton Fee
334 HF DeSoto Estates MHP Fee
335 MS McWhorters - Cupertino Fee
336 HF Hide-Away-Hills MHP Fee
337 HF AAA Interstate SSF Fee
338 HF Your Extra Attic - Winters Chapel Fee
339 HF ABC Mini Storage Fee
340 HF Pep Boys- Gardena (14) Fee
341 HF Eastwood MHP Fee
342 HF Bama Self Storage Fee
343 HF Thomas Apartments Fee
345 HF Missouri Self Storage Facility Fee
346 HF A-American Self Storage-Bent Avenue Fee
347 HF The Pine Garden Apartments Fee
348 HF Stor-N-Lock #7 Fee
349 HF Green Valley Self Storage Fee
350 HF 130 Englewood Street Fee
351 MS Radio Shack - Blockbuster Center Fee
352 HF 1375 Commonwealth Avenue Fee
353 HF Stor-N-Lock #9 Fee
354 HF Mid Cajon Apartments Fee
355 HF Payless Shoe Source Fee
356 HF Panama City Mobile Home Estates Fee
357 HF Your Extra Attic - Norcross Fee
358 HF Terrace View Center Fee
359 HF Village Corner Fee
360 HF 1381 Commonwealth Avenue Fee
361 HF Pinegrove Place Fee
</TABLE>
II-9
<PAGE> 127
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME ADDRESS CITY STATE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Pacific Coast Plaza Shopping Center 2100 to 2191 Vista Way Oceanside CA
2 Norwood Gardens 86 Hampden Drive Norwood MA
3 Rookwood Pavilion 2692 Madison Road Cincinnati OH
4 Skold Self Storage Portfolio 16902 28th Avenue West Lynnwood WA
5 Affordable Self Storage 1621 196th SE Bothell WA
6 Skold Portfolio - Greenwood Self Storage 10113 Greenwood Ave. N. Seattle WA
7 Skold Portfolio - Evergreen Mini Storage 7979 Provost Rd NW Silverdale WA
8 351 California Street 351 California Street San Francisco CA
9 201 Sansome Street 201 Sansome Street San Francisco CA
10 Boulder Marriott 2660 Canyon Boulevard Boulder CO
11 Beverly Garland Hotel 4222 & 4224 North Vineland Avenue North Hollywood CA
12 Rancho Viejo Apts. 7885 West Flamingo Road Las Vegas NV
13 Lincoln on Memorial Apartments 7777 South Memorial Drive Tulsa OK
14 Davis Square Center 18-48 Holland Street Somerville MA
15 Fleming Portfolio 725 West Baseline Road Tempe AZ
16 Marymount Manor 1405 Marshall Street Redwood City CA
17 Marymount Tower 1321 Marshall St. Redwood City CA
18 Park Place Shopping Center NEC of US Route 250 & State Route 2 Perkins Township OH
19 A&P Food Market 500 Chestnut Ridge Road Woodcliff Lake NJ
20 The First National Bank Building 735-740 N. Water Street Milwaukee WI
21 Boylston Apartments 1163-1191 Boylston St. Boston MA
22 Greenbriar Apartments 200 Greenbriar Circle Petaluma CA
23 College Station Apartments 2401 Welch Avenue College Station TX
24 Kmart Plaza 2200 Harbour Blvd Costa Mesa CA
25 Rivershire Apartments 11215 W Morgan Avenue Greenfield WI
26 Haggerty Tech Center 19700-19892 Haggerty Road Livonia MI
27 Village at Chestnut Hill 673 VFW Parkway West Roxbury MA
28 Orland Park Exec. Ctr. 15255 South 94th Street Orland Park IL
29 GMAC Building 15303 South 94th Avenue Orland Park IL
30 Ridgecrest Terrace Apartments 5114 Washington Street West Roxbury MA
31 Fountain Square Shopping Center 320 East Bell Road Phoenix AZ
32 1550 Brickell 1550 Brickell Avenue Miami FL
32a Lafayette Towers 1301 Orleans Detroit MI
33 Lake Village Apartments 5427 Lake Murray Boulevard La Mesa CA
34 All Aboard Mini Storage Portfolio - Oakland 1090 29th Avenue Oakland CA
35 All Aboard Mini-Storage Portfolio - Ventura 375 South Laurel Street Ventura CA
36 All Aboard Mini Storage Portfolio - Van Nuys 15101 Raymer Street Van Nuys CA
37 Stor-Mor of Cypress 6322 Lincoln Avenue Cypress CA
38 Stor-Mor - Anaheim 1050 N. Armando Road Anaheim CA
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME ZIPCODE TYPE UNITS/NSF RENOVATED
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Pacific Coast Plaza Shopping Center 92054 Retail 245,170 1997
2 Norwood Gardens 02062 Multifamily 332 1971
3 Rookwood Pavilion 45208 Retail 245,370 1993
4 Skold Self Storage Portfolio 98012 Self-Storage 334,042 1996
5 Affordable Self Storage 98012 Self-Storage 38,700 1985
6 Skold Portfolio - Greenwood Self Storage 98133 Self-Storage 29,739 1990
7 Skold Portfolio - Evergreen Mini Storage 98383 Self-Storage 30,810 1985
8 351 California Street 94104 Office 131,592 1984
9 201 Sansome Street 94104 Office 48,926 1988
10 Boulder Marriott 80302 Hospitality 155 1997
11 Beverly Garland Hotel 91602 Hospitality 255 1989
12 Rancho Viejo Apts. 89117 Multifamily 312 1997
13 Lincoln on Memorial Apartments 74133 Multifamily 360 1997
14 Davis Square Center 01243 Office 104,051 1990
15 Fleming Portfolio 85283 Retail 256,157 1986
16 Marymount Manor 94063 Multifamily 112 1968
17 Marymount Tower 94063 Multifamily 100 1965
18 Park Place Shopping Center 44870 Retail 248,582 1991
19 A&P Food Market 07675 Retail 70,000 1996
20 The First National Bank Building 53202 Office 302,151 1990
21 Boylston Apartments 02115 Multifamily 318 1997
22 Greenbriar Apartments 94928 Multifamily 224 1975
23 College Station Apartments 77845 Multifamily 554 1983
24 Kmart Plaza 92627 Retail 189,071 1994
25 Rivershire Apartments 53228 Multifamily 224 1991
26 Haggerty Tech Center 48152 Industrial 150,133 1987
27 Village at Chestnut Hill 02167 Retail 58,379 1992
28 Orland Park Exec. Ctr. 60462 Office 74,000 1988
29 GMAC Building 60462 Office 29,302 1994
30 Ridgecrest Terrace Apartments 02167 Multifamily 191 1969
31 Fountain Square Shopping Center 85022 Retail 120,650 1986
32 1550 Brickell 33129 Multifamily 136 1988
32a Lafayette Towers 48207 Multifamily 584 1961
33 Lake Village Apartments 91942 Multifamily 205 1984
34 All Aboard Mini Storage Portfolio - Oakland 94601 Self-Storage 73,925 1996
35 All Aboard Mini-Storage Portfolio - Ventura 93001 Self-Storage 57,215 1996
36 All Aboard Mini Storage Portfolio - Van Nuys 91405 Self-Storage 68,050 1996
37 Stor-Mor of Cypress 90630 Self-Storage 57,653 1992
38 Stor-Mor - Anaheim 92806 Self-Storage 65,850 1992
</TABLE>
II-10
<PAGE> 128
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME ADDRESS CITY STATE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
39 Stor-Mor - Torrance 4300 Emerald Avenue Torrance CA
40 Cypress Lake Apartments 555 Butterfield Road Houston TX
41 Boardwalk Square NEC of Barry Road and Interstate 29 Kansas City MO
42 Whispering Lakes Apts. 45425 Whispering Lakes Blvd. Shelby Township MI
43 Eagle Ridge Retail Shopping Center 4230-4320 North Freeway Pueblo CO
44 Holiday Inn and Ramada Inn 3200 South Hermitage Road Hermitage PA
46 The Willows at Appleton Square 171 & 176 East Street Methuen MA
47 Ashley Park Apartments 8410 W. Bartel Road Houston TX
49 Brumby Apartments 111 North Marietta Parkway Marietta GA
50 Sun Vista RV Resort 7201 East Highway 80 Yuma AZ
51 Sunset Mall NWC NW Cornell Road and Murray Boulevard Portland OR
52 Ramada Hotel Valley Ho Resort 6850 Main Street Scottsdale AZ
53 Wynhaven Apartments 560 Powder Springs Road Marietta GA
54 Claridge Court Apartments 1 Pine Tree Boulevard Old Bridge NJ
55 Lake Forest Office 23101 Lake Center Drive Lake Forest CA
56 Acorn Self Storage 5366 N. Northwest Highway Chicago IL
57 ACORN III SELF STORAGE 1255 Town Line Road Mundelein IL
58 Central Plaza 33300 Alvarado Niles Road Union City CA
59 Bend Villa Court 1801 NE Lotus Drive Bend OR
60 Danbury Retail Center 110 Federal Road Danbury CT
61 Rose Apartments 11711 Ohio Avenue Los Angeles CA
62 Rose Medical Plaza 4545 E. 9th Avenue Denver CO
63 Phoenix Inn - Phoenix 2310 E Highland Ave Phoenix AZ
64 Mesa Verde 9700 W. 51st Place Wheat Ridge CO
65 Cedar Ridge Apts. 10101 - 10201 Cedar Lake Road Minnetonka MN
110 Mira Mesa Self Storage 7044 Flanders Drive San Diego CA
197 Sorrento Mesa SSF 6690 Mira Mesa Blvd. San Diego CA
66 Cardinal Crest MHC 906 19th Street Brodhead WI
67 Harbor Lights Mobile Home Community 902 Happy Valley Drive Menasha WI
68 Meadowview Place MHC 2400 Johnson Street Janesville WI
69 Skyview Terrace Mobile Home Park 2742 Main Street East Troy WI
71 Meadow Park Plaza 22733-22901 Hawthorne Boulevard Torrance CA
72 Lincoln Bank Building 4500 Cameron Valley Pkwy Charlotte NC
73 Walnut Ridge Apts 2500 Burney Road Arlington TX
74 Allsize Commercial Storage 25131 Costeau Street Laguna Hills CA
76 Elmwood Distribution Center 1420 Sams Street Harahan LA
77 Rt. 18 Mobile Home Comm. Portfolio 849 & 893 Henderson Ave. Washington PA
78 Berrytree Apartments 2950 Whitehall Drive Okemos MI
79 Silver Drive Office/Warehouse Buildings 2601 Silver Drive Columbus OH
</TABLE>
<TABLE>
<CAPTION>
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LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME ZIPCODE TYPE UNITS/NSF RENOVATED
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
39 Stor-Mor - Torrance 90503 Self-Storage 93,300 1976
40 Cypress Lake Apartments 77090 Multifamily 216 1997
41 Boardwalk Square 38119 Retail 146,824 1989
42 Whispering Lakes Apts. 48317 Multifamily 184 1997
43 Eagle Ridge Retail Shopping Center 81003 Retail 113,595 1996
44 Holiday Inn and Ramada Inn 16159 Hospitality 304 1974
46 The Willows at Appleton Square 01844 Multifamily 140 1989
47 Ashley Park Apartments 77054 Multifamily 284 1997
49 Brumby Apartments 30060 Multifamily 167 1995
50 Sun Vista RV Resort 85365 Manufactured Housing 1,230 1986
51 Sunset Mall 97229 Retail 113,145 1996
52 Ramada Hotel Valley Ho Resort 85251 Hospitality 292 1961
53 Wynhaven Apartments 30064 Multifamily 296 1992
54 Claridge Court Apartments 08857 Multifamily 324 1995
55 Lake Forest Office 92630 Office 124,271 1985
56 Acorn Self Storage 60630 Self-Storage 74,937 1988
57 ACORN III SELF STORAGE 60060 Self-Storage 80,090 1991
58 Central Plaza 94587 Industrial 170,813 1989
59 Bend Villa Court 97701 Congregate Care 123 1991
60 Danbury Retail Center 06810 Retail 61,155 1997
61 Rose Apartments 90025 Multifamily 48 1991
62 Rose Medical Plaza 80220 Office 81,477 1976
63 Phoenix Inn - Phoenix 85016 Hospitality 120 1995
64 Mesa Verde 80002 Multifamily 276 1990
65 Cedar Ridge Apts. 55305 Multifamily 180 1996
110 Mira Mesa Self Storage 92121 Self-Storage 103,680 1988
197 Sorrento Mesa SSF 92121 Self-Storage 78,020 1996
66 Cardinal Crest MHC 53520 Manufactured Housing 109 1984
67 Harbor Lights Mobile Home Community 54952 Manufactured Housing 95 1969
68 Meadowview Place MHC 53545 Manufactured Housing 102 1965
69 Skyview Terrace Mobile Home Park 53120 Manufactured Housing 109 1965
71 Meadow Park Plaza 90505 Retail 56,101 1986
72 Lincoln Bank Building 28211 Office 57,131 1989
73 Walnut Ridge Apts 76006 Multifamily 264 1982
74 Allsize Commercial Storage 92653 Self-Storage 100,402 1986
76 Elmwood Distribution Center 70123 Industrial 354,600 1977
77 Rt. 18 Mobile Home Comm. Portfolio 15301 Manufactured Housing 412 1961
78 Berrytree Apartments 48864 Multifamily 240 1967
79 Silver Drive Office/Warehouse Buildings 43211 Industrial 135,600 1997
</TABLE>
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PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME ADDRESS CITY STATE ZIPCODE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
80 Fairfield Place Apartments 2009-2071 Fairfield Place O'Fallon IL 62269
81 Holly Ravine Shopping Center Evesham & Springdale Roads Cherry Hill NJ 08003
82 Reeseville Acres 404 Lincoln Ave. Reeseville WI 53579
83 Spring Brook Village MHP 2601 Colley Rd Beloit WI 53511
84 Bridgeview Gardens MHC 888 E Shady Lane Neenah WI 54956
85 Palm Springs Plaza 10299-10385 Royal Palm Boulevard Coral Springs FL 33605
86 Plaza on the Boulevard 12800-12950 Beach Boulevard Stanton CA 90680
87 Burtons Landing 3790 Whispering Way S.E. Grand Rapids MI 49546
88 Comfort Inn - Madison 4822 East Washington Ave Madison WI 53704
89 605 Market Street 605 Market Street San Francisco CA 94105
90 Harford Mobile Village 1115 Paul Martin Drive Edgewood MD 21040
91 511 East 80th Street 511 East 80th Street New York NY 10021
93 Lakeside Park Mobile Home Park 11111 Lakeview Drive Hagerstown MD 21740
94 Hampton Inn - Elgin 405 Airport Road Elgin IL 60123
95 AAA Chatsworth Self Storage 9111 Jordan Avenue Chatsworth CA 91311
96 Triton Valley Estates Portfolio Hemstreet and Porterville Roads Marilla NY 14052
97 Triton Valley Estates - Derby 7979 Erie Road Derby NY 14047
98 Stoneridge Apts. 10615 Beechnut Drive Houston TX 77072
99 29 Dunham Road 29 Dunham Road Billerica MA 02160
100 35 Dunham Road 35 Dunham Road Billerica MA 02160
101 Pacific View Apartments 335 and 380 Talbot Avenue Pacifica CA 94111
102 Sonoma Pointe Apartments 19349 Riverside Dr. El Verano CA 95476
103 A-1 Self Storage - Anaheim 3535 West Ball Road Anaheim CA 92804
104 Holiday Ranch & Happy Landings MHC 1375 South Military Trail West Palm Beach FL 33415
105 Pompano Palms Apartments Various Pompano FL 33060
106 Brewery Apartments 1301 West Fletcher Chicago IL 60657
107 Arbor Woods Mobile Home Community 1993 Arbor Woods Boulevard Ypsilanti MI 48198
108 Gardens at Negley 1001 North Negley Avenue Pittsburgh PA 15206
109 Coral Ridge Office Center 3696 North Federal Highway Fort Lauderdale FL 33308
111 South Street Office Center 210 South Street Boston MA 02111
112 Lake of the Pines 8755 West 21st Street Indianapolis IN 46234
113 Alameda Crossing 105-145 S. Sheridan Boulevard Lakewood CO 80226
114 16 Bleeker Street 16 Bleeker Street Millburn Township NJ 07041
115 Knox Village 85 Blooming Grove Turnpike New Windsor NY 12553
117 Monmouth MHP 4017 U.S. Highway 1 Monmouth Junction NJ 08852
118 American Mini Storage 700-701 Lombardi Court Santa Rosa CA 95407
119 Edison Lock-Up Self Storage 724 Old Post Road Edison NJ 08817
120 Saf Keep SSF - San Leandro 655 Marina Blvd. San Leandro CA 94577
121 The Oaks Office Building 935-1001 Craig Road Creve Coeur MO 63146
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME TYPE UNITS/NSF RENOVATED
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
80 Fairfield Place Apartments Multifamily 108 1995
81 Holly Ravine Shopping Center Retail 38,698 1990
82 Reeseville Acres Manufactured Housing 36 1975
83 Spring Brook Village MHP Manufactured Housing 137 1972
84 Bridgeview Gardens MHC Manufactured Housing 192 1974
85 Palm Springs Plaza Retail 123,066 1987
86 Plaza on the Boulevard Retail 97,595 1989
87 Burtons Landing Multifamily 200 1977
88 Comfort Inn - Madison Hospitality 152 1995
89 605 Market Street Office 51,906 1991
90 Harford Mobile Village Manufactured Housing 392 1974
91 511 East 80th Street Multifamily 126 1963
93 Lakeside Park Mobile Home Park Manufactured Housing 364 1972
94 Hampton Inn - Elgin Hospitality 109 1994
95 AAA Chatsworth Self Storage Self-Storage 98,220 1987
96 Triton Valley Estates Portfolio Manufactured Housing 202 1972
97 Triton Valley Estates - Derby Manufactured Housing 137 1971
98 Stoneridge Apts. Multifamily 268 1976
99 29 Dunham Road Industrial 70,000 1984
100 35 Dunham Road Industrial 65,940 1984
101 Pacific View Apartments Multifamily 61 1964
102 Sonoma Pointe Apartments Multifamily 70 1989
103 A-1 Self Storage - Anaheim Self-Storage 93,010 1995
104 Holiday Ranch & Happy Landings MHC Manufactured Housing 266 1964
105 Pompano Palms Apartments Multifamily 268 1960
106 Brewery Apartments Multifamily 77 1987
107 Arbor Woods Mobile Home Community Manufactured Housing 244 1995
108 Gardens at Negley Multifamily 149 1994
109 Coral Ridge Office Center Office 33,101 1988
111 South Street Office Center Office 96,698 1996
112 Lake of the Pines Manufactured Housing 269 1989
113 Alameda Crossing Retail 82,739 1985
114 16 Bleeker Street Industrial 178,414 1980
115 Knox Village Multifamily 317 1965
117 Monmouth MHP Manufactured Housing 280 1970
118 American Mini Storage Self-Storage 112,315 1986
119 Edison Lock-Up Self Storage Self-Storage 82,502 1987
120 Saf Keep SSF - San Leandro Self-Storage 104,904 1980
121 The Oaks Office Building Office 70,387 1983
</TABLE>
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<TABLE>
<CAPTION>
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LOAN
NO. PROPERTY NAME ADDRESS CITY STATE ZIPCODE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
122 Vista Manor Mobile Home Park 200 Olive Avenue Vista CA 92083
123 Nova Self-Storage 7349 Suva Street Downey CA 90240
124 Lantern Estates 2909 S. Lynhurst Drive Indianapolis IN 46241
125 Harvard Medical Park 1813 West Harvard Avenue Roseburg OR 97470
126 A American Self Storage 10101 South Firmona Avenue Inglewood CA 90304
127 Commerce Crossing 3301-3331 Clarendon Blvd. New Bern NC 28561
128 Woodshire Mobile Home Park 3224 South Military Highway Chesapeake VA 23323
129 Leender's Portfolio 29th and Country Club Avenue Troutdale OR 97060
130 Copps Food Market 2400 West Wisconsin Avenue Appleton WI 54914
131 Harbour East MHC 800 West Hundred Road Chester VA 23831
132 LAGO VISTA MHP 420 East 57th Street Loveland CO 80538
133 Stor N' Lok 4026 E. Mission Boulevard Montclair CA 91766
134 A-American Pico 4174 Pico Boulevard Los Angeles CA 90019
135 Storage Depot-North SSF 4401 N. 6th St. Harrisburg PA 17105
136 Storage Depot-West SSF 350 S. 7th St Harrisburg PA 17043
137 San Luis Obisbo Self Storage 154 Suburban Road San Luis Obispo CA 93401
138 West L.A. Self Storage 5450 Slauson Avenue Culver City CA 90230
139 Willow Creek Apts. 1401 South Nicolet Road Grand Chute WI 54915
140 Redhill MHP 700 Rimrock Drive Gallup NM 87305
141 Phoenix Inn - Troutdale 477 NW Phoenix Drive Troutdale OR 97060
142 North Valley Self Storage Facility 13043 Foothill Blvd. Sylmar CA 91342
143 Stone Creek Plaza 2200-2260 Morris Road Flower Mound TX 75028
144 Everett Portfolio 10011 3rd Avenue Everett WA 98208
145 Sheffield Lofts 999 West Wolfram Chicago IL 60657
146 Paramount Self Storage 8160 East Rosecrans Avenue Paramount CA 90723
147 Allstate Insurance Building 5400 Riverside Drive Macon GA 31210
148 Mira Mesa Retirement Community 380 North Limit Street Colorado Springs CO 80904
149 City Gables Apts. 1611 Pleasant St. Lauderdale MN 55108
150 Windsorland MHC 9290 Old Redwood Highway Windsor CA 95492
151 Budget Mini Storage - Phoenix 4010 W. Indian School Road Phoenix AZ 85019
152 ABQ Mini Storage 4715 McLeod NE Albuquerque NM 87109
153 Safeway Self Storage Facility 116 South Western Avenue Los Angeles CA 90004
154 Southgate Square Apartments 3775 S 27th Street Milwaukee WI 53202
155 Palm Shadows Apartments 1815 East Speedway Boulevard Tucson AZ
156 Park Drive Apts. 231-235 Park Drive Boston MA 02139
157 Continental Luxury Apartments 3341-51 Warrensville Center Road Shaker Heights OH 44120
158 Dohr Apartments 1229 Latta Road Greece NY 14612
159 Belmont Self Storage 1520 Industrial Way Belmont CA 94002
160 Westview Plaza Shopping Center 2929 North 75th Avenue Phoenix AZ 85033
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME TYPE UNITS/NSF RENOVATED
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
122 Vista Manor Mobile Home Park Manufactured Housing 159 1971
123 Nova Self-Storage Self-Storage 110,825 1984
124 Lantern Estates Manufactured Housing 220 1965
125 Harvard Medical Park Office 38,285 1991
126 A American Self Storage Self-Storage 90,947 1994
127 Commerce Crossing Retail 59,673 1997
128 Woodshire Mobile Home Park Manufactured Housing 261 1972
129 Leender's Portfolio Manufactured Housing 126 1996
130 Copps Food Market Retail 82,096 1995
131 Harbour East MHC Manufactured Housing 282 1971
132 LAGO VISTA MHP Manufactured Housing 300 1972
133 Stor N' Lok Self-Storage 83,589 1985
134 A-American Pico Self-Storage 46,450 1987
135 Storage Depot-North SSF Self-Storage 81,800 1989
136 Storage Depot-West SSF Self-Storage 45,192 1986
137 San Luis Obisbo Self Storage Self-Storage 101,575 1993
138 West L.A. Self Storage Self-Storage 68,977 1979
139 Willow Creek Apts. Multifamily 100 1985
140 Redhill MHP Manufactured Housing 428 1975
141 Phoenix Inn - Troutdale Hospitality 73 1992
142 North Valley Self Storage Facility Self-Storage 70,695 1985
143 Stone Creek Plaza Retail 44,517 1995
144 Everett Portfolio Self-Storage 97,730 1990
145 Sheffield Lofts Multifamily 47 1991
146 Paramount Self Storage Self-Storage 73,275 1985
147 Allstate Insurance Building Office 39,101 1989
148 Mira Mesa Retirement Community Congregate Care 55,842 1987
149 City Gables Apts. Multifamily 84 1988
150 Windsorland MHC Manufactured Housing 220 1973
151 Budget Mini Storage - Phoenix Self-Storage 159,873 1997
152 ABQ Mini Storage Self-Storage 72,750 1984
153 Safeway Self Storage Facility Self-Storage 73,439 1991
154 Southgate Square Apartments Multifamily 168 1977
155 Palm Shadows Apartments Multifamily 151 1962
156 Park Drive Apts. Multifamily 80 1970
157 Continental Luxury Apartments Multifamily 66 1997
158 Dohr Apartments Multifamily 112 1959
159 Belmont Self Storage Self-Storage 61,435 1996
160 Westview Plaza Shopping Center Retail 94,214 1988
</TABLE>
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<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME ADDRESS CITY STATE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
161 Hamilton House 700 Boulevard East Weehawken NJ
162 Linkletter Self Storage Facility 42130 Lyndie Lane Temecula CA
163 Lyndie Office Building 42145 Lyndie Lane Temecula CA
164 Juanita Bay Office Building 9757 NE Juanita Drive Kirkland WA
165 Fairway Greens Apartments 11011 Woodmeadow Parkway Dallas TX
166 Rolling Hills 2900 North Hillfield Road Layton UT
167 Barnes & Noble 1545 Briargate Boulevard Colorado Springs CO
168 Diamond Grove 5151 N. Kain Avenue Tucson AZ
169 Yankee Mobile Home Park 3 Idlewood Lane Kittery ME
170 Skylark Village I Mobile Home Park 900 29th Street SE Auburn WA
171 Red Hill Estates 633 Apple Street Red Hill PA
172 Desert Springs Apartments 1750 East Bell Road Phoenix AZ
173 Lake Haven/Tall Pines 11003-39 Grays Corner Road Berlin MD
174 Green Hill MHC 210 Green Hill Drive Green Lane PA
175 Fenton Walgreens 1001 Bowles Avenue Fenton MO
176 Skylark II Village Mobile Home Park 3105 M Street SE Auburn WA
177 Laboratory Building 401 Queen Anne Avenue N. Seattle WA
178 Sorrento Valley Self Storage 10531 Sorrento Valley Road San Diego CA
179 Westminster Garden 6 Andrea Drive Vestal NY
180 Hillside Courtyard 671 State Highway 179 Sedona AZ
181 Village Fair Shopping Center 26688 Ryan Road Warren MI
182 Just For Feet 1565 Briargate Boulevard Colorado Springs CO
183 Airway Trade Center 2225-2235 Avenida Costa North San Diego CA
184 989-1001 Watertown Street 989-1001 Watertown Street Newton MA
185 Kimberly Place 430 & 450 Kimberly Drive Waukesha WI
186 Casa Del Sol Apartment 5155 N. Fresno Street Fresno CA
187 Lake Geneva Apts. 1110 Wells Street Lake Geneva WI
188 Austin Commons Industrial Building 7111 and 7171 North Austin Avenue Niles IL
189 Fairway Executive Center 455 Fairway Drive Deerfield Beach FL
190 National City Self Storage Facility 430 W. 30th Street National City CA
191 Kawaihae Harbor Shopping Center 61-3665 Kawaihae/Mahukona Road Kawaihae HI
192 Greenbriar Business Park 4420-28 Taggart Creek Road Charlotte NC
193 St. Vrain Village MHP 446 S. Francis Street Longmont CO
194 2000 E. Irvington Road 2000 E. Irvington Road Tucson AZ
195 Safe Space Self Storage 2591 Jolly Road Okemos MI
196 Arbor Oaks MHC 36323 Arbor Oaks Drive Zephyrhills FL
198 Windsor Estates 1831 S. 11th Street Kalamazoo MI
199 A-American Self Storage Facility-Palmdale 37909 East 10th Street Palmdale CA
200 Maple Tree Plaza 3335 North Five Mile Road Boise ID
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME ZIPCODE TYPE UNITS/NSF RENOVATED
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
161 Hamilton House 07087 Multifamily 99 1962
162 Linkletter Self Storage Facility 9261 Self-Storage 55,692 1990
163 Lyndie Office Building 92590 Office 26,891 1990
164 Juanita Bay Office Building 98034 Office 36,259 1983
165 Fairway Greens Apartments 75228 Multifamily 80 1990
166 Rolling Hills 84041 Manufactured Housing 355 1976
167 Barnes & Noble 80920 Retail 25,050 1997
168 Diamond Grove 85705 Manufactured Housing 153 1973
169 Yankee Mobile Home Park 03904 Manufactured Housing 185 1982
170 Skylark Village I Mobile Home Park 98002 Manufactured Housing 140 1980
171 Red Hill Estates 18076 Manufactured Housing 149 1994
172 Desert Springs Apartments 85022 Multifamily 135 1984
173 Lake Haven/Tall Pines 21811 Manufactured Housing 230 1970
174 Green Hill MHC 18054 Manufactured Housing 142 1980
175 Fenton Walgreens 63206 Retail 15,120 1997
176 Skylark II Village Mobile Home Park 98002 Manufactured Housing 115 1955
177 Laboratory Building 98119 Office 14,400 1989
178 Sorrento Valley Self Storage 92121 Self-Storage 77,475 1997
179 Westminster Garden 13850 Multifamily 144 1971
180 Hillside Courtyard 86336 Retail 26,316 1990
181 Village Fair Shopping Center 48091 Retail 48,057 1997
182 Just For Feet 80920 Retail 16,500 1997
183 Airway Trade Center 92173 Industrial 121,056 1989
184 989-1001 Watertown Street 02165 Office 33,521 1940
185 Kimberly Place 53188 Multifamily 82 1988
186 Casa Del Sol Apartment 93710 Multifamily 100 1996
187 Lake Geneva Apts. 53147 Multifamily 96 1990
188 Austin Commons Industrial Building 60714 Industrial 80,247 1985
189 Fairway Executive Center 33441 Office 33,010 1984
190 National City Self Storage Facility 91950 Self-Storage 72,019 1989
191 Kawaihae Harbor Shopping Center 96743 Retail 15,535 1986
192 Greenbriar Business Park 28208 Industrial 61,000 1986
193 St. Vrain Village MHP 80501 Manufactured Housing 136 1967
194 2000 E. Irvington Road 85714 Retail 42,757 1985
195 Safe Space Self Storage 48864 Self-Storage 75,477 1979
196 Arbor Oaks MHC 33541 Manufactured Housing 157 1991
198 Windsor Estates 49009 Congregate Care 51 1989
199 A-American Self Storage Facility-Palmdale 93550 Self-Storage 81,300 1988
200 Maple Tree Plaza 83706 Retail 20,379 1985
</TABLE>
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PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME ADDRESS CITY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
201 17th & State Shops 1701 West State Street Boise
202 Oxford Corners Southeast Corner of Roosevelt Road and Main Street Lombard
203 Riverwood 3328-3469 S 113th St West Allis
204 3500 W. Segerstrom 3500 W. Segerstrom Avenue Santa Ana
205 Oakwood MHP 9002 Sheridan Road Kenosha
206 Calexico Mobile Home Park 101 Vernardo Drive Calexico
207 American Harbor Self Storage 7227 South R.L. Thorton Fwy. Dallas
208 Bennett Avenue Apartments 56-64 Bennett Avenue New York
209 Friendly Village MHC 2201 Miller Road Arlington
210 Strawberry Hills Apartments 154 Richardson Drive Vallejo
211 Worthington Business Center 530 Lakeview Plaza Boulevard Worthington
212 Rancho Del Rio MHP 204 West Calle Primera San Ysidro
213 A-1 Self Storage - El Cajon, CA 1370 North Magnolia Ave. El Cajon
214 28308 Industry Drive 28308 Industry Drive Valencia
215 Belmont Self Storage II 1509 Industrial Way Belmont
217 Sunland Manor 1050 South Stapley Drive Mesa
218 Storage Solutions 543 W. Elliot Road Tempe
219 Craycroft Gardens 5402 East 30th Street Tucson
220 Fleming Creek Circle Apartments 5-82 Fleming Creek Circle Greece
221 Tyler Mall Mini Storage 10090 Indiana Avenue Riverside
222 Alyson Manor Mobile Estates 2021 Stevens Drive Richland
223 Ogden Days Inn 3306 Washington Boulevard Ogden
225 99 Brainard Road 99 Brainard Road Boston
226 Securgard Self Storage 391 E. Round Grove Road Lewisville
227 Shattuck Avenue Self Storage Facility 2721 Shattuck Avenue Berkeley
228 Meadowbrook Village 1240 W. Hummingbird West Valley City
229 11959 Canyon Road 11959 SW Canyon Rd Beaverton
230 Walgreens - Monterey NWC of Fremont Blvd. & Canyon del Rey Seaside
231 Southshore Point 3540-3597 E. Norwich Court St. Francis
232 Petcare Superstore 1855 South Randall Road Geneva
233 Memorial Crossing 101st & Memorial; 71st St. & Garnett Tulsa
234 Bethany Square 6001-6049 North 43rd Avenue Phoenix
235 Royal Highlander 826 W. Inverness Drive Peoria
236 932 N. Rush 932 North Rush Street Chicago
237 Fineberg Lancaster Apartments 33-39 Lancaster Terrace Brookline
238 Fineberg Beacon Apartments 1589-95 Beacon Street Brookline
239 Centennial Estates 9885 Mills Station Road Sacramento
240 Armored Self Storage Facility 8355 E. McDonald Drive Scottsdale
241 Extra Space Self Storage Facility 3901 West Sunrise Boulevard Lauderhill
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME STATE ZIPCODE TYPE UNITS/NSF RENOVATED
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
201 17th & State Shops ID 83702 Retail 11,440 1986
202 Oxford Corners IL 60148 Retail 23,000 1989
203 Riverwood WI 53227 Multifamily 64 1989
204 3500 W. Segerstrom CA 92704 Industrial 83,053 1992
205 Oakwood MHP WI 53143 Manufactured Housing 215 1975
206 Calexico Mobile Home Park CA 92231 Manufactured Housing 148 1960
207 American Harbor Self Storage TX 75232 Self-Storage 62,850 1986
208 Bennett Avenue Apartments NY 10033 Multifamily 75 1990
209 Friendly Village MHC TX 76006 Manufactured Housing 251 1970
210 Strawberry Hills Apartments CA 94589 Multifamily 64 1982
211 Worthington Business Center OH 43085 Industrial 68,000 1986
212 Rancho Del Rio MHP CA 92173 Manufactured Housing 130 1986
213 A-1 Self Storage - El Cajon, CA CA 92020 Self-Storage 77,710 1989
214 28308 Industry Drive CA 91355 Industrial 54,060 1997
215 Belmont Self Storage II CA 94002 Self-Storage 38,325 1997
217 Sunland Manor AZ 85204 Multifamily 71 1979
218 Storage Solutions AZ 85284 Self-Storage 67,796 1995
219 Craycroft Gardens AZ 85711 Multifamily 101 1963
220 Fleming Creek Circle Apartments NY 14616 Multifamily 100 1966
221 Tyler Mall Mini Storage CA 92503 Self-Storage 92,171 1990
222 Alyson Manor Mobile Estates WA 98506 Manufactured Housing 126 1972
223 Ogden Days Inn UT 84401 Hospitality 109 1992
225 99 Brainard Road MA 02139 Multifamily 59 1994
226 Securgard Self Storage TX 75067 Self-Storage 46,980 1995
227 Shattuck Avenue Self Storage Facility CA 94705 Self-Storage 27,415 1989
228 Meadowbrook Village UT 84123 Manufactured Housing 303 1973
229 11959 Canyon Road OR 97005 Retail 28,307 1996
230 Walgreens - Monterey CA 93955 Retail 13,905 1997
231 Southshore Point WI 53235 Multifamily 48 1993
232 Petcare Superstore IL 60134 Retail 14,819 1997
233 Memorial Crossing OK 74133 Retail 26,000 1996
234 Bethany Square AZ 85019 Retail 95,048 1973/1978/1986
235 Royal Highlander IL 61615 Manufactured Housing 279 1972
236 932 N. Rush IL 60611 Retail 6,838 1994
237 Fineberg Lancaster Apartments MA 02146 Multifamily 43 1994
238 Fineberg Beacon Apartments MA 02146 Multifamily 37 1930
239 Centennial Estates CA 95827 Manufactured Housing 183 1983
240 Armored Self Storage Facility AZ 85250 Self-Storage 42,233 1988
241 Extra Space Self Storage Facility FL 33311 Self-Storage 93,690 1985
</TABLE>
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PROPERTY INFORMATION
<TABLE>
<CAPTION>
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LOAN
NO. PROPERTY NAME ADDRESS CITY STATE ZIPCODE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
242 Portgage Green MHP 20227 80th Avenue NE Arlington WA 98223
243 A-American El Cajon 1151 Greenfield Drive El Cajon CA 92021
244 7 Mt. Hood Road 7-19 Mt. Hood Road Boston MA 02139
245 370 Diablo Road 370 Diablo Road Danville CA 94526
246 Ashe Road Bus. Park 4300-4600 Ashe Road Bakersfield CA 93313
247 Gilbert Self Storage 530 N. Gilbert Fullerton CA 92633
248 Lamar Mini Storage 1650 E. Lamar Road Phoenix AZ 85016
249 El Dorado Mobile Home Park 6435 Orange Avenue Sacramento CA 95823
250 Boston Market/Kinkos 10 Fort Eddy Road Concord NH 03301
251 British Square 5700 Shattalon Road Winston-Salem NC 27106
252 Valencia Gardens 190 West Valencia Road Tucson AZ 85713
253 Providence Hill Office Building 10301 Democracy Lane Fairfax VA 22030
254 A-AMERICAN SELF STORAGE-Valencia 26053 Bouquet Canyon Road Santa Clarita CA 91350
255 Calhoun Shores Apartments 3101 East Calhoun Parkway Minneapolis MN 55408
256 Wyncrossing Apartments 2235 Plaster Road N.E. Atlanta GA 30324
257 Garcia Apartments 2150 NW 9th Street Miami FL 33125
258 Stor-N-Lock #11 4400 W State St. Boise ID 83703
259 Sycamore Hill Apartments 5915-5995 S. Sycamore Street Littleton CO 80120
260 3400 W. Segerstrom 3400 W. Segerstrom Ave. Santa Ana CA 92704
261 Larkfield Self Storage 5241 Old Redwood Highway Santa Rosa CA 95403
262 Bellmere Apartments 816 North Bell Denton TX 76201
263 Armored Mini Storage - 52nd Street 2845 North 52nd Street Phoenix AZ 85008
264 CVS - Decatur 2738 North Decatur Road Atlanta GA 30033
265 Southwest Professional Plaza 2122-2224 N. Craycroft Road Tucson AZ 85712
266 Tanglewood 9800-9860 Pines Boulevard Pembroke FL 33024
267 Tracy Portfolio 25000 Pitkin Road Spring TX 77386
268 Casa del Rey Apartments 1320 Potter Drive Colorado Springs CO 0
269 A-American SSF - National City 525 West 20th Street National City CA 91950
270 B&R Mini Storage 615 7th Ave Longview WA 98632
271 3630 West Garry Ave. 3630 West Garry Ave. Santa Ana CA 92704
272 Twin Oaks Manor 202, 218 & 222 Twin Oaks Rd. Akron OH 44304
273 Etiwanda Self Storage 13473 Foothill Boulevard Fontana CA 92335
274 Your Extra Attic - Stockbridge 7428 Davdison Circle East Stockbridge GA 30281
275 116 Washington Street 116 Washington Street Boston MA 02135
276 Eugene Camlu Retirement Center 2811 Bailey Lane Eugene OR 97401
277 Newgate Apartments 1115 East Pembroke Avenue Hampton VA 23669
278 Roosevelt Apartments 2450 Overlook Road Cleveland Heights OH 44106
279 Park Place Plaza Shopping Center 5002-5050 North Academy Blvd. Colorado Springs CO 80918
280 Quinsigamond Plaza 87-97 Boston Turnpike Shrewsbury MA 01545
</TABLE>
<TABLE>
<CAPTION>
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LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME TYPE UNITS/NSF RENOVATED
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
242 Portgage Green MHP Manufactured Housing 79 1992
243 A-American El Cajon Self-Storage 65,174 1989
244 7 Mt. Hood Road Multifamily 25 1994
245 370 Diablo Road Office 14,521 1987
246 Ashe Road Bus. Park Industrial 72,951 1986
247 Gilbert Self Storage Self-Storage 73,304 1986
248 Lamar Mini Storage Self-Storage 38,142 1982
249 El Dorado Mobile Home Park Manufactured Housing 128 1961
250 Boston Market/Kinkos Retail 9,500 1996
251 British Square Multifamily 93 1986
252 Valencia Gardens Multifamily 160 1984
253 Providence Hill Office Building Office 46,519 1985
254 A-AMERICAN SELF STORAGE-Valencia Self-Storage 41,590 1995
255 Calhoun Shores Apartments Multifamily 42 1964
256 Wyncrossing Apartments Multifamily 63 1970
257 Garcia Apartments Multifamily 65 1973
258 Stor-N-Lock #11 Self-Storage 67,920 1995
259 Sycamore Hill Apartments Multifamily 50 1996
260 3400 W. Segerstrom Industrial 53,754 1990
261 Larkfield Self Storage Self-Storage 73,365 1988
262 Bellmere Apartments Multifamily 60 1997
263 Armored Mini Storage - 52nd Street Self-Storage 44,077 1987
264 CVS - Decatur Retail 13,325 1997
265 Southwest Professional Plaza Office 40,563 1972
266 Tanglewood Office 17,745 1986
267 Tracy Portfolio Office 53,314 1994
268 Casa del Rey Apartments Multifamily 83 1971
269 A-American SSF - National City Self-Storage 48,207 1996
270 B&R Mini Storage Self-Storage 75,760 1994
271 3630 West Garry Ave. Industrial 40,495 1974
272 Twin Oaks Manor Multifamily 78 1929
273 Etiwanda Self Storage Self-Storage 74,455 1987
274 Your Extra Attic - Stockbridge Self-Storage 48,245 1990
275 116 Washington Street Multifamily 40 1994
276 Eugene Camlu Retirement Center Congregate Care 63 1972
277 Newgate Apartments Multifamily 100 1997
278 Roosevelt Apartments Multifamily 40 1995
279 Park Place Plaza Shopping Center Retail 35,473 1978
280 Quinsigamond Plaza Retail 30,980 1994
</TABLE>
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PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME ADDRESS CITY STATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
281 Hav-A-Storage Self Storage Facility 1600 Industrial Blvd. Lake Havasu City AZ
282 Brackett Air Business Park 1915-1945 McKinley Avenue La Verne CA
283 Van Buren Self Storage 3167 Van Buren Blvd. Riverside CA
284 5 Walbridge Street 5 Walbridge Street Boston MA
285 EZ Storage Center Self Storage Facility 8000 Highway 395 North Reno NV
286 Bethel Self Storage 41 Durant Avenue Bethel CT
287 Handi Self Storage 160 W. Tiverton Way Lexington KY
288 Green Valley Storage (Windmill) 2525 Windmill Pkwy Henderson NV
289 Woodgate Mobile Home Village 2331 Frick Road Houston TX
290 Aire Libre Apartments 16437 N. 31st Street Phoenix AZ
291 Shattalon Terrace Apartments 5470-5472 Shattalon Road Winston-Salem NC
292 Brookhaven MHC 895 S.W. Meadowcreek Way Beaverton OR
294 Heritage/Gibson Mobile Home Village 8810 Pocahontas Trail and 925 Adams Road Williamsburg VA
295 River Point Condos 9823 Summerwood Circle Dallas TX
296 Villa Vallejo 1850 East Maryland Avenue Phoenix AZ
297 CVS - Austell 1172 Milford Church Road Atlanta GA
298 Crown Ridge Apartments Longbow Lane & Excalibur Place Columbus OH
299 1334 Commonwealth Avenue 1334 Commonwealth Avenue Boston MA
300 Mini U Novi 39670 Grand River Novi MI
301 Stor-N-Lock #10 6950 South 2300 East Salt Lake City UT
302 2nd Garage Self Storage 13443 Rosecrans Avenue Santa Fe Springs CA
303 Virginia Court Apartments 362-372 Bath Avenue Long Branch NJ
304 Oakview Manor Apartments 4720 Byrd Avenue Racine WI
305 Timberline Forest Apartments 1503 & 1431 Sherwood Forest Houston TX
306 The Village Plaza 20725 Valley Green Drive San Jose CA
307 9 Egremont Road 9-15 Egremont Road Boston MA
308 Affordable Self Storage 204 Bay Creek Road Loganville GA
309 6630 Baltimore National Pike 6630 Baltimore National Pike Catonsville MD
310 4 Vinal Street 4-8 Vinal Street Boston MA
311 Whiskey Bottom Business Center 9855-9865 U.S. Route 1 Laurel MD
312 Royal Estates MHP 1992 South Schuyler Avenue Kankakee IL
313 Pep Boys - Streamwood 160 North Barrington Road Streamwood IL
314 Orange Avenue Industrial Park 1109 W. Orange Avenue Tallahassee FL
315 Men's Warehouse 8095 Giacosa Place Memphis TN
316 Pier 1 - Saginaw 2508 Tittabawasee Road Saginaw MI
317 Boulevard Apartments 2374 Euclid Heights Boulevard Cleveland Heights OH
318 Stor-N-Lock #8 8620 South 300 West Sandy UT
319 Park Plaza Retail Center 35 W. Baseline Tempe AZ
320 Claremont Self Storage 525 West Arrow Highway Claremont CA
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME ZIPCODE TYPE UNITS/NSF RENOVATED
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
281 Hav-A-Storage Self Storage Facility 86403 Self-Storage 168,618 1976
282 Brackett Air Business Park 91750 Industrial 43,665 1989
283 Van Buren Self Storage 92503 Self-Storage 56,519 1984
284 5 Walbridge Street 02139 Multifamily 43 1970
285 EZ Storage Center Self Storage Facility 89506 Self-Storage 79,240 1997
286 Bethel Self Storage 06801 Self-Storage 48,550 1987
287 Handi Self Storage 40503 Self-Storage 53,650 1986
288 Green Valley Storage (Windmill) 89014 Self-Storage 74,686 1994
289 Woodgate Mobile Home Village 77038 Manufactured Housing 141 1986
290 Aire Libre Apartments 85032 Multifamily 80 1985
291 Shattalon Terrace Apartments 27106 Multifamily 80 1984
292 Brookhaven MHC 97006 Manufactured Housing 55 1995
294 Heritage/Gibson Mobile Home Village 23185 Manufactured Housing 122 1967
295 River Point Condos 75243 Multifamily 34 1985
296 Villa Vallejo 85016 Multifamily 71 1970
297 CVS - Austell 30060 Retail 10,125 1997
298 Crown Ridge Apartments 43235 Multifamily 40 1981
299 1334 Commonwealth Avenue 02134 Multifamily 36 1994
300 Mini U Novi 48375 Self-Storage 59,210 1996
301 Stor-N-Lock #10 84121 Self-Storage 61,375 1993
302 2nd Garage Self Storage 90670 Self-Storage 48,224 1997
303 Virginia Court Apartments 07740 Multifamily 52 1963
304 Oakview Manor Apartments 53207 Multifamily 79 1977
305 Timberline Forest Apartments 77043 Multifamily 66 1992
306 The Village Plaza 95014 Retail 19,511 1980
307 9 Egremont Road 02139 Multifamily 26 1994
308 Affordable Self Storage 30249 Self-Storage 53,700 1995
309 6630 Baltimore National Pike 21228 Office 28,059 1985
310 4 Vinal Street 02135 Multifamily 30 1920
311 Whiskey Bottom Business Center 20723 Industrial 33,600 1984
312 Royal Estates MHP 60901 Manufactured Housing 170 1957
313 Pep Boys - Streamwood 60107 Retail 22,399 1996
314 Orange Avenue Industrial Park 32314 Self-Storage 63,540 1974
315 Men's Warehouse 38133 Retail 6,000 1997
316 Pier 1 - Saginaw 48604 Retail 9,969 1991
317 Boulevard Apartments 44106 Multifamily 30 1993
318 Stor-N-Lock #8 84070 Self-Storage 67,275 1994
319 Park Plaza Retail Center 85283 Retail 27,945 1992
320 Claremont Self Storage 91711 Self-Storage 38,807 1978
</TABLE>
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PROPERTY INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME ADDRESS CITY STATE ZIPCODE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
321 Shamrock MHC 6418 Old Redwood Highway Windsor CA 95403
322 Security Self Storage Facility 219 Walnut Street Napa CA 94559
323 Lock It Up Self Storage Facility 895 Wall Avenue Ogden UT 84404
324 CVS - Bethsaida 7055 Old National Highway Atlanta GA 30296
325 Summer Wind 4801 South Main Mesilla Park NM 88047
326 Victoria Square Apartments 2406 East Mockingbird Land Victoria TX 77904
327 Foxfire Apartments 2421 N. Bell Avenue Denton TX 76201
328 Glen Arbor Apartments 2250 West Glendale Avenue Phoenix AZ 85021
329 Pier 1- Lewisville 2430 South Stemmons Freeway Lewisville TX 75057
330 Bozeman K-Mart/Applebees 1126 North 7th Avenue Bozeman MT 59715
331 Emerald Lakes Mobile Home Park 200 Jeremy Drive Davenport FL 33837
332 Your Extra Attic - Duluth 3280 Peachtree Industrial Blvd. Duluth GA 30136
333 Pier 1 - Canton 4643 Everhard Road, NW Canton OH 44718
334 DeSoto Estates MHP 1000 Hummingbird De Soto TX 75115
335 McWhorters - Cupertino 10105 South De Anza Boulevard Cupertino CA 95014
336 Hide-Away-Hills MHP 2441 West County Road 250 South Wayne IN 46580
337 AAA Interstate SSF 43707 N. Sierra Highway Lancaster CA 93534
338 Your Extra Attic - Winters Chapel 4268 Winters Chapel Rd. Doraville GA 30360
339 ABC Mini Storage 11520 Richcroft Avenue Baton Rouge LA 70814
340 Pep Boys- Gardena 1116 West Redondo Beach Boulevard Gardena CA 90247
341 Eastwood MHP 315 Hillridge Drive Conroe TX 77385
342 Bama Self Storage 213 Skyland Boulevard Tuscaloosa AL 35405
343 Thomas Apartments 334 West 200 North Provo UT 84606
345 Missouri Self Storage Facility 2727 West Missouri Avenue Phoenix AZ 85017
346 A-American Self Storage-Bent Avenue 165 South Bent Avenue San Marcos CA 92069
347 The Pine Garden Apartments 206 West Southern Avenue Mesa AZ 85210
348 Stor-N-Lock #7 4930 South Redwood Road Taylorsville UT 84123
349 Green Valley Self Storage 19 Commerce Ctr. Dr. Henderson NV 89014
350 130 Englewood Street 130-134 Englewood Street Boston MA 02134
351 Radio Shack - Blockbuster Center 6643 South Pulaski Road Chicago IL 60629
352 1375 Commonwealth Avenue 1375/1377 Commonwealth Ave. Boston MA 02134
353 Stor-N-Lock #9 1060 North Beck Street Salt Lake City UT 84103
354 Mid Cajon Apartments 2876-2878 El Cajon Boulevard San Diego CA 92104
355 Payless Shoe Source 3590 W. Dublin Granville Rd. Columbus OH 43235
356 Panama City Mobile Home Estates 700 Transmitter Road Springfield FL 32401
357 Your Extra Attic - Norcross 3120 Medlock Bridge Rd, #K Norcross GA 30071
358 Terrace View Center 4111-4115 Home Avenue San Diego CA 92105
359 Village Corner NWC Cooper Road & Montgomery Road Montgomery OH 45242
360 1381 Commonwealth Avenue 1381 Commonwealth Ave. Boston MA 02134
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME TYPE UNITS/NSF RENOVATED
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
321 Shamrock MHC Manufactured Housing 127 1972
322 Security Self Storage Facility Self-Storage 37,550 1984
323 Lock It Up Self Storage Facility Self-Storage 55,360 1994
324 CVS - Bethsaida Retail 10,125 1997
325 Summer Wind Manufactured Housing 166 1978
326 Victoria Square Apartments Multifamily 80 1975
327 Foxfire Apartments Multifamily 54 1981
328 Glen Arbor Apartments Multifamily 78 1973
329 Pier 1- Lewisville Retail 9,625 1990
330 Bozeman K-Mart/Applebees Retail 103,807 1990
331 Emerald Lakes Mobile Home Park Manufactured Housing 108 1988
332 Your Extra Attic - Duluth Self-Storage 38,850 1986
333 Pier 1 - Canton Retail 9,986 1990
334 DeSoto Estates MHP Manufactured Housing 141 1985
335 McWhorters - Cupertino Retail 11,000 1995
336 Hide-Away-Hills MHP Manufactured Housing 155 1975
337 AAA Interstate SSF Self-Storage 71,170 1991
338 Your Extra Attic - Winters Chapel Self-Storage 37,875 1987
339 ABC Mini Storage Self-Storage 56,775 1993
340 Pep Boys- Gardena Retail 9,498 1996
341 Eastwood MHP Manufactured Housing 102 1984
342 Bama Self Storage Self-Storage 39,650 1992
343 Thomas Apartments Multifamily 42 1976
345 Missouri Self Storage Facility Self-Storage 38,928 1975
346 A-American Self Storage-Bent Avenue Self-Storage 41,296 1983
347 The Pine Garden Apartments Multifamily 55 1969
348 Stor-N-Lock #7 Self-Storage 62,520 1993
349 Green Valley Self Storage Self-Storage 96,564 1993
350 130 Englewood Street Multifamily 12 1920
351 Radio Shack - Blockbuster Center Retail 6,978 1996
352 1375 Commonwealth Avenue Multifamily 25 1920
353 Stor-N-Lock #9 Self-Storage 45,255 1986
354 Mid Cajon Apartments Multifamily 25 1992
355 Payless Shoe Source Retail 3,200 1995
356 Panama City Mobile Home Estates Manufactured Housing 111 1970
357 Your Extra Attic - Norcross Self-Storage 22,361 1992
358 Terrace View Center Retail 15,850 1992
359 Village Corner Retail 15,910 1987
360 1381 Commonwealth Avenue Multifamily 13 1920
</TABLE>
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PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME ADDRESS CITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
361 Pinegrove Place 3707 North Pine Grove Chicago
ADDITIONAL PROPERTY INFORMATION FOR THE MULTIPLE PROPERTY MORTGAGE LOANS:
4 Skold Self Storage Portfolio
Alderwood SSF 16902 28th Avenue West Lynnwood
Auburn-Kent SSF 1721 S. Central Kent
Eagle SSF 6432 233rd Place SE Woodinville
Mill Creek SSF 18205 Bothell Everett Highway Bothell
Puyallup South Hill SSF 9109 109th Street East Puyallup
Silver Lake SSF 10208 19th Avenue SE Everett
15 Fleming Portfolio
725 West Baseline Road 725 West Baseline Road Tempe
1450 North Dysart Road 1450 North Dysart Road Avondale
1645 West Valencia Road 1645 West Valencia Road Tucson
1988 North Alma School Road 1988 North Alma School Road Chandler
5246 East Brown Road 5246 East Brown Road Mesa
9460 East Golf Links Road 9460 East Golf Links Road Tucson
23 College Station Apartments
Brazos House Apartments 2401 Welch Avenue College Station
Yellow House Apartments 1809D Yellow House Street College Station
Navarro Fourplexes 700-814 Navarro Drive College Station
Longmire House Apartments 2300, 2302, 2304, 2306, 2308, 2310, 2312 Longmire Street College Station
Hawk Tree Duplexes 1433-1435, 1437-1439, 1441-1443, 1501-1503, 1505-1507, College Station
1509-1511, 1513-1515, 1517-1519, 1521-23-23A Hawk Tree Drive
Wilde Oak Properties 1812, 1814, 1831, 1833, 1824 Wilde Oak Circle Bryan
Briar Oaks Properties 1810-1826, 1900-1916, 1901, 1918, 1835, 1837 Briar Oaks Drive College Station
Pecan Ridge Duplexes 3600-3615 Mahan; 3601, 3602-3612, 3605-3615 Comanche; College Station
3600-3612, 3609-3613 Western
Prairie Flower Fourplexes 2901, 2903, 2905, 2907, 2909 Prairie Flower Street Bryan
44 Holiday Inn and Ramada Inn
Holiday Inn - Hermitage 3200 South Hermitage Road Hermitage
Ramada Inn - Mattoon 300 Broadway Avenue East Mattoon
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME STATE ZIPCODE TYPE UNITS/NSF RENOVATED
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
361 Pinegrove Place IL 60613 Multifamily 14 1990
ADDITIONAL PROPERTY INFORMATION FOR THE MULTIPLE PROPERTY MORTGAGE LOANS:
4 Skold Self Storage Portfolio
Alderwood SSF WA 98012 Self Storage 80,397 1996
Auburn-Kent SSF WA 98032 Self Storage 60,600 1987
Eagle SSF WA 98072 Self Storage 67,275 1989
Mill Creek SSF WA 98012 Self Storage 58,595 1986
Puyallup South Hill SSF WA 98373 Self Storage 39,600 1985
Silver Lake SSF WA 98208 Self Storage 27,575 1986
15 Fleming Portfolio
725 West Baseline Road AZ 85283 Retail 46,442 1986
1450 North Dysart Road AZ 85323 Retail 43,000 1987
1645 West Valencia Road AZ 85746 Retail 41,268 1988
1988 North Alma School Road AZ 85224 Retail 40,963 1985
5246 East Brown Road AZ 85205 Retail 42,684 1987
9460 East Golf Links Road AZ 85730 Retail 41,800 1988
23 College Station Apartments
Brazos House Apartments TX 77845 Multifamily 134 1983
Yellow House Apartments TX 77845 Multifamily 112 1983
Navarro Fourplexes TX 77845 Multifamily 28 1983
Longmire House Apartments TX 77845 Multifamily 82 1983
Hawk Tree Duplexes TX 77845 Multifamily 21 1983
Wilde Oak Properties TX 77845 Multifamily 52 1983
Briar Oaks Properties TX 77845 Multifamily 29 1983
Pecan Ridge Duplexes TX 77845 Multifamily 76 1983
Prairie Flower Fourplexes TX 77845 Multifamily 20 1983
44 Holiday Inn and Ramada Inn
Holiday Inn - Hermitage PA 16159 Hospitality 180 1971
Ramada Inn - Mattoon IL 61938 Hospitality 124 1975
</TABLE>
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PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
LOAN
NO. PROPERTY NAME ADDRESS CITY STATE ZIPCODE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 Lake Forest Office
Lake Forest Office 22481 Aspan Street Lake Forest CA 92630
Lake Forest Office 22471 Aspan Street Lake Forest CA 92630
Lake Forest Office 23101 Lake Center Drive Lake Forest CA 92630
Lake Forest Office 23161 Lake Center Drive Lake Forest CA 92630
96 Triton Valley Estates Portfolio
Triton Valley Estates- East Aurora Hemstreet and Porterville Roads Marilla NY 14052
Triton Valley Estates - Angola MHC 8157 Erie Road Angola NY 14006
Triton Valley Estates - Arcade MHC 6070 Michigan Road Arcade NY 14009
129 Leender's Portfolio
Victoria Estates MHC 530 SE 197th Avenue Gresham OR 97233
Tower Estates 29th and Country Club Avenue Troutdale OR 97060
Mariah Park N. 4th Avenue and Davis Street Cornelius OR 97113
144 Everett Portfolio
Everett Mall Industrial 10011 3rd Avenue SE Everett WA 98208
Everett Mall Mini Storage 10011 3rd Avenue Everett WA 98208
173 Lake Haven/Tall Pines
Tall Pines 960 Flyer & Deval Road Sullivan NY 13082
Lake Haven 11003-39 Grays Corner Road Berlin MD 21811
225 99 Brainard Road
99 Brainard Road 99 Brainard Road Boston MA 02139
109 Brainard Road 109 Brainard Road Boston MA 02139
25 Walbridge 25 Walbridge Street Boston MA 02139
233 Memorial Crossing
Memorial Crossing 101st Street & South Memorial Drive Tulsa OK 74133
Memorial Crossing 71st Street & South Garnett Road Tulsa OK 74133
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME TYPE UNITS/NSF RENOVATED
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
55 Lake Forest Office
Lake Forest Office Office 19,800 1980
Lake Forest Office Office 29,090 1980
Lake Forest Office Office 47,942 1985
Lake Forest Office Office 27,439 1985
96 Triton Valley Estates Portfolio
Triton Valley Estates- East Aurora Manufactured Housing 81 1972
Triton Valley Estates - Angola MHC Manufactured Housing 70 1972
Triton Valley Estates - Arcade MHC Manufactured Housing 51 1983
129 Leender's Portfolio
Victoria Estates MHC Manufactured Housing 14 1996
Tower Estates Manufactured Housing 76 1996
Mariah Park Manufactured Housing 36 1996
144 Everett Portfolio
Everett Mall Industrial Self Storage 16,800 1990
Everett Mall Mini Storage Self Storage 80,930 1990
173 Lake Haven/Tall Pines
Tall Pines Manufactured Housing 111 1992
Lake Haven Manufactured Housing 119 1970
225 99 Brainard Road
99 Brainard Road Multifamily 21 1994
109 Brainard Road Multifamily 20 1994
25 Walbridge Multifamily 18 1994
233 Memorial Crossing
Memorial Crossing Retail 20,000 1996
Memorial Crossing Retail 6,000 1996
</TABLE>
II-20
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CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
LOAN PROPERTY YEAR BUILT/
NO. PROPERTY NAME ADDRESS CITY STATE ZIP CODE TYPE UNITS/NSF RENOVATED
- ---- ------------- ------- ---- ----- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
267 Tracy Portfolio
Montgomery County Self Storage 25350 Budde Road Spring TX 77380 Self Storage 24,792 1985
Rayford Professional Bldg. 25000 Pitkin Road Spring TX 77386 Office 28,522 1994
284 5 Walbridge Street
1350 Commonwealth Avenue 1350 Commonwealth Avenue Boston MA 02139 Multifamily 20 1994
5 Walbridge Street 5 Walbridge Street Boston MA 02139 Multifamily 23 1994
</TABLE>
II-21
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CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LOAN UNDERWRITABLE MONTHLY PROPERTY VALUATION
NO. PROPERTY NAME CASH FLOW PAYMENT DSCR (4) VALUE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Pacific Coast Plaza Shopping Center $3,762,740 $240,534 1.30 $44,080,000 10/1/97
2 Norwood Gardens $2,274,259 $146,741 1.29 $28,900,000 11/11/97
3 Rookwood Pavilion $2,407,935 $163,248 1.23 $30,000,000 7/3/97
4 Skold Self Storage Portfolio $2,112,088 $101,894 1.78 $21,695,000 12/15/97
5 Affordable Self Storage $192,655 $6,471 1.78 $1,985,000 12/15/97
6 Skold Portfolio - Greenwood Self Storage $273,958 $12,174 1.78 $3,185,000 12/15/97
7 Skold Portfolio - Evergreen Mini Storage $96,283 $4,669 1.78 $1,095,000 12/15/97
8 351 California Street $1,923,040 $99,642 1.55 $20,700,000 4/9/97
9 201 Sansome Street $722,790 $42,815 1.55 $7,400,000 4/9/97
10 Boulder Marriott $2,345,568 $135,195 1.45 $26,000,000 11/1/97
11 Beverly Garland Hotel $1,911,566 $112,629 1.41 $21,800,000 10/17/97
12 Rancho Viejo Apts. $1,723,946 $105,265 1.36 $21,000,000 11/5/97
13 Lincoln on Memorial Apartments $1,577,871 $107,226 1.23 $21,000,000 8/25/97
14 Davis Square Center $1,675,865 $105,949 1.32 $20,900,000 11/1/97
15 Fleming Portfolio $1,800,100 $115,603 1.30 $18,790,000 6/4/97
16 Marymount Manor $860,686 $55,473 1.29 $10,375,000 10/15/97
17 Marymount Tower $627,293 $40,364 1.29 $8,400,000 10/15/97
18 Park Place Shopping Center $1,570,357 $105,237 1.24 $17,000,000 8/22/97
19 A&P Food Market $1,569,304 $89,725 1.46 $18,600,000 10/29/97
20 The First National Bank Building $1,592,401 $99,610 1.33 $18,160,000 7/1/97
21 Boylston Apartments $1,345,119 $86,188 1.30 $18,400,000 12/16/97
22 Greenbriar Apartments $1,432,824 $85,794 1.39 $16,650,000 10/27/97
23 College Station Apartments $1,518,085 $91,680 1.38 $15,500,000 6/24/97
24 Kmart Plaza $1,610,758 $86,384 1.55 $18,500,000 6/9/97
25 Rivershire Apartments $1,168,539 $76,746 1.27 $14,450,000 1/12/98
26 Haggerty Tech Center $1,235,450 $85,211 1.21 $14,600,000 7/1/97
27 Village at Chestnut Hill $1,227,547 $75,528 1.35 $14,400,000 11/11/97
28 Orland Park Exec. Ctr. $886,337 $52,156 1.35 $9,600,000 11/21/97
29 GMAC Building $336,956 $23,333 1.35 $4,400,000 11/21/97
30 Ridgecrest Terrace Apartments $1,145,616 $71,382 1.34 $13,500,000 11/11/97
31 Fountain Square Shopping Center $1,187,189 $79,260 1.25 $14,060,000 5/27/97
32 1550 Brickell $979,412 $68,698 1.19 $13,125,000 12/10/97
32a Lafayette Towers $1,244,695 $71,840 1.44 $13,150,000 12/1/97
33 Lake Village Apartments $1,038,311 $71,075 1.22 $14,000,000 10/3/97
34 All Aboard Mini Storage Portfolio - Oakland $592,587 $35,959 1.29 $5,960,000 5/9/97
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
LOAN CUT-OFF DATE PERCENT LEASED (15)
NO. PROPERTY NAME LTV (4) LEASED DATE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Pacific Coast Plaza Shopping Center 74.7% 100.0% 10/31/97
2 Norwood Gardens 77.0% 95.7% 12/1/97
3 Rookwood Pavilion 72.3% 100.0% 9/30/97
4 Skold Self Storage Portfolio 67.1% 94.6% 10/31/97
5 Affordable Self Storage 67.1% 95.4% 10/1/97
6 Skold Portfolio - Greenwood Self Storage 67.1% 92.0% 9/30/97
7 Skold Portfolio - Evergreen Mini Storage 67.1% 67.0% 12/15/97
8 351 California Street 64.6% 100.0% 1/1/98
9 201 Sansome Street 64.6% 100.0% 1/1/98
10 Boulder Marriott 69.0% 72.6% 9/1/97
11 Beverly Garland Hotel 73.2% 84.2% 9/30/97
12 Rancho Viejo Apts. 74.5% 93.0% 10/31/97
13 Lincoln on Memorial Apartments 73.5% 96.0% 9/1/97
14 Davis Square Center 73.1% 98.3% 11/1/97
15 Fleming Portfolio 81.2% 100.0% 6/3/97
16 Marymount Manor 75.0% 97.3% 12/3/97
17 Marymount Tower 75.0% 99.0% 12/3/97
18 Park Place Shopping Center 79.7% 97.1% 1/21/98
19 A&P Food Market 72.5% 100.0% 10/29/97
20 The First National Bank Building 71.4% 75.8% 12/31/97
21 Boylston Apartments 70.5% 97.0% 11/1/97
22 Greenbriar Apartments 75.4% 99.0% 10/1/97
23 College Station Apartments 77.0% 96.0% 9/10/97
24 Kmart Plaza 64.5% 89.0% 9/30/97
25 Rivershire Apartments 78.8% 96.9% 12/22/97
26 Haggerty Tech Center 77.0% 100.0% 4/1/97
27 Village at Chestnut Hill 77.6% 99.0% 12/1/97
28 Orland Park Exec. Ctr. 78.4% 99.0% 10/1/97
29 GMAC Building 78.4% 100.0% 10/1/97
30 Ridgecrest Terrace Apartments 79.8% 97.0% 12/1/97
31 Fountain Square Shopping Center 75.7% 95.6% 9/30/97
32 1550 Brickell 80.7% 97.0% 11/1/97
32a Lafayette Towers 79.8% 95.0% 12/1/97
33 Lake Village Apartments 74.5% 95.6% 11/10/97
34 All Aboard Mini Storage Portfolio - Oakland 74.6% 9.1% 12/1/97
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
LOAN TENANT INFORMATION (16)
NO. PROPERTY NAME LARGEST TENANT % NSF
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Pacific Coast Plaza Shopping Center Lucky Market 25.4%
2 Norwood Gardens
3 Rookwood Pavilion Stein Mart 14.7%
4 Skold Self Storage Portfolio
5 Affordable Self Storage
6 Skold Portfolio - Greenwood Self Storage
7 Skold Portfolio - Evergreen Mini Storage
8 351 California Street The Pacific Bank 41.5%
9 201 Sansome Street Law offices of G. Furth 53.1%
10 Boulder Marriott
11 Beverly Garland Hotel
12 Rancho Viejo Apts.
13 Lincoln on Memorial Apartments
14 Davis Square Center Harvard Pilgrim Health 62.2%
15 Fleming Portfolio Fleming 16.3%
16 Marymount Manor
17 Marymount Tower
18 Park Place Shopping Center Lowe's Home Improvement 38.3%
19 A&P Food Market A&P Food Market 100.0%
20 The First National Bank Building
21 Boylston Apartments
22 Greenbriar Apartments
23 College Station Apartments
24 Kmart Plaza K-Mart 49.7%
25 Rivershire Apartments
26 Haggerty Tech Center Magna Int'l - Suite 19700 74.3%
27 Village at Chestnut Hill CVS 15.2%
28 Orland Park Exec. Ctr. Publishers Circulation 22.5%
29 GMAC Building GMAC 100.0%
30 Ridgecrest Terrace Apartments
31 Fountain Square Shopping Center Miller's Outpost 16.6%
32 1550 Brickell
32a Lafayette Towers
33 Lake Village Apartments
34 All Aboard Mini Storage Portfolio - Oakland
</TABLE>
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<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LOAN UNDERWRITABLE MONTHLY PROPERTY VALUATION
NO. PROPERTY NAME CASH FLOW PAYMENT DSCR (4) VALUE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
35 All Aboard Mini-Storage Portfolio - Ventura $332,850 $19,892 1.29 $3,500,000 10/16/97
36 All Aboard Mini Storage Portfolio - Van Nuys $269,894 $21,422 1.29 $4,040,000 5/21/97
37 Stor-Mor of Cypress $354,775 $16,587 1.62 $3,400,000 10/17/97
38 Stor-Mor - Anaheim $344,159 $17,693 1.62 $3,450,000 10/17/97
39 Stor-Mor - Torrance $730,053 $39,440 1.62 $7,900,000 10/23/97
40 Cypress Lake Apartments $1,030,858 $69,802 1.23 $12,500,000 8/27/97
41 Boardwalk Square $1,236,762 $75,408 1.37 $13,700,000 nav
42 Whispering Lakes Apts. $1,002,794 $64,573 1.29 $11,500,000 4/1/98
43 Eagle Ridge Retail Shopping Center $991,911 $64,811 1.28 $11,650,000 10/9/97
44 Holiday Inn and Ramada Inn $1,169,412 $70,995 1.37 $11,600,000 9/1/97
46 The Willows at Appleton Square $905,216 $59,100 1.28 $11,150,000 8/5/97
47 Ashley Park Apartments $930,242 $59,299 1.31 $10,250,000 9/4/97
49 Brumby Apartments $963,577 $57,958 1.39 $10,750,000 8/1/97
50 Sun Vista RV Resort $948,483 $53,506 1.48 $10,860,000 nav
51 Sunset Mall $994,803 $54,278 1.53 $10,800,000 8/18/97
52 Ramada Hotel Valley Ho Resort $1,204,037 $57,355 1.75 $11,800,000 3/13/97
53 Wynhaven Apartments $831,021 $52,904 1.31 $9,400,000 9/22/97
54 Claridge Court Apartments $1,038,533 $60,889 1.42 $11,900,000 9/1/96
55 Lake Forest Office $861,248 $51,041 1.41 $11,000,000 11/28/97
56 Acorn Self Storage $453,347 $23,947 1.53 $5,050,000 12/8/97
57 ACORN III SELF STORAGE $447,997 $25,188 1.53 $5,250,000 12/8/97
58 Central Plaza $736,128 $49,742 1.23 $9,300,000 10/14/97
59 Bend Villa Court $994,245 $51,465 1.61 $9,500,000 12/11/97
60 Danbury Retail Center $731,176 $57,083 1.07 $7,700,000 9/1/97
61 Rose Apartments $779,465 $46,747 1.39 $9,250,000 8/22/97
62 Rose Medical Plaza $699,510 $48,556 1.20 $10,000,000 10/15/97
63 Phoenix Inn - Phoenix $997,015 $53,844 1.54 $10,000,000 10/10/97
64 Mesa Verde $972,467 $44,026 1.84 $10,400,000 12/4/97
65 Cedar Ridge Apts. $719,990 $43,803 1.37 $8,300,000 11/19/97
110 Mira Mesa Self Storage $829,902 $34,288 1.71 $5,280,000 4/8/97
197 Sorrento Mesa SSF $258,357 $18,801 1.71 $4,010,000 4/8/97
66 Cardinal Crest MHC $146,564 $9,211 1.32 $1,600,000 9/16/97
67 Harbor Lights Mobile Home Community $190,410 $11,097 1.32 $1,900,000 9/16/97
68 Meadowview Place MHC $147,473 $11,430 1.32 $1,600,000 9/16/97
69 Skyview Terrace Mobile Home Park $260,000 $15,167E 1.32 $2,600,000 9/16/97
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
LOAN CUT-OFF DATE PERCENT LEASED (15)
NO. PROPERTY NAME LTV (4) LEASED DATE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
35 All Aboard Mini-Storage Portfolio - Ventura 74.6% 93.0% 10/1/97
36 All Aboard Mini Storage Portfolio - Van Nuys 74.6% 63.0% 11/30/97
37 Stor-Mor of Cypress 67.5% 94.1% 8/31/97
38 Stor-Mor - Anaheim 67.5% 97.9% 8/31/97
39 Stor-Mor - Torrance 67.5% 97.0% 8/31/97
40 Cypress Lake Apartments 79.7% 97.0% 8/1/97
41 Boardwalk Square 72.6% 92.5% 9/30/97
42 Whispering Lakes Apts. 85.0% 93.0% 11/1/97
43 Eagle Ridge Retail Shopping Center 80.0% 100.0% 10/21/97
44 Holiday Inn and Ramada Inn 74.7% 54.5%
46 The Willows at Appleton Square 75.2% 96.5% 10/1/97
47 Ashley Park Apartments 79.7% 97.7% 9/29/97
49 Brumby Apartments 75.0% 97.0% 8/1/97
50 Sun Vista RV Resort 71.2% 75.0% 10/16/97
51 Sunset Mall 70.6% 99.8% 1/22/98
52 Ramada Hotel Valley Ho Resort 64.2% 93.7% 3/31/97
53 Wynhaven Apartments 79.6% 95.6% 10/21/97
54 Claridge Court Apartments 61.1% 95.0% 9/1/97
55 Lake Forest Office 65.8% 96.0% 12/1/97
56 Acorn Self Storage 69.8% 84.0% 9/1/97
57 ACORN III SELF STORAGE 69.8% 80.6% 11/1/97
58 Central Plaza 76.2% 95.4% 1/1/98
59 Bend Villa Court 73.5% 99.0% 10/31/97
60 Danbury Retail Center 89.7% 94.0% 12/31/97
61 Rose Apartments 74.1% 100.0% 9/1/97
62 Rose Medical Plaza 66.7% 91.0% 11/21/97
63 Phoenix Inn - Phoenix 64.8% 67.7%
64 Mesa Verde 62.4% 93.6% 10/31/97
65 Cedar Ridge Apts. 78.1% 96.0% 10/15/97
110 Mira Mesa Self Storage 69.4% 91.0% 12/11/97
197 Sorrento Mesa SSF 69.4% 91.0% 10/16/97
66 Cardinal Crest MHC 81.9% 100.0% 09/01/97
67 Harbor Lights Mobile Home Community 81.9% 100.0% 09/01/97
68 Meadowview Place MHC 81.9% 99.0% 09/01/97
69 Skyview Terrace Mobile Home Park 81.9% 100.0% 09/01/97
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
LOAN TENANT INFORMATION (16)
NO. PROPERTY NAME LARGEST TENANT % NSF
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
35 All Aboard Mini-Storage Portfolio - Ventura
36 All Aboard Mini Storage Portfolio - Van Nuys
37 Stor-Mor of Cypress
38 Stor-Mor - Anaheim
39 Stor-Mor - Torrance
40 Cypress Lake Apartments
41 Boardwalk Square Food-4-Less 38.8%
42 Whispering Lakes Apts.
43 Eagle Ridge Retail Shopping Center Ross Stores 24.8%
44 Holiday Inn and Ramada Inn
46 The Willows at Appleton Square
47 Ashley Park Apartments
49 Brumby Apartments
50 Sun Vista RV Resort
51 Sunset Mall Safeway Stores 42.4%
52 Ramada Hotel Valley Ho Resort
53 Wynhaven Apartments
54 Claridge Court Apartments
55 Lake Forest Office Freedom Communications 15.9%
56 Acorn Self Storage
57 ACORN III SELF STORAGE
58 Central Plaza D - Metropolitan Concession 32.7%
59 Bend Villa Court
60 Danbury Retail Center Circuit City 49.1%
61 Rose Apartments
62 Rose Medical Plaza
63 Phoenix Inn - Phoenix
64 Mesa Verde
65 Cedar Ridge Apts.
110 Mira Mesa Self Storage
197 Sorrento Mesa SSF
66 Cardinal Crest MHC
67 Harbor Lights Mobile Home Community
68 Meadowview Place MHC
69 Skyview Terrace Mobile Home Park
</TABLE>
II-23
<PAGE> 141
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
LOAN UNDERWRITABLE MONTHLY PROPERTY VALUATION
NO. PROPERTY NAME CASH FLOW PAYMENT DSCR (4) VALUE DATE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
71 Meadow Park Plaza $875,714 $44,445 1.64 $ 7,800,000 7/11/97
72 Lincoln Bank Building $710,380 $40,178 1.47 $ 8,750,000 11/20/97
73 Walnut Ridge Apts $608,422 $42,307 1.20 $ 7,910,000 9/17/97
74 Allsize Commercial Storage $909,922 $45,546 1.66 $ 7,100,000 8/4/97
76 Elmwood Distribution Center $642,804 $43,085 1.24 $ 7,600,000 7/29/97
77 Rt. 18 Mobile Home Comm. Portfolio $532,139 $38,276 1.16 $ 6,400,000 3/1/98
78 Berrytree Apartments $738,250 $39,250 1.57 $ 8,100,000 12/31/97
79 Silver Drive Office/Warehouse Buildings $601,510 $38,429 1.30 $ 7,000,000 11/12/97
80 Fairfield Place Apartments $536,887 $36,835 1.21 $ 6,750,000 9/22/97
81 Holly Ravine Shopping Center $724,390 $37,641 1.60 $ 7,150,000 8/27/97
82 Reeseville Acres $ 66,038 $ 4,809 1.43 $ 850,000 9/16/97
83 Spring Brook Village MHP $154,890 $ 8,508 1.43 $ 1,600,000 9/16/97
84 Bridgeview Gardens MHC $428,917 $24,503 1.43 $ 4,500,000 9/16/97
85 Palm Springs Plaza $855,527 $40,256 1.77 $ 7,750,000 5/26/97
86 Plaza on the Boulevard $619,021 $39,169 1.32 $ 7,000,000 5/29/97
87 Burtons Landing $563,376 $34,449 1.36 $ 6,300,000 1/12/98
88 Comfort Inn - Madison $862,162 $39,614 1.81 $ 7,100,000 10/30/97
89 605 Market Street $547,704 $36,531 1.25 $ 6,770,000 10/21/97
90 Harford Mobile Village $916,442 $35,458 2.15 $11,200,000 7/31/97
91 511 East 80th Street $619,172 $34,724 1.49 $ 9,200,000 8/1/97
93 Lakeside Park Mobile Home Park $662,883 $33,685 1.64 $ 7,000,000 8/1/97
94 Hampton Inn - Elgin $844,407 $37,433 1.88 $ 6,720,000 12/4/97
95 AAA Chatsworth Self Storage $648,288 $35,768 1.51 $ 7,700,000 9/3/97
96 Triton Valley Estates Portfolio $329,988 $17,986 1.51 $ 3,690,000 9/29/97
97 Triton Valley Estates - Derby $250,207 $14,112 1.51 $ 2,800,000 9/29/97
98 Stoneridge Apts. $483,860 $33,020 1.22 $ 5,750,000 8/28/97
99 29 Dunham Road $348,354 $23,859 1.24 $ 3,500,000 4/24/97
100 35 Dunham Road $206,059 $13,394 1.24 $ 3,150,000 4/24/97
101 Pacific View Apartments $463,229 $30,957 1.25 $ 6,000,000 8/22/97
102 Sonoma Pointe Apartments $421,029 $29,762 1.18 $ 6,500,000 10/20/97
103 A-1 Self Storage - Anaheim $720,366 $31,586 1.90 $ 6,250,000 10/17/97
104 Holiday Ranch & Happy Landings MHC $614,374 $35,481 1.44 $ 5,560,000 8/30/96
105 Pompano Palms Apartments $758,006 $38,381 1.65 $ 5,700,000 2/5/97
106 Brewery Apartments $588,123 $30,773 1.59 $ 6,200,000 1/6/98
107 Arbor Woods Mobile Home Community $416,164 $30,213 1.15 $ 5,500,000 8/13/97
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
LOAN CUT-OFF DATE PERCENT LEASED (15)
NO. PROPERTY NAME LTV (4) LEASED DATE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
71 Meadow Park Plaza 76.6% 86.8% 08/06/97
72 Lincoln Bank Building 67.6% 98.0% 10/06/97
73 Walnut Ridge Apts 74.7% 97.0% 08/01/97
74 Allsize Commercial Storage 81.2% 85.6% 12/31/97
76 Elmwood Distribution Center 73.8% 100.0% 05/31/97
77 Rt. 18 Mobile Home Comm. Portfolio 87.5% 99.0% 11/01/97
78 Berrytree Apartments 67.8% 98.0% 12/29/97
79 Silver Drive Office/Warehouse Buildings 78.4% 100.0% 11/20/97
80 Fairfield Place Apartments 79.8% 91.0% 11/30/97
81 Holly Ravine Shopping Center 73.9% 99.3% 08/29/97
82 Reeseville Acres 76.0% 86.0% 09/08/97
83 Spring Brook Village MHP 76.0% 96.3% 09/08/97
84 Bridgeview Gardens MHC 76.0% 98.9% 09/08/97
85 Palm Springs Plaza 67.4% 92.0% 09/30/97
86 Plaza on the Boulevard 72.9% 100.0% 09/30/97
87 Burtons Landing 79.9% 94.0% 12/01/97
88 Comfort Inn - Madison 69.7% 77.6% 09/30/97
89 605 Market Street 73.6% 96.3% 09/19/97
90 Harford Mobile Village 44.5% 98.0% 06/30/97
91 511 East 80th Street 53.5% 99.0% 10/01/97
93 Lakeside Park Mobile Home Park 67.6% 98.0% 06/01/97
94 Hampton Inn - Elgin 69.7% 80.6% 11/30/97
95 AAA Chatsworth Self Storage 63.5% 98.0% 12/19/97
96 Triton Valley Estates Portfolio 71.3% 100.0% 09/02/97
97 Triton Valley Estates - Derby 71.3% 100.0% 09/01/97
98 Stoneridge Apts. 79.2% 95.0% 09/01/97
99 29 Dunham Road 66.4% 100.0% 11/05/97
100 35 Dunham Road 66.4% 100.0% 11/05/97
101 Pacific View Apartments 73.0% 100.0% 10/01/97
102 Sonoma Pointe Apartments 66.7% 100.0% 09/30/97
103 A-1 Self Storage - Anaheim 68.6% 98.6% 11/12/97
104 Holiday Ranch & Happy Landings MHC 77.0% 98.1% 08/01/96
105 Pompano Palms Apartments 74.0% 95.8% 08/01/97
106 Brewery Apartments 68.5% 92.0% 12/20/97
107 Arbor Woods Mobile Home Community 77.0% 100.0% 08/13/97
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
LOAN TENANT INFORMATION (16)
NO. PROPERTY NAME LARGEST TENANT % NSF
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
71 Meadow Park Plaza Richard's Luggage & Handbag 12.6%
72 Lincoln Bank Building Merill Lynch 17.6%
73 Walnut Ridge Apts
74 Allsize Commercial Storage
76 Elmwood Distribution Center Chand Corporation 32.9%
77 Rt. 18 Mobile Home Comm. Portfolio
78 Berrytree Apartments
79 Silver Drive Office/Warehouse Buildings Cont'l Ofc. Furn. Corp. 50.7%
80 Fairfield Place Apartments
81 Holly Ravine Shopping Center CVS 20.7%
82 Reeseville Acres
83 Spring Brook Village MHP
84 Bridgeview Gardens MHC
85 Palm Springs Plaza Publix 34.2%
86 Plaza on the Boulevard Food for Less 56.6%
87 Burtons Landing
88 Comfort Inn - Madison
89 605 Market Street
90 Harford Mobile Village
91 511 East 80th Street
93 Lakeside Park Mobile Home Park
94 Hampton Inn - Elgin
95 AAA Chatsworth Self Storage
96 Triton Valley Estates Portfolio
97 Triton Valley Estates - Derby
98 Stoneridge Apts.
99 29 Dunham Road Prepress Solutions 100.0%
100 35 Dunham Road W.K. Hillquist 32.8%
101 Pacific View Apartments
102 Sonoma Pointe Apartments
103 A-1 Self Storage - Anaheim
104 Holiday Ranch & Happy Landings MHC
105 Pompano Palms Apartments
106 Brewery Apartments
107 Arbor Woods Mobile Home Community
</TABLE>
II-24
<PAGE> 142
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LOAN UNDERWRITABLE MONTHLY PROPERTY VALUATION
NO. PROPERTY NAME CASH FLOW PAYMENT DSCR (4) VALUE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
108 Gardens at Negley $466,176 $29,874 1.30 $5,300,000 11/14/97
109 Coral Ridge Office Center $536,329 $38,402 1.16 $5,260,000 4/17/97
111 South Street Office Center $610,697 $37,555 1.36 $6,600,000 6/2/97
112 Lake of the Pines $547,151 $39,061 1.17 $6,800,000 11/13/97
113 Alameda Crossing $489,185 $31,555 1.29 $6,200,000 5/1/97
114 16 Bleeker Street $851,918 $30,793 2.31 $7,800,000 10/6/97
115 Knox Village $728,264 $27,899 2.18 $10,825,000 12/1/97
117 Monmouth MHP $665,859 $30,070 1.85 $9,300,000 8/26/97
118 American Mini Storage $539,556 $31,303 1.44 $5,300,000 nav
119 Edison Lock-Up Self Storage $511,280 $33,049 1.29 $5,500,000 5/1/97
120 Saf Keep SSF - San Leandro $873,493 $32,473 2.24 $8,100,000 2/20/97
121 The Oaks Office Building $382,414 $30,172 1.06 $5,300,000 7/8/97
122 Vista Manor Mobile Home Park $439,157 $28,753 1.27 $5,050,000 6/25/97
123 Nova Self-Storage $572,600 $30,152 1.58 $4,950,000 9/10/97
124 Lantern Estates $456,457 $28,341 1.34 $5,000,000 9/29/97
125 Harvard Medical Park $572,496 $29,229 1.63 $6,950,000 3/26/97
126 A American Self Storage $582,824 $33,318 1.46 $4,650,000 3/25/97
127 Commerce Crossing $524,242 $32,330 1.35 $5,894,000 4/1/97
128 Woodshire Mobile Home Park $475,733 $26,736 1.48 $5,000,000 10/13/97
129 Leender's Portfolio $428,588 $27,534 1.30 $5,250,000 7/17/97
130 Copps Food Market $435,250 $29,891 1.21 $5,000,000 11/6/97
131 Harbour East MHC $476,963 $29,148 1.36 $5,800,000 6/5/96
132 LAGO VISTA MHP $518,665 $27,719 1.56 $6,180,000 4/3/97
133 Stor N' Lok $237,957 $13,365 1.75 $2,100,000 9/24/96
134 A-American Pico $372,265 $15,698 1.75 $3,580,000 11/4/96
135 Storage Depot-North SSF $441,270 $20,550 1.70 $3,150,000 3/6/97
136 Storage Depot-West SSF $169,078 $9,291 1.70 $1,830,000 3/6/97
137 San Luis Obisbo Self Storage $551,244 $32,177 1.43 $4,030,000 4/18/96
138 West L.A. Self Storage $657,350 $28,275 1.94 $5,300,000 4/3/97
139 Willow Creek Apts. $374,474 $23,427 1.33 $4,730,000 12/30/97
140 Redhill MHP $478,650 $26,872 1.48 $4,595,000 10/16/97
141 Phoenix Inn - Troutdale $489,135 $28,165 1.45 $5,125,000 10/8/97
142 North Valley Self Storage Facility $485,810 $26,287 1.54 $4,250,000 9/4/97
143 Stone Creek Plaza $484,065 $27,316 1.48 $4,550,000 9/10/97
144 Everett Portfolio $472,324 $25,959 1.52 $4,900,000 9/3/97
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
LOAN CUT-OFF DATE PERCENT LEASED (15)
NO. PROPERTY NAME LTV (4) LEASED DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
108 Gardens at Negley 79.8% 97.3% 08/30/97
109 Coral Ridge Office Center 78.7% 100.0% 12/31/97
111 South Street Office Center 70.0% 93.9% 09/01/97
112 Lake of the Pines 59.7% 82.0% 11/01/97
113 Alameda Crossing 65.8% 90.0% 09/16/97
114 16 Bleeker Street 51.2% 100.0% 12/11/97
115 Knox Village 36.8% 87.1% 09/01/97
117 Monmouth MHP 42.8% 97.9% 09/30/97
118 American Mini Storage 75.1% 93.1% 09/08/97
119 Edison Lock-Up Self Storage 72.2% 94.1% 11/30/97
120 Saf Keep SSF - San Leandro 49.1% 95.0% 12/15/97
121 The Oaks Office Building 75.0% 87.3% 09/30/97
122 Vista Manor Mobile Home Park 78.3% 80.0% 07/01/97
123 Nova Self-Storage 78.4% 77.0% 08/22/97
124 Lantern Estates 77.7% 95.9% 08/31/97
125 Harvard Medical Park 55.8% 100.0% 09/01/97
126 A American Self Storage 83.1% 99.0% 09/01/97
127 Commerce Crossing 65.4% 97.1% 08/01/97
128 Woodshire Mobile Home Park 75.8% 96.0% 10/21/97
129 Leender's Portfolio 72.1% 100.0% 12/18/97
130 Copps Food Market 74.7% 100.0% 11/06/97
131 Harbour East MHC 63.5% 98.6% 09/30/97
132 LAGO VISTA MHP 59.6% 100.0% 09/01/97
133 Stor N' Lok 64.6% 88.0% 10/01/97
134 A-American Pico 64.6% 100.0% 10/01/97
135 Storage Depot-North SSF 72.2% 91.2% 09/30/97
136 Storage Depot-West SSF 72.2% 90.0% 09/01/97
137 San Luis Obisbo Self Storage 88.0% 91.0% 09/30/97
138 West L.A. Self Storage 66.4% 95.0% 10/01/97
139 Willow Creek Apts. 74.2% 100.0% 11/01/97
140 Redhill MHP 75.9% 100.0% 09/01/97
141 Phoenix Inn - Troutdale 66.1% 84.3% 09/30/97
142 North Valley Self Storage Facility 79.6% 89.0% 08/17/97
143 Stone Creek Plaza 72.1% 100.0% 10/02/97
144 Everett Portfolio 67.0% 98.2% 08/18/97
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
LOAN TENANT INFORMATION (16)
NO. PROPERTY NAME LARGEST TENANT % NSF
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
108 Gardens at Negley
109 Coral Ridge Office Center Smith Barney 40.3%
111 South Street Office Center Slattery, Interbetton, White - 8 12.9%
112 Lake of the Pines
113 Alameda Crossing Walgreen's Drugs 13.3%
114 16 Bleeker Street Jaydor Corporation 100.0%
115 Knox Village
117 Monmouth MHP
118 American Mini Storage
119 Edison Lock-Up Self Storage
120 Saf Keep SSF - San Leandro
121 The Oaks Office Building Corporate Offices 27.5%
122 Vista Manor Mobile Home Park
123 Nova Self-Storage
124 Lantern Estates
125 Harvard Medical Park Roseburg SurgiCenter, Ltd. 25.3%
126 A American Self Storage
127 Commerce Crossing Food Lion 55.3%
128 Woodshire Mobile Home Park
129 Leender's Portfolio
130 Copps Food Market Copps Food Market 100.0%
131 Harbour East MHC
132 LAGO VISTA MHP
133 Stor N' Lok
134 A-American Pico
135 Storage Depot-North SSF
136 Storage Depot-West SSF
137 San Luis Obisbo Self Storage
138 West L.A. Self Storage
139 Willow Creek Apts.
140 Redhill MHP
141 Phoenix Inn - Troutdale
142 North Valley Self Storage Facility
143 Stone Creek Plaza Baylor Medical CTR 21.9%
144 Everett Portfolio
</TABLE>
II-25
<PAGE> 143
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LOAN UNDERWRITABLE MONTHLY PROPERTY VALUATION CUT-OFF DATE
NO. PROPERTY NAME CASH FLOW PAYMENT DSCR (4) VALUE DATE LTV (4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
145 Sheffield Lofts $429,405 $24,883 1.44 $4,460,000 7/17/97 73.4%
146 Paramount Self Storage $479,272 $26,907 1.48 $4,400,000 3/18/97 74.3%
147 Allstate Insurance Building $378,592 $23,630 1.34 $4,100,000 8/27/97 77.7%
148 Mira Mesa Retirement Community $371,374 $22,398 1.38 $4,400,000 11/21/97 71.4%
149 City Gables Apts. $337,682 $22,480 1.25 $4,200,000 10/17/97 74.8%
150 Windsorland MHC $383,606 $25,584 1.25 $4,600,000 7/25/96 67.5%
151 Budget Mini Storage - Phoenix $333,008 $14,372 2.04 $3,375,000 11/20/97 54.3%
152 ABQ Mini Storage $241,230 $9,077 2.04 $2,315,000 11/19/97 54.3%
153 Safeway Self Storage Facility $548,985 $24,364 1.88 $5,500,000 9/5/97 56.0%
154 Southgate Square Apartments $415,476 $20,536 1.69 $5,240,000 12/12/97 57.2%
155 Palm Shadows Apartments $367,628 $21,781 1.41 $3,950,000 11/19/97 75.9%
156 Park Drive Apts. $301,309 $19,889 1.26 $4,400,000 12/16/97 68.0%
157 Continental Luxury Apartments $461,849 $22,165 1.74 $3,750,000 11/3/97 79.7%
158 Dohr Apartments $357,904 $21,611 1.38 $3,900,000 9/8/97 76.7%
159 Belmont Self Storage $560,962 $23,214 2.01 $5,950,000 8/22/97 50.2%
160 Westview Plaza Shopping Center $426,079 $23,095 1.54 $5,950,000 7/18/97 50.1%
161 Hamilton House $423,359 $22,996 1.53 $4,500,000 2/3/97 66.1%
162 Linkletter Self Storage Facility $228,660 $14,359 1.45 $2,400,000 9/17/97 72.6%
163 Lyndie Office Building $152,955 $7,564 1.45 $1,610,000 9/17/97 72.6%
164 Juanita Bay Office Building $366,565 $21,608 1.41 $4,400,000 9/24/97 65.6%
165 Fairway Greens Apartments $319,166 $19,465 1.37 $3,600,000 11/13/97 78.3%
166 Rolling Hills $415,468 $20,985 1.65 $6,260,000 5/22/97 44.9%
167 Barnes & Noble $268,826 $19,478 1.15 $3,000,000 10/1/97 93.4%
168 Diamond Grove $351,124 $21,705 1.35 $3,500,000 5/3/97 80.0%
169 Yankee Mobile Home Park $384,220 $21,648 1.48 $3,800,000 8/15/97 73.3%
170 Skylark Village I Mobile Home Park $369,096 $21,460 1.43 $4,100,000 8/26/97 67.9%
171 Red Hill Estates $363,008 $23,523 1.29 $3,500,000 11/13/96 79.5%
172 Desert Springs Apartments $413,153 $19,017 1.81 $4,605,000 7/29/97 59.7%
173 Lake Haven/Tall Pines $341,205 $22,592 1.26 $2,650,000 1/6/97 102.9%
174 Green Hill MHC $317,577 $22,890 1.16 $3,850,000 9/10/96 70.8%
175 Fenton Walgreens $258,023 $21,650 0.99 $3,120,000 11/14/97 87.2%
176 Skylark II Village Mobile Home Park $326,409 $20,885 1.30 $3,500,000 8/26/97 77.4%
177 Laboratory Building $351,449 $19,315 1.52 $3,860,000 9/24/97 69.8%
178 Sorrento Valley Self Storage $397,274 $26,777 1.24 $6,280,000 11/10/97 57.3%
179 Westminster Garden $344,515 $20,844 1.38 $3,500,000 12/31/97 77.0%
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
LOAN PERCENT LEASED (15)
NO. PROPERTY NAME LEASED DATE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
145 Sheffield Lofts 100.0% 10/27/97
146 Paramount Self Storage 91.0% 03/27/97
147 Allstate Insurance Building 100.0% 02/28/97
148 Mira Mesa Retirement Community 97.6% 07/31/97
149 City Gables Apts. 96.4% 08/06/97
150 Windsorland MHC 95.0% 01/01/98
151 Budget Mini Storage - Phoenix 81.1% 10/17/97
152 ABQ Mini Storage 76.0% 10/31/97
153 Safeway Self Storage Facility 74.9% 06/30/97
154 Southgate Square Apartments 100.0% 12/01/97
155 Palm Shadows Apartments 99.0% 11/24/97
156 Park Drive Apts. 99.0% 08/01/97
157 Continental Luxury Apartments 77.0% 11/01/97
158 Dohr Apartments 98.0% 08/01/97
159 Belmont Self Storage 94.0% 08/27/97
160 Westview Plaza Shopping Center 87.6% 06/27/97
161 Hamilton House 99.0% 10/01/97
162 Linkletter Self Storage Facility 92.0% 11/30/97
163 Lyndie Office Building 96.0% 11/01/97
164 Juanita Bay Office Building 96.0% 10/01/97
165 Fairway Greens Apartments 98.8% 10/30/97
166 Rolling Hills 99.4% 03/05/97
167 Barnes & Noble 100.0% 09/19/96
168 Diamond Grove 100.0% 11/07/97
169 Yankee Mobile Home Park 97.0% 06/25/97
170 Skylark Village I Mobile Home Park 98.6% 05/28/97
171 Red Hill Estates 92.6% 07/16/97
172 Desert Springs Apartments 95.0% 08/01/97
173 Lake Haven/Tall Pines 94.7% 01/18/98
174 Green Hill MHC 100.0% 09/01/97
175 Fenton Walgreens 100.0% 11/03/96
176 Skylark II Village Mobile Home Park 99.0% 06/25/97
177 Laboratory Building 100.0% 09/24/97
178 Sorrento Valley Self Storage 76.0% 01/01/98
179 Westminster Garden 98.0% 09/01/97
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Loan Tenant Information (16)
No. Property Name Largest Tenant % NSF
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
145 Sheffield Lofts
146 Paramount Self Storage
147 Allstate Insurance Building Allstate Insurance 48.7%
148 Mira Mesa Retirement Community
149 City Gables Apts.
150 Windsorland MHC
151 Budget Mini Storage - Phoenix
152 ABQ Mini Storage
153 Safeway Self Storage Facility
154 Southgate Square Apartments
155 Palm Shadows Apartments
156 Park Drive Apts.
157 Continental Luxury Apartments
158 Dohr Apartments
159 Belmont Self Storage
160 Westview Plaza Shopping Center Savers 23.1%
161 Hamilton House
162 Linkletter Self Storage Facility
163 Lyndie Office Building Marnette, Inc. 15.6%
164 Juanita Bay Office Building Juanita Bay Office Suite 20.8%
165 Fairway Greens Apartments
166 Rolling Hills
167 Barnes & Noble Barnes & Noble 100.0%
168 Diamond Grove
169 Yankee Mobile Home Park
170 Skylark Village I Mobile Home Park
171 Red Hill Estates
172 Desert Springs Apartments
173 Lake Haven/Tall Pines
174 Green Hill MHC
175 Fenton Walgreens Walgreen's 100.0%
176 Skylark II Village Mobile Home Park
177 Laboratory Building University of Washington 100.0%
178 Sorrento Valley Self Storage
179 Westminster Garden
</TABLE>
II-26
<PAGE> 144
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR (4) Value Date
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
180 Hillside Courtyard $522,474 $19,736 2.21 $5,800,000 7/11/97
181 Village Fair Shopping Center $402,608 $17,913 1.87 $3,600,000 11/20/97
182 Just For Feet $305,033 $17,468 1.46 $3,830,000 10/14/97
183 Airway Trade Center $321,615 $18,265 1.47 $3,800,000 10/28/97
184 989-1001 Watertown Street $259,549 $17,157 1.26 $3,400,000 11/19/97
185 Kimberly Place $313,752 $16,507 1.58 $3,400,000 12/23/98
186 Casa Del Sol Apartment $290,188 $17,659 1.37 $3,290,000 9/3/97
187 Lake Geneva Apts. $313,773 $19,912 1.31 $3,300,000 12/3/97
188 Austin Commons Industrial Building $273,158 $20,435 1.11 $3,370,000 4/17/97
189 Fairway Executive Center $280,800 $18,119 1.29 $3,100,000 12/1/97
190 National City Self Storage Facility $383,012 $17,289 1.85 $3,400,000 9/17/97
191 Kawaihae Harbor Shopping Center $282,812 $19,438 1.21 $3,265,000 8/18/97
192 Greenbriar Business Park $264,828 $16,863 1.31 $3,500,000 10/13/97
193 St. Vrain Village MHP $299,871 $18,604 1.34 $3,230,000 9/8/97
194 2000 E. Irvington Road $323,525 $22,810 1.18 $3,200,000 6/4/97
195 Safe Space Self Storage $274,317 $18,750 1.22 $2,650,000 6/16/97
196 Arbor Oaks MHC $261,976 $16,918 1.29 $3,320,000 8/29/97
198 Windsor Estates $348,993 $19,625 1.48 $3,125,000 9/16/96
199 A-American Self Storage Facility-Palmdale $386,499 $17,124 1.88 $3,100,000 12/29/97
200 Maple Tree Plaza $161,390 $10,186 1.32 $1,775,000 1/24/97
201 17th & State Shops $117,087 $8,816 1.11 $1,500,000 12/29/96
202 Oxford Corners $292,495 $17,361 1.40 $3,150,000 9/1/97
203 Riverwood $239,249 $15,484 1.29 $2,900,000 1/13/98
204 3500 W. Segerstrom $292,133 $16,022 1.52 $4,140,000 11/1/97
205 Oakwood MHP $368,383 $16,908 1.82 $4,500,000 7/19/97
206 Calexico Mobile Home Park $353,622 $17,268 1.71 $3,550,000 7/16/97
207 American Harbor Self Storage $271,910 $17,720 1.28 $2,905,000 7/30/97
208 Bennett Avenue Apartments $285,890 $17,244 1.38 $3,150,000 8/5/97
209 Friendly Village MHC $240,215 $17,981 1.11 $3,250,000 9/4/96
210 Strawberry Hills Apartments $257,930 $15,571 1.38 $2,970,000 10/27/97
211 Worthington Business Center $347,901 $19,254 1.51 $3,200,000 10/28/96
212 Rancho Del Rio MHP $313,043 $17,750 1.47 $2,800,000 4/24/97
213 A-1 Self Storage - El Cajon, CA $336,415 $16,646 1.68 $3,100,000 10/29/97
214 28308 Industry Drive $257,946 $14,931 1.44 $3,500,000 11/11/97
215 Belmont Self Storage II $290,377 $17,002 1.42 $3,890,000 10/13/97
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Loan Cut-Off Date Percent Leased (15)
No. Property Name LTV (4) Leased Date
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
180 Hillside Courtyard 46.4% 100.0% 06/30/97
181 Village Fair Shopping Center 73.5% 97.4% 11/01/97
182 Just For Feet 65.6% 100.0% 10/01/97
183 Airway Trade Center 65.6% 100.0% 12/01/97
184 989-1001 Watertown Street 73.4% 95.0% 12/01/97
185 Kimberly Place 73.5% 98.0% 11/04/97
186 Casa Del Sol Apartment 75.7% 97.0% 07/28/97
187 Lake Geneva Apts. 75.3% 97.0% 08/22/97
188 Austin Commons Industrial Building 73.5% 93.1% 09/30/97
189 Fairway Executive Center 79.8% 88.8% 10/15/97
190 National City Self Storage Facility 71.8% 94.0% 09/22/97
191 Kawaihae Harbor Shopping Center 74.6% 95.8% 09/01/97
192 Greenbriar Business Park 68.5% 95.4% 09/01/97
193 St. Vrain Village MHP 74.0% 100.0% 09/01/97
194 2000 E. Irvington Road 73.4% 100.0% 10/01/97
195 Safe Space Self Storage 89.0% 87.3% 09/30/97
196 Arbor Oaks MHC 70.8% 100.0% 08/29/97
198 Windsor Estates 74.6% 90.0% 12/16/97
199 A-American Self Storage Facility-Palmdale 74.9% 96.1% 12/15/97
200 Maple Tree Plaza 69.4% 97.0% 09/30/97
201 17th & State Shops 71.1% 100.0% 09/30/97
202 Oxford Corners 79.2% 94.7% 09/19/97
203 Riverwood 79.2% 95.0% 12/22/97
204 3500 W. Segerstrom 55.4% 100.0% 11/01/97
205 Oakwood MHP 50.9% 100.0% 10/17/97
206 Calexico Mobile Home Park 64.5% 100.0% 06/01/97
207 American Harbor Self Storage 78.7% 97.0% 06/30/97
208 Bennett Avenue Apartments 72.6% 99.0% 12/16/97
209 Friendly Village MHC 70.3% 91.0% 10/13/97
210 Strawberry Hills Apartments 76.7% 94.0% 09/01/97
211 Worthington Business Center 70.9% 100.0% 10/11/97
212 Rancho Del Rio MHP 80.6% 98.0% 04/01/97
213 A-1 Self Storage - El Cajon, CA 72.4% 97.5% 09/30/97
214 28308 Industry Drive 62.9% 100.0% 11/01/97
215 Belmont Self Storage II 56.3% 91.0% 11/16/97
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Tenant Information (16)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
180 Hillside Courtyard Shugrues Hillside Grill 12.7%
181 Village Fair Shopping Center Oak Ridge Market 64.3%
182 Just For Feet Just For Feet 100.0%
183 Airway Trade Center C.T. Produce 31.4%
184 989-1001 Watertown Street Comm of Mass 20.9%
185 Kimberly Place
186 Casa Del Sol Apartment
187 Lake Geneva Apts.
188 Austin Commons Industrial Building Burnham 20.9%
189 Fairway Executive Center Tarmac Florida 51.1%
190 National City Self Storage Facility
191 Kawaihae Harbor Shopping Center Tres Hombres 19.5%
192 Greenbriar Business Park 4420 - Barco Automation 11.7%
193 St. Vrain Village MHP
194 2000 E. Irvington Road Fleming 100.0%
195 Safe Space Self Storage
196 Arbor Oaks MHC
198 Windsor Estates
199 A-American Self Storage Facility-Palmdale
200 Maple Tree Plaza Segall's Pub & Eatery 12.0%
201 17th & State Shops Blockbuster Video 53.4%
202 Oxford Corners Blockbuster Video, Inc. 31.3%
203 Riverwood
204 3500 W. Segerstrom Cal-Compack Foods 100.0%
205 Oakwood MHP
206 Calexico Mobile Home Park
207 American Harbor Self Storage
208 Bennett Avenue Apartments
209 Friendly Village MHC
210 Strawberry Hills Apartments
211 Worthington Business Center Waxworks 35.3%
212 Rancho Del Rio MHP
213 A-1 Self Storage - El Cajon, CA
214 28308 Industry Drive Time Warner Entertainment Co., L.P. 100.0%
215 Belmont Self Storage II
</TABLE>
II-27
<PAGE> 145
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR (4) Value Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
217 Sunland Manor $299,507 $15,769 1.58 $2,700,000 7/17/97
218 Storage Solutions $323,903 $17,676 1.53 $3,000,000 11/15/96
219 Craycroft Gardens $247,768 $17,353 1.19 $2,700,000 4/16/97
220 Fleming Creek Circle Apartments $329,178 $14,269 1.92 $2,800,000 9/9/97
221 Tyler Mall Mini Storage $305,573 $16,236 1.57 $3,150,000 10/8/97
222 Alyson Manor Mobile Estates $250,489 $16,095 1.30 $2,550,000 8/11/97
223 Ogden Days Inn $355,445 $18,612 1.59 $2,900,000 8/12/97
225 99 Brainard Road $209,899 $13,977 1.25 $2,900,000 11/14/97
226 Securgard Self Storage $325,247 $18,475 1.47 $2,600,000 5/27/96
227 Shattuck Avenue Self Storage Facility $302,774 $16,367 1.54 $3,020,000 10/10/97
228 Meadowbrook Village $366,507 $15,556 1.96 $4,460,000 5/23/97
229 11959 Canyon Road $270,947 $16,062 1.41 $3,000,000 7/1/97
230 Walgreens - Monterey $304,104 $18,658 1.36 $3,560,000 12/2/96
231 Southshore Point $231,683 $13,658 1.41 $2,600,000 11/17/97
232 Petcare Superstore $231,638 $15,159 1.27 $2,540,000 8/15/97
233 Memorial Crossing $267,457 $14,927 1.49 $2,670,000 6/4/97
234 Bethany Square $268,957 $15,185 1.48 $3,550,000 8/19/97
235 Royal Highlander $425,465 $13,670 2.59 $4,510,000 10/7/97
236 932 N. Rush $315,999 $14,718 1.79 $5,300,000 11/14/97
237 Fineberg Lancaster Apartments $189,549 $13,437 1.18 $3,240,000 1/6/98
238 Fineberg Beacon Apartments $194,250 $13,437 1.20 $2,970,000 1/6/98
239 Centennial Estates $431,866 $14,857 2.42 $4,860,000 3/5/97
240 Armored Self Storage Facility $422,652 $15,503 2.27 $3,750,000 6/25/97
241 Extra Space Self Storage Facility $492,655 $24,319 1.69 $4,430,000 8/29/97
242 Portgage Green MHP $224,757 $14,626 1.28 $2,850,000 5/20/97
243 A-American El Cajon $274,645 $16,780 1.36 $2,550,000 5/21/97
244 7 Mt. Hood Road $194,139 $12,852 1.26 $2,600,000 nav
245 370 Diablo Road $253,692 $14,950 1.41 $2,700,000 8/12/97
246 Ashe Road Bus. Park $224,200 $13,170 1.42 $2,740,000 11/10/97
247 Gilbert Self Storage $367,688 $19,212 1.59 $3,480,000 7/12/97
248 Lamar Mini Storage $290,349 $16,075 1.51 $2,650,000 1/22/97
249 El Dorado Mobile Home Park $211,166 $14,560 1.21 $2,350,000 7/22/97
250 Boston Market/Kinkos $243,775 $15,747 1.29 $2,600,000 5/1/97
251 British Square $225,218 $12,935 1.45 $2,600,000 10/8/97
252 Valencia Gardens $217,483 $14,081 1.29 $2,600,000 7/23/97
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Loan Cut-Off Date Percent Leased (15)
No. Property Name LTV (4) Leased Date
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
217 Sunland Manor 80.3% 96.0% 09/30/97
218 Storage Solutions 71.0% 85.0% 12/01/97
219 Craycroft Gardens 78.1% 87.0% 09/01/97
220 Fleming Creek Circle Apartments 74.9% 92.9% 09/08/97
221 Tyler Mall Mini Storage 66.4% 89.9% 08/31/97
222 Alyson Manor Mobile Estates 82.0% 93.7% 06/01/97
223 Ogden Days Inn 71.8% 64.0% 06/01/97
225 99 Brainard Road 71.6% 100.0% 09/11/97
226 Securgard Self Storage 79.5% 93.0% 09/30/97
227 Shattuck Avenue Self Storage Facility 68.4% 98.6% 08/31/97
228 Meadowbrook Village 46.2% 99.0% 12/22/97
229 11959 Canyon Road 68.3% 100.0% 07/01/97
230 Walgreens - Monterey 59.9% 100.0% 09/01/97
231 Southshore Point 78.0% 87.5% 08/31/97
232 Petcare Superstore 78.5% 100.0% 08/01/97
233 Memorial Crossing 74.8% 100.0% 10/02/97
234 Bethany Square 56.2% 86.7% 08/27/97
235 Royal Highlander 44.3% 100.0% 09/30/97
236 932 N. Rush 37.6% 100.0% 11/10/97
237 Fineberg Lancaster Apartments 61.7% 100.0% 12/01/97
238 Fineberg Beacon Apartments 67.3% 100.0% 11/01/97
239 Centennial Estates 40.9% 99.5% 10/31/97
240 Armored Self Storage Facility 52.9% 98.0% 09/30/97
241 Extra Space Self Storage Facility 44.1% 94.0% 08/01/97
242 Portgage Green MHP 68.1% 100.0% 08/01/97
243 A-American El Cajon 75.9% 97.0% 10/01/97
244 7 Mt. Hood Road 73.4% 100.0% 09/01/97
245 370 Diablo Road 70.1% 85.2% 07/10/97
246 Ashe Road Bus. Park 69.2% 81.0% 10/01/97
247 Gilbert Self Storage 54.1% 88.9% 12/12/97
248 Lamar Mini Storage 71.0% 93.0% 08/01/97
249 El Dorado Mobile Home Park 79.5% 96.1% 06/01/97
250 Boston Market/Kinkos 71.8% 100.0% 10/01/97
251 British Square 71.0% 87.1% 09/30/97
252 Valencia Gardens 70.8% 85.0% 12/01/97
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Loan Tenant Information (16)
No. Property Name Largest Tenant % NSF
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
217 Sunland Manor
218 Storage Solutions
219 Craycroft Gardens
220 Fleming Creek Circle Apartments
221 Tyler Mall Mini Storage
222 Alyson Manor Mobile Estates
223 Ogden Days Inn
225 99 Brainard Road
226 Securgard Self Storage
227 Shattuck Avenue Self Storage Facility
228 Meadowbrook Village
229 11959 Canyon Road Copeland Sports 100.0%
230 Walgreens - Monterey Walgreen's 100.0%
231 Southshore Point
232 Petcare Superstore PetCare 100.0%
233 Memorial Crossing Crossing Wines & Spirits 19.2%
234 Bethany Square A.I.B.T. 20.1%
235 Royal Highlander
236 932 N. Rush Starbucks 60.4%
237 Fineberg Lancaster Apartments
238 Fineberg Beacon Apartments
239 Centennial Estates
240 Armored Self Storage Facility
241 Extra Space Self Storage Facility
242 Portgage Green MHP
243 A-American El Cajon
244 7 Mt. Hood Road
245 370 Diablo Road Herrmann Financial Services, Inc. 21.6%
246 Ashe Road Bus. Park
247 Gilbert Self Storage
248 Lamar Mini Storage
249 El Dorado Mobile Home Park
250 Boston Market/Kinkos Kinko's 52.6%
251 British Square
252 Valencia Gardens
</TABLE>
II-28
<PAGE> 146
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR (4) Value Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
253 Providence Hill Office Building $227,175 $13,151 1.44 $2,800,000 10/20/97
254 A-AMERICAN SELF STORAGE-Valencia $282,291 $14,482 1.62 $2,400,000 10/11/96
255 Calhoun Shores Apartments $191,793 $13,317 1.20 $2,250,000 10/27/97
256 Wyncrossing Apartments $211,202 $12,591 1.40 $2,500,000 9/22/97
257 Garcia Apartments $216,381 $12,372 1.46 $2,350,000 10/6/97
258 Stor-N-Lock #11 $254,134 $13,845 1.53 $2,200,000 8/12/97
259 Sycamore Hill Apartments $220,083 $11,950 1.53 $2,400,000 8/27/97
260 3400 W. Segerstrom $283,330 $11,779 2.00 $3,410,000 11/1/97
261 Larkfield Self Storage $285,487 $14,396 1.65 $2,400,000 5/1/97
262 Bellmere Apartments $196,648 $11,960 1.37 $2,200,000 9/18/97
263 Armored Mini Storage - 52nd Street $286,987 $12,790 1.87 $2,640,000 5/5/97
264 CVS - Decatur $222,130 $15,014 1.23 $2,700,000 12/16/97
265 Southwest Professional Plaza $191,765 $13,520 1.18 $2,275,000 6/12/97
266 Tanglewood $207,973 $13,438 1.29 $2,030,000 5/5/97
267 Tracy Portfolio $208,731 $12,633 1.38 $2,140,000 10/3/97
268 Casa del Rey Apartments $205,355 $11,340 1.51 $2,075,000 11/21/97
269 A-American SSF - National City $203,432 $11,478 1.48 $2,470,000 11/11/97
270 B&R Mini Storage $288,030 $11,838 2.03 $3,160,000 10/10/97
271 3630 West Garry Ave. $175,176 $10,798 1.35 $2,190,000 11/1/97
272 Twin Oaks Manor $200,273 $12,365 1.35 $2,100,000 9/26/97
273 Etiwanda Self Storage $241,155 $12,355 1.63 $2,650,000 12/10/96
274 Your Extra Attic - Stockbridge $233,143 $11,505 1.69 $2,360,000 9/2/97
275 116 Washington Street $154,025 $10,205 1.26 $1,900,000 11/14/97
276 Eugene Camlu Retirement Center $203,372 $13,409 1.26 $1,750,000 9/4/96
277 Newgate Apartments $180,236 $10,996 1.37 $2,440,000 10/28/97
278 Roosevelt Apartments $192,282 $11,038 1.45 $2,000,000 11/3/97
279 Park Place Plaza Shopping Center $252,187 $10,705 1.96 $2,550,000 11/20/97
280 Quinsigamond Plaza $164,951 $11,998 1.15 $2,100,000 7/30/97
281 Hav-A-Storage Self Storage Facility $232,169 $12,054 1.61 $2,300,000 7/29/97
282 Brackett Air Business Park $188,008 $11,678 1.34 $1,950,000 8/25/97
283 Van Buren Self Storage $212,717 $13,220 1.34 $1,800,000 4/17/97
284 5 Walbridge Street $146,749 $10,021 1.22 $4,700,000 11/14/97
285 EZ Storage Center Self Storage Facility $259,102 $14,317 1.51 $2,600,000 10/6/97
286 Bethel Self Storage $195,071 $13,199 1.23 $2,500,000 3/20/97
287 Handi Self Storage $208,614 $13,231 1.31 $2,070,000 1/10/97
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Loan Cut-Off Date Percent Leased (15)
No. Property Name LTV (4) Leased Date
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
253 Providence Hill Office Building 64.1% 93.0% 12/30/97
254 A-AMERICAN SELF STORAGE-Valencia 74.8% 96.6% 10/01/97
255 Calhoun Shores Apartments 79.6% 92.9% 10/15/97
256 Wyncrossing Apartments 71.2% 94.0% 10/09/97
257 Garcia Apartments 74.9% 100.0% 10/06/97
258 Stor-N-Lock #11 79.7% 87.0% 07/31/97
259 Sycamore Hill Apartments 72.7% 100.0% 09/30/97
260 3400 W. Segerstrom 50.4% 100.0% 10/24/97
261 Larkfield Self Storage 71.7% 92.4% 02/11/98
262 Bellmere Apartments 75.7% 97.0% 09/01/97
263 Armored Mini Storage - 52nd Street 62.2% 94.0% 07/01/97
264 CVS - Decatur 60.5% 100.0% 12/01/97
265 Southwest Professional Plaza 70.5% 93.0% 09/01/97
266 Tanglewood 78.2% 100.0% 09/30/97
267 Tracy Portfolio 73.6% 100.0% 09/01/97
268 Casa del Rey Apartments 74.7% 96.0% 11/30/97
269 A-American SSF - National City 62.7% 90.0% 10/01/97
270 B&R Mini Storage 48.9% 96.0% 09/01/97
271 3630 West Garry Ave. 70.5% 100.0% 11/04/97
272 Twin Oaks Manor 73.4% 95.0% 08/01/97
273 Etiwanda Self Storage 57.8% 90.8% 09/30/97
274 Your Extra Attic - Stockbridge 64.4% 90.0% 08/01/97
275 116 Washington Street 79.8% 100.0% 09/01/97
276 Eugene Camlu Retirement Center 86.4% 98.4% 09/01/97
277 Newgate Apartments 61.5% 89.9% 10/01/97
278 Roosevelt Apartments 74.7% 100.0% 11/01/97
279 Park Place Plaza Shopping Center 58.6% 97.0% 11/20/97
280 Quinsigamond Plaza 71.0% 95.8% 07/09/97
281 Hav-A-Storage Self Storage Facility 64.9% 76.1% 07/02/97
282 Brackett Air Business Park 76.5% 100.0% 08/31/97
283 Van Buren Self Storage 82.8% 92.2% 12/05/97
284 5 Walbridge Street 31.7% 100.0% 09/01/97
285 EZ Storage Center Self Storage Facility 57.0% 90.0% 08/19/97
286 Bethel Self Storage 59.5% 95.0% 03/01/97
287 Handi Self Storage 71.9% 90.3% 09/30/97
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Loan Tenant Information (16)
No. Property Name Largest Tenant % NSF
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
253 Providence Hill Office Building GPS Technologies 21.5%
254 A-AMERICAN SELF STORAGE-Valencia
255 Calhoun Shores Apartments
256 Wyncrossing Apartments
257 Garcia Apartments
258 Stor-N-Lock #11
259 Sycamore Hill Apartments
260 3400 W. Segerstrom Behr Process Corporation 100.0%
261 Larkfield Self Storage
262 Bellmere Apartments
263 Armored Mini Storage - 52nd Street
264 CVS - Decatur CVS Pharmacy 76.0%
265 Southwest Professional Plaza Pima County 14.3%
266 Tanglewood Day Care Center 54.4%
267 Tracy Portfolio First National Net, Inc. 24.3%
268 Casa del Rey Apartments
269 A-American SSF - National City
270 B&R Mini Storage
271 3630 West Garry Ave. A&G, Inc. 100.0%
272 Twin Oaks Manor
273 Etiwanda Self Storage
274 Your Extra Attic - Stockbridge
275 116 Washington Street
276 Eugene Camlu Retirement Center
277 Newgate Apartments
278 Roosevelt Apartments
279 Park Place Plaza Shopping Center Computer Furniture Express I 17.4%
280 Quinsigamond Plaza Petco Animal Supplies 47.2%
281 Hav-A-Storage Self Storage Facility
282 Brackett Air Business Park
283 Van Buren Self Storage
284 5 Walbridge Street
285 EZ Storage Center Self Storage Facility
286 Bethel Self Storage
287 Handi Self Storage
</TABLE>
II-29
<PAGE> 147
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Cut-Off Date
No. Property Name Cash Flow Payment DSCR (4) Value Date LTV (4)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
288 Green Valley Storage (Windmill) $403,654 $10,796 3.12 $4,150,000 12/9/97 35.4%
289 Woodgate Mobile Home Village $181,797 $11,129 1.36 $1,835,000 11/18/97 79.9%
290 Aire Libre Apartments $164,822 $10,711 1.28 $1,950,000 8/5/97 74.0%
291 Shattalon Terrace Apartments $160,677 $10,267 1.30 $2,150,000 10/8/97 66.9%
292 Brookhaven MHC $182,977 $11,086 1.38 $2,340,000 1/1/97 60.0%
294 Heritage/Gibson Mobile Home Village $210,630 $10,730 1.64 $1,920,000 10/21/97 72.6%
295 River Point Condos $148,515 $9,997 1.24 $1,785,000 9/17/97 78.2%
296 Villa Vallejo $190,911 $10,674 1.49 $2,000,000 8/1/97 69.5%
297 CVS - Austell $187,819 $12,603 1.24 $2,100,000 12/9/97 65.3%
298 Crown Ridge Apartments $159,119 $10,749 1.23 $1,800,000 6/17/97 76.2%
299 1334 Commonwealth Avenue $141,287 $9,090 1.30 $1,700,000 11/14/97 79.4%
300 Mini U Novi $348,588 $10,509 2.76 $3,280,000 7/15/97 40.9%
301 Stor-N-Lock #10 $352,112 $11,183 2.62 $3,550,000 8/14/97 37.1%
302 2nd Garage Self Storage $277,698 $12,783 1.81 $2,050,000 9/25/97 64.3%
303 Virginia Court Apartments $177,529 $10,014 1.48 $1,800,000 8/11/97 73.2%
304 Oakview Manor Apartments $184,082 $8,922 1.72 $2,300,000 12/4/97 56.6%
305 Timberline Forest Apartments $125,821 $8,930 1.17 $1,630,000 10/16/97 79.5%
306 The Village Plaza $269,977 $10,129 2.22 $3,200,000 8/22/97 40.4%
307 9 Egremont Road $135,532 $8,700 1.30 $1,900,000 11/14/97 68.0%
308 Affordable Self Storage $179,625 $11,268 1.33 $1,900,000 4/2/97 67.9%
309 6630 Baltimore National Pike $169,576 $11,331 1.25 $1,650,000 nav 78.1%
310 4 Vinal Street $130,640 $8,519 1.28 $2,000,000 11/14/97 63.3%
311 Whiskey Bottom Business Center $174,037 $10,805 1.34 $1,675,000 2/18/97 75.4%
312 Royal Estates MHP $250,877 $9,051 2.31 $2,500,000 10/8/97 49.9%
313 Pep Boys - Streamwood $110,000 $9,139 1.00 $1,300,000 12/28/97 94.1%
314 Orange Avenue Industrial Park $220,010 $11,772 1.56 $1,670,000 1/28/97 72.5%
315 Men's Warehouse $135,975 $8,852 1.28 $1,500,000 12/19/97 79.9%
316 Pier 1 - Saginaw $134,361 $8,973 1.25 $1,600,000 12/1/97 74.7%
317 Boulevard Apartments $141,257 $8,831 1.33 $1,625,000 11/3/97 73.6%
318 Stor-N-Lock #8 $186,563 $10,128 1.54 $2,000,000 8/14/97 59.7%
319 Park Plaza Retail Center $167,043 $9,709 1.43 $1,720,000 6/17/97 69.5%
320 Claremont Self Storage $158,376 $9,791 1.35 $1,820,000 12/23/96 65.6%
321 Shamrock MHC $266,046 $9,193 2.41 $3,710,000 3/14/97 32.2%
322 Security Self Storage Facility $194,401 $9,907 1.64 $1,820,000 6/10/97 65.5%
323 Lock It Up Self Storage Facility $195,179 $11,573 1.41 $1,750,000 7/29/96 67.5%
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Loan Percent Leased (15)
No. Property Name Leased Date
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
288 Green Valley Storage (Windmill) 95.1% 10/27/97
289 Woodgate Mobile Home Village 96.4% 09/30/97
290 Aire Libre Apartments 86.3% 09/24/97
291 Shattalon Terrace Apartments 83.8% 12/19/97
292 Brookhaven MHC 98.0% 10/03/97
294 Heritage/Gibson Mobile Home Village 100.0% 07/01/97
295 River Point Condos 97.0% 07/31/97
296 Villa Vallejo 93.0% 07/31/97
297 CVS - Austell 100.0% 12/01/97
298 Crown Ridge Apartments 100.0% 08/01/97
299 1334 Commonwealth Avenue 100.0% 11/19/97
300 Mini U Novi 83.0% 07/01/97
301 Stor-N-Lock #10 97.0% 06/01/97
302 2nd Garage Self Storage 96.5% 10/01/97
303 Virginia Court Apartments 98.1% 07/11/97
304 Oakview Manor Apartments 98.7% 11/28/97
305 Timberline Forest Apartments 90.9% 09/25/97
306 The Village Plaza 100.0% 07/31/97
307 9 Egremont Road 92.3% 11/19/97
308 Affordable Self Storage 88.0% 12/11/97
309 6630 Baltimore National Pike 90.0% 09/30/97
310 4 Vinal Street 93.0% 09/01/97
311 Whiskey Bottom Business Center 89.0% 09/30/97
312 Royal Estates MHP 100.0% 09/30/97
313 Pep Boys - Streamwood 100.0% 12/01/97
314 Orange Avenue Industrial Park 93.0% 12/01/97
315 Men's Warehouse 100.0% 01/21/98
316 Pier 1 - Saginaw 100.0% 12/03/97
317 Boulevard Apartments 93.3% 11/01/97
318 Stor-N-Lock #8 58.2% 07/31/97
319 Park Plaza Retail Center 100.0% 06/12/97
320 Claremont Self Storage 96.2% 10/01/97
321 Shamrock MHC 100.0% 10/31/97
322 Security Self Storage Facility 99.0% 09/01/97
323 Lock It Up Self Storage Facility 88.7% 06/30/97
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Loan Tenant Information (16)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
288 Green Valley Storage (Windmill)
289 Woodgate Mobile Home Village
290 Aire Libre Apartments
291 Shattalon Terrace Apartments
292 Brookhaven MHC
294 Heritage/Gibson Mobile Home Village
295 River Point Condos
296 Villa Vallejo
297 CVS - Austell CVS Pharmacy 100.0%
298 Crown Ridge Apartments
299 1334 Commonwealth Avenue
300 Mini U Novi
301 Stor-N-Lock #10
302 2nd Garage Self Storage
303 Virginia Court Apartments
304 Oakview Manor Apartments
305 Timberline Forest Apartments
306 The Village Plaza Convenient Food Mart 16.6%
307 9 Egremont Road
308 Affordable Self Storage
309 6630 Baltimore National Pike Leather Interiors 14.8%
310 4 Vinal Street
311 Whiskey Bottom Business Center
312 Royal Estates MHP
313 Pep Boys - Streamwood Pep Boys 100.0%
314 Orange Avenue Industrial Park
315 Men's Warehouse The Men's Warehouse 100.0%
316 Pier 1 - Saginaw Pier 1 100.0%
317 Boulevard Apartments
318 Stor-N-Lock #8
319 Park Plaza Retail Center Universal Portraits 13.2%
320 Claremont Self Storage
321 Shamrock MHC
322 Security Self Storage Facility
323 Lock It Up Self Storage Facility
</TABLE>
II-30
<PAGE> 148
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR (4) Value Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
324 CVS - Bethsaida $168,581 $10,738 1.31 $1,900,000 12/9/97
325 Summer Wind $158,133 $10,097 1.31 $1,700,000 3/24/97
326 Victoria Square Apartments $136,034 $8,402 1.35 $1,920,000 10/24/97
327 Foxfire Apartments $134,771 $8,212 1.37 $1,550,000 7/10/97
328 Glen Arbor Apartments $146,140 $9,181 1.33 $1,600,000 nav
329 Pier 1- Lewisville $124,161 $8,562 1.21 $1,450,000 11/1/97
330 Bozeman K-Mart/Applebees $151,795 $10,045 1.26 $1,650,000 5/1/97
331 Emerald Lakes Mobile Home Park $122,849 $7,986 1.28 $1,490,000 10/17/97
332 Your Extra Attic - Duluth $154,434 $8,448 1.52 $1,570,000 9/3/97
333 Pier 1 - Canton $118,288 $8,225 1.20 $1,450,000 12/1/97
334 DeSoto Estates MHP $160,019 $8,653 1.54 $1,650,000 7/21/97
335 McWhorters - Cupertino $214,787 $10,499 1.70 $2,300,000 2/27/97
336 Hide-Away-Hills MHP $139,367 $7,213 1.61 $1,485,000 10/23/97
337 AAA Interstate SSF $238,446 $8,345 2.38 $2,300,000 7/25/97
338 Your Extra Attic - Winters Chapel $155,324 $7,770 1.67 $1,530,000 9/3/97
339 ABC Mini Storage $177,202 $9,121 1.62 $1,360,000 3/4/97
340 Pep Boys- Gardena $115,000 $9,555 1.00 $1,250,000 11/12/97
341 Eastwood MHP $133,219 $7,731 1.44 $1,335,000 8/14/97
342 Bama Self Storage $178,185 $8,855 1.68 $1,450,000 2/19/97
343 Thomas Apartments $109,286 $7,421 1.23 $1,340,000 4/15/97
345 Missouri Self Storage Facility $137,693 $6,892 1.66 $1,400,000 5/1/97
346 A-American Self Storage-Bent Avenue $110,510 $6,664 1.38 $1,610,000 11/10/97
347 The Pine Garden Apartments $142,071 $7,568 1.56 $1,385,000 8/5/97
348 Stor-N-Lock #7 $212,441 $7,174 2.47 $2,050,000 8/26/97
349 Green Valley Self Storage $274,166 $6,093 3.75 $2,130,000 12/9/97
350 130 Englewood Street $89,654 $5,476 1.36 $1,100,000 11/14/97
351 Radio Shack - Blockbuster Center $89,234 $5,928 1.25 $1,000,000 9/1/97
352 1375 Commonwealth Avenue $75,431 $5,039 1.25 $1,200,000 11/14/97
353 Stor-N-Lock #9 $143,700 $5,908 2.03 $1,420,000 8/27/97
354 Mid Cajon Apartments $78,382 $4,968 1.31 $880,000 10/17/97
355 Payless Shoe Source $74,559 $4,936 1.26 $850,000 12/30/97
356 Panama City Mobile Home Estates $81,538 $5,675 1.20 $910,000 4/1/97
357 Your Extra Attic - Norcross $82,267 $5,144 1.33 $970,000 9/3/97
358 Terrace View Center $73,895 $4,676 1.32 $850,000 10/17/97
359 Village Corner $80,233 $4,566 1.46 $1,300,000 9/2/97
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Loan Cut-Off Date Percent Leased (15)
No. Property Name LTV (4) Leased Date
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
324 CVS - Bethsaida 61.5% 100.0% 12/01/97
325 Summer Wind 68.8% 89.0% 12/01/97
326 Victoria Square Apartments 59.7% 94.0% 12/01/97
327 Foxfire Apartments 73.9% 98.0% 06/01/97
328 Glen Arbor Apartments 70.8% 89.7% 09/30/97
329 Pier 1- Lewisville 77.6% 100.0% 11/13/97
330 Bozeman K-Mart/Applebees 67.5% 100.0% 12/31/97
331 Emerald Lakes Mobile Home Park 74.6% 100.0% 10/31/97
332 Your Extra Attic - Duluth 70.4% 99.2% 09/30/97
333 Pier 1 - Canton 75.6% 100.0% 12/01/97
334 DeSoto Estates MHP 66.4% 95.7% 06/01/97
335 McWhorters - Cupertino 46.9% 100.0% 02/28/98
336 Hide-Away-Hills MHP 70.6% 100.0% 09/01/97
337 AAA Interstate SSF 45.4% 81.0% 07/01/97
338 Your Extra Attic - Winters Chapel 67.1% 91.0% 09/03/97
339 ABC Mini Storage 75.1% 65.0% 08/30/97
340 Pep Boys- Gardena 79.5% 100.0% 11/15/97
341 Eastwood MHP 74.6% 97.0% 07/31/97
342 Bama Self Storage 68.5% 84.0% 10/25/97
343 Thomas Apartments 71.9% 100.0% 09/30/97
345 Missouri Self Storage Facility 64.1% 85.0% 09/01/97
346 A-American Self Storage-Bent Avenue 55.8% 90.0% 11/01/97
347 The Pine Garden Apartments 64.3% 92.7% 09/30/97
348 Stor-N-Lock #7 41.2% 66.9% 07/31/97
349 Green Valley Self Storage 38.6% 100.0% 12/01/97
350 130 Englewood Street 73.9% 100.0% 09/01/97
351 Radio Shack - Blockbuster Center 79.8% 100.0% 12/10/97
352 1375 Commonwealth Avenue 62.4% 100.0% 09/11/97
353 Stor-N-Lock #9 49.0% 69.1% 08/27/97
354 Mid Cajon Apartments 77.0% 96.0% 08/22/97
355 Payless Shoe Source 79.3% 100.0% 12/01/97
356 Panama City Mobile Home Estates 71.2% 95.4% 06/30/97
357 Your Extra Attic - Norcross 66.8% 81.0% 09/30/97
358 Terrace View Center 75.1% 89.9% 12/30/97
359 Village Corner 47.9% 100.0% 12/01/97
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Loan Tenant Information (16)
No. Property Name Largest Tenant % NSF
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
324 CVS - Bethsaida CVS Pharmacy 100.0%
325 Summer Wind
326 Victoria Square Apartments
327 Foxfire Apartments
328 Glen Arbor Apartments
329 Pier 1- Lewisville Pier 1 Imports 100.0%
330 Bozeman K-Mart/Applebees Kmart 94.2%
331 Emerald Lakes Mobile Home Park
332 Your Extra Attic - Duluth
333 Pier 1 - Canton Pier 1 100.0%
334 DeSoto Estates MHP
335 McWhorters - Cupertino McWhorter's Stationery 100.0%
336 Hide-Away-Hills MHP
337 AAA Interstate SSF
338 Your Extra Attic - Winters Chapel
339 ABC Mini Storage
340 Pep Boys- Gardena Pep Boys 100.0%
341 Eastwood MHP
342 Bama Self Storage
343 Thomas Apartments
345 Missouri Self Storage Facility
346 A-American Self Storage-Bent Avenue
347 The Pine Garden Apartments
348 Stor-N-Lock #7
349 Green Valley Self Storage
350 130 Englewood Street
351 Radio Shack - Blockbuster Center Blockbuster Videos, Inc. 65.6%
352 1375 Commonwealth Avenue
353 Stor-N-Lock #9
354 Mid Cajon Apartments
355 Payless Shoe Source Payless ShoeSource 100.0%
356 Panama City Mobile Home Estates
357 Your Extra Attic - Norcross
358 Terrace View Center Neighborhood House 33.1%
359 Village Corner Jacobs Insurance Group 19.5%
</TABLE>
II-31
<PAGE> 149
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation
No. Property Name Cash Flow Payment DSCR (4) Value Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
360 1381 Commonwealth Avenue $52,412 $3,460 1.26 $700,000 11/14/97
361 Pinegrove Place $62,609 $3,782 1.38 $750,000 12/3/97
Total/Weighted Average 1.43
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Loan Cut-Off Date Percent Leased (15)
No. Property Name LTV (4) Leased Date
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
360 1381 Commonwealth Avenue 73.4% 100.0% 09/11/97
361 Pinegrove Place 66.4% 100.0% 11/01/97
Total/Weighted Average 71.6%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Loan Tenant Information (16)
No. Property Name Largest Tenant % NSF
- ------------------------------------------------------------------------------------------------------------
<S> <C>
360 1381 Commonwealth Avenue
361 Pinegrove Place
Total/Weighted Average
</TABLE>
II-32
<PAGE> 150
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 151
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN LOCKOUT DEFEASANCE -------------------------------
NO. PROPERTY NAME SEASONING (17) PERIOD PROVISION YM5L YM4L YM3L YM2L YM1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Pacific Coast Plaza Shopping Center 4 113
2 Norwood Gardens 2 114 Yes
3 Rookwood Pavilion 5 60 36
4 Skold Self Storage Portfolio 1 120 Yes
5 Affordable Self Storage 1 120 Yes
6 Skold Portfolio - Greenwood Self Storage 1 120 Yes
7 Skold Portfolio - Evergreen Mini Storage 1 120 Yes
8 351 California Street 7 117
9 201 Sansome Street 7 117
10 Boulder Marriott (19) 3 60 24 24 24 24 18
11 Beverly Garland Hotel 2 60 57
12 Rancho Viejo Apts. 3 60 57
13 Lincoln on Memorial Apartments 5 36 81
14 Davis Square Center 2 24 93
15 Fleming Portfolio 5 60 54
16 Marymount Manor 2 48 69
17 Marymount Tower 2 48 69
18 Park Place Shopping Center 4 60 57
19 A&P Food Market 2 181 Yes
20 The First National Bank Building 7 114
21 Boylston Apartments 2 72
22 Greenbriar Apartments 3 60 57
23 College Station Apartments 5 60 54
24 Kmart Plaza 7 114
25 Rivershire Apartments 1 120 Yes
26 Haggerty Tech Center 7 117
27 Village at Chestnut Hill 2 72
28 Orland Park Exec. Ctr. 2 60 57
29 GMAC Building 2 60 57
30 Ridgecrest Terrace Apartments 2 72
31 Fountain Square Shopping Center 7 36
32 1550 Brickell 1 60 57
32a Lafayette Towers 1 60 57
33 Lake Village Apartments 3 117 Yes
34 All Aboard Mini Storage Portfolio - Oakland 2 48 69
35 All Aboard Mini-Storage Portfolio - Ventura 2 48 68
36 All Aboard Mini Storage Portfolio - Van Nuys 2 48 68
37 Stor-Mor of Cypress 3 60 48
38 Stor-Mor - Anaheim 3 60 48
39 Stor-Mor - Torrance 3 60 48
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN
NO. PROPERTY NAME YM 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Pacific Coast Plaza Shopping Center
2 Norwood Gardens
3 Rookwood Pavilion
4 Skold Self Storage Portfolio
5 Affordable Self Storage
6 Skold Portfolio - Greenwood Self Storage
7 Skold Portfolio - Evergreen Mini Storage
8 351 California Street
9 201 Sansome Street
10 Boulder Marriott (19)
11 Beverly Garland Hotel
12 Rancho Viejo Apts.
13 Lincoln on Memorial Apartments
14 Davis Square Center
15 Fleming Portfolio
16 Marymount Manor
17 Marymount Tower
18 Park Place Shopping Center
19 A&P Food Market
20 The First National Bank Building
21 Boylston Apartments 12 12 18
22 Greenbriar Apartments
23 College Station Apartments
24 Kmart Plaza
25 Rivershire Apartments
26 Haggerty Tech Center
27 Village at Chestnut Hill 12 12 12 6
28 Orland Park Exec. Ctr.
29 GMAC Building
30 Ridgecrest Terrace Apartments 12 12 12 6
31 Fountain Square Shopping Center 78
32 1550 Brickell
32a Lafayette Towers
33 Lake Village Apartments
34 All Aboard Mini Storage Portfolio - Oakland
35 All Aboard Mini-Storage Portfolio - Ventura
36 All Aboard Mini Storage Portfolio - Van Nuys
37 Stor-Mor of Cypress
38 Stor-Mor - Anaheim
39 Stor-Mor - Torrance
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
LOAN PREPAYMENT CODE (18) ADMIN.
NO. PROPERTY NAME OPEN COST RATE (BPS)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Pacific Coast Plaza Shopping Center 6 7.85
2 Norwood Gardens 6 7.85
3 Rookwood Pavilion 6 7.85
4 Skold Self Storage Portfolio 7.85
5 Affordable Self Storage 7.85
6 Skold Portfolio - Greenwood Self Storage 7.85
7 Skold Portfolio - Evergreen Mini Storage 7.85
8 351 California Street 3 7.85
9 201 Sansome Street 3 7.85
10 Boulder Marriott (19) 6 7.85
11 Beverly Garland Hotel 7.85
12 Rancho Viejo Apts. 3 7.85
13 Lincoln on Memorial Apartments 3 7.85
14 Davis Square Center 3 7.85
15 Fleming Portfolio 6 7.85
16 Marymount Manor 3 7.85
17 Marymount Tower 3 7.85
18 Park Place Shopping Center 3 16.85
19 A&P Food Market 7.85
20 The First National Bank Building 6 7.85
21 Boylston Apartments 6 7.85
22 Greenbriar Apartments 3 7.85
23 College Station Apartments 6 16.85
24 Kmart Plaza 6 7.85
25 Rivershire Apartments 7.85
26 Haggerty Tech Center 3 7.85
27 Village at Chestnut Hill 6 7.85
28 Orland Park Exec. Ctr. 3 7.85
29 GMAC Building 3 7.85
30 Ridgecrest Terrace Apartments 6 7.85
31 Fountain Square Shopping Center 6 7.85
32 1550 Brickell 3 7.85
32a Lafayette Towers 3 7.85
33 Lake Village Apartments 3 7.85
34 All Aboard Mini Storage Portfolio - Oakland 3 7.85
35 All Aboard Mini-Storage Portfolio - Ventura 3 7.85
36 All Aboard Mini Storage Portfolio - Van Nuys 3 7.85
37 Stor-Mor of Cypress 12 7.85
38 Stor-Mor - Anaheim 12 7.85
39 Stor-Mor - Torrance 12 7.85
</TABLE>
II-33
<PAGE> 152
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN LOCKOUT DEFEASANCE -------------------------------
NO. PROPERTY NAME SEASONING (17) PERIOD PROVISION YM5L YM4L YM3L YM2L YM1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 Cypress Lake Apartments 5 60 57
41 Boardwalk Square 8
42 Whispering Lakes Apts. 2 60 58
43 Eagle Ridge Retail Shopping Center 4 60 57
44 Holiday Inn and Ramada Inn 5 60 54
46 The Willows at Appleton Square 6 117
47 Ashley Park Apartments 4 60 57
49 Brumby Apartments 6 117
50 Sun Vista RV Resort 2 60 57
51 Sunset Mall 5 89 85
52 Ramada Hotel Valley Ho Resort 3 60 57
53 Wynhaven Apartments 3 114
54 Claridge Court Apartments 17
55 Lake Forest Office 2 60 57
56 Acorn Self Storage 1 60 57
57 ACORN III SELF STORAGE 1 60 57
58 Central Plaza 3 36 81
59 Bend Villa Court 2 60 54
60 Danbury Retail Center 3 237
61 Rose Apartments 4 48 69
62 Rose Medical Plaza 3 60 57
63 Phoenix Inn - Phoenix 2 60 57
64 Mesa Verde 1 60 56
65 Cedar Ridge Apts. 3 84 153
110 Mira Mesa Self Storage 8
197 Sorrento Mesa SSF 8
66 Cardinal Crest MHC 4 36 81
67 Harbor Lights Mobile Home Community 4 36 81
68 Meadowview Place MHC 4 36 81
69 Skyview Terrace Mobile Home Park 4 36 81
71 Meadow Park Plaza 6 60 117
72 Lincoln Bank Building 2 60 57
73 Walnut Ridge Apts 4 60 57
74 Allsize Commercial Storage 6
76 Elmwood Distribution Center 7 117
77 Rt. 18 Mobile Home Comm. Portfolio (20) 1 60 12 12 33
78 Berrytree Apartments 1 60 54
79 Silver Drive Office/Warehouse Buildings 3 60 57
80 Fairfield Place Apartments 2 60 57
81 Holly Ravine Shopping Center 5 60 57
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN
NO. PROPERTY NAME YM 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 Cypress Lake Apartments
41 Boardwalk Square 117
42 Whispering Lakes Apts.
43 Eagle Ridge Retail Shopping Center
44 Holiday Inn and Ramada Inn
46 The Willows at Appleton Square
47 Ashley Park Apartments
49 Brumby Apartments
50 Sun Vista RV Resort
51 Sunset Mall
52 Ramada Hotel Valley Ho Resort
53 Wynhaven Apartments
54 Claridge Court Apartments 114
55 Lake Forest Office
56 Acorn Self Storage
57 ACORN III SELF STORAGE
58 Central Plaza
59 Bend Villa Court
60 Danbury Retail Center
61 Rose Apartments
62 Rose Medical Plaza
63 Phoenix Inn - Phoenix
64 Mesa Verde
65 Cedar Ridge Apts.
110 Mira Mesa Self Storage 117
197 Sorrento Mesa SSF 117
66 Cardinal Crest MHC
67 Harbor Lights Mobile Home Community
68 Meadowview Place MHC
69 Skyview Terrace Mobile Home Park
71 Meadow Park Plaza
72 Lincoln Bank Building
73 Walnut Ridge Apts
74 Allsize Commercial Storage 12 12 24 24 12
76 Elmwood Distribution Center
77 Rt. 18 Mobile Home Comm. Portfolio (20)
78 Berrytree Apartments
79 Silver Drive Office/Warehouse Buildings
80 Fairfield Place Apartments
81 Holly Ravine Shopping Center
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
LOAN PREPAYMENT CODE (18) ADMIN.
NO. PROPERTY NAME OPEN COST RATE (BPS)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
40 Cypress Lake Apartments 3 7.85
41 Boardwalk Square 3 7.85
42 Whispering Lakes Apts. 3 7.85
43 Eagle Ridge Retail Shopping Center 3 7.85
44 Holiday Inn and Ramada Inn 6 7.85
46 The Willows at Appleton Square 3 7.85
47 Ashley Park Apartments 3 7.85
49 Brumby Apartments 3 7.85
50 Sun Vista RV Resort 3 7.85
51 Sunset Mall 6 7.85
52 Ramada Hotel Valley Ho Resort 3 17.85
53 Wynhaven Apartments 6 17.00
54 Claridge Court Apartments 6 7.85
55 Lake Forest Office 3 7.85
56 Acorn Self Storage 3 7.85
57 ACORN III SELF STORAGE 3 7.85
58 Central Plaza 3 7.85
59 Bend Villa Court 6 7.85
60 Danbury Retail Center 3 7.85
61 Rose Apartments 3 7.85
62 Rose Medical Plaza 3 7.85
63 Phoenix Inn - Phoenix 3 17.00
64 Mesa Verde 4 7.85
65 Cedar Ridge Apts. 3 7.85
110 Mira Mesa Self Storage 3 7.85
197 Sorrento Mesa SSF 3 7.85
66 Cardinal Crest MHC 3 7.85
67 Harbor Lights Mobile Home Community 3 7.85
68 Meadowview Place MHC 3 7.85
69 Skyview Terrace Mobile Home Park 3 7.85
71 Meadow Park Plaza 3 7.85
72 Lincoln Bank Building 3 17.00
73 Walnut Ridge Apts 3 7.85
74 Allsize Commercial Storage 36 7.85
76 Elmwood Distribution Center 3 7.85
77 Rt. 18 Mobile Home Comm. Portfolio (20) 3 7.85
78 Berrytree Apartments 6 7.85
79 Silver Drive Office/Warehouse Buildings 3 7.85
80 Fairfield Place Apartments 3 7.85
81 Holly Ravine Shopping Center 3 7.85
</TABLE>
II-34
<PAGE> 153
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN LOCKOUT DEFEASANCE -------------------------------
NO. PROPERTY NAME SEASONING (17) PERIOD PROVISION YM5L YM4L YM3L YM2L YM1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
82 Reeseville Acres 4 36 81
83 Spring Brook Village MHP 4 36 81
84 Bridgeview Gardens MHC 4 60 57
85 Palm Springs Plaza 9 120
86 Plaza on the Boulevard 6 150
87 Burtons Landing 1 120 Yes
88 Comfort Inn - Madison 2 48 69
89 605 Market Street 2 60 57
90 Harford Mobile Village 4 60 57
91 511 East 80th Street 6 117
93 Lakeside Park Mobile Home Park 4 60 57
94 Hampton Inn - Elgin 2 48 69
95 AAA Chatsworth Self Storage 2 48 126
96 Triton Valley Estates Portfolio 4 60 57
97 Triton Valley Estates - Derby 4 60 57
98 Stoneridge Apts. 5 60 57
99 29 Dunham Road 9
100 35 Dunham Road 9
101 Pacific View Apartments 5 60 54
102 Sonoma Pointe Apartments 3 60 54
103 A-1 Self Storage - Anaheim 2 60 57
104 Holiday Ranch & Happy Landings MHC 16
105 Pompano Palms Apartments 9 60 57
106 Brewery Apartments 1 60 57
107 Arbor Woods Mobile Home Community 5 126
108 Gardens at Negley 2 60 57
109 Coral Ridge Office Center 8 114
111 South Street Office Center 8 117
112 Lake of the Pines 3 72 105
113 Alameda Crossing 9 114
114 16 Bleeker Street 2 36 81
115 Knox Village 2 60 57
117 Monmouth MHP 3 117
118 American Mini Storage 4 60 57
119 Edison Lock-Up Self Storage 7
120 Saf Keep SSF - San Leandro 11
121 The Oaks Office Building 6 36 81
122 Vista Manor Mobile Home Park 7 117
123 Nova Self-Storage 4 60 57
124 Lantern Estates 5
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN
NO. PROPERTY NAME YM 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
82 Reeseville Acres
83 Spring Brook Village MHP
84 Bridgeview Gardens MHC
85 Palm Springs Plaza
86 Plaza on the Boulevard
87 Burtons Landing
88 Comfort Inn - Madison
89 605 Market Street
90 Harford Mobile Village
91 511 East 80th Street
93 Lakeside Park Mobile Home Park
94 Hampton Inn - Elgin
95 AAA Chatsworth Self Storage
96 Triton Valley Estates Portfolio
97 Triton Valley Estates - Derby
98 Stoneridge Apts.
99 29 Dunham Road 12 12 12 12 69
100 35 Dunham Road 12 12 12 12 69
101 Pacific View Apartments
102 Sonoma Pointe Apartments
103 A-1 Self Storage - Anaheim
104 Holiday Ranch & Happy Landings MHC 117
105 Pompano Palms Apartments
106 Brewery Apartments
107 Arbor Woods Mobile Home Community
108 Gardens at Negley
109 Coral Ridge Office Center
111 South Street Office Center
112 Lake of the Pines
113 Alameda Crossing
114 16 Bleeker Street
115 Knox Village
117 Monmouth MHP
118 American Mini Storage
119 Edison Lock-Up Self Storage 117
120 Saf Keep SSF - San Leandro 12 12 24 24 12
121 The Oaks Office Building
122 Vista Manor Mobile Home Park
123 Nova Self-Storage
124 Lantern Estates 12 12 24 24 12
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
LOAN PREPAYMENT CODE (18) ADMIN.
NO. PROPERTY NAME OPEN COST RATE (BPS)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
82 Reeseville Acres 3 7.85
83 Spring Brook Village MHP 3 7.85
84 Bridgeview Gardens MHC 3 7.85
85 Palm Springs Plaza 0 7.85
86 Plaza on the Boulevard 6 7.85
87 Burtons Landing 7.85
88 Comfort Inn - Madison 3 17.00
89 605 Market Street 3 7.85
90 Harford Mobile Village 3 7.85
91 511 East 80th Street 3 7.85
93 Lakeside Park Mobile Home Park 3 7.85
94 Hampton Inn - Elgin 3 17.00
95 AAA Chatsworth Self Storage 6 7.85
96 Triton Valley Estates Portfolio 3 7.85
97 Triton Valley Estates - Derby 3 7.85
98 Stoneridge Apts. 3 7.85
99 29 Dunham Road 3 7.85
100 35 Dunham Road 3 7.85
101 Pacific View Apartments 6 7.85
102 Sonoma Pointe Apartments 6 7.85
103 A-1 Self Storage - Anaheim 3 7.85
104 Holiday Ranch & Happy Landings MHC 3 7.85
105 Pompano Palms Apartments 3 7.85
106 Brewery Apartments 3 7.85
107 Arbor Woods Mobile Home Community 6 7.85
108 Gardens at Negley 3 7.85
109 Coral Ridge Office Center 6 7.85
111 South Street Office Center 3 7.85
112 Lake of the Pines 3 7.85
113 Alameda Crossing 6 7.85
114 16 Bleeker Street 3 16.85
115 Knox Village 3 7.85
117 Monmouth MHP 3 7.85
118 American Mini Storage 3 7.85
119 Edison Lock-Up Self Storage 3 7.85
120 Saf Keep SSF - San Leandro 36 7.85
121 The Oaks Office Building 3 7.85
122 Vista Manor Mobile Home Park 3 7.85
123 Nova Self-Storage 3 7.85
124 Lantern Estates 36 7.85
</TABLE>
II-35
<PAGE> 154
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN LOCKOUT DEFEASANCE -------------------------------
NO. PROPERTY NAME SEASONING (17) PERIOD PROVISION YM5L YM4L YM3L YM2L YM1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
125 Harvard Medical Park 3 60 57
126 A American Self Storage 10
127 Commerce Crossing * 4
128 Woodshire Mobile Home Park 3 60 57
129 Leender's Portfolio 5 60 57
130 Copps Food Market 2 60 56
131 Harbour East MHC 5
132 LAGO VISTA MHP 7
133 Stor N' Lok 2
134 A-American Pico 14
135 Storage Depot-North SSF 9
136 Storage Depot-West SSF 6
137 San Luis Obisbo Self Storage 21
138 West L.A. Self Storage 8
139 Willow Creek Apts. 1 60 57
140 Redhill MHP 3 60 57
141 Phoenix Inn - Troutdale 2 60 57
142 North Valley Self Storage Facility 4 60 57
143 Stone Creek Plaza 3 120 117
144 Everett Portfolio 5
145 Sheffield Lofts 7
146 Paramount Self Storage 9
147 Allstate Insurance Building 3 60 57
148 Mira Mesa Retirement Community 2 60 57
149 City Gables Apts. 4 60 117
150 Windsorland MHC 6
151 Budget Mini Storage - Phoenix 2 90 87
152 ABQ Mini Storage 2 90 87
153 Safeway Self Storage Facility 5 60 57
154 Southgate Square Apartments 2 60 57
155 Palm Shadows Apartments 1 36 36
156 Park Drive Apts. 2 72
157 Continental Luxury Apartments 3 84 93
158 Dohr Apartments 4 60 57
159 Belmont Self Storage 4 60 117
160 Westview Plaza Shopping Center * 6 12
161 Hamilton House 8 117
162 Linkletter Self Storage Facility 2 60 69
163 Lyndie Office Building 2 48 69
164 Juanita Bay Office Building 4 60 57
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN
NO. PROPERTY NAME YM 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
125 Harvard Medical Park
126 A American Self Storage 118
127 Commerce Crossing * 36 12 12 12 12 12 81
128 Woodshire Mobile Home Park
129 Leender's Portfolio
130 Copps Food Market
131 Harbour East MHC 117
132 LAGO VISTA MHP 117
133 Stor N' Lok 117
134 A-American Pico 117
135 Storage Depot-North SSF 117
136 Storage Depot-West SSF 117
137 San Luis Obisbo Self Storage 117
138 West L.A. Self Storage 117
139 Willow Creek Apts.
140 Redhill MHP
141 Phoenix Inn - Troutdale
142 North Valley Self Storage Facility
143 Stone Creek Plaza
144 Everett Portfolio 117
145 Sheffield Lofts 116
146 Paramount Self Storage 117
147 Allstate Insurance Building
148 Mira Mesa Retirement Community
149 City Gables Apts.
150 Windsorland MHC 117
151 Budget Mini Storage - Phoenix
152 ABQ Mini Storage
153 Safeway Self Storage Facility
154 Southgate Square Apartments
155 Palm Shadows Apartments 12 12 21
156 Park Drive Apts. 12 12 18
157 Continental Luxury Apartments
158 Dohr Apartments
159 Belmont Self Storage
160 Westview Plaza Shopping Center * 24 24 24 24 12
161 Hamilton House
162 Linkletter Self Storage Facility
163 Lyndie Office Building
164 Juanita Bay Office Building
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
LOAN PREPAYMENT CODE (18) ADMIN.
NO. PROPERTY NAME OPEN COST RATE (BPS)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
125 Harvard Medical Park 3 17.00
126 A American Self Storage 3 7.85
127 Commerce Crossing * 3 15.85
128 Woodshire Mobile Home Park 3 7.85
129 Leender's Portfolio 3 7.85
130 Copps Food Market 3 7.85
131 Harbour East MHC 3 7.85
132 LAGO VISTA MHP 3 7.85
133 Stor N' Lok 3 7.85
134 A-American Pico 3 7.85
135 Storage Depot-North SSF 3 7.85
136 Storage Depot-West SSF 3 7.85
137 San Luis Obisbo Self Storage 3 7.85
138 West L.A. Self Storage 3 7.85
139 Willow Creek Apts. 3 7.85
140 Redhill MHP 3 7.85
141 Phoenix Inn - Troutdale 3 17.00
142 North Valley Self Storage Facility 3 7.85
143 Stone Creek Plaza 3 7.85
144 Everett Portfolio 3 7.85
145 Sheffield Lofts 4 7.85
146 Paramount Self Storage 3 7.85
147 Allstate Insurance Building 3 17.00
148 Mira Mesa Retirement Community 3 7.85
149 City Gables Apts. 3 7.85
150 Windsorland MHC 3 7.85
151 Budget Mini Storage - Phoenix 3 7.85
152 ABQ Mini Storage 3 7.85
153 Safeway Self Storage Facility 3 7.85
154 Southgate Square Apartments 3 7.85
155 Palm Shadows Apartments 3 7.85
156 Park Drive Apts. 6 7.85
157 Continental Luxury Apartments 3 7.85
158 Dohr Apartments 3 7.85
159 Belmont Self Storage 3 7.85
160 Westview Plaza Shopping Center * 0 15.85
161 Hamilton House 3 7.85
162 Linkletter Self Storage Facility 3 7.85
163 Lyndie Office Building 3 7.85
164 Juanita Bay Office Building 3 7.85
</TABLE>
II-36
<PAGE> 155
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
LOAN LOCKOUT DEFEASANCE PREPAYMENT CODE (18)
NO. PROPERTY NAME SEASONING (17) PERIOD PROVISION YM5L YM4L YM3L YM2L YM1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
165 Fairway Greens Apartments 3 60 57
166 Rolling Hills 6
167 Barnes & Noble 3 60 57
168 Diamond Grove (21) 8 12 12 93
169 Yankee Mobile Home Park 5 60 57
170 Skylark Village I Mobile Home Park 5 60 57
171 Red Hill Estates 11
172 Desert Springs Apartments 5 117
173 Lake Haven/Tall Pines 11
174 Green Hill MHC 10
175 Fenton Walgreens 1 120 112
176 Skylark II Village Mobile Home Park 5 60 57
177 Laboratory Building 3 60 57
178 Sorrento Valley Self Storage 1 60
179 Westminster Garden 1 60 177
180 Hillside Courtyard 5 60 57
181 Village Fair Shopping Center 2 60 57
182 Just For Feet 3 60 57
183 Airway Trade Center 2 60 58
184 989-1001 Watertown Street 2 60
185 Kimberly Place 1 60 57
186 Casa Del Sol Apartment 4 36 81
187 Lake Geneva Apts. 3 60 57
188 Austin Commons Industrial Building 9 117
189 Fairway Executive Center 2 60 57
190 National City Self Storage Facility 4 60 57
191 Kawaihae Harbor Shopping Center 5 114
192 Greenbriar Business Park 2 60 57
193 St. Vrain Village MHP 4 60 44
194 2000 E. Irvington Road 5 60 117
195 Safe Space Self Storage 7 60 57
196 Arbor Oaks MHC 5 36 78
198 Windsor Estates 9 117
199 A-American Self Storage Facility-Palmdale 1 60 54
200 Maple Tree Plaza 8 117
201 17th & State Shops 8 117
202 Oxford Corners 2 60 57
203 Riverwood 1 120 Yes
204 3500 W. Segerstrom 3 60 80
205 Oakwood MHP 5 60 57
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN
NO. PROPERTY NAME YM 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
165 Fairway Greens Apartments
166 Rolling Hills 117
167 Barnes & Noble
168 Diamond Grove (21)
169 Yankee Mobile Home Park
170 Skylark Village I Mobile Home Park
171 Red Hill Estates 117
172 Desert Springs Apartments
173 Lake Haven/Tall Pines 117
174 Green Hill MHC 117
175 Fenton Walgreens
176 Skylark II Village Mobile Home Park
177 Laboratory Building
178 Sorrento Valley Self Storage 57
179 Westminster Garden
180 Hillside Courtyard
181 Village Fair Shopping Center
182 Just For Feet
183 Airway Trade Center
184 989-1001 Watertown Street 24 12 18
185 Kimberly Place
186 Casa Del Sol Apartment
187 Lake Geneva Apts.
188 Austin Commons Industrial Building
189 Fairway Executive Center
190 National City Self Storage Facility
191 Kawaihae Harbor Shopping Center
192 Greenbriar Business Park
193 St. Vrain Village MHP 12
194 2000 E. Irvington Road
195 Safe Space Self Storage
196 Arbor Oaks MHC
198 Windsor Estates
199 A-American Self Storage Facility-Palmdale
200 Maple Tree Plaza
201 17th & State Shops
202 Oxford Corners
203 Riverwood
204 3500 W. Segerstrom
205 Oakwood MHP
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
LOAN PREPAYMENT CODE (18) ADMIN.
NO. PROPERTY NAME OPEN COST RATE (BPS)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
165 Fairway Greens Apartments 3 7.85
166 Rolling Hills 3 7.85
167 Barnes & Noble 3 7.85
168 Diamond Grove (21) 3 7.85
169 Yankee Mobile Home Park 3 7.85
170 Skylark Village I Mobile Home Park 3 7.85
171 Red Hill Estates 3 7.85
172 Desert Springs Apartments 3 7.85
173 Lake Haven/Tall Pines 3 7.85
174 Green Hill MHC 3 7.85
175 Fenton Walgreens 3 7.85
176 Skylark II Village Mobile Home Park 3 7.85
177 Laboratory Building 3 15.35
178 Sorrento Valley Self Storage 3 7.85
179 Westminster Garden 3 7.85
180 Hillside Courtyard 3 14.85
181 Village Fair Shopping Center 3 7.85
182 Just For Feet 3 7.85
183 Airway Trade Center 3 7.85
184 989-1001 Watertown Street 6 7.85
185 Kimberly Place 3 7.85
186 Casa Del Sol Apartment 3 7.85
187 Lake Geneva Apts. 3 7.85
188 Austin Commons Industrial Building 3 7.85
189 Fairway Executive Center 3 7.85
190 National City Self Storage Facility 3 7.85
191 Kawaihae Harbor Shopping Center 6 7.85
192 Greenbriar Business Park 3 7.85
193 St. Vrain Village MHP 3 7.85
194 2000 E. Irvington Road 3 7.85
195 Safe Space Self Storage 3 7.85
196 Arbor Oaks MHC 6 7.85
198 Windsor Estates 3 7.85
199 A-American Self Storage Facility-Palmdale 6 7.85
200 Maple Tree Plaza 3 7.85
201 17th & State Shops 3 7.85
202 Oxford Corners 3 15.85
203 Riverwood 7.85
204 3500 W. Segerstrom 4 7.85
205 Oakwood MHP 3 7.85
</TABLE>
II-37
<PAGE> 156
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
LOAN LOCKOUT DEFEASANCE PREPAYMENT CODE (18)
NO. PROPERTY NAME SEASONING (17) PERIOD PROVISION YM5L YM4L YM3L YM2L YM1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
206 Calexico Mobile Home Park 6 60 57
207 American Harbor Self Storage (22) 5 60
208 Bennett Avenue Apartments 5 60 57
209 Friendly Village MHC 7
210 Strawberry Hills Apartments 3 60 57
211 Worthington Business Center 14
212 Rancho Del Rio MHP 7
213 A-1 Self Storage - El Cajon, CA 2 60 57
214 28308 Industry Drive 3 60 92
215 Belmont Self Storage II 3 60 117
217 Sunland Manor 7 24
218 Storage Solutions 9
219 Craycroft Gardens 10 117
220 Fleming Creek Circle Apartments 2 60 57
221 Tyler Mall Mini Storage 3 60 56
222 Alyson Manor Mobile Estates 4 60 56
223 Ogden Days Inn 5 117
225 99 Brainard Road 2 72
226 Securgard Self Storage 20
227 Shattuck Avenue Self Storage Facility 2
228 Meadowbrook Village 7
229 11959 Canyon Road 4 60 120
230 Walgreens - Monterey * 5 0
231 Southshore Point 3 60 54
232 Petcare Superstore 3 60 57
233 Memorial Crossing 3 60 57
234 Bethany Square * 3 36
235 Royal Highlander 2 60 57
236 932 N. Rush 2 60 57
237 Fineberg Lancaster Apartments 1 72
238 Fineberg Beacon Apartments 1 72
239 Centennial Estates 8
240 Armored Self Storage Facility 7 117
241 Extra Space Self Storage Facility 4 60 57
242 Portgage Green MHP 6 117
243 A-American El Cajon 8 117
244 7 Mt. Hood Road 2 72
245 370 Diablo Road 3 60 60
246 Ashe Road Bus. Park 2 120 Yes
247 Gilbert Self Storage 7 60 117
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN
NO. PROPERTY NAME YM 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
206 Calexico Mobile Home Park
207 American Harbor Self Storage (22) 24 12 12
208 Bennett Avenue Apartments
209 Friendly Village MHC 117
210 Strawberry Hills Apartments
211 Worthington Business Center 117
212 Rancho Del Rio MHP 116
213 A-1 Self Storage - El Cajon, CA
214 28308 Industry Drive
215 Belmont Self Storage II
217 Sunland Manor 12 12 9
218 Storage Solutions 117
219 Craycroft Gardens
220 Fleming Creek Circle Apartments
221 Tyler Mall Mini Storage
222 Alyson Manor Mobile Estates
223 Ogden Days Inn
225 99 Brainard Road 12 12 18
226 Securgard Self Storage 118
227 Shattuck Avenue Self Storage Facility 12 12 24 24 12
228 Meadowbrook Village 117
229 11959 Canyon Road
230 Walgreens - Monterey * 120 120
231 Southshore Point
232 Petcare Superstore
233 Memorial Crossing
234 Bethany Square * 36 12 12 12 12
235 Royal Highlander
236 932 N. Rush
237 Fineberg Lancaster Apartments 12 12 18
238 Fineberg Beacon Apartments 12 12 18
239 Centennial Estates 117
240 Armored Self Storage Facility
241 Extra Space Self Storage Facility
242 Portgage Green MHP
243 A-American El Cajon
244 7 Mt. Hood Road 12 12 18
245 370 Diablo Road
246 Ashe Road Bus. Park
247 Gilbert Self Storage
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
LOAN PREPAYMENT CODE (18) ADMIN.
NO. PROPERTY NAME OPEN COST RATE (BPS)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
206 Calexico Mobile Home Park 3 7.85
207 American Harbor Self Storage (22) 12 7.85
208 Bennett Avenue Apartments 3 7.85
209 Friendly Village MHC 3 7.85
210 Strawberry Hills Apartments 3 7.85
211 Worthington Business Center 3 7.85
212 Rancho Del Rio MHP 3 7.85
213 A-1 Self Storage - El Cajon, CA 3 7.85
214 28308 Industry Drive 4 7.85
215 Belmont Self Storage II 3 7.85
217 Sunland Manor 3 7.85
218 Storage Solutions 3 7.85
219 Craycroft Gardens 3 7.85
220 Fleming Creek Circle Apartments 3 7.85
221 Tyler Mall Mini Storage 3 7.85
222 Alyson Manor Mobile Estates 3 7.85
223 Ogden Days Inn 3 7.85
225 99 Brainard Road 6 7.85
226 Securgard Self Storage 3 7.85
227 Shattuck Avenue Self Storage Facility 36 7.85
228 Meadowbrook Village 3 7.85
229 11959 Canyon Road 0 15.85
230 Walgreens - Monterey * 0 15.85
231 Southshore Point 6 7.85
232 Petcare Superstore 3 15.85
233 Memorial Crossing 3 17.00
234 Bethany Square * 0 15.85
235 Royal Highlander 3 7.85
236 932 N. Rush 4 7.85
237 Fineberg Lancaster Apartments 6 7.85
238 Fineberg Beacon Apartments 6 7.85
239 Centennial Estates 3 7.85
240 Armored Self Storage Facility 3 7.85
241 Extra Space Self Storage Facility 3 7.85
242 Portgage Green MHP 3 7.85
243 A-American El Cajon 3 7.85
244 7 Mt. Hood Road 6 7.85
245 370 Diablo Road 0 15.85
246 Ashe Road Bus. Park 7.85
247 Gilbert Self Storage 3 7.85
</TABLE>
II-38
<PAGE> 157
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
LOAN LOCKOUT DEFEASANCE PREPAYMENT CODE (18)
NO. PROPERTY NAME SEASONING (17) PERIOD PROVISION YM5L YM4L YM3L YM2L YM1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
248 Lamar Mini Storage 10
249 El Dorado Mobile Home Park 6 117
250 Boston Market/Kinkos 8 117
251 British Square 2 60 57
252 Valencia Gardens 7 60 117
253 Providence Hill Office Building 2 60 57
254 A-AMERICAN SELF STORAGE-Valencia 3
255 Calhoun Shores Apartments 4 60 117
256 Wyncrossing Apartments 3 0 114
257 Garcia Apartments 2 60 57
258 Stor-N-Lock #11 3
259 Sycamore Hill Apartments 4 60 57
260 3400 W. Segerstrom 3 60 80
261 Larkfield Self Storage 3
262 Bellmere Apartments 4 60 57
263 Armored Mini Storage - 52nd Street 4 60 57
264 CVS - Decatur 3 60 117
265 Southwest Professional Plaza 8 117
266 Tanglewood 9 117
267 Tracy Portfolio 3 36 81
268 Casa del Rey Apartments 2 60 57
269 A-American SSF - National City 1 60
270 B&R Mini Storage 3 90 87
271 3630 West Garry Ave. 4 60 80
272 Twin Oaks Manor 3 60 54
273 Etiwanda Self Storage 5
274 Your Extra Attic - Stockbridge 3 48 69
275 116 Washington Street 2 72
276 Eugene Camlu Retirement Center 10
277 Newgate Apartments 2 60 57
278 Roosevelt Apartments 3 84 93
279 Park Place Plaza Shopping Center 3 60 57
280 Quinsigamond Plaza 6 60 57
281 Hav-A-Storage Self Storage Facility 5 60 57
282 Brackett Air Business Park 5 36 81
283 Van Buren Self Storage 8
284 5 Walbridge Street 2 72
285 EZ Storage Center Self Storage Facility 4 60 57
286 Bethel Self Storage 9
287 Handi Self Storage 10
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN
NO. PROPERTY NAME YM 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
248 Lamar Mini Storage 129
249 El Dorado Mobile Home Park
250 Boston Market/Kinkos
251 British Square
252 Valencia Gardens
253 Providence Hill Office Building
254 A-AMERICAN SELF STORAGE-Valencia 118
255 Calhoun Shores Apartments
256 Wyncrossing Apartments
257 Garcia Apartments
258 Stor-N-Lock #11 12 12 24 24 12
259 Sycamore Hill Apartments
260 3400 W. Segerstrom
261 Larkfield Self Storage 117
262 Bellmere Apartments
263 Armored Mini Storage - 52nd Street
264 CVS - Decatur
265 Southwest Professional Plaza
266 Tanglewood
267 Tracy Portfolio
268 Casa del Rey Apartments
269 A-American SSF - National City 54
270 B&R Mini Storage
271 3630 West Garry Ave.
272 Twin Oaks Manor
273 Etiwanda Self Storage 117
274 Your Extra Attic - Stockbridge
275 116 Washington Street 12 12 18
276 Eugene Camlu Retirement Center 117
277 Newgate Apartments
278 Roosevelt Apartments
279 Park Place Plaza Shopping Center
280 Quinsigamond Plaza
281 Hav-A-Storage Self Storage Facility
282 Brackett Air Business Park
283 Van Buren Self Storage 117
284 5 Walbridge Street 12 12 18
285 EZ Storage Center Self Storage Facility
286 Bethel Self Storage 117
287 Handi Self Storage 117
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
LOAN PREPAYMENT CODE (18) ADMIN.
NO. PROPERTY NAME OPEN COST RATE (BPS)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
248 Lamar Mini Storage 3 7.85
249 El Dorado Mobile Home Park 3 7.85
250 Boston Market/Kinkos 3 7.85
251 British Square 3 7.85
252 Valencia Gardens 3 7.85
253 Providence Hill Office Building 3 7.85
254 A-AMERICAN SELF STORAGE-Valencia 3 7.85
255 Calhoun Shores Apartments 3 7.85
256 Wyncrossing Apartments 6 17.00
257 Garcia Apartments 3 7.85
258 Stor-N-Lock #11 36 7.85
259 Sycamore Hill Apartments 3 7.85
260 3400 W. Segerstrom 4 7.85
261 Larkfield Self Storage 3 7.85
262 Bellmere Apartments 3 7.85
263 Armored Mini Storage - 52nd Street 3 7.85
264 CVS - Decatur 3 7.85
265 Southwest Professional Plaza 3 7.85
266 Tanglewood 3 7.85
267 Tracy Portfolio 3 7.85
268 Casa del Rey Apartments 3 7.85
269 A-American SSF - National City 6 7.85
270 B&R Mini Storage 3 7.85
271 3630 West Garry Ave. 4 7.85
272 Twin Oaks Manor 6 7.85
273 Etiwanda Self Storage 3 7.85
274 Your Extra Attic - Stockbridge 3 7.85
275 116 Washington Street 6 7.85
276 Eugene Camlu Retirement Center 3 7.85
277 Newgate Apartments 3 7.85
278 Roosevelt Apartments 3 7.85
279 Park Place Plaza Shopping Center 3 7.85
280 Quinsigamond Plaza 3 7.85
281 Hav-A-Storage Self Storage Facility 3 7.85
282 Brackett Air Business Park 3 7.85
283 Van Buren Self Storage 3 7.85
284 5 Walbridge Street 6 7.85
285 EZ Storage Center Self Storage Facility 3 7.85
286 Bethel Self Storage 3 7.85
287 Handi Self Storage 3 7.85
</TABLE>
II-39
<PAGE> 158
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
LOAN LOCKOUT DEFEASANCE PREPAYMENT CODE (18)
NO. PROPERTY NAME SEASONING (17) PERIOD PROVISION YM5L YM4L YM3L YM2L YM1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
288 Green Valley Storage (Windmill) 2 60 58
289 Woodgate Mobile Home Village 2 60 57
290 Aire Libre Apartments 6 60 57
291 Shattalon Terrace Apartments 2 60 57
292 Brookhaven MHC 13
294 Heritage/Gibson Mobile Home Village 3 60 57
295 River Point Condos 4 60 57
296 Villa Vallejo 6 60 57
297 CVS - Austell 3 60 117
298 Crown Ridge Apartments 3 60 57
299 1334 Commonwealth Avenue 2 72
300 Mini U Novi 7 117
301 Stor-N-Lock #10 3
302 2nd Garage Self Storage 19
303 Virginia Court Apartments 5 114
304 Oakview Manor Apartments 2 60 57
305 Timberline Forest Apartments 3 48 69
306 The Village Plaza 5 117
307 9 Egremont Road 2 72
308 Affordable Self Storage 9
309 6630 Baltimore National Pike 10
310 4 Vinal Street 2 72
311 Whiskey Bottom Business Center 10
312 Royal Estates MHP 2 60 57
313 Pep Boys - Streamwood 1 113 110
314 Orange Avenue Industrial Park 11
315 Men's Warehouse 1 60 57
316 Pier 1 - Saginaw 3 60 57
317 Boulevard Apartments 3 84 93
318 Stor-N-Lock #8 3
319 Park Plaza Retail Center 4
320 Claremont Self Storage 5
321 Shamrock MHC 9
322 Security Self Storage Facility 7 60 57
323 Lock It Up Self Storage Facility 5 60 57
324 CVS - Bethsaida 3 60 117
325 Summer Wind 10
326 Victoria Square Apartments 2 60 58
327 Foxfire Apartments 5 60 57
328 Glen Arbor Apartments 10
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN
NO. PROPERTY NAME YM 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
288 Green Valley Storage (Windmill)
289 Woodgate Mobile Home Village
290 Aire Libre Apartments
291 Shattalon Terrace Apartments
292 Brookhaven MHC 129
294 Heritage/Gibson Mobile Home Village
295 River Point Condos
296 Villa Vallejo
297 CVS - Austell
298 Crown Ridge Apartments
299 1334 Commonwealth Avenue 12 12 18
300 Mini U Novi
301 Stor-N-Lock #10 12 12 24 24 12
302 2nd Garage Self Storage 117
303 Virginia Court Apartments
304 Oakview Manor Apartments
305 Timberline Forest Apartments
306 The Village Plaza
307 9 Egremont Road 12 12 18
308 Affordable Self Storage 117
309 6630 Baltimore National Pike 117
310 4 Vinal Street 12 12 18
311 Whiskey Bottom Business Center 117
312 Royal Estates MHP
313 Pep Boys - Streamwood
314 Orange Avenue Industrial Park 117
315 Men's Warehouse
316 Pier 1 - Saginaw
317 Boulevard Apartments
318 Stor-N-Lock #8 12 12 24 24 12
319 Park Plaza Retail Center 117
320 Claremont Self Storage 117
321 Shamrock MHC 116
322 Security Self Storage Facility
323 Lock It Up Self Storage Facility
324 CVS - Bethsaida
325 Summer Wind 117
326 Victoria Square Apartments
327 Foxfire Apartments
328 Glen Arbor Apartments 116
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
LOAN PREPAYMENT CODE (18) ADMIN.
NO. PROPERTY NAME OPEN COST RATE (BPS)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
288 Green Valley Storage (Windmill) 3 7.85
289 Woodgate Mobile Home Village 3 7.85
290 Aire Libre Apartments 3 7.85
291 Shattalon Terrace Apartments 3 7.85
292 Brookhaven MHC 3 7.85
294 Heritage/Gibson Mobile Home Village 3 7.85
295 River Point Condos 3 7.85
296 Villa Vallejo 3 7.85
297 CVS - Austell 3 7.85
298 Crown Ridge Apartments 3 17.00
299 1334 Commonwealth Avenue 6 7.85
300 Mini U Novi 3 7.85
301 Stor-N-Lock #10 36 7.85
302 2nd Garage Self Storage 3 7.85
303 Virginia Court Apartments 6 7.85
304 Oakview Manor Apartments 3 7.85
305 Timberline Forest Apartments 3 7.85
306 The Village Plaza 3 7.85
307 9 Egremont Road 6 7.85
308 Affordable Self Storage 3 7.85
309 6630 Baltimore National Pike 3 7.85
310 4 Vinal Street 6 7.85
311 Whiskey Bottom Business Center 3 7.85
312 Royal Estates MHP 3 7.85
313 Pep Boys - Streamwood 3 7.85
314 Orange Avenue Industrial Park 3 7.85
315 Men's Warehouse 3 7.85
316 Pier 1 - Saginaw 3 7.85
317 Boulevard Apartments 3 7.85
318 Stor-N-Lock #8 36 7.85
319 Park Plaza Retail Center 3 7.85
320 Claremont Self Storage 3 7.85
321 Shamrock MHC 3 7.85
322 Security Self Storage Facility 3 7.85
323 Lock It Up Self Storage Facility 3 7.85
324 CVS - Bethsaida 3 7.85
325 Summer Wind 3 7.85
326 Victoria Square Apartments 3 7.85
327 Foxfire Apartments 3 7.85
328 Glen Arbor Apartments 3 7.85
</TABLE>
II-40
<PAGE> 159
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
LOAN LOCKOUT DEFEASANCE PREPAYMENT CODE (18)
NO. PROPERTY NAME SEASONING (17) PERIOD PROVISION YM5L YM4L YM3L YM2L YM1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
329 Pier 1 - Lewisville 4 114
330 Bozeman K-Mart/Applebees 3 108 102
331 Emerald Lakes Mobile Home Park 2 60 57
332 Your Extra Attic - Duluth 3 48 69
333 Pier 1 - Canton 3 60 57
334 DeSoto Estates MHP 4
335 McWhorters - Cupertino 8 0
336 Hide-Away-Hills MHP 2 60 57
337 AAA Interstate SSF 6 117
338 Your Extra Attic - Winters Chapel 3 48 69
339 ABC Mini Storage 10
340 Pep Boys- Gardena 2 81 77
341 Eastwood MHP 4 60 57
342 Bama Self Storage 8
343 Thomas Apartments 8 117
345 Missouri Self Storage Facility 2 60 20
346 A-American Self Storage-Bent Avenue 1 60
347 The Pine Garden Apartments 6 60 57
348 Stor-N-Lock #7 3
349 Green Valley Self Storage 2 60 57
350 130 Englewood Street 2 72
351 Radio Shack - Blockbuster Center 2 60 57
352 1375 Commonwealth Avenue 2 72
353 Stor-N-Lock #9 3
354 Mid Cajon Apartments 2 60 57
355 Payless Shoe Source 1 60 57
356 Panama City Mobile Home Estates 3
357 Your Extra Attic - Norcross 3 48 69
358 Terrace View Center 2 60 57
359 Village Corner 2 60 58
360 1381 Commonwealth Avenue 2 72
361 Pinegrove Place 3 60 57
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE (18)
LOAN
NO. PROPERTY NAME YM 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
329 Pier 1 - Lewisville
330 Bozeman K-Mart/Applebees
331 Emerald Lakes Mobile Home Park
332 Your Extra Attic - Duluth
333 Pier 1 - Canton
334 DeSoto Estates MHP 12 12 24 24 12
335 McWhorters - Cupertino 96 96
336 Hide-Away-Hills MHP
337 AAA Interstate SSF
338 Your Extra Attic - Winters Chapel
339 ABC Mini Storage 117
340 Pep Boys- Gardena
341 Eastwood MHP
342 Bama Self Storage 117
343 Thomas Apartments
345 Missouri Self Storage Facility
346 A-American Self Storage-Bent Avenue 54
347 The Pine Garden Apartments
348 Stor-N-Lock #7 12 12 24 24 12
349 Green Valley Self Storage
350 130 Englewood Street 12 12 18
351 Radio Shack - Blockbuster Center
352 1375 Commonwealth Avenue 12 12 18
353 Stor-N-Lock #9 12 12 24 24 12
354 Mid Cajon Apartments
355 Payless Shoe Source
356 Panama City Mobile Home Estates 117
357 Your Extra Attic - Norcross
358 Terrace View Center
359 Village Corner
360 1381 Commonwealth Avenue 12 12 18
361 Pinegrove Place
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
LOAN PREPAYMENT CODE (18) ADMIN.
NO. PROPERTY NAME OPEN COST RATE (BPS)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
329 Pier 1- Lewisville 6 7.85
330 Bozeman K-Mart/Applebees 3 17.00
331 Emerald Lakes Mobile Home Park 3 7.85
332 Your Extra Attic - Duluth 3 7.85
333 Pier 1 - Canton 3 7.85
334 DeSoto Estates MHP 36 7.85
335 McWhorters - Cupertino 15.85
336 Hide-Away-Hills MHP 3 7.85
337 AAA Interstate SSF 3 7.85
338 Your Extra Attic - Winters Chapel 3 7.85
339 ABC Mini Storage 3 7.85
340 Pep Boys- Gardena 3 7.85
341 Eastwood MHP 3 7.85
342 Bama Self Storage 3 7.85
343 Thomas Apartments 3 7.85
345 Missouri Self Storage Facility 3 7.85
346 A-American Self Storage-Bent Avenue 6 7.85
347 The Pine Garden Apartments 3 7.85
348 Stor-N-Lock #7 36 7.85
349 Green Valley Self Storage 3 7.85
350 130 Englewood Street 6 7.85
351 Radio Shack - Blockbuster Center 3 15.85
352 1375 Commonwealth Avenue 6 7.85
353 Stor-N-Lock #9 36 7.85
354 Mid Cajon Apartments 3 7.85
355 Payless Shoe Source 3 7.85
356 Panama City Mobile Home Estates 3 7.85
357 Your Extra Attic - Norcross 3 7.85
358 Terrace View Center 3 7.85
359 Village Corner 3 7.85
360 1381 Commonwealth Avenue 6 7.85
361 Pinegrove Place 3 7.85
</TABLE>
II-41
<PAGE> 160
FOOTNOTES TO APPENDIX II
1 "HF", and "MS" denote Heller Financial Capital Funding, Inc., and Morgan
Stanley Mortgage Capital Inc., respectively, as Sellers.
2 Sets of Mortgage Loans that have identical alphabetical coding designates
multiple loans that are cross-collateralized and cross-defaulted.
3 Mortgage Loan is secured by liens on multiple properties. Property type,
address, and year built indicated are for the largest of such properties.
All other property information is aggregated for the multiple properties,
which are summarized below:
(3A) Secured by liens on six self storage facilities.
(3B) Secured by liens on six retail properties.
(3C) Secured by liens on nine multifamily properties.
(3D) Secured by liens on two hospitality properties.
(3E) Secured by liens on four office properties.
(3F) Secured by liens on three manufactured housing communities.
(3G) Secured by liens on three manufactured housing communities.
(3H) Secured by liens on two self storage facilities.
(3I) Secured by liens on two manufactured housing communities.
(3J) Secured by liens on three multi-family properties.
(3K) Secured by liens on two retail properties.
(3L) Secured by liens on one office facility and one self storage
facility.
(3M) Secured by liens on two multi-family properties.
Additional Information regarding the multiple property loans can be found
on pages II-19 through II-21.
4 Certain ratios including Cut-Off Date Balance Loan/Unit or SF, DSCR,
Cut-Off Date LTV and Balloon LTV are calculated on a combined basis for
Mortgage Loans that are secured by multiple properties or are
cross-collateralized and cross-defaulted.
5 Effective Maturity Date is assumed to be the Hyper-Amortization Date. See
"Description of the Mortgage Pool".
6 The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related note. Due to
the actual/360 interest calculation methodology applied to most Mortgage
Loans, the actual amortization to a zero balance will be longer.
7 At loan closing, $100,000 of loan proceeds were set aside in an escrow
account. The escrow will be released to borrower upon satisfaction of a
minimum 1.20x debt service coverage, and a maximum 80% loan to value, as
determined by an updated appraisal, so long as such conditions are met
within six months of the loan closing date. Any portion of the escrow
which the borrower does not qualify for will be applied to partially repay
the loan, subject to a yield maintenance penalty. Debt service coverage
and loan to value presented reflect full loan amount.
8 Loan was interest only until 1/1/98.
9 At loan closing, $700,000 of loan proceeds were set aside in an escrow
account. The escrow will be released to the borrower upon satisfaction of
a minimum 1.25x debt service coverage, and a maximum 80% loan to value, as
determined by an appraisal, so long as such conditions are met by 7/1/99.
Any portion of the escrow which the borrower does not qualify for will be
applied to partially repay the loan. Debt service coverage and loan to
value presented reflect full loan amount. Loan is interest only until
8/1/99.
10 Note provides for an additional $5,000 per month of principal amortization
in excess of the calculated payment for the first 48 payments.
II-42
<PAGE> 161
FOOTNOTES TO APPENDIX II
11 At loan closing, $200,000 of loan proceeds were set aside in an escrow
account. The escrow will be released to borrower upon satisfaction of a
minimum of 1.20x debt service coverage, and a maximum 80% loan to value,
as determined by appraisal, as long as such conditions are met by 9/8/98.
Any portion of the escrow which the borrower does not qualify for will be
applied to partially repay the loan. Debt service coverage and loan to
value presented reflect full amount.
12 Loan is interest only until 1/1/2000.
13 Loan has stepped monthly principal and interest payments as follows:
<TABLE>
<S> <C>
3/98 $ 9,603.96
4/98 - 12/01 $ 9,139.25
1/02 - 12/06 $ 9,870.39
1/07 - 12/11 $ 10,660.02
1/12 - maturity $ 11,300.66
</TABLE>
14 Loan has stepped monthly principal and interest payments as follows:
<TABLE>
<S> <C>
2/98 $ 7,705.38
3/98 - 6/01 $ 9,554.67
7/01 - 4/04 $ 10,510.14
5/04 - maturity $ 9,497.28
</TABLE>
15 In general for each property, "Percent Leased" was determined based on a
rent roll provided by the borrower. In certain cases, "Percent Leased" was
determined based on an appraisal, executed lease, operating statement or
occupancy report. "Percent Leased as of Date" indicates the date as of
which "Percent Leased" was determined based on such information. For
hospitality properties, the data shown is the average daily occupancy
rate, generally for the preceding twelve month period.
16 "Largest Tenant" refers to the tenant that represents the greatest
percentage, equal to or in excess of 10%, of the total square footage at
the subject property.
17 "Seasoning" represents the approximate number of months elapsed from the
date of origination of the Mortgage Loan to the Cut-Off Date.
18 Indicates prepayment provisions from the first Due Date as stated in the
Mortgage Loan. "YM" represents yield maintenance and "YM1" represents the
greater of yield maintenance or one percent of the outstanding principal
balance at such time. "YM2L", "YM3L", "YM4L", and YM5L" represent the
lesser of yield maintenance or 2%, 3%, 4%, or 5%, respectively, of the
outstanding principal balance at such time. The stated percentages
represent Percentage Premiums. "Open" represents a period during which
Principal Prepayments are permitted without payment of a Prepayment
Premium. For each Mortgage Loan, the number set forth under a category of
prepayment provision represents the number of months in the original term
to maturity for which such provision applies. An asterisk ("*") denotes
Mortgage Loans wherein up to 10% of the original loan balance may be
prepaid without penalty each year. In the case of Bethany Square, such 10%
fee provision is superceded by the 36 month lockout period. Unless
otherwise noted, the sequence of prepayment provisions for each loan over
its term is set forth from right to left.
19 Prepayment period indicated as YM1 indicates lesser of yield maintenance
or 1%.
II-43
<PAGE> 162
FOOTNOTES TO APPENDIX II
20 Prepayment provisions in sequential order are as follows:
<TABLE>
Months Prepayment Code
------ ---------------
<S> <C>
1-60 Lockout
61-84 YM1
85-96 YM3L
97-108 YM2L
109-117 Lesser of 1% or YM
118-120 Open
</TABLE>
21 Prepayment provisions in sequential order are as follows:
<TABLE>
Months Prepayment Code
------ ---------------
<S> <C>
1-84 YM1
85-96 YM3L
97-108 YM2L
109-117 Lesser of 1% or YM
118-120 Open
</TABLE>
22 Prepayment provisions in sequential order are as follows:
<TABLE>
Months Prepayment Code
------ ---------------
<S> <C>
1-12 3%
13-72 LO
73-84 3%
85-96 2%
97-108 1%
109-120 Open
</TABLE>
II-44
<PAGE> 163
APPENDIX III
ADDITIONAL INFORMATION REGARDING THE
MULTI-FAMILY MORTGAGE LOANS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
STUDIOS 1 BEDROOMS
------------------- -------------------
LOAN UTILITIES WTD. AVG. WTD. AVG.
NO. PROPERTY NAME CURRENT BALANCE TENANT PAYS # UNITS RENT/MONTH # UNITS RENT/MONTH
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Norwood Apartments $22,266,787 Electric / HVAC 0 $0.00 59 $830.61
12 Rancho Viejo Apts. $15,654,907 Electric / HVAC 0 $0.00 96 $648.71
13 Lincoln on Memorial Apartments $15,433,946 Electric / HVAC 0 $0.00 244 $565.60
16 Marymount Manor $8,149,703 None 0 $0.00 62 $955.00
17 Marymount Tower $5,929,979 Electric / HVAC 2 $330.00 101 $854.00
21 Boylston Apartments $12,971,450 Electric / HVAC 153 $650.13 150 $828.47
22 Greenbriar Apartments $12,554,680 Electric / HVAC 0 $0.00 113 $705.75
23 College Station Apartments $11,929,226 Electric / HVAC 0 $0.00 163 $366.00
25 Rivershire Apartments $11,389,944 Electric / HVAC 0 $0.00 0 $0.00
30 Ridgecrest Terrace Apartments $10,776,200 Electric / HVAC 20 $647.63 89 $807.85
32 1550 Brickell Apartments $10,590,044 Electric / HVAC 0 $0.00 104 $948.94
32a Lafayette Tower Apartments $10,490,985 Electric / HVAC 188 $423.45 236 $531.51
33 Lake Village Apartments $10,425,291 Electric / HVAC 0 $0.00 88 $688.00
40 Cypress Lake Apartments $9,958,020 Electric / HVAC 0 $0.00 132 $662.50
42 Whispering Lakes Apts. $9,778,329 Electric / HVAC 0 $0.00 56 $690.64
46 Willows at Appleton Square Apartments $8,379,266 Electric / HVAC 0 $0.00 29 $785.51
47 Ashley Park Apartments $8,174,151 Electric / HVAC 0 $0.00 152 $475.00
49 Brumby Lofts $8,066,637 Electric / HVAC 6 $534.17 75 $675.05
53 Wynhaven Apartments $7,483,529 Electric / HVAC 21 $447.00 59 $465.00
54 Claridge Court Apartments $7,276,152 Electric / HVAC 0 $0.00 180 $591.60
61 Rose Apartments $6,858,192 Electric / HVAC 0 $0.00 0 $0.00
64 Mesa Verde Apartments $6,494,324 Electric / HVAC 0 $0.00 96 $465.16
65 Cedar Ridge Apts. $6,481,468 Electric / HVAC 0 $0.00 108 $668.83
73 Walnut Ridge Apts $5,905,915 Electric / HVAC 0 $0.00 168 $411.16
78 Berrytree Apartments $5,492,879 None 4 $445.00 105 $488.10
80 Fairfield Place Apartments $5,388,509 Electric / HVAC 0 $0.00 0 $0.00
87 Burtons Landing $5,035,665 Electric / HVAC 44 $376.60 92 $434.66
91 511 East 80th Street $4,925,169 Electric 3 $614.00 55 $1,112.37
98 Stoneridge Apartments $4,556,849 Electric / HVAC 0 $0.00 100 $405.38
101 Pacific View Arroyo Apartments $4,381,773 Electric / HVAC 1 $700.00 60 $993.83
102 Sonoma Pointe Apts. $4,338,233 Electric / HVAC 0 $0.00 22 $703.86
105 Pompano Palms $4,218,764 Electric / HVAC 14 $323.00 180 $387.00
106 The Brewery Apartments $4,244,621 Electric / HVAC 11 $645.91 38 $884.61
108 Gardens at Negley $4,227,152 None 0 $0.00 72 $533.39
115 Knox Village $3,987,737 Electric / HVAC 0 $0.00 123 $566.67
139 Willow Creek Apartments $3,508,854 Electric / HVAC 0 $0.00 23 $532.74
145 Sheffield Lofts $3,274,129 Electric / HVAC 0 $0.00 27 $812.41
149 City Gables Apts. $3,140,948 Electric / HVAC 0 $0.00 32 $700.47
154 Southgate Square Apartments $2,998,139 HVAC 0 $0.00 156 $466.00
155 Palm Shadows Apartments $2,996,469 Electric 32 $365.00 88 $411.00
156 Park Drive Apartments $2,993,412 Electric / HVAC 33 $625.61 45 $783.22
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
2 BEDROOMS 3 BEDROOMS 4 BEDROOMS
------------------- ------------------- -------------------
LOAN WTD. AVG. WTD. AVG. WTD. AVG.
NO. PROPERTY NAME # UNITS RENT/MONTH # UNITS RENT/MONTH # UNITS RENT/MONTH
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2 Norwood Apartments 216 $973.86 57 $1,060.65 0 $0.00
12 Rancho Viejo Apts. 176 $757.31 40 $923.51 0 $0.00
13 Lincoln on Memorial Apartments 108 $804.56 8 $947.50 0 $0.00
16 Marymount Manor 50 $1,274.00 0 $0.00 0 $0.00
17 Marymount Tower 0 $0.00 0 $0.00 0 $0.00
21 Boylston Apartments 13 $996.67 0 $0.00 0 $0.00
22 Greenbriar Apartments 110 $807.68 1 $920.00 0 $0.00
23 College Station Apartments 383 $470.00 8 $558.00 0 $0.00
25 Rivershire Apartments 224 $740.32 0 $0.00 0 $0.00
30 Ridgecrest Terrace Apartments 82 $926.69 0 $0.00 0 $0.00
32 1550 Brickell Apartments 32 $1,332.65 0 $0.00 0 $0.00
32a Lafayette Tower Apartments 148 $712.76 12 $1,003.75 0 $0.00
33 Lake Village Apartments 112 $816.00 0 $0.00 0 $0.00
40 Cypress Lake Apartments 68 $935.85 16 $1,068.43 0 $0.00
42 Whispering Lakes Apts. 128 $784.72 0 $0.00 0 $0.00
46 Willows at Appleton Square Apartments 111 $981.40 0 $0.00 0 $0.00
47 Ashley Park Apartments 132 $612.00 0 $0.00 0 $0.00
49 Brumby Lofts 86 $799.59 0 $0.00 0 $0.00
53 Wynhaven Apartments 182 $534.00 34 $657.00 0 $0.00
54 Claridge Court Apartments 144 $750.41 0 $0.00 0 $0.00
61 Rose Apartments 28 $1,602.00 20 $2,330.00 0 $0.00
64 Mesa Verde Apartments 156 $553.93 24 $741.82 0 $0.00
65 Cedar Ridge Apts. 72 $800.67 0 $0.00 0 $0.00
73 Walnut Ridge Apts 96 $575.14 0 $0.00 0 $0.00
78 Berrytree Apartments 131 $603.13 0 $0.00 0 $0.00
80 Fairfield Place Apartments 120 $658.98 0 $0.00 0 $0.00
87 Burtons Landing 64 $517.33 0 $0.00 0 $0.00
91 511 East 80th Street 62 $1,299.42 5 $1,785.40 1 $2,324.00
98 Stoneridge Apartments 128 $484.18 40 $590.24 0 $0.00
101 Pacific View Arroyo Apartments 0 $0.00 0 $0.00 0 $0.00
102 Sonoma Pointe Apts. 48 $940.21 0 $0.00 0 $0.00
105 Pompano Palms 74 $470.00 0 $0.00 0 $0.00
106 The Brewery Apartments 28 $1,248.49 0 $0.00 0 $0.00
108 Gardens at Negley 77 $622.11 0 $0.00 0 $0.00
115 Knox Village 147 $653.74 46 $766.63 0 $0.00
139 Willow Creek Apartments 77 $628.80 0 $0.00 0 $0.00
145 Sheffield Lofts 20 $1,004.75 0 $0.00 0 $0.00
149 City Gables Apts. 52 $844.13 0 $0.00 0 $0.00
154 Southgate Square Apartments 2 Employee 10 $527.00 0 $0.00
155 Palm Shadows Apartments 32 $588.28 0 $0.00 0 $0.00
156 Park Drive Apartments 2 $1,025.00 0 $0.00 0 $0.00
</TABLE>
III-1
<PAGE> 164
APPENDIX III
ADDITIONAL INFORMATION REGARDING THE
MULTI-FAMILY MORTGAGE LOANS
<TABLE>
<CAPTION>
STUDIOS 1 BEDROOMS
-------------------- --------------------
LOAN UTILITIES WTD. AVG. WTD. AVG.
NO. PROPERTY NAME CURRENT BALANCE TENANT PAYS # UNITS RENT/MONTH # UNITS RENT/MONTH
<S> <C> <C> <C> <C> <C> <C> <C>
157 Continental Luxury Apartments $2,988,288 Electric / HVAC 0 $ 0.00 16 $700.00
158 Dohr Apartments $2,990,480 None 0 $ 0.00 43 $505.65
161 Hamilton House $2,973,836 Electric / HVAC 21 $638.63 59 $764.35
165 Fairway Greens Apartments $2,817,201 Electric / HVAC 0 $ 0.00 8 $466.13
172 Desert Springs Apartments $2,748,159 Electric / HVAC 0 $ 0.00 96 $430.28
179 Westminster Gardens $2,694,568 None 16 $400.00 28 $502.22
185 Kimberly Place $2,497,723 Electric / HVAC 0 $ 0.00 46 $555.87
186 Casa Del Sol Apartments $2,491,798 Electric / HVAC 0 $ 0.00 33 $428.03
187 Lake Geneva Apts. $2,485,203 Electric / HVAC 0 $ 0.00 0 $ 0.00
203 Riverwood Apartments $2,297,971 Electric / HVAC 0 $ 0.00 0 $ 0.00
208 Bennett Avenue Apartments $2,286,064 Electric 2 $366.66 25 $532.73
210 Strawberry Hills Apartments $2,278,590 Electric / HVAC 0 $ 0.00 34 $575.94
217 Sunland Manor $2,169,236 Electric / HVAC 0 $ 0.00 0 $ 0.00
219 Craycroft Gardens $2,109,166 Electric / HVAC 0 $ 0.00 13 $429.40
220 Fleming Creek Circle $2,096,270 Electric / HVAC 0 $ 0.00 19 $503.00
225 99 Brainard Road $2,075,953 Electric 19 $612.89 37 $750.41
231 Southshore Point $2,029,164 Electric / HVAC 0 $ 0.00 0 $ 0.00
237 Fineberg Lancaster Apartments $1,998,230 Electric / HVAC 0 $ 0.00 23 $792.39
238 Fineberg Beacon Apartments $1,998,230 Electric / HVAC 0 $ 0.00 21 $787.00
244 7 Mt. Hood Road $1,908,860 Electric 0 $ 0.00 0 $ 0.00
251 British Square $1,846,863 Electric / HVAC 0 $ 0.00 16 $381.00
252 Valencia Gardens $1,841,805 Electric / HVAC 96 $304.43 32 $365.34
255 Calhoun Shores Apartments $1,791,118 Electric / HVAC 0 $ 0.00 14 $673.85
256 Wyncrossing $1,781,080 Electric / HVAC 0 $ 0.00 0 $ 0.00
257 Garcia Apartments $1,759,530 Electric 3 $337.00 24 $475.00
259 Sycamore Hill $1,744,508 Electric / HVAC 0 $ 0.00 28 $574.00
262 Bellmere Apartments $1,664,647 Electric / HVAC 0 $ 0.00 56 $463.64
268 Casa del Rey $1,549,161 Electric 0 $ 0.00 82 $408.90
272 Twin Oaks Manor $1,540,714 Electric 12 $376.50 36 $472.00
275 116 Washington Street $1,515,713 Electric 17 $621.47 13 $724.23
277 Newgate Apartments $1,500,625 Electric / HVAC 0 $ 0.00 1 $345.00
278 Roosevelt Apartments $1,494,111 Electric 0 $ 0.00 34 $600.73
284 5 Walbridge Street $1,488,317 Electric 15 $624.00 1 $740.00
290 Aire Libre Apartments $1,443,334 Electric / HVAC 0 $ 0.00 20 $405.58
291 Shattalon Terrace $1,437,634 Electric / HVAC 0 $ 0.00 20 $332.00
295 River Point Condos $1,395,490 Electric / HVAC 0 $ 0.00 25 $657.29
296 Villa Vallejo $1,390,364 Electric / HVAC 0 $ 0.00 1 $ 0.00
298 Crown Ridge Apartments $1,370,746 Electric / HVAC 0 $ 0.00 0 $ 0.00
299 1334 Commonwealth Avenue $1,350,072 Electric 14 $658.57 21 $762.38
303 Virginia Court Apartments $1,317,072 Electric / HVAC 0 $ 0.00 20 $616.50
304 Oakview Manor Apartments $1,302,487 Electric / HVAC 0 $ 0.00 78 $455.88
</TABLE>
<TABLE>
<CAPTION>
2 BEDROOMS 3 BEDROOMS 4 BEDROOMS
-------------------- -------------------- --------------------
SLOAN WTD. AVG. WTD. AVG. WTD. AVG.
NO. PROPERTY NAME # UNITS RENT/MONTH # UNITS RENT/MONTH # UNITS RENT/MONTH
<S> <C> <C> <C> <C> <C> <C> <C>
157 Continental Luxury Apartments 40 $ 856.82 10 $ 917.86 0 $ 0.00
158 Dohr Apartments 69 $ 604.72 0 $ 0.00 0 $ 0.00
161 Hamilton House 19 $1,041.31 0 $ 0.00 0 $ 0.00
165 Fairway Greens Apartments 72 $ 670.51 0 $ 0.00 0 $ 0.00
172 Desert Springs Apartments 39 $ 518.61 0 $ 0.00 0 $ 0.00
179 Westminster Gardens 100 $ 565.46 0 $ 0.00 0 $ 0.00
185 Kimberly Place 36 $ 641.47 0 $ 0.00 0 $ 0.00
186 Casa Del Sol Apartments 67 $ 467.05 0 $ 0.00 0 $ 0.00
187 Lake Geneva Apts. 96 $ 506.67 0 $ 0.00 0 $ 0.00
203 Riverwood Apartments 64 $ 672.50 0 $ 0.00 0 $ 0.00
208 Bennett Avenue Apartments 33 $ 665.00 15 $ 796.83 0 $ 0.00
210 Strawberry Hills Apartments 30 $ 662.60 0 $ 0.00 0 $ 0.00
217 Sunland Manor 53 $ 627.84 18 $ 763.40 0 $ 0.00
219 Craycroft Gardens 41 $ 526.50 40 $ 601.60 7 $657.40
220 Fleming Creek Circle 79 $ 620.00 2 $ 650.00 0 $ 0.00
225 99 Brainard Road 3 $ 766.67 0 $ 0.00 0 $ 0.00
231 Southshore Point 48 $ 664.36 0 $ 0.00 0 $ 0.00
237 Fineberg Lancaster Apartments 19 $1,032.63 0 $ 0.00 0 $ 0.00
238 Fineberg Beacon Apartments 16 $ 987.50 0 $ 0.00 0 $ 0.00
244 7 Mt. Hood Road 0 $ 0.00 25 $1,309.96 0 $ 0.00
251 British Square 77 $ 418.00 0 $ 0.00 0 $ 0.00
252 Valencia Gardens 32 $ 460.00 0 $ 0.00 0 $ 0.00
255 Calhoun Shores Apartments 27 $ 960.83 1 $1,120.00 0 $ 0.00
256 Wyncrossing 35 $ 624.00 28 $ 681.00 0 $ 0.00
257 Garcia Apartments 38 $ 592.00 0 $ 0.00 0 $ 0.00
259 Sycamore Hill 22 $ 617.00 0 $ 0.00 0 $ 0.00
262 Bellmere Apartments 4 $ 705.00 0 $ 0.00 0 $ 0.00
268 Casa del Rey 0 $ 0.00 1 $ 680.00 0 $ 0.00
272 Twin Oaks Manor 26 $ 593.60 4 $ 693.66 0 $ 0.00
275 116 Washington Street 10 $ 855.00 0 $ 0.00 0 $ 0.00
277 Newgate Apartments 99 $ 429.71 0 $ 0.00 0 $ 0.00
278 Roosevelt Apartments 6 $ 700.83 0 $ 0.00 0 $ 0.00
284 5 Walbridge Street 2 $ 800.00 0 $ 0.00 0 $ 0.00
290 Aire Libre Apartments 60 $ 459.77 0 $ 0.00 0 $ 0.00
291 Shattalon Terrace 60 $ 381.00 0 $ 0.00 0 $ 0.00
295 River Point Condos 9 $ 836.11 0 $ 0.00 0 $ 0.00
296 Villa Vallejo 70 $ 477.00 0 $ 0.00 0 $ 0.00
298 Crown Ridge Apartments 40 $ 564.00 0 $ 0.00 0 $ 0.00
299 1334 Commonwealth Avenue 0 $ 0.00 0 $ 0.00 0 $ 0.00
303 Virginia Court Apartments 32 $ 723.75 0 $ 0.00 0 $ 0.00
304 Oakview Manor Apartments 1 Employee 0 $ 0.00 0 $ 0.00
</TABLE>
III-2
<PAGE> 165
APPENDIX III
ADDITIONAL INFORMATION REGARDING THE
MULTI-FAMILY MORTGAGE LOANS
<TABLE>
<CAPTION>
STUDIOS 1 BEDROOMS
-------------------- --------------------
LOAN UTILITIES WTD. AVG. WTD. AVG.
NO. PROPERTY NAME CURRENT BALANCE TENANT PAYS # UNITS RENT/MONTH # UNITS RENT/MONTH
<S> <C> <C> <C> <C> <C> <C> <C>
305 Timberline Forest Apartments $1,296,395 Electric / HVAC 0 $ 0.00 0 $ 0.00
307 9 Egremont Road $1,292,198 Electric 0 $ 0.00 8 $709.13
310 4 Vinal Street $1,265,256 Electric / HVAC 0 $ 0.00 7 $780.00
317 Boulevard Apartments $1,195,288 Electric / HVAC 0 $ 0.00 16 $622.67
326 Victoria Square Apartments $1,146,657 Electric / HVAC 0 $ 0.00 16 $391.88
327 Foxfire Apartments $1,145,354 Electric / HVAC 0 $ 0.00 24 $371.88
328 Glen Arbor $1,133,572 None 47 $396.12 30 $450.53
343 Thomas Apartments $ 962,962 Electric / HVAC 39 $326.29 3 $360.00
347 The Pine Garden Apartments $ 890,463 Electric / HVAC 0 $ 0.00 0 $ 0.00
350 130 Englewood Street $ 813,236 Electric 0 $ 0.00 0 $ 0.00
352 1375 Commonwealth Avenue $ 748,377 Electric 4 $619.00 21 $736.00
354 Mid Cajon Apartments $ 678,023 Electric / HVAC 0 $ 0.00 6 $450.00
360 1381 Commonwealth Avenue $ 513,886 Electric 0 $ 0.00 7 $683.00
361 Pinegrove Place $ 498,113 Electric / HVAC 2 $485.00 3 $730.00
</TABLE>
<TABLE>
<CAPTION>
2 BEDROOMS 3 BEDROOMS 4 BEDROOMS
-------------------- -------------------- --------------------
LOAN WTD. AVG. WTD. AVG. WTD. AVG.
NO. PROPERTY NAME # UNITS RENT/MONTH # UNITS RENT/MONTH # UNITS RENT/MONTH
<S> <C> <C> <C> <C> <C> <C> <C>
305 Timberline Forest Apartments 42 $ 536.92 24 $ 650.00 0 $0.00
307 9 Egremont Road 18 $1,013.68 0 $ 0.00 0 $0.00
310 4 Vinal Street 23 $ 933.91 0 $ 0.00 0 $0.00
317 Boulevard Apartments 14 $ 746.15 0 $ 0.00 0 $0.00
326 Victoria Square Apartments 56 $ 440.19 0 $ 0.00 0 $0.00
327 Foxfire Apartments 28 $ 475.18 2 $ 700.00 0 $0.00
328 Glen Arbor 1 $ 600.00 0 $ 0.00 0 $0.00
343 Thomas Apartments 0 $ 0.00 0 $ 0.00 0 $0.00
347 The Pine Garden Apartments 55 $ 482.06 0 $ 0.00 0 $0.00
350 130 Englewood Street 6 $ 955.00 0 $1,292.00 0 $0.00
352 1375 Commonwealth Avenue 0 $ 0.00 0 $ 0.00 0 $0.00
354 Mid Cajon Apartments 12 $ 577.00 4 $ 675.00 0 $0.00
360 1381 Commonwealth Avenue 5 $ 913.00 0 $ 0.00 0 $0.00
361 Pinegrove Place 9 $ 855.00 0 $ 0.00 0 $0.00
</TABLE>
III-3
<PAGE> 166
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 167
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 168
MORGAN STANLEY March 18, 1998
Real Estate Debt Capital Markets
Mortgage/Asset Capital Markets
[MORGAN STANLEY DEAN WITTER LOGO]
CMBS NEW ISSUE
TERM SHEET
-----------------
PRICING DATE: MARCH 18, 1998
-----------------
$1,143,843,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
AS DEPOSITOR
HELLER FINANCIAL CAPITAL FUNDING, INC. AND
MORGAN STANLEY MORTGAGE CAPITAL INC.
AS MORTGAGE LOAN SELLERS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-HF1
-----------------
MORGAN STANLEY DEAN WITTER MERRILL LYNCH & CO.
THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY PURSUANT TO A DEFINITIVE
PROSPECTUS SUPPLEMENT AND PROSPECTUS AND PROSPECTIVE INVESTORS WHO CONSIDER
PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT DECISION BASED ONLY
UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS USED BUT NOT DEFINED
HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE PROSPECTUS SUPPLEMENT.
<PAGE> 169
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 170
$1,143,843,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-HF1
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
INITIAL AGGREGATE EXPECTED
CERTIFICATE BALANCE RATING FINAL
OR NOTIONAL SUBORDINATION (DCR/ AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
CLASS AMOUNT(1) LEVEL S&P) LIFE WINDOW(3)(4) DATE(3) RATE(5)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 $225,000,000 $28.25% AAA/AAA 5.44 1-106 01/15/07 6.19%
- -----------------------------------------------------------------------------------------------------------------------------
A-2 $697,143,000 28.25 AAA/AAA 9.54 106-118 01/15/08 6.52
- -----------------------------------------------------------------------------------------------------------------------------
X $1,285,217,765(2) -- AAA/AAA -- -- 02/15/18 Variable Rate(7)
- -----------------------------------------------------------------------------------------------------------------------------
B $67,474,000 23.00 AA/AA 9.80 118-118 01/15/08 6.58
- -----------------------------------------------------------------------------------------------------------------------------
C $64,261,000 18.00 A/A 9.80 118-118 01/15/08 6.75
- -----------------------------------------------------------------------------------------------------------------------------
D $64,261,000 13.00 BBB/BBB 9.87 118-119 02/15/08 7.10
- -----------------------------------------------------------------------------------------------------------------------------
E $25,704,000 11.00 BBB/BBB 9.88 119-119 02/15/08 Variable Rate(8)
- -----------------------------------------------------------------------------------------------------------------------------
F(6) $51,409,000 7.00 NR/BB+ 10.24 119-141 12/15/09 7.18
- -----------------------------------------------------------------------------------------------------------------------------
G(6) $19,278,000 5.50 NR/BB 12.71 141-169 04/15/12 7.18
- -----------------------------------------------------------------------------------------------------------------------------
H(6) $12,852,000 4.50 NR/BB- 14.44 169-175 10/15/12 6.19
- -----------------------------------------------------------------------------------------------------------------------------
J(6) $25,705,000 2.50 NR/B 14.67 175-177 12/15/12 6.19
- -----------------------------------------------------------------------------------------------------------------------------
K(6) $9,639,000 1.75 NR/B- 14.77 177-179 02/15/13 6.19
- -----------------------------------------------------------------------------------------------------------------------------
L(6) $22,491,765 -- NR/NR 16.71 179-239 02/15/18 6.19
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) In the case of each such Class, subject to a permitted variance of
plus or minus 5%.
(2) The Class X Notional Amount is equal to the sum of all Certificate
Balances outstanding from time to time.
(3) Based on Maturity Assumptions described in the Prospectus Supplement.
(4) Principal Window is the period (expressed in terms of months and
commencing with the month of the first Distribution Date) during
which distributions of principal are expected to be made to the
holders of each designated Class in accordance with the Maturity
Assumptions.
(5) Other than the Class X Certificates and the E Certificates, each
Class of Certificates will accrue interest generally at a fixed rate
of interest as described in the Prospectus Supplement. The Class X
and E Certificates will accrue interest at a variable rate as
described below.
(6) To be offered privately.
(7) The pass-through rate on the Class X Certificates on each
Distribution Date will equal, in general, the excess, if any of (i)
the weighted average Net Mortgage Rate over (ii) the weighted average
of the pass-through rates applicable to the respective balances of
principal balance Certificates.
(8) The pass-through rate on the Class E Certificates equals the weighted
average Net Mortgage Rate minus 0.17%.
T-1
<PAGE> 171
$1,143,843,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-HF1
I. ISSUE CHARACTERISTICS
Issue Type: The Class A-1, A-2, X, B, C, D, and E Certificates
are offered pursuant to the Prospectus Supplement
and accompanying Prospectus dated March 9, 1998,
and the Class F, G, H, J, K, and L Certificates
will be offered privately (pursuant to Rule 144A
under the Securities Act of 1933, as amended)
pursuant to a Private Placement Memorandum, dated
March 18, 1998.
Securities Offered: $1,143,843,000 monthly pay, multi-class
sequential pay commercial mortgage REMIC
Pass-Through Certificates, including five
fixed-rate principal and interest Classes (Classes
A-1, A-2, B, C and D), one weighted average coupon
principal and interest class (Class E) and one
variable rate interest only class (Class X).
Collateral: The collateral consists of a $1,285,217,765 pool
of 352 fixed-rate commercial and multifamily
Mortgage Loans
Sellers: Heller Financial Capital Funding, Inc. and Morgan
Stanley Mortgage Capital Inc.
Lead Manager: Morgan Stanley & Co. Incorporated
Co-Manager: Merrill Lynch, Pierce, Fenner & Smith Incorporated
Master Servicer: AMRESCO Services, L.P.
Special Servicer: Lennar Partners, Inc.
Trustee/Fiscal Agent: LaSalle National Bank/ABN AMRO Bank N.V.
Pricing Date: March 18, 1998
Closing Date: March 27, 1998
Distribution Dates: The 15th of each month, commencing April 15, 1998
Minimum Denominations: $5,000 for Class A Certificates; $50,000 for all
other Certificates (other than the Class R
Certificates)
Settlement Terms: DTC, Euroclear and Cedel, same day funds, with
accrued interest
Legal/Regulatory Status: The Class A-1, A-2, and X Certificates are
expected to be eligible for exemptive relief
under ERISA. No Class of Certificates is SMMEA
eligible.
Risk Factors: THE CERTIFICATES INVOLVE A DEGREE OF RISK AND MAY
NOT BE SUITABLE FOR ALL INVESTORS. SEE THE "RISK
FACTORS AND OTHER SPECIAL CONSIDERATIONS" SECTION
OF THE PROSPECTUS SUPPLEMENT AND THE "RISK
FACTORS" SECTION OF THE PROSPECTUS.
T-2
<PAGE> 172
$1,143,843,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-HF1
II. STRUCTURE CHARACTERISTICS
The Certificates (other than the Class X, E and Class R Certificates) are
fixed-rate, monthly pay, multi-class, sequential pay REMIC Pass-Through
Certificates. The Class E Certificates are weighted average coupon REMIC
Pass-Through Certificates. The Class X Certificates are variable rate interest
only REMIC Pass-Through Certificates. All Classes of Certificates derive their
cash flows from the entire pool of Mortgage Loans.
<TABLE>
<CAPTION>
Class X(1)
----------
<S> <C> <C>
Class A-1 AAA/AAA 6.19 $225.0MM
Class A-2 AAA/AAA 6.52 $697.1MM
Class B AA/AA 6.58 $ 67.5MM
Class C A/A 6.75 $ 64.3MM
Class D BBB/BBB 7.10 $ 64.3MM
Class E BBB-/BBB- 7.60(2) $ 25.7MM
Class F NR/BB+ 7.18 $ 51.4MM
Class G NR/BB 7.18 $ 19.3MM
Class H NR/BB- 6.19 $ 12.9MM
Class J NR/B 6.19 $ 25.7MM
Class K NR/B- 6.19 $ 9.6MM
Class L NR/NR 6.19 $ 22.5MM
</TABLE>
NR = Not Rated
Notes: (1) See Note (7) on Page T-1.
(2) See Note (8) on Page T-1.
T-3
<PAGE> 173
$1,143,843,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-HF1
Interest Distributions: Each Class of Certificates (other than the
Class R Certificates) will be entitled on each
Distribution Date to interest accrued at its
Pass-Through Rate on the outstanding Certificate
Balance or Notional Amount of such Class, as
applicable.
Pass-Through Rates: Class A-1: 6.19%
Class A-2: 6.52
Class B: 6.58
Class C: 6.75
Class D: 7.10
Class E: 7.60 (WAC Rate minus 0.17%)
Class F: 7.18
Class G: 7.18
Class H: 6.19
Class J: 6.19
Class K: 6.19
Class L: 6.19
Class X: See Note (7) on page T-1
Principal Distributions: Principal will be distributed on each
Distribution Date to the most senior Class (i.e.,
the Class with the earliest alphabetical/
numerical Class designation) of the Principal
Balance Certificates outstanding, until its
Certificate Balance is reduced to zero
(sequential order). If, due to losses, the
Certificate Balances of the Class B through
Class L Certificates are reduced to zero or
Appraisal Reductions exceed the aggregate
Certificate Balance of the Subordinate
Certificates, payments of principal to the Class
A-1 and A-2 Certificates will be made on a pro
rata basis.
Prepayment Premium Prepayment Premiums (to the extent received) will
Allocation: be allocated among the Class X Certificates and
the Principal Balance Certificates (other than
Classes F, G, H, J, K, and L) entitled to
distributions in respect of principal on any
Distribution Date, as described in the Prospectus
Supplement under "DESCRIPTION OF THE CERTIFICATES-
Distributions of Prepayment Premiums."
Credit Enhancement: Each Class of Certificates (other than Classes
A-1, A-2 and X) will be subordinate to all other
Classes with an earlier alphabetical Class
designation.
Advancing: The Master Servicer, the Trustee, and the Fiscal
Agent (in that order) will each be obligated to
make P&I Advances and Servicing Advances,
including delinquent property taxes and
insurance, but only to the extent that such
Advances are deemed recoverable.
Realized Losses and Expense Realized Losses and Expense Losses, if any, will
Losses: be allocated to the Class L, Class K, Class J,
Class H, Class G, Class F, Class E, Class D,
Class C and Class B Certificates, in that order,
and then to Classes A-1 and A-2 and, with respect
to losses allocated to interest, Class X
Certificates, pro rata, in each case reducing
amounts payable thereto. Any interest shortfall
of any Class of Certificates will result in
unpaid interest for such Class which, together
with interest thereon compounded monthly at
one-twelfth the applicable Pass-Through Rate for
such Class, will be payable in subsequent
periods, subject to available funds.
T-4
<PAGE> 174
$1,143,843,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-HF1
Prepayment Interest Shortfalls: For any Distribution Date, any Net Aggregate
Prepayment Interest Shortfall for such
Distribution Date will generally be allocated
pro rata to each Class of Certificates in
proportion to its entitlement to interest.
Appraisal Reductions: An appraisal reduction generally will be
created in the amount, if any, by which the
Principal Balance of a Specially Serviced
Mortgage Loan (plus other amounts overdue in
connection with such loan) exceeds 90% of the
appraised value of the related Mortgaged
Property. The Appraisal Reduction Amount will
reduce proportionately the amount of P&I
Advances for such loan, which reduction will
result, in general, in a reduction of interest
distributable to the most subordinate Class of
Principal Balance Certificates outstanding.
An Appraisal Reduction will be reduced to zero
as of the date the related Mortgage Loan has
been brought current for at least three
consecutive months, paid in full, liquidated,
repurchased, or otherwise disposed of.
Operating Adviser: The Operating Adviser, which may be appointed
by the Controlling Class, will have the right
to receive notification concerning certain
actions of the Special Servicer with respect
to Specially Serviced Mortgage Loans, review
and comment on proposed asset resolution
strategies of the Special Servicer and replace
the Special Servicer subject to, among other
things, Rating Agency approval of the
replacement Special Servicer.
Controlling Class: The Controlling Class will generally be the
most subordinate Class of Certificates
outstanding at any time or, if the Certificate
Balance of such Class is less than 25% of the
initial Certificate Balance of such Class, the
next most subordinate Class of Principal
Balance Certificates.
Special Servicer: In general, the Special Servicer has the right
to modify the terms of a Specially Serviced
Mortgage Loan if it determines that such
modification would increase the net present
value of the proceeds to the Trust, provided
that the Special Servicer generally may not
extend the maturity date of a Mortgage Loan
beyond two years prior to the Final Rated
Distribution Date, extend the maturity date of
a Mortgage Loan which has a below market rate
(except in limited circumstances), reduce the
Mortgage Rate to a rate below the market rate
or defer interest due in excess of 10% of the
Stated Principal Balance of such Mortgage Loan.
Optional Termination: The Depositor, then the Master Servicer, then
the Special Servicer, the Controlling Class and
then the holder of a majority of the R-1
Certificates will have the option to purchase,
in whole but not in part, the remaining assets
of the Trust on or after the Distribution Date
on which the aggregate Certificate Balance of
all Classes of Certificates then outstanding is
less than or equal to 1% of the Initial Pool
Balance. Such purchase price will generally be
at a price equal to the unpaid aggregate
Scheduled Principal Balance of the Mortgage
Loans, plus accrued and unpaid interest and
unreimbursed Advances.
Reports to Certificateholders: The Trustee will prepare and deliver monthly
Certificateholder Reports. The Special
Servicer will prepare and deliver to the
Trustee a monthly Special Servicer Report
summarizing the status of each Specially
Serviced Mortgage Loan. The Master Servicer
and the Special Servicer will prepare and
deliver to the Trustee an annual report
setting forth, among other things, the debt
service coverage ratios for each Mortgage
Loan, as available. Each of the reports will
be available to the Certificateholders. A
Report containing information regarding the
Mortgage Loans will be available
electronically.
T-5
<PAGE> 175
$1,143,843,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-HF1
III. SELLERS Heller Financial Capital Funding, Inc.
The Mortgage Pool includes 306 Mortgage Loans, representing
approximately 84.3% of the Initial Pool Balance to be sold by
Heller Financial Capital Funding, Inc. ("Heller") to the
Depositor. Heller is a wholly owned subsidiary of Heller
Financial, Inc. which was organized to acquire and sell loans
secured by mortgages on commercial and multi-family real estate.
All of the Mortgage Loans to be sold by Heller to the Depositor
for the Mortgage Pool were originated by Heller Financial, Inc.
or an affiliate thereof. Heller Financial has been a commercial
real estate portfolio lender since 1980. Since 1993, Heller
Financial has securitized over $1 billion of the commercial
mortgage loans which it has originated.
Morgan Stanley Mortgage Capital Inc.
The Mortgage Pool includes 46 Mortgage Loans, representing
approximately 15.7% of the Initial Pool Balance, either acquired
or originated by or on behalf of Morgan Stanley Mortgage Capital
Inc. ("MSMC"). MSMC is a subsidiary of Morgan Stanley & Co.
Incorporated that was formed to originate and purchase mortgage
loans secured by commercial and multifamily real estate.
T-6
<PAGE> 176
$1,143,843,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-HF1
IV. COLLATERAL DESCRIPTION
Summary: The Mortgage Pool consists of a $1,285,217,765 pool of 352
fixed-rate, first lien, mortgage loans secured by liens on
commercial and multifamily properties located throughout 36
states. As of the Cut-Off Date, the Mortgage Loans have a
weighted average Mortgage Rate of 7.68% and a weighted average
remaining term to maturity of 122 months. See the Appendices to
the Prospectus Supplement for more detailed collateral
information.
PROPERTY SUMMARY
<TABLE>
<CAPTION>
Weighted
Weighted Average
Initial Pool Weighted Average Debt Weighted
Aggregate Balance as Average Remaining Term Service Average
Number of Balance as of of Cut-Off Mortgage to Stated Coverage Loan to
Property Type Loans Cut-Off-Date Date (%) Rate (%) Maturity (mos) Ratio Value (%)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multifamily 96 $407,168,588 31.68% 7.28% 121 mos 1.36x 74.0%
- ------------------------------------------------------------------------------------------------------------------
Retail 57 262,311,122 20.41 7.82 132 1.36 73.2
- ------------------------------------------------------------------------------------------------------------------
Self Storage 86 201,006,960 15.64 8.05 120 1.66 67.6
- ------------------------------------------------------------------------------------------------------------------
Manufactured Housing
Community 56 145,904,078 11.35 7.86 117 1.48 69.5
- ------------------------------------------------------------------------------------------------------------------
Office 26 123,291,975 9.59 7.76 116 1.37 70.6
- ------------------------------------------------------------------------------------------------------------------
Hospitality 9 71,696,771 5.58 7.61 132 1.53 69.8
- ------------------------------------------------------------------------------------------------------------------
Industrial 18 59,875,089 4.66 7.92 118 1.38 70.5
- ------------------------------------------------------------------------------------------------------------------
Congregate Care 4 13,963,181 1.09 7.77 116 1.50 74.6
- ------------------------------------------------------------------------------------------------------------------
Total or Weighted
Average 352 1,285,217,765 100.00 7.68 122 1.43 71.6
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
T-7
<PAGE> 177
$1,143,843,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-HF1
GEOGRAPHIC DISTRIBUTION
-----------------------
[GRAPHICS OF U.S. MAP SHOWING PERCENTAGES]
T-8
<PAGE> 178
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 179
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 180
PROSPECTUS
Mortgage Pass-Through Certificates
(Issuable in Series)
Morgan Stanley Capital I Inc.
Depositor
The Certificates offered hereby and by Supplements to this Prospectus (the
"Offered Certificates") will be offered from time to time in one or more series.
Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund (with respect to any series, the
"Trust Fund") consisting of one or more segregated pools of various types of
multifamily or commercial mortgage loans (the "Mortgage Loans"), mortgage
participations, mortgage pass-through certificates, mortgage-backed securities
evidencing interests therein or secured thereby (the "MBS"), certain direct
obligations of the United States, agencies thereof or agencies created thereby
(the "Government Securities") or a combination of Mortgage Loans, MBS and/or
Government Securities (with respect to any series, collectively, "Assets"). If
so specified in the related Prospectus Supplement, some or all of the Mortgage
Loans will include assignments of the leases of the related Mortgaged Properties
(as defined herein) and/or assignments of the rental payments due from the
lessees under such leases (each type of assignment, a "Lease Assignment"). A
significant or the sole source of payments on certain Commercial Loans (as
defined herein) and, therefore, of distributions on certain series of
Certificates, will be such rent payments. The Mortgage Loans and MBS are
collectively referred to herein as the "Mortgage Assets." If so specified in the
related Prospectus Supplement, the Trust Fund for a series of Certificates may
include letters of credit, insurance policies, guarantees, reserve funds or
other types of credit support, or any combination thereof (with respect to any
series, collectively, "Credit Support"), and currency or interest rate exchange
agreements and other financial assets, or any combination thereof (with respect
to any series, collectively, "Cash Flow Agreements"). See "Description of the
Trust Funds," "Description of the Certificates" and "Description of Credit
Support."
Each series of Certificates will consist of one or more classes of
Certificates that may (i) provide for the accrual of interest thereon based on
fixed, variable or adjustable rates; (ii) be senior or subordinate to one or
more other classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be entitled
to interest distributions, with disproportionately low, nominal or no principal
distributions; (v) provide for distributions of accrued interest thereon
commencing only following the occurrence of certain events, such as the
retirement of one or more other classes of Certificates of such series; (vi)
provide for distributions of principal sequentially, based on specified payment
schedules or other methodologies; and/or (vii) provide for distributions based
on a combination of two or more components thereof with one or more of the
characteristics described in this paragraph, to the extent of available funds,
in each case as described in the related Prospectus Supplement. Any such classes
may include classes of Offered Certificates. See "Description of the
Certificates."
(cover continued on next page)
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
Investors should consider, among other things, certain risks set forth
under the caption "Risk Factors" herein and in the related Prospectus
Supplement.
Prior to issuance there will have been no market for the Certificates of
any series and there can be no assurance that a secondary market for any Offered
Certificates will develop or that, if it does develop, it will continue. This
Prospectus may not be used to consummate sales of the Offered Certificates of
any series unless accompanied by the Prospectus Supplement for such series.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "Plan of Distribution" herein and in the related Prospectus
Supplement.
----------------------
MORGAN STANLEY & CO.
INCOPORATED
March 9, 1998
<PAGE> 181
Principal and interest with respect to Certificates will be distributable
monthly, quarterly, semi-annually or at such other intervals and on the dates
specified in the related Prospectus Supplement. Distributions on the
Certificates of any series will be made only from the assets of the related
Trust Fund.
The Certificates of each series will not represent an obligation of or
interest in the Depositor, Morgan Stanley & Co. Incorporated, any Master
Servicer, any Sub-Servicer, any Special Servicer or any of their respective
affiliates, except to the limited extent described herein and in the related
Prospectus Supplement. Neither the Certificates nor any assets in the related
Trust Fund will be guaranteed or insured by any governmental agency or
instrumentality or by any other person, unless otherwise provided in the related
Prospectus Supplement. The assets in each Trust Fund will be held in trust for
the benefit of the holders of the related series of Certificates pursuant to a
Pooling and Servicing Agreement or a Trust Agreement, as more fully described
herein.
The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including prepayments,
repurchase and defaults) on the Mortgage Assets in the related Trust Fund and
the timing of receipt of such payments as described under the caption "Yield
Considerations" herein and in the related Prospectus Supplement. A Trust Fund
may be subject to early termination under the circumstances described herein and
in the related Prospectus Supplement.
Prospective investors should review the information appearing under the
caption "Risk Factors" herein and such information as may be set forth under the
caption "Risk Factors" in the related Prospectus Supplement before purchasing
any Offered Certificate.
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as a
"real estate mortgage investment conduit" for federal income tax purposes. See
also "Certain Federal Income Tax Consequences" herein.
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus and Prospectus
Supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to the Offered Certificates of each series will, among other things, set forth
with respect to such Certificates, as appropriate: (i) a description of the
class or classes of Certificates, the payment provisions with respect to each
such class and the Pass-Through Rate or method of determining the Pass-Through
Rate with respect to each such class; (ii) the aggregate principal amount and
distribution dates relating to such series and, if applicable, the initial and
final scheduled distribution dates for each class; (iii) information as to the
assets comprising the Trust Fund, including the general characteristics of the
assets included therein, including the Mortgage Assets and any Credit Support
and Cash Flow Agreements (with respect to the Certificates of any series, the
"Trust Assets"); (iv) the circumstances, if any, under which the Trust Fund may
be subject to early termination; (v) additional information with respect to the
method of distribution of such Certificates; (vi) whether one or more REMIC
elections will be made and designation of the regular interests and residual
interests; (vii) the aggregate original percentage ownership interest in the
Trust Fund to be evidenced by each class of Certificates; (viii) information as
to any Master Servicer, any Sub-Servicer, any Special Servicer (or provision for
the appointment thereof) and the Trustee, as applicable; (ix) information as to
the nature and extent of subordination with respect to any class of Certificates
that is subordinate in right of payment to any other class; and (x) whether such
Certificates will be initially issued in definitive or book-entry form.
2
<PAGE> 182
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to each
series of Certificates contain summaries of the material terms of the documents
referred to herein and therein, but do not contain all of the information set
forth in the Registration Statement pursuant to the rules and regulations of the
Commission. For further information, reference is made to such Registration
Statement and the exhibits thereto. Such Registration Statement and exhibits can
be inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at its Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its Regional Offices located as follows:
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661; and New York Regional Office, Seven World Trade Center, New
York, New York 10048.
To the extent described in the related Prospectus Supplement, some or all
of the Mortgage Loans may be secured by an assignment of the lessors' (i.e., the
related mortgagors') rights in one or more leases (each, a "Lease") of the
related Mortgaged Property. Unless otherwise specified in the related Prospectus
Supplement, no series of Certificates will represent interests in or obligations
of any lessee (each, a "Lessee") under a Lease. If indicated, however, in the
Prospectus Supplement for a given series, a significant or the sole source of
payments on the Mortgage Loans in such series, and, therefore, of distributions
on such Certificates, will be rental payments due from the Lessees under the
Leases. Under such circumstances, prospective investors in the related series of
Certificates may wish to consider publicly available information, if any,
concerning the Lessees. Reference should be made to the related Prospectus
Supplement for information concerning the Lessees and whether any such Lessees
are subject to the periodic reporting requirements of the Securities Exchange
Act of 1934, as amended.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Offered
Certificates or an offer of the Offered Certificates to any person in any state
or other jurisdiction in which such offer would be unlawful. The delivery of
this Prospectus at any time does not imply that information herein is correct as
of any time subsequent to its date; however, if any material change occurs while
this Prospectus is required by law to be delivered, this Prospectus will be
amended or supplemented accordingly.
A Master Servicer or the Trustee will be required to mail to holders of
Offered Certificates of each series periodic unaudited reports concerning the
related Trust Fund. Unless and until definitive Certificates are issued, or
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to Cede & Co. ("Cede"), as
nominee of The Depository Trust Company ("DTC") and registered holder of the
Offered Certificates, pursuant to the applicable Agreement. Such reports may be
available to holders of interests in the Certificates (the "Certificateholders")
upon request to their respective DTC participants. See "Description of the
Certificates--Reports to Certificateholders" and "Description of the
Agreements--Evidence as to Compliance." The Depositor will file or cause to be
filed with the Commission such periodic reports with respect to each Trust Fund
as are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
3
<PAGE> 183
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of an offering of Offered Certificates evidencing interests therein. The
Depositor will provide or cause to be provided without charge to each person to
whom this Prospectus is delivered in connection with the offering of one or more
classes of Offered Certificates, a copy of any or all documents or reports
incorporated herein by reference, in each case to the extent such documents or
reports relate to one or more of such classes of such Offered Certificates,
other than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests to the Depositor should
be directed in writing to Morgan Stanley Capital I Inc., c/o Morgan Stanley &
Co. Incorporated, 1585 Broadway, 37th Floor, New York, New York 10036,
Attention: John E. Westerfield, or by telephone at (212) 761-4700. The Depositor
has determined that its financial statements are not material to the offering of
any Offered Certificates.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT...................................................... 2
AVAILABLE INFORMATION...................................................... 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................... 4
SUMMARY OF PROSPECTUS...................................................... 5
RISK FACTORS............................................................... 13
DESCRIPTION OF THE TRUST FUNDS............................................. 20
USE OF PROCEEDS............................................................ 26
YIELD CONSIDERATIONS....................................................... 26
THE DEPOSITOR.............................................................. 30
DESCRIPTION OF THE CERTIFICATES............................................ 30
DESCRIPTION OF THE AGREEMENTS.............................................. 38
DESCRIPTION OF CREDIT SUPPORT.............................................. 54
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES................. 57
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 73
STATE TAX CONSIDERATIONS................................................... 98
ERISA CONSIDERATIONS....................................................... 99
LEGAL INVESTMENT........................................................... 101
PLAN OF DISTRIBUTION....................................................... 103
LEGAL MATTERS.............................................................. 103
FINANCIAL INFORMATION...................................................... 104
RATING..................................................................... 104
INDEX OF PRINCIPAL DEFINITIONS............................................. 105
4
<PAGE> 184
SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of such series. An Index of Principal
Definitions is included at the end of this Prospectus.
Title of Certificates............... Mortgage Pass-Through Certificates,
issuable in series (the "Certificates").
Depositor........................... Morgan Stanley Capital I Inc., a
wholly-owned subsidiary of Morgan Stanley
Group Inc. See "The Depositor."
Master Servicer..................... The master servicer (the "Master
Servicer"), if any, for each series of
Certificates, which may be an affiliate
of the Depositor, will be named in the
related Prospectus Supplement. See
"Description of the
Agreements--Collection and Other
Servicing Procedures."
Special Servicer.................... The special servicer (the "Special
Servicer"), if any, for each series of
Certificates, which may be an affiliate
of the Depositor, will be named, or the
circumstances in accordance with which a
Special Servicer will be appointed will
be described, in the related Prospectus
Supplement. See "Description of the
Agreements--Special Servicers."
Trustee............................. The trustee (the "Trustee") for each
series of Certificates will be named in
the related Prospectus Supplement. See
"Description of the Agreements--The
Trustee."
The Trust Assets.................... Each series of Certificates will
represent in the aggregate the entire
beneficial ownership interest in a Trust
Fund consisting primarily of:
(a) Mortgage Assets................. The Mortgage Assets with respect to each
series of Certificates will consist of a
pool of multifamily and/or commercial
mortgage loans (collectively, the
"Mortgage Loans") and mortgage
participations, mortgage pass-through
certificates or other mortgage-backed
securities evidencing interests in or
secured by Mortgage Loans (collectively,
the "MBS") or a combination of Mortgage
Loans and MBS. The Mortgage Loans will
not be guaranteed or insured by the
Depositor or any of its affiliates or,
unless otherwise provided in the
Prospectus Supplement, by any
governmental agency or instrumentality or
other person. As more specifically
described herein, the Mortgage Loans will
be secured by first or junior liens on,
or security interests in, properties
consisting of (i) residential properties
consisting of five or more rental or
cooperatively-owned dwelling units (the
"Multifamily Properties") or (ii) office
buildings, shopping centers, retail
stores, hotels or motels, nursing homes,
hospitals or other health-care related
facilities, mobile home parks, warehouse
facilities, mini-warehouse facilities or
self-storage facilities, industrial
plants, congregate care facilities, mixed
use or other types of commercial
properties (the "Commercial Properties").
5
<PAGE> 185
The term "Mortgaged Properties" shall
refer to Multifamily Properties or
Commercial Properties, or both.
To the extent described in the related
Prospectus Supplement, some or all of the
Mortgage Loans may also be secured by an
assignment of one or more leases (each, a
"Lease") of one or more lessees (each, a
"Lessee") of all or a portion of the
related Mortgaged Properties. Unless
otherwise specified in the related
Prospectus Supplement, a significant or
the sole source of payments on certain
Commercial Loans (as defined herein) will
be the rental payments due under the
related Leases. In certain circumstances,
with respect to Commercial Properties,
the material terms and conditions of the
related Leases may be set forth in the
related Prospectus Supplement. See
"Description of the Trust Funds--Mortgage
Loans--Leases" and "Risk Factors--Limited
Assets" herein.
The Mortgaged Properties may be located
in any one of the fifty states, the
District of Columbia or the Commonwealth
of Puerto Rico. The Prospectus Supplement
will indicate additional jurisdictions,
if any, in which the Mortgaged Properties
may be located. Unless otherwise provided
in the related Prospectus Supplement, all
Mortgage Loans will have individual
principal balances at origination of not
less than $25,000 and original terms to
maturity of not more than 40 years. All
Mortgage Loans will have been originated
by persons other than the Depositor, and
all Mortgage Assets will have been
purchased, either directly or indirectly,
by the Depositor on or before the date of
initial issuance of the related series of
Certificates. The related Prospectus
Supplement will indicate if any such
persons are affiliates of the Depositor.
Each Mortgage Loan may provide for no
accrual of interest or for accrual of
interest thereon at an interest rate (a
"Mortgage Rate") that is fixed over its
term or that adjusts from time to time,
or that may be converted from an
adjustable to a fixed Mortgage Rate, or
from a fixed to an adjustable Mortgage
Rate, from time to time at the
mortgagor's election, in each case as
described in the related Prospectus
Supplement. Adjustable Mortgage Rates on
the Mortgage Loans in a Trust Fund may be
based on one or more indices. Each
Mortgage Loan may provide for scheduled
payments to maturity, payments that
adjust from time to time to accommodate
changes in the Mortgage Rate or to
reflect the occurrence of certain events,
and may provide for negative amortization
or accelerated amortization, in each case
as described in the related Prospectus
Supplement. Each Mortgage Loan may be
fully amortizing or require a balloon
payment due on its stated maturity date,
in each case as described in the related
Prospectus Supplement. Each Mortgage Loan
may contain prohibitions on prepayment or
require payment of a premium or a yield
maintenance penalty in connection with a
prepayment, in each case as described in
the related Prospectus Supplement. The
Mortgage Loans may provide for payments
of principal, interest or both, on due
dates that occur monthly, quarterly,
semi-annually or
6
<PAGE> 186
at such other interval as is specified in
the related Prospectus Supplement. See
"Description of the Trust Funds--Assets."
(b) Government Securities........... If so provided in the related Prospectus
Supplement, the Trust Fund may include,
in addition to Mortgage Assets, certain
direct obligations of the United States,
agencies thereof or agencies created
thereby which provide for payment of
interest and/or principal (collectively,
"Government Securities").
(c) Collection Accounts............. Each Trust Fund will include one or more
accounts established and maintained on
behalf of the Certificateholders into
which the person or persons designated in
the related Prospectus Supplement will,
to the extent described herein and in
such Prospectus Supplement, deposit all
payments and collections received or
advanced with respect to the Mortgage
Assets and other assets in the Trust
Fund. Such an account may be maintained
as an interest bearing or a non-interest
bearing account, and funds held therein
may be held as cash or invested in
certain short-term, investment grade
obligations, in each case as described in
the related Prospectus Supplement. See
"Description of the
Agreements--Certificate Account and Other
Collection Accounts."
(d) Credit Support.................. If so provided in the related Prospectus
Supplement, partial or full protection
against certain defaults and losses on
the Mortgage Assets in the related Trust
Fund may be provided to one or more
classes of Certificates of the related
series in the form of subordination of
one or more other classes of Certificates
of such series, which other classes may
include one or more classes of Offered
Certificates, or by one or more other
types of credit support, such as a letter
of credit, insurance policy, guarantee,
reserve fund or another type of credit
support, or a combination thereof (any
such coverage with respect to the
Certificates of any series, "Credit
Support"). The amount and types of
coverage, the identification of the
entity providing the coverage (if
applicable) and related information with
respect to each type of Credit Support,
if any, will be described in the
Prospectus Supplement for a series of
Certificates. The Prospectus Supplement
for any series of Certificates evidencing
an interest in a Trust Fund that includes
MBS will describe any similar forms of
credit support that are provided by or
with respect to, or are included as part
of the trust fund evidenced by or
providing security for, such MBS. See
"Risk Factors--Credit Support
Limitations" and "Description of Credit
Support."
(e) Cash Flow Agreements............ If so provided in the related Prospectus
Supplement, the Trust Fund may include
guaranteed investment contracts pursuant
to which moneys held in the funds and
accounts established for the related
series will be invested at a specified
rate. The Trust Fund may also include
certain other agreements, such as
interest rate exchange agreements,
interest rate cap or floor agreements,
currency exchange agreements or similar
agreements provided to reduce the effects
of interest rate or currency exchange
rate fluctuations on the Assets or on one
or more classes of Certificates.
(Currency exchange agreements might be
included in the Trust Fund if some or all
of the
7
<PAGE> 187
Mortgage Assets (such as Mortgage Loans
secured by Mortgaged Properties located
outside the United States) were
denominated in a non-United States
currency.) The principal terms of any
such guaranteed investment contract or
other agreement (any such agreement, a
"Cash Flow Agreement"), including,
without limitation, provisions relating
to the timing, manner and amount of
payments thereunder and provisions
relating to the termination thereof,
will be described in the Prospectus
Supplement for the related series. In
addition, the related Prospectus
Supplement will provide certain
information with respect to the obligor
under any such Cash Flow Agreement. The
Prospectus Supplement for any series of
Certificates evidencing an interest in a
Trust Fund that includes MBS will
describe any cash flow agreements that
are included as part of the trust fund
evidenced by or providing security for
such MBS. See "Description of the Trust
Funds--Cash Flow Agreements."
Description of Certificates.
Distributions on Certificates....... Each series of Certificates evidencing an
interest in a Trust Fund that includes
Mortgage Loans as part of its assets will
be issued pursuant to a pooling and
servicing agreement, and each series of
Certificates evidencing an interest in a
Trust Fund that does not include Mortgage
Loans will be issued pursuant to a trust
agreement. Pooling and servicing
agreements and trust agreements are
referred to herein as the "Agreements."
Each series of Certificates will include
one or more classes. Each series of
Certificates (including any class or
classes of Certificates of such series
not offered hereby) will represent in the
aggregate the entire beneficial ownership
interest in the Trust Fund. Each class of
Certificates (other than certain Stripped
Interest Certificates, as defined below)
will have a stated principal amount (a
"Certificate Balance") and (other than
certain Stripped Principal Certificates,
as defined below), will accrue interest
thereon based on a fixed, variable or
adjustable interest rate (a "Pass-Through
Rate"). The related Prospectus Supplement
will specify the Certificate Balance, if
any, and the Pass-Through Rate for each
class of Certificates or, in the case of
a variable or adjustable Pass-Through
Rate, the method for determining the
Pass-Through Rate.
Each series of Certificates will consist
of one or more classes of Certificates
that may (i) provide for the accrual of
interest thereon based on fixed, variable
or adjustable rates; (ii) be senior
(collectively, "Senior Certificates") or
subordinate (col-lectively, "Subordinate
Certificates") to one or more other
classes of Certificates in respect of
certain distributions on the
Certificates; (iii) be entitled to
principal distributions, with
disproportionately low, nominal or no
interest distributions (collectively,
"Stripped Principal Certificates"); (iv)
be entitled to interest distributions,
with disproportionately low, nominal or
no principal distributions (collectively,
"Stripped Interest Certificates"); (v)
provide for distributions of accrued
interest thereon commencing only
following the occurrence of certain
events, such as the retirement of one or
more other classes of Certificates of
such series (collectively, "Accrual
Certificates"); (vi) provide for
distributions of principal
8
<PAGE> 188
sequentially, based on specified payment
schedules or other methodologies; and/or
(vii) provide for distributions based on
a combination of two or more components
thereof with one or more of the
characteristics described in this
paragraph, including a Stripped
Principal Certificate component and a
Stripped Interest Certificate component,
to the extent of available funds, in
each case as described in the related
Prospectus Supplement. Any such classes
may include classes of Offered
Certificates. With respect to
Certificates with two or more
components, references herein to
Certificate Balance, notional amount and
Pass-Through Rate refer to the principal
balance, if any, notional amount, if
any, and the Pass-Through Rate, if any,
for any such component.
The Certificates will not be guaranteed
or insured by the Depositor or any of its
affiliates, by any governmental agency or
instrumentality or by any other person,
unless otherwise provided in the related
Prospectus Supplement. See "Risk
Factors--Limited Assets" and "Description
of the Certificates."
(a) Interest........................ Interest on each class of Offered
Certificates (other than Stripped
Principal Certificates and certain
classes of Stripped Interest
Certificates) of each series will accrue
at the applicable Pass-Through Rate on
the outstanding Certificate Balance
thereof and will be distributed to
Certificateholders as provided in the
related Prospectus Supplement (each of
the specified dates on which
distributions are to be made, a
"Distribution Date"). Distributions with
respect to interest on Stripped Interest
Certificates may be made on each
Distribution Date on the basis of a
notional amount as described in the
related Prospectus Supplement.
Distributions of interest with respect to
one or more classes of Certificates may
be reduced to the extent of certain
delinquencies, losses, prepayment
interest shortfalls, and other
contingencies described herein and in the
related Prospectus Supplement. See "Risk
Factors--Average Life of Certificates;
Prepayments; Yields," "Yield
Considerations" and "Description of the
Certificates--Distributions of Interest
on the Certificates."
(b) Principal....................... The Certificates of each series initially
will have an aggregate Certificate
Balance no greater than the outstanding
principal balance of the Assets as of,
unless the related Prospectus Supplement
provides otherwise, the close of business
on the first day of the month of
formation of the related Trust Fund (the
"Cut-off Date"), after application of
scheduled payments due on or before such
date, whether or not received. The
Certificate Balance of a Certificate
outstanding from time to time represents
the maximum amount that the holder
thereof is then entitled to receive in
respect of principal from future cash
flow on the assets in the related Trust
Fund. Unless otherwise provided in the
related Prospectus Supplement,
distributions of principal will be made
on each Distribution Date to the class or
classes of Certificates entitled thereto
until the Certificate Balances of such
Certificates have been reduced to zero.
Unless otherwise specified in the related
Prospectus Supplement, distributions of
principal of any class of Certificates
will be made on
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a pro rata basis among all of the
Certificates of such class or by random
selection, as described in the related
Prospectus Supplement or otherwise
established by the related Trustee.
Stripped Interest Certificates with no
Certificate Balance will not receive
distributions in respect of principal.
See "Description of the
Certificates--Distributions of Principal
of the Certificates."
Advances............................ Unless otherwise provided in the related
Prospectus Supplement, the Master
Servicer will be obligated as part of its
servicing responsibilities to make
certain advances that in its good faith
judgment it deems recoverable with
respect to delinquent scheduled payments
on the Whole Loans in such Trust Fund.
Neither the Depositor nor any of its
affiliates will have any responsibility
to make such advances. Advances made by a
Master Servicer are reimbursable
generally from subsequent recoveries in
respect of such Whole Loans and otherwise
to the extent described herein and in the
related Prospectus Supplement. If and to
the extent provided in the Prospectus
Supplement for any series, the Master
Servicer will be entitled to receive
interest on its outstanding advances,
payable from amounts in the related Trust
Fund. The Prospectus Supplement for any
series of Certificates evidencing an
interest in a Trust Fund that includes
MBS will describe any corresponding
advancing obligation of any person in
connection with such MBS. See
"Description of the
Certificates--Advances in Respect of
Delinquencies."
Termination......................... If so specified in the related Prospectus
Supplement, a series of Certificates may
be subject to optional early termination
through the repurchase of the Assets in
the related Trust Fund by the party
specified therein, under the
circumstances and in the manner set forth
therein. If so provided in the related
Prospectus Supplement, upon the reduction
of the Certificate Balance of a specified
class or classes of Certificates by a
specified percentage or amount or on and
after a date specified in such Prospectus
Supplement, the party specified therein
will solicit bids for the purchase of all
of the Assets of the Trust Fund, or of a
sufficient portion of such Assets to
retire such class or classes, or purchase
such Assets at a price set forth in the
related Prospectus Supplement. In
addition, if so provided in the related
Prospectus Supplement, certain classes of
Certificates may be purchased subject to
similar conditions. See "Description of
the Certificates--Termination."
Registration of Certificates........ If so provided in the related Prospectus
Supplement, one or more classes of the
Offered Certificates will initially be
represented by one or more Certificates
registered in the name of Cede & Co., as
the nominee of DTC. No person acquiring
an interest in Offered Certificates so
registered will be entitled to receive a
definitive certificate representing such
person's interest except in the event
that definitive certificates are issued
under the limited circumstances described
herein. See "Risk Factors--Book-Entry
Registration" and "Description of the
Certificates--Book-Entry Registration and
Definitive Certificates."
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Tax Status of the Certificates...... The Certificates of each series will
constitute either (i) "regular interests"
("REMIC Regular Certificates") and
"residual interests" ("REMIC Residual
Certificates") in a Trust Fund treated as
a REMIC under Sections 860A through 860G
of the Code, or (ii) interests ("Grantor
Trust Certificates") in a Trust Fund
treated as a grantor trust under
applicable provisions of the Code.
(a) REMIC........................... REMIC Regular Certificates generally will
be treated as debt obligations of the
applicable REMIC for federal income tax
purposes. Certain REMIC Regular
Certificates may be issued with original
issue discount for federal income tax
purposes. See "Certain Federal Income Tax
Consequences" in the Prospectus
Supplement.
A portion (or, in certain cases, all) of
the income from REMIC Residual
Certificates (i) may not be offset by any
losses from other activities of the
holder of such REMIC Residual
Certificates, (ii) may be treated as
unrelated business taxable income for
holders of REMIC Residual Certificates
that are subject to tax on unrelated
business taxable income (as defined in
Section 511 of the Code), and (iii) may
be subject to foreign withholding rules.
See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners
of REMIC Residual Certificates".
The Offered Certificates will be treated
as (i) assets described in section
7701(a)(19)(C) of the Internal Revenue
Code of 1986, as amended (the "Code") and
(ii) "real estate assets" within the
meaning of section 856(c)(4)(A) of the
Code, in each case to the extent
described herein and in the Prospectus.
See "Certain Federal Income Tax
Consequences" herein and in the
Prospectus.
(b) Grantor Trust................... If no election is made to treat the Trust
Fund relating to a Series of Certificates
as a real estate mortgage investment
conduit ("REMIC"), the Trust Fund will be
classified as a grantor trust and not as
an association taxable as a corporation
for federal income tax purposes, and
therefore holders of Certificates will be
treated as the owners of undivided pro
rata interests in the Mortgage Pool or
pool of securities and any other assets
held by the Trust Fund.
Investors are advised to consult their
tax advisors and to review "Certain
Federal Income Tax Consequences" herein
and in the related Prospectus Supplement.
ERISA Considerations................ A fiduciary of an employee benefit plan
or other retirement plan or arrangement,
including an individual retirement
account or annuity or a Keogh plan, and
any collective investment fund or
insurance company general or separate
account in which such plans, accounts,
annuities or arrangements are invested,
that is subject to Title I of the
Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or Section
4975 of the Code should carefully review
with its legal advisors whether the
purchase or holding of Offered
Certificates could give rise to a
transaction that is prohibited or is not
otherwise permissible either under ERISA
or Section 4975 of the Code. See "ERISA
Considerations" herein and in the related
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Prospectus Supplement. To the extent
specified in the related Prospectus
Supplement, certain classes of
Certificates may not be transferred
unless the Trustee and the Depositor are
furnished with a letter of
representations or an opinion of counsel
to the effect that such transfer will
not result in a violation of the
prohibited transaction provisions of
ERISA and the Code, will not cause the
assets of the Trust to be deemed "plan
assets" for purposes of ERISA and the
Code and will not subject the Trustee,
the Depositor or the Master Servicer to
additional obligations. See "ERISA
Considerations" herein and in the
related Prospectus Supplement.
Legal Investment.................... The related Prospectus Supplement will
specify whether any class or classes of
the Offered Certificates will constitute
"mortgage related securities" for
purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended.
Investors whose investment authority is
subject to legal restrictions should
consult their own legal advisors to
determine whether and to what extent the
Offered Certificates constitute legal
investments for them. See "Legal
Investment" herein and in the related
Prospectus Supplement.
Rating.............................. At the date of issuance, as to each
series, each class of Offered
Certificates will be rated not lower than
investment grade by one or more
nationally recognized statistical rating
agencies (each, a "Rating Agency"). See
"Rating" herein and in the related
Prospectus Supplement.
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RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in "Risk Factors" in the related Prospectus
Supplement.
Limited Liquidity
There can be no assurance that a secondary market for the Certificates of
any series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such series
remain outstanding. Any such secondary market may provide less liquidity to
investors than any comparable market for securities evidencing interests in
single family mortgage loans. The market value of Certificates will fluctuate
with changes in prevailing rates of interest. Consequently, sale of Certificates
by a holder in any secondary market that may develop may be at a discount from
100% of their original principal balance or from their purchase price.
Furthermore, secondary market purchasers may look only hereto, to the related
Prospectus Supplement and to the reports to Certificateholders delivered
pursuant to the related Agreement as described herein under the heading
"Description of the Certificates--Reports to Certificateholders", "--Book-Entry
Registration and Definitive Certificates" and "Description of the
Agreements--Evidence as to Compliance" for information concerning the
Certificates. Except to the extent described herein and in the related
Prospectus Supplement, Certificateholders will have no redemption rights and the
Certificates are subject to early retirement only under certain specified
circumstances described herein and in the related Prospectus Supplement. See
"Description of the Certificates--Termination". Morgan Stanley & Co.
Incorporated currently expects to make a secondary market in the Offered
Certificates, but has no obligation to do so.
Limited Assets
The Certificates will not represent an interest in or obligation of the
Depositor, the Master Servicer, or any of their affiliates. The only obligations
with respect to the Certificates or the Assets will be the obligations (if any)
of the Warrantying Party (as defined herein) pursuant to certain limited
representations and warranties made with respect to the Mortgage Loans, the
Master Servicer's, any Special Servicer's and any Sub-Servicer's servicing
obligations under the related Pooling and Servicing Agreement (including the
limited obligation to make certain advances in the event of delinquencies on the
Mortgage Loans, but only to the extent deemed recoverable). Since certain
representations and warranties with respect to the Mortgage Assets may have been
made and/or assigned in connection with transfers of such Mortgage Assets prior
to the Closing Date, the rights of the Trustee and the Certificateholders with
respect to such representations or warranties will be limited to their rights as
an assignee thereof. Unless otherwise specified in the related Prospectus
Supplement, none of the Depositor, the Master Servicer or any affiliate thereof
will have any obligation with respect to representations or warranties made by
any other entity. Unless otherwise specified in the related Prospectus
Supplement, neither the Certificates nor the underlying Mortgage Assets will be
guaranteed or insured by any governmental agency or instrumentality, or by the
Depositor, the Master Servicer, any Special Servicer, any Sub-Servicer or any of
their affiliates. Proceeds of the assets included in the related Trust Fund for
each series of Certificates (including the Assets and any form of credit
enhancement) will be the sole source of payments on the Certificates, and there
will be no recourse to the Depositor or any other entity in the event that such
proceeds are insufficient or otherwise unavailable to make all payments provided
for under the Certificates.
Unless otherwise specified in the related Prospectus Supplement, a series
of Certificates will not have any claim against or security interest in the
Trust Funds for any other series. If the related Trust Fund is insufficient to
make payments on such Certificates, no other assets will be available for
payment of the deficiency. Additionally, certain amounts remaining in certain
funds or accounts, including the Certificate Account and any accounts maintained
as Credit Support, may be withdrawn under certain conditions, as described in
the related Prospectus Supplement. In the event of such withdrawal, such amounts
will not be available for future payment of principal of or interest on the
Certificates. If so provided in the Prospectus Supplement for a series of
Certificates consisting of one or more classes of Subordinate Certificates, on
any Distribution Date in respect of which losses or shortfalls in collections on
the Assets have been incurred, the amount of such losses or shortfalls will be
borne first by one
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<PAGE> 193
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 such Prospectus Supplement.
Average Life of Certificates; Prepayments; Yields
Prepayments (including those caused by defaults) on the Mortgage Assets in
any Trust Fund generally will result in a faster rate of principal payments on
one or more classes of the related Certificates than if payments on such
Mortgage Assets were made as scheduled. Thus, the prepayment experience on the
Mortgage Assets may affect the average life of each class of related
Certificates. The rate of principal payments on pools of mortgage loans varies
between pools and from time to time is influenced by a variety of economic,
demographic, geographic, social, tax, legal and other factors. There can be no
assurance as to the rate of prepayment on the Mortgage Assets in any Trust Fund
or that the rate of payments will conform to any model described herein or in
any Prospectus Supplement. If prevailing interest rates fall significantly below
the applicable mortgage interest rates, principal prepayments are likely to be
higher than if prevailing rates remain at or above the rates borne by the
Mortgage Loans underlying or comprising the Mortgage Assets in any Trust Fund.
As a result, the actual maturity of any class of Certificates could occur
significantly earlier than expected. A series of Certificates may include one or
more classes of Certificates with priorities of payment and, as a result, yields
on other classes of Certificates, including classes of Offered Certificates, of
such series may be more sensitive to prepayments on Mortgage Assets. A series of
Certificates may include one or more classes offered at a significant premium or
discount. Yields on such classes of Certificates will be sensitive, and in some
cases extremely sensitive, to prepayments on Mortgage Assets and, where the
amount of interest payable with respect to a class is disproportionately high,
as compared to the amount of principal, as with certain classes of Stripped
Interest Certificates, a holder might, in some prepayment scenarios, fail to
recoup its original investment. A series of Certificates may include one or more
classes of Certificates, including classes of Offered Certificates, that provide
for distribution of principal thereof from amounts attributable to interest
accrued but not currently distributable on one or more classes of Accrual
Certificates and, as a result, yields on such Certificates will be sensitive to
(a) the provisions of such Accrual Certificates relating to the timing of
distributions of interest thereon and (b) if such Accrual Certificates accrue
interest at a variable or adjustable Pass-Through Rate, changes in such rate.
See "Yield Considerations" herein and, if applicable, in the related Prospectus
Supplement.
Limited Nature of Ratings
Any rating assigned by a Rating Agency to a class of Certificates will
reflect such Rating Agency's assessment solely of the likelihood that holders of
Certificates of such class will receive payments to which such
Certificateholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments
(including those caused by defaults) on the related Mortgage Assets will be
made, the degree to which the rate of such prepayments might differ from that
originally anticipated or the likelihood of early optional termination of the
series of Certificates. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an investor
purchasing a Certificate at a significant premium might fail to recoup its
initial investment under certain prepayment scenarios. Each Prospectus
Supplement will identify any payment to which holders of Offered Certificates of
the related series are entitled that is not covered by the applicable rating.
The amount, type and nature of credit support, if any, established with
respect to a series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of such series. Such criteria
are sometimes based upon an actuarial analysis of the behavior of mortgage loans
in a larger group. Such analysis is often the basis upon which each Rating
Agency determines the amount of credit support required with respect to each
such class. There can be no assurance that the historical data supporting any
such actuarial analysis will accurately reflect future experience nor any
assurance that the data derived from a large pool of mortgage loans accurately
predicts the delinquency, foreclosure or loss experience of any particular pool
of Mortgage Assets. No assurance can be given that values of any Mortgaged
Properties have remained or will remain at their levels on the respective dates
of origination of the related Mortgage Loans. Moreover, there is no assurance
that appreciation of real estate values generally will limit loss experiences on
the Mortgaged Properties. If the commercial or multifamily residential real
estate markets should experience an overall decline in property values such that
the outstanding
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<PAGE> 194
principal balances of the Mortgage Loans underlying or comprising the Mortgage
Assets in a particular Trust Fund and any secondary financing on the related
Mortgaged Properties become equal to or greater than the value of the Mortgaged
Properties, the rates of delinquencies, foreclosures and losses could be higher
than those now generally experienced by institutional lenders. In addition,
adverse economic conditions (which may or may not affect real property values)
may affect the timely payment by mortgagors of scheduled payments of principal
and interest on the Mortgage Loans and, accordingly, the rates of delinquencies,
foreclosures and losses with respect to any Trust Fund. To the extent that such
losses are not covered by the Credit Support, if any, described in the related
Prospectus Supplement, such losses will be borne, at least in part, by the
holders of one or more classes of the Certificates of the related series. See
"Description of Credit Support" and "Rating."
Risks Associated with Mortgage Loans and Mortgaged Properties
Mortgage loans made with respect to multifamily or commercial property may
entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single family
property. See "Description of the Trust Funds--Assets." The ability of a
mortgagor to repay a loan secured by an income-producing property typically is
dependent primarily upon the successful operation of such property rather than
any independent income or assets of the mortgagor; thus, the value of an
income-producing property is directly related to the net operating income
derived from such property. In contrast, the ability of a mortgagor to repay a
single family loan typically is dependent primarily upon the mortgagor's
household income, rather than the capacity of the property to produce income;
thus, other than in geographical areas where employment is dependent upon a
particular employer or an industry, the mortgagor's income tends not to reflect
directly the value of such property. A decline in the net operating income of an
income-producing property will likely affect both the performance of the related
loan as well as the liquidation value of such property, whereas a decline in the
income of a mortgagor on a single family property will likely affect the
performance of the related loan but may not affect the liquidation value of such
property. Moreover, a decline in the value of a Mortgaged Property will increase
the risk of loss particularly with respect to any related junior Mortgage Loan.
See "--Junior Mortgage Loans."
The performance of a mortgage loan secured by an income-producing property
leased by the mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the business operated by such tenants in
connection with such property, the creditworthiness of such tenants or both; the
risks associated with such loans may be offset by the number of tenants or, if
applicable, a diversity of types of business operated by such tenants.
It is anticipated that a substantial portion of the Mortgage Loans
included in any Trust Fund will be nonrecourse loans or loans for which recourse
may be restricted or unenforceable, as to which, in the event of mortgagor
default, recourse may be had only against the specific property and such other
assets, if any, as have been pledged to secure the related Mortgage Loan. With
respect to those Mortgage Loans that provide for recourse against the mortgagor
and its assets generally, there can be no assurance that such recourse will
ensure a recovery in respect of a defaulted Mortgage Loan greater than the
liquidation value of the related Mortgaged Property.
Further, the concentration of default, foreclosure and loss risks in
individual mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of single
family loans both because the Mortgage Assets in a Trust Fund will generally
consist of a smaller number of loans than would a single family pool of
comparable aggregate unpaid principal balance and because of the higher
principal balance of individual Mortgage Loans. Mortgage Assets in a Trust Fund
may consist of only a limited number of Mortgage Loans and/or relate to Leases
to only a single Lessee or a limited number of Lessees.
If applicable, certain legal aspects of the Mortgage Loans for a series of
Certificates may be described in the related Prospectus Supplement. See also
"Certain Legal Aspects of the Mortgage Loans and the Leases" herein.
Risks Associated with Commercial Loans and Leases
If so described in the related Prospectus Supplement, each mortgagor under
a Commercial Loan may be an entity created by the owner or purchaser of the
related Commercial Property solely to own or purchase such
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property, in part to isolate the property from the debts and liabilities of such
owner or purchaser. Unless otherwise specified, each such Commercial Loan will
represent a nonrecourse obligation of the related mortgagor secured by the lien
of the related Mortgage and the related Lease Assignments. Whether or not such
loans are recourse or nonrecourse obligations, it is not expected that the
mortgagors will have any significant assets other than the Commercial Properties
and the related Leases, which will be pledged to the Trustee under the related
Agreement. Therefore, the payment of amounts due on any such Commercial Loans,
and, consequently, the payment of principal of and interest on the related
Certificates, will depend primarily or solely on rental payments by the Lessees.
Such rental payments will, in turn, depend on continued occupancy by, and/or the
creditworthiness of, such Lessees, which in either case may be adversely
affected by a general economic downturn or an adverse change in their financial
condition. Moreover, to the extent a Commercial Property was designed for the
needs of a specific type of tenant (e.g., a nursing home, hospital, hotel or
motel), the value of such property in the event of a default by the Lessee or
the early termination of such Lease may be adversely affected because of
difficulty in re-leasing the property to a suitable substitute lessee or, if
re-leasing to such a substitute is not possible, because of the cost of altering
the property for another more marketable use. As a result, without the benefit
of the Lessee's continued support of the Commercial Property, and absent
significant amortization of the Commercial Loan, if such loan is foreclosed on
and the Commercial Property liquidated following a lease default, the net
proceeds might be insufficient to cover the outstanding principal and interest
owing on such loan, thereby increasing the risk that holders of the Certificates
will suffer some loss.
Balloon Payments
Certain of the Mortgage Loans (the "Balloon Mortgage Loans") as of the
Cut-off Date may not be fully amortizing over their terms to maturity and, thus,
will require substantial principal payments (i.e., balloon payments) at their
stated maturity. Mortgage Loans with balloon payments involve a greater degree
of risk because the ability of a mortgagor to make a balloon payment typically
will depend upon its ability either to timely refinance the loan or to timely
sell the related Mortgaged Property. The ability of a mortgagor to accomplish
either of these goals will be affected by a number of factors, including the
level of available mortgage interest rates at the time of sale or refinancing,
the mortgagor's equity in the related Mortgaged Property, the financial
condition and operating history of the mortgagor and the related Mortgaged
Property, tax laws, rent control laws (with respect to certain Multifamily
Properties and mobile home parks), reimbursement rates (with respect to certain
hospitals, nursing homes and convalescent homes), renewability of operating
licenses, prevailing general economic conditions and the availability of credit
for commercial or multifamily real properties, as the case may be, generally.
Junior Mortgage Loans
To the extent specified in the related Prospectus Supplement, certain of
the Mortgage Loans may be secured primarily by junior mortgages. In the case of
liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, such Mortgage Loan would suffer a loss and,
accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans will
be greater with respect to junior Mortgage Loans. See "--Risks Associated with
Mortgage Loans and Mortgaged Properties."
Obligor Default
If so specified in the related Prospectus Supplement, in order to maximize
recoveries on defaulted Whole Loans, a Master Servicer, a Sub-Servicer or a
Special Servicer will be permitted (within prescribed parameters) to extend and
modify Whole Loans that are in default or as to which a payment default is
imminent, including in particular with respect to balloon payments. In addition,
a Master Servicer, a Sub-Servicer or a Special Servicer may receive a workout
fee based on receipts from or proceeds of such Whole Loans. While any such
entity generally will be required to determine that any such extension or
modification is reasonably likely to produce a greater recovery on a present
value basis than liquidation, there can be no assurance that such flexibility
with respect to extensions or modifications or payment of a workout fee will
increase the present value of receipts from or
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proceeds of Whole Loans that are in default or as to which a
payment default is imminent. Additionally, if so specified in the related
Prospectus Supplement, certain of the Mortgage Loans included in the Mortgage
Pool for a Series may have been subject to workouts or similar arrangements
following periods of delinquency and default.
Mortgagor Type
Mortgage Loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of single family mortgage loans. The mortgagor's sophistication and form
of organization may increase the likelihood of protracted litigation or
bankruptcy in default situations.
Credit Support Limitations
The Prospectus Supplement for a series of Certificates will describe any
Credit Support in the related Trust Fund, which may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit support,
or combinations thereof. Use of Credit Support will be subject to the conditions
and limitations described herein and in the related Prospectus Supplement.
Moreover, such Credit Support may not cover all potential losses or risks; for
example, Credit Support may or may not cover fraud or negligence by a mortgage
loan originator or other parties.
A series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce the
risk to holders of Senior Certificates of delinquent distributions or ultimate
losses, the amount of subordination will be limited and may decline under
certain circumstances. In addition, if principal payments on one or more classes
of Certificates of a series are made in a specified order of priority, any
limits with respect to the aggregate amount of claims under any related Credit
Support may be exhausted before the principal of the lower priority classes of
Certificates of such series has been repaid. As a result, the impact of
significant losses and shortfalls on the Assets may fall primarily upon those
classes of Certificates having a lower priority of payment. Moreover, if a form
of Credit Support covers more than one series of Certificates (each, a "Covered
Trust"), holders of Certificates evidencing an interest in a Covered Trust will
be subject to the risk that such Credit Support will be exhausted by the claims
of other Covered Trusts.
The amount of any applicable Credit Support supporting one or more classes
of Offered Certificates, including the subordination of one or more classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates based on an assumed level of
defaults, delinquencies, other losses or other factors. There can, however, be
no assurance that the loss experience on the related Mortgage Assets will not
exceed such assumed levels. See "--Limited Nature of Ratings," "Description of
the Certificates" and "Description of Credit Support."
Regardless of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will be subject to periodic
reduction in accordance with a schedule or formula. The Master Servicer will
generally be permitted to reduce, terminate or substitute all or a portion of
the credit enhancement for any series of Certificates, if the applicable Rating
Agency indicates that the then-current rating thereof will not be adversely
affected. The rating of any series of Certificates by any applicable Rating
Agency may be lowered following the initial issuance thereof as a result of the
downgrading of the obligations of any applicable credit support provider, or as
a result of losses on the related Mortgage Assets substantially in excess of the
levels contemplated by such Rating Agency at the time of its initial rating
analysis. None of the Depositor, the Master Servicer or any of their affiliates
will have any obligation to replace or supplement any credit enhancement, or to
take any other action to maintain any rating of any series of Certificates.
Subordination of the Subordinate Certificates; Effect of Losses on the Assets
The rights of Subordinate Certificateholders to receive distributions
to which they would otherwise be entitled with respect to the Assets will be
subordinate to the rights of the Master Servicer (to the extent that the
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Master Servicer is paid its servicing fee, including any unpaid servicing fees
with respect to one or more prior Due Periods, and is reimbursed for certain
unreimbursed advances and unreimbursed liquidation expenses) and the Senior
Certificateholders to the extent described herein. As a result of the foregoing,
investors must be prepared to bear the risk that they may be subject to delays
in payment and may not recover their initial investments in the Subordinate
Certificates. See "Description of the Certificates--General" and "--Allocation
of Losses and Shortfalls."
The yields on the Subordinate Certificates may be extremely sensitive to
the loss experience of the Assets and the timing of any such losses. If the
actual rate and amount of losses experienced by the Assets exceed the rate and
amount of such losses assumed by an investor, the yields to maturity on the
Subordinate Certificates may be lower than anticipated.
Enforceability
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the mortgagor sells, transfers
or conveys the related Mortgaged Property or its interest in the Mortgaged
Property. Mortgages may also include a debt-acceleration clause, which permits
the lender to accelerate the debt upon a monetary or non-monetary default of the
mortgagor. Such clauses are generally enforceable subject to certain exceptions.
The courts of all states will enforce clauses providing for acceleration in the
event of a material payment default. The equity courts of any state, however,
may refuse the foreclosure of a mortgage or deed of trust when an acceleration
of the indebtedness would be inequitable or unjust or the circumstances would
render the acceleration unconscionable.
If so specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by an assignment of leases and rents pursuant to which the
mortgagor typically assigns its right, title and interest as landlord under the
leases on the related Mortgaged Property and the income derived therefrom to the
lender as further security for the related Mortgage Loan, while retaining a
license to collect rents for so long as there is no default. In the event the
mortgagor defaults, the license terminates and the lender is entitled to collect
rents. Such assignments are typically not perfected as security interests prior
to actual possession of the cash flows. Some state laws may require that the
lender take possession of the Mortgaged Property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect of
the mortgagor, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Leases and Rents."
Environmental Risks
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination of
a property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA") a lender may be liable, as an "owner" or
"operator," for costs of addressing releases or threatened releases of hazardous
substances that require remedy at a property, if agents or employees of the
lender have become sufficiently involved in the operations of the mortgagor,
regardless of whether or not the environmental damage or threat was caused by a
prior owner. A lender also risks such liability on foreclosure of the mortgage.
Unless otherwise specified in the related Prospectus Supplement, each Pooling
and Servicing Agreement will provide that none of the Master Servicer, the
Sub-Servicer or the Special Servicer, acting on behalf of the Trust Fund, may
acquire title to a Mortgaged Property securing a Mortgage Loan or take over its
operation unless the Master Servicer has previously determined, based upon a
report prepared by a person who regularly conducts environmental audits, that:
(i) the Mortgaged Property is in compliance with applicable environmental laws,
and there are no circumstances present at the Mortgaged Property relating to the
use, management or disposal of any hazardous substances, hazardous materials,
wastes, or petroleum based materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under any
federal, state or local law or regulation; or (ii) if he Mortgaged Property is
not so in compliance or such circumstances are so present, then it would be in
the best economic interest of the Trust Fund to acquire title to the
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Mortgaged Property and further to take such actions as would be necessary and
appropriate to effect such compliance and/or respond to such circumstances. See
"Certain Legal Aspects of the Mortgage Loans and the Leases--Environmental
Legislation."
ERISA Considerations
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations which govern such plans, prospective investors that are subject to
ERISA are urged to consult their own counsel regarding consequences under ERISA
of acquisition, ownership and disposition of the Offered Certificates of any
series.
Certain Federal Income Tax Considerations Regarding REMIC Residual Certificates
Except as provided in the Prospectus Supplement, REMIC Residual
Certificates, if offered hereunder, are anticipated to have "phantom income"
associated with them. That is, taxable income is anticipated to be allocated to
the REMIC Residual Certificates in the early years of the existence of the
related REMIC, even if the REMIC Residual Certificates receive no distributions
from the related REMIC, with a corresponding amount of losses allocated to the
REMIC Residual Certificates in later years. Accordingly, the present value of
the tax detriments associated with the REMIC Residual Certificates may
significantly exceed the present value of the tax benefits related thereto, and
the REMIC Residual Certificates may have a negative "value." Moreover, the REMIC
Residual Certificates will in effect be allocated an amount of gross income
equal to the non-interest expenses of the REMIC, but such expenses will be
deductible by holders of the REMIC Residual Certificates that are individuals
only as itemized deductions (and be subject to all the limitations applicable to
itemized deductions). Accordingly, investment in the REMIC Residual Certificates
will generally not be suitable for individuals or for certain pass-through
entities, such as partnerships or S corporations, that have individuals as
partners or shareholders. In addition, REMIC Residual Certificates are subject
to certain restrictions on transfer. Finally, prospective purchasers of a REMIC
Residual Certificate should be aware that recently issued final regulations
provide restrictions on the ability to mark-to-market certain "negative value"
REMIC residual interests. See "Certain Federal Income Tax Consequences--REMICs."
Control
Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of a series or a similar means of allocating decision-making under
the related Agreement ("Voting Rights") will be required to direct, and will be
sufficient to bind all Certificateholders of such series to, certain actions,
including directing the Special Servicer or the Master Servicer with respect to
actions to be taken with respect to certain Mortgage Loans and REO Properties
and amending the related Agreement in certain circumstances. See "Description of
the Agreements--Events of Default," "--Rights Upon Event of Default,"
"--Amendment" and "--List of Certificateholders."
Book-Entry Registration
If so provided in the Prospectus Supplement, one or more classes of the
Certificates will be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be registered
in the names of the Certificateholders or their nominees. Because of this,
unless and until Definitive Certificates are issued, Certificateholders will not
be recognized by the Trustee as "Certificateholders" (as that term is to be used
in the related Agreement). Hence, until such time, Certificateholders will be
able to exercise the rights of Certificateholders only indirectly through DTC
and its participating organizations. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
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DESCRIPTION OF THE TRUST FUNDS
Assets
The primary assets of each Trust Fund (the "Assets") will include (i)
multifamily and/or commercial mortgage loans (the "Mortgage Loans"), (ii)
mortgage participations, pass-through certificates or other mortgage-backed
securities evidencing interests in or secured by one or more Mortgage Loans or
other similar participations, certificates or securities ("MBS"), (iii) direct
obligations of the United States, agencies thereof or agencies created thereby
which are not subject to redemption prior to maturity at the option of the
issuer and are (a) interest-bearing securities, (b) non-interest-bearing
securities, (c) originally interest-bearing securities from which coupons
representing the right to payment of interest have been removed, or (d)
interest-bearing securities from which the right to payment of principal has
been removed (the "Government Securities"), or (iv) a combination of Mortgage
Loans, MBS and Government Securities. As used herein, "Mortgage Loans" refers to
both whole Mortgage Loans and Mortgage Loans underlying MBS. Mortgage Loans that
secure, or interests in which are evidenced by, MBS are herein sometimes
referred to as Underlying Mortgage Loans. Mortgage Loans that are not Underlying
Mortgage Loans are sometimes referred to as "Whole Loans." Any mortgage
participations, pass-through certificates or other asset-backed certificates in
which an MBS evidences an interest or which secure an MBS are sometimes referred
to herein also as MBS or as "Underlying MBS." Mortgage Loans and MBS are
sometimes referred to herein as "Mortgage Assets." The Mortgage Assets will not
be guaranteed or insured by Morgan Stanley Capital I Inc. (the "Depositor") or
any of its affiliates or, unless otherwise provided in the Prospectus
Supplement, by any governmental agency or instrumentality or by any other
person. Each Asset will be selected by the Depositor for inclusion in a Trust
Fund from among those purchased, either directly or indirectly, from a prior
holder thereof (an "Asset Seller"), which may be an affiliate of the Depositor
and, with respect to Mortgage Assets, which prior holder may or may not be the
originator of such Mortgage Loan or the issuer of such MBS.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be entitled to payment only from the assets of the related
Trust Fund and will not be entitled to payments in respect of the assets of any
other trust fund established by the Depositor. If specified in the related
Prospectus Supplement, the assets of a Trust Fund will consist of certificates
representing beneficial ownership interests in another trust fund that contains
the Assets.
Mortgage Loans
General
The Mortgage Loans will be secured by liens on, or security interests in,
Mortgaged Properties consisting of (i) residential properties consisting of five
or more rental or cooperatively-owned dwelling units in high-rise, mid-rise or
garden apartment buildings ("Multifamily Properties" and the related loans,
"Multifamily Loans") or (ii) office buildings, shopping centers, retail stores,
hotels or motels, nursing homes, hospitals or other health care-related
facilities, mobile home parks, warehouse facilities, mini-warehouse facilities
or self-storage facilities, industrial plants, congregate care facilities, mixed
use or other types of commercial properties ("Commercial Properties" and the
related loans, "Commercial Loans") located, unless otherwise specified in the
related Prospectus Supplement, in any one of the fifty states, the District of
Columbia or the Commonwealth of Puerto Rico. To the extent specified in the
related Prospectus Supplement, the Mortgage Loans will be secured by first or
junior mortgages or deeds of trust or other similar security instruments
creating a first or junior lien on Mortgaged Property. Multifamily Property may
include mixed commercial and residential structures and may include apartment
buildings owned by private cooperative housing corporations ("Cooperatives").
The Mortgaged Properties may include leasehold interests in properties, the
title to which is held by third party lessors. Unless otherwise specified in the
Prospectus Supplement, the term of any such leasehold will exceed the term of
the related mortgage note by at least five years. Each Mortgage Loan will have
been originated by a person (the "Originator") other than the Depositor. The
related Prospectus Supplement will indicate if any Originator is an affiliate of
the Depositor. The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages or deeds of
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trust (the "Mortgages") creating a lien on the Mortgaged Properties. Mortgage
Loans will generally also be secured by an assignment of leases and rents and/or
operating or other cash flow guarantees relating to the Mortgage Loan.
Leases
To the extent specified in the related Prospectus Supplement, the
Commercial Properties may be leased to Lessees that respectively occupy all or a
portion of such properties. Pursuant to a Lease Assignment, the related
mortgagor may assign its rights, title and interest as lessor under each Lease
and the income derived therefrom to the related mortgagee, while retaining a
license to collect the rents for so long as there is no default. If the
mortgagor defaults, the license terminates and the mortgagee or its agent is
entitled to collect the rents from the related Lessee or Lessees for application
to the monetary obligations of the mortgagor. State law may limit or restrict
the enforcement of the Lease Assignments by a mortgagee until it takes
possession of the related Mortgaged Property and/or a receiver is appointed. See
"Certain Legal Aspects of the Mortgage Loans and the Leases--Leases and Rents."
Alternatively, to the extent specified in the related Prospectus Supplement, the
mortgagor and the mortgagee may agree that payments under Leases are to be made
directly to the Master Servicer.
To the extent described in the related Prospectus Supplement, the Leases
may require the Lessees to pay rent that is sufficient in the aggregate to cover
all scheduled payments of principal and interest on the related Mortgage Loans
and, in certain cases, their pro rata share of the operating expenses, insurance
premiums and real estate taxes associated with the Mortgaged Properties. Certain
of the Leases may require the mortgagor to bear costs associated with structural
repairs and/or the maintenance of the exterior or other portions of the
Mortgaged Property or provide for certain limits on the aggregate amount of
operating expenses, insurance premiums, taxes and other expenses that the
Lessees are required to pay. If so specified in the related Prospectus
Supplement, under certain circumstances the Lessees may be permitted to set off
their rental obligations against the obligations of the mortgagors under the
Leases. In those cases where payments under the Leases (net of any operating
expenses payable by the mortgagors) are insufficient to pay all of the scheduled
principal and interest on the related Mortgage Loans, the mortgagors must rely
on other income or sources (including security deposits) generated by the
related Mortgaged Property to make payments on the related Mortgage Loan. To the
extent specified in the related Prospectus Supplement, some Commercial
Properties may be leased entirely to one Lessee. In such cases, absent the
availability of other funds, the mortgagor must rely entirely on rent paid by
such Lessee in order for the mortgagor to pay all of the scheduled principal and
interest on the related Commercial Loan. To the extent specified in the related
Prospectus Supplement, certain of the Leases may expire prior to the stated
maturity of the related Mortgage Loan. In such cases, upon expiration of the
Leases the mortgagors will have to look to alternative sources of income,
including rent payment by any new Lessees or proceeds from the sale or
refinancing of the Mortgaged Property, to cover the payments of principal and
interest due on such Mortgage Loans unless the Lease is renewed. As specified in
the related Prospectus Supplement, certain of the Leases may provide that upon
the occurrence of a casualty affecting a Mortgaged Property, the Lessee will
have the right to terminate its Lease, unless the mortgagor, as lessor, is able
to cause the Mortgaged Property to be restored within a specified period of
time. Certain Leases may provide that it is the lessor's responsibility, while
other Leases provide that it is the Lessee's responsibility, to restore the
Mortgaged Property after a casualty to its original condition. Certain Leases
may provide a right of termination to the related Lessee if a taking of a
material or specified percentage of the leased space in the Mortgaged Property
occurs, or if the ingress or egress to the leased space has been materially
impaired.
Default and Loss Considerations with Respect to the Mortgage Loans
Mortgage loans secured by commercial and multifamily properties are
markedly different from owner-occupied single family mortgage loans. The
repayment of loans secured by commercial or multifamily properties is typically
dependent upon the successful operation of such property rather than upon the
liquidation value of the real estate. Unless otherwise specified in the
Prospectus Supplement, the Mortgage Loans will be non-recourse loans, which
means that, absent special facts, the mortgagee may look only to the Net
Operating Income from the property for repayment of the mortgage debt, and not
to any other of the mortgagor's assets, in the event of the mortgagor's default.
Lenders typically look to the Debt Service Coverage Ratio of a loan secured by
income-producing property as an important measure of the risk of default on such
a loan. The "Debt Service Coverage Ratio" of a Mortgage Loan at any given time
is the ratio of the Net Operating Income for a twelve-month
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period to the annualized scheduled payments on the Mortgage Loan. "Net
Operating Income" means, for any given period, unless otherwise specified
in the related Prospectus Supplement, the total operating revenues derived from
a Mortgaged Property during such period, minus the total operating expenses
incurred in respect of such Mortgaged Property during such period other than
(i) non-cash items such as depreciation and amortization, (ii) capital
expenditures and (iii) debt service on loans secured by the Mortgaged Property.
The Net Operating Income of a Mortgaged Property will fluctuate over time and
may be sufficient or insufficient to cover debt service on the related Mortgage
Loan at any given time.
As the primary component of Net Operating Income, rental income (as well
as maintenance payments from tenant-stockholders of a Cooperative) is subject to
the vagaries of the applicable real estate market and/or business climate.
Properties typically leased, occupied or used on a short-term basis, such as
health care-related facilities, hotels and motels, and mini-warehouse and
self-storage facilities, tend to be affected more rapidly by changes in market
or business conditions than do properties leased, occupied or used for longer
periods, such as (typically) warehouses, retail stores, office buildings and
industrial plants. Commercial Loans may be secured by owner-occupied Mortgaged
Properties or Mortgaged Properties leased to a single tenant. Accordingly, a
decline in the financial condition of the mortgagor or single tenant, as
applicable, may have a disproportionately greater effect on the Net Operating
Income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses, including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the risk of default on the related
Mortgage Loan. As may be further described in the related Prospectus Supplement,
in some cases leases of Mortgaged Properties may provide that the Lessee, rather
than the mortgagor, is responsible for payment of some or all of these expenses;
however, because leases are subject to default risks as well when a tenant's
income is insufficient to cover its rent and operating expenses, the existence
of such "net of expense" provisions will only temper, not eliminate, the impact
of expense increases on the performance of the related Mortgage Loan. See
"--Leases" above.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities and hospitals,
the income from which and the operating expenses of which are subject to state
and/or federal regulations, such as Medicare and Medicaid, and multifamily
properties and mobile home parks, which may be subject to state or local rent
control regulation and, in certain cases, restrictions on changes in use of the
property. Low-and moderate-income housing in particular may be subject to legal
limitations and regulations but, because of such regulations, may also be less
sensitive to fluctuations in market rents generally.
The Debt Service Coverage Ratio should not be relied upon as the sole
measure of the risk of default of any loan, however, since other factors may
outweigh a high Debt Service Coverage Ratio. With respect to a Balloon Mortgage
Loan, for example, the risk of default as a result of the unavailability of a
source of funds to finance the related balloon payment at maturity on terms
comparable to or better than those of such Balloon Mortgage Loans could be
significant even though the related Debt Service Coverage Ratio is high.
The liquidation value of any Mortgaged Property may be adversely affected
by risks generally incident to interests in real property, including declines in
rental or occupancy rates. Lenders generally use the Loan-to-Value Ratio of a
mortgage loan as a measure of risk of loss if a property must be liquidated upon
a default by the mortgagor.
Appraised values of income-producing properties may be based on the market
comparison method (recent resale value of comparable properties at the date of
the appraisal), the cost replacement method (the cost of replacing the property
at such date), the income capitalization method (a projection of value based
upon the
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property's projected net cash flow), or upon a selection from or interpolation
of the values derived from such methods. Each of these appraisal methods
presents analytical challenges. It is often difficult to find truly comparable
properties that have recently been sold; the replacement cost of a property may
have little to do with its current market value; and income capitalization is
inherently based on inexact projections of income and expense and the selection
of an appropriate capitalization rate. Where more than one of these appraisal
methods are used and create significantly different results, or where a high
Loan-to-Value Ratio accompanies a high Debt Service Coverage Ratio (or vice
versa), the analysis of default and loss risks is even more difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Multifamily and Commercial
Loans from single family mortgage loans and provide insight to the risks
associated with income-producing real estate, there is no assurance that such
factors will in fact have been considered by the Originators of the Multifamily
and Commercial Loans, or that, for any of such Mortgage Loans, they are complete
or relevant. See "Risk Factors--Risks Associated with Mortgage Loans and
Mortgaged Properties," "--Balloon Payments," "--Junior Mortgage Loans,"
"--Obligor Default" and "--Mortgagor Type."
Loan-to-Value Ratio
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is the
ratio (expressed as a percentage) of the then outstanding principal balance of
the Mortgage Loan to the Value of the related Mortgaged Property. The "Value" of
a Mortgaged Property, other than with respect to Refinance Loans, is generally
the lesser of (a) the appraised value determined in an appraisal obtained by the
originator at origination of such loan and (b) the sales price for such
property. "Refinance Loans" are loans made to refinance existing loans. Unless
otherwise set forth in the related Prospectus Supplement, the Value of the
Mortgaged Property securing a Refinance Loan is the appraised value thereof
determined in an appraisal obtained at the time of origination of the Refinance
Loan. The Value of a Mortgaged Property as of the date of initial issuance of
the related series of Certificates may be less than the value at origination and
will fluctuate from time to time based upon changes in economic conditions and
the real estate market.
Mortgage Loan Information in Prospectus Supplements
Each Prospectus Supplement will contain information, as of the date of
such Prospectus Supplement and to the extent then applicable and specifically
known to the Depositor, with respect to the Mortgage Loans, including (i) the
aggregate outstanding principal balance and the largest, smallest and average
outstanding principal balance of the Mortgage Loans as of the applicable Cut-off
Date, (ii) the type of property securing the Mortgage Loans (e.g., Multifamily
Property or Commercial Property and the type of property in each such category),
(iii) the weighted average (by principal balance) of the original and remaining
terms to maturity of the Mortgage Loans, (iv) the earliest and latest
origination date and maturity date of the Mortgage Loans, (v) the weighted
average (by principal balance) of the Loan-to-Value Ratios at origination of the
Mortgage Loans, (vi) the Mortgage Rates or range of Mortgage Rates and the
weighted average Mortgage Rate borne by the Mortgage Loans, (vii) the state or
states in which most of the Mortgaged Properties are located, (viii) information
with respect to the prepayment provisions, if any, of the Mortgage Loans, (ix)
the weighted average Retained Interest, if any, (x) with respect to Mortgage
Loans with adjustable Mortgage Rates ("ARM Loans"), the index, the frequency of
the adjustment dates, the highest, lowest and weighted average note margin and
pass-through margin, and the maximum Mortgage Rate or monthly payment variation
at the time of any adjustment thereof and over the life of the ARM Loan and the
frequency of such monthly payment adjustments, (xi) the Debt Service Coverage
Ratio either at origination or as of a more recent date (or both) and (xii)
information regarding the payment characteristics of the Mortgage Loans,
including without limitation balloon payment and other amortization provisions.
The related Prospectus Supplement will also contain certain information
available to the Depositor with respect to the provisions of leases and the
nature of tenants of the Mortgaged Properties and other information referred to
in a general manner under "--Mortgage Loans--Default and Loss Considerations
with Respect to the Mortgage Loans" above. If specific information respecting
the Mortgage Loans is not known to the Depositor at the time Certificates are
initially offered, more general information of the nature described above will
be provided in the Prospectus Supplement, and specific information will be set
forth in a report which will be available to purchasers of the related
Certificates at or before
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the initial issuance thereof and will be filed as part of a Current Report on
Form 8-K with the Securities and Exchange Commission within fifteen days after
such initial issuance.
Payment Provisions of the Mortgage Loans
Unless otherwise specified in the related Prospectus Supplement, all of
the Mortgage Loans will (i) have individual principal balances at origination of
not less than $25,000, (ii) have original terms to maturity of not more than 40
years and (iii) provide for payments of principal, interest or both, on due
dates that occur monthly, quarterly or semi-annually or at such other interval
as is specified in the related Prospectus Supplement. Each Mortgage Loan may
provide for no accrual of interest or for accrual of interest thereon at an
interest rate (a "Mortgage Rate") that is fixed over its term or that adjusts
from time to time, or that may be converted from an adjustable to a fixed
Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, from time to time
pursuant to an election or as otherwise specified on the related Mortgage Note,
in each case as described in the related Prospectus Supplement. Each Mortgage
Loan may provide for scheduled payments to maturity or payments that adjust from
time to time to accommodate changes in the Mortgage Rate or to reflect the
occurrence of certain events, and may provide for negative amortization or
accelerated amortization, in each case as described in the related Prospectus
Supplement. Each Mortgage Loan may be fully amortizing or require a balloon
payment due on its stated maturity date, in each case as described in the
related Prospectus Supplement. Each Mortgage Loan may contain prohibitions on
prepayment (a "Lock-out Period" and the date of expiration thereof, a "Lock-out
Date") or require payment of a premium or a yield maintenance penalty (a
"Prepayment Premium") in connection with a prepayment, in each case as described
in the related Prospectus Supplement. In the event that holders of any class or
classes of Offered Certificates will be entitled to all or a portion of any
Prepayment Premiums collected in respect of Mortgage Loans, the related
Prospectus Supplement will specify the method or methods by which any such
amounts will be allocated. A Mortgage Loan may also contain provisions entitling
the mortgagee to a share of profits realized from the operation or disposition
of the Mortgaged Property ("Equity Participations"), as described in the related
Prospectus Supplement. In the event that holders of any class or classes of
Offered Certificates will be entitled to all or a portion of an Equity
Participation, the related Prospectus Supplement will specify the terms and
provisions of the Equity Participation and the method or methods by which
distributions in respect thereof will be allocated among such Certificates.
MBS
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, a trust agreement, an indenture or
similar agreement (an "MBS Agreement"). A seller (the "MBS Issuer") and/or
servicer (the "MBS Servicer") of the underlying Mortgage Loans (or Underlying
MBS) will have entered into the MBS Agreement with a trustee or a custodian
under the MBS Agreement (the "MBS Trustee"), if any, or with the original
purchaser of the interest in the underlying Mortgage Loans or MBS evidenced by
the MBS.
Distributions of any principal or interest, as applicable, will be made on
MBS on the dates specified in the related Prospectus Supplement. The MBS may be
issued in one or more classes with characteristics similar to the classes of
Certificates described in this Prospectus. Any principal or interest
distributions will be made on the MBS by the MBS Trustee or the MBS Servicer.
The MBS Issuer or the MBS Servicer or another person specified in the related
Prospectus Supplement may have the right or obligation to repurchase or
substitute assets underlying the MBS after a certain date or under other
circumstances specified in the related Prospectus Supplement.
Enhancement in the form of reserve funds, subordination or other forms of
credit support similar to that described for the Certificates under "Description
of Credit Support" may be provided with respect to the MBS. The type,
characteristics and amount of such credit support, if any, will be a function of
certain characteristics of the Mortgage Loans or Underlying MBS evidenced by or
securing such MBS and other factors and generally will have been established for
the MBS on the basis of requirements of either any Rating Agency that may have
assigned a rating to the MBS or the initial purchasers of the MBS.
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The Prospectus Supplement for a series of Certificates evidencing
interests in Mortgage Assets that include MBS will specify, to the extent
available, (i) the aggregate approximate initial and outstanding principal
amount or notional amount, as applicable, and type of the MBS to be included in
the Trust Fund, (ii) the original and remaining term to stated maturity of the
MBS, if applicable, (iii) whether such MBS is entitled only to interest
payments, only to principal payments or to both, (iv) the pass-through or bond
rate of the MBS or formula for determining such rates, if any, (v) the
applicable payment provisions for the MBS, including, but not limited to, any
priorities, payment schedules and subordination features, (vi) the MBS Issuer,
MBS Servicer and MBS Trustee, as applicable, (vii) certain characteristics of
the credit support, if any, such as subordination, reserve funds, insurance
policies, letters of credit or guarantees relating to the related Underlying
Mortgage Loans, the Underlying MBS or directly to such MBS, (viii) the terms on
which the related Underlying Mortgage Loans or Underlying MBS for such MBS or
the MBS may, or are required to, be purchased prior to their maturity, (ix) the
terms on which Mortgage Loans or Underlying MBS may be substituted for those
originally underlying the MBS, (x) the servicing fees payable under the MBS
Agreement, (xi) the type of information in respect of the Underlying Mortgage
Loans described under "--Mortgage Loans--Mortgage Loan Information in Prospectus
Supplements" above, and the type of information in respect of the Underlying MBS
described in this paragraph, (xii) the characteristics of any cash flow
agreements that are included as part of the trust fund evidenced or secured by
the MBS and (xiii) whether the MBS is in certificated form, book-entry form or
held through a depository such as The Depository Trust Company or the
Participants Trust Company.
Government Securities
The Prospectus Supplement for a series of Certificates evidencing
interests in Assets of a Trust Fund that include Government Securities will
specify, to the extent available, (i) the aggregate approximate initial and
outstanding principal amounts or notional amounts, as applicable, and types of
the Government Securities to be included in the Trust Fund, (ii) the original
and remaining terms to stated maturity of the Government Securities, (iii)
whether such Government Securities are entitled only to interest payments, only
to principal payments or to both, (iv) the interest rates of the Government
Securities or the formula to determine such rates, if any, (v) the applicable
payment provisions for the Government Securities and (vi) to what extent, if
any, the obligation evidenced thereby is backed by the full faith and credit of
the United States.
Accounts
Each Trust Fund will include one or more accounts established and
maintained on behalf of the Certificateholders into which the person or persons
designated in the related Prospectus Supplement will, to the extent described
herein and in such Prospectus Supplement deposit all payments and collections
received or advanced with respect to the Assets and other assets in the Trust
Fund. Such an account may be maintained as an interest bearing or a non-interest
bearing account, and funds held therein may be held as cash or invested in
certain short-term, investment grade obligations, in each case as described in
the related Prospectus Supplement. See "Description of the
Agreement--Certificate Account and Other Collection Accounts."
Credit Support
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Assets in the related
Trust Fund may be provided to one or more classes of Certificates in the related
series in the form of subordination of one or more other classes of Certificates
in such series or by one or more other types of credit support, such as a letter
of credit, insurance policy, guarantee, reserve fund or another type of credit
support, or a combination thereof (any such coverage with respect to the
Certificates of any series, "Credit Support"). The amount and types of coverage,
the identification of the entity providing the coverage (if applicable) and
related information with respect to each type of Credit Support, if any, will be
described in the Prospectus Supplement for a series of Certificates. See "Risk
Factors--Credit Support Limitations" and "Description of Credit Support."
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Cash Flow Agreements
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The Trust Fund may also include certain other agreements, such
as interest rate exchange agreements, interest rate cap or floor agreements,
currency exchange agreements or similar agreements provided to reduce the
effects of interest rate or currency exchange rate fluctuations on the Assets or
on one or more classes of Certificates. (Currency exchange agreements might be
included in the Trust Fund if some or all of the Mortgage Assets (such as
Mortgage Loans secured by Mortgaged Properties located outside the United
States) were denominated in a non-United States currency.) The principal terms
of any such guaranteed investment contract or other agreement (any such
agreement, a "Cash Flow Agreement"), including, without limitation, provisions
relating to the timing, manner and amount of payments thereunder and provisions
relating to the termination thereof, will be described in the Prospectus
Supplement for the related series. In addition, the related Prospectus
Supplement will provide certain information with respect to the obligor under
any such Cash Flow Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor to the purchase of Assets and to pay for certain
expenses incurred in connection with such purchase of Assets and sale of
Certificates. The Depositor expects to sell the Certificates from time to time,
but the timing and amount of offerings of Certificates will depend on a number
of factors, including the volume of Assets acquired by the Depositor, prevailing
interest rates, availability of funds and general market conditions.
YIELD CONSIDERATIONS
General
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate, the receipt and
timing of receipt of distributions on the Certificate and the weighted average
life of the Assets in the related Trust Fund (which may be affected by
prepayments, defaults, liquidations or repurchases). See "Risk Factors."
Pass-Through Rate
Certificates of any class within a series may have fixed, variable or
adjustable Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Assets in the related Trust Fund. The Prospectus Supplement
with respect to any series of Certificates will specify the Pass-Through Rate
for each class of such Certificates or, in the case of a variable or adjustable
Pass-Through Rate, the method of determining the Pass-Through Rate; the effect,
if any, of the prepayment of any Mortgage Asset on the Pass-Through Rate of one
or more classes of Certificates; and whether the distributions of interest on
the Certificates of any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement.
The effective yield to maturity to each holder of Certificates entitled to
payments of interest will be below that otherwise produced by the applicable
Pass-Through Rate and purchase price of such Certificate because, while interest
may accrue on each Asset during a certain period, the distribution of such
interest will be made on a day which may be several days, weeks or months
following the period of accrual.
Timing of Payment of Interest
Each payment of interest on the Certificates (or addition to the
Certificate Balance of a class of Accrual Certificates) on a Distribution Date
will include interest accrued during the Interest Accrual Period for such
Distribution Date. As indicated above under "--Pass-Through Rate," if the
Interest Accrual Period ends on a date other than a Distribution Date for the
related series, the yield realized by the holders of such Certificates may be
lower than the yield that would result if the Interest Accrual Period ended on
such Distribution Date. In addition,
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if so specified in the related Prospectus Supplement, interest accrued for an
Interest Accrual Period for one or more classes of Certificates may be
calculated on the assumption that distributions of principal (and additions to
the Certificate Balance of Accrual Certificates) and allocations of losses on
the Assets may be made on the first day of the Interest Accrual Period for a
Distribution Date and not on such Distribution Date. Such method would produce a
lower effective yield than if interest were calculated on the basis of the
actual principal amount outstanding during an Interest Accrual Period. The
Interest Accrual Period for any class of Offered Certificates will be described
in the related Prospectus Supplement.
Payments of Principal; Prepayments
The yield to maturity on the Certificates will be affected by the rate of
principal payments on the Assets (including principal prepayments on Mortgage
Loans resulting from both voluntary prepayments by the mortgagors and
involuntary liquidations). Such payments may be directly dependent upon the
payments on Leases underlying such Mortgage Loans. The rate at which principal
prepayments occur on the Mortgage Loans will be affected by a variety of
factors, including, without limitation, the terms of the Mortgage Loans, the
level of prevailing interest rates, the availability of mortgage credit and
economic, demographic, geographic, tax, legal and other factors. In general,
however, if prevailing interest rates fall significantly below the Mortgage
Rates on the Mortgage Loans comprising or underlying the Assets in a particular
Trust Fund, such Mortgage Loans are likely to be the subject of higher principal
prepayments than if prevailing rates remain at or above the rates borne by such
Mortgage Loans. In this regard, it should be noted that certain Assets may
consist of Mortgage Loans with different Mortgage Rates and the stated
pass-through or pay-through interest rate of certain MBS may be a number of
percentage points higher or lower than certain of the underlying Mortgage Loans.
The rate of principal payments on some or all of the classes of Certificates of
a series will correspond to the rate of principal payments on the Assets in the
related Trust Fund and is likely to be affected by the existence of Lock-out
Periods and Prepayment Premium provisions of the Mortgage Loans underlying or
comprising such Assets, and by the extent to which the servicer of any such
Mortgage Loan is able to enforce such provisions. Mortgage Loans with a Lock-out
Period or a Prepayment Premium provision, to the extent enforceable, generally
would be expected to experience a lower rate of principal prepayments than
otherwise identical Mortgage Loans without such provisions, with shorter
Lock-out Periods or with lower Prepayment Premiums.
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Assets, the
actual yield to maturity will be lower than that so calculated. Conversely, if
the purchaser of a Certificate offered at a premium calculates its anticipated
yield to maturity based on an assumed rate of distributions of principal that is
slower than that actually experienced on the Assets, the actual yield to
maturity will be lower than that so calculated. In either case, if so provided
in the Prospectus Supplement for a series of Certificates, the effect on yield
on one or more classes of the Certificates of such series of prepayments of the
Assets in the related Trust Fund may be mitigated or exacerbated by any
provisions for sequential or selective distribution of principal to such
classes.
When a full prepayment is made on a Mortgage Loan, the mortgagor is
charged interest on the principal amount of the Mortgage Loan so prepaid for the
number of days in the month actually elapsed up to the date of the prepayment.
Unless otherwise specified in the related Prospectus Supplement, the effect of
prepayments in full will be to reduce the amount of interest paid in the
following month to holders of Certificates entitled to payments of interest
because interest on the principal amount of any Mortgage Loan so prepaid will be
paid only to the date of prepayment rather than for a full month. Unless
otherwise specified in the related Prospectus Supplement, a partial prepayment
of principal is applied so as to reduce the outstanding principal balance of the
related Mortgage Loan as of the Due Date in the month in which such partial
prepayment is received. As a result, unless otherwise specified in the related
Prospectus Supplement, the effect of a partial prepayment on a Mortgage Loan
will be to reduce the amount of interest passed through to holders of
Certificates in the month following the receipt of such partial prepayment by an
amount equal to one month's interest at the applicable Pass-Through Rate on the
prepaid amount.
The timing of changes in the rate of principal payments on the Mortgage
Assets may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an
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investor's expectation. In general, the earlier a principal payment is received
on the Mortgage Assets and distributed on a Certificate, the greater the effect
on such investor's yield to maturity. The effect on an investor's yield of
principal payments occurring at a rate higher (or lower) than the rate
anticipated by the investor during a given period may not be offset by a
subsequent like decrease (or increase) in the rate of principal payments.
Prepayments--Maturity and Weighted Average Life
The rates at which principal payments are received on the Assets included
in or comprising a Trust Fund and the rate at which payments are made from any
Credit Support or Cash Flow Agreement for the related series of Certificates may
affect the ultimate maturity and the weighted average life of each class of such
series. Prepayments on the Mortgage Loans comprising or underlying the Mortgage
Assets in a particular Trust Fund will generally accelerate the rate at which
principal is paid on some or all of the classes of the Certificates of the
related series.
If so provided in the Prospectus Supplement for a series of Certificates,
one or more classes of Certificates may have a final scheduled Distribution
Date, which is the date on or prior to which the Certificate Balance thereof is
scheduled to be reduced to zero, calculated on the basis of the assumptions
applicable to such series set forth therein.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of a
class of Certificates of a series will be influenced by the rate at which
principal on the Mortgage Loans comprising or underlying the Mortgage Assets is
paid to such class, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes prepayments, in
whole or in part, and liquidations due to default).
In addition, the weighted average life of the Certificates may be affected
by the varying maturities of the Mortgage Loans comprising or underlying the
MBS. If any Mortgage Loans comprising or underlying the Assets in a particular
Trust Fund have actual terms to maturity of less than those assumed in
calculating final scheduled Distribution Dates for the classes of Certificates
of the related series, one or more classes of such Certificates may be fully
paid prior to their respective final scheduled Distribution Dates, even in the
absence of prepayments. Accordingly, the prepayment experience of the Assets
will, to some extent, be a function of the mix of Mortgage Rates and maturities
of the Mortgage Loans comprising or underlying such Assets. See "Description of
the Trust Funds."
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment
model. CPR represents a constant assumed rate of prepayment each month relative
to the then outstanding principal balance of a pool of loans for the life of
such loans.
Neither CPR nor any other prepayment model or assumption purports to be a
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the Mortgage
Loans underlying or comprising the Mortgage Assets. Moreover, CPR was developed
based upon historical prepayment experience for single family loans. Thus, it is
likely that prepayment of any Mortgage Loans comprising or underlying the
Mortgage Assets for any series will not conform to any particular level of CPR.
The Depositor is not aware of any meaningful publicly available prepayment
statistics for multifamily or commercial mortgage loans.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average life
of each class of Offered Certificates of such series and the percentage of the
initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the Mortgage Loans
comprising or underlying the related Assets are made at rates corresponding to
various percentages of CPR or at such other rates specified in such Prospectus
Supplement. Such tables and assumptions
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are intended to illustrate the sensitivity of weighted average life of the
Certificates to various prepayment rates and will not be intended to predict or
to provide information that will enable investors to predict the actual weighted
average life of the Certificates. It is unlikely that prepayment of any Mortgage
Loans comprising or underlying the Mortgage Assets for any series will conform
to any particular level of CPR or any other rate specified in the related
Prospectus Supplement.
Other Factors Affecting Weighted Average Life
Type of Mortgage Asset
A number of Mortgage Loans may have balloon payments due at maturity, and
because the ability of a mortgagor to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things, bankruptcy
of the mortgagor or adverse conditions in the market where the property is
located. In order to minimize losses on defaulted Mortgage Loans, the servicer
may, to the extent and under the circumstances set forth in the related
Prospectus Supplement, be permitted to modify Mortgage Loans that are in default
or as to which a payment default is imminent. Any defaulted balloon payment or
modification that extends the maturity of a Mortgage Loan will tend to extend
the weighted average life of the Certificates, thereby lengthening the period of
time elapsed from the date of issuance of a Certificate until it is retired.
Foreclosures and Payment Plans
The number of foreclosures and the principal amount of the Mortgage Loans
comprising or underlying the Mortgage Assets that are foreclosed in relation to
the number and principal amount of Mortgage Loans that are repaid in accordance
with their terms will affect the weighted average life of the Mortgage Loans
comprising or underlying the Mortgage Assets and that of the related series of
Certificates. Servicing decisions made with respect to the Mortgage Loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of Mortgage Loans in bankruptcy proceedings, may also have an
effect upon the payment patterns of particular Mortgage Loans and thus the
weighted average life of the Certificates.
Due-on-Sale and Due-on-Encumbrance Clauses
Acceleration of mortgage payments as a result of certain transfers of or
the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates that may not be reflected in the prepayment
standards or models used in the relevant Prospectus Supplement. A number of the
Mortgage Loans comprising or underlying the Assets may include "due-on-sale"
clauses or "due-on-encumbrance" clauses that allow the holder of the Mortgage
Loans to demand payment in full of the remaining principal balance of the
Mortgage Loans upon sale or certain other transfers of or the creation of
encumbrances upon the related Mortgaged Property. With respect to any Whole
Loans, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer, on behalf of the Trust Fund, will be required to exercise (or
waive its right to exercise) any such right that the Trustee may have as
mortgagee to accelerate payment of the Whole Loan in a manner consistent with
the Servicing Standard. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Due-on-Sale and Due-on-Encumbrance" and "Description of the
Agreements--Due-on-Sale and Due-on-Encumbrance Provisions."
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THE DEPOSITOR
Morgan Stanley Capital I Inc., the Depositor, is a direct wholly-owned
subsidiary of Morgan Stanley Group Inc. and was incorporated in the State of
Delaware on January 28, 1985. The principal executive offices of the Depositor
are located at 1585 Broadway, 37th Floor, New York, New York 10036. Its
telephone number is (212) 761-4700.
The Depositor does not have, nor is it expected in the future to have, any
significant assets.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates of each series (including any class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in the
Trust Fund created pursuant to the related Agreement. Each series of
Certificates will consist of one or more classes of Certificates that may (i)
provide for the accrual of interest thereon based on fixed, variable or
adjustable rates; (ii) be senior (collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate Certificates") to one or more other
classes of Certificates in respect of certain distributions on the Certificates;
(iii) be entitled to principal distributions, with disproportionately low,
nominal or no interest distributions (collectively, "Stripped Principal
Certificates"); (iv) be entitled to interest distributions, with
disproportionately low, nominal or no principal distributions (collectively,
"Stripped Interest Certificates"); (v) provide for distributions of accrued
interest thereon commencing only following the occurrence of certain events,
such as the retirement of one or more other classes of Certificates of such
series (collectively, "Accrual Certificates"); (vi) provide for payments of
principal sequentially, based on specified payment schedules, from only a
portion of the Assets in such Trust Fund or based on specified calculations, to
the extent of available funds, in each case as described in the related
Prospectus Supplement; and/or (vii) provide for distributions based on a
combination of two or more components thereof with one or more of the
characteristics described in this paragraph including a Stripped Principal
Certificate component and a Stripped Interest Certificate component. Any such
classes may include classes of Offered Certificates.
Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to the Certificate Balances or, in case of Stripped
Interest Certificates, notional amounts or percentage interests specified in the
related Prospectus Supplement. The transfer of any Offered Certificates may be
registered and such Certificates may be exchanged without the payment of any
service charge payable in connection with such registration of transfer or
exchange, but the Depositor or the Trustee or any agent thereof may require
payment of a sum sufficient to cover any tax or other governmental charge. One
or more classes of Certificates of a series may be issued in definitive form
("Definitive Certificates") or in book-entry form ("Book-Entry Certificates"),
as provided in the related Prospectus Supplement. See "Risk Factors--Book-Entry
Registration" and "Description of the Certificates--Book-Entry Registration and
Definitive Certificates." Definitive Certificates will be exchangeable for other
Certificates of the same class and series of a like aggregate Certificate
Balance, notional amount or percentage interest but of different authorized
denominations. See "Risk Factors--Limited Liquidity" and "Limited Assets."
Distributions
Distributions on the Certificates of each series will be made by or on
behalf of the Trustee on each Distribution Date as specified in the related
Prospectus Supplement from the Available Distribution Amount for such series and
such Distribution Date. Except as otherwise specified in the related Prospectus
Supplement, distributions (other than the final distribution) will be made to
the persons in whose names the Certificates are registered at the close of
business on the last business day of the month preceding the month in which the
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date"). All
distributions with respect to each class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates in such class
or by random selection, as described in the related Prospectus Supplement or
otherwise established by the
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related Trustee. Payments will be made either by wire transfer in immediately
available funds to the account of a Certificateholder at a bank or other entity
having appropriate facilities therefor, if such Certificateholder has so
notified the Trustee or other person required to make such payments no later
than the date specified in the related Prospectus Supplement (and, if so
provided in the related Prospectus Supplement, holds Certificates in the
requisite amount specified therein), or by check mailed to the address of the
person entitled thereto as it appears on the Certificate Register; provided,
however, that the final distribution in retirement of the Certificates (whether
Definitive Certificates or Book-Entry Certificates) will be made only upon
presentation and surrender of the Certificates at the location specified in the
notice to Certificateholders of such final distribution.
Available Distribution Amount
All distributions on the Certificates of each series on each Distribution
Date will be made from the Available Distribution Amount described below, in
accordance with the terms described in the related Prospectus Supplement. Unless
provided otherwise in the related Prospectus Supplement, the "Available
Distribution Amount" for each Distribution Date equals the sum of the following
amounts:
(i) the total amount of all cash on deposit in the related Certificate
Account as of the corresponding Determination Date, exclusive of:
(a) all scheduled payments of principal and interest collected but
due on a date subsequent to the related Due Period (unless the
related Prospectus Supplement provides otherwise, a "Due Period"
with respect to any Distribution Date will commence on the second
day of the month in which the immediately preceding Distribution
Date occurs, or the day after the Cut-off Date in the case of the
first Due Period, and will end on the first day of the month of the
related Distribution Date),
(b) unless the related Prospectus Supplement provides otherwise, all
prepayments, together with related payments of the interest thereon
and related Prepayment Premiums, Liquidation Proceeds, Insurance
Proceeds and other unscheduled recoveries received subsequent to the
related Due Period, and
(c) all amounts in the Certificate Account that are due or
reimbursable to the Depositor, the Trustee, an Asset Seller, a
Sub-Servicer, a Special Servicer, the Master Servicer or any other
entity as specified in the related Prospectus Supplement or that are
payable in respect of certain expenses of the related Trust Fund;
(ii) if the related Prospectus Supplement so provides, interest or
investment income on amounts on deposit in the Certificate Account,
including any net amounts paid under any Cash Flow Agreements;
(iii) all advances made by a Master Servicer or any other entity as
specified in the related Prospectus Supplement with respect to such
Distribution Date;
(iv) if and to the extent the related Prospectus Supplement so provides,
amounts paid by a Master Servicer or any other entity as specified in the
related Prospectus Supplement with respect to interest shortfalls
resulting from prepayments during the related Prepayment Period; and
(v) unless the related Prospectus Supplement provides otherwise, to the
extent not on deposit in the related Certificate Account as of the
corresponding Determination Date, any amounts collected under, from or in
respect of any Credit Support with respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Certificates (including any Certificates not
offered hereby) on each Distribution Date, and accordingly will be released from
the Trust Fund and will not be available for any future distributions.
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Distributions of Interest on the Certificates
Each class of Certificates (other than classes of Stripped Principal
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which will be a fixed, variable or adjustable rate at which interest will
accrue on such class or a component thereof (the "Pass-Through Rate"). The
related Prospectus Supplement will specify the Pass-Through Rate for each class
or component or, in the case of a variable or adjustable Pass-Through Rate, the
method for determining the Pass-Through Rate. Unless otherwise specified in the
related Prospectus Supplement, interest on the Certificates will be calculated
on the basis of a 360-day year consisting of twelve 30-day months.
Distributions of interest in respect of the Certificates of any class will
be made on each Distribution Date (other than any class of Accrual Certificates,
which will be entitled to distributions of accrued interest commencing only on
the Distribution Date, or under the circumstances, specified in the related
Prospectus Supplement, and any class of Stripped Principal Certificates that are
not entitled to any distributions of interest) based on the Accrued Certificate
Interest for such class and such Distribution Date, subject to the sufficiency
of the portion of the Available Distribution Amount allocable to such class on
such Distribution Date. Prior to the time interest is distributable on any class
of Accrual Certificates, the amount of Accrued Certificate Interest otherwise
distributable on such class will be added to the Certificate Balance thereof on
each Distribution Date. With respect to each class of Certificates and each
Distribution Date (other than certain classes of Stripped Interest
Certificates), "Accrued Certificate Interest" will be equal to interest accrued
for a specified period on the outstanding Certificate Balance thereof
immediately prior to the Distribution Date, at the applicable Pass-Through Rate,
reduced as described below. Unless otherwise provided in the Prospectus
Supplement, Accrued Certificate Interest on Stripped Interest Certificates will
be equal to interest accrued for a specified period on the outstanding notional
amount thereof immediately prior to each Distribution Date, at the applicable
Pass-Through Rate, reduced as described below. The method of determining the
notional amount for any class of Stripped Interest Certificates will be
described in the related Prospectus Supplement. Reference to notional amount is
solely for convenience in certain calculations and does not represent the right
to receive any distributions of principal. Unless otherwise provided in the
related Prospectus Supplement, the Accrued Certificate Interest on a series of
Certificates will be reduced in the event of prepayment interest shortfalls,
which are shortfalls in collections of interest for a full accrual period
resulting from prepayments prior to the due date in such accrual period on the
Mortgage Loans comprising or underlying the Mortgage Assets in the Trust Fund
for such series. The particular manner in which such shortfalls are to be
allocated among some or all of the classes of Certificates of that series will
be specified in the related Prospectus Supplement. The related Prospectus
Supplement will also describe the extent to which the amount of Accrued
Certificate Interest that is otherwise distributable on (or, in the case of
Accrual Certificates, that may otherwise be added to the Certificate Balance of)
a class of Offered Certificates may be reduced as a result of any other
contingencies, including delinquencies, losses and deferred interest on or in
respect of the Mortgage Loans comprising or underlying the Mortgage Assets in
the related Trust Fund. Unless otherwise provided in the related Prospectus
Supplement, any reduction in the amount of Accrued Certificate Interest
otherwise distributable on a class of Certificates by reason of the allocation
to such class of a portion of any deferred interest on the Mortgage Loans
comprising or underlying the Mortgage Assets in the related Trust Fund will
result in a corresponding increase in the Certificate Balance of such class. See
"Risk Factors--Average Life of Certificates; Prepayments; Yields" and "Yield
Considerations."
Distributions of Principal of the Certificates
The Certificates of each series, other than certain classes of Stripped
Interest Certificates, will have a "Certificate Balance" which, at any time,
will equal the then maximum amount that the holder will be entitled to receive
in respect of principal out of the future cash flow on the Assets and other
assets included in the related Trust Fund. The outstanding Certificate Balance
of a Certificate will be reduced to the extent of distributions of principal
thereon from time to time and, if and to the extent so provided in the related
Prospectus Supplement, by the amount of losses incurred in respect of the
related Assets, may be increased in respect of deferred interest on the related
Mortgage Loans to the extent provided in the related Prospectus Supplement and,
in the case of Accrual Certificates prior to the Distribution Date on which
distributions of interest are required to commence, will be increased by any
related Accrued Certificate Interest. Unless otherwise provided in the related
Prospectus Supplement, the initial
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aggregate Certificate Balance of all classes of Certificates of a series will
not be greater than the outstanding aggregate principal balance of the related
Assets as of the applicable Cut-off Date. The initial aggregate Certificate
Balance of a series and each class thereof will be specified in the related
Prospectus Supplement. Unless otherwise provided in the related Prospectus
Supplement, distributions of principal will be made on each Distribution Date to
the class or classes of Certificates entitled thereto in accordance with the
provisions described in such Prospectus Supplement until the Certificate Balance
of such class has been reduced to zero. Stripped Interest Certificates with no
Certificate Balance are not entitled to any distributions of principal.
Components
To the extent specified in the related Prospectus Supplement, distribution
on a class of Certificates may be based on a combination of two or more
different components as described under "--General" above. To such extent, the
descriptions set forth under "--Distributions of Interests on the Certificates"
and "--Distributions of Principal of the Certificates" above also relate to
components of such a class of Certificates. In such case, reference in such
sections to Certificate Balance and Pass-Through Rate refer to the principal
balance, if any, of any such component and the Pass-Through Rate, if any, on any
such component, respectively.
Distributions on the Certificates of Prepayment Premiums or in Respect of Equity
Participations
If so provided in the related Prospectus Supplement, Prepayment Premiums
or payments in respect of Equity Participations that are collected on the
Mortgage Assets in the related Trust Fund will be distributed on each
Distribution Date to the class or classes of Certificates entitled thereto in
accordance with the provisions described in such Prospectus Supplement.
Allocation of Losses and Shortfalls
If so provided in the Prospectus Supplement for a series of Certificates
consisting of one or more classes of Subordinate Certificates, on any
Distribution Date in respect of which losses or shortfalls in collections on the
Mortgage Assets have been incurred, the amount of such losses or shortfalls will
be borne first by a class of Subordinate Certificates in the priority and manner
and subject to the limitations specified in such Prospectus Supplement. See
"Description of Credit Support" for a description of the types of protection
that may be included in a Trust Fund against losses and shortfalls on Mortgage
Assets comprising such Trust Fund.
Advances in Respect of Delinquencies
With respect to any series of Certificates evidencing an interest in a
Trust Fund, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer or another entity described therein will be required as part of
its servicing responsibilities to advance on or before each Distribution Date
its own funds or funds held in the Certificate Account that are not included in
the Available Distribution Amount for such Distribution Date, in an amount equal
to the aggregate of payments of principal (other than any balloon payments) and
interest (net of related servicing fees and Retained Interest) that were due on
the Whole Loans in such Trust Fund during the related Due Period and were
delinquent on the related Determination Date, subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable from Related Proceeds (as defined below). In the case of a series
of Certificates that includes one or more classes of Subordinate Certificates
and if so provided in the related Prospectus Supplement, the Master Servicer's
(or another entity's) advance obligation may be limited only to the portion of
such delinquencies necessary to make the required distributions on one or more
classes of Senior Certificates and/or may be subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable not only from Related Proceeds but also from collections on other
Assets otherwise distributable on one or more classes of such Subordinate
Certificates. See "Description of Credit Support."
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Unless otherwise
provided in the related Prospectus Supplement, advances of the Master Servicer's
(or another entity's)
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funds will be reimbursable only out of related recoveries on the Mortgage Loans
(including amounts received under any form of Credit Support) respecting which
such advances were made (as to any Mortgage Loan, "Related Proceeds") and, if so
provided in the Prospectus Supplement, out of any amounts otherwise
distributable on one or more classes of Subordinate Certificates of such series;
provided, however, that any such advance will be reimbursable from any amounts
in the Certificate Account prior to any distributions being made on the
Certificates to the extent that the Master Servicer (or such other entity) shall
determine in good faith that such advance (a "Nonrecoverable Advance") is not
ultimately recoverable from Related Proceeds or, if applicable, from collections
on other Assets otherwise distributable on such Subordinate Certificates. If
advances have been made by the Master Servicer from excess funds in the
Certificate Account, the Master Servicer is required to replace such funds in
the Certificate Account on any future Distribution Date to the extent that funds
in the Certificate Account on such Distribution Date are less than payments
required to be made to Certificateholders on such date. If so specified in the
related Prospectus Supplement, the obligations of the Master Servicer (or
another entity) to make advances may be secured by a cash advance reserve fund,
a surety bond, a letter of credit or another form of limited guaranty. If
applicable, information regarding the characteristics of, and the identity of
any obligor on, any such surety bond, will be set forth in the related
Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement, the
Master Servicer (or another entity) will be entitled to receive interest at the
rate specified therein on its outstanding advances and will be entitled to pay
itself such interest periodically from general collections on the Assets prior
to any payment to Certificateholders or as otherwise provided in the related
Agreement and described in such Prospectus Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS will describe any corresponding
advancing obligation of any person in connection with such MBS.
Reports to Certificateholders
Unless otherwise provided in the Prospectus Supplement, with each
distribution to holders of any class of Certificates of a series, the Master
Servicer or the Trustee, as provided in the related Prospectus Supplement, will
forward or cause to be forwarded to each such holder, to the Depositor and to
such other parties as may be specified in the related Agreement, a statement
setting forth, in each case to the extent applicable and available:
(i) the amount of such distribution to holders of Certificates of such
class applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount of such distribution allocable to (a) Prepayment Premiums
and (b) payments on account of Equity Participations;
(iv) the amount of related servicing compensation received by a Master
Servicer (and, if payable directly out of the related Trust Fund, by any
Special Servicer and any Sub-Servicer) and such other customary
information as any such Master Servicer or the Trustee deems necessary or
desirable, or that a Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution, and
the aggregate amount of unreimbursed advances at the close of business on
such Distribution Date;
(vi) the aggregate principal balance of the Assets at the close of
business on such Distribution Date;
(vii) the number and aggregate principal balance of Whole Loans in respect
of which (a) one scheduled payment is delinquent, (b) two scheduled
payments are delinquent, (c) three or more scheduled payments are
delinquent and (d) foreclosure proceedings have been commenced;
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(viii) with respect to each Whole Loan that is delinquent two or more
months, (a) the loan number thereof, (b) the unpaid balance thereof, (c)
whether the delinquency is in respect of any balloon payment, (d) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof, (e) if applicable, the aggregate amount of
any interest accrued and payable on related servicing expenses and related
advances assuming such Mortgage Loan is subsequently liquidated through
foreclosure, (f) whether a notice of acceleration has been sent to the
mortgagor and, if so, the date of such notice, (g) whether foreclosure
proceedings have been commenced and, if so, the date so commenced and (h)
if such Mortgage Loan is more than three months delinquent and foreclosure
has not been commenced, the reason therefor;
(ix) with respect to any Whole Loan liquidated during the related Due
Period (other than by payment in full), (a) the loan number thereof, (b)
the manner in which it was liquidated and (c) the aggregate amount of
liquidation proceeds received;
(x) with respect to any Whole Loan liquidated during the related Due
Period, (a) the portion of such liquidation proceeds payable or
reimbursable to the Master Servicer (or any other entity) in respect of
such Mortgage Loan and (b) the amount of any loss to Certificateholders;
(xi) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a)
the loan number of the related Mortgage Loan and (b) the date of
acquisition;
(xii) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a)
the book value, (b) the principal balance of the related Mortgage Loan
immediately following such Distribution Date (calculated as if such
Mortgage Loan were still outstanding taking into account certain limited
modifications to the terms thereof specified in the Agreement), (c) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof and (d) if applicable, the aggregate amount of
interest accrued and payable on related servicing expenses and related
advances;
(xiii) with respect to any such REO Property sold during the related Due
Period (a) the loan number of the related Mortgage Loan, (b) the aggregate
amount of sale proceeds, (c) the portion of such sales proceeds payable or
reimbursable to the Master Servicer or a Special Servicer in respect of
such REO Property or the related Mortgage Loan and (d) the amount of any
loss to Certificateholders in respect of the related Mortgage Loan;
(xiv) the aggregate Certificate Balance or notional amount, as the case
may be, of each class of Certificates (including any class of Certificates
not offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to
the allocation of any loss and increase in the Certificate Balance of a
class of Accrual Certificates in the event that Accrued Certificate
Interest has been added to such balance;
(xv) the aggregate amount of principal prepayments made during the related
Due Period;
(xvi) the amount deposited in the reserve fund, if any, on such
Distribution Date;
(xvii) the amount remaining in the reserve fund, if any, as of the close
of business on such Distribution Date;
(xviii) the aggregate unpaid Accrued Certificate Interest, if any, on each
class of Certificates at the close of business on such Distribution Date;
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(xix) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, and, if available,
the immediately succeeding Distribution Date, as calculated in accordance
with the method specified in the related Prospectus Supplement;
(xx) in the case of Certificates with an adjustable Pass-Through Rate, for
statements to be distributed in any month in which an adjustment date
occurs, the adjustable Pass-Through Rate applicable to such Distribution
Date and the immediately succeeding Distribution Date as calculated in
accordance with the method specified in the related Prospectus Supplement;
(xxi) as to any series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the
close of business on such Distribution Date; and
(xxii) the aggregate amount of payments by the mortgagors of (a) default
interest, (b) late charges and (c) assumption and modification fees
collected during the related Due Period.
In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts shall be expressed as a dollar amount per minimum
denomination of Certificates or for such other specified portion thereof. In
addition, in the case of information furnished pursuant to subclauses (i), (ii),
(xiv), (xviii) and (xix) above, such amounts shall also be provided with respect
to each component, if any, of a class of Certificates. The Master Servicer or
the Trustee, as specified in the related Prospectus Supplement, will forward or
cause to be forwarded to each holder, to the Depositor and to such other parties
as may be specified in the Agreement, a copy of any statements or reports
received by the Master Servicer or the Trustee, as applicable, with respect to
any MBS. The Prospectus Supplement for each series of Offered Certificates will
describe any additional information to be included in reports to the holders of
such Certificates.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, shall furnish to each person who at any time during the calendar
year was a holder of a Certificate a statement containing the information set
forth in subclauses (i)-(iv) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Master Servicer or the Trustee shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer or the Trustee pursuant to any requirements of
the Code as are from time to time in force. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
Termination
The obligations created by the Agreement for each series of Certificates
will terminate upon the payment to Certificateholders of that series of all
amounts held in the Certificate Account or by the Master Servicer, if any, or
the Trustee and required to be paid to them pursuant to such Agreement following
the earlier of (i) the final payment or other liquidation of the last Asset
subject thereto or the disposition of all property acquired upon foreclosure of
any Whole Loan subject thereto and (ii) the purchase of all of the assets of the
Trust Fund by the party entitled to effect such termination, under the
circumstances and in the manner set forth in the related Prospectus Supplement.
In no event, however, will the trust created by the Agreement continue beyond
the date specified in the related Prospectus Supplement. Written notice of
termination of the Agreement will be given to each Certificateholder, and the
final distribution will be made only upon presentation and surrender of the
Certificates at the location to be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the repurchase
of the assets in the related Trust Fund by the party specified therein, under
the circumstances and in the manner set forth therein. If so provided in the
related Prospectus Supplement, upon the reduction of the Certificate Balance of
a specified class or classes of Certificates by a specified percentage or
amount, the party specified therein will solicit bids for the purchase of all
assets of the Trust Fund, or of a sufficient portion of such assets to retire
such class or classes or purchase such class or classes at a price set forth in
the related Prospectus Supplement, in each case, under the circumstances and in
the manner set forth therein.
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Book-Entry Registration and Definitive Certificates
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Certificates of any series will be issued as Book-Entry
Certificates, and each such class will be represented by one or more single
Certificates registered in the name of a nominee for the depository, The
Depository Trust Company ("DTC").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participating organizations ("Participants") and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in their accounts, thereby eliminating the need
for physical movement of certificates. Participants include Morgan Stanley & Co.
Incorporated, securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). Unless otherwise provided in the related Prospectus Supplement,
investors that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Book-Entry Certificates may do so only through Participants and Indirect
Participants. In addition, such investors ("Certificate Owners") will receive
all distributions on the Book-Entry Certificates through DTC and its
Participants. Under a book-entry format, Certificate Owners will receive
payments after the related Distribution Date because, while payments are
required to be forwarded to Cede & Co., as nominee for DTC ("Cede"), on each
such date, DTC will forward such payments to its Participants which thereafter
will be required to forward them to Indirect Participants or Certificate Owners.
Unless otherwise provided in the related Prospectus Supplement, the only
"Certificateholder" (as such term is used in the Agreement) will be Cede, as
nominee of DTC, and the Certificate Owners will not be recognized by the Trustee
as Certificateholders under the Agreement. Certificate Owners will be permitted
to exercise the rights of Certificateholders under the related Agreement only
indirectly through the Participants who in turn will exercise their rights
through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Book-Entry Certificates and is
required to receive and transmit distributions of principal of and interest on
the Book-Entry Certificates. Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Book-Entry Certificates
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Certificate Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge its interest in the Book-Entry Certificates to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of its interest in the Book-Entry Certificates, may be limited due to
the lack of a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under an Agreement only at the direction of one or
more Participants to whose account with DTC interests in the Book-Entry
Certificates are credited.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Certificate Owners or their nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or able
to properly discharge its responsibilities as depository with respect to the
Certificates and the Depositor is unable to locate a qualified successor or (ii)
the Depositor, at its option, elects to terminate the book-entry system through
DTC.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for the Certificate
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Owners. Upon surrender by DTC of the certificate or certificates representing
the Book-Entry Certificates, together with instructions for reregistration, the
Trustee will issue (or cause to be issued) to the Certificate Owners identified
in such instructions the Definitive Certificates to which they are entitled, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each series evidencing interests in a Trust Fund
including Whole Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, any Special Servicer appointed
as of the date of the Pooling and Servicing Agreement and the Trustee. The
Certificates of each series evidencing interests in a Trust Fund not including
Whole Loans will be issued pursuant to a Trust Agreement between the Depositor
and a Trustee. Any Master Servicer, any such Special Servicer and the Trustee
with respect to any series of Certificates will be named in the related
Prospectus Supplement. In lieu of appointing a Master Servicer, a servicer may
be appointed pursuant to the Pooling and Servicing Agreement for any Trust Fund.
Such servicer will service all or a significant number of Whole Loans directly
without a Sub-Servicer. Unless otherwise specified in the related Prospectus
Supplement, the obligations of any such servicer shall be commensurate with
those of the Master Servicer described herein. References in this prospectus to
Master Servicer and its rights and obligations, unless otherwise specified in
the related Prospectus Supplement, shall be deemed to also be references to any
servicer servicing Whole Loans directly. A manager or administrator may be
appointed pursuant to the Trust Agreement for any Trust Fund to administer such
Trust Fund. The provisions of each Agreement will vary depending upon the nature
of the Certificates to be issued thereunder and the nature of the related Trust
Fund. A form of a Pooling and Servicing Agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part. Any Trust
Agreement will generally conform to the form of Pooling and Servicing Agreement
filed herewith, but will not contain provisions with respect to the servicing
and maintenance of Whole Loans. The following summaries describe certain
provisions that may appear in each Agreement. The Prospectus Supplement for a
series of Certificates will describe any provision of the Agreement relating to
such series that materially differs from the description thereof contained in
this Prospectus. The summaries do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all of the provisions of
the Agreement for each Trust Fund and the description of such provisions in the
related Prospectus Supplement. As used herein with respect to any series, the
term "Certificate" refers to all of the Certificates of that series, whether or
not offered hereby and by the related Prospectus Supplement, unless the context
otherwise requires. The Depositor will provide a copy of the Agreement (without
exhibits) relating to any series of Certificates without charge upon written
request of a holder of a Certificate of such series addressed to Morgan Stanley
Capital I Inc., c/o Morgan Stanley & Co. Incorporated, 1585 Broadway, 37th
Floor, New York, New York 10036, Attention: John E. Westerfield.
Assignment of Assets; Repurchases
At the time of issuance of any series of Certificates, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Assets to be
included in the related Trust Fund, together with all principal and interest to
be received on or with respect to such Assets after the Cut-off Date, other than
principal and interest due on or before the Cut-off Date and other than any
Retained Interest. The Trustee will, concurrently with such assignment, deliver
the Certificates to the Depositor in exchange for the Assets and the other
assets comprising the Trust Fund for such series. Each Mortgage Asset will be
identified in a schedule appearing as an exhibit to the related Agreement.
Unless otherwise provided in the related Prospectus Supplement, such schedule
will include detailed information (i) in respect of each Whole Loan included in
the related Trust Fund, including without limitation, the address of the related
Mortgaged Property and type of such property, the Mortgage Rate and, if
applicable, the applicable index, margin, adjustment date and any rate cap
information, the original and remaining term to maturity, the original and
outstanding principal balance and balloon payment, if any, the Value,
Loan-to-Value Ratio and the Debt Service Coverage Ratio as of the date indicated
and payment and prepayment provisions, if applicable, and (ii) in respect of
each MBS included in the related Trust Fund, including without limitation, the
MBS Issuer, MBS Servicer and MBS Trustee, the pass-through or bond rate or
formula for determining such rate, the issue date and original and remaining
term to maturity, if applicable, the original and outstanding principal amount
and payment provisions, if applicable.
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With respect to each Whole Loan, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to) certain
loan documents, which unless otherwise specified in the related Prospectus
Supplement will include the original Mortgage Note endorsed, without recourse,
in blank or to the order of the Trustee, the original Mortgage (or a certified
copy thereof) with evidence of recording indicated thereon and an assignment of
the Mortgage to the Trustee in recordable form. Notwithstanding the foregoing, a
Trust Fund may include Mortgage Loans where the original Mortgage Note is not
delivered to the Trustee if the Depositor delivers to the Trustee or the
custodian a copy or a duplicate original of the Mortgage Note, together with an
affidavit certifying that the original thereof has been lost or destroyed. With
respect to such Mortgage Loans, the Trustee (or its nominee) may not be able to
enforce the Mortgage Note against the related borrower. Unless otherwise
specified in the related Prospectus Supplement, the Asset Seller will be
required to agree to repurchase, or substitute for, each such Mortgage Loan that
is subsequently in default if the enforcement thereof or of the related Mortgage
is materially adversely affected by the absence of the original Mortgage Note.
Unless otherwise provided in the related Prospectus Supplement, the related
Agreement will require the Depositor or another party specified therein to
promptly cause each such assignment of Mortgage to be recorded in the
appropriate public office for real property records, except in the State of
California or in other states where, in the opinion of counsel acceptable to the
Trustee, such recording is not required to protect the Trustee's interest in the
related Whole Loan against the claim of any subsequent transferee or any
successor to or creditor of the Depositor, the Master Servicer, the relevant
Asset Seller or any other prior holder of the Whole Loan.
The Trustee (or a custodian) will review such Whole Loan documents within
a specified period of days after receipt thereof, and the Trustee (or a
custodian) will hold such documents in trust for the benefit of the
Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, if any such document is found to be missing or defective in any
material respect, the Trustee (or such custodian) shall immediately notify the
Master Servicer and the Depositor, and the Master Servicer shall immediately
notify the relevant Asset Seller. If the Asset Seller cannot cure the omission
or defect within a specified number of days after receipt of such notice, then
unless otherwise specified in the related Prospectus Supplement, the Asset
Seller will be obligated, within a specified number of days of receipt of such
notice, to repurchase the related Whole Loan from the Trustee at the Purchase
Price or substitute for such Mortgage Loan. There can be no assurance that an
Asset Seller will fulfill this repurchase or substitution obligation, and
neither the Master Servicer nor the Depositor will be obligated to repurchase or
substitute for such Mortgage Loan if the Asset Seller defaults on its
obligation. Unless otherwise specified in the related Prospectus Supplement,
this repurchase or substitution obligation constitutes the sole remedy available
to the Certificateholders or the Trustee for omission of, or a material defect
in, a constituent document. To the extent specified in the related Prospectus
Supplement, in lieu of curing any omission or defect in the Asset or
repurchasing or substituting for such Asset, the Asset Seller may agree to cover
any losses suffered by the Trust Fund as a result of such breach or defect.
If so provided in the related Prospectus Supplement, the Depositor will,
as to some or all of the Mortgage Loans, assign or cause to be assigned to the
Trustee the related Lease Assignments. In certain cases, the Trustee, or Master
Servicer, as applicable, may collect all moneys under the related Leases and
distribute amounts, if any, required under the Lease for the payment of
maintenance, insurance and taxes, to the extent specified in the related Lease
agreement. The Trustee, or if so specified in the Prospectus Supplement, the
Master Servicer, as agent for the Trustee, may hold the Lease in trust for the
benefit of the Certificateholders.
With respect to each Government Security or MBS in certificated form, the
Depositor will deliver or cause to be delivered to the Trustee (or the
custodian) the original certificate or other definitive evidence of such
Government Security or MBS, as applicable, together with bond power or other
instruments, certifications or documents required to transfer fully such
Government Security or MBS, as applicable, to the Trustee for the benefit of the
Certificateholders. With respect to each Government Security or MBS in
uncertificated or book-entry form or held through a "clearing corporation"
within the meaning of the UCC, the Depositor and the Trustee will cause such
Government Security or MBS to be registered directly or on the books of such
clearing corporation or of a financial intermediary in the name of the Trustee
for the benefit of the Certificateholders. Unless otherwise provided in the
related Prospectus Supplement, the related Agreement will require that either
the Depositor or the Trustee promptly cause any MBS and Government Securities in
certificated form not registered in the name of the Trustee to be re-registered,
with the applicable persons, in the name of the Trustee.
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Representations and Warranties; Repurchases
Unless otherwise provided in the related Prospectus Supplement the
Depositor will, with respect to each Whole Loan, make or assign certain
representations and warranties, as of a specified date (the person making such
representations and warranties, the "Warrantying Party") covering, by way of
example, the following types of matters: (i) the accuracy of the information set
forth for such Whole Loan on the schedule of Assets appearing as an exhibit to
the related Agreement; (ii) the existence of title insurance insuring the lien
priority of the Whole Loan; (iii) the authority of the Warrantying Party to sell
the Whole Loan; (iv) the payment status of the Whole Loan and the status of
payments of taxes, assessments and other charges affecting the related Mortgaged
Property; (v) the existence of customary provisions in the related Mortgage Note
and Mortgage to permit realization against the Mortgaged Property of the benefit
of the security of the Mortgage; and (vi) the existence of hazard and extended
perils insurance coverage on the Mortgaged Property.
Any Warrantying Party, if other than the Depositor, shall be an Asset
Seller or an affiliate thereof or such other person acceptable to the Depositor
and shall be identified in the related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related series of Certificates evidencing an interest in such
Whole Loan. Unless otherwise specified in the related Prospectus Supplement, in
the event of a breach of any such representation or warranty, the Warrantying
Party will be obligated to reimburse the Trust Fund for losses caused by any
such breach or either cure such breach or repurchase or replace the affected
Whole Loan as described below. Since the representations and warranties may not
address events that may occur following the date as of which they were made, the
Warrantying Party will have a reimbursement, cure, repurchase or substitution
obligation in connection with a breach of such a representation and warranty
only if the relevant event that causes such breach occurs prior to such date.
Such party would have no such obligations if the relevant event that causes such
breach occurs after such date.
Unless otherwise provided in the related Prospectus Supplement, each
Agreement will provide that the Master Servicer and/or Trustee will be required
to notify promptly the relevant Warrantying Party of any breach of any
representation or warranty made by it in respect of a Whole Loan that materially
and adversely affects the value of such Whole Loan or the interests therein of
the Certificateholders. If such Warrantying Party cannot cure such breach within
a specified period following the date on which such party was notified of such
breach, then such Warrantying Party will be obligated to repurchase such Whole
Loan from the Trustee within a specified period from the date on which the
Warrantying Party was notified of such breach, at the Purchase Price therefor.
As to any Whole Loan, unless otherwise specified in the related Prospectus
Supplement, the "Purchase Price" is equal to the sum of the unpaid principal
balance thereof, plus unpaid accrued interest thereon at the Mortgage Rate from
the date as to which interest was last paid to the due date in the Due Period in
which the relevant purchase is to occur, plus certain servicing expenses that
are reimbursable to the Master Servicer. If so provided in the Prospectus
Supplement for a series, a Warrantying Party, rather than repurchase a Whole
Loan as to which a breach has occurred, will have the option, within a specified
period after initial issuance of such series of Certificates, to cause the
removal of such Whole Loan from the Trust Fund and substitute in its place one
or more other Whole Loans, in accordance with the standards described in the
related Prospectus Supplement. If so provided in the Prospectus Supplement for a
series, a Warrantying Party, rather than repurchase or substitute a Whole Loan
as to which a breach has occurred, will have the option to reimburse the Trust
Fund or the Certificateholders for any losses caused by such breach. Unless
otherwise specified in the related Prospectus Supplement, this reimbursement,
repurchase or substitution obligation will constitute the sole remedy available
to holders of Certificates or the Trustee for a breach of representation by a
Warrantying Party.
Neither the Depositor (except to the extent that it is the Warrantying
Party) nor the Master Servicer will be obligated to purchase or substitute for a
Whole Loan if a Warrantying Party defaults on its obligation to do so, and no
assurance can be given that Warrantying Parties will carry out such obligations
with respect to Whole Loans.
Unless otherwise provided in the related Prospectus Supplement the
Warrantying Party will, with respect to a Trust Fund that includes Government
Securities or MBS, make or assign certain representations or warranties,
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as of a specified date, with respect to such Government Securities or MBS,
covering (i) the accuracy of the information set forth therefor on the schedule
of Assets appearing as an exhibit to the related Agreement and (ii) the
authority of the Warrantying Party to sell such Assets. The related Prospectus
Supplement will describe the remedies for a breach thereof.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. A breach of any such representation of
the Master Servicer which materially and adversely affects the interests of the
Certificateholders and which continues unremedied for thirty days after the
giving of written notice of such breach to the Master Servicer by the Trustee or
the Depositor, or to the Master Servicer, the Depositor and the Trustee by the
holders of Certificates evidencing not less than 25% of the Voting Rights
(unless otherwise specified in the related Prospectus Supplement), will
constitute an Event of Default under such Pooling and Servicing Agreement. See
"Events of Default" and "Rights Upon Event of Default."
Certificate Account and Other Collection Accounts
General
The Master Servicer and/or the Trustee will, as to each Trust Fund,
establish and maintain or cause to be established and maintained one or more
separate accounts for the collection of payments on the related Assets
(collectively, the "Certificate Account"), which must be either (i) an account
or accounts the deposits in which are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC") (to the limits established by the FDIC) and the uninsured deposits in
which are otherwise secured such that the Certificateholders have a claim with
respect to the funds in the Certificate Account or a perfected first priority
security interest against any collateral securing such funds that is superior to
the claims of any other depositors or general creditors of the institution with
which the Certificate Account is maintained or (ii) otherwise maintained with a
bank or trust company, and in a manner, satisfactory to the Rating Agency or
Agencies rating any class of Certificates of such series. The collateral
eligible to secure amounts in the Certificate Account is limited to United
States government securities and other investment grade obligations specified in
the Agreement ("Permitted Investments"). A Certificate Account may be maintained
as an interest bearing or a non-interest bearing account and the funds held
therein may be invested pending each succeeding Distribution Date in certain
short-term Permitted Investments. Unless otherwise provided in the related
Prospectus Supplement, any interest or other income earned on funds in the
Certificate Account will be paid to a Master Servicer or its designee as
additional servicing compensation. The Certificate Account may be maintained
with an institution that is an affiliate of the Master Servicer, if applicable,
provided that such institution meets the standards imposed by the Rating Agency
or Agencies. If permitted by the Rating Agency or Agencies and so specified in
the related Prospectus Supplement, a Certificate Account may contain funds
relating to more than one series of mortgage pass-through certificates and may
contain other funds respecting payments on mortgage loans belonging to the
Master Servicer or serviced or master serviced by it on behalf of others.
Deposits
A Master Servicer or the Trustee will deposit or cause to be deposited in
the Certificate Account for one or more Trust Funds on a daily basis, unless
otherwise provided in the related Agreement, the following payments and
collections received, or advances made, by the Master Servicer or the Trustee or
on its behalf subsequent to the Cut-off Date (other than payments due on or
before the Cut-off Date, and exclusive of any amounts representing a Retained
Interest):
(i) all payments on account of principal, including principal prepayments,
on the Assets;
(ii) all payments on account of interest on the Assets, including any
default interest collected, in each case net of any portion thereof
retained by a Master Servicer, a Sub-Servicer or a Special Servicer as its
servicing compensation and net of any Retained Interest;
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(iii) all proceeds of the hazard, business interruption and general
liability insurance policies to be maintained in respect of each Mortgaged
Property securing a Whole Loan in the Trust Fund (to the extent such proceeds
are not applied to the restoration of the property or released to the mortgagor
in accordance with the normal servicing procedures of a Master Servicer or the
related Sub-Servicer, subject to the terms and conditions of the related
Mortgage and Mortgage Note) and all proceeds of rental interruption policies, if
any, insuring against losses arising from the failure of Lessees under a Lease
to make timely rental payments because of certain casualty events (collectively,
"Insurance Proceeds") and all other amounts received and retained in connection
with the liquidation of defaulted Mortgage Loans in the Trust Fund, by
foreclosure or otherwise ("Liquidation Proceeds"), together with the net
proceeds on a monthly basis with respect to any Mortgaged Properties acquired
for the benefit of Certificateholders by foreclosure or by deed in lieu of
foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as
described under "Description of Credit Support";
(v) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
(vi) any amounts representing Prepayment Premiums;
(vii) any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements";
(viii) all proceeds of any Asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by the Depositor, any Asset
Seller or any other specified person as described under "Assignment of
Assets; Repurchases" and "Representations and Warranties; Repurchases,"
all proceeds of any defaulted Mortgage Loan purchased as described under
"Realization Upon Defaulted Whole Loans," and all proceeds of any Asset
purchased as described under "Description of the Certificates Termination"
(also, "Liquidation Proceeds");
(ix) any amounts paid by a Master Servicer to cover certain interest
shortfalls arising out of the prepayment of Whole Loans in the Trust Fund
as described under "Description of the Agreements Retained Interest;
Servicing Compensation and Payment of Expenses";
(x) to the extent that any such item does not constitute additional
servicing compensation to a Master Servicer, any payments on account of
modification or assumption fees, late payment charges, Prepayment Premiums
or Equity Participations on the Mortgage Assets; (xi) all payments
required to be deposited in the Certificate Account with respect to any
deductible clause in any blanket insurance policy described under "Hazard
Insurance Policies";
(xii) any amount required to be deposited by a Master Servicer or the
Trustee in connection with losses realized on investments for the benefit
of the Master Servicer or the Trustee, as the case may be, of funds held
in the Certificate Account; and
(xiii) any other amounts required to be deposited in the Certificate
Account as provided in the related Agreement and described in the related
Prospectus Supplement.
Withdrawals
A Master Servicer or the Trustee may, from time to time, unless otherwise
provided in the related Agreement and described in the related Prospectus
Supplement, make withdrawals from the Certificate Account for each Trust Fund
for any of the following purposes:
(i) to make distributions to the Certificateholders on each Distribution
Date;
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(ii) to reimburse a Master Servicer for unreimbursed amounts advanced as
described under "Description of the Certificates Advances in Respect of
Delinquencies," such reimbursement to be made out of amounts received
which were identified and applied by the Master Servicer as late
collections of interest (net of related servicing fees and Retained
Interest) on and principal of the particular Whole Loans with respect to
which the advances were made or out of amounts drawn under any form of
Credit Support with respect to such Whole Loans;
(iii) to reimburse a Master Servicer for unpaid servicing fees earned and
certain unreimbursed servicing expenses incurred with respect to Whole
Loans and properties acquired in respect thereof, such reimbursement to be
made out of amounts that represent Liquidation Proceeds and Insurance
Proceeds collected on the particular Whole Loans and properties, and net
income collected on the particular properties, with respect to which such
fees were earned or such expenses were incurred or out of amounts drawn
under any form of Credit Support with respect to such Whole Loans and
properties;
(iv) to reimburse a Master Servicer for any advances described in clause
(ii) above and any servicing expenses described in clause (iii) above
which, in the Master Servicer's good faith judgment, will not be
recoverable from the amounts described in clauses (ii) and (iii),
respectively, such reimbursement to be made from amounts collected on
other Assets or, if and to the extent so provided by the related Agreement
and described in the related Prospectus Supplement, just from that portion
of amounts collected on other Assets that is otherwise distributable on
one or more classes of Subordinate Certificates, if any, remain
outstanding, and otherwise any outstanding class of Certificates, of the
related series;
(v) if and to the extent described in the related Prospectus Supplement,
to pay a Master Servicer interest accrued on the advances described in
clause (ii) above and the servicing expenses described in clause (iii)
above while such remain outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments with respect to, and for containment,
clean-up or remediation of hazardous wastes, substances and materials on,
Mortgaged Properties securing defaulted Whole Loans as described under
"Realization Upon Defaulted Whole Loans";
(vii) to reimburse a Master Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may be,
for certain expenses, costs and liabilities incurred thereby, as and to
the extent described under "Certain Matters Regarding a Master Servicer
and the Depositor";
(viii) if and to the extent described in the related Prospectus
Supplement, to pay (or to transfer to a separate account for purposes of
escrowing for the payment of) the Trustee's fees;
(ix) to reimburse the Trustee or any of its directors, officers, employees
and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under
"Certain Matters Regarding the Trustee";
(x) unless otherwise provided in the related Prospectus Supplement, to pay
a Master Servicer, as additional servicing compensation, interest and
investment income earned in respect of amounts held in the Certificate
Account;
(xi) to pay the person entitled thereto any amounts deposited in the
Certificate Account that were identified and applied by the Master
Servicer as recoveries of Retained Interest;
(xii) to pay for costs reasonably incurred in connection with the proper
operation, management and maintenance of any Mortgaged Property acquired
for the benefit of Certificateholders by foreclosure or by deed in lieu of
foreclosure or otherwise, such payments to be made out of income received
on such property;
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(xiii) if one or more elections have been made to treat the Trust Fund or
designated portions thereof as a REMIC, to pay any federal, state or local
taxes imposed on the Trust Fund or its assets or transactions, as and to
the extent described under "Certain Federal Income Tax
Consequences--REMICS--Prohibited Transactions Tax and Other Taxes";
(xiv) to pay for the cost of an independent appraiser or other expert in
real estate matters retained to determine a fair sale price for a
defaulted Whole Loan or a property acquired in respect thereof in
connection with the liquidation of such Whole Loan or property;
(xv) to pay for the cost of various opinions of counsel obtained pursuant
to the related Agreement for the benefit of Certificateholders;
(xvi) to pay for the costs of recording the related Agreement if such
recordation materially and beneficially affects the interests of
Certificateholders, provided that such payment shall not constitute a
waiver with respect to the obligation of the Warrantying Party to remedy
any breach of representation or warranty under the Agreement;
(xvii) to pay the person entitled thereto any amounts deposited in the
Certificate Account in error, including amounts received on any Asset
after its removal from the Trust Fund whether by reason of purchase or
substitution as contemplated by "Assignment of Assets; Repurchase" and
"Representations and Warranties; Repurchases" or otherwise;
(xviii) to make any other withdrawals permitted by the related Agreement
and described in the related Prospectus Supplement; and
(xix) to clear and terminate the Certificate Account at the termination of
the Trust Fund.
Other Collection Accounts
Notwithstanding the foregoing, if so specified in the related Prospectus
Supplement, the Agreement for any series of Certificates may provide for the
establishment and maintenance of a separate collection account into which the
Master Servicer or any related Sub-Servicer or Special Servicer will deposit on
a daily basis the amounts described under "--Deposits" above for one or more
series of Certificates. Any amounts on deposit in any such collection account
will be withdrawn therefrom and deposited into the appropriate Certificate
Account by a time specified in the related Prospectus Supplement. To the extent
specified in the related Prospectus Supplement, any amounts which could be
withdrawn from the Certificate Account as described under "--Withdrawals" above,
may also be withdrawn from any such collection account. The Prospectus
Supplement will set forth any restrictions with respect to any such collection
account, including investment restrictions and any restrictions with respect to
financial institutions with which any such collection account may be maintained.
Collection and Other Servicing Procedures
The Master Servicer, directly or through Sub-Servicers, is required to
make reasonable efforts to collect all scheduled payments under the Whole Loans
and will follow or cause to be followed such collection procedures as it would
follow with respect to mortgage loans that are comparable to the Whole Loans and
held for its own account, provided such procedures are consistent with (i) the
terms of the related Agreement and any related hazard, business interruption,
rental interruption or general liability insurance policy or instrument of
Credit Support included in the related Trust Fund described herein or under
"Description of Credit Support," (ii) applicable law and (iii) the general
servicing standard specified in the related Prospectus Supplement or, if no such
standard is so specified, its normal servicing practices (in either case, the
"Servicing Standard"). In connection therewith, the Master Servicer will be
permitted in its discretion to waive any late payment charge or penalty interest
in respect of a late Whole Loan payment.
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Each Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining (or causing
the mortgagor or Lessee on each Mortgage or Lease to maintain) hazard, business
interruption and general liability insurance policies (and, if applicable,
rental interruption policies) as described herein and in any related Prospectus
Supplement, and filing and settling claims thereunder; maintaining escrow or
impoundment accounts of mortgagors for payment of taxes, insurance and other
items required to be paid by any mortgagor pursuant to the Whole Loan;
processing assumptions or substitutions in those cases where the Master Servicer
has determined not to enforce any applicable due-on-sale clause; attempting to
cure delinquencies; supervising foreclosures; inspecting and managing Mortgaged
Properties under certain circumstances; and maintaining accounting records
relating to the Whole Loans. Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer will be responsible for filing and
settling claims in respect of particular Whole Loans under any applicable
instrument of Credit Support. See "Description of Credit Support."
The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan in a manner consistent with the Servicing Standard so long as the
modification, waiver or amendment will not (i) affect the amount or timing of
any scheduled payments of principal or interest on the Whole Loan or (ii) in its
judgment, materially impair the security for the Whole Loan or reduce the
likelihood of timely payment of amounts due thereon. The Master Servicer also
may agree to any modification, waiver or amendment that would so affect or
impair the payments on, or the security for, a Whole Loan if, unless otherwise
provided in the related Prospectus Supplement, (i) in its judgment, a material
default on the Whole Loan has occurred or a payment default is imminent and (ii)
in its judgment, such modification, waiver or amendment is reasonably likely to
produce a greater recovery with respect to the Whole Loan on a present value
basis than would liquidation. The Master Servicer is required to notify the
Trustee in the event of any modification, waiver or amendment of any Whole Loan.
Sub-Servicers
A Master Servicer may delegate its servicing obligations in respect of the
Whole Loans to third-party servicers (each, a "Sub-Servicer"), but such Master
Servicer will remain obligated under the related Agreement. Each sub-servicing
agreement between a Master Servicer and a Sub-Servicer (a "Sub-Servicing
Agreement") must be consistent with the terms of the related Agreement and must
provide that, if for any reason the Master Servicer for the related series of
Certificates is no longer acting in such capacity, the Trustee or any successor
Master Servicer may assume the Master Servicer's rights and obligations under
such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will be solely liable for all fees owed by it to any Sub-Servicer,
irrespective of whether the Master Servicer's compensation pursuant to the
related Agreement is sufficient to pay such fees. However, a Sub-Servicer may be
entitled to a Retained Interest in certain Whole Loans. Each Sub-Servicer will
be reimbursed by the Master Servicer for certain expenditures which it makes,
generally to the same extent the Master Servicer would be reimbursed under an
Agreement. See "Retained Interest, Servicing Compensation and Payment of
Expenses."
Special Servicers
To the extent so specified in the related Prospectus Supplement, a special
servicer (the "Special Servicer") may be appointed. The related Prospectus
Supplement will describe the rights, obligations and compensation of a Special
Servicer. The Master Servicer will only be responsible for the duties and
obligations of a Special Servicer to the extent set forth in the Prospectus
Supplement.
Realization Upon Defaulted Whole Loans
A mortgagor's failure to make required payments may reflect inadequate
income or the diversion of that income from the service of payments due under
the Mortgage Loan, and may call into question such mortgagor's ability to make
timely payment of taxes and to pay for necessary maintenance of the related
Mortgaged Property. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer is required to monitor any Whole Loan which is
in default, contact the mortgagor concerning the default, evaluate whether the
causes of the default can be cured over a reasonable period without significant
impairment of the value of the Mortgaged
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Property, initiate corrective action in cooperation with the mortgagor if cure
is likely, inspect the Mortgaged Property and take such other actions as are
consistent with the Servicing Standard. A significant period of time may elapse
before the Master Servicer is able to assess the success of such corrective
action or the need for additional initiatives.
The time within which the Master Servicer makes the initial determination
of appropriate action, evaluates the success of corrective action, develops
additional initiatives, institutes foreclosure proceedings and actually
forecloses (or takes a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders, may vary considerably depending on the
particular Whole Loan, the Mortgaged Property, the mortgagor, the presence of an
acceptable party to assume the Whole Loan and the laws of the jurisdiction in
which the Mortgaged Property is located. Under federal bankruptcy law, the
Master Servicer in certain cases may not be permitted to accelerate a Whole Loan
or to foreclose on a Mortgaged Property for a considerable period of time. See
"Certain Legal Aspects of the Mortgage--Loans and the Leases."
Any Agreement relating to a Trust Fund that includes Whole Loans may grant
to the Master Servicer and/or the holder or holders of certain classes of
Certificates a right of first refusal to purchase from the Trust Fund at a
predetermined purchase price any such Whole Loan as to which a specified number
of scheduled payments thereunder are delinquent. Any such right granted to the
holder of an Offered Certificate will be described in the related Prospectus
Supplement. The related Prospectus Supplement will also describe any such right
granted to any person if the predetermined purchase price is less than the
Purchase Price described under "Representations and Warranties; Repurchases."
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer may offer to sell any defaulted Whole Loan described in the
preceding paragraph and not otherwise purchased by any person having a right of
first refusal with respect thereto, if and when the Master Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a greater
recovery on a present value basis than would liquidation through foreclosure or
similar proceeding. The related Agreement will provide that any such offering be
made in a commercially reasonable manner for a specified period and that the
Master Servicer accept the highest cash bid received from any person (including
itself, an affiliate of the Master Servicer or any Certificateholder) that
constitutes a fair price for such defaulted Whole Loan. In the absence of any
bid determined in accordance with the related Agreement to be fair, the Master
Servicer shall proceed with respect to such defaulted Mortgage Loan as described
below. Any bid in an amount at least equal to the Purchase Price described under
"Representations and Warranties; Repurchases" will in all cases be deemed fair.
The Master Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any mortgage,
obtain a deed in lieu of foreclosure, or otherwise acquire title to a Mortgaged
Property securing a Whole Loan by operation of law or otherwise, if such action
is consistent with the Servicing Standard and a default on such Whole Loan has
occurred or, in the Master Servicer's judgment, is imminent. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer may not
acquire title to any related Mortgaged Property or take any other action that
would cause the Trustee, for the benefit of Certificateholders, or any other
specified person to be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or an "operator" of such
Mortgaged Property within the meaning of certain federal environmental laws,
unless the Master Servicer has previously determined, based on a report prepared
by a person who regularly conducts environmental audits (which report will be an
expense of the Trust Fund), that either:
(i) the Mortgaged Property is in compliance with applicable environmental
laws, and there are no circumstances present at the Mortgaged Property
relating to the use, management or disposal of any hazardous substances,
hazardous materials, wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or regulation; or
(ii) if the Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic
interest of the Trust Fund to acquire title to the Mortgaged Property and
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further to take such actions as would be necessary and appropriate to
effect such compliance and/or respond to such circumstances (the cost of
which actions will be an expense of the Trust Fund).
Unless otherwise provided in the related Prospectus Supplement, if title
to any Mortgaged Property is acquired by a Trust Fund as to which a REMIC
election has been made, the Master Servicer, on behalf of the Trust Fund, will
be required to sell the Mortgaged Property prior to the close of the third
calendar year following the year of acquisition of such Mortgaged Property by
the Trust Fund, unless (i) the Internal Revenue Service grants an extension of
time to sell such property or (ii) the Trustee receives an opinion of
independent counsel to the effect that the holding of the property by the Trust
Fund subsequent to such period will not result in the imposition of a tax on the
Trust Fund or cause the Trust Fund to fail to qualify as a REMIC under the Code
at any time that any Certificate is outstanding. Subject to the foregoing, the
Master Servicer will be required to (i) solicit bids for any Mortgaged Property
so acquired in such a manner as will be reasonably likely to realize a fair
price for such property and (ii) accept the first (and, if multiple bids are
contemporaneously received, the highest) cash bid received from any person that
constitutes a fair price.
If the Trust Fund acquires title to any Mortgaged Property, the Master
Servicer, on behalf of the Trust Fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the Master Servicer of any of its obligations with
respect to the management and operation of such Mortgaged Property. Unless
otherwise specified in the related Prospectus Supplement, any such property
acquired by the Trust Fund will be managed in a manner consistent with the
management and operation of similar property by a prudent lending institution.
The limitations imposed by the related Agreement and the REMIC provisions
of the Code (if a REMIC election has been made with respect to the related Trust
Fund) on the operations and ownership of any Mortgaged Property acquired on
behalf of the Trust Fund may result in the recovery of an amount less than the
amount that would otherwise be recovered. See "Certain Legal Aspects of the
Mortgage Loans and the Leases--Foreclosure."
If recovery on a defaulted Whole Loan under any related instrument of
Credit Support is not available, the Master Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and procedures
as it deems necessary or advisable to realize upon the defaulted Whole Loan. If
the proceeds of any liquidation of the property securing the defaulted Whole
Loan are less than the outstanding principal balance of the defaulted Whole Loan
plus interest accrued thereon at the Mortgage Rate plus the aggregate amount of
expenses incurred by the Master Servicer in connection with such proceedings and
which are reimbursable under the Agreement, the Trust Fund will realize a loss
in the amount of such difference. The Master Servicer will be entitled to
withdraw or cause to be withdrawn from the Certificate Account out of the
Liquidation Proceeds recovered on any defaulted Whole Loan, prior to the
distribution of such Liquidation Proceeds to Certificateholders, amounts
representing its normal servicing compensation on the Whole Loan, unreimbursed
servicing expenses incurred with respect to the Whole Loan and any unreimbursed
advances of delinquent payments made with respect to the Whole Loan.
If any property securing a defaulted Whole Loan is damaged and proceeds,
if any, from the related hazard insurance policy are insufficient to restore the
damaged property to a condition sufficient to permit recovery under the related
instrument of Credit Support, if any, the Master Servicer is not required to
expend its own funds to restore the damaged property unless it determines (i)
that such restoration will increase the proceeds to Certificateholders on
liquidation of the Whole Loan after reimbursement of the Master Servicer for its
expenses and (ii) that such expenses will be recoverable by it from related
Insurance Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans, a Master Servicer, on behalf of itself,
the Trustee and the Certificateholders, will present claims to the obligor under
each instrument of Credit Support, and will take such reasonable steps as are
necessary to receive payment or to permit recovery thereunder with respect to
defaulted Whole Loans.
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from the
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Certificate Account out of such proceeds, prior to distribution thereof to
Certificateholders, amounts representing its normal servicing compensation on
such Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan. See "Hazard Insurance Policies" and "Description of
Credit Support."
Hazard Insurance Policies
Unless otherwise specified in the related Prospectus Supplement, each
Agreement for a Trust Fund that includes Whole Loans will require the Master
Servicer to cause the mortgagor on each Whole Loan to maintain a hazard
insurance policy providing for such coverage as is required under the related
Mortgage or, if any Mortgage permits the holder thereof to dictate to the
mortgagor the insurance coverage to be maintained on the related Mortgaged
Property, then such coverage as is consistent with the Servicing Standard.
Unless otherwise specified in the related Prospectus Supplement, such coverage
will be in general in an amount equal to the lesser of the principal balance
owing on such Whole Loan and the amount necessary to fully compensate for any
damage or loss to the improvements on the Mortgaged Property on a replacement
cost basis, but in either case not less than the amount necessary to avoid the
application of any co-insurance clause contained in the hazard insurance policy.
The ability of the Master Servicer to assure that hazard insurance proceeds are
appropriately applied may be dependent upon its being named as an additional
insured under any hazard insurance policy and under any other insurance policy
referred to below, or upon the extent to which information in this regard is
furnished by mortgagors. All amounts collected by the Master Servicer under any
such policy (except for amounts to be applied to the restoration or repair of
the Mortgaged Property or released to the mortgagor in accordance with the
Master Servicer's normal servicing procedures, subject to the terms and
conditions of the related Mortgage and Mortgage Note) will be deposited in the
Certificate Account. The Agreement will provide that the Master Servicer may
satisfy its obligation to cause each mortgagor to maintain such a hazard
insurance policy by the Master Servicer's maintaining a blanket policy insuring
against hazard losses on the Whole Loans. If such blanket policy contains a
deductible clause, the Master Servicer will be required to deposit in the
Certificate Account all sums that would have been deposited therein but for such
clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Whole Loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most such policies typically do not cover any physical damage resulting from
war, revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mudflows), wet or dry rot,
vermin, domestic animals and certain other kinds of uninsured risks.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that in effect
requires the insured at all times to carry insurance of a specified percentage
(generally 80% to 90%) of the full replacement value of the improvements on the
property in order to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, such clause generally
provides that the insurer's liability in the event of partial loss does not
exceed the lesser of (i) the replacement cost of the improvements less physical
depreciation and (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
Each Agreement for a Trust Fund that includes Whole Loans will require the
Master Servicer to cause the mortgagor on each Whole Loan, or, in certain cases,
the related Lessee, to maintain all such other insurance coverage with respect
to the related Mortgaged Property as is consistent with the terms of the related
Mortgage and the Servicing Standard, which insurance may typically include flood
insurance (if the related Mortgaged Property was located at the time of
origination in a federally designated flood area).
In addition, to the extent required by the related Mortgage, the Master
Servicer may require the mortgagor or related Lessee to maintain other forms of
insurance including, but not limited to, loss of rent endorsements,
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business interruption insurance and comprehensive public liability insurance,
and the related Agreement may require the Master Servicer, Sub-Servicer or
Special Servicer to maintain public liability insurance with respect to any REO
Properties. Any cost incurred by the Master Servicer in maintaining any such
insurance policy will be added to the amount owing under the Mortgage Loan where
the terms of the Mortgage Loan so permit; provided, however, that the addition
of such cost will not be taken into account for purposes of calculating the
distribution to be made to Certificateholders. Such costs may be recovered by
the Master Servicer, Sub-Servicer or Special Servicer, as the case may be, from
the Collection Account, with interest thereon, as provided by the Agreement.
Under the terms of the Whole Loans, mortgagors will generally be required
to present claims to insurers under hazard insurance policies maintained on the
related Mortgaged Properties. The Master Servicer, on behalf of the Trustee and
Certificateholders, is obligated to present or cause to be presented claims
under any blanket insurance policy insuring against hazard losses on Mortgaged
Properties securing the Whole Loans. However, the ability of the Master Servicer
to present or cause to be presented such claims is dependent upon the extent to
which information in this regard is furnished to the Master Servicer by
mortgagors.
Rental Interruption Insurance Policy
If so specified in the related Prospectus Supplement, the Master Servicer
or the mortgagors will maintain rental interruption insurance policies in full
force and effect with respect to some or all of the Leases. Although the terms
of such policies vary to some degree, a rental interruption insurance policy
typically provides that, to the extent that a Lessee fails to make timely rental
payments under the related Lease due to a casualty event, such losses will be
reimbursed to the insured. If so specified in the related Prospectus Supplement,
the Master Servicer will be required to pay from its servicing compensation the
premiums on the rental interruption policy on a timely basis. If so specified in
the Prospectus Supplement, if such rental interruption policy is canceled or
terminated for any reason (other than the exhaustion of total policy coverage),
the Master Servicer will exercise its best reasonable efforts to obtain from
another insurer a replacement policy comparable to the rental interruption
policy with a total coverage that is equal to the then existing coverage of the
terminated rental interruption policy; provided that if the cost of any such
replacement policy is greater than the cost of the terminated rental
interruption policy, the amount of coverage under the replacement policy will,
unless otherwise specified in the related Prospectus Supplement, be reduced to a
level such that the applicable premium does not exceed, by a percentage that may
be set forth in the related Prospectus Supplement, the cost of the rental
interruption policy that was replaced. Any amounts collected by the Master
Servicer under the rental interruption policy in the nature of insurance
proceeds will be deposited in the Certificate Account.
Fidelity Bonds and Errors and Omissions Insurance
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will require that the Master Servicer and any Special Servicer obtain
and maintain in effect a fidelity bond or similar form of insurance coverage
(which may provide blanket coverage) or any combination thereof insuring against
loss occasioned by fraud, theft or other intentional misconduct of the officers,
employees and agents of the Master Servicer or the Special Servicer, as
applicable. The related Agreement will allow the Master Servicer and any Special
Servicer to self-insure against loss occasioned by the errors and omissions of
the officers, employees and agents of the Master Servicer or the Special
Servicer so long as certain criteria set forth in the Agreement are met.
Due-on-Sale and Due-on-Encumbrance Provisions
Certain of the Whole Loans may contain clauses requiring the consent of
the mortgagee to any sale or other transfer of the related Mortgaged Property,
or due-on-sale clauses entitling the mortgagee to accelerate payment of the
Whole Loan upon any sale or other transfer of the related Mortgaged Property.
Certain of the Whole Loans may contain clauses requiring the consent of the
mortgagee to the creation of any other lien or encumbrance on the Mortgaged
Property or due-on-encumbrance clauses entitling the mortgagee to accelerate
payment of the Whole Loan upon the creation of any other lien or encumbrance
upon the Mortgaged Property. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer, on behalf of the Trust Fund, will exercise any
right the Trustee may have as mortgagee to accelerate payment of any such Whole
Loan or to withhold its consent to any
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transfer or further encumbrance in a manner consistent with the Servicing
Standard. Unless otherwise specified in the related Prospectus Supplement, any
fee collected by or on behalf of the Master Servicer for entering into an
assumption agreement will be retained by or on behalf of the Master Servicer as
additional servicing compensation. See "Certain Legal Aspects of the Mortgage
Loans and the Leases--Due-on-Sale and Due-on-Encumbrance."
Retained Interest; Servicing Compensation and Payment of Expenses
The Prospectus Supplement for a series of Certificates will specify
whether there will be any Retained Interest in the Assets, and, if so, the
initial owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related Agreement.
A "Retained Interest" in an Asset represents a specified portion of the interest
payable thereon. The Retained Interest will be deducted from mortgagor
payments as received and will not be part of the related Trust Fund.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer's and a Sub-Servicer's primary servicing compensation with
respect to a series of Certificates will come from the periodic payment to it of
a portion of the interest payment on each Asset. Since any Retained Interest and
a Master Servicer's primary compensation are percentages of the principal
balance of each Asset, such amounts will decrease in accordance with the
amortization of the Assets. The Prospectus Supplement with respect to a series
of Certificates evidencing interests in a Trust Fund that includes Whole Loans
may provide that, as additional compensation, the Master Servicer or the
Sub-Servicers may retain all or a portion of assumption fees, modification fees,
late payment charges or Prepayment Premiums collected from mortgagors and any
interest or other income which may be earned on funds held in the Certificate
Account or any account established by a Sub-Servicer pursuant to the Agreement.
The Master Servicer may, to the extent provided in the related Prospectus
Supplement, pay from its servicing compensation certain expenses incurred in
connection with its servicing and managing of the Assets, including, without
limitation, payment of the fees and disbursements of the Trustee and independent
accountants, payment of expenses incurred in connection with distributions and
reports to Certificateholders, and payment of any other expenses described in
the related Prospectus Supplement. Certain other expenses, including certain
expenses relating to defaults and liquidations on the Whole Loans and, to the
extent so provided in the related Prospectus Supplement, interest thereon at the
rate specified therein, and the fees of any Special Servicer, may be borne by
the Trust Fund.
Evidence as to Compliance
Each Agreement relating to Assets which include Whole Loans will provide
that on or before a specified date in each year, beginning with the first such
date at least six months after the related Cut-off Date, a firm of independent
public accountants will furnish a statement to the Trustee to the effect that,
on the basis of the examination by such firm conducted substantially in
compliance with either the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for the Federal Home Loan
Mortgage Corporation ("FHLMC"), the servicing by or on behalf of the Master
Servicer of mortgage loans under pooling and servicing agreements substantially
similar to each other (including the related Agreement) was conducted in
compliance with the terms of such agreements except for any significant
exceptions or errors in records that, in the opinion of the firm, either the
Audit Program for Mortgages serviced for FHLMC, or paragraph 4 of the Uniform
Single Attestation Program for Mortgage Bankers, requires it to report. In
rendering its statement such firm may rely, as to matters relating to the direct
servicing of mortgage loans by Sub-Servicers, upon comparable statements for
examinations conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC (rendered within one year of such statement) of firms of
independent public accountants with respect to the related Sub-Servicer.
Each such Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding calendar
year or other specified twelve-month period.
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Unless otherwise provided in the related Prospectus Supplement, copies of
such annual accountants' statement and such statements of officers will be
obtainable by Certificateholders without charge upon written request to the
Master Servicer at the address set forth in the related Prospectus Supplement.
Certain Matters Regarding a Master Servicer and the Depositor
The Master Servicer, if any, or a servicer for substantially all the Whole
Loans under each Agreement will be named in the related Prospectus Supplement.
The entity serving as Master Servicer (or as such servicer) may be an affiliate
of the Depositor and may have other normal business relationships with the
Depositor or the Depositor's affiliates. Reference herein to the Master Servicer
shall be deemed to be to the servicer of substantially all of the Whole Loans,
if applicable.
Unless otherwise specified in the related Prospectus Supplement, the
related Agreement will provide that the Master Servicer may resign from its
obligations and duties thereunder only upon a determination that its duties
under the Agreement are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it, the other activities of the Master Servicer so causing such a conflict
being of a type and nature carried on by the Master Servicer at the date of the
Agreement. No such resignation will become effective until the Trustee or a
successor servicer has assumed the Master Servicer's obligations and duties
under the Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will further provide that neither any Master Servicer, the Depositor
nor any director, officer, employee, or agent of a Master Servicer or the
Depositor will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be protected
against any breach of a representation, warranty or covenant made in such
Agreement, or against any liability specifically imposed thereby, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of obligations or duties thereunder
or by reason of reckless disregard of obligations and duties thereunder. Unless
otherwise specified in the related Prospectus Supplement, each Agreement will
further provide that any Master Servicer, the Depositor and any director,
officer, employee or agent of a Master Servicer or the Depositor will be
entitled to indemnification by the related Trust Fund and will be held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to the Agreement or the Certificates; provided, however, that
such indemnification will not extend to any loss, liability or expense (i)
specifically imposed by such Agreement or otherwise incidental to the
performance of obligations and duties thereunder, including, in the case of a
Master Servicer, the prosecution of an enforcement action in respect of any
specific Whole Loan or Whole Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to such Agreement); (ii)
incurred in connection with any breach of a representation, warranty or covenant
made in such Agreement; (iii) incurred by reason of misfeasance, bad faith or
gross negligence in the performance of obligations or duties thereunder, or by
reason of reckless disregard of such obligations or duties; (iv) incurred in
connection with any violation of any state or federal securities law; or (v)
imposed by any taxing authority if such loss, liability or expense is not
specifically reimbursable pursuant to the terms of the related Agreement. In
addition, each Agreement will provide that neither any Master Servicer nor the
Depositor will be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its respective responsibilities under
the Agreement and which in its opinion may involve it in any expense or
liability. Any such Master Servicer or the Depositor may, however, in its
discretion undertake any such action which it may deem necessary or desirable
with respect to the Agreement and the rights and duties of the parties thereto
and the interests of the Certificateholders thereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom will be
expenses, costs and liabilities of the Certificateholders, and the Master
Servicer or the Depositor, as the case may be, will be entitled to be reimbursed
therefor and to charge the Certificate Account.
Any person into which the Master Servicer or the Depositor may be merged
or consolidated, or any person resulting from any merger or consolidation to
which the Master Servicer or the Depositor is a party, or any person succeeding
to the business of the Master Servicer or the Depositor, will be the successor
of the Master Servicer or the Depositor, as the case may be, under the related
Agreement.
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Events of Default
Unless otherwise provided in the related Prospectus Supplement for a Trust
Fund that includes Whole Loans, Events of Default under the related Agreement
will include (i) any failure by the Master Servicer to distribute or cause to be
distributed to Certificateholders, or to remit to the Trustee for distribution
to Certificateholders, any required payment; (ii) any failure by the Master
Servicer duly to observe or perform in any material respect any of its other
covenants or obligations under the Agreement which continues unremedied for
thirty days after written notice of such failure has been given to the Master
Servicer by the Trustee or the Depositor, or to the Master Servicer, the
Depositor and the Trustee by the holders of Certificates evidencing not less
than 25% of the Voting Rights; (iii) any breach of a representation or warranty
made by the Master Servicer under the Agreement which materially and adversely
affects the interests of Certificateholders and which continues unremedied for
thirty days after written notice of such breach has been given to the Master
Servicer by the Trustee or the Depositor, or to the Master Servicer, the
Depositor and the Trustee by the holders of Certificates evidencing not less
than 25% of the Voting Rights; and (iv) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings and certain actions by or on behalf of the Master Servicer
indicating its insolvency or inability to pay its obligations. Material
variations to the foregoing Events of Default (other than to shorten cure
periods or eliminate notice requirements) will be specified in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the Trustee shall, not later than the later of 60 days after the
occurrence of any event which constitutes or, with notice or lapse of time or
both, would constitute an Event of Default and five days after certain officers
of the Trustee become aware of the occurrence of such an event, transmit by mail
to the Depositor and all Certificateholders of the applicable series notice of
such occurrence, unless such default shall have been cured or waived.
Rights Upon Event of Default
So long as an Event of Default under an Agreement remains unremedied, the
Depositor or the Trustee may, and at the direction of holders of Certificates
evidencing not less than 51% of the Voting Rights, the Trustee shall, terminate
all of the rights and obligations of the Master Servicer under the Agreement and
in and to the Mortgage Loans (other than as a Certificateholder or as the owner
of any Retained Interest), whereupon the Trustee will succeed to all of the
responsibilities, duties and liabilities of the Master Servicer under the
Agreement (except that if the Trustee is prohibited by law from obligating
itself to make advances regarding delinquent mortgage loans, or if the related
Prospectus Supplement so specifies, then the Trustee will not be obligated to
make such advances) and will be entitled to similar compensation arrangements.
Unless otherwise specified in the related Prospectus Supplement, in the event
that the Trustee is unwilling or unable so to act, it may or, at the written
request of the holders of Certificates entitled to at least 51% of the Voting
Rights, it shall appoint, or petition a court of competent jurisdiction for the
appointment of, a loan servicing institution acceptable to the Rating Agency
with a net worth at the time of such appointment of at least $15,000,000 to act
as successor to the Master Servicer under the Agreement. Pending such
appointment, the Trustee is obligated to act in such capacity. The Trustee and
any such successor may agree upon the servicing compensation to be paid, which
in no event may be greater than the compensation payable to the Master Servicer
under the Agreement.
Unless otherwise described in the related Prospectus Supplement, the
holders of Certificates representing at least 66 2/3% of the Voting Rights
allocated to the respective classes of Certificates affected by any Event of
Default will be entitled to waive such Event of Default; provided, however, that
an Event of Default involving a failure to distribute a required payment to
Certificateholders described in clause (i) under "Events of Default" may be
waived only by all of the Certificateholders. Upon any such waiver of an Event
of Default, such Event of Default shall cease to exist and shall be deemed to
have been remedied for every purpose under the Agreement.
No Certificateholder will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given to
the Trustee written notice of default and unless the holders of Certificates
evidencing not less than 25% of the Voting Rights have made written request upon
the Trustee to institute such proceeding in its own name as Trustee thereunder
and have offered to the Trustee reasonable indemnity, and the Trustee for sixty
days has neglected or refused to institute any such proceeding. The Trustee,
however, is under no obligation to exercise any of the trusts or powers vested
in it by any Agreement or to make
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any investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Certificates covered by such Agreement,
unless such Certificateholders have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
Amendment
Each Agreement may be amended by the parties thereto without the consent
of any of the holders of Certificates covered by the Agreement, (i) to cure any
ambiguity, (ii) to correct, modify or supplement any provision therein which may
be inconsistent with any other provision therein, (iii) to make any other
provisions with respect to matters or questions arising under the Agreement
which are not inconsistent with the provisions thereof, or (iv) to comply with
any requirements imposed by the Code; provided that such amendment (other than
an amendment for the purpose specified in clause (iv) above) will not (as
evidenced by an opinion of counsel to such effect) adversely affect in any
material respect the interests of any holder of Certificates covered by the
Agreement. Unless otherwise specified in the related Prospectus Supplement, each
Agreement may also be amended by the Depositor, the Master Servicer, if any, and
the Trustee, with the consent of the holders of Certificates affected thereby
evidencing not less than 51% of the Voting Rights, for any purpose; provided,
however, that unless otherwise specified in the related Prospectus Supplement,
no such amendment may (i) reduce in any manner the amount of or delay the timing
of, payments received or advanced on Mortgage Loans which are required to be
distributed on any Certificate without the consent of the holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
holders of any class of Certificates in a manner other than as described in (i),
without the consent of the holders of all Certificates of such class or (iii)
modify the provisions of such Agreement described in this paragraph without the
consent of the holders of all Certificates covered by such Agreement then
outstanding. However, with respect to any series of Certificates as to which a
REMIC election is to be made, the Trustee will not consent to any amendment of
the Agreement unless it shall first have received an opinion of counsel to the
effect that such amendment will not result in the imposition of a tax on the
related Trust Fund or cause the related Trust Fund to fail to qualify as a REMIC
at any time that the related Certificates are outstanding.
The Trustee
The Trustee under each Agreement will be named in the related Prospectus
Supplement. The commercial bank, national banking association, banking
corporation or trust company serving as Trustee may have a banking relationship
with the Depositor and its affiliates and with any Master Servicer and its
affiliates.
Duties of the Trustee
The Trustee will make no representations as to the validity or sufficiency
of any Agreement, the Certificates or any Asset or related document and is not
accountable for the use or application by or on behalf of any Master Servicer of
any funds paid to the Master Servicer or its designee or any Special Servicer in
respect of the Certificates or the Assets, or deposited into or withdrawn from
the Certificate Account or any other account by or on behalf of the Master
Servicer or any Special Servicer. If no Event of Default has occurred and is
continuing, the Trustee is required to perform only those duties specifically
required under the related Agreement. However, upon receipt of the various
certificates, reports or other instruments required to be furnished to it, the
Trustee is required to examine such documents and to determine whether they
conform to the requirements of the Agreement.
Certain Matters Regarding the Trustee
Unless otherwise specified in the related Prospectus Supplement, the
Trustee and any director, officer, employee or agent of the Trustee shall be
entitled to indemnification out of the Certificate Account for any loss,
liability or expense (including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in settlement)
incurred in connection with the Trustee's (i) enforcing its rights and remedies
and protecting the interests, and enforcing the rights and remedies, of the
Certificateholders during the continuance of an Event of Default, (ii) defending
or prosecuting any legal action in respect of the related Agreement or series of
Certificates, (iii) being the mortgagee of record with respect to the Mortgage
Loans in a
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Trust Fund and the owner of record with respect to any Mortgaged
Property acquired in respect thereof for the benefit of Certificateholders, or
(iv) acting or refraining from acting in good faith at the direction of the
holders of the related series of Certificates entitled to not less than 25% (or
such higher percentage as is specified in the related Agreement with respect to
any particular matter) of the Voting Rights for such series; provided, however,
that such indemnification will not extend to any loss, liability or expense that
constitutes a specific liability of the Trustee pursuant to the related
Agreement, or to any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence on the part of the Trustee in the
performance of its obligations and duties thereunder, or by reason of its
reckless disregard of such obligations or duties, or as may arise from a breach
of any representation, warranty or covenant of the Trustee made therein.
Resignation and Removal of the Trustee
The Trustee may at any time resign from its obligations and duties under
an Agreement by giving written notice thereof to the Depositor, the Master
Servicer, if any, and all Certificateholders. Upon receiving such notice of
resignation, the Depositor is required promptly to appoint a successor trustee
acceptable to the Master Servicer, if any. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as such
under the related Agreement, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Depositor
may remove the Trustee and appoint a successor trustee acceptable to the Master
Servicer, if any. Holders of the Certificates of any series entitled to at least
51% of the Voting Rights for such series may at any time remove the Trustee
without cause and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee shall not become effective until acceptance of appointment by the
successor trustee.
DESCRIPTION OF CREDIT SUPPORT
General
For any series of Certificates, Credit Support may be provided with
respect to one or more classes thereof or the related Assets. Credit Support may
be in the form of the subordination of one or more classes of Certificates,
letters of credit, insurance policies, guarantees, the establishment of one or
more reserve funds or another method of Credit Support described in the related
Prospectus Supplement, or any combination of the foregoing. If so provided in
the related Prospectus Supplement, any form of Credit Support may be structured
so as to be drawn upon by more than one series to the extent described therein.
Unless otherwise provided in the related Prospectus Supplement for a
series of Certificates, the Credit Support will not provide protection against
all risks of loss and will not guarantee repayment of the entire Certificate
Balance of the Certificates and interest thereon. If losses or shortfalls occur
that exceed the amount covered by Credit Support or that are not covered by
Credit Support, Certificateholders will bear their allocable share of
deficiencies. Moreover, if a form of Credit Support covers more than one series
of Certificates (each, a "Covered Trust"), holders of Certificates evidencing
interests in any of such Covered Trusts will be subject to the risk that such
Credit Support will be exhausted by the claims of other Covered Trusts prior to
such Covered Trust receiving any of its intended share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or the related Assets, the related Prospectus
Supplement will include a description of (a) the nature and amount of coverage
under such Credit Support, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the amount
of coverage under such Credit Support may be reduced and under which such
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Credit Support may be terminated or replaced and (d) the material provisions
relating to such Credit Support. Additionally, the related Prospectus Supplement
will set forth certain information with respect to the obligor under any
instrument of Credit Support, including (i) a brief description of its principal
business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (iii) if applicable, the identity of regulatory agencies that exercise
primary jurisdiction over the conduct of its business and (iv) its total assets,
and its stockholders' or policyholders' surplus, if applicable, as of the date
specified in the Prospectus Supplement. See "Risk Factors--Credit Support
Limitations."
Subordinate Certificates
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Certificates to receive distributions of principal and interest from
the Certificate Account on any Distribution Date will be subordinated to such
rights of the holders of Senior Certificates. If so provided in the related
Prospectus Supplement, the subordination of a class may apply only in the event
of (or may be limited to) certain types of losses or shortfalls. The related
Prospectus Supplement will set forth information concerning the amount of
subordination of a class or classes of Subordinate Certificates in a series, the
circumstances in which such subordination will be applicable and the manner, if
any, in which the amount of subordination will be effected.
Cross-Support Provisions
If the Assets for a series are divided into separate groups, each
supporting a separate class or classes of Certificates of a series, credit
support may be provided by cross-support provisions requiring that distributions
be made on Senior Certificates evidencing interests in one group of Mortgage
Assets prior to distributions on Subordinate Certificates evidencing interests
in a different group of Mortgage Assets within the Trust Fund. The Prospectus
Supplement for a series that includes a cross-support provision will describe
the manner and conditions for applying such provisions.
Insurance or Guarantees with Respect to the Whole Loans
If so provided in the Prospectus Supplement for a series of Certificates,
the Whole Loans in the related Trust Fund will be covered for various default
risks by insurance policies or guarantees. A copy of any such material
instrument for a series will be filed with the Commission as an exhibit to a
Current Report on Form 8-K to be filed within 15 days of issuance of the
Certificates of the related series.
Letter of Credit
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such Prospectus Supplement (the "L/C
Bank"). Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, generally equal to a percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Assets on the
related Cut-off Date or of the initial aggregate Certificate Balance of one or
more classes of Certificates. If so specified in the related Prospectus
Supplement, the letter of credit may permit draws in the event of only certain
types of losses and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments
thereunder and may otherwise be reduced as described in the related Prospectus
Supplement. The obligations of the L/C Bank under the letter of credit for each
series of Certificates will expire at the earlier of the date specified in the
related Prospectus Supplement or the termination of the Trust Fund. A copy of
any such letter of credit for a series will be filed with the Commission as an
exhibit to a Current Report on Form 8-K to be filed within 15 days of issuance
of the Certificates of the related series.
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Insurance Policies and Surety Bonds
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of Certificates of the related
series, timely distributions of interest and/or full distributions of principal
on the basis of a schedule of principal distributions set forth in or determined
in the manner specified in the related Prospectus Supplement. A copy of any such
instrument for a series will be filed with the Commission as an exhibit to a
Current Report on Form 8-K to be filed with the Commission within 15 days of
issuance of the Certificates of the related series.
Reserve Funds
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more reserve funds in which cash, a
letter of credit, Permitted Investments, a demand note or a combination thereof
will be deposited, in the amounts so specified in such Prospectus Supplement.
The reserve funds for a series may also be funded over time by depositing
therein a specified amount of the distributions received on the related Assets
as specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the Certificates. If so specified in the related
Prospectus Supplement, reserve funds may be established to provide limited
protection against only certain types of losses and shortfalls. Following each
Distribution Date amounts in a reserve fund in excess of any amount required to
be maintained therein may be released from the reserve fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not be
available for further application to the Certificates.
Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, any
reinvestment income or other gain from such investments will be credited to the
related Reserve Fund for such series, and any loss resulting from such
investments will be charged to such Reserve Fund. However, such income may be
payable to any related Master Servicer or another service provider as additional
compensation. The Reserve Fund, if any, for a series will not be a part of the
Trust Fund unless otherwise specified in the related Prospectus Supplement.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which such required balance will decrease over time, the manner of funding such
Reserve Fund, the purposes for which funds in the Reserve Fund may be applied to
make distributions to Certificateholders and use of investment earnings from the
Reserve Fund, if any.
Credit Support with respect to MBS
If so provided in the Prospectus Supplement for a series of Certificates,
the MBS in the related Trust Fund and/or the Mortgage Loans underlying such MBS
may be covered by one or more of the types of Credit Support described herein.
The related Prospectus Supplement will specify as to each such form of Credit
Support the information indicated above with respect thereto, to the extent such
information is material and available.
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CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do not
purport to be complete nor to reflect the laws of any particular state, nor to
encompass the laws of all states in which the security for the Mortgage Loans is
situated. The summaries are qualified in their entirety by reference to the
applicable federal and state laws governing the Mortgage Loans. See "Description
of the Trust Funds--Assets."
General
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which may
be mortgages, deeds of trust, security deeds or deeds to secure debt, depending
upon the prevailing practice and law in the state in which the Mortgaged
Property is located. Mortgages, deeds of trust and deeds to secure debt are
herein collectively referred to as "mortgages." Any of the foregoing types of
mortgages will create a lien upon, or grant a title interest in, the subject
property, the priority of which will depend on the terms of the particular
security instrument, as well as separate, recorded, contractual arrangements
with others holding interests in the mortgaged property, the knowledge of the
parties to such instrument as well as the order of recordation of the instrument
in the appropriate public recording office. However, recording does not
generally establish priority over governmental claims for real estate taxes and
assessments and other charges imposed under governmental police powers.
Types of Mortgage Instruments
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties--a mortgagor (the borrower and usually the
owner of the subject property) and a mortgagee (the lender). In contrast, a deed
of trust is a three-party instrument, among a trustor (the equivalent of a
mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "mortgagor" includes the
trustor under a deed of trust and a grantor under a security deed or a deed to
secure debt. Under a deed of trust, the mortgagor grants the property,
irrevocably until the debt is paid, in trust, generally with a power of sale as
security for the indebtedness evidenced by the related note. A deed to secure
debt typically has two parties. By executing a deed to secure debt, the grantor
conveys title to, as opposed to merely creating a lien upon, the subject
property to the grantee until such time as the underlying debt is repaid,
generally with a power of sale as security for the indebtedness evidenced by the
related mortgage note. In case the mortgagor under a mortgage is a land trust,
there would be an additional party because legal title to the property is held
by a land trustee under a land trust agreement for the benefit of the mortgagor.
At origination of a mortgage loan involving a land trust, the mortgagor executes
a separate undertaking to make payments on the mortgage note. The mortgagee's
authority under a mortgage, the trustee's authority under a deed of trust and
the grantee's authority under a deed to secure debt are governed by the express
provisions of the mortgage, the law of the state in which the real property is
located, certain federal laws (including, without limitation, the Soldiers' and
Sailors' Civil Relief Act of 1940) and, in some cases, in deed of trust
transactions, the directions of the beneficiary.
Interest in Real Property
The real property covered by a mortgage, deed of trust, security deed or
deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property such
as a tenant's interest in a lease of land or improvements, or both, and the
leasehold estate created by such lease. An instrument covering an interest in
real property other than the fee estate requires special provisions in the
instrument creating such interest or in the mortgage, deed of trust, security
deed or deed to secure debt, to protect the mortgagee against termination of
such interest before the mortgage, deed of trust, security deed or deed to
secure debt is paid. Unless otherwise specified in the Prospectus Supplement,
the Depositor or the Asset Seller will make certain representations and
warranties in the Agreement with respect to the Mortgage Loans which are secured
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by an interest in a leasehold estate. Such representation and warranties will be
set forth in the Prospectus Supplement if applicable.
Leases and Rents
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the mortgagor retains a revocable license to
collect the rents for so long as there is no default. Under such assignments,
the mortgagor typically assigns its right, title and interest as lessor under
each lease and the income derived therefrom to the mortgagee, while retaining a
license to collect the rents for so long as there is no default under the
mortgage loan documentation. The manner of perfecting the mortgagee's interest
in rents may depend on whether the mortgagor's assignment was absolute or one
granted as security for the loan. Failure to properly perfect the mortgagee's
interest in rents may result in the loss of substantial pool of funds, which
could otherwise serve as a source of repayment for such loan. If the mortgagor
defaults, the license terminates and the lender is entitled to collect the
rents. Local law may require that the lender take possession of the property
and/or obtain a court-appointed receiver before becoming entitled to collect the
rents. In most states, hotel and motel room revenues are considered accounts
receivable under the UCC; generally these revenues are either assigned by the
mortgagor, which remains entitled to collect such revenues absent a default, or
pledged by the mortgagor, as security for the loan. In general, the lender must
file financing statements in order to perfect its security interest in the
revenues and must file continuation statements, generally every five years, to
maintain perfection of such security interest. Even if the lender's security
interest in room revenues is perfected under the UCC, the lender will generally
be required to commence a foreclosure or otherwise take possession of the
property in order to collect the room revenues after a default.
Even after a foreclosure, the potential rent payments from the property
may be less than the periodic payments that had been due under the mortgage. For
instance, the net income that would otherwise be generated from the property may
be less than the amount that would have been needed to service the mortgage debt
if the leases on the property are at below-market rents, or as the result of
excessive maintenance, repair or other obligations which a lender succeeds to as
landlord.
Lenders that actually take possession of the property, however, may incur
potentially substantial risks attendant to being a mortgagee in possession. Such
risks include liability for environmental clean-up costs and other risks
inherent in property ownership. See "Environmental Legislation" below.
Personalty
Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value from
personal property which does not constitute "fixtures" under applicable state
real property law and, hence, would not be subject to the lien of a mortgage.
Such property is generally pledged or assigned as security to the lender under
the UCC. In order to perfect its security interest therein, the lender generally
must file UCC financing statements and, to maintain perfection of such security
interest, file continuation statements generally every five years.
Foreclosure
General
Foreclosure is a legal procedure that allows the mortgagee to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its obligations
under the note or mortgage, the mortgagee has the right to institute foreclosure
proceedings to sell the mortgaged property at public auction to satisfy the
indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage vary
from state to state. Two primary methods of foreclosing a mortgage are judicial
foreclosure and non-judicial foreclosure pursuant to a power
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of sale granted in the mortgage instrument. There are several other foreclosure
procedures available in some states that are either infrequently used or
available only in certain limited circumstances, such as strict foreclosure.
Judicial Foreclosure
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated by
the service of legal pleadings upon all parties having a subordinate interest of
record in the real property and all parties in possession of the property, under
leases or otherwise, whose interests are subordinate to the mortgage. Delays in
completion of the foreclosure may occasionally result from difficulties in
locating defendants. When the lender's right to foreclose is contested, the
legal proceedings can be time-consuming. Upon successful completion of a
judicial foreclosure proceeding, the court generally issues a judgment of
foreclosure and appoints a referee or other officer to conduct a public sale of
the mortgaged property, the proceeds of which are used to satisfy the judgment.
Such sales are made in accordance with procedures that vary from state to state.
Equitable Limitations on Enforceability of Certain Provisions
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with
foreclosure. These equitable principles are generally designed to relieve the
mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is perceived as harsh or unfair. Relying on such principles, a court may
alter the specific terms of a loan to the extent it considers necessary to
prevent or remedy an injustice, undue oppression or overreaching, or may require
the lender to undertake affirmative and expensive actions to determine the cause
of the mortgagor's default and the likelihood that the mortgagor will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's and have required that lenders reinstate loans or recast payment
schedules in order to accommodate mortgagors who are suffering from a temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose if the default under the mortgage is not monetary, e.g., the
mortgagor failed to maintain the mortgaged property adequately or the mortgagor
executed a junior mortgage on the mortgaged property. The exercise by the court
of its equity powers will depend on the individual circumstances of each case
presented to it. Finally, some courts have been faced with the issue of whether
federal or state constitutional provisions reflecting due process concerns for
adequate notice require that a mortgagor receive notice in addition to
statutorily-prescribed minimum notice. For the most part, these cases have
upheld the reasonableness of the notice provisions or have found that a public
sale under a mortgage providing for a power of sale does not involve sufficient
state action to afford constitutional protections to the mortgagor.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes require several years to complete. Moreover, as discussed below, a
non-collusive, regularly conducted foreclosure sale may be challenged as a
fraudulent conveyance, regardless of the parties' intent, if a court determines
that the sale was for less than fair consideration and such sale occurred while
the mortgagor was insolvent (or the mortgagor was rendered insolvent as a result
of such sale) and within one year (or within the state statute of limitations if
the trustee in bankruptcy elects to proceed under state fraudulent conveyance
law) of the filing of bankruptcy.
Non-Judicial Foreclosure/Power of Sale
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale pursuant to the power of sale granted in the deed of trust. A
power of sale is typically granted in a deed of trust. It may also be contained
in any other type of mortgage instrument. A power of sale allows a non-judicial
public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
mortgagor under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to such sale,
the trustee under a deed of trust must record a notice of default and notice of
sale and send a copy to the mortgagor and to any other party who has recorded a
request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record
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in the real property, including junior lienholders. A notice of sale must be
posted in a public place and, in most states, published for a specified period
of time in one or more newspapers. The mortgagor or junior lienholder may then
have the right, during a reinstatement period required in some states, to cure
the default by paying the entire actual amount in arrears (without acceleration)
plus the expenses incurred in enforcing the obligation. In other states, the
mortgagor or the junior lienholder is not provided a period to reinstate the
loan, but has only the right to pay off the entire debt to prevent the
foreclosure sale. Generally, the procedure for public sale, the parties entitled
to notice, the method of giving notice and the applicable time periods are
governed by state law and vary among the states. Foreclosure of a deed to secure
debt is also generally accomplished by a non-judicial sale similar to that
required by a deed of trust, except that the lender or its agent, rather than a
trustee, is typically empowered to perform the sale in accordance with the terms
of the deed to secure debt and applicable law.
Public Sale
A third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such property
at the time of sale, due to, among other things, redemption rights which may
exist and the possibility of physical deterioration of the property during the
foreclosure proceedings. For these reasons, it is common for the lender to
purchase the mortgaged property for an amount equal to or less than the
underlying debt and accrued and unpaid interest plus the expenses of
foreclosure. Generally, state law controls the amount of foreclosure costs and
expenses which may be recovered by a lender. Thereafter, subject to the
mortgagor's right in some states to remain in possession during a redemption
period, if applicable, the lender will become the owner of the property and have
both the benefits and burdens of ownership of the mortgaged property. For
example, the lender will have the obligation to pay debt service on any senior
mortgages, to pay taxes, obtain casualty insurance and to make such repairs at
its own expense as are necessary to render the property suitable for sale.
Frequently, the lender employs a third party management company to manage and
operate the property. The costs of operating and maintaining a commercial or
multifamily residential property may be significant and may be greater than the
income derived from that property. The costs of management and operation of
those mortgaged properties which are hotels, motels, restaurants, nursing or
convalescent homes or hospitals may be particularly significant because of the
expertise, knowledge and, with respect to nursing or convalescent homes or
hospitals, regulatory compliance, required to run such operations and the effect
which foreclosure and a change in ownership may have on the public's and the
industry's (including franchisors') perception of the quality of such
operations. The lender will commonly obtain the services of a real estate broker
and pay the broker's commission in connection with the sale of the property.
Depending upon market conditions, the ultimate proceeds of the sale of the
property may not equal the lender's investment in the property. Moreover, a
lender commonly incurs substantial legal fees and court costs in acquiring a
mortgaged property through contested foreclosure and/or bankruptcy proceedings.
Furthermore, a few states require that any environmental contamination at
certain types of properties be cleaned up before a property may be resold. In
addition, a lender may be responsible under federal or state law for the cost of
cleaning up a mortgaged property that is environmentally contaminated. See
"Environmental Legislation." Generally state law controls the amount of
foreclosure expenses and costs, including attorneys' fees, that may be recovered
by a lender.
A junior mortgagee may not foreclose on the property securing the junior
mortgage unless it forecloses subject to senior mortgages and any other prior
liens, in which case it may be obliged to make payments on the senior
mortgages to avoid their foreclosure. In addition, in the event that the
foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale"
clause contained in a senior mortgage, the junior mortgagee may be required to
pay the full amount of the senior mortgage to avoid its foreclosure.
Accordingly, with respect to those Mortgage Loans, if any, that are junior
mortgage loans, if the lender purchases the property the lender's title will be
subject to all senior mortgages, prior liens and certain governmental liens.
The proceeds received by the referee or trustee from the sale are applied
first to the costs, fees and expenses of sale and then in satisfaction of the
indebtedness secured by the mortgage under which the sale was conducted. Any
proceeds remaining after satisfaction of senior mortgage debt are generally
payable to the holders of junior mortgages and other liens and claims in order
of their priority, whether or not the mortgagor is in default. Any additional
proceeds are generally payable to the mortgagor. The payment of the proceeds to
the holders of
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junior mortgages may occur in the foreclosure action of the senior mortgage or a
subsequent ancillary proceeding or may require the institution of separate legal
proceedings by such holders.
REO Properties
If title to any Mortgaged Property is acquired by the Trustee on behalf of
the Certificateholders, the Master Servicer or any related Sub-servicer or the
Special Servicer, on behalf of such holders, will be required to sell the
Mortgaged Property prior to the close of the third calendar year following the
year of acquisition of such Mortgaged Property by the Trust Fund, unless (i) the
Internal Revenue Service grants an extension of time to sell such property (an
"REO Extension") or (ii) it obtains an opinion of counsel generally to the
effect that the holding of the property beyond the close of the third calendar
year after its acquisition will not result in the imposition of a tax on the
Trust Fund or cause any REMIC created pursuant to the Pooling and Servicing
Agreement to fail to qualify as a REMIC under the Code. Subject to the
foregoing, the Master Servicer or any related Sub-servicer or the Special
Servicer will generally be required to solicit bids for any Mortgaged Property
so acquired in such a manner as will be reasonably likely to realize a fair
price for such property. The Master Servicer or any related Sub-servicer or the
Special Servicer may retain an independent contractor to operate and manage any
REO Property; however, the retention of an independent contractor will not
relieve the Master Servicer or any related Sub-servicer or the Special Servicer
of its obligations with respect to such REO Property.
In general, the Master Servicer or any related Sub-servicer or the Special
Servicer or an independent contractor employed by the Master Servicer or any
related Sub-servicer or the Special Servicer at the expense of the Trust Fund
will be obligated to operate and manage any Mortgaged Property acquired as REO
Property in a manner that would, to the extent commercially feasible, maximize
the Trust Fund's net after-tax proceeds from such property. After the Master
Servicer or any related Sub-servicer or the Special Servicer reviews the
operation of such property and consults with the Trustee to determine the Trust
Fund's federal income tax reporting position with respect to the income it is
anticipated that the Trust Fund would derive from such property, the Master
Servicer or any related Sub-servicer or the Special Servicer could determine
(particularly in the case of an REO Property that is a hospitality or
residential health care facility) that it would not be commercially feasible to
manage and operate such property in a manner that would avoid the imposition of
a tax on "net income from foreclosure property," within the meaning of Section
857(b)(4)(B) of the Code (an "REO Tax") at the highest marginal corporate tax
rate (currently 35%). The determination as to whether income from an REO
Property would be subject to an REO Tax will depend on the specific facts and
circumstances relating to the management and operation of each REO Property. Any
REO Tax imposed on the Trust Fund's income from an REO Property would reduce the
amount available for distribution to Certificateholders. Certificateholders are
advised to consult their tax advisors regarding the possible imposition of REO
Taxes in connection with the operation of commercial REO Properties by REMICs.
See "Certain Federal Income Tax Consequences" herein and "Certain Federal Income
Tax Consequences-REMICs" in the Prospectus.
Rights of Redemption
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the mortgagor, and all persons who have an
interest in the property which is subordinate to the mortgage being foreclosed,
from exercise of their "equity of redemption." The doctrine of equity of
redemption provides that, until the property covered by a mortgage has been sold
in accordance with a properly conducted foreclosure and foreclosure sale, those
having an interest which is subordinate to that of the foreclosing mortgagee
have an equity of redemption and may redeem the property by paying the entire
debt with interest. In addition, in some states, when a foreclosure action has
been commenced, the redeeming party must pay certain costs of such action. Those
having an equity of redemption must generally be made parties and joined in the
foreclosure proceeding in order for their equity of redemption to be cut off and
terminated.
The equity of redemption is a common-law (non-statutory) right which
exists prior to completion of the foreclosure, is not waivable by the mortgagor,
must be exercised prior to foreclosure sale and should be distinguished from the
post-sale statutory rights of redemption. In some states, after sale pursuant to
a deed of trust or foreclosure of a mortgage, the mortgagor and foreclosed
junior lienors are given a statutory period in which to
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redeem the property from the foreclosure sale. In some states, statutory
redemption may occur only upon payment of the foreclosure sale price. In other
states, redemption may be authorized if the former mortgagor pays only a portion
of the sums due. The effect of a statutory right of redemption is to diminish
the ability of the lender to sell the foreclosed property. The exercise of a
right of redemption would defeat the title of any purchaser from a foreclosure
sale or sale under a deed of trust. Consequently, the practical effect of the
redemption right is to force the lender to maintain the property and pay the
expenses of ownership until the redemption period has expired. In some states, a
post-sale statutory right of redemption may exist following a judicial
foreclosure, but not following a trustee's sale under a deed of trust.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held beyond the close of the third calendar
year following the year of acquisition. Unless otherwise provided in the related
Prospectus Supplement, with respect to a series of Certificates for which an
election is made to qualify the Trust Fund or a part thereof as a REMIC, the
Agreement will permit foreclosed property to be held beyond the close of the
third calendar year following the year of acquisition if the Internal Revenue
Service grants an extension of time within which to sell such property or
independent counsel renders an opinion to the effect that holding such property
for such additional period is permissible under the REMIC Provisions.
Anti-Deficiency Legislation
Some or all of the Mortgage Loans may be nonrecourse loans, as to which
recourse may be had only against the specific property securing the related
Mortgage Loan and a personal money judgment may not be obtained against the
mortgagor. Even if a mortgage loan by its terms provides for recourse to the
mortgagor, some states impose prohibitions or limitations on such recourse. For
example, statutes in some states limit the right of the lender to obtain a
deficiency judgment against the mortgagor following foreclosure or sale under a
deed of trust. A deficiency judgment would be a personal judgment against the
former mortgagor equal to the difference between the net amount realized upon
the public sale of the real property and the amount due to the lender. Some
states require the lender to exhaust the security afforded under a mortgage by
foreclosure in an attempt to satisfy the full debt before bringing a personal
action against the mortgagor. In certain other states, the lender has the option
of bringing a personal action against the mortgagor on the debt without first
exhausting such security; however, in some of these states, the lender,
following judgment on such personal action, may be deemed to have elected a
remedy and may be precluded from exercising remedies with respect to the
security. In some cases, a lender will be precluded from exercising any
additional rights under the note or mortgage if it has taken any prior
enforcement action. Consequently, the practical effect of the election
requirement, in those states permitting such election, is that lenders will
usually proceed against the security first rather than bringing a personal
action against the mortgagor. Finally, other statutory provisions limit any
deficiency judgment against the former mortgagor following a judicial sale to
the excess of the outstanding debt over the fair market value of the property at
the time of the public sale. The purpose of these statutes is generally to
prevent a lender from obtaining a large deficiency judgment against the former
mortgagor as a result of low or no bids at the judicial sale.
Leasehold Risks
Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of
these risks is that the ground lease creating the leasehold estate could
terminate, leaving the leasehold mortgagee without its security. The ground
lease may terminate if, among other reasons, the ground lessee breaches or
defaults in its obligations under the ground lease or there is a bankruptcy of
the ground lessee or the ground lessor. This risk may be minimized if the ground
lease contains certain provisions protective of the mortgagee, but the ground
leases that secure Mortgage Loans may not contain some of these protective
provisions, and mortgages may not contain the other protections discussed in the
next paragraph. Protective ground lease provisions include the right of the
leasehold mortgagee to receive notices from the ground lessor of any defaults by
the mortgagor; the right to cure such defaults, with adequate cure periods; if a
default is not susceptible of cure by the leasehold mortgagee, the right to
acquire the leasehold estate through foreclosure or otherwise; the ability of
the ground lease to be assigned to and by the leasehold mortgagee or purchaser
at a foreclosure sale and for the concomitant release of the ground lessee's
liabilities thereunder; and the right of the leasehold mortgagee to enter into a
new ground lease
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with the ground lessor on the same terms and conditions as the old ground lease
in the event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground lessee
from treating the ground lease as terminated in the event of the ground lessor's
bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor. As further protection, a leasehold mortgage may provide
for the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (Title
11 of the United States Code) (the "Bankruptcy Code"), although the
enforceability of such clause has not been established. Without the protections
described above, a leasehold mortgagee may lose the collateral securing its
leasehold mortgage. In addition, terms and conditions of a leasehold mortgage
are subject to the terms and conditions of the ground lease. Although certain
rights given to a ground lessee can be limited by the terms of a leasehold
mortgage, the rights of a ground lessee or a leasehold mortgagee with respect
to, among other things, insurance, casualty and condemnation will be governed by
the provisions of the ground lease.
Bankruptcy Laws
The Bankruptcy Code and related state laws may interfere with or affect
the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) are
automatically stayed upon the filing of the bankruptcy petition, and, usually,
no interest or principal payments are made during the course of the bankruptcy
case. The delay and the consequences thereof caused by such automatic stay can
be significant. Also, under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a junior lienor may stay the senior lender from
taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured by
property of the debtor may be modified under certain circumstances. In many
jurisdictions, the outstanding amount of the loan secured by the real property
may be reduced to the then-current value of the property (with a corresponding
partial reduction of the amount of lender's security interest) pursuant to a
confirmed plan or lien avoidance proceeding, thus leaving the lender a general
unsecured creditor for the difference between such value and the outstanding
balance of the loan. Other modifications may include the reduction in the amount
of each scheduled payment, which reduction may result from a reduction in the
rate of interest and/or the alteration of the repayment schedule (with or
without affecting the unpaid principal balance of the loan), and/or an extension
(or reduction) of the final maturity date. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years. Also, under federal bankruptcy law, a
bankruptcy court may permit a debtor through its rehabilitative plan to
de-accelerate a secured loan and to reinstate the loan even though the lender
accelerated the mortgage loan and final judgment of foreclosure had been entered
in state court (provided no sale of the property had yet occurred) prior to the
filing of the debtor's petition. This may be done even if the full amount due
under the original loan is never repaid.
Federal bankruptcy law provides generally that rights and obligation under
an unexpired lease of the debtor/lessee may not be terminated or modified at any
time after the commencement of a case under the Bankruptcy Code solely on the
basis of a provision in the lease to such effect or because of certain other
similar events. This prohibition on so-called "ipso facto clauses" could limit
the ability of the Trustee for a series of Certificates to exercise certain
contractual remedies with respect to the Leases. In addition, Section 362 of the
Bankruptcy Code operates as an automatic stay of, among other things, any act to
obtain possession of property from a debtor's estate, which may delay a
Trustee's exercise of such remedies for a related series of Certificates in the
event that a related Lessee or a related mortgagor becomes the subject of a
proceeding under the Bankruptcy Code. For example, a mortgagee would be stayed
from enforcing a Lease Assignment by a mortgagor related to a Mortgaged Property
if the related mortgagor was in a bankruptcy proceeding. The legal proceedings
necessary to resolve the issues could be time-consuming and might result in
significant delays in the receipt of the assigned rents. Similarly, the filing
of a petition in bankruptcy by or on behalf of a Lessee of a Mortgaged Property
would result in a stay against the commencement or continuation of any state
court proceeding for past due rent, for accelerated rent, for damages
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or for a summary eviction order with respect to a default under the Lease that
occurred prior to the filing of the Lessee's petition. Rents and other proceeds
of a Mortgage Loan may also escape an assignment thereof if the assignment is
not fully perfected under state law prior to commencement of the bankruptcy
proceeding. See "--Leases and Rents" above.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the lease
and retain it or assign it to a third party or (b) reject the lease. If the
lease is assumed, the trustee in bankruptcy on behalf of the lessee, or the
lessee as debtor-in-possession, or the assignee, if applicable, must cure any
defaults under the lease, compensate the lessor for its losses and provide the
lessor with "adequate assurance" of future performance. Such remedies may be
insufficient, however, as the lessor may be forced to continue under the lease
with a lessee that is a poor credit risk or an unfamiliar tenant if the lease
was assigned, and any assurances provided to the lessor may, in fact, be
inadequate. If the lease is rejected, such rejection generally constitutes a
breach of the executory contract or unexpired lease immediately before the date
of filing the petition. As a consequence, the other party or parties to such
lease, such as the mortgagor, as lessor under a Lease, would have only an
unsecured claim against the debtor for damages resulting from such breach, which
could adversely affect the security for the related Mortgage Loan. In addition,
pursuant to Section 502(b)(6) of the Bankruptcy Code, a lessor's damages for
lease rejection in respect of future rent installments are limited to the rent
reserved by the lease, without acceleration, for the greater of one year or 15%,
not to exceed three years, of the remaining term of the lease.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat such lease as terminated by such rejection or, in the alternative, the
lessee may remain in possession of the leasehold for the balance of such term
and for any renewal or extension of such term that is enforceable by the lessee
under applicable nonbankruptcy law. The Bankruptcy Code provides that if a
lessee elects to remain in possession after such a rejection of a lease, the
lessee may offset against rents reserved under the lease for the balance of the
term after the date of rejection of the lease, and any such renewal or extension
thereof, any damages occurring after such date caused by the nonperformance of
any obligation of the lessor under the lease after such date. To the extent
provided in the related Prospectus Supplement, the Lessee will agree under
certain Leases to pay all amounts owing thereunder to the Master Servicer
without offset. To the extent that such a contractual obligation remains
enforceable against the Lessee, the Lessee would not be able to avail itself of
the rights of offset generally afforded to lessees of real property under the
Bankruptcy Code.
In a bankruptcy or similar proceeding of a mortgagor, action may be taken
seeking the recovery, as a preferential transfer or on other grounds, of any
payments made by the mortgagor, or made directly by the related Lessee, under
the related Mortgage Loan to the Trust Fund. Payments on long-term debt may be
protected from recovery as preferences if they are payments in the ordinary
course of business made on debts incurred in the ordinary course of business.
Whether any particular payment would be protected depends upon the facts
specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may have
the power to grant liens senior to the lien of a mortgage, and analogous state
statutes and general principles of equity may also provide a mortgagor with
means to halt a foreclosure proceeding or sale and to force a restructuring of a
mortgage loan on terms a lender would not otherwise accept. Moreover, the laws
of certain states also give priority to certain tax liens over the lien of a
mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that
actions of the mortgagee have been unreasonable, the lien of the related
mortgage may be subordinated to the claims of unsecured creditors.
To the extent described in the related Prospectus Supplement, certain of
the Mortgagors may be partnerships. The laws governing limited partnerships in
certain states provide that the commencement of a case under the Bankruptcy Code
with respect to a general partner will cause a person to cease to be a general
partner of the limited partnership, unless otherwise provided in writing in the
limited partnership agreement. This provision may be construed as an "ipso
facto" clause and, in the event of the general partner's bankruptcy, may not be
enforceable. To the extent described in the related Prospectus Supplement,
certain limited partnership agreements
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of the Mortgagors may provide that the commencement of a case under the
Bankruptcy Code with respect to the related general partner constitutes an event
of withdrawal (assuming the enforceability of the clause is not challenged in
bankruptcy proceedings or, if challenged, is upheld) that might trigger the
dissolution of the limited partnership, the winding up of its affairs and the
distribution of its assets, unless (i) at the time there was at least one other
general partner and the written provisions of the limited partnership permit the
business of the limited partnership to be carried on by the remaining general
partner and that general partner does so or (ii) the written provisions of the
limited partnership agreement permit the limited partner to agree within a
specified time frame (often 60 days) after such withdrawal to continue the
business of the limited partnership and to the appointment of one or more
general partners and the limited partners do so. In addition, the laws governing
general partnerships in certain states provide that the commencement of a case
under the Bankruptcy Code or state bankruptcy laws with respect to a general
partner of such partnerships triggers the dissolution of such partnership, the
winding up of its affairs and the distribution of its assets. Such state laws,
however, may not be enforceable or effective in a bankruptcy case. The
dissolution of a Mortgagor, the winding up of its affairs and the distribution
of its assets could result in an acceleration of its payment obligation under a
related Mortgage Loan, which may reduce the yield on the related series of
Certificates in the same manner as a principal prepayment.
In addition, the bankruptcy of the general partner of a Mortgagor that is
a partnership may provide the opportunity for a trustee in bankruptcy for such
general partner, such general partner as a debtor-in-possession, or a creditor
of such general partner to obtain an order from a court consolidating the assets
and liabilities of the general partner with those of the Mortgagor pursuant to
the doctrines of substantive consolidation or piercing the corporate veil. In
such a case, the respective Mortgaged Property, for example, would become
property of the estate of such bankrupt general partner. Not only would the
Mortgaged Property be available to satisfy the claims of creditors of such
general partner, but an automatic stay would apply to any attempt by the Trustee
to exercise remedies with respect to such Mortgaged Property. However, such an
occurrence should not affect the Trustee's status as a secured creditor with
respect to the Mortgagor or its security interest in the Mortgaged Property.
Junior Mortgages; Rights of Senior Mortgagees or Beneficiaries
To the extent specified in the related Prospectus Supplement, some of the
Mortgage Loans for a series will be secured by junior mortgages or deeds of
trust which are subordinated to senior mortgages or deeds of trust held by other
lenders or institutional investors. The rights of the Trust Fund (and therefore
the related Certificateholders), as beneficiary under a junior deed of trust or
as mortgagee under a junior mortgage, are subordinate to those of the mortgagee
or beneficiary under the senior mortgage or deed of trust, including the prior
rights of the senior mortgagee or beneficiary to receive rents, hazard insurance
and condemnation proceeds and to cause the Mortgaged Property securing the
Mortgage Loan to be sold upon default of the Mortgagor or trustor, thereby
extinguishing the junior mortgagee's or junior beneficiary's lien unless the
Master Servicer or Special Servicer, as applicable, asserts its subordinate
interest in a Mortgaged Property in foreclosure litigation or satisfies the
defaulted senior loan. As discussed more fully below, in many states a junior
mortgagee or beneficiary may satisfy a defaulted senior loan in full, or may
cure such default and bring the senior loan current, in either event adding the
amounts expended to the balance due on the junior loan. Absent a provision in
the senior mortgage, no notice of default is required to be given to the junior
mortgagee unless otherwise required by law.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgagee or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other casualty,
or in the event the property is taken by condemnation, the mortgagee or
beneficiary under the senior mortgage or deed of trust will have the prior right
to collect any insurance proceeds payable under the hazard insurance policy and
any award of damages in connection with the condemnation and to apply the same
to the indebtedness secured by the senior mortgage or deed of trust. Proceeds in
excess of the amount of senior mortgage indebtedness will, in most cases, be
applied to the indebtedness of a junior mortgage or trust deed. The laws of
certain states may limit the ability of mortgagees or beneficiaries to apply the
proceeds of hazard insurance and partial condemnation awards to the secured
indebtedness. In such states, the mortgagor or trustor must be allowed to use
the proceeds of hazard
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insurance to repair the damage unless the security of the mortgagee or
beneficiary has been impaired. Similarly, in certain states, the mortgagee or
beneficiary is entitled to the award for a partial condemnation of the real
property security only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides in essence, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage or deed of trust.
While such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or "optional" advance. If the mortgagee or beneficiary is
obligated to advance the additional amounts, the advance may be entitled to
receive the same priority as amounts initially made under the mortgage or deed
of trust, notwithstanding that there may be intervening junior mortgages or
deeds of trust and other liens between the date of recording of the mortgage or
deed of trust and the date of the future advance, and notwithstanding that the
mortgagee or beneficiary had actual knowledge of such intervening junior
mortgages or deeds of trust and other liens at the time of the advance. Where
the mortgagee or beneficiary is not obligated to advance the additional amounts
and has actual knowledge of the intervening junior mortgages or deeds of trust
and other liens, the advance may be subordinated to such intervening junior
mortgages or deeds of trust and other liens. Priority of advances under a
"future advance" clause rests, in many other states, on state law giving
priority to all advances made under the loan agreement up to a "credit limit"
amount stated in the recorded mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by many institutional lenders obligates the mortgagor or trustor to
pay before delinquency all taxes and assessments on the property and, when due,
all encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee or beneficiary under the
mortgage or deed of trust. Upon a failure of the mortgagor or trustor to perform
any of these obligations, the mortgagee or beneficiary is given the right under
the mortgage or deed of trust to perform the obligation itself, at its election,
with the mortgagor or trustor agreeing to reimburse the mortgagee or beneficiary
on behalf of the mortgagor or trustor. All sums so expended by the mortgagee or
beneficiary become part of the indebtedness secured by the mortgage or deed of
trust.
The form of mortgage or deed of trust used by many institutional lenders
typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting the mortgaged property,
including, without limitation, leasing activities (including new leases and
termination or modification of existing leases), alterations and improvements to
buildings forming a part of the mortgaged property and management and leasing
agreements for the mortgaged property. Tenants will often refuse to execute a
lease unless the mortgagee or beneficiary executes a written agreement with the
tenant not to disturb the tenant's possession of its premises in the event of a
foreclosure. A senior mortgagee or beneficiary may refuse to consent to matters
approved by a junior mortgagee or beneficiary with the result that the value of
the security for the junior mortgage or deed of trust is diminished. For
example, a senior mortgagee or beneficiary may decide not to approve the lease
or to refuse to grant a tenant a non-disturbance agreement. If, as a result, the
lease is not executed, the value of the mortgaged property may be diminished.
Environmental Legislation
Real property pledged as security to a lender may be subject to unforeseen
environmental liabilities. Of particular concern may be those Mortgaged
Properties which are, or have been, the site of manufacturing, industrial or
disposal activity. Such environmental liabilities may give rise to (i) a
diminution in value of property securing any Mortgage Loan, (ii) limitation on
the ability to foreclose against such property or (iii) in certain
circumstances, as more fully described below, liability for clean-up costs or
other remedial actions, which liability could exceed the value of the principal
balance of the related Mortgage Loan or of such Mortgaged Property.
Under the laws of many states, contamination on a property may give rise
to a lien on the property for cleanup costs. In several states, such a lien has
priority over all existing liens (a "superlien") including those of
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existing mortgages; in these states, the lien of a mortgage contemplated by this
transaction may lose its priority to such a superlien.
The presence of hazardous or toxic substances, or the failure to remediate
such property properly, may adversely affect the market value of the property,
as well as the owner's ability to sell or use the real estate or to borrow using
the real estate as collateral. In addition, certain environmental laws and
common law principles govern the responsibility for the removal, encapsulation
or disturbance of asbestos containing materials ("ACMs") when these ACMs are in
poor condition or when a property with ACMs is undergoing repair, renovation or
demolition. Such laws could also be used to impose liability upon owners and
operators of real properties for release of ACMs into the air that cause
personal injury or other damage. In addition to cleanup and natural resource
damages actions brought by federal, state, and local agencies and private
parties, the presence of hazardous substances on a property may lead to claims
of personal injury, property damage, or other claims by private plaintiffs.
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), and under the law of certain
states, a secured party which takes a deed-in-lieu of foreclosure, purchases a
mortgaged property at a foreclosure sale, or operates a Mortgaged Property may
become liable in some circumstances either to the government or to private
parties for cleanup costs, even if the lender does not cause or contribute to
the contamination. Liability under some federal or state statutes may not be
limited to the original or unamortized principal balance of a loan or to the
value of the property securing a loan. CERCLA imposes strict, as well as joint
and several, liability on several classes of potentially responsible parties,
including current owners and operators of the property, regardless of whether
they caused or contributed to the contamination. Many states have laws similar
to CERCLA.
Lenders may be held liable under CERCLA as owners or operators. Excluded
from CERCLA's definition of "owner or operator," however, is a person "who
without participating in the management of the facility, holds indicia of
ownership primarily to protect his security interest." This exemption for
holders of a security interest such as a secured lender applies only in
circumstances where the lender acts to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities encroach on
the actual management of such facility or property, the lender faces potential
liability as an "owner or operator" under CERCLA. Similarly, when a lender
forecloses and takes title to a contaminated facility or property (whether it
holds the facility or property as an investment or leases it to a third party),
the lender may incur potential CERCLA liability.
Whether actions taken by a lender would constitute such an encroachment on
the actual management of a facility or property, so as to render the secured
creditor exemption unavailable to the lender has been a matter of judicial
interpretation of the statutory language, and court decisions have historically
been inconsistent.
This scope of the secured creditor exemption has been clarified by the
enactment of the Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Asset Conservation Act"), which was signed into law
by President Clinton on September 30, 1996, and which lists permissible actions
that may be undertaken by a lender holding security in a contaminated facility
without exceeding the bounds of the secured creditor exemption, subject to
certain conditions and limitations. The Asset Conservation Act provides that in
order to be deemed to have participated in the management of a secured property,
a lender must actually participate in the operational affairs of
the property or the borrower. The Asset Conservation Act also provides that a
lender will continue to have the benefit of the secured creditor exemption even
if it forecloses on a mortgaged property, purchases it at a foreclosure sale or
accepts a deed-in-lieu of foreclosure provided that the lender seeks to sell the
mortgaged property at the earliest practicable commercially reasonable time on
commercially reasonable terms. The protections afforded lenders under the Asset
Conversion Act are subject to terms and conditions that have not been clarified
by the courts.
The secured creditor exemption does not protect a lender from liability
under CERCLA in cases where the lender arranges for disposal of hazardous
substances or for transportation of hazardous substances. In addition, the
secured creditor exemption does not govern liability for cleanup costs under
federal laws other than CERCLA. CERCLA's jurisdiction extends to the
investigation and remediation of releases of "hazardous substances." The
definition of "hazardous substances" under CERCLA specifically excludes
petroleum products. Therefore, a federal
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statute of particular significance is Subtitle I of the Resource Conservation
and Recovery Act ("RCRA"), which governs the operation and management of
underground petroleum storage tanks. Under the Asset Conservation Act, the
holders of security interests in underground storage tanks or properties
containing such tanks are accorded protections similar to the protections
accorded to lenders under CERCLA. It should be noted, however, that liability
for cleanup of petroleum contamination may be governed by state law, which may
not provide for any specific protection for secured creditors.
In a few states, transfer of some types of properties is conditioned upon
clean up of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed-in-lieu of foreclosure
or otherwise, may be required to cleanup the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law
causes of action (for example, actions based on nuisance or on toxic tort
resulting in death, personal injury or damage to property) related to hazardous
environmental conditions on a property. While it may be more difficult to hold a
lender liable in such cases, unanticipated or uninsurable liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental hazard, but that
person or entity may be bankrupt or otherwise judgment proof. It is possible
that cleanup costs could become a liability of the Trust Fund and occasion a
loss to Certificateholders in certain circumstances described above if such
remedial costs were incurred.
Unless otherwise provided in the related Prospectus Supplement, the
Warrantying Party with respect to any Whole Loan included in a Trust Fund for a
particular series of Certificates will represent that a "Phase I Assessment" as
described in and meeting the requirements of the then current version of
Chapter 5 of the Federal National Mortgage Association ("FNMA") Multifamily
Guide has been received and reviewed. In addition, unless otherwise provided in
the related Prospectus Supplement, the related Agreement will provide that the
Master Servicer, acting on behalf of the Trustee, may not acquire title to a
Mortgaged Property or take over its operation unless the Master Servicer has
previously determined, based on a report prepared by a person who regularly
conducts environmental audits, that: (i) such Mortgaged Property is in
compliance with applicable environmental laws, and there are no circumstances
present at the Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, wastes, or petroleum based
materials for which investigation, testing, monitoring, containment, clean-up
or remediation could be required under any federal, state or local law or
regulation; or (ii) if such Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic interest of
the Trust Fund to acquire title to the Mortgaged Property and further to take
such actions as would be necessary and appropriate to effect such compliance
and/or respond to such circumstances. This requirement effectively precludes
enforcement of the security for the related Mortgage Note until a satisfactory
environmental inquiry is undertaken or any required remedial action is provided
for, reducing the likelihood that a given Trust Fund will become liable for any
condition or circumstance that may give rise to any environmental claim (an
"Environmental Hazard Condition") affecting a Mortgaged Property, but making it
more difficult to realize on the security for the Mortgage Loan. However, there
can be no assurance that any environmental assessment obtained by the Master
Servicer or a Special Servicer, as the case may be, will detect all possible
Environmental Hazard Conditions or that the other requirements of the
Agreement, even if fully observed by the Master Servicer or Special Servicer,
as the case may be, will in fact insulate a given Trust Fund from liability for
Environmental Hazard Conditions. See "Description of the
Agreements--Realization Upon Defaulted Whole Loans."
Unless otherwise specified in the related Prospectus Supplement, the
Depositor generally will not have determined whether environmental assessments
have been conducted with respect to the Mortgaged Properties relating to the
Mortgage Loans included in the Mortgage Pool for a Series, and it is likely that
any environmental assessments which would have been conducted with respect to
any of the Mortgaged Properties would have been conducted at the time of the
origination of the related Mortgage Loans and not thereafter. If specified in
the related Prospectus Supplement, a Warrantying Party will represent and
warrant that, as of the date of initial issuance of
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the Certificates of a Series or as of another specified date, no related
Mortgaged Property is affected by a Disqualifying Condition (as defined below).
In the event that, following a default in payment on a Mortgage Loan that
continues for 60 days, (i) the environmental inquiry conducted by the Master
Servicer or Special Servicer, as the case may be, prior to any foreclosure
indicates the presence of a Disqualifying Condition that arose prior to the date
of initial issuance of the Certificates of a Series and (ii) the Master Servicer
or the Special Servicer certify that it has acted in compliance with the
Servicing Standard and has not, by any action, created, caused or contributed to
a Disqualifying Condition the Warrantying Party, at its option, will reimburse
the Trust Fund, cure such Disqualifying Condition or repurchase or substitute
the affected Whole Loan, as described under "Description of the
Agreements--Representations and Warranties; Repurchases." No such person will
however, be responsible for any Disqualifying Condition which may arise on a
Mortgaged Property after the date of initial issuance of the Certificates of the
related Series, whether due to actions of the Mortgagor, the Master Servicer,
the Special Servicer or any other person. It may not always be possible to
determine whether a Disqualifying Condition arose prior or subsequent to the
date of the initial issuance of the Certificates of a Series.
A "Disqualifying Condition" is defined generally as a condition, existing
as a result of, or arising from, the presence of Hazardous Materials (as defined
below) on a Mortgaged Property, such that the Mortgage Loan secured by the
affected Mortgaged Property would be ineligible, solely by reason of such
condition, for purchase by FNMA under the relevant provisions of FNMA's
Multifamily Seller/Servicer Guide in effect as of the date of initial issuance
of the Certificates of such series, including a condition that would constitute
a material violation of applicable federal state or local law in effect as of
their date of initial issuance of the Certificates of such series.
"Hazardous Materials" are generally defined under several federal and
state statutes, and include dangerous toxic or hazardous pollutants, chemicals,
wastes or substances, including, without limitation, those so identified
pursuant to CERCLA and RCRA, and specifically including, asbestos and asbestos
containing materials, polychlorinated biphenyls, radon gas, petroleum and
petroleum products, urea formaldehyde and any substances classified as being "in
inventory," "usable work in process" or similar classification which would, if
classified as unusable, be included in the foregoing definition.
Due-on-Sale and Due-on-Encumbrance
Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender may
accelerate the maturity of the loan if the mortgagor sells or otherwise
transfers or encumbers the related Mortgaged Property. Certain of these clauses
may provide that, upon an attempted breach thereof by the mortgagor of an
otherwise non-recourse loan, the mortgagor becomes personally liable for the
mortgage debt. The enforceability of due-on-sale clauses has been the subject of
legislation or litigation in many states and, in some cases, the enforceability
of these clauses was limited or denied. However, with respect to certain loans
the Garn-St Germain Depository Institutions Act of 1982 preempts state
constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms subject to certain limited exceptions. Unless otherwise
provided in the related Prospectus Supplement, a Master Servicer, on behalf of
the Trust Fund, will determine whether to exercise any right the Trustee may
have as mortgagee to accelerate payment of any such Mortgage Loan or to withhold
its consent to any transfer or further encumbrance in a manner consistent with
the Servicing Standard.
In addition, under federal bankruptcy laws, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances, be
eliminated in any modified mortgage resulting from such bankruptcy proceeding.
Subordinate Financing
Where a mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the mortgagor
may have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the mortgagor (as junior loans often do) and the
senior loan does not, a mortgagor may be more likely to repay sums due on the
junior loan than those on the senior loan. Second, acts of the senior lender
that prejudice the junior lender or impair the junior lender's security may
create a superior
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equity in favor of the junior lender. For example, if the mortgagor and the
senior lender agree to an increase in the principal amount of or the interest
rate payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the mortgagor is additionally
burdened. Third, if the mortgagor defaults on the senior loan and/or any junior
loan or loans, the existence of junior loans and actions taken by junior lenders
can impair the security available to the senior lender and can interfere with or
delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
Default Interest, Prepayment Charges and Prepayments
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if payments
are not timely made, and in some circumstances may provide for prepayment fees
or yield maintenance penalties if the obligation is paid prior to maturity or
prohibit such prepayment for a specified period. In certain states, there are or
may be specific limitations upon the late charges which a lender may collect
from a mortgagor for delinquent payments. Certain states also limit the amounts
that a lender may collect from a mortgagor as an additional charge if the loan
is prepaid. The enforceability, under the laws of a number of states of
provisions providing for prepayment fees or penalties upon, or prohibition of,
an involuntary prepayment is unclear, and no assurance can be given that, at the
time a Prepayment Premium is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, the obligation to make such payment,
or the provisions of any such prohibition, will be enforceable under applicable
state law. The absence of a restraint on prepayment, particularly with respect
to Mortgage Loans having higher Mortgage Rates, may increase the likelihood of
refinancing or other early retirements of the Mortgage Loans.
Acceleration on Default
Unless otherwise specified in the related prospectus Supplement, some of
the Mortgage Loans included in the Mortgage Pool for a Series will include a
"debt-acceleration" clause, which permits the lender to accelerate the full debt
upon a monetary or nonmonetary default of the Mortgagor. The courts of all
states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices. The
equity courts of the state, however, may refuse to foreclose a mortgage or deed
of trust when an acceleration of the indebtedness would be inequitable or unjust
or the circumstances would render the acceleration unconscionable. Furthermore,
in some states, the mortgagor may avoid foreclosure and reinstate an accelerated
loan by paying only the defaulted amounts and the costs and attorneys' fees
incurred by the lender in collecting such defaulted payments.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential (including
multifamily but not other commercial) first mortgage loans originated by certain
lenders after March 31, 1980. A similar federal statute was in effect with
respect to mortgage loans made during the first three months of 1980. The
statute authorized any state to reimpose interest rate limits by adopting,
before April 1, 1983, a law or constitutional provision that expressly rejects
application of the federal law. In addition, even where Title V is not so
rejected, any state is authorized by the law to adopt a provision limiting
discount points or other charges on mortgage loans covered by Title V. Certain
states have taken action to reimpose interest rate limits and/or to limit
discount points or other charges.
The Depositor has been advised by counsel that a court interpreting Title
V would hold that residential first mortgage loans that are originated on or
after January 1, 1980 are subject to federal preemption. Therefore, in a state
that has not taken the requisite action to reject application of Title V or to
adopt a provision limiting discount points or other charges prior to origination
of such mortgage loans, any such limitation under such state's usury law would
not apply to such mortgage loans.
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In any state in which application of Title V has been expressly rejected
or a provision limiting discount points or other charges is adopted, no Mortgage
Loan originated after the date of such state action will be eligible for
inclusion in a Trust Fund unless (i) such Mortgage Loan provides for such
interest rate, discount points and charges as are permitted in such state or
(ii) such Mortgage Loan provides that the terms thereof shall be construed in
accordance with the laws of another state under which such interest rate,
discount points and charges would not be usurious and the mortgagor's counsel
has rendered an opinion that such choice of law provision would be given effect.
Statutes differ in their provisions as to the consequences of a usurious
loan. One group of statutes requires the lender to forfeit the interest due
above the applicable limit or impose a specified penalty. Under this statutory
scheme, the mortgagor may cancel the recorded mortgage or deed of trust upon
paying its debt with lawful interest, and the lender may foreclose, but only for
the debt plus lawful interest. A second group of statutes is more severe. A
violation of this type of usury law results in the invalidation of the
transaction, thereby permitting the mortgagor to cancel the recorded mortgage or
deed of trust without any payment or prohibiting the lender from foreclosing.
Certain Laws and Regulations; Types of Mortgaged Properties
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a Mortgage Property which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(e.g., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related Mortgage Loan. Mortgages on
Mortgaged Properties which are owned by the Mortgagor under a condominium form
of ownership are subject to the declaration, by-laws and other rules and
regulations of the condominium association. Mortgaged Properties which are
hotels or motels may present additional risk in that hotels and motels are
typically operated pursuant to franchise, management and operating agreements
which may be terminable by the operator, and the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchases or foreclosure is subject to the vagaries of local law
requirements. In addition, Mortgaged Properties which are multifamily
residential properties may be subject to rent control laws, which could impact
the future cash flows of such properties.
Americans With Disabilities Act
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
"readily achievable." In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The "readily achievable" standard takes into
account, among other factors, the financial resources of the affected site,
owner, landlord or other applicable person. In addition to imposing a possible
financial burden on the Mortgagor in its capacity as owner or landlord, the ADA
may also impose such requirements on a foreclosing lender who succeeds to the
interest of the Mortgagor as owner of landlord. Furthermore, since the "readily
achievable" standard may vary depending on the financial condition of the owner
or landlord, a foreclosing lender who is financially more capable than the
Mortgagor of complying with the requirements of the ADA may be subject to
more stringent requirements than those to which the Mortgagor is subject.
Soldiers' and Sailors' Civil Relief Act of 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such mortgagor's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
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mortgagors who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to mortgagors
who enter military service (including reservists who are called to active duty)
after origination of the related Mortgage Loan, no information can be provided
as to the number of loans that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of any servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfalls in interest collections resulting from the
application of the Relief Act would result in a reduction of the amounts
distributable to the holders of the related series of Certificates, and would
not be covered by advances or, unless otherwise specified in the related
Prospectus Supplement, any form of Credit Support provided in connection with
such Certificates. In addition, the Relief Act imposes limitations that would
impair the ability of the servicer to foreclose on an affected Mortgage Loan
during the mortgagor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in the
event that such a Mortgage Loan goes into default, there may be delays and
losses occasioned thereby.
Forfeitures in Drug and RICO Proceedings
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties "known to have an alleged interest in the property," including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
is based on the advice of Sidley & Austin or Latham & Watkins or Brown & Wood
LLP or such other counsel as may be specified in the related Prospectus
Supplement, counsel to the Depositor. This summary is based on laws,
regulations, including the REMIC regulations promulgated by the Treasury
Department (the "REMIC Regulations"), rulings and decisions now in effect or
(with respect to regulations) proposed, all of which are subject to change
either prospectively or retroactively. This summary does not address the federal
income tax consequences of an investment in Certificates applicable to all
categories of investors, some of which (for example, banks and insurance
companies) may be subject to special rules. Prospective investors should consult
their tax advisors regarding the federal, state, local and any other tax
consequences to them of the purchase, ownership and disposition of Certificates.
General
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust Fund relating to a
particular Series of Certificates as a REMIC under the Code. The Prospectus
Supplement for each Series of Certificates will specify whether a REMIC election
will be made.
Grantor Trust Funds
If a REMIC election is not made, Sidley & Austin or Latham & Watkins or
Brown & Wood LLP or Cadwalader, Wickersham & Taft or such other counsel as may
be specified in the related Prospectus Supplement will deliver its opinion that
the Trust Fund will not be classified as an association taxable as a corporation
and that each such Trust Fund will be classified as a grantor trust under
subpart E, Part I of subchapter J of Chapter 1 of Subtitle A of the Code. In
this case, owners of Certificates will be treated for federal income tax
purposes as owners of a portion of the Trust Fund's assets as described below.
a. Single Class of Grantor Trust Certificates
Characterization. The Trust Fund may be created with one class of Grantor
Trust Certificates. In this case, each Grantor Trust Certificateholder will be
treated as the owner of a pro rata undivided interest in the interest and
principal portions of the Trust Fund represented by the Grantor Trust
Certificates and will be considered the equitable owner of a pro rata undivided
interest in each of the Mortgage Assets in the Pool. Any amounts received by a
Grantor Trust Certificateholder in lieu of amounts due with respect to any
Mortgage Asset because of a default or delinquency in payment will be treated
for federal income tax purposes as having the same character as the payments
they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Mortgage Loans in the Trust Fund represented by Grantor Trust
Certificates, including interest, original issue discount ("OID"), if any,
prepayment fees, assumption fees, any gain recognized upon an assumption and
late payment charges received by the Master Servicer. Under Code Sections 162 or
212 each Grantor Trust Certificateholder will be entitled to deduct its pro rata
share of servicing fees, prepayment fees, assumption fees, any loss recognized
upon an assumption and late payment charges retained by the Master Servicer,
provided that such amounts are reasonable compensation for services rendered to
the Trust Fund. Grantor Trust Certificateholders that are individuals, estates
or trusts will be entitled to deduct their share of expenses as itemized
deductions only to the extent such expenses plus all other Code Section 212
expenses exceed two percent of its adjusted gross income. In addition, the
amount of itemized deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the applicable amount under Code
Section 68(b) (which amount will be adjusted for inflation) will be reduced by
the lesser of (i) 3% of the excess of adjusted gross income over the applicable
amount and (ii) 80% of the amount of itemized deductions otherwise allowable for
such taxable year. In general, a Grantor Trust Certificateholder using the cash
method of accounting must take into account its pro rata share of income as and
deductions as and when collected by or paid to the Master Servicer or, with
respect to
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original issue discount or certain other income items for which the
Certificateholder has made an election, as such amounts are accrued by the Trust
Fund on a constant interest basis, and will be entitled to claim its pro rata
share of deductions (subject to the foregoing limitations) when such amounts are
paid or such Certificateholder would otherwise be entitled to claim such
deductions had it held the Mortgage Assets directly. A Grantor Trust
Certificateholder using an accrual method of accounting must take into account
its pro rata share of income as payment becomes due or is made to the Master
Servicer, whichever is earlier and may deduct its pro rata share of expense
items (subject to the foregoing limitations) when such amounts are paid or such
Certificateholder otherwise would be entitled to claim such deductions had it
held the Mortgage Assets directly. If the servicing fees paid to the Master
Servicer are deemed to exceed reasonable servicing compensation, the amount of
such excess could be considered as an ownership interest retained by the Master
Servicer (or any person to whom the Master Servicer assigned for value all or a
portion of the servicing fees) in a portion of the interest payments on the
Mortgage Assets. The Mortgage Assets would then be subject to the "coupon
stripping" rules of the Code discussed below.
Unless otherwise specified in the related Prospectus Supplement or
otherwise provided below, as to each Series of Certificates, counsel to the
Depositor will have advised the Depositor that:
(i) a Grantor Trust Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) representing
principal and interest payments on Mortgage Assets will be considered to
represent "loans . . . secured by an interest in real property which is
. . . residential property" within the meaning of Code Section
7701(a)(19)(C)(v), to the extent that the Mortgage Assets represented by
that Grantor Trust Certificate are of a type described in such Code
section;
(ii) a Grantor Trust Certificate owned by a real estate investment trust
representing an interest in Mortgage Assets will be considered to
represent "real estate assets" within the meaning of Code Section
856(c)(4)(A), and interest income on the Mortgage Assets will be
considered "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B), to the extent that the
Mortgage Assets represented by that Grantor Trust Certificate are of a
type described in such Code section; and
(iii) a Grantor Trust Certificate owned by a REMIC will represent
"obligation[s] . . . which [are] principally secured by an interest in
real property" within the meaning of Code Section 860G(a)(3).
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application of
Code Section 593(d) to any taxable year beginning after December 31, 1995.
Stripped Bonds and Coupons. Certain Trust Funds may consist of Government
Securities that constitute "stripped bonds" or "stripped coupons" as those terms
are defined in section 1286 of the Code, and, as a result, such assets would be
subject to the stripped bond provisions of the Code. Under these rules, such
Government Securities are treated as having original issue discount based on the
purchase price and the stated redemption price at maturity of each Security. As
such, Grantor Trust Certificateholders would be required to include in income
their pro rata share of the original issue discount on each Government Security
recognized in any given year on an economic accrual basis even if the Grantor
Trust Certificateholder is a cash method taxpayer. Accordingly, the sum of the
income includible to the Grantor Trust Certificateholder in any taxable year may
exceed amounts actually received during such year.
Premium. The price paid for a Grantor Trust Certificate by a holder will
be allocated to such holder's undivided interest in each Mortgage Asset based on
each Mortgage Asset's relative fair market value, so that such holder's
undivided interest in each Mortgage Asset will have its own tax basis. A Grantor
Trust Certificateholder that acquires an interest in Mortgage Assets at a
premium may elect to amortize such premium under a constant interest method,
provided that the underlying mortgage loans with respect to such Mortgage Assets
were originated after September 27, 1985. Premium allocable to mortgage loans
originated on or before September 27, 1985 should be allocated among the
principal payments on such mortgage loans and allowed as an ordinary deduction
as principal payments are made. Amortizable bond premium will be treated as an
offset to interest income on such Grantor Trust
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Certificate. The basis for such Grantor Trust Certificate will be reduced to the
extent that amortizable premium is applied to offset interest payments. It is
not clear whether a reasonable prepayment assumption should be used in computing
amortization of premium allowable under Code Section 171. A Certificateholder
that makes this election for a Mortgage Asset or any other debt instrument that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Certificateholder acquires during the year of the election or
thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate representing an interest
in a Mortgage Asset or Mortgage Loan acquired at a premium should recognize a
loss if a Mortgage Loan (or an underlying mortgage loan with respect to a
Mortgage Asset) prepays in full, equal to the difference between the portion of
the prepaid principal amount of such Mortgage Loan (or underlying mortgage loan)
that is allocable to the Certificate and the portion of the adjusted basis of
the Certificate that is allocable to such Mortgage Loan (or underlying mortgage
loan). If a reasonable prepayment assumption is used to amortize such premium,
it appears that such a loss would be available, if at all, only if prepayments
have occurred at a rate faster than the reasonable assumed prepayment rate. It
is not clear whether any other adjustments would be required to reflect
differences between an assumed prepayment rate and the actual rate of
prepayments.
On December 30, 1997, the Internal Revenue Service (the "IRS") issued
final regulations (the "Amortizable Bond Premium Regulations") dealing with
amortizable bond premium. These regulations, which generally are effective for
bonds issued or acquired on or after March 2, 1998 (or, for holders making an
election for the taxable year that includes March 2, 1998 or any subsequent
taxable year, shall apply to bonds held on or after the first day of the taxable
year of the election). The Amortizable Bond Premium Regulations specifically do
not apply to prepayable debt instruments or any pool of debt instruments the
yield on which may be affected by prepayments, such as the Trust Fund, which are
subject to Section 1272(a)(6) of the Code. Absent further guidance from the IRS
and unless otherwise specified in the related Prospectus Supplement, the Trustee
will account for amortizable bond premium in the manner described above.
Prospective purchasers should consult their tax advisors regarding amortizable
bond premium and the Amortizable Bond Premium Regulations.
Original Issue Discount. The IRS has stated in published rulings that, in
circumstances similar to those described herein, the special rules of the Code
relating to original issue discount ("OID") (currently Code Sections 1271
through 1273 and 1275) and Treasury regulations issued on January 27, 1994,
under such Sections (the "OID Regulations"), will be applicable to a Grantor
Trust Certificateholder's interest in those Mortgage Assets meeting the
conditions necessary for these sections to apply. Rules regarding periodic
inclusion of OID income are applicable to mortgages of corporations originated
after May 27, 1969, mortgages of noncorporate mortgagors (other than
individuals) originated after July 1, 1982, and mortgages of individuals
originated after March 2, 1984. Such OID could arise by the financing of points
or other charges by the originator of the mortgages in an amount greater than a
statutory de minimis exception to the extent that the points are not currently
deductible under applicable Code provisions or are not for services provided by
the lender. OID generally must be reported as ordinary gross income as it
accrues under a constant interest method. See "--Multiple Classes of Grantor
Trust Certificates--Accrual of Original Issue Discount" below.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Mortgage Assets may be subject to the market discount
rules of Code Sections 1276 through 1278 to the extent an undivided interest in
a Mortgage Asset is considered to have been purchased at a "market discount."
Generally, the amount of market discount is equal to the excess of the portion
of the principal amount of such Mortgage Asset allocable to such holder's
undivided interest over such holder's tax basis in such interest. Market
discount with respect to a Grantor Trust Certificate will be considered to be
zero if the amount allocable to the Grantor Trust Certificate is less than 0.25%
of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
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The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond acquired
by the taxpayer after October 22, 1986 shall be treated as ordinary income to
the extent that it does not exceed the accrued market discount at the time of
such payment. The amount of accrued market discount for purposes of determining
the tax treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry such Grantor Trust Certificate purchased with market discount. For
these purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method for Certificates acquired on or after April 4,
1994. If such an election were to be made with respect to a Grantor Trust
Certificate with market discount, the Certificateholder would be deemed to have
made an election to include in income currently market discount with respect to
all other debt instruments having market discount that such Certificateholder
acquires during the year of the election or thereafter. Similarly, a
Certificateholder that makes this election for a Certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder owns or acquires. See "--Premium" herein. The election to
accrue interest, discount and premium on a constant yield method with respect to
a Certificate is irrevocable without consent of the IRS.
Anti-Abuse Rule. The IRS can apply or depart from the rules contained in
the OID Regulations as necessary or appropriate to achieve a reasonable result
where a principal purpose in structuring a Mortgage Asset, Mortgage Loan or
Grantor Trust Certificate or applying the otherwise applicable rules is to
achieve a result that is unreasonable in light of the purposes of the applicable
statutes (which generally are intended to achieve the clear reflection of income
for both issuers and holders of debt instruments).
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b. Multiple Classes of Grantor Trust Certificates
1. Stripped Bonds and Stripped Coupons
Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the interest payments on an obligation from ownership of
the right to receive some or all of the principal payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of Code Sections 1271
through 1288, Code Section 1286 treats a stripped bond or a stripped coupon as
an obligation issued on the date that such stripped interest is created. If a
Trust Fund is created with two classes of Grantor Trust Certificates, one class
of Grantor Trust Certificates may represent the right to principal and interest,
or principal only, on all or a portion of the Mortgage Assets (the "Stripped
Bond Certificates"), while the second class of Grantor Trust Certificates may
represent the right to some or all of the interest on such portion (the
"Stripped Coupon Certificates").
Servicing fees in excess of reasonable servicing fees ("excess servicing")
will be treated under the stripped bond rules. If the excess servicing fee is
less than 100 basis points (i.e., 1% interest on the Mortgage Asset principal
balance) or the Certificates are initially sold with a de minimis discount
(assuming no prepayment assumption is required), any non-de minimis discount
arising from a subsequent transfer of the Certificates should be treated as
market discount. The IRS appears to require that reasonable servicing fees be
calculated on a Mortgage Asset by Mortgage Asset basis, which could result in
some Mortgage Assets being treated as having more than 100 basis points of
interest stripped off. See "--Non-REMIC Certificates" and "Multiple Classes of
Grantor Trust Certificates--Stripped Bonds and Stripped Coupons" herein.
Although not entirely clear, a Stripped Bond Certificate generally should
be treated as an interest in Mortgage Assets issued on the day such Certificate
is purchased for purposes of calculating any OID. Generally, if the discount on
a Mortgage Asset is larger than a de minimis amount (as calculated for purposes
of the OID rules) a purchaser of such a Certificate will be required to accrue
the discount under the OID rules of the Code. See "--Non-REMIC Certificates" and
"--Single Class of Grantor Trust Certificates--Original Issue Discount" herein.
However, a purchaser of a Stripped Bond Certificate will be required to account
for any discount on the Mortgage Assets as market discount rather than OID if
either (i) the amount of OID with respect to the Mortgage Assets is treated as
zero under the OID de minimis rule when the Certificate was stripped or (ii) no
more than 100 basis points (including any amount of servicing fees in excess of
reasonable servicing fees) is stripped off of the Trust Fund's Mortgage Assets.
Pursuant to Revenue Procedure 91-49, issued on August 8, 1991, purchasers of
Stripped Bond Certificates using an inconsistent method of accounting must
change their method of accounting and request the consent of the IRS to the
change in their accounting method on a statement attached to their first timely
tax return filed after August 8, 1991.
The precise tax treatment of Stripped Coupon Certificates is substantially
uncertain. The Code could be read literally to require that OID computations be
made for each payment from each Mortgage Asset. Unless otherwise specified in
the related prospectus supplement, all payments from a Mortgage Asset underlying
a Stripped Coupon Certificate will be treated as a single installment obligation
subject to the OID rules of the Code, in which case, all payments from such
Mortgage Asset would be included in the Mortgage Asset's stated redemption price
at maturity for purposes of calculating income on such Certificate under the OID
rules of the Code.
It is unclear under what circumstances, if any, the prepayment of Mortgage
Assets will give rise to a loss to the holder of a Stripped Bond Certificate
purchased at a premium or a Stripped Coupon Certificate. If such Certificate is
treated as a single instrument (rather than an interest in discrete mortgage
loans) and the effect of prepayments is taken into account in computing yield
with respect to such Grantor Trust Certificate, it appears that no loss will be
available as a result of any particular prepayment unless prepayments occur at a
rate sufficiently faster than the assumed prepayment rate so that the
Certificateholder will not recover its investment. However, if such Certificate
is treated as an interest in discrete Mortgage Assets, or if no prepayment
assumption is used, then when a Mortgage Asset is prepaid, the holder of such
Certificate should be able to recognize a loss equal to the portion of the
adjusted issue price of such Certificate that is allocable to such Mortgage
Asset.
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Holders of Stripped Bond Certificates and Stripped Coupon Certificates are
urged to consult with their own tax advisors regarding the proper treatment of
these Certificates for federal income tax purposes.
Treatment of Certain Owners. Several Code sections provide beneficial
treatment to certain taxpayers that invest in Mortgage Assets of the type that
make up the Trust Fund. With respect to these Code sections, no specific legal
authority exists regarding whether the character of the Grantor Trust
Certificates, for federal income tax purposes, will be the same as that of the
underlying Mortgage Assets. While Code Section 1286 treats a stripped obligation
as a separate obligation for purposes of the Code provisions addressing OID, it
is not clear whether such characterization would apply with regard to these
other Code sections. Although the issue is not free from doubt, each class of
Grantor Trust Certificates, unless otherwise specified in the related Prospectus
Supplement, should be considered to represent "real estate assets" within the
meaning of Code Section 856(c)(4)(A) and "loans . . . secured by, an interest in
real property which is . . . residential real property" within the meaning of
Code Section 7701(a)(19)(C)(v), and interest income attributable to Grantor
Trust Certificates should be considered to represent "interest on obligations
secured by mortgages on real property" within the meaning of Code Section
856(c)(3)(B), provided that in each case the underlying Mortgage Assets and
interest on such Mortgage Assets qualify for such treatment. Prospective
purchasers to which such characterization of an investment in Certificates is
material should consult their own tax advisors regarding the characterization of
the Grantor Trust Certificates and the income therefrom. Grantor Trust
Certificates will be "obligation[s] . . . which [are] principally secured by an
interest in real property" within the meaning of Code Section 860G(a)(3)(A).
2. Grantor Trust Certificates Representing Interests in Loans Other Than
ARM Loans
The original issue discount rules of Code Sections 1271 through 1275 will
be applicable to a Certificateholder's interest in those Mortgage Assets as to
which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount in income are applicable
to mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors (other than individuals) originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, such original issue discount could arise by the charging of points
by the originator of the mortgage in an amount greater than the statutory de
minimis exception, including a payment of points that is currently deductible by
the borrower under applicable Code provisions, or under certain circumstances,
by the presence of "teaser" rates on the Mortgage Assets. OID on each Grantor
Trust Certificate must be included in the owner's ordinary income for federal
income tax purposes as it accrues, in accordance with a constant interest method
that takes into account the compounding of interest, in advance of receipt of
the cash attributable to such income. The amount of OID required to be included
in an owner's income in any taxable year with respect to a Grantor Trust
Certificate representing an interest in Mortgage Assets other than Mortgage
Assets with interest rates that adjust periodically ("ARM Loans") likely will be
computed as described below under "--Accrual of Original Issue Discount." The
following discussion is based in part on the OID Regulations and in part on the
provisions of the Tax Reform Act of 1986 (the "1986 Act"). The OID Regulations
generally are effective for debt instruments issued on or after April 4, 1994,
but may be relied upon as authority with respect to debt instruments, such as
the Grantor Trust Certificates, issued after December 21, 1992. Alternatively,
proposed Treasury regulations issued December 21, 1992 may be treated as
authority for debt instruments issued after December 21, 1992 and prior to April
4, 1994, and proposed Treasury regulations issued in 1986 and 1991 may be
treated as authority for instruments issued before December 21, 1992. In
applying these dates, the issue date of the Mortgage Assets should be used, or,
in the case of Stripped Bond Certificates or Stripped Coupon Certificates, the
date such Certificates are acquired. The holder of a Certificate should be
aware, however, that neither the proposed OID Regulations nor the OID
Regulations adequately address certain issues relevant to prepayable securities.
Under the Code, the Mortgage Assets underlying the Grantor Trust
Certificate will be treated as having been issued on the date they were
originated with an amount of OID equal to the excess of such Mortgage Asset's
stated redemption price at maturity over its issue price. The issue price of a
Mortgage Asset is generally the amount lent to the mortgagee, which may be
adjusted to take into account certain loan origination fees. The stated
redemption price at maturity of a Mortgage Asset is the sum of all payments to
be made on such Mortgage Asset other than payments that are treated as qualified
stated interest payments. The accrual of this OID, as described below under
"--Accrual of Original Issue Discount," will, unless otherwise specified in the
related Prospectus
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Supplement, utilize the original yield to maturity of the Grantor Trust
Certificate calculated based on a reasonable assumed prepayment rate for the
mortgage loans underlying the Grantor Trust Certificates (the "Prepayment
Assumption") on the issue date of such Grantor Trust Certificate, and will take
into account events that occur during the calculation period. The Prepayment
Assumption will be determined in the manner prescribed by regulations that have
not yet been issued. In the absence of such regulations, the Prepayment
Assumption used will be the prepayment assumption that is used in determining
the offering price of such Certificate. No representation is made that any
Certificate will prepay at the Prepayment Assumption or at any other rate. The
prepayment assumption contained in the Code literally only applies to debt
instruments collateralized by other debt instruments that are subject to
prepayment rather than direct ownership interests in such debt instruments, such
as the Certificates represent. However, no other legal authority provides
guidance with regard to the proper method for accruing OID on obligations that
are subject to prepayment, and, until further guidance is issued, the Master
Servicer intends to calculate and report OID under the method described below.
Accrual of Original Issue Discount. Generally, the owner of a Grantor
Trust Certificate must include in gross income the sum of the "daily portions,"
as defined below, of the OID on such Grantor Trust Certificate for each day on
which it owns such Certificate, including the date of purchase but excluding the
date of disposition. In the case of an original owner, the daily portions of OID
with respect to each component generally will be determined as set forth under
the OID Regulations. A calculation will be made by the Master Servicer or such
other entity specified in the related Prospectus Supplement of the portion of
OID that accrues during each successive monthly accrual period (or shorter
period from the date of original issue) that ends on the day in the calendar
year corresponding to each of the Distribution Dates on the Grantor Trust
Certificates (or the day prior to each such date). This will be done, in the
case of each full month accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the respective component under the Prepayment
Assumption) of all remaining payments to be received under the Prepayment
Assumption on the respective component and (b) any payments included in the
stated redemption price at maturity received during such accrual period, and
(ii) subtracting from that total the "adjusted issue price" of the respective
component at the beginning of such accrual period. The adjusted issue price of a
Grantor Trust Certificate at the beginning of the first accrual period is its
issue price; the adjusted issue price of a Grantor Trust Certificate at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period reduced by the amount of any payment other than
a payment of qualified stated interest made at the end of or during that accrual
period. The OID accruing during such accrual period will then be divided by the
number of days in the period to determine the daily portion of OID for each day
in the period. With respect to an initial accrual period shorter than a full
monthly accrual period, the daily portions of OID must be determined according
to an appropriate allocation under any reasonable method.
Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest as it accrues rather than when received. However,
the amount of original issue discount includible in the income of a holder of an
obligation is reduced when the obligation is acquired after its initial issuance
at a price greater than the sum of the original issue price and the previously
accrued original issue discount, less prior payments of principal. Accordingly,
if such Mortgage Assets acquired by a Certificateholder are purchased at a price
equal to the then unpaid principal amount of such Mortgage Asset, no original
issue discount attributable to the difference between the issue price and the
original principal amount of such Mortgage Asset (i.e. points) will be
includible by such holder. Other original issue discount on the Mortgage Assets
(e.g., that arising from a "teaser" rate) would still need to be accrued.
3. Grantor Trust Certificates Representing Interests in ARM Loans
The OID Regulations do not address the treatment of instruments, such as
the Grantor Trust Certificates, which represent interests in ARM Loans.
Additionally, the IRS has not issued guidance under the Code's coupon stripping
rules with respect to such instruments. In the absence of any authority, the
Master Servicer will report OID on Grantor Trust Certificates attributable to
ARM Loans ("Stripped ARM Obligations") to holders in a manner it
believes is consistent with the rules described above under the heading
"--Grantor Trust Certificates Representing Interests in Loans Other Than ARM
Loans" and with the OID Regulations. In general, application of these rules
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may require inclusion of income on a Stripped ARM Obligation in advance of the
receipt of cash attributable to such income. Further, the addition of interest
deferred by reason of negative amortization ("Deferred Interest") to the
principal balance of an ARM Loan may require the inclusion of such amount in the
income of the Grantor Trust Certificateholder when such amount accrues.
Furthermore, the addition of Deferred Interest to the Grantor Trust
Certificate's principal balance will result in additional income (including
possibly OID income) to the Grantor Trust Certificateholder over the remaining
life of such Grantor Trust Certificates.
Because the treatment of Stripped ARM Obligations is uncertain, investors
are urged to consult their tax advisors regarding how income will be includible
with respect to such Certificates.
c. Sale or Exchange of a Grantor Trust Certificate
Sale or exchange of a Grantor Trust Certificate prior to its maturity will
result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the seller's purchase price for the Grantor
Trust Certificate, increased by the OID included in the seller's gross income
with respect to the Grantor Trust Certificate, and reduced by principal payments
on the Grantor Trust Certificate previously received by the seller. Such gain or
loss will be capital gain or loss to an owner for which a Grantor Trust
Certificate is a "capital asset" within the meaning of Code Section 1221, and
will be long-term or short-term depending on whether the Grantor Trust
Certificate has been owned for the long-term capital gain holding period
(currently more than one year). Lower capital gains rates generally will apply
to individuals who hold Grantor Trust Certificates for more than 18 months.
It is possible that capital gain realized by holders of one or more
classes of Grantor Trust Certificates could be considered gain realized upon the
disposition of property that was part of a "conversion transaction." A sale of a
Grantor Trust Certificate will be part of a conversion transaction if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract to
sell the Grantor Trust Certificate substantially contemporaneously with
acquiring the Grantor Trust Certificate, (ii) the Grantor Trust Certificate is
part of a straddle, (iii) the Grantor Trust Certificate is marketed or sold as
producing capital gain, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of a
Grantor Trust Certificate is part of a conversion transaction, all or any
portion of the gain realized upon the sale or other disposition would be treated
as ordinary income instead of capital gain.
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Code Section 582(c)(1), so that gain or loss recognized from the sale
of a Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
d. Non-U.S. Persons
Generally, to the extent that a Grantor Trust Certificate evidences
ownership in underlying Mortgage Assets that were issued on or before July 18,
1984, interest or OID paid by the person required to withhold tax under Code
Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as defined
below) or (ii) a Grantor Trust Certificateholder holding on behalf of an owner
that is not a U.S. Person will be subject to federal income tax, collected by
withholding, at a rate of 30% or such lower rate as may be provided for interest
by an applicable tax treaty, unless such income is effectively connected with a
U.S. trade or business of such owner or beneficial owner. Accrued OID recognized
by the owner on the sale or exchange of such a Grantor Trust Certificate also
will be subject to federal income tax at the same rate. Generally, such payments
would not be subject to withholding to the extent that a Grantor Trust
Certificate evidences ownership in Mortgage Assets issued after July 18, 1984,
by natural persons if such Grantor Trust Certificateholder complies with certain
identification requirements (including delivery of a statement, signed by the
Grantor Trust Certificateholder under penalties of perjury, certifying that such
Grantor Trust Certificateholder is not a U.S. Person and providing the name and
address of such Grantor Trust Certificateholder). To the extent payments to
Grantor Trust Certificateholders that are not U.S. Persons are payments of
"contingent interest" on the underlying Mortgage Assets, or such Grantor Trust
Certificateholder is ineligible for the exemption described in the preceding
sentence, the 30% withholding tax will apply unless such withholding taxes are
reduced or eliminated by an applicable tax treaty and such holder meets the
eligibility and
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certification requirements necessary to obtain the benefits of such treaty.
Additional restrictions apply to Mortgage Assets where the mortgagor is not a
natural person in order to qualify for the exemption from withholding. If
capital gain derived from the sale, retirement or other disposition of a Grantor
Trust Certificate is effectively connected with a U.S. trade or business of a
Grantor Trust Certificateholder that is not a U.S. Person, such
Certificateholder will be taxed on the net gain under the graduated U.S. federal
income tax rates applicable to U.S. Persons (and, with respect to Grantor Trust
Certificates held by or on behalf of corporations, also may be subject to branch
profits tax). In addition, if the Trust Fund acquires a United States real
property interest through foreclosure, deed in lieu of foreclosure or otherwise
on a Mortgage Asset secured by such an interest (which for this purpose includes
real property located in the United States and the Virgin Islands), a Grantor
Trust Certificateholder that is not a U.S. Person will potentially be subject to
federal income tax on any gain attributable to such real property interest that
is allocable to such holder. Non-U.S. Persons should consult their tax advisors
regarding the application to them of the foregoing rules.
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States or any political subdivision thereof (other than a partnership
that is not treated as a U.S. Person under any applicable Treasury regulations),
an estate the income of which from sources outside the United States is
includible in gross income for federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States or a
trust if a court within the United States is able to exercise primary
supervision of the administration of the trust and one or more U.S. Persons have
the authority to control all substantial decisions of the trust. In addition,
certain trusts treated as U.S. Persons before August 20, 1996 may elect to
continue to be so treated to the extent provided in regulations.
e. Information Reporting and Backup Withholding
The Master Servicer will furnish or make available, within a reasonable
time after the end of each calendar year, to each person who was a
Certificateholder at any time during such year, such information as may be
deemed necessary or desirable to assist Certificateholders in preparing their
federal income tax returns, or to enable holders to make such information
available to beneficial owners or financial intermediaries that hold such
Certificates as nominees on behalf of beneficial owners. If a holder, beneficial
owner, financial intermediary or other recipient of a payment on behalf of a
beneficial owner fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be required with respect to any payments to
registered owners who are not "exempt recipients." In addition, upon the sale of
a Grantor Trust Certificate to (or through) a broker, the broker must withhold
31% of the entire purchase price, unless either (i) the broker determines that
the seller is a corporation or other exempt recipient, or (ii) the seller
provides, in the required manner, certain identifying information and, in the
case of a non-U.S. Person, certifies that such seller is a Non-U.S. Person, and
certain other conditions are met. Such as sale must also be reported by the
broker to the IRS, unless either (a) the broker determines that the seller is an
exempt recipient or (b) the seller certifies its non-U.S. Person status (and
certain other conditions are met). Certification of the registered owner's
non-U.S. Person status normally would be made on IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against such recipient's federal income
tax liability.
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
REMICs
The Trust Fund relating to a Series of Certificates may elect to be
treated as a REMIC. Qualification as a REMIC requires ongoing compliance with
certain conditions. Although a REMIC is not generally subject to federal income
tax (see, however "--Taxation of Owners of REMIC Residual Certificates" and
"--Prohibited
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Transactions" below), if a Trust Fund with respect to which a REMIC election is
made fails to comply with one or more of the ongoing requirements of the Code
for REMIC status during any taxable year, including the implementation of
restrictions on the purchase and transfer of the residual interests in a REMIC
as described below under "Taxation of Owners of REMIC Residual Certificates,"
the Code provides that a Trust Fund will not be treated as a REMIC for such year
and thereafter. In that event, such entity may be taxable as a separate
corporation, and the related Certificates (the "REMIC Certificates") may not be
accorded the status or given the tax treatment described below. While the Code
authorizes the Treasury Department to issue regulations providing relief in the
event of an inadvertent termination of the status of a trust fund as a REMIC, no
such regulations have been issued. Any such relief, moreover, may be accompanied
by sanctions, such as the imposition of a corporate tax on all or a portion of
the REMIC's income for the period in which the requirements for such status are
not satisfied. With respect to each Trust Fund that elects REMIC status, Sidley
& Austin or Latham & Watkins or Brown & Wood LLP or or Cadwalader, Wickersham &
Taft or such other counsel as may be specified in the related Prospectus
Supplement will deliver its opinion generally to the effect that, under then
existing law and assuming compliance with all provisions of the related Pooling
and Servicing Agreement, such Trust Fund will qualify as a REMIC, and the
related Certificates will be considered to be regular interests ("REMIC Regular
Certificates") or a sole class of residual interests ("REMIC Residual
Certificates") in the REMIC. The related Prospectus Supplement for each Series
of Certificates will indicate whether the Trust Fund will make a REMIC election
and whether a class of Certificates will be treated as a regular or residual
interest in the REMIC.
A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in such an obligation and any "regular interest"
in another REMIC) that is principally secured by an interest in real property
and that is transferred to the REMIC within a prescribed time period in exchange
for regular or residual interests in the REMIC.
In general, with respect to each Series of Certificates for which a REMIC
election is made, (i) Certificates held by a thrift institution taxed as a
"domestic building and loan association" will constitute assets described in
Code Section 7701(a)(19)(C); (ii) Certificates held by a real estate investment
trust will constitute "real estate assets" within the meaning of Code Section
856(c)(4)(A); and (iii) interest on Certificates held by a real estate
investment trust will be considered "interest on obligations secured by
mortgages on real property" within the meaning of Code Section 856(c)(3)(B). If
less than 95% of the REMIC's assets are assets qualifying under any of the
foregoing Code sections, the Certificates will be qualifying assets only to the
extent that the REMIC's assets are qualifying assets.
Tiered REMIC Structures. For certain Series of Certificates, two or more
separate elections may be made to treat designated portions of the related Trust
Fund as REMICs (respectively, the "Subsidiary REMIC" and the "Master REMIC") for
federal income tax purposes. Upon the issuance of any such Series of
Certificates, Sidley & Austin or Latham & Watkins or Brown & Wood LLP or
Cadwalader, Wickersham & Taft or such other counsel as may be specified in the
related Prospectus Supplement, counsel to the Depositor, will deliver its
opinion generally to the effect that, assuming compliance with all provisions of
the related Agreement, the Master REMIC as well as any Subsidiary REMIC will
each qualify as a REMIC, and the REMIC Certificates issued by the Master REMIC
and the Subsidiary REMIC or REMICs, respectively, will be considered to evidence
ownership of regular interests ("REMIC Regular Certificates") or residual
interests ("REMIC Residual Certificates") in the related REMIC within the
meaning of the REMIC provisions.
Other than the residual interest in a Subsidiary REMIC, only REMIC
Certificates issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC or REMICs and the Master REMIC will be treated as one REMIC
solely for purposes of determining whether the REMIC Certificates will be (i)
"real estate assets" within the meaning of Section 856(c)(4)(A) of the Code;
(ii) "loans secured by an interest in real property" under Section
7701(a)(19)(C) of the Code; and (iii) whether the income on such Certificates is
interest described in Section 856(c)(3)(B) of the Code.
a. Taxation of Owners of REMIC Regular Certificates
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC
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or its assets. Moreover, holders of REMIC Regular Certificates that otherwise
report income under a cash method of accounting will be required to report
income with respect to REMIC Regular Certificates under an accrual method.
Original Issue Discount and Premium. The REMIC Regular Certificates may be
issued with OID. Generally, such OID, if any, will equal the difference between
the "stated redemption price at maturity" of a REMIC Regular Certificate and its
"issue price." Holders of any class of Certificates issued with OID will be
required to include such OID in gross income for federal income tax purposes as
it accrues, in accordance with a constant interest method based on the
compounding of interest as it accrues rather than in accordance with receipt of
the interest payments. The following discussion is based in part on the OID
Regulations and in part on the provisions of the Tax Reform Act of 1986 (the
"1986 Act"). Holders of REMIC Regular Certificates (the "REMIC Regular
Certificateholders") should be aware, however, that the OID Regulations do not
adequately address certain issues relevant to prepayable securities, such as the
REMIC Regular Certificates.
Rules governing OID are set forth in Code Sections 1271 through 1273 and
1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated reinvestment
rate, if any, relating to the REMIC Regular Certificates and prescribe a method
for adjusting the amount and rate of accrual of such discount where the actual
prepayment rate differs from the Prepayment Assumption. Under the Code, the
Prepayment Assumption must be determined in the manner prescribed by
regulations, which regulations have not yet been issued. The legislative history
of the 1986 Act (the "Legislative History") provides, however, that Congress
intended the regulations to require that the Prepayment Assumption be the
prepayment assumption that is used in determining the initial offering price of
such REMIC Regular Certificates. The Prospectus Supplement for each Series of
REMIC Regular Certificates will specify the Prepayment Assumption to be used for
the purpose of determining the amount and rate of accrual of OID. No
representation is made that the REMIC Regular Certificates will prepay at the
Prepayment Assumption or at any other rate.
In general, each REMIC Regular Certificate will be treated as a single
installment obligation issued with an amount of OID equal to the excess of its
"stated redemption price at maturity" over its "issue price." The issue price of
a REMIC Regular Certificate is the first price at which a substantial amount of
REMIC Regular Certificates of that class are first sold to the public (excluding
bond houses, brokers, underwriters or wholesalers). If less than a substantial
amount of a particular class of REMIC Regular Certificates is sold for cash on
or prior to the date of their initial issuance (the "Closing Date"), the issue
price for such class will be treated as the fair market value of such class on
the Closing Date. The issue price of a REMIC Regular Certificate also includes
the amount paid by an initial Certificateholder for accrued interest that
relates to a period prior to the issue date of the REMIC Regular Certificate.
The stated redemption price at maturity of a REMIC Regular Certificate includes
the original principal amount of the REMIC Regular Certificate, but generally
will not include distributions of interest if such distributions constitute
"qualified stated interest." Qualified stated interest generally means interest
payable at a single fixed rate or qualified variable rate (as described below)
provided that such interest payments are unconditionally payable at intervals of
one year or less during the entire term of the REMIC Regular Certificate.
Interest is payable at a single fixed rate only if the rate appropriately takes
into account the length of the interval between payments. Distributions of
interest on REMIC Regular Certificates with respect to which Deferred Interest
will accrue will not constitute qualified stated interest payments, and the
stated redemption price at maturity of such REMIC Regular Certificates includes
all distributions of interest as well as principal thereon.
Where the interval between the issue date and the first Distribution Date
on a REMIC Regular Certificate is longer than the interval between subsequent
Distribution Dates, the greater of any original issue discount (disregarding the
rate in the first period) and any interest foregone during the first period is
treated as the amount by which the stated redemption price at maturity of the
Certificate exceeds its issue price for purposes of the de minimis rule
described below. The OID Regulations suggest that all interest on a long first
period REMIC Regular Certificate that is issued with non-de minimis OID, as
determined under the foregoing rule, will be treated as OID. Where the interval
between the issue date and the first Distribution Date on a REMIC Regular
Certificate is shorter than the interval between subsequent Distribution Dates,
interest due on the first Distribution Date in excess of the amount that accrued
during the first period would be added to the Certificates, stated redemption
price at maturity.
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REMIC Regular Certificateholders should consult their own tax advisors to
determine the issue price and stated redemption price at maturity of a REMIC
Regular Certificate.
Under the de minimis rule, OID on a REMIC Regular Certificate will be
considered to be zero if such OID is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average maturity of the REMIC Regular Certificate. For this purpose, the
weighted average maturity of the REMIC Regular Certificate is computed as the
sum of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution in
reduction of stated redemption price at maturity is scheduled to be made by a
fraction, the numerator of which is the amount of each distribution included in
the stated redemption price at maturity of the REMIC Regular Certificate and the
denominator of which is the stated redemption price at maturity of the REMIC
Regular Certificate. Although currently unclear, it appears that the schedule of
such distributions should be determined in accordance with the Prepayment
Assumption. The Prepayment Assumption with respect to a Series of REMIC Regular
Certificates will be set forth in the related Prospectus Supplement. Holders
generally must report de minimis OID pro rata as principal payments are
received, and such income will be capital gain if the REMIC Regular Certificate
is held as a capital asset. However, accrual method holders may elect to accrue
all de minimis OID as well as market discount under a constant interest method.
The Prospectus Supplement with respect to a Trust Fund may provide for
certain REMIC Regular Certificates to be issued at prices significantly
exceeding their principal amounts or based on notional principal balances (the
"Super-Premium Certificates"). The income tax treatment of such REMIC Regular
Certificates is not entirely certain. For information reporting purposes, the
Trust Fund intends to take the position that the stated redemption price at
maturity of such REMIC Regular Certificates is the sum of all payments to be
made on such REMIC Regular Certificates determined under the Prepayment
Assumption, with the result that such REMIC Regular Certificates would be issued
with OID. The calculation of income in this manner could result in negative
original issue discount (which delays future accruals of OID rather than being
immediately deductible) when prepayments on the Mortgage Assets exceed those
estimated under the Prepayment Assumption. The IRS might contend, however, that
certain contingent payment rules contained in final regulations issued on June
11, 1996, with respect to original issue discount, should apply to such
Certificates. Although such rules are not applicable to instruments governed by
Code Section 1272(a)(6), they represent the only guidance regarding the current
views of the IRS with respect to contingent payment instruments. These proposed
regulations, if applicable, generally would require holders of Regular Interest
Certificates to take the payments considered contingent interest payments into
income on a yield to maturity basis in accordance with a schedule of projected
payments provided by the Depositor and to make annual adjustments to income to
account for the difference between actual payments received and projected
payment amounts accrued. In the alternative, the IRS could assert that the
stated redemption price at maturity of such REMIC Regular Certificates should be
limited to their principal amount (subject to the discussion below under
"--Accrued Interest Certificates"), so that such REMIC Regular Certificates
would be considered for federal income tax purposes to be issued at a premium.
If such a position were to prevail, the rules described below under "--Taxation
of Owners of REMIC Regular Certificates--Premium" would apply. It is unclear
when a loss may be claimed for any unrecovered basis for a Super-Premium
Certificate. It is possible that a holder of a Super-Premium Certificate may
only claim a loss when its remaining basis exceeds the maximum amount of future
payments, assuming no further prepayments or when the final payment is received
with respect to such Super-Premium Certificate.
Under the REMIC Regulations, if the issue price of a REMIC Regular
Certificate (other than REMIC Regular Certificate based on a notional amount)
does not exceed 125% of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly, such REMIC Regular Certificate
generally should not be treated as a Super-Premium Certificate and the rules
described below under "--REMIC Regular Certificates--Premium" should apply.
However, it is possible that holders of REMIC Regular Certificates issued at a
premium, even if the premium is less than 25% of such Certificate's actual
principal balance, will be required to amortize the premium under an original
issue discount method or contingent interest method even though no election
under Code Section 171 is made to amortize such premium.
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Generally, a REMIC Regular Certificateholder must include in gross income
the "daily portions," as determined below, of the OID that accrues on a REMIC
Regular Certificate for each day a Certificateholder holds the REMIC Regular
Certificate, including the purchase date but excluding the disposition date. In
the case of an original holder of a REMIC Regular Certificate, a calculation
will be made of the portion of the OID that accrues during each successive
period ("an accrual period") that ends on the day in the calendar year
corresponding to a Distribution Date (or if Distribution Dates are on the first
day or first business day of the immediately preceding month, interest may be
treated as payable on the last day of the immediately preceding month) and
begins on the day after the end of the immediately preceding accrual period (or
on the issue date in the case of the first accrual period). This will be done,
in the case of each full accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the REMIC Regular Certificates as calculated under
the Prepayment Assumption) of all remaining payments to be received on the REMIC
Regular Certificates under the Prepayment Assumption and (b) any payments
included in the stated redemption price at maturity received during such accrual
period, and (ii) subtracting from that total the adjusted issue price of the
REMIC Regular Certificates at the beginning of such accrual period. The adjusted
issue price of a REMIC Regular Certificate at the beginning of the first accrual
period is its issue price; the adjusted issue price of a REMIC Regular
Certificate at the beginning of a subsequent accrual period is the adjusted
issue price at the beginning of the immediately preceding accrual period plus
the amount of OID allocable to that accrual period and reduced by the amount of
any payment other than a payment of qualified stated interest made at the end of
or during that accrual period. The OID accrued during an accrual period will
then be divided by the number of days in the period to determine the daily
portion of OID for each day in the accrual period. The calculation of OID under
the method described above will cause the accrual of OID to either increase or
decrease (but never below zero) in a given accrual period to reflect the fact
that prepayments are occurring faster or slower than under the Prepayment
Assumption. With respect to an initial accrual period shorter than a full
accrual period, the daily portions of OID may be determined according to an
appropriate allocation under any reasonable method.
A subsequent purchaser of a REMIC Regular Certificate issued with OID who
purchases the REMIC Regular Certificate at a cost less than the remaining stated
redemption price at maturity will also be required to include in gross income
the sum of the daily portions of OID on that REMIC Regular Certificate. In
computing the daily portions of OID for such a purchaser (as well as an initial
purchaser that purchases at a price higher than the adjusted issue price but
less than the stated redemption price at maturity), however, the daily portion
is reduced by the amount that would be the daily portion for such day (computed
in accordance with the rules set forth above) multiplied by a fraction, the
numerator of which is the amount, if any, by which the price paid by such holder
for that REMIC Regular Certificate exceeds the following amount: (a) the sum of
the issue price plus the aggregate amount of OID that would have been includible
in the gross income of an original REMIC Regular Certificateholder (who
purchased the REMIC Regular Certificate at its issue price), less (b) any prior
payments included in the stated redemption price at maturity, and the
denominator of which is the sum of the daily portions for that REMIC Regular
Certificate for all days beginning on the date after the purchase date and
ending on the maturity date computed under the Prepayment Assumption. A holder
who pays an acquisition premium instead may elect to accrue OID by treating the
purchase as a purchase at original issue.
Variable Rate REMIC Regular Certificates. REMIC Regular Certificates may
provide for interest based on a variable rate. Interest based on a variable rate
will constitute qualified stated interest and not contingent interest if,
generally, (i) such interest is unconditionally payable at least annually, (ii)
the issue price of the debt instrument does not exceed the total noncontingent
principal payments and (iii) interest is based on a "qualified floating rate,"
an "objective rate," a combination of a single fixed rate and one or more
"qualified floating rates," one "qualified inverse floating rate," or a
combination of "qualified floating rates "--that do not operate in a manner that
significantly accelerates or defers interest payments on such REMIC Regular
Certificates.
The amount of OID with respect to a REMIC Regular Certificate bearing a
variable rate of interest will accrue in the manner described above under
"--Original Issue Discount and Premium" by assuming generally that the index
used for the variable rate will remain fixed throughout the term of the
Certificate. Appropriate adjustments are made for the actual variable rate.
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Although unclear at present, the Depositor intends to treat interest on a
REMIC Regular Certificate that is a weighted average of the net interest rates
on Mortgage Loans as qualified stated interest. In such case, the weighted
average rate used to compute the initial pass-through rate on the REMIC Regular
Certificates will be deemed to be the index in effect through the life of the
REMIC Regular Certificates. It is possible, however, that the IRS may treat some
or all of the interest on REMIC Regular Certificates with a weighted average
rate as taxable under the rules relating to obligations providing for contingent
payments. Such treatment may effect the timing of income accruals on such REMIC
Regular Certificates.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market discount or original issue discount) and premium in income as
interest, based on a constant yield method. If such an election were to be made
with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Certificateholder acquires during the year of the
election or thereafter. Similarly, a Certificateholder that makes this election
for a Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or acquires. See
"--REMIC Regular Certificates--Premium" herein. The election to accrue interest,
discount and premium on a constant yield method with respect to a Certificate is
irrevocable without the consent of the IRS.
Market Discount. A purchaser of a REMIC Regular Certificate may also be
subject to the market discount provisions of Code Sections 1276 through 1278.
Under these provisions and the OID Regulations, "market discount" equals the
excess, if any, of (i) the REMIC Regular Certificate's stated principal amount
or, in the case of a REMIC Regular Certificate with OID, the adjusted issue
price (determined for this purpose as if the purchaser had purchased such REMIC
Regular Certificate from an original holder) over (ii) the price for such REMIC
Regular Certificate paid by the purchaser. A Certificateholder that purchases a
REMIC Regular Certificate at a market discount will recognize income upon
receipt of each distribution representing amounts included in such certificate's
stated redemption price at maturity. In particular, under Section 1276 of the
Code such a holder generally will be required to allocate each such distribution
first to accrued market discount not previously included in income, and to
recognize ordinary income to that extent. A Certificateholder may elect to
include market discount in income currently as it accrues rather than including
it on a deferred basis in accordance with the foregoing. If made, such election
will apply to all market discount bonds acquired by such Certificateholder on or
after the first day of the first taxable year to which such election applies.
Market discount with respect to a REMIC Regular Certificate will be
considered to be zero if the amount allocable to the REMIC Regular Certificate
is less than 0.25% of such REMIC Regular Certificate's stated redemption price
at maturity multiplied by such REMIC Regular Certificate's weighted average
maturity remaining after the date of purchase. If market discount on a REMIC
Regular Certificate is considered to be zero under this rule, the actual amount
of market discount must be allocated to the remaining principal payments on the
REMIC Regular Certificate, and gain equal to such allocated amount will be
recognized when the corresponding principal payment is made. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond acquired
by the taxpayer after October 22, 1986, shall be treated as ordinary income to
the extent that it does not exceed the accrued market discount at the time of
such payment. The amount of accrued market discount for purposes of determining
the tax treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.
The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury, rules described in
the Legislative History will apply. Under those rules, the holder of a market
discount bond may elect to accrue market discount either on the basis of a
constant interest method rate or according to one of the following methods. For
REMIC Regular
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Certificates issued with OID, the amount of market discount that accrues during
a period is equal to the product of (i) the total remaining market discount and
(ii) a fraction, the numerator of which is the OID accruing during the period
and the denominator of which is the total remaining OID at the beginning of the
period. For REMIC Regular Certificates issued without OID, the amount of market
discount that accrues during a period is equal to the product of (a) the total
remaining market discount and (b) a fraction, the numerator of which is the
amount of stated interest paid during the accrual period and the denominator of
which is the total amount of stated interest remaining to be paid at the
beginning of the period. For purposes of calculating market discount under any
of the above methods in the case of instruments (such as the REMIC Regular
Certificates) that provide for payments that may be accelerated by reason of
prepayments of other obligations securing such instruments, the same Prepayment
Assumption applicable to calculating the accrual of OID will apply.
A holder who acquired a REMIC Regular Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry such Certificate purchased with market discount. For these purposes,
the de minimis rule referred to above applies. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in which
such market discount is includible in income. If such holder elects to include
market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Premium. A purchaser of a REMIC Regular Certificate that purchases the
REMIC Regular Certificate at a cost (not including accrued qualified stated
interest) greater than its remaining stated redemption price at maturity will be
considered to have purchased the REMIC Regular Certificate at a premium and may
elect to amortize such premium under a constant yield method. A
Certificateholder that makes this election for a Certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder acquires during the year of the election or thereafter. It is
not clear whether the Prepayment Assumption would be taken into account in
determining the life of the REMIC Regular Certificate for this purpose. However,
the Legislative History states that the same rules that apply to accrual of
market discount (which rules require use of a Prepayment Assumption in accruing
market discount with respect to REMIC Regular Certificates without regard to
whether such Certificates have OID) will also apply in amortizing bond premium
under Code Section 171. The Code provides that amortizable bond premium will be
allocated among the interest payments on such REMIC Regular Certificates and
will be applied as an offset against such interest payment. On June 27, 1996,
the IRS published in the Federal Register proposed regulations on the
amortization of bond premium. The foregoing discussion is based in part on such
proposed regulations. On December 30, 1997, the IRS issued the Amortizable Bond
Premium Regulations, which generally are effective for bonds acquired on or
after March 2, 1998 or, for holders making an election to amortize bond premium
as described above for the taxable year that includes March 2, 1998 or any
subsequent taxable year, will apply to bonds held on or after the first day of
the taxable year in which the election is made. Neither the proposed regulations
nor the final regulations, by their express terms, apply to prepayable
securities described in Section 1272(a)(6) of the Code, such as the REMIC
Regular Certificates. Certificateholders should consult their tax advisors
regarding the possibility of making an election to amortize any such bond
premium.
Deferred Interest. Certain classes of REMIC Regular Certificates may
provide for the accrual of Deferred Interest with respect to one or more ARM
Loans. Any Deferred Interest that accrues with respect to a class of REMIC
Regular Certificates will constitute income to the holders of such Certificates
prior to the time distributions of cash with respect to such Deferred Interest
are made. It is unclear, under the OID Regulations, whether any of the interest
on such Certificates will constitute qualified stated interest or whether all or
a portion of the interest payable on such Certificates must be included in the
stated redemption price at maturity of the Certificates and accounted for as OID
(which could accelerate such inclusion). Interest on REMIC Regular Certificates
must in any event be accounted for under an accrual method by the holders of
such Certificates and, therefore, applying the latter analysis
may result only in a slight difference in the timing of the inclusion in income
of interest on such REMIC Regular Certificates.
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Sale, Exchange or Redemption. If a REMIC Regular Certificate is sold,
exchanged, redeemed or retired, the seller will recognize gain or loss equal to
the difference between the amount realized on the sale, exchange, redemption, or
retirement and the seller's adjusted basis in the REMIC Regular Certificate.
Such adjusted basis generally will equal the cost of the REMIC Regular
Certificate to the seller, increased by any OID and market discount included in
the seller's gross income with respect to the REMIC Regular Certificate, and
reduced (but not below zero) by payments included in the stated redemption price
at maturity previously received by the seller and by any amortized premium.
Similarly, a holder who receives a payment that is part of the stated redemption
price at maturity of a REMIC Regular Certificate will recognize gain equal to
the excess, if any, of the amount of the payment over an allocable portion of
the holder's adjusted basis in the REMIC Regular Certificate. A REMIC Regular
Certificateholder who receives a final payment that is less than the holder's
adjusted basis in the REMIC Regular Certificate will generally recognize a loss.
Except as provided in the following paragraph and as provided under "--Market
Discount" above, any such gain or loss will be capital gain or loss, provided
that the REMIC Regular Certificate is held as a "capital asset" (generally,
property held for investment) within the meaning of Code Section 1221.
Gain from the sale or other disposition of a REMIC Regular Certificate
that might otherwise be capital gain will be treated as ordinary income to the
extent that such gain does not exceed the excess, if any, of (i) the amount that
would have been includible in such holder's income with respect to the REMIC
Regular Certificate had income accrued thereon at a rate equal to 110% of the
AFR as defined in Code Section 1274(d) determined as of the date of purchase of
such REMIC Regular Certificate, over (ii) the amount actually includible in such
holder's income. Gain from the sale or other disposition of a REMIC Regular
Certificate that might otherwise be capita gain will be treated as ordinary
income if the REMIC Regular Certificate is held as part of a "conversion
transaction" as defined in Code section 1258(c), up to the amount of interest
that would have accrued on the REMIC Regular Certificateholder's net investment
in the conversion transaction at 120% of the appropriate applicable federal rate
under Code section 1274(d) in effect at the time the taxpayer entered into the
transaction minus any amount previously treated as ordinary income with respect
to any prior disposition of property that was held as part of such transaction,
or if the REMIC Regular Certificate is held as part of a straddle. Potential
investors should consult their tax advisors with respect to tax consequences of
ownership and disposition of an investment in REMIC Regular Certificates in
their particular circumstances.
It is possible that capital gain realized by holders of one or more
classes of REMIC Regular Certificates could be considered gain realized upon the
disposition of property that was part of a "conversion transaction." A sale of a
REMIC Regular Certificate will be part of a "conversion transaction" if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract to
sell the REMIC Regular Certificate substantially contemporaneously with
acquiring the REMIC Regular Certificate, (ii) the REMIC Regular Certificate is
part of a straddle, (iii) the REMIC Regular Certificate is marketed or sold as
producing capital gains, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of a
REMIC Regular Certificate is part of a conversion transaction, all or a portion
of the gain realized upon the sale or other disposition of the REMIC Regular
Certificate would be treated as ordinary income instead of capital gain.
The Certificates will be "evidences of indebtedness" within the meaning of
Code Section 582(c)(1), so that gain or loss recognized from the sale of a REMIC
Regular Certificate by a bank or a thrift institution to which such section
applies will be ordinary income or loss.
The REMIC Regular Certificate information reports will include a statement
of the adjusted issue price of the REMIC Regular Certificate at the beginning of
each accrual period. In addition, the reports will include information necessary
to compute the accrual of any market discount that may arise upon secondary
trading of REMIC Regular Certificates. Because exact computation of the accrual
of market discount on a constant yield method would require information relating
to the holder's purchase price which the REMIC may not have, it appears that the
information reports will only provide information pertaining to the appropriate
proportionate method of accruing market discount.
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The Taxpayer Relief Act of 1997 (the "Act") reduces the maximum rates on
long-term capital gains recognized on capital assets held by individual
taxpayers for more than eighteen months as of the date of disposition (and would
further reduce the maximum rates on such gains in the year 2001 and thereafter
for certain individual taxpayers who meet specified conditions). The capital
gains rate for capital assets held by individual taxpayers for more than twelve
months but not more than eighteen months was not changed by the Act. The Act
does not change the capital gains rates for corporations. Prospective investors
should consult their own tax advisors concerning these tax law changes.
Accrued Interest Certificates. Certain of the REMIC Regular Certificates
("Payment Lag Certificates") may provide for payments of interest based on a
period that corresponds to the interval between Distribution Dates but that ends
prior to each such Distribution Date. The period between the Closing Date for
Payment Lag Certificates and their first Distribution Date may or may not exceed
such interval. Purchasers of Payment Lag Certificates for which the period
between the Closing Date and the first Distribution Date does not exceed such
interval could pay upon purchase of the REMIC Regular Certificates accrued
interest in excess of the accrued interest that would be paid if the interest
paid on the Distribution Date were interest accrued from Distribution Date to
Distribution Date. If a portion of the initial purchase price of a REMIC Regular
Certificate is allocable to interest that has accrued prior to the issue date
("pre-issuance accrued interest") and the REMIC Regular Certificate provides for
a payment of stated interest on the first payment date (and the first payment
date is within one year of the issue date) that equals or exceeds the amount of
the pre-issuance accrued interest, then the REMIC Regular Certificate's issue
price may be computed by subtracting from the issue price the amount of
pre-issuance accrued interest, rather than as an amount payable on the REMIC
Regular Certificate. However, it is unclear under this method how the OID
Regulations treat interest on Payment Lag Certificates. Therefore, in the case
of a Payment Lag Certificate, the Trust Fund intends to include accrued interest
in the issue price and report interest payments made on the first Distribution
Date as interest to the extent such payments represent interest for the number
of days that the Certificateholder has held such Payment Lag Certificate during
the first accrual period.
Investors should consult their own tax advisors concerning the treatment
for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury regulations,
if the REMIC is considered to be a "single-class REMIC," a portion of the
REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those REMIC Regular Certificateholders that are
"pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of these
rules on an investment in the REMIC Regular Certificates. See "Pass-Through of
Non-Interest Expenses of the REMIC" under "Taxation of Owners of REMIC Residual
Certificates" below.
Effects of Defaults, Delinquencies and Losses. Certain Series of
Certificates may contain one or more classes of Subordinated Certificates, and
in the event there are defaults or delinquencies on the Mortgage Assets, amounts
that would otherwise be distributed on the Subordinated Certificates may instead
be distributed on the Senior Certificates. Subordinated Certificateholders
nevertheless will be required to report income with respect to such Certificates
under an accrual method without giving effect to delays and reductions in
distributions on such Subordinated Certificates attributable to defaults and
delinquencies on the Mortgage Assets, except to the extent that it can be
established that such amounts are uncollectible. As a result, the amount of
income reported by a Subordinated Certificateholder in any period could
significantly exceed the amount of cash distributed to such holder in that
period. The holder will eventually be allowed a loss (or will be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Subordinated Certificate is reduced as a result of defaults
and delinquencies on the Mortgage Assets.
Although not entirely clear, it appears that holders of REMIC Regular
Certificates that are corporations should in general be allowed to deduct as an
ordinary loss any loss sustained during the taxable year on account of any such
Certificates becoming wholly or partially worthless, and that, in general,
holders of Certificates that are not corporations should be allowed to deduct as
a short-term capital loss any loss sustained during the taxable year on account
of any such Certificates becoming wholly worthless. Potential investors and
holders of the Certificates are urged to consult their own tax advisors
regarding the appropriate timing, amount and character of any loss
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sustained with respect to such Certificates, including any loss resulting from
the failure to recover previously accrued interest or discount income. Special
loss rules are applicable to banks and thrift institutions, including rules
regarding reserves for bad debts. Such taxpayers are advised to consult their
tax advisors regarding the treatment of losses on Certificates.
Non-U.S. Persons. Generally, payments of interest (including any payment
with respect to accrued OID) on the REMIC Regular Certificates to a REMIC
Regular Certificateholder who is not a U.S. Person and is not engaged in a trade
or business within the United States will not be subject to federal withholding
tax if (i) such REMIC Regular Certificateholder does not actually or
constructively own 10 percent or more of the combined voting power of all
classes of equity in the issuer; (ii) such REMIC Regular Certificateholder is
not a controlled foreign corporation (within the meaning of Code Section 957)
related to the issuer; and (iii) such REMIC Regular Certificateholder complies
with certain identification requirements (including delivery of a statement,
signed by the REMIC Regular Certificateholder under penalties of perjury,
certifying that such REMIC Regular Certificateholder is a foreign person and
providing the name and address of such REMIC Regular Certificateholder). If a
REMIC Regular Certificateholder is not exempt from withholding, distributions of
interest to such holder, including distributions in respect of accrued OID, may
be subject to a 30% withholding tax, subject to reduction under any applicable
tax treaty. If the interest on a REMIC Regular Certificate is effectively
connected with the conduct by the Non-U.S. REMIC Regular Certificateholder of a
trade or business within the United States, then the Non-U.S. REMIC Regular
Certificateholder will be subject to U.S. income tax at regular graduated rates.
Such a Non-U.S. REMIC Regular Certificateholder also may be subject to the
branch profits tax.
Further, a REMIC Regular Certificate will not be included in the estate of
a non-resident alien individual that does not actually or constructively own 10%
or more of the combined voting power of all classes of equity in the Issuer and
will not be subject to United States estate taxes. However, Certificateholders
who are non-resident alien individuals should consult their tax advisors
concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons and persons
related to such holders should not acquire any REMIC Residual Certificates, and
holders of REMIC Residual Certificates (the "REMIC Residual Certificateholder")
and persons related to REMIC Residual Certificateholders should not acquire any
REMIC Regular Certificates without consulting their tax advisors as to the
possible adverse tax consequences of doing so. In addition, the IRS may assert
that non-U.S Persons that own directly or indirectly, a greater than 10%
interest in any Mortgagor, and foreign corporations that are "controlled foreign
corporations" as to the United States of which such a Mortgagor is a "United
States shareholder" within the meaning of Section 951(b) of the Code, are
subject to United States withholding tax on interest distributed to them to the
extent of interest concurrently paid by the related Mortgagor.
For these purposes, a "U.S. Person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in, or under the laws of, the United States or any political subdivision
thereof, an estate the income of which from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business or a trust
as to which (i) a court in the United States is able to exercise primary
supervision over its administration and (ii) one or more U.S. Persons have the
right to control all substantial decisions of the trust.
Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at any
time during such year, such information as may be deemed necessary or desirable
to assist REMIC Regular Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold such Regular Certificates on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments with respect to
any payments to registered owners who are not "exempt recipients." In addition,
upon the sale of a REMIC Regular Certificate to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i)
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the broker determines that the seller is a corporation or other exempt
recipient, or (ii) the seller provides, in the required manner, certain
identifying information and, in the case of a non-U.S. Person, certifies that
such seller is a Non-U.S. Person, and certain other conditions are met. Such as
sale must also be reported by the broker to the IRS, unless either (a) the
broker determines that the seller is an exempt recipient or (b) the seller
certifies its non-U.S. Person status (and certain other conditions are met).
Certification of the registered owner's non-U.S. Person status normally would be
made on IRS Form W-8 under penalties of perjury, although in certain cases it
may be possible to submit other documentary evidence. Any amounts deducted and
withheld from a distribution to a recipient would be allowed as a credit against
such recipient's federal income tax liability.
On October 6, 1997, the Treasury Department issued the New Regulations,
which make certain modifications to the withholding, backup withholding and
information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
b. Taxation of Owners of REMIC Residual Certificates
Allocation of the Income of the REMIC to the REMIC Residual Certificates.
The REMIC will not be subject to federal income tax except with respect to
income from prohibited transactions and certain other transactions. See
"--Prohibited Transactions and Other Taxes" below. Instead, each original holder
of a REMIC Residual Certificate will report on its federal income tax return, as
ordinary income, its share of the taxable income of the REMIC for each day
during the taxable year on which such holder owns any REMIC Residual
Certificates. The taxable income of the REMIC for each day will be determined by
allocating the taxable income of the REMIC for each calendar quarter ratably to
each day in the quarter. Such a holder's share of the taxable income of the
REMIC for each day will be based on the portion of the outstanding REMIC
Residual Certificates that such holder owns on that day. The taxable income of
the REMIC will be determined under an accrual method and will be taxable to the
holders of REMIC Residual Certificates without regard to the timing or amounts
of cash distributions by the REMIC. Ordinary income derived from REMIC Residual
Certificates will be "portfolio income" for purposes of the taxation of
taxpayers subject to the limitations on the deductibility of "passive losses."
As residual interests, the REMIC Residual Certificates will be subject to tax
rules, described below, that differ from those that would apply if the REMIC
Residual Certificates were treated for federal income tax purposes as direct
ownership interests in the Certificates or as debt instruments issued by the
REMIC.
A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests (that is, a fast-pay, slow-pay structure) may generate such a
mismatching of income and cash distributions (that is, "phantom income"). This
mismatching may be caused by the use of certain required tax accounting methods
by the REMIC, variations in the prepayment rate of the underlying Mortgage
Assets and certain other factors. Depending upon the structure of a particular
transaction, the aforementioned factors may significantly reduce the after-tax
yield of a REMIC Residual Certificate to a REMIC Residual Certificateholder or
cause the REMIC Residual Certificate to have negative "value." Investors should
consult their own tax advisors concerning the federal income tax treatment of a
REMIC Residual Certificate and the impact of such tax treatment on the after-tax
yield of a REMIC Residual Certificate.
A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that such REMIC Residual Certificateholder owns
such REMIC Residual Certificate. Those daily amounts generally would equal the
amounts that would have been reported for the same days by an original REMIC
Residual Certificateholder, as described above. The Legislative History
indicates that certain adjustments may be appropriate to reduce (or increase)
the income of a subsequent holder of a REMIC Residual Certificate that purchased
such REMIC Residual Certificate at a price greater than (or less than) the
adjusted basis such REMIC Residual Certificate would have in the hands of an
original REMIC Residual Certificateholder. See "--Sale or Exchange of REMIC
Residual Certificates" below. It is not clear, however, whether such adjustments
will in fact be permitted or required and, if so, how they would be made. The
REMIC Regulations do not provide for any such adjustments.
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Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed to
the REMIC for interest and OID on the REMIC Regular Certificates and, except as
described above under "--Taxation of Owners of REMIC Regular
Certificates--Non-Interest Expenses of the REMIC," other expenses. REMIC taxable
income is generally determined in the same manner as the taxable income of an
individual using the accrual method of accounting, except that (i) the
limitations on deductibility of investment interest expense and expenses for the
production of income do not apply, (ii) all bad loans will be deductible as
business bad debts, and (iii) the limitation on the deductibility of interest
and expenses related to tax-exempt income will apply. The REMIC's gross income
includes interest, original issue discount income, and market discount income,
if any, on the Mortgage Loans, reduced by amortization of any premium on the
Mortgage Loans, plus income on reinvestment of cash flows and reserve assets,
plus any cancellation of indebtedness income upon allocation of realized losses
to the REMIC Regular Certificates. Note that the timing of cancellation of
indebtedness income recognized by REMIC Residual Certificateholders resulting
from defaults and delinquencies on Mortgage Assets may differ from the time of
the actual loss on the Mortgage Asset. The REMIC's deductions include interest
and original issue discount expense on the REMIC Regular Certificates, servicing
fees on the Mortgage Loans, other administrative expenses of the REMIC and
realized losses on the Mortgage Loans. The requirement that REMIC Residual
Certificateholders report their pro rata share of taxable income or net loss of
the REMIC will continue until there are no Certificates of any class of the
related Series outstanding.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the REMIC Regular Certificates and the REMIC Residual Certificates (or, if a
class of Certificates is not sold initially, its fair market value). Such
aggregate basis will be allocated among the Mortgage Assets and other assets of
the REMIC in proportion to their respective fair market value. A Mortgage Asset
will be deemed to have been acquired with discount or premium to the extent that
the REMIC's basis therein is less than or greater than its principal balance,
respectively. Any such discount (whether market discount or OID) will be
includible in the income of the REMIC as it accrues, in advance of receipt of
the cash attributable to such income, under a method similar to the method
described above for accruing OID on the REMIC Regular Certificates. The REMIC
may elect under Code Section 171 to amortize any premium on the Mortgage Assets.
Premium on any Mortgage Asset to which such election applies would be amortized
under a constant yield method. It is not clear whether the yield of a Mortgage
Asset would be calculated for this purpose based on scheduled payments or taking
account of the Prepayment Assumption. Additionally, such an election would not
apply to the yield with respect to any underlying mortgage loan originated on or
before September 27, 1985. Instead, premium with respect to such a mortgage loan
would be allocated among the principal payments thereon and would be deductible
by the REMIC as those payments become due.
The REMIC will be allowed a deduction for interest and OID on the REMIC
Regular Certificates. The amount and method of accrual of OID will be calculated
for this purpose in the same manner as described above with respect to REMIC
Regular Certificates except that the 0.25% per annum de minimis rule and
adjustments for subsequent holders described therein will not apply.
A REMIC Residual Certificateholder will not be permitted to amortize the
cost of the REMIC Residual Certificate as an offset to its share of the REMIC's
taxable income. However, REMIC taxable income will not include cash received by
the REMIC that represents a recovery of the REMIC's basis in its assets, and, as
described above, the issue price of the REMIC Residual Certificates will be
added to the issue price of the REMIC Regular Certificates in determining the
REMIC's initial basis in its assets. See "--Sale or Exchange of REMIC Residual
Certificates" below. For a discussion of possible adjustments to income of a
subsequent holder of a REMIC Residual Certificate to reflect any difference
between the actual cost of such REMIC Residual Certificate to such holder and
the adjusted basis such REMIC Residual Certificate would have in the hands of an
original REMIC Residual Certificateholder, see "--Allocation of the Income of
the REMIC to the REMIC Residual Certificates" above.
Net Losses of the REMIC. The REMIC will have a net loss for any calendar
quarter in which its deductions exceed its gross income. Such net loss would be
allocated among the REMIC Residual Certificateholders in the same manner as the
REMIC's taxable income. The net loss allocable to any REMIC Residual Certificate
will not be deductible by the holder to the extent that such net loss exceeds
such holder's adjusted basis in such REMIC
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Residual Certificate. Any net loss that is not currently deductible by reason of
this limitation may only be used by such REMIC Residual Certificateholder to
offset its share of the REMIC's taxable income in future periods (but not
otherwise). The ability of REMIC Residual Certificateholders that are
individuals or closely held corporations to deduct net losses may be subject to
additional limitations under the Code.
Mark to Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that the IRS has finalized regulations (the
"Mark-to-Market Regulations") which provide that a REMIC Residual Certificate
acquired after January 3, 1995 cannot be marked to market. The Mark-to-Market
Regulations replaced the temporary regulations which allowed a Residual
Certificate to be marked to market provided that it was not a "negative value"
residual interest and did not have the same economic effect as a "negative
value" residual interest.
Pass-Through of Non-Interest Expenses of the REMIC. As a general rule, all
of the fees and expenses of a REMIC will be taken into account by holders of the
REMIC Residual Certificates. In the case of a single class REMIC, however, the
expenses and a matching amount of additional income will be allocated, under
temporary Treasury regulations, among the REMIC Regular Certificateholders and
the REMIC Residual Certificateholders on a daily basis in proportion to the
relative amounts of income accruing to each Certificateholder on that day. In
general terms, a single class REMIC is one that either (i) would qualify, under
existing Treasury regulations, as a grantor trust if it were not a REMIC
(treating all interests as ownership interests, even if they would be classified
as debt for federal income tax purposes) or (ii) is similar to such a trust and
is structured with the principal purpose of avoiding the single class REMIC
rules. Unless otherwise stated in the applicable Prospectus Supplement, the
expenses of the REMIC will be allocated to holders of the related REMIC Residual
Certificates in their entirety and not to holders of the related REMIC Regular
Certificates.
In the case of individuals (or trusts, estates or other persons that
compute their income in the same manner as individuals) who own an interest in a
REMIC Regular Certificate or a REMIC Residual Certificate directly or through a
pass-through interest holder that is required to pass miscellaneous itemized
deductions through to its owners or beneficiaries (e.g. a partnership, an S
corporation or a grantor trust), such expenses will be deductible under Code
Section 67 only to the extent that such expenses, plus other "miscellaneous
itemized deductions" of the individual, exceed 2% of such individual's adjusted
gross income. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a certain amount (the "Applicable Amount") will be reduced by the lesser
of (i) 3% of the excess of the individual's adjusted gross income over the
Applicable Amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for the taxable year. The amount of additional taxable income
recognized by REMIC Residual Certificateholders who are subject to the
limitations of either Code Section 67 or Code Section 68 may be substantial.
Further, holders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
holders' alternative minimum taxable income. The REMIC is required to report to
each pass-through interest holder and to the IRS such holder's allocable share,
if any, of the REMIC's non-interest expenses. The term "pass-through interest
holder" generally refers to individuals, entities taxed as individuals and
certain pass-through entities, but does not include real estate investment
trusts. Accordingly, investment in REMIC Residual Certificates will in general
not be suitable for individuals or for certain pass-through entities, such as
partnerships and S corporations, that have individuals as partners or
shareholders.
Excess Inclusions. A portion of the income on a REMIC Residual Certificate
(referred to in the Code as an "excess inclusion") for any calendar quarter will
be subject to federal income tax in all events. Thus, for example, an excess
inclusion (i) may not, except as described below, be offset by any unrelated
losses, deductions or loss carryovers of a REMIC Residual Certificateholder;
(ii) will be treated as "unrelated business taxable income" within the meaning
of Code Section 512 if the REMIC Residual Certificateholder is a pension fund or
any other organization that is subject to tax only on its unrelated business
taxable income (see "--Tax-Exempt Investors" below); and (iii) is not eligible
for any reduction in the rate of withholding tax in the case of a REMIC Residual
Certificateholder that is a foreign investor. See "--Non-U.S. Persons" below.
Except as discussed in the following paragraph, with respect to any REMIC
Residual Certificateholder, the excess inclusions for any calendar quarter is
the excess, if any, of (i) the income of such REMIC Residual Certificateholder
for that calendar quarter from its REMIC Residual Certificate over (ii) the sum
of the "daily
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accruals" (as defined below) for all days during the calendar quarter on which
the REMIC Residual Certificateholder holds such REMIC Residual Certificate. For
this purpose, the daily accruals with respect to a REMIC Residual Certificate
are determined by allocating to each day in the calendar quarter its ratable
portion of the product of the "adjusted issue price" (as defined below) of the
REMIC Residual Certificate at the beginning of the calendar quarter and 120
percent of the "Federal long-term rate" in effect at the time the REMIC Residual
Certificate is issued. For this purpose, the "adjusted issue price" of a REMIC
Residual Certificate at the beginning of any calendar quarter equals the issue
price of the REMIC Residual Certificate, increased by the amount of daily
accruals for all prior quarters, and decreased (but not below zero) by the
aggregate amount of payments made on the REMIC Residual Certificate before the
beginning of such quarter. The "federal long-term rate" is an average of current
yields on Treasury securities with a remaining term of greater than nine years,
computed and published monthly by the IRS.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Code Section 857(b)(2),
excluding any net capital gain), will be allocated among the shareholders of
such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Regulated investment companies, common trust funds and certain
cooperatives are subject to similar rules.
The Small Business Job Protection Act of 1996 has eliminated the special
rule permitting Section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess inclusion
income from REMIC residual certificates that have "significant value" within the
meaning of the REMIC Regulations, effective for taxable years beginning after
December 31, 1995, except with respect to residual certificates continuously
held by a thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect on excess inclusions on the alternative minimum
taxable income of a residual holder. First, alternative minimum taxable income
for such residual holder is determined without regard to the special rule that
taxable income cannot be less than excess inclusions. Second, the amount of any
alternative minimum tax net operating loss deductions must be computed without
regard to any excess inclusions. Third, a residual holder's alternative minimum
taxable income for a tax year cannot be less than excess inclusions for the
year. The effect of this last statutory amendment is to prevent the use of
nonrefundable tax credits to reduce a taxpayer's income tax below its tentative
minimum tax computed only on excess inclusions. These rules are effective for
tax years beginning after December 31, 1986, unless a residual holder elects to
have such rules apply only to tax years beginning after August 20, 1996.
Payments. Any distribution made on a REMIC Residual Certificate to a REMIC
Residual Certificateholder will be treated as a non-taxable return of capital to
the extent it does not exceed the REMIC Residual Certificateholder's adjusted
basis in such REMIC Residual Certificate. To the extent a distribution exceeds
such adjusted basis, it will be treated as gain from the sale of the REMIC
Residual Certificate.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale or exchange
and its adjusted basis in the REMIC Residual Certificate (except that the
recognition of loss may be limited under the "wash sale" rules described below).
A holder's adjusted basis in a REMIC Residual Certificate generally equals the
cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder, increased by the taxable income of the REMIC that was
included in the income of such REMIC Residual Certificateholder with respect to
such REMIC Residual Certificate, and decreased (but not below zero) by the net
losses that have been allowed as deductions to such REMIC Residual
Certificateholder with respect to such REMIC Residual Certificate and by the
distributions received thereon by such REMIC Residual Certificateholder. In
general, any such gain or loss will be capital gain or loss provided the REMIC
Residual Certificate is held as a capital asset. However, REMIC Residual
Certificates will be "evidences of indebtedness" within the meaning of Code
Section 582(c)(1), so that gain or loss recognized from sale of a REMIC Residual
Certificate by a bank or thrift institution to which such section applies would
be ordinary income or loss. In addition, a transfer of a REMIC Residual
Certificate that
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is a "noneconomic residual interest" may be subject to different rules. See
"--Tax Related Restrictions on Transfers of REMIC Residual
Certificates--Noneconomic REMIC Residual Certificates" below.
Except as provided in Treasury regulations yet to be issued, if the seller
of a REMIC Residual Certificate reacquires such REMIC Residual Certificate, or
acquires any other REMIC Residual Certificate, any residual interest in another
REMIC or similar interest in a "taxable mortgage pool" (as defined in Code
Section 7701(i)) during the period beginning six months before, and ending six
months after, the date of such sale, such sale will be subject to the "wash
sale" rules of Code Section 1091. In that event, any loss realized by the REMIC
Residual Certificateholder on the sale will not be deductible, but, instead,
will increase such REMIC Residual Certificateholder's adjusted basis in the
newly acquired asset.
The Act reduces the maximum rates on long-term capital gains recognized on
capital assets held by individual taxpayers for more than eighteen months as of
the date of disposition (and would further reduce the maximum rates on such
gains in the year 2001 and thereafter for certain individual taxpayers who meet
specified conditions). The capital gains rate for capital assets held by
individual taxpayers for more than twelve months but not more than eighteen
months was not changed by the Act. The Act does not change the capital gains
rates for corporations. Prospective investors should consult their own tax
advisors concerning these tax law changes.
Prohibited Transactions and Other Taxes
The Code imposes a tax on REMICs equal to 100% of the net income derived
from "prohibited transactions" (the "Prohibited Transactions Tax"). In general,
subject to certain specified exceptions, a prohibited transaction means the
disposition of a Mortgage Asset, the receipt of income from a source other than
a Mortgage Asset or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the Mortgage Assets for temporary investment pending
distribution on the Certificates. It is not anticipated that the Trust Fund for
any Series of Certificates will engage in any prohibited transactions in which
it would recognize a material amount of net income.
In addition, certain contributions to a Trust Fund as to which an election
has been made to treat such Trust Fund as a REMIC made after the day on which
such Trust Fund issues all of its interests could result in the imposition of a
tax on the Trust Fund equal to 100% of the value of the contributed property
(the "Contributions Tax"). No Trust Fund for any Series of Certificates will
accept contributions that would subject it to such tax.
In addition, a Trust Fund as to which an election has been made to treat
such Trust Fund as a REMIC may also be subject to federal income tax at the
highest corporate rate on "net income from foreclosure property," determined by
reference to the rules applicable to real estate investment trusts. "Net income
from foreclosure property" generally means income from foreclosure property
other than qualifying income for a real estate investment trust.
Where any Prohibited Transactions Tax, Contributions Tax, tax on net
income from foreclosure property or state or local income or franchise tax that
may be imposed on a REMIC relating to any Series of Certificates arises out of
or results from (i) a breach of the related Servicer's, Trustee's or Depositor's
obligations, as the case may be, under the related Agreement for such Series,
such tax will be borne by such Servicer, Trustee or Depositor, as the case may
be, out of its own funds or (ii) the Depositor's obligation to repurchase a
Mortgage Loan, such tax will be borne by the Depositor. In the event that such
Servicer, Trustee or Depositor, as the case may be, fails to pay or is not
required to pay any such tax as provided above, such tax will be payable out of
the Trust Fund for such Series and will result in a reduction in amounts
available to be distributed to the Certificateholders of such Series.
Liquidation and Termination
If the REMIC adopts a plan of complete liquidation, within the meaning of
Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in the
REMIC's final tax return a date on which such adoption is deemed to occur, and
sells all of its assets (other than cash) within a 90-day period beginning on
such date, the
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REMIC will not be subject to any Prohibited Transaction Tax, provided that the
REMIC credits or distributes in liquidation all of the sale proceeds plus its
cash (other than the amounts retained to meet claims) to holders of Regular and
REMIC Residual Certificates within the 90-day period.
The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis in
the REMIC Residual Certificate exceeds the amount of cash distributed to such
REMIC Residual Certificateholder in final liquidation of its interest, then it
would appear that the REMIC Residual Certificateholder would be entitled to a
loss equal to the amount of such excess. It is unclear whether such a loss, if
allowed, will be a capital loss or an ordinary loss.
Administrative Matters
Solely for the purpose of the administrative provisions of the Code, the
REMIC generally will be treated as a partnership and the REMIC Residual
Certificateholders will be treated as the partners. Certain information will be
furnished quarterly to each REMIC Residual Certificateholder who held a REMIC
Residual Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat items on its
return consistently with their treatment on the REMIC's return, unless the REMIC
Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency resulting
from a failure to comply with the consistency requirement without instituting an
administrative proceeding at the REMIC level. The REMIC does not intend to
register as a tax shelter pursuant to Code Section 6111 because it is not
anticipated that the REMIC will have a net loss for any of the first five
taxable years of its existence. Any person that holds a REMIC Residual
Certificate as a nominee for another person may be required to furnish the
REMIC, in a manner to be provided in Treasury regulations, with the name and
address of such person and other information.
Tax-Exempt Investors
Any REMIC Residual Certificateholder that is a pension fund or other
entity that is subject to federal income taxation only on its "unrelated
business taxable income" within the meaning of Code Section 512 will be subject
to such tax on that portion of the distributions received on a REMIC Residual
Certificate that is considered an excess inclusion. See "--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions" above.
Residual Certificate Payments--Non-U.S. Persons
Amounts paid to REMIC Residual Certificateholders who are not U.S. Persons
(see "--Taxation of Owners of REMIC Regular Certificates--Non-U.S. Persons"
above) are treated as interest for purposes of the 30% (or lower treaty rate)
United States withholding tax. Amounts distributed to holders of REMIC Residual
Certificates should qualify as "portfolio interest," subject to the conditions
described in "--Taxation of Owners of REMIC Regular Certificates" above, but
only to the extent that the underlying mortgage loans were originated after July
18, 1984. Furthermore, the rate of withholding on any income on a REMIC Residual
Certificate that is excess inclusion income will not be subject to reduction
under any applicable tax treaties. See "--Taxation of Owners of REMIC Residual
Certificates--Excess Inclusions" above. If the portfolio interest exemption is
unavailable, such amount will be subject to United States withholding tax when
paid or otherwise distributed (or when the REMIC Residual Certificate is
disposed of) under rules similar to those for withholding upon disposition of
debt instruments that have OID. The Code, however, grants the Treasury
Department authority to issue regulations requiring that those amounts be taken
into account earlier than otherwise provided where necessary to prevent
avoidance of tax (for example, where the REMIC Residual Certificates do not have
significant value). See "--Taxation of Owners of REMIC Residual
Certificates--Excess Inclusions" above. If the amounts paid to REMIC Residual
Certificateholders that are not U.S. Persons are effectively connected with
their conduct of a trade or business within the United States, the 30% (or lower
treaty rate) withholding will not apply. Instead, the amounts paid to such
non-U.S. Person will be subject to U.S. federal income taxation at regular
graduated rates. For special restrictions
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on the transfer of REMIC Residual Certificates, see "--Tax-Related Restrictions
on Transfers of REMIC Residual Certificates" below.
REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.
Tax-Related Restrictions on Transfers of REMIC Residual Certificates
Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests in
such entity are not held by "disqualified organizations" (as defined below).
Further, a tax is imposed on the transfer of a residual interest in a REMIC to a
"disqualified organization." The amount of the tax equals the product of (A) an
amount (as determined under the REMIC Regulations) equal to the present value of
the total anticipated "excess inclusions" with respect to such interest for
periods after the transfer and (ii) the highest marginal federal income tax rate
applicable to corporations. The tax is imposed on the transferor unless the
transfer is through an agent (including a broker or other middleman) for a
disqualified organization, in which event the tax is imposed on the agent. The
person otherwise liable for the tax shall be relieved of liability for the tax
if the transferee furnished to such person an affidavit that the transferee is
not a disqualified organization and, at the time of the transfer, such person
does not have actual knowledge that the affidavit is false. A "disqualified
organization" means (A) the United States, any State, possession or political
subdivision thereof, any foreign government, any international organization or
any agency or instrumentality of any of the foregoing (provided that such term
does not include an instrumentality if all its activities are subject to tax
and, except for FHLMC, a majority of its board of directors is not selected by
any such governmental agency), (B) any organization (other than certain farmers'
cooperatives) generally exempt from federal income taxes unless such
organization is subject to the tax on "unrelated business taxable income" and
(C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding a
residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity. The amount of the tax is equal to the product of (A)
the amount of excess inclusions for the taxable year allocable to the interest
held by the disqualified organization and (B) the highest marginal federal
income tax rate applicable to corporations. The pass-through entity otherwise
liable for the tax, for any period during which the disqualified organization is
the record holder of an interest in such entity, will be relieved of liability
for the tax if such record holder furnishes to such entity an affidavit that
such record holder is not a disqualified organization and, for such period, the
pass-through entity does not have actual knowledge that the affidavit is false.
For this purpose, a "pass-through entity" means (i) a regulated investment
company, real estate investment trust or common trust fund, (ii) a partnership,
trust or estate and (iii) certain cooperatives. Except as may be provided in
Treasury regulations not yet issued, any person holding an interest in a
pass-through entity as a nominee for another will, with respect to such
interest, be treated as a pass-through entity. Electing large partnerships
(generally, non-service partnerships with 100 or more members electing to be
subject to simplified IRS reporting provisions under Code sections 771 through
777) will be taxable on excess inclusion income as if all partners were
disqualified organizations.
In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a REMIC Residual Certificate may be
purchased, transferred or sold, directly or indirectly, without the express
written consent of the Master Servicer. The Master Servicer will grant such
consent to a proposed transfer only if it receives the following: (i) an
affidavit from the proposed transferee to the effect that it is not a
disqualified organization and is not acquiring the REMIC Residual Certificate as
a nominee or agent for a disqualified organization and (ii) a covenant by the
proposed transferee to the effect that the proposed transferee agrees to be
bound by and to abide by the transfer restrictions applicable to the REMIC
Residual Certificate.
Noneconomic REMIC Residual Certificates. The REMIC Regulations disregard,
for federal income tax purposes, any transfer of a Noneconomic REMIC Residual
Certificate to a "U.S. Person," as defined above, unless
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no significant purpose of the transfer is to enable the transferor to impede the
assessment or collection of tax. A Noneconomic REMIC Residual Certificate is any
REMIC Residual Certificate (including a REMIC Residual Certificate with a
positive value at issuance) unless, at the time of transfer, taking into account
the Prepayment Assumption and any required or permitted clean up calls or
required liquidation provided for in the REMIC's organizational documents, (i)
the present value of the expected future distributions on the REMIC Residual
Certificate at least equals the product of the present value of the anticipated
excess inclusions and the highest corporate income tax rate in effect for the
year in which the transfer occurs and (ii) the transferor reasonably expects
that the transferee will receive distributions from the REMIC at or after the
time at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. A significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of the
transfer, either knew or should have known that the transferee would be
unwilling or unable to pay taxes due on its share of the taxable income of the
REMIC. A transferor is presumed not to have such knowledge if (i) the transferor
conducted a reasonable investigation of the transferee and (ii) the transferee
acknowledges to the transferor that the residual interest may generate tax
liabilities in excess of the cash flow and the transferee represents that it
intends to pay such taxes associated with the residual interest as they become
due. If a transfer of a Noneconomic REMIC Residual Certificate is disregarded,
the transferor would continue to be treated as the owner of the REMIC Residual
Certificate and would continue to be subject to tax on its allocable portion of
the net income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the transfer of a
REMIC Residual Certificate that has a "tax avoidance potential" to a "foreign
person" will be disregarded for federal income tax purposes. This rule appears
to apply to a transferee who is not a U.S. Person unless such transferee's
income in respect of the REMIC Residual Certificate is effectively connected
with the conduct of a United States trade or business. A REMIC Residual
Certificate is deemed to have a tax avoidance potential unless, at the time of
transfer, the transferor reasonably expect that the REMIC will distribute to the
transferee amounts that will equal at least 30 percent of each excess inclusion,
and that such amounts will be distributed at or after the time the excess
inclusion accrues and not later than the end of the calendar year following the
year of accrual. If the non-U.S. Person transfers the REMIC Residual Certificate
to a U.S. Person, the transfer will be disregarded, and the foreign transferor
will continue to be treated as the owner, if the transfer has the effect of
allowing the transferor to avoid tax on accrued excess inclusions. The
provisions in the REMIC Regulations regarding transfers of REMIC Residual
Certificates that have tax avoidance potential to foreign persons are effective
for all transfers after June 30, 1992. The Pooling and Servicing Agreement will
provide that no record or beneficial ownership interest in a REMIC Residual
Certificate may be transferred, directly or indirectly, to a non-U.S. Person
unless such person provides the Trustee with a duly completed IRS Form 4224 and
the Trustee consents to such transfer in writing.
Any attempted transfer or pledge in violation of the transfer restrictions
shall be absolutely null and void and shall vest no rights in any purported
transferee. Investors in REMIC Residual Certificates are advised to consult
their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax which may be imposed on a
pass-through entity.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences," potential investors should consider the state
income tax consequences of the acquisition, ownership, and disposition of the
Offered Certificates. State income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state. Therefore, potential investors
should consult their own tax advisors with respect to the various tax
consequences of investments in the Offered Certificates.
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ERISA CONSIDERATIONS
General
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain restrictions on employee benefit plans subject
thereto ("ERISA Plans") and on persons who are parties in interest or
disqualified persons ("parties in interest") with respect to such ERISA Plans.
Certain employee benefit plans, such as governmental plans and church plans (if
no election has been made under Section 410(d) of the Code), are not subject to
the restrictions of ERISA, and assets of such plans may be invested in the
Certificates without regard to the ERISA considerations described below, subject
to other applicable federal, state or local law. However, any such governmental
or church plan which is qualified under Section 401(a) of the Code and exempt
from taxation under Section 501(a) of the Code is subject to the prohibited
transaction rules set forth in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in
accordance with the documents governing the ERISA Plan.
Prohibited Transactions
General
Section 406 of ERISA prohibits parties in interest with respect to an
ERISA Plan from engaging in certain transactions involving such Plan and its
assets unless a statutory or administrative exemption applies to the
transaction. In some cases, a civil penalty may be assessed on non-exempt
prohibited transactions pursuant to Section 502(i) of ERISA. Section 4975 of the
Code imposes certain excise taxes on similar transactions between employee
benefit plans and certain other retirement plans and arrangements, including
individual retirement accounts or annuities and Keogh plans, subject thereto and
disqualified persons with respect to such plans and arrangements (together with
ERISA Plans, "Plans").
The United States Department of Labor ("Labor") has issued a final
regulation (29 C.F.R. Section 2510.3-101) containing rules for determining what
constitutes the assets of a Plan. This regulation provides that, as a general
rule, the underlying assets and properties of corporations, partnerships, trusts
and certain other entities in which a Plan makes an "equity investment" will be
deemed for purposes of ERISA and Section 4975 of the Code to be assets of the
Plan unless certain exceptions apply.
Under the terms of the regulation, the Trust may be deemed to hold plan
assets by reason of a Plan's investment in a Certificate; such plan assets would
include an undivided interest in the Mortgage Loans and any other assets held by
the Trust. In such an event, the Depositor, the Master Servicer, any
Sub-Servicer, the Trustee, any insurer of the Mortgage Assets and other persons,
in providing services with respect to the assets of the Trust, may be
fiduciaries subject to the fiduciary responsibility provisions of Title I of
ERISA, or may otherwise be parties in interest or disqualified persons, with
respect to such Plan. In addition, transactions involving such assets could
constitute or result in prohibited transactions under Section 406 of ERISA or
Section 4975 of the Code unless such transactions are subject to a statutory or
administrative exemption.
The regulations contain a de minimis safe-harbor rule that exempts any
entity from plan assets status as long as the aggregate equity investment in
such entity by plans is not significant. For this purpose, equity participation
in the entity will be significant if immediately after any acquisition of any
equity interest in the entity, "benefit plan investors" in the aggregate, own at
least 25% of the value of any class of equity interest (excluding equity
interests held by persons who have discretionary authority or control with
respect to the assets of the entity (or by affiliates of such persons)).
"Benefit plan investors" are defined as Plans as well as employee benefit plans
not subject to Title I of ERISA (e.g., governmental plans and foreign plans) and
entities whose underlying assets include plan assets by reason of plan
investment in such entities. The 25% limitation must be met with respect to each
class of equity interests, regardless of the portion of total equity value
represented by such class, on an ongoing basis.
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Availability of Underwriter's Exemption for Certificates
Labor has granted to Morgan Stanley & Co. Incorporated Prohibited
Transaction Exemption 90-24, Exemption Application No. D-8019, 55 Fed. Reg.
20548 (1990) (the "Exemption") which exempts from the application of the
prohibited transaction rules transactions relating to: (1) the acquisition, sale
and holding by Plans of certain certificates representing an undivided interest
in certain asset-backed pass-through trusts, with respect to which Morgan
Stanley & Co. Incorporated or any of its affiliates is the sole underwriter or
the manager or co-manager of the underwriting syndicate; and (2) the servicing,
operation and management of such asset-backed pass-through trusts, provided that
the general conditions and certain other conditions set forth in the Exemption
are satisfied.
General Conditions of the Exemption. Section II of the Exemption sets forth
the following general conditions which must be satisfied before a transaction
involving the acquisition, sale and holding of the Certificates or a transaction
in connection with the servicing, operation and management of the Trust may be
eligible for exemptive relief thereunder:
(1) The acquisition of the Certificates by a Plan is on terms (including
the price for such Certificates) that are at least as favorable to the
investing Plan as they would be in an arm's-length transaction with an
unrelated party;
(2) The rights and interests evidenced by the Certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by other
certificates of the Trust with respect to the right to receive payment in
the event of default or delinquencies in the underlying assets of the
Trust;
(3) The Certificates acquired by the Plan have received a rating at the
time of such acquisition that is in one of the three highest generic
rating categories from any of Duff & Phelps Credit Rating Co., Fitch
Investors Service, L.P., Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services;
(4) The Trustee is not an affiliate of the Depositor, any Underwriter, the
Master Servicer, any insurer of the Mortgage Assets, any borrower whose
obligations under one or more Mortgage Loans constitute more than 5% of
the aggregate unamortized principal balance of the assets in the Trust, or
any of their respective affiliates (the "Restricted Group");
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of the Certificates represents not more
than reasonable compensation for underwriting such Certificates; the sum
of all payments made to and retained by the Asset Seller pursuant to the
sale of the Mortgage Loans to the Trust represents not more than the fair
market value of such Mortgage Loans; the sum of all payments made to and
retained by the Master Servicer represent not more than reasonable
compensation for the Master Servicer's services under the Pooling
Agreement and reimbursement of the Master Servicer's reasonable expenses
in connection therewith; and
(6) The Plan investing in the Certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933 as amended.
Before purchasing a Certificate in reliance on the Exemption, a fiduciary
of a Plan should itself confirm (a) that the Certificates constitute
"certificates" for purposes of the Exemption and (b) that the general conditions
and other requirements set forth in the Exemption would be satisfied.
Review by Plan Fiduciaries
Any Plan fiduciary considering whether to purchase any Certificates on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Code to such investment. Among other things, before purchasing any
Certificates, a fiduciary of a Plan should make its own determination as to the
availability of the exemptive relief provided in the Exemption, and also
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consider the availability of any other prohibited transaction exemptions. In
this regard, purchasers that are insurance companies should determine the extent
to which Prohibited Transaction Class Exemption 95-60 (for certain transactions
involving insurance company general accounts) may be available. The Prospectus
Supplement with respect to a series of Certificates may contain additional
information regarding the application of the Exemption, Prohibited Transaction
Class Exemption 83-1 (for certain transactions involving mortgage pool
investment trusts), or any other exemption, with respect to the Certificates
offered thereby.
LEGAL INVESTMENT
The Prospectus Supplement for each series of Offered Certificates will
identify those classes of Offered Certificates, if any, which constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"). Those classes of Offered
Certificates that (i) are rated in one of the two highest rating categories by
one or more Rating Agencies and (ii) are part of a series representing interests
in, or secured by, a Trust Fund consisting of Mortgage Loans or MBS, provided
that such Mortgage Loans (or the Mortgage Loans underlying the MBS) are secured
by first liens on Mortgaged Property and were originated by certain types of
originators as specified in SMMEA, will be "mortgage related securities" for
purposes of SMMEA (the "SMMEA Certificates"). As "mortgage related securities,"
the SMMEA Certificates will constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including, but not limited to, state-chartered savings banks, commercial banks,
savings and loan associations and insurance companies, as well as trustees and
state government employee retirement systems) created pursuant to or existing
under the laws of the United States or of any state (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for such entities. Pursuant
to SMMEA, a number of states enacted legislation, before the October 4, 1991
cutoff established by SMMEA for such enactments, limiting to varying extents the
ability of certain entities (in particular, insurance companies) to invest in
mortgage related securities, in most cases by requiring the affected investors
to rely solely upon existing state law, and not SMMEA. Pursuant to Section 347
of the Riegle Community Development and Regulatory Improvement Act of 1994,
which amended the definition of "mortgage related security" (effective December
31, 1996) to include, in relevant part, Offered Certificates satisfying the
rating, first lien and qualified originator requirements for "mortgage related
securities," but representing interests in, or secured by, a Trust Fund
consisting, in whole or in part, of first liens on one or more parcels of real
estate upon which are located one or more commercial structures, states were
authorized to enact legislation, on or before September 23, 2001, specifically
referring to Section 347 and prohibiting or restricting the purchase, holding or
investment by state-regulated entities in such types of Offered Certificates.
Investors affected by such legislation will be authorized to invest in SMMEA
Certificates only to the extent provided in such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in "mortgage related
securities" without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in such securities, and national banks
may purchase such securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
Section 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe. In this connection, the Office of
the Comptroller of the Currency (the "OCC") has amended 12 C.F.R. Part 1 to
authorize national banks to purchase and sell for their own account, without
limitation as to a percentage of the bank's capital and surplus (but subject to
compliance with certain general standards concerning "safety and soundness" and
retention of credit information in 12 C.F.R. Section 1.5), certain "Type IV
securities," defined in 12 C.F.R. Section 1.2(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
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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. Federal
credit unions should review the National Credit Union Administration ("NCUA")
Letter to Credit Unions No. 96, as modified by Letter to Credit Unions No. 108,
which includes guidelines to assist federal credit unions in making investment
decisions for mortgage related securities. The NCUA has adopted rules, codified
as 12 C.F.R. Section 703.5(f)-(k), which prohibit federal credit unions from
investing in certain mortgage related securities (including securities such as
certain series or classes of Offered Certificates), except under limited
circumstances. Effective January 1, 1998, the NCUA has amended its rules
governing investments by federal credit unions at 12 C.F.R. Part 703; the
revised rules will permit investments in "mortgage related securities" under
certain limited circumstances, but will prohibit investments in stripped
mortgage related securities, residual interests in mortgage related securities,
and commercial mortgage related securities, unless the credit union has obtained
written approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. Section 703.140.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992, as revised April 15, 1994 (the "Policy
Statement") of the Federal Financial Institutions Examination Council. The
Policy Statement, which has been adopted by the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the OCC and
the Office of Thrift Supervision, and by the NCUA (with certain modifications),
prohibits depository institutions from investing in certain "high-risk mortgage
securities" (including securities such as certain series or classes of the
Offered Certificates), except under limited circumstances, and sets forth
certain investment practices deemed to be unsuitable for regulated institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Offered
Certificates, as certain series or classes may be deemed unsuitable investments,
or may otherwise be restricted, under such rules, policies or guidelines (in
certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," and, with regard to any Offered Certificates issued
in book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
If specified in the related Prospectus Supplement, other classes of
Offered Certificates offered pursuant to this Prospectus will not constitute
"mortgage related securities" under SMMEA. The appropriate characterization of
such Offered Certificates under various legal investment restrictions, and thus
the ability of investors subject to these restrictions to purchase such Offered
Certificates, may be subject to significant interpretive uncertainties.
Except as to the status of SMMEA Certificates identified in the Prospectus
Supplement for a series as "mortgage related securities" under SMMEA, no
representations are made as to the proper characterization of the Offered
Certificates for legal investment or financial institution regulatory purposes,
or as to the ability of particular investors to purchase any Offered
Certificates under applicable legal investment restrictions. The uncertainties
described above (and any unfavorable future determinations concerning legal
investment or financial institution regulatory characteristics of the Offered
Certificates) may adversely affect the liquidity of the Offered Certificates.
Investors should consult with their own legal advisors in determining
whether and to what extent the Offered Certificates of any class constitute
legal investments or are subject to investment, capital or other restrictions,
and, if applicable, whether SMMEA has been overridden in any jurisdiction
relevant to such investor.
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PLAN OF DISTRIBUTION
The Offered Certificates offered hereby and by the Supplements to this
Prospectus will be offered in series. The distribution of the Certificates may
be effected from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment therefor. If so
specified in the related Prospectus Supplement, the Offered Certificates will be
distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by Morgan Stanley & Co. Incorporated
("Morgan Stanley") acting as underwriter with other underwriters, if any, named
therein. In such event, the Prospectus Supplement may also specify that the
underwriters will not be obligated to pay for any Offered Certificates agreed to
be purchased by purchasers pursuant to purchase agreements acceptable to the
Depositor. In connection with the sale of Offered Certificates, underwriters may
receive compensation from the Depositor or from purchasers of Offered
Certificates in the form of discounts, concessions or commissions. The
Prospectus Supplement will describe any such compensation paid by the Depositor.
Alternatively, the Prospectus Supplement may specify that Offered
Certificates will be distributed by Morgan Stanley acting as agent or in some
cases as principal with respect to Offered Certificates that it has previously
purchased or agreed to purchase. If Morgan Stanley acts as agent in the sale of
Offered Certificates, Morgan Stanley will receive a selling commission with
respect to such Offered Certificates, depending on market conditions, expressed
as a percentage of the aggregate Certificate Balance or notional amount of such
Offered Certificates as of the Cut-off Date. The exact percentage for each
series of Certificates will be disclosed in the related Prospectus Supplement.
To the extent that Morgan Stanley elects to purchase Offered Certificates as
principal, Morgan Stanley may realize losses or profits based upon the
difference between its purchase price and the sales price. The Prospectus
Supplement with respect to any series offered other than through underwriters
will contain information regarding the nature of such offering and any
agreements to be entered into between the Depositor and purchasers of Offered
Certificates of such series.
The Depositor will indemnify Morgan Stanley and any underwriters against
certain civil liabilities, including liabilities under the Securities Act of
1933, or will contribute to payments Morgan Stanley and any underwriters may be
required to make in respect thereof.
In the ordinary course of business, Morgan Stanley and the Depositor may
engage in various securities and financing transactions, including repurchase
agreements to provide interim financing of the Depositor's mortgage loans
pending the sale of such mortgage loans or interests therein, including the
Certificates.
Offered Certificates will be sold primarily to institutional investors.
Purchasers of Offered Certificates, including dealers, may, depending on the
facts and circumstances of such purchases, be deemed to be "underwriters" within
the meaning of the Securities Act of 1933 in connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
As to each series of Certificates, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any non-investment-grade class may be initially retained by the Depositor, and
may be sold by the Depositor at any time in private transactions.
LEGAL MATTERS
Certain legal matters in connection with the Certificates, including
certain federal income tax consequences, will be passed upon for the Depositor
by Sidley & Austin, New York, New York or Latham & Watkins, New York, New York
or Cadwalader, Wickersham & Taft, New York, New York or Brown & Wood LLP, New
York, New York or such other counsel as may be specified in the related
Prospectus Supplement.
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FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates
that they shall have been rated not lower than investment grade, that is, in one
of the four highest rating categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by mortgagors or of the degree by which such prepayments
might differ from those originally anticipated. As a result, certificateholders
might suffer a lower than anticipated yield, and, in addition, holders of
stripped interest certificates in extreme cases might fail to recoup their
initial investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
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INDEX OF PRINCIPAL DEFINITIONS
Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
Accrual Certificates....................................................... 31
ADA........................................................................ 71
Applicable Amount.......................................................... 93
ARM Loans.............................................................. 23, 78
Asset Conservation Act..................................................... 67
Asset Seller............................................................... 20
Assets.................................................................. 1, 20
Balloon Mortgage Loans..................................................... 16
Bankruptcy Code............................................................ 63
Book-Entry Certificates.................................................... 30
Cash Flow Agreement........................................................ 26
Cash Flow Agreements........................................................ 1
Cede.................................................................... 3, 36
CERCLA................................................................. 18, 68
Certificate Account........................................................ 41
Certificate Owners......................................................... 37
Certificateholders.......................................................... 3
Closing Date............................................................... 83
Commercial Loans........................................................... 20
Commercial Properties...................................................... 20
Commission................................................................. 3
Contributions Tax.......................................................... 95
Cooperatives............................................................... 20
Covered Trust.......................................................... 17, 54
CPR........................................................................ 28
Credit Support.......................................................... 1, 25
Crime Control Act.......................................................... 72
Deferred Interest.......................................................... 80
Definitive Certificates................................................ 30, 37
Depositor.................................................................. 20
Determination Date......................................................... 30
DTC..................................................................... 3, 37
Due Period................................................................. 31
Environmental Hazard Condition............................................. 68
Equity Participations...................................................... 24
ERISA...................................................................... 99
ERISA Plans................................................................ 99
Exchange Act................................................................ 3
Exemption................................................................. 100
FDIC....................................................................... 41
FHLMC...................................................................... 50
FNMA....................................................................... 68
Government Securities................................................... 1, 20
Indirect Participants...................................................... 37
Insurance Proceeds......................................................... 42
IRS........................................................................ 75
Labor...................................................................... 99
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Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
L/C Bank................................................................... 55
Lease....................................................................... 3
Lease Assignment............................................................ 1
Legislative History........................................................ 83
Lessee...................................................................... 3
Liquidation Proceeds....................................................... 42
Lock-out Date.............................................................. 24
Lock-out Period............................................................ 24
Mark-to-Market Regulations................................................. 93
Master REMIC............................................................... 82
MBS..................................................................... 1, 20
MBS Agreement.............................................................. 24
MBS Issuer................................................................. 24
MBS Servicer............................................................... 24
MBS Trustee................................................................ 24
Morgan Stanley............................................................ 103
Mortgage Loans.......................................................... 1, 20
Mortgage Notes............................................................. 20
Mortgage Rate.............................................................. 24
Mortgages.................................................................. 21
Multifamily Loans.......................................................... 20
Multifamily Properties..................................................... 20
NCUA...................................................................... 102
Nonrecoverable Advance..................................................... 34
Offered Certificates........................................................ 1
OID........................................................................ 75
OID Regulations............................................................ 75
Originator................................................................. 20
Participants............................................................... 37
Pass-Through Rate.......................................................... 32
Payment Lag Certificates................................................... 89
Permitted Investments...................................................... 41
Plans...................................................................... 99
Prepayment Assumption...................................................... 79
Prepayment Premium......................................................... 24
Prohibited Transactions Tax................................................ 95
RCRA....................................................................... 68
Record Date................................................................ 30
Related Proceeds........................................................... 34
Relief Act................................................................. 71
REMIC Certificates......................................................... 82
REMIC Regular Certificateholders........................................... 83
REMIC Regular Certificates................................................. 82
REMIC Regulations.......................................................... 73
REMIC Residual Certificateholder........................................... 90
REMIC Residual Certificates................................................ 82
REO Extension.............................................................. 61
REO Tax.................................................................... 61
Restricted Group.......................................................... 100
RICO....................................................................... 72
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Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
Senior Certificates........................................................ 30
Servicing Standard......................................................... 44
SMMEA..................................................................... 101
SMMEA Certificates........................................................ 101
Special Servicer........................................................... 45
Stripped ARM Obligations................................................... 79
Stripped Bond Certificates................................................. 77
Stripped Coupon Certificates............................................... 77
Stripped Interest Certificates............................................. 30
Stripped Principal Certificates............................................ 30
Subordinate Certificates................................................... 30
Sub-Servicer............................................................... 45
Sub-Servicing Agreement.................................................... 45
Subsidiary REMIC........................................................... 82
Super-Premium Certificates................................................. 84
Title V.................................................................... 70
Trust Assets................................................................ 2
Trust Fund.................................................................. 1
UCC........................................................................ 37
Voting Rights.............................................................. 19
Warrantying Party.......................................................... 40
107
