<PAGE> 1
Filed pursuant to Rule 424(b)(3)
Registration No. 333-45467
Information contained herein is subject to completion or amendment. Offers to
buy these securities may not be accepted without the delivery of a final
prospectus supplement and prospectus. This prospectus supplement and the
accompanying prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these
securities, in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such State.
SUBJECT TO COMPLETION, DATED MAY 28, 1998
PRELIMINARY PROSPECTUS SUPPLEMENT [LOGO]
(To Prospectus dated February 19, 1998) WELLS FARGO
$________________ (Approximate)
Morgan Stanley Capital I Inc.
as Depositor
Wells Fargo Bank, National Association
as Master Servicer and Seller
Morgan Stanley Mortgage Capital Inc.
as Seller
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1998-WF2
---------------
The Series 1998-WF2 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will consist of 18 classes (each, a "Class"): (i) the Class A-1
and Class A-2 Certificates (collectively, the "Class A Certificates"), (ii) the
Class X Certificates (the "Interest Only Certificates" and, together 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, Class L, Class M
and Class N Certificates (collectively, the "Subordinate Certificates" and,
collectively with the "Senior Certificates", the "REMIC Regular Certificates")
and the Class R-I, Class R-II and Class R-III Certificates (collectively, the
"Residual Certificates"). Only the Class A-1, Class A-2, Class X, 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 by Fitch IBCA, Inc. ("Fitch" 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 Class X
Certificates) at the per annum rate (the "Pass-Through Rate"), set forth in the
table below.
The Certificates will evidence, in the aggregate, all of the beneficial
ownership interests in a trust (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 June 1, 1998 (the "Pooling and Servicing
Agreement"), among the Depositor, Wells Fargo Bank, National Association, as
master servicer (the "Master Servicer"), CRIIMI MAE Services Limited
Partnership, as Special Servicer (the "Special Servicer"), and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee"). 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 Master Servicer, the Special Servicer, the Trustee, or any of
their respective affiliates. Neither the Certificates nor the Mortgage Loans (as
defined below) will be insured or guaranteed by any governmental agency or
instrumentality or by the Depositor, the Sellers (as defined herein), the Master
Servicer, the Special Servicer, the Trustee, any of their respective affiliates
or any other person.
See "Risk Factors and Other Special Considerations" beginning on page S-
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 Initial Final Scheduled Final Rated
Certificate Balance or Pass-Through Distribution Distribution Ratings
Class Notional Amount(1) Rate(2) Date(3) Date(4) (DCR/Fitch)(5)
- --------- ---------------------- ------------ --------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Class A-1 ... $ % 07/15/2030
Class A-2 ... $ % 07/15/2030
Class X ..... $ % 07/15/2030
Class B ..... $ % 07/15/2030
Class C ..... $ % 07/15/2030
Class D ..... $ % 07/15/2030
Class E ..... $ % 07/15/2030
</TABLE>
- ----------
(Footnotes to table on page S-3)
The Offered Certificates will be purchased from the Depositor by Morgan
Stanley & Co. Incorporated and Bear, Stearns & Co., Inc. (collectively, the
"Underwriters") and will be offered by the Underwriters to the public from time
to time in negotiated transactions or otherwise at varying prices to be
determined at the time of sale. Proceeds to the Depositor from the sale of the
Offered Certificates, before deducting issuance expenses payable by the
Depositor, will be approximately $_____________ 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 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 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 June , 1998 (the "Closing Date").
----------------------
MORGAN STANLEY DEAN WITTER BEAR, STEARNS & CO. INC.
The date of this Prospectus Supplement is June ___, 1998
<PAGE> 2
The footnotes to the table on the cover page are as follows:
(1) 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%, depending on the aggregate principal amount of the Mortgage
Loans actually transferred to the Trust Fund.
(2) The Pass-Through Rates for the Class A-1, Class A-2, Class B and Class C
Certificates for each Distribution Date (as defined herein) will be equal
to the fixed rates per annum set forth in the table; provided, in each
case, that such Pass-Through Rate will not exceed the Weighted Average Net
Mortgage Rate (as defined herein) for such Distribution Date. The
Pass-Through Rates for the Class X, Class D and Class E Certificates set
forth in the table are the approximate initial Pass-Through Rates. The
Pass-Through Rates for the Class X, Class D and Class E Certificates are
variable and, subsequent to the initial Distribution Date, will be
determined as described in "Description Of The Certificates--Pass-Through
Rates" herein.
(3) The Final Scheduled Distribution Date for each Class of Offered
Certificates is the Distribution Date on which such Class is expected to
be paid in full, assuming that timely payments (and no prepayments) will
be made on the Mortgage Loans in accordance with their terms and otherwise
based on the Maturity Assumptions (as defined herein). The actual
performance and experience 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 July 2030.
(4) The Final Rated Distribution Date for each Class of Offered Certificates
is July 15, 2030. That date is approximately twenty-four (24) months
following the end of the amortization term of the Mortgage Loan that, as
of the Cut-Off Date, has the longest remaining amortization term.
(5) See "Ratings."
(continued from cover page)
Initially, the assets of the Trust Fund will consist primarily of a
segregated pool (the "Mortgage Pool") of 226 fixed-rate commercial and
multifamily mortgage loans (the "Mortgage Loans"). The Cut-Off Date is June 1,
1998 and, as of such date, the Mortgage Loans had an aggregate principal balance
(the "Initial Pool Balance") of $1,062,003,110, 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 on Appendix I,
Appendix II and Appendix III hereto.
The Depositor will acquire the Mortgage Loans from the following sellers
(each, a "Seller") on the Closing Date: Wells Fargo Bank, National Association
("Wells Fargo") (152 Mortgage Loans, representing 59.2% of the Initial Pool
Balance); and Morgan Stanley Mortgage Capital Inc. ("MSMC") (74 Mortgage Loans,
representing 40.8% 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 July, 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 Class X 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 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.
S-3
<PAGE> 3
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
Residual Certificates will be subordinate to the REMIC Regular Certificates. See
"Description of the Certificates--Distributions" and
"--Distributions--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, 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 Class X Certificates will be highly sensitive to the rate and timing of
principal payments (including by reason of prepayments, 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 payments 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 Class X Certificates. Investors in the Class X 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 Classes of Certificates to recover fully their initial
investments. See "Yield, Prepayment and Maturity Considerations" herein and
"Yield Considerations," "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 the Prospectus for the location of
meanings of capitalized terms used but not defined herein. See "Index of
Principal Definitions" herein for the location of meanings of other capitalized
terms used herein.
There is currently no secondary market for the Offered Certificates. The
Underwriters currently intend to make a secondary market in the Offered
Certificates, but are 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.
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 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 UNDERWRITERS MAY SELL OFFERED CERTIFICATES TO THEIR AFFILIATES OR
ENTITIES OVER WHICH THEIR AFFILIATES HAVE DISCRETIONARY AUTHORITY IN ACCORDANCE
WITH APPLICABLE LAW.
-----------------
S-4
<PAGE> 4
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 FEBRUARY 19, 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 SEPTEMBER __, 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.
-------------------
THE UNDERWRITERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE PRICE OF THE OFFERED CERTIFICATES, INCLUDING MAKING A
SECONDARY MARKET IN THE OFFERED CERTIFICATES. SEE "PLAN OF DISTRIBUTION" HEREIN.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
--------------------------
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 AND OTHER SPECIAL
CONSIDERATIONS," INHERENTLY ARE SUBJECT TO A VARIETY OF RISKS AND UNCERTAINTIES
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. SUCH
RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, GENERAL ECONOMIC AND BUSINESS
CONDITIONS, COMPETITION, CHANGES IN FOREIGN POLITICAL, SOCIAL AND ECONOMIC
CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS,
CUSTOMER PREFERENCES AND VARIOUS AND OTHER MATTERS, 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.
--------------------------
S-5
<PAGE> 5
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.
---------------------------
REPORTS TO CERTIFICATEHOLDERS
The Trustee will mail 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 any Underwriter. 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 or 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> 6
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS.................................................S-5
AVAILABLE INFORMATION......................................................S-6
REPORTS TO CERTIFICATEHOLDERS..............................................S-6
TRANSACTION OVERVIEW.......................................................S-9
SUMMARY...................................................................S-10
RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS.............................S-35
The Certificates....................................................S-35
The Mortgage Loans..................................................S-36
DESCRIPTION OF THE CERTIFICATES...........................................S-42
General.............................................................S-42
Certificate Balances and Notional Amount............................S-43
Pass-Through Rates..................................................S-44
Distributions.......................................................S-45
Optional Termination................................................S-52
Advances............................................................S-53
Reports to Certificateholders; Available Information................S-54
Example of Distributions............................................S-57
The Trustee.........................................................S-57
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS.............................S-58
General.............................................................S-58
Pass-Through Rates..................................................S-59
Rate and Timing of Principal Payments...............................S-59
Losses and Shortfalls...............................................S-60
Certain Relevant Factors............................................S-60
Weighted Average Life...............................................S-61
Class X Certificates................................................S-64
DESCRIPTION OF THE MORTGAGE POOL..........................................S-66
General.............................................................S-66
Certain Terms and Characteristics of the Mortgage Loans.............S-67
Assessments of Property Value and Condition.........................S-69
Additional Mortgage Loan Information................................S-70
Standard Hazard Insurance...........................................S-71
The Sellers.........................................................S-72
Assignment of The Mortgage Loans....................................S-72
Representations and Warranties......................................S-73
Repurchases And Other Remedies......................................S-74
Changes In Mortgage Pool Characteristics............................S-75
SERVICING OF THE MORTGAGE LOANS...........................................S-75
General.............................................................S-75
The Master Servicer.................................................S-77
The Special Servicer................................................S-78
Termination of Special Servicer.....................................S-79
The Operating Adviser...............................................S-79
S-7
<PAGE> 7
Mortgage Loan Modifications.........................................S-80
Sale of Defaulted Mortgage Loans and REO Properties.................S-81
Foreclosures........................................................S-81
CERTAIN FEDERAL INCOME TAX CONSEQUENCES...................................S-82
General.............................................................S-82
Original Issue Discount and Premium.................................S-83
Additional Considerations...........................................S-84
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS LOCATED IN CALIFORNIA.............S-84
ERISA CONSIDERATIONS......................................................S-85
Plan Assets.........................................................S-85
Special Exemption Applicable to Senior Certificates.................S-86
Insurance Company General Accounts..................................S-87
General Investment Considerations...................................S-88
LEGAL INVESTMENT..........................................................S-88
USE OF PROCEEDS...........................................................S-88
PLAN OF DISTRIBUTION......................................................S-88
LEGAL MATTERS.............................................................S-89
RATINGS...................................................................S-90
INDEX OF PRINCIPAL DEFINITIONS............................................S-91
APPENDIX I - MORTGAGE POOL INFORMATION (TABLES)..........................I-1
APPENDIX II - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS..............II-1
APPENDIX III - SIGNIFICANT LOAN SUMMARIES................................III-1
PRELIMINARY TERM SHEET.....................................................T-1
SAMPLE REMITTANCE REPORT...................................................R-1
S-8
<PAGE> 8
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 their entirety.
<TABLE>
<CAPTION>
======================================================================================================
INITIAL AGGREGATE
CERTIFICATE RATINGS WEIGHTED DESCRIPTION INITIAL
BALANCE OR (DCR/Fitch)(2) AVG. PRINCIPAL OF PASS-THROUGH PASS-THROUGH
CLASS NOTIONAL AMOUNT(1) LIFE(3) WINDOW(3) RATE RATE(4)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A-1 $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
A-2 $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
X $ (a) _____/_____ N/A N/A Variable Rate I/O %
- ------------------------------------------------------------------------------------------------------
B $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
C $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
D $ _____/_____ Variable Rate %
- ------------------------------------------------------------------------------------------------------
E $ _____/_____ Variable Rate %
- ------------------------------------------------------------------------------------------------------
F(b) $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
G(b) $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
H(b) $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
J(b) $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
K(b) $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
L(b) $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
M(b) $ _____/_____ Fixed Rate %
- ------------------------------------------------------------------------------------------------------
N(b) $ NR/NR Fixed Rate %
======================================================================================================
</TABLE>
(1) In each case, subject to a variance of plus or minus 5%.
(2) See "Ratings" herein. "NR" means not rated.
(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 prepayment
speed of 0% CPR (as defined in the Prospectus). See "Yield, Prepayment and
Maturity Considerations" herein.
(4) The Pass-Through Rates for the Class A-1, Class A-2, Class B, Class C,
Class F, Class G, Class H, Class J, Class K, Class L, Class M and Class N
Certificates for each Distribution Date will be equal to the fixed rates
per annum set forth in the table; provided, in each case, that such
Pass-Through Rate will not exceed the Weighted Average Net Mortgage Rate
(as defined herein) for such Distribution Date. The initial Pass-Through
Rates for the Interest Only Certificates and the Class D and Class E
Certificates set forth in the table are the approximate initial
Pass-Through Rates. The Pass-Through Rates for the Interest Only
Certificates and the Class D and Class E Certificates are variable and,
subsequent to the initial Distribution Date, will be determined as
described in "Description of the Certificates--Pass-Through Rates" herein.
- ----------
(a) Aggregate Notional Amount.
(b) Not offered hereby.
S-9
<PAGE> 9
- --------------------------------------------------------------------------------
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 in the Prospectus. An "Index
of Principal Definitions" is included at the end of each of this Prospectus
Supplement and the Prospectus.
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-WF2 Commercial Mortgage
Pass-Through Certificates (the
"Certificates") will be issued in 18 classes
(each, a "Class") designated as: (i) the
Class A-1 and Class A-2 Certificates
(collectively, the "Class A Certificates");
(ii) the Class X Certificates (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, Class L, Class M and Class
N 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 "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 and the
Trustee. Initially, the assets of the Trust
Fund will consist primarily of 226
fixed-rate mortgage loans (each, a "Mortgage
Loan"). As of the Cut-Off Date, the Mortgage
Loans had an aggregate principal balance
(the "Initial Pool Balance") of
$1,062,003,110, after application of all
payments due on or before such date, whether
or not received. 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 described
herein. The Certificates collectively
represent the entire interest in the Trust
Fund.
Only the Class A-1, Class A-2, Class X,
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 M, Class N, 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
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Private Certificates, such information is
provided solely because of its potential
relevance to a prospective purchaser of an
Offered Certificate.
Sellers............................ Wells Fargo Bank, National Association
("Wells Fargo") and Morgan Stanley Mortgage
Capital Inc. ("MSMC"). One hundred fifty-two
(152) of the Mortgage Loans, or 59.2% of the
Initial Pool Balance (the "Wells Fargo
Loans"), were originated by Wells Fargo.
Seventy-four (74) Mortgage Loans, or 40.8%
of the Initial Pool Balance (the "Morgan
Stanley Loans"), were originated by one of
the participants in MSMC's commercial and
multifamily mortgage loan conduit program,
were originated directly by MSMC or were
purchased in the secondary market. MSMC is a
New York corporation and an affiliate of
Morgan Stanley & Co. Incorporated, which is
acting as an Underwriter. Each Seller will
sell its Mortgage Loans on the Closing Date
pursuant to an agreement with the Depositor
(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.................... Wells Fargo will be the Master Servicer of
the Mortgage Loans. The Master Servicer will
be required to make Advances (as defined
herein) with respect to the Mortgage Loans
as described herein. See "Servicing of the
Mortgage Loans--The Master Servicer" and
"Description of the Certificates--Advances"
herein.
Special Servicer................... CRIIMI MAE Services Limited Partnership, a
Maryland limited partnership. 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
seek the advice of the Operating Adviser
before taking certain actions. See
"Servicing of the Mortgage Loans--The
Special Servicer" and "--The Operating
Adviser" herein.
Trustee............................ Norwest Bank Minnesota, National
Association, a national banking association.
See "Description of the Certificates--The
Trustee" herein. The Trustee will be
obligated to make Advances with respect to
the Mortgage Loans in certain circumstances
where the Master Servicer was required, but
failed, to do so, as described under
"Description of the Certificates--Advances"
herein.
Operating Adviser.................. Holders of the majority interest in the most
subordinate Class of Principal Balance
Certificates (as defined herein) outstanding
at any time of determination or, if the
Certificate Balance of such Class of
Certificates is less than 50% (or 20% in the
case of the Class N Certificates) of the
initial Certificate Balance of such Class,
the next most subordinate Class of
Certificates (the "Controlling Class"), may
appoint an
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"Operating Adviser" as described under
"Servicing of the Mortgage Loans--The
Operating Adviser" herein. The Operating
Adviser will have the right to advise
certain actions of the Special Servicer and
to appoint a replacement Special Servicer
subject to certain conditions.
Cut-Off Date....................... The close of business on June 1, 1998.
Closing Date....................... On or about June __, 1998.
Record Date........................ The record date for each Class of
Certificates for each Distribution Date will
be the close of business on the last day of
the month immediately preceding the month in
which such Distribution Date occurs or, if
such day is not a business day, the business
day immediately preceding such day.
Distribution Date.................. The 15th day of each month or, if such day
is not a business day, the next succeeding
business day, commencing July 15, 1998.
Determination Date................. The 10th day of the month in which such
Distribution Date occurs or, if such day is
not a business day, the immediately
preceding business day.
Collection Period.................. The "Collection Period" related to each
Distribution Date, (a) with respect to
Scheduled Payments, will begin 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, will begin 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.
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 Class X, 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.
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S-12
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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 hold their Offered
Certificates in book-entry form, delivery of
which will be 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
Classes of Certificates that are subordinate
to such Certificates 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 certain Expense Losses
(also as defined herein), to the extent
described herein. As described herein, the
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 N Certificates are
subordinate to the Class M 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, and
proceeds from 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 Expenses Losses
will be allocated pro rata among the Class
A-1 and Class A-2 Certificates and, with
respect to losses allocable to interest, the
Class X Certificates.
Description of the Certificates.... The Certificates will have the following
characteristics.
A. Certificate Balances and
Notional Amount ................ Upon initial issuance, the Class A-1, Class
A-2, Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class K,
Class L, Class M and Class N Certificates
(collectively, the "Principal Balance
Certificates") will have
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the following aggregate Certificate Balances
(in each case, subject to a variance of plus
or minus 5%):
<TABLE>
<CAPTION>
Approximate
Initial Approximate
Aggregate Percentage
Certificate of Initial
Class Balance Pool Balance
------------- ----------- --------------
<S> <C> <C>
Class A-1 $ %
Class A-2
Class B
Class C
Class D
Class E
Class F
Class G
Class H
Class J
Class K
Class L
Class M
Class N
-------------------------------------------
</TABLE>
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 each Principal
Balance Certificate will be set forth on the
face thereof. On each Distribution Date, the
Certificate Balance of each Principal
Balance Certificate will be reduced by any
distributions of principal actually made on
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
"--Distributions--Subordination; Allocation
of Losses and Certain Expenses" herein.
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 Notional
Amount of the Class X Certificates will
equal 100% of the aggregate Scheduled
Principal Balance (as defined herein) of 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 Residual Certificates will not have
Certificate Balances or Notional Amounts.
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B. Pass-Through Rates.............. The Pass-Through Rates applicable to the
Class A-1, Class A-2, Class B and Class C
Certificates for each Distribution Date will
be equal to ____%, ____%, ____% and ____%
per annum, respectively; provided, however,
that each such Pass-Through Rate will not
exceed the Weighted Average Net Mortgage
Rate for such Distribution Date.
The Pass-Through Rates on the Class D and
the Class E Certificates for the initial
Distribution Date will equal approximately
____% and ____% per annum, respectively. For
each subsequent Distribution Date, the
Pass-Through Rate on the Class D
Certificates will be a per annum rate equal
to the Weighted Average Net Mortgage Rate
for such Distribution Date minus ____%. For
each subsequent Distribution Date, the
Pass-Through Rate on the Class E
Certificates will be a per annum rate equal
to the Weighted Average Net Mortgage Rate
for such Distribution Date minus ____%.
The Pass-Through Rate applicable to the
Class X Certificates for the initial
Distribution Date will equal approximately
____% per annum. The Pass-Through Rate
applicable to the Class X Certificates for
each Distribution Date subsequent to the
initial Distribution Date will, in general,
equal the excess, if any, of (i) the
weighted average of the Net Mortgage Rate in
effect for the Mortgage Loans as of the
first day of the related Collection Period
(in the case of each such Mortgage Loan that
is a Non-30/360 Loan, adjusted as described
below), the relevant weighting to be on the
basis of the respective Scheduled Principal
Balances of such Mortgage Loans immediately
prior to such Distribution Date, 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 immediately prior to such
Distribution Date.
The Pass-Through Rates applicable to the
Class F, Class G, Class H, Class J, Class K,
Class L, Class M and Class N Certificates
will, at all times, be equal to ____%,
____%, ____%, ____%, ____%, ____%, ____% and
____% per annum, respectively; provided,
however, that each such Pass-Through Rate
will not exceed the Weighted Average Net
Mortgage Rate for such Distribution Date.
The "Weighted Average Net Mortgage Rate" for
any Distribution Date is the weighted
average of the Net Mortgage Rates for the
Mortgage Loans (in the case of each Mortgage
Loan that is a Non-30/360 Mortgage Loan,
adjusted as described below), weighted on
the basis of their respective Scheduled
Principal Balances as of the close of
business on the preceding Distribution Date.
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The "Net Mortgage Rate" with respect to any
Mortgage Loan will, in general, be a per
annum rate equal to the related Mortgage
Rate minus the related Administrative Cost
Rate; provided that, for purposes of
calculating the Pass-Through Rate for each
Class of REMIC Regular Certificates from
time to time, the Net Mortgage Rate for any
Mortgage Loan will be calculated without
regard to any modification, waiver or
amendment of the terms of such Mortgage Loan
subsequent to the Closing Date. In addition,
because the Certificates accrue interest on
the basis of a 360-day year consisting of
twelve 30-day months, when calculating the
Pass-Through Rate for each Class of
Certificates for each Distribution Date, the
Net Mortgage Rate of each Mortgage Loan that
accrues interest other than on the basis of
a 360-day year consisting of twelve 30-day
months (each a "Non-30/360 Loan") will be
appropriately adjusted to reflect such
difference.
C. Distributions of Interest and
Principal ...................... As more particularly described herein, the
total of all payments and other collections
(or advances in lieu thereof) on or in
respect of the Mortgage Loans 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. Prepayment Premiums actually collected
on the Mortgage Loans will not be part of
the Available Distribution Amount for any
Distribution Date and will not be applied to
distributions of interest on and principal
of the Certificates; instead, Prepayment
Premiums will be distributed to
Certificateholders separately, in the
amounts and in accordance with the
priorities described herein. See
"Description of the
Certificates--Distributions--The Available
Distribution Amount" and
"--Distributions--Distributions of
Prepayment Premiums" herein.
On each Distribution Date, for so long as
any Class of Offered Certificates remains
outstanding, and except as otherwise
described under "Description of the
Certificates--Optional Termination" herein,
the Available Distribution Amount for such
date will be distributed to the holders of
the respective Classes of Certificates for
the following purposes and in the following
order of priority:
(1) to the holders of the Class A-1, Class
A-2 and Class X Certificates, all
Distributable Certificate Interest in
respect of each such Class of
Certificates for such Distribution
Date, pro rata in proportion to the
Distributable Certificate Interest
payable in respect of each such Class;
(2) to the holders of the Class A-1
Certificates, the Principal
Distribution Amount for such
Distribution Date, until the aggregate
Certificate Balance of the Class A-1
Certificates has been reduced to zero;
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(3) upon payment in full of the aggregate
Certificate Balance of the Class A-1
Certificates, to the holders of the
Class A-2 Certificates, the Principal
Distribution Amount for such
Distribution Date (reduced by any
portion thereof distributed to the
holders of the Class A-1 Certificates),
until the aggregate Certificate Balance
of the Class A-2 Certificates has been
reduced to zero;
(4) to the holders of the Class A and Class
X Certificates, pro rata in proportion
to their respective entitlements to
reimbursement described in this clause
(4), to reimburse them for any Realized
Losses previously allocated to such
Classes of Certificates plus interest
on such Realized Losses, compounded
monthly, at one-twelfth the applicable
Pass-Through Rate;
(5) to the holders of the Class B
Certificates, all Distributable
Certificate Interest in respect of such
Class of Certificates for such
Distribution Date;
(6) upon payment in full of the aggregate
Certificate Balance of the Class A-2
Certificates, to the holders of the
Class B Certificates, the Principal
Distribution Amount for such
Distribution Date (reduced by any
portion thereof distributed to the
holders of the Class A Certificates),
until the aggregate Certificate Balance
of the Class B Certificates has been
reduced to zero;
(7) to the holders of the Class B
Certificates, to reimburse them for any
Realized Losses previously allocated to
such Class of Certificates, plus
interest on such Realized Losses,
compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(8) to the holders of the Class C
Certificates, all Distributable
Certificate Interest in respect of such
Class of Certificates for such
Distribution Date;
(9) upon payment in full of the aggregate
Certificate Balance of the Class B
Certificates, to the holders of the
Class C Certificates, the Principal
Distribution Amount for such
Distribution Date (reduced by any
portion thereof distributed to the
holders of the Class A and Class B
Certificates), until the aggregate
Certificate Balance of the Class C
Certificates has been reduced to zero;
(10) to the holders of the Class C
Certificates, to reimburse them for any
Realized Losses previously allocated to
such Class of Certificates, plus
interest on such Realized Losses,
compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
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<PAGE> 17
- --------------------------------------------------------------------------------
(11) to the holders of the Class D
Certificates, all Distributable
Certificate Interest in respect of such
Class of Certificates for such
Distribution Date;
(12) upon payment in full of the aggregate
Certificate Balance of the Class C
Certificates, to the holders of the
Class D Certificates, the Principal
Distribution Amount for such
Distribution Date (reduced by any
portion thereof distributed to the
holders of the Class A, Class B and
Class C Certificates), until the
aggregate Certificate Balance of the
Class D Certificates has been reduced
to zero;
(13) to the holders of the Class D
Certificates, to reimburse them for any
Realized Losses previously allocated to
such Class of Certificates, plus
interest on such Realized Losses,
compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(14) to the holders of the Class E
Certificates, all Distributable
Certificate Interest in respect of such
Class of Certificates for such
Distribution Date;
(15) upon payment in full of the aggregate
Certificate Balance of the Class D
Certificates, to the holders of the
Class E Certificates, the Principal
Distribution Amount for such
Distribution Date (reduced by any
portion thereof distributed to the
holders of the Class A, Class B, Class
C and Class D Certificates), until the
aggregate Certificate Balance of the
Class E Certificates has been reduced
to zero;
(16) to the holders of the Class E
Certificates, to reimburse them for any
Realized Losses previously allocated to
such Class of Certificates, plus
interest on such Realized Losses,
compounded monthly, at one-twelfth the
applicable Pass-Through Rate; and
(17) to make payments to the holders of the
Private Certificates as contemplated
below.
Notwithstanding the foregoing, on each
Distribution Date occurring on or after the
date, if any, upon which the aggregate
Certificate Balance of all Classes of
Subordinate Certificates has been reduced to
zero or the aggregate Appraisal Reduction in
effect is greater than or equal to the
aggregate Certificate Balance of all Classes
of Subordinate Certificates, the Principal
Distribution Amount will be distributed,
first, to the Class A-1 and Class A-2
Certificates, pro rata, based on their
respective Certificate Balances, in
reduction of their respective Certificate
Balances, until the Certificate Balance of
each such Class is reduced to zero; and,
second, to the Class A-1 and Class A-2
Certificates, pro rata, based on their
respective Certificate Balances, for the
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<PAGE> 18
- --------------------------------------------------------------------------------
unreimbursed amount of Realized Losses and
Expense Losses previously allocated to such
Classes.
On each Distribution Date, following the
above-described distributions on the
Publicly Offered Certificates, the Trustee
will apply the remaining portion, if any, of
the Available Distribution Amount for such
date to make payments to the holders of each
of the respective Classes of Private
Certificates (other than the Residual
Certificates), in alphabetical order of
Class designation, in each case for the
following purposes and in the following
order of priority (i.e., payments under
clauses (1), (2) and (3) below, in that
order, to the holders of the Class F
Certificates, then payments under clauses
(1), (2) and (3) below, in that order, to
the holders of the Class G, Class H, Class
J, Class K, Class L, Class M and Class N
Certificates):
(1) to pay interest to the holders of the
particular Class of Certificates, up to
an amount equal to all Distributable
Certificate Interest in respect of such
Class of Certificates for such
Distribution Date;
(2) if the aggregate Certificate Balance of
each other Class of Subordinate
Certificates, if any, with an earlier
alphabetical Class designation has been
reduced to zero, to pay principal to the
holders of the particular Class of
Certificates, up to an amount equal to
the lesser of (a) the then outstanding
aggregate Certificate Balance of such
Class of Certificates and (b) the
aggregate of the remaining Principal
Distribution Amount for such
Distribution Date; and
(3) to reimburse the holders of the
particular Class of Certificates, up to
an amount equal to (a) all Realized
Losses and Expense Losses, if any,
previously allocated to such Class of
Certificates and for which no
reimbursement has previously been paid,
plus (b) all unpaid interest on such
amounts, compounded monthly, at
one-twelfth the Pass-Through Rate of
such Classes.
Any portion of the Available Distribution
Amount for any Distribution Date that is not
otherwise payable to the holders of REMIC
Regular Certificates as contemplated above
will be paid to the holders of the Class R-I
Certificates.
The "Distributable Certificate Interest" in
respect of any Class of REMIC Regular
Certificates for any Distribution Date will
equal the sum of (a) Accrued Certificate
Interest in respect of such Class of
Certificates for such Distribution Date,
reduced (to not less than zero) by (i) any
Net Aggregate Prepayment Interest Shortfalls
(as defined herein), and (ii) Realized
Losses and Expense Losses, in each case
specifically allocated with respect to such
Distribution Date to reduce Distributable
Certificate Interest payable in respect of
such Class in
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accordance with the terms of the Pooling and
Servicing Agreement and (b) the portion of
Distributable Certificate Interest for such
Class remaining unpaid as of the close of
business on the preceding Distribution Date,
plus one month's interest thereon at the
applicable Pass-Through Rate (such amount,
"Unpaid Interest"). 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 "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. See
"Description of the
Certificates--Distributions--Distributable
Certificate Interest" and "--Prepayment
Interest Shortfalls and Prepayment Interest
Excesses" herein.
The "Principal Distribution Amount" for any
Distribution Date will, in general, equal
the aggregate of the following:
(a) the principal portions of all Scheduled
Payments (other than the principal
portion of Balloon Payments (as defined
herein)) and any Assumed Scheduled
Payments due or deemed due, as the case
may be, in respect of the Mortgage Loans
for their respective Due Dates (as
defined herein) occurring during the
related Collection Period; and
(b) all payments (including Principal
Prepayments and the principal portion of
Balloon Payments) and other collections
(including Liquidation Proceeds,
Condemnation Proceeds, Insurance
Proceeds and REO Income (each as defined
herein) and proceeds of Mortgage Loan
repurchases) that were received on or in
respect of the Mortgage Loans during the
related Collection Period and that were
identified and applied by the Master
Servicer as recoveries of principal
thereof, in each case net of any portion
of such payment or other collection that
represents a recovery of the principal
portion of any Scheduled Payment (other
than a Balloon Payment) due, or the
principal portion of any Assumed
Scheduled Payment deemed due, in respect
of the related Mortgage Loan on a Due
Date during or prior to the related
Collection Period and not previously
recovered.
The "Scheduled Payment" for of any Mortgage
Loan on any Due Date will, in general, be
the amount of the scheduled
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payment of principal and interest due
thereon on such date (taking into account
any waiver, modification or amendment of the
terms of such Mortgage Loan subsequent to
the Closing Date, whether agreed to by the
Special Servicer or occurring in connection
with a bankruptcy proceeding involving the
related borrower).
An "Assumed Scheduled Payment" is an amount
deemed due in respect of (i) any Balloon
Mortgage Loan that is delinquent in respect
of its Balloon Payment beyond the first
Determination Date that follows its original
stated maturity date or (ii) any Mortgage
Loan as to which the related Mortgaged
Property has become an REO Property. The
Assumed Scheduled Payment deemed due on any
such Balloon Mortgage Loan on its original
stated maturity date and on each successive
Due Date that it remains or is deemed to
remain outstanding will equal the Scheduled
Payment that would have been due 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
its amortization schedule in effect
immediately prior to maturity. With respect
to any Mortgage Loan as to which the related
Mortgaged Property has become an REO
Property, the Assumed Scheduled Payment
deemed due on each Due Date for so long as
the REO Property remains part of the Trust
Fund equals the Scheduled Payment (or
Assumed Scheduled Payment) due on the last
Due Date prior to the acquisition of such
REO Property.
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 any of the
Class A, Class B, Class C, Class D and Class
E Certificates then entitled to
distributions of principal on such
Distribution Date will be entitled to an
aggregate amount (allocable among such
Classes, if more than one, as described
below) equal to the lesser of (a) such
Prepayment Premium and (b) such Prepayment
Premium multiplied by a fraction, the
numerator of which is equal to the excess,
if any, of the Pass-Through Rate applicable
to the most senior of such Classes of
Principal Balance Certificates then
outstanding (or, in the case of 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 of the Mortgage
Loan that prepaid, over the relevant
Discount Rate. If there is more than one
such Class of Principal Balance Certificates
entitled to distributions of principal on
such Distribution Date, the aggregate amount
described in the preceding sentence will be
allocated among such Classes on a pro rata
basis in accordance with the relative
amounts of the entitlement to such
distributions of principal. Any portion of
the Prepayment Premium remaining after any
such payment to the holders of such
Principal Balance Certificates will be
distributed to the holders of the Class X
Certificates. See "Description of the
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<PAGE> 21
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Certificates--Distributions--Distributions
of Prepayment Premiums" herein.
Appraisal Reductions............... Not later than 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 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"), the Special Servicer is required to
have obtained an MAI appraisal (if the
Scheduled Principal Balance of the Mortgage
Loan is greater than $1,000,000) or an
internal valuation (if the Scheduled
Principal Balance of the Mortgage Loan is
equal to or less than $1,000,000) of the
related Mortgaged Property or REO Property,
as the case may be, unless such an appraisal
or valuation had been obtained within the
preceding twelve months. As a result of such
appraisal or internal valuation, an
"Appraisal Reduction" may be created.
The Appraisal Reduction for any Mortgage
Loan, including a Mortgage Loan as to which
the related Mortgaged Property has become an
REO Property, will be an amount, calculated
as of the first Determination Date that is
at least fifteen days after the date on
which the appraisal is obtained or
performed, equal to the excess, if any, of
(a) the sum of (i) the Scheduled Principal
Balance of such Mortgage Loan, (ii) to the
extent not previously advanced by the Master
Servicer or the Trustee, 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
(net of any amounts escrowed for such
items), insurance premiums and, if
applicable, ground rents in respect of the
related Mortgaged Property or REO Property,
as the case may be, over (b) 90% of the
value (net of any prior mortgage liens) of
such Mortgaged Property or REO Property as
determined by such appraisal or internal
valuation. Notwithstanding the foregoing, if
an internal valuation of the Mortgaged
Property is performed, the Appraisal
Reduction will equal the greater of (a) the
amount calculated in the preceding sentence
and (b) 25% of the Scheduled Principal
Balance of the Mortgage Loan. 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, paid in full, liquidated,
repurchased or otherwise disposed of.
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The existence of an Appraisal Reduction will
proportionately reduce the Master Servicer's
obligation to make P&I Advances (as defined
herein) in respect of the related Mortgage
Loan, which will generally result in a
reduction in current distributions of
interest in respect of the then most
subordinate Class of Principal Balance
Certificates. See "Description of the
Certificates--Advances--P&I Advances"
herein.
Allocation of Realized Losses,
Expense Losses and Interest
Shortfalls......................... As and to the extent described herein,
Realized Losses of principal and interest on
the Mortgage Loans and certain Expense
Losses will generally be allocated with
respect to each Distribution Date to the
Class N, Class M, Class L, Class K, Class J,
Class H, Class G, Class F, Class E, Class D,
Class C and Class B Certificates, in that
order, and then to the Class A-1, Class A-2,
and, solely with respect to Realized Losses
and Expense Losses of interest, to the Class
X Certificates, pro rata, in each case
reducing amounts payable thereto.
Any shortfall in the amount of Distributable
Certificate Interest paid to the
Certificateholders of any Class of
Certificates on any Distribution Date will
result in unpaid interest for such Class
which, together with interest thereon
compounded monthly at one-twelfth the
applicable Pass-Through Rate, will be
distributable in subsequent periods to the
extent of funds available therefor.
Prepayment Interest Shortfalls
and Prepayment Interest
Excesses........................... As "Prepayment Interest Shortfall" is a
shortfall in the collection of a full
month's interest on any Mortgage Loan by
reason of a full or partial Principal
Prepayment (including early payment of a
Balloon Payment) made during any Collection
Period prior to the date when the Scheduled
Payment is payable on such Mortgage Loan
(the "Due Date") in such Collection Period,
which is the first day of each month. If a
full or partial Principal Prepayment is made
during any Collection Period but after the
Due Date for such Mortgage Loan occurring in
such Collection Period, then a "Prepayment
Interest Excess" will result. The amount of
Prepayment Interest Excess in any such case
will equal the interest that accrues on the
Mortgage Loan from such Due Date to the date
such payment was made. To the extent that
aggregate Prepayment Interest Shortfalls
exceed the aggregate Prepayment Interest
Excesses for the Collection Period related
to a Distribution Date, such amount will
reduce the Servicing Fee (other than the
portion thereof payable to Sub-Servicers) up
to the amount of such excess. See "Servicing
of the Mortgage Loans--The Master
Servicer--Master Servicer Compensation"
herein.
Any such reduction of the Servicing Fee to
cover such shortfalls will constitute a
"Compensating Interest Payment" by the
Master Servicer. The aggregate of all
Prepayment
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- --------------------------------------------------------------------------------
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 will 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
that any Net Aggregate Prepayment Interest
Shortfalls are allocated thereto. See
"Description of the
Certificates--Distributions--Distributable
Certificate Interest" herein.
Optional Termination............... The Depositor, the Master Servicer, the
Special Servicer and the holder of the
majority interest in the Class R-I
Certificates, each in turn, will have the
option to purchase, in whole but not in
part, the Mortgage Loans and any other
property remaining in the Trust Fund on any
Distribution Date on or after the
Distribution Date on which the aggregate
Certificate Balance of all Classes of
Principal Balance Certificates then
outstanding is less than or equal to 1% of
the Initial Pool Balance. The purchase price
for any such purchase will be 100% of the
aggregate Principal Balance of the Mortgage
Loans (other than any Mortgage Loans as to
which the Master Servicer has determined
that all payments or recoveries with respect
thereto have been made), plus accrued and
unpaid interest at the Mortgage Rate (or the
Mortgage Rate less the Servicing Fee Rate if
the Master Servicer is the purchaser) to the
Due Date for each Mortgage Loan ending in
the Collection Period with respect to which
such purchase occurs, plus unreimbursed
Servicing Advances, with interest on any
unreimbursed Advances at the Advance Rate,
and the fair market value of any other
property remaining in the Trust Fund;
provided, however, that if Wells Fargo or
one of its affiliates is the purchaser, the
purchase price will be the greater of the
foregoing amount and the fair market value
of the Mortgage Loans and any other property
remaining in the Trust Fund. See
"Description Of The Certificates--Optional
Termination" herein.
Administrative Cost Rate........... The administrative costs for each Mortgage
Loan in any month will equal the sum of the
related Servicing Fee, the Special Servicing
Standby Fee and the Trustee Fee for such
month (collectively, expressed as a per
annum rate, the "Administrative Cost Rate"),
which is set forth in Appendix II.
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The Administrative Cost Rate will be payable
on the Scheduled Principal Balance of each
Mortgage Loan outstanding from time to time.
The Administrative Cost Rate applicable to a
Mortgage Loan in any month will be
determined using the same interest accrual
methodology that is applied with respect to
the Mortgage Rate on such Mortgage Loan.
Advances........................... As and to the extent described herein, the
Master Servicer will 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 ("P&I
Advances") and to cover certain servicing
expenses ("Servicing Advances") in
accordance with the provisions of 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.
Each of the Master Servicer and the Trustee,
as applicable, will be obligated to make
Advances only to the extent that it
determines, in its sole discretion,
exercised in good faith, that such Advances
are ultimately recoverable from future
payments and other collections on the
related Mortgage Loan or REO Property. Any
such determination will be conclusive and
binding on the Certificateholders.
The Master Servicer and the Trustee 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. The payment of such interest on any
Advance will result in a reduction in
amounts payable on the Certificates. See
"Description of the Certificates--Advances"
herein.
Certain Yield, Maturity and
Prepayment Consideration........... The yield on the Offered Certificates of
each Class 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
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S-25
<PAGE> 25
- --------------------------------------------------------------------------------
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
investor's expected yield. Insofar as an
investor's initial investment in any Offered
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 Class X 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 highly sensitive to the
prepayment, repurchase, default and 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. Accordingly, investors in the
Interest Only Certificates should fully
consider the associated risks, including the
risk that an extremely rapid rate of
prepayment of the Mortgage Loans could
result in the failure of such investors to
recoup their initial investments. See
"Yield, Prepayment and Maturity
Considerations--Class X 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, Maturity and
Prepayment 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
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S-26
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Credit Rating Co. ("DCR") and Fitch IBCA,
Inc. ("Fitch", and together with DCR, the
"Rating Agencies"):
<TABLE>
<CAPTION>
Class DCR Fitch
----------------- --------- ------------
<S> <C> <C>
Class A-1....
Class A-2....
Class X......
Class B......
Class C......
Class D......
Class E......
</TABLE>
In addition, it is a condition to the
issuance of the Private Certificates that
the Class F, Class G, Class H, Class J,
Class K, Class L and Class M Certificates be
rated "____," "____," "____," "____,"
"____," "____" and "____," respectively, by
Fitch and DCR. The Class N Certificates and
the REMIC Residual Certificates will be
unrated.
A securities rating addresses the likelihood
of the receipt by Certificateholders of
timely payment of interest and ultimate
payment of principal 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, ultimate
distribution of all principal by the
Distribution Date in July 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, voluntary or involuntary, 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 or default interest 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 Class X
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. If all of the Mortgage Loans were
to prepay in the initial month, with the
result that the holders of the Interest Only
Certificates 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/AAA"
ratings received on the Interest Only
Certificates. The Notional Amount upon which
interest in respect of the Interest Only
Certificates is calculated
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- --------------------------------------------------------------------------------
may be reduced by 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 Notional Amount, but only
the obligation to pay interest timely on the
Notional Amount 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 226
fixed-rate Mortgage Loans with an Initial
Pool Balance of approximately
$1,062,003,110, subject to a permitted
variance of plus or minus 5%. The principal
balance of each Mortgage Loan outstanding as
of the Cut-Off Date, after application of
all payments of principal due on or before
such date, whether or not received (each a
"Cut-Off Date Balance" and together, the
"Cut-Off Date Balances"), range from
$543,018 to $51,891,079, and the Mortgage
Loans have an average Cut-Off Date Balance
of $4,699,129. 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. A
brief summary of the material terms of the
largest Mortgage Loans in the Mortgage Pool
is set forth on Appendix III attached
hereto.
For purposes of the presentation of certain
Mortgage Pool information herein, each
Mortgage Loan is deemed to be secured by a
Mortgage on one Mortgaged Property, whether
or not such Mortgaged Property consists of
more than one parcel of real property.
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 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 ten (10) cases, which represent
13.7% of the Initial Pool Balance, leasehold
or partial leasehold and partial fee) 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:
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S-28
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<TABLE>
<CAPTION>
Percentage
of Number of
Initial Pool Mortgage
Property Type Balance Loans
------------- ------- -----
<S> <C> <C>
Retail............. 26.1% 60
Multifamily........ 25.9% 61
Office............. 17.7% 25
Hospitality........ 11.8% 20
Industrial......... 9.2% 37
Self-Storage....... 4.6% 13
Mobile Home Park... 2.6% 8
Other.............. 2.1% 2
</TABLE>
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 four (4)
states with the highest concentrations.
<TABLE>
<CAPTION>
Percentage
of Number of
Initial Pool Mortgage
State Balance Loans
----- ------- -----
<S> <C> <C>
California......... 37.1% 99
Colorado........... 7.2% 11
New Jersey......... 5.5% 3
Florida............ 5.5% 15
</TABLE>
The remaining Mortgaged Properties are
located throughout twenty-eight (28) other
states and the District of Columbia. No
other state has a concentration of Mortgaged
Properties that represents security for more
than 5% of the Initial Pool Balance. See
Appendix I hereto.
The Mortgage Pool includes three (3) groups
of Mortgage Loans, the largest of which
groups collectively represents 3.3% of the
Initial Pool Balance, under which an
aggregate amount of indebtedness is secured
by multiple Mortgaged Properties. For
purposes of the presentation of Mortgage
Pool information herein, such Mortgage Loans
have been treated as multiple
cross-collateralized and cross-defaulted
Mortgage Loans, each secured by one of the
related Mortgaged Properties and each having
a principal balance in an amount equal to an
allocated portion of the aggregate
indebtedness represented by such Mortgage
Loan.
There are four (4) groups of Mortgage Loans,
the largest of which groups collectively
represents 0.9% of the Initial Pool Balance,
that consist of several Mortgage Loans that
are cross-defaulted and cross-collateralized
with the other Mortgage Loan or Loans in
such group.
There are also several groups of Mortgage
Loans (other than those groups that are
either cross-defaulted and cross-
- --------------------------------------------------------------------------------
S-29
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- --------------------------------------------------------------------------------
collateralized or treated as cross-defaulted
and cross-collateralized for purposes of the
presentation of Mortgage Pool information
herein), the largest of which groups
represents 4.6% of the Initial Pool Balance,
where the borrowers are affiliated entities
related through common ownership of
partnership or other equity interests and
where, in general, the related Mortgaged
Properties are commonly managed.
Two hundred one (201) of the Mortgage Loans,
which represent 89.0% of the Initial Pool
Balance, provide for Scheduled Payments
based on amortization schedules
significantly longer than their terms to
maturity. As a result, such Mortgage Loans
(collectively, "Balloon Loans") will have
substantial principal amounts due and
payable (each such amount, together with
scheduled interest, a "Balloon Payment") on
their respective maturity dates, unless
prepaid prior thereto. The remaining
twenty-five (25) Mortgage Loans, which
represent 11.0% of the Initial Pool Balance,
are fully- or substantially-amortizing with
no, or insubstantial, balances due at
maturity. 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.
As of the Cut-Off Date, two hundred four
(204) of the Mortgage Loans, or 80.7% of the
Initial Pool Balance, prohibit voluntary
Principal Prepayments for a period (a
"Lock-out Period") ending on a date
(generally ranging from ten (10) months to
eighty-five (85) months from the Cut-Off
Date) specified in the related Mortgage Note
and, in most such cases, thereafter require,
until a specified date (generally three to
six months) prior to maturity, that any
voluntary Principal Prepayment be
accompanied by an additional amount (a
"Prepayment Premium"), which is calculated
on the basis of (a) the greater of a yield
maintenance formula ("Yield Maintenance
Premium") and zero payable in the case of
three (3) Mortgage Loans, or 1.1% of the
Initial Pool Balance; (b) the greater of a
Yield Maintenance Premium and one percent
(1%) of the amount prepaid ("Percentage
Premium"), payable in the case of one
hundred ninety-six (196) Mortgage Loans, or
78.2% of the Initial Pool Balance; (c) a
Percentage Premium, generally declining over
the remainder of the life of the loan,
payable in the case of one (1) Mortgage Loan
or 0.3% of the Initial Pool Balance or (d) a
Yield Maintenance Premium, then a Percentage
Premium, declining over the remainder of the
life of the loan, payable in the case of
four (4) Mortgage Loans representing 1.1% of
the Initial Pool Balance. Eighteen (18)
Mortgage Loans, representing 17.4% of the
Initial Pool Balance, provide for a Lockout
Period ending between twenty-four (24) and
sixty (60) months following the Cut-Off
Date, and then a period during which the
Borrower is permitted to prepay the Mortgage
Loan (generally upon payment of a Prepayment
Premium or a Yield Maintenance Premium) but
the holder of the Mortgage is
- --------------------------------------------------------------------------------
S-30
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- --------------------------------------------------------------------------------
entitled to require the Mortgagor to defease
the Mortgage Loan in lieu of making such a
prepayment, except that no Prepayment
Premium or Yield Maintenance Premium is
required (and the holder of the mortgage is
not entitled to require defeasance) after a
specified date (generally three (3) to six
(6) months) prior to maturity (or until the
anticipated repayment date in the case of
one (1) such Mortgage Loan, representing
3.3% of the Initial Pool Balance, which is
hyper-amortizing, or until three (3) months
prior to the anticipated repayment date in
the case of one (1) such Mortgage Loan,
representing 0.8% of the Initial Pool
Balance, which is hyper-amortizing). Three
(3) Mortgage Loans, representing 1.7% of the
Initial Pool Balance, provide for a Lockout
Period ending between thirty-three (33) and
thirty-five (35) months following the
Cut-Off Date and then a period during which
the borrower is permitted (in its
discretion) to defease the respective
Mortgage Loan or to prepay the respective
Mortgage Loan upon payment of the greater of
a Yield Maintenance Premium and 1% of the
then outstanding principal balance of the
Mortgage Loan, except that no such payment
is required after a specified date
(generally six (6) months) prior to
maturity. In cases where defeasance is
provided for, the borrower is required, when
it elects, or the holder of the mortgage
requires it, to defease the Mortgage Loan to
substitute a pledge of "defeasance
collateral" in exchange for a release of the
Mortgaged Property from the lien of the
related mortgage. In general, "defeasance
collateral" is required to consist of
direct, noncallable United States Treasury
obligations that provide for payments prior,
but as close as possible, to all successive
Due Dates and the scheduled maturity date,
with each such payment being equal to or
greater than (with any excess returned to
the borrower) the scheduled payment due on
such date. One (1) Mortgage Loan,
representing 0.2% of the Initial Pool
Balance, requires the greater of a Yield
Maintenance Premium or 3% of the amount
prepaid for thirty-three (33) months,
followed by a declining Percentage Premium
until a specified date six (6) months prior
to maturity. See "Description of The
Mortgage Pool--Certain Terms and
Characteristics of the Mortgage
Loans--Prepayment Restrictions" herein. Four
(4) Mortgage Loans representing 2.9% of the
Initial Pool Balance permit prepayment
during the last five years of the loan term
without the imposition of any Prepayment
Penalty.
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
either Seller makes any representation as to
the enforceability of any Mortgage Note
provisions requiring the payment of a
Prepayment Premium or of the collectability
of any Prepayment Premium.
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S-31
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- --------------------------------------------------------------------------------
As of the Cut-Off Date, the Mortgage Loans
will have the following additional
characteristics:
(i) Mortgage Rates ranging from 6.540% per
annum to 8.350% per annum, and a
weighted average Mortgage Rate of
7.259% per annum;
(ii) remaining terms to scheduled maturity
ranging from 55 months to 298 months,
and a weighted average remaining term
to scheduled maturity of 137 months;
(iii) Loan-to-Value Ratios (that is, in each
case, the ratio of (a) the Cut-Off
Date Balance of such Mortgage Loan to
(b) the value of the related Mortgaged
Property based upon an appraisal
performed in connection with the
origination or acquisition of the
Mortgage Loan), ranging from 20.1% to
85.8% and a weighted average
Loan-to-Value Ratio of 66.6%; and
(iv) Debt Service Coverage Ratios
(calculated as described herein under
"Description Of The Mortgage
Pool--Additional Mortgage Loan
Information") ranging from 1.06x to
5.25x, and a weighted average Debt
Service Coverage Ratio of 1.57x.
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 to the Trustee certain
representations and warranties made to it by
a third party) regarding the characteristics
of the Mortgage Loans assigned by such
Seller and, as more particularly described
herein, will agree (or such third party has
agreed) to cure any breach thereof that
materially and adversely affects the
interests of the Certificateholders 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 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. A brief
summary of the material terms of the largest
Mortgage Loans in the Mortgage Pool is set
forth in Appendix III.
Use of Proceeds.................... The Depositor will use substantially all of
the net proceeds from the sale of the
Offered Certificates to purchase the
Mortgage Loans and to pay certain expenses
in connection with the issuance of the
Certificates.
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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. 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, and (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
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. However, the
Certificates will generally be considered to
be assets described in Section
7701(a)(19)(C) of the Code only to the
extent that the Mortgage Loans are secured
by multifamily properties.
The Class X Certificates will, and the other
Classes of Offered Certificates may, be
treated as having been issued with "original
issue discount" for federal income tax
reporting purposes. 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 0% CPR (the "Prepayment
Assumption"). However, the Depositor makes
no representation that the Mortgage Loans
will prepay at any particular rate.
If the method for computing original issue
discount described herein results in a
negative amount for any period with respect
to the Class X Certificates, 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
Consequences" herein and in the Prospectus.
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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 individual prohibited transaction
exemptions to the Underwriters that
generally exempt from the application of
certain of the prohibited transaction
provisions of ERISA and Section 4975 of the
Code transactions relating to the purchase,
holding and sale of certain pass-through
certificates underwritten by the
Underwriters, 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.
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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 the Underwriters that they presently intend to
make a secondary market in the Offered Certificates; however, they have no
obligation to do so and any market making activity may be discontinued at any
time. Accordingly, 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. See "Risk Factors--Limited Liquidity"
in the Prospectus.
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 Class A-1, Class
A-2, Class B and Class C Certificates (which are, in each case, generally
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 on the Class X Certificates
will be highly sensitive to the rate and timing of principal payments (including
by reason of prepayments, defaults and liquidations) on or in respect of the
Mortgage Loans and investors in the Class X Certificates should fully consider
the associated risks, including the risk that an extremely rapid rate of
amortization and prepayment of the Mortgage Loans (and correspondingly, of the
Notional Amount of the Class X Certificates) could result in the failure of such
investors to recoup their initial investment. See "Description of the Mortgage
Pool", "Description of the Certificates--Distributions" and
"--Distributions--Subordination; Allocation of Losses and Certain Expenses" and
"Yield, Prepayment and Maturity Considerations" 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 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
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<PAGE> 35
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 Class B, Class C, Class D and Class E Certificates
As described herein, the rights of holders of the Subordinate
Certificates, including the Class B, Class C, Class D and Class E 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 N, Class M,
Class L, Class K, Class J, Class H, Class G, Class F, Class E, Class D, Class C
and Class B Certificates, in that order, reducing amounts payable to each such
Class.
Potential Conflict of Interest in Connection with Specially Serviced Mortgage
Loans
The Special Servicer is given considerable latitude, subject to certain
rights of the Operating Adviser, 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, in the
absence of significant losses allocated to such Class, be controlled generally
by the holder of the majority interest in the most subordinated Class of
Principal Balance Certificates (that is, the Controlling Class as described
herein) outstanding from time to time, which holders may have interests in
conflict with those of the holders of the 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. However, the Operating Adviser
is not permitted to advise the Special Servicer to take, and the Special
Servicer may not take, any action that will violate the Servicing Standard or
any other provision of the Pooling and Servicing Agreement.
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
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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 Retail, Office, Industrial and Other Properties
Sixty (60) Mortgage Loans, representing 26.1% of the Initial Pool Balance,
are secured by Mortgages on retail properties; twenty-five (25) Mortgage Loans,
representing 17.7% of the Initial Pool Balance, are secured by Mortgages on
office properties; thirty-seven (37) Mortgage Loans, representing 9.2% of the
Initial Pool Balance, are secured by Mortgages on industrial properties; two (2)
Mortgage Loans, representing 2.1% of the Initial Pool Balance are secured by
Mortgages on properties categorized as other properties (one (1) such property
is used for a theater and one (1) is used for a combination of commercial
purposes (retail and office)). 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 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.
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, and like anchored shopping centers, the
success of an office property with a single or dominant tenant may depend
significantly on that tenant's continued occupancy.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment. Also,
an industrial property that suited the particular needs of its original tenant
may be difficult to re-let to another tenant or, like office properties, may
become functionally obsolete relative to newer properties.
Risks Particular to Multifamily Properties
Sixty-one (61) Mortgage Loans, representing 25.9% 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.
Certain of the multifamily Mortgaged Properties have material concentrations of
students as tenants.
Risks Particular to Hospitality Properties
Twenty (20) Mortgage Loans (the "Hospitality Loans"), representing 11.8%
of the Initial Pool Balance, are secured by Mortgages solely on hotel or motel
properties. Various factors, including location, quality and franchise
affiliation, if any, affect the economic viability of a hotel or motel. Adverse
economic conditions, 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 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
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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 or motel 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.
Certain of the Mortgaged Properties securing the Hospitality Loans are not
franchisees of national hotel or motel chains and therefore do not have the
benefits typically associated with being part of such a chain (including, for
example, reservation systems and marketing).
Risks Particular to Self-Storage Facilities.
Thirteen (13) Mortgage Loans, representing 4.6% 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.
Mortgage Loans Not Insured
The Mortgage Loans are not insured or guaranteed by any governmental
entity or any private mortgage insurer. 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; however, there can be no assurance that either 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.
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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 of the related
Mortgage Loan. Although the reports of such environmental site assessments
generally did not disclose the presence or risk of environmental contamination
that is considered material to the interests of the holders of the Offered
Certificates, 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; however, no such
environmental assessments were performed more than a year prior to the
origination of the related Mortgage Loan. See "Description of the Mortgage
Pool--Assessments of Property Value and Condition--Environmental Assessments"
herein and "Certain Legal Aspects of the Mortgage Loans and the
Leases--Environmental Legislation" in the Prospectus.
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) but will decrease the likelihood that the
Trust Fund will become liable for a material adverse environmental condition at
a Mortgaged Property. However, 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 "Risk Factors--Environmental Risks" and "Certain Legal
Aspects of the Mortgage Loans and the Leases--Environmental Legislation" in the
Prospectus.
Balloon Payments
Two hundred one (201) of the Mortgage Loans, representing 89.0% of the
Initial Pool Balance, do not fully amortize over their respective terms to
maturity. Thus, each such Mortgage Loan will have a substantial payment (that
is, a "Balloon Payment") due at its stated maturity date, unless prepaid prior
thereto. With respect to the one hundred forty-four (144) Mortgage Loans that
provide for Balloon Payments that accrue interest on the basis of the actual
number of days elapsed each month in a 360-day year, representing 59.3% of the
Initial Pool Balance, the amount of the Balloon Payment will be greater than
would be the case if such Mortgage Loans accrued interest on the basis of a
360-day year consisting of twelve 30-day months as a result of the application
of interest and principal on such Mortgage Loans over time.
Loans that provide for 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" and "--Obligor Default" in the Prospectus.
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--Mortgage Loan Modifications" 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
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weighted average life of such Class of Certificates. See "Yield, Prepayment and
Maturity Considerations" herein and "Yield Considerations" in the Prospectus.
Geographic Concentration
Ninety-nine (99) of the Mortgage Loans, representing 37.1% of the Initial
Pool Balance, are secured by liens on Mortgaged Properties located in
California. Concentrations of Mortgaged Properties (in each case representing
security for 7.2% 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 earthquakes) than properties located in other parts of the country. The
Mortgage Loans generally do not require any borrowers to maintain earthquake
insurance.
Cross-Collateralization; Related Parties
The Mortgage Pool includes three (3) groups of Mortgage Loans, the largest
of which groups collectively represents 3.3% of the Initial Pool Balance, under
which an aggregate amount of indebtedness is secured by multiple Mortgaged
Properties. For purposes of the presentation of Mortgage Pool information
herein, such Mortgage Loans have been treated as multiple cross-collateralized
and cross-defaulted Mortgage Loans, each secured by one of the related Mortgaged
Properties and each having a principal balance in an amount equal to an
allocated portion of the aggregate indebtedness represented by such Mortgage
Loan.
In addition, there are four (4) groups of Mortgage Loans, the largest of
which groups collectively represents 0.9% of the Initial Pool Balance, that
consist of several Mortgage Loans that are cross-defaulted and
cross-collateralized with the other Mortgage Loan or Loans in such group.
There are also twenty-two (22) groups of Mortgage Loans (other than those
groups that are either cross-defaulted and cross-collateralized or treated as
cross-defaulted and cross-collateralized for purposes of the presentation of
Mortgage Pool information herein), the largest of which group represents 4.6% of
the Initial Pool Balance, where the borrowers are affiliated entities related
through common ownership of partnership or other equity interests and where, in
general, the related Mortgaged Properties are commonly managed.
Adverse circumstances relating to a borrower or a respective affiliate and
affecting one of the related Mortgage Loans or Mortgaged Properties could arise
in connection with the other related Mortgage Loans or Mortgaged Properties. In
particular, the bankruptcy or insolvency of any such borrower or respective
affiliate could have an adverse effect on the operation of all of the related
Mortgaged Properties and on the ability of such related Mortgaged Properties to
produce sufficient cash flow to make required payments on the related Mortgage
Loans. For example, if a person that owns or directly or indirectly controls
several Mortgaged Property experiences financial difficulty at one Mortgaged
Property, it could defer maintenance at one or more other Mortgaged Properties
in order to satisfy current expenses with respect to the Mortgaged Property
experiencing financial difficulty, or it could attempt to avert foreclosure by
filing a bankruptcy petition that might have the effect of interrupting monthly
payments for an indefinite period on all the related Mortgage Loans. See
"Certain Legal Aspects of the Mortgage Loans and the Leases-Bankruptcy Laws" in
the Prospectus. In addition, a number of the borrowers under the Mortgage Loans
are limited or general partnerships. Under certain circumstances, the bankruptcy
of the general partner in a partnership may result in the dissolution of such
partnership. The dissolution of a borrower partnership, the winding-up of its
affairs and the distribution of its assets could result in an acceleration of
its payment obligations under the related Mortgage Loan.
Leasehold Considerations
Ten (10) Mortgage Loans representing 13.7% of the Initial Pool Balance,
are secured solely by a Mortgage on the borrower's leasehold interest under a
ground lease. See "Description of the Mortgage Pool--Additional
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Mortgage Loan Information" 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. However, in each of these cases, 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 and by the leasehold mortgagee or the purchaser at a foreclosure
sale, and contains certain other protective provisions typically included in a
"mortgageable" ground lease.
Limitations of Appraisals
In connection with the origination or acquisition of the Mortgage Loans,
the related Mortgaged Property was appraised by an independent appraiser who,
generally, was a member of the Appraisal Institute. However, those appraisals
represent the analysis and opinion of the person performing the appraisal and
are not guarantees of, and may not be indicative of, present or future values.
There can be no assurance that another person would not have arrived at a
different valuation, even if such person used the same general approach to and
same method of valuing the property. Moreover, the values of the Mortgaged
Properties may have fluctuated significantly since the appraisal 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.
Risks of Secured Subordinate Financing
The Mortgaged Properties currently are unencumbered by secured
subordinated debt held by third parties. With respect to two (2) Mortgage Loans
representing 1.9% of the Initial Pool Balance, there is outstanding debt to
third parties that is unsecured or secured solely by ownership interests in the
related borrower or an affiliate thereof. With respect to six (6) of the
Mortgage Loans representing 2.3% of the Initial Pool Balance, the related
borrower may incur secured subordinate debt subject to minimum debt service
coverage ratios and maximum loan to value tests. 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.
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.
Risk of Year 2000
The transition from the year 1999 to the year 2000 may disrupt the ability
of computerized systems to process information. If the Master Servicer, the
Special Servicer or the Trustee do not have by the year 2000 computerized
systems which are year 2000 compliant, the ability of the Master Servicer, the
Special Servicer or the Trustee to service the Mortgage Loans (in the case of
the Master Servicer and the Special Servicer) and make distributions to the
Certificateholders (in the case of the Trustee) may be materially and adversely
affected.
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DESCRIPTION OF THE CERTIFICATES
General
The Series 1998-WF2 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will be issued on or about June __, 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 and the Trustee. Registered holders of the
Certificates are herein referred to as "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 18 classes (each, a "Class") thereof, to
be designated as: (i) the Class A-1 Certificates and the Class A-2 Certificates
(collectively, the "Class A Certificates"); (ii) the Class X Certificates (the
"Interest Only 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, the Class L Certificates, the Class M
Certificates and the Class N 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 "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. The
Class F, Class G, Class H, Class J, Class K, Class L, Class M and Class N
Certificates and the Residual Certificates (collectively, the "Private
Certificates") have not been registered under the Securities Act of 1933, as
amended, and are not offered hereby.
The Class A Certificates will be issued in book-entry form in
denominations of $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 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 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 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 the
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 the Offered Certificates will refer to
payments, notices, reports and statements to DTC or Cede & Co., as the
registered holder of the Offered Certificates, for distribution to the related
Certificate Owners through DTC's Participants in accordance with DTC procedures.
Until Definitive Certificates are issued in respect of any Class of Offered
Certificates, interests in such Certificates will be transferred on the
book-entry records of DTC (and its Participants). See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates" in the
Prospectus.
Certificateholders must hold their Offered Certificates in book-entry
form, and delivery of the Offered Certificates will be made through the
facilities of DTC (in the United States) and may be made through the facilities
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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.
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 Amount
Upon initial issuance, the Class A-1, Class A-2, Class B, Class C, Class
D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M and
Class N 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>
Class A-1 $ % %
Class A-2
Class B
Class C
Class D
Class E
Class F
Class G
Class H
Class J
Class K
Class L
Class M
Class N
</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 each Principal Balance Certificate will be set forth on
the face thereof. On each Distribution Date, the Certificate Balance of each
Principal Balance Certificate will be reduced by any distributions of principal
actually made on 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
"--Distributions--Subordination; Allocation of Losses and Certain Expenses"
below.
The Interest Only Certificates will not have a Certificate Balance. Such
Class of Certificates will represent the right to receive distributions of
interest accrued as described herein on a notional principal amount (a "Notional
Amount").
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The Notional Amount of the Interest Only Certificates will equal 100% of
the aggregate Scheduled Principal Balance of the Mortgage Loans outstanding from
time to time. The Interest Only Certificates will have an initial aggregate
Notional Amount of $_______________, subject to a permitted variance of plus or
minus 5%. The Notional Amount of each Interest Only Certificate is used solely
for the purpose of determining the amount of interest to be distributed on such
Certificate and does not represent the right to receive any distributions of
principal.
The Residual Certificates will not have Certificate Balances or Notional
Amounts.
Pass-Through Rates
The rate per annum at which any Class of Certificates (other than the
Residual Certificates) accrues interest is referred to herein as its
"Pass-Through Rate."
The Pass-Through Rates applicable to the Class A-1, Class A-2, Class B and
Class C Certificates for each Distribution Date will, at all times, be equal to
____%, ____%, ____%, and ____% per annum, respectively; provided, however, that
each such Pass-Through Rate will not exceed the Weighted Average Net Mortgage
Rate for such Distribution Date.
The Pass-Through Rates on the Class D and the Class E Certificates for the
initial Distribution Date will equal ____% and ____% per annum, respectively.
For each subsequent Distribution Date, the Pass-Through Rate on the Class D
Certificates will be a per annum rate equal to the Weighted Average Net Mortgage
Rate for such Distribution Date minus ____%. For each subsequent Distribution
Date, the Pass-Through Rate on the Class E Certificates will be a per annum rate
equal to the Weighted Average Net Mortgage Rate for such Distribution Date minus
____%.
The Pass-Through Rate applicable to the Class X Certificates for the
initial Distribution Date will equal approximately _____% per annum. The
Pass-Through Rate applicable to the Class X Certificates for each Distribution
Date subsequent to the initial Distribution Date will, in general, equal to the
excess, if any, of (i) the weighted average of the Net Mortgage Rates in effect
for the Mortgage Loans as of the first day of the related Collection Period (in
the case of each such Mortgage Loan that is a Non-30/360 Loan, adjusted as
described below), the relevant weighting to be on the basis of the respective
Scheduled Principal Balances of such Mortgage Loan immediately prior to such
Distribution Date, 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 immediately prior
to such Distribution Date.
The Pass-Through Rates applicable to the Class F, Class G, Class H, Class
J, Class K, Class L, Class M and Class N Certificates for each Distribution Date
will, at all times, be equal to ___%, ___%, ___%, ___%, ___%, ___%, ___%, and
___%, per annum, respectively; provided, however, that each such Pass-Through
Rate will not exceed the Weighted Average Net Mortgage Rate for such
Distribution Date.
The "Weighted Average Net Mortgage Rate" for any Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans (in the case
of each Mortgage Loan that is a Non-30/360 Mortgage Loan, adjusted as described
below), weighted on the basis of their respective Scheduled Principal Balances
as of the close of business on the preceding Distribution 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 minus the
related Administrative Cost Rate; provided that, for purposes of calculating the
Pass-Through Rate for each Class of REMIC Regular Certificates from time to
time, the Net Mortgage Rate for any Mortgage Loan will be calculated without
regard to any modification, waiver or amendment of the terms of such Mortgage
Loan subsequent to the Closing Date. In addition, because the Certificates
accrue interest on the basis of a 360-day year consisting of twelve 30-day
months, when calculating the Pass-Through Rate for each Class of Certificates
for each Distribution Date, the Net Mortgage Rate of each Mortgage Loan that
accrues interest other than on the basis of a 360-day year consisting of twelve
30-day months (each a "Non-30/360 Loan") will be appropriately adjusted to
reflect such difference.
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The "Scheduled Principal Balance" of any Mortgage Loan will generally
equal the Cut-Off Date Balance, as defined below, thereof, reduced (to not less
than zero) on each Distribution Date by (a) any payments or other collections of
principal (or advances in lieu thereof) on such Mortgage Loan that have been
collected or received during any preceding Collection Period, other than any
Scheduled Payments due in any subsequent Collection Period, and (b) the
principal portion of any Realized Loss incurred in respect of such Mortgage Loan
during any preceding Collection Period.
The "Cut-Off Date Balance" of any Mortgage Loan will generally equal 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.
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 July, 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 REMIC Regular 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 (described below) 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) Scheduled 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);
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(iii) amounts that are payable or reimbursable to any person other
than the Certificateholders (including, among other things, amounts
attributable to Expense Losses and amounts payable to the Master Servicer,
the Special Servicer and the Trustee as compensation or in reimbursement
of outstanding Advances); 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
made and any Compensating Interest Payments paid with respect to such
Distribution Date.
Application of the Available Distribution Amount
On each Distribution Date, except as described under "--Optional
Termination" below, for so long as any Class of Offered Certificates remains
outstanding, the Trustee will apply the Available Distribution Amount for such
date for the following purposes and in the following order of priority:
(i) to the holders of the Class A-1, Class A-2 and Class X Certificates,
all Distributable Certificate Interest Certificates for such Distribution Date,
pro rata in proportion to the Distributable Certificate Interest payable in
respect of each such Class;
(ii) to the holders of the Class A-1 Certificates, the Principal
Distribution Amount for such Distribution Date, until the aggregate Certificate
Balance of the Class A-1 Certificates has been reduced to zero;
(iii) upon payment in full of the aggregate Certificate Balance of the
Class A-1 Certificates, to the holders of the Class A-2 Certificates, the
Principal Distribution Amount for such Distribution Date (reduced by any portion
thereof distributed to the holders of the Class A-1 Certificates), until the
aggregate Certificate Balance of the Class A-2 Certificates has been reduced to
zero;
(iv) to the holders of the Class A and Class X Certificates, pro rata in
proportion to their respective entitlements to reimbursement described in this
clause (iv), to reimburse them for any Realized Losses previously allocated to
such Classes of Certificates, plus interest on such Realized Losses, compounded
monthly, at one-twelfth the applicable Pass-Through Rate;
(v) to the holders of the Class B Certificates, all Distributable
Certificate Interest in respect of such Class of Certificates for such
Distribution Date;
(vi) upon payment in full of the aggregate Certificate Balance of the
Class A-2 Certificates, to the holders of the Class B Certificates, the
Principal Distribution Amount for such Distribution Date (reduced by any portion
thereof distributed to the holders of the Class A Certificates), until the
aggregate Certificate Balance of the Class B Certificates has been reduced to
zero;
(vii) to the holders of the Class B Certificates, to reimburse them for
any Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(viii) to the holders of the Class C Certificates, all Distributable
Certificate Interest in respect to such Class of Certificates for such
Distribution Date;
(ix) upon payment in full of the aggregate Certificate Balance of the
Class B Certificates, to the holders of the Class C Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A and Class B Certificates), until the
aggregate Certificate Balance of the Class C Certificates has been reduced to
zero;
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(x) to the holders of the Class C Certificates, to reimburse them for any
Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(xi) to the holders of the Class D, Certificates, all Distributable
Certificate Interest in respect to such Class of Certificates for such
Distribution Date;
(xii) upon payment in full of the aggregate Certificate Balance of the
Class C Certificates, to the holders of the Class D, Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A, Class B and Class C Certificates),
until the aggregate Certificate Balance of the Class D Certificates has been
reduced to zero;
(xiii) to the holders of the Class D Certificates, to reimburse them for
any Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(xiv) to the holders of the Class E, Certificates, all Distributable
Certificate Interest in respect to such Class of Certificates for such
Distribution Date;
(xv) upon payment in full of the aggregate Certificate Balance of the
Class D Certificates, to the holders of the Class E, Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A, Class B, Class C and Class D
Certificates), until the aggregate Certificate Balance of the Class E
Certificates has been reduced to zero;
(xvi) to the holders of the Class E Certificates, to reimburse them for
any Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate; and
(xvii) to make payments to the holders of the Private Certificates as
contemplated below.
Notwithstanding the foregoing, on each Distribution Date occurring on or
after the date, if any, upon which the aggregate Certificate Balance of all
Classes of Subordinate Certificates has been reduced to zero or the aggregate
Appraisal Reduction in effect is greater than or equal to the aggregate
Certificate Balance of all Classes of Subordinate Certificates, the Principal
Distribution Amount will be distributed, first, to the Class A-1 and Class A-2
Certificates, pro rata, based on their respective Certificate Balances, in
reduction of their respective Certificate Balances, until the aggregate
Certificate Balance of each such Class is reduced to zero; and, second, to the
Class A-1 and Class A-2 Certificates, pro rata, based on their respective
Certificate Balances, for the unreimbursed amount of Realized Losses and Expense
Losses previously allocated to such Classes.
On each Distribution Date, following the above-described distributions on
the Publicly Offered Certificates, the Trustee will apply the remaining portion,
if any, of the Available Distribution Amount for such date to make payments to
the holders of each of the respective Classes of Private Certificates (other
than the Residual Certificates), in alphabetical order of Class designation, in
each case for the following purposes and in the following order of priority
(i.e., payments under clauses (1), (2) and (3) below, in that order, to the
holders of the Class F Certificates, then payments under clauses (1), (2), and
(3) below, in that order, to the holders of the Class G, Class H, Class J, Class
K, Class L, Class M and Class N Certificates):
(1) to pay interest to the holders of the particular Class of
Certificates, up to an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such
Distribution Date;
(2) if the aggregate Certificate Balance of each other Class of
Subordinate Certificates, if any, with an earlier alphabetical Class
designation has been reduced to zero, to pay principal to the
holders of the particular Class of Certificates, up to an amount
equal to the lesser of (a) the then outstanding aggregate
Certificate Balance of such Class of Certificates and (b) the
aggregate of the remaining Principal Distribution Amount for such
Distribution Date; and
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(3) to reimburse the holders of the particular Class of Certificates, up
to an amount equal to (a) all Realized Losses and Expense Losses, if
any, previously allocated to such Class of Certificates and for
which no reimbursement has previously been paid, plus (b) all unpaid
interest on such amounts, compounded monthly, at one-twelfth the
Pass-Through Rate of such Classes.
Any portion of the Available Distribution Amount for any Distribution Date
that is not otherwise payable to the holders of REMIC Regular Certificates as
contemplated above, will be paid to the holders of the Class R-I Certificates.
Distributable Certificate Interest
The "Distributable Certificate Interest" in respect of any Class of REMIC
Regular Certificates for any Distribution Date will equal the sum of (a) Accrued
Certificate Interest in respect of such Class of Certificates for such
Distribution Date, reduced (to not less than zero) by (i) any Net Aggregate
Prepayment Interest Shortfalls and (ii) Realized Losses and Expense Losses, in
each case specifically allocated with respect to such Distribution Date to
reduce Distributable Certificate Interest payable in respect of such Class in
accordance with the terms of the Pooling and Servicing Agreement and (b) the
portion of Distributable Certificate Interest for such Class remaining unpaid as
of the close of business on the preceding Distribution Date, plus one month's
interest thereon at the applicable Pass-Through Rate (such amount, "Unpaid
Interest"). 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 "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 Scheduled Payments (other than the
principal portion of Balloon Payments) and any Assumed Scheduled
Payments due or deemed due, as the case may be, in respect of the
Mortgage Loans for their respective Due Dates occurring during the
related Collection Period; and
(b) all payments (including Principal Prepayments and the principal
portion of Balloon Payments) and other collections (including
Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds and
REO Income (each as defined herein) and proceeds of Mortgage Loan
repurchases) that were received on or in respect of the Mortgage
Loans during the related Collection Period and that were identified
and applied by the Master Servicer as recoveries of principal
thereof, in each case net of any portion of such payment or other
collection that represents a recovery of the principal portion of
any Scheduled Payment (other than a Balloon Payment) due, or the
principal portion of any Assumed Scheduled Payment deemed due, in
respect of the related Mortgage Loan on a Due Date during or prior
to the related Collection Period and not previously recovered.
Payments and collections with respect to principal of the Mortgage Loans
include all voluntary and involuntary prepayments of principal made prior to
their scheduled Due Dates ("Principal Prepayments"), all amounts paid by an
insurer in connection with a Mortgage Loan, other than any amounts required to
be paid to the related borrower ("Insurance Proceeds"), proceeds from the sale
or liquidation of a Mortgage Loan or related REO Property, net of expenses and
any related Advances and interest thereon ("Liquidation Proceeds"), and income
received in connection with the operation of an REO Property, net of certain
expenses ("REO Income").
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The "Scheduled Payment" for any Mortgage Loan on any Due Date will, in
general, be the amount of the scheduled payment of principal and interest (or
interest only) due thereon on such date (taking into account any waiver,
modification or amendment of the terms of such Mortgage Loan subsequent to the
Closing Date, whether agreed to by the Special Servicer or occurring in
connection with a bankruptcy proceeding involving the related borrower).
An "Assumed Scheduled Payment" is an amount deemed due in respect of (i)
any Balloon Mortgage Loan that is delinquent in respect of its Balloon Payment
beyond the first Determination Date that follows its original stated maturity
date or (ii) any Mortgage Loan as to which the related Mortgaged Property has
become an REO Property. The Assumed Scheduled Payment deemed due on any such
Balloon Mortgage Loan on its original stated maturity date and on each
successive Due Date that it remains or is deemed to remain outstanding will
equal the Scheduled Payment that would have been due 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 its amortization schedule in effect
immediately prior to maturity. With respect to any Mortgage Loan as to which the
related Mortgaged Property has become an REO Property, the Assumed Scheduled
Payment deemed due on each Due Date for so long as the REO Property remains part
of the Trust Fund, equals the Scheduled Payment (or Assumed Scheduled Payment)
due on the last Due Date prior to the acquisition of such REO Property.
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 Class A, Class B, Class C,
Class D, and Class E Certificates then entitled to distributions of principal on
such Distribution Date will be entitled to an aggregate amount (allocable among
such Classes, if more than one, as described below) equal to the lesser of (a)
such Prepayment Premium and (b) such Prepayment Premium multiplied by a
fraction, the numerator of which is equal to the excess, if any, of the
Pass-Through Rate applicable to the most senior of such Classes of Principal
Balance Certificates then outstanding (or, in the case of 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 of the Mortgage Loan that prepaid, over the
relevant Discount Rate. If there is more than one such Class of Principal
Balance Certificates entitled to distributions of principal on such Distribution
Date, the aggregate amount described in the preceding sentence will be allocated
among such Classes on a pro rata basis in accordance with the relative amounts
of entitlement to such distributions of principal. Any portion of the Prepayment
Premium remaining after any such payment to the holders of such Principal
Balance Certificates will be distributed to the holders of the Class X
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 of the Mortgage Loan prepaid. If Release H.15 is no longer
published, the Master Servicer will select a comparable publication to determine
the Treasury Rate.
Any Prepayment Premiums distributed to the holders of a Class of
Certificates may not be sufficient to fully compensate such Certificateholders
for any loss in yield attributable to the related Principal Prepayments.
Treatment of REO Properties
Notwithstanding that any Mortgaged Property may be acquired as part of the
Trust Fund through foreclosure, deed in lieu of foreclosure or otherwise, the
related Mortgage Loan will, for purposes of, among other things, determining
Pass-Through Rates of, distributions on and allocations of Realized Losses and
Expense Losses to the Certificates, as well as the amount of Servicing Fees,
Trustee Fees and Special Servicing Fees payable under the Pooling and Servicing
Agreement, be treated as having remained outstanding until such REO Property is
liquidated. In connection therewith, operating revenues and other proceeds
derived from such REO Property (exclusive of related operating costs) will be
"applied" by the Master Servicer as principal, interest and other
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amounts "due" on such Mortgage Loan; and, subject to the recoverability
determination described under "--Advances" below and the effect of any Appraisal
Reductions described under "--Appraisal Reductions" below, the Master Servicer
will be required to make P&I Advances in respect of such Mortgage Loan, in all
cases as if such Mortgage Loan had remained outstanding. References to "Mortgage
Loan" and "Mortgage Loans" in the definitions of "Weighted Average Net Mortgage
Rate" and "Principal Distribution Amount" are intended to include any Mortgage
Loan or Mortgage Loans as to which the related Mortgaged Property has become an
REO Property.
Appraisal Reductions
Not later than the earliest 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 that such petition or appointment remains in
effect, (iii) the effective date of any modification to a Money Term of a
Mortgage Loan, other than an extension of the date that a Balloon Payment is due
for a period of less than six months, and (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"), the Special Servicer is required to have obtained
an MAI appraisal (if the Scheduled Principal Balance of the Mortgage Loan is
greater than $1,000,000) or an internal valuation (if the Scheduled Principal
Balance of the Mortgage Loan is equal to or less than $1,000,000) of the related
Mortgaged Property or REO Property, as the case may be, unless such an appraisal
or valuation had been obtained within the prior twelve months. As a result of
such appraisal or internal valuation, an "Appraisal Reduction" may be created.
The Appraisal Reduction for any Mortgage Loan, including a Mortgage Loan
as to which the related Mortgaged Property has become an REO Property, will be
an amount, calculated as of the first Determination Date that is at least
fifteen days after the date on which the appraisal is obtained or the internal
valuation is performed, equal to the excess, if any, of (a) the sum of (i) the
Scheduled Principal Balance of such Mortgage Loan, (ii) to the extent not
previously advanced by the Master Servicer or the Trustee, all accrued and
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)
to the extent not previously advanced by the Master Servicer or the Trustee, all
currently due and unpaid real estate taxes and assessments, insurance premiums
and, if applicable, ground rents in respect of the related Mortgaged Property or
REO Property, as the case may be (in each case, net of any amounts escrowed for
such item), over (b) 90% of the value (net of any prior mortgage liens) of such
Mortgaged Property or REO Property as determined by such appraisal or internal
valuation. Notwithstanding the foregoing, if an internal valuation of the
Mortgaged Property is performed, the Appraisal Reduction will equal the greater
of (a) the amount calculated in the preceding sentence and (b) 25% of the
Scheduled Principal Balance of the Mortgage Loan. 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, paid in full, liquidated, repurchased or otherwise disposed of. An
appraisal for any Mortgage Loan that has not been brought current, for at least
three consecutive months, paid in full, liquidated, repurchased or otherwise
disposed of will be updated annually, with a corresponding adjustment to the
amount of the related Appraisal Reduction.
The existence of an Appraisal Reduction will proportionately reduce the
Master Servicer's or the Trustee's, as the case may be, obligation to make P&I
Advances in respect of the related Mortgage Loan, which will generally result in
a reduction in current distributions of interest in respect of the then most
subordinate Class of Principal Balance Certificates. See "--Advances--P&I
Advances" below.
Subordination; Allocation of Losses and Certain Expenses
As and to the extent described herein, the rights of holders of the
Subordinate Certificates to receive distributions of amounts collected or
advanced on the Mortgage Loans will be subordinated, to the extent described
herein, to the rights of holders of the Senior Certificates, and to the rights
of the holders of each other Class of Subordinate Certificates with an earlier
alphabetical Class designation. This subordination is intended to enhance the
likelihood of timely receipt by the holders of the Senior Certificates of the
full amount of all interest payable in respect of the Senior Certificates on
each Distribution Date, and the ultimate receipt by the holders of each Class of
Class A Certificates of principal in an amount equal to the entire Certificate
Balance of the Class A Certificates. Similarly, but to decreasing degrees (in
alphabetical order of Class designation), this subordination is also intended to
enhance the likelihood of timely receipt by the holders of the Subordinate
Certificates (other than the Class N
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Certificates, which do not have the benefit of any effective subordination) of
the full amount of interest payable in respect of such Classes of Certificates
on each Distribution Date, and the ultimate receipt by such holders of principal
equal to, in each case, the entire Certificate Balance of such Class of
Certificates. This subordination will be accomplished by the application of the
Available Distribution Amount on each Distribution Date in accordance with the
order of priority described above under "--Application of the Available
Distribution Amount" and by the allocation of Realized Losses and Expense Losses
as described below. No other form of credit support will be available for the
benefit of the holders of the Certificates.
Allocation to the Class A Certificates, for so long as they are
outstanding, of the entire Principal Distribution Amount for each Distribution
Date will generally have the effect of reducing the Certificate Balance of that
Class at a faster rate than would be the case if principal payments were
allocated pro rata to all Classes of Certificates with Certificate Balances.
Thus, as principal is distributed to the holders of the Class A Certificates,
the percentage interest in the Trust Fund evidenced by the Class A Certificates
will be decreased (with a corresponding increase in the percentage interest in
the Trust Fund evidenced by the Subordinate Certificates), thereby increasing,
relative to their respective Certificate Balances, the subordination afforded
the Class A Certificates by the Subordinate Certificates. Following retirement
of the Class A Certificates, the herein described successive allocation to the
Subordinate Certificates, in alphabetical order of Class designation, in each
case until such Class is paid in full, of the entire Principal Distribution
Amount for each Distribution Date will provide a similar benefit to each such
Class of Certificates as regards the relative amount of subordination afforded
thereto by the other Classes of Certificates with later alphabetical Class
designations.
Realized Losses of principal and interest on the Mortgage Loans and
Expense Losses for any Distribution Date (to the extent not previously
allocated) will be allocated to the Class N, Class M, Class L, Class K, Class J,
Class H, Class G, Class F, Class E, Class D, Class C and Class B Certificates,
in that order, and then to the Class A-1 and Class A-2 Certificates and, solely
with respect to Realized Losses and Expense Losses of interest, to the Class X
Certificates, pro rata, in each case reducing principal and/or interest
otherwise payable thereon.
"Realized Losses" are losses arising from the inability of the Master
Servicer, the Trustee or the Special Servicer to collect all amounts due and
owing under any defaulted Mortgage Loan, including by reason of any
modifications to the terms of a Mortgage Loan, bankruptcy of the related
borrower or a casualty of any nature at the related Mortgaged Property, to the
extent not covered by insurance. The Realized Loss, if any, in respect of a
liquidated Mortgage Loan (or related REO Property) will generally equal the
excess, if any, of (a) the outstanding principal balance of such Mortgage Loan
as of the date of liquidation, together with all accrued and unpaid interest
thereon at the related Mortgage Rate, over (b) the aggregate amount of
Liquidation Proceeds, if any, recovered in connection with such liquidation (net
of any portion of such liquidation proceeds that is payable or reimbursable in
respect of related liquidation and other servicing expenses). If the Mortgage
Rate on any Mortgage Loan is reduced or a portion of the debt due under any
Mortgage Loan is forgiven, whether in connection with a modification, waiver or
amendment granted or agreed to by the Special Servicer or in connection with a
bankruptcy or similar proceeding involving the related borrower, the resulting
reduction in interest paid and the principal amount so forgiven, as the case may
be, also will be treated as a Realized Loss.
"Expense Losses" include, among other things: (i) any interest paid to the
Master Servicer, Trustee and/or Special Servicer in respect of unreimbursed
Advances; (ii) all Special Servicer Compensation payable to the Special Servicer
from amounts that are part of the Trust Fund; (iii) any of certain other
expenses of the Trust Fund, including, but not limited to, certain
reimbursements and indemnification payments to the Trustee and certain related
persons, certain reimbursements and indemnification payments to the Depositor,
the Master Servicer, the Special Servicer and certain related persons, certain
taxes payable from the assets of the Trust Fund, the costs and expenses of any
tax audits with respect to the Trust Fund and certain other tax-related expenses
and the cost of various opinions of counsel required to be obtained in
connection with the servicing of the Mortgage Loans and administration of the
Trust Fund; and (iv) any other expense of the Trust Fund not specifically
included in the calculation of "Realized Loss" for which there is no
corresponding collection from the borrower.
Any shortfall in the amount of Distributable Certificate Interest paid to
the Certificateholders of any Class of Certificates on any Distribution Date
will result in Unpaid Interest for such Class which, together with interest
thereon compounded monthly at one-twelfth the applicable Pass-Through Rate, will
be distributable in subsequent periods to the extent of funds available
therefor.
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Prepayment Interest Shortfalls and Prepayment Interest Excesses
For any Distribution Date, a "Prepayment Interest Shortfall" will arise
with respect to any Mortgage Loan if the related borrower makes a full or
partial Principal Prepayment or a Balloon Payment during the related Collection
Period, and the date such payment was made (or, in the case of a Balloon
Payment, the date through which interest thereon accrues) occurred prior to the
Due Date for such Mortgage Loan in such Collection Period. Such a shortfall
arises because the amount of interest (net of the Servicing Fee) that accrues on
the amount of such Principal Prepayment or Balloon Payment will be less than the
corresponding amount of interest accruing on the Certificates. In such a case,
the Prepayment Interest Shortfall will equal the excess of (a) the aggregate
amount of interest which would have accrued on the Scheduled Principal Balance
of such Mortgage Loan for the 30 days ending on such Due Date if such Principal
Prepayment or Balloon Payment had not been made over (b) the aggregate interest
that did so accrue through the date such payment was made.
In any other case in which a full or partial Principal Prepayment or a
Balloon Payment is made during any Collection Period after the Due Date for such
Mortgage Loan, a "Prepayment Interest Excess" will arise since the amount of
interest which accrues on the amount of such Principal Prepayment or Balloon
Payment will exceed the corresponding amount of interest accruing on the
Certificates. The amount of the Prepayment Interest Excess in any such case will
equal the interest that accrues on the Mortgage Loan from such Due Date to the
date such payment was made (net of the Servicing Fee, the Special Servicing
Standby Fee and the Trustee Fee).
To the extent that the aggregate Prepayment Interest Shortfalls exceed the
aggregate Prepayment Interest Excesses for the Collection Period related to a
Distribution Date, the Servicing Fee (other than the portion thereof payable to
Sub-Servicers) will be reduced by the amount of such excess. See "Servicing Of
The Mortgage Loans--The Master Servicer--Master Servicer Compensation" herein.
Any such reduction of the Servicing Fee to cover such shortfalls will constitute
a "Compensating Interest Payment" by the Master Servicer. 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 paid by the Master Servicer will 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 each case according to the ratio that the Accrued
Certificate Interest with respect to such Class of Certificates for such
Distribution Date bears to the aggregate 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.
To the extent that the aggregate Prepayment Interest Excesses for any
Distribution Date exceed the aggregate Prepayment Interest Shortfalls for such
Distribution Date, the excess amount will be payable to the Master Servicer as
additional servicing compensation.
Optional Termination
The Depositor, the Master Servicer, the Special Servicer and the holder of
the majority interest in the Class R-I Certificates, each in turn, will have the
option to purchase, in whole but not in part, the Mortgage Loans and any other
property remaining in the Trust Fund on any Distribution Date on or after the
Distribution Date on which the aggregate Certificate Balance of all Classes of
Principal Balance Certificates then outstanding is less than or equal to 1% of
the Initial Pool Balance. The purchase price for any such purchase will be 100%
of the aggregate unpaid principal balances of the Mortgage Loans (other than any
Mortgage Loans as to which the Master Servicer has determined that all payments
or recoveries with respect thereto have been made), plus accrued and unpaid
interest at the Mortgage Rate (or the Mortgage Rate less the Servicing Fee Rate
if the Master Servicer is the purchaser) to the Due Date for each Mortgage Loan
ending in the Collection Period with respect to which such purchase occurs, plus
unreimbursed Servicing Advances, with interest thereon at the Advance Rate, and
the fair market value of any other
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property remaining in the Trust Fund; provided, however, that if Wells Fargo or
one of its affiliates is the purchaser, the purchase price will be the greater
of the foregoing amount and the fair market value of the Mortgage Loans and any
other property remaining in the Trust Fund. The optional termination of the
Trust Fund must be conducted so as to constitute a "qualified liquidation" of
each REMIC under Section 860F of the Code. Upon any such termination, the
purchase price for the Mortgage Loans and the other property in the Trust Fund
will be applied to pay accrued and unpaid interest on and reduce the Certificate
Balance of all outstanding Classes to zero in the manner provided under
"Description of the Certificates--Distributions--Application of the Available
Distribution Amount" herein. Notice of any optional termination must be mailed
by the Trustee, to the Certificateholders and the Rating Agencies at least ten
days prior to the date set for optional termination.
Any such termination will have an adverse effect on the yield of the Class
X Certificates and any other outstanding Offered Certificates purchased at a
premium. See "Yield, Prepayment And Maturity Considerations" herein.
Advances
P&I Advances
On the business day prior to each Distribution Date, the Master Servicer
will be obligated to make an advance (each, a "P&I Advance") in the amount of
any Scheduled Payments (net of the related Servicing Fees), other than any
Balloon Payment, on the Mortgage Loans that are delinquent as of the close of
business on the preceding Determination Date, but only to the extent that the
Master Servicer determines, in its sole discretion, exercised in good faith,
that the amount so advanced, plus interest expected to accrue thereon, will be
recoverable from subsequent payments or collections (including Insurance
Proceeds and Liquidation Proceeds) in respect of the related Mortgage Loan, and
only until the Mortgage Loan has been liquidated; provided, however, that the
amount of any P&I Advance required to be made by the Master Servicer with
respect to a Mortgage Loan as to which there has been an Appraisal Reduction
will be an amount equal to the product of (i) the amount required to be advanced
by the Master Servicer without giving effect to this proviso and (ii) a
fraction, the numerator of which is the Scheduled Principal Balance of such
Mortgage Loan as of the immediately preceding Determination Date less any
Appraisal Reduction in effect with respect to such Mortgage Loan and the
denominator of which is the Scheduled Principal Balance of the Mortgage Loan as
of such Determination Date; and provided, further, that with respect to
Scheduled Payments on any Mortgage Loan that has been modified for which the
Master Servicer is obligated to make a P&I Advance, the amount of any such P&I
Advance shall be adjusted in conformity with the modification.
With respect to any Mortgage Loan that is delinquent in respect of its
Balloon Payment (including any REO Property as to which the related Mortgage
Loan provided for a Balloon Payment), P&I Advances will include amounts equal to
the Assumed Scheduled Payment, less the related Servicing Fee.
P&I Advances (including interest accrued thereon at the Advance Rate) will
be reimbursable from recoveries on the related Mortgage Loans and, to the extent
the Master Servicer determines in its sole discretion, exercised in good faith,
that a P&I Advance will not be ultimately recoverable from related recoveries,
from any funds on deposit in the Certificate Account and Distribution Account.
In no event will the Master Servicer be required to make aggregate P&I Advances
(including interest accrued thereon at the Advance Rate) with respect to any
Mortgage Loan in an amount greater than the Scheduled Principal Balance (plus
all overdue amounts) thereof, less any Appraisal Reductions with respect
thereto. Interest on P&I Advances made by the Master Servicer will accrue at a
rate equal to the "Prime Rate" as reported in The Wall Street Journal from time
to time (the "Advance Rate"). The Master Servicer's right of reimbursement out
of recoveries will be prior to the right of the Certificateholders to receive
any amounts recovered with respect to any Mortgage Loan. If the Master Servicer
fails to make a required P&I Advance, the Trustee is required to make such P&I
Advance.
Servicing Advances
In general, customary, reasonable and necessary "out-of-pocket" costs and
expenses required to be incurred by the Master Servicer in connection with the
servicing of a Mortgage Loan after a default (whether or not a payment default),
delinquency or other unanticipated event, or in connection with the
administration of any REO
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Property, will constitute "Servicing Advances" (Servicing Advances and P&I
Advances, collectively, "Advances") and, in all cases, will be reimbursable as
described below. The Master Servicer will be permitted to pay, or to direct the
payment of, certain servicing expenses directly out of the Certificate Account
or Distribution Account and under certain circumstances without regard to the
relationship between the expense and the funds from which it is being paid.
With respect to Mortgage Loans, the Master Servicer will be obligated to
make Servicing Advances for real estate taxes and insurance premiums not paid by
the related borrower on a timely basis and for collection or foreclosure costs
(including reasonable attorneys fees). With respect to REO Properties, the
Master Servicer will be obligated to make Servicing Advances, if necessary and
to the extent that funds from the operation of the related REO Property are
unavailable to pay any amounts due and payable, for (i) insurance premiums, (ii)
real estate taxes and assessments in respect of such REO Property that may
result in the imposition of a lien, (iii) any ground rents in respect of such
REO Property and (iv) costs and expenses necessary to maintain, manage or
operate such REO Property. Notwithstanding the foregoing, the Master Servicer
will be obligated to make such Servicing Advances only to the extent that the
Master Servicer determines that the amount so advanced will be recoverable from
subsequent payments or collections (including Insurance Proceeds, Liquidation
Proceeds and REO Income) in respect of such Mortgage Loan or REO Property.
Servicing Advances (including interest accrued thereon at the Advance Rate) will
be reimbursable from recoveries or collections on the related Mortgage Loan or
REO Property. However, if the Master Servicer determines (as described below)
that any Servicing Advance previously made (and accrued interest thereon at the
Advance Rate) will not be ultimately recoverable from such related recoveries,
such advances will be reimbursable from any amounts on deposit in the
Certificate or Distribution Account. If the Master Servicer fails to make a
required Servicing Advance, the Trustee is required to make such Servicing
Advance.
Nonrecoverable Advances
The determination by the Master Servicer that any P&I Advance or Servicing
Advance, previously made or proposed to be made, would not be recoverable will
be made in the sole discretion of the Master Servicer, exercising good faith,
and is required to be accompanied by an officer's certificate delivered to the
Trustee and setting forth the reasons for such determination, with copies of
appraisals or internal valuations, if any, or other information that supports
such determination. The Master Servicer's determination of nonrecoverability
will be conclusive and binding upon the Certificateholders and the Trustee. The
Trustee shall be entitled to rely conclusively on any determination by the
Master Servicer of nonrecoverability with respect to such Advance and shall have
no obligation to make a separate determination of recoverability.
Reports to Certificateholders; Available Information
Trustee Reports
Based solely on information provided in monthly reports prepared by the
Master Servicer and the Special Servicer and delivered to the Trustee, the
Trustee will be required to provide or make available either electronically or
by first class mail to each Certificateholder on each Distribution Date:
(a) A statement setting forth, to the extent applicable: (i) the
amount, if any, of such distributions to the holders of each Class of
Principal Balance Certificates applied to reduce the aggregate Certificate
Balance thereof; (ii) the amount of such distribution to holders of each
Class of REMIC Regular Certificates allocable to (A) interest and (B)
Prepayment Premiums; (iii) the number of outstanding Mortgage Loans and
the aggregate principal balance and Scheduled Principal Balance of the
Mortgage Loans at the close of business on such Distribution Date; (iv)
the number and aggregate Scheduled Principal Balance of Mortgage Loans (a)
delinquent 30 to 59 days, (b) delinquent 60 to 89 days, (c) delinquent 90
days or more or (d) as to which foreclosure proceedings have been
commenced; (v) with respect to any REO Property included in the Trust
Fund, the principal balance of the related Mortgage Loan as of the date of
acquisition of the REO Property and the Scheduled Principal Balance
thereof; (vi) as of the related Determination Date (a) as to any REO
Property sold during the related Collection Period, the date of the
related determination by the Special Servicer or Master Servicer, as the
case may be, that it has recovered all payments which it expects to be
finally recoverable and the amount of the proceeds of such
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sale deposited into the Certificate Account, and (b) the aggregate amount
of other revenues collected by the Special Servicer with respect to each
REO Property during the related Collection Period and credited to the
Certificate Account, in each case identifying such REO Property by the
loan number of the related Mortgage Loan; (vii) the aggregate Certificate
Balance or Notional Amount of each Class of REMIC Regular Certificates
before and after giving effect to the distribution made on such
Distribution Date; (viii) the aggregate amount of Principal Prepayments
made during the related Collection Period; (ix) the Pass-Through Rate
applicable to each Class of REMIC Regular Certificates for such
Distribution Date; (x) the aggregate amount of servicing fees paid to the
Master Servicer and the Special Servicer; (xi) the amount of Unpaid
Interest, Realized Losses or Expense Losses, if any, incurred with respect
to the Mortgage Loans; (xii) the aggregate amount of Servicing Advances
and P&I Advances outstanding that have been made by the Master Servicer,
the Special Servicer and the Trustee separately stated; (xiii) the amount
of any Appraisal Reductions effected during the related Collection Period
on a loan-by-loan basis and the total Appraisal Reductions in effect as of
such Distribution Date; and (xiv) such other information and in such form
as shall be specified in the Pooling and Servicing Agreement. In the case
of information furnished pursuant to subclauses (i), (ii) and (xi) above,
the amounts shall be expressed as a dollar amount per $1,000 of original
actual principal amount of the Certificates for all Certificates of each
applicable Class.
(b) A report containing information regarding the Mortgage Loans as
of the end of the related Collection Period, which report will contain
substantially the categories of information regarding the Mortgage Loans
set forth in Appendix I and will be presented in a tabular format
substantially similar to the format utilized in Appendix I.
The Trustee will make available each month, to any interested party, the
foregoing reports via the Trustee's Website, initially located at
"www.securitieslink.net/cmbs" (the "Trustee's Website"), electronic bulletin
board and its fax-on-demand service. The Trustee's electronic bulletin board may
be accessed by calling (301) 815-6620, and its fax-on-demand service may be
accessed by calling (301) 815-6610. For assistance with the above-mentioned
services, Certificateholders may call (301) 815-6600. In addition, the Trustee
will also make Mortgage Loan information as presented in the CSSA loan setup
file format, the CSSA loan periodic update file format, the Special Servicer
Reports (as defined herein) and the Annual Report (as defined herein) available
each month to any Certificateholder, any Certificate Owner, the Rating Agencies
or any other interested party via the Trustee's Website. In addition, pursuant
to the Pooling and Servicing Agreement, the Trustee will make available, as a
convenience for interested parties (and not in furtherance of the distribution
of the Prospectus or the Prospectus Supplement under the securities laws), the
Pooling and Servicing Agreement, the Prospectus and the Prospectus Supplement
via the Trustee's Website. The Trustee will make no representations or
warranties as to the accuracy or completeness of such documents and will assume
no responsibility therefor. In addition, the Trustee may disclaim responsibility
for any information distributed by the Trustee of which information the Trustee
is not the original source.
In connection with providing access to the Trustee's Website or electronic
bulletin board, the Trustee may require registration and the acceptance of a
disclaimer. The Trustee shall not be liable for the dissemination of information
in accordance with the Pooling and Servicing Agreement.
On an annual basis, the Master Servicer is required to deliver to the
Trustee, who will make such report available in electronic format to the
Underwriters, the Certificateholders, the Depositor and anyone the Depositor or
either Underwriter reasonably designates, the Special Servicer and the Rating
Agencies, a report for each Mortgage Loan based on the most recently available
year-end financial statements and most recently available rent rolls of each
applicable borrower (to the extent such information is provided to the Master
Servicer) containing such information and analyses as required by the Pooling
and Servicing Agreement including, without limitation, Debt Service Coverage
Ratios, to the extent available, and in such form as shall be specified in the
Pooling and Servicing Agreement (the "Annual Report").
On a monthly basis, the Trustee is required to make available to the
Underwriters, the Rating Agencies, the Depositor, the Operating Adviser and
anyone the Depositor or any Underwriter reasonably designates, and upon request
to any Certificateholder, a report (in electronic format) substantially in the
form of the data file contained on
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the diskette attached to the inside back cover of this Prospectus Supplement
with the information contained therein updated to the date of such report.
Special Servicer Reports
On or about each Determination Date, the Special Servicer will prepare, or
provide the Master Servicer with the information to prepare, reports with
respect to Specially Serviced Mortgage Loans as required by the Pooling and
Servicing Agreement (collectively, the "Special Servicer Reports"). Such reports
generally will include 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, no
later than the business day prior to each Distribution Date, to the
Underwriters, the Rating Agencies and the Depositor; provided that certain
limitations will be imposed on such recipients with respect to the use and
further dissemination of the information in such reports to the extent described
in the Pooling and Servicing Agreement.
Other Information
The Pooling and Servicing Agreement generally requires that the Master
Servicer make available, at its offices primarily responsible for servicing the
Mortgage Loans or at such other office as it may reasonably designate, during
normal business hours, upon reasonable advance notice for review by any holder
of a Certificate, each Rating Agency or the Depositor, originals or copies of,
among other things, the following items (except to the extent not permitted by
applicable law or under any of the Mortgage Loan documents): (i) the Pooling and
Servicing Agreement and any amendments thereto, (ii) all reports or statements
delivered to holders of the relevant Class of Certificates since the Closing
Date, (iii) all officer's certificates delivered to the Trustee since the
Closing Date, (iv) all accountants' reports delivered to the Trustee since the
Closing Date, (v) 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, (vi) 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, (vii) 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 (viii) 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. Copies
of any and all of the foregoing items and any servicer reports will be available
from the Master Servicer upon request; however, the Master Servicer will be
permitted to require payment of a sum sufficient to cover the reasonable costs
and expenses of providing such copies. Recipients of such information will
generally be required to acknowledge that such information may be used only in
connection with an evaluation of the Certificates by such recipient.
Book-Entry Certificates
Until such time, if any, as Definitive Certificates are issued in respect
of the Offered Certificates, the foregoing information and access will be
available to the related Certificate Owners only to the extent it is forwarded
by, or otherwise available through, DTC and its Participants or otherwise made
available publicly by the Trustee. The manner in which notices and other
communications are conveyed by DTC to its Participants, and by such Participants
to the Certificate Owners, will be governed by arrangements among them, subject
to any statutory or regulatory requirements as may be in effect from time to
time. The Master Servicer, the Special Servicer, the Trustee and the Depositor
are required to recognize as Certificateholders only those persons in whose
names the Certificates are registered on the books and records of the Trustee;
however, any Certificate Owner that has delivered to the Trustee a written
certification, in the form prescribed by the Pooling and Servicing Agreement
regarding such Certificate Owner's beneficial ownership of Offered Certificates
will be recognized as Certificateholders for purposes of obtaining the foregoing
information and access.
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Example of Distributions
The following chart sets forth an example of distributions on the
Certificates for the first month of the Trust Fund's existence, assuming the
Certificates are issued in June, 1998:
The close of business on
June 1 (A) Cut-Off Date.
June 30 (B) Record Date for all Classes of
Certificates.
June 1 - July 10 (C) The Collection Period. The Master
Servicer receives Scheduled Payments due
on July 1 and any Principal Prepayments
made after the Cut-Off Date and on or
prior to July 10.
July 10 (D) Determination Date.
July 14 (E) Master Servicer Remittance Date.
July 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 outstanding principal balance of the Mortgage Loans at the close of
business on June 1, 1998 (after deducting principal payments due on or before
such date, whether or not received). Principal payments due on or before such
date, and the accompanying interest payments, are not part of the Trust Fund.
(B) Distributions on the next Distribution Date will be made to those
persons that are Certificateholders of record on this date. Each subsequent
Record Date will be the last business day of the month preceding the related
Distribution Date.
(C) Any Scheduled Payments due and collected and Principal Prepayments
collected, after the Cut-Off Date and on or prior to July 10, 1998 will be
deposited in the Certificate Account. Each subsequent Collection Period (a) with
respect to Scheduled Payments, will begin on the day after the Determination
Date in the month preceding the month of each Distribution Date and will end on
the Determination Date in the month in which the Distribution Date occurs and
(b) with respect to all other collections on the Mortgage Loans and REO
Properties, will begin on the day following the last day of the previous
Collection Period for such collections, 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.
(D) As of the close of business on the Determination Date, the Master
Servicer will have determined the amounts of principal and interest that will be
remitted with respect to the related Collection Period.
(E) The Master Servicer will remit to the Trustee on the business day
preceding the related Distribution Date all amounts held by the Master Servicer,
and any P&I Advances required to be made by the Master Servicer, that together
constitute the Available Distribution Amount for such Distribution Date.
(F) The Trustee will make distributions to Certificateholders on the 15th
day of each month or, if such day is not a business day, the next succeeding
business day.
The Trustee
The Trustee
Norwest Bank Minnesota, National Association ("Norwest Bank") will act as
Trustee pursuant to the Pooling and Servicing Agreement. Norwest Bank, a direct,
wholly-owned subsidiary of Norwest Corporation, is a
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national banking association originally chartered in 1872 and is engaged in a
wide range of activities typical of a national bank. Norwest Bank's principal
office is located at Norwest Center, Sixth and Marquette, Minneapolis, Minnesota
55479-0113. Certificate transfer services are conducted at Norwest Bank's
offices in Minneapolis. Norwest Bank otherwise conducts its trustee and
securities administration services, including administration of the Trust Fund,
at its offices (the "Corporate Trust Office") located at 11000 Broken Land
Parkway, Columbia, Maryland 21044-3562. In addition, Norwest Bank maintains a
trust office in New York City located at 3 New York Plaza, New York, New York
10004. Certificateholders and other interested parties should direct inquiries
to Norwest Bank's New York City office. The telephone number is (212) 509-7900.
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 each of Fitch and DCR (or such lower ratings as the
Rating Agencies would permit without an adverse effect on any of the
then-current ratings of the Certificates). As of December 31, 1997, the Trustee
had assets of approximately $88.0 billion. See "Description of the
Agreements--The Trustee", "--Duties of the Trustee", "--Certain Matters
Regarding the Trustee" and "--Resignation and Removal of the Trustee" in the
Prospectus.
As compensation for the performance of its duties, the Trustee will be
paid a monthly fee (the "Trustee Fee").
The information set forth herein concerning Norwest Bank has been provided
by Norwest Bank. Accordingly, the Depositor makes no representations or warranty
as to the accuracy or completeness of such information.
Final Scheduled Distribution Date; Final Rated Distribution Date
The Final Scheduled Distribution Date for each Class of Certificates is
the date on which such Class is expected to be paid in full, assuming timely
payments (and no Principal Prepayments) will be made on the Mortgage Loans in
accordance with their terms and otherwise based on the Maturity Assumptions (as
defined herein).
The Final Rated Distribution Date of each Class of Certificates is the
Distribution Date in July 2030. The Final Rated Distribution Date is the first
Distribution Date that follows by at least 24 months the end of the amortization
term of the Mortgage Loan that, as of the Cut-Off Date, has the longest
remaining amortization term.
The ratings assigned by the Rating Agencies to each Class of Principal
Balance Certificates reflects on assessment of the likelihood that the
Certificateholders of such Class will receive, on or before the Final Rated
Distribution Date, all principal distributions to which they are entitled.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
General
The yield to maturity on the Offered Certificates will be affected by the
price paid by the Certificateholder, the related Pass-Through Rates and the
rate, timing and amount of distributions on such Offered Certificates. The rate,
timing and amount of distributions on any such Certificate will in turn depend
on, among other things, (i) the Pass-Through Rate for such Certificate, (ii) the
rate and timing of principal payments (including Principal Prepayments) and
other principal collections on the Mortgage Loans and the extent to which such
amounts are to be applied in reduction of the Certificate Balance or Notional
Amount of such Certificate, (iii) the rate, timing and severity of Realized
Losses and Expense Losses and the extent to which such losses and expenses are
allocable in reduction of the Certificate Balance or Notional Amount of such
Certificate, and (iv) the timing and severity of any Net Aggregate Prepayment
Interest Shortfalls and the extent to which such shortfalls are allocable in
reduction of the Distributable Certificate Interest payable on such Certificate.
In addition, the effective yield to holders of the Certificates that bear
interest will differ from the yield otherwise produced by the applicable
Pass-Through Rate and
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purchase prices of such Certificates because interest distributions will not be
payable to such holders until at least the 15th day of the month following the
month of accrual (without any additional distribution of interest or earnings
thereon in respect of such delay).
Pass-Through Rates
The yield on the Class X Certificates will depend on, among other things,
the Pass-Through Rate in effect with respect thereto from time to time. The
Pass-Through Rate for the Class X Certificates will be variable and will
generally equal the excess, if any, of (i) the weighted average of the Net
Mortgage Rates in effect for the Mortgage Loans as of the first day of the
related Collection Period (in the case of each such Mortgage Loan that is a
Non-30/360 Loan, adjusted as described under "Description of the
Certificates--Pass-Through Rates" herein), the relevant weighting to be on the
basis of the respective Scheduled Principal Balances of such Mortgage Loans
immediately prior to such Distribution Date, 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 immediately prior to such Distribution Date. Accordingly, the yield
on the Class X Certificates will be sensitive to changes in the relative
composition of the Mortgage Pool as a result of scheduled amortization,
voluntary prepayments and any unscheduled collections of principal (and/or any
experience of Realized Losses) as a result of liquidations of Mortgage Loans
and, in general, the effect of any such changes on such Pass-Through Rate and
yield will be particularly adverse to the extent that Mortgage Loans with
relatively higher Mortgage Rates experience faster rates of such amortization,
voluntary prepayments and unscheduled collections (or Realized Losses) than
Mortgage Loans with relatively lower Mortgage Rates.
Rate and Timing of Principal Payments
The yield to maturity on the Class X Certificates will be extremely
sensitive to, and the yield to maturity on any other Class of Offered
Certificate purchased at a discount or premium will be affected by, the rate and
timing of principal payments made in reduction of the aggregate Certificate
Balance or Notional Amount of such Class of Certificates. As described herein,
the Principal Distribution Amount for each Distribution Date will be
distributable entirely in respect of the Class A-1 Certificates until the
Certificate Balance thereof is reduced to zero, and will thereafter be
distributable entirely in respect of each other Class of Principle Balance
Certificates, in descending alphabetical, and, if applicable, descending
numerical, order of Class designation, in each case until the aggregate
Certificate Balance of such Class of Certificates is, in turn, reduced to zero.
Consequently, the rate and timing of principal payments that are distributed or
otherwise result in reduction of the aggregate Certificate Balance or Notional
Amount of each Class of Offered Certificates will be directly related to the
rate and timing of principal payments on or in respect of the Mortgage Loans,
which will in turn be affected by the amortization schedules thereof, the dates
on which Balloon Payments are due and the rate and timing of Principal
Prepayments and other unscheduled collections thereon (including for this
purpose, collections made in connection with liquidations of Mortgage Loans due
to defaults, casualties or condemnations affecting the Mortgaged Properties and
purchases of Mortgage Loans out of the Trust Fund). Prepayments and, assuming
the respective maturity dates therefor have not occurred, liquidations of the
Mortgage Loans will result in distributions on the Certificates of amounts that
would otherwise be distributed over the remaining terms of the Mortgage Loans
and will tend to shorten the weighted average lives of the Principal Balance
Certificates. Any early termination of the Trust Fund as described herein under
"Description Of the Certificates--Optional Termination" will also shorten the
weighted average lives of those Certificates then outstanding. Defaults on the
Mortgage Loans, particularly at or near their maturity dates, may result in
significant delays in payments of principal on the Mortgage Loans (and,
accordingly, on the Principle Balance Certificates) while work-outs are
negotiated or foreclosures are completed, and such delays will tend to lengthen
the weighted average lives of those Certificates. See "Servicing Of The Mortgage
Loans--Mortgage Loan Modifications."
The extent to which the yield to maturity of any Offered Certificate may
vary from the anticipated yield will depend upon the degree to which such
Certificate is purchased at a discount or premium and when, and to what degree,
payments of principal on the Mortgage Loans in turn are distributed or otherwise
result in a reduction of the aggregate Certificate Balance or Notional Amount of
its Class. An investor should consider, in the case of any such Certificate
purchased at a discount, the risk that a slower than anticipated rate of
principal payments on the Mortgage Loans could result in an actual yield to such
investor that is lower than the anticipated yield and, in the
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case of a Class X Certificate or any other such Class of Certificates purchased
at a premium, the risk that a faster than anticipated rate of principal payments
on the Mortgage Loans could result in an actual yield to such investor that is
lower than the anticipated yield. In general, if a Certificate is purchased at a
discount or premium, the earlier a payment of principal on the Mortgage Loans is
distributed or otherwise results in reduction of the Certificate Balance or
Notional Amount of the related Class, the greater will be the effect on the
yield to maturity of such Certificate. As a result, the effect on an investor's
yield of principal payments on the Mortgage Loans occurring at a rate higher (or
lower) than the rate anticipated by the investor during any particular period
may not be fully offset by a subsequent like reduction (or increase) in the rate
of such principal payments. Investors in the Class X Certificates should fully
consider the risk that a faster than anticipated rate of principal payments on
the Mortgage Loans could result in the failure of such investors to fully recoup
their initial investments. With respect to the Class X, Class A, Class B, Class
C, Class D and Class E Certificates, the allocation of a portion of collected
Prepayment Premiums to the Certificates as described herein is intended to
mitigate those risks; however, such allocation (if any) may be insufficient to
offset fully the adverse effects on yield that such prepayments may have.
Because the rate of principal payments on the Mortgage Loans will depend on
future events and a variety of factors (as described more fully below), no
assurance can be given as to such rate or the rate of Principal Prepayments in
particular. The Depositor is not aware of any relevant publicly available or
authoritative statistics with respect to the historical prepayment experience of
a large group of mortgage loans comparable to the Mortgage Loans.
Losses and Shortfalls
The yield to holders of the Offered Certificates will also depend on the
extent to which such holders are required to bear the effects of any losses or
shortfalls on the Mortgage Loans. Realized Losses and Expense Losses will
generally be applied to reduce the Certificate Balances of the Principal Balance
Certificates in the following order: first, to the Class N Certificates until
the Certificate Balance thereof has been reduced to zero; then to the other
respective Classes of Principal Balance Certificates, in ascending (that is,
from N to A) alphabetical order of Class designation, until the remaining
Certificate Balance of each such Class of Certificates has been reduced to zero.
Any Realized Losses and Expense Losses so allocated to the Class A-2, Class B,
Class C, Class D or Class E Certificates will cause corresponding reductions of
the Class X Notional Amount. 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. Shortfalls arising from delinquencies
and defaults (to the extent the Master Servicer determines that P&I Advances
would be nonrecoverable), Appraisal Reductions, Expense Losses and Realized
Losses generally will result in (among other things) a shortfall in current
distributions of interest payable to the most subordinate Class of Certificates
outstanding.
Certain Relevant Factors
The rate and timing of principal payments and defaults and the severity of
losses on the Mortgage Loans may be affected by a number of factors including,
without limitation, prevailing interest rates, the terms of the Mortgage Loans
(for example, provisions prohibiting Principal Prepayments for certain periods
and/or requiring the payment of Prepayment Premiums, and amortization terms that
require Balloon Payments), the demographics and relative economic vitality of
the areas in which the Mortgaged Properties are located and the general supply
and demand for rental units or comparable commercial space, as applicable, in
such areas, the quality of management of the Mortgaged Properties, the servicing
of the Mortgage Loans, possible changes in tax laws and other opportunities for
investment. See "Risk Factors and Other Special Considerations" herein and "Risk
Factors" in the Prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
interest rate, the related borrower has an incentive to refinance its mortgage
loan. A requirement that a prepayment be accompanied by a Prepayment Premium may
not provide a sufficient economic disincentive to deter a borrower from
refinancing at a more favorable interest rate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance Mortgaged Properties in order to realize their equity therein, to meet
cash flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
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The Depositor makes no representation as to the particular factors that
will affect the rate and timing of prepayments and defaults on the Mortgage
Loans, as to the relative importance of such factors, as to the percentage of
the principal balance of the Mortgage Loans that will be prepaid or as to
whether a default will have occurred as of any date or as to the overall rate of
prepayment or default on the Mortgage Loans.
Weighted Average Life
Weighted average life refers to the average amount of time from the date
of issuance of a security until each dollar of principal of such security will
be repaid to the investor. The weighted average life of any Principal Balance
Certificate will be influenced by, among other things, the rate at which
principal on the Mortgage Loans is paid or otherwise collected or advanced and
applied to reduce the Certificate Balance of such Certificate.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The prepayment model used in this Prospectus
Supplement is the "Constant Prepayment Rate" or "CPR" model. The CPR model
represents an assumed constant rate of prepayment each month (which is expressed
on a per annum basis) relative to the then outstanding principal balance of a
pool of mortgage loans for the life of such mortgage loans. CPR does not purport
to be either a historical description of the prepayment experience of any pool
of mortgage loans or a prediction of the anticipated rate of prepayment of any
mortgage loans, including the Mortgage Loans. The Depositor makes no
representation as to the appropriateness of using the CPR model for purposes of
analyzing an investment in the Certificates.
The following tables indicate the percent of the initial Certificate
Balance of each Class of Offered Certificates (other than the Class X
Certificates) after each of the dates shown and the corresponding weighted
average life of each such Class of the Certificates, if the Mortgage Pool were
to prepay at the indicated levels of CPR, and sets forth the percentage of the
initial Certificate Balance of such Certificates that would be outstanding after
each of the dates shown. The tables below have also been prepared generally on
the basis of the assumptions (collectively, the "Maturity Assumptions") that (i)
the initial Certificate Balances and initial Pass-Through Rates of the
Certificates are as set forth herein, (ii) the settlement date for the sale of
the Certificates is June __, 1998, (iii) distributions on the Certificates are
made on the 15th day of each month, commencing in July, 1998, (iv) there are no
delinquencies, defaults or Realized Losses with respect to the Mortgage Loans,
(v) Scheduled Payments on the Mortgage Loans are timely received on the first
day of each month, (vi) there are no Expense Losses, (vii) no Principal
Prepayment on any Mortgage Loan is made for so long as the Mortgage Loan is in a
Lock-out Period or while Principal Prepayments on such Mortgage Loans are
required to be accompanied by a Yield Maintenance Premium, and thereafter
Principal Prepayments are made on the Mortgage Loans at the indicated levels of
CPR, (viii) partial prepayments are permitted under the Mortgage Loans and are
applied to reduce the outstanding principal balance of the Mortgage Loans, (ix)
any Prepayment Premiums are allocated as described elsewhere in this Memorandum,
(x) no Prepayment Interest Shortfalls occur, (xi) no Mortgage Loan is the
subject of a repurchase or substitution by the Seller and no optional
termination of the Trust Fund occurs; and (xii) any Mortgage Loan with an
anticipated repayment date will be paid in full on such date.
The Mortgage Loans do not have all of the characteristics assumed above.
To the extent that the Mortgage Loans have characteristics that differ from
those assumed in preparing the tables, the Classes of Certificates analyzed in
the tables may mature earlier or later than indicated by the tables. The
Mortgage Loans generally do not permit partial prepayments and do not prepay at
any constant rate. Accordingly, it is highly unlikely that the Mortgage Loans
will prepay in a manner consistent with the Maturity Assumptions. Furthermore,
it is unlikely that the Mortgage Loans will experience no defaults or losses. In
addition, variations in the actual prepayment experience and the balance of the
Mortgage Loans that prepay may increase or decrease the percentages of initial
Certificate Balances (and shorten or extend the weighted average lives) shown in
the following tables. Investors are urged to conduct their own analyses of the
rates at which the Mortgage Loans may be expected to prepay.
For the purposes of each table, the weighted average life of a Certificate
is determined by (A) multiplying the amount of each principal distribution
thereon by the number of years from the date of issuance of the Certificate to
the related Distribution Date, (B) summing the results and (C) dividing the sum
by the aggregate amount of the reductions in the Certificate Balance of such
Certificate.
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Percent of Initial Certificate Balance Outstanding for the
Class A-1 Certificates at the Respective Percentages of CPR
<TABLE>
<CAPTION>
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
June, 1999
June, 2000
June, 2001
June, 2002
June, 2003
June, 2004
June, 2005
June, 2006
June, 2007
June, 2008
Weighted average life (years)
</TABLE>
Percent of Initial Certificate Balance Outstanding for the
Class A-2 Certificates at the Respective Percentages of CPR
<TABLE>
<CAPTION>
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
June, 1999
June, 2000
June, 2001
June, 2002
June, 2003
June, 2004
June, 2005
June, 2006
June, 2007
June, 2008
Weighted average life (years)
</TABLE>
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Percent of Initial Certificate Balance Outstanding for the
Class B Certificates at the Respective Percentages of CPR
<TABLE>
<CAPTION>
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
June, 1999
June, 2000
June, 2001
June, 2002
June, 2003
June, 2004
June, 2005
June, 2006
June, 2007
June, 2008
Weighted average life (years)
</TABLE>
Percent of Initial Certificate Balance Outstanding for the
Class C Certificates at the Respective Percentages of CPR
<TABLE>
<CAPTION>
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
June, 1999
June, 2000
June, 2001
June, 2002
June, 2003
June, 2004
June, 2005
June, 2006
June, 2007
June, 2008
Weighted average life (years)
</TABLE>
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Percent of Initial Certificate Balance Outstanding for the
Class D Certificates at the Respective Percentages of CPR
<TABLE>
<CAPTION>
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
June, 1999
June, 2000
June, 2001
June, 2002
June, 2003
June, 2004
June, 2005
June, 2006
June, 2007
June, 2008
Weighted average life (years)
</TABLE>
Percent of Initial Certificate Balance Outstanding for the
Class E Certificates at the Respective Percentages of CPR
<TABLE>
<CAPTION>
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
June, 1999
June, 2000
June, 2001
June, 2002
June, 2003
June, 2004
June, 2005
June, 2006
June, 2007
June, 2008
Weighted average life (years)
</TABLE>
Class X Certificates
The yield to maturity on the Class X Certificates will be highly sensitive
to the rate and timing of principal payments (including both voluntary and
involuntary prepayments) on the Mortgage Loans. Accordingly, investors in the
Class X Certificates should fully consider the associated risks, including the
risk that an extremely rapid rate of prepayment of the Mortgage Loans could
result in the failure of such investors to recoup their initial investments. Any
allocation of a portion of collected Prepayment Premiums to the Class X
Certificates as described herein may be insufficient to offset fully the adverse
effects on the yield on such Class of Certificates that the related
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prepayments may otherwise have. Moreover, because the Mortgage Loans represent
non-recourse obligations of the borrowers, no assurance can be given that the
borrowers will have sufficient funds available to pay all or any portion of any
required Prepayment Premium in the case of a default, or that, in the case of a
foreclosure, foreclosure proceeds will be sufficient or available to permit
recovery of the Prepayment Premium. No assurances are given that the obligation
to pay any Prepayment Premium will be enforceable. In addition, the yield to
maturity on the Class X Certificates may be adversely affected if an optional
termination of the Trust Fund occurs.
The following table indicates the approximate pre-tax yield to maturity on
the Class X Certificates for the specified CPR percentages, stated on a
corporate bond equivalent ("CBE") basis. For purposes of preparing the tables it
was assumed that (i) the Maturity Assumptions (as defined above) apply and the
initial Notional Amount and initial Pass-Through Rate of the Class X
Certificates are as set forth herein; (ii) the purchase price (excluding accrued
interest) for the Class X Certificates, expressed as a percentage of the
Notional Amount thereof, is as specified below; (iii) Prepayment Premiums are
payable in connection with partial prepayments and such Prepayment Premiums, as
so calculated, are collected in connection with the partial prepayments assumed,
and (iv) for purposes of calculating Yield Maintenance Premiums, the yields for
U.S. Treasury securities having a maturity of up to one year, exactly two years,
exactly three years, exactly five years, exactly ten years and exactly thirty
years are approximately _____%, _____%, _____%, _____%, _____% and _____%,
respectively.
Yield Sensitivity of the Class X Certificates to Principal Prepayments
Pre-Tax Yields to Maturity (CBE)
Prepayment Assumption
<TABLE>
<CAPTION>
Assumed Purchase Price % CPR % CPR % CPR % CPR % CPR % CPR
---------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
% % % % % % %
% % % % % % %
% % % % % % %
</TABLE>
The pre-tax yields to maturity set forth in the preceding tables were
calculated by determining the monthly discount rates that, when applied to the
assumed stream of cash flows to be paid on the Class X Certificates (that is,
interest and Prepayment Premiums collected as described above), would cause the
discounted present value of such assumed cash flows to equal the assumed
purchase price thereof plus accrued interest, and by converting such monthly
rates to corporate bond equivalent rates. Such calculations do not take into
account variations that may occur in the interest rates at which investors may
be able to reinvest funds received by them as distributions on the Class X
Certificates and consequently do not purport to reflect the return on any
investment in the Class X Certificates when such reinvestment rates are
considered.
The characteristics of the Mortgage Loans differ in substantial respects
from those assumed in preparing the tables above, and the tables are presented
for illustrative purposes only. In particular, it is unlikely that the Mortgage
Pool will experience neither defaults nor losses, and neither the Mortgage Pool
nor any Mortgage Loan will prepay at any constant rate. Therefore, there can be
no assurance that the Mortgage Loans will prepay at any particular rate or that
the actual pre-tax yields on the Class X Certificates will correspond to any of
the pre-tax yields shown herein. Finally, although the pre-tax yields shown in
the table are based on the assumption that a Prepayment Premium will be
collected (generally each month, in respect of the partial prepayment assumed to
be made in that month) with respect to every Mortgage Loan that requires that
prepayments be accompanied by a Prepayment Premium, there can be no assurance
that the timing and amount of Prepayment Premiums that will actually be
collected will bear any relationship to the timing and amount of Prepayment
Premiums that were assumed to be collected for purposes of the table.
Accordingly, investors must make their own decisions as to the appropriate
assumptions (including prepayment assumptions) to be used in deciding whether to
purchase the Class X Certificates.
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DESCRIPTION OF THE MORTGAGE POOL
General
The Mortgage Pool will consist of 226 fixed-rate mortgage loans (the
"Mortgage Loans"), with an Initial Pool Balance of $1,062,003,110 subject to a
permitted variance of plus or minus 5%. The Cut-Off Date Balances of the
Mortgage Loans range from $543,018 to $51,891,079, and the Mortgage Loans have
an average Cut-Off Date Balance of $4,699,129. Two hundred one (201) of the
Mortgage Loans, representing 89.0% 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 the presentation of
certain Mortgage Pool Information herein, each Mortgage Loan is deemed to be
secured by a mortgage on one Mortgaged Property, whether or not such Mortgaged
Property consists of more than one parcel of real property.
A brief summary of the material terms of the largest Mortgage Loans in the
Mortgage Pool is set forth on Appendix III attached hereto.
As of the Cut-Off Date, none of the Mortgage Loans were 30 days or more
delinquent, or had been 30 days or more delinquent during the 12 calendar months
preceding the Cut-Off Date.
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 simple estate
income-producing real property (a "Mortgaged Property"), except that in ten (10)
cases, representing 13.7% of the Initial Pool Balance, the Mortgage Loan is
secured by a Mortgage on a leasehold estate in the Mortgaged Property or on both
a leasehold interest in a portion of the Mortgaged Property and a fee simple
interest in the remainder of the Mortgaged Property.
Sixty (60) of the Mortgaged Properties, which represent security for 26.1%
of the Initial Pool Balance, are retail properties; sixty one (61) of the
Mortgaged Properties, which represent security for 25.9% of the Initial Pool
Balance, are multifamily apartment properties; twenty-five (25) of the Mortgaged
Properties, which represent security for 17.7% of the Initial Pool Balance, are
office properties; twenty (20) of the Mortgaged Properties, which represent
security for 11.8% of the Initial Pool Balance, are hospitality properties,
sixteen (16) of which are affiliated with national hotel/motel franchisors;
thirty-seven (37) of the Mortgaged Properties, which represent security for 9.2%
of the Initial Pool Balance, are industrial properties; thirteen (13) of the
Mortgaged Properties, which represent security for 4.6% of the Initial Pool
Balance, are self-storage properties; eight (8) of the Mortgaged Properties,
which represent security for 2.6% of the Initial Pool Balance, are mobile home
park properties; two (2) Mortgaged Properties, which represents security for
2.1% of the Initial Pool Balance, are categorized as other properties (one (1)
such property is used for a theater and one (1) such property is used for a
combination of commercial purposes (retail and office)). The Mortgaged
Properties are located throughout thirty-two (32) states and the District of
Columbia, with the largest concentration in California (99 Mortgaged Properties,
which represent security for 37.1% of the Initial Pool Balance). No other state
has a concentration of Mortgaged Properties that represents security for more
than 7.2% of the Initial Pool Balance. See Appendix II for a more detailed
description of the Mortgage Loans.
One hundred fifty-two (152) of the Mortgage Loans, or 59.2% of the Initial
Pool Balance (the "Wells Fargo Loans"), were originated by Wells Fargo.
Seventy-four (74) of the Mortgage Loans or 40.8% of the Initial Pool Balance
(the "Morgan Stanley Loans"), were originated by one of the participants in
MSMC's commercial and multifamily mortgage loan conduit program, were originated
directly by MSMC or were purchased in the secondary market.
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" below.
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The Mortgage Loans were originated between February 1996 and May 1998.
Certain Terms and Characteristics of the Mortgage Loans
Mortgage Rates; Calculations of Interest
The Mortgage Loans bear interest at Mortgage Rates that will remain fixed
for their remaining terms. Seventy-four (74) of the Mortgage Loans, representing
33.0% of the Initial Pool Balance, accrue interest on the basis of a 360-day
year consisting of twelve 30-day months. One hundred fifty-two (152) of the
Mortgage Loans, representing 67.0% of the Initial Pool Balance, accrue interest
on the basis of the actual number of days elapsed each month in a 360-day year.
Due Dates
All of the Mortgage Loans have Due Dates (that is, the dates upon which
the related Scheduled Payments are due) that occur on the first day of each
month.
Amortization
Two hundred one (201) of the Mortgage Loans, which represent 89.0% of the
Initial Pool Balance, provide for Scheduled Payments based on amortization
schedules significantly longer than their terms to maturity thereby leaving
Balloon Payments due and payable on their respective maturity dates, unless
prepaid prior thereto. The amount of the Balloon Payments on those Mortgage
Loans that accrue interest on the basis of the actual number of days elapsed
each month in a 360-day year will be greater, and the actual amortization terms
will be longer, than would be the case if such Mortgage Loans accrued interest
on the basis of a 360-day year consisting of 30-day months as a result of the
application of interest and principal on such Mortgage Loans over time. See
"Risk Factors And Other Special Considerations--The Mortgage Loans--Balloon
Payments."
Prepayment Restrictions
As of the Cut-Off Date, two hundred four (204) of the Mortgage Loans, or
80.7% of the Initial Pool Balance prohibit voluntary Principal Prepayments for a
period (a "Lock-out Period") ending on a date (generally ranging from ten (10)
months to eight-five (85) months from the Cut-Off Date) specified in the related
Mortgage Note and, in most such cases, thereafter require, until a specified
date (generally three to six months) prior to maturity, that any voluntary
Principal Prepayment be accompanied by an additional amount (a "Prepayment
Premium"), which is calculated on the basis of (a) the greater of a yield
maintenance formula ("Yield Maintenance Premium") and zero payable in the case
of three (3) Mortgage Loans, or 1.1% of the Initial Pool Balance; (b) the
greater of a Yield Maintenance Premium and one percent (1%) of the amount
prepaid ("Percentage Premium"), payable in the case of one hundred ninety-six
(196) Mortgage Loans, or 78.2% of the Initial Pool Balance, (c) a Percentage
Premium, generally declining over the remainder of the life of the loan, payable
in the case of one (1) Mortgage Loan, or 0.3% of the Initial Pool Balance or (d)
a Yield Maintenance Premium, then a Percentage Premium declining over the
remainder of the life of the loan, payable in the case of four (4) Mortgage
Loans representing 1.1% of the Initial Pool Balance. Eighteen (18) Mortgage
Loans, representing 17.4% of the Initial Pool Balance, provide for a Lockout
Period ending between twenty-four (24) and sixty (60) months following the
Cut-Off Date, and then a period during which the Borrower is permitted to prepay
the Mortgage Loan (generally upon payment of a Prepayment Premium or a Yield
Maintenance Premium) but the holder of the Mortgage is entitled to require the
Mortgagor to defease the Mortgage Loan in lieu of making such a prepayment,
except that no Prepayment Premium or Yield Maintenance Premium is required (and
the holder of the mortgage is not entitled to require defeasance) after a
specified date (generally three (3) to six (6) months) prior to maturity (or
until the anticipated repayment date in the case of one (1) such Mortgage Loan,
representing 3.3% of the Initial Pool Balance, which is hyper-amortizing, or
until three (3) months prior to the anticipated repayment date in the case of
one (1) such Mortgage Loan, representing 0.8% of the Initial Pool Balance, which
is hyper-amortizing). Three (3) Mortgage Loans, representing 1.7% of the Initial
Pool Balance, provide for a Lockout Period ending between thirty-three (33) and
thirty-five (35) months following the Cut-Off Date and then a period during
which the borrower is permitted (in its discretion) to defease the respective
Mortgage Loan or to prepay the respective Mortgage Loan
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upon payment of the greater of a Yield Maintenance Premium and 1% of the then
outstanding principal balance of the Mortgage Loan, except that no such payment
is required after a specified date (generally six (6) months) prior to maturity.
In cases where defeasance is provided for, the borrower is required, when it
elects, or the holder of the mortgage requires it, to defease the Mortgage Loan
to substitute a pledge of "defeasance collateral" in exchange for a release of
the Mortgaged Property from the lien of the related mortgage. In general,
"defeasance collateral" is required to consist of direct, noncallable United
States Treasury obligations that provide for payments prior, but as close as
possible, to all successive Due Dates and the scheduled maturity date, with each
such payment being equal to or greater than (with any excess returned to the
borrower) the scheduled payment due on such date. One (1) Mortgage Loan,
representing 0.2% of the Initial Pool Balance, requires the greater of a Yield
Maintenance Premium and 3% of the amount prepaid for thirty-three (33) months,
followed by a declining Percentage Premium until a specified date six (6) months
prior to maturity. Four (4) Mortgage Loans representing 2.9% of the Initial Pool
Balance permit prepayment during the last five years of the loan term without
the imposition of any Prepayment Penalty.
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 transfers or encumbers
the related Mortgaged Property or that prohibit the borrower from doing so
without the consent of the holder of the Mortgage. However, the Mortgage Loans
generally permit a one-time transfer of the related Mortgaged Property, subject
to approval of the proposed transferee by the holder of the Mortgage, payment of
an assumption fee (which may be waived by the Master Servicer or the Special
Servicer, as the case may be, or, if collected, will be paid to the Master
Servicer or the Special Servicer as additional servicing compensation) and
certain other conditions. In addition, certain Mortgage Loans permit the
borrower to transfer the related Mortgaged Property to an affiliate or
subsidiary of the borrower, or an entity of which the borrower is the
controlling beneficial owner, upon the satisfaction of certain limited
conditions as determined by the Master Servicer. The Master Servicer or the
Special Servicer, as the case may be, will determine, in a manner consistent
with the Servicing Standard, whether to exercise any right it may have under any
such clause to accelerate payment of the related Mortgage Loan upon, or to
withhold its consent to, any transfer or further encumbrance of the related
Mortgaged Property in accordance with the Pooling and Servicing Agreement.
Cross-Collateralization; Related Parties
The Mortgage Pool includes three (3) groups of Mortgage Loans, the largest
of which groups collectively represents 3.3% of the Initial Pool Balance, as to
which an aggregate amount of indebtedness is secured by multiple Mortgaged
Properties. For purposes of the presentation of Mortgage Pool information
herein, such Mortgage Loans have been treated as multiple cross-collateralized
and cross-defaulted Mortgage Loans, each secured by one of the related Mortgaged
Properties and each having a principal balance in an amount equal to an
allocated portion of the aggregate indebtedness represented by such Mortgage
Loan.
In addition, four (4) groups of Mortgage Loans, the largest of which
groups collectively represents 0.9% of the Initial Pool Balance, are
cross-defaulted and cross-collateralized with the other Mortgage Loan or Loans
in such groups.
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There are also twenty-two (22) groups of Mortgage Loans other than those
groups that are either cross-defaulted and cross-collateralized, or those that
are treated as cross-defaulted and cross-collateralized for disclosure purposes,
the largest of which groups represents 4.6% of the Initial Pool Balance, where
the borrowers are affiliated entities related through common ownership of
partnership or other equity interests and where, in general, the related
Mortgaged Properties are commonly managed.
Subordinate Financing
Generally the Mortgage Loans prohibit the borrower from incurring
subordinate indebtedness or require the consent of the holder of the Mortgage
prior to doing so. However, with respect to two (2) Mortgage Loans, representing
1.9% of the Initial Pool Balance, there is outstanding debt to third parties
that is unsecured or secured solely by ownership interests in the related
borrower or an affiliate thereof. With respect to six (6) of the Mortgage Loans,
representing 2.3% of the Initial Pool Balance, the related borrower may incur
secured subordinate debt subject to minimum debt service coverage ratios and
maximum loan to value tests. See "Certain Legal Aspects of the Mortgage Loans
and the Leases--Subordinate Financing" in the Prospectus.
Assessments of Property Value and Condition
Appraisals
In connection with the origination or acquisition of the Mortgage Loans,
the related Mortgaged Property was appraised by an independent appraiser who,
generally, was a member of the Appraisal Institute. In general, those appraisals
represent the analysis and opinion of the person performing the appraisal and
are not guarantees of, and may not be indicative of, present or future value.
There can be no assurance that another person would not have arrived at a
different valuation, even if such person used the same general approach to and
same method of valuing the property. Moreover, such appraisals sought to
establish the amount of typically motivated buyer would pay a typically
motivated seller. Such amount could be significantly higher than the amount
obtained from the sale of a Mortgaged Property under a distress or liquidation
sale. Information regarding the values of the Mortgaged Property as of the
Cut-Off Date is presented herein for illustrative purposes only.
Environmental Assessments
An environmental site assessment was performed with respect to each
Mortgaged Property generally within the twelve-month period preceding the
origination of the related Mortgage Loan. In all cases, the environmental site
assessment was a "Phase I" environmental assessment, generally performed in
accordance with industry practice. In general, the environmental assessments
contained no recommendations for further significant environmental remediation
efforts. However, in certain cases, the assessment disclosed the existence of or
potential for adverse environmental conditions, generally the result of the
activities of identified tenants, adjacent property owners or previous owners of
the Mortgaged Property. In certain cases, the related borrowers were required to
establish operations and maintenance plans, monitor the Mortgaged Property,
abate or remediate the condition and/or provide additional security.
Property Condition Assessments
Most of the Mortgaged Properties were inspected, in connection with the
origination or acquisition of the related Mortgage Loan, by a representative of
the related Seller or by a third party professional engaged by such Seller.
Furthermore, in most cases, a licensed engineer or consultant inspected the
related Mortgaged Property, in connection with the origination of the related
Mortgage Loan, to assess the structure, exterior walls, roofing, interior
structure and mechanical and electrical systems. In certain cases, where
material deficiencies were observed, the related borrower was required to
establish reserves for replacement or repair or remediate the deficiency.
Seismic Review Process
A California law, the Alquist-Priolo Special Studies Zone Act, established
zones consisting of areas surrounding active California earthquake faults
("Alquist-Priolo Zones") and requires that cities and counties limit
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certain real estate development projects within the zones unless geologic
investigation demonstrates that the sites are not threatened by future fault
activity. In general, the underwriting guidelines applicable to the origination
of the Mortgage Loans required that prospective borrowers seeking loans secured
by properties located in an Alquist-Priolo Zone obtain a seismic engineering
report of the building and, based thereon and on certain statistical
information, an estimate of probable maximum loss ("PML"), that is, an estimate
of the loss that the property would sustain in a "worst case" earthquake
scenario. Generally, any proposed loan as to which the property was estimated to
have a PML in excess of 20% of the estimated replacement cost of the
improvements would be subject to a lower loan-to-value limit at origination, be
conditioned on seismic upgrading of the Mortgaged Property, be conditioned on
receipt of satisfactory earthquake insurance or be declined. No Mortgaged
Property is located in an Alquist-Priolo zone.
Additional Mortgage Loan Information
Each of the tables set forth in Appendix I sets forth certain
characteristics of the Mortgage Pool presented, where applicable, as of the
Cut-Off Date. For a detailed presentation of certain of the characteristics of
the Mortgage Loans and the Mortgaged Properties, on an individual basis, see
Appendix II hereto, and for a brief summary of the largest Mortgage Loans in the
Mortgage Pool, see Appendix III 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 the
Mortgage Pool" section and under "Certain Legal Aspects of Mortgage Loans and
the Leases" in the Prospectus.
For purposes of the tables in Appendix I and for the information set forth
in Appendix II and Appendix III:
(1) References to "DSCR" are references to "Debt Service Coverage
Ratios." In general, debt service coverage ratios are used by
income property lenders to measure the ratio of (a) cash
currently generated by a property that is available for debt
service to (b) required debt service payments. However, debt
service coverage ratios only measure the current, or recent,
ability of a property to service mortgage debt. If a property
does not possess a stable operating expectancy (for instance,
if it is subject to material leases that are scheduled to
expire during the loan term and that provide for above-market
rents and/or that may be difficult to replace), a debt service
coverage ratio may not be a reliable indicator of a property's
ability to service the mortgage debt over the entire remaining
loan term. For purposes of this Prospectus Supplement,
including for the tables in Appendix I and the information set
forth in Appendix II and Appendix III, the "Debt Service
Coverage Ratio" or "DSCR" for any Mortgage Loan (or group of
cross-collateralized Mortgage Loans) 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
that group of cross-collateralized Mortgage Loans).
"Underwritable Cash Flow" in each case is an estimate of
stabilized cash flow available for debt service. In general,
it is the estimated stabilized revenue derived from the use
and operation of a Mortgaged Property (consisting primarily of
rental income) less the sum of (a) estimated stabilized
operating expenses (such as utilities, administrative
expenses, repairs and maintenance, management fees and
advertising), (b) fixed expenses (such as insurance, real
estate taxes and, if applicable, ground lease payments) and
(c) reserves for capital expenditures, including tenant
improvement costs and leasing commissions. Underwritable Cash
Flow generally does not reflect interest expenses and non-cash
items such as depreciation and amortization. In determining
Underwritable Cash Flow for a Mortgaged Property, the
applicable Seller relied on rent rolls and other generally
unaudited financial information provided by the respective
borrowers and calculated stabilized estimates of cash flow
that took into consideration historical financial statements,
material changes in the operating position of the Mortgaged
Property of which the Seller was aware (e.g., new signed
leases or end of "free rent" periods and market data), and
estimated capital expenditures, leasing commission and tenant
improvement reserves. The applicable Seller made certain
changes to operating statements and operating information
obtained from the respective borrowers, resulting in either an
increase or decrease in the estimate of Underwritable Cash
Flow derived therefrom, based upon the Seller's evaluation of
such operating statements and operating information and the
assumptions applied by the respective
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borrowers in preparing such statements and information. In
certain cases, partial year 1997 or 1998 operating income data
was annualized, with certain adjustments for items deemed not
appropriate to be annualized, or borrower supplied
"trailing-12 months" income and/or expense information was
utilized. In certain instances, 1997 historical expenses were
inflated. For purposes of calculating Underwritable Cash Flow
for Mortgage Loans where leases have been executed by one or
more affiliates of the borrower, the rents under some of such
leases have been adjusted to reflect market rents for similar
properties. Several Mortgage Loans are secured by Mortgaged
Properties with newly constructed improvements and,
accordingly, there were no historical operating results or
financial statements available with respect to such Mortgaged
Properties. In such cases, items of revenue and expense used
in calculating Underwritable Cash Flow were generally derived
from rent rolls, estimates set forth in the related appraisal
or from borrower-supplied information. No assurance can be
given with respect to the accuracy of the information provided
by any borrowers, or the adequacy of the procedures used by
the applicable Seller in determining the presented operating
information.
The Debt Service Coverage Ratios are presented herein for
illustrative purposes only and, as discussed above, are
limited in their usefulness in assessing the current, or
predicting the future, ability of a Mortgaged Property to
generate sufficient cash flow to repay the related Mortgage
Loan. Accordingly, no assurance can be given, and no
representation is made, that the Debt Service Coverage Ratios
accurately reflect that ability.
(2) References in the tables to "Cut-Off Date Loan-to-Value" or
"Cut-Off Date LTV" are references to the ratio, expressed as a
percentage, of the Cut-Off Date Balance of a Mortgage Loan (or
the aggregate principal balance of a group of
cross-collateralized Mortgage Loans) to the value of the
related Mortgaged Property or Properties as determined by the
most recent appraisal (as described above under "--Assessments
of Property Value and Condition--Appraisals") of such
Mortgaged Property. 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
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 "Years 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.
Standard Hazard Insurance
To the extent permitted by the related Mortgage Loan and required by the
Servicing Standard, the Master Servicer will require each borrower to maintain a
fire and hazard insurance policy with extended coverage. The coverage of each
such policy will be in an amount (subject to a deductible customary in the
related geographic area) that is not less than the lesser of the full
replacement cost of the improvements that represent security for such Mortgage
Loan, with no deduction for depreciation, and the outstanding principal balance
owing on such Mortgage Loan, but in any event, unless otherwise specified in the
applicable Mortgage or Mortgage Note, in an amount sufficient to avoid the
application of any coinsurance clause. If, on the date of origination of a
Mortgage Loan, the
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related Mortgaged Property was in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards (and
such flood insurance has been made available), the Master Servicer will cause to
be maintained a flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administration in an amount representing
coverage of at least the lesser of (i) the outstanding principal balance of the
related Mortgage Loan and (ii) the maximum amount of such insurance available
for the related Mortgaged Property, but only to the extent such Mortgage Loan
permits the lender to require such coverage and such coverage conforms to the
Servicing Standard. If a borrower fails to maintain such hazard insurance, the
Master Servicer will be required to obtain such insurance and the cost thereof
will be a Servicing Advance, subject to a determination of recoverability. The
Special Servicer will be required to maintain fire insurance with extended
coverage and, if applicable, flood insurance on an REO Property in an amount not
less than the maximum amount obtainable with respect to such REO Property and
the cost thereof will be a Servicing Advance, subject to a determination of
recoverability. In addition, the Master Servicer may require any borrower to
maintain other forms of insurance as the Master Servicer may be permitted to
require under the related Mortgage, including, but not limited to, loss of rents
endorsements and comprehensive public liability insurance. The Master Servicer
will not require borrowers to maintain earthquake insurance unless the related
borrower is required under the terms of its Mortgage Loan to maintain earthquake
insurance. Any losses incurred with respect to Mortgage Loans due to uninsured
risks (including earthquakes, mudflows and floods) or insufficient hazard
insurance proceeds may adversely affect payments to Certificateholders.
The Sellers
Wells Fargo Bank, National Association
A description of Wells Fargo is contained herein under "Servicing of the
Mortgage Loans--The Master Servicer" herein.
Morgan Stanley Mortgage Capital Inc.
MSMC is a subsidiary of Morgan Stanley & Co., Inc. formed as a New York
corporation to originate and acquire loans secured by mortgages on commercial
and multifamily real estate. Each of MSMC's 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 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 such assignments, 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) in blank or to the order of Trustee; (b) the original or a
copy of the related Mortgage(s), together with originals or copies of any
intervening assignments of such document(s), in each case with evidence of
recording thereon (unless such document(s) have not been returned by the
applicable recorder's office); (c) the original or a copy of any related
assignment(s) of rents and leases (if any such item is a document separate from
the Mortgage), together with originals or copies of any intervening assignments
of such document(s), in each case with evidence of recording thereon (unless
such document(s) have not been returned by the applicable recorder's office);
(d) an assignment of each related Mortgage in blank or 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 blank or
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 copy
thereof. The Trustee will be required to review the documents delivered by each
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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 completed
in the name of the Trustee (if delivered in blank) and submitted for recording
in the real property records of the appropriate jurisdictions.
Representations and Warranties
In each Mortgage Loan Purchase Agreement, the related Seller has
represented and warranted with respect to each of its Mortgage Loans, subject to
certain specified exceptions, as of the Closing Date or as of such other date
specifically provided in the representation and warranty, among other things,
generally to the effect that: (1) the information set forth in the schedule of
the mortgage loans attached to the related Mortgage Loan Purchase Agreement is
true and correct in all material respects; (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 creditor's rights
exceptions, enforceable first priority lien in the related borrower's interest
in all leases of the Mortgaged Property; (7) the Mortgage has not been
satisfied, cancelled, rescinded or subordinated in whole or in material part,
and the related Mortgaged Property has not been released from the lien of such
Mortgage, in whole or in material part; (8) 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; (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 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
to the knowledge of the Seller there is no valid defense, counterclaim or right
of offset or rescission available to the related borrower with respect to such
Mortgage Note, Mortgage or other agreement; (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) to such Seller's knowledge, there are no
delinquent or unpaid taxes, assessments or other outstanding charges affecting
the related Mortgaged Property that are or may become a lien of priority equal
to or higher than the lien of the related Mortgage; (16) the related borrower is
not, to the Seller's knowledge, a debtor in any state or federal bankruptcy or
insolvency proceeding; (17) the 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; (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, and further provides
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
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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 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, 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 five (5) Mortgage Loans
(representing 3.7% of the Initial Pool Balance) sold by it to the Depositor,
MSMC will assign to the Trustee, for the benefit of the Certificateholders, its
right to require General American Life Insurance Company ("GAL") to either (i)
cure a material breach of the representations and warranties made by GAL to MSMC
in connection with GAL's sale of such Mortgage Loans to MSMC, which
representations and warranties are substantially similar to those listed above,
or (ii) repurchase such Mortgage Loans affected by any such breach.
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 in general, GAL) regarding the
characteristics of any 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 or, in the case of a breach of any
of the representations and warranties required to be made by a Seller, such
breach materially and adversely affects the value of such Mortgage Loans or the
interest of the Trust Fund in such Mortgage Loans (a "Material Document Defect"
and a "Material Breach", respectively), then the Seller will be obligated to
cure such Material Document Defect or Material Breach in all material respects
within the applicable Permitted Cure Period. If any such Material Document
Defect or Material Breach cannot be corrected or cured in all material respects
within the applicable Permitted Cure Period, the Seller will be obligated, not
later than the last day of such Permitted Cure Period, to (i) repurchase the
affected Mortgage Loan from the Trust Fund 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 and any related unreimbursed Servicing
Advances, 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
860(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
(B) pay an amount generally equal to the excess of the applicable Purchase Price
for the Mortgage Loan to be replaced (calculated as if it were to be repurchased
instead of replaced), over the unpaid principal balance of the applicable
Qualifying Substitute Mortgage Loan as of the date of substitution, after
application of all payments due on or before such date, whether or not received.
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 in all material respects within such 90-day period, but it
is reasonably
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likely that such Material Document Defect or Material Breach, as the case may
be, could be corrected or cured 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, the other Seller
or any other person or entity will be obligated to repurchase or replace the
affected Mortgage Loan if the related Seller defaults on its obligation to do
so.
Changes In Mortgage Pool Characteristics
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the time the Offered Certificates are issued. Prior to the
issuance of the Offered Certificates, a Mortgage Loan may be removed from the
Mortgage Pool if the Depositor deems such removal necessary or appropriate or if
it is prepaid. A limited number of other mortgage loans may be included in the
Mortgage Pool prior to the issuance of the Offered Certificates, unless
including such Mortgage Loans would materially alter the characteristics of the
Mortgage Pool as described herein. The information set forth herein is
representative of the characteristics of the Mortgage Pool as it will be
constituted at the time the Offered Certificates are issued, although the range
of Mortgage Rates and maturities and certain other characteristics of the
Mortgage Loans in the Mortgage Pool may vary.
SERVICING OF THE MORTGAGE LOANS
General
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, will be required to service and administer the Mortgage Loans
with the higher of the following standards of care (the "Servicing Standard"):
(a) in the same manner in which and with the same care, skill, prudence
and diligence with which the Master Servicer or the Special Servicer, as the
case may be, services and administers similar mortgage loans for other
third-party portfolios, giving due consideration to customary and usual
standards of practice of prudent institutional commercial mortgage lenders
servicing their own mortgage loans and to the maximization of the net present
value of the mortgage loans; and
(b) the care, skill, prudence and diligence the Master Servicer or the
Special Servicer, as the case may be, uses for loans which it owns and which are
substantially the same as the Mortgage Loans, giving due consideration to the
maximization of the net present value of the mortgage loans.
Each of the Master Servicer and the Special Servicer is required to adhere
to the Servicing Standard without regard to any conflict of interest that it may
have, any fees or other compensation to which it is entitled and any
relationship it may have with any borrower, and without regard to the different
payment priorities among the Classes of Certificates. Each of the Master
Servicer and the Special Servicer may become the owner or pledgee of
Certificates with the same rights as each would have if it were not the Master
Servicer or a Special Servicer, as the case may be. Any such interest of the
Master Servicer or the Special Servicer in the Certificates will not be taken
into account when evaluating whether actions of the Master Servicer or the
Special Servicer are consistent with their respective obligations in accordance
with the Servicing Standard, regardless of whether such actions may have the
effect of benefiting the Class or Classes of Certificates owned by the Master
Servicer or the Special Servicer. In addition, the Master Servicer or the
Special Servicer may, under certain limited circumstances, lend money on an
unsecured basis, accept deposits from, and otherwise generally engage in any
kind of business or dealings with, any borrower as though the Master Servicer or
the Special Servicer were not a party to the transactions contemplated hereby.
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Each of the Master Servicer and the Special Servicer is permitted to enter
into a servicing agreement with a servicer (a "Sub-Servicer"), and any such
Sub-Servicer will receive a fee for the services specified in such servicing
agreement. However, the Master Servicer or the Special Servicer, as the case may
be, will remain liable for its servicing obligations under the Pooling and
Servicing Agreement. The Master Servicer or the Special Servicer, as the case
may be, will be required to pay any servicing compensation due to any
Sub-Servicer out of its own funds.
The Master Servicer may resign from the obligations and duties imposed on
it under the Pooling and Servicing Agreement, upon 30 days notice to the
Trustee, provided that (a) a successor servicer is available and willing to
assume the obligations of the Master Servicer on substantially the same terms
and conditions, and for not more than equivalent compensation; (b) the Master
Servicer bears all costs associated with its resignation and the transfer of
servicing; and (c) the Rating Agencies have confirmed in writing that such
servicing transfer will not result in a withdrawal, downgrade or qualification
of the then current ratings on the Certificates. Furthermore, the Master
Servicer may resign as Master Servicer if it determines that the Master
Servicer's duties are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it. If the Master Servicer ceases to serve as such and shall not have been
replaced by a qualified successor, the Trustee will assume the Master Servicer's
duties and obligations under the Pooling and Servicing Agreement. If the Special
Servicer shall cease to serve as such and a qualified successor shall not have
been engaged, the Master Servicer will assume the Special Servicer's duties and
obligations and, in the absence of the Master Servicer to so assume such duties
and responsibilities, the Trustee will assume the duties and obligations of the
Special Servicer. The relationship of each of the Master Servicer and the
Special Servicer to the Trustee is intended to be that of an independent
contractor and not that of a joint venturer, partner or agent.
The Master Servicer will have no responsibility for the performance by the
Special Servicer of its duties under the Pooling and Servicing Agreement, and
the Special Servicer will have no responsibility for the performance by the
Master Servicer of its duties under the Pooling and Servicing Agreement.
The Master Servicer initially will be responsible for the servicing and
administration of the entire Mortgage Pool. However, the Special Servicer will
be responsible for servicing and administering (i) any Mortgage Loan as to which
a Balloon Payment is past due, and the Master Servicer has determined that
payment is unlikely to be made on or before the second Due Date succeeding the
date the Balloon Payment was due, or any other payment is more than 60 days past
due or has not been made on or before the second Due Date following the date
such payment was due; (ii) any Mortgage Loan as to which, to the Master
Servicer's knowledge, the borrower has consented to the appointment of a
receiver or conservator in any insolvency or similar proceeding of or relating
to such borrower or to all or substantially all of its property, or the borrower
has become the subject of a decree or order issued under a bankruptcy,
insolvency or similar law and such decree or order shall have remained
undischarged or unstayed for a period of 60 days; (iii) any Mortgage Loan as to
which the Master Servicer shall have received notice of the foreclosure or
proposed foreclosure of any other lien on the Mortgaged Property; (iv) any
Mortgage Loan as to which the Master Servicer has knowledge of a default (other
than a failure by the related borrower to pay principal or interest) which in
the judgement of the Master Servicer materially and adversely affects the
interests of the Certificateholders and which has occurred and remains
unremedied for the applicable grace period specified in such Mortgage Loan (or,
if no grace period is specified, 60 days); (v) any Mortgage Loan as to which the
borrower admits in writing its inability to pay its debts generally as they
become due, files a petition to take advantage of any applicable insolvency or
reorganization statute, makes an assignment for the benefit of its creditors or
voluntarily suspends payment of its obligations; and (vi) any Mortgage Loan as
to which, in the judgment of the Master Servicer, a default has occurred or in
the judgment of the Master Servicer is imminent or is likely to occur within 60
days (any of the foregoing events, a "Servicing Transfer Event," and any
Mortgage Loan as to which any of the foregoing events has occurred, a "Specially
Serviced Mortgage Loan").
In the event of any of the foregoing with respect to any Mortgage Loan,
the Master Servicer will be required to transfer its principal servicing
responsibilities with respect thereto to the Special Servicer in accordance with
certain procedures set forth in the Pooling and Servicing Agreement.
Notwithstanding such transfer, the Master Servicer will continue to receive
payments on such Mortgage Loan (including amounts collected by the Special
Servicer), to make certain calculations with respect to such Mortgage Loan, and
to make remittances and prepare certain reports to the Trustee with respect to
such Mortgage Loan. If title to the related Mortgaged Property is acquired by
the Trust Fund (upon acquisition, an "REO Property"), whether through
foreclosure, deed-in-lieu of
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foreclosure or otherwise, the Special Servicer will be responsible for the
operation and management thereof. Mortgage Loans serviced by the Special
Servicer are referred to herein as "Specially Serviced Mortgage Loans."
A Mortgage Loan will cease to be a Specially Serviced Mortgage Loan (and
will become a "Rehabilitated Mortgage Loan" as to which the Master Servicer will
re-assume all servicing responsibilities) when (i) three consecutive Scheduled
Payments have been made (in the case of any such Mortgage Loan that was
modified, based on the modified terms), (ii) no other Servicing Transfer Event
has occurred and is continuing with respect to such Mortgage Loan and (iii) the
Trust Fund has been reimbursed for all costs incurred as a result of the
occurrence of the Servicing Transfer Event or such amounts have been forgiven.
The Master Servicer and the Special Servicer will, in general, each be
required to pay all ordinary expenses incurred by it in connection with its
servicing activities under the Pooling and Servicing Agreement and will not be
entitled to reimbursement therefor except as expressly provided in the Pooling
and Servicing Agreement. See "Description Of The
Certificates--Advances--Servicing Advances" herein.
The Master Servicer
Wells Fargo will be responsible for servicing the Mortgage Loans as Master
Servicer. Wells Fargo provides a full range of banking services to individual,
agribusiness, real estate, commercial and small business customers.
Founded in 1852, Wells Fargo & Company is the holding company for Wells
Fargo. For the years ended December 31, 1997 and 1996, Wells Fargo & Company
reported, on a consolidated basis, total assets of $97.5 billion and $108.9
billion, respectively, and total capital (Tier 1 and 2) of $9.2 billion and
$10.0 billion, respectively. For the years ended December 31, 1997 and 1996,
respectively, Wells Fargo & Company reported, on a consolidated basis, net
income of $1,155 million and $1,071 million, respectively. On April 1, 1996,
First Interstate Bancorp merged with and into Wells Fargo & Company. First
Interstate Bancorp was the holding company for 16 subsidiary banks located in 13
Western states. As of December 31, 1995 and 1994, First Interstate Bancorp
reported, on a consolidated basis, total assets of $58.1 billion and $55.8
billion, respectively, and total capital (Tier 1 and 2) of $4.7 billion and $4.1
billion, respectively. For the years ended December 31, 1995 and 1994, First
Interstate Bancorp reported, on a consolidated basis, net income of $885 million
and $734 million, respectively. Wells Fargo & Company files annual and quarterly
reports with the Securities and Exchange Commission.
As of December 31, 1997, Wells Fargo and its subsidiaries serviced a
portfolio of multifamily and commercial mortgage loans totaling approximately
$15.2 billion in aggregate outstanding principal amount, of which approximately
$3.0 billion was serviced for others.
Commercial and multifamily mortgage loans originated for securitization by
Wells Fargo and its subsidiaries are currently serviced by Wells Fargo.
The information set forth herein concerning Wells Fargo has been provided
by Wells Fargo. Accordingly, the Depositor makes no representations or warranty
as to the accuracy or completeness of such information. Wells Fargo has been
approved as a servicer by all nationally recognized statistical rating
organizations.
Master Servicer Compensation
The Master Servicer will be entitled to receive each month a servicing fee
(the "Servicing Fee") equal to the portion of a specified rate per annum (the
"Servicing Fee Rate") applicable to such month (determined in the same manner as
the applicable Mortgage Rate is determined for each Mortgage Loan for such
month) applied to the outstanding Scheduled Principal Balance of each Mortgage
Loan (including REO Properties) as compensation for servicing the Mortgage
Loans. The Master Servicer will be entitled to retain as additional servicing
compensation all investment income earned on amounts on deposit in the
Certificate Account, and (in each case to the extent not payable to the Special
Servicer or any Sub-Servicer as provided in the Pooling and Servicing Agreement)
late payment charges, assumption fees, modification fees, extension fees and
default interest payable at a rate above the related Mortgage Rate. However, the
amount of the related Servicing Fee (but not the fees payable to the Special
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Servicer or to the Trustee or, in general, the portion of the Servicing Fee
payable to Sub-Servicers) will be reduced (to not less than zero) on each
Distribution Date by the amount (if any) of Compensating Interest paid by the
Master Servicer on such Distribution Date. Any Net Aggregate Prepayment Interest
Shortfall will be allocated as set forth under "Description of the
Certificates--Distributions--Prepayment Interest Shortfalls and Prepayment
Interest Excesses" herein. If Prepayment Interest Excesses for all Mortgage
Loans exceed Prepayment Interest Shortfalls for all Mortgage Loans as of any
Distribution Date, such excess amount will be payable to the Master Servicer as
additional servicing compensation.
The Special Servicer
The initial Special Servicer will be CRIIMI MAE Services Limited
Partnership, a Maryland limited partnership ("CRIIMI MAE"), the general partner
of which is CRIIMI MAE Services, Inc. The Special Servicer will oversee the
resolution of Specially Serviced Mortgage Loans, act as disposition manager of
REO Properties acquired on behalf of the Trust Fund through foreclosure or deed
in lieu of foreclosure, maintain insurance with respect to REO Properties and
provide monthly reports to the Master Servicer and the Trustee. As of May 1,
1998, the Special Servicer was responsible for performing certain servicing
functions with respect to approximately 4,200 commercial and multifamily loans
with an aggregate principal balance of approximately $22 billion, the collateral
for which is located throughout 49 states and Puerto Rico. It is anticipated
that the Special Servicer or an affiliate of the Special Servicer will purchase
all or a significant portion of certain Classes of the Subordinate Certificates
on or about the Closing Date. The Special Servicer's principal offices are
located at 11200 Rockville Pike, Rockville, Maryland 20852.
The information set forth herein concerning CRIIMI MAE has been provided
by CRIIMI MAE. Accordingly, the Depositor makes no representations or warranty
as to the accuracy or completeness of such information.
Special Servicer Compensation
The Special Servicer will be entitled to receive (i) a special servicing
fee (the "Special Servicing Fee") equal to, in any month, the portion of a rate
equal to 0.25% per annum applicable to such month (determined in the same manner
as the applicable Mortgage Rate is determined for each Specially Serviced
Mortgage Loan for such month) of the outstanding Scheduled Principal Balance of
each Specially Serviced Mortgage Loan; and (ii) a fee (the "Liquidation Fee")
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 (collectively, such fees payable to the Special
Servicer, the "Special Servicer Compensation"). The Special Servicer is also
permitted to retain, in general, certain assumption fees, modification fees and
extension fees collected on Specially Serviced Mortgage Loans, certain
borrower-paid fees, investment income earned on amounts on deposit in any
accounts maintained for REO Property collections, and other charges specified in
the Pooling and Servicing Agreement. The Special Servicing Fee and Liquidation
Fee will be obligations of the Trust Fund and will represent Expense Losses. The
Special Servicing Compensation will be payable in addition to the Servicing Fee
payable to the Master Servicer.
The Special Servicer will also be entitled to a receive each month a
standby fee (the "Special Servicing Standby Fee") equal to the portion of a
specified rate per annum (the "Special Servicing Standby Fee Rate") applicable
to such month (determined in the same manner as the applicable Mortgage Rate is
determined for each Mortgage Loan for such month) of the Scheduled Principal
Balance of each Mortgage Loan (including REO Properties).
As described herein under "--The Operating Adviser," the Operating Adviser
will have the right to approve and advise certain actions of the Special
Servicer, subject to the limitations described herein.
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Termination of Special Servicer
The Trustee may terminate the Special Servicer due to (i) any failure by
the Special Servicer to remit to the Trustee or the Master Servicer when due any
amount required to be so remitted under the terms of the Pooling and Servicing
Agreement; (ii) any failure on the part of the Special Servicer duly to observe
or perform in any material respect any other of the covenants or agreements on
the part of the Special Servicer contained in the Pooling and Servicing
Agreement which continues unremedied for a period of 90 days after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to the Special Servicer by the Depositor or the Trustee;
provided, however, that to the extent that the Special Servicer certifies to the
Trustee and the Depositor that the Special Servicer is in good faith attempting
to remedy such failure and the Certificateholders shall not be materially and
adversely affected thereby, such cure period will be extended for up to an
additional 60 days; (iii) any breach by the Special Servicer of the
representations and warranties contained in the Pooling and Servicing Agreement
that materially and adversely affects the interests of the holders of any Class
of Certificates and that continues unremedied for a period of 120 days after the
date on which notice of such breach, requiring the same to be remedied, shall
have been given to the Special Servicer by the Depositor or the Trustee,
provided, however, that to the extent that the Special Servicer is in good faith
attempting to remedy such breach and the Certificateholders shall not be
materially and adversely affected thereby, such cure period may be extended for
up to an additional 60 days; (iv) the Trustee shall receive notice from a Rating
Agency to the effect that the continuation of the Special Servicer in such
capacity would result in the downgrade, withdrawal or qualification of any
rating then assigned by such Rating Agency to any Class of Certificates; (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 for the appointment of a
conservator, receiver, liquidator, trustee or similar official in any
bankruptcy, insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Special Servicer and such decree or
order shall have remained in force undischarged or unstayed for a period of 60
days; (vi) the Special Servicer shall consent to the appointment of a
conservator, receiver, liquidator, trustee or similar official in any
bankruptcy, insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Special Servicer or of
or relating to all or substantially all of its property; or (vii) the Special
Servicer shall admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization statute, make an assignment for the benefit of its
creditors, voluntarily suspend payment of its obligations, or take any corporate
action in furtherance of the foregoing. In addition to the above events of
termination, upon the direction of the Operating Adviser, subject to the
satisfaction of certain conditions, the Trustee will remove the Special Servicer
from its duties as Special Servicer at any time upon the appointment and
acceptance of such appointment by a successor Special Servicer appointed by the
Operating Adviser; provided that, prior to the effectiveness of any such
appointment the Trustee shall have received a letter from each Rating Agency to
the effect that such appointment would not result in a downgrade, withdrawal or
qualification in any rating then assigned to any Class of Certificates.
The Operating Adviser
An operating adviser (the "Operating Adviser") appointed by the holders of
a majority of the Controlling Class will have the right to advise the Special
Servicer in regard to certain actions; provided that the Operating Adviser will
have no right to direct the Special Servicer to violate any provision of the
Pooling and Servicing Agreement, including, without limitation, the Servicing
Standard. The Special Servicer will be required to seek the advice of the
Operating Adviser for, among other things, (i) any proposed modification of a
Money Term of a Mortgage Loan other than an extension of the original maturity
date for two years or less, (ii) any foreclosure or comparable conversion of the
ownership of a Mortgaged Property, (iii) any proposed sale of a Specially
Serviced Mortgage Loan (other than in connection with the termination of the
Trust Fund as described herein under "Description of the Certificates--Optional
Termination"), (iv) any proposal to bring an REO Property into compliance with
applicable environmental laws, and (v) any acceptance of substitute or
additional collateral for a Mortgage Loan. The Operating Adviser, in its good
faith business judgment, may reject the recommendations of the Special Servicer
in accordance with the terms of the Pooling and Servicing Agreement. However, if
the Operating Adviser has not advised regarding a proposed action of the Special
Servicer within five business days of the date that the Operating Adviser
received notice of such proposed action, or if the Special Servicer believes
that the Servicing Standard requires that the Special Servicer take such action,
the Special Servicer may take such action. In addition, subject to the
satisfaction of certain conditions, the Operating Adviser will have the right to
direct the
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Trustee to remove the Special Servicer at any time upon the appointment and
acceptance of such appointment by a successor Special Servicer appointed by the
Operating Adviser; provided that, prior to the effectiveness of any such
appointment the Trustee shall have received a letter from each Rating Agency to
the effect that such appointment would not result in a downgrade, withdrawal or
qualification in any rating then assigned to any Class of Certificates.
The "Controlling Class" will be the most subordinate Class of Subordinate
Certificates outstanding at any time of determination; provided, however, that
the aggregate Certificate Balance of such Class of Certificates is not less than
50% (or 20% in the case of the Class N Certificates) of the initial aggregate
Certificate Balance of such Class, in which case the Controlling Class shall be
the next most subordinate Class of Certificates.
At any time, the holders of a majority of the Controlling Class may direct
the Trustee in writing to hold an election for an Operating Adviser, which
election will be held commencing as soon as practicable thereafter or upon (i)
the resignation or removal of the person acting as Operating Adviser or (ii)
upon a determination by the Trustee that the Controlling Class has changed.
After such receipt or determination, the Trustee is required to call a meeting
of the holders of the Controlling Class (which may be held by telephone) in the
manner specified in the Pooling and Servicing Agreement. The meeting will be
held in accordance with the procedures specified in the Pooling and Servicing
Agreement. At the meeting, each such holder will be entitled to nominate one
person to act as Operating Adviser.
Mortgage Loan Modifications
Subject to any restrictions applicable to REMICs, and to certain
limitations imposed by the Pooling and Servicing Agreement, the Master Servicer
may amend any term, other than a Money Term, of a Mortgage Loan that is not a
Specially Serviced Mortgage Loan and may extend the maturity date of any Balloon
Loan (other than a Specially Serviced Mortgage Loan) to a date not more than 60
days beyond the original maturity date. Subject to any restrictions applicable
to REMICs, and to the requirement that it obtain the approval of the Operating
Adviser to the amendment of any Money Term of a Mortgage Loan, 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 Scheduled 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, as demonstrated in
writing 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 and provide for an interest rate
during such extension period 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 which is ten (10) years prior to
the expiration of the term of such ground lease, (iv) reduce the Mortgage Rate
of a Specially Serviced Mortgage Loan 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 Scheduled 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
related Mortgage Rate.
Notwithstanding the foregoing, if a Mortgage Loan is a Balloon Loan whose
borrower failed to make the Balloon Payment at scheduled maturity, and such
Balloon Loan is not a Specially Serviced Mortgage Loan (other
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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 agree to up to three one-year extensions of the maturity of
the Mortgage Loan, in each case at the existing Mortgage Rate.
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" herein.
The modification of a Mortgage Loan may tend to reduce prepayments by
avoiding liquidations and therefore may extend the weighted average life of the
Certificates beyond that which might otherwise be the case. See "Yield,
Prepayment and Maturity Considerations" herein.
Sale of Defaulted Mortgage Loans and REO Properties
The Special Servicer, with the advice of the Operating Adviser, 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. The Special Servicer
is required 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, 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 to accept the highest cash bid received in such auction or other
procedure 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 and with the advice of the Operating
Adviser, 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 the Trustee's
affiliates, or any interested person (as described in the Pooling and Servicing
Agreement), except in limited circumstances described in the Pooling and
Servicing Agreement, including the ability of the Special Servicer to purchase a
defaulted Mortgage Loan or REO Property only if it is the highest bidder and at
least three offers are received from independent third parties.
Foreclosures
The Special Servicer may at any time, with the advice of the Operating
Adviser and in accordance with the Pooling and Servicing Agreement, institute
foreclosure proceedings, exercise any power of sale contained in any Mortgage,
accept a deed in lieu of foreclosure or otherwise acquire title to a Mortgaged
Property by operation of law or otherwise, if such action is consistent with the
Servicing Standard and a default on the related Mortgage Loan has occurred but
subject, in all cases, to certain limitations concerning environmental matters
and, in certain cases, the receipt of an opinion of counsel relating to certain
REMIC requirements.
If any Mortgaged Property is acquired as described in the preceding
paragraph, the Special Servicer is required to sell the REO Property within
three years after the end of the year in which it was acquired, or any
applicable extension period, unless the Special Servicer has previously
delivered to the Trustee an opinion of counsel to the effect that the holding of
the REO Property by the Trust Fund subsequent to three years after the end of
the year in which it was acquired, or to the expiration of such extension
period, will not result in the failure of such REO Property to qualify as
"foreclosure property" under the REMIC provisions of the Code. In addition, the
Special Servicer is required to use its best efforts to sell any REO Property
prior to the Final Rated Distribution Date.
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
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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 of the Code 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, but is particularly an issue as
to an REO Property operated as a hotel or skilled health care facility.
Generally, income from an REO Property that is directly operated by the Special
Servicer would be 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, 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. Prospective investors are
advised to consult their own tax advisors regarding the possible imposition of
REO Taxes in connection with the operation of commercial REO Properties by
REMICs.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion, when read in conjunction with the discussion of
"Certain Federal Income Tax Consequences" in the Prospectus, describes the
material federal income tax considerations for investors in the Offered
Certificates. However, these two discussions do not purport to deal with all
federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules, and do not address state and local tax
considerations. Prospective purchasers should consult their own tax advisers in
determining the federal, 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, Sidley & Austin, 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 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 Certificate 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 REMIC
Regular Certificates" in the Prospectus for a discussion of the principal
federal income tax consequences of the purchase, ownership and disposition of
the Offered Certificates. References in the Prospectus to the Master REMIC
should be read as references to REMIC III. Each of REMIC I and REMIC II will be
a Subsidiary REMIC as such term is used in the Prospectus.
The Offered Certificates will be "real estate assets" within the meaning
of Section 856(c)(4)(A) (formerly, Section 856(c)(5)(A)) and 856(c)(5)(B)
(formerly, Section 856(c)(6)(B)) of the Code in the same proportion that the
assets of the Trust Fund underlying such Certificates would be so treated. In
addition, interest (including original issue discount, if any) on the Offered
Certificates will be interest described in Section 856(c)(3)(B) of the Code to
the extent that such Certificates are treated as "real estate assets" under
Section 856(c)(4)(A) of the Code. Moreover, the Offered Certificates will be
"qualified mortgages" under Section 860G(a)(3) of the Code if
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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 institution will constitute
"evidence of indebtedness" within the meaning of Section 582(c)(1) of the Code.
The Offered Certificates will be treated as assets described in Section
7701(a)(19)(C)(v) of the Code generally only to the extent that the Mortgage
Loans secured by mortgages on multifamily, 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 is 25.9%. 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 Class X Certificates will, and the other Classes of Offered
Certificates may, be treated as having been issued with "original issue
discount" ("OID") for federal income tax reporting purposes. 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 may be issued
with premium, depending on the price at which such Classes of Certificates are
sold. The Prepayment Assumption that will be used in determining the rate of
accrual of original issue discount and amortizable premium, if any, for federal
income tax purposes will be a 0% CPR (as described in the Prospectus) applied to
each Mortgage Loan during any period that voluntary principal prepayments may be
made thereon without a Yield Maintenance Premium being required. For a
description of CPR, see "Yield, Prepayment and Maturity Considerations" in this
Prospectus Supplement. However, the Depositor makes no representation that the
Mortgage Loans 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 Section 1271 to 1275 of the Code
generally addressing the treatment of debt instruments issued with original
issue discount. See "Certain Federal Income Tax Consequences--REMICs--Taxation
of Owners of REMIC Regular Certificates--Original Issue Discount and Premium" in
the Prospectus. Purchasers of the Offered Certificates should be aware that the
OID Regulations and Section 1272(a)(6) of the Code do not adequately address
certain issues relevant to prepayable securities such as the Offered
Certificates. Moreover, the OID Regulations include an antiabuse rule allowing
the IRS to apply or depart from the OID Regulations where necessary or
appropriate to ensure a reasonable tax result in light of applicable statutory
provisions. No assurance can be given that the Internal Revenue Service will not
take a different position as to matters respecting accrual of original issue
discount in respect of Offered Certificates. 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 Class X Certificates.
See "Certain Federal Income Tax Consequences--REMICs--Taxation of Owners of
REMIC Regular Certificates--Original Issue Discount and Premium" in the
Prospectus. Prospective purchasers of the Offered Certificates are advised to
consult their tax advisors concerning the tax treatment of such Certificates,
and the appropriate method of reporting interest and original issue discount
with respect to Offered Certificates.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a holder
of a Certificate, the amount of original issue discount allocable to such period
would be zero and such Certificateholder will be permitted to offset such
negative amount only against future original issue discount (if any)
attributable to such Certificate. Although the matter is not free from doubt, a
holder may be permitted to deduct a loss to the extent that his or her
respective remaining basis in such Certificate exceeds the maximum amount of
future payments to which such Certificateholder is entitled, assuming no further
prepayments of the Mortgage Loans. Any such loss might be treated as a capital
loss.
Certain Classes of Offered Certificates may be treated for federal income
tax purposes as having been issued at a premium. Whether any holder of any such
Class of Certificates will be treated as holding a Certificate with amortizable
bond premium will depend on such Certificateholder's purchase price and the
distributions remaining to be made on such Certificate at the time of its
acquisition by such Certificateholder. On December 31,
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1997, the IRS published in the Federal Register final regulations on the
amortization of bond premium. Those regulations (a) do not apply to regular
interests in a REMIC such as the Offered Certificates, and (b) state that they
are intended to create no inference concerning the amortization of premium of
such instruments. Holders of each such Class of Certificates should consult
their tax advisors regarding the possibility of making an election to amortize
such premium. See "Certain Federal Income Tax Consequences--REMICs--Taxation of
Owners of REMIC Regular Certificates--Premium" in the Prospectus.
To the extent that any Offered Certificate is purchased in this offering
or in the secondary market at not more than a de minimis discount, as defined in
the Prospectus, a holder who receives a payment that is included in the stated
redemption price at maturity (generally, the principal amount) of such
Certificate will recognize gain equal to the excess, if any, of the amount of
the payment over an allocable portion of the holder's adjusted basis in the
Offered Certificate. Such allocable portion of the holder's adjusted basis will
be based upon the proportion that such payment of stated redemption price bears
to the total remaining stated redemption price at maturity. Immediately before
such payment is made, of such Certificate. See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates--Original
Issue Discount and Premium" and "--Sale Exchange or Redemption" in the
Prospectus.
The OID Regulations in some circumstances permit the holder of a debt
instrument to recognize original issue discount under a method that differs from
that used by the issuer. Accordingly, it is possible that holders of Offered
Certificates issued with original issue discount may be able to select a method
for recognizing original issue discount that differs from that used by the
Trustee in preparing reports to Certificateholders and the IRS. Prospective
purchasers of Offered Certificates issued with original issue discount are
advised to consult their tax advisors concerning the treatment of such
Certificates.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to the holders of each Class of Certificates entitled thereto as
described herein. It is not entirely clear under the Code when the amount of a
Prepayment Premium should be taxed to the holders of a Class of Certificates
entitled to a Prepayment Premium. For federal income tax information reporting
purposes, Prepayment Premiums will be treated as income to the holders of a
Class of Certificates entitled to Prepayment Premiums only after the Master
Servicer's actual receipt of a Prepayment Premium to which the holders of such
Class of Certificates is entitled under the terms of the Pooling and Servicing
Agreement, rather than including projected Prepayment Premiums in the
determination of a Certificateholder's projected constant yield to maturity. It
appears that Prepayment Premiums are treated as ordinary income rather than
capital gain. However, the timing and characterization of such income is not
entirely clear and Certificateholders should consult their tax advisors
concerning the treatment of Prepayment Premiums.
Additional Considerations
The Special Servicer is authorized, under certain circumstances in which
doing so is consistent with maximizing the Trust Fund's net after-tax proceeds
from an REO Property, to incur taxes on the Trust Fund in connection with the
operation of such REO Property. Any such taxes imposed on the Trust Fund would
reduce the amount distributable to Certificateholders. See "Servicing of the
Mortgage Loans--Foreclosure" 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.
Fur further information regarding the tax consequences of investing in the
Offered Certificates, see "Certain Federal Income Tax Consequences--REMICs" and
"State Tax Considerations" in the Prospectus.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
LOCATED IN CALIFORNIA
The following discussion summarizes certain legal aspects of mortgage
loans secured by real property in California (approximately 37.1% of the Initial
Pool Balance) which is general in nature. This summary does not
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purport to be complete and is qualified in its entirety by reference to the
applicable federal and state laws governing the Mortgage Loans.
Mortgage Loans in California generally are secured by deeds of trust on
the related real estate. Foreclosure of a deed of trust in California may be
accomplished by a non-judicial trustee's sale under a specific provision in the
deed of trust or by judicial foreclosure. Public notice of either the trustee's
sale or the judgment of foreclosure is given for a statutory period of time
after which the mortgaged real estate may be sold by the Trustee, if foreclosed
pursuant to the Trustee's power of sale, or by court appointed sheriff under a
judicial foreclosure. Following a judicial foreclosure sale, the borrower or its
successor in interest may, for a period of up to one year, redeem the property.
California's "one action rule" requires the lender to exhaust the security
afforded under the deed of trust by foreclosure in an attempt to satisfy the
full debt before bringing a personal action (if otherwise permitted) against the
borrower for recovery of the debt, except in certain cases involving
environmentally impaired real property. California case law has held that acts
such as an offset of an unpledged account or the application of rents from
secured property prior to foreclosure, under some circumstances, constitute
violations of such statutes. Violations of such statutes may result in the loss
of some or all of the security under the loan. Other statutory provisions in
California limit any deficiency judgment (if otherwise permitted) against the
borrower following a judicial sale to the excess of the outstanding debt over
the greater of (i) the fair market value of the property at the time of the
public sale and (ii) the amount of the winning bid in the foreclosure. Further,
under California law, once a property has been sold pursuant to a power-of-sale
clause contained in a deed of trust, the lender is precluded from seeking a
deficiency judgment from the borrower or, under certain circumstances,
guarantors. In certain circumstances, the lender may have a receiver appointed.
ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on employee benefit and
other plans ("Plans") that are subject to ERISA and/or Section 4975 of the Code
and on persons that have certain specified relationships to such Plans ("parties
in interest" under ERISA or "disqualified persons" under Section 4975 of the
Code) (collectively, "Parties in Interest"). ERISA also imposes certain duties
on persons who are fiduciaries of Plans subject to ERISA and prohibits certain
transactions between a Plan and Parties in Interest with respect to such Plan.
Under ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a Plan, and any person who provides
investment advice with respect to such assets for a fee, is a fiduciary of such
Plan.
Plan Assets
A final regulation (the "DOL Regulation") promulgated by the Department of
Labor (the "DOL") defining the term "plan assets" provides, generally, that when
a Plan makes an equity investment in another entity, the underlying assets of
that entity may be considered plan assets unless certain exceptions apply. There
can be no assurance, however, that any of the exceptions set forth in the DOL
Regulation will apply to the purchase or holding of Certificates. Accordingly, a
Plan's investment in Certificates may cause the Mortgage Loans or other assets
constituting, or underlying the assets of, the Trust Fund to be deemed plan
assets. If the Mortgage Loans or other Trust Fund assets constitute plan assets,
then any party exercising management or discretionary control regarding those
assets may be deemed to be a "fiduciary" with respect to those assets, and thus
subject to the fiduciary requirements and prohibited transaction provisions of
ERISA and Section 4975 of the Code with respect to the Mortgage Loans and other
Trust Fund assets. Certain affiliates of the Depositor, the Underwriters, the
Master Servicer, the Special Servicer and certain of their respective affiliates
might be considered or might become fiduciaries or other Parties in Interest
with respect to investing Plans. Moreover, the Trustee, the Master Servicer, the
Special Servicer, the Operating Adviser, any insurer, primary insurer or any
other issuer of a credit support instrument relating to the primary assets in
the Trust Fund or certain of their respective affiliates might be considered
fiduciaries or other Parties in Interest with respect to investing Plans. In the
absence of an applicable exemption, "prohibited transactions" (within the
meaning of ERISA and Section 4975 of the Code) could arise if Certificates were
acquired by, or with "plan assets" of, a Plan with respect to which any such
person is a Party in Interest.
In addition, an insurance company proposing to acquire or hold the
Subordinate Certificates with assets of its general account should consider the
extent to which such acquisition or holding would be subject to the requirements
of ERISA and Section 4975 of the Code under John Hancock Mutual Life Insurance
Co. v. Harris
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Trust and Savings Bank, 510 U.S. 86 (1993), and Section 401(c) of ERISA, as
amended by the Small Business Job Protection Act of 1996, Public Law No.
104-188, and subsequent DOL and judicial guidance. See "--Insurance Company
General Accounts" below.
Special Exemption Applicable to Senior Certificates
With respect to the acquisition and holding of Senior Certificates, the
DOL has granted to the Underwriters individual prohibited transaction exemptions
(collectively, the "Exemptions"), which generally exempt from certain of the
prohibited transaction rules of ERISA and Section 4975 of the Code transactions
relating to (i) the initial purchase, the holding, and the subsequent resale by
Plans of Certificates evidencing interests in pass-through trusts and (ii)
transactions in connection with the servicing, management and operation of such
trusts, provided that the assets of such trusts consist of certain secured
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The assets covered by the Exemption include
mortgage loans such as the Mortgage Loans and fractional undivided interests in
such Loans.
Among the conditions that must be satisfied for the Exemptions to apply
are the following:
(1) The acquisition of the Certificates by a Plan must be on terms
(including the price for the Certificates) that are at least as favorable
to the Plan as they would be in an arm's-length transaction with an
unrelated party;
(2) The rights and interests evidenced by the Certificates acquired
by the Plan are not subordinated to the rights and interests evidenced by
other Certificates of the Trust Fund;
(3) The Certificates acquired by the Plan must have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from Standard & Poor's Ratings Services, Fitch,
Moody's Investors Service, Inc. or DCR;
(4) The sum of all payments made to the Underwriters in connection
with the Distribution of the Certificates must represent not more than
reasonable compensation for underwriting the Certificates; the sum of all
payments made to and retained by the Depositor in consideration of the
assignment of the Mortgage Loans to the Trust Fund must represent not more
than the fair market value of such Mortgage Loans; the sum of all payments
made to and retained by the Master Servicer, the Special Servicer, and any
sub-servicer must represent not more than reasonable compensation for such
person's services under the Pooling and Servicing Agreement or other
relevant servicing agreement and reimbursement of such person's reasonable
expenses in connection therewith; and
(5) The Plan investing in the Certificates must be an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the 1933 Act.
Moreover, the Exemptions provide relief from certain self-dealing/conflict
of interest prohibited transactions, but only if, among other requirements, (i)
the investing Plan fiduciary (or its affiliates) is an obligor with respect to
five percent or less of the fair market value of the obligations contained in
the trust; (ii) the Plan's investment in certificates does not exceed 25 percent
of all of the certificates outstanding at the time of the acquisition; and (iii)
immediately after the acquisition, no more than 25 percent of the assets of the
Plan are invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity.
The Depositor believes that the Exemptions will apply to the acquisition
and holding of Senior Certificates by Plans or persons acting on behalf of or
with "plan assets" of Plans, and that all conditions of the Exemptions, other
than those within the control of the investing Plans (or Plan investors), have
been met. Upon request, the Underwriters will deliver to any fiduciary or other
person considering investing "plan assets" of any Plan in the Certificates a
list identifying each borrower that is the obligor under each Mortgage Loan that
constitutes more than five percent of the aggregate principal balance of the
assets of the Trust Fund.
S-86
<PAGE> 86
Because the characteristics of the Subordinate Certificates do not meet
the requirements of the Exemptions, the purchase or holding of such Certificates
by, on behalf of or with "plan assets" of any Plan may result in a non-exempt
prohibited transaction or the imposition of excise taxes or civil penalties
under ERISA and/or Section 4975 of the Code. Accordingly, the Subordinate
Certificates may not be purchased by, transferred to or held by a Plan or any
person using "plan assets" of any Plan to effect such acquisition or holding.
Each person that acquires or holds any Subordinate Certificates shall be deemed
to have represented and warranted to the Depositor, the Trustee and the Master
Servicer that it satisfies the foregoing limitation, provided that an insurance
company investing solely assets of its general account may acquire and hold the
Subordinate Certificates subject to the limitations described in "--Insurance
Company General Accounts" below.
Insurance Company General Accounts
The Small Business Job Protection Act of 1996 added a new Section 401(c)
to ERISA ("Section 401(c)"), which provides certain exemptive relief from the
provisions of Part 4 of Title I of ERISA and Section 4975 of the Code, including
the prohibited transaction restrictions imposed by ERISA and the related excise
taxes imposed by the Code, for transactions involving an insurance company
general account. The DOL issued proposed regulations under Section 401(c) on
December 22, 1997, but the required final regulations have not been issued as of
the date hereof. Section 401(c) required the DOL to issue final regulations (the
"401(c) Regulations") no later than December 31, 1997 to provide guidance for
purposes of determining, in cases where insurance policies or annuity contracts
supported by an insurer's general account are issued to or for the benefit of a
Plan on or before December 31, 1998, which general account assets constitute
Plan Assets. Section 401(c) generally provides that, until the date which is 18
months after the 401(c) Regulations become final, no person shall be subject to
liability under Part 4 of Title I of ERISA and Section 4975 of the Code on the
basis of a claim that the assets of an insurance company general account
constitute "plan assets" of any Plan, except (i) as otherwise provided by the
DOL in the 401(c) Regulations to prevent avoidance of the Regulations or (ii) as
determined in an action brought by the DOL for certain breaches of fiduciary
duty which would also constitute a violation of federal or state criminal law.
Any assets of an insurance company general account which support insurance
policies or annuity contracts issued to Plans after December 31, 1998, or on or
before that date for which the insurer does not comply with the 401(c)
Regulations, may be treated as "plan assets" of such Plans. Because Section
401(c) does not relate to insurance company separate accounts, separate account
assets continue to be treated as "plan assets" of any Plan that is invested in
such separate account. Insurance companies contemplating the investment of
general account assets in the Subordinate Certificates should consult with their
legal counsel with respect to the applicability of Section 401(c), including the
general account's ability to continue to hold such Certificates after the date
which is 18 months after the date the 401(c) Regulations become final.
Accordingly, any insurance company that acquires or holds any Subordinate
Certificate shall be deemed to have represented and warranted to the Depositor,
the Trustee and the Master Servicer that (i) such acquisition and holding is
permissible under applicable law, will not constitute or result on a non-exempt
prohibited transaction under ERISA or Section 4975 of the Code, and will not
subject the Company, the Trustee or the Master Servicer to any obligation in
addition to those undertaken in the Pooling and Servicing Agreement, and (ii)
the statements made in either of the following two paragraphs is correct:
(a) The source of funds used to acquire and hold such Certificates
is an "insurance company general account" (as defined in DOL Prohibited
Transaction Class Exemption ("PTCE") 95-60) and the conditions set forth
in Sections I and III of PTCE 95-60 have been satisfied; or
(b) (1) The source of funds used to acquire and hold such
Certificates is an insurance company general account, (2) applicable
requirements of Section 401(c) and the 401(c) Regulations to be
promulgated thereunder have been satisfied and will continue to be
satisfied, and (3) the insurance company represents that it understands
that the operation of the general account after December 31, 1998 may
affect its ability to continue to hold such Certificates after the date
which is 18 months after the 401(c) Regulations become final, and if the
assets of the general account then include "plan assets" of any Plan, it
will dispose of such Certificates prior to the date which is 18 months
after the 401(c) Regulations become final, unless the continued holding of
such Certificates is then permissible under PTCE 95-60, another PTCE or an
exception under Section 401(c).
S-87
<PAGE> 87
General Investment Considerations
Prospective Plan investors should consult with their legal counsel
concerning the impact of ERISA and Section 4975 of the Code, the applicability
of the Exemption or other exemptive relief, and the potential consequences to
their specific circumstances, prior to making an investment in the Certificates.
Moreover, each Plan fiduciary should determine whether, under the general
fiduciary standards of ERISA regarding prudent investment procedure and
diversification, an investment in the Certificates is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("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 from the
Sellers and to the payment of certain expenses in connection with the issuance
of the Certificates.
PLAN OF DISTRIBUTION
The Depositor has entered into an underwriting agreement (the
"Underwriting Agreement") with Morgan Stanley & Co., Incorporated, an affiliate
of the Depositor, and Bear, Stearns & Co. Inc. (collectively, the
"Underwriters"). Subject to the terms and conditions set forth in the
Underwriting Agreement, the Depositor has agreed to sell to each Underwriter,
and each Underwriter has agreed severally to purchase from the Depositor, the
percentage of the respective aggregate Certificate Balance or Notional Amount of
each Class of Offered Certificates set forth below.
<TABLE>
<CAPTION>
Underwriter Class A-1 Class A-2 Class X Class B Class C Class D Class E
- ----------- --------- --------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Morgan Stanley
& Co., Incorporated
Bear, Stearns & Co.,
Incorporated
Total............ 100% 100% 100% 100% 100% 100% 100%
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters severally will be obligated to purchase all of the Offered
Certificates if any are purchased. In the event of a default by an Underwriter,
the Underwriting Agreement provides that the
S-88
<PAGE> 88
purchase commitment of the non-defaulting Underwriter may be increased. Proceeds
to the Depositor from the sale of the Offered Certificates, before deducting
expenses payable by the Depositor, will be approximately $__________________,
plus accrued interest.
The Underwriters have advised the Depositor that they propose to offer the
Offered Certificates from time to time for sale in one or more negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The Underwriters may effect such transactions by selling such Classes of
Offered Certificates to or through dealers and such dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriters and any purchasers of such Classes of Offered Certificates
for whom they may act as agent.
The Offered Certificates are offered by the Underwriters when, as and if
issued by 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 June __, 1998, which is
the fifth business day following the date of pricing of the Certificates. Under
Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the
secondary market generally are required to settle in three business days, unless
the parties to any such trade expressly agree otherwise. Accordingly, purchasers
who wish to trade Offered Certificates in the secondary market prior to such
delivery should specify a longer settlement cycle, or should refrain from
specifying a shorter settlement cycle, to the extent that failing to do so would
result in a settlement date that is earlier than the date of delivery of such
Offered Certificates.
The Underwriters and any dealers that participate with the Underwriters in
the distribution of the Offered Certificates may be deemed to be underwriters,
and any discounts or commissions received by them and any profit on the resale
of such Classes of Offered Certificates by them may be deemed to be underwriting
discounts or commissions, under the Securities Act of 1933, as amended.
The Depositor has agreed to indemnify the Underwriters against civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or contribute to payments the Underwriters may be required to make in respect
thereof.
The Underwriters currently intend to make a secondary market in the
Offered Certificates, but they are not obligated to do so.
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 Sidley & Austin, New York, New York. Certain legal matters
with respect to the Offered Certificates will be passed upon for the
Underwriters by Sidley & Austin, New York, New York. Certain legal matters will
be passed upon for Wells Fargo by Orrick, Herrington & Sutcliffe LLP, San
Francisco, California, and for MSMC by Sidley & Austin, New York, New York.
S-89
<PAGE> 89
RATINGS
It is a condition of the issuance of the Offered Certificates that they
receive the following credit ratings from DCR and Fitch:
<TABLE>
<CAPTION>
CLASS DCR Fitch
- ----- --- -----
<S> <C> <C>
Class A-1...........................................
Class A-2...........................................
Class X.............................................
Class B.............................................
Class C.............................................
Class D.............................................
Class E.............................................
</TABLE>
The ratings of the Offered Certificates address the likelihood of the
timely payment of interest and the ultimate payment of principal, if any, due on
the Offered Certificates by the 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, voluntary or involuntary, 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 or default interest 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 Class X 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 Class X Certificates consist only of
interest. If all of the Mortgage Loans were to prepay in the initial month, with
the result that holders of the Class X Certificates 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/AAA" ratings received on the Class
X Certificates. The related Notional Amount upon which interest in respect of
the Class X Certificates is calculated will be 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 Notional Amount, but only the obligation to pay interest timely on such
Notional Amount of such Certificates as so reduced from time to time.
Accordingly, the ratings of the Class X 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.
S-90
<PAGE> 90
INDEX OF PRINCIPAL DEFINITIONS
Page(s) on which
term is defined
in the Prospectus
Term Supplement
- ---- -----------------
Accrued Certificate Interest........................................S-20, S-48
Administrative Cost Rate..................................................S-27
Advance Rate........................................................S-27, S-55
Advances............................................................S-27, S-55
Appraisal Event.....................................................S-24, S-51
Appraisal Reduction.................................................S-24, S-52
Assumed Scheduled Payment...........................................S-23, S-50
Available Distribution Amount.......................................S-18, S-47
Balloon Loans.............................................................S-32
Balloon LTV...............................................................S-73
Balloon LTV Ratio.........................................................S-73
Balloon Payment.....................................................S-32, S-41
CBE.......................................................................S-67
CEDEL...............................................................S-15, S-44
Certificate Balance.................................................S-16, S-45
Certificate Owner...................................................S-15, S-44
Certificateholders..................................................S-34, S-43
Certificates..................................................S-12, S-43, S-55
Class...............................................................S-12, S-43
Class A Certificates................................................S-12, S-43
Closing Date........................................................S-14, S-43
Code......................................................................S-34
Collection Period.........................................................S-14
Commission.................................................................S-6
Compensating Interest Payment.......................................S-25, S-54
Controlling Class...................................................S-14, S-82
CRIIMI MAE................................................................S-80
Cut-Off Date..............................................................S-14
Cut-Off Date Balance......................................................S-30
DCR.......................................................................S-29
Debt Service Coverage Ratios..............................................S-72
Definitive Certificate..............................................S-15, S-44
Depositor.................................................................S-12
Determination Date........................................................S-14
Discount Rate.............................................................S-51
Distributable Certificate Interest..................................S-21, S-49
Distribution Date..............................................S-3, S-14, S-46
Document Defect...........................................................S-76
DOL.......................................................................S-87
DOL Regulation............................................................S-87
DSCR......................................................................S-72
DTC.................................................................S-15, S-44
Due Date..................................................................S-25
ERISA.....................................................................S-35
Euroclear...........................................................S-15, S-44
Expense Losses............................................................S-53
FASIT.....................................................................S-84
Final Rated Distribution Date.............................................S-29
Fitch.....................................................................S-29
S-91
<PAGE> 91
Hospitality Loans.........................................................S-39
Initial Pool Balance.................................................S-3, S-12
Insurance Proceeds........................................................S-50
Interest Accrual Period...................................................S-50
Interest Only Certificates..........................................S-12, S-44
Liquidation Fee...........................................................S-80
Liquidation Proceeds......................................................S-50
Loan-to-Value.............................................................S-73
Lock-out Period.....................................................S-32, S-69
LTV.......................................................................S-73
Master Servicer...........................................................S-13
Material Breach...........................................................S-76
Material Document Defect..................................................S-76
Money Term................................................................S-24
Morgan Stanley Loans................................................S-13, S-68
Mortgage..................................................................S-68
Mortgage File.............................................................S-74
Mortgage Loan.............................................................S-12
Mortgage Loan Purchase Agreement....................................S-13, S-68
Mortgage Loans.......................................................S-3, S-68
Mortgage Note.............................................................S-68
Mortgage Pool..............................................................S-3
Mortgaged Property..................................................S-30, S-68
MSMC.................................................................S-3, S-13
Net Aggregate Prepayment Interest Shortfall.........................S-26, S-54
Net Mortgage Rate...................................................S-17, S-46
Non-30/360 Loan.....................................................S-18, S-46
Norwest Bank..............................................................S-59
Notional Amount.....................................................S-16, S-45
Offered Certificates................................................S-12, S-44
OID.......................................................................S-85
Operating Adviser...................................................S-14, S-81
P&I Advance...............................................................S-55
P&I Advances..............................................................S-27
Participants..............................................................S-44
Parties in Interest.......................................................S-87
Pass-Through Rate.........................................................S-45
Percentage Interest.......................................................S-47
Percentage Premium..................................................S-32, S-69
Permitted Cure Period.....................................................S-76
Plans.....................................................................S-87
Pooling and Servicing Agreement...........................................S-12
Prepayment Assumption.....................................................S-35
Prepayment Interest Excess..........................................S-25, S-54
Prepayment Interest Shortfall.......................................S-25, S-53
Prepayment Premium..................................................S-32, S-69
Principal Balance Certificates.................................S-3, S-16, S-45
Principal Distribution Amount.......................................S-22, S-50
Principal Prepayments.....................................................S-50
Principal Window..........................................................S-11
Private Certificates......................................................S-44
PTCE......................................................................S-89
Purchase Price............................................................S-76
Qualifying Substitute Mortgage Loan.......................................S-76
Rating Agencies...........................................................S-29
Realized Losses...........................................................S-53
S-92
<PAGE> 92
Record Date.........................................................S-14, S-47
Rehabilitated Mortgage Loan...............................................S-79
REMIC................................................................S-4, S-34
REMIC I..............................................................S-4, S-34
REMIC II.............................................................S-4, S-34
REMIC III............................................................S-4, S-34
REMIC Regular Certificates..........................................S-12, S-44
REO Income................................................................S-50
REO Property..................................................S-12, S-43, S-78
REO Tax...................................................................S-84
Residual Certificates...............................................S-12, S-44
Scheduled Payment...................................................S-22, S-50
Scheduled Principal Balance...............................................S-46
Seller.....................................................................S-3
Sellers...................................................................S-13
Senior Certificates.................................................S-12, S-44
Servicing Advances..................................................S-27, S-55
Servicing Fee.............................................................S-79
Servicing Fee Rate........................................................S-79
Servicing Standard........................................................S-77
Servicing Transfer Event..................................................S-78
SMMEA...............................................................S-36, S-90
Special Servicer..........................................................S-13
Special Servicer Compensation.............................................S-80
Special Servicing Fee.....................................................S-80
Special Servicing Standby Fee.............................................S-80
Special Servicing Standby Fee Rate........................................S-80
Specially Serviced Mortgage Loan..........................................S-78
Specially Serviced Mortgage Loans.........................................S-78
Subordinate Certificates............................................S-12, S-44
Subordination.............................................................S-15
Sub-Servicer..............................................................S-77
Treasury Rate.............................................................S-51
Trust Fund..........................................................S-12, S-43
Trustee...................................................................S-13
Trustee Fee...............................................................S-60
Underwritable Cash Flow...................................................S-72
Underwriters..............................................................S-90
Underwriting Agreement....................................................S-90
Unpaid Interest.....................................................S-22, S-49
Weighted Average Net Mortgage Rate..................................S-17, S-46
Wells Fargo..........................................................S-3, S-13
Wells Fargo Loans...................................................S-13, S-68
Yield Maintenance Premium.................................................S-69
S-93
<PAGE> 93
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE BALANCES
<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
Cut-Off Date Balance ($) Loans Balance ($) (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 1,000,000 17 $14,490,058 1.36% 7.372% 125 1.74x 55.1% 38.0%
1,000,001 to 2,000,000 55 84,941,832 8.00 7.295 146 1.57 64.0 38.9
2,000,001 to 3,000,000 39 94,882,063 8.93 7.275 132 1.62 64.4 44.6
3,000,001 to 4,000,000 36 127,558,369 12.01 7.128 123 1.61 67.9 56.5
4,000,001 to 5,000,000 30 134,053,605 12.62 7.324 128 1.62 67.5 52.2
5,000,001 to 6,000,000 11 60,058,111 5.66 7.286 112 1.62 63.5 54.4
6,000,001 to 7,000,000 3 20,067,624 1.89 7.034 118 1.76 62.4 51.6
7,000,001 to 8,000,000 5 38,157,105 3.59 6.995 97 1.53 67.6 59.5
8,000,001 to 9,000,000 8 69,003,875 6.50 7.373 125 1.54 68.5 54.5
9,000,001 to 10,000,000 2 18,467,421 1.74 7.020 119 1.67 66.0 54.9
10,000,001 to 15,000,000 9 103,844,406 9.78 7.168 110 1.67 68.2 59.4
15,000,001 to 20,000,000 3 50,804,566 4.78 7.562 168 1.77 53.4 25.5
20,000,001 to 25,000,000 2 42,699,953 4.02 7.977 207 1.38 63.1 39.9
25,000,001 and above 6 202,974,121 19.11 7.134 163 1.38 72.2 48.3
- -------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 226 $1,062,003,110 100.00% 7.259% 137 1.57x 66.6% 49.5%
===============================================================================================================================
Min: $543,018
Max: $51,891,079
Average: $4,699,129
</TABLE>
I-1
<PAGE> 94
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
State Loans Balance ($) (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 99 $393,937,735 37.09% 7.273% 135 1.65x 63.8% 47.1%
Colorado 11 76,140,032 7.17 7.101 147 1.63 67.1 42.9
New Jersey 3 58,145,852 5.48 7.180 116 1.39 72.9 63.7
Florida 15 57,975,271 5.46 7.300 113 1.39 71.6 60.8
District of Columbia 1 51,891,079 4.89 7.460 298 1.27 69.2 4.4
Arizona 9 41,916,809 3.95 7.089 119 1.70 68.0 57.6
Virginia 3 41,291,886 3.89 7.145 115 1.32 73.1 63.0
Texas 11 39,023,668 3.67 6.800 127 1.84 61.4 46.2
Indiana 6 28,988,027 2.73 7.126 132 1.41 67.2 48.5
Wisconsin 6 27,367,263 2.58 7.262 117 1.50 73.4 62.8
Ohio 7 25,073,930 2.36 7.280 129 1.39 73.9 62.7
Maryland 3 22,994,627 2.17 7.604 116 1.51 70.1 59.4
Michigan 4 19,838,979 1.87 7.237 133 1.42 67.0 50.9
Minnesota 3 19,201,724 1.81 7.366 118 1.54 73.8 59.3
New York 1 17,404,566 1.64 8.050 135 2.56 24.9 21.5
Georgia 5 15,507,894 1.46 7.279 126 1.43 72.1 61.1
Washington 5 15,403,949 1.45 7.159 119 1.62 58.8 48.0
Rhode Island 1 13,580,662 1.28 7.080 118 1.39 79.4 69.5
North Carolina 5 12,109,429 1.14 7.228 116 1.38 75.8 66.7
Nevada 6 9,769,645 0.92 7.322 124 1.60 69.9 56.3
Utah 3 9,180,490 0.86 7.343 147 1.44 67.0 47.6
New Hampshire 1 8,570,974 0.81 7.605 116 1.47 69.7 57.0
New Mexico 1 8,362,227 0.79 7.655 116 1.51 69.7 57.1
Missouri 2 7,838,050 0.74 7.449 118 1.51 69.1 50.8
Maine 2 5,713,982 0.54 7.605 116 1.46 69.7 57.0
Illinois 2 5,289,681 0.50 7.234 117 1.26 78.4 69.0
Oregon 3 5,288,133 0.50 7.127 117 1.68 55.7 45.8
West Virginia 1 5,284,861 0.50 7.740 116 1.43 61.5 53.8
Alabama 1 5,281,235 0.50 6.685 57 2.70 40.6 37.2
Massachusetts 2 4,637,799 0.44 7.466 117 1.70 67.5 59.1
Vermont 1 3,289,874 0.31 7.390 116 1.35 72.5 64.0
South Carolina 2 3,111,493 0.29 7.149 187 1.23 79.5 21.9
Kansas 1 2,591,283 0.24 7.760 115 1.31 84.7 75.5
- -------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 226 $1,062,003,110 100.00% 7.259% 137 1.57x 66.6% 49.5%
===============================================================================================================================
</TABLE>
I-2
<PAGE> 95
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Property Type Loans Balance ($) (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail 60 $276,822,001 26.07% 7.335% 137 1.59x 66.5% 51.9%
Multifamily 61 274,904,331 25.89 7.024 127 1.55 68.6 55.5
Office 25 188,135,629 17.72 7.263 167 1.49 67.0 41.1
Hospitality 20 125,573,430 11.82 7.626 123 1.66 63.9 49.1
Industrial 37 97,485,000 9.18 7.254 119 1.54 64.6 48.0
Self Storage 13 48,490,255 4.57 7.074 121 1.80 64.2 49.9
Mobile Home Park 8 27,907,616 2.63 7.167 104 1.52 65.4 57.3
Other 2 22,684,848 2.14 7.656 214 1.28 72.6 16.7
- ----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 226 $1,062,003,110 100.00% 7.259% 137 1.57x 66.6% 49.5%
==================================================================================================================================
</TABLE>
I-3
<PAGE> 96
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Mortgage Rate (%) Loans Balance ($) (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.501 to 7.000 64 $300,506,311 28.30% 6.844% 124 1.76x 64.3% 51.5%
7.001 to 7.500 102 511,140,633 48.13 7.246 138 1.48 68.8 50.5
7.501 to 8.000 52 194,898,435 18.35 7.672 143 1.45 68.0 47.5
8.001 to 8.500 8 55,457,731 5.22 8.172 169 1.77 54.4 37.3
- ----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 226 $1,062,003,110 100.00% 7.259% 137 1.57x 66.6% 49.5%
==================================================================================================================================
Min: 6.540%
Max: 8.350%
Weighted Average: 7.259%
</TABLE>
I-4
<PAGE> 97
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Original Term to Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Stated Maturity (mos) Loans Balance ($) (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 and below 4 $ 26,954,394 2.54% 7.125% 57 2.12x 50.0% 45.3%
61 to 120 180 813,655,119 76.62 7.182 116 1.55 68.6 57.7
121 to 180 26 99,493,306 9.37 7.548 168 1.85 53.2 28.9
181 to 240 15 70,009,212 6.59 7.651 236 1.37 67.4 19.2
241 to 300 1 51,891,079 4.89 7.460 298 1.27 69.2 4.4
- ----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 226 $1,062,003,110 100.00% 7.259% 137 1.57x 66.6% 49.5%
==================================================================================================================================
Min: 59
Max: 300
Weighted Average: 140
</TABLE>
I-5
<PAGE> 98
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Remaining Term to Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Stated Maturity (mos) Loans Balance ($) (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 and below 5 $ 29,231,118 2.75% 7.190% 57 2.07x 51.0% 46.2%
61 to 120 179 811,378,395 76.40 7.179 117 1.55 68.6 57.7
121 to 180 26 99,493,306 9.37 7.548 168 1.85 53.2 28.9
181 to 240 15 70,009,212 6.59 7.651 236 1.37 67.4 19.2
241 to 300 1 51,891,079 4.89 7.460 298 1.27 69.2 4.4
- ----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 226 $1,062,003,110 100.00% 7.259% 137 1.57x 66.6% 49.5%
==================================================================================================================================
Min: 55
Max: 298
Weighted Average: 137
</TABLE>
I-6
<PAGE> 99
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL AMORTIZATION TERM
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Original Amortization Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Term (mos) Loans Balance ($) (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balloon Loan 201 $ 944,724,296 88.96% 7.241% 122 1.59x 66.9% 55.4%
120 1 2,232,483 0.21 6.800 55 2.58 24.8 15.0
180 2 1,487,075 0.14 6.881 117 2.04 42.1 19.7
240 16 41,030,750 3.86 7.423 119 1.63 64.5 43.9
264 2 4,021,179 0.38 7.829 118 1.87 54.4 41.3
270 1 1,787,894 0.17 7.790 115 1.28 63.9 49.3
300 89 340,299,967 32.04 7.331 119 1.64 63.4 50.6
324 1 2,538,559 0.24 7.940 115 1.40 74.7 62.9
348 1 25,500,000 2.40 7.310 113 1.29 77.7 67.7
360 88 525,826,389 49.51 7.158 126 1.55 69.2 59.1
Fully-Amortizing Loan 25 $ 117,278,815 11.04% 7.407% 251 1.44x 64.5% 2.6%
120 1 2,075,220 0.20 6.910 116 1.29 51.9 0.0
180 12 22,996,363 2.17 7.340 178 1.90 54.4 0.3
228 1 1,995,883 0.19 7.210 228 1.06 84.9 0.0
240 10 38,320,270 3.61 7.412 238 1.42 63.9 1.9
300 1 51,891,079 4.89 7.460 298 1.27 69.2 4.4
- ----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 226 $1,062,003,110 100.00% 7.259% 137 1.57x 66.6% 49.5%
==================================================================================================================================
Min: 120
Max: 360
Weighted Average: 323
</TABLE>
I-7
<PAGE> 100
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Debt Service Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Coverage Ratio (x) Loans Balance ($) (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.15 and below 2 $ 2,989,723 0.28% 7.243% 211 1.08x 78.7% 0.0%
1.16 to 1.25 13 65,270,150 6.15 7.795 161 1.22 74.5 54.5
1.26 to 1.35 28 212,549,068 20.01 7.357 173 1.29 72.6 42.6
1.36 to 1.50 74 357,388,778 33.65 7.225 121 1.43 70.6 57.5
1.51 to 1.75 54 210,499,147 19.82 7.233 133 1.59 66.1 50.6
1.76 to 2.00 28 100,166,143 9.43 6.993 123 1.88 61.5 49.0
2.01 and above 27 113,140,102 10.65 7.158 118 2.44 43.8 34.4
- ----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 226 $1,062,003,110 100.00% 7.259% 137 1.57x 66.6% 49.5%
==================================================================================================================================
Min: 1.06x
Max: 5.25x
Weighted Average: 1.57x
</TABLE>
I-8
<PAGE> 101
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Cut-Off Date Loan-to- Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Value Ratio (%) Loans Balance ($) (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.1 to 30.0 3 $ 21,731,520 2.05% 7.783% 122 2.82x 24.4% 20.4%
30.1 to 40.0 5 11,507,116 1.08 7.096 147 3.14 37.8 20.1
40.1 to 50.0 19 45,686,258 4.30 7.029 135 2.15 46.3 29.1
50.1 to 60.0 37 151,142,826 14.23 7.237 131 1.79 54.8 38.4
60.1 to 70.0 85 381,596,176 35.93 7.260 149 1.51 67.0 45.5
70.1 to 80.0 73 439,670,072 41.40 7.263 128 1.38 74.9 61.0
80.1 to 90.0 4 10,669,142 1.00 7.494 159 1.29 84.4 57.7
- ----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 226 $1,062,003,110 100.00% 7.259% 137 1.57x 66.6% 49.5%
==================================================================================================================================
Min: 20.1%
Max: 85.8%
Weighted Average: 66.6%
</TABLE>
I-9
<PAGE> 102
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Balloon Loan-to- Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Value Ratio (%) Loans Balance ($) (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0 17 $ 35,402,205 3.33% 7.166% 200 1.77x 57.0% 0.0%
0.1 to 10.0 8 81,876,609 7.71 7.511 272 1.30 67.8 3.8
10.1 to 20.0 3 5,271,012 0.50 6.723 77 3.55 25.7 16.6
20.1 to 30.0 5 21,861,292 2.06 7.888 145 2.50 28.6 21.9
30.1 to 40.0 18 68,201,567 6.42 7.314 141 2.00 48.6 35.1
40.1 to 50.0 44 168,846,330 15.90 7.352 136 1.71 61.2 45.6
50.1 to 60.0 69 284,774,443 26.81 7.247 116 1.54 67.1 55.7
60.1 to 70.0 55 363,624,310 34.24 7.130 117 1.42 74.6 64.7
70.1 to 80.0 7 32,145,342 3.03 7.348 118 1.37 80.5 71.0
- ----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 226 $1,062,003,110 100.00% 7.259% 137 1.57x 66.6% 49.5%
==================================================================================================================================
Min: 0.0%
Max: 75.5%
Weighted Average: 49.5%
</TABLE>
I-10
<PAGE> 103
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.
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Locked Out/Defeasance 99.79% 99.59% 97.34% 54.13% 50.98%
Yield Maintenance 0.21% 0.41% 2.66% 45.66% 48.81%
Penalty Points
5.00% and greater 0.00% 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.00% 0.00% 0.00% 0.00% 0.00%
3.00% to 3.99% 0.00% 0.00% 0.00% 0.00% 0.00%
2.00% to 2.99% 0.00% 0.00% 0.00% 0.21% 0.00%
1.00% to 1.99% 0.00% 0.00% 0.00% 0.00% 0.21%
Open 0.00% 0.00% 0.00% 0.00% 0.00%
===========================================================================================================
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00%
Mortgage Pool Balance
Outstanding (in millions) $1,062.00 $1,048.20 $1,033.39 $1,017.30 $1,000.01
--------- --------- --------- --------- ---------
% of Initial Pool Balance 100.00% 98.70% 97.31% 95.79% 94.16%
Percentage of Mortgage Pool by Prepayment Restriction
Assuming No Prepayments
- -----------------------------------------------------------------------------------------------------------
Prepayment Restriction 60 Mo. 72 Mo. 84 Mo. 96 Mo. 108 Mo. 120 Mo.
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Locked Out/Defeasance 18.44% 18.46% 18.67% 18.21% 18.25% 27.02%
Yield Maintenance 81.20% 81.17% 80.96% 81.42% 76.78% 68.56%
Penalty Points
5.00% and greater 0.36% 0.00% 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.00% 0.37% 0.00% 0.00% 0.00% 0.00%
3.00% to 3.99% 0.00% 0.00% 0.37% 0.00% 0.00% 0.00%
2.00% to 2.99% 0.00% 0.00% 0.00% 0.37% 0.00% 3.50%
1.00% to 1.99% 0.00% 0.00% 0.00% 0.00% 0.38% 0.92%
Open 0.00% 0.00% 0.00% 0.00% 4.60% 0.00%
===========================================================================================================
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Mortgage Pool Balance
Outstanding (in millions) $ 955.51 $ 936.44 $ 907.27 $ 885.31 $ 861.68 $ 169.61
--------- --------- --------- --------- --------- ---------
% of Initial Pool Balance 89.97% 88.18% 85.43% 83.36% 81.14% 15.97%
</TABLE>
Notes: (1) For three of the Mortgage Loans (1.74% of the Cut-Off Date
Balance) which allow borrowers to choose between Defeasance and
Yield Maintenance, Yield Maintenance is assumed.
I-11
<PAGE> 104
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 105
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./ Mortgage
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3) Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1 MS 1201 Pennsylvania Avenue $51,891,079 $118 7.460%
- -----------------------------------------------------------------------------------------------------------------------------------
2 MS Courthouse Plaza II $35,358,184 $138 7.190%
- -----------------------------------------------------------------------------------------------------------------------------------
3 WF Marina del Rey Stor It (2I) $6,800,000 $5,053 6.940%
4 WF Santa Clara Extra Storage (2I) $8,500,000 $5,053 6.940%
5 WF Aliso Viejo Stor It (2I) $4,400,000 $5,053 6.940%
6 WF Mission Viejo Stor It (2I) $3,800,000 $5,053 6.940%
7 WF Foothill Ranch Stor It (2I) $3,400,000 $5,053 6.940%
8 WF Redwood City Extra Storage (2I) $4,600,000 $5,053 6.940%
9 WF San Juan Capistrano Stor It (2I) $3,100,000 $5,053 6.940%
- -----------------------------------------------------------------------------------------------------------------------------------
10 WF Westminster City Center Marketplace (16) $30,293,029 $89 6.690%
- -----------------------------------------------------------------------------------------------------------------------------------
11 WF Gateway Plaza Shopping Center $29,974,905 $256 6.897%
- -----------------------------------------------------------------------------------------------------------------------------------
12 MS Atrium IV $29,956,924 $116 7.040%
- -----------------------------------------------------------------------------------------------------------------------------------
13 WF Fountainview Village Apartments $25,500,000 $26,289 7.310%
- -----------------------------------------------------------------------------------------------------------------------------------
14 WF Centre on Seventeenth $21,899,953 $108 8.260%
- -----------------------------------------------------------------------------------------------------------------------------------
15 WF Catamaran Resort Hotel $20,800,000 $66,454 7.680%
- -----------------------------------------------------------------------------------------------------------------------------------
16 WF AMC Theatres Highlands Ranch (10) $18,100,000 $201 7.610%
- -----------------------------------------------------------------------------------------------------------------------------------
18 MS 48-18 Northern Boulevard $17,404,566 $80 8.050%
- -----------------------------------------------------------------------------------------------------------------------------------
19 WF Fleischhauer Student Housing Portfolio $15,300,000 $55,636 6.950%
- -----------------------------------------------------------------------------------------------------------------------------------
20 MS Independence Park Shopping Center $13,580,662 $69 7.080%
- -----------------------------------------------------------------------------------------------------------------------------------
21 MS Normandy Apartments $11,960,400 $39,343 7.020%
- -----------------------------------------------------------------------------------------------------------------------------------
22 MS Beachwood Apartments $11,512,624 $30,619 7.120%
- -----------------------------------------------------------------------------------------------------------------------------------
23 WF Cupertino Town Center (94) $11,480,679 $77 6.890%
- -----------------------------------------------------------------------------------------------------------------------------------
24 WF Orchard Mesa Apartments $11,369,155 $16,335 6.540%
- -----------------------------------------------------------------------------------------------------------------------------------
25 MS Bel Air Town Center $10,954,261 $134 7.440%
- -----------------------------------------------------------------------------------------------------------------------------------
26 MS Stratford Wood Apartments $10,545,456 $35,507 7.210%
- -----------------------------------------------------------------------------------------------------------------------------------
27 WF Pacific Terrace Inn $10,455,248 $143,223 7.990%
- -----------------------------------------------------------------------------------------------------------------------------------
28 WF Goldorado Shopping Center (2A) $8,658,992 $92 7.350%
29 WF Hollywood Video - Pad (2A) $1,098,823 $92 7.890%
- -----------------------------------------------------------------------------------------------------------------------------------
30 WF Camelot Village (32), (37) $9,300,000 $18,164 6.725%
- -----------------------------------------------------------------------------------------------------------------------------------
31 WF Vaz-Lodi (34), (77), (160) $9,167,421 $23 7.320%
- -----------------------------------------------------------------------------------------------------------------------------------
32 WF The Carlyle (30), (37) $8,950,000 $49,722 6.725%
- -----------------------------------------------------------------------------------------------------------------------------------
33 MS Holiday Inn - College Park (35), (36), (65), (68), (80) $8,794,163 $39,793 7.655%
- -----------------------------------------------------------------------------------------------------------------------------------
34 WF Ball Post - Fairfield (31), (77), (160) $8,559,911 $26 7.420%
- -----------------------------------------------------------------------------------------------------------------------------------
35 MS Courtyard by Marriott - Portsmouth (33), (36), (65), (68), (80) $8,570,974 $78,633 7.605%
- -----------------------------------------------------------------------------------------------------------------------------------
36 MS Courtyard by Marriott - Albuquerque (33), (35), (65), (68), (80) $8,362,227 $55,748 7.655%
- -----------------------------------------------------------------------------------------------------------------------------------
37 WF Rolling Hills Place Apartments (30), (32) $7,900,000 $20,573 6.725%
- -----------------------------------------------------------------------------------------------------------------------------------
38 WF 33201 Dowe Avenue $7,754,047 $25 7.370%
- -----------------------------------------------------------------------------------------------------------------------------------
39 MS Sycamore Greens Apartments $7,673,010 $47,658 6.710%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity to Maturity Amort. Scheduled
Loan Note Maturity Date or ARD or ARD Term(5)(6) Balloon Balloon Security
No. Date or ARD(4) (mos) (mos) (mos) Balance LTV(3) Type
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
1 3/10/98 4/1/23 300 298 300 $3,297,960 4.4% Leasehold
- -------------------------------------------------------------------------------------------------------
2 12/11/97 1/1/08 120 115 360 $30,598,181 63.5% Leasehold
- -------------------------------------------------------------------------------------------------------
3 5/11/98 6/1/08 120 120 300 $5,430,415 52.0% Fee
4 5/11/98 6/1/08 120 120 300 $6,788,018 52.0% Fee
5 5/11/98 6/1/08 120 120 300 $3,513,798 52.0% Fee
6 5/11/98 6/1/08 120 120 300 $3,034,643 52.0% Fee
7 5/11/98 6/1/08 120 120 300 $2,715,208 52.0% Fee
8 5/11/98 6/1/08 120 120 300 $3,673,515 52.0% Fee
9 5/11/98 6/1/08 120 120 300 $2,475,631 52.0% Fee
- -------------------------------------------------------------------------------------------------------
10 12/23/97 2/1/08 120 116 360 $26,280,806 61.5% Fee
- -------------------------------------------------------------------------------------------------------
11 4/28/98 5/1/08 120 119 360 $25,680,996 64.2% Fee
- -------------------------------------------------------------------------------------------------------
12 3/25/98 4/1/08 120 118 360 $26,197,142 60.9% Fee
- -------------------------------------------------------------------------------------------------------
13 10/22/97 11/1/07 120 113 348(6) $22,210,846 67.7% Fee
- -------------------------------------------------------------------------------------------------------
14 9/24/97 11/1/17 240 233 360 $13,482,114 45.3% Fee
- -------------------------------------------------------------------------------------------------------
15 4/29/98 5/1/13 179 179 300 $13,704,374 34.3% Leasehold
- -------------------------------------------------------------------------------------------------------
16 4/30/98 5/1/18 239 239 240 $833,272 3.3% Fee
- -------------------------------------------------------------------------------------------------------
18 8/14/97 9/1/09 144 135 360 $15,084,564 21.5% Fee
- -------------------------------------------------------------------------------------------------------
19 5/5/98 6/1/08 120 120 360 $13,328,259 56.3% Fee
- -------------------------------------------------------------------------------------------------------
20 3/3/98 4/1/08 120 118 360 $11,888,578 69.5% Fee
- -------------------------------------------------------------------------------------------------------
21 1/14/98 2/1/08 120 116 360 $10,466,174 69.1% Fee
- -------------------------------------------------------------------------------------------------------
22 1/16/98 2/1/08 120 116 360 $10,100,114 59.4% Fee
- -------------------------------------------------------------------------------------------------------
23 3/3/98 4/1/08 120 118 360 $9,842,739 44.5% Fee
- -------------------------------------------------------------------------------------------------------
24 2/10/98 3/1/08 120 117 360 $9,674,156 46.1% Fee
- -------------------------------------------------------------------------------------------------------
25 11/20/97 12/1/07 120 114 360 $9,701,531 67.1% Fee
- -------------------------------------------------------------------------------------------------------
26 3/16/98 4/1/08 120 118 360 $9,262,563 70.2% Fee
- -------------------------------------------------------------------------------------------------------
27 1/8/98 2/1/08 120 116 300 $8,646,696 60.0% Fee
- -------------------------------------------------------------------------------------------------------
28 12/19/97 2/1/13 180 176 300 $5,380,394 41.9% Fee
29 4/17/98 2/1/13 177 176 300 $707,837 41.9% Fee
- -------------------------------------------------------------------------------------------------------
30 4/29/98 6/1/08 120 120 360 $8,052,417 56.3% Fee
- -------------------------------------------------------------------------------------------------------
31 2/6/98 3/1/08 120 117 300 $7,298,510 53.4% Fee
- -------------------------------------------------------------------------------------------------------
32 4/29/98 6/1/08 120 120 360 $7,749,369 50.6% Fee
- -------------------------------------------------------------------------------------------------------
33 2/2/98 3/1/08 120 117 300 $7,200,525 57.1% Fee
- -------------------------------------------------------------------------------------------------------
34 1/12/98 2/1/08 120 116 300 $6,841,009 59.2% Fee
- -------------------------------------------------------------------------------------------------------
35 1/29/98 2/1/08 120 116 300 $7,011,219 57.0% Leasehold
- -------------------------------------------------------------------------------------------------------
36 1/29/98 2/1/08 120 116 300 $6,850,319 57.1% Fee
- -------------------------------------------------------------------------------------------------------
37 4/29/98 6/1/08 120 120 360 $6,840,225 55.2% Fee
- -------------------------------------------------------------------------------------------------------
38 11/24/97 1/1/05 84 79 300 $6,805,930 61.9% Fee
- -------------------------------------------------------------------------------------------------------
39 1/12/98 2/1/08 120 116 360 $6,660,280 67.8% Fee
- -------------------------------------------------------------------------------------------------------
</TABLE>
II-1
<PAGE> 106
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./ Mortgage
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3) Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
40 WF Lake Village Mobile Home Park $7,454,756 $19,066 7.220%
- -----------------------------------------------------------------------------------------------------------------------------------
41 MS Pleasant Lake Apartments $7,375,292 $21,820 6.960%
- -----------------------------------------------------------------------------------------------------------------------------------
45 MS Lake Fredrica Shopping Center $6,783,479 $68 7.070%
- -----------------------------------------------------------------------------------------------------------------------------------
46 WF Alberto Oaks $6,484,145 $116 7.095%
- -----------------------------------------------------------------------------------------------------------------------------------
48-A MS Hawthorne Apartments (2II) $4,504,108 $42,346 7.415%
48-B MS Greenbriar Apartments (2II) $1,593,761 $42,346 7.415%
- -----------------------------------------------------------------------------------------------------------------------------------
49 WF Park Village Apartments $6,000,000 $17,493 7.045%
- -----------------------------------------------------------------------------------------------------------------------------------
50 WF Vineyard Mobile Villa $5,996,428 $28,829 7.160%
- -----------------------------------------------------------------------------------------------------------------------------------
51 MS Kern Canyon Estates Mobile Home Park $5,980,924 $23,455 7.210%
- -----------------------------------------------------------------------------------------------------------------------------------
52 WF Willow Hilll Apartments $5,493,075 $20,729 6.875%
- -----------------------------------------------------------------------------------------------------------------------------------
53 MS Havasu Plaza $5,432,673 $44 7.210%
- -----------------------------------------------------------------------------------------------------------------------------------
54 WF University Plaza Shopping Center $5,281,235 $34 6.685%
- -----------------------------------------------------------------------------------------------------------------------------------
55 WF Midtown Center $5,284,861 $38 7.740%
- -----------------------------------------------------------------------------------------------------------------------------------
56 WF Brea Corporate Park $5,200,000 $49 7.110%
- -----------------------------------------------------------------------------------------------------------------------------------
57 MS Lenox East (2B) $3,432,836 $41,700 7.000%
58 MS Hawks Nest Apartments (2B) $1,696,320 $41,700 6.850%
- -----------------------------------------------------------------------------------------------------------------------------------
59 MS Hampton Inn - Columbia (75), (82), (115) $4,997,066 $40,960 7.550%
- -----------------------------------------------------------------------------------------------------------------------------------
60 MS Imperial Rose Plaza $5,047,736 $56 8.350%
- -----------------------------------------------------------------------------------------------------------------------------------
61 WF Park 16 Apartments $4,988,695 $28,671 7.050%
- -----------------------------------------------------------------------------------------------------------------------------------
62 MS Aspen Square (84), (93) $4,990,016 $350 7.160%
- -----------------------------------------------------------------------------------------------------------------------------------
63 MS Irvine Suites Hotel (232) $4,985,398 $55,393 7.670%
- -----------------------------------------------------------------------------------------------------------------------------------
64 WF Vineyard Plaza $4,970,543 $62 7.370%
- -----------------------------------------------------------------------------------------------------------------------------------
65 MS Courtyard by Marriott - Jensen (33), (35), (36), (68), (80) $4,956,141 $45,056 7.255%
- -----------------------------------------------------------------------------------------------------------------------------------
67 MS Barnett Bank Center (117) $4,633,997 $147 7.460%
- -----------------------------------------------------------------------------------------------------------------------------------
68 MS Holiday Inn - Port St. Lucie (33), (35), (36), (65), (80) $4,604,203 $32,424 7.655%
- -----------------------------------------------------------------------------------------------------------------------------------
69 WF Nottingham Village Apartments $4,584,064 $17,364 6.800%
- -----------------------------------------------------------------------------------------------------------------------------------
70 MS Colony Square Shopping Center $4,584,848 $73 7.840%
- -----------------------------------------------------------------------------------------------------------------------------------
71 MS University Centre West II (2C) $3,095,350 $110 7.360%
72 MS University Centre West I (2C) $1,390,665 $110 7.360%
- -----------------------------------------------------------------------------------------------------------------------------------
73 WF Country Suites Carlson $4,446,494 $31,989 8.160%
- -----------------------------------------------------------------------------------------------------------------------------------
74 WF Summer Glen Apartments (123), (185) $4,397,979 $30,331 6.990%
- -----------------------------------------------------------------------------------------------------------------------------------
75 MS Hampton Inn - Eagan (59), (82), (115) $4,393,036 $35,716 7.560%
- -----------------------------------------------------------------------------------------------------------------------------------
76 WF Mission Tierra Apartments $4,397,526 $19,989 7.340%
- -----------------------------------------------------------------------------------------------------------------------------------
77 WF Spec 188 (31), (34), (160) $4,355,094 $23 7.030%
- -----------------------------------------------------------------------------------------------------------------------------------
79 WF Myriad Genetics Building $4,309,470 $89 7.170%
- -----------------------------------------------------------------------------------------------------------------------------------
80 MS Fairfield Inn - Bangor [33], [35], [36], [65], [68] $4,320,328 $28,237 7.605%
- -----------------------------------------------------------------------------------------------------------------------------------
81 WF 269 South Lafayette Park Place $4,308,974 $29,313 6.840%
- -----------------------------------------------------------------------------------------------------------------------------------
82 MS Hampton Inn - Rochester (59), (75), (115) $4,263,231 $40,602 7.550%
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity to Maturity Amort. Scheduled
Loan Note Maturity Date or ARD or ARD Term(5)(6) Balloon Balloon Security
No. Date or ARD(4) (mos) (mos) (mos) Balance LTV(3) Type
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
40 12/22/97 1/1/03 60 55 300 $6,856,256 54.9% Fee
- -------------------------------------------------------------------------------------------------------
41 1/16/98 2/1/08 120 116 360 $6,443,918 57.6% Fee
- -------------------------------------------------------------------------------------------------------
45 12/24/97 1/1/08 120 115 360 $5,948,253 63.6% Fee
- -------------------------------------------------------------------------------------------------------
46 3/24/98 4/1/08 120 118 300 $5,124,750 38.7% Fee
- -------------------------------------------------------------------------------------------------------
48-A 12/10/97 1/1/08 120 115 360 $3,983,675 61.3% Fee
48-B 12/10/97 1/1/08 120 115 360 $1,409,608 61.3% Fee
- -------------------------------------------------------------------------------------------------------
49 4/15/98 6/1/08 120 120 360 $5,239,969 61.0% Fee
- -------------------------------------------------------------------------------------------------------
50 4/23/98 5/1/08 120 119 360 $5,256,601 63.6% Fee
- -------------------------------------------------------------------------------------------------------
51 1/30/98 2/1/08 120 116 360 $5,259,071 69.0% Fee
- -------------------------------------------------------------------------------------------------------
52 4/6/98 5/1/08 120 119 300 $4,309,602 35.4% Fee
- -------------------------------------------------------------------------------------------------------
53 1/8/98 2/1/08 120 116 360 $4,776,990 65.9% Fee
- -------------------------------------------------------------------------------------------------------
54 1/22/98 3/1/03 60 57 300 $4,841,424 37.2% Fee
- -------------------------------------------------------------------------------------------------------
55 12/15/97 2/1/08 120 116 360 $4,624,133 53.8% Fee
- -------------------------------------------------------------------------------------------------------
56 5/7/98 6/1/08 120 120 300 $4,101,508 41.0% Fee
- -------------------------------------------------------------------------------------------------------
57 2/9/98 3/1/08 120 117 360 $3,001,186 64.0% Fee
58 2/9/98 3/1/08 120 117 360 $1,477,194 64.0% Fee
- -------------------------------------------------------------------------------------------------------
59 4/24/98 5/1/08 120 119 240 $3,476,477 48.6% Fee
- -------------------------------------------------------------------------------------------------------
60 5/30/97 8/1/07 120 110 300 $4,155,095 46.2% Fee
- -------------------------------------------------------------------------------------------------------
61 3/16/98 4/1/08 120 118 300 $4,006,828 61.6% Fee/Leasehold
- -------------------------------------------------------------------------------------------------------
62 2/6/98 3/1/08 120 117 360 $4,380,631 44.2% Fee
- -------------------------------------------------------------------------------------------------------
63 2/27/98 3/1/08 120 117 300 $4,083,748 56.8% Fee
- -------------------------------------------------------------------------------------------------------
64 12/15/97 1/1/13 180 175 300 $3,094,937 30.9% Fee
- -------------------------------------------------------------------------------------------------------
65 1/28/98 2/1/08 120 116 300 $4,012,910 52.5% Fee
- -------------------------------------------------------------------------------------------------------
67 3/16/98 4/1/08 120 118 360 $4,096,077 70.6% Fee
- -------------------------------------------------------------------------------------------------------
68 1/28/98 2/1/08 120 116 300 $3,771,753 57.0% Fee
- -------------------------------------------------------------------------------------------------------
69 1/28/98 3/1/08 120 117 300 $3,658,021 55.4% Fee
- -------------------------------------------------------------------------------------------------------
70 12/23/97 1/1/08 120 115 360 $4,096,597 69.4% Fee
- -------------------------------------------------------------------------------------------------------
71 2/27/98 3/1/08 120 117 300 $2,512,509 59.9% Fee
72 2/27/98 3/1/08 120 117 300 $1,128,808 59.9% Fee
- -------------------------------------------------------------------------------------------------------
73 10/10/97 11/1/07 120 113 240 $3,117,596 46.2% Fee
- -------------------------------------------------------------------------------------------------------
74 3/13/98 4/1/18 240 238 240 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
75 4/24/98 5/1/08 120 119 240 $3,057,329 43.7% Fee
- -------------------------------------------------------------------------------------------------------
76 4/10/98 5/1/10 144 143 360 $3,711,351 62.1% Fee
- -------------------------------------------------------------------------------------------------------
77 3/2/98 4/1/08 120 118 300 $3,495,783 47.9% Fee
- -------------------------------------------------------------------------------------------------------
79 12/18/97 1/1/08 120 115 240 $2,977,913 49.6% Leasehold
- -------------------------------------------------------------------------------------------------------
80 1/30/98 2/1/08 120 116 300 $3,534,111 57.0% Fee
- -------------------------------------------------------------------------------------------------------
81 2/6/98 3/1/08 120 117 360 $3,693,023 68.2% Fee
- -------------------------------------------------------------------------------------------------------
82 4/24/98 5/1/08 120 119 240 $2,965,945 48.6% Fee
</TABLE>
II-2
<PAGE> 107
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./ Mortgage
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3) Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
83 MS Windsor Medical Center $4,284,885 $136 7.545%
- -----------------------------------------------------------------------------------------------------------------------------------
84 MS Glenwood Springs Mall (62), (93) $4,194,144 $25 7.160%
- -----------------------------------------------------------------------------------------------------------------------------------
85 WF Village Center at Highlands Ranch $4,194,158 $149 7.170%
- -----------------------------------------------------------------------------------------------------------------------------------
86 WF Wherehouse Plaza - San Jose $4,095,258 $85 7.410%
- -----------------------------------------------------------------------------------------------------------------------------------
87 WF Best Western La Jolla $4,074,054 $30,864 7.000%
- -----------------------------------------------------------------------------------------------------------------------------------
88 WF Casa De Colinas Town Homes $4,091,506 $53,836 7.020%
- -----------------------------------------------------------------------------------------------------------------------------------
89 MS River Valley Apartments $4,086,284 $28,377 7.770%
- -----------------------------------------------------------------------------------------------------------------------------------
90 MS Village at the Oaks $4,042,104 $109 7.250%
- -----------------------------------------------------------------------------------------------------------------------------------
91 WF Vista de la Sierra (92) $3,997,484 $18,170 6.980%
- -----------------------------------------------------------------------------------------------------------------------------------
92 WF Casa de la Sierra (91) $3,997,484 $18,170 6.980%
- -----------------------------------------------------------------------------------------------------------------------------------
93 MS Aspen Grove Building (62), (84) $3,991,928 $228 7.120%
- -----------------------------------------------------------------------------------------------------------------------------------
94 WF Barclay Buena Park (23) $3,940,296 $23 7.050%
- -----------------------------------------------------------------------------------------------------------------------------------
95 WF Cowell Terrace Apartments (189) $3,876,634 $48,458 7.060%
- -----------------------------------------------------------------------------------------------------------------------------------
96 MS Landmark Plaza $3,843,180 $40 7.600%
- -----------------------------------------------------------------------------------------------------------------------------------
97 WF High Desert Villas Apartments $3,837,241 $16,540 6.990%
- -----------------------------------------------------------------------------------------------------------------------------------
98 MS Port 95 - Building 3 $3,840,000 $39 7.000%
- -----------------------------------------------------------------------------------------------------------------------------------
99 WF Arbor Village Shopping Center Phase II $3,794,504 $76 7.010%
- -----------------------------------------------------------------------------------------------------------------------------------
100 MS Windy Hill Key Apartments (113) $3,794,080 $27,101 6.700%
- -----------------------------------------------------------------------------------------------------------------------------------
101 MS Park Terrace Apartments $3,792,452 $39,505 7.180%
- -----------------------------------------------------------------------------------------------------------------------------------
102 MS 489 Whitney Avenue $3,643,167 $63 7.400%
- -----------------------------------------------------------------------------------------------------------------------------------
103 WF Limeridge Apartments $3,594,556 $51,351 6.825%
- -----------------------------------------------------------------------------------------------------------------------------------
104 WF South Bay Plaza $3,596,252 $93 6.995%
- -----------------------------------------------------------------------------------------------------------------------------------
105 WF Public Storage - Redwood City, CA $3,588,768 $4,830 7.340%
- -----------------------------------------------------------------------------------------------------------------------------------
106 WF Broadway Plaza $3,585,588 $26,172 6.940%
- -----------------------------------------------------------------------------------------------------------------------------------
107 WF 1313 Geneva Drive $3,582,575 $73 7.190%
- -----------------------------------------------------------------------------------------------------------------------------------
108 WF Omni Business Park $3,547,203 $38 7.200%
- -----------------------------------------------------------------------------------------------------------------------------------
109 WF Rancho San Diego Plaza $3,486,859 $37 6.950%
- -----------------------------------------------------------------------------------------------------------------------------------
110 MS Wallburg Towne Center $3,489,024 $63 7.280%
- -----------------------------------------------------------------------------------------------------------------------------------
111 WF North Chase Office Building H $3,464,072 $77 7.300%
- -----------------------------------------------------------------------------------------------------------------------------------
112 WF Wixom Plaza (Oakland Pontiac Center) $3,388,169 $86 7.430%
- -----------------------------------------------------------------------------------------------------------------------------------
113 MS Lakeside Apartments (100) $3,292,579 $17,149 6.700%
- -----------------------------------------------------------------------------------------------------------------------------------
114 MS Pillsbury Manor $3,289,874 $54,831 7.390%
- -----------------------------------------------------------------------------------------------------------------------------------
115 MS Comfort Suites - Stevens Point (59), (75), (82) $3,244,816 $30,903 7.510%
- -----------------------------------------------------------------------------------------------------------------------------------
116 WF Westmore Auto Park $3,246,203 $33 8.020%
- -----------------------------------------------------------------------------------------------------------------------------------
117 MS Jog Road Center (67) $3,245,688 $136 7.360%
- -----------------------------------------------------------------------------------------------------------------------------------
118 WF Citadel Apartments $3,220,773 $22,682 6.620%
- -----------------------------------------------------------------------------------------------------------------------------------
119 MS Pfeiffer Commons $3,193,610 $74 7.160%
- -----------------------------------------------------------------------------------------------------------------------------------
120 WF 7803 Madison Ave. $3,181,738 $82 7.350%
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity to Maturity Amort. Scheduled
Loan Note Maturity Date or ARD or ARD Term(5)(6) Balloon Balloon Security
No. Date or ARD(4) (mos) (mos) (mos) Balance LTV(3) Type
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
83 12/31/97 1/1/08 120 115 360 $3,801,790 64.4% Fee
- -------------------------------------------------------------------------------------------------------
84 3/12/98 4/1/08 120 118 360 $3,679,180 47.2% Fee
- -------------------------------------------------------------------------------------------------------
85 3/10/98 4/1/08 120 118 360 $3,680,141 65.1% Fee
- -------------------------------------------------------------------------------------------------------
86 3/6/98 5/1/08 120 119 300 $3,260,532 53.3% Fee
- -------------------------------------------------------------------------------------------------------
87 3/9/98 4/1/13 180 178 180 $0 0.0% Leasehold
- -------------------------------------------------------------------------------------------------------
88 2/6/98 3/1/08 120 117 360 $3,578,897 69.5% Fee
- -------------------------------------------------------------------------------------------------------
89 12/30/97 1/1/13 180 175 360 $3,243,850 66.2% Fee
- -------------------------------------------------------------------------------------------------------
90 2/11/98 3/1/08 120 117 360 $3,556,632 65.9% Fee
- -------------------------------------------------------------------------------------------------------
91 4/2/98 5/1/08 120 119 360 $3,487,793 64.6% Fee
- -------------------------------------------------------------------------------------------------------
92 4/2/98 5/1/08 120 119 360 $3,487,793 65.2% Fee
- -------------------------------------------------------------------------------------------------------
93 2/6/98 3/1/08 120 117 360 $3,500,834 33.3% Fee
- -------------------------------------------------------------------------------------------------------
94 3/6/98 4/1/08 120 118 300 $3,110,370 46.6% Fee
- -------------------------------------------------------------------------------------------------------
95 12/9/97 1/1/08 120 115 300 $3,124,447 46.6% Fee
- -------------------------------------------------------------------------------------------------------
96 2/26/98 3/1/08 120 117 360 $3,411,225 67.4% Fee
- -------------------------------------------------------------------------------------------------------
97 1/7/98 2/1/13 180 176 360 $2,848,623 41.0% Fee
- -------------------------------------------------------------------------------------------------------
98 4/13/98 6/1/08 120 120 360 $3,349,586 69.8% Fee
- -------------------------------------------------------------------------------------------------------
99 3/2/98 4/1/08 120 118 360 $3,315,670 65.0% Fee
- -------------------------------------------------------------------------------------------------------
100 3/10/98 4/1/08 120 118 360 $3,288,022 62.0% Fee
- -------------------------------------------------------------------------------------------------------
101 2/12/98 3/1/08 120 117 360 $3,331,020 70.1% Fee
- -------------------------------------------------------------------------------------------------------
102 2/12/98 3/1/08 120 117 360 $3,217,739 67.0% Fee
- -------------------------------------------------------------------------------------------------------
103 2/25/98 4/1/18 240 238 360 $2,178,633 41.9% Fee
- -------------------------------------------------------------------------------------------------------
104 3/3/98 5/1/08 120 119 300 $2,880,355 61.3% Fee
- -------------------------------------------------------------------------------------------------------
105 1/13/98 2/1/08 119 116 300 $2,920,246 37.9% Fee
- -------------------------------------------------------------------------------------------------------
106 12/15/97 1/1/08 120 115 360 $3,133,670 58.6% Fee
- -------------------------------------------------------------------------------------------------------
107 12/24/97 2/1/08 120 116 300 $2,895,152 41.2% Fee
- -------------------------------------------------------------------------------------------------------
108 4/2/98 5/1/08 120 119 360 $3,060,520 58.3% Fee
- -------------------------------------------------------------------------------------------------------
109 2/6/98 3/1/08 120 117 300 $2,748,301 52.9% Fee
- -------------------------------------------------------------------------------------------------------
110 1/5/98 2/1/08 120 116 360 $3,073,317 70.3% Fee
- -------------------------------------------------------------------------------------------------------
111 2/17/98 3/1/08 120 117 300 $2,806,770 58.6% Fee
- -------------------------------------------------------------------------------------------------------
112 2/23/98 3/1/08 120 117 300 $2,705,312 59.2% Fee
- -------------------------------------------------------------------------------------------------------
113 2/26/98 3/1/08 120 117 360 $2,855,807 64.9% Fee
- -------------------------------------------------------------------------------------------------------
114 1/14/98 2/1/08 120 116 360 $2,905,827 64.0% Fee
- -------------------------------------------------------------------------------------------------------
115 4/24/98 5/1/08 120 119 240 $2,254,244 41.0% Fee
- -------------------------------------------------------------------------------------------------------
116 4/13/98 5/1/08 120 119 264 $2,476,073 39.3% Fee
- -------------------------------------------------------------------------------------------------------
117 3/16/98 4/1/08 120 118 360 $2,861,733 69.8% Fee
- -------------------------------------------------------------------------------------------------------
118 4/9/98 5/1/08 120 119 300 $2,508,537 45.6% Fee
- -------------------------------------------------------------------------------------------------------
119 2/3/98 3/1/08 120 117 360 $2,803,604 65.4% Fee
- -------------------------------------------------------------------------------------------------------
120 12/10/97 1/1/08 120 115 300 $2,586,495 57.5% Fee
</TABLE>
II-3
<PAGE> 108
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./ Mortgage
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3) Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
121 MS Miami Bluffs Apartments $3,143,389 $34,543 6.970%
- -----------------------------------------------------------------------------------------------------------------------------------
122 WF Roberts Industrial Park $3,000,000 $70 7.320%
- -----------------------------------------------------------------------------------------------------------------------------------
123 WF Orangewood Apartments (74), (185) $2,982,622 $20,713 7.000%
- -----------------------------------------------------------------------------------------------------------------------------------
124 WF Rosedown Apartments (2D) $2,883,240 $26,697 7.630%
- -----------------------------------------------------------------------------------------------------------------------------------
211 WF Adair Professional Building (2D) $1,093,912 $32 8.080%
- -----------------------------------------------------------------------------------------------------------------------------------
125 WF Secure Self Storage of Lakeside $2,854,241 $4,077 7.340%
- -----------------------------------------------------------------------------------------------------------------------------------
126 MS Walnut Tower Apartments $2,840,984 $14,644 7.270%
- -----------------------------------------------------------------------------------------------------------------------------------
127 WF Five Building Portfolio $2,747,321 $56 7.300%
- -----------------------------------------------------------------------------------------------------------------------------------
128 WF Barnes & Noble, Tucson $2,741,495 $102 7.350%
- -----------------------------------------------------------------------------------------------------------------------------------
129 MS Builders Square - Lansing, MI $2,695,893 $25 7.810%
- -----------------------------------------------------------------------------------------------------------------------------------
130 MS Tennent Nine Shopping Center $2,688,928 $45 7.500%
- -----------------------------------------------------------------------------------------------------------------------------------
131 MS Brook Hollow Village (156) $2,653,374 $57 7.660%
- -----------------------------------------------------------------------------------------------------------------------------------
132 WF Countryside Apartments $2,597,255 $26,503 6.930%
- -----------------------------------------------------------------------------------------------------------------------------------
133 MS Summerfield Apartments 1 $2,591,283 $35,990 7.760%
- -----------------------------------------------------------------------------------------------------------------------------------
134 WF Garden Grove Secured Storage $2,585,019 $3,451 7.510%
- -----------------------------------------------------------------------------------------------------------------------------------
135 WF Windermere Shoppes $2,538,559 $101 7.940%
- -----------------------------------------------------------------------------------------------------------------------------------
136 MS Carriage Square $2,492,184 $32 7.330%
- -----------------------------------------------------------------------------------------------------------------------------------
137 WF Fountainebleau Apartments $2,463,508 $47,375 7.100%
- -----------------------------------------------------------------------------------------------------------------------------------
138 WF Walgreens - Vero Beach (205) $2,430,001 $157 7.060%
- -----------------------------------------------------------------------------------------------------------------------------------
139 WF HH Gregg Shopping Center (164) $2,385,286 $37 7.365%
- -----------------------------------------------------------------------------------------------------------------------------------
140 WF Arundell Business Park (223) $2,394,306 $25 7.270%
- -----------------------------------------------------------------------------------------------------------------------------------
141 WF Fed Ex - San Leandro $2,377,137 $67 7.160%
- -----------------------------------------------------------------------------------------------------------------------------------
142 WF Future Shop (152) $2,378,836 $65 7.670%
- -----------------------------------------------------------------------------------------------------------------------------------
143 WF Eastview Medical Center $2,348,141 $97 7.180%
- -----------------------------------------------------------------------------------------------------------------------------------
144 WF The Willows $2,345,797 $29,322 6.570%
- -----------------------------------------------------------------------------------------------------------------------------------
145 MS AmericInn, Ripon (2III) $1,246,391 $28,279 8.160%
146 MS AmericInn, Waupun (2III) $1,072,476 $28,279 8.160%
- -----------------------------------------------------------------------------------------------------------------------------------
147 WF Beechwood Apartments $2,317,192 $34,076 6.930%
- -----------------------------------------------------------------------------------------------------------------------------------
148 WF Shadowridge Self-Storage $2,289,431 $3,583 7.510%
- -----------------------------------------------------------------------------------------------------------------------------------
149 MS Partridge Court Apartments $2,276,724 $25,297 7.960%
- -----------------------------------------------------------------------------------------------------------------------------------
150 WF Don Joy Building $2,232,483 $16 6.800%
- -----------------------------------------------------------------------------------------------------------------------------------
151 MS Birchwood Farms Mobile Home Park $2,242,294 $15,680 6.860%
- -----------------------------------------------------------------------------------------------------------------------------------
152 WF Food 4 Less - Stockton (142) $2,224,414 $51 6.900%
- -----------------------------------------------------------------------------------------------------------------------------------
153 WF 1530 Old Oakland Road (161), (177), (181), (198), (204) $2,225,000 $80 7.320%
- -----------------------------------------------------------------------------------------------------------------------------------
154 WF 4125 Blackhawk Plaza Circle $2,194,961 $91 6.980%
- -----------------------------------------------------------------------------------------------------------------------------------
155 WF Yamato Village Center (218) $2,193,128 $74 7.300%
- -----------------------------------------------------------------------------------------------------------------------------------
156 MS Hawthorn Plaza (131) $2,192,343 $46 7.590%
- -----------------------------------------------------------------------------------------------------------------------------------
157 WF Connors Business Park $2,139,622 $30 7.200%
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity to Maturity Amort. Scheduled
Loan Note Maturity Date or ARD or ARD Term(5)(6) Balloon Balloon Security
No. Date or ARD(4) (mos) (mos) (mos) Balance LTV(3) Type
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
121 2/3/98 3/1/08 120 117 360 $2,745,984 68.6% Fee
- -------------------------------------------------------------------------------------------------------
122 3/19/98 6/1/08 120 120 300 $2,379,950 59.5% Fee
- -------------------------------------------------------------------------------------------------------
123 2/19/98 3/1/18 240 237 240 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
124 2/23/98 4/1/13 180 178 180 $63,285 1.3% Fee
- -------------------------------------------------------------------------------------------------------
211 2/23/98 4/1/13 180 178 180 $26,850 1.3% Fee
- -------------------------------------------------------------------------------------------------------
125 4/7/98 5/1/08 120 119 300 $2,310,343 56.3% Fee
- -------------------------------------------------------------------------------------------------------
126 2/13/98 3/1/08 120 117 300 $2,299,845 54.8% Fee
- -------------------------------------------------------------------------------------------------------
127 4/8/98 5/1/08 120 119 300 $2,221,106 62.4% Fee
- -------------------------------------------------------------------------------------------------------
128 1/21/98 2/1/08 120 116 360 $2,419,067 59.7% Fee
- -------------------------------------------------------------------------------------------------------
129 4/28/98 5/1/18 240 239 240 $113,701 2.3% Fee
- -------------------------------------------------------------------------------------------------------
130 11/21/97 12/1/07 120 114 360 $2,384,886 56.8% Fee
- -------------------------------------------------------------------------------------------------------
131 12/5/97 1/1/13 180 175 360 $2,096,579 59.1% Fee
- -------------------------------------------------------------------------------------------------------
132 4/9/98 5/1/08 120 119 300 $2,076,021 50.6% Fee
- -------------------------------------------------------------------------------------------------------
133 12/16/97 1/1/08 120 115 360 $2,310,977 75.5% Fee
- -------------------------------------------------------------------------------------------------------
134 12/17/97 1/1/08 120 115 300 $2,073,210 56.0% Fee
- -------------------------------------------------------------------------------------------------------
135 12/4/97 1/1/08 120 115 324 $2,138,257 62.9% Fee
- -------------------------------------------------------------------------------------------------------
136 2/4/98 3/1/08 120 117 300 $2,021,108 51.4% Fee
- -------------------------------------------------------------------------------------------------------
137 1/8/98 2/1/13 180 176 180 $0 0.0% Fee/Leasehold
- -------------------------------------------------------------------------------------------------------
138 12/8/97 1/1/08 120 115 360 $2,096,768 68.7% Fee
- -------------------------------------------------------------------------------------------------------
139 3/2/98 4/1/13 180 178 180 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
140 3/5/98 4/1/08 120 118 300 $1,901,366 49.2% Fee
- -------------------------------------------------------------------------------------------------------
141 12/24/97 1/1/11 156 151 240 $1,241,734 32.7% Fee
- -------------------------------------------------------------------------------------------------------
142 12/23/97 1/1/18 240 235 360 $1,531,261 40.0% Fee
- -------------------------------------------------------------------------------------------------------
143 4/2/98 5/1/08 120 119 360 $2,025,048 56.3% Fee
- -------------------------------------------------------------------------------------------------------
144 3/13/98 4/1/08 120 118 360 $1,995,724 41.6% Fee
- -------------------------------------------------------------------------------------------------------
145 2/6/98 3/1/08 120 117 300 $1,035,341 57.8% Fee
146 2/6/98 3/1/08 120 117 300 $890,876 57.8% Fee
- -------------------------------------------------------------------------------------------------------
147 1/8/98 2/1/08 120 116 360 $2,022,997 63.5% Fee
- -------------------------------------------------------------------------------------------------------
148 1/26/98 2/1/08 120 116 300 $1,833,993 57.1% Fee
- -------------------------------------------------------------------------------------------------------
149 2/9/96 3/1/03 84 57 300 $2,071,579 57.5% Fee
- -------------------------------------------------------------------------------------------------------
150 12/11/97 1/1/03 60 55 120 $1,353,849 15.0% Fee
- -------------------------------------------------------------------------------------------------------
151 2/17/98 3/1/08 120 117 300 $1,792,655 53.5% Fee
- -------------------------------------------------------------------------------------------------------
152 1/27/98 3/1/08 120 117 300 $1,780,561 49.8% Fee
- -------------------------------------------------------------------------------------------------------
153 4/30/98 5/1/08 119 119 240 $1,509,802 47.3% Fee
- -------------------------------------------------------------------------------------------------------
154 3/24/98 4/1/08 120 118 300 $1,759,158 49.6% Fee
- -------------------------------------------------------------------------------------------------------
155 12/16/97 2/1/08 120 116 360 $1,932,788 55.2% Fee
- -------------------------------------------------------------------------------------------------------
156 12/29/97 1/1/13 180 175 360 $1,727,159 59.6% Fee
- -------------------------------------------------------------------------------------------------------
157 12/19/97 2/1/08 120 116 300 $1,700,039 56.7% Fee
</TABLE>
II-4
<PAGE> 109
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./ Mortgage
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3) Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
158 WF Oasis Morning Apartments $2,123,635 $20,034 6.910%
- -----------------------------------------------------------------------------------------------------------------------------------
159 WF R. G. Barry Distribution Warehouse $2,075,220 $12 6.910%
- -----------------------------------------------------------------------------------------------------------------------------------
160 WF 22nd & Broadway (31), (34), (77) $2,094,472 $18 6.610%
- -----------------------------------------------------------------------------------------------------------------------------------
161 WF 1510 Old Oakland Road (153), (177), (181), (198), (204) $2,025,000 $72 7.320%
- -----------------------------------------------------------------------------------------------------------------------------------
162 WF 233 South Lafayette Park Place $2,020,737 $24,643 7.100%
- -----------------------------------------------------------------------------------------------------------------------------------
163 WF Parkwood Plaza Townhomes $1,995,693 $24,946 6.870%
- -----------------------------------------------------------------------------------------------------------------------------------
164 WF HH Gregg Store (139) $1,987,776 $47 7.400%
- -----------------------------------------------------------------------------------------------------------------------------------
165 WF Free Standing Eckerds - Rock Hill $1,995,883 $183 7.210%
- -----------------------------------------------------------------------------------------------------------------------------------
166 WF Springfield Manor Mobile Home Park $1,993,629 $21,670 7.200%
- -----------------------------------------------------------------------------------------------------------------------------------
167 MS Salem Crossing Apartments $1,996,367 $17,825 7.510%
- -----------------------------------------------------------------------------------------------------------------------------------
168 WF Airport Plaza - Santee $1,989,975 $28 6.960%
- -----------------------------------------------------------------------------------------------------------------------------------
169 MS Richland Shopping Center $1,989,697 $38 7.950%
- -----------------------------------------------------------------------------------------------------------------------------------
170 WF Bedford Hills Apartments $1,943,322 $23,135 6.830%
- -----------------------------------------------------------------------------------------------------------------------------------
171 WF Canon Plaza $1,935,660 $25 7.430%
- -----------------------------------------------------------------------------------------------------------------------------------
172 WF 3987-3991 First Street $1,893,430 $45 7.410%
- -----------------------------------------------------------------------------------------------------------------------------------
173 MS Walgreens - Gainesville $1,819,714 $131 7.440%
- -----------------------------------------------------------------------------------------------------------------------------------
174 MS Courtyard Office Building $1,796,358 $56 7.110%
- -----------------------------------------------------------------------------------------------------------------------------------
176 MS 380 Diablo $1,787,894 $118 7.790%
- -----------------------------------------------------------------------------------------------------------------------------------
177 WF 2680 North 1st Street (153), (161), (181), (198), (204) $1,743,318 $81 7.070%
- -----------------------------------------------------------------------------------------------------------------------------------
178 WF Foremost Business Park $1,718,401 $40 7.510%
- -----------------------------------------------------------------------------------------------------------------------------------
179 WF Valley Business Center $1,692,188 $36 7.510%
- -----------------------------------------------------------------------------------------------------------------------------------
180 WF James Casey Garden Medical Center (227) $1,675,000 $78 7.470%
- -----------------------------------------------------------------------------------------------------------------------------------
181 WF 3949 Research Park Court (153), (161), (177), (198), (204) $1,661,978 $71 6.970%
- -----------------------------------------------------------------------------------------------------------------------------------
182 WF Oaks Apartments $1,644,056 $9,341 7.110%
- -----------------------------------------------------------------------------------------------------------------------------------
183 WF 8439 Steller Drive $1,590,597 $41 6.880%
- -----------------------------------------------------------------------------------------------------------------------------------
184 WF Broomfield Safeway Marketplace $1,594,893 $76 7.190%
- -----------------------------------------------------------------------------------------------------------------------------------
185 WF Glen Arbor Apartments (74), (123) $1,590,721 $32,464 6.990%
- -----------------------------------------------------------------------------------------------------------------------------------
186 WF Highland Knolls MHP $1,548,707 $8,652 6.910%
- -----------------------------------------------------------------------------------------------------------------------------------
187 WF Lawrence Business Center $1,546,005 $38 6.790%
- -----------------------------------------------------------------------------------------------------------------------------------
188 WF Maple Commerce Center $1,541,478 $26 7.570%
- -----------------------------------------------------------------------------------------------------------------------------------
189 WF 1901 Camino Ramon (95) $1,496,411 $38 6.740%
- -----------------------------------------------------------------------------------------------------------------------------------
190 WF Office Max - Stockton $1,490,663 $63 7.190%
- -----------------------------------------------------------------------------------------------------------------------------------
191 WF Bradley OfficeMax $1,497,229 $64 7.370%
- -----------------------------------------------------------------------------------------------------------------------------------
192 WF Tracy/Schulte Shopping Center $1,489,313 $117 7.690%
- -----------------------------------------------------------------------------------------------------------------------------------
193 MS Newbridge Shopping Center $1,494,881 $29 7.680%
- -----------------------------------------------------------------------------------------------------------------------------------
194 MS Whitehall Manor Apartments $1,492,508 $23,320 6.990%
- -----------------------------------------------------------------------------------------------------------------------------------
195 MS Underwood/Johnson 142 Building $1,475,661 $48 7.620%
- -----------------------------------------------------------------------------------------------------------------------------------
196 WF Lindsay Corners $1,442,993 $60 7.200%
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity to Maturity Amort. Scheduled
Loan Note Maturity Date or ARD or ARD Term(5)(6) Balloon Balloon Security
No. Date or ARD(4) (mos) (mos) (mos) Balance LTV(3) Type
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
158 4/13/98 5/1/08 120 119 360 $1,849,426 53.2% Fee
- -------------------------------------------------------------------------------------------------------
159 12/26/97 2/1/08 120 116 120 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
160 3/5/98 4/1/05 84 82 300 $1,806,578 17.4% Fee
- -------------------------------------------------------------------------------------------------------
161 4/7/98 5/1/08 119 119 240 $1,374,091 44.9% Fee
- -------------------------------------------------------------------------------------------------------
162 3/31/98 4/1/08 120 118 360 $1,740,906 65.8% Fee
- -------------------------------------------------------------------------------------------------------
163 12/23/97 3/1/08 120 117 360 $1,738,812 74.8% Fee
- -------------------------------------------------------------------------------------------------------
164 3/2/98 4/1/13 180 178 180 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
165 3/24/98 6/1/17 229 228 228 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
166 1/26/98 2/1/08 120 116 360 $1,752,572 62.6% Fee
- -------------------------------------------------------------------------------------------------------
167 2/6/98 3/1/08 120 117 360 $1,768,069 66.7% Fee
- -------------------------------------------------------------------------------------------------------
168 1/5/98 2/1/08 120 116 300 $1,570,900 50.7% Fee
- -------------------------------------------------------------------------------------------------------
169 12/8/97 1/1/08 120 115 300 $1,645,454 49.1% Fee
- -------------------------------------------------------------------------------------------------------
170 12/4/97 2/1/08 120 116 360 $1,692,179 52.9% Fee
- -------------------------------------------------------------------------------------------------------
171 1/21/98 2/1/18 240 236 240 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
172 3/27/98 4/1/18 240 238 240 $70,387 2.2% Fee
- -------------------------------------------------------------------------------------------------------
173 12/15/97 1/1/18 240 235 300 $747,622 20.3% Fee
- -------------------------------------------------------------------------------------------------------
174 2/12/98 3/1/08 120 117 360 $1,574,962 53.4% Fee
- -------------------------------------------------------------------------------------------------------
176 12/5/97 1/1/08 120 115 270 $1,381,590 49.3% Fee
- -------------------------------------------------------------------------------------------------------
177 2/24/98 4/1/08 120 118 240 $1,171,238 44.2% Fee
- -------------------------------------------------------------------------------------------------------
178 4/15/98 5/1/08 120 119 300 $1,398,063 60.8% Fee
- -------------------------------------------------------------------------------------------------------
179 1/12/98 2/1/08 120 116 300 $1,355,560 56.7% Fee
- -------------------------------------------------------------------------------------------------------
180 4/21/98 6/1/13 180 180 180 $34,971 1.2% Fee
- -------------------------------------------------------------------------------------------------------
181 12/30/97 2/1/08 120 116 240 $1,117,350 43.8% Fee
- -------------------------------------------------------------------------------------------------------
182 2/25/98 4/1/18 240 238 240 $55,876 1.6% Fee
- -------------------------------------------------------------------------------------------------------
183 2/13/98 3/1/18 240 237 240 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
184 12/31/97 2/1/08 120 116 360 $1,401,695 63.7% Fee
- -------------------------------------------------------------------------------------------------------
185 2/13/98 3/1/18 240 237 240 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
186 3/24/98 5/1/13 180 179 360 $1,143,279 26.0% Fee
- -------------------------------------------------------------------------------------------------------
187 2/2/98 3/1/08 120 117 360 $1,323,447 54.6% Fee
- -------------------------------------------------------------------------------------------------------
188 12/19/97 1/1/08 120 115 300 $1,261,123 54.8% Fee
- -------------------------------------------------------------------------------------------------------
189 3/3/98 4/1/08 120 118 300 $1,190,373 34.0% Fee
- -------------------------------------------------------------------------------------------------------
190 2/27/98 4/1/13 180 178 180 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
191 1/22/98 3/1/08 120 117 360 $1,324,899 66.2% Fee
- -------------------------------------------------------------------------------------------------------
192 1/12/98 2/1/18 240 236 240 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
193 12/30/97 1/1/08 120 115 360 $1,330,647 67.4% Leasehold
- -------------------------------------------------------------------------------------------------------
194 1/26/98 2/1/13 180 176 300 $947,262 49.9% Fee
- -------------------------------------------------------------------------------------------------------
195 1/23/98 2/1/08 120 116 360 $1,310,728 69.0% Fee
- -------------------------------------------------------------------------------------------------------
196 1/23/98 2/1/08 120 116 300 $1,166,459 58.8% Fee
</TABLE>
II-5
<PAGE> 110
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./ Mortgage
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3) Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
197 WF Eldorado Building $1,442,019 $48 7.540%
- -----------------------------------------------------------------------------------------------------------------------------------
198 WF 2674 North 1st Street (153), (161), (177), (181), (204) $1,394,655 $54 7.070%
- -----------------------------------------------------------------------------------------------------------------------------------
199 WF Del Diablo Mini Storage $1,575,000 $2,062 7.500%
- -----------------------------------------------------------------------------------------------------------------------------------
200 WF Highland Oaks Village Apartments $1,398,522 $15,539 6.930%
- -----------------------------------------------------------------------------------------------------------------------------------
201 WF Camelot Manufactured Home Park $1,395,305 $11,926 6.970%
- -----------------------------------------------------------------------------------------------------------------------------------
202 MS Fairfield Inn - Bar Harbor $1,393,654 $23,621 7.605%
- -----------------------------------------------------------------------------------------------------------------------------------
203 WF Ridgewood Mobile Estates $1,295,573 $17,047 7.690%
- -----------------------------------------------------------------------------------------------------------------------------------
204 WF 2880 Research Park Drive (153), (161), (177), (181), (198) $1,215,477 $52 6.970%
- -----------------------------------------------------------------------------------------------------------------------------------
205 WF Rite Aid - Fremont (138) $1,198,000 $106 6.930%
- -----------------------------------------------------------------------------------------------------------------------------------
206 WF Brook Hollow Apartments $1,197,799 $9,982 6.590%
- -----------------------------------------------------------------------------------------------------------------------------------
207 WF 14600 Arminta $1,185,430 $25 7.550%
- -----------------------------------------------------------------------------------------------------------------------------------
208 WF 2240 Yates Avenue $1,188,654 $17 7.080%
- -----------------------------------------------------------------------------------------------------------------------------------
209 WF Eagle Valley Commercial Center (212) $1,174,413 $33 7.330%
- -----------------------------------------------------------------------------------------------------------------------------------
210 MS Heritage Park Apartments $1,115,610 $30,989 7.040%
- -----------------------------------------------------------------------------------------------------------------------------------
212 WF 1572 East College Parkway (209) $1,026,974 $50 7.640%
- -----------------------------------------------------------------------------------------------------------------------------------
213 WF River Park Apartments $993,840 $31,058 7.310%
- -----------------------------------------------------------------------------------------------------------------------------------
214 WF Sycamore Self Storage $997,797 $1,855 7.190%
- -----------------------------------------------------------------------------------------------------------------------------------
215 WF 8675 Rochester Avenue $997,624 $20 7.260%
- -----------------------------------------------------------------------------------------------------------------------------------
217 WF Airport Business Park $997,050 $50 7.620%
- -----------------------------------------------------------------------------------------------------------------------------------
218 WF Sorrento Meadows (155) $996,171 $32 7.150%
- -----------------------------------------------------------------------------------------------------------------------------------
219 MS 27 - 37 Main Street $994,632 $82 7.710%
- -----------------------------------------------------------------------------------------------------------------------------------
220 WF La Jolla Colony Pad Building $990,984 $158 7.430%
- -----------------------------------------------------------------------------------------------------------------------------------
221 WF Grove Garden Apartments $978,901 $23,307 7.600%
- -----------------------------------------------------------------------------------------------------------------------------------
222 WF Emerald Point Apartments $944,057 $7,867 6.790%
- -----------------------------------------------------------------------------------------------------------------------------------
223 WF Colt Industrial (140) $897,796 $23 7.070%
- -----------------------------------------------------------------------------------------------------------------------------------
224 WF Pep Boys Build-To-Suit $848,206 $43 7.420%
- -----------------------------------------------------------------------------------------------------------------------------------
225 WF Plaza West Building $843,330 $29 7.765%
- -----------------------------------------------------------------------------------------------------------------------------------
226 WF Hollywood Video - Englewood $774,977 $104 7.030%
- -----------------------------------------------------------------------------------------------------------------------------------
227 WF Hollywood Video - Victorville (180) $598,020 $80 7.760%
- -----------------------------------------------------------------------------------------------------------------------------------
228 WF 2001 E. 4th Street/Santa Ana $548,368 $26 7.590%
- -----------------------------------------------------------------------------------------------------------------------------------
229 WF Hollywood Video - Poway $545,288 $78 7.830%
- -----------------------------------------------------------------------------------------------------------------------------------
230 WF Vista Colina Apartments $543,018 $22,626 7.040%
- -----------------------------------------------------------------------------------------------------------------------------------
231 WF Galleria Park Hotel $11,985,921 $67,717 7.320%
- -----------------------------------------------------------------------------------------------------------------------------------
232 MS Quality Suites Hotel San Diego (63) $8,607,608 $66,212 7.660%
- -----------------------------------------------------------------------------------------------------------------------------------
233 WF Brookstone Apartments $5,243,742 $34,498 7.220%
- -----------------------------------------------------------------------------------------------------------------------------------
234 WF Ponte Vedra Pointe $5,097,437 $71 7.680%
Total/Weighted Average: $1,062,003,110 $15,872 7.259%
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity to Maturity Amort. Scheduled
Loan Note Maturity Date or ARD or ARD Term(5)(6) Balloon Balloon Security
No. Date or ARD(4) (mos) (mos) (mos) Balance LTV(3) Type
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
197 2/26/98 4/1/08 120 118 300 $1,175,414 56.0% Fee
- -------------------------------------------------------------------------------------------------------
198 2/24/98 4/1/08 120 118 240 $936,990 30.2% Fee
- -------------------------------------------------------------------------------------------------------
199 4/24/98 6/1/13 180 180 180 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
200 4/9/98 5/1/08 120 119 300 $1,117,858 55.9% Fee
- -------------------------------------------------------------------------------------------------------
201 1/13/98 3/1/08 120 117 300 $1,119,299 32.5% Fee
- -------------------------------------------------------------------------------------------------------
202 1/30/98 2/1/08 120 116 300 $1,140,036 57.0% Fee
- -------------------------------------------------------------------------------------------------------
203 12/18/97 1/1/08 120 115 360 $1,153,510 50.6% Fee
- -------------------------------------------------------------------------------------------------------
204 12/30/97 2/1/08 120 116 240 $817,166 34.1% Fee
- -------------------------------------------------------------------------------------------------------
205 3/17/98 4/1/08 120 118 360 $1,028,046 49.0% Fee
- -------------------------------------------------------------------------------------------------------
206 3/18/98 5/1/08 120 119 240 $804,866 32.2% Fee
- -------------------------------------------------------------------------------------------------------
207 12/23/97 2/1/13 180 176 180 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
208 1/16/98 3/1/13 180 177 180 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
209 1/12/98 2/1/08 120 116 300 $953,016 56.1% Fee
- -------------------------------------------------------------------------------------------------------
210 12/16/97 1/1/08 120 115 360 $977,503 61.1% Fee
- -------------------------------------------------------------------------------------------------------
212 2/4/98 3/1/08 120 117 300 $840,503 54.2% Fee
- -------------------------------------------------------------------------------------------------------
213 3/4/98 4/1/13 180 178 180 $0 0.0% Fee
- -------------------------------------------------------------------------------------------------------
214 2/18/98 4/1/08 120 118 300 $804,843 46.3% Fee
- -------------------------------------------------------------------------------------------------------
215 2/23/98 4/1/08 120 118 300 $792,019 39.6% Fee
- -------------------------------------------------------------------------------------------------------
217 2/3/98 3/1/08 120 117 300 $815,537 58.3% Fee
- -------------------------------------------------------------------------------------------------------
218 12/12/97 1/1/08 120 115 360 $875,285 46.7% Fee
- -------------------------------------------------------------------------------------------------------
219 12/23/97 1/1/08 120 115 300 $817,000 30.3% Fee
- -------------------------------------------------------------------------------------------------------
220 12/18/97 1/1/08 120 115 240 $690,980 46.1% Fee
- -------------------------------------------------------------------------------------------------------
221 3/31/98 5/1/13 180 179 300 $612,792 40.9% Fee
- -------------------------------------------------------------------------------------------------------
222 3/5/98 4/1/08 120 118 180 $438,553 18.7% Fee
- -------------------------------------------------------------------------------------------------------
223 3/3/98 4/1/08 120 118 300 $709,087 31.1% Fee
- -------------------------------------------------------------------------------------------------------
224 3/3/98 4/1/08 120 118 300 $688,930 48.2% Fee
- -------------------------------------------------------------------------------------------------------
225 2/23/98 4/1/08 120 118 300 $691,956 49.4% Fee
- -------------------------------------------------------------------------------------------------------
226 1/14/98 2/1/08 120 116 264 $574,447 49.5% Fee
- -------------------------------------------------------------------------------------------------------
227 1/21/98 3/1/08 120 117 300 $481,597 43.0% Fee
- -------------------------------------------------------------------------------------------------------
228 1/27/98 3/1/08 120 117 300 $448,145 43.9% Fee
- -------------------------------------------------------------------------------------------------------
229 12/22/97 1/1/08 120 115 240 $385,421 29.9% Fee
- -------------------------------------------------------------------------------------------------------
230 1/16/98 2/1/08 120 116 180 $256,282 21.4% Fee
- -------------------------------------------------------------------------------------------------------
231 4/27/98 4/1/03 59 58 300 $11,003,825 48.5% Leasehold
- -------------------------------------------------------------------------------------------------------
232 3/23/98 4/1/08 120 118 300 $7,041,000 61.2% Fee
- -------------------------------------------------------------------------------------------------------
233 4/28/98 5/1/08 120 119 300 $4,153,543 51.3% Fee
- -------------------------------------------------------------------------------------------------------
234 4/30/98 5/1/08 120 119 360 $4,527,608 70.2% Fee
140 137 314 49.5%
</TABLE>
II-6
<PAGE> 111
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 1201 Pennsylvania Avenue 1201 Pennsylvania Avenue Washington DC
- -----------------------------------------------------------------------------------------------------------------------------------
2 Courthouse Plaza II 2300 Clarendon Boulevard Arlington VA
- -----------------------------------------------------------------------------------------------------------------------------------
3 Marina del Rey Stor It (2I) 4068 Del Rey Avenue Marina del Rey CA
4 Santa Clara Extra Storage (2I) 2797 Scott Boulevard Santa Clara CA
5 Aliso Viejo Stor It (2I) 51 Argonaut Alsio Viejo CA
6 Mission Viejo Stor It (2I) 23552 Madero Mission Viejo CA
7 Foothill Ranch Stor It (2I) 19822 Pauling Foothill Ranch CA
8 Redwood City Extra Storage (2I) 1940 Spring Street Redwood City CA
9 San Juan Capistrano Stor It (2I) 32981 Calle Aviador San Juan Capistrano CA
- -----------------------------------------------------------------------------------------------------------------------------------
10 Westminster City Center Marketplace 9230 Sheridan Boulevard Westminster CO
- -----------------------------------------------------------------------------------------------------------------------------------
11 Gateway Plaza Shopping Center 21909-21949 Ventura Blvd. & 5422-40 Topanga Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
12 Atrium IV 200 Plaza Drive Secaucus NJ
- -----------------------------------------------------------------------------------------------------------------------------------
13 Fountainview Village Apartments 1501 Little Gloucester Road Blackwood NJ
- -----------------------------------------------------------------------------------------------------------------------------------
14 Centre on Seventeenth 2000-2278 East 17th Street Santa Ana CA
- -----------------------------------------------------------------------------------------------------------------------------------
15 Catamaran Resort Hotel 3999 Mission Boulevard San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
16 AMC Theatres Highlands Ranch 103 Centennial Boulevard Highlands Ranch CO
- -----------------------------------------------------------------------------------------------------------------------------------
18 48-18 Northern Boulevard 48-18 Northern Boulevard Long Island City NY
- -----------------------------------------------------------------------------------------------------------------------------------
19 Fleischhauer Student Housing Portfolio Various West Lafayette IN
- -----------------------------------------------------------------------------------------------------------------------------------
20 Independence Park Shopping Center 1776 Plainfield Pike Cranston RI
- -----------------------------------------------------------------------------------------------------------------------------------
21 Normandy Apartments 4701-25 Sheboygan Avenue Madison WI
- -----------------------------------------------------------------------------------------------------------------------------------
22 Beachwood Apartments 38001 Clubhouse Lane Harrison Township MI
- -----------------------------------------------------------------------------------------------------------------------------------
23 Cupertino Town Center 10320-10440 S. De Anza Boulevard Cupertino CA
- -----------------------------------------------------------------------------------------------------------------------------------
24 Orchard Mesa Apartments 108 N. Greenfield Road Mesa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
25 Bel Air Town Center 502-580 Baltimore Pike Bel Air MD
- -----------------------------------------------------------------------------------------------------------------------------------
26 Stratford Wood Apartments 18900 Stratford Road(Bldg II) Minnetonka MN
- -----------------------------------------------------------------------------------------------------------------------------------
27 Pacific Terrace Inn 610 Diamond Street San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
28 Goldorado Shopping Center (2A) US 50 and Cameron Park Drive Cameron Park CA
29 Hollywood Video - Pad (2A) 3454 Palmer Drive Cameron Park CA
- -----------------------------------------------------------------------------------------------------------------------------------
30 Camelot Village 4200 East Highway 80 Mesquite TX
- -----------------------------------------------------------------------------------------------------------------------------------
31 Vaz-Lodi 960 Guild Avenue Lodi CA
- -----------------------------------------------------------------------------------------------------------------------------------
32 The Carlyle 5750 East University Boulevard Dallas TX
- -----------------------------------------------------------------------------------------------------------------------------------
33 Holiday Inn - College Park 10000 Baltimore Boulevard College Park MD
- -----------------------------------------------------------------------------------------------------------------------------------
34 Ball Post - Fairfield 5191 Fermi Drive Fairfield CA
- -----------------------------------------------------------------------------------------------------------------------------------
35 Courtyard by Marriott - Portsmouth 1000 Market Street Portsmouth NH
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
Loan Property Sub-Property Year Built/
No. Zipcode Type Type Units/NSF Renovated
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
1 20004 Office Urban Office 437,961 1981
- --------------------------------------------------------------------------------------
2 22201 Office Suburban Office 255,856 1989
- --------------------------------------------------------------------------------------
3 90292 Self Storage Self Storage 1,202 1988
4 95050 Self Storage Self Storage 1,744 1986
5 92708 Self Storage Self Storage 919 1989
6 92691 Self Storage Self Storage 928 1987
7 92610 Self Storage Self Storage 675 1996
8 94063 Self Storage Self Storage 842 1985
9 92675 Self Storage Self Storage 537 1987
- --------------------------------------------------------------------------------------
10 80030 Retail Anchored Retail 339,600 1996
- --------------------------------------------------------------------------------------
11 91364 Retail Anchored Retail 116,960 1994
- --------------------------------------------------------------------------------------
12 07094 Office Urban Office 258,711 1985
- --------------------------------------------------------------------------------------
13 8012 Multifamily Garden Apartment 970 1992
- --------------------------------------------------------------------------------------
14 92701 Retail Anchored Retail 201,957 1997
- --------------------------------------------------------------------------------------
15 92109 Hospitality Full Service 313 1988
- --------------------------------------------------------------------------------------
16 80126 Other Theater 90,000 1998
- --------------------------------------------------------------------------------------
18 11101 Retail Anchored Retail 218,813 1997
- --------------------------------------------------------------------------------------
19 47906 Multifamily Garden Apartment 275 1972-1995
- --------------------------------------------------------------------------------------
20 02920 Retail Anchored Retail 197,630 1993
- --------------------------------------------------------------------------------------
21 53705 Multifamily Garden Apartment 304 1970
- --------------------------------------------------------------------------------------
22 48045 Multifamily Garden Apartment 376 1997
- --------------------------------------------------------------------------------------
23 95014 Office Garden Office 149,224 1967-1984
- --------------------------------------------------------------------------------------
24 85205 Multifamily Garden Apartment 696 1984
- --------------------------------------------------------------------------------------
25 21014 Retail Anchored Retail 81,642 1990
- --------------------------------------------------------------------------------------
26 55391 Multifamily Garden Apartment 297 1995
- --------------------------------------------------------------------------------------
27 92109 Hospitality Limited Service 73 1995
- --------------------------------------------------------------------------------------
28 95682 Retail Anchored Retail 98,428 1992
29 95682 Retail Shadow Retail 7,800 1998
- --------------------------------------------------------------------------------------
30 75149 Multifamily Garden Apartment 512 1983
- --------------------------------------------------------------------------------------
31 95240 Industrial Bulk Industrial 400,000 1996-1997
- --------------------------------------------------------------------------------------
32 75206 Multifamily Garden Apartment 180 1993
- --------------------------------------------------------------------------------------
33 20740 Hospitality Full Service 221 1997
- --------------------------------------------------------------------------------------
34 94585 Industrial Bulk Industrial 330,750 1997
- --------------------------------------------------------------------------------------
35 03801 Hospitality Limited Service 109 1996
- --------------------------------------------------------------------------------------
</TABLE>
II-7
<PAGE> 112
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
36 Courtyard by Marriott - Albuquerque 5151 Journal Center Boulevard, N.E. Albuquerque NM
- -----------------------------------------------------------------------------------------------------------------------------------
37 Rolling Hills Place Apartments 500 Rolling Hills Place Lancaster TX
- -----------------------------------------------------------------------------------------------------------------------------------
38 33201 Dowe Avenue 33201 Dowe Avenue Union City CA
- -----------------------------------------------------------------------------------------------------------------------------------
39 Sycamore Greens Apartments 1974 Wellington Lane Vista CA
- -----------------------------------------------------------------------------------------------------------------------------------
40 Lake Village Mobile Home Park 400 Lake Drive Nokomis FL
- -----------------------------------------------------------------------------------------------------------------------------------
41 Pleasant Lake Apartments 10129 South Lake Boulevard Parma OH
- -----------------------------------------------------------------------------------------------------------------------------------
45 Lake Fredrica Shopping Center 4066 S. Semoran Boulevard Orlando FL
- -----------------------------------------------------------------------------------------------------------------------------------
46 Alberto Oaks 475 and 485 Alberto Way Los Gatos CA
- -----------------------------------------------------------------------------------------------------------------------------------
48-A Hawthorne Apartments (2II) Hawthorne Street Statesboro GA
48-B Greenbriar Apartments (2II) 21 Greenbriar Street Statesboro GA
- -----------------------------------------------------------------------------------------------------------------------------------
49 Park Village Apartments 2305-09 S. Park Street & 2203-43 Woodview Ct. Madison WI
- -----------------------------------------------------------------------------------------------------------------------------------
50 Vineyard Mobile Villa 3263 Vineyard Avenue Pleasanton CA
- -----------------------------------------------------------------------------------------------------------------------------------
51 Kern Canyon Estates Mobile Home Park 8536 Kern Canyon Road Bakersfield CA
- -----------------------------------------------------------------------------------------------------------------------------------
52 Willow Hilll Apartments 13011 Merdian East Puyallup WA
- -----------------------------------------------------------------------------------------------------------------------------------
53 Havasu Plaza 1850-1870 McCulloch Boulevard Lake Havasu City AZ
- -----------------------------------------------------------------------------------------------------------------------------------
54 University Plaza Shopping Center 6125 University Drive Huntsville AL
- -----------------------------------------------------------------------------------------------------------------------------------
55 Midtown Center 405 Capitol Street Charleston WV
- -----------------------------------------------------------------------------------------------------------------------------------
56 Brea Corporate Park 3020-3040 Saturn Street Brea CA
- -----------------------------------------------------------------------------------------------------------------------------------
57 Lenox East (2B) 100-500 Mayfield Circle Durham NC
- -----------------------------------------------------------------------------------------------------------------------------------
58 Hawks Nest Apartments (2B) 3400 Sandy Creek Drive Durham NC
- -----------------------------------------------------------------------------------------------------------------------------------
59 Hampton Inn - Columbia 3400 Clark Lane Columbia MO
- -----------------------------------------------------------------------------------------------------------------------------------
60 Imperial Rose Plaza 1101 East Imperial Highway Placentia CA
- -----------------------------------------------------------------------------------------------------------------------------------
61 Park 16 Apartments 1111 SW 16th Avenue Gainesville FL
- -----------------------------------------------------------------------------------------------------------------------------------
62 Aspen Square 617 East Cooper Avenue Aspen CO
- -----------------------------------------------------------------------------------------------------------------------------------
63 Irvine Suites Hotel 23192 Lake Center Drive Lake Forest CA
- -----------------------------------------------------------------------------------------------------------------------------------
64 Vineyard Plaza 1001-23 Vine Street Healdsburg CA
- -----------------------------------------------------------------------------------------------------------------------------------
65 Courtyard by Marriott - Jensen 10978 South Ocean Drive Jensen Beach FL
- -----------------------------------------------------------------------------------------------------------------------------------
67 Barnett Bank Center 1625 North Commerce Parkway Ft. Lauderdale FL
- -----------------------------------------------------------------------------------------------------------------------------------
68 Holiday Inn - Port St. Lucie 10120 South Federal Highway Port St. Lucie FL
- -----------------------------------------------------------------------------------------------------------------------------------
69 Nottingham Village Apartments 9300 East 21st Street Indianapolis IN
- -----------------------------------------------------------------------------------------------------------------------------------
70 Colony Square Shopping Center 6257-6289 Mayfield Road Mayfield Heights OH
- -----------------------------------------------------------------------------------------------------------------------------------
71 University Centre West II (2C) 2790 N. University Drive Coral Springs FL
72 University Centre West I (2C) 2790 N. University Drive Coral Springs FL
- -----------------------------------------------------------------------------------------------------------------------------------
73 Country Suites Carlson 1660 West Elliot Road Tempe AZ
<CAPTION>
- --------------------------------------------------------------------------------------
Loan Property Sub-Property Year Built/
No. Zipcode Type Type Units/NSF Renovated
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
36 87109 Hospitality Full Service 150 1996
- --------------------------------------------------------------------------------------
37 75146 Multifamily Garden Apartment 384 1985
- --------------------------------------------------------------------------------------
38 94587 Industrial Bulk Industrial 306,650 1987
- --------------------------------------------------------------------------------------
39 92803 Multifamily Garden Apartment 161 1987
- --------------------------------------------------------------------------------------
40 34275 Mobile Home Park Mobile Home Park 391 1968
- --------------------------------------------------------------------------------------
41 44115 Multifamily Garden Apartment 338 1994
- --------------------------------------------------------------------------------------
45 32822 Retail Anchored Retail 99,210 1988
- --------------------------------------------------------------------------------------
46 95032 Office Garden Office 56,000 1986
- --------------------------------------------------------------------------------------
48-A 30458 Multifamily Garden Apartment 104 1992
48-B 30458 Multifamily Garden Apartment 40 1979
- --------------------------------------------------------------------------------------
49 53713 Multifamily Garden Apartment 343 1991
- --------------------------------------------------------------------------------------
50 94566 Mobile Home Park Mobile Home Park 208 1972
- --------------------------------------------------------------------------------------
51 93306 Mobile Home Park Mobile Home Park 255 1978
- --------------------------------------------------------------------------------------
52 98373 Multifamily Garden Apartment 265 1988
- --------------------------------------------------------------------------------------
53 86403 Retail Anchored Retail 123,764 1989
- --------------------------------------------------------------------------------------
54 35806 Retail Anchored Retail 154,766 1989
- --------------------------------------------------------------------------------------
55 25301 Office High-Rise Office 138,535 1984
- --------------------------------------------------------------------------------------
56 92621 Office Garden Office 105,944 1984
- --------------------------------------------------------------------------------------
57 27713 Multifamily Garden Apartment 81 1996
- --------------------------------------------------------------------------------------
58 27705 Multifamily Garden Apartment 42 1986
- --------------------------------------------------------------------------------------
59 65202 Hospitality Limited Service 122 1996
- --------------------------------------------------------------------------------------
60 92670 Retail Anchored Retail 90,364 1991
- --------------------------------------------------------------------------------------
61 32601 Multifamily Garden Apartment 174 1966
- --------------------------------------------------------------------------------------
62 81611 Retail Unanchored Retail 14,277 1985
- --------------------------------------------------------------------------------------
63 92630 Hospitality Limited Service 90 1989
- --------------------------------------------------------------------------------------
64 95448 Retail Anchored Retail 80,705 1983
- --------------------------------------------------------------------------------------
65 34957 Hospitality Full Service 110 1992
- --------------------------------------------------------------------------------------
67 33326 Office Suburban Office 31,437 1992
- --------------------------------------------------------------------------------------
68 34951 Hospitality Full Service 142 1993
- --------------------------------------------------------------------------------------
69 46229 Multifamily Garden Apartment 264 1970
- --------------------------------------------------------------------------------------
70 44124 Other Retail/Office 62,838 1990
- --------------------------------------------------------------------------------------
71 33065 Retail Unanchored Retail 27,035 1996
72 33065 Retail Box Retail 13,850 1995
- --------------------------------------------------------------------------------------
73 85283 Hospitality Limited Service 139 1987
</TABLE>
II-8
<PAGE> 113
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
74 Summer Glen Apartments 23200 Western Avenue Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
75 Hampton Inn-Eagan 3000 Eagandale Place Eagan MN
- -----------------------------------------------------------------------------------------------------------------------------------
76 Mission Tierra Apartments 5505 South Mission Road Tucson AZ
- -----------------------------------------------------------------------------------------------------------------------------------
77 Spec 188 760 Hanna Drive American Canyon CA
- -----------------------------------------------------------------------------------------------------------------------------------
79 Myriad Genetics Building 320 Wakara Way Salt Lake City UT
- -----------------------------------------------------------------------------------------------------------------------------------
80 Fairfield Inn - Bangor 300 Odlin Road Bangor ME
- -----------------------------------------------------------------------------------------------------------------------------------
81 269 South Lafayette Park Place 269 S. Lafayette Park Place Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
82 Hampton Inn - Rochester 1755 South Broadway Rochester MN
- -----------------------------------------------------------------------------------------------------------------------------------
83 Windsor Medical Center 911 Medical Center Plaza Windsor CA
- -----------------------------------------------------------------------------------------------------------------------------------
84 Glenwood Springs Mall 51027 U.S. Highway 6 & 24 Glenwood Springs CO
- -----------------------------------------------------------------------------------------------------------------------------------
85 Village Center at Highlands Ranch 9553-9559 South University Boulevard Highlands Ranch CO
- -----------------------------------------------------------------------------------------------------------------------------------
86 Wherehouse Plaza - San Jose 1315-1345 Blossom Hill Road San Jose CA
- -----------------------------------------------------------------------------------------------------------------------------------
87 Best Western La Jolla 7830 Fay Avenue La Jolla CA
- -----------------------------------------------------------------------------------------------------------------------------------
88 Casa De Colinas Town Homes 2162 W. Speedway Tucson AZ
- -----------------------------------------------------------------------------------------------------------------------------------
89 River Valley Apartments 1237 Watermark Drive Lancaster OH
- -----------------------------------------------------------------------------------------------------------------------------------
90 Village at the Oaks 7850, 7950 & 8040 White Lane Bakersfield CA
- -----------------------------------------------------------------------------------------------------------------------------------
91 Vista de la Sierra 1555 East Busby Drive Sierra Vista AZ
- -----------------------------------------------------------------------------------------------------------------------------------
92 Casa de la Sierra 500 S. Coronado Drive Sierra Vista AZ
- -----------------------------------------------------------------------------------------------------------------------------------
93 Aspen Grove Building 521-525 East Cooper Aspen CO
- -----------------------------------------------------------------------------------------------------------------------------------
94 Barclay Buena Park 6230-6246 Descanso Avenue Buena Park CA
- -----------------------------------------------------------------------------------------------------------------------------------
95 Cowell Terrace Apartments 1167 St. Matthews Place Concord CA
- -----------------------------------------------------------------------------------------------------------------------------------
96 Landmark Plaza 300 South Koeller Street Oshkosh WI
- -----------------------------------------------------------------------------------------------------------------------------------
97 High Desert Villas Apartments 16850 Jasmine Street Victorville CA
- -----------------------------------------------------------------------------------------------------------------------------------
98 Port 95 - Building 3 3659-3699 SW 30 Avenue Hollywood FL
- -----------------------------------------------------------------------------------------------------------------------------------
99 Arbor Village Shopping Center Phase II 7270-7430 West 88th Avenue Arvada CO
- -----------------------------------------------------------------------------------------------------------------------------------
100 Windy Hill Key Apartments 5400 Bernard Drive S.W. Roanoke VA
- -----------------------------------------------------------------------------------------------------------------------------------
101 Park Terrace Apartments 3 Emerald Lane Fairview Heights IL
- -----------------------------------------------------------------------------------------------------------------------------------
102 489 Whitney Avenue 489 Whitney Avenue Holyoke MA
- -----------------------------------------------------------------------------------------------------------------------------------
103 Limeridge Apartments 3266-3299 Tioga Road Concord CA
- -----------------------------------------------------------------------------------------------------------------------------------
104 South Bay Plaza 2216-2240 Sepulveda Boulevard Torrance CA
- -----------------------------------------------------------------------------------------------------------------------------------
105 Public Storage - Redwood City, CA 1839-93 Bayshore Road Redwood City CA
- -----------------------------------------------------------------------------------------------------------------------------------
106 Broadway Plaza 1610 North Broadway Santa Ana CA
- -----------------------------------------------------------------------------------------------------------------------------------
107 1313 Geneva Drive 1313 Geneva Drive Sunnyvale CA
- -----------------------------------------------------------------------------------------------------------------------------------
108 Omni Business Park 302-402 S. Milliken Avenue Ontario CA
<CAPTION>
- --------------------------------------------------------------------------------------
Loan Property Sub-Property Year Built/
No. Zipcode Type Type Units/NSF Renovated
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
74 90710 Multifamily Garden Apartment 145 1981
- --------------------------------------------------------------------------------------
75 55121 Hospitality Limited Service 123 1994
- --------------------------------------------------------------------------------------
76 85746 Multifamily Garden Apartment 220 1994
- --------------------------------------------------------------------------------------
77 94589 Industrial Bulk Industrial 188,000 1996
- --------------------------------------------------------------------------------------
79 84108 Office Garden Office 48,483 1996
- --------------------------------------------------------------------------------------
80 04401 Hospitality Limited Service 153 1997
- --------------------------------------------------------------------------------------
81 90057 Multifamily Garden Apartment 147 1970
- --------------------------------------------------------------------------------------
82 55904 Hospitality Limited Service 105 1994
- --------------------------------------------------------------------------------------
83 95492 Office Medical Office 31,592 1992
- --------------------------------------------------------------------------------------
84 81601 Retail Anchored Retail 170,213 1995
- --------------------------------------------------------------------------------------
85 80126 Retail Shadow Retail 28,179 1997
- --------------------------------------------------------------------------------------
86 95118 Retail Unanchored Retail 48,351 1997
- --------------------------------------------------------------------------------------
87 92037 Hospitality Limited Service 132 1996
- --------------------------------------------------------------------------------------
88 85745 Multifamily Garden Apartment 76 1997
- --------------------------------------------------------------------------------------
89 43130 Multifamily Garden Apartment 144 1994
- --------------------------------------------------------------------------------------
90 93309 Retail Shadow Retail 37,193 1991
- --------------------------------------------------------------------------------------
91 85635 Multifamily Garden Apartment 220 1995
- --------------------------------------------------------------------------------------
92 85635 Multifamily Garden Apartment 220 1995
- --------------------------------------------------------------------------------------
93 81611 Retail Unanchored Retail 17,521 1985
- --------------------------------------------------------------------------------------
94 90620 Industrial Bulk Industrial 175,008 1978
- --------------------------------------------------------------------------------------
95 94518 Multifamily Garden Apartment 80 1988
- --------------------------------------------------------------------------------------
96 54901 Retail Anchored Retail 96,160 1994
- --------------------------------------------------------------------------------------
97 92392 Multifamily Garden Apartment 232 1990
- --------------------------------------------------------------------------------------
98 33312 Industrial Warehouse 99,000 1996
- --------------------------------------------------------------------------------------
99 80003 Retail Shadow Retail 49,902 1989
- --------------------------------------------------------------------------------------
100 24014 Multifamily Garden Apartment 140 1995
- --------------------------------------------------------------------------------------
101 62208 Multifamily Garden Apartment 96 1997
- --------------------------------------------------------------------------------------
102 01040 Office Suburban Office 57,428 1981
- --------------------------------------------------------------------------------------
103 94518 Multifamily Garden Apartment 70 1988
- --------------------------------------------------------------------------------------
104 90501 Retail Anchored Retail 38,851 1990
- --------------------------------------------------------------------------------------
105 94063 Self Storage Self Storage 743 1983
- --------------------------------------------------------------------------------------
106 92706 Multifamily Garden Apartment 137 1993
- --------------------------------------------------------------------------------------
107 94089 Industrial Flex Industrial 48,850 1997
- --------------------------------------------------------------------------------------
108 91761 Industrial Flex Industrial 94,158 1988
</TABLE>
II-9
<PAGE> 114
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
109 Rancho San Diego Plaza 2731-39 Via Orange Way Spring Valley CA
- -----------------------------------------------------------------------------------------------------------------------------------
110 Wallburg Towne Center 10479 N. North Carolina Highway 109 Wallburg NC
- -----------------------------------------------------------------------------------------------------------------------------------
111 North Chase Office Building H 1110 North Chase Parkway Marietta GA
- -----------------------------------------------------------------------------------------------------------------------------------
112 Wixom Plaza (Oakland Pontiac Center) 47300-47526 Pontiac Trail Wixom MI
- -----------------------------------------------------------------------------------------------------------------------------------
113 Lakeside Apartments 1718 Northside Drive Valdosta GA
- -----------------------------------------------------------------------------------------------------------------------------------
114 Pillsbury Manor 90 Allen Road South Burlington VT
- -----------------------------------------------------------------------------------------------------------------------------------
115 Comfort Suites - Stevens Point 300 Division Street Stevens Point WI
- -----------------------------------------------------------------------------------------------------------------------------------
116 Westmore Auto Park 7402-7428 Westmore Road Rockville MD
- -----------------------------------------------------------------------------------------------------------------------------------
117 Jog Road Center 2901 Clint Moore Road Boca Raton FL
- -----------------------------------------------------------------------------------------------------------------------------------
118 Citadel Apartments 150 South Magnolia Avenue Anaheim CA
- -----------------------------------------------------------------------------------------------------------------------------------
119 Pfeiffer Commons 5901 Pfeiffer Road Blue Ash OH
- -----------------------------------------------------------------------------------------------------------------------------------
120 7803 Madison Ave. 7803 Madsion Avenue Citrus Heights CA
- -----------------------------------------------------------------------------------------------------------------------------------
121 Miami Bluffs Apartments 8204 Wooster Pike Cincinnati OH
- -----------------------------------------------------------------------------------------------------------------------------------
122 Roberts Industrial Park 8637-63 Hayden Park Culver City CA
- -----------------------------------------------------------------------------------------------------------------------------------
123 Orangewood Apartments 25973 Redlands Boulevard Redlands CA
- -----------------------------------------------------------------------------------------------------------------------------------
124 Rosedown Apartments (2D) 6500 47th Street Sacramento CA
- -----------------------------------------------------------------------------------------------------------------------------------
211 Adair Professional Building (2D) 4600 & 4730 47th Avenue Sacramento CA
- -----------------------------------------------------------------------------------------------------------------------------------
125 Secure Self Storage of Lakeside 12202 Woodside Avenue Lakeside CA
- -----------------------------------------------------------------------------------------------------------------------------------
126 Walnut Tower Apartments 722 Walnut Street Kansas City MO
- -----------------------------------------------------------------------------------------------------------------------------------
127 Five Building Portfolio Various Properties Las Vegas NV
- -----------------------------------------------------------------------------------------------------------------------------------
128 Barnes & Noble, Tucson 5130 East Broadway Boulevard Tucson AZ
- -----------------------------------------------------------------------------------------------------------------------------------
129 Builders Square - Lansing, MI 5750 S. Cedar Street Lansing MI
- -----------------------------------------------------------------------------------------------------------------------------------
130 Tennent Nine Shopping Center 700 Tennent Road Manalapan NJ
- -----------------------------------------------------------------------------------------------------------------------------------
131 Brook Hollow Village 5775 Jimmy Carter Boulevard Norcross GA
- -----------------------------------------------------------------------------------------------------------------------------------
132 Countryside Apartments 565 Harlow Road Springfield OR
- -----------------------------------------------------------------------------------------------------------------------------------
133 Summerfield Apartments 1 2601, 2611 and 2621 Springdale Pittsburg KS
- -----------------------------------------------------------------------------------------------------------------------------------
134 Garden Grove Secured Storage 13632 Euclid Street Garden Grove CA
- -----------------------------------------------------------------------------------------------------------------------------------
135 Windermere Shoppes 10558 East 96th Street Fishers IN
- -----------------------------------------------------------------------------------------------------------------------------------
136 Carriage Square 4170 South 1785 West Taylorsville City UT
- -----------------------------------------------------------------------------------------------------------------------------------
137 Fountainebleau Apartments 6525 El Colegio Road Isla Vista CA
- -----------------------------------------------------------------------------------------------------------------------------------
138 Walgreens - Vero Beach 915 South, Highway US 1 Vero Beach FL
- -----------------------------------------------------------------------------------------------------------------------------------
139 HH Gregg Shopping Center 10101 East Washington Street Indianapolis IN
- -----------------------------------------------------------------------------------------------------------------------------------
140 Arundell Business Park 3503-3669 Arundell Circle Ventura CA
- -----------------------------------------------------------------------------------------------------------------------------------
141 Fed Ex - San Leandro 1601 Aurora Drive San Leandro CA
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
Loan Property Sub-Property Year Built/
No. Zipcode Type Type Units/NSF Renovated
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
109 91978 Industrial Flex Industrial 94,546 1986
- --------------------------------------------------------------------------------------
110 27107 Retail Anchored Retail 55,450 1997
- --------------------------------------------------------------------------------------
111 30067 Office Garden Office 45,068 1989
- --------------------------------------------------------------------------------------
112 48393 Retail Anchored Retail 39,462 1996
- --------------------------------------------------------------------------------------
113 31602 Multifamily Garden Apartment 192 1986
- --------------------------------------------------------------------------------------
114 05403 Multifamily Senior Housing 60 1997
- --------------------------------------------------------------------------------------
115 54481 Hospitality Limited Service 105 1990
- --------------------------------------------------------------------------------------
116 20850 Industrial Flex Industrial 99,319 1965-1985
- --------------------------------------------------------------------------------------
117 33496 Retail Anchored Retail 23,779 1993
- --------------------------------------------------------------------------------------
118 92804 Multifamily Garden Apartment 142 1970
- --------------------------------------------------------------------------------------
119 45242 Retail Anchored Retail 43,322 1995
- --------------------------------------------------------------------------------------
120 95610 Office Garden Office 38,619 1988
- --------------------------------------------------------------------------------------
121 45227 Multifamily Garden Apartment 91 1994
- --------------------------------------------------------------------------------------
122 90232 Industrial Flex Industrial 42,800 1977
- --------------------------------------------------------------------------------------
123 92373 Multifamily Garden Apartment 144 1986
- --------------------------------------------------------------------------------------
124 95823 Multifamily Garden Apartment 108 1994
- --------------------------------------------------------------------------------------
211 95820 Office Garden Office 34,672 1980/1989
- --------------------------------------------------------------------------------------
125 92040 Self Storage Self Storage 700 1988
- --------------------------------------------------------------------------------------
126 64106 Multifamily High-rise 194 1962
- --------------------------------------------------------------------------------------
127 89102 Industrial Bulk Industrial 49,329 1986-1994
- --------------------------------------------------------------------------------------
128 85711 Retail Shadow Retail 27,000 1997
- --------------------------------------------------------------------------------------
129 48911 Retail Box Retail 106,080 1995
- --------------------------------------------------------------------------------------
130 07726 Retail Anchored Retail 60,398 1994
- --------------------------------------------------------------------------------------
131 30071 Retail Shadow Retail 46,921 1996
- --------------------------------------------------------------------------------------
132 97477 Multifamily Garden Apartment 98 1971
- --------------------------------------------------------------------------------------
133 66702 Multifamily Garden Apartment 72 1995
- --------------------------------------------------------------------------------------
134 92843 Self Storage Self Storage 749 1986
- --------------------------------------------------------------------------------------
135 46038 Retail Anchored Retail 25,122 1997
- --------------------------------------------------------------------------------------
136 84119 Retail Unanchored Retail 78,605 1996
- --------------------------------------------------------------------------------------
137 93117 Multifamily Garden Apartment 52 1966
- --------------------------------------------------------------------------------------
138 32963 Retail Anchored Retail 15,525 1996
- --------------------------------------------------------------------------------------
139 46299 Retail Anchored Retail 64,119 1996
- --------------------------------------------------------------------------------------
140 93003 Industrial Flex Industrial 94,050 1980
- --------------------------------------------------------------------------------------
141 94577 Industrial Bulk Industrial 35,357 1996
- --------------------------------------------------------------------------------------
</TABLE>
II-10
<PAGE> 115
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
142 Future Shop 50 West 1300 South Street Orem UT
- -----------------------------------------------------------------------------------------------------------------------------------
143 Eastview Medical Center 1370 116th Avenue N.E. Bellevue WA
- -----------------------------------------------------------------------------------------------------------------------------------
144 The Willows 24724 Valley Street Santa Clarita CA
- -----------------------------------------------------------------------------------------------------------------------------------
145 AmericInn, Ripon (2III) 1219 West Fond du Lac Street Ripon WI
146 AmericInn, Waupun (2III) 5 Gateway Drive Waupun WI
- -----------------------------------------------------------------------------------------------------------------------------------
147 Beechwood Apartments 3910 West Beechwood Avenue Fresno CA
- -----------------------------------------------------------------------------------------------------------------------------------
148 Shadowridge Self-Storage 2220 Watson Way Vista CA
- -----------------------------------------------------------------------------------------------------------------------------------
149 Partridge Court Apartments 1302-18 West 4th Avenue Broomfield CO
- -----------------------------------------------------------------------------------------------------------------------------------
150 Don Joy Building 2985 & 3105 Scott Street Vista CA
- -----------------------------------------------------------------------------------------------------------------------------------
151 Birchwood Farms Mobile Home Park 12635 Church Street Birch Run MI
- -----------------------------------------------------------------------------------------------------------------------------------
152 Food 4 Less - Stockton 255 East March Lane Stockton CA
- -----------------------------------------------------------------------------------------------------------------------------------
153 1530 Old Oakland Road 1530 Old Oakland Road San Jose CA
- -----------------------------------------------------------------------------------------------------------------------------------
154 4125 Blackhawk Plaza Circle 4125 Blackhawk Plaza Circle Danville CA
- -----------------------------------------------------------------------------------------------------------------------------------
155 Yamato Village Center 9101 Lake Ridge Boulevard Boca Raton FL
- -----------------------------------------------------------------------------------------------------------------------------------
156 Hawthorn Plaza 5018 E. 62nd Street Indianapolis IN
- -----------------------------------------------------------------------------------------------------------------------------------
157 Connors Business Park 8503-8505 Euclid Avenue Manassas Park VA
- -----------------------------------------------------------------------------------------------------------------------------------
158 Oasis Morning Apartments 6415-6453 Casada Way Las Vegas NV
- -----------------------------------------------------------------------------------------------------------------------------------
159 R. G. Barry Distribution Warehouse 3301 Barry Avenue San Angelo TX
- -----------------------------------------------------------------------------------------------------------------------------------
160 22nd & Broadway 2201 Broadway Sacramento CA
- -----------------------------------------------------------------------------------------------------------------------------------
161 1510 Old Oakland Road 1510 Old Oakland Road San Jose CA
- -----------------------------------------------------------------------------------------------------------------------------------
162 233 South Lafayette Park Place 233 S. Lafayette Park Place Los Angeles CA
- -----------------------------------------------------------------------------------------------------------------------------------
163 Parkwood Plaza Townhomes 713 West Center Street Duncanville TX
- -----------------------------------------------------------------------------------------------------------------------------------
164 HH Gregg Store 8921 US 31 South Indianapolis IN
- -----------------------------------------------------------------------------------------------------------------------------------
165 Free Standing Eckerds - Rock Hill 1705 Ebenezer Road Rock Hill SC
- -----------------------------------------------------------------------------------------------------------------------------------
166 Springfield Manor Mobile Home Park 2050 Springfield Drive Chico CA
- -----------------------------------------------------------------------------------------------------------------------------------
167 Salem Crossing Apartments 1111 Salem Valley Road Winston-Salem NC
- -----------------------------------------------------------------------------------------------------------------------------------
168 Airport Plaza - Santee 8400-8406 N. Magnolia Avenue Santee CA
- -----------------------------------------------------------------------------------------------------------------------------------
169 Richland Shopping Center 1421 Coffee Road Modesto CA
- -----------------------------------------------------------------------------------------------------------------------------------
170 Bedford Hills Apartments 942 Simpson Terrace Bedford TX
- -----------------------------------------------------------------------------------------------------------------------------------
171 Canon Plaza 302-310 16th St. & 1703 N. Fremont Canon City CO
- -----------------------------------------------------------------------------------------------------------------------------------
172 3987-3991 First Street 3987-3991 First Street Livermore CA
- -----------------------------------------------------------------------------------------------------------------------------------
173 Walgreens - Gainesville 1615 NW 13th Street Gainesville FL
- -----------------------------------------------------------------------------------------------------------------------------------
174 Courtyard Office Building 27349 Jefferson Avenue Temecula CA
- -----------------------------------------------------------------------------------------------------------------------------------
176 380 Diablo 380 Diablo Road Danville CA
<CAPTION>
- --------------------------------------------------------------------------------------
Loan Property Sub-Property Year Built/
No. Zipcode Type Type Units/NSF Renovated
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
142 84058 Retail Anchored Retail 36,760 1996
- --------------------------------------------------------------------------------------
143 98004 Office Medical Office 24,264 1986
- --------------------------------------------------------------------------------------
144 91321 Multifamily Garden Apartment 80 1987
- --------------------------------------------------------------------------------------
145 54971 Hospitality Limited Service 43 1992
146 53963 Hospitality Limited Service 39 1992
- --------------------------------------------------------------------------------------
147 93711 Multifamily Garden Apartment 68 1985
- --------------------------------------------------------------------------------------
148 92083 Self Storage Self Storage 639 1988
- --------------------------------------------------------------------------------------
149 80020 Multifamily Garden Apartment 90 1995
- --------------------------------------------------------------------------------------
150 92083 Industrial Bulk Industrial 139,593 1990
- --------------------------------------------------------------------------------------
151 48415 Mobile Home Park Mobile Home Park 143 1995
- --------------------------------------------------------------------------------------
152 95207 Retail Anchored Retail 43,240 1984
- --------------------------------------------------------------------------------------
153 95112 Industrial Flex Industrial 27,890 1986
- --------------------------------------------------------------------------------------
154 94506 Office Garden Office 24,097 1989
- --------------------------------------------------------------------------------------
155 33496 Retail Unanchored Retail 29,692 1996
- --------------------------------------------------------------------------------------
156 46220 Retail Anchored Retail 47,550 1987
- --------------------------------------------------------------------------------------
157 20111 Industrial Bulk Industrial 70,590 1985
- --------------------------------------------------------------------------------------
158 89107 Multifamily Garden Apartment 106 1977
- --------------------------------------------------------------------------------------
159 76901 Industrial Bulk Industrial 172,800 1987
- --------------------------------------------------------------------------------------
160 95818 Office Garden Office 114,393 1985
- --------------------------------------------------------------------------------------
161 95112 Industrial Flex Industrial 28,100 1986
- --------------------------------------------------------------------------------------
162 90057 Multifamily Garden Apartment 82 1965
- --------------------------------------------------------------------------------------
163 75116 Multifamily Garden Apartment 80 1994
- --------------------------------------------------------------------------------------
164 46227 Retail Box Retail 42,000 1997
- --------------------------------------------------------------------------------------
165 29732 Retail Box Retail 10,908 1997
- --------------------------------------------------------------------------------------
166 95928 Mobile Home Park Mobile Home Park 92 1989
- --------------------------------------------------------------------------------------
167 27401 Multifamily Garden Apartment 112 1996
- --------------------------------------------------------------------------------------
168 92071 Industrial Flex Industrial 70,822 1973
- --------------------------------------------------------------------------------------
169 95350 Retail Anchored Retail 52,613 1992
- --------------------------------------------------------------------------------------
170 76021 Multifamily Garden Apartment 84 1995
- --------------------------------------------------------------------------------------
171 81212 Retail Anchored Retail 78,722 1993
- --------------------------------------------------------------------------------------
172 94550 Industrial Flex Industrial 41,956 1989-1997
- --------------------------------------------------------------------------------------
173 32609 Retail Box Retail 13,905 1997
- --------------------------------------------------------------------------------------
174 92590 Office Suburban Office 32,031 1989
- --------------------------------------------------------------------------------------
176 94526 Office Suburban Office 15,100 1984
</TABLE>
II-11
<PAGE> 116
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
177 2680 North 1st Street 2680 North 1st Street San Jose CA
- -----------------------------------------------------------------------------------------------------------------------------------
178 Foremost Business Park 4440 South Arville Las Vegas NV
- -----------------------------------------------------------------------------------------------------------------------------------
179 Valley Business Center 4100-20 West Valley Boulevard Pomona CA
- -----------------------------------------------------------------------------------------------------------------------------------
180 James Casey Garden Medical Center 4310 James Casey Street Austin TX
- -----------------------------------------------------------------------------------------------------------------------------------
181 3949 Research Park Court 3949 Research Park Court Soquel CA
- -----------------------------------------------------------------------------------------------------------------------------------
182 Oaks Apartments 3401 Camelia Drive Temple TX
- -----------------------------------------------------------------------------------------------------------------------------------
183 8439 Steller Drive 8439 Steller Drive Culver City CA
- -----------------------------------------------------------------------------------------------------------------------------------
184 Broomfield Safeway Marketplace 6765 and 6785 West 120th Avenue Broomfield CO
- -----------------------------------------------------------------------------------------------------------------------------------
185 Glen Arbor Apartments 340 Burchett Street Glendale CA
- -----------------------------------------------------------------------------------------------------------------------------------
186 Highland Knolls MHP 4000 North Chester Avenue Bakersfield CA
- -----------------------------------------------------------------------------------------------------------------------------------
187 Lawrence Business Center 1090 Lawrence Drive & 2624-2628 Lavery Court Newbury Park CA
- -----------------------------------------------------------------------------------------------------------------------------------
188 Maple Commerce Center 109, 119 N. Maple St. & 1869 W. Pomona Road Corona CA
- -----------------------------------------------------------------------------------------------------------------------------------
189 1901 Camino Ramon 1901 Camino Ramon Danville CA
- -----------------------------------------------------------------------------------------------------------------------------------
190 Office Max - Stockton 3939 East Hammer Lane Stockton CA
- -----------------------------------------------------------------------------------------------------------------------------------
191 Bradley OfficeMax 1190 North Kinzie Avenue Bradley IL
- -----------------------------------------------------------------------------------------------------------------------------------
192 Tracy/Schulte Shopping Center 785 -965 S Tracy Boulevard Tracy CA
- -----------------------------------------------------------------------------------------------------------------------------------
193 Newbridge Shopping Center 55 Weaverville Road Asheville NC
- -----------------------------------------------------------------------------------------------------------------------------------
194 Whitehall Manor Apartments 5890-5911 Woolman Court Parma OH
- -----------------------------------------------------------------------------------------------------------------------------------
195 Underwood/Johnson 142 Building 20315 - 142nd Avenue NE Woodinville WA
- -----------------------------------------------------------------------------------------------------------------------------------
196 Lindsay Corners 2750 & 2760 E. Main Street Mesa AZ
- -----------------------------------------------------------------------------------------------------------------------------------
197 Eldorado Building 3170 N. Federal Highway Lighthouse Point FL
- -----------------------------------------------------------------------------------------------------------------------------------
198 2674 North 1st Street 2674 North 1st Street San Jose CA
- -----------------------------------------------------------------------------------------------------------------------------------
199 Del Diablo Mini Storage 1561 S Hale Avenue Escondido CA
- -----------------------------------------------------------------------------------------------------------------------------------
200 Highland Oaks Village Apartments 2119-2201 West Irving Boulevard Irving TX
- -----------------------------------------------------------------------------------------------------------------------------------
201 Camelot Manufactured Home Park 3700 Babcock Lane Eugene OR
- -----------------------------------------------------------------------------------------------------------------------------------
202 Fairfield Inn - Bar Harbor 125 Eden Street Bar Harbor ME
- -----------------------------------------------------------------------------------------------------------------------------------
203 Ridgewood Mobile Estates 15287 SE Louise Lane Clackamas OR
- -----------------------------------------------------------------------------------------------------------------------------------
204 2880 Research Park Drive 2880 Research Park Drive Soquel CA
- -----------------------------------------------------------------------------------------------------------------------------------
205 Rite Aid - Fremont 2020 W. State Street Fremont OH
- -----------------------------------------------------------------------------------------------------------------------------------
206 Brook Hollow Apartments 202 Thigpen Drive Tyler TX
- -----------------------------------------------------------------------------------------------------------------------------------
207 14600 Arminta 14600 Arminta Street Van Nuys CA
- -----------------------------------------------------------------------------------------------------------------------------------
208 2240 Yates Avenue 2240 Yates Avenue Commerce CA
- -----------------------------------------------------------------------------------------------------------------------------------
209 Eagle Valley Commercial Center 3107 & 3111 N. Deer Run Road Carson City NV
- -----------------------------------------------------------------------------------------------------------------------------------
210 Heritage Park Apartments 408 Townes Street Greenville SC
<CAPTION>
- --------------------------------------------------------------------------------------
Loan Property Sub-Property Year Built/
No. Zipcode Type Type Units/NSF Renovated
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
177 95134 Office Garden Office 21,506 1980
- --------------------------------------------------------------------------------------
178 89103 Industrial Flex Industrial 43,006 1987
- --------------------------------------------------------------------------------------
179 91789 Industrial Bulk Industrial 46,740 1985
- --------------------------------------------------------------------------------------
180 78745 Office Medical Office 21,426 1986-1995
- --------------------------------------------------------------------------------------
181 95073 Industrial Flex Industrial 23,402 1988
- --------------------------------------------------------------------------------------
182 76502 Multifamily Garden Apartment 176 1997
- --------------------------------------------------------------------------------------
183 90232 Industrial Bulk Industrial 38,350 1993
- --------------------------------------------------------------------------------------
184 80020 Retail Shadow Retail 21,020 1994
- --------------------------------------------------------------------------------------
185 91203 Multifamily Garden Apartment 49 1974
- --------------------------------------------------------------------------------------
186 93308 Mobile Home Park Mobile Home Park 179 1972
- --------------------------------------------------------------------------------------
187 91320 Industrial Flex Industrial 40,983 1988
- --------------------------------------------------------------------------------------
188 91720 Industrial Flex Industrial 59,062 1987
- --------------------------------------------------------------------------------------
189 94596 Retail Shadow Retail 39,878 1994
- --------------------------------------------------------------------------------------
190 95212 Retail Box Retail 23,500 1998
- --------------------------------------------------------------------------------------
191 60915 Retail Anchored Retail 23,500 1997
- --------------------------------------------------------------------------------------
192 95376 Retail Shadow Retail 12,780 1997
- --------------------------------------------------------------------------------------
193 28804 Retail Anchored Retail 51,106 1990
- --------------------------------------------------------------------------------------
194 44130 Multifamily Garden Apartment 64 1989
- --------------------------------------------------------------------------------------
195 98072 Industrial Light Industrial 30,923 1995
- --------------------------------------------------------------------------------------
196 85213 Retail Unanchored Retail 24,041 1987
- --------------------------------------------------------------------------------------
197 33064 Office Garden Office 30,268 1966
- --------------------------------------------------------------------------------------
198 95134 Office Garden Office 25,793 1980
- --------------------------------------------------------------------------------------
199 92029 Self Storage Self Storage 764 1984
- --------------------------------------------------------------------------------------
200 75061 Multifamily Garden Apartment 90 1962
- --------------------------------------------------------------------------------------
201 97401 Mobile Home Park Mobile Home Park 117 1992
- --------------------------------------------------------------------------------------
202 04609 Hospitality Limited Service 59 1992
- --------------------------------------------------------------------------------------
203 97015 Mobile Home Park Mobile Home Park 76 1989
- --------------------------------------------------------------------------------------
204 95073 Industrial Flex Industrial 23,400 1988
- --------------------------------------------------------------------------------------
205 43420 Retail Anchored Retail 11,325 1998
- --------------------------------------------------------------------------------------
206 75703 Multifamily Garden Apartment 120 1977
- --------------------------------------------------------------------------------------
207 94102 Industrial Bulk Industrial 48,271 1953
- --------------------------------------------------------------------------------------
208 90040 Industrial Bulk Industrial 72,000 1984
- --------------------------------------------------------------------------------------
209 89701 Industrial Flex Industrial 35,472 1992
- --------------------------------------------------------------------------------------
210 29601 Multifamily Garden Apartment 36 1984
</TABLE>
II-12
<PAGE> 117
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
212 1572 East College Parkway 1572 East College Parkway Carson City NV
- -----------------------------------------------------------------------------------------------------------------------------------
213 River Park Apartments 5483 Carlson Drive Sacramento CA
- -----------------------------------------------------------------------------------------------------------------------------------
214 Sycamore Self Storage 148 Robelini Drive Vista CA
- -----------------------------------------------------------------------------------------------------------------------------------
215 8675 Rochester Avenue 8675 Rochester Avenue Rancho Cucamonga CA
- -----------------------------------------------------------------------------------------------------------------------------------
217 Airport Business Park 12219 Airport Business Park Drive Truckee CA
- -----------------------------------------------------------------------------------------------------------------------------------
218 Sorrento Meadows 4105-4125 Sorrento Valley Boulevard San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
219 27 - 37 Main Street 27 - 37 Main Street Watertown MA
- -----------------------------------------------------------------------------------------------------------------------------------
220 La Jolla Colony Pad Building 7708 Regents Road San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
221 Grove Garden Apartments 197 E. Grove Street Reno NV
- -----------------------------------------------------------------------------------------------------------------------------------
222 Emerald Point Apartments 3433 Arden Road San Angelo TX
- -----------------------------------------------------------------------------------------------------------------------------------
223 Colt Industrial 4835 Colt St & 2476 Palma Drive Ventura CA
- -----------------------------------------------------------------------------------------------------------------------------------
224 Pep Boys 10041 Mission Gorge Road Santee CA
- -----------------------------------------------------------------------------------------------------------------------------------
225 Plaza West Building 830 N. Columbia Center Boulevard Kennewick WA
- -----------------------------------------------------------------------------------------------------------------------------------
226 Hollywood Video - Englewood 3305 South Broadway Englewood CO
- -----------------------------------------------------------------------------------------------------------------------------------
227 Hollywood Video - Victorville 15152 Bear Valley Road Victorville CA
- -----------------------------------------------------------------------------------------------------------------------------------
228 2001 E. 4th Street/Santa Ana 2001 E. 4th Street Santa Ana CA
- -----------------------------------------------------------------------------------------------------------------------------------
229 Hollywood Video - Poway 13395 Poway Road Poway CA
- -----------------------------------------------------------------------------------------------------------------------------------
230 Vista Colina Apartments 560 W. Gonzales Road Oxnard CA
- -----------------------------------------------------------------------------------------------------------------------------------
231 Galleria Park Hotel 191Sutter Street San Francisco CA
- -----------------------------------------------------------------------------------------------------------------------------------
232 Quality Suites Hotel San Diego 9880 Mira Mesa Boulevard San Diego CA
- -----------------------------------------------------------------------------------------------------------------------------------
233 Brookstone Apartments 3231 South 204th Street SeaTac WA
- -----------------------------------------------------------------------------------------------------------------------------------
234 Ponte Vedra Pointe 880 Highway A1A Ponte Vedra Beach FL
<CAPTION>
- --------------------------------------------------------------------------------------
Loan Property Sub-Property Year Built/
No. Zipcode Type Type Units/NSF Renovated
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
212 89701 Industrial Flex Industrial 20,510 1997
- --------------------------------------------------------------------------------------
213 95819 Multifamily Garden Apartment 32 1985
- --------------------------------------------------------------------------------------
214 92083 Self Storage Self Storage 538 1987
- --------------------------------------------------------------------------------------
215 91730 Industrial Bulk Industrial 50,700 1990
- --------------------------------------------------------------------------------------
217 96161 Industrial Flex Industrial 19,750 1987
- --------------------------------------------------------------------------------------
218 92121 Industrial Flex Industrial 31,374 1978
- --------------------------------------------------------------------------------------
219 02172 Retail Anchored Retail 12,113 1988
- --------------------------------------------------------------------------------------
220 92122 Retail Shadow Retail 6,287 1986
- --------------------------------------------------------------------------------------
221 89502 Multifamily Garden Apartment 42 1985
- --------------------------------------------------------------------------------------
222 76903 Multifamily Garden Apartment 120 1996
- --------------------------------------------------------------------------------------
223 93003 Industrial Flex Industrial 39,692 1985
- --------------------------------------------------------------------------------------
224 92071 Retail Anchored Retail 19,673 1997
- --------------------------------------------------------------------------------------
225 99336 Office Garden Office 29,306 1980
- --------------------------------------------------------------------------------------
226 80110 Retail Box Retail 7,478 1997
- --------------------------------------------------------------------------------------
227 92392 Retail Anchored Retail 7,488 1997
- --------------------------------------------------------------------------------------
228 92705 Office Garden Office 20,868 1969
- --------------------------------------------------------------------------------------
229 92064 Retail Box Retail 7,000 1996
- --------------------------------------------------------------------------------------
230 93030 Multifamily Garden Apartment 24 1969
- --------------------------------------------------------------------------------------
231 94108 Hospitality Full Service 177 1984
- --------------------------------------------------------------------------------------
232 92131 Hospitality Limited Service 130 1988
- --------------------------------------------------------------------------------------
233 98198 Multifamily Garden Apartment 152 1997
- --------------------------------------------------------------------------------------
234 32082 Retail Anchored Retail 71,660 1989
</TABLE>
II-13
<PAGE> 118
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 119
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
1 1201 Pennsylvania Avenue $5,830,294 $382,923 1.27 $75,000,000 10/6/97 69.2% 94.3%
- ------------------------------------------------------------------------------------------------------------------------------
2 Courthouse Plaza II $3,662,199 $240,730 1.27 $48,200,000 11/11/97 73.4% 99.2%
- ------------------------------------------------------------------------------------------------------------------------------
3 Marina del Rey Stor It (2I) $1,047,704 $47,801 1.83 $10,700,000 4/1/98 65.1% 92.4%
4 Santa Clara Extra Storage (2I) $1,370,456 $59,751 1.83 $13,000,000 4/1/98 65.1% 92.2%
5 Aliso Viejo Stor It (2I) $671,638 $30,930 1.83 $6,600,000 4/1/98 65.1% 97.4%
6 Mission Viejo Stor It (2I) $583,318 $26,712 1.83 $5,850,000 4/9/98 65.1% 91.5%
7 Foothill Ranch Stor It (2I) $495,521 $23,901 1.83 $5,200,000 9/1/97 65.1% 96.4%
8 Redwood City Extra Storage (2I) $717,151 $32,336 1.83 $7,100,000 4/1/98 65.1% 94.9%
9 San Juan Capistrano Stor It (2I) $446,815 $21,792 1.83 $4,700,000 4/1/98 65.1% 96.6%
- ------------------------------------------------------------------------------------------------------------------------------
10 Westminster City Center Marketplace $3,796,282 $195,963 1.61 $42,750,000 12/8/97 70.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
11 Gateway Plaza Shopping Center $3,356,337 $197,520 1.42 $40,000,000 4/7/98 74.9% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
12 Atrium IV $3,556,309 $200,397 1.48 $43,000,000 11/30/97 69.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
13 Fountainview Village Apartments (6) $2,724,590 $176,684 1.29 $32,800,000 10/1/97 77.7% 91.0%
- ------------------------------------------------------------------------------------------------------------------------------
14 Centre on Seventeenth $2,407,947 $165,433 1.21 $29,730,000 9/5/97 73.7% 97.0%
- ------------------------------------------------------------------------------------------------------------------------------
15 Catamaran Resort Hotel $2,931,042 $156,154 1.56 $40,000,000 2/11/98 52.0% 83.0%
- ------------------------------------------------------------------------------------------------------------------------------
16 AMC Theatres Highlands Ranch $2,260,563 $147,063 1.28 $25,400,000 4/8/98 71.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
18 48-18 Northern Boulevard (7) $3,969,749 $129,019 2.56 $70,000,000 11/1/97 24.9% 70.1%
- ------------------------------------------------------------------------------------------------------------------------------
19 Fleischhauer Student Housing Portfolio $1,759,419 $101,278 1.45 $23,670,000 3/2/98 64.6% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
20 Independence Park Shopping Center $1,525,434 $91,213 1.39 $17,100,000 11/25/97 79.4% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
21 Normandy Apartments $1,337,757 $79,998 1.39 $15,150,000 10/22/97 78.9% 98.7%
- ------------------------------------------------------------------------------------------------------------------------------
22 Beachwood Apartments $1,283,623 $77,776 1.38 $17,000,000 12/22/97 67.7% 90.4%
- ------------------------------------------------------------------------------------------------------------------------------
23 Cupertino Town Center $2,103,339 $75,662 2.32 $22,100,000 2/18/98 51.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
24 Orchard Mesa Apartments $1,896,098 $72,356 2.18 $21,000,000 1/8/98 54.1% 97.0%
- ------------------------------------------------------------------------------------------------------------------------------
25 Bel Air Town Center $1,350,000 $76,462 1.47 $14,450,000 9/8/97 75.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
26 Stratford Wood Apartments $1,251,713 $71,752 1.45 $13,200,000 2/19/98 79.9% 98.3%
- ------------------------------------------------------------------------------------------------------------------------------
27 Pacific Terrace Inn $1,208,834 $80,971 1.24 $14,400,000 12/23/97 72.6% 87.2%
- ------------------------------------------------------------------------------------------------------------------------------
28 Goldorado Shopping Center (2A) $1,206,669 $63,446 1.55 $13,000,000 11/21/97 67.1% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
29 Hollywood Video - Pad (2A) $134,035 $8,410 1.55 $1,545,000 4/6/98 67.1% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
30 Camelot Village $1,373,160 $60,165 1.90 $14,300,000 4/16/98 65.0% 93.0%
- ------------------------------------------------------------------------------------------------------------------------------
31 Vaz-Lodi $1,148,464 $66,914 1.43 $13,680,000 1/12/98 67.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
32 The Carlyle $1,285,578 $57,901 1.85 $15,300,000 3/10/98 58.5% 94.0%
- ------------------------------------------------------------------------------------------------------------------------------
33 Holiday Inn- College Park $1,108,610 $66,071 1.40 $12,600,000 1/9/98 69.8% 62.9%
- ------------------------------------------------------------------------------------------------------------------------------
34 Ball Post - Fairfield $944,554 $63,106 1.25 $11,550,000 12/4/97 74.1% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
35 Courtyard by Marriott-Portsmouth $1,132,289 $64,216 1.47 $12,300,000 1/6/98 69.7% 78.8%
- ------------------------------------------------------------------------------------------------------------------------------
36 Courtyard by Marriott - Albuquerque $1,137,588 $62,925 1.51 $12,000,000 12/29/97 69.7% 74.8%
<CAPTION>
- ------------------------------------------------------------------------
Loan Leased(8) Tenant Information(9)
No. Date Largest Tenant % NSF
- ------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------
1 3/1/98 Covington & Burling 42.8%
- ------------------------------------------------------------------------
2 4/1/98 KPMG 21.0%
- ------------------------------------------------------------------------
3 3/29/98
4 3/29/98
5 3/29/98
6 3/29/98
7 3/29/98
8 3/29/98
9 3/29/98
- ------------------------------------------------------------------------
10 4/8/98
- ------------------------------------------------------------------------
11 2/4/98 Ralph's Grocery Co. 38.0%
- ------------------------------------------------------------------------
12 2/18/98 Equitable Life 77.9%
- ------------------------------------------------------------------------
13 3/25/98
- ------------------------------------------------------------------------
14 1/5/98 Lucky 31.0%
- ------------------------------------------------------------------------
15 12/31/97
- ------------------------------------------------------------------------
16 4/8/98 American Multi-Cinema Inc. 100.0%
- ------------------------------------------------------------------------
18 3/31/98 Edward's Supermarket 29.0%
- ------------------------------------------------------------------------
19 1/1/98
- ------------------------------------------------------------------------
20 4/1/98 Wal-Mart 59.2%
- ------------------------------------------------------------------------
21 1/1/98
- ------------------------------------------------------------------------
22 3/25/98
- ------------------------------------------------------------------------
23 3/1/98
- ------------------------------------------------------------------------
24 3/30/98
- ------------------------------------------------------------------------
25 4/6/98 Drug Emporium 31.2%
- ------------------------------------------------------------------------
26 3/10/98
- ------------------------------------------------------------------------
27 12/31/97
- ------------------------------------------------------------------------
28 1/7/98 Bel Air Market 43.9%
29 4/6/98 Hollywood Video 100.0%
- ------------------------------------------------------------------------
30 3/17/98
- ------------------------------------------------------------------------
31 12/8/97 Paul E. Vaz Trucking, Inc. 40.0%
- ------------------------------------------------------------------------
32 3/17/98
- ------------------------------------------------------------------------
33 12/31/97
- ------------------------------------------------------------------------
34 4/23/98 Ball Foster Glass 53.8%
- ------------------------------------------------------------------------
35 12/31/97
- ------------------------------------------------------------------------
36 12/31/97
</TABLE>
II-14
<PAGE> 120
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
37 Rolling Hills Place Apartments $1,219,272 $51,108 1.99 $12,400,000 4/16/98 63.7% 95.0%
- ------------------------------------------------------------------------------------------------------------------------------
38 33201 Dowe Avenue $962,645 $56,983 1.41 $11,000,000 11/12/97 70.5% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
39 Sycamore Greens Apartments $809,051 $49,737 1.36 $9,830,000 11/18/97 78.1% 96.3%
- ------------------------------------------------------------------------------------------------------------------------------
40 Lake Village Mobile Home Park $913,243 $54,066 1.41 $12,500,000 10/6/97 59.6% 98.0%
- ------------------------------------------------------------------------------------------------------------------------------
41 Pleasant Lake Apartments $865,492 $49,034 1.47 $11,190,000 12/18/97 65.9% 95.0%
- ------------------------------------------------------------------------------------------------------------------------------
45 Lake Fredrica Shopping Center $737,857 $45,628 1.35 $9,350,000 10/27/97 72.6% 98.9%
- ------------------------------------------------------------------------------------------------------------------------------
46 Alberto Oaks $1,186,621 $46,335 2.13 $13,250,000 2/10/98 48.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
48-A Hawthorne Apartments (2II) $538,482 $31,345 1.48 $6,500,000 10/11/97 69.3% 96.0%
48-B Greenbriar Apartments (2II) $215,876 $11,091 1.48 $2,300,000 10/11/97 69.3% 95.0%
- ------------------------------------------------------------------------------------------------------------------------------
49 Park Village Apartments $791,278 $40,100 1.64 $8,590,000 3/11/98 69.8% 95.0%
- ------------------------------------------------------------------------------------------------------------------------------
50 Vineyard Mobile Villa $690,206 $40,565 1.42 $8,260,000 4/14/98 72.6% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
51 Kern Canyon Estates Mobile Home Park $631,870 $40,768 1.29 $7,620,000 1/6/98 78.5% 96.1%
- ------------------------------------------------------------------------------------------------------------------------------
52 Willow Hilll Apartments $901,953 $38,435 1.96 $12,175,000 3/26/98 45.1% 94.0%
- ------------------------------------------------------------------------------------------------------------------------------
53 Havasu Plaza $631,236 $37,031 1.42 $7,250,000 11/14/97 74.9% 97.8%
- ------------------------------------------------------------------------------------------------------------------------------
54 University Plaza Shopping Center $1,177,721 $36,401 2.70 $13,000,000 12/20/97 40.6% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
55 Midtown Center $650,184 $37,933 1.43 $8,600,000 7/30/97 61.5% 92.0%
- ------------------------------------------------------------------------------------------------------------------------------
56 Brea Corporate Park $779,851 $37,118 1.75 $10,000,000 3/6/98 52.0% 93.1%
- ------------------------------------------------------------------------------------------------------------------------------
57 Lenox East (2B) $388,045 $22,886 1.44 $4,600,000 1/13/98 73.3% 100.0%
58 Hawks Nest Apartments (2B) $201,845 $11,139 1.44 $2,400,000 1/13/98 73.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
59 Hampton Inn-Columbia $770,498 $40,473 1.59 $7,150,000 2/6/98 69.9% 77.0%
- ------------------------------------------------------------------------------------------------------------------------------
60 Imperial Rose Plaza $713,931 $40,552 1.47 $9,000,000 4/7/97 56.1% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
61 Park 16 Apartments $536,473 $35,499 1.26 $6,500,000 1/20/98 76.7% 91.0%
- ------------------------------------------------------------------------------------------------------------------------------
62 Aspen Square $850,329 $33,804 2.10 $9,900,000 12/15/97 50.4% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
63 Irvine Suites Hotel $688,629 $37,504 1.53 $7,190,000 12/20/97 69.3% 67.3%
- ------------------------------------------------------------------------------------------------------------------------------
64 Vineyard Plaza $921,776 $36,528 2.10 $10,020,000 11/13/97 49.6% 88.0%
- ------------------------------------------------------------------------------------------------------------------------------
65 Courtyard by Marriott - Jensen $657,851 $36,012 1.52 $7,650,000 12/29/97 64.8% 73.5%
- ------------------------------------------------------------------------------------------------------------------------------
67 Barnett Bank Center $507,074 $32,317 1.31 $5,800,000 12/22/97 79.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
68 Holiday Inn- Port St. Lucie $630,342 $34,646 1.52 $6,615,000 12/29/97 69.6% 73.9%
- ------------------------------------------------------------------------------------------------------------------------------
69 Nottingham Village Apartments $558,368 $31,927 1.46 $6,600,000 1/5/98 69.5% 97.0%
- ------------------------------------------------------------------------------------------------------------------------------
70 Colony Square Shopping Center $505,072 $33,242 1.27 $5,900,000 9/18/97 77.7% 98.1%
- ------------------------------------------------------------------------------------------------------------------------------
71 University Centre West II (2C) $336,668 $22,664 1.20 $4,160,000 11/20/97 73.8% 100.0%
72 University Centre West I (2C) $134,485 $10,182 1.20 $1,920,000 11/20/97 73.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
73 Country Suites Carlson $874,250 $38,089 1.91 $6,750,000 2/14/97 65.9% 81.8%
- ------------------------------------------------------------------------------------------------------------------------------
74 Summer Glen Apartments $636,169 $34,203 1.55 $8,190,000 1/7/98 53.7% 97.0%
- ------------------------------------------------------------------------------------------------------------------------------
75 Hampton Inn-Eagan $708,799 $35,608 1.66 $7,000,000 3/3/98 62.8% 75.9%
<CAPTION>
- ------------------------------------------------------------------------
Loan Leased(8) Tenant Information(9)
No. Date Largest Tenant % NSF
- ------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------
37 3/17/98
- ------------------------------------------------------------------------
38 3/19/98 Chino Pacific Coast Warehouse 100.0%
- ------------------------------------------------------------------------
39 3/31/98
- ------------------------------------------------------------------------
40 2/28/98
- ------------------------------------------------------------------------
41 1/1/98
- ------------------------------------------------------------------------
45 3/17/98 Publix Food and Drugs 56.4%
- ------------------------------------------------------------------------
46 5/31/98 Red Brick 67.3%
- ------------------------------------------------------------------------
48-A 11/22/97
- ------------------------------------------------------------------------
48-B 11/22/97
- ------------------------------------------------------------------------
49 1/28/98
- ------------------------------------------------------------------------
50 3/15/98
- ------------------------------------------------------------------------
51 12/7/97
- ------------------------------------------------------------------------
52 3/31/98
- ------------------------------------------------------------------------
53 4/3/98 K-Mart 81.0%
- ------------------------------------------------------------------------
54 2/28/98 Winn Dixie 29.9%
- ------------------------------------------------------------------------
55 3/1/98
- ------------------------------------------------------------------------
56 4/20/98
- ------------------------------------------------------------------------
57 1/13/98
58 12/31/97
- ------------------------------------------------------------------------
59 2/7/98
- ------------------------------------------------------------------------
60 4/8/98 Albertson's 47.2%
- ------------------------------------------------------------------------
61 2/25/98
- ------------------------------------------------------------------------
62 1/1/98
- ------------------------------------------------------------------------
63 12/31/97
- ------------------------------------------------------------------------
64 4/22/98 Safeway 52.0%
- ------------------------------------------------------------------------
65 12/31/97
- ------------------------------------------------------------------------
67 3/25/98
- ------------------------------------------------------------------------
68 12/31/97
- ------------------------------------------------------------------------
69 1/21/98
- ------------------------------------------------------------------------
70 4/6/98 Sun TV 27.1%
- ------------------------------------------------------------------------
71 12/31/97 Barnes & Noble Superstore 100.0%
72 12/31/97 Hops of Coral Springs 54.2%
- ------------------------------------------------------------------------
73 12/31/97
- ------------------------------------------------------------------------
74 3/6/98
- ------------------------------------------------------------------------
75 12/31/97
</TABLE>
II-15
<PAGE> 121
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
76 Mission Tierra Apartments $511,678 $30,285 1.41 $5,975,000 3/19/98 73.6% 93.0%
- ------------------------------------------------------------------------------------------------------------------------------
77 Spec 188 $572,708 $30,935 1.54 $7,300,000 2/3/98 59.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
79 Myriad Genetics Building $562,597 $34,171 1.37 $6,000,000 11/7/97 71.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
80 Fairfield Inn - Bangor $539,831 $32,369 1.39 $6,200,000 1/14/98 69.7% 75.1%
- ------------------------------------------------------------------------------------------------------------------------------
81 269 South Lafayette Park Place $548,700 $28,278 1.62 $5,415,000 1/28/98 79.6% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
82 Hampton Inn - Rochester $670,570 $34,529 1.62 $6,100,000 3/3/98 69.9% 79.9%
- ------------------------------------------------------------------------------------------------------------------------------
83 Windsor Medical Center $488,311 $30,199 1.35 $5,900,000 10/31/97 72.6% 91.4%
- ------------------------------------------------------------------------------------------------------------------------------
84 Glenwood Springs Mall $559,946 $28,395 1.64 $7,800,000 1/2/98 53.8% 97.6%
- ------------------------------------------------------------------------------------------------------------------------------
85 Village Center at Highlands Ranch $528,888 $28,424 1.55 $5,650,000 2/23/98 74.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
86 Wherehouse Plaza - San Jose $563,211 $30,059 1.56 $6,115,000 2/20/98 67.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
87 Best Western La Jolla $1,654,611 $36,852 3.74 $10,560,000 6/4/97 38.6% 79.8%
- ------------------------------------------------------------------------------------------------------------------------------
88 Casa De Colinas Town Homes $457,606 $27,332 1.40 $5,150,000 1/30/98 79.4% 97.0%
- ------------------------------------------------------------------------------------------------------------------------------
89 River Valley Apartments $430,419 $29,430 1.22 $4,900,000 12/15/97 83.4% 90.0%
- ------------------------------------------------------------------------------------------------------------------------------
90 Village at the Oaks $470,407 $27,628 1.42 $5,400,000 5/9/97 74.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
91 Vista de la Sierra $467,490 $26,558 1.47 $5,400,000 2/2/98 74.0% 97.0%
- ------------------------------------------------------------------------------------------------------------------------------
92 Casa de la Sierra $484,691 $26,558 1.52 $5,350,000 2/9/98 74.7% 95.0%
- ------------------------------------------------------------------------------------------------------------------------------
93 Aspen Grove Building $939,934 $26,935 2.91 $10,500,000 1/5/98 38.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
94 Barclay Buena Park $547,965 $28,044 1.63 $6,675,000 1/28/98 59.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
95 Cowell Terrace Apartments $428,103 $27,714 1.29 $6,700,000 11/11/97 57.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
96 Landmark Plaza $424,675 $27,184 1.30 $5,060,000 1/26/98 76.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
97 High Desert Villas Apartments $647,974 $25,588 2.11 $6,940,000 12/18/97 55.3% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
98 Port 95 - Building 3 $411,176 $25,548 1.34 $4,800,000 1/14/98 80.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
99 Arbor Village Shopping Center Phase II $557,615 $25,307 1.84 $5,100,000 1/28/98 74.4% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
100 Windy Hill Key Apartments $490,053 $24,521 1.67 $5,300,000 1/16/98 71.6% 93.6%
- ------------------------------------------------------------------------------------------------------------------------------
101 Park Terrace Apartments $373,280 $25,743 1.21 $4,750,000 1/5/98 79.8% 97.9%
- ------------------------------------------------------------------------------------------------------------------------------
102 489 Whitney Avenue $418,621 $25,272 1.38 $4,800,000 2/1/98 75.9% 95.0%
- ------------------------------------------------------------------------------------------------------------------------------
103 Limeridge Apartments $397,790 $23,529 1.41 $5,200,000 1/15/98 69.1% 97.0%
- ------------------------------------------------------------------------------------------------------------------------------
104 South Bay Plaza $422,037 $25,433 1.38 $4,700,000 12/22/97 76.5% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
105 Public Storage - Redwood City, CA $760,504 $26,230 2.42 $7,700,000 10/13/97 46.6% 97.0%
- ------------------------------------------------------------------------------------------------------------------------------
106 Broadway Plaza $415,722 $23,806 1.46 $5,345,000 11/4/97 67.1% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
107 1313 Geneva Drive $698,254 $25,882 2.25 $7,030,000 11/24/97 51.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
108 Omni Business Park $458,261 $24,097 1.58 $5,250,000 3/13/98 67.6% 98.0%
- ------------------------------------------------------------------------------------------------------------------------------
109 Rancho San Diego Plaza $458,597 $24,626 1.55 $5,200,000 1/14/98 67.1% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
110 Wallburg Towne Center $386,123 $23,947 1.34 $4,370,000 11/20/97 79.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
111 North Chase Office Building H $425,643 $25,230 1.41 $4,790,000 1/12/98 72.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------
Loan Leased(8) Tenant Information(9)
No. Date Largest Tenant % NSF
- ------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------
76 2/25/98
- ------------------------------------------------------------------------
77 4/23/98 Western Wines 100.0%
- ------------------------------------------------------------------------
79 12/31/97 Myriad Genetics, Inc. 100.0%
- ------------------------------------------------------------------------
80 12/31/97
- ------------------------------------------------------------------------
81 12/29/97
- ------------------------------------------------------------------------
82 12/31/97
- ------------------------------------------------------------------------
83 12/31/97
- ------------------------------------------------------------------------
84 1/8/98 K-Mart 23.7%
- ------------------------------------------------------------------------
85 3/4/98 Berlinger (Video Vision) 21.5%
- ------------------------------------------------------------------------
86 2/15/98 Right Stuff Health Club 29.4%
- ------------------------------------------------------------------------
87 1/27/98
- ------------------------------------------------------------------------
88 12/25/97
- ------------------------------------------------------------------------
89 3/31/98
- ------------------------------------------------------------------------
90 3/19/98 Video City 29.8%
- ------------------------------------------------------------------------
91 1/16/98
- ------------------------------------------------------------------------
92 12/16/97
- ------------------------------------------------------------------------
93 1/12/98
- ------------------------------------------------------------------------
94 3/31/98 Far West Transportation 44.0%
- ------------------------------------------------------------------------
95 4/6/98
- ------------------------------------------------------------------------
96 4/1/98 Stein Garden Center 31.2%
- ------------------------------------------------------------------------
97 3/14/98
- ------------------------------------------------------------------------
98 1/31/98 Princess Cruises 40.8%
- ------------------------------------------------------------------------
99 1/5/98 So Fro Fabrics 27.1%
- ------------------------------------------------------------------------
100 1/16/98
- ------------------------------------------------------------------------
101 3/25/98
- ------------------------------------------------------------------------
102 2/9/98 St. Paul Fire & Marine Ins. 45.9%
- ------------------------------------------------------------------------
103 3/31/98
- ------------------------------------------------------------------------
104 1/14/98 Thrifty Drugs Rite Aid Co. 63.0%
- ------------------------------------------------------------------------
105 1/16/98
- ------------------------------------------------------------------------
106 3/1/98
- ------------------------------------------------------------------------
107 3/24/98 Environmental & Occupational Risk Mgmt. 56.9%
- ------------------------------------------------------------------------
108 4/1/98
- ------------------------------------------------------------------------
109 4/20/98
- ------------------------------------------------------------------------
110 3/1/98 Food Lion 52.3%
- ------------------------------------------------------------------------
111 1/1/98 United Energy 68.1%
- ------------------------------------------------------------------------
</TABLE>
II-16
<PAGE> 122
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
112 Wixom Plaza (Oakland Pontiac Center) $455,124 $24,971 1.52 $4,570,000 9/30/97 74.1% 85.0%
- ------------------------------------------------------------------------------------------------------------------------------
113 Lakeside Apartments $336,522 $21,294 1.32 $4,400,000 1/26/98 74.8% 88.0%
- ------------------------------------------------------------------------------------------------------------------------------
114 Pillsbury Manor $370,609 $22,826 1.35 $4,540,000 11/17/97 72.5% 98.3%
- ------------------------------------------------------------------------------------------------------------------------------
115 Comfort Suites - Stevens Point $625,793 $26,202 1.99 $5,500,000 2/10/98 59.0% 64.7%
- ------------------------------------------------------------------------------------------------------------------------------
116 Westmore Auto Park $615,780 $26,242 1.96 $6,300,000 2/26/98 51.5% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
117 Jog Road Center $328,894 $22,414 1.22 $4,100,000 12/19/97 79.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
118 Citadel Apartments $467,554 $22,018 1.77 $5,500,000 3/16/98 58.6% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
119 Pfeiffer Commons $334,885 $21,635 1.29 $4,290,000 10/27/97 74.4% 95.3%
- ------------------------------------------------------------------------------------------------------------------------------
120 7803 Madison Ave. $401,663 $23,336 1.43 $4,500,000 11/26/97 70.7% 98.0%
- ------------------------------------------------------------------------------------------------------------------------------
121 Miami Bluffs Apartments $346,735 $20,894 1.38 $4,000,000 9/3/97 78.6% 97.8%
- ------------------------------------------------------------------------------------------------------------------------------
122 Roberts Industrial Park $414,199 $21,820 1.58 $4,000,000 1/22/98 75.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
123 Orangewood Apartments $410,170 $23,259 1.47 $4,600,000 1/20/98 64.8% 98.0%
- ------------------------------------------------------------------------------------------------------------------------------
124 Rosedown Apartments (2D) $421,995 $27,098 1.38 $4,380,000 11/13/97 58.4% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
211 Adair Professional Building (2D) $203,211 $10,563 1.38 $2,435,000 11/12/97 58.4% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
125 Secure Self Storage of Lakeside $368,431 $20,817 1.47 $4,100,000 3/6/98 69.6% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
126 Walnut Tower Apartments $336,208 $20,637 1.36 $4,200,000 11/25/97 67.6% 99.5%
- ------------------------------------------------------------------------------------------------------------------------------
127 Five Building Portfolio $361,606 $19,966 1.51 $3,560,000 3/13/98 77.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
128 Barnes & Noble, Tucson $331,634 $18,947 1.46 $4,050,000 1/8/98 67.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
129 Builders Square - Lansing, MI $401,652 $22,266 1.50 $4,870,000 12/10/97 55.4% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
130 Tennent Nine Shopping Center $306,031 $18,879 1.35 $4,200,000 8/15/97 64.0% 98.0%
- ------------------------------------------------------------------------------------------------------------------------------
131 Brook Hollow Village $339,147 $18,909 1.49 $3,550,000 11/2/97 74.7% 94.0%
- ------------------------------------------------------------------------------------------------------------------------------
132 Countryside Apartments $322,245 $18,260 1.47 $4,100,000 3/16/98 63.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
133 Summerfield Apartments 1 $294,181 $18,645 1.31 $3,060,000 9/3/97 84.7% 97.2%
- ------------------------------------------------------------------------------------------------------------------------------
134 Garden Grove Secured Storage $353,395 $19,231 1.53 $3,700,000 11/19/97 69.9% 95.6%
- ------------------------------------------------------------------------------------------------------------------------------
135 Windermere Shoppes $321,542 $19,131 1.40 $3,400,000 12/1/97 74.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
136 Carriage Square $290,072 $18,199 1.33 $3,930,000 10/23/97 63.4% 93.1%
- ------------------------------------------------------------------------------------------------------------------------------
137 Fountainebleau Apartments $686,644 $22,565 2.54 $5,405,000 10/1/97 45.6% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
138 Walgreens - Vero Beach $247,833 $16,332 1.26 $3,050,000 11/4/97 79.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
139 HH Gregg Shopping Center $340,530 $22,065 1.29 $3,900,000 12/16/97 61.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
140 Arundell Business Park $313,412 $17,378 1.50 $3,865,000 8/20/97 61.9% 92.0%
- ------------------------------------------------------------------------------------------------------------------------------
141 Fed Ex - San Leandro $339,438 $18,838 1.50 $3,800,000 12/17/97 62.6% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
142 Future Shop $339,869 $16,969 1.67 $3,825,000 12/1/97 62.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
143 Eastview Medical Center $313,125 $15,920 1.64 $3,600,000 3/1/98 65.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
144 The Willows $360,683 $14,962 2.01 $4,800,000 2/20/98 48.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
145 AmericInn, Ripon (2III) $143,716 $9,778 1.36 $1,790,000 1/8/98 69.6% 67.2%
<CAPTION>
- ------------------------------------------------------------------------
Loan Leased(8) Tenant Information(9)
No. Date Largest Tenant % NSF
- ------------------------------------------------------------------------
<S> <C> <C> <C>
112 3/17/98 Rite Aid Drug 28.3%
- ------------------------------------------------------------------------
113 12/31/97
- ------------------------------------------------------------------------
114 11/30/97
- ------------------------------------------------------------------------
115 12/31/97
- ------------------------------------------------------------------------
116 3/18/98
- ------------------------------------------------------------------------
117 3/25/98 Eckerd Drug Company 40.0%
- ------------------------------------------------------------------------
118 2/23/98
- ------------------------------------------------------------------------
119 4/30/98 Office Depot 71.3%
- ------------------------------------------------------------------------
120 4/1/98
- ------------------------------------------------------------------------
121 1/23/98
- ------------------------------------------------------------------------
122 3/11/98
- ------------------------------------------------------------------------
123 2/17/98
- ------------------------------------------------------------------------
124 3/24/98
- ------------------------------------------------------------------------
211 1/12/98 Turning Point 22.1%
- ------------------------------------------------------------------------
125 3/31/98
- ------------------------------------------------------------------------
126 1/15/98
- ------------------------------------------------------------------------
127 1/7/98 T&F Corp. 24.3%
- ------------------------------------------------------------------------
128 1/28/98 Barnes & Noble 100.0%
- ------------------------------------------------------------------------
129 4/2/98 K-Mart (Builders Square) 100.0%
- ------------------------------------------------------------------------
130 3/1/98 Foodtown 66.2%
- ------------------------------------------------------------------------
131 3/31/98
- ------------------------------------------------------------------------
132 12/31/97
- ------------------------------------------------------------------------
133 4/14/98
- ------------------------------------------------------------------------
134 3/17/98
- ------------------------------------------------------------------------
135 2/28/98 Revco Drugs 42.7%
- ------------------------------------------------------------------------
136 4/1/98
- ------------------------------------------------------------------------
137 8/31/97
- ------------------------------------------------------------------------
138 11/17/99 Walgreens 100.0%
- ------------------------------------------------------------------------
139 12/31/97 HH Gregg Appliance 66.5%
- ------------------------------------------------------------------------
140 3/5/98
- ------------------------------------------------------------------------
141 12/19/97 Federal Express 100.0%
- ------------------------------------------------------------------------
142 3/25/98 Future Shop 100.0%
- ------------------------------------------------------------------------
143 3/12/98
- ------------------------------------------------------------------------
144 2/1/98
- ------------------------------------------------------------------------
145 10/5/97
</TABLE>
II-17
<PAGE> 123
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
146 AmericInn, Waupun (2III) $152,162 $8,414 1.36 $1,540,000 1/8/98 69.6% 66.8%
- ------------------------------------------------------------------------------------------------------------------------------
147 Beechwood Apartments $260,260 $15,359 1.41 $3,185,000 11/20/97 72.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
148 Shadowridge Self-Storage $288,436 $17,012 1.41 $3,210,000 12/26/97 71.3% 93.1%
- ------------------------------------------------------------------------------------------------------------------------------
149 Partridge Court Apartments $336,823 $18,075 1.55 $3,600,000 1/30/96 63.2% 94.4%
- ------------------------------------------------------------------------------------------------------------------------------
150 Don Joy Building $820,842 $26,468 2.58 $9,000,000 11/28/97 24.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
151 Birchwood Farms Mobile Home Park $266,456 $15,702 1.41 $3,350,000 11/10/97 66.9% 97.2%
- ------------------------------------------------------------------------------------------------------------------------------
152 Food 4 Less - Stockton $296,905 $15,633 1.58 $3,572,000 12/12/97 62.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
153 1530 Old Oakland Road $290,496 $17,680 1.37 $3,190,000 3/10/98 69.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
154 4125 Blackhawk Plaza Circle $282,751 $15,521 1.52 $3,550,000 3/17/98 61.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
155 Yamato Village Center $316,208 $15,083 1.75 $3,500,000 11/20/97 62.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
156 Hawthorn Plaza $255,046 $15,518 1.37 $2,900,000 12/1/97 75.6% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
157 Connors Business Park $299,467 $15,471 1.61 $3,000,000 12/11/97 71.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
158 Oasis Morning Apartments $317,813 $14,009 1.89 $3,475,000 3/10/98 61.1% 98.0%
- ------------------------------------------------------------------------------------------------------------------------------
159 R. G. Barry Distribution Warehouse $381,660 $24,575 1.29 $4,000,000 12/8/97 51.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
160 22nd & Broadway $902,175 $14,324 5.25 $10,400,000 2/9/98 20.1% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
161 1510 Old Oakland Road $263,472 $16,091 1.36 $3,060,000 2/13/98 66.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
162 233 South Lafayette Park Place $271,905 $13,602 1.67 $2,645,000 3/20/98 76.4% 98.0%
- ------------------------------------------------------------------------------------------------------------------------------
163 Parkwood Plaza Townhomes $260,795 $13,132 1.65 $2,325,000 12/9/97 85.8% 95.0%
- ------------------------------------------------------------------------------------------------------------------------------
164 HH Gregg Store $264,225 $18,427 1.19 $2,850,000 12/15/97 69.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
165 Free Standing Eckerds-Rock Hill $206,024 $16,134 1.06 $2,350,000 3/10/98 84.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
166 Springfield Manor Mobile Home Park $253,153 $13,576 1.55 $2,800,000 12/22/97 71.2% 92.4%
- ------------------------------------------------------------------------------------------------------------------------------
167 Salem Crossing Apartments $204,938 $13,998 1.22 $2,650,000 11/18/97 75.3% 90.2%
- ------------------------------------------------------------------------------------------------------------------------------
168 Airport Plaza - Santee $278,403 $14,085 1.65 $3,100,000 11/17/97 64.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
169 Richland Shopping Center $314,675 $15,370 1.71 $3,350,000 8/20/97 59.4% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
170 Bedford Hills Apartments $284,591 $12,752 1.86 $3,200,000 10/23/97 60.7% 95.0%
- ------------------------------------------------------------------------------------------------------------------------------
171 Canon Plaza $284,360 $15,626 1.52 $2,800,000 12/5/97 69.1% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
172 3987-3991 First Street $245,669 $15,202 1.35 $3,220,000 2/14/98 58.8% 98.3%
- ------------------------------------------------------------------------------------------------------------------------------
173 Walgreens - Gainesville $306,414 $13,452 1.90 $3,685,000 12/1/97 49.4% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
174 Courtyard Office Building $231,485 $12,109 1.59 $2,950,000 1/9/98 60.9% 98.0%
- ------------------------------------------------------------------------------------------------------------------------------
176 380 Diablo $217,014 $14,151 1.28 $2,800,000 9/2/97 63.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
177 2680 North 1st Street $190,606 $13,641 1.16 $2,650,000 12/24/97 65.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
178 Foremost Business Park $256,313 $12,722 1.68 $2,300,000 3/16/98 74.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
179 Valley Business Center $211,581 $12,574 1.40 $2,390,000 12/19/97 70.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
180 James Casey Garden Medical Center $261,360 $15,499 1.41 $2,875,000 3/3/98 58.3% 95.0%
- ------------------------------------------------------------------------------------------------------------------------------
181 3949 Research Park Court $217,999 $12,956 1.40 $2,550,000 12/8/97 65.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------
Loan Leased(8) Tenant Information(9)
No. Date Largest Tenant % NSF
- ------------------------------------------------------------------------
<S> <C> <C> <C>
146 11/12/97
- ------------------------------------------------------------------------
147 1/18/98
- ------------------------------------------------------------------------
148 4/3/98
- ------------------------------------------------------------------------
149 3/31/98
- ------------------------------------------------------------------------
150 12/23/97 Smith & Nephew, Inc. 100.0%
- ------------------------------------------------------------------------
151 4/7/98
- ------------------------------------------------------------------------
152 3/25/98 Food 4 Less 100.0%
- ------------------------------------------------------------------------
153 3/11/98 Keri System, Inc. 65.8%
- ------------------------------------------------------------------------
154 3/1/98
- ------------------------------------------------------------------------
155 11/1/97 Doris Italian Market 22.0%
- ------------------------------------------------------------------------
156 3/1/98 Peak Performance Program 35.8%
- ------------------------------------------------------------------------
157 1/1/98
- ------------------------------------------------------------------------
158 1/20/98
- ------------------------------------------------------------------------
159 4/8/98 R. G. Barry Corp. 100.0%
- ------------------------------------------------------------------------
160 12/31/97 CA Dept of Real Estate 37.6%
- ------------------------------------------------------------------------
161 3/11/98 Karas Corporation 38.8%
- ------------------------------------------------------------------------
162 2/26/98
- ------------------------------------------------------------------------
163 3/17/98
- ------------------------------------------------------------------------
164 1/1/98 HH Gregg Appliance 100.0%
- ------------------------------------------------------------------------
165 2/10/98 Eckerds 100.0%
- ------------------------------------------------------------------------
166 1/31/98
- ------------------------------------------------------------------------
167 1/31/98
- ------------------------------------------------------------------------
168 3/12/98
- ------------------------------------------------------------------------
169 2/1/98 Richland Market 49.4%
- ------------------------------------------------------------------------
170 1/21/98
- ------------------------------------------------------------------------
171 2/1/98 City Market 56.8%
- ------------------------------------------------------------------------
172 1/22/98
- ------------------------------------------------------------------------
173 9/19/97 Walgreens 100.0%
- ------------------------------------------------------------------------
174 3/1/98
- ------------------------------------------------------------------------
176 1/1/98 Old Republic Title 20.0%
- ------------------------------------------------------------------------
177 2/4/98
- ------------------------------------------------------------------------
178 2/28/98
- ------------------------------------------------------------------------
179 2/4/98
- ------------------------------------------------------------------------
180 3/15/98 Utts, Rice & Becker 22.9%
- ------------------------------------------------------------------------
181 12/18/97 Greg Spak 27.7%
- ------------------------------------------------------------------------
</TABLE>
II-18
<PAGE> 124
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
182 Oaks Apartments $265,990 $12,902 1.72 $3,580,000 12/22/97 45.9% 90.3%
- ------------------------------------------------------------------------------------------------------------------------------
183 8439 Steller Drive $287,021 $12,290 1.95 $3,200,000 11/6/97 49.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
184 Broomfield Safeway Marketplace $199,642 $10,850 1.53 $2,200,000 11/6/97 72.5% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
185 Glen Arbor Apartments $230,887 $12,395 1.55 $2,930,000 1/9/98 54.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
186 Highland Knolls MHP $348,161 $10,219 2.84 $4,400,000 3/12/98 35.2% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
187 Lawrence Business Center $230,720 $10,095 1.90 $2,425,000 1/8/98 63.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
188 Maple Commerce Center $164,817 $11,525 1.19 $2,300,000 11/20/97 67.0% 93.0%
- ------------------------------------------------------------------------------------------------------------------------------
189 1901 Camino Ramon $298,041 $10,354 2.40 $3,500,000 1/13/98 42.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
190 Office Max - Stockton $231,473 $13,642 1.41 $3,000,000 2/19/98 49.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
191 Bradley OfficeMax $173,017 $10,335 1.40 $2,000,000 12/17/97 74.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
192 Tracy/Schulte Shopping Center $212,951 $12,259 1.45 $2,410,000 12/11/97 61.8% 92.0%
- ------------------------------------------------------------------------------------------------------------------------------
193 Newbridge Shopping Center $190,056 $10,674 1.48 $1,975,000 9/29/97 75.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
194 Whitehall Manor Apartments $197,571 $10,592 1.55 $1,900,000 11/25/97 78.6% 95.3%
- ------------------------------------------------------------------------------------------------------------------------------
195 Underwood/Johnson 142 Building $153,228 $10,470 1.22 $1,900,000 10/30/97 77.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
196 Lindsay Corners $194,455 $10,434 1.55 $1,985,000 12/11/97 72.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
197 Eldorado Building $206,681 $10,716 1.61 $2,100,000 2/26/98 68.7% 96.0%
- ------------------------------------------------------------------------------------------------------------------------------
198 2674 North 1st Street $273,521 $10,913 2.09 $3,100,000 12/11/97 45.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
199 Del Diablo Mini Storage $251,264 $14,600 1.43 $2,600,000 3/12/98 60.6% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
200 Highland Oaks Village Apartments $213,997 $9,832 1.81 $2,000,000 3/5/98 69.9% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
201 Camelot Manufactured Home Park $266,362 $9,868 2.25 $3,440,000 11/13/97 40.6% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
202 Fairfield Inn - Bar Harbor $209,502 $10,442 1.67 $2,000,000 1/1/98 69.7% 69.4%
- ------------------------------------------------------------------------------------------------------------------------------
203 Ridgewood Mobile Estates $167,166 $9,260 1.50 $2,280,000 10/28/97 56.8% 99.0%
- ------------------------------------------------------------------------------------------------------------------------------
204 2880 Research Park Drive $205,767 $9,475 1.81 $2,400,000 12/8/97 50.6% 87.0%
- ------------------------------------------------------------------------------------------------------------------------------
205 Rite Aid - Fremont $185,489 $7,927 1.95 $2,100,000 2/4/98 57.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
206 Brook Hollow Apartments $222,603 $9,011 2.06 $2,500,000 2/4/98 47.9% 98.3%
- ------------------------------------------------------------------------------------------------------------------------------
207 14600 Arminta $171,420 $11,158 1.28 $2,040,000 10/7/97 58.1% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
208 2240 Yates Avenue $212,523 $10,840 1.63 $2,230,000 12/2/97 53.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
209 Eagle Valley Commercial Center $146,858 $8,590 1.42 $1,700,000 11/17/97 69.1% 90.0%
- ------------------------------------------------------------------------------------------------------------------------------
210 Heritage Park Apartments $137,711 $7,481 1.53 $1,600,000 10/28/97 69.7% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
212 1572 East College Parkway $127,174 $7,706 1.38 $1,550,000 11/6/97 66.3% 81.0%
- ------------------------------------------------------------------------------------------------------------------------------
213 River Park Apartments $124,636 $9,162 1.13 $1,500,000 2/13/98 66.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
214 Sycamore Self Storage $158,900 $7,189 1.84 $1,740,000 1/12/98 57.3% 89.4%
- ------------------------------------------------------------------------------------------------------------------------------
215 8675 Rochester Avenue $124,520 $7,235 1.43 $2,000,000 1/17/98 49.9% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
217 Airport Business Park $121,668 $7,468 1.36 $1,400,000 12/10/97 71.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
218 Sorrento Meadows $145,614 $6,754 1.80 $1,875,000 11/2/97 53.1% 100.0%
<CAPTION>
- ------------------------------------------------------------------------
Loan Leased(8) Tenant Information(9)
No. Date Largest Tenant % NSF
- ------------------------------------------------------------------------
<S> <C> <C> <C>
182 3/20/98
- ------------------------------------------------------------------------
183 1/31/98 Los Angeles Times 100.0%
- ------------------------------------------------------------------------
184 1/23/98 Checker Auto Parts 28.5%
- ------------------------------------------------------------------------
185 12/15/97
- ------------------------------------------------------------------------
186 3/1/98
- ------------------------------------------------------------------------
187 1/22/98
- ------------------------------------------------------------------------
188 4/15/98
- ------------------------------------------------------------------------
189 4/7/98 Home Consignment 38.7%
- ------------------------------------------------------------------------
190 1/15/98 OfficeMax 100.0%
- ------------------------------------------------------------------------
191 12/31/97 OfficeMax 100.0%
- ------------------------------------------------------------------------
192 1/7/98
- ------------------------------------------------------------------------
193 12/31/97 Food Lion 48.9%
- ------------------------------------------------------------------------
194 2/28/98
- ------------------------------------------------------------------------
195 1/21/98 Precor, Inc. 100.0%
- ------------------------------------------------------------------------
196 2/1/98 Checker Auto 23.6%
- ------------------------------------------------------------------------
197 2/26/98
- ------------------------------------------------------------------------
198 3/11/98
- ------------------------------------------------------------------------
199 2/25/98
- ------------------------------------------------------------------------
200 3/31/98
- ------------------------------------------------------------------------
201 3/31/98
- ------------------------------------------------------------------------
202 11/30/97
- ------------------------------------------------------------------------
203 3/1/98
- ------------------------------------------------------------------------
204 12/18/97 Stallion Technologies 48.8%
- ------------------------------------------------------------------------
205 1/28/98 Rite Aid Drug Store 100.0%
- ------------------------------------------------------------------------
206 3/26/98
- ------------------------------------------------------------------------
207 4/15/98 Terry Hinge & Hardware 100.0%
- ------------------------------------------------------------------------
208 3/16/98 Interstate Electric Co., Inc. 100.0%
- ------------------------------------------------------------------------
209 1/5/98
- ------------------------------------------------------------------------
210 3/31/98
- ------------------------------------------------------------------------
212 1/8/98 Carson Technologies 49.7%
- ------------------------------------------------------------------------
213 2/25/98
- ------------------------------------------------------------------------
214 12/4/97
- ------------------------------------------------------------------------
215 2/28/98 Elec Insulation Supply 50.0%
- ------------------------------------------------------------------------
217 1/20/98 High Sierra Fitness 27.1%
- ------------------------------------------------------------------------
218 3/18/98 American Film Tech. 26.8%
</TABLE>
II-19
<PAGE> 125
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
219 27 - 37 Main Street $258,307 $7,527 2.86 $2,700,000 7/6/97 36.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
220 La Jolla Colony Pad Building $128,427 $8,013 1.34 $1,500,000 12/5/97 66.1% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
221 Grove Garden Apartments $134,164 $7,306 1.53 $1,500,000 2/19/98 65.3% 98.0%
- ------------------------------------------------------------------------------------------------------------------------------
222 Emerald Point Apartments $210,375 $8,428 2.08 $2,350,000 1/14/98 40.2% 93.0%
- ------------------------------------------------------------------------------------------------------------------------------
223 Colt Industrial $172,718 $6,401 2.25 $2,280,000 1/20/98 39.4% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
224 Pep Boys Build-To-Suit $105,039 $6,237 1.40 $1,430,000 12/29/97 59.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
225 Plaza West Building $107,164 $6,391 1.40 $1,400,000 10/10/97 60.2% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
226 Hollywood Video - Englewood $105,364 $5,813 1.51 $1,160,000 12/29/97 66.8% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
227 Hollywood Video - Victorville $107,701 $4,536 1.98 $1,120,000 1/5/98 53.4% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
228 2001 E. 4th Street/Santa Ana $99,398 $4,097 2.02 $1,020,000 12/21/97 53.8% 88.2%
- ------------------------------------------------------------------------------------------------------------------------------
229 Hollywood Video - Poway $109,620 $4,542 2.01 $1,290,000 12/15/97 42.3% 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
230 Vista Colina Apartments $117,124 $4,956 1.97 $1,200,000 12/15/97 45.3% 87.5%
- ------------------------------------------------------------------------------------------------------------------------------
231 Galleria Park Hotel $2,318,838 $87,279 2.21 $22,700,000 4/8/98 52.8% 87.0%
- ------------------------------------------------------------------------------------------------------------------------------
232 Quality Suites Hotel San Diego $1,154,496 $64,638 1.49 $11,500,000 1/30/98 74.8% 81.1%
- ------------------------------------------------------------------------------------------------------------------------------
233 Brookstone Apartments $638,275 $37,846 1.41 $8,100,000 4/23/98 64.7% 92.0%
- ------------------------------------------------------------------------------------------------------------------------------
234 Ponte Vedra Pointe $576,498 $36,291 1.32 $6,450,000 4/1/98 79.0% 94.0%
- ------------------------------------------------------------------------------------------------------------------------------
Total/Weighted Average: 1.57 66.6%
<CAPTION>
- ------------------------------------------------------------------------
Loan Leased(8) Tenant Information(9)
No. Date Largest Tenant % NSF
- ------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------
219 12/31/97 CVS, Inc. 88.8%
- ------------------------------------------------------------------------
220 3/1/98 San Diego County Credit Union 57.7%
- ------------------------------------------------------------------------
221 3/18/98
- ------------------------------------------------------------------------
222 3/10/98
- ------------------------------------------------------------------------
223 3/9/98
- ------------------------------------------------------------------------
224 2/1/98 Pep Boys 100.0%
- ------------------------------------------------------------------------
225 12/30/97 Coldwell Banker / Adams Realty 32.4%
- ------------------------------------------------------------------------
226 12/20/97 Hollywood Video 100.0%
- ------------------------------------------------------------------------
227 10/1/97 Hollywood Entertainment 100.0%
- ------------------------------------------------------------------------
228 1/26/98 Santa Ana Educators 21.2%
- ------------------------------------------------------------------------
229 10/31/97 Hollywood Video 100.0%
- ------------------------------------------------------------------------
230 3/19/98
- ------------------------------------------------------------------------
231 2/28/98
- ------------------------------------------------------------------------
232 1/31/98
- ------------------------------------------------------------------------
233 4/10/98
- ------------------------------------------------------------------------
234 3/6/98 Fresh Market 27.3%
- ------------------------------------------------------------------------
</TABLE>
II-20
<PAGE> 126
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 127
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan Interest Accrual Lockout
No. Property Name Method Seasoning(11) Period YM3 YM1 YM DEF DEF/YM1 5.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1 1201 Pennsylvania Avenue Actual/360 2 38 259
- ------------------------------------------------------------------------------------------------------------------------------------
2 Courthouse Plaza II 30/360 5 41 76
- ------------------------------------------------------------------------------------------------------------------------------------
3 Marina del Rey Stor It (2I) Actual/360 0 60 54
4 Santa Clara Extra Storage (2I) Actual/360 0 60 54
5 Aliso Viejo Stor It (2I) Actual/360 0 60 54
6 Mission Viejo Stor It (2I) Actual/360 0 60 54
7 Foothill Ranch Stor It (2I) Actual/360 0 60 54
8 Redwood City Extra Storage (2I) Actual/360 0 60 54
9 San Juan Capistrano Stor It (2I) Actual/360 0 60 54
- ------------------------------------------------------------------------------------------------------------------------------------
10 Westminster City Center Marketplace Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
11 Gateway Plaza Shopping Center 30/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
12 Atrium IV Actual/360 2 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
13 Fountainview Village Apartments 30/360 7 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
14 Centre on Seventeenth 30/360 7 60 120
- ------------------------------------------------------------------------------------------------------------------------------------
15 Catamaran Resort Hotel Actual/360 0 36 137
- ------------------------------------------------------------------------------------------------------------------------------------
16 AMC Theatres Highlands Ranch Actual/360 0 36 197
- ------------------------------------------------------------------------------------------------------------------------------------
18 48-18 Northern Boulevard Actual/360 9 60 81
- ------------------------------------------------------------------------------------------------------------------------------------
19 Fleischhauer Student Housing Portfolio Actual/360 0 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
20 Independence Park Shopping Center Actual/360 2 60 54
- ------------------------------------------------------------------------------------------------------------------------------------
21 Normandy Apartments Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
22 Beachwood Apartments Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
23 Cupertino Town Center 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
24 Orchard Mesa Apartments 30/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
25 Bel Air Town Center Actual/360 6 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
26 Stratford Wood Apartments Actual/360 2 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
27 Pacific Terrace Inn Actual/360 4 60 54
- ------------------------------------------------------------------------------------------------------------------------------------
28 Goldorado Shopping Center (2A) 30/360 4 36 138
29 Hollywood Video - Pad (2A) 30/360 1 36 135
- ------------------------------------------------------------------------------------------------------------------------------------
30 Camelot Village Actual/360 0 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
31 Vaz-Lodi 30/360 3 24 90
- ------------------------------------------------------------------------------------------------------------------------------------
32 The Carlyle Actual/360 0 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
33 Holiday Inn- College Park Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
34 Ball Post - Fairfield 30/360 4 24 90
- ------------------------------------------------------------------------------------------------------------------------------------
35 Courtyard by Marriott-Portsmouth Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------
Prepayment Code(10)
Loan Admin.
No. 4.0% 3.0% 2.0% 1.0% Open Cost Rate(bps)(12)
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------
1 3 1.5
- ---------------------------------------------------------------
2 3 1.5
- ---------------------------------------------------------------
3 6 4.8
4 6 4.8
5 6 4.8
6 6 4.8
7 6 4.8
8 6 4.8
9 6 4.8
- ---------------------------------------------------------------
10 6 4.8
- ---------------------------------------------------------------
11 6 4.8
- ---------------------------------------------------------------
12 3 10
- ---------------------------------------------------------------
13 6 4.8
- ---------------------------------------------------------------
14 60 4.8
- ---------------------------------------------------------------
15 6 4.8
- ---------------------------------------------------------------
16 6 4.8
- ---------------------------------------------------------------
18 3 11.7
- ---------------------------------------------------------------
19 6 4.8
- ---------------------------------------------------------------
20 6 1.5
- ---------------------------------------------------------------
21 3 11.7
- ---------------------------------------------------------------
22 3 11.7
- ---------------------------------------------------------------
23 6 4.8
- ---------------------------------------------------------------
24 6 4.8
- ---------------------------------------------------------------
25 6 11
- ---------------------------------------------------------------
26 3 10
- ---------------------------------------------------------------
27 6 4.8
- ---------------------------------------------------------------
28 6 4.8
29 6 4.8
- ---------------------------------------------------------------
30 6 4.8
- ---------------------------------------------------------------
31 6 4.8
- ---------------------------------------------------------------
32 6 4.8
- ---------------------------------------------------------------
33 3 1.5
- ---------------------------------------------------------------
34 6 4.8
- ---------------------------------------------------------------
35 3 1.5
- ---------------------------------------------------------------
</TABLE>
II-21
<PAGE> 128
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan Interest Accrual Lockout
No. Property Name Method Seasoning(11) Period YM3 YM1 YM DEF DEF/YM1 5.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
36 Courtyard by Marriott - Albuquerque Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
37 Rolling Hills Place Apartments Actual/360 0 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
38 33201 Dowe Avenue 30/360 5 36 42
- ------------------------------------------------------------------------------------------------------------------------------------
39 Sycamore Greens Apartments Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
40 Lake Village Mobile Home Park 30/360 5 36 18
- ------------------------------------------------------------------------------------------------------------------------------------
41 Pleasant Lake Apartments Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
45 Lake Fredrica Shopping Center Actual/360 5 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
46 Alberto Oaks 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
48-A Hawthorne Apartments (2II) Actual/360 5 60 57
48-B Greenbriar Apartments (2II) Actual/360 5 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
49 Park Village Apartments Actual/360 0 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
50 Vineyard Mobile Villa Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
51 Kern Canyon Estates Mobile Home Park Actual/360 4 60 54
- ------------------------------------------------------------------------------------------------------------------------------------
52 Willow Hilll Apartments 30/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
53 Havasu Plaza Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
54 University Plaza Shopping Center Actual/360 3 36 18
- ------------------------------------------------------------------------------------------------------------------------------------
55 Midtown Center 30/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
56 Brea Corporate Park 30/360 0 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
57 Lenox East (2B) Actual/360 3 60 57
58 Hawks Nest Apartments (2B) Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
59 Hampton Inn-Columbia Actual/360 1 48 69
- ------------------------------------------------------------------------------------------------------------------------------------
60 Imperial Rose Plaza 30/360 10 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
61 Park 16 Apartments Actual/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
62 Aspen Square Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
63 Irvine Suites Hotel Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
64 Vineyard Plaza 30/360 5 36 138
- ------------------------------------------------------------------------------------------------------------------------------------
65 Courtyard by Marriott - Jensen Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
67 Barnett Bank Center Actual/360 2 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
68 Holiday Inn- Port St. Lucie Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
69 Nottingham Village Apartments Actual/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
70 Colony Square Shopping Center Actual/360 5 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
71 University Centre West II (2C) Actual/360 3 36 80
72 University Centre West I (2C) Actual/360 3 36 80
- ------------------------------------------------------------------------------------------------------------------------------------
73 Country Suites Carlson 30/360 7 36 78
<CAPTION>
- ---------------------------------------------------------------
Prepayment Code(10)
Loan Admin.
No. 4.0% 3.0% 2.0% 1.0% Open Cost Rate(bps)(12)
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
36 3 1.5
- ---------------------------------------------------------------
37 6 4.8
- ---------------------------------------------------------------
38 6 4.8
- ---------------------------------------------------------------
39 3 1.5
- ---------------------------------------------------------------
40 6 4.8
- ---------------------------------------------------------------
41 3 11
- ---------------------------------------------------------------
45 3 11.7
- ---------------------------------------------------------------
46 6 4.8
- ---------------------------------------------------------------
48-A 3 11.7
48-B 3 11.7
- ---------------------------------------------------------------
49 6 4.8
- ---------------------------------------------------------------
50 6 4.8
- ---------------------------------------------------------------
51 6 1.5
- ---------------------------------------------------------------
52 6 4.8
- ---------------------------------------------------------------
53 3 1.5
- ---------------------------------------------------------------
54 6 4.8
- ---------------------------------------------------------------
55 6 4.8
- ---------------------------------------------------------------
56 6 4.8
- ---------------------------------------------------------------
57 3 11.7
58 3 11.7
- ---------------------------------------------------------------
59 3 11.7
- ---------------------------------------------------------------
60 3 11
- ---------------------------------------------------------------
61 6 4.8
- ---------------------------------------------------------------
62 3 10
- ---------------------------------------------------------------
63 3 9
- ---------------------------------------------------------------
64 6 4.8
- ---------------------------------------------------------------
65 3 1.5
- ---------------------------------------------------------------
67 3 11.7
- ---------------------------------------------------------------
68 3 11.7
- ---------------------------------------------------------------
69 6 4.8
- ---------------------------------------------------------------
70 3 11
- ---------------------------------------------------------------
71 4 11.7
72 4 11.7
- ---------------------------------------------------------------
73 6 4.8
</TABLE>
II-22
<PAGE> 129
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan Interest Accrual Lockout
No. Property Name Method Seasoning(11) Period YM3 YM1 YM DEF DEF/YM1 5.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
74 Summer Glen Apartments 30/360 2 36 84
- ------------------------------------------------------------------------------------------------------------------------------------
75 Hampton Inn-Eagan Actual/360 1 48 69
- ------------------------------------------------------------------------------------------------------------------------------------
76 Mission Tierra Apartments Actual/360 1 48 90
- ------------------------------------------------------------------------------------------------------------------------------------
77 Spec 188 Actual/360 2 24 90
- ------------------------------------------------------------------------------------------------------------------------------------
79 Myriad Genetics Building Actual/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
80 Fairfield Inn - Bangor Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
81 269 South Lafayette Park Place 30/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
82 Hampton Inn - Rochester Actual/360 1 48 69
- ------------------------------------------------------------------------------------------------------------------------------------
83 Windsor Medical Center Actual/360 5 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
84 Glenwood Springs Mall Actual/360 2 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
85 Village Center at Highlands Ranch Actual/360 2 48 66
- ------------------------------------------------------------------------------------------------------------------------------------
86 Wherehouse Plaza - San Jose 30/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
87 Best Western La Jolla 30/360 2 36 138
- ------------------------------------------------------------------------------------------------------------------------------------
88 Casa De Colinas Town Homes Actual/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
89 River Valley Apartments Actual/360 5 60 117
- ------------------------------------------------------------------------------------------------------------------------------------
90 Village at the Oaks Actual/360 3 60 60
- ------------------------------------------------------------------------------------------------------------------------------------
91 Vista de la Sierra Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
92 Casa de la Sierra Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
93 Aspen Grove Building Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
94 Barclay Buena Park 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
95 Cowell Terrace Apartments Actual/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
96 Landmark Plaza Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
97 High Desert Villas Apartments 30/360 4 36 132
- ------------------------------------------------------------------------------------------------------------------------------------
98 Port 95 - Building 3 Actual/360 0 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
99 Arbor Village Shopping Center Phase II Actual/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
100 Windy Hill Key Apartments Actual/360 2 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
101 Park Terrace Apartments Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
102 489 Whitney Avenue Actual/360 3 60 12
- ------------------------------------------------------------------------------------------------------------------------------------
103 Limeridge Apartments Actual/360 2 36 198
- ------------------------------------------------------------------------------------------------------------------------------------
104 South Bay Plaza Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
105 Public Storage - Redwood City, CA Actual/360 3 36 77
- ------------------------------------------------------------------------------------------------------------------------------------
106 Broadway Plaza Actual/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
107 1313 Geneva Drive Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
108 Omni Business Park 30/360 1 36 78
<CAPTION>
- ---------------------------------------------------------------
Prepayment Code(10)
Loan Admin.
No. 4.0% 3.0% 2.0% 1.0% Open Cost Rate(bps)(12)
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------
74 24 36 60 4.8
- ---------------------------------------------------------------
75 3 11.7
- ---------------------------------------------------------------
76 6 4.8
- ---------------------------------------------------------------
77 6 4.8
- ---------------------------------------------------------------
79 6 4.8
- ---------------------------------------------------------------
80 3 1.5
- ---------------------------------------------------------------
81 6 4.8
- ---------------------------------------------------------------
82 3 11.7
- ---------------------------------------------------------------
83 3 1.5
- ---------------------------------------------------------------
84 3 10
- ---------------------------------------------------------------
85 6 4.8
- ---------------------------------------------------------------
86 6 4.8
- ---------------------------------------------------------------
87 6 4.8
- ---------------------------------------------------------------
88 6 4.8
- ---------------------------------------------------------------
89 3 11.7
- ---------------------------------------------------------------
90 10
- ---------------------------------------------------------------
91 6 4.8
- ---------------------------------------------------------------
92 6 4.8
- ---------------------------------------------------------------
93 3 10
- ---------------------------------------------------------------
94 6 4.8
- ---------------------------------------------------------------
95 6 4.8
- ---------------------------------------------------------------
96 3 10
- ---------------------------------------------------------------
97 12 4.8
- ---------------------------------------------------------------
98 3 11.7
- ---------------------------------------------------------------
99 6 4.8
- ---------------------------------------------------------------
100 3 1.5
- ---------------------------------------------------------------
101 3 10
- ---------------------------------------------------------------
102 12 12 12 9 3 11.7
- ---------------------------------------------------------------
103 6 4.8
- ---------------------------------------------------------------
104 6 4.8
- ---------------------------------------------------------------
105 6 4.8
- ---------------------------------------------------------------
106 6 4.8
- ---------------------------------------------------------------
107 6 4.8
- ---------------------------------------------------------------
108 6 4.8
</TABLE>
II-23
<PAGE> 130
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan Interest Accrual Lockout
No. Property Name Method Seasoning(11) Period YM3 YM1 YM DEF DEF/YM1 5.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
109 Rancho San Diego Plaza 30/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
110 Wallburg Towne Center Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
111 North Chase Office Building H Actual/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
112 Wixom Plaza (Oakland Pontiac Center) 30/360 3 48 66
- ------------------------------------------------------------------------------------------------------------------------------------
113 Lakeside Apartments Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
114 Pillsbury Manor Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
115 Comfort Suites - Stevens Point Actual/360 1 48 69
- ------------------------------------------------------------------------------------------------------------------------------------
116 Westmore Auto Park Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
117 Jog Road Center Actual/360 2 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
118 Citadel Apartments 30/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
119 Pfeiffer Commons Actual/360 3 60 54
- ------------------------------------------------------------------------------------------------------------------------------------
120 7803 Madison Ave. Actual/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
121 Miami Bluffs Apartments Actual/360 3 60 54
- ------------------------------------------------------------------------------------------------------------------------------------
122 Roberts Industrial Park 30/360 0 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
123 Orangewood Apartments 30/360 3 36 84
- ------------------------------------------------------------------------------------------------------------------------------------
124 Rosedown Apartments (2D) Actual/360 2 60 114
211 Adair Professional Building (2D) Actual/360 2 60 114
- ------------------------------------------------------------------------------------------------------------------------------------
125 Secure Self Storage of Lakeside Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
126 Walnut Tower Apartments Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
127 Five Building Portfolio Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
128 Barnes & Noble, Tucson Actual/360 4 48 66
- ------------------------------------------------------------------------------------------------------------------------------------
129 Builders Square - Lansing, MI Actual/360 1 60 177
- ------------------------------------------------------------------------------------------------------------------------------------
130 Tennent Nine Shopping Center Actual/360 6 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
131 Brook Hollow Village Actual/360 5 90 87
- ------------------------------------------------------------------------------------------------------------------------------------
132 Countryside Apartments Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
133 Summerfield Apartments 1 Actual/360 5 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
134 Garden Grove Secured Storage 30/360 5 48 66
- ------------------------------------------------------------------------------------------------------------------------------------
135 Windermere Shoppes 30/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
136 Carriage Square Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
137 Fountainebleau Apartments 30/360 4 48 126
- ------------------------------------------------------------------------------------------------------------------------------------
138 Walgreens - Vero Beach 30/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
139 HH Gregg Shopping Center 30/360 2 36 138
- ------------------------------------------------------------------------------------------------------------------------------------
140 Arundell Business Park 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
141 Fed Ex - San Leandro 30/360 5 60 60
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------
Prepayment Code(10)
Loan Admin.
No. 4.0% 3.0% 2.0% 1.0% Open Cost Rate(bps)(12)
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------
109 6 4.8
- ---------------------------------------------------------------
110 3 11.7
- ---------------------------------------------------------------
111 6 4.8
- ---------------------------------------------------------------
112 6 4.8
- ---------------------------------------------------------------
113 3 1.5
- ---------------------------------------------------------------
114 3 11.7
- ---------------------------------------------------------------
115 3 11.7
- ---------------------------------------------------------------
116 6 4.8
- ---------------------------------------------------------------
117 3 11.7
- ---------------------------------------------------------------
118 6 4.8
- ---------------------------------------------------------------
119 6 11
- ---------------------------------------------------------------
120 6 4.8
- ---------------------------------------------------------------
121 6 11
- ---------------------------------------------------------------
122 6 4.8
- ---------------------------------------------------------------
123 24 36 60 4.8
- ---------------------------------------------------------------
124 6 4.8
211 6 4.8
- ---------------------------------------------------------------
125 6 4.8
- ---------------------------------------------------------------
126 3 11.7
- ---------------------------------------------------------------
127 6 4.8
- ---------------------------------------------------------------
128 6 4.8
- ---------------------------------------------------------------
129 3 11.7
- ---------------------------------------------------------------
130 3 11.7
- ---------------------------------------------------------------
131 3 11.7
- ---------------------------------------------------------------
132 6 4.8
- ---------------------------------------------------------------
133 3 11
- ---------------------------------------------------------------
134 6 4.8
- ---------------------------------------------------------------
135 6 4.8
- ---------------------------------------------------------------
136 3 1.5
- ---------------------------------------------------------------
137 6 4.8
- ---------------------------------------------------------------
138 6 4.8
- ---------------------------------------------------------------
139 6 4.8
- ---------------------------------------------------------------
140 6 4.8
- ---------------------------------------------------------------
141 30 6 4.8
- ---------------------------------------------------------------
</TABLE>
II-24
<PAGE> 131
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan Interest Accrual Lockout
No. Property Name Method Seasoning(11) Period YM3 YM1 YM DEF DEF/YM1 5.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
142 Future Shop Actual/360 5 36 198
- ------------------------------------------------------------------------------------------------------------------------------------
143 Eastview Medical Center 30/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
144 The Willows 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
145 AmericInn, Ripon (2III) Actual/360 3 60 57
146 AmericInn, Waupun (2III) Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
147 Beechwood Apartments Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
148 Shadowridge Self-Storage 30/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
149 Partridge Court Apartments 30/360 27 60
- ------------------------------------------------------------------------------------------------------------------------------------
150 Don Joy Building Actual/360 5 24 30
- ------------------------------------------------------------------------------------------------------------------------------------
151 Birchwood Farms Mobile Home Park Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
152 Food 4 Less - Stockton Actual/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
153 1530 Old Oakland Road 30/360 0 36 77
- ------------------------------------------------------------------------------------------------------------------------------------
154 4125 Blackhawk Plaza Circle Actual/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
155 Yamato Village Center Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
156 Hawthorn Plaza Actual/360 5 90 87
- ------------------------------------------------------------------------------------------------------------------------------------
157 Connors Business Park 30/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
158 Oasis Morning Apartments Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
159 R. G. Barry Distribution Warehouse 30/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
160 22nd & Broadway 30/360 2 12 66
- ------------------------------------------------------------------------------------------------------------------------------------
161 1510 Old Oakland Road 30/360 0 36 77
- ------------------------------------------------------------------------------------------------------------------------------------
162 233 South Lafayette Park Place 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
163 Parkwood Plaza Townhomes Actual/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
164 HH Gregg Store 30/360 2 36 138
- ------------------------------------------------------------------------------------------------------------------------------------
165 Free Standing Eckerds-Rock Hill 30/360 1 60 163
- ------------------------------------------------------------------------------------------------------------------------------------
166 Springfield Manor Mobile Home Park Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
167 Salem Crossing Apartments Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
168 Airport Plaza - Santee 30/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
169 Richland Shopping Center Actual/360 5 60 54
- ------------------------------------------------------------------------------------------------------------------------------------
170 Bedford Hills Apartments Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
171 Canon Plaza 30/360 4 36 198
- ------------------------------------------------------------------------------------------------------------------------------------
172 3987-3991 First Street Actual/360 2 60 174
- ------------------------------------------------------------------------------------------------------------------------------------
173 Walgreens - Gainesville Actual/360 5 60 180
- ------------------------------------------------------------------------------------------------------------------------------------
174 Courtyard Office Building Actual/360 3 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
176 380 Diablo Actual/360 5 60 60
<CAPTION>
- ---------------------------------------------------------------
Prepayment Code(10)
Loan Admin.
No. 4.0% 3.0% 2.0% 1.0% Open Cost Rate(bps)(12)
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
142 6 4.8
- ---------------------------------------------------------------
143 6 4.8
- ---------------------------------------------------------------
144 6 4.8
- ---------------------------------------------------------------
145 3 10
146 3 10
- ---------------------------------------------------------------
147 6 4.8
- ---------------------------------------------------------------
148 6 4.8
- ---------------------------------------------------------------
149 12 6 6 1.5
- ---------------------------------------------------------------
150 6 4.8
- ---------------------------------------------------------------
151 3 1.5
- ---------------------------------------------------------------
152 6 4.8
- ---------------------------------------------------------------
153 6 4.8
- ---------------------------------------------------------------
154 6 4.8
- ---------------------------------------------------------------
155 6 4.8
- ---------------------------------------------------------------
156 3 11.7
- ---------------------------------------------------------------
157 6 4.8
- ---------------------------------------------------------------
158 6 4.8
- ---------------------------------------------------------------
159 6 4.8
- ---------------------------------------------------------------
160 6 4.8
- ---------------------------------------------------------------
161 6 4.8
- ---------------------------------------------------------------
162 6 4.8
- ---------------------------------------------------------------
163 6 4.8
- ---------------------------------------------------------------
164 6 4.8
- ---------------------------------------------------------------
165 6 4.8
- ---------------------------------------------------------------
166 6 4.8
- ---------------------------------------------------------------
167 3 1.5
- ---------------------------------------------------------------
168 6 4.8
- ---------------------------------------------------------------
169 6 10
- ---------------------------------------------------------------
170 6 4.8
- ---------------------------------------------------------------
171 6 4.8
- ---------------------------------------------------------------
172 6 4.8
- ---------------------------------------------------------------
173 0 10
- ---------------------------------------------------------------
174 3 11.7
- ---------------------------------------------------------------
176 0 10
</TABLE>
II-25
<PAGE> 132
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan Interest Accrual Lockout
No. Property Name Method Seasoning(11) Period YM3 YM1 YM DEF DEF/YM1 5.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
177 2680 North 1st Street 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
178 Foremost Business Park Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
179 Valley Business Center 30/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
180 James Casey Garden Medical Center Actual/360 0 60 114
- ------------------------------------------------------------------------------------------------------------------------------------
181 3949 Research Park Court 30/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
182 Oaks Apartments Actual/360 2 60 174
- ------------------------------------------------------------------------------------------------------------------------------------
183 8439 Steller Drive 30/360 3 36 198
- ------------------------------------------------------------------------------------------------------------------------------------
184 Broomfield Safeway Marketplace Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
185 Glen Arbor Apartments 30/360 3 36 84
- ------------------------------------------------------------------------------------------------------------------------------------
186 Highland Knolls MHP 30/360 1 36 138
- ------------------------------------------------------------------------------------------------------------------------------------
187 Lawrence Business Center 30/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
188 Maple Commerce Center Actual/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
189 1901 Camino Ramon Actual/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
190 Office Max - Stockton 30/360 2 60 114
- ------------------------------------------------------------------------------------------------------------------------------------
191 Bradley OfficeMax Actual/360 3 48 66
- ------------------------------------------------------------------------------------------------------------------------------------
192 Tracy/Schulte Shopping Center 30/360 4 60 174
- ------------------------------------------------------------------------------------------------------------------------------------
193 Newbridge Shopping Center Actual/360 5 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
194 Whitehall Manor Apartments Actual/360 4 48 126
- ------------------------------------------------------------------------------------------------------------------------------------
195 Underwood/Johnson 142 Building Actual/360 4 36 81
- ------------------------------------------------------------------------------------------------------------------------------------
196 Lindsay Corners Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
197 Eldorado Building Actual/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
198 2674 North 1st Street 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
199 Del Diablo Mini Storage 30/360 0 36 138
- ------------------------------------------------------------------------------------------------------------------------------------
200 Highland Oaks Village Apartments Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
201 Camelot Manufactured Home Park Actual/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
202 Fairfield Inn - Bar Harbor Actual/360 4 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
203 Ridgewood Mobile Estates Actual/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
204 2880 Research Park Drive 30/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
205 Rite Aid - Fremont 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
206 Brook Hollow Apartments Actual/360 1 60 54
- ------------------------------------------------------------------------------------------------------------------------------------
207 14600 Arminta 30/360 4 36 138
- ------------------------------------------------------------------------------------------------------------------------------------
208 2240 Yates Avenue 30/360 3 60 114
- ------------------------------------------------------------------------------------------------------------------------------------
209 Eagle Valley Commercial Center Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
210 Heritage Park Apartments Actual/360 5 60 57
<CAPTION>
- ---------------------------------------------------------------
Prepayment Code(10)
Loan Admin.
No. 4.0% 3.0% 2.0% 1.0% Open Cost Rate(bps)(12)
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------
177 6 4.8
- ---------------------------------------------------------------
178 6 4.8
- ---------------------------------------------------------------
179 6 4.8
- ---------------------------------------------------------------
180 6 4.8
- ---------------------------------------------------------------
181 6 4.8
- ---------------------------------------------------------------
182 6 4.8
- ---------------------------------------------------------------
183 6 4.8
- ---------------------------------------------------------------
184 6 4.8
- ---------------------------------------------------------------
185 24 36 60 4.8
- ---------------------------------------------------------------
186 6 4.8
- ---------------------------------------------------------------
187 6 4.8
- ---------------------------------------------------------------
188 6 4.8
- ---------------------------------------------------------------
189 6 4.8
- ---------------------------------------------------------------
190 6 4.8
- ---------------------------------------------------------------
191 6 4.8
- ---------------------------------------------------------------
192 6 4.8
- ---------------------------------------------------------------
193 3 11.7
- ---------------------------------------------------------------
194 6 11
- ---------------------------------------------------------------
195 3 11.7
- ---------------------------------------------------------------
196 6 4.8
- ---------------------------------------------------------------
197 6 4.8
- ---------------------------------------------------------------
198 6 4.8
- ---------------------------------------------------------------
199 6 4.8
- ---------------------------------------------------------------
200 6 4.8
- ---------------------------------------------------------------
201 6 4.8
- ---------------------------------------------------------------
202 3 1.5
- ---------------------------------------------------------------
203 6 4.8
- ---------------------------------------------------------------
204 6 4.8
- ---------------------------------------------------------------
205 6 4.8
- ---------------------------------------------------------------
206 6 4.8
- ---------------------------------------------------------------
207 6 4.8
- ---------------------------------------------------------------
208 6 4.8
- ---------------------------------------------------------------
209 6 4.8
- ---------------------------------------------------------------
210 3 11.7
</TABLE>
II-26
<PAGE> 133
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(10)
Loan Interest Accrual Lockout
No. Property Name Method Seasoning(11) Period YM3 YM1 YM DEF DEF/YM1 5.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
212 1572 East College Parkway Actual/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
213 River Park Apartments 30/360 2 60 114
- ------------------------------------------------------------------------------------------------------------------------------------
214 Sycamore Self Storage Actual/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
215 8675 Rochester Avenue 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
217 Airport Business Park Actual/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
218 Sorrento Meadows Actual/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
219 27 - 37 Main Street Actual/360 5 60 57
- ------------------------------------------------------------------------------------------------------------------------------------
220 La Jolla Colony Pad Building Actual/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
221 Grove Garden Apartments 30/360 1 60 114
- ------------------------------------------------------------------------------------------------------------------------------------
222 Emerald Point Apartments Actual/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
223 Colt Industrial 30/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
224 Pep Boys Build-To-Suit Actual/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
225 Plaza West Building Actual/360 2 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
226 Hollywood Video - Englewood Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
227 Hollywood Video - Victorville 30/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
228 2001 E. 4th Street/Santa Ana Actual/360 3 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
229 Hollywood Video - Poway Actual/360 5 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
230 Vista Colina Apartments Actual/360 4 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
231 Galleria Park Hotel 30/360 1 36 17
- ------------------------------------------------------------------------------------------------------------------------------------
232 Quality Suites Hotel San Diego Actual/360 2 26 91
- ------------------------------------------------------------------------------------------------------------------------------------
233 Brookstone Apartments 30/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
234 Ponte Vedra Pointe Actual/360 1 36 78
- ------------------------------------------------------------------------------------------------------------------------------------
Total/Weighted Average:
<CAPTION>
- ---------------------------------------------------------------
Prepayment Code(10)
Loan Admin.
No. 4.0% 3.0% 2.0% 1.0% Open Cost Rate(bps)(12)
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------
212 6 4.8
- ---------------------------------------------------------------
213 6 4.8
- ---------------------------------------------------------------
214 6 4.8
- ---------------------------------------------------------------
215 6 4.8
- ---------------------------------------------------------------
217 6 4.8
- ---------------------------------------------------------------
218 6 4.8
- ---------------------------------------------------------------
219 3 11.7
- ---------------------------------------------------------------
220 6 4.8
- ---------------------------------------------------------------
221 6 4.8
- ---------------------------------------------------------------
222 6 4.8
- ---------------------------------------------------------------
223 6 4.8
- ---------------------------------------------------------------
224 6 4.8
- ---------------------------------------------------------------
225 6 4.8
- ---------------------------------------------------------------
226 6 4.8
- ---------------------------------------------------------------
227 6 4.8
- ---------------------------------------------------------------
228 6 4.8
- ---------------------------------------------------------------
229 6 4.8
- ---------------------------------------------------------------
230 6 4.8
- ---------------------------------------------------------------
231 6 4.8
- ---------------------------------------------------------------
232 3 1.5
- ---------------------------------------------------------------
233 6 4.8
- ---------------------------------------------------------------
234 6 4.8
- ---------------------------------------------------------------
5.7
</TABLE>
II-27
<PAGE> 134
Footnotes to Appendix II
1 "WF" and "MS" denote Wells Fargo Bank, National Association and Morgan
Stanley Mortgage Capital Inc., respectively, as Sellers.
2 Sets of Mortgage Loans that have identical alphabetical coding designate
multiple loans that are cross-collateralized and cross-defaulted, while
Mortgage Loans that have identical Roman Numeral coding indicate multiple
properties securing one note. For the purposes of the Prospectus
Supplement, the latter are treated as if they were multiple loans that are
cross-collateralized and cross-defaulted.
3 Certain ratios including Cut-Off Date Balance Loan/ Unit or SF, DSCR, 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. For the purposes of the statistical information set forth
in this Prospectus Supplement, as to such multiple property loans, a
portion of the aggregate Cut-Off Date Balance has been allocated to each
property, generally based on relative appraised value or Underwrittable
Cash Flow.
4 "ARD" indicates the anticipated repayment date for hyper-amortizing loans.
Loan No. 2, Courthouse Plaza II and Loan No. 232, Quality Suites Hotel San
Diego are the only hyper-amortizing loans in the Mortgage Pool.
5 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.
6 Loan No. 13, Fountainview Village Apartments, requires interest only
payments for the first year. The monthly payment shown is the principal
and interest payment which will be due beginning on 12/1/99, when the
Mortgage Loan begins to amortize over a 348 month schedule. DSCR is based
on this monthly payment.
7 Loan No. 18, 48-18 Northern Boulevard, encumbers a fee interest subject to
a subordinated ground lease. DSCR shown is based on Underwritable Cash
Flow from sub-tenants in place. The subject's stated appraised value is a
combination of fee and leasehold values. Based on ground lease payments
only, DSCR is 1.10x, Appraised Value is $26 million and LTV is 66.9%.
8 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 1997 or the preceding twelve month period.
9 "Largest Tenant" refers to the tenant that represents the greatest
percentage, equal to, or in excess of 20%, of the total square footage at
the subject property.
10 Indicates prepayment provisions from the first Due Date as stated in the
Mortgage Loan. "YM" represents yield maintenance and "YM1" and "YM3"
represent the greater of yield maintenance or one percent and three
percent of the outstanding principal balance at such time, respectively.
"DEF/YM1" is an option for the borrower to choose defeasance or the
greater of yield maintenance or one percent of the outstanding principal
balance. 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.
11 "Seasoning" represents the approximate number of months elapsed from the
date of the first regularly scheduled payment or due date to the Cut-Off
Date.
12 The "Administrative Cost Rate" indicated for each Mortgage Loan will be
calculated based on the same interest calculation methodology (ie.,
actual/360) applicable to such Mortgage Loan.
II-28
<PAGE> 135
APPENDIX III
SIGNIFICANT LOAN SUMMARIES
Loan No. 1 - 1201 Pennsylvania Avenue Loan and Property
<TABLE>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $51,891,079 Property Type: Office
Loan Type: Principal and Location: Washington, DC
Interest;
Balloon Year Built/Renovated: 1981
Origination Date: 3/10/1998 Square Feet: 437,961
Maturity Date: 4/1/2023 Cut-Off Date Balance/SF: $119
Mortgage Rate: 7.460% Appraised Value: $75,000,000
Annual Debt Service: $4,595,082 Current LTV: 69.2%
DSCR: 1.27x Balance at Maturity LTV: 4.4%
Underwritten Cash Flow: $5,830,294 Percent Leased: 94.3%
Balance at Maturity: $3,297,960 Percent Leased as of Date: 3/1/1998
- -----------------------------------------------------------------------------------------------
</TABLE>
The Loan
The 1201 Pennsylvania Avenue Loan (the "1201 Pennsylvania Avenue Loan") is
secured by a first mortgage on a 437,961 square foot, thirteen-story office
building located in Washington, District of Columbia (the "1201 Pennsylvania
Avenue Property"). The 1201 Pennsylvania Avenue Loan was originated by MSMC on
March 10, 1998.
The Borrower. The borrower is D.C. One Associates, a District of Columbia
limited partnership (the "1201 Pennsylvania Avenue Borrower"). The general
partners of the 1201 Pennsylvania Avenue Borrower are Sentinel Associates, a
District of Columbia corporation, and Sentinel Managing Corp., a District of
Columbia corporation. The 1201 Pennsylvania Avenue Borrower and its general
partners are special purpose entities.
Security. The 1201 Pennsylvania Avenue Loan is secured by a Mortgage,
Assignment of Rents and Leases, UCC Financing Statements and certain additional
security documents. The mortgage is a first lien on a leasehold interest in the
1201 Pennsylvania Avenue Property. The 1201 Pennsylvania Avenue Loan is
non-recourse, subject to certain limited exceptions.
Major Tenants. The major tenants at the 1201 Pennsylvania Avenue Property
are the law firms Covington & Burling and Squires, Sanders & Dempsey. Certain
easement agreements established the rights and obligations of the tenants and
the 1201 Pennsylvania Avenue Borrower.
Payment Terms. The Mortgage Rate is fixed at 7.460%. The 1201 Pennsylvania
Avenue Loan requires monthly payments of principal and interest of $382,923.48
until its maturity on April 1, 2023, at which time all unpaid principal and
accrued but unpaid interest is due. The 1201 Pennsylvania Avenue Loan accrues
interest computed on the basis of the actual number of days elapsed each month
in a 360-day year.
Prepayment. The 1201 Pennsylvania Avenue Loan may be defeased in whole,
but not in part, on or after July 1, 2001. No defeasance is necessary within
ninety (90) days prior to maturity.
III-1
<PAGE> 136
If there is an event of default and the lender accelerates the 1201
Pennsylvania Avenue Loan, the security documents require 1201 Pennsylvania
Avenue Borrower to pay a prepayment premium as described above. There is a 5%
late fee on overdue installments, and the 1201 Pennsylvania Avenue Loan accrues
interest at the mortgage rate plus 5% per annum while the 1201 Pennsylvania
Avenue Loan is in default.
Transfer of Property or Interest in Borrower. The 1201 Pennsylvania Avenue
Loan becomes immediately due and payable upon the transfer of the 1201
Pennsylvania Avenue Property or any ownership interest in the 1201 Pennsylvania
Avenue Borrower, except in connection with the rights of transfer described
below. The 1201 Pennsylvania Avenue Borrower has the right to transfer the 1201
Pennsylvania Avenue Property subject to the related mortgage on or after March
10, 1999, with the payment of a 1% assumption fee provided that the proposed
transferee meets certain criteria, including receipt of rating agency approval.
The 1201 Pennsylvania Avenue Borrower will be required to provide the lender
with a non-consolidation opinion in the event of any such transfer.
Escrow/Reserves. There is a tax escrow which requires deposits in an
amount sufficient to pay taxes when due. There is no insurance escrow.
Subordinate/Other Debt. Subordinate encumbrances are prohibited. The 1201
Pennsylvania Avenue Borrower may borrow up to $5,000,000 in unsecured debt from
its partners. As of June 1, 1998, this unsecured debt totaled approximately
$3,582,000 and bore interest at a rate of 8.5% per annum.
The Property
The 1201 Pennsylvania Avenue Property is a thirteen story, 437,961 square
foot office building located in Washington, District of Columbia. The 1201
Pennsylvania Avenue Property was 94.3% leased as of March 1, 1998 to 10 tenants.
The building is of reinforced concrete construction with concrete exterior. The
property is an urban office building with a 14-story atrium, granite floors,
extensive interior lobby landscaping and a landscaped roof terrace.
Approximately 82.5% of the space is rented by the law firms Covington &
Burling (various leases) and Squires, Sanders & Dempsey. Contractual lease
expirations during the loan term for all tenants are as follows: 8,753 square
feet (2%) in 1998 or earlier, 600 square feet (less than 1%) in 1999, 10,083
square feet (2%) in 2001, 2,482 square feet (1%) in 2002, 14,037 square feet
(3%) in 2003, 15,332 square feet (4%) in 2007, and 358,857 square feet (82%) in
or after 2008. As of March 1, 1998, average base rental was $20.74 per square
foot.
Management
Sentinel Real Estate Corporation ("Sentinel") is the property manager.
Sentinel is related to the 1201 Pennsylvania Avenue Borrower and reportedly
manages over 200 properties in 31 states.
III-2
<PAGE> 137
Loan No. 2 - Courthouse Plaza II Loan and Property
<TABLE>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $35,358,184 Property Type: Office
Loan Type: Principal and Location: Arlington, VA
Interest;
Hyper-amortizing Year Built/Renovated: 1989
Balloon Square Feet: 255,856
Origination Date: 12/11/1997 Cut-Off Date Balance/SF: $138
Anticipated Repayment Date: 1/1/2008 Appraised Value: $48,200,000
Maturity Date: 1/1/2028 Current LTV: 73.4%
Mortgage Rate: 7.190% Balance at ARD LTV 63.5%
Annual Debt Service: $2,888,754 Percent Leased: 99.2%
DSCR: 1.27x Percent Leased as of Date: 4/1/1998
Underwritten Cash Flow: $3,662,199
Balance at ARD: $30,598,181
- -----------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Courthouse Plaza II Loan (the "Courthouse Plaza II Loan") is secured
by a first mortgage on a fourteen story, 255,856 square foot office building
located in Arlington, Virginia (the "Courthouse Plaza II Property"). The
Courthouse Plaza II Loan was originated by MSMC on December 11, 1997.
The Borrower. The borrower is Second Courthouse Plaza Associates Limited
Partnership, a Virginia limited partnership (the "Courthouse Plaza II
Borrower"). Second Courthouse Plaza, LLC, a Delaware limited liability company,
is the general partner of the Courthouse Plaza II Borrower. The Courthouse Plaza
II Borrower and its general partner are special purpose entities.
Security. The Courthouse Plaza II Loan is secured by a Deed of Trust,
Assignment of Rents and Leases, UCC Financing Statements and certain additional
security documents (the "Courthouse Plaza II Financing Documents"). The mortgage
is a first lien on a leasehold interest in the Courthouse Plaza II Property. The
Courthouse Plaza II Loan is non-recourse, subject to certain limited exceptions.
Major Tenants. The major tenants at the Courthouse Plaza II Property are
KPMG Peat Marwick, Information Builders and Ryan-McGinn. Certain easement
agreements established the rights and obligations of the tenants and the
Courthouse Plaza II Borrower.
Payment Terms. The Mortgage Rate is fixed at 7.190%. The Courthouse Plaza
II Loan requires monthly payments of principal and interest of $240,729.54 until
its anticipated repayment date of January 1, 2008, at which time the Courthouse
Plaza II Loan may be paid off without defeasance substitution, or the Courthouse
Plaza II Borrower may elect to repay the remaining balance according to a
hyperamortization schedule, with a final scheduled maturity date of January 1,
2028. If the Courthouse Plaza II Borrower makes such an election, the Mortgage
Rate will increase to the greater of (i) the initial interest rate plus four
percentage points (4.00%) or (ii) the applicable Treasury Rate plus four
percentage points (4.00%) and a cash flow lockbox will be implemented. Upon the
anticipated repayment date, Excess Cash Flow (as defined in the Courthouse Plaza
II Financing Documents) will be applied to the outstanding principal balance.
The Courthouse Plaza II Loan accrues interest computed on the basis of an
assumed 30-day month and 360-day year.
Prepayment. The Courthouse Plaza II Loan may be defeased on or after July
1, 2001. No defeasance is necessary on or after the anticipated repayment date
of January 1, 2008.
III-3
<PAGE> 138
If there is an event of default and the lender accelerates the Courthouse
Plaza II Loan, the security documents require Courthouse Plaza II Borrower to
pay a prepayment premium as described above. There is a 5% late fee on overdue
installments, and the Courthouse Plaza II Loan accrues interest at the mortgage
rate plus 5% per annum while the Courthouse Plaza II Loan is in default.
Transfer of Property or Interest in Borrower. The Courthouse Plaza II Loan
becomes immediately due and payable upon the transfer of the Courthouse Plaza II
Property or any ownership interest in the Courthouse Plaza II Borrower, except
in connection with the rights of transfer described below. The Courthouse Plaza
II Borrower has the right to transfer the Courthouse Plaza II Property subject
to the related mortgage with the payment of a 0.50% assumption fee and provided
that the proposed transferee meets certain criteria, including receipt of rating
agency approval. Notwithstanding the above, the Courthouse Plaza II Borrower has
the right to transfer the Courthouse Plaza II Property to affiliated entities
subject to the related mortgage without the requirement of lender approval or
the payment of any fee. The Courthouse Plaza II Borrower will be required to
provide the lender with a non-consolidation opinion in the event of transfer to
a related entity.
Escrow/Reserves. There is a tax escrow which requires deposits in an
amount sufficient to pay taxes when due. There is also an escrow for capital
expenditures which is funded monthly in the amount of $9,219. There are also
escrows for tenant improvements and leasing costs which is funded annually in
the amount of $518,958. Such amounts will be disbursed to pay such costs and
provide additional security for the Courthouse Plaza II Loan. There is no
insurance escrow.
Subordinate/Other Debt. Secured subordinate encumbrances are prohibited.
The Courthouse Plaza II Borrower may borrow up to $3,300,000 of unsecured debt
from its affiliated management company.
The Property
The Courthouse Plaza II Property is a fourteen story, 255,856 square foot
office building located in Arlington, Virginia. The Courthouse Plaza II Property
was 99.2% leased as of April 1, 1998. The building is of reinforced concrete
construction with concrete and glass exterior. The property is a suburban office
building with a marble lobby highlighted by millwork and customized standing
planters.
Approximately 35% of the space is rented by major tenants including KPMG
Peat Marwick, Information Builders and Ryan-McGinn. Contractual lease
expirations during the loan term for all tenants are as follows: 14,967 square
feet (6% in 1998 or earlier, 5,947 square feet (2%) in 1999, 82,002 square feet
(32%) in 2000, 83,513 square feet (33%) in 2001, 15,698 square feet (6% in 2002,
7,975 square feet (3%) in 2003, 32,537 square feet (13%) in 2004 and 11,047
square feet (4%) in 2007. As of April 1, 1998, average base rental was $26.35
per square foot.
Management
Charles E. Smith Management, Inc. is the property manager and is an
affiliate of the Courthouse Plaza II Borrower.
III-4
<PAGE> 139
Loan Nos. 3-9 - Lyons Investment Properties, L.L.C. Loan and Properties
<TABLE>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $34,600,000 Property Type: Self-Storage
Loan Type: Principal and Locations: Various
Interest; Balloon Years Built/Renovated: Various
Origination Date: 5/11/1998 Units: See below
Maturity Date: 6/1/2008 Cut-Off Date Balance/Unit: $5,053
Mortgage Rate: 6.940% Appraised Value: $53,150,000
Annual Debt Service: $2,918,674 Current LTV: 65.1%
DSCR: 1.83x Balance at Maturity LTV: 52.0%
Underwritten Cash Flow: $5,332,602 Percent Leased: Various
Balance at Maturity: $27,631,228
- -----------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Lyons Investment Properties, L.L.C. Loan (the "Lyons Loan") is secured
by a first mortgage on the seven self storage facilities (collectively, the
"Lyons Properties") more particularly described below in the tables under the
heading "The Properties." The Lyons Loan was originated by Wells Fargo on May
11, 1998.
The Borrower. The borrower is Lyons Investment Properties, L.L.C., a
California limited liability company (the "Lyons Borrower"). The Lyons Borrower
is a special purpose entity
Security. The Lyons Loan is secured by Deeds of Trust, Assignments of
Rents and Leases, UCC Financing Statements and certain additional security
documents. The mortgage is a first lien on fee interests in the Lyons
Properties. The Lyons Loan is non-recourse, subject to certain limited
exceptions.
Payment Terms. The Mortgage Rate is fixed at 6.940%. The Lyons Loan
requires monthly payments of principal and interest of $243,222.85 until its
maturity on June 1, 2008, at which time all unpaid principal and accrued but
unpaid interest is due. The Lyons Loan accrues interest computed on the basis of
the actual number of days elapsed each month in a 360-day year.
Prepayment. The Lyons Loan may be prepaid in whole, but not in part, on or
after July 1, 2003, upon payment of a Yield Maintenance Premium calculated by
reference to U.S. Treasury obligations. No Prepayment Premium is due if the
Lyons Loan is prepaid within one-hundred eighty (180) days prior to maturity.
If there is an event of default and the lender accelerates the Lyons Loan,
the security documents require Lyons Borrower to pay a prepayment premium as
described above. There is a 4% late fee on overdue installments, and the Lyons
Loan accrues interest at the mortgage rate plus 5% per annum while the Lyons
Loan is in default.
Transfer of Properties or Interest in Borrower. The Lyons Loan becomes
immediately due and payable upon the transfer of the Lyons Properties or any
ownership interest in the Lyons Borrower, except in connection with a one-time
right of assumption and the rights of transfer described below. Transfers of
ownership interests in the Lyons Borrower are permitted so long as (a) Philip
Lyons retains at least a 10% ownership interest in the Lyons Borrower, (b) Craig
Lyons retains an ownership interest in the Lyons Borrower equivalent to at least
50% of the ownership interest he held at the time the Lyons Loan was originated,
and (c) Philip Lyons or Craig Lyons manages the Lyons Borrower and the Lyons
Property.
Escrow/Reserves. There is a tax escrow which require deposits in an amount
sufficient to pay taxes when due. There is no insurance escrow.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited.
The Properties
The Lyons Properties consist of the following seven self storage
facilities:
III-5
<PAGE> 140
<TABLE>
Marina del Rey Stor It
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Location: Marina del Rey, Units: 1,202
California
Construction: Concrete block Percent Leased: 92.4%
Year Built/Renovated: 1988 Percent Leased as of date: 3/29/1998
- -----------------------------------------------------------------------------------------------
Santa Clara Extra Storage
- -----------------------------------------------------------------------------------------------
Location: Santa Clara, Units: 1,744
California
Construction: Wood frame Percent Leased: 92.2%
Year Built/Renovated: 1986 Percent Leased as of date: 3/29/1998
- -----------------------------------------------------------------------------------------------
Aliso Viejo Stor It
- -----------------------------------------------------------------------------------------------
Location: Aliso Viejo, Units: 919
California
Construction: Wood frame Percent Leased: 97.4%
Year Built/Renovated: 1989 Percent Leased as of date: 3/29/1998
- -----------------------------------------------------------------------------------------------
Mission Viejo Stor It
- -----------------------------------------------------------------------------------------------
Location: Mission Viejo, Units: 928
California
Construction: Wood frame Percent Leased: 91.5%
Year Built/Renovated: 1987 Percent Leased as of date: 3/29/1998
- -----------------------------------------------------------------------------------------------
Foothill Ranch Stor It
- -----------------------------------------------------------------------------------------------
Location: Foothill Ranch, Units: 675
California
Construction: Concrete tilt-up Percent Leased: 96.4%
Year Built/Renovated: 1996 Percent Leased as of date: 4/6/1998
- -----------------------------------------------------------------------------------------------
Redwood City Extra Storage
- -----------------------------------------------------------------------------------------------
Location: Redwood City, Units: 842
California
Construction: Concrete tilt-up Percent Leased: 94.9%
Year Built/Renovated: 1985 Percent Leased as of date: 3/29/1998
- -----------------------------------------------------------------------------------------------
San Juan Capistrano Stor It
- -----------------------------------------------------------------------------------------------
Location: San Juan Capistrano, Units: 537
California
Construction: Concrete tilt-up Percent Leased: 96.6%
Year Built/Renovated: 1987 Percent Leased as of date: 3/29/1998
- -----------------------------------------------------------------------------------------------
</TABLE>
Management
The C.N. Lyons Development Company, L.L.C., an affiliate of the Lyons
Borrower, is the property manager.
III-6
<PAGE> 141
Loan No. 10 - Westminster City Center Marketplace Loan and Property
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $30,293,029 Property Type: Retail
Loan Type: Principal and Location: Westminster, CO
Interest; Balloon Year Built/Renovated: 1996
Origination Date: 12/23/1997 Square Feet: 339,600
Maturity Date: 2/1/2008 Cut-Off Date Balance/SF: $89
Mortgage Rate: 6.690% Appraised Value: $42,750,000
Annual Debt Service: $2,351,555 Current LTV: 70.9%
DSCR: 1.61x Balance at Maturity LTV: 61.5%
Underwritten Cash Flow: $3,796,282 Percent Leased: 100.0%
Balance at Maturity: $26,280,806 Percent Leased as of Date: 4/8/1998
- ------------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Westminster City Center Marketplace Loan (the "Westminster Loan") is
secured by a first mortgage on a 339,600 square foot shopping center located in
Westminster, Colorado (the "Westminster Property"). The Westminster Loan was
originated by Wells Fargo on December 23, 1997.
The Borrower. The borrower is Excel Westminster Marketplace, Inc., a
Delaware corporation (the "Westminster Borrower"). The Westminster Borrower is a
special purpose entity and a majority-owned subsidiary of Excel Realty Trust,
Inc. ("Excel").
Security. The Westminster Loan is secured by a Deed of Trust, Assignment
of Rents and Leases, UCC Financing Statements and certain additional security
documents. The mortgage is a first lien on a fee interest in the Westminster
Property. The Westminster Loan is non-recourse, subject to certain limited
exceptions.
Major Anchors. The major anchor stores at the Westminster Property are:
Circuit City, HomePlace, Inc., Babies R Us, Barnes & Noble, CompUSA, Golfsmith
International, Designer Shoe Ware, Michael's and David's Bridal. Certain
easement agreements established the rights and obligations of the anchor stores
and the Westminster Borrower.
Payment Terms. The Mortgage Rate is fixed at 6.690%. The Westminster Loan
requires monthly payments of principal and interest of $195,962.90 until its
maturity on February 1, 2008, at which time all unpaid principal and accrued but
unpaid interest is due. The Westminster Loan accrues interest computed on the
basis of the actual number of days elapsed each month in a 360-day year.
Prepayment. The Westminster Loan may be prepaid in whole, but not in part,
on or after March 1, 2001 upon payment of a Yield Maintenance Premium calculated
by reference to U.S. Treasury obligations. No Prepayment Premium is due if the
Loan is prepaid within one-hundred eighty (180) days prior to maturity.
If there is an event of default and the lender accelerates the Westminster
Loan, the security documents require Westminster Borrower to pay a prepayment
premium as described above. There is a 4% late fee on overdue installments, and
the Westminster Loan accrues interest at the mortgage rate plus 5% per annum
while the Westminster Loan is in default.
Transfer of Property or Interest in Borrower. The Westminster Loan becomes
immediately due and payable upon the transfer of the Westminster Property or any
ownership interest in the Westminster Borrower, except in connection with a
one-time right of assumption.
Escrow/Reserves. There are tax and insurance escrows which require
deposits in an amount sufficient to pay taxes and insurance premiums when due.
There is also a deferred maintenance reserve in the amount of $161,250 as of the
Cut-Off Date. Such amounts will be disbursed to pay settlement repair costs and
provide additional security for the Westminster Loan.
III-7
<PAGE> 142
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited.
The Property
The Westminster Property is a 339,600 square foot shopping center located
in the Westminster, Colorado. The Westminster Property was 100% leased as of
April 8, 1998 to 15 tenants. Buildings are typically of steel frame construction
with brick exteriors. The property is a suburban-style shopping center with
botanical themes exhibited in its landscaping.
Approximately 86% of the space is rented by national tenants including
Circuit City, HomePlace, Inc., Babies R Us, Barnes & Noble, CompUSA, Golfsmith
International, Designer Shoe Ware, Michael's and David's Bridal. Contractual
lease expirations during the loan term for all tenants are as follows: 20,424
square feet (6%) in 2000, 30,554 square feet (9%) in 2001, 13,000 square feet
(4%) in 2002, 100,481 square feet (48%) in 2006 and 175,141 square feet (52%) in
or after 2007. As of April 8, 1998, average base rental was $12.40 per square
foot.
Management
Excel is the property manager. Excel reportedly owns and operates 138
retail properties in 28 states, primarily in the southwestern and southeastern
United States.
III-8
<PAGE> 143
Loan No. 11 - Gateway Plaza Shopping Center Loan and Property
<TABLE>
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $29,974,905 Property Type: Retail
Loan Type: Principal and Location: Los Angeles, CA
Interest; Balloon Year Built/Renovated: 1994
Origination Date: 4/28/1998 Square Feet: 116,960
Maturity Date: 5/1/2008 Cut-Off Date Balance/SF: $256
Mortgage Rate: 6.897% Appraised Value: $40,000,000
Annual Debt Service: $2,370,238 Current LTV: 74.9%
DSCR: 1.42x Balance at Maturity LTV: 64.2%
Underwritten Cash Flow: $3,356,337 Percent Leased: 99.0%
Balance at Maturity: $25,680,996 Percent Leased as of Date: 2/4/1998
- --------------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Gateway Plaza Shopping Center Loan (the "Gateway Plaza Loan") is
secured by a first mortgage on a 116,960 square foot shopping center located in
Los Angeles, California (the "Gateway Plaza Property"). The Loan was originated
by Wells Fargo on April 28, 1998.
The Borrower. The borrower is Ventura & Topanga Partners, L.P., a
California limited partnership (the "Gateway Plaza Borrower"). The general
partner of the Gateway Plaza Borrower is Harris Toibb Corp. ("HTC"). The Gateway
Plaza Borrower is a special purpose entity.
Security. The Gateway Plaza Loan is secured by a Deed of Trust, Assignment
of Rents and Leases, UCC Financing Statements and certain additional security
documents. The mortgage is a first lien on a fee interest in the Gateway Plaza
Property. The Gateway Plaza Loan is non-recourse, subject to certain limited
exceptions.
Major Anchors. The major anchor stores at the Gateway Plaza Property are:
Ralph's Grocery Co., Rite Aid (formerly Thrifty) and Petco. Certain easement
agreements establish the rights and obligations of the anchor stores and the
Gateway Plaza Borrower.
Payment Terms. The Mortgage Rate is fixed at 6.897%. The Gateway Plaza
Loan requires monthly payments of principal and interest of $197,519.85 until
its maturity on May 1, 2008, at which time all unpaid principal and accrued but
unpaid interest is due. The Gateway Plaza Loan accrues interest computed on the
basis of an assumed 30-day month and a 360-day year.
Prepayment. On or after April 28, 2001, the Gateway Plaza Loan may be
prepaid in whole, but not in part, upon payment of a Prepayment Premium based on
a defeasance calculation. No Prepayment Premium is due if the Loan is prepaid
within one-hundred eighty (180) days prior to maturity.
If there is an event of default and the lender accelerates the Gateway
Plaza Loan, the security documents require Gateway Plaza Borrower to pay a
prepayment premium as described above. There is a 4% late fee on overdue
installments, and the Gateway Plaza Loan accrues interest at the mortgage rate
plus 5% per annum while the Gateway Plaza Loan is in default.
Transfer of Property or Interest in Borrower. The Gateway Plaza Loan
becomes immediately due and payable upon the transfer of the Gateway Plaza
Property or any ownership interest in the Gateway Plaza Property.
Escrow/Reserves. There is a tax escrow which requires deposits in an
amount sufficient to pay taxes when due. There are also escrows for capital
expenditures, tenant improvements and leasing costs which are funded monthly in
an aggregate amount of $4,000. Such amounts will be disbursed to pay such costs
and provide additional security for the Gateway Plaza Loan. There is no
insurance escrow.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited.
III-9
<PAGE> 144
The Property
The Gateway Plaza Property is a 116,960 square foot shopping center
located in Los Angeles, California. The Gateway Plaza Property was 99.0% leased
as of February 4, 1998 to 18 tenants. Buildings are typically of concrete block
construction and the site is landscaped. The Gateway Plaza Property is located
on a heavily trafficked commercial thoroughfare through the southern portion of
the San Fernando Valley.
Approximately 71% of the space is rented by the following national or
regional tenants: Ralph's Grocery Co., Rite Aid (formerly Thrifty) and Petco.
Contractual lease expirations during the loan term for all tenants are as
follows: 7,800 square feet (7%) in 2001, 40,875 square feet (35%) in 2003,
17,282 square feet (15%) in 2004 and 2,233 square feet (2%) in 2005, and 48,020
square feet after 2007. As of February 4, 1998 average base rental was $30.67
per square foot.
Management
The Gateway Plaza Property is managed by HTC. Harris Toibb, the majority
stockholder of HTC, reportedly has more than 25 years of real estate investment
and management experience. HTC and its affiliates engage in the construction,
ownership, management and leasing of residential and commercial property.
III-10
<PAGE> 145
Loan No. 12 - Atrium IV Loan and Property
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $29,956,924 Property Type: Office
Loan Type: Principal and Location: Secaucus, NJ
Interest; Balloon Year Built/Renovated: 1985
Origination Date: 3/25/1998 Square Feet: 258,711
Maturity Date: 4/1/2008 Cut-Off Date Balance/SF: $116
Mortgage Rate: 7.040% Appraised Value: $43,000,000
Annual Debt Service: $2,404,768 Current LTV: 69.7%
DSCR: 1.48x Balance at Maturity LTV: 60.9%
Underwritten Cash Flow: $3,556,309 Percent Leased: 100.0%
Balance at Maturity: $26,197,142 Percent Leased as of Date: 2/18/1998
- ------------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Atrium IV Loan (the "Atrium IV Loan") is secured by a first mortgage
on a four-story, 258,711 square foot office building located in Secaucus, New
Jersey (the "Atrium IV Property"). The Atrium IV Loan was originated by MSMC on
March 25, 1998.
The Borrower. The borrower is Atrium IV, L.L.C., a New Jersey limited
liability company (the "Atrium IV Borrower"). 200 Plaza Drive, a New Jersey
corporation, is the managing member of the Atrium IV Borrower. The Atrium IV
Borrower and its managing member are special purpose entities.
Security. The Atrium IV Loan is secured by a Mortgage, Assignment of Rents
and Leases, UCC Financing Statements and certain additional security documents
(the "Atrium IV Financing Documents"). The mortgage is a first lien on a fee
interest in the Atrium IV Property. The Atrium IV Loan is non-recourse, subject
to certain limited exceptions.
Major Tenants. The major tenants at the Atrium IV Property are Equitable
Life and Homestead Insurance Company. Certain easement agreements established
the rights and obligations of the tenants and the Atrium IV Borrower.
Payment Terms. The Mortgage Rate is fixed at 7.040%. The Atrium IV Loan
requires monthly payments of principal and interest of $200,397.31 until its
maturity on April 1, 2008, at which time all unpaid principal and accrued but
unpaid interest is due. The Atrium IV Loan accrues interest computed on the
basis of the actual number of days elapsed each month in a 360-day year.
Prepayment. The Atrium IV Loan may be prepaid in whole, but not in part,
on or after June 1, 2003 upon payment of a Yield Maintenance Premium calculated
by reference to U.S. Treasury obligations. No Prepayment Premium is due if the
Loan is prepaid within ninety (90) days prior to maturity.
If there is an event of default and the lender accelerates the Atrium IV
Loan, the security documents require Atrium IV Borrower to pay a prepayment
premium as described above. There is a 5% late fee on overdue installments, and
the Atrium IV Loan accrues interest at the mortgage rate plus 5% per annum while
the Atrium IV Loan is in default.
Transfer of Property or Interest in Borrower. The Atrium IV Loan becomes
immediately due and payable upon the transfer of the Atrium IV Property or any
ownership interest in the Atrium IV Borrower, except in connection with the
rights of transfer described below. The Atrium IV Borrower has the right to
transfer the Atrium IV Property subject to the related mortgage with the payment
of a 1% assumption fee upon the approval of the lender and the rating agencies.
Transfers of ownership interests in the Atrium IV Borrower to members of the
Leonard N. Stern family, trusts established for the benefit of the members of
such family or entities owned by Leonard Stern, his family members or any such
trusts are permitted, provided that such transferees own no more than 50% of the
voting and equitable interests in the Atrium IV Borrower or its managing member.
III-11
<PAGE> 146
Escrow/Reserves. There is a tax escrow which requires deposits in an
amount sufficient to pay taxes when due. There is also an escrow for tenant
improvements and leasing costs which is funded annually in the amount of
$258,711. Such amounts will be disbursed to pay such costs and provide
additional security for the Atrium IV Loan. There is no insurance escrow.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited.
The Property
The Atrium IV Property is a four story, 258,711 square foot office
building located in Secaucus, New Jersey. The Atrium IV Property was 100% leased
as of February 18, 1998 to 4 tenants. The building is of steel frame
construction with a concrete panel facade exterior and tinted windows. The
property is an urban office building with a four-story atrium, cafeteria and
enclosed dining area.
Approximately 95% of the space is rented by Equitable Life and Homestead
Insurance Co. Contractual lease expirations during the loan term for all tenants
are as follows: 25,785 square feet (10%) in 1999, 218,571 square feet (84%) in
2001, and 14,355 square feet (6%) in 2002. As of February 18, 1998, average base
rental was $20.10 per square foot.
Management
Hartz Mountain Industries, Inc., an affiliate of the Atrium IV Borrower,
is the property manager. Hartz Mountain Industries, Inc. reportedly owns and
operates over 175 properties and over 31,000,000 square feet of commercial real
estate.
III-12
<PAGE> 147
Loan No. 13 - Fountainview Village Apartments Loan and Property
<TABLE>
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $25,500,000 Property Type: Multifamily
Loan Type: Interest Only (mos. Location: Blackwood, NJ
1-12); Amortizing Year Built/Renovated: 1992
Balloon
Origination Date: 10/22/1997 No. of Units: 970
Maturity Date: 11/1/2007 Cut-Off Date Balance/Unit: $26,289
Mortgage Rate: 7.310% Appraised Value: $32,800,000
Annual Debt Service: $2,120,210 Current LTV: 77.7%
DSCR: 1.29x Balance at Maturity LTV: 67.7%
Underwritten Cash Flow: $2,724,590 Percent Leased: 91.0%
Balance at Maturity: $22,210,846 Percent Leased as of Date: 3/25/1998
- -------------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Fountainview Village Apartments Loan (the "Fountainview Village Loan")
is secured by a first mortgage on a 970 unit multifamily housing facility
located in Blackwood, New Jersey (the "Fountainview Village Property"). The
Fountainview Village Loan was originated by Wells Fargo on October 22, 1997.
The Borrower. The borrower is AE Blackwood Associates, a Pennsylvania
limited partnership (the "Fountainview Village Borrower"). The general partner
of the Fountainview Village Borrower is A. E. Blackwood, Inc. The Fountainview
Village Borrower is a special purpose entity.
Security. The Fountainview Village Loan is secured by a Mortgage, an
Assignment of Rents and Leases, UCC Financing Statements and certain additional
security documents. The mortgage is a first lien on a fee interest in the
Fountainview Village Property. The Fountainview Village Loan is non-recourse,
subject to certain limited exceptions.
Payment Terms. The Mortgage Rate is fixed at 7.310%. The Fountainview
Village Loan requires monthly payments of interest only of $155,337.50 through
December 1, 1998 and monthly payments of principal and interest of $176,684.14
thereafter until its maturity on November 1, 2007, at which time all unpaid
principal and accrued but unpaid interest is due. The Fountainview Village Loan
accrues interest computed on the basis of an assumed 30-day month and 360-day
year.
Prepayment. The Fountainview Village Loan may be prepaid in whole, but not
in part, on or after December 1, 2000 upon payment of a Yield Maintenance
Premium calculated by reference to U.S. Treasury obligations. No Prepayment
Premium is due if the Loan is prepaid within one-hundred eighty (180) days prior
to maturity.
If there is an event of default and the lender accelerates the
Fountainview Village Loan, the security documents require Fountainview Village
Borrower to pay a prepayment premium as described above. There is a 4% late fee
on overdue installments, and the Fountainview Village Loan accrues interest at
the mortgage rate plus 5% per annum while the Fountainview Village Loan is in
default.
Transfer of Property or Interest in Borrower. The Fountainview Village
Loan becomes immediately due and payable upon the transfer of the Fountainview
Village Property or any ownership interest in the Fountainview Village Borrower.
Escrow/Reserves. There is a tax escrow which requires deposits in amounts
sufficient to pay taxes when due. There is no insurance escrow.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited.
III-13
<PAGE> 148
The Property
The Fountainview Village Property consists of 22 brick-and wood-framed,
four story apartment buildings located in Blackwood, New Jersey. As of March 25,
1998, the Fountainview Village Property was 91% leased.
The Fountainview Village Property was built in 1973 and underwent a $12
million renovation program in 1992. The 970 units comprising the Fountainview
Village Property average 715 square feet and consist of the following unit mix:
56 studio apartment units, 406 one bedroom units, 480 two bedroom units and 28
three bedroom units. Buildings are typically of brick and wood frame
construction with brick exteriors. Facilities include a clubhouse, fitness
center, meeting room, central laundry facility, picnic area with grills and
tables and landscaped pool area.
Management
Amerimar Enterprises is the property manager. Amerimar Enterprises is the
managing agent for a portfolio of properties owned or controlled by A.E.
Blackwood, Inc.
III-14
<PAGE> 149
Loan No. 14 - Centre on Seventeenth Loan and Property
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $21,899,953 Property Type: Retail
Loan Type: Principal and Location: Santa Ana, CA
Interest; Balloon Year Built/Renovated: 1997
Origination Date: 9/24/1997 Square Feet: 201,957
Maturity Date: 11/1/2017 Cut-Off Date Balance/SF: $108
Mortgage Rate: 8.260% Appraised Value: $29,730,000
Annual Debt Service: $1,985,200 Current LTV: 73.7%
DSCR: 1.21x Balance at Maturity LTV: 45.3%
Underwritten Cash Flow: $2,407,947 Percent Leased: 97.0%
Balance at Maturity: $13,482,114 Percent Leased as of Date: 1/5/98
- ------------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Centre on Seventeenth Loan (the "Centre on Seventeenth Loan") is
secured by a first mortgage on a 201,957 square foot shopping center located in
Santa Ana, California (the "Centre on Seventeenth Property"). The Centre on
Seventeenth Loan consists of two components that are cross collateralized and
cross-defaulted. The Centre on Seventeenth Loan was originated by Wells Fargo on
September 24, 1997.
The Borrowers. The borrowers are, with respect to the $16.7 million
component of the Centre on Seventeenth Loan, Centre on Seventeenth Partners, a
special purpose California limited partnership, and, with respect to the $5.3
million component of the Centre on Seventeenth Loan, COS Santa Ana Partners, a
special purpose California limited partnership (together, the "Centre on
Seventeenth Borrowers"). The Centre on Seventeenth Borrowers are special purpose
entities.
Security. The Centre on Seventeenth Loan is secured by a Deed of Trust,
Assignment of Rents and Leases UCC Financing Statements and certain additional
security documents. The mortgage is a first lien on a fee interest in the Centre
on Seventeenth Property. The Centre on Seventeenth Loan is non-recourse, subject
to certain limited exceptions.
Major Anchors. The major anchor stores at the Centre on Seventeenth
Property are: Lucky, Ross Stores, Petsmart and Staples. Certain easement
agreements established the rights and obligations of the anchor stores and the
Centre on Seventeenth Borrowers.
Payment Terms. The Mortgage Rate is fixed at 8.260%. The Centre on
Seventeenth Loan requires monthly payments of principal and interest of
$165,433.34 until its maturity on November 1, 2017, at which time all unpaid
principal and accrued but unpaid interest is due. The Centre on Seventeenth Loan
accrues interest computed on the basis of an assumed 30-day month and 360-day
year.
Prepayment. The Centre on Seventeenth Loan may be prepaid. On or after
December 1, 2002, the Centre on Seventeenth Loan may be prepaid in whole, but
not in part, upon payment of a Yield Maintenance Premium calculated by reference
to U.S. Treasury obligations. On or after December 1, 2012, the Centre on
Seventeenth Loan may be prepaid in whole, but not in part, with payment of any
Yield Maintenance or Prepayment Premium.
III-15
<PAGE> 150
If there is an event of default and the lender accelerates the Centre on
Seventeenth Loan, the security documents require Centre on Seventeenth Borrowers
to pay a prepayment premium as described above. There is a 4% late fee on
overdue installments, and the Centre on Seventeenth Loan accrues interest at the
mortgage rate plus 5% per annum while the Centre on Seventeenth Loan is in
default.
Transfer of Properties or Interest in Borrowers. The Centre on Seventeenth
Loan becomes immediately due and payable upon the transfer of the Centre on
Seventeenth Property or any ownership interest in the Centre on Seventeenth
Borrowers, except in connection with a two-time right of assumption and the
rights of transfer described below. The following transfers of ownership
interests in the Centre on Seventeenth Borrower are permitted: (a) transfers
following which Leo David, R. Scott Bell and Dan Wojkowski retain ownership
interests equivalent to at least 50% of their respective ownership interests at
the time the Centre on Seventeenth Loan was originated; and (b) transfers
ownership interests in COS Santa Ana Partners to Centre on Seventeenth Partners.
Escrow/Reserves. There is a tax escrow which requires deposits in an
amount sufficient to pay taxes when due. There is no insurance escrow. Escrows
are scheduled to be impounded for tenant improvements and leasing costs. Such
amounts will be disbursed to pay such costs and provide additional security for
the Centre on Seventeenth Loan.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited.
The Property
The Centre on Seventeenth Property is a 201,957 square feet shopping
center located in Santa Ana, California. The Centre on Seventeenth Property was
97% leased as of January 5, 1998, to 27 tenants. Buildings are typically of
concrete block construction with stucco exteriors.
Approximately 71% of the space is rented by national tenants including
Lucky, Ross Stores, Petsmart and Staples. Contractual lease expirations during
the loan term are as follows: 16,846 square feet (8%) in 2002, 2,070 square feet
(1%) in 2003, 3,600 square feet (2%) in 2004, 10,000 square feet (5%) in 2005,
and 152,876 square feet (77%) in or after 2007.
Management
Interstate Consolidated Industries ("ICI"), an affiliate of the Centre on
Seventeenth Borrowers, is the property manager of the Centre on Seventeenth
Property. ICI reportedly has a portfolio consisting of eleven completed
properties and seven properties under development.
III-16
<PAGE> 151
Loan No. 15 - Catamaran Resort Hotel Loan and Property
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $20,800,000 Property Type: Hospitality
Loan Type: Principal and Location: San Diego, CA
Origination Date: Interest Year Built/Renovated: 1988
4/29/1998
Maturity Date: 5/1/2013 Rooms: 313
Mortgage Rate: 7.680% Cut-Off Date Balance/Rm.: $66,454
Annual Debt Service: $1,873,845 Appraised Value: $40,000,000
DSCR: 1.56x Current LTV: 52.0%
Underwritten Cash Flow: $2,931,042 Balance at Maturity LTV: 34.3%
Balance at Maturity: $13,704,374 Average Occupancy: 83.0%
Average Occupancy as of Date: 12/31/1997
- ------------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Catamaran Resort Hotel Loan (the "Catamaran Loan") is secured by a
first mortgage on a 313-room full-service, resort hotel situated on 8.1 acres of
waterfront land located in San Diego, California (the "Catamaran Property"). The
Catamaran Loan was originated by Wells Fargo on April 29, 1998.
The Borrower. The borrower entity consists of two special purpose
California limited partnerships, the Braemer Limited Partnership (52%) and the
Ninth & A Limited Partnership (48%) (each a "Catamaran Borrower" and together,
the "Catamaran Borrowers"). The managing general partner of both limited
partnerships is Braemar Corporation, a California corporation ("Braemar Corp.").
The Catamaran Borrowers are special purpose entities.
Security. The Catamaran Loan is secured by a Leasehold Deed of Trust, UCC
Financing Statements and certain additional security documents. The mortgage is
a first lien on a leasehold interest in the Catamaran Property. The Catamaran
Loan is non-recourse, subject to certain limited exceptions.
Payment Terms. The Mortgage Rate is fixed at 7.680%. The Catamaran Loan
requires monthly payments of principal and interest of $156,153.71 until its
maturity on May 1, 2013, at which time all unpaid principal and accrued but
unpaid interest is due. The Catamaran Loan accrues interest computed on the
basis of the actual number of days elapsed each month in a 360-day year.
Prepayment. On or after July 1, 2001, the Catamaran Loan may be prepaid in
whole, but not in part, upon payment of a Yield Maintenance Premium equivalent
to the greater of 1% of the outstanding principal balance of the Catamaran
Resort Hotel Loan or an amount determined by reference to U.S. Treasury
obligations. No Prepayment Premium is due if the Catamaran Loan is prepaid
within one-hundred (180) days prior to maturity.
If there is an event of default and the lender accelerates the Catamaran
Loan, the security documents require the Catamaran Borrowers to pay a prepayment
premium as described above. There is a 4% late fee on overdue installments, and
the Catamaran Loan accrues interest at the mortgage rate plus 5% per annum while
the Catamaran Loan is in default.
Transfer of Property or Interest in Borrower. The Catamaran Loan becomes
immediately due and payable upon the transfer of the Catamaran Property or any
ownership interest in the Catamaran Borrowers, except in connection with the
rights of transfer described below. Other than transfers of ownership interests
by Anne L. Evans, which are prohibited by the loan documents, transfers of
ownership interests in either of the Catamaran Borrowers to the other Catamaran
Borrower shall be permitted.
Escrow/Reserves. There is a tax escrow which requires monthly deposits in
an amount sufficient to pay taxes when due. There is also a furniture, fixtures
and equipment escrow which is funded in an amount equal to 4% of annual revenue.
Such amounts will be disbursed to pay such costs and provide additional security
for the Catamaran Loan. There is no insurance escrow.
III-17
<PAGE> 152
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited.
The Property
The Catamaran Property is a 313-room full-service beachfront resort hotel
located in San Diego, California. Amenities include a restaurant, pool, meeting
rooms, lounge, ballroom, sauna, spa, gift shop and sail boat rentals.
The Catamaran Property was built in 1959 and underwent an extensive $24
million renovation in 1988. The Catamaran Property consists of nine wood frame
and stucco buildings situated on 8.1 acres of waterfront land. In 1997, the
Catamaran Property achieved an estimated occupancy rate of approximately 83% and
had an estimated average daily room rate for the same period of approximately
$103.
Management
Braemar Corp., the general partner of each of the Catamaran Borrowers, is
the property manager.
III-18
<PAGE> 153
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 154
- --------------------------------------------------------------------------------
MORGAN STANLEY [GRAPHIC OMITTED] June [ ], 1998
Real Estate Debt Capital Markets
Mortgage/Asset Capital Markets
- --------------------------------------------------------------------------------
CMBS New Issue
Preliminary Term Sheet
----------------------------------
Expected Pricing Date: June [ ], 1998
----------------------------------
$[ ]
(Approximate)
Morgan Stanley Capital I Inc.
as Depositor
Wells Fargo Bank, National Association
as Master Servicer and Seller
Morgan Stanley Mortgage Capital Inc.
as Seller
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
----------------------------------
MORGAN STANLEY DEAN WITTER BEAR, STEARNS & CO. INC.
THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY PURSUANT TO A DEFINITIVE
PROSPECTUS SUPPLEMENT AND PROSPECTUS AND PROSPECTIVE INVESTORS WHO CONSIDER
PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT DECISION BASED ONLY
UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS USED BUT NOT DEFINED
HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE PROSPECTUS SUPPLEMENT.
<PAGE> 155
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 156
[ ]
(Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Rating Expected Final Initial
Amount(1) Subordination (DCR/ Average Principal Distribution Pass-Through
Class ($MM) Levels Fitch) Life(3) Window(3)(4) Date(3) Rate(5)(6)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 [ ] [ ] [ ] [ ] [ ]%
- -------------------------------------------------------------------------------------------------------------
A-2 [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
X [ ](2) ---- ---- [ ] Variable
Rate(8)
- -------------------------------------------------------------------------------------------------------------
B [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
C [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
D [ ] [ ] [ ] [ ] NWAC - [ ]
- -------------------------------------------------------------------------------------------------------------
E [ ] [ ] [ ] [ ] NWAC - [ ]
- -------------------------------------------------------------------------------------------------------------
F(7) [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
G(7) [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
H(7) [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
J(7) [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
K(7) [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
L(7) [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
M(7) [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
N(7) [ ] [ ] [ ] [ ] [ ]
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) In the case of each such Class, subject to a permitted
variance of plus or minus 5%.
(2) 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 Prosectus
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, Class D and Class E Certificates, each
Class of Certificates will accrue interest generally at a
fixed rate of interest except in limited circumstances as
described in the Prospectus Supplement.
(6) The pass-through rates shown are only for indicative purposes.
The final pass-through rates will be determined at pricing.
(7) To be offered privately.
(8) The Class X Notional Amount is equal to the sum of all
Certificate Balances outstanding from time to time. The
Pass-Through Rate on the Class X Certificates on each
Distribution Date will equal, in general, the weighted average
of the Class X Strip Rates for the respective Principal
Balance Certificates for such Distribution Date. The Class X
Strip Rate in respect of any Class of Principal Balance
Certificates will, in general, equal the excess, if any, of
the Weighted Average Net Mortgage Rate over the pass-through
rate applicable to such Class of Principal Balance
Certificates.
T-1
<PAGE> 157
[ ]
(Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
I. Issue Characteristics
Issue Type: Public: Class X, A-1, A-2, B, C, D and E
Private (Rule 144A): Class F, G, H, J, K, L, M
and N
Securities Offered: $[ ] monthly pay, multi-class sequential pay
commercial mortgage REMIC Pass-Through
Certificates, including four fixed-rate principal
and interest classes (A-1, A-2, B and C), two
weighted average coupon principal and interest
classes (D and E) and one variable rate interest
only class (X).
Collateral: The collateral consists of a $1,062,003,110 pool of
fixed-rate commercial and multifamily Mortgage
Loans
Sellers: Wells Fargo Bank, National Association and Morgan
Stanley Mortgage Capital Inc.
Lead Manager: Morgan Stanley & Co. Incorporated
Co-Manager: Bear, Stearns & Co. Inc. (Investment grade Classes
only)
Master Servicer: Wells Fargo Bank, National Association
Special Servicer: CRIIMI MAE Services Limited Partnership
Trustee: Norwest Bank Minnesota, National Association
Expected Pricing Date: On or about June [ ], 1998
Expected Closing Date: On or about June [ ], 1998
Distribution Dates: The 15th of each month, commencing July 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: 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> 158
[ ]
(Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
II. Structure Characteristics
The Certificates (other than the Class X, D, E and R Certificates) are
fixed-rate, monthly pay, multi-class, sequential pay REMIC Pass-Through
Certificates. The Class D and 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.
[GRAPHIC OMITTED]
Class A-1 [ ]% | | $[ ]MM
Class A-2 [ ]% | | $[ ]MM
Class B [ ]% | | $[ ]MM
Class C [ ]% | | $[ ]MM
Class D [ ]% | | $[ ]MM
Class C NWAC - [ ]% | | $[ ]MM
Class E NWAC - [ ]% | | $[ ]MM
Class F [ ]% | | $[ ]MM
Class G [ ]% | | $[ ]MM
Class H [ ]% | | $[ ]MM
Class I [ ]% | | $[ ]MM
Class J [ ]% | | $[ ]MM
Class K [ ]% | | $[ ]MM
Class L [ ]% | | $[ ]MM
Class M [ ]% | | $[ ]MM
Class N [ ]% | | $[ ]MM
NR = Not Related
Note: (1) See footnote 8 on page T-1.
T-3
<PAGE> 159
[ ]
(Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
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: [ %]
Class A-2: [ %]
Class B: [ %]
Class C: [ %]
Class D: NWAC - [ %]
Class E: NWAC - [ %]
Class F: [ %]
Class G: [ %]
Class H: [ %]
Class J: [ %]
Class K: [ %]
Class L: [ %]
Class M: [ %]
Class N: [ %]
Class X: See footnote 8 on page T-1.
The Pass-Through Rate for each class of
Principal Balance Certificates for any
Distribution Date will not exceed the Weighted
Average Net Mortgage Rate ("NWAC") for such
Distribution Date.
Principal Distributions: Principal will be distributed on each
Distribution Date to the most senior Class
(i.e., the Class with the earliest
alphabetical/numerical Class designation) of the
Principal Balance Certificates outstanding,
until its Certificate Balance is reduced to zero
(sequential order). If, due to losses, the
Certificate Balances of the Class B through
Class N 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
Allocation: Prepayment Premiums (to the extent received)
will be allocated among the Class X Certificates
and the Principal Balance Certificates (other
than Classes F, G, H, J, K, L, M and N) 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."
T-4
<PAGE> 160
[ ]
(Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
Credit Enhancement: Each Class of Certificates (other than Classes
A-1, A-2 and X) will be subordinate to all other
Classes with an earlier alphabetical Class
designation.
Advancing: The Master Servicer and the Trustee (in that
order) will each be obligated to make P&I
Advances and Servicing Advances, including
delinquent property taxes and insurance, but
only to the extent that such Advances are deemed
recoverable.
Realized Losses and
Expense Losses: Realized Losses and Expense Losses, if any, will
be allocated to the Class N, Class M, Class L,
Class K, Class J, Class H, Class G, Class F,
Class E, Class D, Class C and Class B
Certificates, in that order, and then to Classes
A-1 and A-2 and, with respect to losses
allocated to interest, Class X Certificates, pro
rata, in each case reducing amounts payable
thereto. Any interest shortfall of any Class of
Certificates will result in unpaid interest for
such Class which, together with interest thereon
compounded monthly at one-twelfth the applicable
Pass-Through Rate for such Class, will be
payable in subsequent periods, subject to
available funds.
Prepayment Interest
Shortfalls: For any Distribution Date, any Net Aggregate
Prepayment Interest Shortfall not offset by the
Servicing Fee (less the amount payable to
Sub-Servicers 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
Certificate outstanding.
An Appraisal Reduction will be reduced to zero
as of the date the related Mortgage Loan has
been brought current for at least three
consecutive months, paid in full, liquidated,
repurchased or otherwise disposed of.
T-5
<PAGE> 161
[ ]
(Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
Operating Adviser: The Operating Adviser, which may be appointed by
the Controlling Class, will have the right to
advise the Special Servicer with respect to
certain actions regarding Specially Serviced
Mortgage Loans. Examples include the right to
make certain modifications, foreclose, sell,
bring an REO Property into environmental
compliance or accept substitute or additional
collateral.
Controlling Class: The Controlling Class will generally be the most
subordinate Class of Certificates outstanding at
any time or, if the Certificate Balance of such
Class is less than 50% (or for Class N, 20%) 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, grant more than three
one-year extensions of the maturity date of a
Mortgage Loan which has a below market rate,
reduce the Mortgage Rate to a rate below the
market rate or defer interest due in excess of
10% of the Scheduled Principal Balance of such
Mortgage Loan.
Optional Termination: The Depositor, then the Master Servicer, then
the Special Servicer and then the holder of a
majority of the R-I Certificates will have the
option to purchase, in whole but not in part,
the remaining assets of the Trust on or after
the Distribution Date on which the aggregate
Certificate Balance of all Classes of
Certificates then outstanding is less than or
equal to 1% of the Initial Pool Balance. Such
purchase price will generally be at a price
equal to the unpaid aggregate Scheduled
Principal Balance of the Mortgage Loans, plus
accrued and unpaid interest and unreimbursed
Advances.
Reports to
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-6
<PAGE> 162
[ ]
(Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
III. Originators Wells Fargo
The Mortgage Pool includes 152 Mortgage Loans, representing
approximately 59.2% of the Initial Pool Balance, originated
by Wells Fargo, National Association ("Wells Fargo").
Founded in 1852, Wells Fargo & Company is the holding company
for Wells Fargo. Wells Fargo provides a full range of banking
services to individual, agri-business, real estate,
commercial and small business customers.
For the year ended December 31, 1997 and for the year ended
December 31, 1996, Wells Fargo & Company reported, on a
consolidated basis, net income of $1,155MM and $1,071MM,
respectively.
As of December 31, 1997 and as of December 31, 1996 Wells
Fargo & Company reported, on a consolidated basis, total
assets of $97.5Bn and $108.9Bn, respectively and total
capital (Tier 1 & 2) of $9.2Bn and $10.0Bn, respectively.
As of December 31, 1997 Wells Fargo and its subsidiaries
serviced a portfolio of multifamily and commercial mortgage
loans totaling approximately $15.2Bn, of which $3.0Bn was for
third parties.
The Loans originated by Wells Fargo were originated through
Wells Fargo's Capital Markets Group ("Capital Markets
Group"). The Capital Markets Group maintains loan production
offices in six metropolitan areas in California and nine
other cities nationwide. The group is staffed with
approximately 20 originators and approximately 20
underwriters and is supported by Wells Fargo's Appraisal and
Real Estate Technical Services (RETECHS) personnel.
Commercial and multifamily mortgage loans originated for
securitization by Wells Fargo and its subsidiaries are
generally serviced by Wells Fargo. Wells Fargo has been
approved as a master and special servicer by all four rating
agencies. Wells Fargo has completed three previous conduit
securitizations.
Morgan Stanley Mortgage Capital Inc.
The Mortgage Pool includes 74 Mortgage Loans, representing
approximately 40.8% 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-7
<PAGE> 163
[ ]
(Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
IV. Collateral Description
Summary: The Mortgage Pool consists of a $1,062,003,110 pool of 226
fixed-rate, first lien, mortgage loans secured by first liens
on commercial and multifamily properties located throughout 32
states and the District of Columbia. As of the Cut-Off Date,
the Mortgage Loans have a weighted average mortgage rate of
7.259% and a weighted average remaining term to maturity of
137 months. See the Appendices to the Prospectus Supplement
for more detailed collateral information.
T-8
<PAGE> 164
[ ]
(Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
Property Summary
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Weighted Weighted
Initial Average Average
Aggregate Pool Weighted Remaining Debt Weighted
Number Balance as Balance as Average Term to Service Average
of of Cut-Off of Cut-Off Mortgage Maturity Coverage Loan to
Property Type Loans Date($) Date (%) Rate (%) (mos) Ratio(x) Value (%)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail 60 276,822,001 26.1 7.335 137 1.59 66.5
- --------------------------------------------------------------------------------------------------------------
Multifamily 61 274,904,331 25.9 7.024 127 1.55 68.6
- --------------------------------------------------------------------------------------------------------------
Office 25 188,135,629 17.7 7.263 167 1.49 67.0
- --------------------------------------------------------------------------------------------------------------
Hospitality 20 125,573,430 11.8 7.626 123 1.66 63.9
- --------------------------------------------------------------------------------------------------------------
Industrial 37 97,485,000 9.2 7.254 119 1.54 64.6
- --------------------------------------------------------------------------------------------------------------
Self Storage 13 48,490,255 4.6 7.074 121 1.80 64.2
- --------------------------------------------------------------------------------------------------------------
Mobile Home Park 8 27,907,616 2.6 7.167 104 1.52 65.4
- --------------------------------------------------------------------------------------------------------------
Other 2 22,684,848 2.1 7.656 214 1.28 72.6
- --------------------------------------------------------------------------------------------------------------
Total: 226 $1,062,003,110 100.0% 7.259% 137 1.57x 66.6%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
GEOGRAPHIC DISTRIBUTION
[OBJECT OMITTED]
T-9
<PAGE> 165
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 166
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
DISTRIBUTION DATE STATEMENT
Table of Contents
================================================================================
STATEMENT SECTIONS PAGE(s)
- ------------------ -------
Certificate Distribution Detail 2
Certificate Factor Detail 3
Reconciliation Detail 4
Other Required Information 5
Ratings Detail 6
Current Mortgage Loan and Property Stratification Tables 7-9
Mortgage Loan Detail 10
Principal Prepayment Detail 11
Historical Detail 12
Delinquency Loan Detail 13
Specially Serviced Loan Detail 14-15
Modified Loan Detail 16
Liquidated Loan Detail 17
================================================================================
Underwriter
================================================================================
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Contact:
Phone Number:
================================================================================
Master Servicer
================================================================================
Wells Fargo Bank, National Association
555 Montgomery Street, 17th Floor
San Francisco, CA 94111
Contact: Matilde Sanchez
Phone Number: (510) 677-5225
================================================================================
Special Servicer
================================================================================
CRIIMI MAE Services
11200 Rockville Pike
Rockville, MD 20852
Contact: Brian Hanson
Phone Number: (301) 816-2300
================================================================================
This report has been compiled from information provided to Norwest by various
third parties, which may include the Servicer, Master Servicer, Special Servicer
and others. Norwest has not independently confirmed the accuracy of information
received from these third parties and assumes no duty to do so. Norwest
expressly disclaims any responsibility for the accuracy or completeness of
information furnished by third parties.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 1 of 17
<PAGE> 167
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Certificate Distribution Detail
<TABLE>
<CAPTION>
===================================================================================================================================
Pass-Through Original Beginning Principal Interest Prepayment Realized Total Ending
Class CUSIP Rate Balance Balance Distribution Distribution Premium Loss Distribution Balance
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
C 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
E 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
F 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
G 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
H 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
J 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
K 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
L 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
M 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-I 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-II 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-III 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
===================================================================================================================================
Totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
===================================================================================================================================
<CAPTION>
======================
Current
Subordination
Class Level(1)
======================
<S> <C>
A-1 0.00%
A-2 0.00%
B 0.00%
C 0.00%
D 0.00%
E 0.00%
F 0.00%
G 0.00%
H 0.00%
J 0.00%
K 0.00%
L 0.00%
M 0.00%
N 0.00%
R-I 0.00%
R-II 0.00%
R-III 0.00%
======================
Totals
======================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================
Original Beginning Ending
Pass-Through Notional Notional Interest Prepayment Total Notional
Class CUSIP Rate Amount Amount Distribution Premium Distribution Amount
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
X-1 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
X-2 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================
</TABLE>
(1) Calculated by taking (A) the sum of the ending certificate balance of all
classes less (B) the sum of (i) the ending certificate balance of the designated
class and (ii) the ending certificate balance of all classes which are not
subordinate to the designated class and dividing the result by (A).
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 2 of 17
<PAGE> 168
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Certificate Factor Detail
<TABLE>
<CAPTION>
===================================================================================================
Beginning Principal Interest Prepayment Realized Ending
Class CUSIP Balance Distribution Distribution Premium Loss Balance
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
C 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
D 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
E 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
F 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
G 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
H 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
J 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
K 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
L 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
M 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
N 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-II 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-III 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=================================================================
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Premium Amount
=================================================================
<S> <C> <C> <C> <C> <C>
X-1 0.00000000 0.00000000 0.00000000 0.00000000
X-2 0.00000000 0.00000000 0.00000000 0.00000000
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 3 of 17
<PAGE> 169
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Reconciliation Detail
<TABLE>
<CAPTION>
Advance Summary
<S> <C>
P & I Advances Outstanding 0.00
Servicing Advances Outstanding 0.00
Reimbursement for Interest on 0.00
Advances paid from general collections
Servicing Fee Breakdowns
Current Period Accrued Servicing Fees 0.00
Less Delinquent Servicing Fees 0.00
Less Reductions to Servicing Fees 0.00
Plus Servicing Fees for Delinquent Payments Received 0.00
Plus Adjustments for Prior Servicing Calculation 0.00
Total Servicing Fees Collected 0.00
</TABLE>
Certificate Interest Reconciliation
<TABLE>
<CAPTION>
============================================================================================================
Accrued Net Aggregate Realized Previously Unpaid Distributable Distributable
Certificate Prepayment Losses/ Interest (including Certificate Certif. Interest
Class Interest Interest Shortfall Expense Losses interest thereon) Interest Adjustment
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
A-1 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.00 0.00 0.00 0.00 0.00 0.00
X-1 0.00 0.00 0.00 0.00 0.00 0.00
X-2 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00
C 0.00 0.00 0.00 0.00 0.00 0.00
D 0.00 0.00 0.00 0.00 0.00 0.00
E 0.00 0.00 0.00 0.00 0.00 0.00
F 0.00 0.00 0.00 0.00 0.00 0.00
G 0.00 0.00 0.00 0.00 0.00 0.00
H 0.00 0.00 0.00 0.00 0.00 0.00
J 0.00 0.00 0.00 0.00 0.00 0.00
K 0.00 0.00 0.00 0.00 0.00 0.00
L 0.00 0.00 0.00 0.00 0.00 0.00
M 0.00 0.00 0.00 0.00 0.00 0.00
N 0.00 0.00 0.00 0.00 0.00 0.00
============================================================================================================
Totals 0.00 0.00 0.00 0.00 0.00 0.00
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================
Remaining
Interest Unpaid
Class Distribution Interest
==============================
<S> <C> <C>
A-1 0.00 0.00
A-2 0.00 0.00
X-1 0.00 0.00
X-2 0.00 0.00
B 0.00 0.00
C 0.00 0.00
D 0.00 0.00
E 0.00 0.00
F 0.00 0.00
G 0.00 0.00
H 0.00 0.00
J 0.00 0.00
K 0.00 0.00
L 0.00 0.00
M 0.00 0.00
N 0.00 0.00
==============================
Totals 0.00 0.00
==============================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 4 of 17
<PAGE> 170
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Other Required Information
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Available Distribution Amount 0.00
Principal Distribution Amount 0.00
(a) Principal portion of Scheduled Payments 0.00
and any Assumed Scheduled Payments
(b) Principal Prepayments 0.00
(c) Principal Protion of Balloon Payments 0.00
(d) Liquidation, Condemnation, Purchase, 0.00
and Insurance Proceeds and REO Income
Received on a Mortgage Loan
Aggregate Number of Outstanding Mortgatge Loans 0
Aggregate Principal Balance of the Mortgage Loans 0.00
Aggregate Scheduled Principal Balance of the Mortgage Loans 0.00
Total Servicing and Special Servicing Fee paid 0.00
Servicing Fee paid 0.00
Special Servicing Fee paid 0.00
Special Servicing Standby Fee paid 0.00
Trustee Fee paid 0.00
Expense Losses (Additional Trust Fund Expenses) 0.00
(i) Special Servicing and Liquidation Fees 0.00
(ii) Advance Interest 0.00
(iii) Indemnification Expenses 0.00
(iv) Taxes Imposed on the Trust 0.00
(v) Amount of any Advance not Recovered 0.00
upon a Final Recovery Determination
</TABLE>
Appraisal Reduction Amount
<TABLE>
<CAPTION>
=================================================
Appraisal Date Appraisal
Loan Reduction Reduction
Number Amount Effected
=================================================
<S> <C> <C>
=================================================
Total
=================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 5 of 17
<PAGE> 171
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Ratings Detail
<TABLE>
<CAPTION>
================================================================================
Original Ratings Current Ratings (1)
------------------------------------------------------------
Class CUSIP DCR Fitch Moody's S & P DCR Fitch Moody's S & P
================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
X-1
X-2
B
C
D
E
F
G
H
J
K
L
M
N
================================================================================
</TABLE>
NR - Designates that the class was not rated by the above agency at the time
of original issuance.
X - Designates that the above rating agency did not rate any classes in this
transaction at the time of original issuance.
N/A - Data not available this period.
1) For any class not rated at the time of original issuance by any particular
rating agency, no request has been made subsequent to issuance to obtain rating
information, if any, from such rating agency. The current ratings were obtained
directly from the applicable rating agency within 30 days of the payment date
listed above. The ratings may have changed since they were obtained. Because the
ratings may have changed, you may want to obtain current ratings directly from
the rating agencies.
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
(312) 368-3100
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
(212) 908-0500
Moody's Investors Service
99 Church Street
New York, New York 10007
(212) 553-0300
Standard & Poor's Rating Services
26 Broadway
New York, New York 10004
(212) 208-8000
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 6 of 17
<PAGE> 172
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Current Mortgage Loan and Property Stratification Tables
<TABLE>
<CAPTION>
Scheduled Balance
================================================================================
% of
Scheduled # of Scheduled Agg. WAM Weighted
Balance Loans Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
<S> <C> <C> <C> <C> <C> <C>
================================================================================
Totals
================================================================================
</TABLE>
<TABLE>
<CAPTION>
State (3)
================================================================================
% of
# of Scheduled Agg. WAM Weighted
State Props. Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
<S> <C> <C> <C> <C> <C> <C>
================================================================================
Totals
================================================================================
</TABLE>
See footnotes on last page of this section.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 7 of 17
<PAGE> 173
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Current Mortgage Loan and Property Stratification Tables
<TABLE>
<CAPTION>
Debt Service Coverage Ratio
================================================================================
Debt Service # of Scheduled % of WAM Weighted
Coverage Ratio Loans Balance Agg (2) WAC Avg DSCR (1)
Bal.
================================================================================
<S> <C> <C> <C> <C> <C> <C>
================================================================================
Totals
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Note Rate
================================================================================
Note # of Scheduled % of WAM Weighted
Rate Loans Balance Agg (2) WAC Avg DSCR (1)
Bal.
================================================================================
<S> <C> <C> <C> <C> <C> <C>
================================================================================
Totals
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Property Type (3)
================================================================================
Property # of Scheduled % of WAM Weighted
Type Props. Balance Agg (2) WAC Avg DSCR (1)
Bal.
================================================================================
<S> <C> <C> <C> <C> <C> <C>
================================================================================
Totals
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Seasoning
================================================================================
# of Scheduled % of WAM Weighted
Seasoning Loans Balance Agg (2) WAC Avg DSCR (1)
Bal.
================================================================================
<S> <C> <C> <C> <C> <C> <C>
================================================================================
Totals
================================================================================
</TABLE>
See footnotes on last page of this section.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 8 of 17
<PAGE> 174
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Current Mortgage Loan and Property Stratification Tables
<TABLE>
<CAPTION>
Anticipated Remaining Term (ARD and Balloon Loans)
================================================================================
Anticipated # of Scheduled % of WAM Weighted
Remaining Loans Balance Agg. (2) WAC Avg DSCR (1)
Term(2) Bal.
================================================================================
<S> <C> <C> <C> <C> <C> <C>
================================================================================
Totals
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Remaining Amortization Term (ARD and Balloon Loans)
================================================================================
Remaining # of Scheduled % of WAM Weighted
Amortization Loans Balance Agg. (2) WAC Avg DSCR (1)
Term Bal.
================================================================================
<S> <C> <C> <C> <C> <C> <C>
================================================================================
Totals
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Remaining Stated Term (Fully Amortizing Loans)
================================================================================
Remaining # of Scheduled % of WAM Weighted
Stated Loans Balance Agg. (2) WAC Avg DSCR (1)
Term Bal.
================================================================================
<S> <C> <C> <C> <C> <C> <C>
================================================================================
Totals
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Age of Most Recent NOI
================================================================================
Age of Most # of Scheduled % of WAM Weighted
Recent NOI Loans Balance Agg. (2) WAC Avg DSCR (1)
Bal.
================================================================================
<S> <C> <C> <C> <C> <C> <C>
================================================================================
Totals
================================================================================
</TABLE>
(1) Debt Service Coverage Ratios are calculated as described in the prospectus,
values are updated periodically as new NOI figures become available from
borrowers on an asset level. The Trustee makes no representations as to the
accuracy of the data provided by the borrower for this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the term
from the current month to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
(3) Data in this table was calculated by allocating pro-rata the current loan
information to the properties based upon the Cut-off Date balance of each
property as disclosed in the offering document.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 9 of 17
<PAGE> 175
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Mortgage Loan Detail
<TABLE>
<CAPTION>
====================================================================================================================================
Anticipated Neg. Beginning Ending Paid Appraisal
Loan ODCR Property City State Interest Principal Gross Repayment Maturity Amort Scheduled Scheduled Thru Reduction
Number Type (1) Payment Payment Coupon Date Date (Y/N) Balance Balance Date Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Totals
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===============================
Appraisal Res. Mod.
Loan Reduction Strat. Code
Number Amount (2) (3)
===============================
<S> <C> <C> <C>
===============================
Totals
===============================
</TABLE>
(1) Property Type Code (2) Resolution Strategy Code (3) Modification Code
- ---------------------- ---------------------------- ---------------------
MF - Multi- Family 1 - Modification 1 - Maturity Date Extension
RT - Retail 2 - Foreclosure 2 - Amortization Change
HC - Health Care 3 - Bankruptcy 3 - Principal Write-Off
IN - Industrial 4 - Extension 4 - Combination
WH - Warehouse 5 - Note Sale
MH - Mobile Home Park 6 - DPO
OF - Office 7 - REO
MU - Mixed Use 8 - Resolved
LO - Lodging 9 - Pending Return
SS - Self Storage to Master Servicer
OT - Other 10 - Deed In Lieu Of
Foreclosure
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 10 of 17
<PAGE> 176
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Principal Prepayment Detail
<TABLE>
<CAPTION>
====================================================================================================================================
Principal Prepayment Amount Prepayment Premium
Offering Document --------------------------------- -----------------------------------------------------------------
Loan Number Cross-Reference Payoff Amount Curtailment Amount Precentage Premium Yield Maintenance Premium Percentage Premuim
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Totals
====================================================================================================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 11 of 17
<PAGE> 177
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Historical Detail
<TABLE>
<CAPTION>
====================================================================================================================================
Delinquencies Prepayments Rate and Maturities
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications Curtailments Payoff Next Weighted Avg.
Date # Balance # Balance # Balance # Balance # Balance # Balance # Amount # Amount Coupon Remit WAM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
Note: Foreclosure and REO Totals are excluded from the delinquencies aging
categories.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 12 of 17
<PAGE> 178
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Delinquency Loan Detail
<TABLE>
<CAPTION>
=============================================================================================================================
Offering # of Current Outstanding Status of Resolution
Document Months Paid Through P & I P & I Mortgage Strategy Servicing Foreclosure
Loan Number Cross-Reference Delinq. Date Advances Advances ** Loan (1) Code (2) Transfer Date Date
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
=============================================================================================================================
Totals
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Delinquency Loan Detail
==========================================================
Current Outstanding
Servicing Servicing REO
Loan Number Advances Advances Bankruptcy Date Date
==========================================================
<S> <C> <C> <C> <C>
==========================================================
Totals
==========================================================
</TABLE>
(1) Status of Mortgage Loan (2) Resolution Strategy Code
--------------------------- ----------------------------
A - Payment Not Received 1 - Modification
But Still in Grace Period 2 - Foreclosure
B - Late Payment But Less 3 - Bankruptcy
Than 1 Month Delinquent 4 - Extension
0 - Current 5 - Note Sale
1 - One Month Delinquent 6 - DPO
2 - Two Months Delinquent 7 - REO
3 - Three Or More Months Delinquent 8 - Resolved
4 - Assumed Scheduled Payment 9 - Pending Return
(Performing Matured Balloon) to Master Servicer
7 - Foreclosure 10- Deed In Lieu Of
9 - REO Foreclosure
** Outstanding P & I Advances include the current period advance
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 13 of 17
<PAGE> 179
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Specially Serviced Loan Detail - Part 1
<TABLE>
<CAPTION>
====================================================================================================================================
Offering Servicing Resolution Net
Distribution Loan Document Transfer Strategy Scheduled Property Interest Actual Operating NOI
Date Number Cross-Reference Date Code (1) Balance Type (2) State Rate Balance Income Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=================================
Note Maturity Remaining
DSCR Date Date Amortization
Term
=================================
<S> <C> <C> <C>
=================================
</TABLE>
(1) Resolution Strategy Code (2) Property Type Code
---------------------------- ----------------------
1 - Modification MF - Multi-Family
2 - Foreclosure RT - Retail
3 - Bankruptcy HC - Health Care
4 - Extension IN - Industrial
5 - Note Sale WH - Warehouse
6 - DPO MH - Mobile Home Park
7 - REO OF - Office
8 - Resolved MU - Mixed Use
9 - Pending Return LO - Lodging
to Master Servicer SS - Self Storage
10 - Deed In Lieu Of OT - Other
Foreclosure
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 14 of 17
<PAGE> 180
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Specially Serviced Loan Detail - Part 2
<TABLE>
<CAPTION>
===================================================================================================================================
Offering Resolution Site
Distribution Loan Document Strategy Inspection Appraisal Appraisal Other REO
Date Number Cross-Reference Code (1) Date Phase 1 Date Date Value Property Revenue Comment
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
</TABLE>
(1) Resolution Strategy Code
----------------------------
1 - Modification
2 - Foreclosure
3 - Bankruptcy
4 - Extension
5 - Note Sale
6 - DPO
7 - REO
8 - Resolved
9 - Pending Return
to Master Servicer
10 - Deed In Lieu Of
Foreclosure
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 15 of 17
<PAGE> 181
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
<TABLE>
<CAPTION>
Modified Loan Detail
================================================================================
Offering
Loan Document Pre-Modification Modification
Number Cross-Reference Balance Modification Date Description
================================================================================
<S> <C> <C> <C> <C>
================================================================================
Total
================================================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 16 of 17
<PAGE> 182
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1998-WF2
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 509-1630
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.securitieslink.net/cmbs
Payment Date: 7/15/98
Record Date: 6/30/98
================================================================================
Liquidated Loan Detail
<TABLE>
<CAPTION>
===========================================================================================================
Final Recovery Offering Gross Proceeds
Loan Determination Document Appraisal Appraisal Actual Gross as a % of
Number Date Cross-Reference Date Value Balance Proceeds Actual Balance
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
===========================================================================================================
Current Total
===========================================================================================================
Cumulative Total
===========================================================================================================
<CAPTION>
==================================================================
Aggregate Net Net Proceeds Repurchased
Liquidation Liquidation as a % of Realized by Seller
Expenses* Proceeds Actual Balance Loss (Y/N)
==================================================================
<S> <C> <C> <C> <C>
==================================================================
Current Total
==================================================================
Cumulative Total
==================================================================
</TABLE>
* Aggregate liquidation expenses also include outstanding P & I advances and
unpaid fees (servicing, trustee, etc.).
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 17 of 17
<PAGE> 183
[THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE> 184
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
February 19, 1998
<PAGE> 185
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> 186
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> 187
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............................................. 19
USE OF PROCEEDS............................................................ 25
YIELD CONSIDERATIONS....................................................... 26
THE DEPOSITOR.............................................................. 29
DESCRIPTION OF THE CERTIFICATES............................................ 29
DESCRIPTION OF THE AGREEMENTS.............................................. 37
DESCRIPTION OF CREDIT SUPPORT.............................................. 53
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES................. 56
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 72
STATE TAX CONSIDERATIONS................................................... 97
ERISA CONSIDERATIONS....................................................... 97
LEGAL INVESTMENT............................................................99
PLAN OF DISTRIBUTION.......................................................101
LEGAL MATTERS..............................................................102
FINANCIAL INFORMATION......................................................102
RATING.....................................................................102
INDEX OF PRINCIPAL DEFINITIONS.............................................103
4
<PAGE> 188
- --------------------------------------------------------------------------------
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 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 ofServicer will be appointed
will be described, in the related 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> 189
- --------------------------------------------------------------------------------
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> 190
- --------------------------------------------------------------------------------
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> 191
- --------------------------------------------------------------------------------
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
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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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11
<PAGE> 195
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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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<PAGE> 196
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> 197
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 principal balances of the Mortgage Loans underlying or
comprising the Mortgage Assets in a particular Trust Fund
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<PAGE> 198
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 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
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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 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.
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<PAGE> 200
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 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
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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 the Mortgaged Property is
not so in compliance or such circumstances are so present, then it would be in
the best economic interest of the Trust Fund to acquire title to the Mortgaged
Property and further to take such actions as would be necessary and appropriate
to effect such compliance and/or respond to such circumstances. See "Certain
Legal Aspects of the Mortgage Loans and the Leases--Environmental Legislation."
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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."
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
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(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 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
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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 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
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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 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,
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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 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
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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.
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
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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."
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
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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, 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
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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 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
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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 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.
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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."
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.
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Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to the Certificate Balances or, in case of Stripped
Interest Certificates, notional amounts or percentage interests specified in the
related Prospectus Supplement. The transfer of any Offered Certificates may be
registered and 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 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
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(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.
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
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Supplement. The related Prospectus Supplement will also describe the extent to
which the amount of Accrued Certificate Interest that is otherwise distributable
on (or, in the case of Accrual Certificates, that may otherwise be added to the
Certificate Balance of) a class of Offered Certificates may be reduced as a
result of any other contingencies, including delinquencies, losses and deferred
interest on or in respect of the Mortgage Loans comprising or underlying the
Mortgage Assets in the related Trust Fund. Unless otherwise provided in the
related Prospectus Supplement, any reduction in the amount of Accrued
Certificate Interest otherwise distributable on a class of Certificates by
reason of the allocation to such class of a portion of any deferred interest on
the Mortgage Loans comprising or underlying the Mortgage Assets in the related
Trust Fund will result in a corresponding increase in the Certificate Balance of
such class. See "Risk Factors--Average Life of Certificates; Prepayments;
Yields" and "Yield Considerations."
Distributions of Principal of the Certificates
The Certificates of each series, other than certain classes of Stripped
Interest Certificates, will have a "Certificate Balance" which, at any time,
will equal the then maximum amount that the holder will be entitled to receive
in respect of principal out of the future cash flow on the Assets and other
assets included in the related Trust Fund. The outstanding Certificate Balance
of a Certificate will be reduced to the extent of distributions of principal
thereon from time to time and, if and to the extent so provided in the related
Prospectus Supplement, by the amount of losses incurred in respect of the
related Assets, may be increased in respect of deferred interest on the related
Mortgage Loans to the extent provided in the related Prospectus Supplement and,
in the case of Accrual Certificates prior to the Distribution Date on which
distributions of interest are required to commence, will be increased by any
related Accrued Certificate Interest. Unless otherwise provided in the related
Prospectus Supplement, the initial aggregate Certificate Balance of all classes
of Certificates of a series will not be greater than the outstanding aggregate
principal balance of the related Assets as of the applicable Cut-off Date. The
initial aggregate Certificate 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.
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Advances in Respect of Delinquencies
With respect to any series of Certificates evidencing an interest in a
Trust Fund, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer or another entity described therein will be required as part of
its servicing responsibilities to advance on or before each Distribution Date
its own funds or funds held in the Certificate Account that are not included in
the Available Distribution Amount for such Distribution Date, in an amount equal
to the aggregate of payments of principal (other than any balloon payments) and
interest (net of related servicing fees and Retained Interest) that were due on
the Whole Loans in such Trust Fund during the related Due Period and were
delinquent on the related Determination Date, subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable from Related Proceeds (as defined below). In the case of a series
of Certificates that includes one or more classes of Subordinate Certificates
and if so provided in the related Prospectus Supplement, the Master Servicer's
(or another entity's) advance obligation may be limited only to the portion of
such delinquencies necessary to make the required distributions on one or more
classes of Senior Certificates and/or may be subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable not only from Related Proceeds but also from collections on other
Assets otherwise distributable on one or more classes of such Subordinate
Certificates. See "Description of Credit Support."
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Unless otherwise
provided in the related Prospectus Supplement, advances of the Master Servicer's
(or another entity's) funds will be reimbursable only out of related recoveries
on the Mortgage Loans (including amounts received under any form of Credit
Support) respecting which such advances were made (as to any Mortgage Loan,
"Related Proceeds") and, if so provided in the Prospectus Supplement, out of any
amounts otherwise distributable on one or more classes of Subordinate
Certificates of such series; provided, however, that any such advance will be
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;
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(ii) the amount of such distribution to holders of Certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount of such distribution allocable to (a) Prepayment Premiums
and (b) payments on account of Equity Participations;
(iv) the amount of related servicing compensation received by a Master
Servicer (and, if payable directly out of the related Trust Fund, by any
Special Servicer and any Sub-Servicer) and such other customary
information as any such Master Servicer or the Trustee deems necessary or
desirable, or that a Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution, and
the aggregate amount of unreimbursed advances at the close of business on
such Distribution Date;
(vi) the aggregate principal balance of the Assets at the close of
business on such Distribution Date;
(vii) the number and aggregate principal balance of Whole Loans in respect
of which (a) one scheduled payment is delinquent, (b) two scheduled
payments are delinquent, (c) three or more scheduled payments are
delinquent and (d) foreclosure proceedings have been commenced;
(viii) with respect to each Whole Loan that is delinquent two or more
months, (a) the loan number thereof, (b) the unpaid balance thereof, (c)
whether the delinquency is in respect of any balloon payment, (d) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof, (e) if applicable, the aggregate amount of
any interest accrued and payable on related servicing expenses and related
advances assuming such Mortgage Loan is subsequently liquidated through
foreclosure, (f) whether a notice of acceleration has been sent to the
mortgagor and, if so, the date of such notice, (g) whether foreclosure
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;
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(xiv) the aggregate Certificate Balance or notional amount, as the case
may be, of each class of Certificates (including any class of Certificates
not offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to
the allocation of any loss and increase in the Certificate Balance of a
class of Accrual Certificates in the event that Accrued Certificate
Interest has been added to such balance;
(xv) the aggregate amount of principal prepayments made during the related
Due Period;
(xvi) the amount deposited in the reserve fund, if any, on such
Distribution Date;
(xvii) the amount remaining in the reserve fund, if any, as of the close
of business on such Distribution Date;
(xviii) the aggregate unpaid Accrued Certificate Interest, if any, on each
class of Certificates at the close of business on such Distribution Date;
(xix) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, and, if available,
the immediately succeeding Distribution Date, as calculated in accordance
with the method specified in the related Prospectus Supplement;
(xx) in the case of Certificates with an adjustable Pass-Through Rate, for
statements to be distributed in any month in which an adjustment date
occurs, the adjustable Pass-Through Rate applicable to such Distribution
Date and the immediately succeeding Distribution Date as calculated in
accordance with the method specified in the related Prospectus Supplement;
(xxi) as to any series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the
close of business on such Distribution Date; and
(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
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payment or other liquidation of the last Asset subject thereto or the
disposition of all property acquired upon foreclosure of any Whole Loan subject
thereto and (ii) the purchase of all of the assets of the Trust Fund by the
party entitled to effect such termination, under the circumstances and in the
manner set forth in the related Prospectus Supplement. In no event, however,
will the trust created by the Agreement continue beyond the date specified in
the related Prospectus Supplement. Written notice of termination of the
Agreement will be given to each Certificateholder, and the final distribution
will be made only upon presentation and surrender of the Certificates at the
location to be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the repurchase
of the assets in the related Trust Fund by the party specified therein, under
the circumstances and in the manner set forth therein. If so provided in the
related Prospectus Supplement, upon the reduction of the Certificate Balance of
a specified class or classes of Certificates by a specified percentage or
amount, the party specified therein will solicit bids for the purchase of all
assets of the Trust Fund, or of a sufficient portion of such assets to retire
such class or classes or purchase such class or classes at a price set forth in
the related Prospectus Supplement, in each case, under the circumstances and in
the manner set forth therein.
Book-Entry Registration and Definitive Certificates
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Certificates of any series will be issued as Book-Entry
Certificates, and each such class will be represented by one or more single
Certificates registered in the name of a nominee for the depository, The
Depository Trust Company ("DTC").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participating organizations ("Participants") and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in their accounts, thereby eliminating the need
for physical movement of certificates. Participants include Morgan Stanley & Co.
Incorporated, securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to 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
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entities that do not participate in the DTC system, or otherwise take actions in
respect of its interest in the Book-Entry Certificates, may be limited due to
the lack of a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under an Agreement only at the direction of one or
more Participants to whose account with DTC interests in the Book-Entry
Certificates are credited.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Certificate Owners or their nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or able
to properly discharge its responsibilities as depository with respect to the
Certificates and the Depositor is unable to locate a qualified successor or (ii)
the Depositor, at its option, elects to terminate the book-entry system through
DTC.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for the Certificate Owners.
Upon surrender by DTC of the certificate or certificates representing the
Book-Entry Certificates, together with instructions for reregistration, the
Trustee will issue (or cause to be issued) to the Certificate Owners identified
in such instructions the Definitive Certificates to which they are entitled, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each series evidencing interests in a Trust Fund
including Whole Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, any Special Servicer appointed
as of the date of the Pooling and Servicing Agreement and the Trustee. The
Certificates of each series evidencing interests in a Trust Fund not including
Whole Loans will be issued pursuant to a Trust Agreement between the Depositor
and a Trustee. Any Master Servicer, any such Special Servicer and the Trustee
with respect to any series of Certificates will be named in the related
Prospectus Supplement. In lieu of appointing a Master Servicer, a servicer may
be appointed pursuant to the Pooling and Servicing Agreement for any Trust Fund.
Such servicer will service all or a significant number of Whole Loans directly
without a Sub-Servicer. Unless otherwise specified in the related Prospectus
Supplement, the obligations of any such servicer shall be commensurate with
those of the Master Servicer described herein. References in this prospectus to
Master Servicer and its rights and 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
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to be received on or with respect to such Assets after the Cut-off Date, other
than principal and interest due on or before the Cut-off Date and other than any
Retained Interest. The Trustee will, concurrently with such assignment, deliver
the Certificates to the Depositor in exchange for the Assets and the other
assets comprising the Trust Fund for such series. Each Mortgage Asset will be
identified in a schedule appearing as an exhibit to the related Agreement.
Unless otherwise provided in the related Prospectus Supplement, such schedule
will include detailed information (i) in respect of each Whole Loan included in
the related Trust Fund, including without limitation, the address of the related
Mortgaged Property and type of such property, the Mortgage Rate and, if
applicable, the applicable index, margin, adjustment date and any rate cap
information, the original and remaining term to maturity, the original and
outstanding principal balance and balloon payment, if any, the Value,
Loan-to-Value Ratio and the Debt Service Coverage Ratio as of the date indicated
and payment and prepayment provisions, if applicable, and (ii) in respect of
each MBS included in the related Trust Fund, including without limitation, the
MBS Issuer, MBS Servicer and MBS Trustee, the pass-through or bond rate or
formula for determining such rate, the issue date and original and remaining
term to maturity, if applicable, the original and outstanding principal amount
and payment provisions, if applicable.
With respect to each Whole Loan, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to) certain
loan documents, which unless otherwise specified in the related Prospectus
Supplement will include the original Mortgage Note endorsed, without recourse,
in blank or to the order of the Trustee, the original Mortgage (or a certified
copy thereof) with evidence of recording indicated thereon and an assignment of
the Mortgage to the Trustee in recordable form. Notwithstanding the foregoing, a
Trust Fund may include Mortgage Loans where the original Mortgage Note is not
delivered to the Trustee if the Depositor delivers to the Trustee or the
custodian a copy or a duplicate original of the Mortgage Note, together with an
affidavit certifying that the original thereof has been lost or destroyed. With
respect to such Mortgage Loans, the Trustee (or its nominee) may not be able to
enforce the Mortgage Note against the related borrower. Unless otherwise
specified in the related Prospectus Supplement, the Asset Seller will be
required to agree to repurchase, or substitute for, each such Mortgage Loan that
is subsequently in default if the enforcement thereof or of the related Mortgage
is materially adversely affected by the absence of the original Mortgage Note.
Unless otherwise provided in the related Prospectus Supplement, the related
Agreement will require the Depositor or another party specified therein to
promptly cause each such assignment of Mortgage to be recorded in the
appropriate public office for real property records, except in the State of
California or in other states where, in the opinion of counsel acceptable to the
Trustee, such recording is not required to protect the Trustee's interest in the
related Whole Loan against the claim of any subsequent transferee or any
successor to or creditor of the Depositor, the Master Servicer, the relevant
Asset Seller or any other prior holder of the Whole Loan.
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
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Lease agreement. The Trustee, or if so specified in the Prospectus Supplement,
the Master Servicer, as agent for the Trustee, may hold the Lease in trust for
the benefit of the Certificateholders.
With respect to each Government Security or MBS in certificated form, the
Depositor will deliver or cause to be delivered to the Trustee (or the
custodian) the original certificate or other definitive evidence of such
Government Security or MBS, as applicable, together with bond power or other
instruments, certifications or documents required to transfer fully such
Government Security or MBS, as applicable, to the Trustee for the benefit of the
Certificateholders. With respect to each Government Security or MBS in
uncertificated or book-entry form or held through a "clearing corporation"
within the meaning of the UCC, the Depositor and the Trustee will cause such
Government Security or MBS to be registered directly or on the books of such
clearing corporation or of a financial intermediary in the name of the Trustee
for the benefit of the Certificateholders. Unless otherwise provided in the
related Prospectus Supplement, the related Agreement will require that either
the Depositor or the Trustee promptly cause any MBS and Government Securities in
certificated form not registered in the name of the Trustee to be re-registered,
with the applicable persons, in the name of the Trustee.
Representations and Warranties; Repurchases
Unless otherwise provided in the related Prospectus Supplement the
Depositor will, with respect to each Whole Loan, make or assign certain
representations and warranties, as of a specified date (the person making such
representations and warranties, the "Warrantying Party") covering, by way of
example, the following types of matters: (i) the accuracy of the information set
forth for such Whole Loan on the schedule of Assets appearing as an exhibit to
the related Agreement; (ii) the existence of title insurance insuring the lien
priority of the Whole Loan; (iii) the authority of the Warrantying Party to sell
the Whole Loan; (iv) the payment status of the Whole Loan and the status of
payments of taxes, assessments and other charges affecting the related Mortgaged
Property; (v) the existence of customary provisions in the related Mortgage Note
and Mortgage to permit realization against the Mortgaged Property of the benefit
of the security of the Mortgage; and (vi) the existence of hazard and extended
perils insurance coverage on the Mortgaged Property.
Any Warrantying Party, if other than the Depositor, shall be an Asset
Seller or an affiliate thereof or such other person acceptable to the Depositor
and shall be identified in the related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related series of Certificates evidencing an interest in such
Whole Loan. Unless otherwise specified in the related Prospectus Supplement, in
the event of a breach of any such representation or warranty, the 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
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of such Whole Loan from the Trust Fund and substitute in its place one or more
other Whole Loans, in accordance with the standards described in the related
Prospectus Supplement. If so provided in the Prospectus Supplement for a series,
a Warrantying Party, rather than repurchase or substitute a Whole Loan as to
which a breach has occurred, will have the option to reimburse the Trust Fund or
the Certificateholders for any losses caused by such breach. Unless otherwise
specified in the related Prospectus Supplement, this reimbursement, repurchase
or substitution obligation will constitute the sole remedy available to holders
of Certificates or the Trustee for a breach of representation by a Warrantying
Party.
Neither the Depositor (except to the extent that it is the Warrantying
Party) nor the Master Servicer will be obligated to purchase or substitute for a
Whole Loan if a Warrantying Party defaults on its obligation to do so, and no
assurance can be given that Warrantying Parties will carry out such obligations
with respect to Whole Loans.
Unless otherwise provided in the related Prospectus Supplement the
Warrantying Party will, with respect to a Trust Fund that includes Government
Securities or MBS, make or assign certain representations or warranties, as of a
specified date, with respect to such Government Securities or MBS, covering (i)
the accuracy of the information set forth therefor on the schedule of Assets
appearing as an exhibit to the related Agreement and (ii) the authority of the
Warrantying Party to sell such Assets. The related Prospectus Supplement will
describe the remedies for a breach thereof.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. A breach of any such representation of
the Master Servicer which materially and adversely affects the interests of the
Certificateholders and which continues unremedied for thirty days after the
giving of written notice of such breach to the Master Servicer by the Trustee or
the Depositor, or to the Master Servicer, the Depositor and the Trustee by the
holders of Certificates evidencing not less than 25% of the Voting Rights
(unless otherwise specified in the related Prospectus Supplement), will
constitute an Event of Default under such Pooling and Servicing Agreement. See
"Events of Default" and "Rights Upon Event of Default."
Certificate Account and Other Collection Accounts
General
The Master Servicer and/or the Trustee will, as to each Trust Fund,
establish and maintain or cause to be established and maintained one or more
separate accounts for the collection of payments on the related Assets
(collectively, the "Certificate Account"), which must be either (i) an account
or accounts the deposits in which are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance 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.
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Deposits
A Master Servicer or the Trustee will deposit or cause to be deposited in
the Certificate Account for one or more Trust Funds on a daily basis, unless
otherwise provided in the related Agreement, the following payments and
collections received, or advances made, by the Master Servicer or the Trustee or
on its behalf subsequent to the Cut-off Date (other than payments due on or
before the Cut-off Date, and exclusive of any amounts representing a Retained
Interest):
(i) all payments on account of principal, including principal prepayments,
on the Assets;
(ii) all payments on account of interest on the Assets, including any
default interest collected, in each case net of any portion thereof
retained by a Master Servicer, a Sub-Servicer or a Special Servicer as its
servicing compensation and net of any Retained Interest;
(iii) all proceeds of the hazard, business interruption and general
liability insurance policies to be maintained in respect of each Mortgaged
Property securing a Whole Loan in the Trust Fund (to the extent such proceeds
are not applied to the restoration of the property or released to the mortgagor
in accordance with the normal servicing procedures of a Master Servicer or the
related Sub-Servicer, subject to the terms and conditions of the related
Mortgage and Mortgage Note) and all proceeds of rental interruption policies, if
any, insuring against losses arising from the failure of Lessees under a Lease
to make timely rental payments because of certain casualty events (collectively,
"Insurance Proceeds") and all other amounts received and retained in connection
with the liquidation of defaulted Mortgage Loans in the Trust Fund, by
foreclosure or otherwise ("Liquidation Proceeds"), together with the net
proceeds on a monthly basis with respect to any Mortgaged Properties acquired
for the benefit of Certificateholders by foreclosure or by deed in lieu of
foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as
described under "Description of Credit Support";
(v) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
(vi) any amounts representing Prepayment Premiums;
(vii) any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements";
(viii) all proceeds of any Asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by the Depositor, any Asset
Seller or any other specified person as described under "Assignment of
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";
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(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;
(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;
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(ix) to reimburse the Trustee or any of its directors, officers, employees
and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under
"Certain Matters Regarding the Trustee";
(x) unless otherwise provided in the related Prospectus Supplement, to pay
a Master Servicer, as additional servicing compensation, interest and
investment income earned in respect of amounts held in the Certificate
Account;
(xi) to pay the person entitled thereto any amounts deposited in the
Certificate Account that were identified and applied by the Master
Servicer as recoveries of Retained Interest;
(xii) to pay for costs reasonably incurred in connection with the proper
operation, management and maintenance of any Mortgaged Property acquired
for the benefit of Certificateholders by foreclosure or by deed in lieu of
foreclosure or otherwise, such payments to be made out of income received
on such property;
(xiii) if one or more elections have been made to treat the Trust Fund or
designated portions thereof as a REMIC, to pay any federal, state or local
taxes imposed on the Trust Fund or its assets or transactions, as and to
the extent described under "Certain Federal Income Tax
Consequences--REMICS--Prohibited Transactions Tax and Other Taxes";
(xiv) to pay for the cost of an independent appraiser or other expert in
real estate matters retained to determine a fair sale price for a
defaulted Whole Loan or a property acquired in respect thereof in
connection with the liquidation of such Whole Loan or property;
(xv) to pay for the cost of various opinions of counsel obtained pursuant
to the related Agreement for the benefit of Certificateholders;
(xvi) to pay for the costs of recording the related Agreement if such
recordation materially and beneficially affects the interests of
Certificateholders, provided that such payment shall not constitute a
waiver with respect to the obligation of the Warrantying Party to remedy
any breach of representation or warranty under the Agreement;
(xvii) to pay the person entitled thereto any amounts deposited in the
Certificate Account in error, including amounts received on any Asset
after its removal from the Trust Fund whether by reason of purchase or
substitution as contemplated by "Assignment of Assets; Repurchase" and
"Representations and Warranties; Repurchases" or otherwise;
(xviii) to make any other withdrawals permitted by the related Agreement
and described in the related Prospectus Supplement; and
(xix) to clear and terminate the Certificate Account at the termination of
the Trust Fund.
Other Collection Accounts
Notwithstanding the foregoing, if so specified in the related Prospectus
Supplement, the Agreement for any series of Certificates may provide for the
establishment and maintenance of a separate collection account into which 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.
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Collection and Other Servicing Procedures
The Master Servicer, directly or through Sub-Servicers, is required to
make reasonable efforts to collect all scheduled payments under the Whole Loans
and will follow or cause to be followed such collection procedures as it would
follow with respect to mortgage loans that are comparable to the Whole Loans and
held for its own account, provided such procedures are consistent with (i) the
terms of the related Agreement and any related hazard, business interruption,
rental interruption or general liability insurance policy or instrument of
Credit Support included in the related Trust Fund described herein or under
"Description of Credit Support," (ii) applicable law and (iii) the general
servicing standard specified in the related Prospectus Supplement or, if no such
standard is so specified, its normal servicing practices (in either case, the
"Servicing Standard"). In connection therewith, the Master Servicer will be
permitted in its discretion to waive any late payment charge or penalty interest
in respect of a late Whole Loan payment.
Each Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining (or causing
the mortgagor or Lessee on each Mortgage or Lease to maintain) hazard, business
interruption and general liability insurance policies (and, if applicable,
rental interruption policies) as described herein and in any related Prospectus
Supplement, and filing and settling claims thereunder; maintaining escrow or
impoundment accounts of mortgagors for payment of taxes, insurance and other
items required to be paid by any mortgagor pursuant to the Whole Loan;
processing assumptions or substitutions in those cases where the Master Servicer
has determined not to enforce any applicable due-on-sale clause; attempting to
cure delinquencies; supervising foreclosures; inspecting and managing Mortgaged
Properties under certain circumstances; and maintaining accounting records
relating to the Whole Loans. Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer will be responsible for filing and
settling claims in respect of particular Whole Loans under any applicable
instrument of Credit Support. See "Description of Credit Support."
The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan in a manner consistent with the Servicing Standard so long as the
modification, waiver or amendment will not (i) affect the amount or timing of
any scheduled payments of principal or interest on the Whole Loan or (ii) in its
judgment, materially impair the security for the Whole Loan or reduce the
likelihood of timely payment of amounts due thereon. The Master Servicer also
may agree to any modification, waiver or amendment that would so affect or
impair the payments on, or the security for, a Whole Loan if, unless otherwise
provided in the related Prospectus Supplement, (i) in its judgment, a material
default on the Whole Loan has occurred or a payment default is imminent and (ii)
in its judgment, such modification, waiver or amendment is reasonably likely to
produce a greater recovery with respect to the Whole Loan on a present value
basis than would liquidation. The Master Servicer is required to notify the
Trustee in the event of any modification, waiver or amendment of any Whole Loan.
Sub-Servicers
A Master Servicer may delegate its servicing obligations in respect of the
Whole Loans to third-party servicers (each, a "Sub-Servicer"), but such Master
Servicer will remain obligated under the related Agreement. Each sub-servicing
agreement between a Master Servicer and a Sub-Servicer (a "Sub-Servicing
Agreement") must be consistent with the terms of the related Agreement and must
provide that, if for any reason the Master Servicer for the related series of
Certificates is no longer acting in such capacity, the Trustee or any successor
Master Servicer may assume the Master Servicer's rights and obligations under
such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will be solely liable for all fees owed by it to any Sub-Servicer,
irrespective of whether the Master Servicer's compensation pursuant to 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."
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Special Servicers
To the extent so specified in the related Prospectus Supplement, a special
servicer (the "Special Servicer") may be appointed. The related Prospectus
Supplement will describe the rights, obligations and compensation of a Special
Servicer. The Master Servicer will only be responsible for the duties and
obligations of a Special Servicer to the extent set forth in the Prospectus
Supplement.
Realization Upon Defaulted Whole Loans
A mortgagor's failure to make required payments may reflect inadequate
income or the diversion of that income from the service of payments due under
the Mortgage Loan, and may call into question such mortgagor's ability to make
timely payment of taxes and to pay for necessary maintenance of the related
Mortgaged Property. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer is required to monitor any Whole Loan which is
in default, contact the mortgagor concerning the default, evaluate whether the
causes of the default can be cured over a reasonable period without significant
impairment of the value of the Mortgaged Property, initiate corrective action in
cooperation with the mortgagor if cure is likely, inspect the Mortgaged Property
and take such other actions as are consistent with the Servicing Standard. A
significant period of time may elapse before the Master Servicer is able to
assess the success of such corrective action or the need for additional
initiatives.
The time within which the Master Servicer makes the initial determination
of appropriate action, evaluates the success of corrective action, develops
additional initiatives, institutes foreclosure proceedings and actually
forecloses (or takes a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders, may vary considerably depending on the
particular Whole Loan, the Mortgaged Property, the mortgagor, the presence of an
acceptable party to assume the Whole Loan and the laws of the jurisdiction in
which the Mortgaged Property is located. Under federal bankruptcy law, the
Master Servicer in certain cases may not be permitted to accelerate a Whole Loan
or to foreclose on a Mortgaged Property for a considerable period of time. See
"Certain Legal Aspects of the Mortgage--Loans and the Leases."
Any Agreement relating to a Trust Fund that includes Whole Loans may grant
to the Master Servicer and/or the holder or holders of certain classes of
Certificates a right of first refusal to purchase from the Trust Fund at a
predetermined purchase price any such Whole Loan as to which a specified number
of scheduled payments thereunder are delinquent. Any such right granted to the
holder of an Offered Certificate will be described in the related Prospectus
Supplement. The related Prospectus Supplement will also describe any such right
granted to any person if the predetermined purchase price is less than the
Purchase Price described under "Representations and Warranties; Repurchases."
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer may offer to sell any defaulted Whole Loan described in the
preceding paragraph and not otherwise purchased by any person having a right of
first refusal with respect thereto, if and when the Master Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a greater
recovery on a present value basis than would liquidation through foreclosure or
similar proceeding. The related Agreement will provide that any such offering be
made in a commercially reasonable manner for a specified period and that the
Master Servicer accept the highest cash bid received from any person (including
itself, an affiliate of the Master Servicer or any Certificateholder) that
constitutes a fair price for such defaulted Whole Loan. In the absence of any
bid determined in accordance with the related Agreement to be fair, the Master
Servicer shall proceed with respect to such defaulted Mortgage Loan as described
below. Any bid in an amount at least equal to the Purchase Price described under
"Representations and Warranties; Repurchases" will in all cases be deemed fair.
The Master Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any mortgage,
obtain a deed in lieu of foreclosure, or otherwise acquire title to a Mortgaged
Property securing a Whole Loan by operation of law or otherwise, if such action
is consistent with the 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
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Certificateholders, or any other specified person to be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or an "operator"
of such Mortgaged Property within the meaning of certain federal environmental
laws, unless the Master Servicer has previously determined, based on a report
prepared by a person who regularly conducts environmental audits (which report
will be an expense of the Trust Fund), that either:
(i) the Mortgaged Property is in compliance with applicable environmental
laws, and there are no circumstances present at the Mortgaged Property
relating to the use, management or disposal of any hazardous substances,
hazardous materials, wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or regulation; or
(ii) if the Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic
interest of the Trust Fund to acquire title to the Mortgaged Property and
further to take such actions as would be necessary and appropriate to
effect such compliance and/or respond to such circumstances (the cost of
which actions will be an expense of the Trust Fund).
Unless otherwise provided in the related Prospectus Supplement, if title
to any Mortgaged Property is acquired by a Trust Fund as to which a REMIC
election has been made, the Master Servicer, on behalf of the Trust Fund, will
be required to sell the Mortgaged Property prior to the close of the third
calendar year following the year of acquisition of such Mortgaged Property by
the Trust Fund, unless (i) the Internal Revenue Service grants an extension of
time to sell such property or (ii) the Trustee receives an opinion of
independent counsel to the effect that the holding of the property by the Trust
Fund subsequent to such period will not result in the imposition of a tax on the
Trust Fund or cause the Trust Fund to fail to qualify as a REMIC under the Code
at any time that any Certificate is outstanding. Subject to the foregoing, the
Master Servicer will be required to (i) solicit bids for any Mortgaged Property
so acquired in such a manner as will be reasonably likely to realize a fair
price for such property and (ii) accept the first (and, if multiple bids are
contemporaneously received, the highest) cash bid received from any person that
constitutes a fair price.
If the Trust Fund acquires title to any Mortgaged Property, the Master
Servicer, on behalf of the Trust Fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the Master Servicer of any of its obligations with
respect to the management and operation of such Mortgaged Property. Unless
otherwise specified in the related Prospectus Supplement, any such property
acquired by the Trust Fund will be managed in a manner consistent with the
management and operation of similar property by a prudent lending institution.
The limitations imposed by the related Agreement and the REMIC provisions
of the Code (if a REMIC election has been made with respect to the related Trust
Fund) on the operations and ownership of any Mortgaged Property acquired on
behalf of the Trust Fund may result in the recovery of an amount less than the
amount that would otherwise be recovered. See "Certain Legal Aspects of the
Mortgage Loans and the Leases--Foreclosure."
If recovery on a defaulted Whole Loan under any related instrument of
Credit Support is not available, the Master Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and procedures
as it deems necessary or advisable to realize upon the defaulted Whole Loan. If
the proceeds of any liquidation of the property securing the defaulted Whole
Loan are less than the outstanding principal balance of the defaulted Whole Loan
plus interest accrued thereon at the Mortgage Rate plus the aggregate amount of
expenses incurred by the Master Servicer in connection with such proceedings and
which are reimbursable under the Agreement, the Trust Fund will realize a loss
in the amount of such difference. The Master Servicer will be entitled to
withdraw or cause to be withdrawn from the Certificate Account out of the
Liquidation Proceeds recovered on any defaulted Whole Loan, prior to the
distribution of such Liquidation Proceeds to Certificateholders, amounts
representing its normal servicing compensation on the Whole Loan, unreimbursed
servicing expenses incurred with respect to the Whole Loan and any unreimbursed
advances of delinquent payments made with respect to the Whole Loan.
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
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the related instrument of Credit Support, if any, the Master Servicer is not
required to expend its own funds to restore the damaged property unless it
determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Whole Loan after reimbursement of the
Master Servicer for its expenses and (ii) that such expenses will be recoverable
by it from related Insurance Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans, a Master Servicer, on behalf of itself,
the Trustee and the Certificateholders, will present claims to the obligor under
each instrument of Credit Support, and will take such reasonable steps as are
necessary to receive payment or to permit recovery thereunder with respect to
defaulted Whole Loans.
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from the
Certificate Account out of such proceeds, prior to distribution thereof to
Certificateholders, amounts representing its normal servicing compensation on
such Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan. See "Hazard Insurance Policies" and "Description of
Credit Support."
Hazard Insurance Policies
Unless otherwise specified in the related Prospectus Supplement, each
Agreement for a Trust Fund that includes Whole Loans will require the Master
Servicer to cause the mortgagor on each Whole Loan to maintain a hazard
insurance policy providing for such coverage as is required under the related
Mortgage or, if any Mortgage permits the holder thereof to dictate to the
mortgagor the insurance coverage to be maintained on the related Mortgaged
Property, then such coverage as is consistent with the Servicing Standard.
Unless otherwise specified in the related Prospectus Supplement, such coverage
will be in general in an amount equal to the lesser of the principal balance
owing on such Whole Loan and the amount necessary to fully compensate for any
damage or loss to the improvements on the Mortgaged Property on a replacement
cost basis, but in either case not less than the amount necessary to avoid the
application of any co-insurance clause contained in the hazard insurance policy.
The ability of the Master Servicer to assure that hazard insurance proceeds are
appropriately applied may be dependent upon its being named as an additional
insured under any hazard insurance policy and under any other insurance policy
referred to below, or upon the extent to which information in this regard is
furnished by mortgagors. All amounts collected by the Master Servicer under any
such policy (except for amounts to be applied to the restoration or repair of
the Mortgaged Property or released to the mortgagor in accordance with the
Master Servicer's normal servicing procedures, subject to the terms and
conditions of the related Mortgage and Mortgage Note) will be deposited in the
Certificate Account. The Agreement will provide that the Master Servicer may
satisfy its obligation to cause each mortgagor to maintain such a hazard
insurance policy by the Master Servicer's maintaining a blanket policy insuring
against hazard losses on the Whole Loans. If such blanket policy contains a
deductible clause, the Master Servicer will be required to deposit in the
Certificate Account all sums that would have been deposited therein but for such
clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Whole Loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most such policies typically do not cover any physical damage resulting from
war, revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mudflows), wet or dry rot,
vermin, domestic animals and certain other kinds of uninsured risks.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that in effect
requires the insured at all times to carry insurance of a specified percentage
(generally 80% to 90%) of the full replacement value of the improvements on the
property in order to 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
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replacement cost of the improvements less physical depreciation and (ii) such
proportion of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
Each Agreement for a Trust Fund that includes Whole Loans will require the
Master Servicer to cause the mortgagor on each Whole Loan, or, in certain cases,
the related Lessee, to maintain all such other insurance coverage with respect
to the related Mortgaged Property as is consistent with the terms of the related
Mortgage and the Servicing Standard, which insurance may typically include flood
insurance (if the related Mortgaged Property was located at the time of
origination in a federally designated flood area).
In addition, to the extent required by the related Mortgage, the Master
Servicer may require the mortgagor or related Lessee to maintain other forms of
insurance including, but not limited to, loss of rent endorsements, business
interruption insurance and comprehensive public liability insurance, and the
related Agreement may require the Master Servicer, Sub-Servicer or Special
Servicer to maintain public liability insurance with respect to any REO
Properties. Any cost incurred by the Master Servicer in maintaining any such
insurance policy will be added to the amount owing under the Mortgage Loan where
the terms of the Mortgage Loan so permit; provided, however, that the addition
of such cost will not be taken into account for purposes of calculating the
distribution to be made to Certificateholders. Such costs may be recovered by
the Master Servicer, Sub-Servicer or Special Servicer, as the case may be, from
the Collection Account, with interest thereon, as provided by the Agreement.
Under the terms of the Whole Loans, mortgagors will generally be required
to present claims to insurers under hazard insurance policies maintained on the
related Mortgaged Properties. The Master Servicer, on behalf of the Trustee and
Certificateholders, is obligated to present or cause to be presented claims
under any blanket insurance policy insuring against hazard losses on Mortgaged
Properties securing the Whole Loans. However, the ability of the Master Servicer
to present or cause to be presented such claims is dependent upon the extent to
which information in this regard is furnished to the Master Servicer by
mortgagors.
Rental Interruption Insurance Policy
If so specified in the related Prospectus Supplement, the Master Servicer
or the mortgagors will maintain rental interruption insurance policies in full
force and effect with respect to some or all of the Leases. Although the terms
of such policies vary to some degree, a rental interruption insurance policy
typically provides that, to the extent that a Lessee fails to make timely rental
payments under the related Lease due to a casualty event, such losses will be
reimbursed to the insured. If so specified in the related Prospectus Supplement,
the Master Servicer will be required to pay from its servicing compensation the
premiums on the rental interruption policy on a timely basis. If so specified in
the Prospectus Supplement, if such rental interruption policy is canceled or
terminated for any reason (other than the exhaustion of total policy coverage),
the Master Servicer will exercise its best reasonable efforts to obtain from
another insurer a replacement policy comparable to the rental interruption
policy with a total coverage that is equal to the then existing coverage of the
terminated rental interruption policy; provided that if the cost of any such
replacement policy is greater than the cost of the terminated rental
interruption policy, the amount of coverage under the replacement policy will,
unless otherwise specified in the related Prospectus Supplement, be reduced to a
level such that the applicable premium does not exceed, by a percentage that may
be set forth in the related Prospectus Supplement, the cost of the rental
interruption policy that was replaced. Any amounts collected by the Master
Servicer under the rental interruption policy in the nature of insurance
proceeds will be deposited in the Certificate Account.
Fidelity Bonds and Errors and Omissions Insurance
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will require that the Master Servicer and any Special Servicer obtain
and maintain in effect a fidelity bond or similar form of insurance coverage
(which may provide blanket coverage) or any combination thereof insuring against
loss occasioned by fraud, theft or other intentional misconduct of the officers,
employees and agents of the Master Servicer or the Special Servicer, as
applicable. The related Agreement will allow the Master Servicer and any Special
Servicer to self-insure against loss occasioned by the errors and omissions of
the officers, employees and agents of the Master Servicer or the Special
Servicer so long as certain criteria set forth in the Agreement are met.
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Due-on-Sale and Due-on-Encumbrance Provisions
Certain of the Whole Loans may contain clauses requiring the consent of
the mortgagee to any sale or other transfer of the related Mortgaged Property,
or due-on-sale clauses entitling the mortgagee to accelerate payment of the
Whole Loan upon any sale or other transfer of the related Mortgaged Property.
Certain of the Whole Loans may contain clauses requiring the consent of the
mortgagee to the creation of any other lien or encumbrance on the Mortgaged
Property or due-on-encumbrance clauses entitling the mortgagee to accelerate
payment of the Whole Loan upon the creation of any other lien or encumbrance
upon the Mortgaged Property. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer, on behalf of the Trust Fund, will exercise any
right the Trustee may have as mortgagee to accelerate payment of any such Whole
Loan or to withhold its consent to any transfer or further encumbrance in a
manner consistent with the Servicing Standard. Unless otherwise specified in the
related Prospectus Supplement, any fee collected by or on behalf of the Master
Servicer for entering into an assumption agreement will be retained by or on
behalf of the Master Servicer as additional servicing compensation. See "Certain
Legal Aspects of the Mortgage Loans and the Leases--Due-on-Sale and
Due-on-Encumbrance."
Retained Interest; Servicing Compensation and Payment of Expenses
The Prospectus Supplement for a series of Certificates will specify
whether there will be any Retained Interest in the Assets, and, if so, the
initial owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related Agreement.
A "Retained Interest" in an Asset represents a specified portion of the interest
payable thereon. The Retained Interest will be deducted from mortgagor payments
as received and will not be part of the related Trust Fund.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer's and a Sub-Servicer's primary servicing compensation with
respect to a series of Certificates will come from the periodic payment to it of
a portion of the interest payment on each Asset. Since any Retained Interest and
a Master Servicer's primary compensation are percentages of the principal
balance of each Asset, such amounts will decrease in accordance with the
amortization of the Assets. The Prospectus Supplement with respect to a series
of Certificates evidencing interests in a Trust Fund that includes Whole Loans
may provide that, as additional compensation, the Master Servicer or the
Sub-Servicers may retain all or a portion of assumption fees, modification fees,
late payment charges or Prepayment Premiums collected from mortgagors and any
interest or other income which may be earned on funds held in the Certificate
Account or any account established by a Sub-Servicer pursuant to the Agreement.
The Master Servicer may, to the extent provided in the related Prospectus
Supplement, pay from its servicing compensation certain expenses incurred in
connection with its servicing and managing of the Assets, including, without
limitation, payment of the fees and disbursements of the Trustee and independent
accountants, payment of expenses incurred in connection with distributions and
reports to Certificateholders, and payment of any other expenses described in
the related Prospectus Supplement. Certain other expenses, including certain
expenses relating to defaults and liquidations on the Whole Loans and, to the
extent so provided in the related Prospectus Supplement, interest thereon at the
rate specified therein, and the fees of any Special Servicer, may be borne by
the Trust Fund.
Evidence as to Compliance
Each Agreement relating to Assets which include Whole Loans will provide
that on or before a specified date in each year, beginning with the first such
date at least six months after the related Cut-off Date, a firm of independent
public accountants will furnish a statement to the Trustee to the effect that,
on the basis of the examination by such firm conducted substantially in
compliance with either the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for the Federal Home Loan
Mortgage Corporation ("FHLMC"), the servicing by or on behalf of the Master
Servicer of mortgage loans under pooling and servicing agreements substantially
similar to each other (including the related Agreement) was conducted in
compliance with the terms of such agreements except for any significant
exceptions or errors in records that, in the opinion of the firm, either the
Audit Program for Mortgages serviced for FHLMC, or paragraph 4 of the Uniform
Single Attestation Program for Mortgage Bankers, requires it to report. In
rendering its statement such firm may rely, as to matters relating to the direct
servicing of mortgage loans by Sub-Servicers, upon comparable statements
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for examinations conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC (rendered within one year of such statement) of firms of
independent public accountants with respect to the related Sub-Servicer.
Each such Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding calendar
year or other specified twelve-month period.
Unless otherwise provided in the related Prospectus Supplement, copies of
such annual accountants' statement and such statements of officers will be
obtainable by Certificateholders without charge upon written request to the
Master Servicer at the address set forth in the related Prospectus Supplement.
Certain Matters Regarding a Master Servicer and the Depositor
The Master Servicer, if any, or a servicer for substantially all the Whole
Loans under each Agreement will be named in the related Prospectus Supplement.
The entity serving as Master Servicer (or as such servicer) may be an affiliate
of the Depositor and may have other normal business relationships with the
Depositor or the Depositor's affiliates. Reference herein to the Master Servicer
shall be deemed to be to the servicer of substantially all of the Whole Loans,
if applicable.
Unless otherwise specified in the related Prospectus Supplement, the
related Agreement will provide that the Master Servicer may resign from its
obligations and duties thereunder only upon a determination that its duties
under the Agreement are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it, the other activities of the Master Servicer so causing such a conflict
being of a type and nature carried on by the Master Servicer at the date of the
Agreement. No such resignation will become effective until the Trustee or a
successor servicer has assumed the Master Servicer's obligations and duties
under the Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will further provide that neither any Master Servicer, the Depositor
nor any director, officer, employee, or agent of a Master Servicer or the
Depositor will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be protected
against any breach of a representation, warranty or covenant made in such
Agreement, or against any liability specifically imposed thereby, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of obligations or duties thereunder
or by reason of reckless disregard of obligations and duties thereunder. Unless
otherwise specified in the related Prospectus Supplement, each Agreement will
further provide that any Master Servicer, the Depositor and any director,
officer, employee or agent of a Master Servicer or the Depositor will be
entitled to indemnification by the related Trust Fund and will be held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to the Agreement or the Certificates; provided, however, that
such indemnification will not extend to any loss, liability or expense (i)
specifically imposed by such Agreement or otherwise incidental to the
performance of obligations and duties thereunder, including, in the case of a
Master Servicer, the prosecution of an enforcement action in respect of any
specific Whole Loan or Whole Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to such Agreement); (ii)
incurred in connection with any breach of a representation, warranty or covenant
made in such Agreement; (iii) incurred by reason of misfeasance, bad faith or
gross negligence in the performance of obligations or duties thereunder, or by
reason of reckless disregard of such obligations or duties; (iv) incurred in
connection with any violation of any state or federal securities law; or (v)
imposed by any taxing authority if such loss, liability or expense is not
specifically reimbursable pursuant to the terms of the related Agreement. In
addition, each Agreement will provide that neither any Master Servicer nor the
Depositor will be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its respective responsibilities under
the Agreement and which in its opinion may involve it in any expense or
liability. Any such Master Servicer or the Depositor may, however, in its
discretion undertake any such action which it may deem necessary or desirable
with respect to the Agreement and the rights and duties of the parties thereto
and the interests of the Certificateholders thereunder. In
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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.
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
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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 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.
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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 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
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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 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
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credit for each series of Certificates will expire at the earlier of the date
specified in the related Prospectus Supplement or the termination of the Trust
Fund. A copy of any such letter of credit for a series will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed within 15
days of issuance of the Certificates of the related series.
Insurance Policies and Surety Bonds
If so provided in the Prospectus Supplement for a series of Certificates,
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
by an interest in a leasehold estate. Such representation and warranties will be
set forth in the Prospectus Supplement if applicable.
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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 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.
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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 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,
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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 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.
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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 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
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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 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
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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 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.
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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 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
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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 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
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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 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.
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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 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
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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 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
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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 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.
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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.
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
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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
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,
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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 original issue discount or certain other income items for which the
Certificateholder has made an election, as such
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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 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
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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.
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
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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 Supplement, utilize the original yield to maturity of the
Grantor Trust Certificate calculated based on a reasonable
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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 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
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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 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
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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 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
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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 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.
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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. 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
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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.
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
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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.
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
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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 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.
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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.
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
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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.
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
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paid if the interest paid on the Distribution Date were interest accrued from
Distribution Date to Distribution Date. If a portion of the initial purchase
price of a REMIC Regular Certificate is allocable to interest that has accrued
prior to the issue date ("pre-issuance accrued interest") and the REMIC Regular
Certificate provides for a payment of stated interest on the first payment date
(and the first payment date is within one year of the issue date) that equals or
exceeds the amount of the pre-issuance accrued interest, then the REMIC Regular
Certificate's issue price may be computed by subtracting from the issue price
the amount of pre-issuance accrued interest, rather than as an amount payable on
the REMIC Regular Certificate. However, it is unclear under this method how the
OID Regulations treat interest on Payment Lag Certificates. Therefore, in the
case of a Payment Lag Certificate, the Trust Fund intends to include accrued
interest in the issue price and report interest payments made on the first
Distribution Date as interest to the extent such payments represent interest for
the number of days that the Certificateholder has held such Payment Lag
Certificate during the first accrual period.
Investors should consult their own tax advisors concerning the treatment
for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury regulations,
if the REMIC is considered to be a "single-class REMIC," a portion of the
REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those REMIC Regular Certificateholders that are
"pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of these
rules on an investment in the REMIC Regular Certificates. See "Pass-Through of
Non-Interest Expenses of the REMIC" under "Taxation of Owners of REMIC Residual
Certificates" below.
Effects of Defaults, Delinquencies and Losses. Certain Series of
Certificates may contain one or more classes of Subordinated Certificates, and
in the event there are defaults or delinquencies on the Mortgage Assets, amounts
that would otherwise be distributed on the Subordinated Certificates may instead
be distributed on the Senior Certificates. Subordinated Certificateholders
nevertheless will be required to report income with respect to such Certificates
under an accrual method without giving effect to delays and reductions in
distributions on such Subordinated Certificates attributable to defaults and
delinquencies on the Mortgage Assets, except to the extent that it can be
established that such amounts are uncollectible. As a result, the amount of
income reported by a Subordinated Certificateholder in any period could
significantly exceed the amount of cash distributed to such holder in that
period. The holder will eventually be allowed a loss (or will be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Subordinated Certificate is reduced as a result of defaults
and delinquencies on the Mortgage Assets.
Although not entirely clear, it appears that holders of REMIC Regular
Certificates that are corporations should in general be allowed to deduct as an
ordinary loss any loss sustained during the taxable year on account of any such
Certificates becoming wholly or partially worthless, and that, in general,
holders of Certificates that are not corporations should be allowed to deduct as
a short-term capital loss any loss sustained during the taxable year on account
of any such Certificates becoming wholly worthless. Potential investors and
holders of the Certificates are urged to consult their own tax advisors
regarding the appropriate timing, amount and character of any loss sustained
with respect to such Certificates, including any loss resulting from the failure
to recover previously accrued interest or discount income. Special loss rules
are applicable to banks and thrift institutions, including rules regarding
reserves for bad debts. Such taxpayers are advised to consult their tax advisors
regarding the treatment of losses on Certificates.
Non-U.S. Persons. Generally, payments of interest (including any payment
with respect to accrued OID) on the REMIC Regular Certificates to a REMIC
Regular Certificateholder who is not a U.S. Person and is not engaged in a trade
or business within the United States will not be subject to federal withholding
tax if (i) such REMIC Regular Certificateholder does not actually or
constructively own 10 percent or more of the combined voting power of all
classes of equity in the issuer; (ii) such REMIC Regular Certificateholder is
not a controlled foreign corporation (within the meaning of Code Section 957)
related to the issuer; and (iii) such REMIC Regular Certificateholder complies
with certain identification requirements (including delivery of a statement,
signed by the REMIC Regular Certificateholder under penalties of perjury,
certifying that such REMIC Regular Certificateholder 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
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distributions in respect of accrued OID, may be subject to a 30% withholding
tax, subject to reduction under any applicable tax treaty. If the interest on a
REMIC Regular Certificate is effectively connected with the conduct by the
Non-U.S. REMIC Regular Certificateholder of a trade or business within the
United States, then the Non-U.S. REMIC Regular Certificateholder will be subject
to U.S. income tax at regular graduated rates. Such a Non-U.S.
REMIC Regular Certificateholder also may be subject to the branch profits tax.
Further, a REMIC Regular Certificate will not be included in the estate of
a non-resident alien individual that does not actually or constructively own 10%
or more of the combined voting power of all classes of equity in the Issuer and
will not be subject to United States estate taxes. However, Certificateholders
who are non-resident alien individuals should consult their tax advisors
concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons and persons
related to such holders should not acquire any REMIC Residual Certificates, and
holders of REMIC Residual Certificates (the "REMIC Residual Certificateholder")
and persons related to REMIC Residual Certificateholders should not acquire any
REMIC Regular Certificates without consulting their tax advisors as to the
possible adverse tax consequences of doing so. In addition, the IRS may assert
that non-U.S Persons that own directly or indirectly, a greater than 10%
interest in any Mortgagor, and foreign corporations that are "controlled foreign
corporations" as to the United States of which such a Mortgagor is a "United
States shareholder" within the meaning of Section 951(b) of the Code, are
subject to United States withholding tax on interest distributed to them to the
extent of interest concurrently paid by the related Mortgagor.
For these purposes, a "U.S. Person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in, or under the laws of, the United States or any political subdivision
thereof, an estate the income of which from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business or a trust
as to which (i) a court in the United States is able to exercise primary
supervision over its administration and (ii) one or more U.S. Persons have the
right to control all substantial decisions of the trust.
Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at any
time during such year, such information as may be deemed necessary or desirable
to assist REMIC Regular Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold such REMIC Regular Certificates on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments with respect to
any payments to registered owners who are not "exempt recipients." In addition,
upon the sale of a REMIC Regular Certificate to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient, or
(ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Person, certifies that such seller is
a Non-U.S. Person, and certain other conditions are met. Such as sale must also
be reported by the broker to the IRS, unless either (a) the broker determines
that the seller is an exempt recipient or (b) the seller certifies its non-U.S.
Person status (and certain other conditions are met). Certification of the
registered owner's non-U.S. Person status normally would be made on IRS Form W-8
under penalties of perjury, although in certain cases it may be possible to
submit other documentary evidence. Any amounts deducted and withheld from a
distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
On October 6, 1997, the Treasury Department issued the New Regulations,
which make certain modifications to the withholding, backup withholding and
information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
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b. Taxation of Owners of REMIC Residual Certificates
Allocation of the Income of the REMIC to the REMIC Residual Certificates.
The REMIC will not be subject to federal income tax except with respect to
income from prohibited transactions and certain other transactions. See
"--Prohibited Transactions and Other Taxes" below. Instead, each original holder
of a REMIC Residual Certificate will report on its federal income tax return, as
ordinary income, its share of the taxable income of the REMIC for each day
during the taxable year on which such holder owns any REMIC Residual
Certificates. The taxable income of the REMIC for each day will be determined by
allocating the taxable income of the REMIC for each calendar quarter ratably to
each day in the quarter. Such a holder's share of the taxable income of the
REMIC for each day will be based on the portion of the outstanding REMIC
Residual Certificates that such holder owns on that day. The taxable income of
the REMIC will be determined under an accrual method and will be taxable to the
holders of REMIC Residual Certificates without regard to the timing or amounts
of cash distributions by the REMIC. Ordinary income derived from REMIC Residual
Certificates will be "portfolio income" for purposes of the taxation of
taxpayers subject to the limitations on the deductibility of "passive losses."
As residual interests, the REMIC Residual Certificates will be subject to tax
rules, described below, that differ from those that would apply if the REMIC
Residual Certificates were treated for federal income tax purposes as direct
ownership interests in the Certificates or as debt instruments issued by the
REMIC.
A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests (that is, a fast-pay, slow-pay structure) may generate such a
mismatching of income and cash distributions (that is, "phantom income"). This
mismatching may be caused by the use of certain required tax accounting methods
by the REMIC, variations in the prepayment rate of the underlying Mortgage
Assets and certain other factors. Depending upon the structure of a particular
transaction, the aforementioned factors may significantly reduce the after-tax
yield of a REMIC Residual Certificate to a REMIC Residual Certificateholder or
cause the REMIC Residual Certificate to have negative "value." Investors should
consult their own tax advisors concerning the federal income tax treatment of a
REMIC Residual Certificate and the impact of such tax treatment on the after-tax
yield of a REMIC Residual Certificate.
A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that such REMIC Residual Certificateholder owns
such REMIC Residual Certificate. Those daily amounts generally would equal the
amounts that would have been reported for the same days by an original REMIC
Residual Certificateholder, as described above. The Legislative History
indicates that certain adjustments may be appropriate to reduce (or increase)
the income of a subsequent holder of a REMIC Residual Certificate that purchased
such REMIC Residual Certificate at a price greater than (or less than) the
adjusted basis such REMIC Residual Certificate would have in the hands of an
original REMIC Residual Certificateholder. See "--Sale or Exchange of REMIC
Residual Certificates" below. It is not clear, however, whether such adjustments
will in fact be permitted or required and, if so, how they would be made. The
REMIC Regulations do not provide for any such adjustments.
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed to
the REMIC for interest and OID on the REMIC Regular Certificates and, except as
described above under "--Taxation of Owners of REMIC Regular
Certificates--Non-Interest Expenses of the REMIC," other expenses. REMIC taxable
income is generally determined in the same manner as the taxable income of an
individual using the accrual method of accounting, except that (i) the
limitations on deductibility of investment interest expense and expenses for the
production of income do not apply, (ii) all bad loans will be deductible as
business bad debts, and (iii) the limitation on the deductibility of interest
and expenses related to tax-exempt income will apply. The REMIC's gross income
includes interest, original issue discount income, and market discount income,
if any, on the Mortgage Loans, reduced by amortization of any premium on the
Mortgage Loans, plus income on reinvestment of cash flows and reserve assets,
plus any cancellation of indebtedness income upon allocation of realized losses
to the REMIC Regular Certificates. Note that the timing of cancellation of
indebtedness income recognized by REMIC Residual Certificateholders resulting
from defaults and delinquencies on Mortgage Assets may differ from the time of
the actual loss on the Mortgage Asset. The REMIC's deductions include interest
and original issue discount expense on the REMIC Regular Certificates, servicing
fees on the Mortgage Loans, other administrative
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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 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
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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 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
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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 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.
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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 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
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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 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
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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 no significant purpose
of the transfer is to enable the transferor to impede the assessment or
collection of tax. A Noneconomic REMIC Residual Certificate is any REMIC
Residual Certificate (including a REMIC Residual Certificate with a positive
value at issuance) unless, at the time of transfer, taking into account the
Prepayment Assumption and any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents, (i) the
present value of the expected future distributions on the REMIC Residual
Certificate at least equals the product of the present value of the anticipated
excess inclusions and the highest corporate income tax rate in effect for the
year in which the transfer occurs and (ii) the transferor reasonably expects
that the transferee will receive distributions from the REMIC at or after the
time at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. A significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of the
transfer, either knew or should have known that the transferee would be
unwilling or unable to pay taxes due on its share of the taxable income of the
REMIC. A transferor is presumed not to have such knowledge if (i) the transferor
conducted a reasonable investigation of the transferee and (ii) the transferee
acknowledges to the transferor that the residual interest may generate tax
liabilities in excess of the cash flow and the transferee represents that it
intends to pay such taxes associated with the residual interest as they become
due. If a transfer of a Noneconomic REMIC Residual Certificate is disregarded,
the transferor would continue to be treated as the owner of the REMIC Residual
Certificate and would continue to be subject to tax on its allocable portion of
the net income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the transfer of a
REMIC Residual Certificate that has a "tax avoidance potential" to a "foreign
person" will be disregarded for federal income tax purposes. This rule appears
to apply to a transferee who is not a U.S. Person unless such transferee's
income in respect of the REMIC Residual Certificate is effectively connected
with the conduct of a United Sates trade or business. A REMIC
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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.
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").
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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.
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;
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(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
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
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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 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
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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.
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.
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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.
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........................................................................ 70
Applicable Amount.......................................................... 92
ARM Loans.............................................................. 23, 78
Asset Conservation Act..................................................... 66
Asset Seller............................................................... 20
Assets.................................................................. 1, 19
Balloon Mortgage Loans..................................................... 16
Bankruptcy Code............................................................ 62
Book-Entry Certificates.................................................... 30
Cash Flow Agreement........................................................ 25
Cash Flow Agreements........................................................ 1
Cede.................................................................... 3, 36
CERCLA................................................................. 18, 68
Certificate Account........................................................ 40
Certificate Owners......................................................... 36
Certificateholders.......................................................... 3
Closing Date............................................................... 82
Commercial Loans........................................................... 20
Commercial Properties...................................................... 20
Commission................................................................. 3
Contributions Tax.......................................................... 94
Cooperatives............................................................... 20
Covered Trust.......................................................... 17, 53
CPR........................................................................ 28
Credit Support.......................................................... 1, 25
Crime Control Act.......................................................... 71
Deferred Interest.......................................................... 78
Definitive Certificates................................................ 30, 37
Depositor.................................................................. 20
Determination Date......................................................... 30
DTC..................................................................... 3, 36
Due Period................................................................. 30
Environmental Hazard Condition............................................. 67
Equity Participations...................................................... 24
ERISA...................................................................... 97
ERISA Plans................................................................ 97
Exchange Act................................................................ 3
Exemption.................................................................. 98
FDIC....................................................................... 40
FHLMC...................................................................... 49
FNMA....................................................................... 67
Government Securities................................................... 1, 20
Indirect Participants...................................................... 36
Insurance Proceeds......................................................... 41
IRS........................................................................ 74
Labor...................................................................... 98
L/C Bank................................................................... 54
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Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
Lease....................................................................... 3
Lease Assignment............................................................ 1
Legislative History........................................................ 82
Lessee...................................................................... 3
Liquidation Proceeds....................................................... 41
Lock-out Date.............................................................. 24
Lock-out Period............................................................ 24
Mark-to-Market Regulations................................................. 91
Master REMIC............................................................... 81
MBS..................................................................... 1, 19
MBS Agreement.............................................................. 24
MBS Issuer................................................................. 24
MBS Servicer............................................................... 24
MBS Trustee................................................................ 24
Morgan Stanley............................................................ 101
Mortgage Loans.......................................................... 1, 20
Mortgage Notes............................................................. 20
Mortgage Rate.............................................................. 23
Mortgages.................................................................. 20
Multifamily Loans.......................................................... 20
Multifamily Properties..................................................... 20
NCUA...................................................................... 100
Nonrecoverable Advance..................................................... 33
Offered Certificates........................................................ 1
OID........................................................................ 74
OID Regulations............................................................ 74
Originator................................................................. 20
Participants............................................................... 36
Pass-Through Rate.......................................................... 31
Payment Lag Certificates................................................... 87
Permitted Investments...................................................... 40
Plans...................................................................... 97
Prepayment Assumption...................................................... 78
Prepayment Premium......................................................... 24
Prohibited Transactions Tax................................................ 94
RCRA....................................................................... 66
Record Date................................................................ 30
Related Proceeds........................................................... 33
Relief Act................................................................. 70
REMIC Certificates......................................................... 81
REMIC Regular Certificateholders........................................... 82
REMIC Regular Certificates................................................. 81
REMIC Regulations.......................................................... 72
REMIC Residual Certificateholder........................................... 89
REMIC Residual Certificates................................................ 81
REO Extension.............................................................. 60
REO Tax.................................................................... 60
Restricted Group........................................................... 99
RICO....................................................................... 71
Senior Certificates........................................................ 29
Servicing Standard......................................................... 44
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Page(s) on which
term is defined
Term in the Prospectus
- ---- -----------------
SMMEA...................................................................... 99
SMMEA Certificates......................................................... 99
Special Servicer........................................................... 45
Stripped ARM Obligations................................................... 78
Stripped Bond Certificates................................................. 76
Stripped Coupon Certificates............................................... 76
Stripped Interest Certificates............................................. 29
Stripped Principal Certificates............................................ 29
Subordinate Certificates................................................... 29
Sub-Servicer............................................................... 44
Sub-Servicing Agreement.................................................... 44
Subsidiary REMIC........................................................... 81
Super-Premium Certificates................................................. 83
Title V.................................................................... 69
Trust Assets................................................................ 2
Trust Fund.................................................................. 1
UCC........................................................................ 36
Voting Rights.............................................................. 19
Warrantying Party.......................................................... 39
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