<PAGE> 1
Filed Pursuing to Rule 424(b)(3)
Registration No. 333-62911
Information contained herein is subject to completion or amendment. 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 the registration or qualification under the securities laws
of any such state.
Subject to Completion Dated February 1, 1999
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 9, 1998)
$893,452,000 (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
1999-WF1
-------------------
Morgan Stanley Capital I Inc. is offering certain classes of its Series
1999-WF1 Commercial Mortgage Pass-Through Certificates, which represent
beneficial ownership interests in a trust. The trust's assets will primarily be
274 mortgage loans secured by liens on commercial and multifamily properties.
The Series 1999-WF1 Certificates are not obligations of Morgan Stanley Capital I
Inc., Wells Fargo Bank, National Association or any of their affiliates, and
neither the certificates nor the underlying mortgage loans are insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
-------------------
Morgan Stanley Capital I Inc. will not list the offered certificates on
any national securities exchange or on any automated quotation system of any
registered securities association such as NASDAQ.
-------------------
Investing in the offered certificates involves risks. See "Risk Factors"
beginning on page S-23 of this Prospectus Supplement and page 16 of the
Prospectus.
-------------------
Certain characteristics of the offered certificates include:
<TABLE>
<CAPTION>
Approximate Initial Pass-Through Ratings Expected Final
Certificate Initial Rate (DCR/ Distribution
Class Balance(1) Pass-Through Rate(2) Description Moody's)(3) Date(4)
----- ---------- -------------------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Class A-1 $269,000,000 5.72% Fixed AAA/Aaa April 2008
Class A-2 $476,754,000 6.03% Fixed AAA/Aaa September 2008
Class B $48,425,000 6.18% Fixed AA/Aa2 October 2008
Class C $43,583,000 6.47% Fixed A/A2 October 2008
Class D $9,685,000 6.26% Variable A-/A3 October 2008
Class E $29,056,000 6.61% Variable BBB/Baa2 November 2008
Class F $16,949,000 6.61% Variable BBB-/NR August 2010
</TABLE>
(Footnotes on page S-3)
-------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this Prospectus Supplement or the accompanying Prospectus are truthful or
complete. Any representation to the contrary is a criminal offense.
-------------------
Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co. and Norwest
Investment Services, Inc. will purchase the offered certificates from Morgan
Stanley Capital I Inc. and will offer them to the public at negotiated prices
determined at the time of sale. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. expect to deliver the offered
certificates to purchasers on or about February , 1999. Morgan Stanley Capital
I Inc. expects to receive from this offering approximately % of the initial
principal amount of the offered certificates, plus accrued interest from
February 1, 1999, before deducting expenses payable by Morgan Stanley Capital I
Inc.
-------------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
NORWEST INVESTMENT SERVICES, INC.
February , 1999
<PAGE> 2
- --------------------------------------------------------------------------------
[pictures of representative properties]
- --------------------------------------------------------------------------------
<PAGE> 3
- ----------
(1) Approximate; subject to a variance of plus or minus 5%.
(2) The pass-through rates for the Class A-1, Class A-2, Class B and Class C
Certificates for each distribution date will be equal to the fixed rates
per annum set forth in the table; provided, in each case, that such
pass-through rate will not exceed the NWAC Rate (as defined herein) for
such distribution date. The pass-through rates for the Class D, Class E
and Class F Certificates set forth in the table are the approximate
initial pass-through rates for those classes. Subsequent to the initial
distribution date, the pass-through rate on the Class D Certificates will
be a per annum rate equal to the NWAC Rate for such distribution date
minus 0.38%. For each subsequent distribution date, the pass-through rate
on the Class E and Class F Certificates will be a per annum rate equal to
the NWAC Rate for such distribution date minus 0.03%. See "Description of
the Certificates--Pass-Through Rates" in this Prospectus Supplement.
(3) See "Ratings" in this Prospectus Supplement. The rated final distribution
date for each class of offered certificates is the distribution date in
November 2031.
(4) The expected final distribution date for each class of offered
certificates is the date on which such class is expected to be paid in
full, assuming timely payments (and no principal prepayments) will be made
on the Mortgage Loans (as defined herein) and otherwise based on the
Maturity Assumptions and a 0% CPR (each, as defined in "Yield, Prepayment
and Maturity Considerations--Weighted Average Life" in this Prospectus
Supplement).
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) the accompanying
Prospectus, which provides general information, some of which may not apply to
the offered certificates; and (b) this Prospectus Supplement, which describes
the specific terms of the offered certificates. If the terms of the offered
certificates vary between this Prospectus Supplement and the accompanying
Prospectus, you should rely on the information in this Prospectus Supplement.
You should rely only on the information contained in this Prospectus
Supplement and the accompanying Prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
Prospectus Supplement and the Prospectus. The information in this Prospectus
Supplement is accurate only as of the date of this Prospectus Supplement.
This Prospectus Supplement and the accompanying Prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this Prospectus Supplement and the
accompanying Prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this Prospectus
Supplement and the Prospectus to assist you in understanding the terms of the
offered certificates and this offering. The capitalized terms used in this
Prospectus Supplement are defined on the pages indicated under the caption
"Index of Terms for Prospectus Supplement" beginning on page S-99 in this
Prospectus Supplement. The capitalized terms used in the Prospectus are defined
on the pages indicated under the caption "Index of Principal Definitions"
beginning on page 108 of the Prospectus.
-------------------
In this Prospectus Supplement, the terms "Depositor," "we," "us" and "our"
refer to Morgan Stanley Capital I Inc.
-------------------
Until May , 1999, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a Prospectus Supplement and the accompanying Prospectus. This is in
addition to the dealers' obligation to deliver a Prospectus Supplement and the
accompanying Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
S-3
<PAGE> 4
TABLE OF CONTENTS
EXECUTIVE SUMMARY............................................................S-7
SUMMARY OF TERMS.............................................................S-9
ADDITIONAL ASPECTS OF CERTIFICATES..........................................S-20
RISK FACTORS................................................................S-23
General ..............................................................S-43
Certificate Balances and Notional Amount..............................S-45
Pass-Through Rates....................................................S-45
Distributions.........................................................S-47
Optional Termination..................................................S-55
Advances .............................................................S-56
Reports to Certificateholders; Available Information..................S-57
Example of Distributions..............................................S-61
The Trustee and the Fiscal Agent......................................S-62
The Paying Agent, Certificate Registrar and Authenticating Agent......S-62
Expected Final Distribution Date; Rated Final Distribution Date.......S-62
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS...............................S-63
General ..............................................................S-63
Pass-Through Rates....................................................S-63
Rate and Timing of Principal Payments.................................S-63
Losses and Shortfalls.................................................S-64
Certain Relevant Factors..............................................S-64
Weighted Average Life.................................................S-65
DESCRIPTION OF THE MORTGAGE POOL............................................S-70
General ..............................................................S-70
Certain Terms and Characteristics of the Mortgage Loans...............S-71
Assessments of Property Value and Condition...........................S-74
Additional Mortgage Loan Information..................................S-75
Standard Hazard Insurance.............................................S-77
The Sellers...........................................................S-78
Assignment of The Mortgage Loans......................................S-78
Representations and Warranties........................................S-79
Repurchases And Other Remedies........................................S-81
Changes In Mortgage Pool Characteristics..............................S-81
SERVICING OF THE MORTGAGE LOANS.............................................S-82
General ..............................................................S-82
The Master Servicer...................................................S-84
S-4
<PAGE> 5
The Special Servicer..................................................S-86
Termination of Special Servicer.......................................S-86
The Operating Adviser.................................................S-87
Mortgage Loan Modifications...........................................S-88
Sale of Defaulted Mortgage Loans and REO Properties...................S-89
Foreclosures..........................................................S-89
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.....................................S-90
General ..............................................................S-90
Original Issue Discount and Premium...................................S-91
Additional Considerations.............................................S-92
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS LOCATED IN CALIFORNIA...............S-93
ERISA CONSIDERATIONS........................................................S-93
Plan Assets...........................................................S-93
Special Exemption Applicable to Class A Certificates..................S-94
Insurance Company General Accounts....................................S-95
General Investment Considerations.....................................S-95
LEGAL INVESTMENT............................................................S-96
USE OF PROCEEDS.............................................................S-96
PLAN OF DISTRIBUTION........................................................S-96
LEGAL MATTERS...............................................................S-97
RATINGS ....................................................................S-97
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT....................................S-94
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-5
<PAGE> 6
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-6
<PAGE> 7
EXECUTIVE SUMMARY
This Executive Summary highlights selected information regarding the offered
certificates. It does not contain all of the information you need to consider in
making your investment decision. To understand all of the terms of the offering
of the offered certificates and the underlying mortgage loans, read this entire
Prospectus Supplement and the accompanying Prospectus carefully.
Certificate Structure
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Approximate Initial Ratings Approximate
Credit Support Certificate (DCR/ Percent of Total
Support Class Balance Moody's) Certificates
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
23.00%(1) Class X(2) Class A-1 $269,000,000 AAA/Aaa 27.77%
$968,511,922
- ---------------- ---------------------------------------------------------------------------
23.00%(1) (Approximate Class A-2 $476,754,000 AAA/Aaa 49.23%
Notional Amount)
- ---------------- ---------------------------------------------------------------------------
18.00% AAA/Aaa Class B $48,425,000 AA/Aa2 5.00%
- ---------------- ---------------------------------------------------------------------------
13.50% Class C $43,583,000 A/A2 4.50%
- ---------------- ---------------------------------------------------------------------------
12.50% Class D $9,685,000 A-/A3 1.00%
- ---------------- ---------------------------------------------------------------------------
9.50% Class E $29,056,000 BBB/Baa2 3.00%
- ---------------- ---------------------------------------------------------------------------
7.75% Class F $16,949,000 BBB-/NR 1.75%
- --------------------------------------------------------------------------------------------------------------------
--------- Classes G-O(2) $75,059,923 --------- 7.75%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the approximate credit support for the Class A-1 and Class A-2
Certificates in the aggregate.
(2) Not offered hereby.
The Series 1999-WF1 Class R-I, R-II and R-III Certificates also represent
ownership interests in the trust. Such certificates are not represented in
this table and are not offered hereby.
|_| Offered Certificates
|_| Certificates not offered hereby
S-7
<PAGE> 8
Certificate Summary for Offered Certificates
<TABLE>
<CAPTION>
======================================================================================================================
Approximate
Initial
Certificate Initial Weighted
Approximate Balance or Pass-Through Average
Credit Notional Approximate Rate and Rate Ratings Life Principal
Support Class Amount (1) % of Total Description (2) DCR/Moody's (3) (Yrs.) (4) Window (4)
======================================================================================================================
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
23.00% (5) A-1 $269,000,000 27.77% 5.72% (Fixed) AAA/Aaa 5.50 1-110
- ----------------------------------------------------------------------------------------------------------------------
23.00% (5) A-2 $476,754,000 49.23% 6.03% (Fixed) AAA/Aaa 9.38 110-115
- ----------------------------------------------------------------------------------------------------------------------
18.00% B $48,425,000 5.00% 6.18% (Fixed) AA/Aa2 9.61 115-116
- ----------------------------------------------------------------------------------------------------------------------
13.50% C $43,583,000 4.50% 6.47% (Fixed) A/A2 9.64 116-116
- ----------------------------------------------------------------------------------------------------------------------
12.50% D $9,685,000 1.00% 6.26% (Variable) A-/A3 9.64 116-116
- ----------------------------------------------------------------------------------------------------------------------
9.50% E $29,056,000 3.00% 6.61% (Variable) BBB/Baa2 9.69 116-117
- ----------------------------------------------------------------------------------------------------------------------
7.75% F $16,949,000 1.75% 6.61% (Variable) BBB-/NR 10.48 117-138
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Approximate; subject to a variance of plus or minus 5%.
(2) The pass-through rates for the Class A-1, Class A-2, Class B and Class C
Certificates for each distribution date will be equal to the fixed rates
per annum set forth in the table; provided, in each case, that such
pass-through rate will not exceed the NWAC Rate (as defined herein) for
such distribution date. The pass-through rates for the Class D, Class E
and Class F Certificates set forth in the table are the approximate
initial pass-through rates for those classes. Subsequent to the initial
distribution date, the pass-through rate on the Class D Certificates will
be a per annum rate equal to the NWAC Rate for such distribution date
minus 0.38%. For each subsequent distribution date, the pass-through rate
on the Class E and Class F Certificates will be a per annum rate equal to
the NWAC Rate for such distribution date minus 0.03%. See "Description of
the Certificates--Pass-Through Rates" in this Prospectus Supplement.
(3) See "Ratings" in this Prospectus Supplement. "NR" means not rated.
(4) The principal window is expressed in months following the closing date and
reflects the period during which distributions of principal would be
received. The weighted average life and principal window figures set forth
above are based on the following assumptions, among others: (i) no losses
on the Mortgage Loans; (ii) no extensions of maturity dates of Mortgage
Loans that do not have Anticipated Repayment Dates (as defined herein);
and (iii) repayment in full on the Anticipated Repayment Date of each
Mortgage Loan having such a date. See the assumptions set forth under
"Yield, Prepayment and Maturity Considerations--Weighted Average Life" in
this Prospectus Supplement.
(5) Represents the approximate credit support for the Class A-1 and Class A-2
Certificates in the aggregate.
S-8
<PAGE> 9
- --------------------------------------------------------------------------------
SUMMARY OF TERMS
This summary highlights selected information from this Prospectus Supplement. It
does not contain all of the information you need to consider in making your
investment decision. To understand all of the terms of the offering of the
offered certificates, read this entire document and the accompanying Prospectus
carefully.
RELEVANT PARTIES AND DATES
Depositor................ Morgan Stanley Capital I Inc. The Depositor's
principal executive offices are located at 1585
Broadway, 37th Floor, New York, New York 10036. The
Depositor's telephone number is (212) 761-4700.
Master Servicer.......... Wells Fargo Bank, National Association, a national
banking association. See "Servicing of the Mortgage
Loans--The Master Servicer" and "Description of the
Certificates--Advances" in this Prospectus
Supplement.
Special Servicer......... GMAC Commercial Mortgage Corporation. See "Servicing
of the Mortgage Loans--The Special Servicer" and
"--General" in this Prospectus Supplement.
Trustee.................. LaSalle National Bank, a national banking
association. See "Description of the
Certificates--The Trustee and the Fiscal Agent" in
this Prospectus Supplement and "--Advances" in this
Prospectus Supplement.
Fiscal Agent............. ABN AMRO Bank N.V., a Netherlands banking
corporation. See "Description of the
Certificates--The Trustee and the Fiscal Agent" and
"--Advances" in this Prospectus Supplement.
Paying Agent............. Norwest Bank Minnesota, National Association, a
national banking association. Norwest Bank Minnesota,
National Association will also act as the Certificate
Registrar and Authenticating Agent. See "Description
of the Certificates--The Paying Agent, Certificate
Registrar and Authenticating Agent" in this
Prospectus Supplement.
Operating Adviser........ The holders of certificates representing more than
50% of the aggregate certificate balance of the most
subordinate class of certificates outstanding at any
time of determination (or, if the certificate balance
of such class of certificates is less than 25% of the
initial certificate balance of such class, the next
most subordinate class of certificates) may appoint a
representative for the purposes described in this
Prospectus Supplement. See "Servicing of the Mortgage
Loans--The Operating Adviser" and "--General" in this
Prospectus Supplement.
Mortgage Loan Sellers.... Wells Fargo Bank, National Association, as to 202
Mortgage Loans, representing 60.7% of the aggregate
principal balance of the mortgage pool as of February
1, 1999 (the "Initial Pool Balance"); and Morgan
Stanley Mortgage Capital Inc., as to 72 Mortgage
Loans, representing 39.3% of the Initial Pool
Balance. See "Description of the Mortgage Pool--The
Sellers" in this Prospectus Supplement.
Underwriters............. Morgan Stanley & Co. Incorporated, Goldman, Sachs &
Co. and Norwest Investment Services, Inc. See "Plan
of Distribution" in this Prospectus Supplement.
Cut-Off Date............. February 1, 1999.
- --------------------------------------------------------------------------------
S-9
<PAGE> 10
- --------------------------------------------------------------------------------
Closing Date............. On or about February 25, 1999.
Distribution Date........ The 15th day of each month, or, if such 15th day is
not a business day, the business day immediately
following such 15th day, commencing in March 1999.
Record Date.............. With respect to each distribution date, the close of
business on the last business day of the preceding
month.
OFFERED SECURITIES
General.................. Morgan Stanley Capital I Inc. is offering the
following seven classes of its Series 1999-WF1
Commercial Mortgage Pass-Through Certificates
(collectively, the "Offered Certificates"):
o Class A-l
o Class A-2
o Class B
o Class C
o Class D
o Class E
o Class F
Series 1999-WF1 will consist of a total of 19
classes, the following twelve of which are not being
offered by this Prospectus Supplement and the
accompanying Prospectus: Class X, Class G, Class H,
Class J, Class K, Class L, Class M, Class N, Class O,
Class R-I, Class R-II, and Class R-III (collectively,
the "Private Certificates").
The Offered Certificates and the Private Certificates
will represent beneficial ownership interests in a
trust created by Morgan Stanley Capital I Inc. The
trust's assets will primarily be 274 mortgage loans
(the "Mortgage Loans") secured by liens on commercial
and multifamily properties.
Certificate Balance...... Your certificates will have the approximate aggregate
initial certificate balance set forth below, subject
to a variance of plus or minus 5%:
-----------------------------------------------------
Class A-1 $269,000,000 Certificate Balance
-----------------------------------------------------
Class A-2 $476,754,000 Certificate Balance
-----------------------------------------------------
Class B $48,425,000 Certificate Balance
-----------------------------------------------------
Class C $43,583,000 Certificate Balance
-----------------------------------------------------
Class D $9,685,000 Certificate Balance
-----------------------------------------------------
Class E $29,056,000 Certificate Balance
-----------------------------------------------------
Class F $16,949,000 Certificate Balance
-----------------------------------------------------
- --------------------------------------------------------------------------------
S-10
<PAGE> 11
- --------------------------------------------------------------------------------
Pass-Through Rates....... Your certificates will accrue interest at an annual
rate called a "Pass-Through Rate," which is set forth
below for each Class of Offered Certificates:
-----------------------------------------------------
Class A-1 5.72%, but not in excess of the NWAC
Rate (as defined below)
-----------------------------------------------------
Class A-2 6.03%, but not in excess of NWAC
Rate
-----------------------------------------------------
Class B 6.18%, but not in excess of NWAC
Rate
-----------------------------------------------------
Class C 6.47%, but not in excess of NWAC
Rate
-----------------------------------------------------
Class D NWAC Rate minus 0.38%
-----------------------------------------------------
Class E NWAC Rate minus 0.03%
-----------------------------------------------------
Class F NWAC Rate minus 0.03%
-----------------------------------------------------
Interest on the Offered Certificates will be
calculated on the basis of a 360-day year consisting
of twelve 30-day months, or a 30/360 basis.
The "Weighted Average Net Mortgage Rate" or "NWAC
Rate" for a particular distribution date is a
weighted average of the interest rates on the
Mortgage Loans minus a weighted average annual
administrative cost rate (which includes the
servicing fee rates and the trustee fee rate). The
relevant weighting is based upon the respective
principal balances of the Mortgage Loans as in effect
immediately prior to such distribution date. For
purposes of calculating the NWAC Rate, the Mortgage
Loan interest rates will not reflect any default
interest rate or any rate increase occurring after an
Anticipated Repayment Date. The Mortgage Loan
interest rates will also be determined without regard
to any loan term modifications agreed to by the
Special Servicer or resulting from the borrower's
bankruptcy or insolvency. In addition, for purposes
of calculating the NWAC Rate, if a Mortgage Loan does
not accrue interest on a 30/360 basis, its interest
rate for any month that is not a 30-day month will be
deemed to be the rate per annum that, when calculated
on a 30/360 basis, will produce the amount of
interest that actually accrues on that loan in that
month.
- --------------------------------------------------------------------------------
S-11
<PAGE> 12
- --------------------------------------------------------------------------------
Distributions
A. Amount and Order
of Distributions....... On each distribution date, funds available
for distribution from the Mortgage Loans,
net of specified trust expenses, will be
distributed in the following amounts and
priority:
Step l/Class A and Class X: To interest on
Classes A-1, A-2 and X, pro rata, in
accordance with their interest entitlements.
Step 2/Class A: To the extent of the
Principal Distribution Amount, to principal
on Class A-1 and, if Class A-1 has been
retired, to Class A-2, until each in turn is
reduced to zero. If the principal amount of
each class of certificates other than
Classes A-1 and A-2 has been reduced to zero
as a result of losses on the Mortgage Loans,
the Principal Distribution Amount will be
distributed to Classes A-1 and A-2, pro
rata, rather than sequentially.
Step 3/Class A: To reimburse Classes A-1 and
A-2, pro rata, for any previously
unreimbursed losses on the Mortgage Loans
allocable to principal that were previously
borne by those classes, together with
interest thereon.
Step 4/Class B: To Class B as follows: (a)
to interest on Class B in the amount of its
interest entitlement; (b) to the extent of
the Principal Distribution Amount, to
principal on Class B until its principal
amount is reduced to zero; and (c) to
reimburse Class B for any previously
unreimbursed losses on the Mortgage Loans
allocable to principal that were previously
borne by that class, together with interest
thereon.
Step 5/Class C: To Class C in a manner
analogous to the Class B allocations of Step
4.
Step 6/Class D: To Class D in a manner
analogous to the Class B allocations of Step
4.
Step 7/Class E: To Class E in a manner
analogous to the Class B allocations of Step
4.
Step 8/Class F: To Class F in a manner
analogous to the Class B allocations of Step
4.
Step 9/Subordinate Private Certificates: In
the amounts and order of priority described
in "Description of the
Certificates--Distributions" in this
Prospectus Supplement.
The "Principal Distribution Amount" for any
distribution date will, in general, equal
the sum of (i) the principal portion of all
scheduled payments (other than balloon
payments), whether or not received, due
during the related collection period; (ii)
all principal prepayments and the principal
portion of balloon payments received during
the related collection period; (iii) the
principal portion of other collections on
the Mortgage Loans received during the
related collection period (i.e., liquidation
proceeds, condemnation proceeds, insurance
proceeds and income on "real estate owned"
property); and (iv) the principal portion of
proceeds of Mortgage Loan repurchases
received during the related collection
period.
- --------------------------------------------------------------------------------
S-12
<PAGE> 13
- --------------------------------------------------------------------------------
B. Interest and Principal
Entitlements........... A description of each class's interest
entitlement can be found in "Description of
the Certificates--Distributions" in this
Prospectus Supplement. As described in such
section, there are circumstances relating to
the timing of prepayments in which your
interest entitlement for a distribution date
could be less than one full month's interest
at the Pass-Through Rate on your
certificate's principal amount.
The amount of principal required to be
distributed to the classes entitled to
principal on a particular distribution date
also can be found in "Description of the
Certificates--Distributions" in this
Prospectus Supplement.
C. Prepayment
Premiums.............. The manner in which any prepayment premiums
received during a particular collection
period will be allocated to the Class X
Certificates, on the one hand, and the
classes of certificates entitled to
principal, on the other hand, is described
in "Description of the
Certificates--Distributions" in this
Prospectus Supplement.
Subordination
A. General................. The chart below describes the manner in
which the rights of various classes will be
senior to the rights of other classes.
Entitlement to receive principal and
interest on any distribution date is
depicted in descending order. The manner in
which Mortgage Loan losses are allocated is
depicted in ascending order.
----------------------------
Class A-l, Class A-2,
Class X
----------------------------
|
----------------------------
Class B
----------------------------
|
----------------------------
Class C
----------------------------
|
----------------------------
Class D
----------------------------
|
----------------------------
Class E
----------------------------
|
----------------------------
Class F
----------------------------
|
----------------------------
Classes G-O
----------------------------
No other form of credit enhancement will be
available for the benefit of the holders of
the Offered Certificates.
See "Description of the Certificates" in
this Prospectus Supplement.
- --------------------------------------------------------------------------------
S-13
<PAGE> 14
- --------------------------------------------------------------------------------
B. Shortfalls in Available
Funds................. The following types of shortfalls in
available funds will be allocated in the
same manner as Mortgage Loan losses: (i)
shortfalls resulting from compensation which
the Special Servicer is entitled to receive;
(ii) shortfalls resulting from interest on
P&I Advances and Servicing Advances (each,
as defined in this Prospectus Supplement,
and collectively, "Advances") made by the
Master Servicer, the Trustee or the Fiscal
Agent (to the extent not covered by default
interest and late payment charges paid by
the borrower); (iii) shortfalls resulting
from extraordinary expenses of the trust;
and (iv) shortfalls resulting from other
unanticipated or default-related expenses of
the trust.
Shortfalls in Mortgage Loan interest as a
result of the timing of prepayments (net of
the Master Servicer's servicing fee payable
on the related distribution date) will be
allocated to each class of certificates, pro
rata, in accordance with their respective
interest entitlements.
See "Description of the
Certificates--Distributions" in this
Prospectus Supplement.
THE MORTGAGE POOL
Characteristics of the
Mortgage Pool
A. General................. For a more complete description of the
Mortgage Loans, see the following sections
in this Prospectus Supplement:
o Description of the Mortgage Pool;
o Appendix I (characteristics of the
Mortgage Loans);
o Appendix II (characteristics of each
Mortgage Loan on a
property-by-property basis); and
o Appendix III (descriptions of
significant Mortgage Loans).
All numerical information provided in this
Prospectus Supplement with respect to the
Mortgage Loans is approximate. All weighted
average information regarding the Mortgage
Loans reflects weighting of the Mortgage
Loans based upon their outstanding principal
balances as of the Cut-Off Date. For
purposes of the presentation of mortgage
pool information herein, an aggregate amount
of indebtedness that is evidenced by a
single obligation for a particular borrower
and secured by multiple mortgaged properties
has 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 evidenced by such obligation.
B. Principal Balances...... The trust's primary assets will be 274
Mortgage Loans with an initial principal
balance of $968,511,922, subject to a
permitted variance of plus or minus 5%. As
of the Cut-Off Date, the outstanding
principal balances of the Mortgage Loans in
the mortgage pool ranged from $317,728 to
$41,232,654, and the Mortgage Loans had an
average
- --------------------------------------------------------------------------------
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balance of $3,534,715. See "Description of
the Mortgage Pool" in this Prospectus
Supplement.
C. Non-Recourse............ Substantially all of the Mortgage Loans are
non-recourse obligations. No Mortgage Loan
will be insured or guaranteed by the Federal
Deposit Insurance Corporation or any other
governmental entity or private insurer, or
by any other person.
D. Fee Simple/Leasehold.... Each Mortgage Loan is secured by a first
mortgage lien on the borrower's fee simple
(or, in 4 cases, which represent 1.7% of the
Initial Pool Balance, leasehold) estate in
an income-producing real property. In
addition, two Mortgage Loans (representing
1.1% of the Initial Pool Balance), are
secured by a mortgage on both the borrower's
leasehold interest in a portion of the
related mortgaged property and the
borrower's fee simple interest in the
remainder of the related mortgaged property.
E. Property Types
--------------------------------------------
Percentage of
Initial Pool Number of
Property Type Balance Mortgage Loans
--------------------------------------------
Multifamily 30.7 86
--------------------------------------------
Retail 24.3 52
--------------------------------------------
Industrial 16.9 74
--------------------------------------------
Office 13.0 36
--------------------------------------------
Hospitality 9.1 6
--------------------------------------------
Other 2.2 6
--------------------------------------------
Mobile Home Park 2.1 6
--------------------------------------------
Self-Storage 1.8 8
--------------------------------------------
F. Property Location....... 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 five states with the highest
concentrations of mortgaged properties, are
as set forth below:
--------------------------------------------
Percentage of
Initial Pool Number of
State Balance Mortgage Loans
--------------------------------------------
California 45.6 140
--------------------------------------------
Texas 10.9 32
--------------------------------------------
Illinois 5.9 6
--------------------------------------------
Georgia 4.7 5
--------------------------------------------
Arizona 4.4 7
--------------------------------------------
The remaining mortgaged properties are
located throughout 24 other states. None of
these states has a concentration of
mortgaged
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properties that represents security for more
than 5% of the Initial Pool Balance. See
Appendix I hereto.
G. Other Mortgage
Loan Features......... As of the Cut-Off Date, the Mortgage Loans
had the following characteristics:
o No scheduled payment of
principal and interest on any
Mortgage Loan was thirty days or
more past due, and no Mortgage
Loan had been thirty days or
more delinquent in the past
year.
o Six (6) separate groups of
Mortgage Loans are, within such
group, cross-collateralized with
each other, the largest group of
which represents 3.4% of the
Initial Pool Balance. See
Appendix II for further
information with respect to such
groups.
o Four (4) additional groups of
Mortgage Loans are, in each
case, evidenced by a single
obligation for a particular
borrower secured by one or more
mortgages encumbering multiple
real properties, the largest
group of which represents 1.5%
of the Initial Pool Balance. For
purposes of the presentation of
mortgage pool information
herein, an aggregate amount of
indebtedness that is evidenced
by a single obligation for a
particular borrower and secured
by multiple mortgaged properties
has 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 evidenced
by such obligation.
o Eighteen (18) groups of Mortgage
Loans, other than those
cross-collateralized or single
obligation multi-property
Mortgage Loan groups described
above, were made to the same
borrower or to borrowers that
are affiliated with one another
through partial or complete
direct or indirect common
ownership, the three largest of
these groups representing 2.9%,
1.4% and 1.1%, respectively, of
the Initial Pool Balance.
o Fifty (50) Mortgage Loans,
representing 11.8% of the
Initial Pool Balance, are
secured by a mortgaged property
that is 100% leased to a single
tenant.
o All Mortgage Loans bear interest
at fixed rates.
o No Mortgage Loan permits
negative amortization or, other
than after the respective
Anticipated Repayment Dates with
respect to certain of the
Hyper-Amortization Loans, the
deferral of accrued interest.
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H. Balloon/Hyper-
Amortization Loans.... Two hundred thirty-four (234) of the
Mortgage Loans, representing 91.3% of the
Initial Pool Balance, provide for one of the
following:
o Monthly payments based on
amortization schedules
significantly longer than their
respective terms to maturity
(231 of such Mortgage Loans,
representing 81.2% of the
Initial Pool Balance); or
o Monthly payments of interest
only for the term of the
Mortgage Loan with a "balloon
payment" due at maturity, (1 of
such Mortgage Loans,
representing 2.9% of the Initial
Pool Balance); or
o Increases in the mortgage rate
and/or rate of principal
amortization at a date prior to
stated maturity that create an
incentive for the related
borrower to prepay the loan on
that date (2 of such Mortgage
Loans, representing 7.2% of the
Initial Pool Balance) (the
"Hyper-Amortization Loans");
substantial principal payments
on such Mortgage Loans are
anticipated to be made on the
date (which is prior to stated
maturity) upon which these
increases occur (the
"Anticipated Repayment Date" or
"ARD").
I. Prepayment Provisions;
Defeasance Loans...... As of the Cut-Off Date, all of the Mortgage
Loans restricted voluntary principal
prepayments as follows:
o One hundred fifty-four (154)
Mortgage Loans, representing
57.7% of the Initial Pool
Balance, prohibit voluntary
principal prepayments for a
period ending on a date
determined by the related
mortgage note (the "Lock-out
Period") but permit the related
borrower (after an initial
period of at least two years
following the date of issuance
of the Certificates) to defease
the loan by pledging direct,
non-callable United States
Treasury obligations and
obtaining the release of the
mortgaged property from the lien
of the mortgage.
o Sixty-three (63) Mortgage Loans,
representing 25.6% of the
Initial Pool Balance, prohibit
voluntary principal prepayments
during a Lock-out Period and
thereafter provide for
prepayment premiums calculated
of the basis of the greater of a
yield maintenance formula and 1%
of the amount prepaid.
o Fifty-three (53) Mortgage Loans,
representing 15.9% of the
Initial Pool Balance, prohibit
voluntary principal prepayments
during a Lock-out Period and
thereafter permit the related
borrower to either (i) defease
the loan by
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pledging direct, non-callable
United States Treasury
obligations and obtaining the
release of the mortgaged
property from the lien of the
mortgage or (ii) pay a
prepayment premium equal to the
greater of a yield maintenance
formula and 1% of the amount
prepaid; provided that one (1)
such Mortgage Loan, representing
1.7% of the Initial Pool
Balance, prohibits voluntary
principal prepayments for a
Lock-out Period and thereafter
permits the borrower to either
(i) defease the loan by pledging
direct, non-callable United
States Treasury obligations and
obtaining the release of the
mortgaged property from the lien
of the Mortgage or (ii) pay a
prepayment premium based upon a
yield maintenance formula.
o Four (4) Mortgage Loans,
representing 0.8% of the Initial
Pool Balance, do not provide for
Lock-out Periods but impose
prepayment premiums in
connection with voluntary
principal prepayments made prior
to a specified date (which date
is 3 to 6 months prior to
maturity). One (1) of such
Mortgage Loans, representing
0.3% of the Initial Pool
Balance, permits voluntary
principal prepayments of up to
10% of the original principal
balance of the Mortgage Loan in
any calendar year without the
imposition of a prepayment
premium.
J. Mortgage Loan Ranges and
Weighted Averages..... As of the Cut-Off Date, the Mortgage Loans
had the following additional
characteristics:
i. Mortgage Interest
Rates Mortgage interest rates ranging from
6.240% per annum to 8.750% per annum, and
a weighted average mortgage interest rate
of 7.067% per annum;
ii. Remaining Terms Remaining terms to scheduled maturity
(or, in the case of the
Hyper-Amortization Loans, remaining terms
to the Anticipated Repayment Date)
ranging from 26 months to 236 months, and
a weighted average remaining term to
scheduled maturity of 122 months;
iii. Remaining
Amortization Terms Remaining amortization terms
ranging from 111 months to 357 months,
and a weighted average remaining
amortization term of 308 months (for the
amortizing loans);
iv. Loan-to-Value Ratios Loan-to-value ratios (determined
according to the methodology set forth
under "Description of the Mortgage
Pool--Additional Mortgage Loan
Information" in this Prospectus
Supplement) ranging from 19.2% to 81.1%
and a weighted average loan-to-value
ratio (calculated as described in this
Prospectus Supplement under "Description
of the Mortgage Pool--Additional Mortgage
Loan Information") of 64.9%; and
v. Debt Service
Coverage Ratios Debt service coverage ratios (determined
according to the methodology set forth
under "Description of the Mortgage
Pool--Additional Mortgage Loan
Information" in this Prospectus
Supplement) ranging from 1.11x to 6.43x
and a weighted average debt service
coverage ratio (calculated as described
in this Prospectus Supplement under
"Description of the Mortgage
Pool--Additional Mortgage Loan
Information") of 1.63x.
See "Description of the Mortgage
Pool--Representations and Warranties" and
"--Repurchases and Other Remedies" in this
Prospectus Supplement.
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The Mortgage Loans are more particularly
described in this Prospectus Supplement
under "Description of the Mortgage Pool," in
the tables in Appendix I and in "Certain
Characteristics of the Mortgage Loans" in
Appendix II. In addition, a brief summary of
the material terms of the eight largest
Mortgage Loans is set forth in Appendix III.
Advances of Principal and Interest
A. General................. The Master Servicer is required to advance
delinquent monthly Mortgage Loan payments
(each such advance, a "P&I Advance"). The
Master Servicer will not be required to
advance interest in excess of --- interest
accrued at a Mortgage Loan's regular
interest rate (i.e., not including excess
interest accrued as a result of the
imposition of any default rate or any
increased rate imposed after an Anticipated
Repayment Date). The Master Servicer also is
not required to advance prepayment or yield
maintenance premiums, or balloon payments.
If a P&I Advance is made, the Master
Servicer will defer rather than advance its
servicing fee, but will advance the Trustee
Fee.
If the Master Servicer fails to make a
required P&I Advance, the Trustee will be
required to make the P&I Advance. If the
Trustee fails to make a required P&I
Advance, the Fiscal Agent - ABN AMRO Bank
N.V. - will be required to make such P&I
Advance.
Notwithstanding the foregoing, none of the
Master Servicer, the Trustee or the Fiscal
Agent will be obligated to make any Advance
if it determines that such Advance would not
be recoverable.
See "Description of the
Certificates--Advances" in this Prospectus
Supplement.
B. Advances During an
Appraisal Reduction
Event................. The occurrence of certain adverse events
affecting a Mortgage Loan, called "Appraisal
Reduction Events," will require the Special
Servicer to obtain a new appraisal or other
valuation of the related mortgaged property.
Based on the value of the mortgaged property
determined by such appraisal or other
valuation, an "Appraisal Reduction" may be
created as described in this Prospectus
Supplement under "Description of the
Certificates--Appraisal Reductions." If
there exists an Appraisal Reduction for any
Mortgage Loan, the amount of P&I Advances
required to be made in respect of such
Mortgage Loan will be proportionately
reduced to the extent of such Appraisal
Reduction. Due to the payment priorities
described above, this will reduce the funds
available to pay principal and interest on
the most subordinate class or classes of
certificates then outstanding.
See "Description of the Certificates -
Appraisal Reductions" in this Prospectus
Supplement.
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S-19
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ADDITIONAL ASPECTS OF CERTIFICATES
Ratings.......................... The Offered Certificates will not be issued
unless each such class receives the
following ratings from Duff & Phelps Credit
Rating Co. and Moody's Investors Service,
Inc.:
--------------------------------------------
Ratings
Class DCR/Moody's
--------------------------------------------
Classes A- 1 and A-2 AAA/Aaa
--------------------------------------------
Class B AA/Aa2
--------------------------------------------
Class C A/A2
--------------------------------------------
Class D A-/A3
--------------------------------------------
Class E BBB/Baa2
--------------------------------------------
Class F BBB-/NR
--------------------------------------------
A rating agency may lower or withdraw a
security rating at any time.
See "Ratings" in this Prospectus Supplement
and in the Prospectus for a discussion of
the basis upon which ratings are given, the
limitations of and restrictions on the
ratings, and the conclusions that should not
be drawn from a rating.
Optional Termination............. On any distribution date on which the
aggregate certificate balance of all classes
of certificates is less than 1% of the
Initial Pool Balance, the Depositor, Master
Servicer, the Special Servicer, the majority
holders of the Controlling Class and any
holder of a majority interest in the Class
R-I Certificates, each in turn, will have
the option to purchase all of the remaining
Mortgage Loans (and all property acquired
through exercise of remedies in respect of
any Mortgage Loan), at the price specified
in this Prospectus Supplement. Exercise of
this option will terminate the trust and
retire the then outstanding certificates.
See "Description of the
Certificates--Optional Termination" in this
Prospectus Supplement.
Denominations.................... The Class A-1 and Class A-2 Certificates
will be offered in minimum denominations of
$25,000. The remaining Offered Certificates
will be offered in minimum denominations of
$100,000. Investments in excess of the
minimum denominations may be made in
multiples of $1.
Registration, Clearance
and Settlement................. Your certificates will be registered in the
name of CEDE & Co., as nominee of the
Depository Trust Company, and will not be
registered in your name. You will not
receive a definitive certificate
representing your interest, except in very
limited circumstances described in this
Prospectus Supplement. As a result, you will
not be a certificateholder of record, and
you will receive distributions on your
certificates and
- --------------------------------------------------------------------------------
S-20
<PAGE> 21
- --------------------------------------------------------------------------------
reports relating to distributions only
through DTC, CEDEL or Euroclear or, through
participants in DTC, CEDEL or Euroclear.
You may hold your Offered Certificates
through (i) The Depository Trust Company
("DTC") in the United States, or (ii) Cedel
Bank, S.A. ("CEDEL") or The Euroclear System
("Euroclear") in Europe. Transfers within
DTC, CEDEL or Euroclear will be made in
accordance with the usual rules and
operating procedures of those systems.
Cross-market transfers between persons
holding directly through DTC, CEDEL or
Euroclear will be effected in DTC through
the relevant depositories of CEDEL or
Euroclear.
The Depositor may elect to terminate the
book-entry system through DTC with respect
to all or any portion of any class of the
Offered Certificates.
See "Description of the Certificates --
Book-Entry Certificates" in this Prospectus
Supplement and "Description of the
Certificates-General" in the Prospectus.
We expect that the Offered Certificates will
be delivered in book-entry form through the
facilities of DTC, CEDEL or Euroclear on or
about February 25, 1999.
Tax Status....................... An election will be made to treat the trust
as three separate REMICs - - REMIC I, REMIC
II and REMIC III - - for federal income tax
purposes. In the opinion of counsel, the
trust will qualify for this treatment and
each class of Offered Certificates will
constitute "regular interests" in REMIC III.
Pertinent federal income tax consequences of
an investment in the Offered Certificates
include:
o The regular interests will be
treated as newly originated debt
instruments for federal income
tax purposes.
o Beneficial owners of Offered
Certificates will be required to
report income thereon in
accordance with the accrual
method of accounting.
o One or more classes of Offered
Certificates may be issued with
original issue discount.
See "Certain Federal Income Tax
Consequences" in this Prospectus
Supplement and "Certain Federal Income
Tax Consequences-REMICs-Taxation of
Owners of REMIC Regular Certificates"
in the Prospectus.
ERISA Considerations............. Subject to the satisfaction of important
conditions described under "ERISA
Considerations" in this Prospectus
Supplement and in the accompanying
Prospectus, the Class A-1 and Class A-2
Certificates may be purchased by persons
investing assets of employee benefit plans
or individual retirement accounts.
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The Class B, Class C, Class D, Class E and
Class F Certificates may not be purchased
by, or transferred to, a Plan or any person
investing the assets of a Plan, unless such
transaction is covered by a Prohibited
Transaction Class Exemption issued by the
U.S. Department of Labor.
Legal Investments................ The Offered Certificates will not constitute
"mortgage related securities" for purposes
of the Secondary Mortgage Market Enhancement
Act of 1984, as amended ("SMMEA").
No representation is made regarding the
proper characterization of the Offered
Certificates for purposes of any applicable
legal investment restrictions, regulatory
capital requirements or other similar
purposes. Regulated entities should consult
with their own advisors regarding these
matters.
See "Legal Investment" in this Prospectus
Supplement and in the accompanying
Prospectus.
- --------------------------------------------------------------------------------
S-22
<PAGE> 23
RISK FACTORS
You should carefully consider the risks before making an investment
decision. In particular, the timing and amount of distributions on your
certificates will depend on payments received on and other recoveries with
respect to the Mortgage Loans. Therefore, you should carefully consider the risk
factors relating to the Mortgage Loans and the mortgaged properties.
The risks and uncertainties described below are not the only ones relating
to your certificates. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial may also impair your investment.
This Prospectus Supplement also contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of a variety
of factors, including the risks described below and elsewhere in this Prospectus
Supplement.
Mortgage Loans Are Payments under the Mortgage Loans are not
Nonrecourse and Are Not insured or guaranteed by any person or
Insured or Guaranteed entity.
Substantially all of the Mortgage Loans are
nonrecourse loans. If a default occurs, the
lender's remedies generally are limited to
foreclosing against the specific properties
and other assets that have been pledged to
secure the loan. Payment of amounts due
under the Mortgage Loan prior to maturity is
consequently dependent primarily on the
sufficiency of the net operating income of
the mortgaged property. Payment of the
Mortgage Loan at maturity is primarily
dependent upon the borrower's ability to
sell or refinance the property for an amount
sufficient to repay the loan.
In certain limited circumstances, either of
Wells Fargo Bank, National Association or
Morgan Stanley Mortgage Capital Inc. may be
obligated to repurchase or replace a
Mortgage Loan as to which its
representations and warranties concerning
such Mortgage Loan are breached. However, we
cannot assure you that either of such
entities 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" in
this Prospectus Supplement.
All of the Mortgage Loans were originated
within 58 months prior to the Cut-Off Date
with 98.9% (by Initial Pool Balance) of the
Mortgage Loans originated within 12 months
of the Cut-Off Date. Consequently, the
Mortgage Loans do not have a long-standing
payment history.
Commercial Lending Is The Mortgage Loans are secured by various
Dependent Upon Net types of income-producing commercial
Operating Income properties. Commercial lending is generally
thought to expose a lender to greater risk
than one-to-four family residential lending
because, among other things, it typically
involves larger loans.
The repayment of a commercial loan is
typically dependent upon the ability of the
applicable property to produce cash flow.
Even the liquidation value of a commercial
property is determined, in substantial part,
by the amount of the property's cash flow
(or its potential to generate cash flow).
However, net operating income and cash flow
can be volatile and may be insufficient to
cover debt service on the loan at any given
time.
S-23
<PAGE> 24
The net operating income, cash flow and
property value of the mortgaged properties
may be adversely affected by a large number
of factors. Some of these factors relate to
the property itself, such as:
o the age, design and construction
quality of the property;
o perceptions regarding the
safety, convenience and
attractiveness of the property;
o the proximity and attractiveness
of competing properties;
o the adequacy of the property's
management and maintenance;
o increases in operating expenses
at the property and in relation
to competing properties;
o an increase in the capital
expenditures needed to maintain
the property or make
improvements;
o the dependence upon a single
tenant, or a concentration of
tenants in a particular business
or industry;
o a decline in the financial
condition of a major tenant;
o an increase in vacancy rates;
and
o a decline in rental rates as
leases are renewed or entered
into with new tenants.
Others factors are more general in nature,
such as:
o national, regional or local
economic conditions (including
plant closings, military base
closings, industry slowdowns and
unemployment rates);
o local real estate conditions
(such as an oversupply of
competing properties, space or
multifamily housing);
o demographic factors;
o decreases in consumer
confidence;
o changes in consumer tastes and
preferences; and
o retroactive changes in building
codes.
The volatility of net operating income will
be influenced by many of the foregoing
factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
S-24
<PAGE> 25
o the level of tenant defaults;
o the rate at which new rentals
occur; and
o the property's "operating
leverage" (i.e., the percentage
of total property expenses in
relation to revenue, the ratio
of fixed operating expenses to
those that vary with revenues,
and the level of capital
expenditures required to
maintain the property and to
retain or replace tenants).
A decline in the real estate market or in
the financial condition of a major tenant
will tend to have a more immediate effect on
the net operating income of properties with
short-term revenue sources and may lead to
higher rates of delinquency or defaults
under Mortgage Loans.
Some Mortgaged Properties Some of the mortgaged properties may not be
May Not Be Readily readily convertible to alternative uses if
Convertible to Alternative those properties were to become unprofitable
Uses for any reason. Converting commercial
properties to alternate uses generally
requires substantial capital expenditures.
In addition, zoning or other restrictions
also may prevent alternative uses. The
liquidation value of any such mortgaged
property consequently may be substantially
less than would be the case if the property
were readily adaptable to other uses.
Property Value May Be Various factors may adversely affect the
Adversely Affected Even When value of the mortgaged properties without
Current Operating Income Is affecting the properties' current net
Not operating income. These factors include,
among others:
o changes in governmental
regulations, fiscal policy,
zoning or tax laws;
o potential environmental
legislation or liabilities or
other legal liabilities;
o the availability of refinancing;
and
o changes in interest rate levels.
Tenant Concentration Entails A deterioration in the financial condition
Risk of a tenant can be particularly significant
if a mortgaged property is leased to a
single tenant, or a small number of tenants.
Mortgaged properties leased to a single
tenant, or a small number of tenants, also
are more susceptible to interruptions of
cash flow if a tenant fails to renew its
lease or defaults under its lease. This is
so because: (i) the financial effect of the
absence of rental income may be severe; (ii)
more time may be required to re-lease the
space; and (iii) substantial capital costs
may be incurred to make the space
appropriate for replacement tenants.
Fifty (50) Mortgage Loans (representing
11.8% of the Initial Pool Balance) are
secured by mortgaged properties leased to
single tenants and in certain cases, such
tenant is related to the Borrower.
Retail and office properties also may be
adversely affected if there is a
concentration of particular tenants or of
tenants in a particular business or industry
at the property or properties.
S-25
<PAGE> 26
Mortgaged Properties Leased If a mortgaged property has multiple
Multiple Tenants Have tenants, re-leasing expenditures may be to
Special Risks more frequent than in the case of mortgaged
properties with fewer tenants, thereby
reducing the cash flow available for debt
service payments. Multi-tenanted mortgaged
properties also may experience higher
continuing vacancy rates and greater
volatility in rental income and expenses.
Risks Relating to Loan The effect of mortgage pool loan losses will
Concentration be more severe: (i) if the pool is comprised
of a small number of loans, each with a
relatively large principal amount; or (ii)
if the losses relate to loans that account
for a disproportionately large percentage of
the pool's aggregate principal balance. The
eight largest loans constitute 21.5% of the
Initial Pool Balance. Losses on any of these
loans may have a particularly adverse effect
on the certificates.
Each of the other Mortgage Loans represents
less than 1.2% of the Initial Pool Balance.
A concentration of mortgaged property types
or of Mortgage Loans with the same borrower
or related borrowers also can pose increased
risks. The following property types
represent the indicated percentage of the
Initial Pool Balance:
o multifamily properties represent
30.7%;
o retail properties represent
24.3%;
o industrial properties represent
16.9%;
o office properties represent
13.0%;
o hospitality properties represent
9.1%;
o other types of properties
represent 2.2%;
o mobile home park properties
represent 2.1%; and
o self storage properties
represent 1.8%.
With respect to concentration of borrowers,
eighteen (18) groups of Mortgage Loans (not
including cross-collateralized or single
obligation multi-property Mortgage Loan
groups) are made to the same borrower or
borrowers related through common ownership
and where, in general, the related mortgaged
properties are commonly managed. The three
largest of these groups represent 2.9%, 1.4%
and 1.1% respectively of the Initial Pool
Balance.
Geographic Concentration Concentrations of mortgaged properties in
Entails Risks geographic areas may increase the risk that
adverse economic or other developments or a
natural disaster affecting a particular
region of the country could increase the
frequency and severity of losses on Mortgage
Loans secured by the properties. In recent
periods, several regions of the United
States have experienced significant real
estate downturns. Regional economic declines
or adverse conditions in regional real
estate markets could adversely affect the
income from, and market value of, the
mortgaged properties located in the region.
Other regional factors -- e.g., earthquakes,
floods or hurricanes or changes in
S-26
<PAGE> 27
governmental rules or fiscal policies --
also may adversely affect those mortgaged
properties.
The mortgaged properties are located
throughout 29 states. In particular,
investors should note that approximately
45.6% of the mortgaged properties (based on
the Initial Pool Balance) are located in
California. Mortgaged properties located in
California may be more susceptible to
certain types of special hazards not covered
by insurance (such as earthquakes) than
properties located in other parts of the
country. The Mortgage Loans generally do not
require any borrowers to maintain earthquake
insurance. In addition, 10.9% and 5.9% of
the mortgaged properties (based on the
Initial Pool Balance) are located in Texas
and Illinois, respectively, and
concentrations of mortgaged properties (in
each case, representing less than 5% of the
Initial Pool Balance) also exist in several
other states. See "Description of the
Mortgage Pool" in this Prospectus
Supplement.
Multifamily Properties Have Multifamily properties secure 86 of the
Special Risks Mortgage Loans (representing 30.7% of the
Initial Pool Balance).
A large number of factors may affect the
value and successful operation of a
multifamily property, including:
o the physical attributes of the
apartment building (e.g., its
age, appearance and construction
quality);
o the location of the property;
o the ability of management to
provide adequate maintenance and
insurance;
o the types of services and
amenities provided at the
property;
o the property's reputation;
o the level of mortgage interest
rates (which may encourage
tenants to purchase rather than
rent housing);
o the presence of competing
properties;
o local or national economic
conditions;
o state and local regulations; and
o government assistance/rent
subsidy programs.
Multifamily properties known to have
material concentrations of students secure
six of the Mortgage Loans (representing 1.9%
of the Initial Pool Balance).
Risks Relating to Government Four (4) of the Mortgage Loans (representing
Assisted Properties 1.3% of the Initial Pool Balance) are
secured by multi-family properties believed
to have tenants eligible for rental subsidy
payments under certain federal housing
assistance payment programs, including
Section 8 of United States Housing Act of
1937, as amended. Under that program,
administered by the Department of Housing
and Urban Development, a property must
satisfy certain requirements to qualify for
inclusion in the program. These requirements
relate to, among other things, income
limitations on tenants. The borrower under
these
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Mortgage Loans may be adversely affected if
it or the mortgaged property fails to
qualify for inclusion in the program, if
subsidies thereunder are reduced, or if the
programs are otherwise terminated.
Retail Properties Have Retail properties secure 52 of the Mortgage
Special Risks Loans (representing 24.3% of the Initial
Pool Balance). The quality and success of a
retail property's tenants significantly
affect the property's value. For example, if
the sales of retail tenants were to decline,
rents tied to a percentage of gross sales
may decline and those tenants may be unable
to pay their basic rent or other occupancy
costs.
The presence or absence of an "anchor store"
in a shopping center also can be important
because anchor stores play a key role in
generating customer traffic and making a
center desirable for other tenants.
Consequently, the economic performance of an
anchored retail property will be adversely
affected by:
o an anchor store's failure to
renew its lease;
o termination of an anchor store's
lease;
o the bankruptcy or economic
decline of an anchor store or
self-owned anchor; or
o the cessation of the business of
an anchor store at the shopping
center, even if, as a tenant, it
continues to pay rent.
Certain of the anchor stores are permitted
to cease operating if certain other stores
are not operated at those locations.
Furthermore, certain non-anchor tenants may
also be permitted to terminate their leases
if certain anchor stores are either not
operated or fail to meet certain business
objectives.
Retail properties also face competition from
sources outside a given real estate market.
For example, all of the following compete
with more traditional retail properties for
consumer dollars: factory outlet centers,
discount shopping centers and clubs,
catalogue retailers, home shopping networks,
internet web sites, and telemarketing.
Continued growth of these alternative retail
outlets (which often have lower operating
costs) could adversely affect the rents
collectible at the retail properties
included in the mortgage pool, as well as
the income from, and market value of, the
mortgaged properties. Moreover, additional
competing retail properties may be built in
the areas where the retail properties are
located.
Industrial Properties Have Industrial properties secure 74 of the
Special Risks Mortgage Loans (representing 16.9% of the
Initial Pool Balance). Various factors may
adversely affect the economic performance of
an industrial property, including:
o reduced demand for industrial
space because of a decline in a
particular industry segment;
o a property becoming functionally
obsolete;
o the unavailability of labor
sources;
o changes in access to the
property, energy prices,
strikes, relocation of
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highways or the construction of
additional highways;
o a change in the proximity of
supply sources; and
o environmental hazards.
Office Properties Have Office properties secure 36 of the Mortgage
Special Risks Loans (representing 13.0% of the Initial
Pool Balance).
A large number of factors affect the value
of office properties, including:
o the quality of an office
building's tenants;
o the diversity of an office
building's tenants (or reliance
on a single or dominant tenant);
o the physical attributes of the
building in relation to
competing buildings (e.g., age,
condition, design, location,
access to transportation and
ability to offer certain
amenities, such as sophisticated
building systems);
o the desirability of the area as
a business location; and
o the strength and nature of the
local economy (including labor
costs and quality, tax
environment and quality of life
for employees).
Moreover, the cost of refitting office space
for a new tenant is often higher than the
cost of refitting other types of property.
Hospitality Properties Have Hospitality properties secure 6 of the
Special Risks Mortgage Loans (representing 9.1% of the
Initial Pool Balance). Various factors may
adversely affect the economic performance of
a hotel, including:
o adverse economic and social
conditions, either local,
regional, national or
international (which may limit
the amount that can be charged
for a room and reduce occupancy
levels);
o the construction of competing
hotels or resorts;
o continuing expenditures for
modernizing, refurbishing, and
maintaining existing facilities
prior to the expiration of their
anticipated useful lives;
o a deterioration in the financial
strength or managerial
capabilities of the owner and/or
operator of a hotel; and
o changes in travel patterns,
increases in energy prices,
strikes, relocation of highways
or the construction of
additional highways.
Because hotel rooms generally are rented for
short periods of time, the financial
performance of hotels tends to be affected
by adverse economic conditions and
competition more quickly than are other
types of commercial properties.
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Moreover, the hotel and lodging industry is
generally seasonal in nature. This
seasonality can be expected to cause
periodic fluctuations in a hotel property's
revenues, occupancy levels, room rates and
operating expenses.
Risks Relating to Certain of the hospitality properties are
Affiliation with a Franchise operated as franchises of national hotel
or Hotel Management Company chains or managed by a hotel management
company. The performance of a hotel property
operated as a franchise or by a hotel
management company depends in part on:
(i) the continued existence and
financial strength of the
franchisor or hotel management
company;
(ii) the public perception of the
franchise or hotel chain service
mark; and
(iii) the duration of the franchise
license or management agreement.
The transferability of franchise license
agreements may be restricted. In the event
of a foreclosure, the lender or its agent
may not have the right to use the franchise
license without the franchisor's consent.
Conversely, in the case of certain Mortgage
Loans, the lender may be unable to remove a
franchisor or a hotel management company
that it desires to replace following a
foreclosure.
Further, in the event of a foreclosure, the
Trustee or a purchaser of such mortgaged
property probably would not be entitled to
the rights under any liquor license for the
mortgaged property. Such party would be
required to apply in its own right for such
a license, and we cannot assure you that a
new license could be obtained.
Risks Relating to Certain of the hospitality properties are
Non-Affiliation with a not operated as franchises of national hotel
Franchise or motel chains and therefore do not have
the benefits typically associated with being
part of a chain (including, for example,
reservation systems and marketing).
Tenant Bankruptcy Entails The bankruptcy or insolvency of a major
Risks tenant, or a number of smaller tenants, in
retail and office properties may adversely
affect the income produced by the property.
Under the Bankruptcy Code, a tenant/debtor
has the option of assuming or rejecting any
unexpired lease. If the tenant rejects the
lease, the landlord's claim for breach of
the lease would be a general unsecured claim
against the tenant (absent collateral
securing the claim). The claim would be
limited to the unpaid rent under the lease
for the periods prior to the bankruptcy
petition (or earlier surrender of the leased
premises), plus the rent under the lease for
the greater of one year, or 15% (not to
exceed three years), of the remaining term
of such lease.
Environmental Laws Entail Various environmental laws may make a
Risks current or previous owner or operator of
real property liable for the costs of
removal or remediation of hazardous or toxic
substances on, under or adjacent to such
property. Those laws often impose liability
whether or not the owner or operator knew
of, or was responsible for, the presence of
the hazardous or toxic substances. For
example, certain laws impose liability for
release of asbestos-containing materials
("ACMs") into the air or require the removal
or containment of ACMs. In some states,
contamination of a property may give rise to
a lien on the property to assure payment of
the costs of cleanup. In some states, this
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lien has priority over the lien of a
pre-existing mortgage. Additionally, third
parties may seek recovery from owners or
operators of real properties for personal
injury associated with ACMs or other
exposure to hazardous substances related to
the properties.
The owner's liability for any required
remediation generally is not limited by law
and could accordingly exceed the value of
the property and/or the aggregate assets of
the owner. The presence of hazardous or
toxic substances also may adversely affect
the owner's ability to refinance the
property or to sell the property to a third
party. The presence of, or strong potential
for contamination by, hazardous substances
consequently can have a materially adverse
effect on the value of the property and a
borrower's ability to repay its Mortgage
Loan.
In addition, under certain circumstances, a
lender (such as the trust) could be liable
for the costs of responding to an
environmental hazard. See "Legal Matters" in
the Prospectus.
Environmental Risks Relating All of the mortgaged properties securing the
to Specific Mortgaged Mortgage Loans have been subject to
Properties environmental site assessments (or in some
cases an update of a previous assessment) in
connection with the origination or
acquisition of the loans. The reports of
such environmental 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. We
cannot assure you, however, that the
environmental assessments revealed all
existing or potential environmental risks or
that all adverse environmental conditions
have been completely remediated. Moreover,
we cannot assure you that: (i) future laws,
ordinances or regulations will not impose
any material environmental liability; or
(ii) the current environmental condition of
the mortgaged properties will not be
adversely affected by tenants or by the
condition of land or operations in the
vicinity of the mortgaged properties (such
as underground storage tanks). Environmental
assessments on properties securing 38 of the
Mortgage Loans (representing 20.8% of the
Initial Pool Balance) are more than a year
old as of the Cut-Off Date. In addition,
four (4) such environmental assessments on
Mortgage Loans representing 2.9% of the
Initial Pool Balance were performed more
than a year prior to the origination of the
related Mortgage Loan.
Before the Special Servicer acquires title
to a mortgaged property on behalf of the
trust or assumes operation of the property,
it must obtain an environmental assessment
of the property. This requirement will
decrease the likelihood that the trust will
become liable under any environmental law.
However, this requirement may effectively
preclude foreclosure until a satisfactory
environmental assessment is obtained (or
until any required remedial action is
thereafter taken). There is accordingly some
risk that the mortgaged property will
decline in value while this assessment is
being obtained. Moreover, we cannot assure
you that this requirement will effectively
insulate the trust from potential liability
under environmental laws.
Borrower May Be Unable to Two hundred thirty-four (234) of the
Repay Remaining Principal Mortgage Loans, representing 91.3% of the
Balance on Maturity Date Initial Pool Balance, are expected to have
substantial remaining principal balances
(equal to or greater than 10% of the
original principal balance of each Mortgage
Loan) as of their respective Anticipated
Repayment Dates or stated maturity dates.
One (1) of the Mortgage Loans within this
group, representing 2.9% of the Initial Pool
Balance, is an interest-only loan and does
not provide for any amortization of the
principal balance thereof. We cannot
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assure you that each borrower will have the
ability to repay the principal balance
outstanding on the Anticipated Repayment
Dates or stated maturity dates, as the case
may be. Mortgage Loans with substantial
remaining principal balances at their stated
maturity date (i.e., "balloon loans") or
Anticipated Repayment Date, as the case may
be, involve greater risk than fully
amortizing loans.
A borrower's ability to repay a loan on its
Anticipated Repayment Date or stated
maturity date, as the case may be, typically
will depend upon its ability either to
refinance the loan or to sell the mortgaged
property at a price sufficient to permit
repayment. A borrower's ability to achieve
either of these goals will be affected by a
number of factors, including:
o the availability of, and
competition for, credit for
commercial real estate projects;
o prevailing interest rates;
o the fair market value of the
related mortgaged property;
o the borrower's equity in the
related mortgaged property;
o the borrower's financial
condition;
o the operating history and
occupancy level of the property;
o tax laws; and
o prevailing general and regional
economic conditions.
The availability of funds in the credit
markets fluctuates over time.
We cannot assure you that each borrower will
have the ability to repay the remaining
principal balances on the pertinent date.
Wells Fargo Bank, National Association,
Morgan Stanley Mortgage Capital Inc., GMAC
Commercial Mortgage Corporation and their
respective affiliates are not under any
obligation to refinance any Mortgage Loan.
See "Mortgage Pool Characteristics--Certain
Characteristics of the Mortgage Loans" in
this Prospectus Supplement and "Risk
Factors--Balloon Payments" and "--Obligor
Default" in the Prospectus.
Authority to Effect Other Four (4) of the Mortgage Loans (representing
Borrowings Entails Risks 1.7% of the Initial Pool Balance) permit the
borrower, subject to certain maximum
loan-to-value and minimum debt service
coverage ratio restrictions, to utilize the
mortgaged property as collateral for
subordinated loans. See "Description of the
Mortgage Pool--Certain Terms and
Characteristics of the Mortgage
Loans--Subordinate Financing" in this
Prospectus Supplement. Generally, however,
the borrower must satisfy certain conditions
before such additional indebtedness may be
incurred, such as maximum loan-to-value
tests and the maintenance of minimum debt
service coverage ratios. Substantially all
of the Mortgage Loans also permit the
related borrower to incur limited
indebtedness in the ordinary course of
business.
When a Mortgage Loan borrower (or its
constituent members) also has one or more
other outstanding loans (even if
subordinated or mezzanine loans), the
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<PAGE> 33
trust is subjected to additional risk. The
borrower may have difficulty servicing and
repaying multiple loans. Also, the existence
of another loan generally will make it more
difficult for the borrower to obtain
refinancing of the Mortgage Loan and may
thus jeopardize repayment of the Mortgage
Loan at maturity. Moreover, the need to
service additional debt may reduce the cash
flow available to the borrower to operate
and maintain the mortgaged property.
Additionally, if the borrower (or its
constituent members) defaults on the
Mortgage Loan and/or any other loan, actions
taken by other lenders could impair the
security available to the trust. If a junior
lender files an involuntary bankruptcy
petition against the borrower (or the
borrower files a voluntary petition to stay
enforcement by a junior lender), the trust's
ability to foreclose on the property will be
automatically stayed, and principal and
interest payments might not be made during
the course of the bankruptcy case. The
bankruptcy of a junior lender also may
operate to stay foreclosure by the trust.
Further, if another loan secured by the
mortgaged property is in default, the other
lender may foreclose on the mortgaged
property, absent an agreement to the
contrary, thereby causing a delay in
payments and/or an involuntary repayment of
the Mortgage Loan prior to maturity. The
trust may also be subject to the costs and
administrative burdens of involvement in
foreclosure proceedings or related
litigation.
Bankruptcy Proceedings Under the Bankruptcy Code, the filing of a
Entail Certain Risks bankruptcy petition by or against a borrower
will stay the commencement or continuation
of a foreclosure action. In addition, if a
court determines that the value of the
mortgaged property is less than the
principal balance of the Mortgage Loan it
secures, the court may reduce the amount of
secured indebtedness to the then-current
value of the mortgaged property. Such an
action would make the lender a general
unsecured creditor for the difference
between the then-current value and the
amount of its outstanding mortgage
indebtedness. A bankruptcy court also may:
(i) grant a debtor a reasonable time to cure
a payment default on a Mortgage Loan; (ii)
reduce monthly payments due under a Mortgage
Loan; (iii) change the rate of interest due
on a Mortgage Loan; or (iv) otherwise alter
the Mortgage Loan's repayment schedule.
Additionally, the borrower's trustee or the
borrower, as debtor in possession, has
certain special powers to avoid, subordinate
or disallow debts. In certain circumstances,
the claims of the mortgage lender may be
subordinated to financing obtained by a
debtor-in-possession subsequent to its
bankruptcy.
The filing of a bankruptcy petition will
also stay the lender from enforcing a
borrower's assignment of rents and leases.
The Bankruptcy Code also may interfere with
the Trustee's ability to enforce any lockbox
requirements. The legal proceedings
necessary to resolve these issues can be
time consuming and may significantly delay
the lender's receipt of rents. Rents also
may escape an assignment to the extent they
are used by the borrower to maintain the
mortgaged property or for other court
authorized expenses.
As a result of the foregoing, the Trustee's
recovery with respect to borrowers in
bankruptcy proceedings may be significantly
delayed, and the aggregate amount ultimately
collected may be substantially less than the
amount owed.
In addition, a number of the borrowers under
the Mortgage Loans are limited or general
partnerships. Under certain circumstances,
the bankruptcy of a general partner in
partnership may result in the dissolution of
such
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<PAGE> 34
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.
Reliance on Property The successful operation of a real estate
Managers Entails Risks project depends upon the property manager's
performance and viability. The property
manager is generally responsible for:
o responding to changes in the
local market;
o planning and implementing the
rental structure;
o operating the property and
providing building services;
o managing operating expenses; and
o assuring that maintenance and
capital improvements are carried
out in a timely fashion.
Properties deriving revenues primarily from
short-term sources are generally more
management-intensive than properties leased
to creditworthy tenants under long-term
leases.
A good property manager, by controlling
costs, providing appropriate service to
tenants and seeing to the maintenance of
improvements, can improve cash flow, reduce
vacancy, leasing and repair costs and
preserve building value. On the other hand,
management errors can, in some cases, impair
short-term cash flow and the long-term
viability of an income producing property.
We make no representation or warranty as to
the skills of any present or future
managers. Additionally, we cannot assure you
that the property managers will be in a
financial condition to fulfill their
management responsibilities throughout the
terms of their respective management
agreements.
Risks Relating to Property Except in cases where the mortgaged property
Inspections was newly constructed, licensed engineers or
consultants inspected most of the mortgaged
properties in connection with the
origination of the Mortgage Loans to assess
items such as structure, exterior walls,
roofing, interior construction, mechanical
and electrical systems and general condition
of the site, buildings and other
improvements. However, we cannot assure you
that all conditions requiring repair or
replacement were identified. Engineering
reports by licensed engineers or consultants
were prepared with respect to all of the
mortgaged properties in connection with the
origination of the related Mortgage Loan,
except for five (5) mortgaged properties
representing 3.7% of the Initial Pool
Balance.
Absence or Inadequacy of The mortgaged properties may suffer casualty
Insurance Coverage Entails losses due to risks that are not covered by
Risks insurance or for which insurance coverage is
not available at commercially reasonable
rates. In addition, certain of the mortgaged
properties are located in California and
Texas and in coastal areas of Florida, areas
that have historically been at greater risk
of acts of nature for which adequate
insurance is not generally available (such
as earthquakes, hurricanes and floods). The
Mortgage Loans generally do not require
borrowers to maintain earthquake, hurricane
or flood insurance and we cannot assure you
that borrowers will attempt or be able to
obtain adequate insurance against
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<PAGE> 35
such risks. Moreover, if reconstruction or
major repairs are required following a
casualty, changes in laws that have occurred
since the time of original construction may
materially affect the borrower's ability to
effect such reconstruction or major repairs
or may materially increase the cost thereof.
Limitations of Appraisals An appraisal was conducted in respect of
each mortgaged property in connection with
the origination or acquisition of the
related Mortgage Loan. The resulting
estimates of value are the basis of the
Cut-Off Date Loan-to-Value Ratios referred
to herein. Those estimates represent the
analysis and opinion of the person
performing the appraisal or market analysis
and are not guarantees of present or future
values. Moreover, the values of the
mortgaged properties may have changed
significantly since the appraisal or market
study was performed. In addition, appraisals
seek to establish the amount a typically
motivated buyer would pay a typically
motivated seller. Such amount could be
significantly higher than the amount
obtained from the sale of a mortgaged
property under a distress or liquidation
sale. With the exception of one such
appraisal on a Mortgage Loan representing
0.5% of the Initial Pool Balance, appraisals
on all of the Mortgaged Properties were
performed within a year of the origination
of the related Mortgage Loan. Information
regarding the values of mortgaged properties
available to the depositor as of the Cut-Off
Date is presented for illustrative purposes
only in Appendix I and Appendix II hereto.
See "Description of the Mortgage
Pool--Assessments of Property Value and
Condition--Appraisals" in this Prospectus
Supplement.
Timing of Mortgage Loan As principal payments or prepayments are
Amortization Poses Certain made on the Mortgage Loans, the remaining
Risks mortgage pool may be subject to increased
concentrations of property types, geographic
locations and other pool characteristics of
the Mortgage Loans and the mortgaged
properties, some of which may be
unfavorable. Classes that have a lower
payment priority are more likely to be
exposed to this concentration risk than are
classes with a higher payment priority. This
is so because realized losses are allocated
to the class outstanding at any time with
the lowest payment priority and principal on
the certificates entitled to principal is
generally payable in sequential order (i.e.,
in alphabetical order), with such classes
generally not being entitled to receive
principal until the principal amount of the
preceding class or classes entitled to
receive principal have been retired.
Subordination of Subordinate As described in this Prospectus Supplement,
Offered Certificates the rights of the holders of each class of
subordinate certificates to receive payments
of principal and interest otherwise payable
on their certificates will be subordinated
to such rights of the holders of the more
senior certificates having an earlier
alphabetical class designation. Losses on
the Mortgage Loans will be allocated to the
Class O, Class N, Class M, Class L, Class K,
Class J, Class H, Class G, Class F, Class E,
Class D, Class C and Class B Certificates,
in that order, reducing amounts otherwise
payable to each class. Any remaining losses
would then be allocated to the Class A-1 and
Class A-2 Certificates. See "Description of
the Certificates--Distributions" in this
Prospectus Supplement and "Risk
Factors--Subordination of the Subordinate
Certificates; Effect of Losses on the
Assets" in the Prospectus.
Tax Considerations Relating If the trust acquires a mortgaged property
to Foreclosure pursuant to a foreclosure or deed in lieu of
foreclosure, the special servicer will
generally retain an independent contractor
to operate the property. Any net income from
such operation (other than qualifying "rents
from real property"), or any rental income
based on the
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<PAGE> 36
net profits of a tenant or sub-tenant or
allocable to a non-customary service, will
subject the trust to federal tax on such
income at the highest marginal corporate tax
rate (currently 35%) and possibly state or
local tax. In such event, the net proceeds
available for distribution to
certificateholders will be reduced. The
Special Servicer may permit the trust to
earn "net income from foreclosure property"
that is subject to tax if it determines that
the net after-tax benefit to
certificateholders is greater than under
another method of operating or leasing the
mortgaged property.
State Law Limitations Entail Some states (including California) have laws
Certain Risks prohibiting more than one "judicial action"
to enforce a mortgage obligation. Some
courts have construed the term "judicial
action" broadly. In the case of a Mortgage
Loan secured by mortgaged properties located
in multiple states, the Master Servicer or
Special Servicer may be required to
foreclose first on mortgaged properties
located in states where such "one action"
rules apply (and where non-judicial
foreclosure is permitted) before foreclosing
on properties located in states where
judicial foreclosure is the only permitted
method of foreclosure. As a result, the
ability to realize upon the Mortgage Loans
may be limited by the application of state
laws.
Leasehold Interests Entail Four (4) of the Mortgage Loans (representing
Certain Risks 1.7% of the Initial Pool Balance) are
secured solely by mortgages on borrowers'
leasehold interests under ground leases. In
addition, two Mortgage Loans (representing
1.1% of the Initial Pool Balance), are
secured by mortgages on both the borrower's
leasehold interest in a portion of the
related mortgaged property and the
borrower's fee simple interest in the
remainder of the related mortgaged property.
Leasehold Mortgage Loans are subject to
certain risks not associated with Mortgage
Loans secured by a lien on the fee estate of
the borrower. The most significant of these
risks is that if the borrower's leasehold
were to be terminated upon a lease default,
the leasehold mortgagee would lose its
security. Generally, the related ground
lease requires the lessor to give the
leasehold mortgagee notice of lessee
defaults and an opportunity to cure them,
permits the leasehold estate to be assigned
to the leasehold mortgagee or the purchaser
at a foreclosure sale, and contains certain
other protective provisions typically
included in a "mortgageable" ground lease.
Upon the bankruptcy of a lessor or a lessee
under a ground lease, the debtor entity has
the right to assume or reject the lease. If
a debtor lessor rejects the lease, the
lessee has the right to remain in possession
of its leased premises under the rent under
the lease for the term of the lease
(including renewals). If a debtor
lessee/borrower rejects any or all of its
leases, the leasehold lender could succeed
to the lessee/borrower's position under the
lease only if the lessor specifically grants
the lender such right. As a result, the
lender may lose its security. If both the
lessor and the lessee/borrower are involved
in bankruptcy proceedings, the Trustee may
be unable to enforce the bankrupt
lessee/borrower's obligation to refuse to
treat a ground lease rejected by a bankrupt
lessor as terminated. In such circumstances,
a lease could be terminated notwithstanding
lender protection provisions contained
therein or in the mortgage so that the
lender would lose its security. Some of the
ground leases securing the mortgaged
properties provide that the ground rent
payable thereunder increases during the term
of the lease. These increases may adversely
affect the cash flow and net income of the
borrower from the mortgaged property.
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Risks Relating to The mortgage pool includes ten (10) groups
Enforceability of of Mortgage Loans, the largest of which
Cross-Collateralization collectively represents 3.4% of the Initial
Pool Balance, under which an aggregate
amount of indebtedness is evidenced by a
single obligation and secured by multiple
mortgaged properties or is evidenced by
multiple obligations that are
cross-defaulted and cross-collateralized
among multiple mortgaged properties. See
Appendix II for further information with
respect to such groups.
Cross-collateralization arrangements
involving more than one borrower could be
challenged as fraudulent conveyances by
creditors of the related borrower in an
action brought outside a bankruptcy case or,
if such borrower were to become a debtor in
a bankruptcy case, by the borrower or its
representative. Specifically, a lien granted
by a borrower entity for the benefit of
another borrower or borrowers in a
cross-collateralization arrangement could be
avoided if a court were to determine that:
(i) such borrower entity was insolvent when
it granted the lien, was rendered insolvent
by the granting of the lien or was left with
inadequate capital, or was not able to pay
its debts as they matured; and (ii) such
borrower entity did not receive fair
consideration or reasonably equivalent value
when it allowed its mortgaged property or
properties to be encumbered by a lien
benefiting the other borrowers. Among other
things, a legal challenge to the granting of
the liens may focus on the benefits realized
by such borrower entity from the respective
Mortgage Loan proceeds, as well as the
overall cross-collateralization. If a court
were to conclude that the granting of the
liens was an avoidable fraudulent
conveyance, that court could subordinate all
or part of the pertinent Mortgage Loan to
existing or future indebtedness of that
borrower. The court also could recover
payments made under that Mortgage Loan or
take other actions detrimental to the
holders of the certificates, including,
under certain circumstances, invalidating
the loan or the mortgages that are subject
to such cross-collateralization.
Risks Related to Affiliated Eighteen (18) groups of Mortgage Loans (not
Borrowers including cross-collateralized or single
obligation multi-property Mortgage Loan
groups), the largest of which represents
2.9% of the Initial Pool Balance, were made
to borrowers which are affiliated through
common ownership of partnership or other
equity interests and where, in general, the
related mortgaged properties are commonly
managed.
The bankruptcy or insolvency of any such
borrower or respective affiliate could have
an adverse effect on the operation of all of
the related mortgaged properties and on the
ability of such related mortgaged properties
to produce sufficient cash flow to make
required payments on the related Mortgage
Loans. For example, if a person that owns or
controls several mortgaged properties
experiences financial difficulty at one such
property, it could defer maintenance at one
or more other mortgaged properties in order
to satisfy current expenses with respect to
the mortgaged property experiencing
financial difficulty, or it could attempt to
avert foreclosure by filing a bankruptcy
petition that might have the effect of
interrupting monthly payments for an
indefinite period on all the related
Mortgage Loans. See "Certain Legal Aspects
of the Mortgage Loans and the
Leases-Bankruptcy Laws" in the Prospectus.
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Absence of Attornment In some jurisdictions, if tenant leases are
Provisions Entails Risks subordinate to the liens created by the
mortgage and do not contain attornment
provisions (i.e., provisions requiring the
tenant to recognize a successor owner
following foreclosure as landlord under the
lease), the leases may terminate upon the
transfer of the property to a foreclosing
lender or purchaser at foreclosure. Not all
leases were reviewed to ascertain the
existence of attornment or subordination
provisions. Accordingly, if a mortgaged
property is located in such a jurisdiction
and is leased to one or more desirable
tenants under leases that are subordinate to
the mortgage and do not contain attornment
provisions, such mortgaged property could
experience a further decline in value if
such tenants' leases were terminated. This
is particularly likely if such tenants were
paying above-market rents or could not be
replaced.
If a lease is not subordinate to a mortgage,
the trust will not possess the right to
dispossess the tenant upon foreclosure of
the mortgaged property (unless it has
otherwise agreed with the tenant). If the
lease contains provisions inconsistent with
the mortgage (e.g., provisions relating to
application of insurance proceeds or
condemnation awards) or which could affect
the enforcement of the lender's rights
(e.g., a right of first refusal to purchase
the property), the provisions of the lease
will take precedence over the provisions of
the mortgage. Certain of the leases at the
retail properties included in the trust may
not be subordinate to the related mortgage.
Risks Relating to Litigation There may be pending or threatened legal
proceedings against the borrowers and
managers of the mortgaged properties and
their respective affiliates arising out of
the ordinary business of the borrowers,
managers and affiliates. We cannot assure
you that any such litigation would not have
a material adverse effect on your
certificates.
Risks Relating to Compliance Under the Americans with Disabilities Act of
with Americans with 1990 ("ADA"), all public accommodations are
Disabilities Act required to meet certain federal
requirements related to access and use by
disabled persons. Borrowers may incur costs
complying with the ADA. In addition,
noncompliance could result in the imposition
of fines by the federal government or an
award of damages to private litigants.
Risks Relating to Conflicts The Special Servicer is given considerable
of Interest latitude in determining whether and in what
manner to liquidate or modify defaulted
Mortgage Loans. The Operating Adviser will
have the right to replace the Special
Servicer upon satisfaction of certain
conditions. At any given time, the Operating
Adviser will be controlled generally by the
holders of the most subordinated (or, under
certain circumstances, the next most
subordinated) class of certificates (that
is, the "Controlling Class") outstanding
from time to time, and such holders may have
interests in conflict with those of the
holders of the other certificates. For
instance, the holders of certificates of the
Controlling Class might desire to mitigate
the potential for loss to that class from a
troubled Mortgage Loan by deferring
enforcement in the hope of maximizing future
proceeds. However, the interests of the
trust may be better served by prompt action,
since delay followed by a market downturn
could result in less proceeds to the trust
than would have been realized if earlier
action had been taken.
The Special Servicer or an affiliate may
acquire certain of the most subordinated
certificates (including those of the initial
Controlling Class). Under such
circumstances, the Special Servicer itself
may have interests that conflict with the
interests of the other holders of the
certificates.
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Substantially all of the property managers
for the mortgaged properties (or their
affiliates) manage additional properties,
including properties that may compete with
the mortgaged properties. Affiliates of the
managers, and certain of the managers
themselves, also may own other properties,
including competing properties. The managers
of the mortgaged properties may accordingly
experience conflicts of interest in the
management of such mortgaged properties.
Risks Relating to The yield to maturity on your certificates
Prepayments and Repurchases will depend, in significant part, upon the
rate and timing of principal payments on the
Mortgage Loans. For this purpose, principal
payments include both voluntary prepayments,
if permitted, and involuntary prepayments,
such as prepayments resulting from casualty
or condemnation of mortgaged properties,
defaults and liquidations by borrowers, or
repurchases as a result of a Seller's
breaches of representations and warranties.
The investment performance of your
certificates may vary materially and
adversely from your expectations if the
actual rate of prepayment is higher or lower
than you anticipate.
Voluntary prepayments under certain of the
Mortgage Loans require payment of a
prepayment premium unless the prepayment
occurs within generally two to six months
prior to the Anticipated Repayment Date or
stated maturity date, as the case may be.
See "Description of the Mortgage
Pool--Certain Terms and Characteristics of
the Mortgage Loans--Prepayment Restrictions"
in this Prospectus Supplement. Nevertheless,
we cannot assure you that the related
borrowers will refrain from prepaying their
Mortgage Loans due to the existence of a
prepayment premium. We also cannot assure
you that involuntary prepayments will not
occur. The rate at which voluntary
prepayments occur on the Mortgage Loans will
be affected by a variety of factors,
including:
o the terms of the Mortgage Loans;
o the length of any prepayment
lockout period;
o the level of prevailing interest
rates;
o the availability of mortgage
credit;
o the applicable yield maintenance
charges or prepayment premiums;
o the occurrence of casualties or
natural disasters; and
o economic, demographic, tax or
legal factors.
Generally, no prepayment premium will be
required for prepayments in connection with
a casualty or condemnation. In addition, if
a Seller repurchases any Mortgage Loan from
the trust due to the breach of a
representation or warranty, the repurchase
price paid will be passed through to the
holders of the certificates with the same
effect as if the Mortgage Loan had been
prepaid in part or in full, except that no
prepayment premium will be payable. Such a
repurchase may, therefore, adversely affect
the yield to maturity on your certificates.
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Risk of Uncertain Yield The yield on any certificate will depend on
(i) the price at which such certificate is
purchased by an investor and (ii) the rate,
timing and amount of distributions on such
certificate. The rate, timing and amount of
distributions on any certificate will, in
turn, depend on, among other things:
o the interest rate for such
certificate;
o the rate and timing of principal
payments (including principal
prepayments) and other principal
collections on or in respect of
the Mortgage Loans and the
extent to which such amounts are
to be applied or otherwise
result in a reduction of the
certificate balance of such
certificate;
o the rate, timing and severity of
losses on or in respect of the
Mortgage Loans or unanticipated
expenses of the trust;
o the timing and severity of any
interest shortfalls resulting
from prepayments;
o the timing and severity of any
Appraisal Reductions; and
o the extent to which prepayment
premiums are collected and, in
turn, distributed on such
certificate. See "Description of
the Mortgage Pool," "Description
of the
Certificates-Distributions" and
"Yield, Prepayment and Maturity
Considerations" in this
Prospectus Supplement. See also
"Yield Considerations" and "Risk
Factors-Average Life of
Certificates; Prepayments;
Yields" in the Prospectus.
Risks Relating to Borrower The rate and timing of delinquencies or
Default defaults on the Mortgage Loans will affect
the following aspects of the Offered
Certificates:
o the aggregate amount of
distributions on them;
o their yields to maturity;
o their rates of principal
payments; and
o their weighted average lives.
The rights of holders of each class of
subordinate certificates to receive payments
of principal and interest otherwise payable
on their certificates will be subordinated
to such rights of the holders of the more
senior certificates having an earlier
alphabetical class designation. See
"Description of the
Certificates--Distributions" in this
Prospectus Supplement. Losses on the
Mortgage Loans will be allocated to the
Class O, Class N, Class M, Class L, Class K,
Class J, Class H, Class G, Class F, Class E,
Class D, Class C and Class B Certificates,
in that order, reducing amounts otherwise
payable to each class. Any remaining losses
would then be allocated to the Class A-1 and
Class A-2 Certificates.
If losses on the Mortgage Loans exceed the
aggregate certificate balance of the classes
of certificates subordinated to a particular
class, such class will suffer a loss equal
to the full amount of such excess (up to the
outstanding certificate balance of such
class).
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<PAGE> 41
If you calculate your anticipated yield
based on assumed rates of default and losses
that are lower than the default rate and
losses actually experienced and such losses
are allocable to your certificates, your
actual yield to maturity will be lower than
the assumed yield. Under certain extreme
scenarios, such yield could be negative. In
general, the earlier a loss borne by your
certificates occurs, the greater the effect
on your yield to maturity.
Even if losses on the Mortgage Loans are not
borne by your certificates, those losses may
affect the weighted average life and yield
to maturity of your certificates. This may
be so because those losses cause your
certificates to have a higher percentage
ownership interest in the trust (and
therefore related distributions of principal
payments on the Mortgage Loans) than would
otherwise have been the case. The effect on
the weighted average life and yield to
maturity of your certificates will depend
upon the characteristics of the remaining
Mortgage Loans.
Additionally, delinquencies and defaults on
the Mortgage Loans may significantly delay
the receipt of distributions by you on your
certificates, unless Advances are made to
cover delinquent payments or the
subordination of another class of
certificates fully offsets the effects of
any such delinquency or default.
Also, if the related borrower does not repay
a Hyper-Amortization Loan by its Anticipated
Repayment Date, the effect will be to
increase the weighted average life of your
certificates and may reduce your yield to
maturity.
Risks Relating to Servicing To the extent described in this Prospectus
Compensation Supplement, the Master Servicer, the Special
Servicer, the Trustee or the Fiscal Agent,
as applicable, will be entitled to receive
interest on unreimbursed Advances. This
interest will generally accrue from the date
on which the related Advance is made or the
related expense is incurred through the date
of reimbursement. In addition, under certain
circumstances, including delinquencies in
the payment of principal and interest, a
Mortgage Loan will be serviced by the
Special Servicer, and the Special Servicer
is entitled to compensation for special
servicing activities. The right to receive
interest on Advances and special servicing
compensation is senior to the rights of
certificateholders to receive distributions.
Risks of Limited Liquidity Your certificates will not be listed on any
and Market Value securities exchange, and there is currently
no secondary market for the Offered
Certificates. While Morgan Stanley & Co.
Incorporated, Goldman, Sachs & Co. and
Norwest Investment Services, Inc. each
currently intends to make a secondary market
in the Offered Certificates, none is
obligated to do so. Accordingly, you may not
have an active or liquid secondary market
for your certificates. Lack of liquidity
could result in a substantial decrease in
the market value of your certificates. The
market value of your certificates also may
be affected by many other factors, including
the then-prevailing interest rates.
Furthermore, you should be aware that the
market for securities of the same type as
the certificates has recently been volatile
and offered very limited liquidity.
Risk of Limited Assets The Offered Certificates will represent
interests solely in the assets of the trust
and will not represent an interest in or an
obligation of or any other entity or person.
Distributions on any of the certificates
will depend solely on the amount and timing
of payments on the Mortgage Loans.
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Risks Associated with Year We are aware of the issues associated with
2000 Compliance the programming code in existing computer
systems as the year 2000 approaches. The
"year 2000 problem" is pervasive and
complex; virtually every computer operation
will be affected in some way by the rollover
of the two digit year value to 00. The issue
is whether computer systems will properly
recognize date-sensitive information when
the year changes to 2000. Systems that do
not properly recognize such information
could generate erroneous data or otherwise
fail.
We have been advised by each of the Master
Servicer, the Special Servicer and the
Paying Agent that they are committed either
to (i) implement modifications to their
respective existing systems to the extent
required to cause them to be year 2000
compliant or (ii) acquire computer systems
that are year 2000 compliant, in each case
prior to January 1, 2000. However, we have
not made any independent investigation of
the computer systems of the Master Servicer,
the Special Servicer or the Paying Agent. In
the event that computer problems arise out
of a failure of such efforts to be completed
on time, or in the event that the computer
systems of the Master Servicer, the Special
Servicer or the Paying Agent are not fully
year 2000 compliant, the resulting
disruptions in the collection or
distribution of receipts on the Mortgage
Loans could materially adversely affect your
investment.
Other Risks See "Risk Factors" in the Prospectus for a
description of certain other risks and
special considerations that may be
applicable to your certificates.
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DESCRIPTION OF THE CERTIFICATES
General
The Series 1999-WF1 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will be issued on or about February 25, 1999 (the "Closing
Date") pursuant to a Pooling and Servicing Agreement to be dated as of the
Cut-Off Date (the "Pooling and Servicing Agreement"), among the Depositor, the
Master Servicer, the Special Servicer, the Paying Agent, the Trustee and the
Fiscal Agent. 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 19 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, the Class N Certificates and the Class O 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 Class A, Class B, Class C, Class D, Class E and Class F
Certificates (collectively, the "Offered Certificates") are offered hereby. The
Class X, Class G, Class H, Class J, Class K, Class L, Class M, Class N and Class
O Certificates and the Residual Certificates (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 $25,000 initial Certificate Balance and in any whole dollar
denomination in excess thereof. The Class B, Class C, Class D, Class E and Class
F Certificates will be issued in book-entry form in denominations of $100,000
initial Certificate Balance and in any whole dollar denomination in excess
thereof.
Each Class of Offered Certificates will initially be represented by one or
more global Certificates registered in the name of the nominee of 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
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<PAGE> 44
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.
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.
DTC management is aware that some computer applications, systems, and the
like for processing data (the "DTC Systems") that are dependent upon calendar
dates, including dates before, on, and after January 1, 2000, may encounter
"Year 2000 problems." DTC has informed its Participants and other members of the
financial community that it has developed and is implementing a program so that
the DTC Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provisions of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed its Participants and other members of the
financial community that it is contacting (and will continue to contact) third
party vendors from whom DTC acquires services to: (i) impress upon them the
importance of such services being Year 2000 compliant; and (ii) determine the
extent of their efforts for Year 2000 remediation (and, as appropriate, testing)
of their services. In addition, DTC is in the process of developing such
contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to its Participants and other members of the financial community for
informational purposes only and is not intended to serve as a representation,
warranty, or contract modification of any kind.
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<PAGE> 45
Certificate Balances and Notional Amount
Upon initial issuance, the Class A-1, Class A-2, Class B, Class C, Class
D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class
N and Class O Certificates (collectively, the "Principal Balance Certificates")
will have the following aggregate Certificate Balances (in each case, subject to
a variance of plus or minus 5%):
Approximate Approximate
Initial Aggregate Percent of Initial Percent of
Class Certificate Balance Pool Balance Credit Support
- --------- ------------------- ------------------ --------------
Class A-1 $269,000,000 27.77% 23.00%
Class A-2 476,754,000 49.23% 23.00%
Class B 48,425,000 5.00% 18.00%
Class C 43,583,000 4.50% 13.50%
Class D 9,685,000 1.00% 12.50%
Class E 29,056,000 3.00% 9.50%
Class F 16,949,000 1.75% 7.75%
Classes G-O 75,059,923 7.75% -----------
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").
The aggregate Notional Amount of the Interest Only Certificates will equal
100% of the aggregate Scheduled Principal Balance of the Mortgage Loans
outstanding from time to time. The Interest Only Certificates will have an
initial aggregate Notional Amount of $968,511,922, 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
5.72%, 6.03%, 6.18% and 6.47% 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, Class E and the Class F
Certificates for the initial Distribution Date will equal approximately 6.26%,
6.61% and 6.61% 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
0.38%. For each subsequent Distribution Date, the Pass-Through
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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 0.03%. For each
subsequent Distribution Date, the Pass-Through Rate on the Class F Certificates
will be a per annum rate equal to the Weighted Average Net Mortgage Rate for
such Distribution Date minus 0.03%.
The Pass-Through Rates applicable to the Class G, Class H, Class J, Class
K, Class L, Class M, Class N and Class O Certificates, which are Private
Certificates, for each Distribution Date will each, at all times, be equal to
5.72% per annum; provided, however, that each such Pass-Through Rate will not
exceed the Weighted Average Net Mortgage Rate for such Distribution Date.
The Pass-Through Rate applicable to the Class X Certificates, which are
Private Certificates, for the initial Distribution Date will equal approximately
0.67% 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 Net Mortgage Rate
for 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 "Weighted Average Net Mortgage Rate" or "NWAC 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; provided, further, that, with respect to
each Interest Reserve Loan (as defined in this Prospectus Supplement), (i) the
Mortgage Rate in effect for purposes of the Scheduled Payment due in January of
each year (other than a leap year) and February of each year will be adjusted to
take into account the applicable Interest Reserve Amount and (ii) the Mortgage
Rate in effect for purposes of the Scheduled Payment due in March of each year
(commencing in 2000) will be adjusted to take into account the applicable
Interest Reserve Amount for the preceding January (if applicable) and February.
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.
The "Administrative Cost Rate" for any Mortgage Loan in any month will
equal the sum of the related Servicing Fee and the Trustee Fee for such month
(in each case, expressed as a per annum rate). The Administrative Cost Rate for
each Mortgage Loan is set forth in Appendix II. The Administrative Cost Rate
will be payable on the Scheduled Principal Balance of each Mortgage Loan
outstanding from time to time. The Administrative Cost Rate applicable to a
Mortgage Loan in any month will be determined using the same interest accrual
basis (i.e., a 360-day year consisting of twelve 30-day months or a 360 day year
and actual days elapsed) on which interest accrues under the terms of such
Mortgage Loan.
The "Scheduled Principal Balance" of any Mortgage Loan on any Distribution
Date will generally equal the Cut-Off Date Balance, as defined below, thereof,
reduced (to not less than zero) 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.
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Distributions
General
Distributions on or with respect to the Certificates will be made by the
Paying Agent, 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 March, 1999. Except as otherwise described
below, all such distributions will be made to the persons in whose names the
Certificates are registered at the close of business on the related Record Date
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 Paying Agent 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);
(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);
(iv) amounts deposited in the Certificate Account in error; and
(v) if such Distribution Date occurs during January or February of
any year, the Interest Reserve Amounts with respect to the Interest
Reserve Loans to be deposited into the Interest Reserve Account;
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(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; and
(c) if such Distribution Date occurs during March of any year, the
aggregate of the Interest Reserve Amounts then on deposit in the Interest
Reserve Account in respect of each Interest Reserve Loan.
The "Determination Date" with respect to any Distribution Date will be 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.
The Master Servicer has established and will maintain an "Interest Reserve
Account" in the name of the Trustee for the benefit of the holders of the
Certificates. With respect to the Distribution Date occurring in each January
(other than a leap year) and each February, there will be deposited to the
Interest Reserve Account in respect of each Mortgage Loan bearing interest
computed on an actual/360 basis (the "Interest Reserve Loans") an amount equal
to one day's interest at the related Net Mortgage Rate (without regard to any
adjustment for Interest Reserve Amounts pursuant to the definition thereof) on
its principal balance as of the Due Date in the month in which such Distribution
Date occurs, to the extent a Scheduled Payment or P&I Advance is timely made in
respect thereof for such Due Date (all amounts so deposited with respect to
Scheduled Payments due in any applicable January and February, the "Interest
Reserve Amount"). With respect to the Distribution Date occurring in March of
each year (commencing in 2000), an amount is required to be withdrawn from the
Interest Reserve Account in respect of each Interest Reserve Loan equal to the
related Interest Reserve Amount from the preceding January (if applicable) and
February, and such withdrawn amount is to be included as part of the Available
Distribution Amount for 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 Paying Agent will apply the Available Distribution Amount
(other than Excess Interest and Excess Liquidation Proceeds, if any) for such
date for the following purposes and in the following order of priority:
(i) to the holders of the Class A-1, Class A-2 and Class X Certificates,
the Distributable Certificate Interest Amount in respect of each such Class of
Certificates for such Distribution Date, pro rata in proportion to the
Distributable Certificate Interest Amount payable in respect of each such Class;
(ii) to the holders of the Class A-1 Certificates, the Principal
Distribution Amount for such Distribution Date, until the aggregate Certificate
Balance of the Class A-1 Certificates has been reduced to zero;
(iii) upon payment in full of the aggregate Certificate Balance of the
Class A-1 Certificates, to the holders of the Class A-2 Certificates, the
Principal Distribution Amount for such Distribution Date (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, the Distributable
Certificate Interest Amount in respect of such Class of Certificates for such
Distribution Date;
(vi) upon payment in full of the aggregate Certificate Balance of the
Class A-2 Certificates, to the holders of the Class B Certificates, the
Principal Distribution Amount for such Distribution Date (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;
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(vii) to the holders of the Class B Certificates, to reimburse them for
any Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(viii) to the holders of the Class C Certificates, the Distributable
Certificate Interest Amount in respect of such Class of Certificates for such
Distribution Date;
(ix) upon payment in full of the aggregate Certificate Balance of the
Class B Certificates, to the holders of the Class C Certificates, the Principal
Distribution Amount for such Distribution Date (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;
(x) to the holders of the Class C Certificates, to reimburse them for any
Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(xi) to the holders of the Class D Certificates, the Distributable
Certificate Interest Amount in respect of such Class of Certificates for such
Distribution Date;
(xii) upon payment in full of the aggregate Certificate Balance of the
Class C Certificates, to the holders of the Class D Certificates, the Principal
Distribution Amount for such Distribution Date (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, the Distributable
Certificate Interest Amount in respect of such Class of Certificates for such
Distribution Date;
(xv) upon payment in full of the aggregate Certificate Balance of the
Class D Certificates, to the holders of the Class E Certificates, the Principal
Distribution Amount for such Distribution Date (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;
(xvii) to the holders of the Class F Certificates, the Distributable
Certificate Interest Amount in respect of such Class of Certificates for such
Distribution Date;
(xviii) upon payment in full of the aggregate Certificate Balance of the
Class E Certificates, to the holders of the Class F Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A, Class B, Class C, Class D and Class E
Certificates), until the aggregate Certificate Balance of the Class F
Certificates has been reduced to zero;
(xix) to the holders of the Class F Certificates, to reimburse them for
any Realized Losses previously allocated to such Class of Certificates, plus
interest on such Realized Losses, compounded monthly, at one-twelfth the
applicable Pass-Through Rate; and
(xx) to make payments to the holders of the Private Certificates (other
than the Class X Certificates) as contemplated below.
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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 Offered Certificates and the Class X Certificates, the Paying Agent will
apply the remaining portion, if any, of the Available Distribution Amount for
such date to make payments to the holders of each of the respective Classes of
Private Certificates (other than the Class X Certificates and Residual
Certificates), in alphabetical order of Class designation, in each case for the
following purposes and in the following order of priority (i.e., payments under
clauses (1), (2) and (3) below, in that order, to the holders of the Class G
Certificates, then payments under clauses (1), (2), and (3) below, in that
order, to the holders of the Class H, Class J, Class K, Class L, Class M, Class
N and Class O Certificates):
(1) to pay interest to the holders of the particular Class of
Certificates, up to an amount equal to the Distributable Certificate
Interest Amount in respect of such Class of Certificates for such
Distribution Date;
(2) if the aggregate Certificate Balance of each other Class of
Subordinate Certificates, if any, with an earlier alphabetical Class
designation has been reduced to zero, to pay principal to the
holders of the particular Class of Certificates, up to an amount
equal to the lesser of (a) the then outstanding aggregate
Certificate Balance of such Class of Certificates and (b) the
aggregate of the remaining Principal Distribution Amount for such
Distribution Date; and
(3) to reimburse the holders of the particular Class of Certificates, up
to an amount equal to (a) all Realized Losses and Expense Losses, if
any, previously allocated to such Class of Certificates and for
which no reimbursement has previously been paid, plus (b) all unpaid
interest on such amounts, compounded monthly, at one-twelfth the
Pass-Through Rate of such Classes.
Any portion of the Available Distribution Amount for any Distribution Date
that is not otherwise payable to the holders of REMIC Regular Certificates as
contemplated above, will be paid to the holders of the Class R-I Certificates.
Excess Interest, if any, will be paid to the holders of the Class O
Certificates and Excess Liquidation Proceeds will be deposited to the Reserve
Account.
The "Excess Interest" in respect of each Hyper-Amortization Loan that does
not repay on its Anticipated Repayment Date is the excess, if any, of interest
accrued at the rate of interest applicable to such loan after the Anticipated
Repayment Date over interest accrued at the rate of interest applicable to such
loan before the Anticipated Repayment Date. Excess Interest on a Mortgage Loan
is not due and payable until the Mortgage Loan is paid in full.
"Excess Liquidation Proceeds" are defined to be the excess of (i) proceeds
from the sale or liquidation of a Mortgage Loan or related REO Property, net of
expenses and any related Advances and interest thereon over (ii) the amount that
would have been received if a prepayment in full had been made with respect to
such Mortgage Loan on the date such proceeds were received.
The "Reserve Account" will be an account set up in the name of the Trustee
by the Paying Agent for the deposit of any Excess Liquidation Proceeds. On each
Distribution Date, amounts on deposit in the Reserve Account will be used,
first, to reimburse the holders of the Principal Balance Certificates (in
reverse order of alphabetical Class designation) for any, and to the extent of,
Realized Losses or Expense Losses previously allocated to them; second, to pay
amounts that would otherwise constitute Realized Losses or Expense Losses in the
future; and third,
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upon the reduction of the aggregate Certificate Balance of the Principal Balance
Certificates to zero, to pay any amounts remaining on deposit in such account to
the Special Servicer as additional Special Servicer compensation.
Distributable Certificate Interest Amount
The "Distributable Certificate Interest Amount" 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 the Distributable Certificate Interest Amount payable in respect of such
Class in accordance with the terms of the Pooling and Servicing Agreement and
(b) the portion of the Distributable Certificate Interest Amount for such Class
remaining unpaid as of the close of business on the preceding Distribution Date,
plus one month's interest thereon at the applicable Pass-Through Rate (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 (other than
Excess Liquidation 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").
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
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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 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 (net of amounts allocable to the Servicing Fee)
will be distributed on the following Distribution Date as follows: The holders
of the Class A, Class B, Class C, Class D, Class E and Class F Certificates then
entitled to distributions of principal on such Distribution Date will be
entitled to an aggregate amount (allocable among such Classes, if more than one,
as described below) equal to the lesser of (a) such 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 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
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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 30 days after receipt of notice that
the related borrower has filed a bankruptcy petition or a receiver is appointed
in respect of the related Mortgaged Property, provided that such petition or
appointment remains in effect, (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; provided, that if the Special Servicer is required to obtain an
MAI appraisal of a Mortgaged Property after receipt of the notice described in
(ii) above, such appraisal will be obtained no later than 60 days after receipt
of such notice and an internal valuation will be obtained no later than 30 days
after receipt of such notice. 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, the Trustee or the Fiscal Agent, 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, the
Trustee or the Fiscal Agent, all currently due and unpaid real estate taxes and
assessments, insurance premiums and, if applicable, ground rents in respect of
the related Mortgaged Property or REO Property, as the case may be (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 (and no Appraisal Reduction
will exist as to any Mortgage Loan after it has been paid in full, liquidated,
repurchased or otherwise disposed of). An appraisal for any Mortgage Loan that
has not been brought current for at least three consecutive months (or 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, the Trustee's or the Fiscal Agent's, as the case may be,
obligation to make P&I Advances in respect of the related Mortgage Loan, which
will generally result in a reduction in current distributions 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.
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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 O Certificates, which do not have the benefit of any effective
subordination) of the full amount of interest payable in respect of such Classes
of Certificates on each Distribution Date, and the ultimate receipt by such
holders of principal equal to, in each case, the entire Certificate Balance of
such Class of Certificates. This subordination will be accomplished by the
application of the Available Distribution Amount on each Distribution Date in
accordance with the order of priority described above under "--Application of
the Available Distribution Amount" and by the allocation of Realized Losses and
Expense Losses as described below. No other form of credit support will be
available for the benefit of the holders of the Certificates.
Allocation to the Class A Certificates, for so long as they are
outstanding, of the entire Principal Distribution Amount for each Distribution
Date will generally have the effect of reducing the Certificate Balance of that
Class at a faster rate than would be the case if principal payments were
allocated pro rata to all Classes of Certificates with Certificate Balances.
Thus, as principal is distributed to the holders of the Class A Certificates,
the percentage interest in the Trust Fund evidenced by the Class A Certificates
will be decreased (with a corresponding increase in the percentage interest in
the Trust Fund evidenced by the Subordinate Certificates), thereby increasing,
relative to their respective Certificate Balances, the subordination afforded
the Class A Certificates by the Subordinate Certificates. Following retirement
of the Class A Certificates, the herein described successive allocation to the
Subordinate Certificates, in alphabetical order of Class designation, in each
case until such Class is paid in full, of the entire Principal Distribution
Amount for each Distribution Date will provide a similar benefit to each such
Class of Certificates as regards the relative amount of subordination afforded
thereto by the other Classes of Certificates with later alphabetical Class
designations.
Realized Losses of principal and interest on the Mortgage Loans and
Expense Losses for any Distribution Date (to the extent not previously allocated
and net of amounts, if any, on deposit in the Reserve Account) will be allocated
to the Class O, Class N, Class M, Class L, Class K, Class J, Class H, Class G,
Class F, Class E, Class D, Class C and Class B Certificates, in that order, and
then to the Class A-1 and Class A-2 Certificates and, solely with respect to
Realized Losses and Expense Losses of interest, to the Class X Certificates, pro
rata, in each case reducing principal and/or interest otherwise payable thereon.
"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, Fiscal Agent 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, the Paying Agent 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.
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Any shortfall in the amount of the Distributable Certificate Interest
Amount paid to the Certificateholders of any Class of Certificates on any
Distribution Date will result in Unpaid Interest for such Class which, together
with interest thereon compounded monthly at one-twelfth the applicable
Pass-Through Rate, will be distributable in subsequent periods to the extent of
funds available therefor.
Prepayment Interest Shortfalls and Prepayment Interest Excesses
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 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" in this
Prospectus Supplement. 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 to the Class O, Class N, Class M, Class L, Class K, Class J,
Class H, Class G, Class F, Class E, Class D, Class C, Class B, Class A-1, Class
A-2 and Class X Certificates, pro rata, in each case reducing interest otherwise
payable thereon. The Distributable Certificate Interest Amount in respect of any
Class of REMIC Regular Certificates will be reduced to the extent any Net
Aggregate Prepayment Interest Shortfalls are allocated to such Class of
Certificates. See "Servicing of the Mortgage Loans--Servicing and Other
Compensation and Payment of Expense" in this Prospectus Supplement.
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
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determined that all payments or recoveries with respect thereto have been made),
plus accrued and unpaid interest at the Mortgage Rate (or the Mortgage Rate less
the Servicing Fee Rate if the Master Servicer is the purchaser) to the Due Date
for each Mortgage Loan ending in the Collection Period with respect to which
such purchase occurs, plus unreimbursed Advances, with interest thereon at the
Advance Rate, and the fair market value of any other property remaining in the
Trust Fund; provided, however, that if Wells Fargo or any 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"
in this Prospectus Supplement. Notice of any optional termination must be mailed
by the Trustee to the Certificateholders and the Rating Agencies upon the
receipt of written notice of such optional termination by the Trustee and the
Paying Agent.
Any such termination will have an adverse effect on the yield of any
outstanding Offered Certificates purchased at a premium. See "Yield, Prepayment
And Maturity Considerations" in this Prospectus Supplement.
Advances
P&I Advances
On the business day prior to each Distribution Date, the Master Servicer
will be obligated to make 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 be required in an amount
equal to the Assumed Scheduled Payment, less the related Servicing Fee, subject
to the same conditions and limitations (as described above) that apply to P&I
Advances of other Scheduled Payments.
The Master Servicer will be entitled to interest on P&I Advances, which
interest will accrue at a rate equal to the "Prime Rate" as reported in The Wall
Street Journal from time to time (the "Advance Rate").
P&I Advances (and interest accrued thereon at the Advance Rate) will be
reimbursable (or payable) from recoveries on the related Mortgage Loans and, to
the extent the Master Servicer determines in its sole discretion, exercised in
good faith, that a P&I Advance will not be ultimately recoverable from related
recoveries, from any funds on deposit in the Certificate Account and
Distribution Account. In no event will the Master Servicer be required to make
aggregate P&I Advances with respect to any Mortgage Loan which, when including
the amount of interest accrued thereon at the Advance Rate, equals an amount
greater than the Scheduled Principal Balance (plus all overdue amounts) thereof,
less any Appraisal Reductions with respect thereto. Such right of the Master
Servicer to reimbursement (or payment) out of recoveries will be prior to the
right of the Certificateholders to receive any
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amounts recovered with respect to any Mortgage Loan. If the Master Servicer
fails to make a required P&I Advance, the Trustee is required to make such P&I
Advance, and if the Trustee fails to make any required P&I Advance, the Fiscal
Agent 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 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, and if the Trustee fails to make any such Servicing Advance, the Fiscal
Agent 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 the Paying Agent and setting forth the reasons for such
determination, with copies of appraisals or internal valuations, if any, or
other information that supports such determination. The Master Servicer's
determination of nonrecoverability will be conclusive and binding upon the
Certificateholders, the Trustee and the Fiscal Agent. The Trustee and the Fiscal
Agent shall be entitled to rely conclusively on any determination by the Master
Servicer of nonrecoverability with respect to such Advance and shall have no
obligation (but will be entitled) to make a separate determination of
recoverability.
Reports to Certificateholders; Available Information
Paying Agent Reports
Based solely on information provided in monthly reports prepared by the
Master Servicer and the Special Servicer and delivered to the Trustee and the
Paying Agent, the Paying Agent will be required to provide or make available to
each Certificateholder on each Distribution Date:
(a) A statement setting forth, to the extent applicable:
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(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
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, the Trustee and the Fiscal Agent separately
stated;
(xiii) the amount of any Appraisal Reductions effected during
the related Collection Period on a loan-by-loan basis and the total
Appraisal Reductions in effect as of such Distribution Date; and
(xiv) such other information and in such form as shall be
specified in the Pooling and Servicing Agreement.
(b) A report containing information regarding the Mortgage Loans as
of the end of the related Collection Period, which report will contain
substantially the categories of information regarding
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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.
In the case of information furnished pursuant to subclauses (a)(i),
(a)(ii) and (a)(xi) above, the amounts shall be expressed as a dollar amount per
$1,000 of original actual principal amount of the Certificates for all
Certificates of each applicable Class.
The Paying Agent will make available each month, to any interested party,
the foregoing reports via its website, initially located at
"www.ctslink.com/cmbs" (the "Paying Agent's Website"), electronic bulletin board
and its fax-on-demand service. The Paying Agent'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 Paying
Agent 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 Paying Agent's Website. In
addition, pursuant to the Pooling and Servicing Agreement, the Paying Agent 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 Paying Agent's Website. The Trustee and the Paying
Agent 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 and the Paying Agent may disclaim responsibility for any
information of which it is not the original source.
In connection with providing access to the Paying Agent's Website or
electronic bulletin board, the Paying Agent may require registration and the
acceptance of a disclaimer. The Trustee and the Paying Agent 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 and the Paying Agent, who will deliver such report to the Underwriters,
the Certificateholders, the Depositor and anyone the Depositor or any
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 Paying Agent 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 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.
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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 or the Paying
Agent since the Closing Date;
(iv) all accountants' reports delivered to the Trustee or the Paying Agent
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 officer's certificates and other evidence delivered to
the Trustee or the Paying Agent to support the Master Servicer's determination
that any Advance was not or, if made, would not be, recoverable.
Copies of any and all of the foregoing items and any servicer reports will
be available from the 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 Paying Agent. 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, the Paying Agent
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 Certificate Registrar as of the related Record Date; however, any
Certificate Owner that has delivered to the Certificate Registrar a written
certification, in the form prescribed by the Pooling and Servicing Agreement,
regarding such Certificate Owner's beneficial ownership of Offered Certificates
will be recognized as a Certificateholder for purposes of obtaining the
foregoing information and access.
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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 February, 1999:
The close of business on
February 1 (A) Cut-Off Date.
February 26 (B) Record Date for all Classes of
Certificates.
February 1 - March 10 (C) The Collection Period. The Master
Servicer receives Scheduled Payments
due on February 1 and any Principal
Prepayments made after the Cut-Off
Date and on or prior to March 10.
March 10 (D) Determination Date.
March 12 (E) Master Servicer Remittance Date.
March 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 February 1, 1999 (after deducting principal payments due on or
before such date, whether or not received). Principal payments due on or before
such date, and the accompanying interest payments, are not part of the Trust
Fund.
(B) Distributions on the next Distribution Date will be made to those
persons that are Certificateholders of record on this date. Each subsequent
Record Date will be the last business day of the month preceding the related
Distribution Date.
(C) Any Scheduled Payments due and collected and Principal Prepayments
collected, after the Cut-Off Date and on or prior to March 10, 1999 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 Paying Agent 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 Paying Agent 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.
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The Trustee and the Fiscal Agent
The Trustee
LaSalle National Bank ("LaSalle") will act as Trustee. LaSalle is a
subsidiary of LaSalle National Corporation which is a subsidiary of the Fiscal
Agent. The Trustee is at all times required to be, and will be required to
resign if it fails to be: (i) an institution insured by the FDIC, (ii) a
corporation or national bank, organized and doing business under the laws of the
United States of America or any state thereof, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of not
less than $50,000,000 and subject to supervision or examination by federal or
state authority, and (iii) an institution whose long-term senior unsecured debt
(or that of its fiscal agent, if applicable) is rated not less than "AA" by DCR
and "Aa" by Moody's (or such lower ratings as the Rating Agencies would permit
without an adverse effect on any of the then-current ratings of the
Certificates). The corporate trust office of the Trustee responsible for
administration of the Trust Fund (the "Corporate Trust Office") is located at
135 South LaSalle Street, Suite 1625, Chicago, Illinois 60674, Attention:
Asset-Backed Securities Trust Services Group-- Morgan Stanley Capital I Inc.,
Commercial Mortgage Pass-Through Certificates, Series 1999-WF1. As of June 30,
1998, the Trustee had assets of approximately $19 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 as set forth in the Pooling and Servicing Agreement (the
"Trustee Fee").
The Fiscal Agent
ABN AMRO Bank N.V., a Netherlands banking corporation and the indirect
corporate parent of the Trustee, will act as Fiscal Agent for the Trust Fund and
will be obligated to make any Advance required to be made, and not made, by the
Master Servicer and the Trustee under the Pooling and Servicing Agreement,
provided that the Fiscal Agent will not be obligated to make any Advance that it
determines, in its sole discretion, exercised in good faith, to be a
Nonrecoverable Advance. The Fiscal Agent will be entitled to rely conclusively
on any determination by the Master Servicer, the Special Servicer (solely in the
case of Servicing Advances) or the Trustee that an Advance, if made, would be a
Nonrecoverable Advance. The Fiscal Agent will be entitled to reimbursement for
each Advance made by it in the same manner and to the same extent as, but prior
to, the Master Servicer and the Trustee. See "--Advances" above. The Fiscal
Agent will be entitled to various rights, protections and indemnities similar to
those afforded the Trustee. The Trustee will be responsible for payment of the
compensation of the Fiscal Agent. As of June 30, 1998, the Fiscal Agent had
consolidated assets of approximately $490.8 billion. In the event that LaSalle
shall, for any reason, cease to act as Trustee under the Pooling and Servicing
Agreement, ABN AMRO Bank N.V. likewise shall no longer serve in the capacity of
Fiscal Agent thereunder.
The Paying Agent, Certificate Registrar and Authenticating Agent
Norwest Bank Minnesota, National Association ("Norwest Bank"), will serve
as the paying agent (in such capacity, the "Paying Agent"). In addition, Norwest
Bank Minnesota, National Association will serve as registrar (in such capacity,
the "Certificate Registrar") for purposes of recording and otherwise providing
for the registration of the Offered Certificates and of transfers and exchanges
of the Definitive Certificates, if issued, and as authenticating agent of the
Certificates (in such capacity, the "Authenticating Agent"). Norwest Bank's
principal office is located at Norwest Center, Sixth and Marquette, Minneapolis,
Minnesota 55479-0113. Norwest Bank is an affiliate of the Master Servicer. As
compensation for the performance of its duties as Paying Agent, Certificate
Registrar and Authenticating Agent, Norwest Bank will be paid a portion of the
monthly Trustee Fee as set forth in the Pooling and Servicing Agreement.
Expected Final Distribution Date; Rated Final Distribution Date
The Expected Final 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).
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The Rated Final Distribution Date of each Class of Certificates is the
Distribution Date in November 2031. The "Rated Final Distribution Date" is the
first Distribution Date that follows by at least 36 months the end of the
amortization term of the Mortgage Loan that, as of the Cut-Off Date, has the
longest remaining amortization term.
The ratings 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 Rated Final
Distribution Date, all principal distributions to which they are entitled.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
General
The yield to maturity on the Offered Certificates will be affected by the
price paid by the Certificateholder, the related Pass-Through Rates and the
rate, timing and amount of distributions on such Offered Certificates. The rate,
timing and amount of distributions on any such Certificate will in turn depend
on, among other things, (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 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 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 Amount payable on such Certificate. In addition, the
effective yield to holders of the Offered Certificates will differ from the
yield otherwise produced by the applicable Pass-Through Rate and purchase prices
of such Certificates because interest distributions will not be payable to such
holders until at least the 15th day of the month following the month of accrual
(without any additional distribution of interest or earnings thereon in respect
of such delay).
Pass-Through Rates
The Pass-Through Rates on the Class D, Class E and Class F Certificates
will be based on the Weighted Average Net Mortgage Rate. Accordingly, the yields
on the Class D, Class E and Class F Certificates will be sensitive to changes in
the relative composition of the Mortgage Pool as a result of scheduled
amortization, voluntary prepayments and any unscheduled collections of principal
(and/or any experience of Realized Losses) as a result of liquidations of
Mortgage Loans. In general, the effect of any such changes on such yields and
Pass-Through Rates will be particularly adverse to the extent that Mortgage
Loans with relatively higher Mortgage Rates experience faster rates of such
scheduled amortization, voluntary prepayments and unscheduled collections (or
Realized Losses) than Mortgage Loans with relatively lower Mortgage Rates.
Rate and Timing of Principal Payments
The yield to maturity on any Class of Offered Certificate purchased at a
discount or premium will be affected by the rate and timing of principal
payments made in reduction of the aggregate Certificate Balance of such Class of
Certificates. As described herein, the Principal Distribution Amount for each
Distribution Date will be distributable entirely in respect of the Class A-1
Certificates until the Certificate Balance thereof is reduced to zero, and will
thereafter be distributable entirely in respect of each other Class of Principal
Balance Certificates, in descending alphabetical, and, if applicable, descending
numerical, order of Class designation, in each case until the aggregate
Certificate Balance of such Class of Certificates is, in turn, reduced to zero.
Consequently, the rate and timing of principal payments that are distributed or
otherwise result in reduction of the aggregate Certificate Balance of each Class
of Offered Certificates will be directly related to the rate and timing of
principal payments on or in respect of the Mortgage Loans, which will in turn be
affected by the amortization schedules thereof, the dates on which Balloon
Payments are due and the rate and timing of Principal Prepayments and other
unscheduled collections thereon (including for this purpose, collections made in
connection with liquidations of Mortgage Loans due to defaults, casualties or
condemnations affecting the Mortgaged Properties and purchases of Mortgage Loans
out of the Trust Fund). Prepayments and, assuming the respective maturity dates
therefor have not occurred, liquidations of the Mortgage Loans will result in
distributions on the Certificates of amounts that would otherwise be distributed
over the remaining terms of the Mortgage Loans and will tend to shorten the
weighted average lives of
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the Principal Balance Certificates. Any early termination of the Trust Fund as
described herein under "Description Of the Certificates--Optional Termination"
will also shorten the weighted average lives of those Certificates then
outstanding. Defaults on the Mortgage Loans, particularly at or near their
maturity dates, may result in significant delays in payments of principal on the
Mortgage Loans (and, accordingly, on the Principal Balance Certificates) while
work-outs are negotiated or foreclosures are completed, and such delays will
tend to lengthen the weighted average lives of those Certificates. See
"Servicing of the Mortgage Loans--Mortgage Loan Modifications" in this
Prospectus Supplement.
The extent to which the yield to maturity of any Offered Certificate may
vary from the anticipated yield will depend upon the degree to which such
Certificate is purchased at a discount or premium and when, and to what degree,
payments of principal on the Mortgage Loans in turn are distributed or otherwise
result in a reduction of the aggregate Certificate Balance of its Class. An
investor should consider, in the case of any such Certificate purchased at a
discount, the risk that a slower than anticipated rate of principal payments on
the Mortgage Loans could result in an actual yield to such investor that is
lower than the anticipated yield and, in the case of any Certificate purchased
at a premium, the risk that a faster than anticipated rate of principal payments
on the Mortgage Loans could result in an actual yield to such investor that is
lower than the anticipated yield. In general, if an Offered Certificate is
purchased at a discount or premium, the earlier a payment of principal on the
Mortgage Loans is distributed or otherwise results in reduction of the
Certificate Balance of the related Class, the greater will be the effect on the
yield to maturity of such Certificate. As a result, the effect on an investor's
yield of principal payments on the Mortgage Loans occurring at a rate higher (or
lower) than the rate anticipated by the investor during any particular period
may not be fully offset by a subsequent like reduction (or increase) in the rate
of such principal payments. With respect to the Class A, Class B, Class C, Class
D, Class E and Class F Certificates, the allocation of a portion of collected
Prepayment Premiums to the Certificates as described herein is intended to
mitigate those risks; however, such allocation (if any) may be insufficient to
offset fully the adverse effects on yield that such prepayments may have.
Because the rate of principal payments on the Mortgage Loans will depend on
future events and a variety of factors (as described more fully below), no
assurance can be given as to such rate or the rate of Principal Prepayments in
particular. The Depositor is not aware of any relevant publicly available or
authoritative statistics with respect to the historical prepayment experience of
a large group of mortgage loans comparable to the Mortgage Loans.
Losses and Shortfalls
The yield to holders of the Offered Certificates will also depend on the
extent to which such holders are required to bear the effects of any losses or
shortfalls on the Mortgage Loans. Realized Losses and Expense Losses will
generally be applied to reduce the Certificate Balances of the Principal Balance
Certificates in the following order: first, to the Class O Certificates until
the Certificate Balance thereof has been reduced to zero; then to the other
respective Classes of Principal Balance Certificates, in ascending (that is,
from N to A) alphabetical order of Class designation, until the remaining
Certificate Balance of each such Class of Certificates has been reduced to zero.
Net Aggregate Prepayment Interest Shortfalls will be borne by the holders of the
Class O, Class N, Class M, Class L, Class K, Class J, Class H, Class G, Class F,
Class E, Class D, Class C, Class B, Class A-1, Class A-2 and Class X
Certificates, pro rata in each case reducing interest otherwise payable thereon.
Shortfalls arising from delinquencies and defaults (to the extent the Master
Servicer determines that P&I Advances would be nonrecoverable), Appraisal
Reductions, Expense Losses and Realized Losses generally will result in (among
other things) a shortfall in current distributions of interest payable to the
most subordinate Class of Certificates outstanding.
Certain Relevant Factors
The rate and timing of principal payments and defaults and the severity of
losses on the Mortgage Loans may be affected by a number of factors including,
without limitation, prevailing interest rates, the terms of the Mortgage Loans
(for example, provisions prohibiting Principal Prepayments for certain periods
and/or requiring the payment of Prepayment Premiums, and amortization terms that
require Balloon Payments), the demographics and relative economic vitality of
the areas in which the Mortgaged Properties are located and the general supply
and demand for rental units or comparable commercial space, as applicable, in
such areas, the quality of management of the Mortgaged Properties, the servicing
of the Mortgage Loans, possible changes in tax laws and other opportunities
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for investment. See "Risk Factors and Other Special Considerations" in this
Prospectus Supplement and "Risk Factors" in the Prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
interest rate, the related borrower has an incentive to refinance its mortgage
loan. A requirement that a prepayment be accompanied by a Prepayment Premium may
not provide a sufficient economic disincentive to deter a borrower from
refinancing at a more favorable interest rate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance Mortgaged Properties in order to realize their equity therein, to meet
cash flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
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 Offered Certificates.
The following tables indicate the percent of the initial Certificate
Balance of each Class of Offered Certificates after each of the dates shown and
the corresponding weighted average life of each such Class of the Certificates,
if the Mortgage Pool were to prepay at the indicated levels of CPR, and sets
forth the percentage of the initial Certificate Balance of such Certificates
that would be outstanding after each of the dates shown. The tables below have
also been prepared generally on the basis of the following assumptions
(collectively, the "Maturity Assumptions");
(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 February 25,
1999;
(iii) distributions on the Certificates are made on the 15th day of each
month, commencing in March, 1999;
(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) the Trust Fund does not experience any Expense Losses;
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(vii) no Principal Prepayment on any Mortgage Loan is made during its
Lock-out Period (if any) or during any period when Principal Prepayments on such
Mortgage Loans are required to be accompanied by a Yield Maintenance Premium,
each Mortgage Loan with an Anticipated Repayment Date is paid in full on such
date and otherwise Principal Prepayments are made on the Mortgage Loans at the
indicated levels of CPR (notwithstanding any limitations in the Mortgage Loans
on partial prepayments);
(viii) any Prepayment Premiums are allocated as described elsewhere in
this Prospectus Supplement;
(ix) no Prepayment Interest Shortfalls occur; and
(x) no Mortgage Loan is the subject of a repurchase or substitution by the
Seller and no optional termination of the Trust Fund occurs.
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%
February, 2000 95 95 95 95 95 95
February, 2001 89 89 89 89 89 89
February, 2002 83 83 82 82 82 82
February, 2003 75 75 75 75 75 75
February, 2004 54 54 54 54 54 54
February, 2005 47 47 47 47 47 46
February, 2006 29 28 28 28 28 28
February, 2007 20 20 20 20 20 20
February, 2008 9 8 8 8 8 7
February, 2009 0 0 0 0 0 0
Weighted average life (years) 5.50 5.48 5.47 5.47 5.46 5.44
</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%
February, 2000 100 100 100 100 100 100
February, 2001 100 100 100 100 100 100
February, 2002 100 100 100 100 100 100
February, 2003 100 100 100 100 100 100
February, 2004 100 100 100 100 100 100
February, 2005 100 100 100 100 100 100
February, 2006 100 100 100 100 100 100
February, 2007 100 100 100 100 100 100
February, 2008 100 100 100 100 100 100
February, 2009 0 0 0 0 0 0
Weighted average life (years) 9.38 9.38 9.38 9.38 9.37 9.37
</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%
February, 2000 100 100 100 100 100 100
February, 2001 100 100 100 100 100 100
February, 2002 100 100 100 100 100 100
February, 2003 100 100 100 100 100 100
February, 2004 100 100 100 100 100 100
February, 2005 100 100 100 100 100 100
February, 2006 100 100 100 100 100 100
February, 2007 100 100 100 100 100 100
February, 2008 100 100 100 100 100 100
February, 2009 0 0 0 0 0 0
Weighted average life (years) 9.61 9.61 9.61 9.60 9.60 9.60
</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%
February, 2000 100 100 100 100 100 100
February, 2001 100 100 100 100 100 100
February, 2002 100 100 100 100 100 100
February, 2003 100 100 100 100 100 100
February, 2004 100 100 100 100 100 100
February, 2005 100 100 100 100 100 100
February, 2006 100 100 100 100 100 100
February, 2007 100 100 100 100 100 100
February, 2008 100 100 100 100 100 100
February, 2009 0 0 0 0 0 0
Weighted average life (years) 9.64 9.64 9.64 9.64 9.64 9.64
</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%
February, 2000 100 100 100 100 100 100
February, 2001 100 100 100 100 100 100
February, 2002 100 100 100 100 100 100
February, 2003 100 100 100 100 100 100
February, 2004 100 100 100 100 100 100
February, 2005 100 100 100 100 100 100
February, 2006 100 100 100 100 100 100
February, 2007 100 100 100 100 100 100
February, 2008 100 100 100 100 100 100
February, 2009 0 0 0 0 0 0
Weighted average life (years) 9.64 9.64 9.64 9.64 9.64 9.64
</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%
February, 2000 100 100 100 100 100 100
February, 2001 100 100 100 100 100 100
February, 2002 100 100 100 100 100 100
February, 2003 100 100 100 100 100 100
February, 2004 100 100 100 100 100 100
February, 2005 100 100 100 100 100 100
February, 2006 100 100 100 100 100 100
February, 2007 100 100 100 100 100 100
February, 2008 100 100 100 100 100 100
February, 2009 0 0 0 0 0 0
Weighted average life (years) 9.69 9.68 9.68 9.68 9.68 9.68
</TABLE>
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Percent of Initial Certificate Balance Outstanding for the
Class F Certificates at the Respective Percentages of CPR
<TABLE>
<CAPTION>
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
February, 2000 100 100 100 100 100 100
February, 2001 100 100 100 100 100 100
February, 2002 100 100 100 100 100 100
February, 2003 100 100 100 100 100 100
February, 2004 100 100 100 100 100 100
February, 2005 100 100 100 100 100 100
February, 2006 100 100 100 100 100 100
February, 2007 100 100 100 100 100 100
February, 2008 100 100 100 100 100 100
February, 2009 75 72 71 69 68 66
February, 2010 24 21 20 18 17 15
February, 2011 0 0 0 0 0 0
Weighted average life (years) 10.48 10.43 10.41 10.38 10.36 10.33
</TABLE>
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.
DESCRIPTION OF THE MORTGAGE POOL
General
The Mortgage Pool will consist of 274 fixed-rate mortgage loans (the
"Mortgage Loans" and collectively, the "Mortgage Pool"), with aggregate Cut-Off
Date Balances of $968,511,922 (the "Initial Pool Balance") subject to a
permitted variance of plus or minus 5%. The Cut-Off Date Balances of the
Mortgage Loans range from $317,728 to $41,232,654, and the Mortgage Loans have
an average Cut-Off Date Balance of $3,534,715. 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 significant 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.
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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 six (6)
cases, representing 2.8% 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.
The Mortgaged Properties are located throughout twenty-nine (29) states,
with the largest concentration in California (140 Mortgaged Properties, which
represent security for 45.6% of the Initial Pool Balance). No other state has a
concentration of Mortgaged Properties that represents security for more than
10.9% of the Initial Pool Balance. See Appendix II for a more detailed
description of the Mortgage Loans.
Two hundred and two (202) of the Mortgage Loans, or 60.7% of the Initial
Pool Balance (the "Wells Fargo Loans"), were originated by Wells Fargo.
Seventy-two (72) of the Mortgage Loans or 39.3% 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.
The Mortgage Loans were originated between March 15, 1994 and December 4,
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. Ninety-one (91) of the Mortgage Loans, representing
21.4% of the Initial Pool Balance, accrue interest on the basis of a 360-day
year consisting of twelve 30-day months. One hundred eighty-three (183) of the
Mortgage Loans, representing 78.6% of the Initial Pool Balance, accrue interest
on the basis of the actual number of days elapsed each month in a 360-day year.
Property Types
The Mortgaged Properties consist of the following property types:
o Eighty-six (86) of the Mortgaged Properties, which represent security
for 30.7% of the Initial Pool Balance, are multifamily apartment properties;
o Fifty-two (52) of the Mortgaged Properties, which represent security for
24.3% of the Initial Pool Balance, are retail properties;
o Seventy-four (74) of the Mortgaged Properties, which represent security
for 16.9% of the Initial Pool Balance, are industrial properties;
o Thirty-six (36) of the Mortgaged Properties, which represent security
for 13.0% of the Initial Pool Balance, are office properties;
o Six (6) of the Mortgaged Properties, which represent security for 9.0%
of the Initial Pool Balance, are hospitality properties, three (3) of which are
affiliated with national hotel/motel franchisors;
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o Six (6) of the Mortgaged Properties, which represent security for 2.2%
of the Initial Pool Balance, are categorized as other properties;
o Six (6) of the Mortgaged Properties, which represent security for 2.1%
of the Initial Pool Balance, are mobile home park properties; and
o Eight (8) of the Mortgaged Properties, which represent security for 1.8%
of the Initial Pool Balance, are self-storage properties.
Six (6) of the multifamily apartment properties, which represent security
for 1.9% of the Initial Pool Balance, are known to have material concentrations
of students and four (4) of the multifamily apartment properties, which
represent security for 1.3% of the Initial Pool Balance, are believed to have
tenants eligible for subsidy payment under certain federal housing assistance
programs, including Section 8 of the National Housing Act.
Property Location
The number of Mortgaged Properties, and the approximate percentage of the
Initial Pool Balance represented by such Mortgage Loans, located in the three
states with the highest concentrations of Mortgaged Properties, are as follows:
o One hundred-forty (140) of the Mortgaged Properties, representing 45.6%
of the Initial Pool Balance, are located in California;
o Thirty-two (32) of the Mortgaged Properties, representing 10.9% of the
Initial Pool Balance, are located in Texas; and
o Six (6) of the Mortgaged Properties, representing 5.9% of the Initial
Pool Balance, are located in Illinois.
The remaining Mortgaged Properties are located throughout 24 other states.
None of these states has a concentration of Mortgaged Properties that represents
security for more than 5% of the Initial Pool Balance. See Appendix I hereto.
Due Dates
All of the Mortgage Loans have dates upon which the related Scheduled
Payments are due ("Due Dates") that occur on the first day of each month.
Amortization
Two hundred thirty-four (234) of the Mortgage Loans, which represent 91.3%
of the Initial Pool Balance, have the following amortization features.
o Two hundred thirty-one (231) of the Mortgage Loans, which represent
81.2% of the Initial Pool Balance, provide for Scheduled Payments based on
amortization schedules significantly longer than their terms to maturity (the
"Balloon Loans") and, as a result, will have substantial principal payments due
and payable (each such amount, together with scheduled interest, a "Balloon
Payment") on their respective maturity dates, unless prepaid prior thereto. The
amount of the Balloon Payments on those Mortgage Loans that accrue interest on
the basis of the actual number of days elapsed each month in a 360-day year will
be greater, and the actual amortization terms will be longer, than would be the
case if such Mortgage Loans accrued interest on the basis of a 360-day year
consisting of 30-day months as a result of the application of interest and
principal on such Mortgage Loans over time. See "Risk Factors And Other Special
Considerations--The Mortgage Loans--Balloon Payments."
o Two (2) of the Mortgage Loans, which represent 7.2% of the Initial
Pool Balance, are fully-amortizing but each provides for, among other things,
significant increases in the Mortgage Rate and/or principal
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amortization of the respective Mortgage Loan at a date (the "Anticipated
Repayment Date") prior to stated maturity, thereby providing an increased
incentive to prepay the Mortgage Loan (the "Hyper-Amortization Loans"). As a
result, the Hyper-Amortization Loans will have substantial principal payments
due and payable on their Anticipated Repayment Dates, unless prepaid prior
thereto.
o One (1) Mortgage Loan, representing 2.9% of the Initial Pool Balance, is
an interest-only loan and does not provide for any amortization of the principal
balance thereof.
Prepayment Restrictions; Defeasance Provisions
One hundred fifty-four (154) Mortgage Loans, representing 57.7% of the
Initial Pool Balance, prohibit voluntary principal prepayments for a period
ending on a date determined by the related mortgage note (the "Lock-out Period")
but permit the related borrower (after an initial period of at least two years
following the date of issuance of the Certificates) to defease the loan by
pledging direct, non-callable United States Treasury obligations and obtaining
the release of the mortgaged property from the lien of the mortgage.
Sixty-three (63) Mortgage Loans, representing 25.6% of the Initial Pool
Balance, prohibit voluntary principal prepayments during a Lock-out Period and
thereafter provide for prepayment premiums calculated of the basis of the
greater of a yield maintenance formula and 1% of the amount prepaid.
Fifty-three (53) Mortgage Loans, representing 15.9% of the Initial Pool
Balance, prohibit voluntary principal prepayments during a Lock-out Period and
thereafter permit the related borrower to either (i) defease the loan by
pledging direct, non-callable United States Treasury obligations and obtaining
the release of the mortgaged property from the lien of the mortgage or (ii) pay
a prepayment premium equal to the greater of a yield maintenance formula and 1%
of the amount prepaid; provided that one (1) such Mortgage Loan, representing
1.7% of the Initial Pool Balance, prohibits voluntary principal prepayments for
a Lock-out Period and thereafter permits the borrower to either (i) defease the
loan by pledging direct, non-callable United States Treasury obligations and
obtaining the release of the mortgaged property from the lien of the Mortgage or
(ii) pay a prepayment premium based upon a yield maintenance formula.
Four (4) Mortgage Loans, representing 0.8% of the Initial Pool Balance, do
not provide for Lock-out Periods but impose prepayment premiums in connection
with voluntary principal prepayments made prior to a specified date (which date
is 3 to 6 months prior to maturity). One (1) of such Mortgage Loans,
representing 0.3% of the Initial Pool Balance, permits voluntary principal
prepayments of up to 10% of the original principal balance of the Mortgage Loan
in any calendar year without the imposition of a prepayment premium.
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 transfers of the related Mortgaged Property, subject to
reasonable approval of the proposed transferee by the holder of the Mortgage,
payment of an assumption fee (which may be waived by the Master Servicer or the
Special Servicer, as the case may be, or, if collected, will be paid to the
Master Servicer or the Special Servicer as additional servicing compensation)
and
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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 four (4) groups of Mortgage Loans, the largest
of which collectively represents 1.5% of the Initial Pool Balance, under which
an aggregate amount of indebtedness is evidenced by a single obligation secured
by multiple Mortgaged Properties. Generally, 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 obligation.
In addition, the Mortgage Pool includes six (6) groups of Mortgage Loans,
the largest of which collectively represents 3.4% of the Initial Pool Balance,
under which an aggregate amount of indebtedness is evidenced by multiple
obligations and is secured by mortgages on multiple Mortgaged Properties. Each
such Mortgage Loan is cross-defaulted and cross-collateralized with the other
Mortgage Loan or Loans in such group. See Appendix II for further information
with respect to such groups.
There are also eighteen (18) 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 represents 2.9% of the Initial Pool Balance, where the
borrowers are affiliated through common ownership of partnership or other equity
interests and where, in general, the related Mortgaged Properties are commonly
managed.
Subordinate and Other 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 four (4) of the Mortgage Loans,
representing 1.7% of the Initial Pool Balance, the related borrower may incur
secured subordinate debt. With respect to one of such Mortgage Loans,
representing 1.0% of the Initial Pool Balance, the borrower may only incur
secured subordinate debt, however, subject to the maintenance of certain maximum
combined loan to value and minimum debt-service coverage ratios. 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. Each such appraisal complied
with the real estate appraisal regulations issued jointly by the federal bank
regulatory agencies under the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, as amended. In general, those appraisals represent the
analysis and opinion of the person performing the appraisal and are not
guarantees of, and may not be indicative of, present or future value. There can
be no assurance that another person would not have arrived at a different
valuation, even if such person used the same general approach to and same method
of valuing the property. Moreover, such appraisals sought to establish the
amount of typically motivated buyer would pay a typically motivated seller. Such
amount could be significantly higher than the amount obtained from the sale of a
Mortgaged Property under a distress or liquidation sale. Information regarding
the values of the Mortgaged Properties as of the Cut-Off Date is presented
herein for illustrative purposes only.
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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
Except in cases where the mortgaged property was newly constructed, 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. Engineering reports by
licensed engineers or consultants were prepared with respect to all of the
Mortgaged Properties in connection with the origination of the related Mortgage
Loan, except for five (5) Mortgaged Properties representing 3.7% of the Initial
Pool Balance.
Seismic Review Process
For Wells Fargo Loans, loan requests secured by properties located in
California are screened using a software system to perform a preliminary
probable maximum loss ("PML") analysis. Properties with any one of the following
characteristics are subject to a third party seismic survey performed by an
approved seismic engineering firm: a property with a preliminary PML over 20% of
the estimated replacement cost of the improvements, a loan of more than
$10,000,000, a property located in an Alquist Priolo Zone (a zone surrounding
active California earthquake faults, as established under California law), a
property of three or more stories, a property constructed of non-reinforced
masonry, a property found to exhibit indications of significant seismic stress
during the completion of the property condition assessment or a property located
in a county having special inspection or retrofit requirements.
For the Morgan Stanley Loans, loan requests secured by properties in
California are subject to a third party seismic report.
Generally, any of the Mortgage Loans as to which the property was
estimated to have PML in excess of 20% of the estimated replacement cost would
either be subject to a lower loan-to-value limit at origination, be conditioned
on seismic upgrading, be conditioned on satisfactory earthquake insurance or be
declined.
The Mortgage Pool contains 20 Mortgage Loans, representing 10.6% of the
Initial Pool Balance, that have PMLs in excess of 20% of the estimated
replacement costs of the improvements and are subject to the above-described
mitigants.
Additional Mortgage Loan Information
Each of the tables set forth in Appendix I sets forth certain
characteristics of the Mortgage Pool presented, where applicable, as of the
Cut-Off Date. For a detailed presentation of certain of the characteristics of
the Mortgage Loans and the Mortgaged Properties, on an individual basis, see
Appendix II hereto, and for a brief summary of the significant Mortgage Loans in
the Mortgage Pool, see Appendix III hereto. Certain additional information
regarding the Mortgage Loans is contained in this Prospectus Supplement under
"Risk Factors and
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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 borrowers in preparing
such statements and information. In most cases, borrower
supplied "trailing-12 months" income and/or expense
information was utilized. In certain cases, partial year
operating income data was annualized, with certain adjustments
for items deemed not appropriate to be annualized. In certain
instances, historical expenses were inflated. For purposes of
calculating Underwritable Cash Flow for Mortgage Loans where
leases have been executed by one or more affiliates of the
borrower, the rents under some of such leases have been
adjusted to reflect market rents for similar properties.
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
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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 a
Hyper-Amortization Loan, as the case may be, anticipated to be
outstanding on the date on which the related Balloon Payment
is scheduled to be due or on the Anticipated Repayment Date,
as applicable, (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.
Generally, the loan documents with respect to the Mortgage Loans require
the borrowers to provide the related lender with annual operating statements.
Standard Hazard Insurance
To the extent 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 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
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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 under "Servicing of the Mortgage
Loans--The Master Servicer" in this Prospectus Supplement.
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 the Morgan Stanley 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 Morgan Stanley 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, Wells Fargo Bank, National Association
("Wells Fargo") and Morgan Stanley Mortgage Capital Inc. ("MSMC", and each of
Wells Fargo and MSMC, a "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
Seller with respect to its Mortgage Loans within 90 days following the Closing
Date, and the Trustee will hold the related documents in trust. Within 90 days
following the Closing Date, pursuant to the Pooling and Servicing Agreement, the
assignments with respect to each Mortgage Loan described in clauses (d) and (e)
of the preceding paragraph are to be completed in the name of
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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 certain permitted encumbrances;
(11) the proceeds of the Mortgage Loan have been fully disbursed and there
is no obligation for future advances with respect thereto;
(12) 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
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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 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;
(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 twelve (12) Mortgage Loans
(representing 8.8% of the Initial Pool Balance) sold by it to the
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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, is not properly executed or is defective on its
face (any such omission 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 such breach materially and adversely affects the interests of the
holders of the Certificates (a "Material Document Defect" and a "Material
Breach", respectively), then the Seller will be obligated to cure such Material
Document Defect or Material Breach 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)), (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. If such
Material Document Defect or Material Breach would cause the Mortgage Loan to be
other than a "qualified mortgage" (as defined in the Code), then notwithstanding
the previous sentence, repurchase must occur within 90 days from the date the
Seller was notified of the defect and substitution must occur within the sooner
of (i) 90 days from the date the Seller was notified of the defect or (ii) two
years from the Closing Date.
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
the related Seller is diligently attempting to effect such correction or cure,
then the applicable Permitted Cure Period will be extended for an additional 90
days.
The foregoing obligations of each Seller to cure a Material Document
Defect or a Material Breach in respect of any of its Mortgage Loans or
repurchase or replace the defective Mortgage Loan, will constitute the sole
remedies of the Trustee and the Certificateholders with respect to such Material
Document Defect or Material Breach; and none of the Depositor, the other Seller
or any other person or entity will be obligated to repurchase or replace the
affected Mortgage Loan if the related Seller defaults on its obligation to do
so.
Changes In Mortgage Pool Characteristics
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the time the Offered Certificates are issued. Prior to the
issuance of the Offered Certificates, a Mortgage Loan may be removed from the
Mortgage Pool if the Depositor deems such removal necessary or appropriate or if
it is prepaid. A limited number of other mortgage loans may be included in the
Mortgage Pool prior to the issuance of the Offered Certificates, unless
including such Mortgage
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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.
Each of the Master Servicer and the Special Servicer is permitted to enter
into a sub-servicing agreement with a sub-servicer (a "Sub-Servicer"), and any
such Sub-Servicer will receive a fee for the services specified in such
sub-servicing agreement. However, the Master Servicer or the Special Servicer,
as the case may be, will remain liable for its servicing obligations under the
Pooling and Servicing Agreement. The Master Servicer or the Special Servicer, as
the case may be, will be required to pay any servicing compensation due to any
Sub-Servicer out of its own funds.
The Master Servicer may resign from the obligations and duties imposed on
it under the Pooling and Servicing Agreement, upon 30 days notice to the
Trustee, provided that (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 or downgrade 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
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assume the Special Servicer's duties and obligations and, if the Master Servicer
fails 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 to the Paying Agent and prepare certain reports to the
Trustee and the Paying Agent 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 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
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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" in this Prospectus Supplement.
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. The Master
Servicer is an affiliate of the Paying Agent.
Founded in 1852, Wells Fargo & Company is the holding company for Wells
Fargo. For the years ended December 31, 1998 and 1997, Wells Fargo & Company
reported, on a consolidated basis, total assets of $202.5 billion and $185.7
billion, respectively, and total capital (Tier 1 and 2) of $10.9 billion and
$11.2 billion, respectively. For the years ended December 31, 1998 and 1997,
respectively, Wells Fargo & Company reported, on a consolidated basis, net
income of $1,950 million and $2,499 million, respectively.
On November 2, 1998, the former Wells Fargo & Company merged with WFC
Holdings Corporation, a wholly-owned subsidiary of Norwest Corporation. In
connection with such merger, Norwest Corporation changed its name to Wells Fargo
& Company. Such merger was accounted for as a pooling of interests. The total
assets, total capital and net income indicated above for Wells Fargo & Company
reflect the consolidated assets, capital and income of such merged companies for
the periods set forth above.
As of December 31, 1998, Wells Fargo and its subsidiaries serviced
approximately $25.9 billion of multifamily and commercial mortgage loans,
including approximately $5.4 billion for third parties.
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
or any sub-servicing agreement) late payment charges, assumption fees,
modification fees, extension fees and default interest payable at a rate above
the related Mortgage Rate. However, the amount of the related Servicing Fee (but
not the fees payable to the Special 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" in this Prospectus Supplement. 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.
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Master Servicer Events of Default
An "Event of Default" with respect to the Master Servicer under the
Pooling and Servicing Agreement will include any one of the following events:
(i) any failure by the Master Servicer to remit to the Paying Agent
any payment required to be remitted by the Master Servicer under the terms
of the Pooling and Servicing Agreement, including any required Advances;
(ii) any failure on the part of the Master Servicer duly to observe
or perform in any material respect any other of the duties, covenants or
agreements on the part of the Master Servicer contained in the Pooling and
Servicing Agreement which continues unremedied for a period of 30 days
after the date on which notice shall have been given by the Depositor or
the Trustee; provided, however, that if the Master Servicer certifies to
the Trustee and the Depositor that the Master Servicer is in good faith
attempting to remedy such failure, such cure period will be extended to
the extent necessary to permit the Master Servicer to cure such failure;
provided, further that such cure period may not exceed 90 days;
(iii) any breach of the representations and warranties of the Master
Servicer in the Pooling and Servicing Agreement that materially and
adversely affects the interest of any holder of any Class of Certificates
and that continues unremedied for a period of 30 days after notice shall
have been given to the Master Servicer by the Depositor or the Trustee,
provided, however, that if the Master Servicer certifies to the Trustee
and the Depositor that the Master Servicer is in good faith attempting to
remedy such breach, such cure period will be extended to the extent
necessary to permit the Master Servicer to cure such breach; provided,
further that such cure period may not exceed 90 days; or
(iv) the Trustee shall receive notice from any Rating Agency to the
effect that the continuation of the Master Servicer in such capacity would
result in the downgrade, qualification or withdrawal of any rating then
assigned by such Rating Agency to any Class of Certificates; or
(v) 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.
Rights Upon Event of Default
If an Event of Default described in clauses (ii), (iii) or (iv) above has
occurred, the obligations and responsibilities of the Master Servicer under the
Pooling and Servicing Agreement will terminate on the date which is 60 days
following the date on which the Trustee or Depositor gives written notice to the
Master Servicer that the Master Servicer is terminated. If an Event of Default
described in clauses (i) or (v) above has occurred, the obligations and
responsibilities of the Master Servicer under the Pooling and Servicing
Agreement will terminate immediately upon the date on which the Trustee or the
Depositor gives written notice to the Master Servicer that the Master Servicer
is terminated. After any Event of Default, the Trustee may elect to terminate
the Master Servicer by providing such notice, and shall provide such notice if
holders of Certificates representing more than 25% of the Certificate Balance of
all Certificates so direct the Trustee. On such date, all authority, power and
rights of the Master Servicer under the Pooling and Servicing Agreement, whether
with respect to the Mortgage Loans or otherwise, shall terminate; provided that
in no event shall the termination of the Master Servicer be effective until a
successor servicer shall have succeeded the Master Servicer as successor
servicer, notified the Master Servicer of such designation, and such successor
servicer shall have assumed the Master Servicer's obligations and
responsibilities with respect to the Mortgage Loans, as set forth in an
agreement substantially in the form of the Pooling and Servicing Agreement. The
Trustee may not succeed the Master Servicer as servicer until and unless it has
satisfied certain provisions specified in the Pooling and Servicing Agreement.
However, if the Master Servicer is terminated as a result of an Event of Default
described in clause (v) of the definition thereof, the Trustee shall act as
successor servicer immediately and shall use its best efforts to either satisfy
the conditions specified in the Pooling and Servicing Agreement or transfer the
duties of the Master Servicer to a successor servicer who has satisfied such
conditions.
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The Special Servicer
The initial Special Servicer will be GMAC Commercial Mortgage Corporation
(the "Special Servicer"). The Special Servicer will oversee the resolution of
Specially Serviced Mortgage Loans, act as disposition manager of REO Properties
acquired on behalf of the Trust Fund through foreclosure or deed in lieu of
foreclosure, maintain insurance with respect to REO Properties and provide
monthly reports to the Master Servicer, the Trustee and the Paying Agent. As of
June 30, 1998, the Special Servicer was responsible for performing certain
servicing functions with respect to commercial and multifamily loans with an
aggregate principal balance of approximately $46 billion. 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 650 Dresher Road, Horsham, Pennsylvania 19044.
The information set forth herein concerning the Special Servicer has been
provided by the Special Servicer. 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; (ii) a fee (the "Workout Fee"), payable
with respect to any Rehabilitated Mortgage Loan, equal to the product of (x)
1.0% and (y) the amount of each collection of interest and principal received on
such Mortgage Loan for so long as it remains a Rehabilitated Mortgage Loan; and
(iii) a fee (the "Liquidation Fee") equal to the product of (x) 1.0% and (y) the
related Liquidation Proceeds (collectively, such fees payable to the Special
Servicer, the "Special Servicer Compensation"). The Workout Fee with respect to
any Rehabilitated Mortgage Loan will cease to be payable if such loan again
becomes a Specially Serviced Mortgage Loan or if the related Mortgaged Property
becomes an REO Property. The Special Servicer is also permitted to retain, in
general, certain assumption fees, modification fees and extension fees collected
on Specially Serviced Mortgage Loans, certain borrower-paid fees, investment
income earned on amounts on deposit in any accounts maintained for REO Property
collections, and other charges specified in the Pooling and Servicing Agreement.
The Special Servicing Fee, the Liquidation Fee and the Workout Fee will be
obligations of the Trust Fund and will represent Expense Losses. The Special
Servicer Compensation will be payable in addition to the Servicing Fee payable
to the Master Servicer. In addition, the Special Servicer will be entitled to
all assumption fees received in connection with any Specially Serviced Mortgage
Loan and 50% of any other assumption fees. The Special Servicer will be entitled
to approve assumptions with respect to all Mortgage Loans.
As described in this Prospectus Supplement under "--The Operating
Adviser," the Operating Adviser will have the right to receive notification of
certain actions of the Special Servicer, subject to the limitations described
herein.
Termination of Special Servicer
The Trustee may terminate the Special Servicer due to (i) any failure by
the Special Servicer to remit to the Paying Agent 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
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Certificates and that continues unremedied for a period of 30 days after the
date on which notice of such breach, requiring the same to be remedied, shall
have been given to the Special Servicer by 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 or withdrawal 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 or withdrawal 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 receive notification
from the Special Servicer in regard to certain actions. The Special Servicer
will be required to notify the Operating Adviser of, among other things, (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 in this Prospectus
Supplement 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. In addition, subject to the satisfaction of
certain conditions, the Operating Adviser will have the right to direct the
Trustee to remove the Special Servicer at any time upon the appointment and
acceptance of such appointment by a successor Special Servicer appointed by the
Operating Adviser; provided that, prior to the effectiveness of any such
appointment the Trustee shall have received a letter from each Rating Agency to
the effect that such appointment would not result in a downgrade or withdrawal
in any rating then assigned to any Class of Certificates.
The "Controlling Class" will be the most subordinate Class of Subordinate
Certificates outstanding at any time of determination; provided, however, that
if the aggregate Certificate Balance of such Class of Certificates is less than
25% of the initial aggregate Certificate Balance of such Class, 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, based upon a written notice from the
Certificate Registrar, that the Controlling Class has changed. After such
receipt or determination, the Trustee is required to call a meeting of the
holders of the Controlling Class (which may be held by telephone) in the manner
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.
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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. A "Money Term" means with respect to any
Mortgage Loan, the maturity date, Mortgage Rate, principal balance, amortization
term or payment frequency thereof or any provision thereof requiring the payment
of a Prepayment Premium, Yield Maintenance Premium or Percentage Premium in
connection with a Principal Prepayment (but shall not include late fees or
default interest provisions).
Subject to any restrictions applicable to REMICs, the Special Servicer
will be permitted to enter into a modification, waiver or amendment of the terms
of any Specially Serviced Mortgage Loan, including any modification, waiver or
amendment to:
(i) reduce the amounts owing under any Specially Serviced Mortgage Loan by
forgiving principal, accrued interest and/or any Prepayment Premium;
(ii) reduce the amount of the 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 and the Paying Agent.
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 Rated Final 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
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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 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 that forgive principal or interest of a Mortgage Loan will
result in Realized Losses on such Mortgage Loan and such Realized Losses will be
allocated among the various Classes of Certificates in the manner described
under "Description of the Certificates--Distributions--Subordination; Allocation
of Losses and Certain Expenses" in this Prospectus Supplement.
The modification of a Mortgage Loan may tend to reduce prepayments by
avoiding liquidations and therefore may extend the weighted average life of the
Certificates beyond that which might otherwise be the case. See "Yield,
Prepayment and Maturity Considerations" in this Prospectus Supplement.
Sale of Defaulted Mortgage Loans and REO Properties
The Special Servicer may, with notification to the Operating Adviser,
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, the Trustee and the Paying
Agent 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 notification to 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 notification to the Operating
Adviser and in accordance with the Pooling and Servicing Agreement, institute
foreclosure proceedings, exercise any power of sale contained in any Mortgage,
accept a deed in lieu of foreclosure or otherwise acquire title to a Mortgaged
Property by operation of law or otherwise, if such action is consistent with the
Servicing Standard and a default on the related Mortgage Loan has occurred but
subject, in all cases, to certain limitations concerning environmental matters
and, in certain cases, the receipt of an opinion of counsel relating to certain
REMIC requirements.
If any Mortgaged Property is acquired as described in the preceding
paragraph, the Special Servicer is required to sell the REO Property within
three years after the end of the year in which it was acquired, or any
applicable extension period, unless the Special Servicer has 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
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such REO Property to qualify as "foreclosure property" under the REMIC
provisions of the Code. In addition, the Special Servicer is required to use its
best efforts to sell any REO Property prior to the Rated Final Distribution
Date.
In general, the Special Servicer will be obligated to, or may contract
with a third party to, operate and manage any Mortgaged Property acquired as REO
Property in a manner that would, to the extent commercially feasible, maximize
the Trust Fund's net after-tax proceeds from such property. After the Special
Servicer reviews the operation of such property and consults with the Trustee to
determine the Trust Fund's federal income tax reporting position with respect to
income it is anticipated that the Trust Fund would derive from such property,
the Special Servicer could determine that it would not be commercially feasible
to manage and operate such property in a manner that would avoid the imposition
of a tax on "net income from foreclosure property" within the meaning of the
REMIC provisions 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.
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The Offered Certificates will be "real estate assets" within the meaning
of Section 856(c)(4)(A) (formerly, Section 856(c)(5)(A)) and 856(c)(5)(B)
(formerly, Section 856(c)(6)(B)) of the Code in the same proportion that the
assets of the Trust Fund underlying such Certificates would be so treated. In
addition, interest (including original issue discount, if any) on the Offered
Certificates will be interest described in Section 856(c)(3)(B) of the Code to
the extent that such Certificates are treated as "real estate assets" under
Section 856(c)(4)(A) of the Code. Moreover, the Offered Certificates will be
"qualified mortgages" under Section 860G(a)(3) of the Code if transferred to
another REMIC on its start-up day in exchange for regular or residual interests
therein. Offered Certificates also will qualify for treatment as "permitted
assets," within the meaning of Section 860L(c)(1)(G) of the Code, of a financial
asset securitization investment trust (a "FASIT") generally in the same
proportion as the assets of the Trust Fund would be so treated, and those
Offered Certificates held by certain financial institution will constitute
"evidence of indebtedness" within the meaning of Section 582(c)(1) of the Code.
The Offered Certificates will be treated as assets described in Section
7701(a)(19)(C)(v) of the Code generally only to the extent that the Mortgage
Loans secured by mortgages on multifamily properties are a percentage of the
principal balance of the Mortgage Pool. The percentage of such Mortgage Loans
included in the initial principal balance of the Mortgage Pool is 30.7%. The
Small Business Job Protection Act of 1996, as part of the repeal of the bad debt
reserve method for thrift institutions, repealed the application of Section
593(d) to any taxable year beginning after December 31, 1995. See "Description
of the Mortgage Pool" in this Prospectus Supplement and "Certain Federal Income
Tax Consequences--REMICs" in the Prospectus.
Original Issue Discount and Premium
The Class may be and the other Offered Certificates will not be treated as
having been issued with "original issue discount" ("OID") for federal income tax
reporting purposes. Certain Classes of Offered Certificates may be issued with
premium depending on the price at which such Classes of Certificates are 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 (and the further
assumption that each Hyper-Amortization Loan is repaid in full on its
Anticipated Repayment Date). 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. 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.
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Certain Classes of Offered Certificates may be treated for federal income
tax purposes as having been issued at a premium. Whether any holder of any such
Class of Certificates will be treated as holding a Certificate with amortizable
bond premium will depend on such Certificateholder's purchase price and the
distributions remaining to be made on such Certificate at the time of its
acquisition by such Certificateholder. On December 31, 1997, the IRS published
in the Federal Register final regulations on the amortization of bond premium.
Those regulations (a) do not apply to regular interests in a REMIC such as the
Offered Certificates, and (b) state that they are intended to create no
inference concerning the amortization of premium of such instruments. Holders of
each such Class of Certificates should consult their tax advisors regarding the
possibility of making an election to amortize such premium. See "Certain Federal
Income Tax Consequences--REMICs--Taxation of Owners of REMIC Regular
Certificates--Premium" in the Prospectus.
To the extent that any Offered Certificate is purchased in this offering
or in the secondary market at not more than a de minimis discount, as defined in
the Prospectus, a holder who receives a payment that is included in the stated
redemption price at maturity (generally, the principal amount) of such
Certificate will recognize gain equal to the excess, if any, of the amount of
the payment over an allocable portion of the holder's adjusted basis in the
Offered Certificate. Such allocable portion of the holder's adjusted basis will
be based upon the proportion that such payment of stated redemption price bears
to the total remaining stated redemption price at maturity. Immediately before
such payment is made, of such Certificate. See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates--Original
Issue Discount and Premium" and "--Sale Exchange or Redemption" in the
Prospectus.
The OID Regulations in some circumstances permit the holder of a debt
instrument to recognize original issue discount under a method that differs from
that used by the issuer. Accordingly, it is possible that holders of Offered
Certificates issued with original issue discount may be able to select a method
for recognizing original issue discount that differs from that used by the
Paying Agent in preparing reports to Certificateholders and the IRS. Prospective
purchasers of Offered Certificates issued with original issue discount are
advised to consult their tax advisors concerning the treatment of such
Certificates.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to the holders of each Class of Certificates entitled thereto as
described under "Description of the Certificates--Distributions--Distributions
of Prepayment Premiums" in this Prospectus Supplement. It is not entirely clear
under the Code when the amount of a Prepayment Premium should be taxed to the
holders of a Class of Certificates entitled to a Prepayment Premium. For federal
income tax information reporting purposes, Prepayment Premiums will be treated
as income to the holders of a Class of Certificates entitled to Prepayment
Premiums only after the Master Servicer's actual receipt of a Prepayment Premium
to which the holders of such Class of Certificates is entitled under the terms
of the Pooling and Servicing Agreement, rather than including projected
Prepayment Premiums in the determination of a Certificateholder's projected
constant yield to maturity. It appears that Prepayment Premiums are treated as
ordinary income rather than capital gain. However, the timing and
characterization of such income is not entirely clear and Certificateholders
should consult their tax advisors concerning the treatment of Prepayment
Premiums.
Additional Considerations
The Special Servicer is authorized, under certain circumstances in which
doing so is consistent with maximizing the Trust Fund's net after-tax proceeds
from an REO Property, to incur taxes on the Trust Fund in connection with the
operation of such REO Property. Any such taxes imposed on the Trust Fund would
reduce the amount distributable to Certificateholders. See "Servicing of the
Mortgage Loans--Foreclosure" in this Prospectus Supplement.
Federal income tax information reporting duties with respect to the
Offered Certificates and REMIC I, REMIC II and REMIC III will be the obligation
of the Paying Agent, 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.
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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 45.6% of the Initial
Pool Balance) which is general in nature. This summary does not purport to be
complete and is qualified in its entirety by reference to the applicable federal
and state laws governing the Mortgage Loans.
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 Fiscal Agent, the Paying Agent, 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
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the Code) could arise if Certificates were acquired by, or with "plan assets"
of, a Plan with respect to which any such person is a Party in Interest.
In addition, an insurance company proposing to acquire or hold the
Subordinate Certificates with assets of its general account should consider the
extent to which such acquisition or holding would be subject to the requirements
of ERISA and Section 4975 of the Code under John Hancock Mutual Life Insurance
Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993), and Section 401(c) of
ERISA, as amended by the Small Business Job Protection Act of 1996, Public Law
No. 104-188, and subsequent DOL and judicial guidance. See "--Insurance Company
General Accounts" below.
Special Exemption Applicable to Class A Certificates
With respect to the acquisition and holding of Class A Certificates, the
DOL has granted to the Underwriters individual prohibited transaction exemptions
(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
IBCA, Inc., Moody's 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 Class A Certificates by Plans or persons acting on behalf of or
with "plan assets" of Plans, and that all conditions of the
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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.
Because the characteristics of the Class B, Class C, Class D, Class E and
Class F Certificates do not meet the requirements of the Exemptions, the
purchase or holding of such Certificates by, on behalf of or with "plan assets"
of any Plan may result in a non-exempt prohibited transaction or the imposition
of excise taxes or civil penalties under ERISA and/or Section 4975 of the Code.
Accordingly, such Certificates may not be purchased by, transferred to or held
by a Plan or any person using "plan assets" of any Plan to effect such
acquisition or holding. Each person that acquires or holds any Class B, Class C,
Class D, Class E or Class F Certificate shall be deemed to have represented and
warranted to the Depositor, the Trustee, the Paying Agent and the Master
Servicer that it satisfies the foregoing limitation, provided that an insurance
company investing solely assets of its general account may acquire and hold such
Certificates subject to the limitations described in "--Insurance Company
General Accounts" below.
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 Class B,
Class C, Class D, Class E or Class F Certificate shall be deemed to have
represented and warranted to the Depositor, the Trustee, the Paying Agent and
the Master Servicer that (i) such acquisition and holding is permissible under
applicable law, will not constitute or result in a non-exempt prohibited
transaction under ERISA or Section 4975 of the Code, and will not subject the
Depositor, the Trustee, the Paying Agent or the Master Servicer to any
obligation in addition to those undertaken in the Pooling and Servicing
Agreement, and (ii) 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.
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
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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, Goldman, Sachs & Co. and Norwest Investment Services, 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 of
each Class of Offered Certificates set forth below.
<TABLE>
<CAPTION>
Underwriter Class A-1 Class A-2 Class B Class C Class D Class E Class F
- ----------- --------- --------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Morgan Stanley
& Co. Incorporated
Goldman, Sachs & Co.
Norwest Investment
Services, Inc.
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 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.
S-96
<PAGE> 97
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 February 25, 1999, which
is the business day following the date of pricing of the Certificates. Under
Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, trades in the
secondary market generally are required to settle in three business days, unless
the parties to any such trade expressly agree otherwise. Accordingly, purchasers
who wish to trade Offered Certificates in the secondary market prior to such
delivery should specify a longer settlement cycle, or should refrain from
specifying a shorter settlement cycle, to the extent that failing to do so would
result in a settlement date that is earlier than the date of delivery of such
Offered Certificates.
The Underwriters and any dealers that participate with the Underwriters in
the distribution of the Offered Certificates may be deemed to be underwriters,
and any discounts or commissions received by them and any profit on the resale
of such Classes of Offered Certificates by them may be deemed to be underwriting
discounts or commissions, under the Securities Act of 1933, as amended.
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.
RATINGS
It is a condition of the issuance of the Offered Certificates that they
receive the following credit ratings from Duff & Phelps Credit Rating Co.
("DCR") and Moody's Investors Service, Inc. ("Moody's," and collectively, the
"Rating Agencies"):
<TABLE>
<CAPTION>
CLASS DCR Moody's
- ----- --- -------
<S> <C> <C>
Class A-1................................... AAA Aaa
Class A-2................................... AAA Aaa
Class B..................................... AA Aa2
Class C..................................... A A2
Class D..................................... A- A3
Class E..................................... BBB Baa2
Class F..................................... BBB- NR
</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 distribution date in November 2031 (the
S-97
<PAGE> 98
"Rated Final Distribution Date"). That date is the first Distribution Date that
follows by at least 36 months the end of the amortization term of the Mortgage
Loan that, as of the Cut-Off Date, has the longest remaining amortization term.
The ratings on the Offered Certificates should be evaluated independently from
similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency.
The ratings of the Certificates do not represent any assessment of (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, (iii) whether and to what extent Prepayment
Premiums or default interest will be received or (iv) the allocation of Net
Aggregate Prepayment Interest Shortfalls. A security rating does not represent
any assessment of the yield to maturity that investors may experience. In
general, the ratings thus address credit risk and not prepayment risk.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating to any Class
thereof and, if so, what such rating would be. A rating assigned to any Class of
Offered Certificates by a rating agency that has not been requested by the
Depositor to do so may be lower than the ratings assigned thereto at the request
of the Depositor.
S-98
<PAGE> 99
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
Page(s) on which
term is defined
in the Prospectus
Term Supplement
- ---- -----------------
Accrued Certificate Interest............................................S-51
Administrative Cost Rate................................................S-46
Advance Rate............................................................S-56
Advances................................................................S-57
Anticipated Repayment Date........................................S-17, S-73
Appraisal Event.........................................................S-53
Appraisal Reduction.....................................................S-53
Assumed Scheduled Payment...............................................S-52
Authenticating Agent....................................................S-62
Available Distribution Amount...........................................S-47
Balloon LTV.............................................................S-77
Balloon LTV Ratio.......................................................S-77
CEDEL.............................................................S-21, S-44
Certificate Balance.....................................................S-45
Certificate Owner.......................................................S-43
Certificate Registrar...................................................S-62
Certificateholders......................................................S-43
Certificates............................................................S-43
Class...................................................................S-43
Class A Certificates....................................................S-43
Closing Date............................................................S-43
Compensating Interest Payment...........................................S-55
Controlling Class.......................................................S-87
Corporate Trust Office..................................................S-62
Debt Service Coverage Ratios............................................S-76
Definitive Certificate..................................................S-43
Discount Rate...........................................................S-52
Distributable Certificate Interest Amount...............................S-51
Distribution Date.......................................................S-47
Document Defect.........................................................S-81
DOL.....................................................................S-93
DOL Regulation..........................................................S-93
DSCR....................................................................S-76
DTC...............................................................S-21, S-43
Due Dates...............................................................S-72
Euroclear.........................................................S-21, S-44
Excess Interest.........................................................S-50
Excess Liquidation Proceeds.............................................S-50
Expense Losses..........................................................S-54
FASIT...................................................................S-91
Hyper-Amortization Date.................................................S-73
Hyper-Amortization Loans..........................................S-17, S-73
Initial Pool Balance.....................................................S-9
Insurance Proceeds......................................................S-51
Interest Accrual Period.................................................S-51
Interest Only Certificates..............................................S-43
Interest Reserve Account................................................S-48
Interest Reserve Amount.................................................S-48
Interest Reserve Loans..................................................S-48
S-99
<PAGE> 100
LaSalle.................................................................S-62
Liquidation Fee.........................................................S-86
Liquidation Proceeds....................................................S-51
Loan-to-Value...........................................................S-77
Lock-out Period...................................................S-17, S-73
LTV.....................................................................S-77
Material Breach.........................................................S-81
Material Document Defect................................................S-81
Money Term..............................................................S-88
Morgan Stanley Loans....................................................S-71
Mortgage................................................................S-71
Mortgage File...........................................................S-78
Mortgage Loan Purchase Agreement........................................S-71
Mortgage Loans..........................................................S-70
Mortgage Note...........................................................S-71
Mortgaged Property......................................................S-71
MSMC....................................................................S-78
Net Aggregate Prepayment Interest Shortfall.............................S-55
Net Mortgage Rate.......................................................S-46
Non-30/360 Loan.........................................................S-46
Norwest Bank............................................................S-62
Notional Amount.........................................................S-45
NWAC Rate...............................................................S-11
Offered Certificates..............................................S-10, S-43
OID.....................................................................S-91
Operating Adviser.......................................................S-87
P&I Advance.......................................................S-19, S-56
Participants............................................................S-43
Parties in Interest.....................................................S-93
Pass-Through Rate.......................................................S-45
Paying Agent............................................................S-62
Paying Agent's Website..................................................S-59
Percentage Interest.....................................................S-47
Permitted Cure Period...................................................S-81
Plans...................................................................S-93
Prepayment Interest Excess..............................................S-55
Prepayment Interest Shortfall...........................................S-55
Principal Balance Certificates..........................................S-45
Principal Distribution Amount.....................................S-12, S-51
Principal Prepayments...................................................S-51
Private Certificates..............................................S-10, S-43
PTCE....................................................................S-95
Purchase Price..........................................................S-81
Qualifying Substitute Mortgage Loan.....................................S-81
Rated Final Distribution Date...........................................S-98
Realized Losses.........................................................S-54
Record Date.............................................................S-47
Rehabilitated Mortgage Loan.............................................S-83
REMIC Regular Certificates..............................................S-43
REO Income..............................................................S-51
REO Property......................................................S-43, S-83
REO Tax.................................................................S-90
Reserve Account.........................................................S-50
Residual Certificates...................................................S-43
Scheduled Payment.......................................................S-51
Scheduled Principal Balance.............................................S-46
S-100
<PAGE> 101
Senior Certificates.....................................................S-43
Servicing Advances......................................................S-57
Servicing Fee...........................................................S-84
Servicing Fee Rate......................................................S-84
Servicing Standard......................................................S-82
Servicing Transfer Event................................................S-83
SMMEA.............................................................S-22, S-96
Special Servicer........................................................S-86
Special Servicer Compensation...........................................S-86
Special Servicing Fee...................................................S-86
Specially Serviced Mortgage Loan........................................S-83
Specially Serviced Mortgage Loans.......................................S-83
Subordinate Certificates................................................S-43
Sub-Servicer............................................................S-82
Treasury Rate...........................................................S-52
Trust Fund..............................................................S-43
Trustee Fee.............................................................S-62
Underwritable Cash Flow.................................................S-76
Underwriters............................................................S-96
Underwriting Agreement..................................................S-96
Unpaid Interest.........................................................S-51
Weighted Average Net Mortgage Rate................................S-11, S-46
Wells Fargo.............................................................S-78
Wells Fargo Loans.......................................................S-71
Workout Fee.............................................................S-86
S-101
<PAGE> 102
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted
Percent by Weighted Average Weighted Weighted
Number of Aggregate Aggregate Average Remaining Weighted Average Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Cut-Off Balloon
Cut-Off Date Balance ($) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) Date LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 1,000,000 50 39,411,512 4.07 7.125 140 2.03 53.3 31.1
1,000,001 to 2,000,000 81 116,334,697 12.01 7.215 128 1.66 62.6 43.6
2,000,001 to 3,000,000 42 103,017,431 10.64 7.069 130 1.66 62.8 43.6
3,000,001 to 4,000,000 34 117,016,226 12.08 7.070 121 1.62 67.0 51.6
4,000,001 to 5,000,000 16 73,743,162 7.61 6.978 133 1.68 66.2 50.2
5,000,001 to 6,000,000 14 77,972,519 8.05 7.048 125 1.56 64.8 52.4
6,000,001 to 7,000,000 9 57,526,269 5.94 7.065 156 1.43 69.5 36.6
7,000,001 to 8,000,000 7 52,498,548 5.42 6.966 123 1.59 67.4 54.4
8,000,001 to 9,000,000 6 50,860,263 5.25 6.938 124 1.57 66.2 50.8
9,000,001 to 10,000,000 2 19,832,806 2.05 7.017 83 2.03 51.0 44.5
10,000,001 to 15,000,000 6 66,337,756 6.85 6.937 112 1.78 61.9 52.5
15,000,001 to 20,000,000 2 36,213,567 3.74 7.569 110 1.59 67.3 57.5
20,000,001 to 25,000,000 1 24,935,425 2.57 7.190 80 1.43 71.2 66.0
25,000,001 and above 4 132,811,741 13.71 6.981 101 1.51 68.0 59.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 274 $968,511,922 100.00% 7.067% 122 1.63x 64.9% 49.7%
====================================================================================================================================
</TABLE>
Min: $317,728
Max: $41,232,654
Average: $3,534,715
I-1
<PAGE> 103
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted
Percent by Weighted Average Weighted Weighted
Number of Aggregate Aggregate Average Remaining Weighted Average Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Cut-Off Balloon
State Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) Date LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 140 441,499,972 45.59 7.014 116 1.71 62.1 48.7
Texas 32 105,159,866 10.86 7.125 128 1.80 61.4 42.7
Illinois 6 56,964,719 5.88 7.066 120 1.44 72.6 57.5
Georgia 5 45,888,047 4.74 7.142 96 1.43 70.8 62.8
Arizona 7 42,762,844 4.42 6.951 126 1.44 72.1 56.5
Colorado 5 40,442,863 4.18 7.372 114 1.59 63.9 51.1
Florida 14 32,776,093 3.38 7.079 111 1.45 73.2 62.5
Maryland 8 26,084,735 2.69 6.857 190 1.55 63.9 19.1
Washington 11 24,860,187 2.57 7.222 124 1.39 68.9 55.1
Oregon 7 17,158,203 1.77 7.004 144 1.86 52.5 34.2
Massachusetts 4 16,866,069 1.74 7.579 115 1.50 67.0 57.7
Nevada 6 15,288,669 1.58 6.720 132 1.48 72.9 53.3
Utah 4 13,543,125 1.40 7.111 99 1.50 65.0 53.5
Virginia 1 10,395,375 1.07 7.340 112 1.27 79.4 70.2
Oklahoma 3 10,305,898 1.06 6.992 114 1.64 69.1 59.3
Wisconsin 2 10,196,732 1.05 6.940 116 1.34 76.0 66.3
Ohio 3 8,272,299 0.85 6.947 186 2.87 44.8 25.1
Michigan 1 6,909,501 0.71 7.030 199 1.22 69.1 0.0
Pennsylvania 2 6,128,216 0.63 7.268 115 1.41 74.2 60.3
Indiana 1 6,096,683 0.63 6.740 116 1.46 59.8 47.7
New York 1 5,737,324 0.59 7.250 114 1.32 74.5 65.7
Connecticut 2 5,672,955 0.59 7.283 166 1.39 73.4 55.9
Delaware 1 4,186,837 0.43 7.320 117 1.41 74.8 60.6
</TABLE>
I-2
<PAGE> 104
MORTGAGE POOL INFORMATION
STATES
(continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted
Percent by Weighted Average Weighted Weighted
Number of Aggregate Aggregate Average Remaining Weighted Average Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Cut-Off Balloon
State Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) Date LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New Jersey 1 3,988,942 0.41 6.940 116 1.61 69.4 60.6
Alaska 2 3,588,169 0.37 7.270 235 1.56 66.1 2.3
Kansas 2 3,362,704 0.35 6.980 114 1.54 64.9 44.0
Idaho 1 1,951,864 0.20 7.570 233 1.35 73.9 47.4
South Carolina 1 1,429,195 0.15 8.500 42 1.40 65.0 60.6
North Carolina 1 993,835 0.10 7.450 114 1.61 45.2 36.9
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 274 $968,511,922 100.00% 7.067% 122 1.63x 64.9% 49.7%
===================================================================================================================================
</TABLE>
I-3
<PAGE> 105
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Percent by Weighted Average Average Weighted
Number of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date LTV Balloon
Property Type Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily 86 297,627,262 30.73 6.898 119 1.67 65.2 53.1
Garden 81 282,066,382 29.12 6.915 119 1.68 65.2 52.9
High-Rise 2 6,378,142 0.66 6.287 116 1.77 61.9 53.1
Senior Housing 1 4,700,721 0.49 6.780 113 1.35 74.6 65.0
Low-Rise 2 4,482,016 0.46 6.850 108 1.41 63.4 55.6
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal: 86 $297,627,262 30.73% 6.898% 119 1.67x 65.2% 53.1%
Retail 52 235,072,705 24.27 7.198 128 1.53 68.2 52.1
Anchored 26 140,666,381 14.52 7.232 128 1.53 68.4 52.4
Unanchored 21 47,097,116 4.86 7.262 142 1.61 63.9 43.5
Regional Mall 1 41,232,654 4.26 7.010 113 1.43 73.6 61.8
Big Box 4 6,076,554 0.63 7.178 122 1.58 60.5 47.4
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal: 52 $235,072,705 24.27% 7.198% 128 1.53x 68.2% 52.1%
Industrial 74 163,796,815 16.91 7.049 130 1.66 63.2 42.6
Warehouse 33 86,117,935 8.89 7.085 131 1.48 67.6 45.2
Flex 23 42,753,141 4.41 6.985 130 1.95 58.5 41.2
Light 17 32,554,107 3.36 7.046 129 1.77 56.8 36.9
Bulk 1 2,371,631 0.24 6.905 114 1.27 71.9 48.4
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal: 74 $163,796,815 16.91% 7.049% 130 1.66x 63.2% 42.6%
Office 36 125,831,434 12.99 7.031 120 1.59 61.1 42.8
Suburban 32 79,586,175 8.22 7.091 139 1.57 62.2 37.5
Urban 3 41,268,465 4.26 6.952 84 1.61 57.9 51.2
Garden 1 4,976,794 0.51 6.720 116 1.64 71.1 56.6
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal: 36 $125,831,434 12.99% 7.031% 120 1.59x 61.1% 42.8%
</TABLE>
I-4
<PAGE> 106
MORTGAGE POOL INFORMATION
PROPERTY TYPES
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Percent by Weighted Average Average Weighted
Number of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date LTV Balloon
Property Type Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hospitality 6 87,639,765 9.05 7.326 105 1.71 63.8 52.3
Full Service 3 43,281,413 4.47 7.227 97 1.83 64.1 53.7
Resort 1 34,704,501 3.58 7.390 112 1.59 64.0 52.3
Limited Service 1 6,164,172 0.64 7.490 112 1.81 64.0 45.0
Extended Stay 1 3,489,679 0.36 7.625 117 1.36 58.2 47.6
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal: 6 $87,639,765 9.05% 7.326% 105 1.71x 63.8% 52.3%
Other 6 21,021,513 2.17 7.294 114 1.56 69.1 58.7
Mixed Use (Marina) 1 7,527,592 0.78 7.125 116 1.72 65.5 52.8
Mixed Use (Retail/Office) 3 7,522,260 0.78 7.066 115 1.51 69.9 61.3
Mixed Use (Office/Industrial) 1 4,781,086 0.49 8.000 111 1.40 73.6 64.9
Mixed Use (Retail/MF) 1 1,190,576 0.12 6.970 114 1.56 68.4 55.0
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal: 6 $21,021,513 2.17% 7.294% 114 1.56x 69.1% 58.7%
Mobile Home Park 6 20,056,298 2.07 6.987 116 1.77 62.4 52.2
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal: 6 $20,056,298 2.07% 6.987% 116 1.77x 62.4% 52.2%
Self Storage 8 17,466,131 1.80 7.161 113 1.79 63.3 48.1
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal: 8 $17,466,131 1.80% 7.161% 113 1.79x 63.3% 48.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 274 $968,511,922 100.00% 7.067% 122 1.63x 64.9% 49.7%
====================================================================================================================================
</TABLE>
I-5
<PAGE> 107
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted
Percent by Weighted Average Weighted Weighted
Number of Aggregate Aggregate Average Remaining Weighted Average Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Cut-Off Balloon
Mortgage Rate (%) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) Date LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.001 to 6.500 5 19,140,736 1.98 6.346 116 1.77 59.3 50.8
6.501 to 7.000 109 414,589,862 42.81 6.790 121 1.74 62.4 48.2
7.001 to 7.500 133 460,108,733 47.51 7.212 120 1.56 67.1 51.8
7.501 to 8.000 22 60,935,102 6.29 7.758 142 1.43 67.8 44.4
8.001 to 8.500 3 9,061,498 0.94 8.435 91 1.39 65.7 57.2
8.501 to 9.000 2 4,675,991 0.48 8.750 150 1.54 55.1 21.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 274 $968,511,922 100.00% 7.067% 122 1.63x 64.9% 49.7%
====================================================================================================================================
</TABLE>
Min: 6.240%
Max: 8.750%
Weighted Average: 7.067%
I-6
<PAGE> 108
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted
Average
Percent by Weighted Remaining Weighted Weighted
Number of Aggregate Aggregate Average Term to Weighted Average Average
Original Term to Stated Mortgage Cut-Off Date Cut-Off Date Mortgage Maturity Average Cut-Off Balloon
Maturity (mos) Loans Balance ($) Balance (%) Rate (%) (mos) DSCR (x) Date LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 60 3 38,652,722 3.99 6.712 53 1.77 58.3 56.9
61 to 120 217 766,805,970 79.17 7.081 111 1.63 65.6 54.7
121 to 180 27 96,295,297 9.94 6.996 154 1.53 64.3 37.9
181 to 240 27 66,757,933 6.89 7.219 230 1.68 61.9 4.7
- -----------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 274 $968,511,922 100.00% 7.067% 122 1.63x 64.9% 49.7%
===================================================================================================================================
</TABLE>
Min: 59
Max: 240
Weighted Average: 128
I-7
<PAGE> 109
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted
Percent by Weighted Average Weighted Weighted
Number of Aggregate Aggregate Average Remaining Weighted Average Average
Remaining Term to Stated Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Cut-Off Balloon
Maturity (mos) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) Date LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 60 6 43,609,391 4.50 6.912 52 1.74 58.9 57.3
61 to 120 216 791,914,463 81.77 7.065 112 1.62 65.9 55.0
121 to 180 25 66,230,135 6.84 7.043 171 1.58 59.8 25.9
181 to 240 27 66,757,933 6.89 7.219 230 1.68 61.9 4.7
- ------------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 274 $968,511,922 100.00% 7.067% 122 1.63x 64.9% 49.7%
====================================================================================================================================
</TABLE>
Min: 26
Max: 236
Weighted Average: 122
I-8
<PAGE> 110
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL AMORTIZATION TERMS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted
Percent by Weighted Average Weighted Weighted
Number of Aggregate Aggregate Average Remaining Weighted Average Average
Original Amortization Term Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Cut-Off Balloon
(mos) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) Date LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balloon Loan 234 $883,915,263 91.27% 7.060% 113 1.62x 65.6% 54.4%
Interest Only 1 28,000,000 2.89 6.525 54 1.67 58.3 58.3
180 5 11,894,241 1.23 6.986 110 1.80 42.3 20.6
192 2 5,388,875 0.56 7.500 116 1.44 70.4 37.8
240 21 57,803,784 5.97 7.070 128 1.69 61.6 38.2
300 94 318,253,055 32.86 7.198 112 1.62 64.4 52.1
324 1 41,232,654 4.26 7.010 113 1.43 73.6 61.8
360 110 421,342,654 43.50 6.991 115 1.63 67.3 58.6
Fully-Amortizing Loan 40 $84,596,660 8.73% 7.146% 211 1.71x 57.9% 0.2%
120 2 2,386,449 0.25 7.221 112 2.05 30.9 0.0
144 1 1,016,948 0.11 7.110 137 1.18 63.6 0.0
180 12 21,609,388 2.23 6.987 175 1.70 51.0 0.2
204 1 6,909,501 0.71 7.030 199 1.22 69.1 0.0
240 24 52,674,373 5.44 7.224 234 1.77 60.4 0.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 274 $968,511,922 100.00% 7.067% 122 1.63x 64.9% 49.7%
====================================================================================================================================
</TABLE>
Min: 120
Max: 360
Weighted Average: 315
I-9
<PAGE> 111
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted
Percent by Weighted Average Weighted Weighted
Number of Aggregate Aggregate Average Remaining Weighted Average Average
Debt Service Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Cut-Off Balloon
Coverage Ratio (x) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) Date LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.01 to 1.15 2 2,826,048 0.29 7.780 232 1.12 70.7 1.9
1.16 to 1.25 9 26,106,459 2.70 7.018 180 1.21 68.9 10.4
1.26 to 1.35 26 88,263,191 9.11 7.336 119 1.31 73.6 61.1
1.36 to 1.50 76 323,070,799 33.36 7.155 124 1.43 71.1 54.5
1.51 to 1.75 76 311,629,987 32.18 7.019 115 1.64 64.6 52.1
1.76 to 2.00 45 122,266,678 12.62 6.895 123 1.86 56.1 42.6
2.01 and above 40 94,348,760 9.74 6.894 118 2.43 47.1 35.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 274 $968,511,922 100.00% 7.067% 122 1.63x 64.9% 49.7%
====================================================================================================================================
</TABLE>
Min: 1.11x
Max: 6.43x
Weighted Average: 1.63x
I-10
<PAGE> 112
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted
Percent by Weighted Average Weighted Weighted
Number of Aggregate Aggregate Average Remaining Weighted Average Average
Cut-Off Date Loan-to-Value Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Cut-Off Balloon
Ratio (%) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) Date LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10.1 to 20.0 2 1,540,952 0.16 7.026 142 5.41 19.5 8.9
20.1 to 30.0 9 10,835,732 1.12 7.033 177 3.49 27.5 7.9
30.1 to 40.0 13 23,209,493 2.40 6.889 131 2.43 34.8 16.2
40.1 to 50.0 19 36,453,606 3.76 6.868 131 2.02 43.8 27.3
50.1 to 60.0 51 183,697,024 18.97 6.938 109 1.79 56.0 45.2
60.1 to 70.0 93 338,319,182 34.93 7.157 129 1.59 65.5 47.5
70.1 to 80.0 86 370,399,172 38.24 7.079 118 1.43 73.9 59.4
80.1 to 90.0 1 4,056,762 0.42 7.300 173 1.31 81.1 63.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 274 $968,511,922 100.00% 7.067% 122 1.63x 64.9% 49.7%
====================================================================================================================================
</TABLE>
Min: 19.2%
Max: 81.1%
Weighted Average: 64.9%
I-11
<PAGE> 113
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted
Percent by Weighted Average Weighted Weighted
Number of Aggregate Aggregate Average Remaining Weighted Average Average
Balloon Loan-to-Value Ratio Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Cut-Off Balloon
(%) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) Date LTV (%) LTV (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0 34 73,098,734 7.55 7.148 212 1.71 58.2 0.0
0.1 to 10.0 6 11,497,926 1.19 7.132 207 1.70 56.1 1.7
10.1 to 20.0 3 7,155,138 0.74 6.818 114 2.82 32.7 16.5
20.1 to 30.0 18 35,254,177 3.64 7.020 143 2.02 49.1 25.3
30.1 to 40.0 16 37,872,384 3.91 7.079 131 1.88 51.5 36.5
40.1 to 50.0 55 155,797,315 16.09 6.970 121 1.77 58.2 45.6
50.1 to 60.0 72 319,383,234 32.98 7.047 105 1.63 65.1 55.0
60.1 to 70.0 67 314,832,276 32.51 7.113 111 1.45 73.5 63.8
70.1 to 80.0 3 13,620,738 1.41 7.329 109 1.30 79.2 70.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total or Weighted Average: 274 $968,511,922 100.00% 7.067% 122 1.63x 64.9% 49.7%
====================================================================================================================================
</TABLE>
Min: 0.0%
Max: 70.7%
Weighted Average: 49.7%
I-12
<PAGE> 114
APPENDIX I
MORTGAGE POOL INFORMATION
PREPAYMENT RESTRICTION ANALYSIS
<TABLE>
<CAPTION>
Percentage of Mortgage Pool by Prepayment Restriction
Assuming No Prepayments(1)(2)
- --------------------------------------------------------------------------------------------------
Prepayment Restriction Current 12 Mo. 24 Mo. 36 Mo. 48 Mo. 60 Mo. 72 Mo.
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Locked Out/Defeasance 99.19% 99.19% 99.10% 73.33% 66.04% 56.13% 55.98%
Yield Maintenance 0.33% 0.33% 0.09% 26.05% 29.54% 43.57% 43.55%
Penalty Points
5.00% and greater 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.48% 0.30% 0.30% 0.29% 0.29% 0.30% 0.29%
3.00% to 3.99% 0.00% 0.18% 0.00% 0.00% 0.00% 0.00% 0.00%
2.00% to 2.99% 0.00% 0.00% 0.33% 0.00% 0.00% 0.00% 0.00%
1.00% to 1.99% 0.00% 0.00% 0.00% 0.18% 0.00% 0.00% 0.00%
Open 0.00% 0.00% 0.18% 0.15% 4.13% 0.00% 0.18%
- --------------------------------------------------------------------------------------------------
Totals 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
==================================================================================================
Mortgage Pool Balance
Outstanding (in millions) $968.51 $954.49 $939.60 $921.80 $901.55 $845.46 $826.00
------- ------- ------- ------- ------- ------- -------
% of Initial Pool Balance 100.00% 98.55% 97.02% 95.18% 93.09% 87.30% 85.29%
<CAPTION>
- --------------------------------------------------------------------
Prepayment Restriction 84 Mo. 96 Mo. 108 Mo. 120 Mo.
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Locked Out/Defeasance 57.49% 57.49% 41.22% 44.33%
Yield Maintenance 42.21% 42.22% 19.42% 53.47%
Penalty Points
5.00% and greater 0.00% 0.00% 0.00% 0.00%
4.00% to 4.99% 0.30% 0.29% 0.00% 0.00%
3.00% to 3.99% 0.00% 0.00% 0.29% 2.20%
2.00% to 2.99% 0.00% 0.00% 0.00% 0.00%
1.00% to 1.99% 0.00% 0.00% 0.00% 0.00%
Open 0.00% 0.00% 39.07% 0.00%
- --------------------------------------------------------------------
Totals 100.00% 100.00% 100.00% 100.00%
====================================================================
Mortgage Pool Balance
Outstanding (in millions) $776.39 $754.40 $723.40 $87.80
------- ------- ------- ------
% of Initial Pool Balance 80.16% 77.89% 74.68% 9.07%
</TABLE>
Notes: (1) For 53 of the Mortgage Loans (15.9% of the Cut-Off Date
Balance) which allow borrowers to choose between Defeasance
and Yield Maintenance, Yield Maintenance is assumed.
(2) The above analysis is based on Maturity Assumptions and a 0%
CPR as discussed in the Prospectus Supplement.
I-13
<PAGE> 115
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Balance/ Mortgage
No. Seller(1) Property Name(2) (by Loan No.) Date Balance(3) Unit or SF(4) Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 MS Golf Mill Shopping Center $41,232,654 $55 7.010%
2 MS Silvertree Hotel and Wildwood Lodge $34,704,501 $84,645 7.390%
3 MS Mission Valley Hilton Hotel (A) $19,531,446 $43,576 7.200%
4 MS Hanalei Hotel (A) $13,847,977 $43,576 7.300%
5 MS Galleria Palms Apartments $28,874,586 $50,836 6.890%
6 WF 55 Hawthorne & 631 Howard $28,000,000 $119 6.525%
7 WF Dunwoody Club Apartments $24,935,425 $46,871 7.190%
8 MS Grapevine Town Shopping Center $16,682,121 $89 8.000%
9 WF Ward - Bel Air Professional Ctr (I) $6,002,684 $99 6.920%
10 WF Ward - Bel Air Retail (I) $4,489,611 $99 6.920%
11 WF Ward - Bright Oaks Office (I) $2,802,906 $99 6.920%
12 WF Ward - Blue Spruce (I) $892,961 $99 6.920%
13 WF Ward - Hayes/Thomas Office (I) $793,743 $99 6.920%
14 WF Central Park Apartments (107) $10,890,971 $58,554 6.535%
15 WF Boca Industrial (B) $5,782,357 $52 6.575%
16 WF South Congress Industrial (B) $4,967,276 $52 7.145%
17 WF North Los Altos Shopping Center $10,644,644 $82 6.815%
18 WF International Residence-Austin (IRA) (23), (27) $10,534,893 $20,657 6.705%
19 MS Crossway Commons Shopping Center $10,395,375 $68 7.340%
20 MS La Veta Grand Apartments $10,023,895 $40,096 6.830%
21 WF 1 Lombard St. & 150 Greenwich St. $9,930,816 $83 6.855%
22 WF Vintage Court Hotel $9,901,990 $92,542 7.180%
23 WF Wimberly Park (18), (27) $8,745,949 $19,877 6.705%
24 WF Federal Express Building $8,597,635 $72 7.366%
25 MS Merrimac Plaza Shopping Center $8,519,179 $74 6.950%
26 WF Stockton Center $8,413,848 $55 7.135%
27 WF International Residence San Antonio (18), (23) $8,348,406 $23,990 6.705%
28 WF Corporate Drive, Sugarland, TX $8,235,245 $58 6.760%
29 WF Weatherly Walk $7,868,658 $40,560 6.560%
30 WF Office Depot - Long Beach, CA $7,628,252 $41 6.835%
31 WF Hurst Harbor Marina $7,527,592 $14,645 7.125%
32 MS Casady Square Shopping Center $7,468,307 $37 6.980%
33 WF Commonwealth Building $7,409,265 $38 7.340%
34 WF Coyote Creek Mobile Home Park $7,350,957 $40,169 7.080%
35 MS Mountainview Marketplace Shopping Center $7,245,516 $59 6.870%
36 WF Hurley's Children & Family Medical Ctr. $6,909,501 $110 7.030%
37 MS Druid Pointe Office Building $6,834,406 $68 7.375%
38 WF Nohl Plaza Shopping Center $6,563,119 $64 7.225%
39 WF Monterey Park II Apts. $6,475,013 $47,610 6.690%
40 WF Spring Hill Market Place $6,463,219 $60 7.000%
41 MS Hampton Inn Hotel $6,164,172 $49,711 7.490%
42 WF Crestview Apartments $6,096,683 $28,095 6.740%
43 WF Fiesta Shopping Center $6,017,471 $65 7.090%
44 WF Sierra Crest Shopping Center $5,971,766 $63 7.115%
45 WF Casa Del Rey Apartments $5,915,181 $24,243 6.820%
46 WF Alameda Business Centre $5,882,685 $12 6.790%
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Term to Rem. Term Scheduled
Maturity to Maturity Amort. Balance at
Loan Note Maturity Date or ARD or ARD Term Maturity Balloon Security
No. Date or ARD(5) (mos) (mos) (mos)(6) or ARD LTV(4) Type
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 6/23/98 7/1/08 120 113 324 $34,588,117 61.8% Fee
2 5/12/98 6/1/08 120 112 300 $28,340,948 52.3% Fee
3 3/20/98 4/1/08 120 110 300 $15,900,544 53.3% Fee
4 3/20/98 4/1/08 120 110 300 $11,305,833 53.3% Fee
5 7/30/98 10/1/08 122 116 360 $25,134,074 64.8% Fee
6 7/8/98 8/1/03 60 54 0 $28,000,000 58.3% Fee
7 9/1/98 10/1/05 84 80 360 $23,085,023 66.0% Fee
8 5/1/98 5/1/08 120 111 360 $14,998,197 62.5% Fee
9 9/25/98 10/1/18 240 236 240 $0 0.0% Fee
10 9/25/98 10/1/18 240 236 240 $0 0.0% Fee
11 9/25/98 10/1/18 240 236 240 $0 0.0% Fee
12 9/25/98 10/1/18 240 236 240 $0 0.0% Fee
13 9/25/98 10/1/18 240 236 240 $0 0.0% Fee
14 5/22/98 6/1/08 120 112 300 $8,671,830 43.4% Fee
15 9/15/98 10/1/08 120 116 360 $5,000,967 64.0% Fee
16 7/22/98 8/1/08 120 114 300 $4,018,361 64.0% Fee
17 6/29/98 8/1/08 120 114 360 $9,141,572 45.1% Fee
18 5/8/98 6/1/08 120 112 360 $9,173,004 47.4% Fee
19 5/6/98 6/1/08 120 112 360 $9,196,576 70.2% Fee
20 6/4/98 7/1/08 120 113 360 $8,749,331 56.4% Fee
21 6/25/98 8/1/08 120 114 300 $7,964,311 33.9% Fee
22 5/4/98 5/1/03 59 51 300 $9,154,145 55.1% Fee
23 5/8/98 6/1/08 120 112 360 $7,615,325 52.9% Fee
24 4/6/98 5/1/08 120 111 300 $6,910,472 59.6% Fee
25 8/28/98 9/1/08 120 115 360 $7,446,871 65.3% Fee
26 8/28/98 10/1/08 120 116 300 $6,788,680 46.0% Fee
27 5/8/98 6/1/08 120 112 360 $7,269,175 50.1% Fee
28 12/4/98 1/1/14 180 179 240 $3,355,487 29.8% Fee
29 8/10/98 9/1/08 120 115 360 $6,808,143 65.5% Fee
30 9/1/98 10/1/08 120 116 360 $6,643,205 55.8% Fee
31 9/1/98 10/1/08 120 116 300 $6,071,786 52.8% Fee/Leasehold
32 7/15/98 8/1/08 120 114 360 $6,538,495 61.1% Fee
33 5/22/98 7/1/13 180 173 240 $3,171,388 21.5% Fee
34 7/1/98 8/1/08 120 114 300 $5,935,228 58.2% Fee
35 3/3/98 4/1/08 120 110 360 $6,345,793 65.1% Fee
36 8/17/98 9/1/15 204 199 204 $1 0.0% Fee
37 5/21/98 6/1/08 120 112 300 $5,482,054 54.8% Fee
38 5/28/98 7/1/08 120 113 360 $5,693,237 65.4% Leasehold
39 8/14/98 9/1/08 120 115 360 $5,621,750 68.6% Fee
40 7/15/98 9/1/13 180 175 300 $4,110,084 44.7% Fee
41 5/5/98 6/1/08 120 112 240 $4,330,961 45.0% Fee
42 8/27/98 10/1/08 120 116 300 $4,860,220 47.7% Fee
43 6/9/98 7/1/18 240 233 240 $2 0.0% Fee
44 6/19/98 7/1/08 120 113 360 $5,250,250 60.3% Fee
45 7/30/98 9/1/08 120 115 300 $4,732,770 57.4% Fee
46 5/14/98 8/1/08 120 114 180 $2,701,603 16.2% Leasehold
</TABLE>
II-1
<PAGE> 116
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Balance/ Mortgage
No. Seller(1) Property Name(2) (by Loan No.) Date Balance(3) Unit or SF(4) Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
47 MS 58 Charles Street Office Building $5,859,200 $123 8.500%
48 MS Syosset Plaza Shopping Center $5,737,324 $183 7.250%
49 WF Silver Creek Shopping Center $5,684,909 $90 7.100%
50 WF Martin Woodworking $5,566,019 $28 7.530%
51 MS Park Bank Office Building (68) $5,559,588 $84 6.940%
52 MS Consolidated Technology Warehouse (II) $3,169,736 $12 7.500%
53 MS Consolidated Technology Industrial Building (II) $2,219,139 $12 7.500%
54 WF 1155 Jones Street $5,382,128 $89,702 6.240%
55 WF Kramer - 6 Arcata Apartments (III) $3,457,952 $24,117 7.560%
56 WF Kramer - Eureka Apartments (III) $1,505,903 $24,117 7.560%
57 WF Kramer - Fields Landing (III) $317,728 $24,117 7.560%
58 WF Vista Oaks Apartment $5,222,195 $48,354 7.290%
59 MS Nash Finch Distribution Warehouse $5,179,070 $14 6.500%
60 WF Syracuse Center - Phase I $5,153,767 $66 7.190%
61 WF Amador II Building (63) $5,076,330 $79 6.720%
62 MS Catalina Apartments $4,978,762 $50,291 6.960%
63 WF 4670 Willow Road (61) $4,976,794 $108 6.720%
64 WF Hamilton House Apartments $4,950,153 $12,406 6.780%
65 WF Sacramento Place Apartments (121) $4,834,067 $24,790 6.270%
66 MS Zycon R&D Building $4,781,086 $81 8.000%
67 MS Rudolph-Hendrickson Senior Apartments $4,700,721 $27,980 6.780%
68 MS Holborn Village Apartments (51) $4,637,145 $53,301 6.940%
69 WF 100 E. Tujunga $4,540,722 $98 6.890%
70 WF Rancho Anita Industrial Park $4,523,250 $33 6.795%
71 MS Beverly Hills Tower Apartments (C) $3,083,429 $87,883 6.850%
72 MS Beverly Hills Regency Apartments (C) $1,398,587 $87,883 6.850%
73 WF Chico Town & Country Shopping Ctr. $4,476,107 $53 7.335%
74 MS Windsor Court Apartments $4,464,735 $23,133 6.670%
75 MS Pathmark Super Center-Wilmington, DE (90) $4,186,837 $85 7.320%
76 MS New Villa Valencia Mobile Home Park $4,179,135 $28,237 6.910%
77 MS Veterans Plaza Shopping Center $4,056,762 $56 7.300%
78 MS 150 Sylvan Avenue Shopping Center $3,988,942 $95 6.940%
79 WF Reynolds Industries Bldg $3,980,644 $71 7.010%
80 MS Strada Da Valle Office Building $3,833,191 $71 7.390%
81 WF Conrad Villas Apts. $3,821,586 $34,121 7.100%
82 WF Ocean Business Park $3,782,164 $40 7.395%
83 MS Westwood Village Shopping Center $3,679,102 $45 7.010%
84 WF Enclave Apartments (140) $3,662,478 $48,833 6.765%
85 MS Westside Shopping Center $3,592,977 $58 7.250%
86 MS Riverside Country Club Mobile Home Park $3,584,866 $26,167 7.000%
87 WF 3030 Bridgeway Boulevard $3,584,020 $134 7.330%
88 WF Food 4 Less $3,572,461 $71 7.105%
89 MS Suburban Lodge Hotel $3,489,679 $25,288 7.625%
90 MS Pathmark Super Center-Upper Darby, PA (75) $3,489,031 $66 7.320%
91 WF The Ladco Building $3,454,597 $45 6.780%
92 MS Hickory Plaza $3,438,025 $75 7.100%
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Term to Rem. Term Scheduled
Maturity to Maturity Amort. Balance at
Loan Note Maturity Date or ARD or ARD Term Maturity Balloon Security
No. Date or ARD(5) (mos) (mos) (mos)(6) or ARD LTV(4) Type
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
47 9/14/98 10/1/08 120 116 300 $4,914,803 55.0% Fee
48 7/15/98 8/1/08 120 114 360 $5,057,235 65.7% Fee
49 8/14/98 10/1/13 180 176 360 $4,381,224 42.1% Fee
50 6/24/98 8/1/08 120 114 300 $4,553,527 58.4% Fee
51 9/22/98 10/1/08 120 116 360 $4,854,955 63.9% Fee
52 9/29/98 10/1/08 120 116 192 $1,702,536 37.8% Fee
53 9/29/98 10/1/08 120 116 192 $1,191,949 37.8% Fee
54 9/11/98 10/1/08 120 116 360 $4,612,232 54.1% Fee
55 6/11/98 7/1/18 240 233 240 $0 0.0% Fee
56 6/11/98 7/1/18 240 233 240 $0 0.0% Fee
57 6/11/98 7/1/18 240 233 240 $0 0.0% Fee
58 5/14/98 6/1/18 240 232 360 $3,284,275 39.7% Fee
59 9/1/98 9/1/08 120 115 360 $4,473,828 52.6% Fee
60 8/11/98 9/1/05 84 79 240 $4,184,460 58.1% Fee
61 9/10/98 10/1/08 120 116 300 $4,044,298 45.4% Fee
62 7/8/98 8/1/08 120 114 360 $4,356,676 59.7% Fee
63 9/10/98 10/1/08 120 116 300 $3,964,997 56.6% Fee
64 7/28/98 9/1/18 240 235 240 $1 0.0% Fee
65 9/1/98 10/1/08 120 116 360 $4,146,036 54.8% Fee
66 5/1/98 5/1/08 120 111 360 $4,220,370 64.9% Fee
67 6/19/98 7/1/08 120 113 360 $4,097,722 65.0% Fee
68 9/22/98 10/1/08 120 116 360 $4,049,424 69.2% Fee
69 5/19/98 7/1/08 120 113 240 $3,119,702 41.6% Fee
70 8/3/98 9/1/08 120 115 300 $3,616,315 49.5% Fee
71 1/15/98 2/1/08 120 108 360 $2,702,861 55.6% Fee
72 1/15/98 2/1/08 120 108 360 $1,225,967 55.6% Fee
73 7/24/98 9/1/08 120 115 300 $3,636,968 53.5% Fee
74 3/2/98 4/1/08 120 110 360 $3,890,566 55.6% Fee
75 10/2/98 11/1/08 120 117 300 $3,392,823 60.6% Fee
76 6/30/98 7/1/08 120 113 360 $3,655,233 46.3% Fee
77 6/5/98 7/1/13 180 173 360 $3,161,700 63.2% Fee
78 9/9/98 10/1/08 120 116 360 $3,483,376 60.6% Fee
79 5/11/98 7/1/08 120 113 360 $3,490,477 61.2% Fee
80 6/5/98 7/1/08 120 113 360 $3,392,972 60.6% Fee
81 4/24/98 6/1/08 120 112 300 $3,094,758 56.3% Fee
82 4/28/98 6/1/08 120 112 360 $3,350,452 68.1% Fee
83 8/20/98 9/1/08 120 115 300 $2,960,653 50.5% Fee
84 6/18/98 7/1/08 120 113 360 $3,144,487 52.1% Fee
85 10/22/98 11/1/08 120 117 360 $3,160,179 61.1% Fee
86 7/27/98 8/1/08 120 114 360 $3,140,145 58.7% Fee
87 5/6/98 7/1/08 120 113 360 $3,167,782 63.4% Fee
88 6/8/98 7/1/08 120 113 300 $2,890,139 57.5% Fee
89 10/8/98 11/1/08 120 117 300 $2,853,349 47.6% Fee
90 10/2/98 11/1/08 120 117 300 $2,827,353 60.2% Fee
91 9/2/98 10/1/13 180 176 180 $0 0.0% Fee
92 8/31/98 9/1/08 120 115 360 $3,016,813 65.6% Fee
</TABLE>
II-2
<PAGE> 117
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Balance/ Mortgage
No. Seller(1) Property Name(2) (by Loan No.) Date Balance(3) Unit or SF(4) Rate
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
93 WF College Way Marketplace $3,410,750 $67 7.040%
94 WF Grove Business Joint Venture $3,409,776 $28 6.950%
95 WF Edison Way Industrial Center $3,406,539 $40 6.620%
96 WF Pacific Terrace Apartments $3,344,725 $34,130 7.073%
97 MS 4700-4800 SW 51 St Warehouse (135), (158), (195) $3,338,490 $37 7.140%
98 MS Brookside Villas Apartments $3,322,620 $29,404 6.770%
99 WF Castaic Apartments $3,316,651 $39,484 7.080%
100 WF La Habra Hills (106), (219) $3,286,765 $23,991 6.515%
101 WF 5251 - 5271 East 2nd St. $3,268,752 $239 7.400%
102 WF Montgomery Business Park $3,219,985 $27 7.440%
103 MS Atherton Park Apartments $3,218,428 $22,350 7.060%
104 WF Let's Store It II - Brookhurst (105) $3,175,553 $32 6.895%
105 WF Torrance Western Self Storage (104) $3,175,553 $36 6.895%
106 WF Sierra Gardens (100), (219) $3,163,108 $32,949 6.650%
107 WF Shelter Creek Apartments (14) $3,149,946 $25,403 6.535%
108 MS Design Row Shopping Center (168), (213), (232) $3,143,706 $102 7.160%
109 WF Veteran Plaza $2,986,411 $110,608 6.545%
110 WF Rolling Hills Apartments $2,984,265 $27,890 6.700%
111 WF Four Corners Shopping Center $2,957,010 $82 7.750%
112 MS Rimrock Plaza Shopping Center $2,921,621 $35 8.750%
113 WF Orchard View Apartments $2,885,869 $24,049 7.140%
114 WF Secure Self Storage of Old Town $2,781,904 $49 7.210%
115 MS Waterford Place Condominiums $2,759,877 $76,663 7.180%
116 WF Nimitz Point Apartments $2,712,573 $42,384 7.100%
117 WF Physician's Plaza $2,688,941 $131 7.100%
118 WF Artesia Mobile Home Estates $2,688,159 $28,296 6.835%
119 WF Del Prado Apartments $2,684,418 $47,936 6.895%
120 WF Concord Villas $2,684,173 $38,345 6.980%
121 WF San Mateo Office Complex (65) $2,651,477 $77 6.370%
122 MS Colonial Arms Apartments $2,639,185 $21,993 7.200%
123 WF Westport Apartments $2,633,457 $13,860 7.060%
124 WF Marina Self Storage $2,631,182 $46 7.630%
125 MS Americana Palos Verdes Apartments (127), (187) $2,490,437 $24,416 6.710%
126 MS Grand York Shopping Center $2,485,734 $42 6.880%
127 MS Brooktree Estates Apartments (125), (187) $2,483,094 $20,692 6.760%
128 WF Daily California Building $2,422,990 $31 7.220%
129 MS The Regent-Chicago $2,386,701 $265 7.520%
130 WF Lyons Shopping Center $2,385,950 $103 7.410%
131 WF Renaissance Tech $2,385,849 $29 6.950%
132 WF Columbian Steel Tank Co. $2,371,631 $15 6.905%
133 MS Barbur Place Center $2,293,084 $76 6.620%
134 WF Samoan Sea Apartments $2,268,285 $15,022 6.930%
135 MS 4759 51 Street Warehouse (97), (158), (195) $2,241,869 $31 6.940%
136 WF 20650 Prairie $2,207,002 $22 7.060%
137 WF Sierra West Business Park $2,200,358 $62 7.720%
138 WF PetsMart-Sand City $2,169,356 $95 6.845%
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Term to Rem. Term Scheduled
Maturity to Maturity Amort. Balance at
Loan Note Maturity Date or ARD or ARD Term Maturity Balloon Security
No. Date or ARD(5) (mos) (mos) (mos)(6) or ARD LTV(4) Type
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
93 7/2/98 8/1/08 120 114 360 $2,990,664 61.7% Fee
94 6/25/98 7/1/08 120 113 360 $2,939,894 47.3% Fee
95 8/31/98 10/1/13 180 176 180 $57,140 0.7% Fee
96 4/29/98 6/1/08 120 112 300 $2,706,450 60.1% Fee
97 8/28/98 9/1/08 120 115 360 $2,932,436 69.8% Fee
98 7/15/98 8/1/08 120 114 360 $2,893,247 66.5% Fee
99 5/14/98 6/1/08 120 112 300 $2,640,116 60.0% Fee
100 8/7/98 9/1/08 120 115 360 $2,840,349 53.6% Fee
101 5/15/98 6/1/08 120 112 300 $2,623,624 48.0% Fee
102 7/20/98 8/1/08 120 114 300 $2,627,429 60.8% Fee
103 12/23/97 1/1/08 120 107 360 $2,837,995 45.8% Fee
104 6/25/98 8/1/08 120 114 300 $2,508,829 50.4% Fee
105 6/25/98 8/1/08 120 114 300 $2,508,829 54.2% Fee
106 5/26/98 7/1/08 120 113 360 $2,748,033 64.8% Fee
107 5/22/98 6/1/08 120 112 240 $2,141,483 20.6% Fee
108 10/30/98 11/1/08 120 117 360 $2,758,714 65.7% Fee
109 8/11/98 9/1/08 120 115 360 $2,546,148 52.3% Fee
110 5/14/98 7/1/08 120 113 360 $2,596,051 37.1% Fee
111 5/26/98 6/1/18 240 232 240 $0 0.0% Leasehold
112 9/19/97 10/1/17 240 224 240 $0 0.0% Fee
113 8/26/98 10/1/13 180 176 300 $1,776,606 40.8% Fee
114 7/9/98 8/1/08 120 114 300 $2,254,788 60.9% Fee/Leasehold
115 5/22/98 6/1/08 120 112 360 $2,432,082 65.7% Fee
116 4/24/98 6/1/08 120 112 300 $2,196,669 61.0% Fee
117 6/24/98 8/1/08 120 114 360 $2,361,334 65.6% Fee
118 7/15/98 8/1/08 120 114 360 $2,344,731 45.7% Fee
119 7/28/98 9/1/08 120 115 300 $2,152,726 59.3% Fee
120 5/15/98 7/1/08 120 113 360 $2,315,842 63.1% Fee
121 9/1/98 10/1/08 120 116 360 $2,280,398 42.6% Fee
122 4/25/98 6/1/08 120 112 300 $2,143,479 60.4% Fee
123 5/8/98 6/1/08 120 112 180 $1,260,900 25.2% Fee
124 5/20/98 6/1/08 120 112 240 $1,819,554 49.2% Fee
125 8/18/98 9/1/08 120 115 360 $2,163,396 60.1% Fee
126 8/12/98 9/1/13 180 175 180 $44,266 0.0% Fee
127 4/23/98 5/1/09 132 123 360 $2,119,280 51.1% Fee
128 3/12/98 4/1/08 120 110 300 $1,973,685 49.0% Fee
129 4/6/98 5/1/08 120 111 360 $2,122,147 66.0% Fee
130 7/13/98 9/1/08 120 115 300 $1,908,604 57.5% Fee
131 6/25/98 7/1/08 120 113 360 $2,057,068 44.7% Fee
132 6/15/98 8/1/08 120 114 240 $1,597,531 48.4% Fee
133 9/25/98 10/1/08 120 116 360 $1,985,614 64.1% Fee
134 6/1/98 7/1/08 120 113 240 $1,532,239 47.9% Fee
135 8/28/98 9/1/08 120 115 360 $1,959,181 65.3% Fee
136 7/8/98 8/1/13 180 174 180 $0 0.0% Fee
137 4/15/98 5/1/08 120 111 300 $1,815,798 58.6% Fee
138 5/28/98 7/1/08 120 113 240 $1,461,480 36.5% Fee
</TABLE>
II-3
<PAGE> 118
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Balance/ Mortgage
No. Seller(1) Property Name(2) (by Loan No.) Date Balance(3) Unit or SF(4) Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
139 MS Mesa Breeze Apartments $2,136,648 $34,462 6.660%
140 WF Palm Garden Apartments (84) $2,130,542 $40,972 6.815%
141 MS Harvard Apartments $2,109,935 $49,068 7.040%
142 MS Safeworks Warehouse $2,092,986 $38 7.250%
143 MS Garden Brook Apartments (144) $2,090,375 $17,420 6.660%
144 MS Lynmarie Apartments (143) $2,090,375 $12,296 6.660%
145 WF Storey Plastics Building $2,083,476 $52 6.960%
146 WF Casa de Jerado (147) $2,073,107 $17,276 6.935%
147 WF Palm Central South (146) $2,073,107 $18,185 6.935%
148 WF Barnes - 380 Tennant Ave (D) $993,877 $54 7.485%
149 WF Barnes - 6550 Brem Lane (D) $646,020 $54 7.485%
150 WF Barnes - Santa Cruz (D) $422,398 $54 7.485%
151 WF Arctic Business Park III $2,031,974 $43 7.270%
152 MS Savannah Gardens Apartments $1,992,520 $16,604 7.440%
153 WF Markison Vista $1,988,207 $23 6.950%
154 WF London Press Building $1,961,812 $24 7.070%
155 WF Canal Park Apartments $1,951,864 $27,109 7.570%
156 WF Hayvenhurst Airport Business Park $1,933,264 $39 7.305%
157 WF Bashas' Shopping Center $1,896,520 $35 7.780%
158 MS 15th & 16th Street Warehouse (97), (135), (195) $1,893,638 $36 7.240%
159 WF Raintree Apartments $1,884,642 $13,088 6.820%
160 MS Lindys Town Lake Apartments $1,841,071 $18,050 7.020%
161 MS Discount Mini Storage North (194) $1,809,141 $38 7.240%
162 WF 1207-15 Pearl Street Mall $1,791,150 $132 7.570%
163 WF Midway Park North $1,774,475 $27 6.950%
164 MS Winchester House Apartments $1,773,104 $23,330 8.170%
165 WF 740 W. Knox $1,767,114 $43 7.090%
166 MS Normandie Apartments $1,754,370 $15,949 8.750%
167 WF Oakmont Shopping Center $1,737,283 $95 7.365%
168 MS Coral Place Pilgrim Building Shopping Center (108), (213), (232) $1,721,553 $83 7.160%
169 WF 1730 I Street $1,690,982 $92 7.340%
170 WF Western Digital Building $1,688,971 $69 7.190%
171 WF Casa Alegre Apartments $1,676,307 $22,057 6.840%
172 WF Rodeo Plaza $1,663,852 $40 7.770%
173 WF Casa Del Sol North (E) $859,550 $18,261 6.770%
174 WF Casa Del Sol South (E) $765,691 $18,261 6.770%
175 WF Staples-Southington $1,616,194 $92 7.240%
176 WF 55 th & Wadsworth Retail Center $1,593,034 $133 7.400%
177 WF OMA Building $1,589,740 $59 7.250%
178 WF Cleator Corp Buildings $1,587,652 $34 7.060%
179 WF Hidden Village Apartments $1,575,128 $12,116 7.070%
180 WF Arctic Business Park II $1,556,195 $39 7.270%
181 WF Eckerd Drug Store No. 816R $1,534,840 $118 6.940%
182 WF Willow Glen Mobile Home Park $1,517,454 $17,244 6.925%
183 WF 940 E. Diehl Road $1,493,271 $76 6.595%
184 WF Gateway Office Center $1,491,827 $60 7.200%
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Term to Rem. Term Scheduled
Maturity to Maturity Amort. Balance at
Loan Note Maturity Date or ARD or ARD Term Maturity Balloon Security
No. Date or ARD(5) (mos) (mos) (mos)(6) or ARD LTV(4) Type
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
139 5/5/98 6/1/08 120 112 360 $1,858,266 51.6% Fee
140 6/18/98 7/1/08 120 113 300 $1,681,787 42.6% Fee
141 7/9/98 8/1/08 120 114 360 $1,850,065 65.5% Fee
142 9/1/98 9/1/08 120 115 360 $1,843,499 65.8% Fee
143 7/28/98 8/1/08 120 114 360 $1,815,002 40.1% Fee
144 7/28/98 8/1/08 120 114 360 $1,815,002 27.8% Fee
145 6/12/98 7/1/08 120 113 300 $1,678,311 45.4% Fee
146 5/27/98 7/1/08 120 113 240 $1,426,569 41.1% Fee
147 5/27/98 7/1/08 120 113 240 $1,426,569 39.8% Fee
148 7/10/98 8/1/08 120 114 300 $812,034 52.3% Fee
149 7/10/98 8/1/08 120 114 300 $527,822 52.3% Fee
150 7/10/98 8/1/08 120 114 300 $345,114 52.3% Fee
151 8/11/98 9/1/18 240 235 240 $71,419 2.4% Fee
152 7/31/98 8/1/08 120 114 360 $1,764,542 70.6% Fee
153 6/25/98 7/1/08 120 113 360 $1,714,223 50.0% Fee
154 5/29/98 8/1/13 180 174 180 $0 0.0% Fee
155 5/26/98 7/1/18 240 233 360 $1,251,302 47.4% Fee
156 5/4/98 6/1/08 120 112 300 $1,574,925 55.7% Fee
157 4/24/98 5/1/18 240 231 240 $80,360 2.9% Fee
158 8/28/98 9/1/08 120 115 360 $1,667,498 69.5% Fee
159 5/29/98 7/1/08 120 113 300 $1,511,786 52.4% Fee
160 6/18/98 7/1/08 120 113 360 $1,614,774 59.8% Fee
161 5/8/98 6/1/08 120 112 300 $1,471,043 51.4% Fee
162 4/28/98 6/1/08 120 112 360 $1,593,345 49.3% Fee
163 6/25/98 7/1/08 120 113 360 $1,529,945 43.3% Fee
164 1/19/96 2/1/03 84 48 300 $1,636,505 61.8% Fee
165 7/10/98 8/1/13 180 174 180 $33,939 1.2% Fee
166 3/15/94 4/1/01 84 26 300 $1,678,408 56.9% Fee
167 6/23/98 7/1/08 120 113 300 $1,416,179 51.5% Fee
168 10/30/98 11/1/08 120 117 360 $1,510,724 65.7% Fee
169 7/17/98 9/1/08 120 115 300 $1,374,174 60.3% Fee
170 7/2/98 8/1/08 120 114 300 $1,368,137 54.7% Fee
171 6/5/98 7/1/08 120 113 240 $1,129,136 47.6% Fee
172 6/8/98 8/1/08 120 114 300 $1,344,807 55.1% Fee
173 7/1/98 8/1/08 120 114 240 $576,500 40.4% Fee
174 7/1/98 8/1/08 120 114 240 $513,549 40.4% Fee
175 5/14/98 7/1/11 156 149 300 $1,130,527 37.7% Fee
176 6/8/98 7/1/08 120 113 360 $1,410,425 60.5% Fee
177 7/3/98 8/1/08 120 114 300 $1,290,031 58.6% Fee
178 6/22/98 7/1/08 120 113 300 $1,282,713 53.4% Fee
179 5/11/98 6/1/18 240 232 240 $0 0.0% Fee
180 8/11/98 9/1/18 240 235 240 $54,700 2.2% Fee
181 8/20/98 9/1/18 240 235 240 $2 0.0% Fee
182 6/10/98 7/1/08 120 113 360 $1,327,733 60.4% Fee
183 7/17/98 9/1/08 120 115 360 $1,274,657 51.8% Fee
184 8/18/98 9/1/08 120 115 300 $1,207,339 61.3% Fee
</TABLE>
II-4
<PAGE> 119
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Balance/ Mortgage
No. Seller(1) Property Name(2) (by Loan No.) Date Balance(3) Unit or SF(4) Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
185 WF Laguna Hills Property $1,491,544 $57 7.020%
186 WF Rancho Dominguez $1,491,512 $28 7.000%
187 MS The Hampton Apartments (125), (127) $1,490,358 $35,485 6.960%
188 WF Redwood Self Storage $1,486,865 $22 7.200%
189 WF Hewlett Packard Bldg. $1,486,281 $32 6.970%
190 WF Spenwick Industrial Park $1,486,139 $15 7.555%
191 WF Lancaster Medical Office Building $1,468,452 $82 7.780%
192 MS Dorchester Gardens Apartments $1,429,195 $12,537 8.500%
193 WF Safeway-Marlow Center $1,421,512 $38 7.330%
194 MS Keylock Mini Storage (161) $1,414,861 $19 7.240%
195 MS 53rd Court Warehouse (97), (135), (158) $1,395,066 $30 7.040%
196 WF Stadium Court $1,387,938 $38 7.285%
197 MS Oakhurst Drive Apartments $1,371,130 $114,261 6.960%
198 WF 4602 North Avenue $1,347,885 $31 7.110%
199 WF Cal Plate, Inc. Buildings $1,337,797 $42 7.620%
200 WF McKinley Business Center $1,334,901 $27 7.200%
201 WF Rite Aid - Cleveland $1,329,627 $119 6.830%
202 MS 77 Rumford Avenue Office Building $1,295,922 $56 7.490%
203 WF Herndon/West Office II (F) $644,994 $64 7.070%
204 WF Herndon/West Office I (F) $644,746 $64 6.820%
205 WF Daisy I Apartments (240), (253) $1,283,186 $49,353 7.300%
206 WF Sunset East Apartments $1,282,645 $32,066 6.960%
207 WF Overlook Terrace Apts. $1,266,436 $26,384 7.010%
208 WF 2275 East Bayshore Road $1,234,953 $99 7.375%
209 WF Darant Industrial $1,233,478 $28 6.560%
210 WF 354 S. La Fayette Park Place $1,232,844 $30,069 7.060%
211 WF 22322 Gilberto $1,212,506 $38 7.160%
212 WF Parkview $1,202,865 $21 6.950%
213 MS Las Olas Shopping Center (108), (168), (232) $1,197,602 $160 7.160%
214 WF 1841 Fuller Apartments $1,195,082 $44,262 7.060%
215 MS Brighton Avenue Plaza Shopping Center $1,191,768 $42 7.650%
216 WF Tiffany Building $1,190,576 $54 6.970%
217 WF Ballinger Trace Apts. $1,166,073 $43,188 7.330%
218 WF Freeway Industrial Center $1,164,795 $25 7.080%
219 WF Villa Monaco (100), (106) $1,139,147 $28,479 6.800%
220 WF Cheyenne Mountain Blockbuster $1,120,700 $122 7.360%
221 WF Sunset Hill Apartments $1,106,814 $19,418 7.220%
222 WF Le Med Apartments $1,093,993 $12,432 6.410%
223 WF Kerner Automotive Center $1,093,880 $41 7.090%
224 WF Bachman Glen Apartments $1,093,539 $14,389 6.800%
225 WF Westview Plaza $1,088,514 $44 7.310%
226 WF Fairmont Apartments $1,082,779 $25,780 7.010%
227 WF Commerce-Executive $1,078,603 $13 6.950%
228 WF St. Andrews Apartments $1,074,760 $29,854 7.000%
229 WF Dunbar Amored Building $1,058,825 $34 7.025%
230 WF 631 Giguere Court $1,044,219 $43 7.145%
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Term to Rem. Term Scheduled
Maturity to Maturity Amort. Balance at
Loan Note Maturity Date or ARD or ARD Term Maturity Balloon Security
No. Date or ARD(5) (mos) (mos) (mos)(6) or ARD LTV(4) Type
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
185 8/19/98 9/1/08 120 115 300 $1,200,644 50.0% Fee
186 7/7/98 9/1/08 120 115 300 $1,199,896 53.0% Fee
187 4/21/98 5/1/13 180 171 360 $1,146,124 52.1% Fee
188 4/23/98 6/1/08 120 112 300 $1,207,594 36.6% Fee
189 5/12/98 6/1/08 120 112 300 $1,199,012 43.8% Fee
190 4/30/98 6/1/08 120 112 300 $1,197,516 54.4% Fee
191 6/3/98 7/1/13 180 173 180 $2 0.0% Leasehold
192 7/18/95 8/1/02 84 42 300 $1,333,956 60.6% Fee
193 4/22/98 5/1/08 120 111 120 $0 0.0% Fee
194 5/8/98 6/1/08 120 112 180 $682,383 20.3% Fee
195 8/28/98 9/1/08 120 115 360 $1,222,284 61.1% Fee
196 4/20/98 6/1/08 120 112 300 $1,130,025 47.7% Fee
197 4/3/98 5/1/08 120 111 360 $1,202,646 61.7% Fee
198 5/1/98 6/1/08 120 112 300 $1,091,851 45.9% Fee
199 6/22/98 7/1/18 240 233 240 $0 0.0% Fee
200 6/19/98 7/1/08 120 113 300 $1,082,960 49.9% Fee
201 6/17/98 7/1/08 120 113 360 $1,143,280 50.1% Fee
202 8/10/98 9/1/08 120 115 360 $1,148,213 47.8% Fee
203 4/27/98 7/1/08 120 113 300 $521,264 47.2% Fee
204 4/27/98 7/1/08 120 113 300 $517,190 47.2% Fee
205 5/4/98 6/1/08 120 112 360 $1,134,107 62.1% Fee
206 7/31/98 9/1/08 120 115 300 $1,030,623 51.8% Fee
207 6/25/98 8/1/08 120 114 300 $1,020,400 59.3% Fee
208 6/4/98 7/1/08 120 113 240 $862,805 29.1% Fee
209 8/3/98 10/1/13 180 176 180 $0 0.0% Fee
210 6/25/98 7/1/05 84 77 360 $1,131,278 70.7% Fee
211 6/10/98 7/1/08 120 113 180 $566,323 26.3% Fee
212 6/25/98 7/1/08 120 113 360 $1,037,105 35.8% Fee
213 10/30/98 11/1/08 120 117 360 $1,050,939 61.8% Fee
214 8/10/98 9/1/13 180 175 360 $890,288 46.9% Fee
215 6/2/98 7/1/08 120 113 300 $979,441 27.2% Fee
216 6/15/98 8/1/08 121 114 300 $956,635 55.0% Fee
217 4/15/98 5/1/13 180 171 180 $0 0.0% Fee
218 5/29/98 7/1/08 120 113 300 $926,010 57.9% Fee
219 5/26/98 7/1/08 120 113 360 $993,534 60.2% Fee
220 6/25/98 8/1/08 120 114 360 $990,537 60.0% Fee
221 7/20/98 8/1/08 120 114 300 $897,359 57.9% Fee
222 7/21/98 10/1/08 120 116 300 $850,359 28.3% Fee
223 7/30/98 9/1/08 120 115 300 $882,386 38.4% Fee
224 7/29/98 9/1/08 120 115 300 $874,413 58.3% Fee
225 7/1/98 8/1/13 180 174 240 $463,921 23.2% Fee
226 5/15/98 6/1/08 120 112 240 $734,753 43.7% Fee
227 6/23/98 7/1/08 120 113 360 $929,967 25.5% Fee
228 6/17/98 7/1/08 120 113 360 $942,178 69.8% Fee
229 7/13/98 9/1/08 120 115 360 $927,331 63.5% Fee
230 7/30/98 9/1/08 120 115 300 $843,709 48.2% Fee
</TABLE>
II-5
<PAGE> 120
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Balance/ Mortgage
No. Seller(1) Property Name(2) (by Loan No.) Date Balance(3) Unit or SF(4) Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
231 WF Woodfront Condominiums $1,043,388 $21,294 7.040%
232 MS Coral Shopping Center (108), (168), (213) $1,022,670 $68 6.660%
233 WF Morally Wholesale $1,016,948 $44 7.110%
234 WF Emerald Court Apartments $1,002,461 $35,802 7.060%
235 WF 1500 International Parkway $999,074 $22 6.950%
236 WF 4801 W. 147th $995,288 $34 7.110%
237 WF 7225 & 7235 Bermuda Road (238), (254) $991,826 $45 6.550%
238 WF 150 North Gibson Road (237), (254) $991,826 $30 6.550%
239 WF San Carlos Apartments $996,014 $26,211 6.540%
240 WF Daisy III Apartments (205), (253) $994,718 $45,214 7.300%
241 WF Evergreen Garden Apts. $994,006 $14,618 6.690%
242 WF Albermarle Center $993,835 $24 7.450%
243 WF The Village at Weber Ranch $991,159 $94 7.150%
244 MS U-Stor George Washington $991,072 $19 7.160%
245 WF 1410 W. 10th Pl. $987,406 $65 7.055%
246 WF Memorial Hills Townhomes $986,647 $24,666 7.200%
247 WF Espalier Square $984,378 $40 7.250%
248 WF Mission Plaza $969,251 $25 6.950%
249 WF Huebner Road Office Buildings $964,937 $35 7.060%
250 WF Kickapoo Plaza Shopping Center $952,949 $22 7.430%
251 WF Cascade Optical Buildings $929,529 $44 7.780%
252 WF The 3700 Building $918,970 $67 7.165%
253 WF Daisy IV Apartments (205), (240) $895,246 $44,762 7.300%
254 WF 2201 Sturgis (237), (238) $892,765 $25 6.690%
255 WF Petal Street $889,723 $10 6.950%
256 WF Thrifty Payless, Laguna Niguel (IV) $443,950 $22 7.360%
257 WF Thrifty Payless, Bellflower (IV) $443,950 $22 7.360%
258 WF Jam Pharmaceutical $877,727 $35 7.460%
259 WF Sonora Court $839,585 $43 7.250%
260 WF Parkway Square $805,224 $10 6.950%
261 WF Glenbrook Place Apartments $750,732 $8,531 7.500%
262 WF 4625 West Jennifer Avenue $744,770 $38 7.570%
263 WF Commercial Building West Lake Village $738,483 $36 7.450%
264 WF South Park Apartments $736,217 $35,058 6.800%
265 WF Reseda Mobile Homes $735,728 $6,812 7.110%
266 WF Murphy Avenue (268), (269) $723,836 $34 7.260%
267 WF 10925 Kinross Avenue $693,230 $43 7.265%
268 WF 4 Wrigley Street (266), (269) $640,346 $37 7.260%
269 WF 9 Marconi Street (266), (268) $634,596 $38 7.260%
270 WF Westridge Commerce Center $497,523 $31 7.690%
271 WF Centennial Green $477,170 $29 6.950%
272 WF Bowser Tech $467,229 $12 6.950%
273 WF 1720 Greenville Avenue $452,317 $16 6.950%
274 WF Taco Bell/ Scottsdale $416,574 $87 7.480%
Total/Weighted Average $968,511,922 7.067%
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Term to Rem. Term Scheduled
Maturity to Maturity Amort. Balance at
Loan Note Maturity Date or ARD or ARD Term Maturity Balloon Security
No. Date or ARD(5) (mos) (mos) (mos)(6) or ARD LTV(4) Type
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
231 4/23/98 5/1/08 120 111 360 $917,005 70.0% Fee
232 10/30/98 11/1/08 120 117 360 $885,753 63.3% Fee
233 6/10/98 7/1/10 144 137 144 $0 0.0% Fee
234 4/22/98 5/1/08 120 111 360 $867,925 51.1% Fee
235 6/25/98 7/1/08 120 113 360 $861,397 31.9% Fee
236 6/3/98 7/1/10 144 137 360 $837,095 54.4% Fee
237 8/24/98 10/1/18 240 236 240 $0 0.0% Fee
238 8/24/98 10/1/18 240 236 240 $0 0.0% Fee
239 8/21/98 9/1/08 120 115 360 $861,311 47.9% Fee
240 5/11/98 6/1/08 120 112 360 $879,152 57.6% Fee
241 8/14/98 9/1/08 120 115 300 $792,143 41.7% Fee
242 6/25/98 8/1/08 120 114 300 $811,179 36.9% Fee
243 5/20/98 6/1/08 120 112 300 $803,824 45.8% Fee
244 8/26/98 9/1/08 120 115 240 $684,592 33.4% Fee
245 6/3/98 7/1/08 120 113 240 $682,306 50.5% Fee
246 6/4/98 7/1/18 240 233 240 $2 0.0% Fee
247 7/31/98 9/1/13 180 175 180 $0 0.0% Fee
248 6/25/98 7/1/08 120 113 360 $835,684 37.1% Fee
249 7/22/98 8/1/08 120 114 120 $0 0.0% Fee
250 5/5/98 6/1/08 120 112 300 $779,102 58.4% Fee
251 5/14/98 7/1/18 240 233 240 $0 0.0% Fee
252 7/23/98 8/1/08 120 114 300 $743,856 53.1% Fee
253 5/12/98 6/1/08 120 112 360 $791,237 68.8% Fee
254 8/24/98 10/1/18 240 236 240 $0 0.0% Fee
255 6/25/98 7/1/08 120 113 360 $767,116 29.5% Fee
256 12/16/97 2/1/08 120 108 300 $363,768 24.5% Fee
257 12/16/97 2/1/08 120 108 300 $363,768 24.5% Fee
258 5/22/98 6/1/08 120 112 240 $616,070 44.0% Fee
259 6/17/98 7/1/18 240 233 240 $30,258 0.9% Fee
260 6/25/98 7/1/08 120 113 360 $694,260 17.0% Fee
261 8/14/98 10/1/03 60 56 180 $593,529 30.8% Fee
262 5/1/98 7/1/08 120 113 300 $610,693 61.1% Fee
263 7/28/98 9/1/13 180 175 180 $0 0.0% Fee
264 5/26/98 7/1/08 120 113 360 $642,108 60.3% Fee
265 7/1/98 8/1/13 180 174 180 $0 0.0% Fee
266 5/29/98 7/1/08 120 113 300 $578,175 48.2% Fee
267 5/13/98 6/1/08 120 112 300 $554,488 21.0% Fee
268 5/29/98 8/1/08 120 114 300 $510,852 44.4% Fee
269 5/29/98 7/1/08 120 113 300 $506,892 45.3% Fee
270 7/28/98 9/1/08 120 115 300 $408,423 22.7% Fee
271 6/25/98 7/1/08 120 113 360 $411,414 42.9% Fee
272 6/24/98 7/1/08 120 113 360 $402,842 19.9% Fee
273 6/23/98 7/1/08 120 113 360 $389,986 28.9% Fee
274 5/21/98 7/1/05 84 77 300 $367,191 42.7% Fee
128 122 315 49.7%
</TABLE>
II-6
<PAGE> 121
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CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name(2) Address
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Golf Mill Shopping Center 239 Golf Mill Center
2 Silvertree Hotel and Wildwood Lodge 40-100 Elbert Lane
3 Mission Valley Hilton Hotel (A) 901 Camino Del Rio South
4 Hanalei Hotel (A) 2270 Hotel Circle North
5 Galleria Palms Apartments 1600 West La Jolla Drive
6 55 Hawthorne & 631 Howard 55 Hawthorne Street & 631 Howard Street
7 Dunwoody Club Apartments 7700 Colquitt Road
8 Grapevine Town Shopping Center 1217 State Highway 114 West
9 Ward - Bel Air Professional Ctr (I) 2012 Tollgate Road
10 Ward - Bel Air Retail (I) 16 Bel Air South Parkway
11 Ward - Bright Oaks Office (I) 2021 Emmorton Road
12 Ward - Blue Spruce (I) 2 Bel Air South Parkway
13 Ward - Hayes/Thomas Office (I) 112 Hayes St/209 Thomas St
14 Central Park Apartments 1750 Stokes Street
15 Boca Industrial (B) 3100 N.W. Boca Raton Boulevard
16 South Congress Industrial (B) 1101-1141 Holland Drive
17 North Los Altos Shopping Center 2210-2244 & 2280-2290 Bellflower Blvd.
18 International Residence-Austin (IRA) 9815 Copper Creek
19 Crossway Commons Shopping Center 1589/91/93 Crossway Blvd.
20 La Veta Grand Apartments 401 W. La Veta Ave
21 1 Lombard St. & 150 Greenwich St. 1 Lombard St. & 150 Greenwich St.
22 Vintage Court Hotel 650 Bush Street
23 Wimberly Park 800 Link Drive and Jellison Blvd.
24 Federal Express Building 2000 San Fernando Road
25 Merrimac Plaza Shopping Center 180 Haverhill Street
26 Stockton Center 1880 E. Hammer Lane
27 International Residence San Antonio 8702 - 8722 Cinnamon Creek Drive
28 Corporate Drive, Sugarland, TX SWC Corporate Drive and Executive Drive
29 Weatherly Walk 100 Knight Way
30 Office Depot - Long Beach, CA 3500 East Willow Street
31 Hurst Harbor Marina 16045 Marina Point
32 Casady Square Shopping Center 9207 N Pennsylvania Ave
33 Commonwealth Building 421 S.W. Sixth Street
34 Coyote Creek Mobile Home Park 2580 Senter Road
35 Mountainview Marketplace Shopping Center 3131 East Thunderbird Road
36 Hurley's Children & Family Medical Ctr. 1085 & 1125 South Linden Road
37 Druid Pointe Office Building 2751 Buford Highway
38 Nohl Plaza Shopping Center 1440 - 1628 E. Lincoln Ave., 2634 - 2756 N. Tustin
39 Monterey Park II Apts. 5200 West Pioneer Avenue
40 Spring Hill Market Place 142-212 South Western Avenue
41 Hampton Inn Hotel 3908 West Braker Lane
42 Crestview Apartments 270 Littleton
43 Fiesta Shopping Center 5334 Ross Ave.
44 Sierra Crest Shopping Center 3800-3870 La Sierra Avenue
45 Casa Del Rey Apartments 526 East Barstow Avenue
46 Alameda Business Centre 2501 - 3187 S. Alameda Street & 1791-1837 MLK Blvd
47 58 Charles Street Office Building 58 Charles Street
48 Syosset Plaza Shopping Center 603-641 Jericho Turnpike
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. City State Zip Code Type Sub-Type Units/NSF Renovated(7)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Niles IL 60714 Retail Regional Mall 750,682 1998
2 Snowmass Village CO 81615 Hospitality Resort 410 1992
3 San Diego CA 92108 Hospitality Full Service 350 1988
4 San Diego CA 92108 Hospitality Full Service 416 1997
5 Tempe AZ 85282 Multifamily Garden 568 1997
6 San Francisco CA 94105 Office Urban 235,912 1988
7 Atlanta GA 30350 Multifamily Garden 532 1998
8 Grapevine TX 76051 Retail Anchored 186,984 1995
9 Bel Air MD 21015 Office Suburban 64,389 1996
10 Bel Air MD 21015 Retail Unanchored 26,773 1995
11 Bel Air MD 21015 Office Suburban 39,684 1991
12 Bel Air MD 21015 Retail Unanchored 6,698 1993
13 Bel Air MD 21014 Office Suburban 14,100 1998
14 San Jose CA 95126 Multifamily Garden 186 1997
15 Boca Raton FL 33431 Industrial Flex 87,670 1998
16 Boca Raton FL 33487 Industrial Warehouse 118,800 1981
17 Long Beach CA 90815 Retail Anchored 129,241 1996
18 Austin TX 78729 Multifamily Garden 510 1996
19 Chesapeake VA 23320 Retail Anchored 152,686 1997
20 Orange CA 92866 Multifamily Garden 250 1995
21 San Francisco CA 94111 Office Suburban 119,955 1994
22 San Francisco CA 94108 Hospitality Full Service 107 1982
23 Duncanville TX 75116 Multifamily Garden 440 1981
24 Los Angeles CA 90039 Industrial Warehouse 119,381 1998
25 Methuen MA 01844 Retail Anchored 114,964 1984
26 Stockton CA 95210 Retail Anchored 152,919 1998
27 San Antonio TX 78240 Multifamily Garden 348 1985
28 Sugar Land TX 77478 Industrial Warehouse 143,175 1998
29 Fayetteville GA 30214 Multifamily Garden 194 1988
30 Long Beach CA 90815 Industrial Warehouse 187,500 1997
31 Austin TX 78734 Other Marina 514 1994
32 Oklahoma City OK 73120 Retail Anchored 200,999 1997
33 Portland OR 97204 Office Urban 192,551 1995
34 San Jose CA 95101 Mobile Home Park Mobile Home Park 183 1973
35 Phoenix AZ 85032 Retail Anchored 123,184 1988
36 Flint MI 48532 Office Suburban 62,942 1994
37 Atlanta GA 30324 Office Suburban 100,511 1996
38 Orange CA 92865 Retail Anchored 102,961 1989
39 Las Vegas NV 89102 Multifamily Garden 136 1988
40 Carpentersville IL 60110 Retail Anchored 108,416 1989
41 Austin TX 78759 Hospitality Limited Service 124 1996
42 West Lafayette IN 47906 Multifamily Garden 217 1997
43 Dallas TX 75206 Retail Anchored 92,641 1996
44 Riverside CA 92505 Retail Anchored 94,734 1979
45 Fresno CA 93710 Multifamily Garden 244 1972
46 Los Angeles CA 90058 Industrial Light 509,301 1978
47 Cambridge MA 02141 Office Urban 47,793 1987
48 Syosset NY 11791 Retail Unanchored 31,278 1989
</TABLE>
II-7
<PAGE> 122
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CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name(2) Address
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
49 Silver Creek Shopping Center Capitol Expressway and Silver Creek Road
50 Martin Woodworking 7757 Saint Andrews Avenue
51 Park Bank Office Building 2810 Crossroads Drive
52 Consolidated Technology Warehouse (II) 815 Reasor Road
53 Consolidated Technology Industrial Building (II) 400 West Delaware
54 1155 Jones Street 1155 Jones Street
55 Kramer - 6 Arcata Apartments (III) 599 Ridge Rd
56 Kramer - Eureka Apartments (III) 2520-2590 Hubbard Lane
57 Kramer - Fields Landing (III) 6682 Second Ave/363 Railroad Ave
58 Vista Oaks Apartment 3883 Vista Oaks Drive
59 Nash Finch Distribution Warehouse 3601 Washington Boulevard
60 Syracuse Center - Phase I SEC of 1000 West St & 1700 South St.
61 Amador II Building 4480 Willow Road
62 Catalina Apartments 3912 & 3930 Laurel Canyon Blvd.
63 4670 Willow Road 4670 Willow Road
64 Hamilton House Apartments 200 & 250 Chatham Way
65 Sacramento Place Apartments 4337 Norwood Avenue
66 Zycon R&D Building 425 El Camino Real
67 Rudolph-Hendrickson Senior Apartments 6618 Amethyst Street
68 Holborn Village Apartments 2802-2999 Holborn Circle
69 100 E. Tujunga 100 E. Tujunga
70 Rancho Anita Industrial Park 753-775 Anita Street & 1616 Industrial Boulevard
71 Beverly Hills Tower Apartments (C) 125 North Doheny Drive
72 Beverly Hills Regency Apartments (C) 135 North Doheny Drive
73 Chico Town & Country Shopping Ctr. 110-236 W. East Avenue
74 Windsor Court Apartments 900-1000 West Zeering Road
75 Pathmark Super Center-Wilmington, DE 3901 Lancaster Pike
76 New Villa Valencia Mobile Home Park 14092 Browning Ave.
77 Veterans Plaza Shopping Center 1 Kent Road
78 150 Sylvan Avenue Shopping Center 150 Sylvan Avenue
79 Reynolds Industries Bldg 5005 McConnell Ave
80 Strada Da Valle Office Building 2300-2500 East Valley Rd
81 Conrad Villas Apts. 3917-25 Conrad Drive
82 Ocean Business Park 1945 Placentia Avenue
83 Westwood Village Shopping Center 2600 West 4700 South
84 Enclave Apartments 7917 Selma Ave.
85 Westside Shopping Center 2000-2010 Harrison Ave. N.W.
86 Riverside Country Club Mobile Home Park 9391 California Avenue
87 3030 Bridgeway Boulevard 3030 Bridgeway Boulevard
88 Food 4 Less 3434 Manthey Road
89 Suburban Lodge Hotel 106 Woodpark Boulevard
90 Pathmark Super Center-Upper Darby, PA 421 South 69th Street
91 The Ladco Building 7900 Washington Avenue
92 Hickory Plaza 10801 & 10805 Hickory Ridge Road
93 College Way Marketplace 1808 Market Street
94 Grove Business Joint Venture 777-797 Grove Road
95 Edison Way Industrial Center 3475-3517 Edison Way
96 Pacific Terrace Apartments 15000 Pacific Street
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. City State Zip Code Type Sub-Type Units/NSF Renovated(7)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
49 San Jose CA 95111 Retail Unanchored 63,365 1990
50 San Diego CA 92173 Industrial Warehouse 200,800 1998
51 Madison WI 53707 Office Suburban 66,201 1997
52 Charleston IL 46041 Industrial Warehouse 259,205 1981
53 Casey IL 62420 Industrial Light 187,874 1996
54 San Francisco CA 94114 Multifamily High-Rise 60 1924
55 Arcata CA 95521 Multifamily Garden 159 1986
56 Eureka CA 95503 Multifamily Garden 49 1994
57 Fields Landing CA 95537 Multifamily Garden 11 1997
58 Martinez CA 94553 Multifamily Garden 108 1988
59 Baltimore MD 21227 Industrial Warehouse 380,432 1941
60 Syracuse UT 84075 Retail Anchored 77,600 1997
61 Pleasanton CA 94566 Industrial Flex 63,934 1984
62 Studio City CA 91604 Multifamily Garden 99 1989
63 Pleasanton CA 94588 Office Garden 46,130 1997
64 Mayfield Heights OH 44124 Multifamily Garden 399 1969
65 Sacramento CA 95838 Multifamily Garden 195 1987
66 Santa Clara CA 95050 Other Mixed (Office/Industrial) 59,000 1996
67 Rancho Cucamonga CA 91737 Multifamily Senior Housing 168 1987
68 Madison WI 53718 Multifamily Garden 87 1994
69 Burbank CA 91502 Office Suburban 46,545 1991
70 Chula Vista CA 91911 Industrial Light 137,745 1982
71 Los Angeles CA 90048 Multifamily Low-Rise 35 1996
72 Los Angeles CA 90048 Multifamily Low-Rise 16 1988
73 Chico CA 95926 Retail Unanchored 84,630 1988
74 Turlock CA 95382 Multifamily Garden 193 1997
75 Wilmington DE 19805 Retail Anchored 49,200 1988
76 Tustin CA 92680 Mobile Home Park Mobile Home Park 148 1994
77 New Milford CT 06776 Retail Anchored 72,209 1965
78 Englewood Cliffs NJ 07632 Retail Anchored 42,200 1986
79 Los Angeles CA 90066 Industrial Flex 56,300 1992
80 Renton WA 98055 Office Suburban 53,736 1989
81 Spring Valley CA 91977 Multifamily Garden 112 1997
82 Costa Mesa CA 92627 Industrial Warehouse 94,448 1990
83 Taylorsville City UT 84118 Retail Anchored 80,909 1992
84 Los Angeles CA 90046 Multifamily Garden 75 1986
85 Olympia WA 98502 Retail Anchored 62,038 1992
86 Riverside CA 92503 Mobile Home Park Mobile Home Park 137 1995
87 Sausalito CA 94965 Office Suburban 26,734 1970
88 Stockton CA 95206 Retail Big Box 50,039 1998
89 Woodstock GA 30188 Hospitality Extended Stay 138 1997
90 Upper Darby PA 19082 Retail Anchored 52,900 1988
91 Houston TX 77007 Industrial Warehouse 76,600 1997
92 Columbia MD 21044 Other Mixed (Retail/Office) 45,666 1988
93 Mount Vernon WA 98273 Retail Anchored 50,675 1998
94 Richardson TX 75081 Industrial Light 123,364 1983
95 Menlo Park CA 94025 Industrial Flex 84,539 1985
96 Midway City CA 92655 Multifamily Garden 98 1976
</TABLE>
II-8
<PAGE> 123
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name(2) Address
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
97 4700-4800 SW 51 St Warehouse 4700-4800 SW 51 Street
98 Brookside Villas Apartments 1850 Idlewild Drive
99 Castaic Apartments 31657 Ridge Route Road
100 La Habra Hills 841 W. La Habra Blvd.
101 5251 - 5271 East 2nd St. 5251 - 5271 East 2nd St.
102 Montgomery Business Park 9922 E. Montgomery St. & 10021 E. Knox Ave.
103 Atherton Park Apartments 4545 South Atherton Drive
104 Let's Store It II - Brookhurst 850 N. Brookhurst
105 Torrance Western Self Storage 22011 Western Avenue
106 Sierra Gardens 16235 - 45 Lakewood Blvd.
107 Shelter Creek Apartments 2050 Southwest Expressway
108 Design Row Shopping Center 7365-7446, 7655-7679 W. Sample Road
109 Veteran Plaza 1508 Veteran Avenue
110 Rolling Hills Apartments 25935 Rolling Hills Road
111 Four Corners Shopping Center 1701, 1803, 1853, 1955, & 1991 Monument Blvd
112 Rimrock Plaza Shopping Center 4733 Palm Canyon Drive
113 Orchard View Apartments 3509 South Orchard Street
114 Secure Self Storage of Old Town 3865 Rosecrans
115 Waterford Place Condominiums 393 Oconee Street
116 Nimitz Point Apartments 2401 Seaside Street
117 Physician's Plaza 2120 Professional Drive
118 Artesia Mobile Home Estates 19172 South Pioneer Blvd.
119 Del Prado Apartments 9150-9160 East Florence Avenue
120 Concord Villas 3738 Harrison Street
121 San Mateo Office Complex 3130 La Selva
122 Colonial Arms Apartments 151 Milne Drive
123 Westport Apartments 1700 Dairy Ave.
124 Marina Self Storage 2600 W. Wooley Road
125 Americana Palos Verdes Apartments 4060 Palos Verdes Road
126 Grand York Shopping Center 1815 York & Ridgely Road
127 Brooktree Estates Apartments 13535 Valerio Street
128 Daily California Building 1000, 1044 Pioneer Way & 500, 550 Fesler Street
129 The Regent-Chicago 180-190 E. Walton Street
130 Lyons Shopping Center 23640 Lyons Avenue
131 Renaissance Tech 1751 International Parkway
132 Columbian Steel Tank Co. 5400 Kansas Avenue
133 Barbur Place Center 9202-9220 SW Barbur Boulevard
134 Samoan Sea Apartments 661 N. Harbor Boulevard
135 4759 51 Street Warehouse 4759 SW 51 Street
136 20650 Prairie 20650 Prairie Street
137 Sierra West Business Park 11702-34 Enterprise Drive
138 PetsMart-Sand City 2020 California Avenue
139 Mesa Breeze Apartments 867 W. 19th Street
140 Palm Garden Apartments 954-958 Palm Ave. and 975 Hancock Ave.
141 Harvard Apartments 330 S. Harvard Boulevard
142 Safeworks Warehouse 365 Upland Drive
143 Garden Brook Apartments 3950 SW 102nd Avenue
144 Lynmarie Apartments 11570 SW Center Street
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. City State Zip Code Type Sub-Type Units/NSF Renovated(7)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
97 Davie FL 33314 Industrial Warehouse 89,396 1988
98 Reno NV 89509 Multifamily Garden 113 1997
99 Castaic CA 91384 Multifamily Garden 84 1990
100 La Habra CA 90631 Multifamily Garden 137 1997
101 Long Beach CA 90803 Retail Unanchored 13,688 1988
102 Spokane WA 99206 Industrial Flex 118,128 1996
103 Taylorsville UT 84123 Multifamily Garden 144 1997
104 Anaheim CA 92801 Self Storage Self Storage 99,741 1978
105 Torrance CA 90501 Self Storage Self Storage 87,925 1986
106 Bellflower CA 90706 Multifamily Garden 96 1997
107 San Jose CA 95126 Multifamily Garden 124 1996
108 Coral Springs FL 33065 Retail Unanchored 30,931 1997
109 Los Angeles CA 90024 Multifamily Garden 27 1990
110 Torrance CA 90505 Multifamily Garden 107 1970
111 Concord CA 94520 Retail Unanchored 35,921 1993
112 Palm Springs CA 92264 Retail Anchored 84,182 1981
113 Tacoma WA 98466 Multifamily Garden 120 1980
114 San Diego CA 92110 Self Storage Self Storage 56,585 1994
115 Athens GA 30601 Multifamily Garden 36 1992
116 San Diego CA 92107 Multifamily Garden 64 1995
117 Roseville CA 95661 Office Suburban 20,458 1990
118 Artesia CA 90701 Mobile Home Park Mobile Home Park 95 1984
119 Downey CA 90240 Multifamily Garden 56 1969
120 Riverside CA 92503 Multifamily Garden 70 1988
121 San Mateo CA 94403 Office Suburban 34,417 1980
122 Center Township PA 15061 Multifamily Garden 120 1998
123 Corcoran CA 93212 Multifamily Garden 190 1987
124 Oxnard CA 93035 Self Storage Self Storage 56,771 1990
125 Las Vegas NV 89119 Multifamily Garden 102 1997
126 Timonium MD 21098 Retail Anchored 58,902 1973
127 Los Angeles CA 90405 Multifamily Garden 120 1996
128 El Cajon CA 92020 Industrial Flex 79,404 1998
129 Chicago IL 60611 Retail Unanchored 9,000 1997
130 Santa Clarita CA 91321 Retail Anchored 23,125 1991
131 Richardson TX 75081 Industrial Flex 81,231 1984
132 Kansas City KS 66106 Industrial Bulk 155,500 1958
133 Portland OR 97219 Other Mixed (Retail/Office) 30,324 1988
134 San Pedro CA 90731 Multifamily Garden 151 1997
135 Davie FL 33314 Industrial Warehouse 72,000 1987
136 Chatsworth CA 91311 Industrial Warehouse 102,534 1981
137 Auburn CA 95603 Office Suburban 35,628 1987
138 Sand City CA 93955 Retail Anchored 22,809 1997
139 Costa Mesa CA 92627 Multifamily Garden 62 1985
140 West Hollywood CA 90069 Multifamily Garden 52 1969
141 Los Angeles CA 90020 Multifamily Garden 43 1990
142 Tukwila WA 98188 Industrial Warehouse 54,668 1992
143 Beaverton OR 97005 Multifamily Garden 120 1973
144 Beaverton OR 97005 Multifamily Garden 170 1997
</TABLE>
II-9
<PAGE> 124
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CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name(2) Address
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
145 Storey Plastics Building 3333 West Pacific Avenue
146 Casa de Jerado 7500-7598 Orchard St.
147 Palm Central South 6655 Palm Avenue
148 Barnes - 380 Tennant Ave (D) 380 Tennant Avenue
149 Barnes - 6550 Brem Lane (D) 6550 Brem Lane
150 Barnes - Santa Cruz (D) 335 North Santa Cruz Ave
151 Arctic Business Park III 500-521 West 41st Street
152 Savannah Gardens Apartments 1906 Savannah Way
153 Markison Vista 10410-10430 Vista Park Road and 10510-10515 Markison Road
154 London Press Building 24811 Avenue Rockefeller
155 Canal Park Apartments 2410 - 2490 Canal Street
156 Hayvenhurst Airport Business Park 7625 Hayvenhurst Avenue
157 Bashas' Shopping Center 170 Yavapai Street
158 15th & 16th Street Warehouse 3685 NW 15th Street and 3698 NW 16th Street
159 Raintree Apartments 100 David Lane
160 Lindys Town Lake Apartments 2215 Town Lake Circle
161 Discount Mini Storage North 4105 W. Hillsborough Ave.
162 1207-15 Pearl Street Mall 1207-1215 Pearl Street
163 Midway Park North 15900-15960 Midway Road
164 Winchester House Apartments 5960 NW 38th Street
165 740 W. Knox 740 W. Knox
166 Normandie Apartments 8610 McCullough Avenue
167 Oakmont Shopping Center 19940 - 19990 Homestead Rd.
168 Coral Place Pilgrim Building Shopping Center 10150-10200 W. Sample Rd.
169 1730 I Street 1730 I Street
170 Western Digital Building 5101 Lafayette Street
171 Casa Alegre Apartments 13020 Doty Avenue
172 Rodeo Plaza 2825 - 2829 South Rodeo Gulch Road
173 Casa Del Sol North (E) 13931 Chadron Avenue
174 Casa Del Sol South (E) 14037 Chadron Avenue
175 Staples-Southington 33 Spring Street
176 55 th & Wadsworth Retail Center 5545 Wadsworth Blvd
177 OMA Building 1125 West 190th Street
178 Cleator Corp Buildings 8745 Production Avenue
179 Hidden Village Apartments 8605 N. 59th Avenue
180 Arctic Business Park II 4011 Arctic Boulevard
181 Eckerd Drug Store No. 816R 1101 North Beach Street
182 Willow Glen Mobile Home Park 225 North Akers Road
183 940 E. Diehl Road 940 E. Diehl
184 Gateway Office Center 155 South 300 West
185 Laguna Hills Property 22921-41 Triton Way
186 Rancho Dominguez 18420 Santa Fe Avenue
187 The Hampton Apartments 7545 Hampton Avenue
188 Redwood Self Storage 425 Houser Street
189 Hewlett Packard Bldg. 15890 Bernardo Center Drive
190 Spenwick Industrial Park 2550 Spenwick
191 Lancaster Medical Office Building 43860 N. 10th Street West
192 Dorchester Gardens Apartments 5500 Dorchester Road
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. City State Zip Code Type Sub-Type Units/NSF Renovated(7)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
145 Burbank CA 91505 Industrial Warehouse 40,250 1986
146 Riverside CA 92506 Multifamily Garden 120 1968
147 Riverside CA 92506 Multifamily Garden 114 1971
148 Morgan Hill CA 95037 Industrial Flex 19,939 1982
149 Gilroy CA 95020 Industrial Light 15,800 1980
150 Los Gatos CA 95030 Office Suburban 2,500 1984
151 Anchorage AK 99503 Industrial Light 46,715 1997
152 Cincinnati OH 45224 Multifamily Garden 120 1973
153 Garland TX 75041 Industrial Light 86,481 1987
154 Valencia CA 91355 Industrial Warehouse 81,850 1989
155 Boise ID 83705 Multifamily Garden 72 1994
156 Van Nuys CA 91406 Industrial Light 49,486 1987
157 Wickenburg AZ 85390 Retail Anchored 53,814 1995
158 Lauderhill FL 33311 Industrial Warehouse 52,400 1988
159 Muskogee OK 74403 Multifamily Garden 144 1984
160 Austin TX 78741 Multifamily Garden 102 1995
161 Tampa FL 33614 Self Storage Self Storage 47,918 1990
162 Boulder CO 80302 Other Mixed (Retail/Office) 13,536 1995
163 Addison TX 75006 Industrial Flex 66,568 1984
164 Virgnia Gardens FL 33166 Multifamily Garden 76 1965
165 Tempe AZ 85284 Industrial Warehouse 41,415 1997
166 San Antonio TX 78216 Multifamily Garden 110 1964
167 Cupertino CA 95014 Retail Unanchored 18,241 1969
168 Coral Springs FL 33065 Retail Unanchored 20,719 1975
169 Sacramento CA 95814 Office Suburban 18,435 1986
170 Santa Clara CA 95054 Industrial Flex 24,500 1996
171 Hawthorne CA 90250 Multifamily Garden 76 1973
172 Soquel CA 95073 Industrial Light 41,760 1983
173 Hawthorne CA 90250 Multifamily Garden 40 1970
174 Hawthorne CA 90250 Multifamily Garden 49 1969
175 Southington CT 06489 Retail Big Box 17,646 1995
176 Arvada CO 80002 Retail Unanchored 11,995 1997
177 Gardena CA 90248 Office Suburban 26,795 1998
178 San Diego CA 92121 Industrial Warehouse 46,820 1976
179 Phoenix AZ 85302 Multifamily Garden 130 1983
180 Anchorage AK 99503 Industrial Flex 39,608 1978
181 Fort Worth TX 76111 Retail Anchored 13,050 1997
182 Visalia CA 93291 Mobile Home Park Mobile Home Park 88 1968
183 Naperville IL 60563 Office Suburban 19,668 1996
184 Salt Lake City UT 84101 Office Suburban 24,764 1995
185 Laguna Hills CA 92653 Office Suburban 25,984 1982
186 Compton CA 90221 Industrial Warehouse 54,000 1998
187 West Hollywood CA 90046 Multifamily Garden 42 1963
188 Cotati CA 94931 Self Storage Self Storage 68,325 1984
189 Rancho Bernardo CA 92128 Industrial Warehouse 46,324 1991
190 Houston TX 77055 Industrial Warehouse 101,376 1976
191 Lancaster CA 93534 Office Suburban 18,000 1998
192 North Charleston SC 29437 Multifamily Garden 114 1984
</TABLE>
II-10
<PAGE> 125
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name(2) Address
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
193 Safeway-Marlow Center 1791-1793 Marlow Road
194 Keylock Mini Storage 4750 62nd Ave. North
195 53rd Court Warehouse 3560-3570 NW 53 Court
196 Stadium Court 1717 South State College Blvd.
197 Oakhurst Drive Apartments 316 North Oakhurst Drive
198 4602 North Avenue 4602 North Avenue
199 Cal Plate, Inc. Buildings 17110 Jersey Avenue
200 McKinley Business Center 2175 & 2185 Sampson Ave.
201 Rite Aid - Cleveland 3402 Clark Avenue
202 77 Rumford Avenue Office Building 77 Rumford Avenue
203 Herndon/West Office II (F) 6770 N. West Avenue
204 Herndon/West Office I (F) 6760 N. West Avenue
205 Daisy I Apartments 1780 Placentia Avenue
206 Sunset East Apartments 4400 N.E. Sunset Blvd.
207 Overlook Terrace Apts. 4820 110th Ave. Court East
208 2275 East Bayshore Road 2275 East Bayshore Road
209 Darant Industrial 1832 E. 68th Avenue
210 354 S. La Fayette Park Place 354 S. La Fayette Park Place
211 22322 Gilberto 22322 Gilberto
212 Parkview 1819 Firman Drive
213 Las Olas Shopping Center 1501 E. Las Olas Blvd.
214 1841 Fuller Apartments 1841 Fuller Avenue
215 Brighton Avenue Plaza Shopping Center 177-193 Brighton Avenue
216 Tiffany Building 795 Willamette Street
217 Ballinger Trace Apts. 7610-36 230th Street SW
218 Freeway Industrial Center 6250-55 Inez Street
219 Villa Monaco 1051 Stearns Avenue
220 Cheyenne Mountain Blockbuster 1795-1805 Cheyenne Mountain Blvd.
221 Sunset Hill Apartments 2804 West 7th Avenue
222 Le Med Apartments 1200 West 40th Street
223 Kerner Automotive Center 3241 A&B Kerner Blvd.
224 Bachman Glen Apartments 2555 Webb Chapel Extension
225 Westview Plaza 10725 SW Barbur Blvd.
226 Fairmont Apartments 665 Fairmont Avenue
227 Commerce-Executive 1100-1198 Commerce Drive
228 St. Andrews Apartments 4201 Linebaugh
229 Dunbar Amored Building 4208 Alameda Boulevard
230 631 Giguere Court 631 Giguere Court
231 Woodfront Condominiums 5411 Columbia
232 Coral Shopping Center 10260-10322 Sample Road
233 Morally Wholesale 3250 West Harmon Avenue
234 Emerald Court Apartments 1600 Garfield Street
235 1500 International Parkway 1500 International Parkway
236 4801 W. 147th 14695 Ingelwood Ave.
237 7225 & 7235 Bermuda Road 7225 & 7235 Bermuda Road
238 150 North Gibson Road 150 N. Gibson Road
239 San Carlos Apartments 831 S.W. Vista Avenue
240 Daisy III Apartments 687 W. 18th Street
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. City State Zip Code Type Sub-Type Units/NSF Renovated(7)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
193 Santa Rosa CA 95401 Retail Unanchored 37,834 1985
194 Pinellas Park FL 33781 Self Storage Self Storage 76,320 1988
195 Fort Lauderdale FL 33309 Industrial Warehouse 46,950 1987
196 Anaheim CA 92806 Office Suburban 36,755 1974
197 Beverly Hills CA 90210 Multifamily Garden 12 1987
198 Oceanside CA 92056 Industrial Warehouse 43,084 1986
199 Artesia CA 90701 Industrial Flex 32,234 1993
200 Corona CA 91719 Industrial Light 50,130 1991
201 Cleveland OH 44109 Retail Anchored 11,190 1998
202 Waltham MA 02154 Office Suburban 23,292 1985
203 Fresno CA 93711 Office Suburban 10,085 1986
204 Fresno CA 93711 Office Suburban 10,122 1986
205 Costa Mesa CA 92627 Multifamily Garden 26 1974
206 Renton WA 98059 Multifamily Garden 40 1993
207 Edgewood WA 98372 Multifamily Garden 48 1977
208 Palo Alto CA 94303 Office Suburban 12,421 1979
209 Denver CO 80229 Industrial Warehouse 44,160 1994
210 Los Angeles CA 90057 Multifamily Garden 41 1970
211 Rancho Santa Margarita CA 92688 Industrial Warehouse 31,918 1988
212 Richardson TX 75081 Industrial Flex 56,353 1981
213 Fort Lauderdale FL 33301 Retail Unanchored 7,500 1995
214 Hollywood CA 90046 Multifamily Garden 27 1991
215 Boston MA 02135 Retail Unanchored 28,489 1984
216 Eugene OR 97401 Other Mixed (Retail/Multifamily) 22,231 1992
217 Edmonds WA 98020 Multifamily Garden 27 1992
218 Ventura CA 93003 Industrial Light 46,044 1997
219 La Habra CA 90631 Multifamily Garden 40 1997
220 Colorado Springs CO 80901 Retail Unanchored 9,190 1997
221 Spokane WA 99224 Multifamily Garden 57 1979
222 Austin TX 78734 Multifamily Garden 88 1994
223 San Rafael CA 94901 Industrial Light 26,770 1977
224 Dallas TX 75220 Multifamily Garden 76 1996
225 Portland OR 97219 Office Suburban 24,549 1983
226 Glendale CA 91203 Multifamily Garden 42 1971
227 Richardson TX 75081 Industrial Flex 84,383 1975
228 Tampa FL 33624 Multifamily Garden 36 1985
229 Vernon CA 90058 Industrial Flex 31,497 1998
230 San Jose CA 95113 Industrial Light 24,432 1989
231 Dallas TX 75214 Multifamily Garden 49 1996
232 Coral Springs FL 33065 Retail Unanchored 15,000 1981
233 Las Vegas NV 89103 Industrial Warehouse 22,948 1997
234 Enumclaw WA 98022 Multifamily Garden 28 1989
235 Richardson TX 75081 Industrial Flex 45,865 1986
236 Hawthorne CA 90250 Industrial Warehouse 29,600 1997
237 Las Vegas NV 89119 Industrial Light 22,080 1993
238 Henderson NV 89014 Industrial Light 32,820 1997
239 Portland OR 97205 Multifamily High-Rise 38 1992
240 Costa Mesa CA 92627 Multifamily Garden 22 1977
</TABLE>
II-11
<PAGE> 126
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name(2) Address
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
241 Evergreen Garden Apts. 291 Jamacha Road
242 Albermarle Center 4822 Albemarle Road
243 The Village at Weber Ranch 5066 North West Lane
244 U-Stor George Washington 1775 S. George Washington Blvd.
245 1410 W. 10th Pl. 1410 W. 10th Pl.
246 Memorial Hills Townhomes 1819 Briarcreek Blvd.
247 Espalier Square 5300 Orange Avenue
248 Mission Plaza 1201 Richardson Drive
249 Huebner Road Office Buildings 19206-10 Huebner Road
250 Kickapoo Plaza Shopping Center 1510 N. Kickapoo Street
251 Cascade Optical Buildings 1213 Hunter Avenue
252 The 3700 Building 3700 Campus Drive
253 Daisy IV Apartments 122 S. Ohio Street
254 2201 Sturgis 2201 Sturgis
255 Petal Street 11110-11140 Petal Street
256 Thrifty Payless, Laguna Niguel (IV) 30222 Crown Valley Pkwy.
257 Thrifty Payless, Bellflower (IV) 15924 Bellflower Blvd.
258 Jam Pharmaceutical 1748 W. Business Center Drive
259 Sonora Court 1171 Sonora Court
260 Parkway Square 801 E. Plano Parkway
261 Glenbrook Place Apartments 2120 & 2121 S. Glenbrook Drive
262 4625 West Jennifer Avenue 4625 W. Jennifer Avenue
263 Commercial Building West Lake Village 31238 Via Colinas
264 South Park Apartments 514-16 E. South Street
265 Reseda Mobile Homes 6545 Wilbur Avenue
266 Murphy Avenue 17352 Murphy Avenue
267 10925 Kinross Avenue 10925 Kinross Avenue
268 4 Wrigley Street 4 Wrigley Street
269 9 Marconi Street 9 Marconi Street
270 Westridge Commerce Center 430-446 Westridge Drive
271 Centennial Green 850 S. Greenville Avenue
272 Bowser Tech 990 N Bowser Road
273 1720 Greenville Avenue 1720 Greenville
274 Taco Bell/ Scottsdale 7153-7155 East Thomas Road
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. City State Zip Code Type Sub-Type Units/NSF Renovated(7)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
241 El Cajon CA 92019 Multifamily Garden 68 1972
242 Charlotte NC 28205 Office Suburban 41,210 1970
243 Stockton CA 95210 Retail Unanchored 10,578 1989
244 Wichita KS 67218 Self Storage Self Storage 53,150 1995
245 Tempe AZ 85281 Industrial Flex 15,215 1997
246 Houston TX 77073 Multifamily Garden 40 1984
247 Cypress CA 90630 Office Suburban 24,600 1977
248 Richardson TX 75080 Office Suburban 38,715 1983
249 San Antonio TX 78258 Office Suburban 27,875 1994
250 Shawnee OK 74801 Retail Unancored 43,774 1983
251 Santa Ana CA 92705 Industrial Warehouse 20,900 1983
252 Newport Beach CA 92660 Office Suburban 13,658 1978
253 Anaheim CA 92805 Multifamily Garden 20 1976
254 Oxnard CA 93030 Industrial Warehouse 35,371 1997
255 Dallas TX 75238 Industrial Light 92,222 1983
256 Laguna Niguel CA 92677 Retail Big Box 20,100 1972
257 Bellflower CA 90706 Retail Big Box 20,100 1970
258 Orange CA 92867 Industrial Warehouse 25,254 1985
259 Sunnyvale CA 94086 Industrial Flex 19,512 1976
260 Plano TX 75074 Industrial Flex 82,022 1982
261 Garland TX 75041 Multifamily Garden 88 1968
262 Fresno CA 93722 Industrial Light 19,504 1988
263 Westlake Village CA 91362 Industrial Flex 20,480 1986
264 Anaheim CA 92805 Multifamily Garden 21 1997
265 Reseda CA 91335 Mobile Home Park Mobile Home Park 108 1960
266 Irvine CA 92614 Industrial Warehouse 21,320 1997
267 Los Angeles CA 90024 Retail Unanchored 16,300 1998
268 Irvine CA 92618 Industrial Warehouse 17,360 1980
269 Irvine CA 92618 Industrial Warehouse 16,489 1980
270 Watsonville CA 95067 Industrial Flex 16,248 1991
271 Richardson TX 75081 Office Suburban 16,466 1982
272 Richardson TX 75081 Industrial Flex 37,850 1985
273 Richardson TX 75081 Industrial Flex 28,177 1990
274 Scottsdale AZ 85257 Retail Unanchored 4,789 1975
</TABLE>
II-12
<PAGE> 127
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Appraised Valuation
No. Property Name(2) Cash Flow Payment(8) DSCR(4) Value Date
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Golf Mill Shopping Center $4,886,425 $285,714 1.43 $56,000,000 7/28/98
2 Silvertree Hotel and Wildwood Lodge $4,886,890 $256,148 1.59 $54,200,000 2/18/98
3 Mission Valley Hilton Hotel (A) $3,149,408 $142,119 1.75 $28,500,000 1/7/98
4 Hanalei Hotel (A) $1,961,436 $101,644 1.75 $22,500,000 1/9/98
5 Galleria Palms Apartments $3,180,389 $190,800 1.39 $38,800,000 7/17/98
6 55 Hawthorne & 631 Howard $3,088,108 $154,365 1.67 $48,000,000 7/22/98
7 Dunwoody Club Apartments $2,908,214 $169,528 1.43 $35,000,000 8/1/98
8 Grapevine Town Shopping Center $2,088,083 $123,003 1.41 $24,000,000 1/7/98
9 Ward - Bel Air Professional Ctr (I) $812,419 $46,616 1.47 $8,500,000 7/14/98
10 Ward - Bel Air Retail (I) $609,107 $34,865 1.47 $6,700,000 7/14/98
11 Ward - Bright Oaks Office (I) $396,088 $21,767 1.47 $4,700,000 7/14/98
12 Ward - Blue Spruce (I) $123,916 $6,935 1.47 $1,250,000 7/21/98
13 Ward - Hayes/Thomas Office (I) $112,489 $6,164 1.47 $1,420,000 7/21/98
14 Central Park Apartments $1,690,692 $74,514 1.89 $20,000,000 5/1/98
15 Boca Industrial (B) $651,296 $36,946 1.42 $7,300,000 7/14/98
16 South Congress Industrial (B) $584,990 $35,803 1.42 $6,800,000 7/12/98
17 North Los Altos Shopping Center $1,725,308 $69,863 2.06 $20,250,000 6/8/98
18 International Residence-Austin (IRA) $1,678,310 $68,435 2.04 $19,350,000 3/31/98
19 Crossway Commons Shopping Center $1,094,925 $71,926 1.27 $13,100,000 12/8/97
20 La Veta Grand Apartments $1,333,221 $65,883 1.69 $15,500,000 1/30/98
21 1 Lombard St. & 150 Greenwich St. $1,647,637 $69,756 1.97 $23,500,000 6/2/98
22 Vintage Court Hotel $1,798,184 $71,830 2.09 $16,600,000 4/21/98
23 Wimberly Park $1,220,026 $56,814 1.79 $14,400,000 4/24/98
24 Federal Express Building $1,086,986 $63,536 1.43 $11,600,000 2/2/98
25 Merrimac Plaza Shopping Center $1,026,803 $56,597 1.51 $11,400,000 7/22/98
26 Stockton Center $1,207,586 $60,453 1.66 $14,750,000 6/5/98
27 International Residence San Antonio $1,175,052 $54,231 1.81 $14,500,000 4/3/98
28 Corporate Drive, Sugarland, TX $925,576 $62,779 1.23 $11,250,000 3/25/98
29 Weatherly Walk $959,236 $50,246 1.59 $10,400,000 7/9/98
30 Office Depot - Long Beach, CA $962,441 $50,051 1.60 $11,900,000 8/6/98
31 Hurst Harbor Marina $1,112,184 $54,037 1.72 $11,500,000 6/24/98
32 Casady Square Shopping Center $988,696 $49,797 1.65 $10,700,000 2/18/98
33 Commonwealth Building $1,169,404 $59,688 1.63 $14,750,000 4/28/98
34 Coyote Creek Mobile Home Park $887,110 $52,680 1.40 $10,200,000 5/13/98
35 Mountainview Marketplace Shopping Center $877,023 $47,931 1.52 $9,750,000 2/9/98
36 Hurley's Children & Family Medical Ctr. $865,670 $58,897 1.22 $10,000,000 6/23/98
37 Druid Pointe Office Building $762,728 $50,431 1.26 $10,000,000 4/6/98
38 Nohl Plaza Shopping Center $744,235 $44,912 1.38 $8,700,000 4/6/98
39 Monterey Park II Apts. $715,754 $41,900 1.42 $8,190,000 7/30/98
40 Spring Hill Market Place $802,259 $45,941 1.46 $9,200,000 5/6/98
41 Hampton Inn Hotel $1,090,083 $50,311 1.81 $9,625,000 2/10/98
42 Crestview Apartments $739,376 $42,280 1.46 $10,190,000 8/3/98
43 Fiesta Shopping Center $845,034 $47,623 1.48 $8,350,000 3/26/98
44 Sierra Crest Shopping Center $798,400 $40,383 1.65 $8,700,000 3/27/98
45 Casa Del Rey Apartments $701,558 $41,373 1.41 $8,250,000 6/3/98
46 Alameda Business Centre $1,367,695 $53,228 2.14 $16,650,000 1/27/98
47 58 Charles Street Office Building $752,840 $47,331 1.33 $8,940,000 8/27/98
48 Syosset Plaza Shopping Center $623,146 $39,293 1.32 $7,700,000 2/18/98
49 Silver Creek Shopping Center $892,074 $38,306 1.94 $10,400,000 7/6/98
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Loan Percent Leased(9) Tenant Information(10) Tax Insurance
No. LTV(4) Leased Date Largest Tenant % NSF Escrow Escrow
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 73.6% 86.9% 2/1/99 JCPenney 24.6% Yes Yes
2 64.0% 57.8% 3/31/98 Yes Yes
3 65.4% 81.2% 12/31/98 Yes Yes
4 65.4% 67.8% 12/31/98 Yes Yes
5 74.4% 98.4% 9/25/98 Yes Yes
6 58.3% 91.0% 6/10/98 No No
7 71.2% 93.8% 6/30/98 Yes No
8 69.5% 100.0% 7/1/98 Yes No
9 66.4% 95.3% 9/1/98 Battelle Memorial Institute 32.0% Yes No
10 66.4% 100.0% 9/1/98 Duclaw Brewing Co. 31.9% Yes No
11 66.4% 97.0% 9/1/98 Yes No
12 66.4% 100.0% 9/1/98 Bell Atlantic Mobile 100.0% Yes No
13 66.4% 100.0% 9/1/98 Key Point Health Service 55.3% Yes No
14 54.5% 94.7% 7/16/98 Yes No
15 76.2% 100.0% 8/18/98 Yes No
16 76.2% 100.0% 7/16/98 Yes No
17 52.6% 99.0% 4/22/98 Yes No
18 54.4% 94.9% 7/20/98 No No
19 79.4% 100.0% 7/22/98 Farm Fresh 58.9% Yes No
20 64.7% 94.0% 7/17/98 Yes Yes
21 42.3% 100.0% 7/15/98 SF Bay Club 35.0% Yes Yes
22 59.7% 83.3% 11/30/98 Yes No
23 60.7% 92.0% 7/22/98 No No
24 74.1% 100.0% 9/30/98 Federal Express 100.0% Yes No
25 74.7% 94.1% 5/1/98 Mar-Lin Outlets 29.9% Yes Yes
26 57.0% 100.0% 8/5/98 Home Base 65.4% No No
27 57.6% 87.9% 8/6/98 No No
28 73.2% 100.0% 9/1/98 CGI Desserts, Inc. 100.0% No No
29 75.7% 94.8% 6/25/98 Yes No
30 64.1% 100.0% 6/30/98 Office Depot 100.0% No No
31 65.5% 100.0% 7/23/98 Yes Yes
32 69.8% 93.7% 6/30/98 Yes Yes
33 50.2% 99.0% 7/22/98 Comm. Family Svcs. 35.9% Yes No
34 72.1% 99.0% 1/6/98 Yes No
35 74.3% 96.2% 8/31/98 Safeway Supermarket 35.5% Yes Yes
36 69.1% 100.0% 6/30/98 Hurley Medical Center 90.7% Yes Yes
37 68.3% 100.0% 3/1/98 AT&T 99.8% No No
38 75.4% 97.9% 6/30/98 Vons Grocery Co. 49.4% Yes Yes
39 79.1% 94.1% 6/20/98 Yes Yes
40 70.3% 87.0% 1/25/99 Circuit City 33.6% Yes No
41 64.0% 79.4% 8/30/98 Yes No
42 59.8% 100.0% 8/20/98 Yes No
43 72.1% 100.0% 8/21/98 Fiesta 52.5% Yes No
44 68.6% 100.0% 12/18/98 Von's(Safeway) 38.9% Yes Yes
45 71.7% 98.0% 6/30/98 Yes Yes
46 35.3% 100.0% 8/17/98 No No
47 65.5% 100.0% 9/1/98 The Economist Group 28.7% Yes Yes
48 74.5% 92.2% 6/1/98 West Marine Products, Inc. 20.3% Yes Yes
49 54.7% 100.0% 6/9/98 Yes Yes
</TABLE>
II-13
<PAGE> 128
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Appraised Valuation
No. Property Name(2) Cash Flow Payment(8) DSCR(4) Value Date
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 Martin Woodworking $663,570 $41,493 1.33 $7,800,000 4/14/98
51 Park Bank Office Building $604,984 $36,866 1.37 $7,600,000 7/30/98
52 Consolidated Technology Warehouse (II) $485,493 $28,691 1.44 $4,500,000 7/21/98
53 Consolidated Technology Industrial Building (II) $356,103 $20,087 1.44 $3,150,000 7/21/98
54 1155 Jones Street $677,855 $33,214 1.70 $8,525,000 7/20/98
55 Kramer - 6 Arcata Apartments (III) $519,835 $28,347 1.50 $5,224,000 5/22/98
56 Kramer - Eureka Apartments (III) $224,689 $12,345 1.50 $2,275,000 5/22/98
57 Kramer - Fields Landing (III) $33,535 $2,605 1.50 $480,000 5/22/98
58 Vista Oaks Apartment $645,181 $35,957 1.50 $8,275,000 4/9/98
59 Nash Finch Distribution Warehouse $684,647 $32,868 1.74 $8,500,000 6/17/98
60 Syracuse Center - Phase I $720,643 $40,911 1.47 $7,200,000 6/30/98
61 Amador II Building $666,654 $35,140 1.58 $8,900,000 9/2/98
62 Catalina Apartments $646,623 $33,131 1.63 $7,300,000 2/23/98
63 4670 Willow Road $677,976 $34,451 1.64 $7,000,000 8/24/98
64 Hamilton House Apartments $1,699,404 $38,107 3.72 $18,200,000 7/7/98
65 Sacramento Place Apartments $585,671 $29,925 1.63 $7,570,000 7/3/98
66 Zycon R&D Building $591,668 $35,301 1.40 $6,500,000 3/10/97
67 Rudolph-Hendrickson Senior Apartments $499,061 $30,741 1.35 $6,300,000 4/6/98
68 Holborn Village Apartments $483,367 $30,749 1.31 $5,850,000 7/30/98
69 100 E. Tujunga $748,971 $35,361 1.77 $7,500,000 4/21/98
70 Rancho Anita Industrial Park $551,638 $31,566 1.46 $7,300,000 7/6/98
71 Beverly Hills Tower Apartments (C) $360,747 $20,398 1.41 $4,880,000 11/25/97
72 Beverly Hills Regency Apartments (C) $142,497 $9,252 1.41 $2,190,000 11/25/97
73 Chico Town & Country Shopping Ctr. $599,119 $32,773 1.52 $6,800,000 4/28/98
74 Windsor Court Apartments $605,582 $28,948 1.74 $7,000,000 12/3/97
75 Pathmark Super Center-Wilmington, DE $516,718 $30,548 1.41 $5,600,000 6/17/98
76 New Villa Valencia Mobile Home Park $642,598 $27,689 1.93 $7,900,000 4/3/98
77 Veterans Plaza Shopping Center $439,314 $27,937 1.31 $5,000,000 2/2/98
78 150 Sylvan Avenue Shopping Center $511,844 $26,451 1.61 $5,750,000 7/24/98
79 Reynolds Industries Bldg $477,773 $26,639 1.49 $5,700,000 4/22/98
80 Strada Da Valle Office Building $403,609 $26,630 1.26 $5,600,000 3/16/98
81 Conrad Villas Apts. $492,784 $27,500 1.49 $5,500,000 3/26/98
82 Ocean Business Park $431,972 $26,310 1.37 $4,920,000 4/13/98
83 Westwood Village Shopping Center $460,622 $26,175 1.47 $5,866,000 12/3/97
84 Enclave Apartments $524,234 $23,938 1.83 $6,040,000 5/26/98
85 Westside Shopping Center $432,653 $24,558 1.47 $5,170,000 9/3/98
86 Riverside Country Club Mobile Home Park $474,122 $23,951 1.65 $5,350,000 4/17/98
87 3030 Bridgeway Boulevard $527,566 $24,754 1.78 $5,000,000 3/18/98
88 Food 4 Less $469,547 $25,686 1.52 $5,025,000 5/21/98
89 Suburban Lodge Hotel $426,940 $26,150 1.36 $6,000,000 6/5/98
90 Pathmark Super Center-Upper Darby, PA $450,438 $25,456 1.47 $4,700,000 6/17/98
91 The Ladco Building $435,234 $31,030 1.17 $4,600,000 6/26/98
92 Hickory Plaza $406,069 $23,185 1.46 $4,600,000 7/9/98
93 College Way Marketplace $391,192 $22,879 1.42 $4,850,000 4/4/98
94 Grove Business Joint Venture $518,317 $22,705 1.90 $6,220,000 6/4/98
95 Edison Way Industrial Center $695,383 $30,281 1.91 $8,100,000 7/17/98
96 Pacific Terrace Apartments $579,782 $24,011 2.01 $4,500,000 3/19/98
97 4700-4800 SW 51 St Warehouse $349,581 $22,604 1.29 $4,200,000 6/12/98
98 Brookside Villas Apartments $370,507 $21,691 1.42 $4,350,000 2/10/98
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Loan Percent Leased(9) Tenant Information(10) Tax Insurance
No. LTV(4) Leased Date Largest Tenant % NSF Escrow Escrow
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 71.4% 100.0% 12/11/98 Martin Woodworking 100.0% No No
51 73.2% 94.3% 9/9/98 Yes Yes
52 70.4% 100.0% 9/29/98 Casey Tool & Machine 100.0% Yes Yes
53 70.4% 100.0% 9/29/98 Casey Tool & Machine 100.0% Yes Yes
54 63.1% 100.0% 7/1/98 Yes Yes
55 66.2% 100.0% 7/1/98 Yes Yes
56 66.2% 98.0% 7/1/98 Yes Yes
57 66.2% 100.0% 7/1/98 Yes Yes
58 63.1% 97.2% 6/30/98 Yes No
59 60.9% 100.0% 6/25/98 Nash Finch 100.0% Yes Yes
60 71.6% 96.7% 8/1/98 Smith's Foods 77.3% Yes No
61 57.0% 100.0% 8/21/98 AT&T 100.0% No No
62 68.2% 95.0% 6/9/98 Yes Yes
63 71.1% 100.0% 8/1/98 Signature Properties, Inc 50.5% No No
64 27.2% 98.0% 6/30/98 Yes No
65 63.9% 99.0% 10/21/98 Yes Yes
66 73.6% 100.0% 3/17/98 (Hadco) Zycon 100.0% No No
67 74.6% 99.3% 1/1/98 Yes Yes
68 79.3% 96.6% 8/6/98 Yes Yes
69 60.5% 100.0% 7/1/98 Care Home Health Serv. Inc 50.6% Yes No
70 62.0% 96.0% 6/23/98 RTA International 28.9% Yes No
71 63.4% 100.0% 1/7/98 Yes Yes
72 63.4% 93.8% 1/7/98 Yes Yes
73 65.8% 97.0% 7/10/98 Rite Aid 22.6% Yes No
74 63.8% 100.0% 9/14/98 Yes Yes
75 74.8% 100.0% 9/21/98 Pathmark Super Center 100.0% No No
76 52.9% 100.0% 8/1/98 Yes Yes
77 81.1% 100.0% 5/12/98 Big Y 61.3% Yes Yes
78 69.4% 100.0% 6/25/98 Bally Total Fitness 82.9% Yes Yes
79 69.8% 100.0% 11/3/98 Reynolds Industries 100.0% Yes Yes
80 68.4% 100.0% 5/13/98 U.S. Bank of Washington 35.0% Yes Yes
81 69.5% 97.3% 6/30/98 Yes No
82 76.9% 98.8% 12/18/98 Billy's International 51.5% Yes Yes
83 62.7% 94.8% 9/17/98 Reams Food Store 51.6% Yes Yes
84 60.6% 98.7% 6/25/98 Yes No
85 69.5% 86.9% 7/30/98 Value Village 25.4% No No
86 67.0% 100.0% 4/14/98 Yes Yes
87 71.7% 100.0% 6/1/98 Yes Yes
88 71.1% 100.0% 4/21/98 Food 4 Less 100.0% Yes Yes
89 58.2% 86.4% 6/30/98 No No
90 74.2% 100.0% 9/21/98 Pathmark Super Center 100.0% Yes Yes
91 75.1% 100.0% 9/15/98 Ladco, Inc. 100.0% Yes No
92 74.7% 100.0% 9/9/98 Long & Foster 22.0% Yes Yes
93 70.3% 92.9% 7/22/98 Office Depot 60.5% Yes No
94 54.8% 100.0% 6/11/98 No No
95 42.1% 100.0% 8/14/98 Yes Yes
96 74.3% 100.0% 8/31/98 Yes No
97 79.5% 100.0% 8/24/98 Tri Star 21.7% Yes Yes
98 76.4% 97.4% 4/30/98 Yes Yes
</TABLE>
II-14
<PAGE> 129
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Appraised Valuation
No. Property Name(2) Cash Flow Payment(8) DSCR(4) Value Date
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
99 Castaic Apartments $458,849 $23,848 1.60 $4,400,000 5/3/98
100 La Habra Hills $593,105 $20,891 2.37 $5,300,000 3/4/98
101 5251 - 5271 East 2nd St. $501,789 $24,172 1.73 $5,465,000 3/27/98
102 Montgomery Business Park $378,538 $23,817 1.32 $4,320,000 7/7/98
103 Atherton Park Apartments $422,332 $21,753 1.62 $6,190,000 10/24/97
104 Let's Store It II - Brookhurst $478,072 $22,403 1.78 $4,975,000 5/4/98
105 Torrance Western Self Storage $488,621 $22,403 1.82 $4,625,000 5/4/98
106 Sierra Gardens $471,096 $20,414 1.92 $4,240,000 3/4/98
107 Shelter Creek Apartments $836,089 $23,924 2.91 $10,400,000 4/24/98
108 Design Row Shopping Center $359,453 $21,297 1.41 $4,200,000 7/24/98
109 Veteran Plaza $373,587 $19,051 1.63 $4,865,000 6/27/98
110 Rolling Hills Apartments $512,486 $19,358 2.21 $7,000,000 4/8/98
111 Four Corners Shopping Center $480,056 $24,628 1.62 $4,700,000 3/17/98
112 Rimrock Plaza Shopping Center $507,780 $26,511 1.60 $5,570,000 7/10/97
113 Orchard View Apartments $345,890 $20,756 1.39 $4,350,000 7/16/98
114 Secure Self Storage of Old Town $351,802 $20,166 1.45 $3,700,000 3/17/98
115 Waterford Place Condominiums $330,359 $18,799 1.46 $3,700,000 2/26/98
116 Nimitz Point Apartments $305,963 $19,520 1.31 $3,600,000 3/20/98
117 Physician's Plaza $338,496 $18,145 1.55 $3,600,000 5/20/98
118 Artesia Mobile Home Estates $454,078 $17,665 2.14 $5,130,000 5/22/98
119 Del Prado Apartments $346,003 $18,903 1.53 $3,630,000 6/19/98
120 Concord Villas $331,246 $17,927 1.54 $3,670,000 4/16/98
121 San Mateo Office Complex $381,738 $16,586 1.92 $5,350,000 6/29/98
122 Colonial Arms Apartments $304,911 $19,159 1.33 $3,550,000 3/12/98
123 Westport Apartments $389,065 $24,359 1.33 $5,000,000 4/16/98
124 Marina Self Storage $352,350 $21,722 1.35 $3,700,000 4/28/98
125 Americana Palos Verdes Apartments $325,122 $16,149 1.68 $3,600,000 6/10/98
126 Grand York Shopping Center $482,999 $22,526 1.79 $6,200,000 6/25/98
127 Brooktree Estates Apartments $341,290 $16,232 1.75 $4,150,000 12/10/97
128 Daily California Building $394,050 $17,661 1.86 $4,025,000 1/30/98
129 The Regent-Chicago $271,832 $16,814 1.35 $3,215,000 1/16/98
130 Lyons Shopping Center $297,927 $17,596 1.41 $3,320,000 6/18/98
131 Renaissance Tech $410,058 $15,887 2.15 $4,600,000 6/9/98
132 Columbian Steel Tank Co. $281,383 $18,471 1.27 $3,300,000 5/4/98
133 Barbur Place Center $243,992 $14,720 1.38 $3,100,000 7/24/98
134 Samoan Sea Apartments $339,166 $17,735 1.59 $3,200,000 4/29/98
135 4759 51 Street Warehouse $240,701 $14,879 1.35 $3,000,000 6/12/98
136 20650 Prairie $559,252 $20,299 2.30 $6,160,000 4/30/98
137 Sierra West Business Park $279,464 $16,725 1.39 $3,100,000 3/6/98
138 PetsMart-Sand City $335,216 $16,852 1.66 $4,000,000 5/7/98
139 Mesa Breeze Apartments $294,053 $13,816 1.77 $3,600,000 2/26/98
140 Palm Garden Apartments $302,947 $14,943 1.69 $3,950,000 5/30/98
141 Harvard Apartments $272,265 $14,153 1.60 $2,825,000 1/30/98
142 Safeworks Warehouse $216,964 $14,326 1.26 $2,800,000 8/12/98
143 Garden Brook Apartments $327,273 $13,495 2.02 $4,525,000 6/4/98
144 Lynmarie Apartments $483,879 $13,495 2.99 $6,525,000 6/5/98
145 Storey Plastics Building $335,730 $14,789 1.89 $3,700,000 5/15/98
146 Casa de Jerado $418,460 $16,199 2.15 $3,470,000 4/13/98
147 Palm Central South $393,458 $16,199 2.02 $3,580,000 4/13/98
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Loan Percent Leased(9) Tenant Information(10) Tax Insurance
No. LTV(4) Leased Date Largest Tenant % NSF Escrow Escrow
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
99 75.4% 95.2% 8/19/98 Yes Yes
100 62.0% 97.0% 7/15/98 Yes No
101 59.8% 100.0% 8/21/98 Shorehouse Cafe 22.8% Yes No
102 74.5% 96.4% 7/8/98 Olivetti Training 23.5% Yes Yes
103 52.0% 79.9% 10/1/98 Yes Yes
104 63.8% 89.0% 7/28/98 Yes Yes
105 68.7% 93.0% 7/28/98 Yes Yes
106 74.6% 93.0% 7/8/98 Yes Yes
107 30.3% 97.6% 7/16/98 Yes No
108 74.9% 100.0% 10/1/98 Beautiful Things, Inc. 21.3% Yes Yes
109 61.4% 100.0% 6/1/98 Yes No
110 42.6% 99.0% 3/5/98 Yes No
111 62.9% 100.0% 8/6/98 Yes No
112 52.5% 87.9% 6/30/98 Safeway (Von's) 49.1% No No
113 66.3% 98.3% 6/30/98 Yes Yes
114 75.2% 95.7% 11/30/98 Yes No
115 74.6% 100.0% 7/1/98 Yes Yes
116 75.3% 98.0% 1/28/98 Yes No
117 74.7% 100.0% 6/30/98 Kaiser 61.7% Yes Yes
118 52.4% 96.8% 7/16/98 Yes Yes
119 74.0% 100.0% 6/30/98 Yes Yes
120 73.1% 99.0% 8/2/98 No No
121 49.6% 100.0% 8/3/98 Golden Gate Regional 31.4% Yes Yes
122 74.3% 95.0% 2/28/98 Yes Yes
123 52.7% 89.5% 6/30/98 Yes Yes
124 71.1% 96.0% 8/10/98 Yes No
125 69.2% 100.0% 7/10/98 No No
126 40.1% 100.0% 6/30/98 Mars Supermarkets 57.0% No No
127 59.8% 90.0% 3/23/98 No No
128 60.2% 94.0% 8/4/98 Central Publishing 35.5% Yes No
129 74.2% 100.0% 6/30/98 Wally Findlay Gallery Int'l. 55.6% Yes Yes
130 71.9% 100.0% 7/5/98 Smart & Final 56.4% Yes Yes
131 51.9% 100.0% 6/11/98 Lucent Technologies 26.5% No No
132 71.9% 100.0% 9/10/98 Columbian Steel 100.0% No No
133 74.0% 96.2% 9/1/98 Yes Yes
134 70.9% 90.0% 8/5/98 Yes No
135 74.7% 100.0% 7/28/98 Yes Yes
136 35.8% 100.0% 7/27/98 General Ribbon Corp. 100.0% Yes No
137 71.0% 100.0% 7/29/98 Fares 25.5% Yes Yes
138 54.2% 100.0% 6/15/98 PetsMart 100.0% No No
139 59.4% 96.8% 4/13/98 Yes Yes
140 53.9% 98.1% 6/25/98 Yes No
141 74.7% 100.0% 5/7/98 Yes Yes
142 74.7% 100.0% 8/12/98 Safeworks 100.0% Yes Yes
143 46.2% 98.3% 7/6/98 Yes Yes
144 32.0% 93.5% 7/6/98 Yes Yes
145 56.3% 100.0% 8/1/98 Story Plastics 100.0% No No
146 59.7% 100.0% 6/30/98 Yes No
147 57.9% 97.4% 6/30/98 Yes No
</TABLE>
II-15
<PAGE> 130
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Appraised Valuation
No. Property Name(2) Cash Flow Payment(8) DSCR(4) Value Date
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
148 Barnes - 380 Tennant Ave (D) $117,611 $7,380 1.39 $1,600,000 6/10/98
149 Barnes - 6550 Brem Lane (D) $82,446 $4,797 1.39 $920,000 6/12/98
150 Barnes - Santa Cruz (D) $54,711 $3,137 1.39 $700,000 6/8/98
151 Arctic Business Park III $304,588 $16,228 1.56 $3,000,000 6/26/98
152 Savannah Gardens Apartments $224,806 $13,902 1.35 $2,500,000 5/23/98
153 Markison Vista $295,478 $13,239 1.86 $3,430,000 6/9/98
154 London Press Building $404,416 $18,055 1.87 $5,300,000 4/14/98
155 Canal Park Apartments $224,349 $13,799 1.35 $2,640,000 5/4/98
156 Hayvenhurst Airport Business Park $276,300 $14,164 1.63 $2,825,000 4/8/98
157 Bashas' Shopping Center $213,992 $15,839 1.13 $2,750,000 3/4/98
158 15th & 16th Street Warehouse $199,480 $12,948 1.28 $2,400,000 5/7/98
159 Raintree Apartments $268,641 $13,211 1.69 $2,885,000 4/14/98
160 Lindys Town Lake Apartments $243,595 $12,333 1.65 $2,700,000 1/30/98
161 Discount Mini Storage North $285,706 $13,179 1.81 $2,860,000 12/26/97
162 1207-15 Pearl Street Mall $268,983 $12,672 1.77 $3,230,000 4/9/98
163 Midway Park North $296,339 $11,816 2.09 $3,530,000 6/9/98
164 Winchester House Apartments $275,761 $14,488 1.59 $2,650,000 12/8/95
165 740 W. Knox $236,847 $16,270 1.21 $2,800,000 6/12/98
166 Normandie Apartments $266,618 $15,456 1.44 $2,950,000 2/10/94
167 Oakmont Shopping Center $218,457 $12,779 1.42 $2,750,000 6/3/98
168 Coral Place Pilgrim Building Shopping Center $194,644 $11,662 1.39 $2,300,000 7/20/98
169 1730 I Street $215,927 $12,386 1.45 $2,280,000 6/5/98
170 Western Digital Building $225,641 $12,222 1.54 $2,500,000 6/15/98
171 Casa Alegre Apartments $256,520 $13,017 1.64 $2,370,000 4/30/98
172 Rodeo Plaza $234,992 $12,674 1.55 $2,440,000 5/11/98
173 Casa Del Sol North (E) $128,638 $6,626 1.90 $1,270,000 4/30/98
174 Casa Del Sol South (E) $157,721 $5,902 1.90 $1,430,000 4/30/98
175 Staples-Southington $225,444 $11,771 1.60 $3,000,000 4/15/98
176 55 th & Wadsworth Retail Center $207,736 $11,078 1.56 $2,330,000 5/11/98
177 OMA Building $205,287 $11,565 1.48 $2,200,000 6/3/98
178 Cleator Corp Buildings $204,818 $11,370 1.50 $2,400,000 6/12/98
179 Hidden Village Apartments $388,552 $12,472 2.60 $4,000,000 2/17/98
180 Arctic Business Park II $232,052 $12,428 1.56 $2,435,000 7/21/98
181 Eckerd Drug Store No. 816R $221,886 $11,961 1.55 $2,620,000 6/3/98
182 Willow Glen Mobile Home Park $183,392 $10,069 1.52 $2,200,000 4/29/98
183 940 E. Diehl Road $225,064 $9,575 1.96 $2,460,000 5/22/98
184 Gateway Office Center $179,824 $10,794 1.39 $1,970,000 7/31/98
185 Laguna Hills Property $200,604 $10,621 1.57 $2,400,000 7/31/98
186 Rancho Dominguez $224,258 $10,602 1.76 $2,265,000 5/1/98
187 The Hampton Apartments $184,129 $9,939 1.54 $2,200,000 11/25/97
188 Redwood Self Storage $344,899 $10,794 2.66 $3,300,000 3/10/98
189 Hewlett Packard Bldg. $244,306 $10,573 1.93 $2,740,000 4/10/98
190 Spenwick Industrial Park $195,475 $11,139 1.46 $2,200,000 3/24/98
191 Lancaster Medical Office Building $200,768 $14,145 1.18 $2,200,000 5/14/98
192 Dorchester Gardens Apartments $202,324 $12,078 1.40 $2,200,000 12/9/97
193 Safeway-Marlow Center $496,910 $17,672 2.34 $5,000,000 4/13/98
194 Keylock Mini Storage $316,543 $13,228 1.99 $3,360,000 12/26/97
195 53rd Court Warehouse $156,264 $9,352 1.39 $2,000,000 5/7/98
196 Stadium Court $226,225 $10,151 1.86 $2,370,000 3/30/98
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Loan Percent Leased(9) Tenant Information(10) Tax Insurance
No. LTV(4) Leased Date Largest Tenant % NSF Escrow Escrow
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
148 64.0% 100.0% 6/19/98 Nova Microwave 25.4% Yes Yes
149 64.0% 100.0% 6/19/98 Products Plus 39.2% Yes Yes
150 64.0% 100.0% 6/19/98 North American Title 100.0% Yes Yes
151 67.7% 96.0% 8/1/98 Yes No
152 79.7% 94.2% 5/15/98 Yes Yes
153 58.0% 100.0% 6/11/98 Atrium-Web Technology 32.2% No No
154 37.0% 100.0% 7/1/98 London Press, Inc 100.0% Yes Yes
155 73.9% 97.2% 7/1/98 No No
156 68.4% 90.2% 9/18/98 Yes Yes
157 69.0% 100.0% 3/1/98 Bashas' 76.7% Yes Yes
158 78.9% 100.0% 7/31/98 Yes Yes
159 65.3% 95.8% 6/30/98 Yes Yes
160 68.2% 91.2% 5/12/98 Yes Yes
161 63.3% 89.1% 3/12/98 Yes Yes
162 55.5% 100.0% 7/1/98 Alleycatz 33.7% Yes Yes
163 50.3% 100.0% 6/11/98 No No
164 66.9% 96.1% 7/22/98 Yes Yes
165 63.1% 100.0% 8/1/98 SW Mold 100.0% No No
166 59.5% 94.6% 7/1/98 Yes Yes
167 63.2% 100.0% 8/5/98 Yes Yes
168 74.9% 93.6% 10/1/98 Senior Care 25.6% Yes Yes
169 74.2% 100.0% 8/3/98 State of CA-Dept of F & G 46.2% No No
170 67.6% 100.0% 7/9/98 Western Digital Corp. 100.0% Yes No
171 70.7% 93.4% 8/5/98 Yes No
172 68.2% 98.9% 5/12/98 Yes Yes
173 60.2% 92.5% 7/7/98 Yes No
174 60.2% 92.0% 3/13/98 Yes No
175 53.9% 100.0% 9/17/98 Staples 100.0% Yes Yes
176 68.4% 100.0% 4/17/98 Mattress Discounters 29.6% Yes No
177 72.3% 100.0% 7/1/98 OMA 43.6% No No
178 66.2% 100.0% 6/30/98 Cleator Corporation 71.6% Yes Yes
179 39.4% 94.6% 8/26/98 Yes Yes
180 63.9% 92.0% 7/16/98 Yes No
181 58.6% 100.0% 5/1/98 Eckerd Drug Store 100.0% Yes Yes
182 69.0% 97.7% 6/30/98 Yes No
183 60.7% 100.0% 8/20/98 Power 2000 47.1% Yes Yes
184 75.7% 93.5% 7/29/98 Rapistan Demag 36.5% Yes Yes
185 62.1% 100.0% 7/1/98 County of Orange 32.3% Yes Yes
186 65.9% 100.0% 4/7/98 Showpower, Inc. 100.0% No No
187 67.7% 100.0% 3/18/98 No No
188 45.1% 98.0% 7/1/98 Yes Yes
189 54.2% 100.0% 9/17/98 Hewlett Packard 100.0% Yes Yes
190 67.6% 100.0% 1/11/99 Pioneer Contract 100.0% Yes Yes
191 66.7% 100.0% 6/19/98 Lancaster Hospital 100.0% No No
192 65.0% 97.4% 7/17/98 Yes Yes
193 28.4% 96.8% 8/1/98 Ben Franklin Crafts 38.9% Yes No
194 42.1% 92.4% 1/7/98 Yes Yes
195 69.8% 100.0% 7/31/98 Quantum Fine Casework 100.0% Yes Yes
196 58.6% 89.0% 6/30/98 Yes Yes
</TABLE>
II-16
<PAGE> 131
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Appraised Valuation
No. Property Name(2) Cash Flow Payment(8) DSCR(4) Value Date
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
197 Oakhurst Drive Apartments $137,874 $9,144 1.26 $1,950,000 12/29/97
198 4602 North Avenue $216,889 $9,708 1.86 $2,380,000 4/3/98
199 Cal Plate, Inc. Buildings $157,269 $11,015 1.19 $1,850,000 5/28/98
200 McKinley Business Center $171,424 $9,678 1.48 $2,170,000 6/7/98
201 Rite Aid - Cleveland $209,378 $8,748 1.99 $2,280,000 4/22/98
202 77 Rumford Avenue Office Building $171,046 $9,081 1.57 $2,400,000 6/15/98
203 Herndon/West Office II (F) $97,703 $4,623 1.81 $1,100,000 3/23/98
204 Herndon/West Office I (F) $100,366 $4,520 1.81 $1,100,000 3/23/98
205 Daisy I Apartments $142,877 $8,844 1.35 $1,825,000 3/27/98
206 Sunset East Apartments $164,801 $9,085 1.51 $1,990,000 7/17/98
207 Overlook Terrace Apts. $159,043 $9,020 1.47 $1,720,000 6/9/98
208 2275 East Bayshore Road $242,845 $9,975 2.03 $2,960,000 5/15/98
209 Darant Industrial $189,674 $10,930 1.45 $1,975,000 7/1/98
210 354 S. La Fayette Park Place $149,981 $8,300 1.51 $1,600,000 6/10/98
211 22322 Gilberto $183,070 $11,257 1.36 $2,150,000 5/19/98
212 Parkview $278,973 $8,010 2.90 $2,900,000 6/9/98
213 Las Olas Shopping Center $133,908 $8,113 1.38 $1,700,000 8/6/98
214 1841 Fuller Apartments $158,383 $8,032 1.64 $1,900,000 7/28/98
215 Brighton Avenue Plaza Shopping Center $235,376 $8,985 2.18 $3,600,000 6/29/97
216 Tiffany Building $158,463 $8,458 1.56 $1,740,000 5/18/98
217 Ballinger Trace Apts. $156,938 $11,009 1.19 $2,270,000 3/23/98
218 Freeway Industrial Center $146,252 $8,365 1.46 $1,600,000 4/20/98
219 Villa Monaco $159,409 $7,465 1.78 $1,650,000 3/6/98
220 Cheyenne Mountain Blockbuster $148,382 $7,759 1.59 $1,650,000 6/5/98
221 Sunset Hill Apartments $144,917 $8,031 1.50 $1,550,000 6/8/98
222 Le Med Apartments $227,052 $7,366 2.57 $3,000,000 6/17/98
223 Kerner Automotive Center $188,702 $7,838 2.01 $2,300,000 6/20/98
224 Bachman Glen Apartments $207,107 $7,635 2.26 $1,500,000 6/17/98
225 Westview Plaza $205,316 $8,734 1.96 $2,000,000 6/1/98
226 Fairmont Apartments $163,902 $8,535 1.60 $1,680,000 4/27/98
227 Commerce-Executive $374,679 $7,182 4.35 $3,650,000 6/9/98
228 St. Andrews Apartments $143,757 $7,185 1.67 $1,350,000 5/18/98
229 Dunbar Amored Building $119,916 $7,087 1.41 $1,460,000 11/12/97
230 631 Giguere Court $142,954 $7,519 1.58 $1,750,000 7/14/98
231 Woodfront Condominiums $141,356 $7,014 1.68 $1,310,000 2/17/98
232 Coral Shopping Center $115,829 $6,587 1.47 $1,400,000 7/20/98
233 Morally Wholesale $154,130 $10,860 1.18 $1,600,000 4/20/98
234 Emerald Court Apartments $140,555 $6,760 1.73 $1,700,000 4/10/98
235 1500 International Parkway $219,448 $6,653 2.75 $2,700,000 6/9/98
236 4801 W. 147th $140,882 $6,727 1.75 $1,540,000 3/16/98
237 7225 & 7235 Bermuda Road $136,717 $7,485 1.52 $1,525,000 8/4/98
238 150 North Gibson Road $169,036 $7,485 1.88 $2,100,000 8/3/98
239 San Carlos Apartments $162,660 $6,347 2.14 $1,800,000 5/15/98
240 Daisy III Apartments $111,829 $6,856 1.36 $1,525,000 3/27/98
241 Evergreen Garden Apts. $148,336 $6,871 1.80 $1,900,000 8/3/98
242 Albermarle Center $141,872 $7,357 1.61 $2,200,000 5/5/98
243 The Village at Weber Ranch $142,322 $7,164 1.66 $1,755,000 4/23/98
244 U-Stor George Washington $207,350 $7,849 2.20 $2,050,000 6/5/98
245 1410 W. 10th Pl. $121,103 $7,786 1.30 $1,350,000 5/6/98
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Loan Percent Leased(9) Tenant Information(10) Tax Insurance
No. LTV(4) Leased Date Largest Tenant % NSF Escrow Escrow
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
197 70.3% 100.0% 4/2/98 Yes Yes
198 56.6% 100.0% 5/21/98 Federal Sign Company 100.0% No No
199 72.3% 100.0% 8/1/98 Cal Plate, Inc. 100.0% No No
200 61.5% 95.0% 7/28/98 Yes No
201 58.3% 100.0% 8/1/98 Rite Aid Drug Store 100.0% No No
202 54.0% 100.0% 11/1/98 Warren Business Forms 20.3% Yes Yes
203 58.6% 100.0% 7/14/98 Chambers-Lorenz 40.2% Yes No
204 58.6% 100.0% 7/14/98 Anethesia 39.1% Yes No
205 70.3% 100.0% 5/22/98 Yes Yes
206 64.5% 100.0% 7/27/98 Yes Yes
207 73.6% 100.0% 6/18/98 Yes Yes
208 41.7% 100.0% 5/26/98 Asset Management 36.6% No No
209 62.5% 100.0% 6/1/98 Darant Distributing 100.0% Yes Yes
210 77.1% 92.7% 4/1/98 Yes Yes
211 56.4% 100.0% 8/1/98 Forespar Products 100.0% No No
212 41.5% 100.0% 6/11/98 Flowdata, Inc. 27.0% No No
213 70.4% 100.0% 9/1/98 The Beauty Center 53.3% Yes Yes
214 62.9% 96.4% 5/18/98 Yes Yes
215 33.1% 100.0% 12/11/98 Osco Drug (American Stores Prop.I) 54.1% No No
216 68.4% 100.0% 7/30/98 Provenance 52.2% Yes Yes
217 51.4% 100.0% 7/13/98 Yes Yes
218 72.8% 100.0% 2/1/98 American Intl. 34.8% Yes No
219 69.0% 97.5% 7/8/98 Yes Yes
220 67.9% 100.0% 6/24/98 Blockbuster Videos 71.2% Yes No
221 71.4% 93.0% 7/1/98 Yes Yes
222 36.5% 99.0% 5/31/98 Yes No
223 47.6% 100.0% 7/30/98 Crebassa Auto Body 29.9% Yes No
224 72.9% 100.0% 6/27/98 Yes Yes
225 54.4% 98.9% 7/22/98 No No
226 64.5% 97.6% 8/5/98 Yes No
227 29.6% 100.0% 6/11/98 No No
228 79.6% 100.0% 5/31/98 Yes Yes
229 72.5% 100.0% 6/24/98 Dunbar Armored Co. 100.0% No No
230 59.7% 100.0% 7/27/98 Environmental Filtration 54.2% Yes Yes
231 79.6% 100.0% 6/30/98 Yes Yes
232 73.0% 100.0% 10/1/98 Yes Yes
233 63.6% 100.0% 1/1/98 Morally Wholesale Inc. 100.0% Yes No
234 59.0% 100.0% 7/14/98 Yes Yes
235 37.0% 100.0% 6/11/98 Paging Network Equipment 38.7% No No
236 64.6% 100.0% 6/30/98 Cedars-Sinai Medical Ctr. 100.0% No No
237 65.0% 100.0% 8/14/98 No No
238 47.2% 100.0% 8/14/98 Angler Tech 25.0% No No
239 55.3% 89.0% 8/10/98 Yes Yes
240 65.2% 100.0% 5/18/98 Yes Yes
241 52.3% 95.6% 6/30/98 Yes No
242 45.2% 92.0% 7/27/98 Yes Yes
243 56.5% 100.0% 8/20/98 Hollywood Video 74.5% Yes No
244 48.3% 99.1% 6/18/98 Yes No
245 73.1% 100.0% 8/5/98 Al Collins Graphic Design 100.0% Yes No
</TABLE>
II-17
<PAGE> 132
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Appraised Valuation
No. Property Name(2) Cash Flow Payment(8) DSCR(4) Value Date
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
246 Memorial Hills Townhomes $156,546 $7,873 1.66 $1,400,000 4/2/98
247 Espalier Square $157,538 $9,129 1.44 $1,800,000 7/9/98
248 Mission Plaza $160,949 $6,454 2.08 $2,250,000 6/4/98
249 Huebner Road Office Buildings $228,296 $11,642 1.63 $2,780,000 6/29/98
250 Kickapoo Plaza Shopping Center $121,015 $7,058 1.43 $1,335,000 3/16/98
251 Cascade Optical Buildings $102,698 $7,745 1.11 $1,255,000 4/20/98
252 The 3700 Building $120,745 $6,635 1.52 $1,400,000 7/11/98
253 Daisy IV Apartments $99,394 $6,170 1.34 $1,150,000 3/25/98
254 2201 Sturgis $153,305 $6,811 1.88 $1,950,000 7/29/98
255 Petal Street $260,868 $5,924 3.67 $2,600,000 6/9/98
256 Thrifty Payless, Laguna Niguel (IV) $69,735 $3,285 1.77 $1,750,000 10/9/97
257 Thrifty Payless, Bellflower (IV) $69,735 $3,285 1.77 $1,220,000 10/9/97
258 Jam Pharmaceutical $117,057 $7,148 1.36 $1,400,000 5/11/98
259 Sonora Court $307,152 $6,718 3.81 $3,200,000 6/4/98
260 Parkway Square $413,493 $5,362 6.43 $4,090,000 6/4/98
261 Glenbrook Place Apartments $102,264 $7,045 1.21 $1,930,000 6/30/98
262 4625 West Jennifer Avenue $91,633 $5,577 1.37 $1,000,000 4/20/98
263 Commercial Building West Lake Village $147,747 $6,931 1.78 $1,615,000 7/6/98
264 South Park Apartments $95,197 $4,824 1.64 $1,065,000 4/10/98
265 Reseda Mobile Homes $350,222 $6,787 4.30 $3,840,000 6/16/98
266 Murphy Avenue $106,853 $5,281 1.69 $1,200,000 5/18/98
267 10925 Kinross Avenue $223,093 $5,066 3.67 $2,640,000 3/16/98
268 4 Wrigley Street $106,516 $4,666 1.90 $1,150,000 5/15/98
269 9 Marconi Street $105,211 $4,630 1.89 $1,120,000 5/18/98
270 Westridge Commerce Center $155,361 $3,757 3.45 $1,800,000 6/19/98
271 Centennial Green $83,705 $3,177 2.20 $960,000 6/9/98
272 Bowser Tech $190,682 $3,111 5.11 $2,020,000 6/9/98
273 1720 Greenville Avenue $132,495 $3,012 3.67 $1,350,000 6/4/98
274 Taco Bell/ Scottsdale $62,554 $3,098 1.68 $860,000 4/2/98
Total/Weighted Average 1.63
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Loan Percent Leased(9) Tenant Information(10) Tax Insurance
No. LTV(4) Leased Date Largest Tenant % NSF Escrow Escrow
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
246 70.5% 100.0% 6/30/98 Yes Yes
247 54.7% 100.0% 7/1/98 The Cambria Group 21.9% Yes Yes
248 43.1% 99.0% 6/11/98 Multitechnology S. Corp. 43.1% No No
249 34.7% 100.0% 6/24/98 Yes Yes
250 71.4% 98.0% 7/14/98 W. R. Jones 34.3% Yes No
251 74.1% 100.0% 6/2/98 Cascade Optical 100.0% No No
252 65.6% 100.0% 7/7/98 Yes No
253 77.8% 100.0% 5/18/98 Yes Yes
254 45.8% 100.0% 6/18/98 Airborne Freight Corp. 52.4% No No
255 34.2% 94.9% 6/11/98 Daystone Int'l Sports 11.0% No No
256 29.9% 100.0% 10/1/97 Thrifty Payless - Laguna Niguel 100.0% No No
257 29.9% 100.0% 10/1/97 Thrifty Payless - Bellflower 100.0% No No
258 62.7% 100.0% 8/1/98 Jam Pharmaceutical 100.0% Yes Yes
259 26.2% 100.0% 4/1/98 Silicon Storage Technolog 100.00% Yes Yes
260 19.7% 100.0% 6/11/98 Harte-Hanks/Star Cou. 25.1% No No
261 38.9% 98.0% 6/1/98 Yes Yes
262 74.5% 100.0% 7/31/98 Fresno CASC Cnty 52.5% Yes No
263 45.7% 100.0% 8/4/98 Accelerated Network 33.69% Yes Yes
264 69.1% 100.0% 7/8/98 Yes Yes
265 19.2% 96.3% 7/1/98 Yes Yes
266 60.3% 100.0% 4/17/98 Kusha, Inc. 100.0% Yes No
267 26.3% 100.0% 2/9/98 Bel Air Camera, Inc. 100.00% No No
268 55.7% 100.0% 4/17/98 Monarch Business Forms 100.0% Yes No
269 56.7% 100.0% 4/17/98 Kinetic Systems 100.00% Yes No
270 27.6% 100.0% 7/30/98 Cornerstone Propane 45.4% Yes No
271 49.7% 100.0% 6/11/98 Macro Gourmet, Inc. 22.26% No No
272 23.1% 100.0% 6/11/98 Accucom Telecomm. 34.2% No No
273 33.5% 100.0% 6/11/98 Dallas G.S., Inc. 24.44% No No
274 48.4% 100.0% 2/1/98 Nancor Corporation 100.0% No No
64.9% 80.5% 51.3%
</TABLE>
II-18
<PAGE> 133
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Loan Replacement
No. Property Name(2) Reserves(11)
- --------------------------------------------------------------------------
<S> <C> <C>
1 Golf Mill Shopping Center Yes
2 Silvertree Hotel and Wildwood Lodge Yes
3 Mission Valley Hilton Hotel (A) Yes
4 Hanalei Hotel (A) Yes
5 Galleria Palms Apartments Yes
6 55 Hawthorne & 631 Howard No
7 Dunwoody Club Apartments Yes
8 Grapevine Town Shopping Center No
9 Ward - Bel Air Professional Ctr (I) Yes
10 Ward - Bel Air Retail (I) Yes
11 Ward - Bright Oaks Office (I) Yes
12 Ward - Blue Spruce (I) Yes
13 Ward - Hayes/Thomas Office (I) Yes
14 Central Park Apartments No
15 Boca Industrial (B) No
16 South Congress Industrial (B) No
17 North Los Altos Shopping Center No
18 International Residence-Austin (IRA) No
19 Crossway Commons Shopping Center Yes
20 La Veta Grand Apartments Yes
21 1 Lombard St. & 150 Greenwich St. No
22 Vintage Court Hotel No
23 Wimberly Park No
24 Federal Express Building Yes
25 Merrimac Plaza Shopping Center Yes
26 Stockton Center No
27 International Residence San Antonio No
28 Corporate Drive, Sugarland, TX No
29 Weatherly Walk Yes
30 Office Depot - Long Beach, CA No
31 Hurst Harbor Marina No
32 Casady Square Shopping Center Yes
33 Commonwealth Building No
34 Coyote Creek Mobile Home Park No
35 Mountainview Marketplace Shopping Center Yes
36 Hurley's Children & Family Medical Ctr. No
37 Druid Pointe Office Building No
38 Nohl Plaza Shopping Center Yes
39 Monterey Park II Apts. No
40 Spring Hill Market Place No
41 Hampton Inn Hotel Yes
42 Crestview Apartments Yes
43 Fiesta Shopping Center No
44 Sierra Crest Shopping Center No
45 Casa Del Rey Apartments No
46 Alameda Business Centre No
47 58 Charles Street Office Building Yes
48 Syosset Plaza Shopping Center Yes
49 Silver Creek Shopping Center No
</TABLE>
II-19
<PAGE> 134
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Loan Replacement
No. Property Name(2) Reserves(11)
- --------------------------------------------------------------------------
<S> <C> <C>
50 Martin Woodworking No
51 Park Bank Office Building Yes
52 Consolidated Technology Warehouse (II) Yes
53 Consolidated Technology Industrial Building (II) Yes
54 1155 Jones Street No
55 Kramer - 6 Arcata Apartments (III) No
56 Kramer - Eureka Apartments (III) No
57 Kramer - Fields Landing (III) No
58 Vista Oaks Apartment No
59 Nash Finch Distribution Warehouse No
60 Syracuse Center - Phase I No
61 Amador II Building No
62 Catalina Apartments No
63 4670 Willow Road No
64 Hamilton House Apartments No
65 Sacramento Place Apartments No
66 Zycon R&D Building No
67 Rudolph-Hendrickson Senior Apartments No
68 Holborn Village Apartments Yes
69 100 E. Tujunga No
70 Rancho Anita Industrial Park No
71 Beverly Hills Tower Apartments (C) No
72 Beverly Hills Regency Apartments (C) No
73 Chico Town & Country Shopping Ctr. No
74 Windsor Court Apartments No
75 Pathmark Super Center-Wilmington, DE Yes
76 New Villa Valencia Mobile Home Park No
77 Veterans Plaza Shopping Center Yes
78 150 Sylvan Avenue Shopping Center Yes
79 Reynolds Industries Bldg No
80 Strada Da Valle Office Building No
81 Conrad Villas Apts. No
82 Ocean Business Park No
83 Westwood Village Shopping Center Yes
84 Enclave Apartments No
85 Westside Shopping Center No
86 Riverside Country Club Mobile Home Park No
87 3030 Bridgeway Boulevard No
88 Food 4 Less No
89 Suburban Lodge Hotel Yes
90 Pathmark Super Center-Upper Darby, PA Yes
91 The Ladco Building No
92 Hickory Plaza Yes
93 College Way Marketplace No
94 Grove Business Joint Venture No
95 Edison Way Industrial Center No
96 Pacific Terrace Apartments No
97 4700-4800 SW 51 St Warehouse Yes
98 Brookside Villas Apartments Yes
</TABLE>
II-20
<PAGE> 135
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Loan Replacement
No. Property Name(2) Reserves(11)
- --------------------------------------------------------------------------
<S> <C> <C>
99 Castaic Apartments No
100 La Habra Hills No
101 5251 - 5271 East 2nd St. Yes
102 Montgomery Business Park No
103 Atherton Park Apartments Yes
104 Let's Store It II - Brookhurst Yes
105 Torrance Western Self Storage No
106 Sierra Gardens No
107 Shelter Creek Apartments No
108 Design Row Shopping Center Yes
109 Veteran Plaza No
110 Rolling Hills Apartments No
111 Four Corners Shopping Center No
112 Rimrock Plaza Shopping Center No
113 Orchard View Apartments No
114 Secure Self Storage of Old Town No
115 Waterford Place Condominiums Yes
116 Nimitz Point Apartments No
117 Physician's Plaza No
118 Artesia Mobile Home Estates No
119 Del Prado Apartments No
120 Concord Villas No
121 San Mateo Office Complex No
122 Colonial Arms Apartments Yes
123 Westport Apartments No
124 Marina Self Storage No
125 Americana Palos Verdes Apartments No
126 Grand York Shopping Center No
127 Brooktree Estates Apartments No
128 Daily California Building No
129 The Regent-Chicago Yes
130 Lyons Shopping Center No
131 Renaissance Tech No
132 Columbian Steel Tank Co. No
133 Barbur Place Center Yes
134 Samoan Sea Apartments No
135 4759 51 Street Warehouse Yes
136 20650 Prairie No
137 Sierra West Business Park No
138 PetsMart-Sand City No
139 Mesa Breeze Apartments No
140 Palm Garden Apartments No
141 Harvard Apartments No
142 Safeworks Warehouse Yes
143 Garden Brook Apartments No
144 Lynmarie Apartments No
145 Storey Plastics Building No
146 Casa de Jerado No
147 Palm Central South No
</TABLE>
II-21
<PAGE> 136
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Loan Replacement
No. Property Name(2) Reserves(11)
- --------------------------------------------------------------------------
<S> <C> <C>
148 Barnes - 380 Tennant Ave (D) No
149 Barnes - 6550 Brem Lane (D) No
150 Barnes - Santa Cruz (D) No
151 Arctic Business Park III No
152 Savannah Gardens Apartments Yes
153 Markison Vista No
154 London Press Building No
155 Canal Park Apartments No
156 Hayvenhurst Airport Business Park No
157 Bashas' Shopping Center No
158 15th & 16th Street Warehouse Yes
159 Raintree Apartments No
160 Lindys Town Lake Apartments Yes
161 Discount Mini Storage North No
162 1207-15 Pearl Street Mall No
163 Midway Park North No
164 Winchester House Apartments Yes
165 740 W. Knox No
166 Normandie Apartments Yes
167 Oakmont Shopping Center No
168 Coral Place Pilgrim Building Shopping Center Yes
169 1730 I Street No
170 Western Digital Building No
171 Casa Alegre Apartments No
172 Rodeo Plaza No
173 Casa Del Sol North (E) No
174 Casa Del Sol South (E) No
175 Staples-Southington No
176 55 th & Wadsworth Retail Center No
177 OMA Building No
178 Cleator Corp Buildings No
179 Hidden Village Apartments No
180 Arctic Business Park II No
181 Eckerd Drug Store No. 816R No
182 Willow Glen Mobile Home Park No
183 940 E. Diehl Road No
184 Gateway Office Center No
185 Laguna Hills Property No
186 Rancho Dominguez No
187 The Hampton Apartments No
188 Redwood Self Storage No
189 Hewlett Packard Bldg. No
190 Spenwick Industrial Park No
191 Lancaster Medical Office Building No
192 Dorchester Gardens Apartments Yes
193 Safeway-Marlow Center Yes
194 Keylock Mini Storage No
195 53rd Court Warehouse Yes
196 Stadium Court No
</TABLE>
II-22
<PAGE> 137
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Loan Replacement
No. Property Name(2) Reserves(11)
- --------------------------------------------------------------------------
<S> <C> <C>
197 Oakhurst Drive Apartments Yes
198 4602 North Avenue No
199 Cal Plate, Inc. Buildings No
200 McKinley Business Center No
201 Rite Aid - Cleveland No
202 77 Rumford Avenue Office Building Yes
203 Herndon/West Office II (F) No
204 Herndon/West Office I (F) No
205 Daisy I Apartments No
206 Sunset East Apartments No
207 Overlook Terrace Apts. No
208 2275 East Bayshore Road No
209 Darant Industrial No
210 354 S. La Fayette Park Place No
211 22322 Gilberto No
212 Parkview No
213 Las Olas Shopping Center Yes
214 1841 Fuller Apartments No
215 Brighton Avenue Plaza Shopping Center No
216 Tiffany Building No
217 Ballinger Trace Apts. No
218 Freeway Industrial Center No
219 Villa Monaco No
220 Cheyenne Mountain Blockbuster No
221 Sunset Hill Apartments No
222 Le Med Apartments No
223 Kerner Automotive Center No
224 Bachman Glen Apartments Yes
225 Westview Plaza No
226 Fairmont Apartments No
227 Commerce-Executive No
228 St. Andrews Apartments Yes
229 Dunbar Amored Building No
230 631 Giguere Court No
231 Woodfront Condominiums No
232 Coral Shopping Center Yes
233 Morally Wholesale No
234 Emerald Court Apartments No
235 1500 International Parkway No
236 4801 W. 147th No
237 7225 & 7235 Bermuda Road No
238 150 North Gibson Road No
239 San Carlos Apartments No
240 Daisy III Apartments No
241 Evergreen Garden Apts. No
242 Albermarle Center No
243 The Village at Weber Ranch No
244 U-Stor George Washington Yes
245 1410 W. 10th Pl. No
</TABLE>
II-23
<PAGE> 138
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Loan Replacement
No. Property Name(2) Reserves(11)
- --------------------------------------------------------------------------
<S> <C> <C>
246 Memorial Hills Townhomes No
247 Espalier Square No
248 Mission Plaza No
249 Huebner Road Office Buildings No
250 Kickapoo Plaza Shopping Center No
251 Cascade Optical Buildings No
252 The 3700 Building No
253 Daisy IV Apartments No
254 2201 Sturgis No
255 Petal Street No
256 Thrifty Payless, Laguna Niguel (IV) No
257 Thrifty Payless, Bellflower (IV) No
258 Jam Pharmaceutical No
259 Sonora Court No
260 Parkway Square No
261 Glenbrook Place Apartments No
262 4625 West Jennifer Avenue No
263 Commercial Building West Lake Village No
264 South Park Apartments No
265 Reseda Mobile Homes No
266 Murphy Avenue No
267 10925 Kinross Avenue No
268 4 Wrigley Street No
269 9 Marconi Street No
270 Westridge Commerce Center No
271 Centennial Green No
272 Bowser Tech No
273 1720 Greenville Avenue No
274 Taco Bell/ Scottsdale No
Total/Weighted Average 38.0%
</TABLE>
II-24
<PAGE> 139
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Interest Accrual Lockout
No. Property Name(2) Method Seasoning(12) Period YM1 YM DEF/YM1 DEF/YM DEF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Golf Mill Shopping Center Actual/360 7 31 86
2 Silvertree Hotel and Wildwood Lodge Actual/360 8 44 73
3 Mission Valley Hilton Hotel (A) Actual/360 10 60 58
4 Hanalei Hotel (A) Actual/360 10 60 58
5 Galleria Palms Apartments Actual/360 6 30 87
6 55 Hawthorne & 631 Howard Actual/360 6 24 30
7 Dunwoody Club Apartments Actual/360 4 36 42
8 Grapevine Town Shopping Center Actual/360 9 60 57
9 Ward - Bel Air Professional Ctr (I) 30/360 4 36 198
10 Ward - Bel Air Retail (I) 30/360 4 36 198
11 Ward - Bright Oaks Office (I) 30/360 4 36 198
12 Ward - Blue Spruce (I) 30/360 4 36 198
13 Ward - Hayes/Thomas Office (I) 30/360 4 36 198
14 Central Park Apartments Actual/360 8 36 78
15 Boca Industrial (B) Actual/360 4 36 78
16 South Congress Industrial (B) Actual/360 6 36 78
17 North Los Altos Shopping Center 30/360 6 36 78
18 International Residence-Austin (IRA) Actual/360 8 36 78
19 Crossway Commons Shopping Center Actual/360 8 60 57
20 La Veta Grand Apartments Actual/360 7 31 86
21 1 Lombard St. & 150 Greenwich St. Actual/360 6 36 78
22 Vintage Court Hotel 30/360 8 36 17
23 Wimberly Park Actual/360 8 36 78
24 Federal Express Building 30/360 9 36 78
25 Merrimac Plaza Shopping Center Actual/360 5 29 88
26 Stockton Center Actual/360 4 36 78
27 International Residence San Antonio Actual/360 8 36 78
28 Corporate Drive, Sugarland, TX Actual/360 1 36 138
29 Weatherly Walk Actual/360 5 36 78
30 Office Depot - Long Beach, CA Actual/360 4 36 78
31 Hurst Harbor Marina Actual/360 4 36 78
32 Casady Square Shopping Center Actual/360 6 30 87
33 Commonwealth Building Actual/360 7 36 138
34 Coyote Creek Mobile Home Park Actual/360 6 36 78
35 Mountainview Marketplace Shopping Center Actual/360 10 60 60
36 Hurley's Children & Family Medical Ctr. 30/360 5 84 114
37 Druid Pointe Office Building 30/360 8 60 60
38 Nohl Plaza Shopping Center 30/360 7 36 78
39 Monterey Park II Apts. Actual/360 5 36 78
40 Spring Hill Market Place Actual/360 5 36 138
41 Hampton Inn Hotel Actual/360 8 60 57
42 Crestview Apartments Actual/360 4 36 78
43 Fiesta Shopping Center 30/360 7 60 174
44 Sierra Crest Shopping Center Actual/360 7 36 78
45 Casa Del Rey Apartments Actual/360 5 36 78
46 Alameda Business Centre 30/360 6 36 78
47 58 Charles Street Office Building Actual/360 4 28 89
<CAPTION>
- ------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Administrative
No. 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.0% Open Cost Rate (bps)(14)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3 1.45
2 3 1.45
3 2 9.45
4 2 9.45
5 5 1.45
6 6 5.85
7 6 5.85
8 3 9.45
9 6 5.85
10 6 5.85
11 6 5.85
12 6 5.85
13 6 5.85
14 6 5.85
15 6 5.85
16 6 5.85
17 6 5.85
18 6 5.85
19 3 1.45
20 3 10.45
21 6 5.85
22 6 5.85
23 6 5.85
24 6 5.85
25 3 1.45
26 6 5.85
27 6 5.85
28 6 5.85
29 6 5.85
30 6 5.85
31 6 5.85
32 3 1.45
33 6 5.85
34 6 5.85
35 9.45
36 6 5.85
37 9.45
38 6 5.85
39 6 5.85
40 6 5.85
41 3 1.45
42 6 5.85
43 6 5.85
44 6 5.85
45 6 5.85
46 6 5.85
47 3 1.45
</TABLE>
II-19
<PAGE> 140
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Interest Accrual Lockout
No. Property Name(2) Method Seasoning(12) Period YM1 YM DEF/YM1 DEF/YM DEF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
48 Syosset Plaza Shopping Center Actual/360 6 30 87
49 Silver Creek Shopping Center Actual/360 4 36 138
50 Martin Woodworking Actual/360 6 36 78
51 Park Bank Office Building Actual/360 4 28 89
52 Consolidated Technology Warehouse (II) Actual/360 4 28 89
53 Consolidated Technology Industrial
Building (II) Actual/360 4 28 89
54 1155 Jones Street Actual/360 4 36 78
55 Kramer - 6 Arcata Apartments (III) 30/360 7 84 150
56 Kramer - Eureka Apartments (III) 30/360 7 84 150
57 Kramer - Fields Landing (III) 30/360 7 84 150
58 Vista Oaks Apartment Actual/360 8 36 198
59 Nash Finch Distribution Warehouse Actual/360 5 29 88
60 Syracuse Center - Phase I Actual/360 5 36 42
61 Amador II Building Actual/360 4 36 78
62 Catalina Apartments Actual/360 6 48 69
63 4670 Willow Road Actual/360 4 36 78
64 Hamilton House Apartments 30/360 5 36 198
65 Sacramento Place Apartments Actual/360 4 36 78
66 Zycon R&D Building 30/360 9 60 57
67 Rudolph-Hendrickson Senior Apartments Actual/360 7 48 69
68 Holborn Village Apartments Actual/360 4 28 89
69 100 E. Tujunga Actual/360 7 36 78
70 Rancho Anita Industrial Park Actual/360 5 36 78
71 Beverly Hills Tower Apartments (C) Actual/360 12 48 69
72 Beverly Hills Regency Apartments (C) Actual/360 12 48 69
73 Chico Town & Country Shopping Ctr. Actual/360 5 36 78
74 Windsor Court Apartments Actual/360 10 48 69
75 Pathmark Super Center-Wilmington, DE Actual/360 3 27 90
76 New Villa Valencia Mobile Home Park Actual/360 7 48 69
77 Veterans Plaza Shopping Center Actual/360 7 28 146
78 150 Sylvan Avenue Shopping Center Actual/360 4 28 86
79 Reynolds Industries Bldg Actual/360 7 36 78
80 Strada Da Valle Office Building Actual/360 7 60 57
81 Conrad Villas Apts. Actual/360 8 36 78
82 Ocean Business Park Actual/360 8 36 78
83 Westwood Village Shopping Center Actual/360 5 29 88
84 Enclave Apartments 30/360 7 36 78
85 Westside Shopping Center Actual/360 3 27 90
86 Riverside Country Club Mobile Home Park Actual/360 6 48 69
87 3030 Bridgeway Boulevard Actual/360 7 36 78
88 Food 4 Less Actual/360 7 36 78
89 Suburban Lodge Hotel Actual/360 3 60 60
90 Pathmark Super Center-Upper Darby, PA Actual/360 3 27 90
91 The Ladco Building 30/360 4 60 114
92 Hickory Plaza Actual/360 5 60 57
93 College Way Marketplace Actual/360 6 36 78
94 Grove Business Joint Venture 30/360 7 60 54
95 Edison Way Industrial Center Actual/360 4 36 138
<CAPTION>
- ------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Administrative
No. 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.0% Open Cost Rate (bps)(14)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
48 3 12.5
49 6 5.85
50 6 5.85
51 3 9.45
52 3 1.45
53
3 1.45
54 6 5.85
55 6 5.85
56 6 5.85
57 6 5.85
58 6 5.85
59 3 10.45
60 6 5.85
61 6 5.85
62 3 1.45
63 6 5.85
64 6 5.85
65 6 5.85
66 3 9.45
67 3 1.45
68 3 9.45
69 6 5.85
70 6 5.85
71 3 1.45
72 3 1.45
73 6 5.85
74 3 1.45
75 3 1.45
76 3 1.45
77 6 12.5
78 6 1.45
79 6 5.85
80 3 12.5
81 6 5.85
82 6 5.85
83 3 1.45
84 6 5.85
85 3 9.45
86 3 1.45
87 6 5.85
88 6 5.85
89 9.45
90 3 1.45
91 6 5.85
92 3 12.5
93 6 5.85
94 6 5.85
95 6 5.85
</TABLE>
II-20
<PAGE> 141
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Interest Accrual Lockout
No. Property Name(2) Method Seasoning(12) Period YM1 YM DEF/YM1 DEF/YM DEF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
96 Pacific Terrace Apartments Actual/360 8 36 78
97 4700-4800 SW 51 St Warehouse Actual/360 5 29 88
98 Brookside Villas Apartments Actual/360 6 30 87
99 Castaic Apartments 30/360 8 36 78
100 La Habra Hills Actual/360 5 36 78
101 5251 - 5271 East 2nd St. 30/360 8 36 78
102 Montgomery Business Park Actual/360 6 36 78
103 Atherton Park Apartments Actual/360 13 48 69
104 Let's Store It II - Brookhurst 30/360 6 36 78
105 Torrance Western Self Storage 30/360 6 36 78
106 Sierra Gardens Actual/360 7 36 78
107 Shelter Creek Apartments Actual/360 8 36 78
108 Design Row Shopping Center Actual/360 3 27 90
109 Veteran Plaza 30/360 5 36 78
110 Rolling Hills Apartments Actual/360 7 36 78
111 Four Corners Shopping Center 30/360 8 60 174
112 Rimrock Plaza Shopping Center 30/360 16
113 Orchard View Apartments 30/360 4 36 138
114 Secure Self Storage of Old Town Actual/360 6 36 78
115 Waterford Place Condominiums Actual/360 8 32 85
116 Nimitz Point Apartments Actual/360 8 36 78
117 Physician's Plaza Actual/360 6 36 78
118 Artesia Mobile Home Estates Actual/360 6 36 78
119 Del Prado Apartments Actual/360 5 36 78
120 Concord Villas 30/360 7 36 78
121 San Mateo Office Complex Actual/360 4 36 78
122 Colonial Arms Apartments Actual/360 8 32 85
123 Westport Apartments Actual/360 8 36 78
124 Marina Self Storage 30/360 8 36 78
125 Americana Palos Verdes Apartments Actual/360 5 29 88
126 Grand York Shopping Center Actual/360 5 26 151
127 Brooktree Estates Apartments Actual/360 9 60 72
128 Daily California Building Actual/360 10 36 78
129 The Regent-Chicago Actual/360 9 60 57
130 Lyons Shopping Center 30/360 5 36 78
131 Renaissance Tech 30/360 7 60 54
132 Columbian Steel Tank Co. 30/360 6 36 78
133 Barbur Place Center Actual/360 4 28 89
134 Samoan Sea Apartments 30/360 7 36 78
135 4759 51 Street Warehouse Actual/360 5 29 88
136 20650 Prairie 30/360 6 36 138
137 Sierra West Business Park Actual/360 9 36 78
138 PetsMart-Sand City 30/360 7 36 78
139 Mesa Breeze Apartments Actual/360 8 48 69
140 Palm Garden Apartments 30/360 7 36 78
141 Harvard Apartments Actual/360 6 48 69
142 Safeworks Warehouse Actual/360 5 29 88
143 Garden Brook Apartments Actual/360 6 30 87
<CAPTION>
- ------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Administrative
No. 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.0% Open Cost Rate (bps)(14)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
96 6 5.85
97 3 12.5
98 3 10.45
99 6 5.85
100 6 5.85
101 6 5.85
102 6 5.85
103 3 1.45
104 6 5.85
105 6 5.85
106 6 5.85
107 6 5.85
108 3 12.5
109 6 5.85
110 6 5.85
111 6 5.85
112 120 60 54 6 9.45
113 6 5.85
114 6 5.85
115 3 10.45
116 6 5.85
117 6 5.85
118 6 5.85
119 6 5.85
120 6 5.85
121 6 5.85
122 3 12.5
123 6 5.85
124 6 5.85
125 3 9.45
126 3 10.45
127 9.45
128 6 5.85
129 3 9.45
130 6 5.85
131 6 5.85
132 6 5.85
133 3 12.5
134 6 5.85
135 3 12.5
136 6 5.85
137 6 5.85
138 6 5.85
139 3 1.45
140 6 5.85
141 3 1.45
142 3 12.5
143 3 1.45
</TABLE>
II-21
<PAGE> 142
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Interest Accrual Lockout
No. Property Name(2) Method Seasoning(12) Period YM1 YM DEF/YM1 DEF/YM DEF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
144 Lynmarie Apartments Actual/360 6 30 87
145 Storey Plastics Building Actual/360 7 36 78
146 Casa de Jerado Actual/360 7 36 78
147 Palm Central South Actual/360 7 36 78
148 Barnes - 380 Tennant Ave (D) Actual/360 6 36 78
149 Barnes - 6550 Brem Lane (D) Actual/360 6 36 78
150 Barnes - Santa Cruz (D) Actual/360 6 36 78
151 Arctic Business Park III Actual/360 5 48 186
152 Savannah Gardens Apartments Actual/360 6 30 87
153 Markison Vista 30/360 7 60 54
154 London Press Building 30/360 6 36 138
155 Canal Park Apartments Actual/360 7 84 150
156 Hayvenhurst Airport Business Park Actual/360 8 36 78
157 Bashas' Shopping Center Actual/360 9 36 198
158 15th & 16th Street Warehouse Actual/360 5 29 88
159 Raintree Apartments Actual/360 7 36 78
160 Lindys Town Lake Apartments Actual/360 7 31 86
161 Discount Mini Storage North Actual/360 8 60 57
162 1207-15 Pearl Street Mall Actual/360 8 36 78
163 Midway Park North 30/360 7 60 54
164 Winchester House Apartments 30/360 36 60
165 740 W. Knox Actual/360 6 60 114
166 Normandie Apartments 30/360 58 36
167 Oakmont Shopping Center Actual/360 7 36 78
168 Coral Place Pilgrim Building Shopping Center Actual/360 3 27 90
169 1730 I Street Actual/360 5 36 78
170 Western Digital Building Actual/360 6 36 78
171 Casa Alegre Apartments 30/360 7 36 78
172 Rodeo Plaza 30/360 6 36 78
173 Casa Del Sol North (E) 30/360 6 36 78
174 Casa Del Sol South (E) 30/360 6 36 78
175 Staples-Southington 30/360 7 48 102
176 55 th & Wadsworth Retail Center Actual/360 7 36 78
177 OMA Building Actual/360 6 36 78
178 Cleator Corp Buildings Actual/360 7 36 78
179 Hidden Village Apartments 30/360 8 36 198
180 Arctic Business Park II Actual/360 5 48 186
181 Eckerd Drug Store No. 816R 30/360 5 60 174
182 Willow Glen Mobile Home Park Actual/360 7 36 78
183 940 E. Diehl Road 30/360 5 36 78
184 Gateway Office Center Actual/360 5 36 78
185 Laguna Hills Property Actual/360 5 36 78
186 Rancho Dominguez Actual/360 5 36 78
187 The Hampton Apartments Actual/360 9 60 120
188 Redwood Self Storage Actual/360 8 36 78
189 Hewlett Packard Bldg. Actual/360 8 48 66
190 Spenwick Industrial Park 30/360 8 36 78
191 Lancaster Medical Office Building 30/360 7 36 138
<CAPTION>
- ------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Administrative
No. 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.0% Open Cost Rate (bps)(14)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
144 3 1.45
145 6 5.85
146 6 5.85
147 6 5.85
148 6 5.85
149 6 5.85
150 6 5.85
151 6 5.85
152 3 10.45
153 6 5.85
154 6 5.85
155 6 5.85
156 6 5.85
157 6 5.85
158 3 12.5
159 6 5.85
160 3 12.5
161 3 1.45
162 6 5.85
163 6 5.85
164 12 6 6 1.45
165 6 5.85
166 12 12 12 9 3 1.45
167 6 5.85
168 3 12.5
169 6 12.5
170 6 5.85
171 6 5.85
172 6 5.85
173 6 5.85
174 6 5.85
175 6 5.85
176 6 5.85
177 6 5.85
178 6 5.85
179 6 5.85
180 6 5.85
181 6 5.85
182 6 5.85
183 6 5.85
184 6 5.85
185 6 5.85
186 6 5.85
187 5.85
188 6 9.45
189 6 5.85
190 6 5.85
191 6 5.85
</TABLE>
II-22
<PAGE> 143
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Interest Accrual Lockout
No. Property Name(2) Method Seasoning(12) Period YM1 YM DEF/YM1 DEF/YM DEF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
192 Dorchester Gardens Apartments 30/360 42 60
193 Safeway-Marlow Center 30/360 9 36 78
194 Keylock Mini Storage Actual/360 8 60 57
195 53rd Court Warehouse Actual/360 5 29 88
196 Stadium Court Actual/360 8 36 78
197 Oakhurst Drive Apartments Actual/360 9 48 69
198 4602 North Avenue Actual/360 8 36 78
199 Cal Plate, Inc. Buildings 30/360 7 84 150
200 McKinley Business Center Actual/360 7 36 78
201 Rite Aid - Cleveland 30/360 7 36 78
202 77 Rumford Avenue Office Building Actual/360 5 29 88
203 Herndon/West Office II (F) Actual/360 7 36 78
204 Herndon/West Office I (F) Actual/360 7 36 78
205 Daisy I Apartments Actual/360 8 36 78
206 Sunset East Apartments Actual/360 5 36 78
207 Overlook Terrace Apts. Actual/360 6 36 78
208 2275 East Bayshore Road Actual/360 7 36 78
209 Darant Industrial 30/360 4 36 138
210 354 S. La Fayette Park Place 30/360 7 36 42
211 22322 Gilberto 30/360 7 36 78
212 Parkview 30/360 7 60 54
213 Las Olas Shopping Center Actual/360 3 27 90
214 1841 Fuller Apartments 30/360 5 36 138
215 Brighton Avenue Plaza Shopping Center Actual/360 7 60 57
216 Tiffany Building Actual/360 7 36 79
217 Ballinger Trace Apts. 30/360 9 60 114
218 Freeway Industrial Center 30/360 7 36 78
219 Villa Monaco Actual/360 7 36 78
220 Cheyenne Mountain Blockbuster Actual/360 6 36 78
221 Sunset Hill Apartments Actual/360 6 36 78
222 Le Med Apartments 30/360 4 36 78
223 Kerner Automotive Center Actual/360 5 36 78
224 Bachman Glen Apartments Actual/360 5 36 78
225 Westview Plaza Actual/360 6 36 138
226 Fairmont Apartments 30/360 8 36 78
227 Commerce-Executive 30/360 7 60 54
228 St. Andrews Apartments Actual/360 7 36 78
229 Dunbar Amored Building Actual/360 5 36 78
230 631 Giguere Court Actual/360 5 36 78
231 Woodfront Condominiums Actual/360 9 36 78
232 Coral Shopping Center Actual/360 3 27 90
233 Morally Wholesale 30/360 7 36 102
234 Emerald Court Apartments 30/360 9 36 78
235 1500 International Parkway 30/360 7 60 54
236 4801 W. 147th Actual/360 7 36 102
237 7225 & 7235 Bermuda Road 30/360 4 36 198
238 150 North Gibson Road 30/360 4 36 198
239 San Carlos Apartments Actual/360 5 36 78
<CAPTION>
- ------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Administrative
No. 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.0% Open Cost Rate (bps)(14)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
192 12 6 6 5.85
193 6 5.85
194 3 1.45
195 3 1.45
196 6 12.5
197 3 5.85
198 6 1.45
199 6 5.85
200 6 5.85
201 6 5.85
202 3 5.85
203 6 5.85
204 6 5.85
205 6 5.85
206 6 12.5
207 6 5.85
208 6 5.85
209 6 5.85
210 6 5.85
211 6 5.85
212 6 5.85
213 3 5.85
214 6 12.5
215 3 5.85
216 6 12.5
217 6 5.85
218 6 5.85
219 6 5.85
220 6 5.85
221 6 5.85
222 6 5.85
223 6 5.85
224 6 5.85
225 6 5.85
226 6 5.85
227 6 5.85
228 6 5.85
229 6 5.85
230 6 5.85
231 6 5.85
232 3 5.85
233 6 5.85
234 6 5.85
235 6 5.85
236 6 5.85
237 6 5.85
238 6 5.85
239 6 5.85
</TABLE>
II-23
<PAGE> 144
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Interest Accrual Lockout
No. Property Name(2) Method Seasoning(12) Period YM1 YM DEF/YM1 DEF/YM DEF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
240 Daisy III Apartments Actual/360 8 36 78
241 Evergreen Garden Apts. Actual/360 5 36 78
242 Albermarle Center Actual/360 6 36 78
243 The Village at Weber Ranch Actual/360 8 36 78
244 U-Stor George Washington Actual/360 5 29 88
245 1410 W. 10th Pl. Actual/360 7 36 78
246 Memorial Hills Townhomes 30/360 7 60 174
247 Espalier Square 30/360 5 60 114
248 Mission Plaza 30/360 7 60 54
249 Huebner Road Office Buildings 30/360 6 36 78
250 Kickapoo Plaza Shopping Center Actual/360 8 36 78
251 Cascade Optical Buildings 30/360 7 84 150
252 The 3700 Building Actual/360 6 36 78
253 Daisy IV Apartments Actual/360 8 36 78
254 2201 Sturgis 30/360 4 36 198
255 Petal Street 30/360 7 60 54
256 Thrifty Payless, Laguna Niguel (IV) Actual/360 12 36 78
257 Thrifty Payless, Bellflower (IV) Actual/360 12 36 78
258 Jam Pharmaceutical Actual/360 8 36 78
259 Sonora Court Actual/360 7 60 174
260 Parkway Square 30/360 7 60 54
261 Glenbrook Place Apartments 30/360 4 36 18
262 4625 West Jennifer Avenue Actual/360 7 36 78
263 Commercial Building West Lake Village 30/360 5 60 114
264 South Park Apartments Actual/360 7 36 78
265 Reseda Mobile Homes 30/360 6 60 114
266 Murphy Avenue 30/360 7 36 78
267 10925 Kinross Avenue 30/360 8 36 78
268 4 Wrigley Street 30/360 6 36 78
269 9 Marconi Street 30/360 7 36 78
270 Westridge Commerce Center Actual/360 5 36 78
271 Centennial Green 30/360 7 60 54
272 Bowser Tech 30/360 7 60 54
273 1720 Greenville Avenue 30/360 7 60 54
274 Taco Bell/ Scottsdale 30/360 7 36 42
Total/Weighted Average 6.6 39.3
<CAPTION>
- ------------------------------------------------------------------------------------------
Prepayment Code(13)
Loan Administrative
No. 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.0% Open Cost Rate (bps)(14)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
240 6 5.85
241 6 5.85
242 6 5.85
243 6 5.85
244 3 1.45
245 6 5.85
246 6 5.85
247 6 5.85
248 6 5.85
249 6 5.85
250 6 5.85
251 6 5.85
252 6 5.85
253 6 5.85
254 6 5.85
255 6 5.85
256 6 5.85
257 6 5.85
258 6 5.85
259 6 5.85
260 6 5.85
261 6 5.85
262 6 5.85
263 6 5.85
264 6 5.85
265 6 5.85
266 6 5.85
267 6 5.85
268 6 5.85
269 6 5.85
270 6 5.85
271 6 5.85
272 6 5.85
273 6 5.85
274 6 5.85
Total/Weighted Average 4.8 5.68
</TABLE>
II-24
<PAGE> 145
APPENDIX II
ADDITIONAL INFORMATION REGARDING THE MULTIFAMILY MORTGAGE LOANS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Loan Utilities Cut-Off
No. Property Name City County State Tenant Pays Date Balance
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5 Galleria Palms Apartments Tempe Maricopa AZ Electricity, Cable T.V. $28,874,586
7 Dunwoody Club Apartments Atlanta Fulton GA Gas, Electric $24,935,425
14 Central Park Apartments San Jose Santa Clara CA Gas, Electric $10,890,971
18 International
Residence-Austin (IRA) Austin Williamson TX Gas, Electric $10,534,893
20 La Veta Grand Apartments Orange Orange CA Electricity, Gas $10,023,895
23 Wimberly Park Duncanville Dallas TX Gas, Electric $8,745,949
27 International Residence
San Antonio San Antonio Bexar TX Gas, Electric $8,348,406
29 Weatherly Walk Fayetteville Fayette GA Gas, Electric $7,868,658
39 Monterey Park II Apts. Las Vegas Clark NV Gas, Electric $6,475,013
42 Crestview Apartments West Lafayette Tippecanoe IN Gas, Electric $6,096,683
45 Casa Del Rey Apartments Fresno Fresno CA Gas, Electric $5,915,181
54 1155 Jones Street San Francisco San Francisco CA Gas, Electric $5,382,128
55 Kramer - 6 Arcata Apartments Arcata Humboldt CA Gas,Electric,Water, Trash $3,457,952
56 Kramer - Eureka Apartments Eureka Humboldt CA Electricity, Gas $1,505,903
57 Kramer - Fields Landing Fields Landing Humboldt CA Electricity, Gas $317,728
58 Vista Oaks Apartment Martinez Contra Costa CA Gas, Electric $5,222,195
62 Catalina Apartments Studio City Los Angeles CA Electricity, Gas $4,978,762
64 Hamilton House Apartments Mayfield Heights Cuyahoga OH Electric $4,950,153
65 Sacramento Place Apartments Sacramento Sacramento CA Gas, Electric $4,834,067
67 Rudolph-Hendrickson
Senior Apartments Rancho Cucamonga San Bernardino CA Electricity, Cable T.V. $4,700,721
68 Holborn Village Apartments Madison Dane WI Electricity, Gas, Cable T.V. $4,637,145
71 Beverly Hills Tower Apartments Los Angeles Los Angeles CA None $3,083,429
72 Beverly Hills Regency Apartments Los Angeles Los Angeles CA Gas, Electricity $1,398,587
74 Windsor Court Apartments Turlock Stanislaus CA Electricity $4,464,735
81 Conrad Villas Apts. Spring Valley San Diego CA Gas, Electric $3,821,586
84 Enclave Apartments Los Angeles Los Angeles CA Gas, Electric $3,662,478
96 Pacific Terrace Apartments Midway City Orange CA Gas, Electric{HUD Reimbursed} $3,344,725
98 Brookside Villas Apartments Reno Washoe NV Electricity $3,322,620
99 Castaic Apartments Castaic Los Angeles CA Gas, Electric $3,316,651
100 La Habra Hills La Habra Orange CA Gas, Electric $3,286,765
103 Atherton Park Apartments Taylorsville Salt Lake County UT Gas, Electricity $3,218,428
106 Sierra Gardens Bellflower Los Angeles CA Gas, Electric $3,163,108
107 Shelter Creek Apartments San Jose Santa Clara CA Gas, Electric $3,149,946
109 Veteran Plaza Los Angeles Los Angeles CA Gas, Electric $2,986,411
110 Rolling Hills Apartments Torrance Los Angeles CA Gas, Electric $2,984,265
113 Orchard View Apartments Tacoma Pierce WA Gas, Electric $2,885,869
115 Waterford Place Condominiums Athens Clarke GA Electricity, Water $2,759,877
116 Nimitz Point Apartments San Diego San Diego CA Gas, Electric $2,712,573
119 Del Prado Apartments Downey Los Angeles CA Gas, Electric $2,684,418
120 Concord Villas Riverside Riverside CA Gas, Electric $2,684,173
122 Colonial Arms Apartments Center Township Beaver PA Electricity $2,639,185
123 Westport Apartments Corcoran Kings CA Gas, Electric $2,633,457
125 Americana Palos Verdes Apartments Las Vegas Clark County NV Electricity $2,490,437
127 Brooktree Estates Apartments Los Angeles Los Angeles CA Electricity $2,483,094
134 Samoan Sea Apartments San Pedro Los Angeles CA Gas, Electric $2,268,285
139 Mesa Breeze Apartments Costa Mesa Orange County CA Electricity $2,136,648
140 Palm Garden Apartments West Hollywood Los Angeles CA Gas, Electric $2,130,542
141 Harvard Apartments Los Angeles Los Angeles CA Electricity, Gas $2,109,935
143 Garden Brook Apartments Beaverton Washington OR Electricity, Cable T.V. $2,090,375
144 Lynmarie Apartments Beaverton Washington OR Electricity $2,090,375
146 Casa de Jerado Riverside Riverside CA Gas, Electric $2,073,107
<CAPTION>
- -----------------------------------------------------
Rem. Term to Maturity
Loan Maturity Date or ARD
No. or ARD(5) (mos) Elevator
- -----------------------------------------------------
<S> <C> <C> <C>
5 10/1/08 116 No
7 10/1/05 80 No
14 6/1/08 112 No
18
6/1/08 112 No
20 7/1/08 113 No
23 6/1/08 112 No
27
6/1/08 112 No
29 9/1/08 115 No
39 9/1/08 115 No
42 10/1/08 116 No
45 9/1/08 115 No
54 10/1/08 116 Yes
55 7/1/18 233 No
56 7/1/18 233 No
57 7/1/18 233 No
58 6/1/18 232 No
62 8/1/08 114 Yes
64 9/1/18 235 Yes
65 10/1/08 116 No
67
7/1/08 113 Yes
68 10/1/08 116 No
71 2/1/08 108 Yes
72 2/1/08 108 Yes
74 4/1/08 110 No
81 6/1/08 112 No
84 7/1/08 113 Yes
96 6/1/08 112 Yes
98 8/1/08 114 No
99 6/1/08 112 No
100 9/1/08 115 Yes
103 1/1/08 107 No
106 7/1/08 113 No
107 6/1/08 112 No
109 9/1/08 115 Yes
110 7/1/08 113 Yes
113 10/1/13 176 No
115 6/1/08 112 N/A
116 6/1/08 112 Yes
119 9/1/08 115 Yes
120 7/1/08 113 No
122 6/1/08 112 N/A
123 6/1/08 112 No
125 9/1/08 115 No
127 5/1/09 123 No
134 7/1/08 113 No
139 6/1/08 112 No
140 7/1/08 113 No
141 8/1/08 114 Yes
143 8/1/08 114 No
144 8/1/08 114 No
146 7/1/08 113 No
</TABLE>
II-25
<PAGE> 146
APPENDIX II
ADDITIONAL INFORMATION REGARDING THE MULTIFAMILY MORTGAGE LOANS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Loan Utilities Cut-Off
No. Property Name City County State Tenant Pays Date Balance
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
147 Palm Central South Riverside Riverside CA Gas, Electric $2,073,107
152 Savannah Gardens Apartments Cincinnati Hamilton OH Electricity $1,992,520
155 Canal Park Apartments Boise Ada ID Gas, Electric $1,951,864
159 Raintree Apartments Muskogee Muskogee OK Electric $1,884,642
160 Lindys Town Lake Apartments Austin Travis TX Electricity $1,841,071
164 Winchester House Apartments Virgnia Gardens Dade County FL Electricity $1,773,104
166 Normandie Apartments San Antonio Bexar TX None $1,754,370
171 Casa Alegre Apartments Hawthorne Los Angeles CA Gas, Electric $1,676,307
173 Casa Del Sol North Hawthorne Los Angleles CA None $859,550
174 Casa Del Sol South Hawthorne Los Angleles CA None $765,691
179 Hidden Village Apartments Phoenix Maricopa AZ Gas, Electric $1,575,128
187 The Hampton Apartments West Hollywood Los Angeles County CA Electricity $1,490,358
193 Dorchester Gardens Apartments North Charleston Charleston County SC Electricity $1,429,195
197 Oakhurst Drive Apartments Beverly Hills Los Angeles CA Electricity, Gas $1,371,130
205 Daisy I Apartments Costa Mesa Orange CA Gas, Electric $1,283,186
206 Sunset East Apartments Renton King WA Gas, Electric $1,282,645
207 Overlook Terrace Apts. Edgewood Pierce WA Gas, Electric $1,266,436
210 354 S. La Fayette Park Place Los Angeles Los Angeles CA Gas, Electric $1,232,844
214 1841 Fuller Apartments Hollywood Los Angeles CA Gas, Electric $1,195,082
217 Ballinger Trace Apts. Edmonds Snohomish WA Gas, Electric, Water $1,166,073
219 Villa Monaco La Habra Orange CA Gas, Electric $1,139,147
221 Sunset Hill Apartments Spokane Spokane WA Gas, Electric $1,106,814
222 Le Med Apartments Austin Travis TX Electric $1,093,993
224 Bachman Glen Apartments Dallas Dallas TX Gas, Electric $1,093,539
226 Fairmont Apartments Glendale Los Angeles CA Gas, Electric $1,082,779
228 St. Andrews Apartments Tampa Hillsborough FL Gas, Electric, Water $1,074,760
231 Woodfront Condominiums Dallas Dallas TX Gas, Electric $1,043,388
234 Emerald Court Apartments Enumclaw King WA Gas, Electric $1,002,461
239 San Carlos Apartments Portland Multnomah OR Gas, Electric $996,014
240 Daisy III Apartments Costa Mesa Orange CA Gas, Electric $994,718
241 Evergreen Garden Apts. El Cajon San Diego CA Gas, Electric $994,006
246 Memorial Hills Townhomes Houston Harris TX Gas, Electric, Water $986,647
253 Daisy IV Apartments Anaheim Orange CA Gas, Electric $895,246
261 Glenbrook Place Apartments Garland Dallas TX Gas, Electric $750,732
264 South Park Apartments Anaheim Orange CA Gas, Electric $736,217
<CAPTION>
- -----------------------------------------------------
Rem. Term to Maturity
Loan Maturity Date or ARD
No. or ARD(5) (mos) Elevator
- -----------------------------------------------------
<S> <C> <C> <C>
147 7/1/08 113 No
152 8/1/08 114 No
155 7/1/18 233 No
159 7/1/08 113 No
160 7/1/08 113 No
164 2/1/03 48 Yes
166 4/1/01 26 No
171 7/1/08 113 No
173 8/1/08 114 No
174 8/1/08 114 No
179 6/1/18 232 No
187 5/1/13 171 Yes
193 8/1/02 42 No
197 5/1/08 111 Yes
205 6/1/08 112 No
206 9/1/08 115 No
207 8/1/08 114 No
210 7/1/05 77 Yes
214 9/1/13 175 Yes
217 5/1/13 171 No
219 7/1/08 113 No
221 8/1/08 114 No
222 10/1/08 116 No
224 9/1/08 115 No
226 6/1/08 112 No
228 7/1/08 113 No
231 5/1/08 111 No
234 5/1/08 111 No
239 9/1/08 115 Yes
240 6/1/08 112 No
241 9/1/08 115 No
246 7/1/18 233 No
253 6/1/08 112 No
261 10/1/03 56 No
264 7/1/08 113 No
</TABLE>
II-26
<PAGE> 147
APPENDIX II
ADDITIONAL INFORMATION REGARDING THE MULTIFAMILY MORTGAGE LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Studios 1 Bedrooms
------- ----------
Loan Wtd. Avg. Wtd. Avg.
No. Property Name # Units Rent/Month Range # Units Rent/Month Range # Units
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5 Galleria Palms Apartments N/A N/A N/A 224 $651 $599 - $880 296
7 Dunwoody Club Apartments N/A N/A N/A 242 $714 $675 -$ 775 226
14 Central Park Apartments N/A N/A N/A N/A N/A N/A 161
18 International Residence-Austin (IRA) 132 $415 $370 - $540 66 $506 $465 - $720 112
20 La Veta Grand Apartments N/A N/A N/A N/A N/A N/A 208
23 Wimberly Park N/A N/A N/A 224 $482 $415 - $590 216
27 International Residence San Antonio 70 $345 $300 - $456 50 $476 $385 - $630 36
28 Weatherly Walk N/A N/A N/A 54 $635 $615 - $655 100
39 Monterey Park II Apts. N/A N/A N/A N/A N/A N/A 136
42 Crestview Apartments 143 $406 $210 - $455 2 $455 $400 - $510 72
46 Casa Del Rey Apartments N/A N/A N/A 63 $477 $430 - $510 181
54 1155 Jones Street 18 $1,188 $428 - $1,400 42 $1,734 $488 - $2,700 N/A
55 Kramer - 6 Arcata Apartments 159 $395 $395 - $395 N/A N/A N/A N/A
56 Kramer - Eureka Apartments N/A N/A N/A 16 425 $425 - $425 33
57 Kramer - Fields Landing N/A N/A N/A 6 $367 $350 - $375 4
58 Vista Oaks Apartment N/A N/A N/A 57 $767 $660 - $920 51
63 Catalina Apartments 6 $745 $610 - $910 72 $908 $730 - $1,130 21
64 Hamilton House Apartments 1 $499 N/A 216 $597 $538 - $601 182
65 Sacramento Place Apartments N/A N/A N/A 107 $501 $475 - $525 88
67 Rudolph-Hendrickson Senior Apartments N/A N/A N/A 104 $490 $445 - $560 64
69 Holborn Village Apartments N/A N/A N/A N/A N/A N/A 87
71 Beverly Hills Tower Apartments N/A N/A N/A N/A N/A N/A 35
72 Beverly Hills Regency Apartments N/A N/A N/A 6 $1,432 $1,400 - $1,495 10
74 Windsor Court Apartments 1 $400 $400 N/A N/A N/A 151
81 Conrad Villas Apts. N/A N/A N/A 32 $560 $545 - $575 80
84 Enclave Apartments 30 $870 $800 - $925 41 $1,001 $900 - $1,225 4
96 Pacific Terrace Apartments N/A N/A N/A 97 $765 $765 - $765 1
99 Brookside Villas Apartments N/A N/A N/A 16 $473 $445 - $480 73
98 Castaic Apartments N/A N/A N/A 24 $604 $600 - $615 48
100 La Habra Hills 20 $483 $475 - $550 48 $589 $525 - $650 55
103 Atherton Park Apartments N/A N/A N/A 2 $475 $475 142
106 Sierra Gardens N/A N/A N/A N/A N/A N/A 78
107 Shelter Creek Apartments N/A N/A N/A 74 $864 $702 - $1,075 50
109 Veteran Plaza N/A N/A N/A N/A N/A N/A 26
110 Rolling Hills Apartments N/A N/A N/A 59 $749 $650 - $775 30
113 Orchard View Apartments N/A N/A N/A 24 $439 $425 - $455 90
115 Waterford Place Condominiums N/A N/A N/A N/A N/A N/A N/A
116 Nimitz Point Apartments 4 $467 $450 - $500 51 $593 $550 - $605 9
119 Del Prado Apartments N/A N/A N/A 10 $722 $650 - $730 35
120 Concord Villas N/A N/A N/A N/A N/A N/A 53
123 Colonial Arms Apartments N/A N/A N/A 95 $416 $399 - $515 25
122 Westport Apartments N/A N/A N/A 110 $440 $375 - $475 44
126 Americana Palos Verdes Apartments 1 $475 $475 101 $458 $245 - $525 N/A
127 Brooktree Estates Apartments 28 $425 $410 - $460 56 $529 $510 - $570 36
134 Samoan Sea Apartments 143 $428 $300 - $475 1 $550 $550 7
139 Mesa Breeze Apartments N/A N/A N/A 42 $630 $595 - $670 20
140 Palm Garden Apartments 3 $546 $495 - $597 33 $805 $613 - $937 16
141 Harvard Apartments N/A N/A N/A N/A N/A N/A 43
146 Garden Brook Apartments 48 $446 $435 - $460 48 $498 $495 - $505 24
147 Lynmarie Apartments 12 $415 $400 - $430 58 $502 $457 - $530 72
144 Casa de Jerado N/A N/A N/A 22 $431 $415 - $433 98
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
2 Bedrooms 3 Bedrooms 4 Bedrooms Range
---------- ---------- ----------
Loan Wtd. Avg. Wtd. Avg. Wtd. Avg. for
No. Rent/Month Range # Units Rent/Month Range # Units Rent/Month Range Entire Property
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 $783 $604 - $865 48 $1,002 $935 - $1,275 N/A N/A N/A $599 - $1,275
7 $897 $870 - $955 64 $1,032 $935 - $1,185 N/A N/A N/A $675 - $1,185
14 $1,150 $945 - $1,242 25 $1,502 $1,377 - $1,595 N/A N/A N/A $945 - $1,595
18 $679 $635 - $885 200 $775 $685 - $1,114 N/A N/A N/A $370 - $1,114
20 $813 $740 - $900 42 $1,061 $1,000 - $1,125 N/A N/A N/A $745 - $1,125
23 $626 $530 - $1,000 N/A N/A N/A N/A N/A N/A $415 - $1,000
27 $671 $610 - $922 192 $751 $585 - $1,200 N/A N/A N/A $300 - $1,200
28 $720 $675 - $765 40 $834 $800 - $860 N/A N/A N/A $615 - $860
39 $708 $675 - $735 N/A N/A N/A N/A N/A N/A $675 - $735
42 $605 $485 - $750 N/A N/A N/A N/A N/A N/A $210 - $750
46 $542 $480 - $725 N/A N/A N/A N/A N/A N/A $430 - $725
54 N/A N/A N/A N/A N/A N/A N/A N/A $428 - $2,700
55 N/A N/A N/A N/A N/A N/A N/A N/A $395
56 $564 $550 - $595 N/A N/A N/A N/A N/A N/A $425 - $595
57 $474 $425 - $525 1 $575 $575 - $575 N/A N/A N/A $350 - $575
58 $892 $810 - $995 N/A N/A N/A N/A N/A N/A $660 - $995
63 $1,126 $1,030 - $1,305 N/A N/A N/A N/A N/A N/A $610 - $1,305
64 $701 $689 - $730 N/A N/A N/A N/A N/A N/A $499 - $730
65 $605 $575 - $635 N/A N/A N/A N/A N/A N/A $475 - $635
67 $590 $530 - $630 N/A N/A N/A N/A N/A N/A $445 - $630
69 $831 $435 - $1,500 N/A N/A N/A N/A N/A N/A $435 - $1,500
71 $1,247 $1,125 - $1,495 N/A N/A N/A N/A N/A N/A $1,125 - $1,495
72 $1,166 $1,125 - $1,200 N/A N/A N/A N/A N/A N/A $1,125 - $1,495
74 $470 $425 - $525 41 $535 $425 - $575 N/A N/A N/A $400 - $575
81 $665 $635 - $675 N/A N/A N/A N/A N/A N/A $545 - $675
84 $1,351 $1,300 - $1,430 N/A N/A N/A N/A N/A N/A $800 - $1,430
96 $765 $765 N/A N/A N/A N/A N/A N/A $765
99 $563 $480 - $580 24 $678 $660 - $685 N/A N/A N/A $445 - $685
98 $700 $500 - $715 12 $804 $800 - $815 N/A N/A N/A $600 - $815
100 $692 $580 - $710 14 $885 $825 - $895 N/A N/A N/A $475 - $895
103 $558 $540 - $650 N/A N/A N/A N/A N/A N/A $475 - $650
106 $697 $685 - $740 18 $895 $895 - $895 N/A N/A N/A $685 - $895
107 $1,036 $826 - $1,157 N/A N/A N/A N/A N/A N/A $702 - $1,157
109 $1,663 $1,500 - $2,050 1 $3,575 $3,575 N/A N/A N/A $1,500 - $3,575
110 $866 $725 - $900 18 $965 $825 - $1,000 N/A N/A N/A $650 - $1,000
113 $539 $510 - $565 6 $742 $720 - $760 N/A N/A N/A $425 - $760
115 N/A N/A N/A N/A N/A 36 $1,100 $1,060 - $1,100 $1,060 - $1,100
116 $749 $695 - $815 N/A N/A N/A N/A N/A N/A $450 - $815
119 $833 $790 - $850 11 $969 $850 - $1,050 N/A N/A N/A $650 - $1,050
120 $648 $625 - $700 17 $764 $750 - $775 N/A N/A N/A $625 - $775
123 $514 $479 - $549 N/A N/A N/A N/A N/A N/A $399 - $549
122 $506 $375 - $525 36 $592 $550 - $595 N/A N/A N/A $375 - $595
126 N/A N/A N/A N/A N/A N/A N/A N/A $245 - $525
127 $664 $625 - $750 N/A N/A N/A N/A N/A N/A $410 - $750
134 $738 $725 - $775 N/A N/A N/A N/A N/A N/A $300 - $775
139 $832 $795 - $865 N/A N/A N/A N/A N/A N/A $595 - $865
140 $1,079 $751 - $1,500 N/A N/A N/A N/A N/A N/A $494 - $1,500
141 $953 $900 - $1,100 N/A N/A N/A N/A N/A N/A $900 - $1,100
146 $603 $600 - $610 N/A N/A N/A N/A N/A N/A $435 - $610
147 $583 $500 - $590 28 $636 $630 - $800 N/A N/A N/A $400 - $800
144 $486 $475 - $503 N/A N/A N/A N/A N/A N/A $415 - $503
</TABLE>
II-27
<PAGE> 148
<TABLE>
<CAPTION>
APPENDIX II
ADDITIONAL INFORMATION REGARDING THE MULTIFAMILY MORTGAGE LOANS
- -----------------------------------------------------------------------------------------------------------------------------------
Studios 1 Bedrooms
------- ----------
Loan Wtd. Avg. Wtd. Avg.
No. Property Name # Units Rent/Month Range # Units Rent/Month Range # Units
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
145 Palm Central South 9 $393 $390 - $395 45 $465 $445 - $478 50
155 Savannah Gardens Apartments N/A N/A N/A 48 $360 $345 - $375 72
154 Canal Park Apartments 24 $388 $385 - $435 44 $449 $435 - $475 4
159 Raintree Apartments N/A N/A N/A 80 $297 $275 - $300 64
160 Lindys Town Lake Apartments 29 $406 $385 - $435 17 $470 $450 - $495 48
164 Winchester House Apartments N/A N/A N/A 24 $495 $490 - $495 52
166 Normandie Apartments N/A N/A N/A 21 $467 $470 - $490 72
171 Casa Alegre Apartments 14 $447 $380 - $485 58 $555 $540 - $595 4
173 Casa Del Sol North 4 405 $400 - $410 34 558 $495 - $600 4
174 Casa Del Sol South 1 360 $360 - $360 42 525 $500 - $550 6
179 Hidden Village Apartments N/A N/A N/A 32 $417 $360 - $425 97
187 The Hampton Apartments 3 $433 $399 - $450 27 $560 $320- $678 12
193 Dorchester Gardens Apartments N/A N/A N/A 48 $358 $340 - $375 54
197 Oakhurst Drive Apartments N/A N/A N/A 4 $1,306 $1,275 - $1,350 8
206 Daisy I Apartments N/A N/A N/A 3 $638 $608 - $675 22
205 Sunset East Apartments N/A N/A N/A N/A N/A N/A 40
207 Overlook Terrace Apts. N/A N/A N/A 24 $439 $400 - $475 24
210 354 S. La Fayette Park Place N/A N/A N/A 35 $536 $500 - $600 6
214 1841 Fuller Apartments N/A N/A N/A 12 $783 $475 - $875 15
217 Ballinger Trace Apts. N/A N/A N/A N/A N/A N/A 26
219 Villa Monaco N/A N/A N/A 15 $569 $550 - $580 25
221 Sunset Hill Apartments N/A N/A N/A 22 $348 $300 - $360 35
222 Le Med Apartments N/A N/A N/A 68 $475 $475 - $475 20
224 Bachman Glen Apartments N/A N/A N/A 28 $419 $375 - $470 48
226 Fairmont Apartments N/A N/A N/A 39 $541 $515 - $600 3
228 St. Andrews Apartments N/A N/A N/A N/A N/A N/A 36
231 Woodfront Condominiums 2 $355 $355 - $355 37 $461 $455 - $475 10
234 Emerald Court Apartments N/A N/A N/A 4 $595 $590 - $600 24
239 San Carlos Apartments 21 $476 $445 - $525 13 $628 $595 - $685 4
242 Daisy III Apartments N/A N/A N/A 1 $665 $665 20
240 Evergreen Garden Apts. N/A N/A N/A 52 $445 $445 16
247 Memorial Hills Townhomes N/A N/A N/A N/A N/A N/A 40
256 Daisy IV Apartments N/A N/A N/A 1 $650 $650 18
261 Glenbrook Place Apartments N/A N/A N/A 17 $418 $410 - $430 67
265 South Park Apartments N/A N/A N/A 6 $563 $550 - $575 15
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
2 Bedrooms 3 Bedrooms 4 Bedrooms Range
---------- ---------- ----------
Loan Wtd. Avg. Wtd. Avg. Wtd. Avg. for
No. Rent/Month Range # Units Rent/Month Range # Units Rent/Month Range Entire Property
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
145 $536 $478 - $545 10 $627 $598 - $645 N/A N/A N/A $390 - $645
155 $447 $430 - $460 N/A N/A N/A N/A N/A N/A $345 - $460
154 $505 $495 - $535 N/A N/A N/A N/A N/A N/A $385 - $535
159 $357 $300 - $365 N/A N/A N/A N/A N/A N/A $275 - $365
160 $571 $475 - $625 8 $758 $695 - $795 N/A N/A N/A $385 - $795
164 $585 $500 - $635 N/A N/A N/A N/A N/A N/A $490 - $635
166 $613 $610 - $650 16 $753 $675 - $790 N/A N/A N/A $470 - $790
171 $758 $750 - $765 N/A N/A N/A N/A N/A N/A $380 - $765
173 750 $750 - $750 N/A N/A N/A N/A N/A N/A $400 - $750
174 675 $625 - $725 N/A N/A N/A N/A N/A N/A $360 - $725
179 $520 $486 - $527 1 $709 $709 N/A N/A N/A $360 - $709
187 $780 $633 - $887 N/A N/A N/A N/A N/A N/A $399 - $887
193 $415 $400 - $435 12 $508 $495 - $525 N/A N/A N/A $340 - $525
197 $1,634 $1,500 - $1,750 N/A N/A N/A N/A N/A N/A $1,275 - $1,750
206 $794 $740 - $855 1 $935 $935 N/A N/A N/A $608 - $935
205 $658 $500 - $675 N/A N/A N/A N/A N/A N/A $500 - $675
207 $550 $525 - $575 N/A N/A N/A N/A N/A N/A $400 - $575
210 $655 $400 - $750 N/A N/A N/A N/A N/A N/A $500 - $750
214 $1,153 $970 - $1,400 N/A N/A N/A N/A N/A N/A $475 - $1,400
217 $873 $795 - $1,010 1 $1,060 $1,060 N/A N/A N/A $795 - $1,060
219 $666 $655 - $675 N/A N/A N/A N/A N/A N/A $550 - $675
221 $413 $390 - $420 N/A N/A N/A N/A N/A N/A $300 - $420
222 $660 $660 - $660 N/A N/A N/A N/A N/A N/A $475 - $660
224 $531 $440 - $676 N/A N/A N/A N/A N/A N/A $375 - $676
226 $838 $690 - $985 N/A N/A N/A N/A N/A N/A $515 - $985
228 $620 $504 - $640 N/A N/A N/A N/A N/A N/A $504 - $640
231 $575 $575 - $575 N/A N/A N/A N/A N/A N/A $355 - $575
234 $650 $650 - $650 N/A N/A N/A N/A N/A N/A $590 - $650
239 $858 $830 - $895 N/A N/A N/A N/A N/A N/A $445 - $895
242 $786 $730 - $840 1 $875 $875 N/A N/A N/A $665 - $875
240 $550 $550 N/A N/A N/A N/A N/A N/A $445 - $550
247 $581 $525 - $615 N/A N/A N/A N/A N/A N/A $525 - $615
256 $744 $725 - $780 1 $870 $870 N/A N/A N/A $650 - $870
261 $527 $500 - $550 4 $665 $655 - $675 N/A N/A N/A $410 - $675
265 $689 $675 - $695 N/A N/A N/A N/A N/A N/A $550 - $695
</TABLE>
II-28
<PAGE> 149
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.
Loan No. 3, The Mission Valley Hilton, serves as additional collateral for
Loan No. 4, the Hanalei Hotel. The Hanalei Hotel does not serve as
additional collateral for the Mission Valley Hilton. This additional
collateral feature of the Hanalei Hotel Loan may be released when the
Hanalei Hotel Property achieves a certain minimum DSCR on a stand-alone
basis. The Mission Valley Hilton borrower has requested release of the
additional collateral provision based on the recent financial performance
of the Hanalei Hotel Property.
Loan Nos. 10-14, the "Ward Portfolio", contain provisions that permit the
borrower to obtain release of portfolio properties from the mortgage lien
after the applicable Lock-out period, provided 125% of the property
allocated balance is defeased or prepaid (with any applicable yield
maintenance premium), and the underwritten NOI of the remaining properties
subject to the mortgage lien at the time of the release is greater than or
equal to the underwritten 1997 NOI.
3 The Cut-Off Date Balance reported for Loan No. 17, North Los Altos
Shopping Center, represents the total balance of two promissory notes
secured by mortgages on a shopping center and a related "pad" building.
Loan No. 21, 1 Lombard Street & 150 Greenwich St., permits the borrower to
incur additional, subordinate property-secured financing from a
third-party lender, provided a combined maximum 65% LTV ratio and a
minimum combined 1.55x DSCR, are maintained.
Loan Nos. 125, 127, and 187, Americana Palos Verdes Apartments, Brooktree
Estates Apartments, and The Hampton Apartments, permit the related
borrowers to incure additional, subordinate property-secured financing
from a third-party lender, provided combined maximum 70% LTV ratios and
minimum combined 1.30x DSCRs are maintained.
4 Certain ratios including Cut-Off Date Balance / 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 Underwritable
Cash Flow. For purposes of information contained within the Prospectus
Supplement, Balloon Loans are defined as having a balance at maturity
totaling 10% or more of the related Mortgage Loans's original principal
balance.
5 "ARD" indicates the Anticipated Repayment Date for hyper-amortizing
Mortgage Loans. Loan No. 1, Golf Mill Shopping Center, and Loan No. 5,
Galleria Palms Apartments, are the only hyper-amortizing Mortgage Loans in
the Mortgage Pool.
II-29
<PAGE> 150
Footnotes to Appendix II
6 The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related note. Due to
the actual/360 interest calculation methodology applied to most Mortgage
Loans, the actual amortization to a zero balance will be longer.
7 The year indicated is the later of the property's construction date or
date of renovation.
8 Loan No. 6, 55 Hawthorne & 631 Howard, requires monthly payments of
interest only until its maturity on August 1,2003. In addition, the lender
maintains a $2,500,000 holdback, a portion of which may be applied to the
outstanding principal balance on June 1, 1999, should the borrower fail to
meet certain leasing thresholds. Any related principal reduction is
subject to a yield maintenance premium charge, and will trigger
re-amortization for the remaining loan term. Please see Appendix III, the
"Significant Loan Summaries" for further information.
9 In general for each property, "Percent Leased" was determined based on a
rent roll provided by the borrower. In certain cases, "Percent Leased" was
determined based on an appraisal, executed lease, operating statement or
occupancy report. "Percent Leased as of Date" indicates the date as of
which "Percent Leased" was determined based on such information. For
hospitality properties, the data shown is the average daily occupancy
rate, generally for the immediately preceding twelve month period.
10 "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
11 The replacement reserves indicated by a "yes" may be one-time collections,
or on-going. In certain instances, the replacement reserves may be capped
at certain amounts, collected only for certain periods of the Mortgage
Loan terms, or may not be replenished after a release of funds.
12 "Seasoning" represents the approximate number of months elapsed from the
date of the first regularly scheduled payment or due date to the Cut-Off
Date.
13 Indicates prepayment provisions from the first Due Date as stated in the
Mortgage Loan. "YM" represents yield maintenance and ("YM1")represents the
greater of yield maintenance or one 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. DEF/YM is an option for the
borrower to choose defeasance or yield maintenance. 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. Loan No. 112, Rimrock Plaza
Shopping Center, permits prepayment of up to 10% of the original loan
balance in any loan year without a Prepayment Premium.
14 The "Administrative Cost Rate" indicated for each Mortgage Loan will be
calculated based on the same interest calculation methodology (i.e.,
actual/360) applicable to each Mortgage Loan.
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<PAGE> 151
APPENDIX III
SIGNIFICANT LOAN SUMMARIES
Loan No. 1 - Golf Mill Shopping Center Loan and Property
<TABLE>
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $41,232,654 Balance at ARD: $34,588,117
Loan Type: Principal Interest; Property Type: Retail
Hyper-amortizing Location: Niles, IL
Balloon Year Built/Renovated: 1958/1998
Origination Date: 6/23/1998 Square Feet: 750,682
Anticipated Repayment Date Cut-Off Date Balance/SF: $55
("ARD"): 7/1/2008
Maturity Date: 7/1/2025 Appraised Value: $56,000,000
Mortgage Rate: 7.010% Cut-Off Date LTV: 73.6%
Annual Debt Service: $3,428,565 Balloon LTV: 61.8%
DSCR: 1.43x Percent Leased: 86.9%
Underwritten Cash Flow: $4,886,425 Percent Leased as of Date: 2/1/1999
- -------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Golf Mill Shopping Center Loan (the "Golf Mill Loan") is secured by a
first mortgage on 750,682 square feet (including ground lease anchor stores,
which are owned by their respective tenants, but are constructed on land owned
by the borrower) of a 963,724 square foot enclosed regional mall located in
Niles, Illinois (the "Golf Mill Property"). The Golf Mill Loan was originated by
MSMC on June 23, 1998.
The Borrower. The borrower is Milwaukee Golf Development Company, LLC, an
Illinois limited liability company (the "Golf Mill Borrower"). The Golf Mill
Borrower is a special purpose entity.
Security. The Golf Mill Loan is secured by a Mortgage, Assignment of Rents
and Leases, UCC Financing Statements and certain additional security documents
(the "Golf Mill Financing Documents"). The mortgage is a first lien on the Golf
Mill Borrower's fee interest in the Golf Mill Property. In the event that
underwritable cash flow (as defined in the Golf Mill Financing Documents) at the
Golf Mill Property equals or exceeds $5,200,000 for any six-month period, the
Golf Mill Borrower is entitled to require the lender to release the lien of the
mortgage on the Circuit City store (approximately 32,279 square feet). The Golf
Mill Loan is non-recourse to the Golf Mill Borrower, subject to certain limited
exceptions.
Anchors. The anchor stores at the Golf Mill Property are JCPenney, Target
and Kohl's. Certain easement agreements established the rights and obligations
of the anchor stores and the Golf Mill Borrower. A 213,042 square foot Sears
store also anchors the shopping mall, but is not part of the collateral for the
loan.
Payment Terms. The Mortgage Rate is fixed at 7.010% per annum until the
anticipated repayment date of July 1, 2008 (the "Anticipated Repayment Date").
The Golf Mill Loan requires monthly payments of principal and interest of
$285,713.79 until the Anticipated Repayment Date, following which, unless the
Golf Mill Loan is paid off in full, the Mortgage Rate will increase to the
greater of (i) the initial interest rate plus five percentage points (5.00%), or
(ii) the applicable Treasury Rate plus five percentage points (5.00%). Upon the
Anticipated Repayment Date, Excess Cash Flow (as defined in the Golf Mill
Financing Documents and which is generally cash flow from the operations of the
Golf Mill Property in excess of principal, interest, operating expenses, escrows
and reserves) will be applied to the outstanding principal balance. There is a
lockbox in place. The Golf Mill Loan accrues interest computed on the basis of
the actual number of days elapsed each month in a 360-day year.
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<PAGE> 152
Prepayment/Defeasance. Voluntary prepayment is prohibited until ninety
(90) days prior to the Anticipated Repayment Date. However, the Golf Mill
Borrower may defease the Golf Mill Loan with United States Treasury securities,
in whole, but not in part, at any time after two (2) years following issuance of
the Certificates. Defeasance is permitted only upon the satisfaction of certain
conditions specified in the Golf Mill Financing Documents, including
confirmation from each Rating Agency that defeasance would not result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
any Class of Certificates.
Late Fees and Default Interest. There is a 5% late fee on overdue
installments, and the Golf Mill Loan accrues interest at the mortgage rate plus
5% per annum while the Golf Mill Loan is in default.
Transfer of Property or Interest in Borrower. The Golf Mill Loan provides
that it will become immediately due and payable upon the transfer of the Golf
Mill Property or any ownership interest in the Golf Mill Borrower, except in
connection with any of the following permitted transfers.
Upon the payment of an assumption fee in an amount equal to 0.15% of the
original principal amount of the Golf Mill Loan, the Golf Mill Financing
Documents permit the Golf Mill Borrower to transfer the Golf Mill Property,
subject to the Golf Mill Financing Documents (with a full release of the
obligations of the transferor under the Golf Mill Loan). Such transfers are
permitted only upon the satisfaction of certain conditions specified in the Golf
Mill Financing Documents, including confirmation from each Rating Agency that
the transfer would not result in a downgrade, qualification or withdrawal of the
then current ratings assigned to any Class of Certificates. In addition, the
proposed transferee must reasonably satisfy the lender's underwriting standards
with respect to organization structure, and the lender may require a
non-consolidation opinion with respect to the proposed transferee.
The Golf Mill Financing Documents permit transfer of ownership interests
in the Golf Mill Borrower with the consent of the lender, provided certain
conditions specified in the Golf Mill Financing Documents are satisfied,
including confirmation from each Rating Agency that the transfer would not
result in a downgrade, qualification or withdrawal of the then current ratings
assigned to any Class of Certificates. In addition, the lender may require the
proposed transferee to provide a non-consolidation opinion, and all such
transfers must not result in a transfer of 49% or more of the ownership
interests in the Golf Mill Borrower.
Escrow/Reserves. The Golf Mill Financing Documents require monthly escrow
deposits in amounts sufficient to pay taxes and insurance premiums when due. The
Golf Mill Financing Documents also require the Golf Mill Borrower to fund an
escrow for capital expenditures monthly in the amount of $16,771. In addition,
there is a $5,000,000 letter of credit in favor of the lender and a cash
interest reserve account, with an initial balance of $1,000,000, that may be
applied to payment of monthly debt service as provided in the Golf Mill
Financing Documents. If underwritable cash flow (as defined in the Golf Mill
Financing Documents) exceeds $4,990,375 for any six consecutive months prior to
May 31, 2001, then the letter of credit and any balance in the interest reserve
account must be released to the Golf Mill Borrower. If underwritable cash flow
does not exceed $4,990,375 for six consecutive months by May 31, 2001, then the
Golf Mill Borrower must deposit the amount calculated according to the Golf Mill
Financing Documents into a rollover expenditure reserve account that may be used
for capital expenditures or leasing costs. Upon funding of this account, the
letter of credit and any balance in the interest reserve account must be
released to the Golf Mill Borrower.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited by the Golf Mill Financing Documents.
The Property
The Golf Mill Property consists of 750,682 square feet of a 963,724 square
foot enclosed regional mall located in Niles, Illinois. As of February 1, 1999,
the Golf Mill Property was 86.9% leased to 100 tenants. The Golf Mill Property
is situated along a commercial section of Niles, approximately 15 miles
northwest of the Chicago central business district.
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<PAGE> 153
As of February 1, 1999, approximately 57% of the space was rented by the
following national or regional tenants: JCPenney (24.6%), Target (13.7%), Kohl's
(10.1%), Butera's (4.6%) and Circuit City (4.3%). Contractual lease expirations
during the loan term for all tenants are as follows: 17,468 square feet (2.3%)
in 1999 or earlier, 67,356 square feet (9%) in 2000, 189,040 square feet (27%)
in 2001, 13,957 square feet (2%) in 2002, 15,886 square feet (2%) in 2003, 6,081
square feet (1%) in 2004, 44,006 square feet (6%) in 2005, 24,974 square feet
(4%) in 2006, 22,031 square feet (3%) in 2007, and 234,823 square feet (33%) in
or after 2008. As of August 12, 1998, the average in-line base rental for the
Golf Mill Property was $21.86 per square foot.
Management
General Growth Management, Inc., a subsidiary of General Growth Properties
("GGP"), is the manager of the Golf Mill Property. As of December 31, 1997, GGP,
whose shares are traded on the New York Stock Exchange, reportedly had ownership
interests in, or management responsibility for, 119 regional shopping centers
totaling more than 93,000,000 square feet of retail space in 38 states.
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Loan No. 2 - Silvertree Hotel and Wildwood Lodge Loan and Property
<TABLE>
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $34,704,501 Property Type: Hospitality
Loan Type: Principal and Location: Snowmass
Interest; Balloon Village, CO
Origination Date: 5/12/1998 Year Built/Renovated: 1968/1992
Rooms: 410
Maturity Date: 6/1/2008 Cut-Off Date Balance/Rm.: $84,645
Mortgage Rate: 7.390% Appraised Value: $54,200,000
Annual Debt Service: $3,073,774 Cut-Off Date LTV: 64.0%
DSCR: 1.59x Balloon LTV: 52.3%
Underwritten Cash Flow: $4,886,890 Average Occupancy: 57.8%
Balance at Maturity: $28,340,948 Occupancy for 12 months
ending: 3/31/1998
- -------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Silvertree Hotel and Wildwood Lodge Loan (the "Silvertree and Wildwood
Loan") is secured by a first mortgage on two resort hotels in Snowmass, Colorado
that are jointly operated and managed as a single entity (the "Silvertree and
Wildwood Property"). The Silvertree and Wildwood Loan was originated by MSMC on
May 12, 1998.
The Borrower. The borrower is Silvertree Hotel of Snowmass L.P., a
Minnesota limited partnership (the "Silvertree and Wildwood Borrower"). The
general partner of the Silvertree and Wildwood Borrower is Silvertree Hotel,
Inc., a Minnesota corporation. Rodney P. Burwell is Chairman and Chief Executive
Officer of Silvertree Hotel, Inc. The Silvertree and Wildwood Borrower is a
special purpose entity.
Security. The Silvertree and Wildwood Loan is secured by a Deed of Trust,
Assignment of Rents and Leases, UCC Financing Statements and certain additional
security documents (the "Silvertree and Wildwood Financing Documents"). The
mortgage is a first lien on the Silvertree and Wildwood Borrower's fee interest
in the Silvertree and Wildwood Property. The Silvertree and Wildwood Loan is
non-recourse to the Silvertree and Wildwood Borrower, subject to certain limited
exceptions.
Payment Terms. The Mortgage Rate is fixed at 7.390% per annum. The
Silvertree and Wildwood Loan requires monthly payments of principal and interest
of $256,147.85 until its maturity on June 1, 2008, at which time all unpaid
principal and accrued but unpaid interest is due, except that each payment that
is due in February of each Loan Year (as defined in the Silvertree and Wildwood
Financing Documents) must be accompanied by an early payment of the required
principal and interest payments for the immediately following March and April.
The loan servicer will retain such prepaid monthly payments until the
appropriate month for their distribution. The Silvertree and Wildwood Loan
accrues interest computed on the basis of the actual number of days elapsed each
month in a 360-day year.
Prepayment/Defeasance. Voluntary prepayment is prohibited until ninety
(90) days prior to the Maturity Date. However, the Silvertree and Wildwood
Borrower may defease the Silvertree and Wildwood Loan with United States
Treasury securities, in whole, but not in part, at any time after three (3)
years following the issuance of the Certificates. Defeasance is permitted only
upon the satisfaction of certain conditions specified in the Silvertree and
Wildwood Financing Documents, including confirmation from each Rating Agency
that defeasance would not result in a downgrade, qualification or withdrawal of
the then current ratings assigned to any Class of Certificates.
Late Fees and Default Interest. There is a 5% late fee on overdue
installments, and the Silvertree and Wildwood Loan accrues interest at the
mortgage rate plus 5% per annum while the Silvertree and Wildwood Loan is in
default.
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<PAGE> 155
Transfer of Property or Interest in Borrower. The Silvertree and Wildwood
Loan provides that it will become immediately due and payable upon the transfer
of the Silvertree and Wildwood Property or any ownership interest in the
Silvertree and Wildwood Borrower, except in connection with any of the following
permitted transfers.
Upon the payment of an assumption fee in an amount equal to 0.5% of the
then current principal balance of the Silvertree and Wildwood Loan, the
Silvertree and Wildwood Financing Documents permit a one-time transfer of the
Silvertree and Wildwood Property, subject to the Silvertree and Wildwood
Financing Documents with such modifications as the lender may require (with a
full release of the obligations of the transferor under the Silvertree and
Wildwood Loan). Such transfers are permitted only upon the satisfaction of
certain conditions specified in the Silvertree and Wildwood Financing Documents,
including confirmation from each Rating Agency that the transfer would not
result in a downgrade, qualification or withdrawal of the then current ratings
assigned to any Class of Certificates. In addition, the proposed transferee must
reasonably satisfy the lender's underwriting standards with respect to
organization structure, and the lender may require a non-consolidation opinion
with respect to the proposed transferee.
The Silvertree and Wildwood Financing Documents permit Rodney P. Burwell
to transfer ownership interests in the Silvertree and Wildwood Borrower to
members of his family or to trusts primarily for their benefit, provided that he
retains at least a fifty-one percent (51%) ownership interest in the Silvertree
and Wildwood Borrower during his lifetime.
Escrow/Reserves. The Silvertree and Wildwood Financing Documents require
monthly escrow deposits in amounts sufficient to pay taxes and insurance
premiums when due. The Silvertree and Wildwood Financing Documents also require
the Silvertree and Wildwood Borrower to fund an escrow for capital expenditures
monthly in the amount of $53,846. Such monthly contribution to the capital
expenditure reserve account may be adjusted at the lender's discretion to
address the capital needs of the Silvertree and Wildwood Property. In addition,
there is a $750,000 irrevocable letter of credit in favor of the lender that may
be applied to the payment of monthly debt service as provided in the Silvertree
and Wildwood Financing Documents.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited by the Silvertree and Wildwood Financing Documents.
The Property
The Silvertree and Wildwood Property consists primarily of two resort
hotels, the Silvertree Hotel and the Wildwood Lodge, which are adjacent to the
Snowmass Conference Center, in Snowmass Village, Colorado, approximately ten
miles from Aspen.
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<PAGE> 156
The two hotels have a combined total of 410 rooms, and are jointly
operated and managed as a single property. The hotels are not affiliated with
any national hotel or lodging chain. The Silvertree and Wildwood Property also
includes 17,484 square feet of retail space and a 4,200 square foot residential
unit located on the top floor of the Silvertree Hotel that is separately valued
at $2,350,000, including furnishings, but not included in Appraised Value,
Cut-Off Date LTV or Balloon LTV. The Silvertree and Wildwood Property does not
include any guest parking, though parking permits from the town of Snowmass
Village for nearby spaces are available for sale to guests. As of March 31,
1998, the Silvertree and Wildwood Property achieved an estimated occupancy rate
of approximately 57.8% and had an estimated average daily room rate of $142.91.
The 260-room Silvertree Hotel was built in the late 1960's and underwent
extensive renovations from 1985 to 1989. The hotel provides ski-in/ski-out
accessibility, and includes two slope-side restaurants, 9,554 square feet of
meeting and banquet space, two outdoor heated swimming pools and whirlpools, a
health and fitness center and a business center.
The 150-room Wildwood Lodge was built from 1967 to 1969, and underwent
extensive renovations in 1992. The hotel includes a restaurant, 3,218 square
feet of meeting and banquet space and an outdoor heated swimming pool and
whirlpool.
Management
The Silvertree and Wildwood Borrower is the property manager. An affiliate
of the Silvertree and Wildwood Borrower owns and manages the Concourse Hotel in
Madison, Wisconsin.
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<PAGE> 157
Loan No. 3 -Mission Valley Hilton Hotel Loan and Property(1)
<TABLE>
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $19,531,446 Property Type: Hospitality
Loan Type: Principal and Location: San Diego, CA
Interest; Balloon Year Built: 1988
Origination Date: 3/20/1998 Rooms: 350
Maturity Date: 4/1/2008 Cut-Off Date Balance/Rm.: $43,576
Mortgage Rate: 7.200% Appraised Value: $28,500,000
Annual Debt Service: $1,705,425 Cut-Off Date LTV: 65.4%
DSCR: 1.75x Balloon LTV: 53.3%
Underwritten Cash Flow: $3,149,408 Average Occupancy: 79.0%
Balance at Maturity: $15,900,544 Occupancy for 12 months ending: 12/31/1998
- -------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Mission Valley Hilton Hotel Loan (the "Mission Valley Loan") is
secured by a first mortgage on a 350-room, 13-story, full-service hotel situated
on 4.1 acres of land located in the Mission Valley section of San Diego,
California (the "Mission Valley Property"). The Mission Valley Loan was
originated by MSMC on March 20, 1998. As further described below under
"Security," the Mission Valley Property is additional collateral for the Hanalei
Loan until the Hanalei Property (see Loan No. 4 below) achieves a certain
minimum debt service coverage ratio.
The Borrower. The borrower is M.V. Partners, a California limited
partnership (the "Mission Valley Borrower"). The Mission Valley Borrower
partners are Daniel S. Weber, the general partner, L. Robert Payne and Mission
Valley Associates, LLC. Ownership interests are divided equally among the three
partners.
Security. The Mission Valley Loan is secured by a Deed of Trust,
Assignment of Rents and Leases, UCC Financing Statements and certain additional
security documents (the "Mission Valley Financing Documents"). The mortgage is a
first lien on the Mission Valley Borrower's fee interest in the Mission Valley
Property. The Mission Valley Loan is non-recourse to the Mission Valley
Borrower, subject to certain limited exceptions.
The Mission Valley Property is additional collateral for the Hanalei Loan
until the Hanalei Property performs at a stand alone debt service coverage ratio
of 1.50x, based on underwritable cash flow (as defined in the Hanalei Financing
Documents), for any twelve month period. The Mission Valley Borrower has
requested release of the additional collateral provision based on the Hanalei
Property's recently reported financial performance.
Payment Terms. The Mortgage Rate is fixed at 7.200% per annum. The Mission
Valley Loan requires monthly payments of principal and interest of $142,118.77
until its maturity on April 1, 2008, at which time all unpaid principal and
accrued but unpaid interest is due. The Mission Valley Loan accrues interest
computed on the basis of the actual number of days elapsed each month in a
360-day year.
Prepayment/Defeasance. The Mission Valley Loan may be prepaid in whole,
but not in part, at any time on or after March 1, 2003 upon payment of the
greater of a Yield Maintenance Premium calculated by reference to U.S. Treasury
obligations and 1% of the amount prepaid. No prepayment premium is due if the
Mission Valley Loan is prepaid within sixty (60) days prior to maturity.
Late Fees and Default Interest. There is a 3% late fee on overdue
installments, and the Mission Valley Loan accrues interest at the mortgage rate
plus 3% per annum while the Mission Valley Loan is in default.
- --------
(1) DSCR, Cut-Off Date Balance/Rm, Cut-Off Date LTV and Balance at Maturity LTV
were calculated on a combined basis with the Hanalei Loan (See Loan No. 4
below).
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<PAGE> 158
Transfer of Property or Interest in Borrower. The Mission Valley Loan
provides that it will become immediately due and payable upon the transfer of
the Mission Valley Property or any ownership interest in the Mission Valley
Borrower, except in connection with any of the following permitted transfers.
Upon the payment of a transfer fee in an amount not to exceed 1.0% of the
then current principal balance of the Mission Valley Loan, the Mission Valley
Financing Documents permit a single transfer of the Mission Valley Property
(with a full release of the obligations of the transferor under the Mission
Valley Loan). Such transfers are permitted only upon the satisfaction of certain
conditions specified in the Mission Valley Financing Documents, including the
requirement that the proposed transferee reasonably satisfy the lender's
underwriting standards with respect to organization structure and
creditworthiness.
Escrow/Reserves. The Mission Valley Financing Documents require monthly
escrow deposits in amounts sufficient to pay taxes and insurance premiums when
due. The Mission Valley Financing Documents also require the Mission Valley
Borrower to fund an escrow for capital expenditures monthly in the amount of
$19,462.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited by the Mission Valley Financing Documents.
The Property
The Mission Valley Property is a 13-story, 350-room, full-service hotel
located in the Mission Valley section of San Diego, California, approximately
three miles northeast of San Diego International Airport. The Mission Valley
Property was built in 1988, and includes two levels of subterranean parking with
space for 248 cars plus an additional 195 surface parking spaces.
Amenities include a concierge level, restaurant and lounge, meeting rooms,
ballroom, outdoor swimming pool and fitness room with sauna. The Mission Valley
Property also includes a three-story building in the rear portion of the
property that provides additional conference room space. As of December 31,
1998, the Mission Valley Property achieved an estimated average occupancy rate
for the prior twelve months of approximately 79.0% and had an estimated average
daily room rate of approximately $91.38.
Management
The Mission Valley Borrower is the property manager.
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Loan No. 4 -Hanalei Hotel Loan and Property(2)
<TABLE>
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $13,847,977 Property Type: Hospitality
Loan Type: Principal and Location: San Diego, CA
Interest; Balloon Year Built/Renovated: 1956/1997
Origination Date: 3/20/1998 Rooms: 416
Maturity Date: 4/1/2008 Cut-Off Date Balance/Rm.: $43,576
Mortgage Rate: 7.300% Appraised Value: $22,500,000
Annual Debt Service: $1,219,733 Cut-Off Date LTV: 65.4%
DSCR: 1.75x Balloon LTV: 53.3%
Underwritten Cash Flow: $1,961,436 Average Occupancy: 71.8%
Balance at Maturity: $11,305,833 Occupancy for 12 months
ending: 12/31/1998
- ---------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Hanalei Hotel Loan (the "Hanalei Loan") is secured by a first mortgage
on a 416-room, eight-story, full-service hotel situated on 9.9 acres of land
located in the Mission Valley section of San Diego, California (the "Hanalei
Property"). The Hanalei Loan was originated by MSMC on March 20, 1998. As
further described below under "Security," the Hanalei Loan is also
collateralized by the Mission Valley Property (see Loan No. 3 above) until the
Hanalei Property achieves a certain minimum debt service coverage ratio.
The Borrower. The borrower is Hanalei Associates, LLC, a California
limited liability corporation (the "Hanalei Borrower"). The Hanalei Borrower is
90% owned by the Payne Family Trust and MAJR L.P., with each party owning 45%.
Security. The Hanalei Loan is secured by a Deed of Trust, Assignment of
Rents and Leases, UCC Financing Statements and certain additional security
documents (the "Hanalei Financing Documents"). The mortgage is a first lien on
the Hanalei Borrower's fee interest in the Hanalei Property. The Hanalei Loan is
non-recourse to the Hanalei Borrower, subject to certain limited exceptions.
The Hanalei Loan is also collateralized by the Mission Valley Property
until the Hanalei Property performs at a stand alone debt service coverage ratio
of 1.50x, based on underwritable cash flow (as defined in the Hanalei Financing
Documents), for any twelve month period. The Mission Valley Borrower has
requested release of the additional collateral provision based on the Hanalei
Property's recently reported financial performance.
Payment Terms. The Mortgage Rate is fixed at 7.300% per annum. The Hanalei
Loan requires monthly payments of principal and interest of $101,644.38 until
its maturity on April 1, 2008, at which time all unpaid principal and accrued
but unpaid interest is due. The Hanalei Loan accrues interest computed on the
basis of the actual number of days elapsed each month in a 360-day year.
Prepayment/Defeasance. The Hanalei Loan may be prepaid in whole, but not
in part, at any time on or after March 1, 2003 upon payment of the greater of a
Yield Maintenance Premium calculated by reference to U.S. Treasury obligations
and 1% of the amount prepaid. No prepayment premium is due if the Hanalei Loan
is prepaid within sixty (60) days prior to maturity.
Late Fees and Default Interest. There is a 3% late fee on overdue
installments, and the Hanalei Loan accrues interest at the mortgage rate plus 3%
per annum while the Hanalei is in default.
- ----------
(2) DSCR, Cut-Off Date Balance/Rm, Cut-Off Date LTV and Balance at Maturity LTV
were calculated on a combined basis with the Mission Valley Loan (See Loan No. 3
above).
III-9
<PAGE> 160
Transfer of Property or Interest in Borrower. The Hanalei Loan provides
that it will become immediately due and payable upon the transfer of the Hanalei
Property or any ownership interest in the Hanalei Borrower, except in connection
with any of the following permitted transfers.
Upon the payment of a transfer fee in an amount equal to 1.0% of the then
current principal balance of the Hanalei Loan, the Hanalei Financing Documents
permit a single transfer of the Hanalei Property (with a full release of the
obligations of the transferor under the Hanalei Loan). Such transfers are
permitted only upon the satisfaction of certain conditions specified in the
Hanalei Financing Documents, including the requirement that the proposed
transferee reasonably satisfy the lender's underwriting standards with respect
to organization structure and creditworthiness.
Escrow/Reserves. The Hanalei Financing Documents require monthly escrow
deposits in amounts sufficient to pay taxes and insurance premiums when due. The
Hanalei Financing Documents also require the Hanalei Borrower to fund an escrow
for capital expenditures monthly in the amount of $13,042.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited by the Hanalei Financing Documents.
The Property
The Hanalei Property is an eight-story, 416-room, full-service hotel with
538 parking spaces situated on 9.9 acres of land located in the Mission Valley
section of San Diego, California. The Hanalei Property is a member of the
Lexington Services reservation system. The Hanalei Property consists of two
eight-story towers and six one- to three-story buildings that are connected by
covered and open corridors decorated with a variety of waterscapes. Buildings
are of wood construction with stucco finish. Amenities include three conference
suites, an outdoor swimming pool, tennis courts, and a restaurant and cocktail
lounge.
The Hanalei Property was originally built in 1956, was expanded to add
additional capacity from 1956 to 1981, and underwent an approximately $6,000,000
renovation in 1997. As of December 31, 1998, the Hanalei Property achieved an
estimated average occupancy rate for the prior twelve months of approximately
71.8% and had an estimated average daily room rate of approximately $73.93.
Management
Multi-Ventures, Inc. is the property manager. L. Robert Payne, the Chief
Executive Officer of Multi-Ventures, controls the Hanalei Borrower by virtue of
his control of the Payne Family Trust and of MAJR L.P. Mr. Payne also has a
one-third ownership interest in the Mission Valley Borrower (see Loan No. 3
above).
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Loan No. 5 - Galleria Palms Apartments Loan and Property
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $28,874,586 Balance at ARD: $25,134,074
Loan Type: Principal and
Interest; Property Type: Multifamily
Hyper-amortizing Location: Tempe, AZ
Balloon Year Built: 1997
Origination Date: 7/30/1998 No. of Units: 568
Anticipated Repayment Cut-Off Date Balance/Unit: $50,836
Date ("ARD"): 10/1/2008
Maturity Date: 8/1/2028 Appraised Value: $38,800,000
Mortgage Rate: 6.890% Cut-Off Date LTV: 74.4%
Annual Debt Service: $2,289,601 Balloon LTV: 64.8%
DSCR: 1.39x Percent Leased: 98.4%
Underwritten Cash Flow: $3,180,389 Percent Leased as of Date: 9/25/1998
- --------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Galleria Palms Apartments Loan (the "Galleria Palms Loan") is secured
by a first mortgage on a 568-unit multifamily housing facility located in Tempe,
Arizona (the "Galleria Palms Property"). The Galleria Palms Loan was originated
by MSMC on July 30, 1998.
The Borrower. The borrower is Magellan Galleria Palms Property, L.P., an
Arizona limited partnership (the "Galleria Palms Borrower"). The general partner
of the Galleria Palms Borrower is Magellan Galleria Palms Property I, LLC, and
the limited partner is Magellan Galleria Palms Apartments Limited Partnership.
The Galleria Palms Borrower is a special purpose entity.
Security. The Galleria Palms Loan is secured by a Mortgage, Assignment of
Rents and Leases, UCC Financing Statements and certain additional security
documents (the "Galleria Palms Financing Documents"). The mortgage is a first
lien on the Galleria Palms Borrower's fee interest in the Galleria Palms
Property. The Galleria Palms Loan is non-recourse to the Galleria Palms
Borrower, subject to certain limited exceptions.
Payment Terms. The Mortgage Rate is fixed at 6.890% per annum until the
anticipated repayment date of October 1, 2008 (the "Anticipated Repayment
Date"). The Galleria Palms Loan requires monthly payments of principal and
interest of $190,800.11 until the Anticipated Repayment Date, following which,
unless the Galleria Palms Loan is paid off in full, the Mortgage Rate will
increase to the greater of (i) the initial interest rate plus two percentage
points (2.00%), or (ii) the applicable Treasury Rate plus two percentage points
(2.00%). There is a lockbox in place. The Galleria Palms Loan accrues interest
computed on the basis of the actual number of days elapsed each month in a
360-day year.
Prepayment/Defeasance. Voluntary prepayment is prohibited until one
hundred-fifty (150) days prior to the Anticipated Repayment Date. However, the
Galleria Palms Borrower may defease the Galleria Palms Loan with United States
Treasury securities, in whole, but not in part, at any time after two (2) years
following the issuance of the Certificates. Defeasance is permitted only upon
the satisfaction of certain conditions specified in the Galleria Palms Financing
Documents, including confirmation from each Rating Agency that defeasance would
not result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any Class of Certificates.
Late Fees and Default Interest. There is a 5% late fee on overdue
installments, and the Galleria Palms Loan accrues interest at the mortgage rate
plus 5% per annum while the Galleria Palms Loan is in default.
III-11
<PAGE> 162
Transfer of Property or Interest in Borrower. The Galleria Palms Loan
provides that it will become immediately due and payable upon the transfer of
the Galleria Palms Property or any ownership interest in the Galleria Palms
Borrower, except in connection with any of the following permitted transfers.
Upon the payment of an assumption fee in an amount equal to 1.0% of the
then current principal balance of the Galleria Palms Loan, the Galleria Palms
Financing Documents permit up to two transfers of the Galleria Palms Property,
subject to the Galleria Palms Financing Documents (with a full release of the
obligations of the transferor under the Galleria Palms Loan). Such transfers are
permitted only upon the satisfaction of certain conditions specified in the
Galleria Palms Financing Documents, including confirmation from each Rating
Agency that the transfer would not result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any Class of Certificates. In
addition, the proposed transferee must reasonably satisfy the lender's
underwriting standards with respect to organization structure, and the lender
may require a non-consolidation opinion with respect to the proposed transferee.
The Galleria Palms Financing Documents permit transfers of ownership
interests in the Galleria Palms Borrower, provided that, in certain cases
specified in the Galleria Palms Financing Documents, the lender may require a
non-consolidation opinion with respect to the proposed transferee.
Escrow/Reserves. The Galleria Palms Financing Documents require monthly
escrow deposits in amounts sufficient to pay taxes and insurance premiums when
due. The Galleria Palms Financing Documents also require the Galleria Palms
Borrower to fund an escrow for capital expenditures monthly in the amount of
$10,650.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited by the Galleria Palms Financing Documents.
The Property
The Galleria Palms Property is a 568-unit garden apartment complex that
consists of 41 detached, two-story buildings with wood frame construction and a
stucco exterior located on a 33 acre site in Tempe, Arizona. As of September 25,
1998, the Galleria Palms Property was 98.4% leased.
The Galleria Palms Property was built from 1996 to 1998, with the first
units being occupied in 1997. The 568 units that constitute the Galleria Palms
Property average 857 square feet, and consist of the following unit mix: 224
one-bedroom units, 296 two-bedroom units and 48 three-bedroom units. All
apartments have a refrigerator, electric range, dishwasher, washer and dryer,
microwave, disposal, air conditioning, ceiling fans, carpets and window blinds.
Some apartments also have balconies, patios and storage areas. Parking is
provided for 1,226 cars. Facilities include a clubhouse building with a
mini-theater, gymnasium (including a basketball half-court), computer room,
fitness center, party room, on-site management office, three outdoor swimming
pools, two spas, tennis court, sand volleyball court, playground, storage areas,
and a jogging/walking trail.
Management
Magellan Corporation is the manager of the Galleria Palms Property.
Magellan Corporation reportedly owns and manages 6,045 multifamily units in 30
complexes and 181,324 square feet of commercial space in two buildings.
III-12
<PAGE> 163
Loan No. 6 - 55 Hawthorne & 631 Howard Loan and Property
<TABLE>
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $28,000,000 Property Type: Office
Loan Type: Interest only; Location: San Francisco, CA
Balloon Year Built/Renovated: 1929/1988
Origination Date: 7/8/98 Square Feet: 235,912
Maturity Date: 8/1/2003 Cut-Off Date Balance/SF: $119
Mortgage Rate: 6.525% Appraised Value: $48,000,000
Annual Debt Service: $1,852,375 Cut-Off Date LTV: 58.3%
DSCR: 1.67x Balloon LTV: 58.3%
Underwritten Cash Flow: $3,088,110 Percent Leased: 91.0%
Balance at Maturity: $28,000,000 Percent Leased as of Date: 6/10/1998
- -------------------------------------------------------------------------------------------------
</TABLE>
The Loan
The 55 Hawthorne & 631 Howard Loan (the "Hawthorne & Howard Loan") is
secured by a first mortgage on two office buildings located in the South of
Market area of the greater Financial District in San Francisco, California (the
"Hawthorne & Howard Property"). The Hawthorne & Howard Loan was originated by
Wells Fargo on July 8, 1998.
The Borrower. The borrower is G&I Howard, LLC, a Delaware limited
liability company (the "Hawthorne & Howard Borrower"). G&I Investment Howard LLC
("G&I Investment") is the managing member of the Hawthorne & Howard Borrower.
DRA Growth and Income Fund, LLC is the majority member of the Hawthorne & Howard
Borrower, and also is the sole shareholder of G&I Investment Howard Corp, the
managing member of G&I Investment. The Hawthorne & Howard Borrower is a special
purpose entity.
Security. The Hawthorne & Howard Loan is secured by a Deed of Trust,
Assignment of Rents and Leases, UCC Financing Statements and certain additional
security documents (the "Hawthorne & Howard Financing Documents"). The mortgage
is a first lien on the Hawthorne & Howard Borrower's fee interest in the
Hawthorne & Howard Property. The Hawthorne & Howard Loan is non-recourse to the
Hawthorne & Howard Borrower, subject to certain limited exceptions.
Major Tenants. The major tenants at the Hawthorne & Howard Property are
KFOG Radio, KNBR Radio and Miller Freeman, Inc. Certain easement agreements
established the rights and obligations of the tenants and the Hawthorne & Howard
Borrower.
Payment Terms. The Mortgage Rate is fixed at 6.525%. The Hawthorne &
Howard Loan requires monthly payments of interest only until its maturity on
August 1, 2003, at which time all unpaid principal and accrued but unpaid
interest is due. The Hawthorne & Howard Loan accrues interest computed on the
basis of the actual number of days elapsed each month in a 360-day year.
Prepayment/Defeasance. Voluntary prepayment is prohibited until
one-hundred eighty (180) days prior to the Maturity Date. However, the Hawthorne
& Howard Borrower may defease the Hawthorne & Howard Loan with United States
Treasury securities, in whole, but not in part, at any time after two (2) years
following issuance of the Certificates. Defeasance is permitted only upon the
satisfaction of certain conditions specified in the Hawthorne & Howard Financing
Documents, including confirmation from each Rating Agency that defeasance would
not result in a downgrade, qualification or withdrawal of the then current
ratings assigned to any Class of Certificates.
Late Fees and Default Interest. There is a 4% late fee on overdue
installments, and the Hawthorne & Howard Loan accrues interest at the mortgage
rate plus 5% per annum while the Hawthorne & Howard Loan is in default.
III-13
<PAGE> 164
Transfer of Property or Interest in Borrower. The Hawthorne & Howard Loan
provides that it will become immediately due and payable upon the transfer of
the Hawthorne & Howard Property or any ownership interest in the Hawthorne &
Howard Borrower, except in connection with any of the permitted transfers
described below.
Upon the payment of an assumption fee in an amount equal to 0.5% of the
then current principal balance of the Hawthorne & Howard Loan, the Hawthorne &
Howard Financing Documents permit up to two transfers of the Hawthorne & Howard
Property, subject to the Hawthorne & Howard Financing Documents (with a full
release of the obligations of the transferor under the Hawthorne & Howard Loan).
Such transfers are permitted only upon the satisfaction of certain conditions
specified in the Hawthorne & Howard Financing Documents, including confirmation
from each Rating Agency that the transfer would not result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class of
Certificates. In addition, the proposed transferee must reasonably satisfy the
lender's underwriting standards with respect to organization structure, and the
lender may require a non-consolidation opinion as to the proposed transferee.
The Hawthorne & Howard Financing Documents permit transfer of ownership
interests in the Hawthorne & Howard Borrower, provided that certain principals
of the Hawthorne & Howard Borrower maintain at least fifty percent (50%) of
their ownership interest in the Hawthorne & Howard Borrower. The Hawthorne &
Howard Financing Documents also permit the Hawthorne & Howard Borrower's
principals to transfer their ownership interests in the Hawthorne & Howard
Borrower to a revocable inter vivos trust, provided a principal of the Hawthorne
& Howard Borrower is the trustee of such trust.
Escrow/Reserves. The Hawthorne & Howard Financing Documents do not require
monthly escrow deposits to pay for taxes, insurance premiums or capital
expenditures. Because the Hawthorne & Howard Property was only 91% occupied on
the date the Hawthorne & Howard Loan was originated, the Hawthorne & Howard
Borrower was required to establish a $2,500,000 reserve to help mitigate the
risks associated with the vacancy of one full floor consisting of 16,631 square
feet of office space. The Hawthorne & Howard Financing Documents require the
reserve to be released to the Hawthorne & Howard Borrower if the vacancy rate is
reduced to 5.0% or less by March 1, 1999. However, if the rental rate of the new
leases is less than $38 per square foot per year, the Hawthorne & Howard
Borrower is required to prepay the Hawthorne & Howard Loan so that the debt
service coverage ratio will remain at the same level as originally underwritten.
If the Hawthorne & Howard Borrower is unable to execute leases for the vacant
space that maintain the original debt service coverage ratio of 1.67x by March
31, 1999, the lender may apply up to the full amount of the $2,500,000 reserve
on June 1, 1999 to reduce the principal balance of the Hawthorne & Howard Loan
to achieve a 1.67x debt service coverage ratio. In the event of such prepayment,
the Hawthorne & Howard Borrower is required to pay a prepayment penalty based on
the lender's standard yield maintenance formula.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited by the Hawthorne & Howard Financing Documents.
The Property
The Hawthorne & Howard Property consists of two office buildings located
in the South of Market area of the greater Financial District in San Francisco,
California. The two office buildings are connected at the first floor by a
common corridor and contain an aggregate of 235,912 square feet of net rentable
space. The Hawthorne & Howard Property was 91% leased to 33 tenants as of June
10, 1998. The buildings are of reinforced concrete construction with brick
exterior.
631 Howard was built in 1929 and underwent significant renovations in 1938
and 1949 and seismic upgrades in 1988 and 1989. The building is classified as a
Category II "Significant" building by the San Francisco Landmarks Board, which
allows for substantial renovation of the building as long as the facade is
maintained. The building is five stories, with tenant storage space in the
basement, retail stores and a cafe on the first floor and office space on the
upper floors. The building contains 103,173 square feet of net rentable space.
Parking is provided in the 55 Hawthorne parking garage.
III-14
<PAGE> 165
55 Hawthorne was built in 1970 and serves as the primary entrance for both
buildings. The 11-story building contains eight floors of office space, three
floors of above-grade parking and two additional floors of subterranean parking.
The parking garage is 94,000 square feet and provides parking capacity for 272
cars, which can be expanded to provide parking capacity for 475 cars with valet
parking. The building includes 132,739 square feet of net rentable area and
three elevators. Several floors have sprinkler systems, and the remaining floors
are required by city and county ordinance to be retrofitted with automatic
sprinklers by 2006.
As of June 10, 1998, approximately 21% of the space was rented by major
tenants, including KFOG Radio (7.0%), KNBR Radio (7.0%), and Miller Freeman, Inc
(7.0%). Contractual lease expirations during the loan term for all tenants are
as follows: 9,114 square feet (4%) in 1998, 24,816 square feet (11%) in 1999,
36,778 square feet (16%) in 2000, 15,800 square feet (7%) in 2001, 29,674 square
feet (13%) in 2002, 23,011 square feet (10%) in 2003, 11,302 square feet (5%) in
2004, and 59,431 square feet (25%) in 2007 or later. As of June 10, 1998,
average base rental was $17.12 per square foot.
Management
The Hawthorne & Howard Property is managed by Landmark Development, an
affiliate of the Hawthorne & Howard Borrower.
III-15
<PAGE> 166
Loan No. 7 - Dunwoody Club Apartments Loan and Property
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $24,935,425 Property Type: Multifamily
Loan Type: Principal and Location: Atlanta, GA
Interest; Balloon Year Built/Renovated: 1979/1998
Origination Date: 9/1/1998 No. of Units: 532
Maturity Date: 10/1/2005 Cut-Off Date Balance/Unit: $46,871
Mortgage Rate: 7.190% Appraised Value: $35,000,000
Annual Debt Service: $2,034,334 Cut-Off Date LTV: 71.2%
DSCR: 1.43x Balloon LTV: 66.0%
Underwritten Cash Flow: $2,908,214 Percent Leased: 93.8%
Balance at Maturity: $23,085,024 Percent Leased as of Date: 6/30/1998
- --------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Dunwoody Club Apartments Loan (the "Dunwoody Club Loan") is secured by
a first mortgage on a 532-unit multifamily housing facility located in Atlanta,
Georgia (the "Dunwoody Club Property"). The Dunwoody Club Loan was originated by
Wells Fargo on September 1, 1998.
The Borrower. The borrower is comprised of Dermot Dunwoody, LLC, a Georgia
limited liability company ("Dermot"), and Landsum, LLC, a Delaware limited
liability company ("Landsum"), which hold the property as tenants in common
(together, the "Dunwoody Club Borrower"). Dermot Dunwoody, Inc., a California
corporation, is the managing member of Dermot. Landsum, a passive investor in
the Dunwoody Club Property, is controlled by the Summers Family Trust (the
"Family Trust").
Security. The Dunwoody Club Loan is secured by a Mortgage, Assignment of
Rents and Leases, UCC Financing Statements and certain additional security
documents (The "Dunwoody Club Financing Documents"). The mortgage is a first
lien on the Dunwoody Club Borrower's fee interest in the Dunwoody Club Property.
The Dunwoody Club Loan is non-recourse to the Dunwoody Club Borrower, subject to
certain limited exceptions.
Payment Terms. The Mortgage Rate is fixed at 7.190% per annum. The
Dunwoody Club Loan requires monthly payments of principal and interest of
$169,527.85 until its maturity on October 1, 2005, at which time all unpaid
principal and accrued but unpaid interest is due. The Dunwoody Club Loan accrues
interest computed on the basis of the actual number of days elapsed each month
in a 360-day year.
Prepayment/Defeasance. The Dunwoody Club Loan may be prepaid in whole, but
not in part, at any time after three (3) years following origination upon
payment of the greater of a Yield Maintenance Premium calculated by reference to
U.S. Treasury obligations and 1% of the amount prepaid. No prepayment premium is
due if the Dunwoody Club Loan is prepaid within one-hundred eighty (180) days
prior to maturity.
Late Fees and Default Interest. There is a 4% late fee on overdue
installments, and the Dunwoody Club Loan accrues interest at the mortgage rate
plus 5% per annum while the Dunwoody Club Loan is in default.
Transfer of Property or Interest in Borrower. The Dunwoody Club Loan
provides that it will become immediately due and payable upon the transfer of
the Dunwoody Club Property or any ownership interest in the Dunwoody Club
Borrower, except in connection with any of the permitted transfers described
below.
III-16
<PAGE> 167
Upon the payment of an assumption fee in an amount equal to 1.0% of the
then current principal balance of the Dunwoody Club Loan, the Dunwoody Club
Financing Documents permit up to two transfers of the Dunwoody Club Property,
subject to the Dunwoody Club Financing Documents (with a full release of the
obligations of the transferor under the Dunwoody Club Loan). Such transfers are
permitted only upon the satisfaction of certain conditions specified in the
Dunwoody Club Financing Documents, including confirmation from each Rating
Agency that the transfer would not result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any Class of Certificates. In
addition, the proposed transferee must reasonably satisfy the lender's
underwriting standards with respect to organization structure, and the lender
may require a non-consolidation opinion with respect to the proposed transferee.
The Dunwoody Club Financing Documents permit transfer of ownership
interests in the entities that make up the Dunwoody Club Borrower, provided that
a certain principal of the Dunwoody Club Borrower maintains the same percentage
of ownership in and management of Dermot and the Dunwoody Club Property. The
Dunwoody Club Financing Documents also permit Landsum to transfer its ownership
interest in the Dunwoody Club Property to Dermot. In addition, the Dunwoody Club
Financing Documents permit transfers of beneficial interests in the Family
Trust, provided there is no change in the trustees of the Family Trust and the
Family Trust continues to control the management of Landsum.
Escrow/Reserves. The Dunwoody Club Financing Documents require monthly
escrow deposits in amounts sufficient to pay taxes when due. There is also a
replacement reserve for capital expenditures that the Dunwoody Club Borrower
must fund through monthly collections from tenants at the rate of $250 per unit
per year and a deferred maintenance reserve account that the Dunwoody Club
Borrower funded at closing in the amount of $103,525.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited by the Dunwoody Club Financing Documents.
The Property
The Dunwoody Club Property consists of a 532-unit apartment complex
located on approximately 53 acres in the Dunwoody area of suburban Atlanta,
Georgia, approximately 15 miles north of the central Atlanta business district.
As of June 30, 1998, the Dunwoody Club Property was 93.8% leased.
The Dunwoody Club Property was built in two phases, with the first 332
units completed in 1979 to 1980 and an additional 200 units completed in 1984,
and underwent a $2,200,000 renovation program in 1998. The 532 units, situated
in 59 two- and three-story, wood frame buildings, are of an average size of
1,230 square feet and consist of the following unit mix: 242
one-bedroom/one-bath units, 226 two-bedroom/two-bath units and 64
three-bedroom/two-bath units. All units have washer/dryer connections, while
selected units include stone fireplaces, screened in porches, sunrooms/skylights
and two car garages. Complex facilities include a clubhouse, outdoor pool, five
lighted tennis courts, gas grills, picnic area, indoor lap pool, and a fitness
facility with three racquetball courts. The complex has a density of ten units
per acre, and includes 1,100 parking spaces, resulting in a ratio of 2.1 parking
spaces per unit.
Management
The Dunwoody Club Borrower is the property manager. Dermot and its
managing member, Dermot Dunwoody, Inc., are the active property managers, and
reportedly hold investments in multi-family, retail and office properties
throughout the United States.
III-17
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Loan No. 8 - Grapevine Town Shopping Center Loan and Property
<TABLE>
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $16,682,121 Property Type: Retail
Loan Type: Principal and Location: Grapevine, TX
Interest; Balloon Year Built: 1995
Origination Date: 5/1/1998 Square Feet: 186,984
Maturity Date: 5/1/2008 Cut-Off Date Balance/SF: $89
Mortgage Rate: 8.000% Appraised Value: $24,000,000
Annual Debt Service: $1,476,030 Cut-Off Date LTV: 69.5%
DSCR: 1.41x Balloon LTV: 62.5%
Underwritten Cash Flow: $2,088,083 Percent Leased: 100%
Balance at Maturity: $14,998,197 Percent Leased as of Date: 7/1/1998
- ----------------------------------------------------------------------------------------------
</TABLE>
The Loan
The Grapevine Town Shopping Center Loan (the "Grapevine Loan") is secured
by a first mortgage on a 186,984 square foot anchored retail shopping center
located in Grapevine, Texas, approximately 25 miles northwest of the Dallas
central business district (the "Grapevine Property"). The Loan was originated by
MSMC on May 1, 1998.
The Borrower. The borrower is the Grapevine/Tate Joint Venture (the
"Grapevine Borrower"), which was formed in 1992 for the purpose of acquiring and
developing the Grapevine Property and other adjacent property. The Grapevine
Borrower has eleven partners. The Grapevine Borrower is not a special purpose
entity.
Security. The Grapevine Loan is secured by a Mortgage, Assignment of Rents
and Leases, UCC Financing Statements and certain additional security documents
(the "Grapevine Financing Documents"). The mortgage is a first lien on the
Grapevine Borrower's fee interest in the Grapevine Property. The Grapevine Loan
is non-recourse to the Grapevine Borrower, subject to certain limited
exceptions.
Anchors. The anchor stores at the Grapevine Property are Linens & Things,
Office Depot, Ross Stores and Barnes & Noble. Certain easement agreements
establish the rights and obligations of the anchor stores and the Grapevine
Borrower.
Payment Terms. The Mortgage Rate is fixed at 8.000% per annum. The
Grapevine Loan requires monthly payments of principal and interest of
$123,002.52 until its maturity on May 1, 2008, at which time all unpaid
principal and accrued but unpaid interest is due. The Grapevine Loan accrues
interest computed on the basis of the actual number of days elapsed each month
in a 360-day year.
Prepayment/Defeasance. The Grapevine Loan may be prepaid in whole, but not
in part, at any time on or after May 1, 2003 upon payment of a Yield Maintenance
Premium calculated by reference to U.S. Treasury obligations. No prepayment
premium is due if the Grapevine Loan is prepaid within ninety (90) days prior to
maturity. The Grapevine Borrower may also defease the Grapevine Loan with United
States Treasury securities, in whole, but not in part, at any time on or after
May 1, 2003. Defeasance is permitted only upon the satisfaction of certain
conditions specified in the Grapevine Financing Documents, including
confirmation from each Rating Agency that defeasance would not result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
any Class of Certificates.
Late Fees and Default Interest. The Grapevine Loan accrues interest at 11%
per annum while the Grapevine Loan is in default.
Transfer of Property or Interest in Borrower. The Grapevine Loan provides
that it will become immediately due and payable upon the transfer of the
Grapevine Property or any ownership interest in the Grapevine Property, except
in connection with any of the following permitted transfers.
III-18
<PAGE> 169
Upon the payment of an assumption fee in an amount equal to 1.0% of the
then current principal balance of the Grapevine Loan, the Grapevine Financing
Documents permit a one-time transfer of the Grapevine Property, subject to the
Grapevine Financing Documents (with a full release of the obligations of the
transferor under the Grapevine Loan). Such transfers are permitted only upon the
satisfaction of certain conditions specified in the Grapevine Financing
Documents, including the requirement that the proposed transferee satisfy the
lender's underwriting standards with respect to organization structure,
creditworthiness and management ability.
The Grapevine Financing Documents permit the Grapevine Borrower to
transfer the property in a transaction involving substantially all of the
shopping center properties owned and controlled by Herbert D. Weitzman.
Escrow/Reserves. The Grapevine Financing Documents require monthly escrow
deposits in an amount sufficient to pay taxes when due. The Grapevine Financing
Documents do not require monthly escrow deposits to pay for insurance or capital
expenditures.
Subordinate/Other Debt. Subordinate indebtedness and encumbrances are
prohibited by the Grapevine Financing Documents.
The Property
The Grapevine Property is a 186,984 square foot anchored retail shopping
center with 959 parking spaces located in Grapevine, Texas, approximately 25
miles northwest of the Dallas central business district. The Grapevine Property
was developed in three stages from 1995 to 1997, and was 100% leased to 14
tenants as of July 1, 1998. Buildings are of concrete construction with brick
exterior.
As of July 1, 1998, approximately 67.8% of the space was rented by the
following national or regional tenants: Linens & Things (18.7%), Office Depot
(16.5%), Ross Stores (15.2%) and Barnes & Noble (13.4%). Contractual lease
expirations during the loan term for all tenants are as follows: 10,300 square
feet (6%) in 2001, 6,200 square feet (3%) in 2005, 60,550 square feet (32%) in
2006 and 109,934 square feet (59%) in 2008 or later. As of July 1, 1998, average
base rental was $13.02 per square foot.
Management
The Grapevine Property is managed by Cencor Realty Services, an affiliate
of the Grapevine Borrower.
III-19
<PAGE> 170
- --------------------------------------------------------------------------------
MORGAN STANLEY [GRAPHIC OMITTED] February 1, 1999
Real Estate Debt Capital Markets
Mortgage Capital Markets MORGAN STANLEY DEAN WITTER
- --------------------------------------------------------------------------------
CMBS New Issue
Preliminary Term Sheet
--------------------
Expected Pricing Date: February 11, 1999
--------------------
$893,452,000
(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 1999-WF1
--------------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
NORWEST INVESTMENT SERVICES, INC.
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 171
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
Transaction Highlights
o This transaction is the fifth joint securitization by Wells Fargo Bank, NA
("Wells Fargo") and Morgan Stanley Mortgage Capital ("MSMC"). Transactions
have ranged in size from $600MM to $1.3Bn.
o The collateral for this transaction consists of 274 Mortgage Loans with a
Cut-Off Date Balance of $968,511,922.
o Property Type Diversification: Multifamily (30.7%), Retail (24.3%),
Industrial (16.9%), Office (13.0%), Hospitality (9.0%), Other (2.2%),
Mobile Home Park (2.1%) and Self Storage (1.8%).
o Loan Diversification: The largest loan equals 4.3% of the initial pool
balance and the average loan balance is $3.5MM.
o Call Protection: 100% of the loans are call protected; 99.2% of the
Mortgage loans provide for an initial lockout period followed by either
defeasance (57.7%), yield maintenance (25.6%) or an option allowing the
borrower to choose either defeasance or yield maintenance (15.9%).
o Updated loan information will be part of the monthly remittance report in
addition to detailed payment and delinquency information. Updated property
operating and occupancy information, to the extent delivered by borrowers,
will be available to Certificateholders.
o Cash flows will be modeled by TREPP and will be available on BLOOMBERG.
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 172
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
Offered Certificates
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Rating Expected Final Initial
Amount(1) Subordination (DCR/ Average Principal Distribution Pass-Through
Class ($MM) Levels Moody's) Life(2) Window(2)(3) Date(3) Rate(4)(5)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 269,000,000 23.00% AAA/Aaa 5.50 1-110 4/15/08 [5.72%]
- ------------------------------------------------------------------------------------------------------------------------------------
A-2 476,754,000 23.00 AAA/Aaa 9.38 110-115 9/15/08 [6.03]
- ------------------------------------------------------------------------------------------------------------------------------------
B 48,425,000 18.00 AA/Aa2 9.61 115-116 10/15/08 [6.18]
- ------------------------------------------------------------------------------------------------------------------------------------
C 43,583,000 13.50 A/A2 9.64 116-116 10/15/08 [6.47]
- ------------------------------------------------------------------------------------------------------------------------------------
D 9,685,000 12.50 A-/A3 9.64 116-116 10/15/08 NWAC - [0.38]
- ------------------------------------------------------------------------------------------------------------------------------------
E 29,056,000 9.50 BBB/Baa2 9.69 116-117 11/15/08 NWAC - [0.03]
- ------------------------------------------------------------------------------------------------------------------------------------
F 16,949,000 7.75 BBB-/NR 10.48 117-138 8/15/10 NWAC - [0.03]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Private Certificates
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Rating Expected Final Initial
Amount(1) Subordination (DCR/ Average Principal Distribution Pass-Through
Class ($MM) Levels Moody's) Life(2) Window(2)(3) Date(3) Rate(4) (5)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
G-O 75,059,922 -- -- -- -- -- [5.72%]
- ------------------------------------------------------------------------------------------------------------------------------------
X Notional -- AAA/Aaa 8.80 -- 10/15/18 Variable Rate
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1): In the case of each such Class, subject to a permitted
variance of plus or minus 5%. The Class X Notional Amount is
equal to the sum of all Certificate Balances outstanding from
time to time.
(2) In years, based on Maturity Assumptions and a 0% CPR as
described in the Prospectus Supplement.
(3) Principal Window is the period (expressed in terms of months
and commencing with the month of the first Distribution Date)
during which distributions of principal are expected to be
made to the holders of each designated Class in accordance
with the Maturity Assumptions and a 0% CPR as described in the
Prospectus Supplement.
(4) Other than the Class D, Class E and Class F Certificates, each
Class of Certificates will accrue interest generally at a
fixed rate of interest except in limited circumstances as
described in the Prospectus Supplement.
(5) The pass-through rates shown are only for indicative purposes.
The final pass-through rates will be determined at pricing.
T-1
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 173
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
I. Issue Characteristics
Issue Type: Public: Class A-1, A-2, B, C, D, E and F (the
"Offered Certificates")
Private (Rule 144A): Class X, G, H, J, K, L, M, N
and O
Securities Offered $893,452,000 monthly pay, multi-class
sequential pay commercial mortgage REMIC
Pass-Through Certificates, including four fixed-rate
principal and interest classes (A-1, A-2, B and C)
and three weighted average coupon principal and
interest classes (D, E and F).
Collateral: The collateral consists of a $968,511,922 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-Managers: Goldman, Sachs & Co.
Norwest Investment Services, Inc.
Master Servicer: Wells Fargo Bank, National Association
Special Servicer: GMAC Commercial Mortgage Corporation
Trustee/Fiscal Agent: LaSalle National Bank/ABN AMRO Bank N.V.
Expected Pricing Date: On or about February 11, 1999
Expected Closing Date: On or about February 25, 1999
Distribution Dates: The 15th of each month, commencing March 15, 1999
Cut-Off Date: February 1, 1999
Minimum Denominations: $25,000 for Class A Certificates; $100,000 for all
other Certificates (other than the Class R
Certificates)
Settlement Terms: DTC, Euroclear and Cedel, same day funds, with
accrued interest
Legal/Regulatory Status: Class A-1 and A-2 Certificates are expected to be
eligible for exemptive relief under ERISA. No Class
of Certificates is SMMEA eligible.
Risk Factors: THE CERTIFICATES INVOLVE A DEGREE OF RISK AND MAY
NOT BE SUITABLE FOR ALL INVESTORS. SEE THE "RISK
FACTORS AND OTHER SPECIAL CONSIDERATIONS" SECTION OF
THE PROSPECTUS SUPPLEMENT AND THE "RISK FACTORS"
SECTION OF THE PROSPECTUS.
T-2
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 174
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
II. Structure Characteristics
The Offered Certificates (other than the Class D, E and F Certificates) are
fixed-rate, monthly pay, multi-class, sequential pay REMIC Pass-Through
Certificates. The Class D, E and F 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.
[BAR GRAPH OMITTED]
Note: (1) Class X is entitled to interest (on a notional amount equal to the
aggregate pool balance) at the weighted average Class X Strip Rates
for the respective classes of Principal Balance Certificates. The
Class X Strip Rate for each such class for any Distribution Date is
equal to the NWAC minus the Pass-Through Rate for such class and such
Distribution Date.
T-3
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 175
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
[BAR GRAPH OMITTED]
Notes: (1) The class A-1, A-2 and X certificates will be paid interest on a pro
rata basis.
(2) The above analysis is based on the Maturity Assumptions and a 0% CPR
as described in the Prospectus Supplement.
T-4
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 176
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
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: [5.72%]
Class A-2: [6.03%]
Class B: [6.18%]
Class C: [6.47%]
Class D: NWAC - [0.38%]
Class E: NWAC - [0.03%]
Class F: NWAC - [0.03%]
Classes G-O: [5.72%]
Class X: See Note on page T-3
The Pass-Through Rate for each class of Principal
Balance Certificates for any Distribution Date
will not exceed the Weighted Average Net Mortgage
Rate ("NWAC") for such Distribution Date.
Principal Distributions: Principal will be distributed on each Distribution
Date to the most senior Class (i.e., the Class
with the earliest alphabetical/numerical Class
designation) of the Principal Balance Certificates
outstanding, until its Certificate Balance is
reduced to zero (sequential order). If, due to
losses, the Certificate Balances of the Class B
through Class O Certificates are reduced to zero
or Appraisal Reductions exceed the aggregate
Certificate Balance of the Subordinate
Certificates, payments of principal to the Class
A-1 and A-2 Certificates will be made on a pro
rata basis.
Prepayment Premium The holders of each Class of Principal
Allocation: Certificates (other than an excluded class as
defined below) then entitled to distributions of
principal on such distribution date will be
entitled to an aggregate amount (allocable on a
pro-rata basis if there is more than one Class of
Principal Balance Certificates entitled to a
distribution of principal) 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 in the Prospectus
Supplement), and the denominator of which is equal
to the excess, if any, of the Mortgage Rate of the
Mortgage Loan that prepaid, over the relevant
Discount Rate. The portion, if any, of the
Prepayment Premium remaining after such payments
to the holders of the Principal Balance
Certificates will be distributed to the holders of
the Class X Certificates. For the purposes of the
foregoing, the classes G, H, J, K, L, M, N and O
are the excluded classes.
T-5
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 177
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
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 Realized Losses and Expense Losses, if any, will
Losses: be allocated to the Class O, Class N, Class M,
Class L, Class K, Class J, Class H, Class G, Class
F, Class E, Class D, Class C and Class B
Certificates, in that order, and then to Classes
A-1 and A-2 and, with respect to losses allocated
to interest, Class X Certificates, pro rata, in
each case reducing amounts payable thereto. Any
interest shortfall of any Class of Certificates
will result in unpaid interest for such Class
which, together with interest thereon compounded
monthly at one-twelfth the applicable Pass-Through
Rate for such Class, will be payable in subsequent
periods, subject to available funds.
Prepayment Interest For any Distribution Date, any Net Aggregate
Shortfalls: Prepayment Interest Shortfall not offset by the
Servicing Fee (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.
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 25% of the initial Certificate
Balance of such Class, the next most subordinate
Class of Principal Balance Certificates.
T-6
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 178
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
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 The Trustee will prepare and deliver monthly
Certificateholders: Certificateholder Reports. The Special Servicer
will prepare and deliver to the Trustee a monthly
Special Servicer Report summarizing the status of
each Specially Serviced Mortgage Loan. The Master
Servicer and the Special Servicer will prepare and
deliver to the Trustee an annual report setting
forth, among other things, the debt service
coverage ratios for each Mortgage Loan, as
available. Each of the reports will be available
to the Certificateholders. A report containing
information regarding the Mortgage Loans will be
available electronically.
T-7
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 179
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
III. Originators Wells Fargo Bank, N.A.
The Mortgage Pool includes 202 Mortgage Loans,
representing approximately 60.7% of the Initial Pool
Balance, originated by Wells Fargo Bank, 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, 1998 and for the year
ended December 31, 1997, Wells Fargo & Company reported,
on a consolidated basis, net income of $1,950MM and
$2,499MM, respectively.
As of December 31, 1998 and as of December 31, 1997
Wells Fargo & Company reported, on a consolidated basis,
total assets of $202.5Bn and $185.7Bn, respectively and
total capital (Tier 1 & 2) of $10.9Bn and $11.2Bn,
respectively.
As of December 31, 1998 Wells Fargo and its subsidiaries
serviced a portfolio of multifamily and commercial
mortgage loans totaling approximately $25.9Bn, of which
$5.4Bn was for third parties.
On November 2, 1998, the former Wells Fargo Company
merged with WFC Holding Corporation, a wholly owned
subsidiary of Norwest Corporation. In connection with
such merger, Norwest Corporation changed its name to
Wells Fargo & Company. Such merger was accounted for as
a pooling of interests. The total assets, total capital
and net income indicated above for Well Fargo & Company
reflect the consolidated assets, capital and income of
such merged companies for the periods set forth above.
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 five previous
conduit securitizations.
Morgan Stanley Mortgage Capital Inc.
The Mortgage Pool includes 72 Mortgage Loans,
representing approximately 39.3% of the Initial Pool
Balance, which were 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-8
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 180
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
IV. Collateral Description
Summary: The Mortgage Pool consists of a $968,511,922 pool
of 274 fixed-rate, first lien, mortgage loans
secured by first liens on commercial and
multifamily properties located throughout 29
states. As of the Cut-Off Date, the Mortgage Loans
have a weighted average mortgage rate of 7.067%
and a weighted average remaining term to maturity
of 122 months. See the Summary: Appendices to the
Prospectus Supplement for more detailed collateral
information.
Seismic Review Process: For loans originated by Wells Fargo, loan requests
secured by properties located in California are
screened using a seismic software system to
perform a preliminary probable maximum loss
("PML") analysis. Properties with any one of the
following characteristics are subject to a third
party seismic survey performed by an approved
seismic engineering firm: a property with a
preliminary PML over 20%, a loan of more than
$10,000,000, a property located in an Alquist
Priolo Zone, a property of three or more stories,
a property constructed of non-reinforced masonry,
a property found to exhibit indications of
significant seismic stress during the completion
of the property condition assessment or a property
located in a county having special inspection or
retrofit requirements.
For loans originated by MSMC, all loan requests
secured by properties in California are subject to
a third party seismic report.
Generally, any proposed loan originated by Wells
Fargo or MSMC as to which the property was
estimated to have a PML in excess of 20% of the
estimated replacement cost would either be subject
to a lower loan-to-value limit at origination, be
conditioned on seismic upgrading, be conditioned
on satisfactory earthquake insurance or be
declined.
This portfolio contains 20 Mortgage Loans,
representing 10.6% of the pool, that have PMLs in
excess of 20% and are subject to the above stated
mitigants.
[GRAPHIC OMITTED]
[The following table was depicted as a graphic map of the
U.S in the printed material]
GEOGRAPHIC DISTRIBUTION
AK 0.37%
WA 2.57%
OR 1.77%
CA 45.59
ID 0.20%
NV 1.58%
UT 1.40%
AZ 4.41%
CO 4.18%
KS 0.35%
OK 1.06%
TX 10.86%
WI 1.05%
IL 5.88%
MI 0.72%
IN 0.63%
OH 0.86%
MA 1.74%
NY 0.59%
CT 0.59%
NJ 0.41%
PA 0.63%
DE 0.43%
MD 2.70%
VA 1.07%
NC 0.10%
SC 0.15%
GA 4.74%
FL 3.38%
T-9
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 181
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
Sellers
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
Wells Fargo 202 587,870,511 60.70
Morgan Stanley 72 380,641,411 39.30
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Cut-Off Date Balances ($)
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
<= 1MM 50 39,411,512 4.07
1MM - 2MM 81 116,334,697 12.01
2MM - 3MM 42 103,017,431 10.64
3MM - 4MM 34 117,016,226 12.08
4MM - 5MM 16 73,743,162 7.61
5MM - 6MM 14 77,972,519 8.05
6MM - 7MM 9 57,526,269 5.94
7MM - 8MM 7 52,498,548 5.42
8MM - 9MM 6 50,860,263 5.25
9MM - 10MM 2 19,832,806 2.05
10MM - >= 13 260,298,489 26.87
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Min: 317,728 Max: 41,232,654 Average: 3,534,715
- --------------------------------------------------------------------------------
States
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
California 140 441,499,972 45.59
Texas 32 105,159,866 10.86
Illinois 6 56,964,719 5.88
Georgia 5 45,888,047 4.74
Arizona 7 42,762,844 4.42
Other 84 276,236,474 28.51
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Property Type
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
Multifamily 86 297,627,262 30.73
Retail 52 235,072,705 24.27
Industrial 74 163,796,815 16.91
Office 36 125,831,434 12.99
Hospitality 6 87,639,765 9.05
Other 6 21,021,513 2.17
Mobile Home Park 6 20,056,298 2.07
Self Storage 8 17,466,131 1.80
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Mortgage Rates (%)
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
6.001 - 7.000 114 433,730,598 44.79
7.001 - 8.000 155 521,043,835 53.80
8.001 - 9.000 5 13,737,489 1.42
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Min: 6.240 Max: 8.750 WAC: 7.067
- --------------------------------------------------------------------------------
Original Terms to Stated Maturity (mos)
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
<= 60 3 38,652,722 3.99
61 - 120 217 766,805,970 79.17
121 - 180 27 96,295,297 9.94
181 - 240 27 66,757,933 6.89
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Min: 59 Max: 240 Wtd Avg: 128
- --------------------------------------------------------------------------------
Remaining Terms to Stated Maturity (mos)
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
<= 60 6 43,609,391 4.50
61 - 120 216 791,914,463 81.77
121 - 180 25 66,230,135 6.84
181 - 240 27 66,757,933 6.89
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Min: 26 Max: 236 Wtd Avg: 122
- --------------------------------------------------------------------------------
Balloon Loans
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
Yes 234 883,915,263 91.27
No 40 84,596,660 8.73
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Debt Service Coverage Ratios (x)
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
1.01 - 1.15 2 2,826,048 0.29
1.16 - 1.25 9 26,106,459 2.70
1.26 - 1.35 26 88,263,191 9.11
1.36 - 1.50 76 323,070,799 33.36
1.51 - 1.75 76 311,629,987 32.18
1.76 - 2.00 45 122,266,678 12.62
2.00 >= 40 94,348,760 9.74
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Min: 1.11 Max: 6.43 Wtd Avg: 1.63
- --------------------------------------------------------------------------------
Cut-Off Date Loan-to-Value Ratios (%)
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
10.1 - 20.0 2 1,540,952 0.16
20.1 - 30.0 9 10,835,732 1.12
30.1 - 40.0 13 23,209,493 2.40
40.1 - 50.0 19 36,453,606 3.76
50.1 - 60.0 51 183,697,024 18.97
60.1 - 70.0 93 338,319,182 34.93
70.1 - 80.0 86 370,399,172 38.24
80.1 - 90.0 1 4,056,762 0.42
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Min: 19.2 Max: 81.1 Wtd Avg: 64.9
- --------------------------------------------------------------------------------
Balloon Loan-to-Value Ratios (%)
- --------------------------------------------------------------------------------
No. Cut-Off Date %
of Principal of
Loans Balance Pool
- --------------------------------------------------------------------------------
0.0 34 73,098,734 7.55
0.1 - 10.0 6 11,497,926 1.19
10.1 - 20.0 3 7,155,138 0.74
20.1 - 30.0 18 35,254,177 3.64
30.1 - 40.0 16 37,872,384 3.91
40.1 - 50.0 55 155,797,315 16.09
50.1 - 60.0 72 319,383,234 32.98
60.1 - 70.0 67 314,832,276 32.51
70.1 - 80.0 3 13,620,738 1.41
- --------------------------------------------------------------------------------
Total: 274 968,511,922 100.00
- --------------------------------------------------------------------------------
Min: 0.0 Max: 70.7 Wtd Avg: 49.7
- --------------------------------------------------------------------------------
T-10
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 182
$893,452,000 (Approximate)
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
Percentage of Mortgage Pool Balance by Prepayment Restriction (%) (1) (2)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Restrictions February 1999 February 2000 February 2001 February 2002 February 2003
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out 99.19% 99.19% 99.10% 73.33% 66.04%
Yield Maintenance Total 0.33% 0.33% 0.09% 26.05% 29.54%
Penalty Points:
5.00% and greater 0.00 0.00 0.00 0.00 0.00
4.00% to 4.99% 0.48 0.30 0.30 0.29 0.29
3.00% to 3.99% 0.00 0.18 0.00 0.00 0.00
2.00% to 2.99% 0.00 0.00 0.33 0.00 0.00
1.00% to 1.99% 0.00 0.00 0.00 0.18 0.00
Open 0.00 0.00 0.18 0.15 4.13
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $ 968,511,922 $ 954,499,547 $ 939,602,735 $ 921,807,451 $ 901,551,545
% of initial Pool Balance 100.00% 98.55% 97.02% 95.18% 93.09%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Percentage of Mortgage Pool Balance by Prepayment Restriction (%) - continued (1) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment Restrictions February 2004 February 2005 February 2006 February 2007 February 2008 February 2009
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Locked Out 56.13% 55.98% 57.49% 57.49% 41.22% 44.33%
Yield Maintenance Total 43.57% 43.55% 42.21% 42.22% 19.42% 53.47%
Penalty Points:
5.00% and greater 0.00 0.00 0.00 0.00 0.00 0.00
4.00% to 4.99% 0.30 0.29 0.30 0.29 0.00 0.00
3.00% to 3.99% 0.00 0.00 0.00 0.00 0.29 2.20
2.00% to 2.99% 0.00 0.00 0.00 0.00 0.00 0.00
1.00% to 1.99% 0.00 0.00 0.00 0.00 0.00 0.00
Open 0.00 0.18 0.00 0.00 39.07 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $ 845,469,734 $ 826,005,075 $ 776,399,187 $ 754,400,945 $ 723,287,400 $ 87,807,148
% of Initial Pool Balance 87.30% 85.29% 80.16% 77.89% 74.68% 9.07%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) For 53 of the Mortgage Loans (15.9% of the Cut-Off Date Balance)
which allow borrowers to choose between Defeasance and Yield
Maintenance, Yield Maintenance is assumed.
(2) The above analysis is based on Maturity Assumptions and a 0% CPR as
discussed in the Prospectus Supplement.
T-11
- --------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Norwest Investment Services, Inc. (collectively the
"Underwriters") disclaim any and all liability relating to this information,
including without limitation any express or implied representations and
warranties for, statements contained in, and omissions from, this information.
Additional information is available upon request. The Underwriters and others
associated with them may have positions in, and may effect transaction in,
securities and instruments of issuers mentioned herein and may also perform or
seek to perform investment banking services for the issuers of such securities
and instruments. Past performance is not necessarily indicative of future
results. Price and availability are subject to change without notice. This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement. To Morgan
Stanley's readers worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated, approved by Morgan Stanley
International Limited, a member of The Securities and Futures Authority, any by
Morgan Stanley Japan Ltd. Morgan Stanley recommends that such readers obtain the
advice of their Morgan Stanley & Co. Incorporated, Morgan Stanley International
or Morgan Stanley Japan Ltd. representative about the investments concerned.
NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K.
SECURITIES AND FUTURES AUTHORITY
- --------------------------------------------------------------------------------
<PAGE> 183
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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: General Information Number
Phone Number: (212) 761-4700
================================================================================
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
================================================================================
GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, PA 10944-8015
Contact: Coral I. Horstmeyer
Phone Number: (215) 328-1790
================================================================================
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> 184
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
Certificate Distribution Detail
<TABLE>
<CAPTION>
===================================================================================================================================
Realized Loss /
Pass-Through Original Beginning Principal Interest Prepayment Additional Trust Total Ending
Class CUSIP Rate Balance Balance Distribution Distribution Penalties Fund Expenses 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 Penalties Distribution Amount
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
X 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> 185
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
Certificate Factor Detail
<TABLE>
<CAPTION>
====================================================================================================
Realized Loss /
Beginning Principal Interest Prepayment Additional Trust Ending
Class CUSIP Balance Distribution Distribution Penalties Fund Expenses 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 0.00000000 0.00000000 0.00000000 0.00000000
=================================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 3 of 17
<PAGE> 186
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
Reconciliation Detail
<TABLE>
<S> <C>
Advance Summary
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 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 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> 187
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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 Portion 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>
None
=================================================
Total
=================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 5 of 17
<PAGE> 188
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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>
================================================================================
</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> 189
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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> 190
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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> 191
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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 updated periodically as new NOI figures
become available from borrowers on an asset level. In all cases the most current
DSCR provided by the Servicer is used. To the extent that no DSCR is provided by
the Servicer, information from the offering document is used. 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 the related
mortgage loan as disclosed in the offering document.
Note: (i) "Scheduled Balance" has the meaning assigned thereto in the CSSA
Standard Information Package.
(ii) An ARD Loan constitutes a "Hyper-Amortization Loan" as defined in the
offering document.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 9 of 17
<PAGE> 192
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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> 193
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
Principal Prepayment Detail
<TABLE>
<CAPTION>
================================================================================================================
Principal Prepayment Amount Prepayment Penalties
Offering Document --------------------------------- ---------------------------------------------
Loan Number Cross-Reference Payoff Amount Curtailment Amount Prepayment Premium Yield Maintenance Premium
================================================================================================================
<S> <C> <C> <C> <C> <C>
================================================================================================================
Totals
================================================================================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 11 of 17
<PAGE> 194
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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> 195
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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> 196
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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
Loan DSCR Date Date Amortization
Number Term
=========================================
<C> <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> 197
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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> 198
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
Modified Loan Detail
<TABLE>
<CAPTION>
================================================================================
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> 199
Morgan Stanley Capital I Inc.
Commercial Mortgage Pass-Through Certificates
Series 1999-WF1
------------------------------------------
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
Norwest Bank Minnesota, N.A. Leslie Gaskill
Corporate Trust Services (212) 515-5254
3 New York Plaza, 15th Floor Reports Available on the World Wide Web
New York, NY 10004 @ www.ctslink.com/cmbs
------------------------------------------
Payment Date: 03/15/1999
Record Date: 02/26/1999
================================================================================
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
Loan Liquidation Liquidation as a % of Realized by Seller
Number Expenses* Proceeds Actual Balance Loss (Y/N)
=============================================================================
<S> <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> 200
PROSPECTUS
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
MORGAN STANLEY CAPITAL I INC.
DEPOSITOR
The Certificates offered hereby and by Supplements to this Prospectus
(the "Offered Certificates") will be offered from time to time in one or more
series. Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund (with respect to any series, the
"Trust Fund") consisting of one or more segregated pools of various types of
multifamily or commercial mortgage loans (the "Mortgage Loans"), mortgage
participations, mortgage pass-through certificates, mortgage-backed securities
evidencing interests therein or secured thereby (the "MBS"), certain direct
obligations of the United States, agencies thereof or agencies created thereby
(the "Government Securities") or a combination of Mortgage Loans, MBS and/or
Government Securities (with respect to any series, collectively, "Assets"). If
so specified in the related Prospectus Supplement, some or all of the Mortgage
Loans will include assignments of the leases of the related Mortgaged Properties
(as defined herein) and/or assignments of the rental payments due from the
lessees under such leases (each type of assignment, a "Lease Assignment"). A
significant or the sole source of payments on certain Commercial Loans (as
defined herein) and, therefore, of distributions on certain series of
Certificates, will be such rent payments. The Mortgage Loans and MBS are
collectively referred to herein as the "Mortgage Assets." If so specified in the
related Prospectus Supplement, the Trust Fund for a series of Certificates may
include letters of credit, insurance policies, guarantees, reserve funds or
other types of credit support, or any combination thereof (with respect to any
series, collectively, "Credit Support"), and currency or interest rate exchange
agreements and other financial assets, or any combination thereof (with respect
to any series, collectively, "Cash Flow Agreements"). See "Description of the
Trust Funds," "Description of the Certificates" and "Description of Credit
Support."
Each series of Certificates will consist of one or more classes of
Certificates that may (i) provide for the accrual of interest thereon based on
fixed, variable or adjustable rates; (ii) be senior or subordinate to one or
more other classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be entitled
to interest distributions, with disproportionately low, nominal or no principal
distributions; (v) provide for distributions of accrued interest thereon
commencing only following the occurrence of certain events, such as the
retirement of one or more other classes of Certificates of such series; (vi)
provide for distributions of principal sequentially, based on specified payment
schedules or other methodologies; and/or (vii) provide for distributions based
on a combination of two or more components thereof with one or more of the
characteristics described in this paragraph, to the extent of available funds,
in each case as described in the related Prospectus Supplement. Any such classes
may include classes of Offered Certificates. See "Description of the
Certificates."
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "Plan of Distribution" herein and in the related Prospectus
Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT.ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, CERTAIN RISKS SET FORTH
UNDER THE CAPTION "RISK FACTORS" HEREIN AND IN THE RELATED PROSPECTUS
SUPPLEMENT.
Prior to issuance there will have been no market for the Certificates
of any series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will continue.
This Prospectus may not be used to consummate sales of the Offered Certificates
of any series unless accompanied by the Prospectus Supplement for such series.
MORGAN STANLEY & CO.
INCORPORATED
October 9, 1998
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.
<PAGE> 201
The Certificates of each series will not represent an obligation of or
interest in the Depositor, Morgan Stanley & Co. Incorporated, any Master
Servicer, any Sub-Servicer, any Special Servicer or any of their respective
affiliates, except to the limited extent described herein and in the related
Prospectus Supplement. Neither the Certificates nor any assets in the related
Trust Fund will be guaranteed or insured by any governmental agency or
instrumentality or by any other person, unless otherwise provided in the related
Prospectus Supplement. The assets in each Trust Fund will be held in trust for
the benefit of the holders of the related series of Certificates pursuant to a
Pooling and Servicing Agreement or a Trust Agreement, as more fully described
herein.
The yield on each class of Certificates of a series will be affected
by, among other things, the rate of payment of principal (including prepayments,
repurchase and defaults) on the Mortgage Assets in the related Trust Fund and
the timing of receipt of such payments as described under the caption "Yield
Considerations" herein and in the related Prospectus Supplement. A Trust Fund
may be subject to early termination under the circumstances described herein and
in the related Prospectus Supplement.
Prospective investors should review the information appearing under the
caption "Risk Factors" herein and such information as may be set forth under the
caption "Risk Factors" in the related Prospectus Supplement before purchasing
any Offered Certificate.
If so provided in the related Prospectus Supplement, one or more
elections may be made to treat the related Trust Fund or a designated portion
thereof as a "real estate mortgage investment conduit" for federal income tax
purposes. See also "Certain Federal Income Tax Consequences" herein.
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus and Prospectus
Supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement
relating to the Offered Certificates of each series will, among other things,
set forth with respect to such Certificates, as appropriate: (i) a description
of the class or classes of Certificates, the payment provisions with respect to
each such class and the Pass-Through Rate or method of determining the
Pass-Through Rate with respect to each such class; (ii) the aggregate principal
amount and distribution dates relating to such series and, if applicable, the
initial and final scheduled distribution dates for each class; (iii) information
as to the assets comprising the Trust Fund, including the general
characteristics of the assets included therein, including the Mortgage Assets
and any Credit Support and Cash Flow Agreements (with respect to the
Certificates of any series, the "Trust Assets"); (iv) the circumstances, if any,
under which the Trust Fund may be subject to early termination; (v) additional
information with respect to the method of distribution of such Certificates;
(vi) whether one or more REMIC elections will be made and designation of the
regular interests and residual interests; (vii) the aggregate original
percentage ownership interest in the Trust Fund to be evidenced by each class of
Certificates; (viii) information as to any Master Servicer, any Sub-Servicer,
any Special Servicer (or provision for the appointment thereof) and the Trustee,
as applicable; (ix) information as to the nature and extent of subordination
with respect to any class of Certificates that is subordinate in right of
payment to any other class; and (x) whether such Certificates will be initially
issued in definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement (of which this Prospectus forms a
part) under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to each
series of Certificates contain summaries of the material terms of the documents
referred to herein and therein, but do not contain all of the
2
<PAGE> 202
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located as follows: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661; and New York Regional Office, Seven
World Trade Center, New York, New York 10048.
To the extent described in the related Prospectus Supplement, some or
all of the Mortgage Loans may be secured by an assignment of the lessors' (i.e.,
the related mortgagors') rights in one or more leases (each, a "Lease") of the
related Mortgaged Property. Unless otherwise specified in the related Prospectus
Supplement, no series of Certificates will represent interests in or obligations
of any lessee (each, a "Lessee") under a Lease. If indicated, however, in the
Prospectus Supplement for a given series, a significant or the sole source of
payments on the Mortgage Loans in such series, and, therefore, of distributions
on such Certificates, will be rental payments due from the Lessees under the
Leases. Under such circumstances, prospective investors in the related series of
Certificates may wish to consider publicly available information, if any,
concerning the Lessees. Reference should be made to the related Prospectus
Supplement for information concerning the Lessees and whether any such Lessees
are subject to the periodic reporting requirements of the Securities Exchange
Act of 1934, as amended.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Offered
Certificates or an offer of the Offered Certificates to any person in any state
or other jurisdiction in which such offer would be unlawful. The delivery of
this Prospectus at any time does not imply that information herein is correct as
of any time subsequent to its date; however, if any material change occurs while
this Prospectus is required by law to be delivered, this Prospectus will be
amended or supplemented accordingly.
A Master Servicer or the Trustee will be required to mail to holders of
Offered Certificates of each series periodic unaudited reports concerning the
related Trust Fund. Unless and until definitive Certificates are issued, or
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to Cede & Co. ("Cede"), as
nominee of The Depository Trust Company ("DTC") and registered holder of the
Offered Certificates, pursuant to the applicable Agreement. Such reports may be
available to holders of interests in the Certificates (the "Certificateholders")
upon request to their respective DTC participants. See "Description of the
Certificates--Reports to Certificateholders" and "Description of the
Agreements--Evidence as to Compliance." The Depositor will file or cause to be
filed with the Commission such periodic reports with respect to each Trust Fund
as are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports
filed or caused to be filed by the Depositor with respect to a Trust Fund
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the
termination of an offering of Offered Certificates evidencing interests therein.
The Depositor will provide or cause to be provided without charge to each person
to whom this Prospectus is delivered in connection with the offering of one or
more classes of Offered Certificates, a copy of any or all documents or reports
incorporated herein by reference, in each case to the extent such documents or
reports relate to one or more of such classes of such Offered Certificates,
other than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests to the Depositor should
be directed in writing to Morgan Stanley Capital I Inc., c/o Morgan Stanley &
Co. Incorporated, 1585 Broadway, 37th Floor, New York, New York 10036,
Attention: John E. Westerfield, or by telephone at (212) 761-4700. The Depositor
has determined that its financial statements are not material to the offering of
any Offered Certificates.
3
<PAGE> 203
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT......................................................................................... 2
AVAILABLE INFORMATION......................................................................................... 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................................................. 3
SUMMARY OF PROSPECTUS......................................................................................... 5
RISK FACTORS.................................................................................................. 15
DESCRIPTION OF THE TRUST FUNDS................................................................................ 22
USE OF PROCEEDS............................................................................................... 28
YIELD CONSIDERATIONS.......................................................................................... 28
THE DEPOSITOR................................................................................................. 31
DESCRIPTION OF THE CERTIFICATES............................................................................... 32
DESCRIPTION OF THE AGREEMENTS................................................................................. 39
DESCRIPTION OF CREDIT SUPPORT................................................................................. 56
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES.................................................... 58
CERTAIN FEDERAL INCOME TAX CONSEQUENCES....................................................................... 73
STATE TAX CONSIDERATIONS...................................................................................... 99
CERTAIN ERISA CONSIDERATIONS.................................................................................. 99
LEGAL INVESTMENT.............................................................................................. 101
PLAN OF DISTRIBUTION.......................................................................................... 103
LEGAL MATTERS................................................................................................. 104
FINANCIAL INFORMATION......................................................................................... 104
RATING........................................................................................................ 104
INDEX OF PRINCIPAL DEFINITIONS................................................................................ 105
</TABLE>
4
<PAGE> 204
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.
<TABLE>
<S> <C>
TITLE OF CERTIFICATES................................ Mortgage Pass-Through Certificates, issuable in series (the
"Certificates").
DEPOSITOR............................................ Morgan Stanley Capital I Inc., a wholly-owned subsidiary of Morgan
Stanley Group Inc. See "The Depositor."
MASTER SERVICER...................................... The master servicer (the "Master Servicer"), if any, for each series of
Certificates, which may be an affiliate of the Depositor, will be named
in the related Prospectus Supplement. See "Description of the
Agreements--Collection and Other Servicing Procedures."
SPECIAL SERVICER..................................... The special servicer (the "Special Servicer"), if any, for each series
of Certificates, which may be an affiliate of the Depositor, will be
named, or the circumstances in accordance with which a Special Servicer
will be appointed will be described, in the related Prospectus
Supplement. See "Description of the Agreements--Special Servicers."
TRUSTEE.............................................. The trustee (the "Trustee") for each series of Certificates will be
named in the related Prospectus Supplement. See "Description of the
Agreements--The Trustee."
THE TRUST ASSETS..................................... Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a Trust Fund consisting primarily of:
(a) MORTGAGE ASSETS.................................. The Mortgage Assets with respect to each series of Certificates will
consist of a pool of multifamily and/or commercial mortgage loans
(collectively, the "Mortgage Loans") and mortgage participations,
mortgage pass-through certificates or other mortgage-backed securities
evidencing interests in or secured by Mortgage Loans (collectively, the
"MBS") or a combination of Mortgage Loans and MBS. The Mortgage Loans
will not be guaranteed or insured by the Depositor or any of its
affiliates or, unless otherwise provided in the Prospectus Supplement,
by any governmental agency or instrumentality or other person. As more
specifically described
</TABLE>
5
<PAGE> 205
<TABLE>
<S> <C>
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"). 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
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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 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
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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 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
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security for such MBS. See "Description of the Trust Funds--Cash Flow
Agreements." Description of Certificates.
DISTRIBUTIONS ON CERTIFICATES........................ Each series of Certificates evidencing an interest in a Trust Fund that
includes Mortgage Loans as part of its assets will be issued pursuant
to a pooling and servicing agreement, and each series of Certificates
evidencing an interest in a Trust Fund that does not include Mortgage
Loans will be issued pursuant to a trust agreement. Pooling and
servicing agreements and trust agreements are referred to herein as the
"Agreements." Each series of Certificates will include one or more
classes. Each series of Certificates (including any class or classes of
Certificates of such series not offered hereby) will represent in the
aggregate the entire beneficial ownership interest in the Trust Fund.
Each class of Certificates (other than certain Stripped Interest
Certificates, as defined below) will have a stated principal amount (a
"Certificate Balance") and (other than certain Stripped Principal
Certificates, as defined below), will accrue interest thereon based on
a fixed, variable or adjustable interest rate (a "Pass-Through Rate").
The related Prospectus Supplement will specify the Certificate Balance,
if any, and the Pass-Through Rate for each class of Certificates or, in
the case of a variable or adjustable Pass-Through Rate, the method for
determining the Pass-Through Rate.
Each series of Certificates will consist of one or more classes of
Certificates that may (i) provide for the accrual of interest thereon
based on fixed, variable or adjustable rates; (ii) be senior
(collectively, "Senior Certificates") or subordinate (collectively,
"Subordinate Certificates") to one or more other classes of
Certificates in respect of certain distributions on the Certificates;
(iii) be entitled to principal distributions, with disproportionately
low, nominal or no interest distributions (collectively, "Stripped
Principal Certificates"); (iv) be entitled to interest distributions,
with disproportionately low, nominal or no principal distributions
(collectively, "Stripped Interest Certificates"); (v) provide for
distributions of accrued interest thereon commencing only following the
occurrence of certain events, such as the retirement of one or more
other classes of Certificates of such series (collectively, "Accrual
Certificates"); (vi) provide for distributions of principal
sequentially, based on specified payment schedules or other
methodologies; and/or (vii) provide for distributions based on a
combination of two or more components thereof with one or more of the
characteristics described in this paragraph, including a Stripped
Principal Certificate component and a Stripped Interest Certificate
component, to the extent of
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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
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Balances of such Certificates have been reduced to zero. Unless
otherwise specified in the related Prospectus Supplement, distributions
of principal of any class of Certificates will be made on a pro rata
basis among all of the Certificates of such class or by random
selection, as described in the related Prospectus Supplement or
otherwise established by the related Trustee. Stripped Interest
Certificates with no Certificate Balance will not receive distributions
in respect of principal. See "Description of the
Certificates--Distributions of Principal of the Certificates."
ADVANCES............................................. Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer will be obligated as part of its servicing
responsibilities to make certain advances that in its good faith
judgment it deems recoverable with respect to delinquent scheduled
payments on the Whole Loans in such Trust Fund. Neither the Depositor
nor any of its affiliates will have any responsibility to make such
advances. Advances made by a Master Servicer are reimbursable generally
from subsequent recoveries in respect of such Whole Loans and otherwise
to the extent described herein and in the related Prospectus
Supplement. If and to the extent provided in the Prospectus Supplement
for any series, the Master Servicer will be entitled to receive
interest on its outstanding advances, payable from amounts in the
related Trust Fund. The Prospectus Supplement for any series of
Certificates evidencing an interest in a Trust Fund that includes MBS
will describe any corresponding advancing obligation of any person in
connection with such MBS. See "Description of the
Certificates--Advances in Respect of Delinquencies."
TERMINATION.......................................... If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the
repurchase of the Assets in the related Trust Fund by the party
specified therein, under the circumstances and in the manner set forth
therein. If so provided in the related Prospectus Supplement, upon the
reduction of the Certificate Balance of a specified class or classes of
Certificates by a specified percentage or amount or on and after a date
specified in such Prospectus Supplement, the party specified therein
will solicit bids for the purchase of all of the Assets of the Trust
Fund, or of a sufficient portion of such Assets to retire such class or
classes, or purchase such Assets at a price set forth in the related
Prospectus Supplement. In addition, if so provided in the related
Prospectus Supplement, certain classes of Certificates may be purchased
subject to similar conditions. See "Description of the
Certificates--Termination."
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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."
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.
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(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
"Certain ERISA Considerations" herein and in the related Prospectus
Supplement. To the extent specified in the related Prospectus
Supplement, certain classes of Certificates may not be transferred
unless the Trustee and the Depositor are furnished with a letter of
representations or an opinion of counsel to the effect that such
transfer will not result in a violation of the prohibited transaction
provisions of ERISA and the Code, will not cause the assets of the
Trust to be deemed "plan assets" for purposes of ERISA and the Code and
will not subject the Trustee, the Depositor or the Master Servicer to
additional obligations. See "Certain ERISA Considerations" herein and
in the related Prospectus Supplement.
LEGAL INVESTMENT..................................... The related Prospectus Supplement will specify whether any class or
classes of the Offered Certificates will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984, as amended. Investors whose investment authority is
subject to legal restrictions should consult their own legal advisors
to determine whether and to what extent the Offered Certificates
constitute legal investments for them. See "Legal Investment" herein
and in the related Prospectus Supplement.
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RATING............................................... At the date of issuance, as to each series, each class of Offered
Certificates will be rated not lower than investment grade by one or
more nationally recognized statistical rating agencies (each, a "Rating
Agency"). See "Rating" herein and in the related Prospectus Supplement.
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RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in "Risk Factors" in the related Prospectus
Supplement.
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Certificates
of any series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such series
remain outstanding. Any such secondary market may provide less liquidity to
investors than any comparable market for securities evidencing interests in
single family mortgage loans. The market value of Certificates will fluctuate
with changes in prevailing rates of interest. Consequently, sale of Certificates
by a holder in any secondary market that may develop may be at a discount from
100% of their original principal balance or from their purchase price.
Furthermore, secondary market purchasers may look only hereto, to the related
Prospectus Supplement and to the reports to Certificateholders delivered
pursuant to the related Agreement as described herein under the heading
"Description of the Certificates--Reports to Certificateholders", "--Book-Entry
Registration and Definitive Certificates" and "Description of the
Agreements--Evidence as to Compliance" for information concerning the
Certificates. Except to the extent described herein and in the related
Prospectus Supplement, Certificateholders will have no redemption rights and the
Certificates are subject to early retirement only under certain specified
circumstances described herein and in the related Prospectus Supplement. See
"Description of the Certificates--Termination". Morgan Stanley & Co.
Incorporated currently expects to make a secondary market in the Offered
Certificates, but has no obligation to do so.
LIMITED ASSETS
The Certificates will not represent an interest in or obligation of the
Depositor, the Master Servicer, or any of their affiliates. The only obligations
with respect to the Certificates or the Assets will be the obligations (if any)
of the Warrantying Party (as defined herein) pursuant to certain limited
representations and warranties made with respect to the Mortgage Loans, the
Master Servicer's, any Special Servicer's and any Sub-Servicer's servicing
obligations under the related Pooling and Servicing Agreement (including the
limited obligation to make certain advances in the event of delinquencies on the
Mortgage Loans, but only to the extent deemed recoverable). Since certain
representations and warranties with respect to the Mortgage Assets may have been
made and/or assigned in connection with transfers of such Mortgage Assets prior
to the Closing Date, the rights of the Trustee and the Certificateholders with
respect to such representations or warranties will be limited to their rights as
an assignee thereof. Unless otherwise specified in the related Prospectus
Supplement, none of the Depositor, the Master Servicer or any affiliate thereof
will have any obligation with respect to representations or warranties made by
any other entity. Unless otherwise specified in the related Prospectus
Supplement, neither the Certificates nor the underlying Mortgage Assets will be
guaranteed or insured by any governmental agency or instrumentality, or by the
Depositor, the Master Servicer, any Special Servicer, any Sub-Servicer or any of
their affiliates. Proceeds of the assets included in the related Trust Fund for
each series of Certificates (including the Assets and any form of credit
enhancement) will be the sole source of payments on the Certificates, and there
will be no recourse to the Depositor or any other entity in the event that such
proceeds are insufficient or otherwise unavailable to make all payments provided
for under the Certificates.
Unless otherwise specified in the related Prospectus Supplement, a
series of Certificates will not have any claim against or security interest in
the Trust Funds for any other series. If the related Trust Fund is insufficient
to make payments on such Certificates, no other assets will be available for
payment of the deficiency. Additionally, certain amounts remaining in certain
funds or accounts, including the Certificate Account and any accounts maintained
as Credit Support, may be withdrawn under certain conditions, as described in
the related Prospectus Supplement. In the event of such withdrawal, such amounts
will not be available for future payment of principal of or interest on the
Certificates. If so provided in the Prospectus Supplement for a series of
Certificates consisting of one or more classes of Subordinate Certificates, on
any Distribution Date in respect of which losses or shortfalls in
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collections on the Assets have been incurred, the amount of such losses or
shortfalls will be borne first by one or more classes of the Subordinate
Certificates, and, thereafter, by the remaining classes of Certificates in the
priority and manner and subject to the limitations specified in 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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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
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specified, each such Commercial Loan will represent a nonrecourse obligation of
the related mortgagor secured by the lien of the related Mortgage and the
related Lease Assignments. Whether or not such loans are recourse or nonrecourse
obligations, it is not expected that the mortgagors will have any significant
assets other than the Commercial Properties and the related Leases, which will
be pledged to the Trustee under the related Agreement. Therefore, the payment of
amounts due on any such Commercial Loans, and, consequently, the payment of
principal of and interest on the related Certificates, will depend primarily or
solely on rental payments by the Lessees. Such rental payments will, in turn,
depend on continued occupancy by, and/or the creditworthiness of, such Lessees,
which in either case may be adversely affected by a general economic downturn or
an adverse change in their financial condition. Moreover, to the extent a
Commercial Property was designed for the needs of a specific type of tenant
(e.g., a nursing home, hospital, hotel or motel), the value of such property in
the event of a default by the Lessee or the early termination of such Lease may
be adversely affected because of difficulty in re-leasing the property to a
suitable substitute lessee or, if re-leasing to such a substitute is not
possible, because of the cost of altering the property for another more
marketable use. As a result, without the benefit of the Lessee's continued
support of the Commercial Property, and absent significant amortization of the
Commercial Loan, if such loan is foreclosed on and the Commercial Property
liquidated following a lease default, the net proceeds might be insufficient to
cover the outstanding principal and interest owing on such loan, thereby
increasing the risk that holders of the Certificates will suffer some loss.
BALLOON PAYMENTS
Certain of the Mortgage Loans (the "Balloon Mortgage Loans") as of the
Cut-off Date may not be fully amortizing over their terms to maturity and, thus,
will require substantial principal payments (i.e., balloon payments) at their
stated maturity. Mortgage Loans with balloon payments involve a greater degree
of risk because the ability of a mortgagor to make a balloon payment typically
will depend upon its ability either to timely refinance the loan or to timely
sell the related Mortgaged Property. The ability of a mortgagor to accomplish
either of these goals will be affected by a number of factors, including the
level of available mortgage interest rates at the time of sale or refinancing,
the mortgagor's equity in the related Mortgaged Property, the financial
condition and operating history of the mortgagor and the related Mortgaged
Property, tax laws, rent control laws (with respect to certain Multifamily
Properties and mobile home parks), reimbursement rates (with respect to certain
hospitals, nursing homes and convalescent homes), renewability of operating
licenses, prevailing general economic conditions and the availability of credit
for commercial or multifamily real properties, as the case may be, generally.
JUNIOR MORTGAGE LOANS
To the extent specified in the related Prospectus Supplement, certain
of the Mortgage Loans may be secured primarily by junior mortgages. In the case
of liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, such Mortgage Loan would suffer a loss and,
accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans will
be greater with respect to junior Mortgage Loans. See "--Risks Associated with
Mortgage Loans and Mortgaged Properties."
OBLIGOR DEFAULT
If so specified in the related Prospectus Supplement, in order to
maximize recoveries on defaulted Whole Loans, a Master Servicer, a Sub-Servicer
or a Special Servicer will be permitted (within prescribed parameters) to extend
and modify Whole Loans that are in default or as to which a payment default is
imminent, including in particular with respect to balloon payments. In addition,
a Master Servicer, a Sub-Servicer or a Special Servicer may receive a workout
fee based on receipts from or proceeds of such Whole Loans. While any such
entity generally will be required to determine that any such extension or
modification is reasonably likely to produce a greater recovery on a present
value basis than liquidation, there can be no assurance that such flexibility
with respect to extensions or modifications or payment of a workout fee will
increase the present value of receipts from or proceeds of Whole Loans that are
in default or as to which a payment default is imminent. Additionally, if so
specified in the related
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Prospectus Supplement, certain of the Mortgage Loans included in the Mortgage
Pool for a Series may have been subject to workouts or similar arrangements
following periods of delinquency and default.
MORTGAGOR TYPE
Mortgage Loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of single family mortgage loans. The mortgagor's sophistication and form
of organization may increase the likelihood of protracted litigation or
bankruptcy in default situations.
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for a series of Certificates will describe
any Credit Support in the related Trust Fund, which may include letters of
credit, insurance policies, guarantees, reserve funds or other types of credit
support, or combinations thereof. Use of Credit Support will be subject to the
conditions and limitations described herein and in the related Prospectus
Supplement. Moreover, such Credit Support may not cover all potential losses or
risks; for example, Credit Support may or may not cover fraud or negligence by a
mortgage loan originator or other parties.
A series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce the
risk to holders of Senior Certificates of delinquent distributions or ultimate
losses, the amount of subordination will be limited and may decline under
certain circumstances. In addition, if principal payments on one or more classes
of Certificates of a series are made in a specified order of priority, any
limits with respect to the aggregate amount of claims under any related Credit
Support may be exhausted before the principal of the lower priority classes of
Certificates of such series has been repaid. As a result, the impact of
significant losses and shortfalls on the Assets may fall primarily upon those
classes of Certificates having a lower priority of payment. Moreover, if a form
of Credit Support covers more than one series of Certificates (each, a "Covered
Trust"), holders of Certificates evidencing an interest in a Covered Trust will
be subject to the risk that such Credit Support will be exhausted by the claims
of other Covered Trusts.
The amount of any applicable Credit Support supporting one or more
classes of Offered Certificates, including the subordination of one or more
classes of Certificates, will be determined on the basis of criteria established
by each Rating Agency rating such classes of Certificates based on an assumed
level of defaults, delinquencies, other losses or other factors. There can,
however, be no assurance that the loss experience on the related Mortgage Assets
will not exceed such assumed levels. See "--Limited Nature of Ratings,"
"Description of the Certificates" and "Description of Credit Support."
Regardless of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will be subject to periodic
reduction in accordance with a schedule or formula. The Master Servicer will
generally be permitted to reduce, terminate or substitute all or a portion of
the credit enhancement for any series of Certificates, if the applicable Rating
Agency indicates that the then-current rating thereof will not be adversely
affected. The rating of any series of Certificates by any applicable Rating
Agency may be lowered following the initial issuance thereof as a result of the
downgrading of the obligations of any applicable credit support provider, or as
a result of losses on the related Mortgage Assets substantially in excess of the
levels contemplated by such Rating Agency at the time of its initial rating
analysis. None of the Depositor, the Master Servicer or any of their affiliates
will have any obligation to replace or supplement any credit enhancement, or to
take any other action to maintain any rating of any series of Certificates.
SUBORDINATION OF THE SUBORDINATE CERTIFICATES; EFFECT OF LOSSES ON THE ASSETS
The rights of Subordinate Certificateholders to receive distributions
to which they would otherwise be entitled with respect to the Assets will be
subordinate to the rights of the Master Servicer (to the extent that the Master
Servicer is paid its servicing fee, including any unpaid servicing fees with
respect to one or more prior Due
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Periods, and is reimbursed for certain unreimbursed advances and unreimbursed
liquidation expenses) and the Senior Certificateholders to the extent described
herein. As a result of the foregoing, investors must be prepared to bear the
risk that they may be subject to delays in payment and may not recover their
initial investments in the Subordinate Certificates. See "Description of the
Certificates--General" and "--Allocation of Losses and Shortfalls."
The yields on the Subordinate Certificates may be extremely sensitive
to the loss experience of the Assets and the timing of any such losses. If the
actual rate and amount of losses experienced by the Assets exceed the rate and
amount of such losses assumed by an investor, the yields to maturity on the
Subordinate Certificates may be lower than anticipated.
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the mortgagor sells, transfers
or conveys the related Mortgaged Property or its interest in the Mortgaged
Property. Mortgages may also include a debt-acceleration clause, which permits
the lender to accelerate the debt upon a monetary or non-monetary default of the
mortgagor. Such clauses are generally enforceable subject to certain exceptions.
The courts of all states will enforce clauses providing for acceleration in the
event of a material payment default. The equity courts of any state, however,
may refuse the foreclosure of a mortgage or deed of trust when an acceleration
of the indebtedness would be inequitable or unjust or the circumstances would
render the acceleration unconscionable.
If so specified in the related Prospectus Supplement, the Mortgage
Loans will be secured by an assignment of leases and rents pursuant to which the
mortgagor typically assigns its right, title and interest as landlord under the
leases on the related Mortgaged Property and the income derived therefrom to the
lender as further security for the related Mortgage Loan, while retaining a
license to collect rents for so long as there is no default. In the event the
mortgagor defaults, the license terminates and the lender is entitled to collect
rents. Such assignments are typically not perfected as security interests prior
to actual possession of the cash flows. Some state laws may require that the
lender take possession of the Mortgaged Property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect of
the mortgagor, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Leases and Rents."
ENVIRONMENTAL RISKS
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination of
a property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. Moreoever, the presence of hazardous or
toxic substances, or the failure to remediate such property, may adversely
affect the owner or operator's ability to borrow using such property as
collateral. In addition, under the laws of some states and under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA") and other federal law, a lender may be liable, as an "owner" or
"operator," for costs of addressing releases or threatened releases of hazardous
substances that require remedy at a property, if agents or employees of the
lender have become sufficiently involved in the operations of the mortgagor,
regardless of whether or not the environmental damage or threat was caused by a
prior owner. A lender also risks such liability on foreclosure of the mortgage
under certain circumstances. Unless otherwise specified in the related
Prospectus Supplement, each Pooling and Servicing Agreement will provide that
none of the Master Servicer, the Sub-Servicer or the Special Servicer, acting on
behalf of the Trust Fund, may acquire title to a Mortgaged Property securing a
Mortgage Loan or take over its operation unless the Master Servicer has
previously determined, based upon a report prepared by a person who regularly
conducts environmental audits, that: (i) the Mortgaged Property is in compliance
with applicable environmental laws, and there are no circumstances present at
the Mortgaged Property relating to the use, management or disposal of any
hazardous substances, hazardous materials, wastes, or petroleum based materials
for which investigation, testing, monitoring, containment, clean-up or
remediation could be required under any federal, state or local law or
regulation; or (ii) if the Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic interest of
the Trust Fund to acquire title to the Mortgaged Property
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and further to take such actions as would be necessary and appropriate to effect
such compliance and/or respond to such circumstances. See "Certain Legal Aspects
of the Mortgage Loans and the Leases--Environmental Legislation."
ERISA CONSIDERATIONS
Generally, ERISA applies to investments made by employee benefit plans
and transactions involving the assets of such plans. Due to the complexity of
regulations which govern such plans, prospective investors that are subject to
ERISA are urged to consult their own counsel regarding consequences under ERISA
of acquisition, ownership and disposition of the Offered Certificates of any
series.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Except as provided in the Prospectus Supplement, REMIC Residual
Certificates, if offered hereunder, are anticipated to have "phantom income"
associated with them. That is, taxable income is anticipated to be allocated to
the REMIC Residual Certificates in the early years of the existence of the
related REMIC, even if the REMIC Residual Certificates receive no distributions
from the related REMIC, with a corresponding amount of losses allocated to the
REMIC Residual Certificates in later years. Accordingly, the present value of
the tax detriments associated with the REMIC Residual Certificates may
significantly exceed the present value of the tax benefits related thereto, and
the REMIC Residual Certificates may have a negative "value." Moreover, the REMIC
Residual Certificates will in effect be allocated an amount of gross income
equal to the non-interest expenses of the REMIC, but such expenses will be
deductible by holders of the REMIC Residual Certificates that are individuals
only as itemized deductions (and be subject to all the limitations applicable to
itemized deductions). Accordingly, investment in the REMIC Residual Certificates
will generally not be suitable for individuals or for certain pass-through
entities, such as partnerships or S corporations, that have individuals as
partners or shareholders. In addition, REMIC Residual Certificates are subject
to certain restrictions on transfer. Finally, prospective purchasers of a REMIC
Residual Certificate should be aware that recently issued final regulations
provide restrictions on the ability to mark-to-market certain "negative value"
REMIC residual interests. See "Certain Federal Income Tax Consequences--REMICs."
CONTROL
Under certain circumstances, the consent or approval of the holders of
a specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of a series or a similar means of allocating decision-making under
the related Agreement ("Voting Rights") will be required to direct, and will be
sufficient to bind all Certificateholders of such series to, certain actions,
including directing the Special Servicer or the Master Servicer with respect to
actions to be taken with respect to certain Mortgage Loans and REO Properties
and amending the related Agreement in certain circumstances. See "Description of
the Agreements--Events of Default," "--Rights Upon Event of Default,"
"--Amendment" and "--List of Certificateholders."
BOOK-ENTRY REGISTRATION
If so provided in the Prospectus Supplement, one or more classes of the
Certificates will be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be registered
in the names of the Certificateholders or their nominees. Because of this,
unless and until Definitive Certificates are issued, Certificateholders will not
be recognized by the Trustee as "Certificateholders" (as that term is to be used
in the related Agreement). Hence, until such time, Certificateholders will be
able to exercise the rights of Certificateholders only indirectly through DTC
and its participating organizations. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
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DESCRIPTION OF THE TRUST FUNDS
ASSETS
The primary assets of each Trust Fund (the "Assets") will include (i)
multifamily and/or commercial mortgage loans (the "Mortgage Loans"), (ii)
mortgage participations, pass-through certificates or other mortgage-backed
securities evidencing interests in or secured by one or more Mortgage Loans or
other similar participations, certificates or securities ("MBS"), (iii) direct
obligations of the United States, agencies thereof or agencies created thereby
which are not subject to redemption prior to maturity at the option of the
issuer and are (a) interest-bearing securities, (b) non-interest-bearing
securities, (c) originally interest-bearing securities from which coupons
representing the right to payment of interest have been removed, or (d)
interest-bearing securities from which the right to payment of principal has
been removed (the "Government Securities"), or (iv) a combination of Mortgage
Loans, MBS and Government Securities. As used herein, "Mortgage Loans" refers to
both whole Mortgage Loans and Mortgage Loans underlying MBS. Mortgage Loans that
secure, or interests in which are evidenced by, MBS are herein sometimes
referred to as Underlying Mortgage Loans. Mortgage Loans that are not Underlying
Mortgage Loans are sometimes referred to as "Whole Loans." Any mortgage
participations, pass-through certificates or other asset-backed certificates in
which an MBS evidences an interest or which secure an MBS are sometimes referred
to herein also as MBS or as "Underlying MBS." Mortgage Loans and MBS are
sometimes referred to herein as "Mortgage Assets." The Mortgage Assets will not
be guaranteed or insured by Morgan Stanley Capital I Inc. (the "Depositor") or
any of its affiliates or, unless otherwise provided in the Prospectus
Supplement, by any governmental agency or instrumentality or by any other
person. Each Asset will be selected by the Depositor for inclusion in a Trust
Fund from among those purchased, either directly or indirectly, from a prior
holder thereof (an "Asset Seller"), which may be an affiliate of the Depositor
and, with respect to Mortgage Assets, which prior holder may or may not be the
originator of such Mortgage Loan or the issuer of such MBS.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be entitled to payment only from the assets of the related
Trust Fund and will not be entitled to payments in respect of the assets of any
other trust fund established by the Depositor. If specified in the related
Prospectus Supplement, the assets of a Trust Fund will consist of certificates
representing beneficial ownership interests in another trust fund that contains
the Assets.
MORTGAGE LOANS
GENERAL
The Mortgage Loans will be secured by liens on, or security interests
in, Mortgaged Properties consisting of (i) residential properties consisting of
five or more rental or cooperatively-owned dwelling units in high-rise, mid-rise
or garden apartment buildings ("Multifamily Properties" and the related loans,
"Multifamily Loans") or (ii) office buildings, shopping centers, retail stores,
hotels or motels, nursing homes, hospitals or other health care-related
facilities, mobile home parks, warehouse facilities, mini-warehouse facilities
or self-storage facilities, industrial plants, congregate care facilities, mixed
use or other types of commercial properties ("Commercial Properties" and the
related loans, "Commercial Loans") located, unless otherwise specified in the
related Prospectus Supplement, in any one of the fifty states, the District of
Columbia or the Commonwealth of Puerto Rico. To the extent specified in the
related Prospectus Supplement, the Mortgage Loans will be secured by first or
junior mortgages or deeds of trust or other similar security instruments
creating a first or junior lien on Mortgaged Property. Multifamily Property may
include mixed commercial and residential structures and may include apartment
buildings owned by private cooperative housing corporations ("Cooperatives").
The Mortgaged Properties may include leasehold interests in properties, the
title to which is held by third party lessors. Unless otherwise specified in the
Prospectus Supplement, the term of any such leasehold will exceed the term of
the related mortgage note by at least five years. Each Mortgage Loan will have
been originated by a person (the "Originator") other than the Depositor. The
related Prospectus Supplement will indicate if any Originator is an affiliate of
the Depositor. The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages or deeds of 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.
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LEASES
To the extent specified in the related Prospectus Supplement, the
Commercial Properties may be leased to Lessees that respectively occupy all or a
portion of such properties. Pursuant to a Lease Assignment, the related
mortgagor may assign its rights, title and interest as lessor under each Lease
and the income derived therefrom to the related mortgagee, while retaining a
license to collect the rents for so long as there is no default. If the
mortgagor defaults, the license terminates and the mortgagee or its agent is
entitled to collect the rents from the related Lessee or Lessees for application
to the monetary obligations of the mortgagor. State law may limit or restrict
the enforcement of the Lease Assignments by a mortgagee until it takes
possession of the related Mortgaged Property and/or a receiver is appointed. See
"Certain Legal Aspects of the Mortgage Loans and the Leases--Leases and Rents."
Alternatively, to the extent specified in the related Prospectus Supplement, the
mortgagor and the mortgagee may agree that payments under Leases are to be made
directly to the Master Servicer.
To the extent described in the related Prospectus Supplement, the
Leases may require the Lessees to pay rent that is sufficient in the aggregate
to cover all scheduled payments of principal and interest on the related
Mortgage Loans and, in certain cases, their pro rata share of the operating
expenses, insurance premiums and real estate taxes associated with the Mortgaged
Properties. Certain of the Leases may require the mortgagor to bear costs
associated with structural repairs and/or the maintenance of the exterior or
other portions of the Mortgaged Property or provide for certain limits on the
aggregate amount of operating expenses, insurance premiums, taxes and other
expenses that the Lessees are required to pay. If so specified in the related
Prospectus Supplement, under certain circumstances the Lessees may be permitted
to set off their rental obligations against the obligations of the mortgagors
under the Leases. In those cases where payments under the Leases (net of any
operating expenses payable by the mortgagors) are insufficient to pay all of the
scheduled principal and interest on the related Mortgage Loans, the mortgagors
must rely on other income or sources (including security deposits) generated by
the related Mortgaged Property to make payments on the related Mortgage Loan. To
the extent specified in the related Prospectus Supplement, some Commercial
Properties may be leased entirely to one Lessee. In such cases, absent the
availability of other funds, the mortgagor must rely entirely on rent paid by
such Lessee in order for the mortgagor to pay all of the scheduled principal and
interest on the related Commercial Loan. To the extent specified in the related
Prospectus Supplement, certain of the Leases may expire prior to the stated
maturity of the related Mortgage Loan. In such cases, upon expiration of the
Leases the mortgagors will have to look to alternative sources of income,
including rent payment by any new Lessees or proceeds from the sale or
refinancing of the Mortgaged Property, to cover the payments of principal and
interest due on such Mortgage Loans unless the Lease is renewed. As specified in
the related Prospectus Supplement, certain of the Leases may provide that upon
the occurrence of a casualty affecting a Mortgaged Property, the Lessee will
have the right to terminate its Lease, unless the mortgagor, as lessor, is able
to cause the Mortgaged Property to be restored within a specified period of
time. Certain Leases may provide that it is the lessor's responsibility, while
other Leases provide that it is the Lessee's responsibility, to restore the
Mortgaged Property after a casualty to its original condition. Certain Leases
may provide a right of termination to the related Lessee if a taking of a
material or specified percentage of the leased space in the Mortgaged Property
occurs, or if the ingress or egress to the leased space has been materially
impaired.
DEFAULT AND LOSS CONSIDERATIONS WITH RESPECT TO THE MORTGAGE LOANS
Mortgage loans secured by commercial and multifamily properties are
markedly different from owner-occupied single family mortgage loans. The
repayment of loans secured by commercial or multifamily properties is typically
dependent upon the successful operation of such property rather than upon the
liquidation value of the real estate. Unless otherwise specified in the
Prospectus Supplement, the Mortgage Loans will be non-recourse loans, which
means that, absent special facts, the mortgagee may look only to the Net
Operating Income from the property for repayment of the mortgage debt, and not
to any other of the mortgagor's assets, in the event of the mortgagor's default.
Lenders typically look to the Debt Service Coverage Ratio of a loan secured by
income-producing property as an important measure of the risk of default on such
a loan. The "Debt Service Coverage Ratio" of a Mortgage Loan at any given time
is the ratio of the Net Operating Income for a twelve-month 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
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expenditures and (iii) debt service on loans secured by the Mortgaged Property.
The Net Operating Income of a Mortgaged Property will fluctuate over time and
may be sufficient or insufficient to cover debt service on the related Mortgage
Loan at any given time.
As the primary component of Net Operating Income, rental income (as
well as maintenance payments from tenant-stockholders of a Cooperative) is
subject to the vagaries of the applicable real estate market and/or business
climate. Properties typically leased, occupied or used on a short-term basis,
such as health care-related facilities, hotels and motels, and mini-warehouse
and self-storage facilities, tend to be affected more rapidly by changes in
market or business conditions than do properties leased, occupied or used for
longer periods, such as (typically) warehouses, retail stores, office buildings
and industrial plants. Commercial Loans may be secured by owner-occupied
Mortgaged Properties or Mortgaged Properties leased to a single tenant.
Accordingly, a decline in the financial condition of the mortgagor or single
tenant, as applicable, may have a disproportionately greater effect on the Net
Operating Income from such Mortgaged Properties than would be the case with
respect to Mortgaged Properties with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses, including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the risk of default on the related
Mortgage Loan. As may be further described in the related Prospectus Supplement,
in some cases leases of Mortgaged Properties may provide that the Lessee, rather
than the mortgagor, is responsible for payment of some or all of these expenses;
however, because leases are subject to default risks as well when a tenant's
income is insufficient to cover its rent and operating expenses, the existence
of such "net of expense" provisions will only temper, not eliminate, the impact
of expense increases on the performance of the related Mortgage Loan. See
"--Leases" above.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities and hospitals,
the income from which and the operating expenses of which are subject to state
and/or federal regulations, such as Medicare and Medicaid, and multifamily
properties and mobile home parks, which may be subject to state or local rent
control regulation and, in certain cases, restrictions on changes in use of the
property. Low-and moderate-income housing in particular may be subject to legal
limitations and regulations but, because of such regulations, may also be less
sensitive to fluctuations in market rents generally.
The Debt Service Coverage Ratio should not be relied upon as the sole
measure of the risk of default of any loan, however, since other factors may
outweigh a high Debt Service Coverage Ratio. With respect to a Balloon Mortgage
Loan, for example, the risk of default as a result of the unavailability of a
source of funds to finance the related balloon payment at maturity on terms
comparable to or better than those of such Balloon Mortgage Loans could be
significant even though the related Debt Service Coverage Ratio is high.
The liquidation value of any Mortgaged Property may be adversely
affected by risks generally incident to interests in real property, including
declines in rental or occupancy rates. Lenders generally use the Loan-to-Value
Ratio of a mortgage loan as a measure of risk of loss if a property must be
liquidated upon a default by the mortgagor.
Appraised values of income-producing properties may be based on the
market comparison method (recent resale value of comparable properties at the
date of the appraisal), the cost replacement method (the cost of replacing the
property at such date), the income capitalization method (a projection of value
based upon the 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
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appropriate capitalization rate. Where more than one of these appraisal methods
are used and create significantly different results, or where a high
Loan-to-Value Ratio accompanies a high Debt Service Coverage Ratio (or vice
versa), the analysis of default and loss risks is even more difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Multifamily and Commercial
Loans from single family mortgage loans and provide insight to the risks
associated with income-producing real estate, there is no assurance that such
factors will in fact have been considered by the Originators of the Multifamily
and Commercial Loans, or that, for any of such Mortgage Loans, they are complete
or relevant. See "Risk Factors--Risks Associated with Mortgage Loans and
Mortgaged Properties," "--Balloon Payments," "--Junior Mortgage Loans,"
"--Obligor Default" and "--Mortgagor Type."
LOAN-TO-VALUE RATIO
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is the
ratio (expressed as a percentage) of the then outstanding principal balance of
the Mortgage Loan to the Value of the related Mortgaged Property. The "Value" of
a Mortgaged Property, other than with respect to Refinance Loans, is generally
the lesser of (a) the appraised value determined in an appraisal obtained by the
originator at origination of such loan and (b) the sales price for such
property. "Refinance Loans" are loans made to refinance existing loans. Unless
otherwise set forth in the related Prospectus Supplement, the Value of the
Mortgaged Property securing a Refinance Loan is the appraised value thereof
determined in an appraisal obtained at the time of origination of the Refinance
Loan. The Value of a Mortgaged Property as of the date of initial issuance of
the related series of Certificates may be less than the value at origination and
will fluctuate from time to time based upon changes in economic conditions and
the real estate market.
MORTGAGE LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS
Each Prospectus Supplement will contain information, as of the date of
such Prospectus Supplement and to the extent then applicable and specifically
known to the Depositor, with respect to the Mortgage Loans, including (i) the
aggregate outstanding principal balance and the largest, smallest and average
outstanding principal balance of the Mortgage Loans as of the applicable Cut-off
Date, (ii) the type of property securing the Mortgage Loans (e.g., Multifamily
Property or Commercial Property and the type of property in each such category),
(iii) the weighted average (by principal balance) of the original and remaining
terms to maturity of the Mortgage Loans, (iv) the earliest and latest
origination date and maturity date of the Mortgage Loans, (v) the weighted
average (by principal balance) of the Loan-to-Value Ratios at origination of the
Mortgage Loans, (vi) the Mortgage Rates or range of Mortgage Rates and the
weighted average Mortgage Rate borne by the Mortgage Loans, (vii) the state or
states in which most of the Mortgaged Properties are located, (viii) information
with respect to the prepayment provisions, if any, of the Mortgage Loans, (ix)
the weighted average Retained Interest, if any, (x) with respect to Mortgage
Loans with adjustable Mortgage Rates ("ARM Loans"), the index, the frequency of
the adjustment dates, the highest, lowest and weighted average note margin and
pass-through margin, and the maximum Mortgage Rate or monthly payment variation
at the time of any adjustment thereof and over the life of the ARM Loan and the
frequency of such monthly payment adjustments, (xi) the Debt Service Coverage
Ratio either at origination or as of a more recent date (or both) and (xii)
information regarding the payment characteristics of the Mortgage Loans,
including without limitation balloon payment and other amortization provisions.
The related Prospectus Supplement will also contain certain information
available to the Depositor with respect to the provisions of leases and the
nature of tenants of the Mortgaged Properties and other information referred to
in a general manner under "--Mortgage Loans--Default and Loss Considerations
with Respect to the Mortgage Loans" above. If specific information respecting
the Mortgage Loans is not known to the Depositor at the time Certificates are
initially offered, more general information of the nature described above will
be provided in the Prospectus Supplement, and specific information will be set
forth in a report which will be available to purchasers of the related
Certificates at or before 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.
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PAYMENT PROVISIONS OF THE MORTGAGE LOANS
Unless otherwise specified in the related Prospectus Supplement, all of
the Mortgage Loans will (i) have individual principal balances at origination of
not less than $25,000, (ii) have original terms to maturity of not more than 40
years and (iii) provide for payments of principal, interest or both, on due
dates that occur monthly, quarterly or semi-annually or at such other interval
as is specified in the related Prospectus Supplement. Each Mortgage Loan may
provide for no accrual of interest or for accrual of interest thereon at an
interest rate (a "Mortgage Rate") that is fixed over its term or that adjusts
from time to time, or that may be converted from an adjustable to a fixed
Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, from time to time
pursuant to an election or as otherwise specified on the related Mortgage Note,
in each case as described in the related Prospectus Supplement. Each Mortgage
Loan may provide for scheduled payments to maturity or payments that adjust from
time to time to accommodate changes in the Mortgage Rate or to reflect the
occurrence of certain events, and may provide for negative amortization or
accelerated amortization, in each case as described in the related Prospectus
Supplement. Each Mortgage Loan may be fully amortizing or require a balloon
payment due on its stated maturity date, in each case as described in the
related Prospectus Supplement. Each Mortgage Loan may contain prohibitions on
prepayment (a "Lock-out Period" and the date of expiration thereof, a "Lock-out
Date") or require payment of a premium or a yield maintenance penalty (a
"Prepayment Premium") in connection with a prepayment, in each case as described
in the related Prospectus Supplement. In the event that holders of any class or
classes of Offered Certificates will be entitled to all or a portion of any
Prepayment Premiums collected in respect of Mortgage Loans, the related
Prospectus Supplement will specify the method or methods by which any such
amounts will be allocated. A Mortgage Loan may also contain provisions entitling
the mortgagee to a share of profits realized from the operation or disposition
of the Mortgaged Property ("Equity Participations"), as described in the related
Prospectus Supplement. In the event that holders of any class or classes of
Offered Certificates will be entitled to all or a portion of an Equity
Participation, the related Prospectus Supplement will specify the terms and
provisions of the Equity Participation and the method or methods by which
distributions in respect thereof will be allocated among such Certificates.
MBS
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, a trust agreement, an indenture or
similar agreement (an "MBS Agreement"). A seller (the "MBS Issuer") and/or
servicer (the "MBS Servicer") of the underlying Mortgage Loans (or Underlying
MBS) will have entered into the MBS Agreement with a trustee or a custodian
under the MBS Agreement (the "MBS Trustee"), if any, or with the original
purchaser of the interest in the underlying Mortgage Loans or MBS evidenced by
the MBS.
Distributions of any principal or interest, as applicable, will be made
on MBS on the dates specified in the related Prospectus Supplement. The MBS may
be issued in one or more classes with characteristics similar to the classes of
Certificates described in this Prospectus. Any principal or interest
distributions will be made on the MBS by the MBS Trustee or the MBS Servicer.
The MBS Issuer or the MBS Servicer or another person specified in the related
Prospectus Supplement may have the right or obligation to repurchase or
substitute assets underlying the MBS after a certain date or under other
circumstances specified in the related Prospectus Supplement.
Enhancement in the form of reserve funds, subordination or other forms
of credit support similar to that described for the Certificates under
"Description of Credit Support" may be provided with respect to the MBS. The
type, characteristics and amount of such credit support, if any, will be a
function of certain characteristics of the Mortgage Loans or Underlying MBS
evidenced by or securing such MBS and other factors and generally will have been
established for the MBS on the basis of requirements of either any Rating Agency
that may have assigned a rating to the MBS or the initial purchasers of the MBS.
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
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rates, if any, (v) the applicable payment provisions for the MBS, including, but
not limited to, any priorities, payment schedules and subordination features,
(vi) the MBS Issuer, MBS Servicer and MBS Trustee, as applicable, (vii) certain
characteristics of the credit support, if any, such as subordination, reserve
funds, insurance policies, letters of credit or guarantees relating to the
related Underlying Mortgage Loans, the Underlying MBS or directly to such MBS,
(viii) the terms on which the related Underlying Mortgage Loans or Underlying
MBS for such MBS or the MBS may, or are required to, be purchased prior to their
maturity, (ix) the terms on which Mortgage Loans or Underlying MBS may be
substituted for those originally underlying the MBS, (x) the servicing fees
payable under the MBS Agreement, (xi) the type of information in respect of the
Underlying Mortgage Loans described under "--Mortgage Loans--Mortgage Loan
Information in Prospectus Supplements" above, and the type of information in
respect of the Underlying MBS described in this paragraph, (xii) the
characteristics of any cash flow agreements that are included as part of the
trust fund evidenced or secured by the MBS and (xiii) whether the MBS is in
certificated form, book-entry form or held through a depository such as The
Depository Trust Company or the Participants Trust Company.
GOVERNMENT SECURITIES
The Prospectus Supplement for a series of Certificates evidencing
interests in Assets of a Trust Fund that include Government Securities will
specify, to the extent available, (i) the aggregate approximate initial and
outstanding principal amounts or notional amounts, as applicable, and types of
the Government Securities to be included in the Trust Fund, (ii) the original
and remaining terms to stated maturity of the Government Securities, (iii)
whether such Government Securities are entitled only to interest payments, only
to principal payments or to both, (iv) the interest rates of the Government
Securities or the formula to determine such rates, if any, (v) the applicable
payment provisions for the Government Securities and (vi) to what extent, if
any, the obligation evidenced thereby is backed by the full faith and credit of
the United States.
ACCOUNTS
Each Trust Fund will include one or more accounts established and
maintained on behalf of the Certificateholders into which the person or persons
designated in the related Prospectus Supplement will, to the extent described
herein and in such Prospectus Supplement deposit all payments and collections
received or advanced with respect to the Assets and other assets in the Trust
Fund. Such an account may be maintained as an interest bearing or a non-interest
bearing account, and funds held therein may be held as cash or invested in
certain short-term, investment grade obligations, in each case as described in
the related Prospectus Supplement. See "Description of the
Agreement--Certificate Account and Other Collection Accounts."
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Assets in the related
Trust Fund may be provided to one or more classes of Certificates in the related
series in the form of subordination of one or more other classes of Certificates
in such series or by one or more other types of credit support, such as a letter
of credit, insurance policy, guarantee, reserve fund or another type of credit
support, or a combination thereof (any such coverage with respect to the
Certificates of any series, "Credit Support"). The amount and types of coverage,
the identification of the entity providing the coverage (if applicable) and
related information with respect to each type of Credit Support, if any, will be
described in the Prospectus Supplement for a series of Certificates. See "Risk
Factors--Credit Support Limitations" and "Description of Credit Support."
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
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Certificates. (Currency exchange agreements might be included in the Trust Fund
if some or all of the Mortgage Assets (such as Mortgage Loans secured by
Mortgaged Properties located outside the United States) were denominated in a
non-United States currency.) The principal terms of any such guaranteed
investment contract or other agreement (any such agreement, a "Cash Flow
Agreement"), including, without limitation, provisions relating to the timing,
manner and amount of payments thereunder and provisions relating to the
termination thereof, will be described in the Prospectus Supplement for the
related series. In addition, the related Prospectus Supplement will provide
certain information with respect to the obligor under any such Cash Flow
Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will
be applied by the Depositor to the purchase of Assets and to pay for certain
expenses incurred in connection with such purchase of Assets and sale of
Certificates. The Depositor expects to sell the Certificates from time to time,
but the timing and amount of offerings of Certificates will depend on a number
of factors, including the volume of Assets acquired by the Depositor, prevailing
interest rates, availability of funds and general market conditions.
YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by
the Certificateholder, the Pass-Through Rate of the Certificate, the receipt and
timing of receipt of distributions on the Certificate and the weighted average
life of the Assets in the related Trust Fund (which may be affected by
prepayments, defaults, liquidations or repurchases). See "Risk Factors."
PASS-THROUGH RATE
Certificates of any class within a series may have fixed, variable or
adjustable Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Assets in the related Trust Fund. The Prospectus Supplement
with respect to any series of Certificates will specify the Pass-Through Rate
for each class of such Certificates or, in the case of a variable or adjustable
Pass-Through Rate, the method of determining the Pass-Through Rate; the effect,
if any, of the prepayment of any Mortgage Asset on the Pass-Through Rate of one
or more classes of Certificates; and whether the distributions of interest on
the Certificates of any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement.
The effective yield to maturity to each holder of Certificates entitled
to payments of interest will be below that otherwise produced by the applicable
Pass-Through Rate and purchase price of such Certificate because, while interest
may accrue on each Asset during a certain period, the distribution of such
interest will be made on a day which may be several days, weeks or months
following the period of accrual.
TIMING OF PAYMENT OF INTEREST
Each payment of interest on the Certificates (or addition to the
Certificate Balance of a class of Accrual Certificates) on a Distribution Date
will include interest accrued during the Interest Accrual Period for such
Distribution Date. As indicated above under "--Pass-Through Rate," if the
Interest Accrual Period ends on a date other than a Distribution Date for the
related series, the yield realized by the holders of such Certificates may be
lower than the yield that would result if the Interest Accrual Period ended on
such Distribution Date. In addition, 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
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Interest Accrual Period. The Interest Accrual Period for any class of Offered
Certificates will be described in the related Prospectus Supplement.
PAYMENTS OF PRINCIPAL; PREPAYMENTS
The yield to maturity on the Certificates will be affected by the rate
of principal payments on the Assets (including principal prepayments on Mortgage
Loans resulting from both voluntary prepayments by the mortgagors and
involuntary liquidations). Such payments may be directly dependent upon the
payments on Leases underlying such Mortgage Loans. The rate at which principal
prepayments occur on the Mortgage Loans will be affected by a variety of
factors, including, without limitation, the terms of the Mortgage Loans, the
level of prevailing interest rates, the availability of mortgage credit and
economic, demographic, geographic, tax, legal and other factors. In general,
however, if prevailing interest rates fall significantly below the Mortgage
Rates on the Mortgage Loans comprising or underlying the Assets in a particular
Trust Fund, such Mortgage Loans are likely to be the subject of higher principal
prepayments than if prevailing rates remain at or above the rates borne by such
Mortgage Loans. In this regard, it should be noted that certain Assets may
consist of Mortgage Loans with different Mortgage Rates and the stated
pass-through or pay-through interest rate of certain MBS may be a number of
percentage points higher or lower than certain of the underlying Mortgage Loans.
The rate of principal payments on some or all of the classes of Certificates of
a series will correspond to the rate of principal payments on the Assets in the
related Trust Fund and is likely to be affected by the existence of Lock-out
Periods and Prepayment Premium provisions of the Mortgage Loans underlying or
comprising such Assets, and by the extent to which the servicer of any such
Mortgage Loan is able to enforce such provisions. Mortgage Loans with a Lock-out
Period or a Prepayment Premium provision, to the extent enforceable, generally
would be expected to experience a lower rate of principal prepayments than
otherwise identical Mortgage Loans without such provisions, with shorter
Lock-out Periods or with lower Prepayment Premiums.
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Assets, the
actual yield to maturity will be lower than that so calculated. Conversely, if
the purchaser of a Certificate offered at a premium calculates its anticipated
yield to maturity based on an assumed rate of distributions of principal that is
slower than that actually experienced on the Assets, the actual yield to
maturity will be lower than that so calculated. In either case, if so provided
in the Prospectus Supplement for a series of Certificates, the effect on yield
on one or more classes of the Certificates of such series of prepayments of the
Assets in the related Trust Fund may be mitigated or exacerbated by any
provisions for sequential or selective distribution of principal to such
classes.
When a full prepayment is made on a Mortgage Loan, the mortgagor is
charged interest on the principal amount of the Mortgage Loan so prepaid for the
number of days in the month actually elapsed up to the date of the prepayment.
Unless otherwise specified in the related Prospectus Supplement, the effect of
prepayments in full will be to reduce the amount of interest paid in the
following month to holders of Certificates entitled to payments of interest
because interest on the principal amount of any Mortgage Loan so prepaid will be
paid only to the date of prepayment rather than for a full month. Unless
otherwise specified in the related Prospectus Supplement, a partial prepayment
of principal is applied so as to reduce the outstanding principal balance of the
related Mortgage Loan as of the Due Date in the month in which such partial
prepayment is received. As a result, unless otherwise specified in the related
Prospectus Supplement, the effect of a partial prepayment on a Mortgage Loan
will be to reduce the amount of interest passed through to holders of
Certificates in the month following the receipt of such partial prepayment by an
amount equal to one month's interest at the applicable Pass-Through Rate on the
prepaid amount.
The timing of changes in the rate of principal payments on the Mortgage
Assets may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an 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.
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PREPAYMENTS--MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the Assets
included in or comprising a Trust Fund and the rate at which payments are made
from any Credit Support or Cash Flow Agreement for the related series of
Certificates may affect the ultimate maturity and the weighted average life of
each class of such series. Prepayments on the Mortgage Loans comprising or
underlying the Mortgage Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the classes of
the Certificates of the related series.
If so provided in the Prospectus Supplement for a series of
Certificates, one or more classes of Certificates may have a final scheduled
Distribution Date, which is the date on or prior to which the Certificate
Balance thereof is scheduled to be reduced to zero, calculated on the basis of
the assumptions applicable to such series set forth therein.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of a
class of Certificates of a series will be influenced by the rate at which
principal on the Mortgage Loans comprising or underlying the Mortgage Assets is
paid to such class, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes prepayments, in
whole or in part, and liquidations due to default).
In addition, the weighted average life of the Certificates may be
affected by the varying maturities of the Mortgage Loans comprising or
underlying the MBS. If any Mortgage Loans comprising or underlying the Assets in
a particular Trust Fund have actual terms to maturity of less than those assumed
in calculating final scheduled Distribution Dates for the classes of
Certificates of the related series, one or more classes of such Certificates may
be fully paid prior to their respective final scheduled Distribution Dates, even
in the absence of prepayments. Accordingly, the prepayment experience of the
Assets will, to some extent, be a function of the mix of Mortgage Rates and
maturities of the Mortgage Loans comprising or underlying such Assets. See
"Description of the Trust Funds."
Prepayments on loans are also commonly measured relative to a
prepayment standard or model, such as the Constant Prepayment Rate ("CPR")
prepayment model. CPR represents a constant assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of loans for
the life of such loans.
Neither CPR nor any other prepayment model or assumption purports to be
a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the Mortgage
Loans underlying or comprising the Mortgage Assets. Moreover, CPR was developed
based upon historical prepayment experience for single family loans. Thus, it is
likely that prepayment of any Mortgage Loans comprising or underlying the
Mortgage Assets for any series will not conform to any particular level of CPR.
The Depositor is not aware of any meaningful publicly available
prepayment statistics for multifamily or commercial mortgage loans.
The Prospectus Supplement with respect to each series of Certificates
will contain tables, if applicable, setting forth the projected weighted average
life of each class of Offered Certificates of such series and the percentage of
the initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the Mortgage Loans
comprising or underlying the related Assets are made at rates corresponding to
various percentages of CPR or at such other rates specified in such Prospectus
Supplement. Such tables and assumptions 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.
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OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
TYPE OF MORTGAGE ASSET
A number of Mortgage Loans may have balloon payments due at maturity,
and because the ability of a mortgagor to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things, bankruptcy
of the mortgagor or adverse conditions in the market where the property is
located. In order to minimize losses on defaulted Mortgage Loans, the servicer
may, to the extent and under the circumstances set forth in the related
Prospectus Supplement, be permitted to modify Mortgage Loans that are in default
or as to which a payment default is imminent. Any defaulted balloon payment or
modification that extends the maturity of a Mortgage Loan will tend to extend
the weighted average life of the Certificates, thereby lengthening the period of
time elapsed from the date of issuance of a Certificate until it is retired.
FORECLOSURES AND PAYMENT PLANS
The number of foreclosures and the principal amount of the Mortgage
Loans comprising or underlying the Mortgage Assets that are foreclosed in
relation to the number and principal amount of Mortgage Loans that are repaid in
accordance with their terms will affect the weighted average life of the
Mortgage Loans comprising or underlying the Mortgage Assets and that of the
related series of Certificates. Servicing decisions made with respect to the
Mortgage Loans, including the use of payment plans prior to a demand for
acceleration and the restructuring of Mortgage Loans in bankruptcy proceedings,
may also have an effect upon the payment patterns of particular Mortgage Loans
and thus the weighted average life of the Certificates.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE CLAUSES
Acceleration of mortgage payments as a result of certain transfers of
or the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates that may not be reflected in the prepayment
standards or models used in the relevant Prospectus Supplement. A number of the
Mortgage Loans comprising or underlying the Assets may include "due-on-sale"
clauses or "due-on-encumbrance" clauses that allow the holder of the Mortgage
Loans to demand payment in full of the remaining principal balance of the
Mortgage Loans upon sale or certain other transfers of or the creation of
encumbrances upon the related Mortgaged Property. With respect to any Whole
Loans, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer, on behalf of the Trust Fund, will be required to exercise (or
waive its right to exercise) any such right that the Trustee may have as
mortgagee to accelerate payment of the Whole Loan in a manner consistent with
the Servicing Standard. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Due-on-Sale and Due-on-Encumbrance" and "Description of the
Agreements--Due-on-Sale and Due-on-Encumbrance Provisions."
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.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of each series (including any class of Certificates
not offered hereby) will represent the entire beneficial ownership interest in
the Trust Fund created pursuant to the related Agreement. Each series of
Certificates will consist of one or more classes of Certificates that may (i)
provide for the accrual of interest thereon based on fixed, variable or
adjustable rates; (ii) be senior (collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate Certificates") to one or more other
classes of Certificates in respect of certain distributions on the Certificates;
(iii) be entitled to principal distributions, with disproportionately low,
nominal or no interest distributions (collectively, "Stripped Principal
Certificates"); (iv) be entitled to interest distributions, with
disproportionately low, nominal or no principal distributions (collectively,
"Stripped Interest Certificates"); (v) provide for distributions of accrued
interest thereon commencing only following the occurrence of certain events,
such as the retirement of one or more other classes of Certificates of such
series (collectively, "Accrual Certificates"); (vi) provide for payments of
principal sequentially, based on specified payment schedules, from only a
portion of the Assets in such Trust Fund or based on specified calculations, to
the extent of available funds, in each case as described in the related
Prospectus Supplement; and/or (vii) provide for distributions based on a
combination of two or more components thereof with one or more of the
characteristics described in this paragraph including a Stripped Principal
Certificate component and a Stripped Interest Certificate component. Any such
classes may include classes of Offered Certificates.
Each class of Offered Certificates of a series will be issued in
minimum denominations corresponding to the Certificate Balances or, in case of
Stripped Interest Certificates, notional amounts or percentage interests
specified in the related Prospectus Supplement. The transfer of any Offered
Certificates may be registered and such Certificates may be exchanged without
the payment of any service charge payable in connection with such registration
of transfer or exchange, but the Depositor or the Trustee or any agent thereof
may require payment of a sum sufficient to cover any tax or other governmental
charge. One or more classes of Certificates of a series may be issued in
definitive form ("Definitive Certificates") or in book-entry form ("Book-Entry
Certificates"), as provided in the related Prospectus Supplement. See "Risk
Factors--Book-Entry Registration" and "Description of the
Certificates--Book-Entry Registration and Definitive Certificates." Definitive
Certificates will be exchangeable for other Certificates of the same class and
series of a like aggregate Certificate Balance, notional amount or percentage
interest but of different authorized denominations. See "Risk Factors--Limited
Liquidity" and "Limited Assets."
DISTRIBUTIONS
Distributions on the Certificates of each series will be made by or on
behalf of the Trustee on each Distribution Date as specified in the related
Prospectus Supplement from the Available Distribution Amount for such series and
such Distribution Date. Except as otherwise specified in the related Prospectus
Supplement, distributions (other than the final distribution) will be made to
the persons in whose names the Certificates are registered at the close of
business on the last business day of the month preceding the month in which the
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date"). All
distributions with respect to each class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates in such class
or by random selection, as described in the related Prospectus Supplement or
otherwise established by the 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.
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AVAILABLE DISTRIBUTION AMOUNT
All distributions on the Certificates of each series on each
Distribution Date will be made from the Available Distribution Amount described
below, in accordance with the terms described in the related Prospectus
Supplement. Unless provided otherwise in the related Prospectus Supplement, the
"Available Distribution Amount" for each Distribution Date equals the sum of the
following amounts:
(i) the total amount of all cash on deposit in the related
Certificate Account as of the corresponding Determination Date, exclusive of:
(a) all scheduled payments of principal and interest collected but
due on a date subsequent to the related Due Period (unless the related
Prospectus Supplement provides otherwise, a "Due Period" with respect to any
Distribution Date will commence on the second day of the month in which the
immediately preceding Distribution Date occurs, or the day after the Cut-off
Date in the case of the first Due Period, and will end on the first day of the
month of the related Distribution Date),
(b) unless the related Prospectus Supplement provides otherwise,
all prepayments, together with related payments of the interest thereon and
related Prepayment Premiums, Liquidation Proceeds, Insurance Proceeds and other
unscheduled recoveries received subsequent to the related Due Period, and
(c) all amounts in the Certificate Account that are due or
reimbursable to the Depositor, the Trustee, an Asset Seller, a Sub-Servicer, a
Special Servicer, the Master Servicer or any other entity as specified in the
related Prospectus Supplement or that are payable in respect of certain expenses
of the related Trust Fund;
(ii) if the related Prospectus Supplement so provides, interest or
investment income on amounts on deposit in the Certificate Account, including
any net amounts paid under any Cash Flow Agreements;
(iii) all advances made by a Master Servicer or any other entity as
specified in the related Prospectus Supplement with respect to such Distribution
Date;
(iv) if and to the extent the related Prospectus Supplement so
provides, amounts paid by a Master Servicer or any other entity as specified in
the related Prospectus Supplement with respect to interest shortfalls resulting
from prepayments during the related Prepayment Period; and
(v) unless the related Prospectus Supplement provides otherwise, to
the extent not on deposit in the related Certificate Account as of the
corresponding Determination Date, any amounts collected under, from or in
respect of any Credit Support with respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Certificates (including any Certificates not
offered hereby) on each Distribution Date, and accordingly will be released from
the Trust Fund and will not be available for any future distributions.
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
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only on the Distribution Date, or under the circumstances, specified in the
related Prospectus Supplement, and any class of Stripped Principal Certificates
that are not entitled to any distributions of interest) based on the Accrued
Certificate Interest for such class and such Distribution Date, subject to the
sufficiency of the portion of the Available Distribution Amount allocable to
such class on such Distribution Date. Prior to the time interest is
distributable on any class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
class of Certificates and each Distribution Date (other than certain classes of
Stripped Interest Certificates), "Accrued Certificate Interest" will be equal to
interest accrued for a specified period on the outstanding Certificate Balance
thereof immediately prior to the Distribution Date, at the applicable
Pass-Through Rate, reduced as described below. Unless otherwise provided in the
Prospectus Supplement, Accrued Certificate Interest on Stripped Interest
Certificates will be equal to interest accrued for a specified period on the
outstanding notional amount thereof immediately prior to each Distribution Date,
at the applicable Pass-Through Rate, reduced as described below. The method of
determining the notional amount for any class of Stripped Interest Certificates
will be described in the related Prospectus Supplement. Reference to notional
amount is solely for convenience in certain calculations and does not represent
the right to receive any distributions of principal. Unless otherwise provided
in the related Prospectus Supplement, the Accrued Certificate Interest on a
series of Certificates will be reduced in the event of prepayment interest
shortfalls, which are shortfalls in collections of interest for a full accrual
period resulting from prepayments prior to the due date in such accrual period
on the Mortgage Loans comprising or underlying the Mortgage Assets in the Trust
Fund for such series. The particular manner in which such shortfalls are to be
allocated among some or all of the classes of Certificates of that series will
be specified in the related Prospectus Supplement. The related Prospectus
Supplement will also describe the extent to which the amount of Accrued
Certificate Interest that is otherwise distributable on (or, in the case of
Accrual Certificates, that may otherwise be added to the Certificate Balance of)
a class of Offered Certificates may be reduced as a result of any other
contingencies, including delinquencies, losses and deferred interest on or in
respect of the Mortgage Loans comprising or underlying the Mortgage Assets in
the related Trust Fund. Unless otherwise provided in the related Prospectus
Supplement, any reduction in the amount of Accrued Certificate Interest
otherwise distributable on a class of Certificates by reason of the allocation
to such class of a portion of any deferred interest on the Mortgage Loans
comprising or underlying the Mortgage Assets in the related Trust Fund will
result in a corresponding increase in the Certificate Balance of such class. See
"Risk Factors--Average Life of Certificates; Prepayments; Yields" and "Yield
Considerations."
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
The Certificates of each series, other than certain classes of Stripped
Interest Certificates, will have a "Certificate Balance" which, at any time,
will equal the then maximum amount that the holder will be entitled to receive
in respect of principal out of the future cash flow on the Assets and other
assets included in the related Trust Fund. The outstanding Certificate Balance
of a Certificate will be reduced to the extent of distributions of principal
thereon from time to time and, if and to the extent so provided in the related
Prospectus Supplement, by the amount of losses incurred in respect of the
related Assets, may be increased in respect of deferred interest on the related
Mortgage Loans to the extent provided in the related Prospectus Supplement and,
in the case of Accrual Certificates prior to the Distribution Date on which
distributions of interest are required to commence, will be increased by any
related Accrued Certificate Interest. Unless otherwise provided in the related
Prospectus Supplement, the initial aggregate Certificate Balance of all classes
of Certificates of a series will not be greater than the outstanding aggregate
principal balance of the related Assets as of the applicable Cut-off Date. The
initial aggregate Certificate 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
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the Certificates" above also relate to components of such a class of
Certificates. In such case, reference in such sections to Certificate Balance
and Pass-Through Rate refer to the principal balance, if any, of any such
component and the Pass-Through Rate, if any, on any such component,
respectively.
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN RESPECT OF EQUITY
PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment
Premiums or payments in respect of Equity Participations that are collected on
the Mortgage Assets in the related Trust Fund will be distributed on each
Distribution Date to the class or classes of Certificates entitled thereto in
accordance with the provisions described in such Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the Prospectus Supplement for a series of
Certificates consisting of one or more classes of Subordinate Certificates, on
any Distribution Date in respect of which losses or shortfalls in collections on
the Mortgage Assets have been incurred, the amount of such losses or shortfalls
will be borne first by a class of Subordinate Certificates in the priority and
manner and subject to the limitations specified in such Prospectus Supplement.
See "Description of Credit Support" for a description of the types of protection
that may be included in a Trust Fund against losses and shortfalls on Mortgage
Assets comprising such Trust Fund.
ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any series of Certificates evidencing an interest in a
Trust Fund, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer or another entity described therein will be required as part of
its servicing responsibilities to advance on or before each Distribution Date
its own funds or funds held in the Certificate Account that are not included in
the Available Distribution Amount for such Distribution Date, in an amount equal
to the aggregate of payments of principal (other than any balloon payments) and
interest (net of related servicing fees and Retained Interest) that were due on
the Whole Loans in such Trust Fund during the related Due Period and were
delinquent on the related Determination Date, subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable from Related Proceeds (as defined below). In the case of a series
of Certificates that includes one or more classes of Subordinate Certificates
and if so provided in the related Prospectus Supplement, the Master Servicer's
(or another entity's) advance obligation may be limited only to the portion of
such delinquencies necessary to make the required distributions on one or more
classes of Senior Certificates and/or may be subject to the Master Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable not only from Related Proceeds but also from collections on other
Assets otherwise distributable on one or more classes of such Subordinate
Certificates. See "Description of Credit Support."
Advances are intended to maintain a regular flow of scheduled interest
and principal payments to holders of the class or classes of Certificates
entitled thereto, rather than to guarantee or insure against losses. Unless
otherwise provided in the related Prospectus Supplement, advances of the Master
Servicer's (or another entity's) funds will be reimbursable only out of related
recoveries on the Mortgage Loans (including amounts received under any form of
Credit Support) respecting which such advances were made (as to any Mortgage
Loan, "Related Proceeds") and, if so provided in the Prospectus Supplement, out
of any amounts otherwise distributable on one or more classes of Subordinate
Certificates of such series; provided, however, that any such advance will be
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
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regarding the characteristics of, and the identity of any obligor on, any such
surety bond, will be set forth in the related Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement,
the Master Servicer (or another entity) will be entitled to receive interest at
the rate specified therein on its outstanding advances and will be entitled to
pay itself such interest periodically from general collections on the Assets
prior to any payment to Certificateholders or as otherwise provided in the
related Agreement and described in such Prospectus Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS will describe any corresponding
advancing obligation of any person in connection with such MBS.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise provided in the Prospectus Supplement, with each
distribution to holders of any class of Certificates of a series, the Master
Servicer or the Trustee, as provided in the related Prospectus Supplement, will
forward or cause to be forwarded to each such holder, to the Depositor and to
such other parties as may be specified in the related Agreement, a statement
setting forth, in each case to the extent applicable and available:
(i) the amount of such distribution to holders of Certificates of such
class applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount of such distribution allocable to (a) Prepayment Premiums
and (b) payments on account of Equity Participations;
(iv) the amount of related servicing compensation received by a Master
Servicer (and, if payable directly out of the related Trust Fund, by
any Special Servicer and any Sub-Servicer) and such other customary
information as any such Master Servicer or the Trustee deems necessary
or desirable, or that a Certificateholder reasonably requests, to
enable Certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution, and the
aggregate amount of unreimbursed advances at the close of business on
such Distribution Date;
(vi) the aggregate principal balance of the Assets at the close of business
on such Distribution Date;
(vii) the number and aggregate principal balance of Whole Loans in respect of
which (a) one scheduled payment is delinquent, (b) two scheduled
payments are delinquent, (c) three or more scheduled payments are
delinquent and (d) foreclosure proceedings have been commenced;
(viii) with respect to each Whole Loan that is delinquent two or more months,
(a) the loan number thereof, (b) the unpaid balance thereof, (c)
whether the delinquency is in respect of any balloon payment, (d) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof, (e) if applicable, the aggregate amount of
any interest accrued and payable on related servicing expenses and
related advances assuming such Mortgage Loan is subsequently liquidated
through foreclosure, (f) whether a notice of acceleration has been sent
to the mortgagor and, if so, the date of such notice, (g) whether
foreclosure 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;
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(x) with respect to any Whole Loan liquidated during the related Due
Period, (a) the portion of such liquidation proceeds payable or
reimbursable to the Master Servicer (or any other entity) in respect of
such Mortgage Loan and (b) the amount of any loss to
Certificateholders;
(xi) with respect to each REO Property relating to a Whole Loan and included
in the Trust Fund as of the end of the related Due Period, (a) the loan
number of the related Mortgage Loan and (b) the date of acquisition;
(xii) with respect to each REO Property relating to a Whole Loan and included
in the Trust Fund as of the end of the related Due Period, (a) the book
value, (b) the principal balance of the related Mortgage Loan
immediately following such Distribution Date (calculated as if such
Mortgage Loan were still outstanding taking into account certain
limited modifications to the terms thereof specified in the Agreement),
(c) the aggregate amount of unreimbursed servicing expenses and
unreimbursed advances in respect thereof and (d) if applicable, the
aggregate amount of interest accrued and payable on related servicing
expenses and related advances;
(xiii) with respect to any such REO Property sold during the related Due
Period (a) the loan number of the related Mortgage Loan, (b) the
aggregate amount of sale proceeds, (c) the portion of such sales
proceeds payable or reimbursable to the Master Servicer or a Special
Servicer in respect of such REO Property or the related Mortgage Loan
and (d) the amount of any loss to Certificateholders in respect of the
related Mortgage Loan;
(xiv) the aggregate Certificate Balance or notional amount, as the case may
be, of each class of Certificates (including any class of Certificates
not offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to
the allocation of any loss and increase in the Certificate Balance of a
class of Accrual Certificates in the event that Accrued Certificate
Interest has been added to such balance;
(xv) the aggregate amount of principal prepayments made during the related
Due Period;
(xvi) the amount deposited in the reserve fund, if any, on such Distribution
Date;
(xvii) the amount remaining in the reserve fund, if any, as of the close of
business on such Distribution Date;
(xviii) the aggregate unpaid Accrued Certificate Interest, if any, on each
class of Certificates at the close of business on such Distribution
Date;
(xix) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, and, if
available, the immediately succeeding Distribution Date, as calculated
in accordance with the method specified in the related Prospectus
Supplement;
(xx) in the case of Certificates with an adjustable Pass-Through Rate, for
statements to be distributed in any month in which an adjustment date
occurs, the adjustable Pass-Through Rate applicable to such
Distribution Date and the immediately succeeding Distribution Date as
calculated in accordance with the method specified in the related
Prospectus Supplement;
(xxi) as to any series which includes Credit Support, the amount of coverage
of each instrument of Credit Support included therein as of the close
of business on such Distribution Date; and
(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
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also be provided with respect to each component, if any, of a class of
Certificates. The Master Servicer or the Trustee, as specified in the related
Prospectus Supplement, will forward or cause to be forwarded to each holder, to
the Depositor and to such other parties as may be specified in the Agreement, a
copy of any statements or reports received by the Master Servicer or the
Trustee, as applicable, with respect to any MBS. The Prospectus Supplement for
each series of Offered Certificates will describe any additional information to
be included in reports to the holders of such Certificates.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, shall furnish to each person who at any time during the calendar
year was a holder of a Certificate a statement containing the information set
forth in subclauses (i)-(iv) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Master Servicer or the Trustee shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer or the Trustee pursuant to any requirements of
the Code as are from time to time in force. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
TERMINATION
The obligations created by the Agreement for each series of
Certificates will terminate upon the payment to Certificateholders of that
series of all amounts held in the Certificate Account or by the Master Servicer,
if any, or the Trustee and required to be paid to them pursuant to such
Agreement following the earlier of (i) the final payment or other liquidation of
the last Asset subject thereto or the disposition of all property acquired upon
foreclosure of any Whole Loan subject thereto and (ii) the purchase of all of
the assets of the Trust Fund by the party entitled to effect such termination,
under the circumstances and in the manner set forth in the related Prospectus
Supplement. In no event, however, will the trust created by the Agreement
continue beyond the date specified in the related Prospectus Supplement. Written
notice of termination of the Agreement will be given to each Certificateholder,
and the final distribution will be made only upon presentation and surrender of
the Certificates at the location to be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the repurchase
of the assets in the related Trust Fund by the party specified therein, under
the circumstances and in the manner set forth therein. If so provided in the
related Prospectus Supplement, upon the reduction of the Certificate Balance of
a specified class or classes of Certificates by a specified percentage or
amount, the party specified therein will solicit bids for the purchase of all
assets of the Trust Fund, or of a sufficient portion of such assets to retire
such class or classes or purchase such class or classes at a price set forth in
the related Prospectus Supplement, in each case, under the circumstances and in
the manner set forth therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related Prospectus Supplement, one or more
classes of the Offered Certificates of any series will be issued as Book-Entry
Certificates, and each such class will be represented by one or more single
Certificates registered in the name of a nominee for the depository, The
Depository Trust Company ("DTC").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participating organizations ("Participants") and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in their accounts, thereby eliminating the need
for physical movement of certificates. Participants include Morgan Stanley & Co.
Incorporated, securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to 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
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of, or other interests in, Book-Entry Certificates may do so only through
Participants and Indirect Participants. In addition, such investors
("Certificate Owners") will receive all distributions on the Book-Entry
Certificates through DTC and its Participants. Under a book-entry format,
Certificate Owners will receive payments after the related Distribution Date
because, while payments are required to be forwarded to Cede & Co., as nominee
for DTC ("Cede"), on each such date, DTC will forward such payments to its
Participants which thereafter will be required to forward them to Indirect
Participants or Certificate Owners. Unless otherwise provided in the related
Prospectus Supplement, the only "Certificateholder" (as such term is used in the
Agreement) will be Cede, as nominee of DTC, and the Certificate Owners will not
be recognized by the Trustee as Certificateholders under the Agreement.
Certificate Owners will be permitted to exercise the rights of
Certificateholders under the related Agreement only indirectly through the
Participants who in turn will exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Book-Entry Certificates
and is required to receive and transmit distributions of principal of and
interest on the Book-Entry Certificates. Participants and Indirect Participants
with which Certificate Owners have accounts with respect to the Book-Entry
Certificates similarly are required to make book-entry transfers and receive and
transmit such payments on behalf of their respective Certificate Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge its interest in the Book-Entry Certificates to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of its interest in the Book-Entry Certificates, may be limited due to
the lack of a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to
be taken by a Certificateholder under an Agreement only at the direction of one
or more Participants to whose account with DTC interests in the Book-Entry
Certificates are credited.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Certificate Owners or their nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or able
to properly discharge its responsibilities as depository with respect to the
Certificates and the Depositor is unable to locate a qualified successor or (ii)
the Depositor, at its option, elects to terminate the book-entry system through
DTC.
Upon the occurrence of either of the events described in the
immediately preceding paragraph, DTC is required to notify all Participants of
the availability through DTC of Definitive Certificates for the Certificate
Owners. Upon surrender by DTC of the certificate or certificates representing
the Book-Entry Certificates, together with instructions for reregistration, the
Trustee will issue (or cause to be issued) to the Certificate Owners identified
in such instructions the Definitive Certificates to which they are entitled, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each series evidencing interests in a Trust Fund
including Whole Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, any Special Servicer appointed
as of the date of the Pooling and Servicing Agreement and the Trustee. The
Certificates of each series evidencing interests in a Trust Fund not including
Whole Loans will be issued pursuant to a Trust Agreement between the Depositor
and a Trustee. Any Master Servicer, any such Special Servicer and the Trustee
with respect to any series of Certificates will be named in the related
Prospectus Supplement. In lieu of appointing a Master Servicer, a servicer may
be appointed pursuant to the Pooling and Servicing Agreement for any Trust Fund.
Such servicer will service all or a significant number of Whole Loans directly
without a Sub-Servicer. Unless otherwise specified in the related Prospectus
Supplement, the obligations of any such servicer shall be commensurate with
those of the Master Servicer described herein. References in this prospectus to
Master Servicer and its rights and
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obligations, unless otherwise specified in the related Prospectus Supplement,
shall be deemed to also be references to any servicer servicing Whole Loans
directly. A manager or administrator may be appointed pursuant to the Trust
Agreement for any Trust Fund to administer such Trust Fund. The provisions of
each Agreement will vary depending upon the nature of the Certificates to be
issued thereunder and the nature of the related Trust Fund. A form of a Pooling
and Servicing Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. Any Trust Agreement will generally
conform to the form of Pooling and Servicing Agreement filed herewith, but will
not contain provisions with respect to the servicing and maintenance of Whole
Loans. The following summaries describe certain provisions that may appear in
each Agreement. The Prospectus Supplement for a series of Certificates will
describe any provision of the Agreement relating to such series that materially
differs from the description thereof contained in this Prospectus. The summaries
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Agreement for each Trust
Fund and the description of such provisions in the related Prospectus
Supplement. As used herein with respect to any series, the term "Certificate"
refers to all of the Certificates of that series, whether or not offered hereby
and by the related Prospectus Supplement, unless the context otherwise requires.
The Depositor will provide a copy of the Agreement (without exhibits) relating
to any series of Certificates without charge upon written request of a holder of
a Certificate of such series addressed to Morgan Stanley Capital I Inc., c/o
Morgan Stanley & Co. Incorporated, 1585 Broadway, 37th Floor, New York, New York
10036, Attention: John E. Westerfield.
ASSIGNMENT OF ASSETS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor
will assign (or cause to be assigned) to the designated Trustee the Assets to be
included in the related Trust Fund, together with all principal and interest to
be received on or with respect to such Assets after the Cut-off Date, other than
principal and interest due on or before the Cut-off Date and other than any
Retained Interest. The Trustee will, concurrently with such assignment, deliver
the Certificates to the Depositor in exchange for the Assets and the other
assets comprising the Trust Fund for such series. Each Mortgage Asset will be
identified in a schedule appearing as an exhibit to the related Agreement.
Unless otherwise provided in the related Prospectus Supplement, such schedule
will include detailed information (i) in respect of each Whole Loan included in
the related Trust Fund, including without limitation, the address of the related
Mortgaged Property and type of such property, the Mortgage Rate and, if
applicable, the applicable index, margin, adjustment date and any rate cap
information, the original and remaining term to maturity, the original and
outstanding principal balance and balloon payment, if any, the Value,
Loan-to-Value Ratio and the Debt Service Coverage Ratio as of the date indicated
and payment and prepayment provisions, if applicable, and (ii) in respect of
each MBS included in the related Trust Fund, including without limitation, the
MBS Issuer, MBS Servicer and MBS Trustee, the pass-through or bond rate or
formula for determining such rate, the issue date and original and remaining
term to maturity, if applicable, the original and outstanding principal amount
and payment provisions, if applicable.
With respect to each Whole Loan, the Depositor will deliver or cause to
be delivered to the Trustee (or to the custodian hereinafter referred to)
certain loan documents, which unless otherwise specified in the related
Prospectus Supplement will include the original Mortgage Note endorsed, without
recourse, in blank or to the order of the Trustee, the original Mortgage (or a
certified copy thereof) with evidence of recording indicated thereon and an
assignment of the Mortgage to the Trustee in recordable form. Notwithstanding
the foregoing, a Trust Fund may include Mortgage Loans where the original
Mortgage Note is not delivered to the Trustee if the Depositor delivers to the
Trustee or the custodian a copy or a duplicate original of the Mortgage Note,
together with an affidavit certifying that the original thereof has been lost or
destroyed. With respect to such Mortgage Loans, the Trustee (or its nominee) may
not be able to enforce the Mortgage Note against the related borrower. Unless
otherwise specified in the related Prospectus Supplement, the Asset Seller will
be required to agree to repurchase, or substitute for, each such Mortgage Loan
that is subsequently in default if the enforcement thereof or of the related
Mortgage is materially adversely affected by the absence of the original
Mortgage Note. Unless otherwise provided in the related Prospectus Supplement,
the related Agreement will require the Depositor or another party specified
therein to promptly cause each such assignment of Mortgage to be recorded in the
appropriate public office for real property records, except in the State of
California or in other states where, in the opinion of counsel acceptable to the
Trustee, such recording is not required to protect the Trustee's interest in the
related Whole Loan against the claim of any subsequent transferee or any
successor to or creditor of the Depositor, the Master Servicer, the relevant
Asset Seller or any other prior holder of the Whole Loan.
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The Trustee (or a custodian) will review such Whole Loan documents
within a specified period of days after receipt thereof, and the Trustee (or a
custodian) will hold such documents in trust for the benefit of the
Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, if any such document is found to be missing or defective in any
material respect, the Trustee (or such custodian) shall immediately notify the
Master Servicer and the Depositor, and the Master Servicer shall immediately
notify the relevant Asset Seller. If the Asset Seller cannot cure the omission
or defect within a specified number of days after receipt of such notice, then
unless otherwise specified in the related Prospectus Supplement, the Asset
Seller will be obligated, within a specified number of days of receipt of such
notice, to repurchase the related Whole Loan from the Trustee at the Purchase
Price or substitute for such Mortgage Loan. There can be no assurance that an
Asset Seller will fulfill this repurchase or substitution obligation, and
neither the Master Servicer nor the Depositor will be obligated to repurchase or
substitute for such Mortgage Loan if the Asset Seller defaults on its
obligation. Unless otherwise specified in the related Prospectus Supplement,
this repurchase or substitution obligation constitutes the sole remedy available
to the Certificateholders or the Trustee for omission of, or a material defect
in, a constituent document. To the extent specified in the related Prospectus
Supplement, in lieu of curing any omission or defect in the Asset or
repurchasing or substituting for such Asset, the Asset Seller may agree to cover
any losses suffered by the Trust Fund as a result of such breach or defect.
If so provided in the related Prospectus Supplement, the Depositor
will, as to some or all of the Mortgage Loans, assign or cause to be assigned to
the Trustee the related Lease Assignments. In certain cases, the Trustee, or
Master Servicer, as applicable, may collect all moneys under the related Leases
and distribute amounts, if any, required under the Lease for the payment of
maintenance, insurance and taxes, to the extent specified in the related Lease
agreement. The Trustee, or if so specified in the Prospectus Supplement, the
Master Servicer, as agent for the Trustee, may hold the Lease in trust for the
benefit of the Certificateholders.
With respect to each Government Security or MBS in certificated form,
the Depositor will deliver or cause to be delivered to the Trustee (or the
custodian) the original certificate or other definitive evidence of such
Government Security or MBS, as applicable, together with bond power or other
instruments, certifications or documents required to transfer fully such
Government Security or MBS, as applicable, to the Trustee for the benefit of the
Certificateholders. With respect to each Government Security or MBS in
uncertificated or book-entry form or held through a "clearing corporation"
within the meaning of the UCC, the Depositor and the Trustee will cause such
Government Security or MBS to be registered directly or on the books of such
clearing corporation or of a financial intermediary in the name of the Trustee
for the benefit of the Certificateholders. Unless otherwise provided in the
related Prospectus Supplement, the related Agreement will require that either
the Depositor or the Trustee promptly cause any MBS and Government Securities in
certificated form not registered in the name of the Trustee to be re-registered,
with the applicable persons, in the name of the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related Prospectus Supplement the
Depositor will, with respect to each Whole Loan, make or assign certain
representations and warranties, as of a specified date (the person making such
representations and warranties, the "Warrantying Party") covering, by way of
example, the following types of matters: (i) the accuracy of the information set
forth for such Whole Loan on the schedule of Assets appearing as an exhibit to
the related Agreement; (ii) the existence of title insurance insuring the lien
priority of the Whole Loan; (iii) the authority of the Warrantying Party to sell
the Whole Loan; (iv) the payment status of the Whole Loan and the status of
payments of taxes, assessments and other charges affecting the related Mortgaged
Property; (v) the existence of customary provisions in the related Mortgage Note
and Mortgage to permit realization against the Mortgaged Property of the benefit
of the security of the Mortgage; and (vi) the existence of hazard and extended
perils insurance coverage on the Mortgaged Property.
Any Warrantying Party, if other than the Depositor, shall be an Asset
Seller or an affiliate thereof or such other person acceptable to the Depositor
and shall be identified in the related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
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issuance of the related series of Certificates evidencing an interest in such
Whole Loan. Unless otherwise specified in the related Prospectus Supplement, in
the event of a breach of any such representation or warranty, the Warrantying
Party will be obligated to reimburse the Trust Fund for losses caused by any
such breach or either cure such breach or repurchase or replace the affected
Whole Loan as described below. Since the representations and warranties may not
address events that may occur following the date as of which they were made, the
Warrantying Party will have a reimbursement, cure, repurchase or substitution
obligation in connection with a breach of such a representation and warranty
only if the relevant event that causes such breach occurs prior to such date.
Such party would have no such obligations if the relevant event that causes such
breach occurs after such date.
Unless otherwise provided in the related Prospectus Supplement, each
Agreement will provide that the Master Servicer and/or Trustee will be required
to notify promptly the relevant Warrantying Party of any breach of any
representation or warranty made by it in respect of a Whole Loan that materially
and adversely affects the value of such Whole Loan or the interests therein of
the Certificateholders. If such Warrantying Party cannot cure such breach within
a specified period following the date on which such party was notified of such
breach, then such Warrantying Party will be obligated to repurchase such Whole
Loan from the Trustee within a specified period from the date on which the
Warrantying Party was notified of such breach, at the Purchase Price therefor.
As to any Whole Loan, unless otherwise specified in the related Prospectus
Supplement, the "Purchase Price" is equal to the sum of the unpaid principal
balance thereof, plus unpaid accrued interest thereon at the Mortgage Rate from
the date as to which interest was last paid to the due date in the Due Period in
which the relevant purchase is to occur, plus certain servicing expenses that
are reimbursable to the Master Servicer. If so provided in the Prospectus
Supplement for a series, a Warrantying Party, rather than repurchase a Whole
Loan as to which a breach has occurred, will have the option, within a specified
period after initial issuance of such series of Certificates, to cause the
removal of such Whole Loan from the Trust Fund and substitute in its place one
or more other Whole Loans, in accordance with the standards described in the
related Prospectus Supplement. If so provided in the Prospectus Supplement for a
series, a Warrantying Party, rather than repurchase or substitute a Whole Loan
as to which a breach has occurred, will have the option to reimburse the Trust
Fund or the Certificateholders for any losses caused by such breach. Unless
otherwise specified in the related Prospectus Supplement, this reimbursement,
repurchase or substitution obligation will constitute the sole remedy available
to holders of Certificates or the Trustee for a breach of representation by a
Warrantying Party.
Neither the Depositor (except to the extent that it is the Warrantying
Party) nor the Master Servicer will be obligated to purchase or substitute for a
Whole Loan if a Warrantying Party defaults on its obligation to do so, and no
assurance can be given that Warrantying Parties will carry out such obligations
with respect to Whole Loans.
Unless otherwise provided in the related Prospectus Supplement the
Warrantying Party will, with respect to a Trust Fund that includes Government
Securities or MBS, make or assign certain representations or warranties, 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."
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CERTIFICATE ACCOUNT AND OTHER COLLECTION ACCOUNTS
GENERAL
The Master Servicer and/or the Trustee will, as to each Trust Fund,
establish and maintain or cause to be established and maintained one or more
separate accounts for the collection of payments on the related Assets
(collectively, the "Certificate Account"), which must be either (i) an account
or accounts the deposits in which are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC") (to the limits established by the FDIC) and the uninsured deposits in
which are otherwise secured such that the Certificateholders have a claim with
respect to the funds in the Certificate Account or a perfected first priority
security interest against any collateral securing such funds that is superior to
the claims of any other depositors or general creditors of the institution with
which the Certificate Account is maintained or (ii) otherwise maintained with a
bank or trust company, and in a manner, satisfactory to the Rating Agency or
Agencies rating any class of Certificates of such series. The collateral
eligible to secure amounts in the Certificate Account is limited to United
States government securities and other investment grade obligations specified in
the Agreement ("Permitted Investments"). A Certificate Account may be maintained
as an interest bearing or a non-interest bearing account and the funds held
therein may be invested pending each succeeding Distribution Date in certain
short-term Permitted Investments. Unless otherwise provided in the related
Prospectus Supplement, any interest or other income earned on funds in the
Certificate Account will be paid to a Master Servicer or its designee as
additional servicing compensation. The Certificate Account may be maintained
with an institution that is an affiliate of the Master Servicer, if applicable,
provided that such institution meets the standards imposed by the Rating Agency
or Agencies. If permitted by the Rating Agency or Agencies and so specified in
the related Prospectus Supplement, a Certificate Account may contain funds
relating to more than one series of mortgage pass-through certificates and may
contain other funds respecting payments on mortgage loans belonging to the
Master Servicer or serviced or master serviced by it on behalf of others.
DEPOSITS
A Master Servicer or the Trustee will deposit or cause to be deposited
in the Certificate Account for one or more Trust Funds on a daily basis, unless
otherwise provided in the related Agreement, the following payments and
collections received, or advances made, by the Master Servicer or the Trustee or
on its behalf subsequent to the Cut-off Date (other than payments due on or
before the Cut-off Date, and exclusive of any amounts representing a Retained
Interest):
(i) all payments on account of principal, including principal
prepayments, on the Assets;
(ii) all payments on account of interest on the Assets, including
any default interest collected, in each case net of any
portion thereof retained by a Master Servicer, a Sub-Servicer
or a Special Servicer as its servicing compensation and net of
any Retained Interest;
(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;
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(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";
(xi) any amount required to be deposited by a Master Servicer or
the Trustee in connection with losses realized on investments
for the benefit of the Master Servicer or the Trustee, as the
case may be, of funds held in the Certificate Account; and
(xii) any other amounts required to be deposited in the Certificate
Account as provided in the related Agreement and described in
the related Prospectus Supplement.
WITHDRAWALS
A Master Servicer or the Trustee may, from time to time, unless
otherwise provided in the related Agreement and described in the related
Prospectus Supplement, make withdrawals from the Certificate Account for each
Trust Fund for any of the following purposes:
(i) to make distributions to the Certificateholders on each
Distribution Date;
(ii) to reimburse a Master Servicer for unreimbursed amounts
advanced as described under "Description of the Certificates Advances in Respect
of Delinquencies," such reimbursement to be made out of amounts received which
were identified and applied by the Master Servicer as late collections of
interest (net of related servicing fees and Retained Interest) on and principal
of the particular Whole Loans with respect to which the advances were made or
out of amounts drawn under any form of Credit Support with respect to such Whole
Loans;
(iii) to reimburse a Master Servicer for unpaid servicing fees
earned and certain unreimbursed servicing expenses incurred with respect to
Whole Loans and properties acquired in respect thereof, such reimbursement to be
made out of amounts that represent Liquidation Proceeds and Insurance Proceeds
collected on the particular Whole Loans and properties, and net income collected
on the particular properties, with respect to
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which such fees were earned or such expenses were incurred or out of amounts
drawn under any form of Credit Support with respect to such Whole Loans and
properties;
(iv) to reimburse a Master Servicer for any advances described in
clause (ii) above and any servicing expenses described in clause (iii) above
which, in the Master Servicer's good faith judgment, will not be recoverable
from the amounts described in clauses (ii) and (iii), respectively, such
reimbursement to be made from amounts collected on other Assets or, if and to
the extent so provided by the related Agreement and described in the related
Prospectus Supplement, just from that portion of amounts collected on other
Assets that is otherwise distributable on one or more classes of Subordinate
Certificates, if any, remain outstanding, and otherwise any outstanding class of
Certificates, of the related series;
(v) if and to the extent described in the related Prospectus
Supplement, to pay a Master Servicer interest accrued on the advances described
in clause (ii) above and the servicing expenses described in clause (iii) above
while such remain outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments with respect to, and for containment, clean-up or
remediation of hazardous wastes, substances and materials on, Mortgaged
Properties securing defaulted Whole Loans as described under "Realization Upon
Defaulted Whole Loans";
(vii) to reimburse a Master Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may be, for
certain expenses, costs and liabilities incurred thereby, as and to the extent
described under "Certain Matters Regarding a Master Servicer and the Depositor";
(viii) if and to the extent described in the related Prospectus
Supplement, to pay (or to transfer to a separate account for purposes of
escrowing for the payment of) the Trustee's fees;
(ix) to reimburse the Trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under "Certain
Matters Regarding the Trustee";
(x) unless otherwise provided in the related Prospectus
Supplement, to pay a Master Servicer, as additional servicing compensation,
interest and investment income earned in respect of amounts held in the
Certificate Account;
(xi) to pay the person entitled thereto any amounts deposited in
the Certificate Account that were identified and applied by the Master Servicer
as recoveries of Retained Interest;
(xii) to pay for costs reasonably incurred in connection with the
proper operation, management and maintenance of any Mortgaged Property acquired
for the benefit of Certificateholders by foreclosure or by deed in lieu of
foreclosure or otherwise, such payments to be made out of income received on
such property;
(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;
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(xvi) to pay for the costs of recording the related Agreement if
such recordation materially and beneficially affects the interests of
Certificateholders, provided that such payment shall not constitute a waiver
with respect to the obligation of the Warrantying Party to remedy any breach of
representation or warranty under the Agreement;
(xvii) to pay the person entitled thereto any amounts deposited in
the Certificate Account in error, including amounts received on any Asset after
its removal from the Trust Fund whether by reason of purchase or substitution as
contemplated by "Assignment of Assets; Repurchase" and "Representations and
Warranties; Repurchases" or otherwise;
(xviii) to make any other withdrawals permitted by the related
Agreement and described in the related Prospectus Supplement; and
(xix) to clear and terminate the Certificate Account at the
termination of the Trust Fund.
OTHER COLLECTION ACCOUNTS
Notwithstanding the foregoing, if so specified in the related
Prospectus Supplement, the Agreement for any series of Certificates may provide
for the establishment and maintenance of a separate collection account into
which the Master Servicer or any related Sub-Servicer or Special Servicer will
deposit on a daily basis the amounts described under "--Deposits" above for one
or more series of Certificates. Any amounts on deposit in any such collection
account will be withdrawn therefrom and deposited into the appropriate
Certificate Account by a time specified in the related Prospectus Supplement. To
the extent specified in the related Prospectus Supplement, any amounts which
could be withdrawn from the Certificate Account as described under
"--Withdrawals" above, may also be withdrawn from any such collection account.
The Prospectus Supplement will set forth any restrictions with respect to any
such collection account, including investment restrictions and any restrictions
with respect to financial institutions with which any such collection account
may be maintained.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer, directly or through Sub-Servicers, is required to
make reasonable efforts to collect all scheduled payments under the Whole Loans
and will follow or cause to be followed such collection procedures as it would
follow with respect to mortgage loans that are comparable to the Whole Loans and
held for its own account, provided such procedures are consistent with (i) the
terms of the related Agreement and any related hazard, business interruption,
rental interruption or general liability insurance policy or instrument of
Credit Support included in the related Trust Fund described herein or under
"Description of Credit Support," (ii) applicable law and (iii) the general
servicing standard specified in the related Prospectus Supplement or, if no such
standard is so specified, its normal servicing practices (in either case, the
"Servicing Standard"). In connection therewith, the Master Servicer will be
permitted in its discretion to waive any late payment charge or penalty interest
in respect of a late Whole Loan payment.
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."
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The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan in a manner consistent with the Servicing Standard so long as the
modification, waiver or amendment will not (i) affect the amount or timing of
any scheduled payments of principal or interest on the Whole Loan or (ii) in its
judgment, materially impair the security for the Whole Loan or reduce the
likelihood of timely payment of amounts due thereon. The Master Servicer also
may agree to any modification, waiver or amendment that would so affect or
impair the payments on, or the security for, a Whole Loan if, unless otherwise
provided in the related Prospectus Supplement, (i) in its judgment, a material
default on the Whole Loan has occurred or a payment default is imminent and (ii)
in its judgment, such modification, waiver or amendment is reasonably likely to
produce a greater recovery with respect to the Whole Loan on a present value
basis than would liquidation. The Master Servicer is required to notify the
Trustee in the event of any modification, waiver or amendment of any Whole Loan.
SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of
the Whole Loans to third-party servicers (each, a "Sub-Servicer"), but such
Master Servicer will remain obligated under the related Agreement. Each
sub-servicing agreement between a Master Servicer and a Sub-Servicer (a
"Sub-Servicing Agreement") must be consistent with the terms of the related
Agreement and must provide that, if for any reason the Master Servicer for the
related series of Certificates is no longer acting in such capacity, the Trustee
or any successor Master Servicer may assume the Master Servicer's rights and
obligations under such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer will be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to the related Agreement is sufficient to pay such fees. However, a
Sub-Servicer may be entitled to a Retained Interest in certain Whole Loans. Each
Sub-Servicer will be reimbursed by the Master Servicer for certain expenditures
which it makes, generally to the same extent the Master Servicer would be
reimbursed under an Agreement. See "Retained Interest, Servicing Compensation
and Payment of Expenses."
SPECIAL SERVICERS
To the extent so specified in the related Prospectus Supplement, a
special servicer (the "Special Servicer") may be appointed. The related
Prospectus Supplement will describe the rights, obligations and compensation of
a Special Servicer. The Master Servicer will only be responsible for the duties
and obligations of a Special Servicer to the extent set forth in the Prospectus
Supplement.
REALIZATION UPON DEFAULTED WHOLE LOANS
A mortgagor's failure to make required payments may reflect inadequate
income or the diversion of that income from the service of payments due under
the Mortgage Loan, and may call into question such mortgagor's ability to make
timely payment of taxes and to pay for necessary maintenance of the related
Mortgaged Property. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer is required to monitor any Whole Loan which is
in default, contact the mortgagor concerning the default, evaluate whether the
causes of the default can be cured over a reasonable period without significant
impairment of the value of the Mortgaged 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."
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Any Agreement relating to a Trust Fund that includes Whole Loans may
grant to the Master Servicer and/or the holder or holders of certain classes of
Certificates a right of first refusal to purchase from the Trust Fund at a
predetermined purchase price any such Whole Loan as to which a specified number
of scheduled payments thereunder are delinquent. Any such right granted to the
holder of an Offered Certificate will be described in the related Prospectus
Supplement. The related Prospectus Supplement will also describe any such right
granted to any person if the predetermined purchase price is less than the
Purchase Price described under "Representations and Warranties; Repurchases."
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer may offer to sell any defaulted Whole Loan described in the
preceding paragraph and not otherwise purchased by any person having a right of
first refusal with respect thereto, if and when the Master Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a greater
recovery on a present value basis than would liquidation through foreclosure or
similar proceeding. The related Agreement will provide that any such offering be
made in a commercially reasonable manner for a specified period and that the
Master Servicer accept the highest cash bid received from any person (including
itself, an affiliate of the Master Servicer or any Certificateholder) that
constitutes a fair price for such defaulted Whole Loan. In the absence of any
bid determined in accordance with the related Agreement to be fair, the Master
Servicer shall proceed with respect to such defaulted Mortgage Loan as described
below. Any bid in an amount at least equal to the Purchase Price described under
"Representations and Warranties; Repurchases" will in all cases be deemed fair.
The Master Servicer, on behalf of the Trustee, may at any time
institute foreclosure proceedings, exercise any power of sale contained in any
mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire title to a
Mortgaged Property securing a Whole Loan by operation of law or otherwise, if
such action is consistent with the Servicing Standard and a default on such
Whole Loan has occurred or, in the Master Servicer's judgment, is imminent.
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer may not acquire title to any related Mortgaged Property or take any
other action that would cause the Trustee, for the benefit of
Certificateholders, or any other specified person to be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or an "operator"
of such Mortgaged Property within the meaning of certain federal environmental
laws, unless the Master Servicer has previously determined, based on a report
prepared by a person who regularly conducts environmental audits (which report
will be an expense of the Trust Fund), that either:
(i) the Mortgaged Property is in compliance with applicable environmental
laws, and there are no circumstances present at the Mortgaged Property relating
to the use, management or disposal of any hazardous substances, hazardous
materials, wastes, or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation could be required
under any federal, state or local law or regulation; or
(ii) if the Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic interest of
the Trust Fund to acquire title to the Mortgaged Property and 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.
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If the Trust Fund acquires title to any Mortgaged Property, the Master
Servicer, on behalf of the Trust Fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the Master Servicer of any of its obligations with
respect to the management and operation of such Mortgaged Property. Unless
otherwise specified in the related Prospectus Supplement, any such property
acquired by the Trust Fund will be managed in a manner consistent with the
management and operation of similar property by a prudent lending institution.
The limitations imposed by the related Agreement and the REMIC
provisions of the Code (if a REMIC election has been made with respect to the
related Trust Fund) on the operations and ownership of any Mortgaged Property
acquired on behalf of the Trust Fund may result in the recovery of an amount
less than the amount that would otherwise be recovered. See "Certain Legal
Aspects of the Mortgage Loans and the Leases--Foreclosure."
If recovery on a defaulted Whole Loan under any related instrument of
Credit Support is not available, the Master Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and procedures
as it deems necessary or advisable to realize upon the defaulted Whole Loan. If
the proceeds of any liquidation of the property securing the defaulted Whole
Loan are less than the outstanding principal balance of the defaulted Whole Loan
plus interest accrued thereon at the Mortgage Rate plus the aggregate amount of
expenses incurred by the Master Servicer in connection with such proceedings and
which are reimbursable under the Agreement, the Trust Fund will realize a loss
in the amount of such difference. The Master Servicer will be entitled to
withdraw or cause to be withdrawn from the Certificate Account out of the
Liquidation Proceeds recovered on any defaulted Whole Loan, prior to the
distribution of such Liquidation Proceeds to Certificateholders, amounts
representing its normal servicing compensation on the Whole Loan, unreimbursed
servicing expenses incurred with respect to the Whole Loan and any unreimbursed
advances of delinquent payments made with respect to the Whole Loan.
If any property securing a defaulted Whole Loan is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient to
restore the damaged property to a condition sufficient to permit recovery under
the related instrument of Credit Support, if any, the Master Servicer is not
required to expend its own funds to restore the damaged property unless it
determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Whole Loan after reimbursement of the
Master Servicer for its expenses and (ii) that such expenses will be recoverable
by it from related Insurance Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans, a Master Servicer, on behalf of itself,
the Trustee and the Certificateholders, will present claims to the obligor under
each instrument of Credit Support, and will take such reasonable steps as are
necessary to receive payment or to permit recovery thereunder with respect to
defaulted Whole Loans.
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from the
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
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necessary to avoid the application of any co-insurance clause contained in the
hazard insurance policy. The ability of the Master Servicer to assure that
hazard insurance proceeds are appropriately applied may be dependent upon its
being named as an additional insured under any hazard insurance policy and under
any other insurance policy referred to below, or upon the extent to which
information in this regard is furnished by mortgagors. All amounts collected by
the Master Servicer under any such policy (except for amounts to be applied to
the restoration or repair of the Mortgaged Property or released to the mortgagor
in accordance with the Master Servicer's normal servicing procedures, subject to
the terms and conditions of the related Mortgage and Mortgage Note) will be
deposited in the Certificate Account. The Agreement will provide that the Master
Servicer may satisfy its obligation to cause each mortgagor to maintain such a
hazard insurance policy by the Master Servicer's maintaining a blanket policy
insuring against hazard losses on the Whole Loans. If such blanket policy
contains a deductible clause, the Master Servicer will be required to deposit in
the Certificate Account all sums that would have been deposited therein but for
such clause.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements of the property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions specified in each
policy. Although the policies relating to the Whole Loans will be underwritten
by different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most such policies typically do not cover any physical damage resulting from
war, revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mudflows), wet or dry rot,
vermin, domestic animals and certain other kinds of uninsured risks.
The hazard insurance policies covering the Mortgaged Properties
securing the Whole Loans will typically contain a co-insurance clause that in
effect requires the insured at all times to carry insurance of a specified
percentage (generally 80% to 90%) of the full replacement value of the
improvements on the property in order to recover the full amount of any partial
loss. If the insured's coverage falls below this specified percentage, such
clause generally provides that the insurer's liability in the event of partial
loss does not exceed the lesser of (i) the replacement cost of the improvements
less physical depreciation and (ii) such proportion of the loss as the amount of
insurance carried bears to the specified percentage of the full replacement cost
of such improvements.
Each Agreement for a Trust Fund that includes Whole Loans will require
the Master Servicer to cause the mortgagor on each Whole Loan, or, in certain
cases, the related Lessee, to maintain all such other insurance coverage with
respect to the related Mortgaged Property as is consistent with the terms of the
related Mortgage and the Servicing Standard, which insurance may typically
include flood insurance (if the related Mortgaged Property was located at the
time of origination in a federally designated flood area).
In addition, to the extent required by the related Mortgage, the Master
Servicer may require the mortgagor or related Lessee to maintain other forms of
insurance including, but not limited to, loss of rent endorsements, 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.
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RENTAL INTERRUPTION INSURANCE POLICY
If so specified in the related Prospectus Supplement, the Master
Servicer or the mortgagors will maintain rental interruption insurance policies
in full force and effect with respect to some or all of the Leases. Although the
terms of such policies vary to some degree, a rental interruption insurance
policy typically provides that, to the extent that a Lessee fails to make timely
rental payments under the related Lease due to a casualty event, such losses
will be reimbursed to the insured. If so specified in the related Prospectus
Supplement, the Master Servicer will be required to pay from its servicing
compensation the premiums on the rental interruption policy on a timely basis.
If so specified in the Prospectus Supplement, if such rental interruption policy
is canceled or terminated for any reason (other than the exhaustion of total
policy coverage), the Master Servicer will exercise its best reasonable efforts
to obtain from another insurer a replacement policy comparable to the rental
interruption policy with a total coverage that is equal to the then existing
coverage of the terminated rental interruption policy; provided that if the cost
of any such replacement policy is greater than the cost of the terminated rental
interruption policy, the amount of coverage under the replacement policy will,
unless otherwise specified in the related Prospectus Supplement, be reduced to a
level such that the applicable premium does not exceed, by a percentage that may
be set forth in the related Prospectus Supplement, the cost of the rental
interruption policy that was replaced. Any amounts collected by the Master
Servicer under the rental interruption policy in the nature of insurance
proceeds will be deposited in the Certificate Account.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will require that the Master Servicer and any Special Servicer obtain
and maintain in effect a fidelity bond or similar form of insurance coverage
(which may provide blanket coverage) or any combination thereof insuring against
loss occasioned by fraud, theft or other intentional misconduct of the officers,
employees and agents of the Master Servicer or the Special Servicer, as
applicable. The related Agreement will allow the Master Servicer and any Special
Servicer to self-insure against loss occasioned by the errors and omissions of
the officers, employees and agents of the Master Servicer or the Special
Servicer so long as certain criteria set forth in the Agreement are met.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Whole Loans may contain clauses requiring the consent of
the mortgagee to any sale or other transfer of the related Mortgaged Property,
or due-on-sale clauses entitling the mortgagee to accelerate payment of the
Whole Loan upon any sale or other transfer of the related Mortgaged Property.
Certain of the Whole Loans may contain clauses requiring the consent of the
mortgagee to the creation of any other lien or encumbrance on the Mortgaged
Property or due-on-encumbrance clauses entitling the mortgagee to accelerate
payment of the Whole Loan upon the creation of any other lien or encumbrance
upon the Mortgaged Property. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer, on behalf of the Trust Fund, will exercise any
right the Trustee may have as mortgagee to accelerate payment of any such Whole
Loan or to withhold its consent to any 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
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payment to it of a portion of the interest payment on each Asset. Since any
Retained Interest and a Master Servicer's primary compensation are percentages
of the principal balance of each Asset, such amounts will decrease in accordance
with the amortization of the Assets. The Prospectus Supplement with respect to a
series of Certificates evidencing interests in a Trust Fund that includes Whole
Loans may provide that, as additional compensation, the Master Servicer or the
Sub-Servicers may retain all or a portion of assumption fees, modification fees,
late payment charges or Prepayment Premiums collected from mortgagors and any
interest or other income which may be earned on funds held in the Certificate
Account or any account established by a Sub-Servicer pursuant to the Agreement.
The Master Servicer may, to the extent provided in the related
Prospectus Supplement, pay from its servicing compensation certain expenses
incurred in connection with its servicing and managing of the Assets, including,
without limitation, payment of the fees and disbursements of the Trustee and
independent accountants, payment of expenses incurred in connection with
distributions and reports to Certificateholders, and payment of any other
expenses described in the related Prospectus Supplement. Certain other expenses,
including certain expenses relating to defaults and liquidations on the Whole
Loans and, to the extent so provided in the related Prospectus Supplement,
interest thereon at the rate specified therein, and the fees of any Special
Servicer, may be borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
Each Agreement relating to Assets which include Whole Loans will
provide that on or before a specified date in each year, beginning with the
first such date at least six months after the related Cut-off Date, a firm of
independent public accountants will furnish a statement to the Trustee to the
effect that, on the basis of the examination by such firm conducted
substantially in compliance with either the Uniform Single Attestation Program
for Mortgage Bankers or the Audit Program for Mortgages serviced for the Federal
Home Loan Mortgage Corporation ("FHLMC"), the servicing by or on behalf of the
Master Servicer of mortgage loans under pooling and servicing agreements
substantially similar to each other (including the related Agreement) was
conducted in compliance with the terms of such agreements except for any
significant exceptions or errors in records that, in the opinion of the firm,
either the Audit Program for Mortgages serviced for FHLMC, or paragraph 4 of the
Uniform Single Attestation Program for Mortgage Bankers, requires it to report.
In rendering its statement such firm may rely, as to matters relating to the
direct servicing of mortgage loans by Sub-Servicers, upon comparable statements
for examinations conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC (rendered within one year of such statement) of firms of
independent public accountants with respect to the related Sub-Servicer.
Each such Agreement will also provide for delivery to the Trustee, on
or before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding calendar
year or other specified twelve-month period.
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
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applicable law with any other activities carried on by it, the other activities
of the Master Servicer so causing such a conflict being of a type and nature
carried on by the Master Servicer at the date of the Agreement. No such
resignation will become effective until the Trustee or a successor servicer has
assumed the Master Servicer's obligations and duties under the Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will further provide that neither any Master Servicer, the Depositor
nor any director, officer, employee, or agent of a Master Servicer or the
Depositor will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be protected
against any breach of a representation, warranty or covenant made in such
Agreement, or against any liability specifically imposed thereby, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of obligations or duties thereunder
or by reason of reckless disregard of obligations and duties thereunder. Unless
otherwise specified in the related Prospectus Supplement, each Agreement will
further provide that any Master Servicer, the Depositor and any director,
officer, employee or agent of a Master Servicer or the Depositor will be
entitled to indemnification by the related Trust Fund and will be held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to the Agreement or the Certificates; provided, however, that
such indemnification will not extend to any loss, liability or expense (i)
specifically imposed by such Agreement or otherwise incidental to the
performance of obligations and duties thereunder, including, in the case of a
Master Servicer, the prosecution of an enforcement action in respect of any
specific Whole Loan or Whole Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to such Agreement); (ii)
incurred in connection with any breach of a representation, warranty or covenant
made in such Agreement; (iii) incurred by reason of misfeasance, bad faith or
gross negligence in the performance of obligations or duties thereunder, or by
reason of reckless disregard of such obligations or duties; (iv) incurred in
connection with any violation of any state or federal securities law; or (v)
imposed by any taxing authority if such loss, liability or expense is not
specifically reimbursable pursuant to the terms of the related Agreement. In
addition, each Agreement will provide that neither any Master Servicer nor the
Depositor will be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its respective responsibilities under
the Agreement and which in its opinion may involve it in any expense or
liability. Any such Master Servicer or the Depositor may, however, in its
discretion undertake any such action which it may deem necessary or desirable
with respect to the Agreement and the rights and duties of the parties thereto
and the interests of the Certificateholders thereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom will be
expenses, costs and liabilities of the Certificateholders, and the Master
Servicer or the Depositor, as the case may be, will be entitled to be reimbursed
therefor and to charge the Certificate Account.
Any person into which the Master Servicer or the Depositor may be
merged or consolidated, or any person resulting from any merger or consolidation
to which the Master Servicer or the Depositor is a party, or any person
succeeding to the business of the Master Servicer or the Depositor, will be the
successor of the Master Servicer or the Depositor, as the case may be, under the
related Agreement.
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
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obligations. Material variations to the foregoing Events of Default (other than
to shorten cure periods or eliminate notice requirements) will be specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the Trustee shall, not later than the later of 60 days
after the occurrence of any event which constitutes or, with notice or lapse of
time or both, would constitute an Event of Default and five days after certain
officers of the Trustee become aware of the occurrence of such an event,
transmit by mail to the Depositor and all Certificateholders of the applicable
series notice of such occurrence, unless such default shall have been cured or
waived.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under an Agreement remains unremedied,
the Depositor or the Trustee may, and at the direction of holders of
Certificates evidencing not less than 51% of the Voting Rights, the Trustee
shall, terminate all of the rights and obligations of the Master Servicer under
the Agreement and in and to the Mortgage Loans (other than as a
Certificateholder or as the owner of any Retained Interest), whereupon the
Trustee will succeed to all of the responsibilities, duties and liabilities of
the Master Servicer under the Agreement (except that if the Trustee is
prohibited by law from obligating itself to make advances regarding delinquent
mortgage loans, or if the related Prospectus Supplement so specifies, then the
Trustee will not be obligated to make such advances) and will be entitled to
similar compensation arrangements. Unless otherwise specified in the related
Prospectus Supplement, in the event that the Trustee is unwilling or unable so
to act, it may or, at the written request of the holders of Certificates
entitled to at least 51% of the Voting Rights, it shall appoint, or petition a
court of competent jurisdiction for the appointment of, a loan servicing
institution acceptable to the Rating Agency with a net worth at the time of such
appointment of at least $15,000,000 to act as successor to the Master Servicer
under the Agreement. Pending such appointment, the Trustee is obligated to act
in such capacity. The Trustee and any such successor may agree upon the
servicing compensation to be paid, which in no event may be greater than the
compensation payable to the Master Servicer under the Agreement.
Unless otherwise described in the related Prospectus Supplement, the
holders of Certificates representing at least 66 2/3% of the Voting Rights
allocated to the respective classes of Certificates affected by any Event of
Default will be entitled to waive such Event of Default; provided, however, that
an Event of Default involving a failure to distribute a required payment to
Certificateholders described in clause (i) under "Events of Default" may be
waived only by all of the Certificateholders. Upon any such waiver of an Event
of Default, such Event of Default shall cease to exist and shall be deemed to
have been remedied for every purpose under the Agreement.
No Certificateholder will have the right under any Agreement to
institute any proceeding with respect thereto unless such holder previously has
given to the Trustee written notice of default and unless the holders of
Certificates evidencing not less than 25% of the Voting Rights have made written
request upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity, and the Trustee
for sixty days has neglected or refused to institute any such proceeding. The
Trustee, however, is under no obligation to exercise any of the trusts or powers
vested in it by any Agreement or to make 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
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than 51% of the Voting Rights, for any purpose; provided, however, that unless
otherwise specified in the related Prospectus Supplement, no such amendment may
(i) reduce in any manner the amount of or delay the timing of, payments received
or advanced on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the holder of such Certificate, (ii)
adversely affect in any material respect the interests of the holders of any
class of Certificates in a manner other than as described in (i), without the
consent of the holders of all Certificates of such class or (iii) modify the
provisions of such Agreement described in this paragraph without the consent of
the holders of all Certificates covered by such Agreement then outstanding.
However, with respect to any series of Certificates as to which a REMIC election
is to be made, the Trustee will not consent to any amendment of the Agreement
unless it shall first have received an opinion of counsel to the effect that
such amendment will not result in the imposition of a tax on the related Trust
Fund or cause the related Trust Fund to fail to qualify as a REMIC at any time
that the related Certificates are outstanding.
THE TRUSTEE
The Trustee under each Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company serving as Trustee may have a banking
relationship with the Depositor and its affiliates and with any Master Servicer
and its affiliates.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or
sufficiency of any Agreement, the Certificates or any Asset or related document
and is not accountable for the use or application by or on behalf of any Master
Servicer of any funds paid to the Master Servicer or its designee or any Special
Servicer in respect of the Certificates or the Assets, or deposited into or
withdrawn from the Certificate Account or any other account by or on behalf of
the Master Servicer or any Special Servicer. If no Event of Default has occurred
and is continuing, the Trustee is required to perform only those duties
specifically required under the related Agreement. However, upon receipt of the
various certificates, reports or other instruments required to be furnished to
it, the Trustee is required to examine such documents and to determine whether
they conform to the requirements of the Agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Trustee and any director, officer, employee or agent of the Trustee shall be
entitled to indemnification out of the Certificate Account for any loss,
liability or expense (including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in settlement)
incurred in connection with the Trustee's (i) enforcing its rights and remedies
and protecting the interests, and enforcing the rights and remedies, of the
Certificateholders during the continuance of an Event of Default, (ii) defending
or prosecuting any legal action in respect of the related Agreement or series of
Certificates, (iii) being the mortgagee of record with respect to the Mortgage
Loans in a 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
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giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as
such under the related Agreement, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Depositor
may remove the Trustee and appoint a successor trustee acceptable to the Master
Servicer, if any. Holders of the Certificates of any series entitled to at least
51% of the Voting Rights for such series may at any time remove the Trustee
without cause and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee shall not become effective until acceptance of appointment by
the successor trustee.
DESCRIPTION OF CREDIT SUPPORT
GENERAL
For any series of Certificates, Credit Support may be provided with
respect to one or more classes thereof or the related Assets. Credit Support may
be in the form of the subordination of one or more classes of Certificates,
letters of credit, insurance policies, guarantees, the establishment of one or
more reserve funds or another method of Credit Support described in the related
Prospectus Supplement, or any combination of the foregoing. If so provided in
the related Prospectus Supplement, any form of Credit Support may be structured
so as to be drawn upon by more than one series to the extent described therein.
Unless otherwise provided in the related Prospectus Supplement for a
series of Certificates, the Credit Support will not provide protection against
all risks of loss and will not guarantee repayment of the entire Certificate
Balance of the Certificates and interest thereon. If losses or shortfalls occur
that exceed the amount covered by Credit Support or that are not covered by
Credit Support, Certificateholders will bear their allocable share of
deficiencies. Moreover, if a form of Credit Support covers more than one series
of Certificates (each, a "Covered Trust"), holders of Certificates evidencing
interests in any of such Covered Trusts will be subject to the risk that such
Credit Support will be exhausted by the claims of other Covered Trusts prior to
such Covered Trust receiving any of its intended share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or the related Assets, the related Prospectus
Supplement will include a description of (a) the nature and amount of coverage
under such Credit Support, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the amount
of coverage under such Credit Support may be reduced and under which such 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)
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certain types of losses or shortfalls. The related Prospectus Supplement will
set forth information concerning the amount of subordination of a class or
classes of Subordinate Certificates in a series, the circumstances in which such
subordination will be applicable and the manner, if any, in which the amount of
subordination will be effected.
CROSS-SUPPORT PROVISIONS
If the Assets for a series are divided into separate groups, each
supporting a separate class or classes of Certificates of a series, credit
support may be provided by cross-support provisions requiring that distributions
be made on Senior Certificates evidencing interests in one group of Mortgage
Assets prior to distributions on Subordinate Certificates evidencing interests
in a different group of Mortgage Assets within the Trust Fund. The Prospectus
Supplement for a series that includes a cross-support provision will describe
the manner and conditions for applying such provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO THE WHOLE LOANS
If so provided in the Prospectus Supplement for a series of
Certificates, the Whole Loans in the related Trust Fund will be covered for
various default risks by insurance policies or guarantees. A copy of any such
material instrument for a series will be filed with the Commission as an exhibit
to a Current Report on Form 8-K to be filed within 15 days of issuance of the
Certificates of the related series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of
Certificates, deficiencies in amounts otherwise payable on such Certificates or
certain classes thereof will be covered by one or more letters of credit, issued
by a bank or financial institution specified in such Prospectus Supplement (the
"L/C Bank"). Under a letter of credit, the L/C Bank will be obligated to honor
draws thereunder in an aggregate fixed dollar amount, net of unreimbursed
payments thereunder, generally equal to a percentage specified in the related
Prospectus Supplement of the aggregate principal balance of the Mortgage Assets
on the related Cut-off Date or of the initial aggregate Certificate Balance of
one or more classes of Certificates. If so specified in the related Prospectus
Supplement, the letter of credit may permit draws in the event of only certain
types of losses and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments
thereunder and may otherwise be reduced as described in the related Prospectus
Supplement. The obligations of the L/C Bank under the letter of credit for each
series of Certificates will expire at the earlier of the date specified in the
related Prospectus Supplement or the termination of the Trust Fund. A copy of
any such letter of credit for a series will be filed with the Commission as an
exhibit to a Current Report on Form 8-K to be filed within 15 days of issuance
of the Certificates of the related series.
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
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therein a specified amount of the distributions received on the related Assets
as specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the Certificates. If so specified in the related
Prospectus Supplement, reserve funds may be established to provide limited
protection against only certain types of losses and shortfalls. Following each
Distribution Date amounts in a reserve fund in excess of any amount required to
be maintained therein may be released from the reserve fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not be
available for further application to the Certificates.
Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, any
reinvestment income or other gain from such investments will be credited to the
related Reserve Fund for such series, and any loss resulting from such
investments will be charged to such Reserve Fund. However, such income may be
payable to any related Master Servicer or another service provider as additional
compensation. The Reserve Fund, if any, for a series will not be a part of the
Trust Fund unless otherwise specified in the related Prospectus Supplement.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which such required balance will decrease over time, the manner of funding such
Reserve Fund, the purposes for which funds in the Reserve Fund may be applied to
make distributions to Certificateholders and use of investment earnings from the
Reserve Fund, if any.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of
Certificates, the MBS in the related Trust Fund and/or the Mortgage Loans
underlying such MBS may be covered by one or more of the types of Credit Support
described herein. The related Prospectus Supplement will specify as to each such
form of Credit Support the information indicated above with respect thereto, to
the extent such information is material and available.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do not
purport to be complete nor to reflect the laws of any particular state, nor to
encompass the laws of all states in which the security for the 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.
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TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties--a mortgagor (the borrower and usually the
owner of the subject property) and a mortgagee (the lender). In contrast, a deed
of trust is a three-party instrument, among a trustor (the equivalent of a
mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "mortgagor" includes the
trustor under a deed of trust and a grantor under a security deed or a deed to
secure debt. Under a deed of trust, the mortgagor grants the property,
irrevocably until the debt is paid, in trust, generally with a power of sale as
security for the indebtedness evidenced by the related note. A deed to secure
debt typically has two parties. By executing a deed to secure debt, the grantor
conveys title to, as opposed to merely creating a lien upon, the subject
property to the grantee until such time as the underlying debt is repaid,
generally with a power of sale as security for the indebtedness evidenced by the
related mortgage note. In case the mortgagor under a mortgage is a land trust,
there would be an additional party because legal title to the property is held
by a land trustee under a land trust agreement for the benefit of the mortgagor.
At origination of a mortgage loan involving a land trust, the mortgagor executes
a separate undertaking to make payments on the mortgage note. The mortgagee's
authority under a mortgage, the trustee's authority under a deed of trust and
the grantee's authority under a deed to secure debt are governed by the express
provisions of the mortgage, the law of the state in which the real property is
located, certain federal laws (including, without limitation, the Soldiers' and
Sailors' Civil Relief Act of 1940) and, in some cases, in deed of trust
transactions, the directions of the beneficiary.
INTEREST IN REAL PROPERTY
The real property covered by a mortgage, deed of trust, security deed
or deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property such
as a tenant's interest in a lease of land or improvements, or both, and the
leasehold estate created by such lease. An instrument covering an interest in
real property other than the fee estate requires special provisions in the
instrument creating such interest or in the mortgage, deed of trust, security
deed or deed to secure debt, to protect the mortgagee against termination of
such interest before the mortgage, deed of trust, security deed or deed to
secure debt is paid. Unless otherwise specified in the Prospectus Supplement,
the Depositor or the Asset Seller will make certain representations and
warranties in the Agreement with respect to the Mortgage Loans which are secured
by an interest in a leasehold estate. Such representation and warranties will be
set forth in the Prospectus Supplement if applicable.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the mortgagor retains a revocable license to
collect the rents for so long as there is no default. Under such assignments,
the mortgagor typically assigns its right, title and interest as lessor 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.
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Even after a foreclosure, the potential rent payments from the property
may be less than the periodic payments that had been due under the mortgage. For
instance, the net income that would otherwise be generated from the property may
be less than the amount that would have been needed to service the mortgage debt
if the leases on the property are at below-market rents, or as the result of
excessive maintenance, repair or other obligations which a lender succeeds to as
landlord.
Lenders that actually take possession of the property, however, may
incur potentially substantial risks attendant to being a mortgagee in
possession. Such risks include liability for environmental clean-up costs and
other risks inherent in property ownership. See "Environmental Legislation"
below.
PERSONALTY
Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value from
personal property which does not constitute "fixtures" under applicable state
real property law and, hence, would not be subject to the lien of a mortgage.
Such property is generally pledged or assigned as security to the lender under
the UCC. In order to perfect its security interest therein, the lender generally
must file UCC financing statements and, to maintain perfection of such security
interest, file continuation statements generally every five years.
FORECLOSURE
GENERAL
Foreclosure is a legal procedure that allows the mortgagee to recover
its mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its obligations
under the note or mortgage, the mortgagee has the right to institute foreclosure
proceedings to sell the mortgaged property at public auction to satisfy the
indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage
vary from state to state. Two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage instrument. There are several other foreclosure
procedures available in some states that are either infrequently used or
available only in certain limited circumstances, such as strict foreclosure.
JUDICIAL FORECLOSURE
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated by
the service of legal pleadings upon all parties having a subordinate interest of
record in the real property and all parties in possession of the property, under
leases or otherwise, whose interests are subordinate to the mortgage. Delays in
completion of the foreclosure may occasionally result from difficulties in
locating defendants. When the lender's right to foreclose is contested, the
legal proceedings can be time-consuming. Upon successful completion of a
judicial foreclosure proceeding, the court generally issues a judgment of
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
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that lenders reinstate loans or recast payment schedules in order to accommodate
mortgagors who are suffering from a temporary financial disability. In other
cases, courts have limited the right of the lender to foreclose if the default
under the mortgage is not monetary, e.g., the mortgagor failed to maintain the
mortgaged property adequately or the mortgagor executed a junior mortgage on the
mortgaged property. The exercise by the court of its equity powers will depend
on the individual circumstances of each case presented to it. Finally, some
courts have been faced with the issue of whether federal or state constitutional
provisions reflecting due process concerns for adequate notice require that a
mortgagor receive notice in addition to statutorily-prescribed minimum notice.
For the most part, these cases have upheld the reasonableness of the notice
provisions or have found that a public sale under a mortgage providing for a
power of sale does not involve sufficient state action to afford constitutional
protections to the mortgagor.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes require several years to complete. Moreover, as discussed below, a
non-collusive, regularly conducted foreclosure sale may be challenged as a
fraudulent conveyance, regardless of the parties' intent, if a court determines
that the sale was for less than fair consideration and such sale occurred while
the mortgagor was insolvent (or the mortgagor was rendered insolvent as a result
of such sale) and within one year (or within the state statute of limitations if
the trustee in bankruptcy elects to proceed under state fraudulent conveyance
law) of the filing of bankruptcy.
NON-JUDICIAL FORECLOSURE/POWER OF SALE
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale pursuant to the power of sale granted in the deed of
trust. A power of sale is typically granted in a deed of trust. It may also be
contained in any other type of mortgage instrument. A power of sale allows a
non-judicial public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
mortgagor under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to such sale,
the trustee under a deed of trust must record a notice of default and notice of
sale and send a copy to the mortgagor and to any other party who has recorded a
request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record in the real property, including junior lienholders. A notice
of sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. The mortgagor or junior
lienholder may then have the right, during a reinstatement period required in
some states, to cure the default by paying the entire actual amount in arrears
(without acceleration) plus the expenses incurred in enforcing the obligation.
In other states, the mortgagor or the junior lienholder is not provided a period
to reinstate the loan, but has only the right to pay off the entire debt to
prevent the foreclosure sale. Generally, the procedure for public sale, the
parties entitled to notice, the method of giving notice and the applicable time
periods are governed by state law and vary among the states. Foreclosure of a
deed to secure debt is also generally accomplished by a non-judicial sale
similar to that required by a deed of trust, except that the lender or its
agent, rather than a trustee, is typically empowered to perform the sale in
accordance with the terms of the deed to secure debt and applicable law.
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
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properties which are hotels, motels, restaurants, nursing or convalescent homes
or hospitals may be particularly significant because of the expertise, knowledge
and, with respect to nursing or convalescent homes or hospitals, regulatory
compliance, required to run such operations and the effect which foreclosure and
a change in ownership may have on the public's and the industry's (including
franchisors') perception of the quality of such operations. The lender will
commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale of the property. Depending upon market
conditions, the ultimate proceeds of the sale of the property may not equal the
lender's investment in the property. Moreover, a lender commonly incurs
substantial legal fees and court costs in acquiring a mortgaged property through
contested foreclosure and/or bankruptcy proceedings. Furthermore, a few states
require that any environmental contamination at certain types of properties be
cleaned up before a property may be resold. In addition, a lender may be
responsible under federal or state law for the cost of cleaning up a mortgaged
property that is environmentally contaminated. See "Environmental Legislation."
Generally state law controls the amount of foreclosure expenses and costs,
including attorneys' fees, that may be recovered by a lender.
A junior mortgagee may not foreclose on the property securing the
junior mortgage unless it forecloses subject to senior mortgages and any other
prior liens, in which case it may be obliged to make payments on the senior
mortgages to avoid their foreclosure. In addition, in the event that the
foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale"
clause contained in a senior mortgage, the junior mortgagee may be required to
pay the full amount of the senior mortgage to avoid its foreclosure.
Accordingly, with respect to those Mortgage Loans, if any, that are junior
mortgage loans, if the lender purchases the property the lender's title will be
subject to all senior mortgages, prior liens and certain governmental liens.
The proceeds received by the referee or trustee from the sale are
applied first to the costs, fees and expenses of sale and then in satisfaction
of the indebtedness secured by the mortgage under which the sale was conducted.
Any proceeds remaining after satisfaction of senior mortgage debt are generally
payable to the holders of junior mortgages and other liens and claims in order
of their priority, whether or not the mortgagor is in default. Any additional
proceeds are generally payable to the mortgagor. The payment of the proceeds to
the holders of junior mortgages may occur in the foreclosure action of the
senior mortgage or a subsequent ancillary proceeding or may require the
institution of separate legal proceedings by such holders.
REO PROPERTIES
If title to any Mortgaged Property is acquired by the Trustee on behalf
of the Certificateholders, the Master Servicer or any related Sub-servicer or
the Special Servicer, on behalf of such holders, will be required to sell the
Mortgaged Property prior to the close of the third calendar year following the
year of acquisition of such Mortgaged Property by the Trust Fund, unless (i) the
Internal Revenue Service grants an extension of time to sell such property (an
"REO Extension") or (ii) it obtains an opinion of counsel generally to the
effect that the holding of the property beyond the close of the third calendar
year after its acquisition will not result in the imposition of a tax on the
Trust Fund or cause any REMIC created pursuant to the Pooling and Servicing
Agreement to fail to qualify as a REMIC under the Code. Subject to the
foregoing, the Master Servicer or any related Sub-servicer or the Special
Servicer will generally be required to solicit bids for any Mortgaged Property
so acquired in such a manner as will be 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
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meaning of Section 857(b)(4)(B) of the Code (an "REO Tax") at the highest
marginal corporate tax rate (currently 35%). The determination as to whether
income from an REO Property would be subject to an REO Tax will depend on the
specific facts and circumstances relating to the management and operation of
each REO Property. Any REO Tax imposed on the Trust Fund's income from an REO
Property would reduce the amount available for distribution to
Certificateholders. Certificateholders are advised to consult their tax advisors
regarding the possible imposition of REO Taxes in connection with the operation
of commercial REO Properties by REMICs. See "Certain Federal Income Tax
Consequences" herein and "Certain Federal Income Tax Consequences-REMICs" in the
Prospectus.
RIGHTS OF REDEMPTION
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the mortgagor, and all persons who have an
interest in the property which is subordinate to the mortgage being foreclosed,
from exercise of their "equity of redemption." The doctrine of equity of
redemption provides that, until the property covered by a mortgage has been sold
in accordance with a properly conducted foreclosure and foreclosure sale, those
having an interest which is subordinate to that of the foreclosing mortgagee
have an equity of redemption and may redeem the property by paying the entire
debt with interest. In addition, in some states, when a foreclosure action has
been commenced, the redeeming party must pay certain costs of such action. Those
having an equity of redemption must generally be made parties and joined in the
foreclosure proceeding in order for their equity of redemption to be cut off and
terminated.
The equity of redemption is a common-law (non-statutory) right which
exists prior to completion of the foreclosure, is not waivable by the mortgagor,
must be exercised prior to foreclosure sale and should be distinguished from the
post-sale statutory rights of redemption. In some states, after sale pursuant to
a deed of trust or foreclosure of a mortgage, the mortgagor and foreclosed
junior lienors are given a statutory period in which to redeem the property from
the foreclosure sale. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
authorized if the former mortgagor pays only a portion of the sums due. The
effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property. The exercise of a right of redemption
would defeat the title of any purchaser from a foreclosure sale or sale under a
deed of trust. Consequently, the practical effect of the redemption right is to
force the lender to maintain the property and pay the expenses of ownership
until the redemption period has expired. In some states, a post-sale statutory
right of redemption may exist following a judicial foreclosure, but not
following a trustee's sale under a deed of trust.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held beyond the close of the third calendar
year following the year of acquisition. Unless otherwise provided in the related
Prospectus Supplement, with respect to a series of Certificates for which an
election is made to qualify the Trust Fund or a part thereof as a REMIC, the
Agreement will permit foreclosed property to be held beyond the close of the
third calendar year following the year of acquisition if the Internal Revenue
Service grants an extension of time within which to sell such property or
independent counsel renders an opinion to the effect that holding such property
for such additional period is permissible under the REMIC Provisions.
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
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exercising any additional rights under the note or mortgage if it has taken any
prior enforcement action. Consequently, the practical effect of the election
requirement, in those states permitting such election, is that lenders will
usually proceed against the security first rather than bringing a personal
action against the mortgagor. Finally, other statutory provisions limit any
deficiency judgment against the former mortgagor following a judicial sale to
the excess of the outstanding debt over the fair market value of the property at
the time of the public sale. The purpose of these statutes is generally to
prevent a lender from obtaining a large deficiency judgment against the former
mortgagor as a result of low or no bids at the judicial sale.
LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on a ground lease.
Leasehold mortgages are subject to certain risks not associated with mortgage
loans secured by the fee estate of the mortgagor. The most significant of these
risks is that the ground lease creating the leasehold estate could terminate,
leaving the leasehold mortgagee without its security. The ground lease may
terminate if, among other reasons, the ground lessee breaches or defaults in its
obligations under the ground lease or there is a bankruptcy of the ground lessee
or the ground lessor. This risk may be minimized if the ground lease contains
certain provisions protective of the mortgagee, but the ground leases that
secure Mortgage Loans may not contain some of these protective provisions, and
mortgages may not contain the other protections discussed in the next paragraph.
Protective ground lease provisions include the right of the leasehold mortgagee
to receive notices from the ground lessor of any defaults by the mortgagor; the
right to cure such defaults, with adequate cure periods; if a default is not
susceptible of cure by the leasehold mortgagee, the right to acquire the
leasehold estate through foreclosure or otherwise; the ability of the ground
lease to be assigned to and by the leasehold mortgagee or purchaser at a
foreclosure sale and for the concomitant release of the ground lessee's
liabilities thereunder; and the right of the leasehold mortgagee to enter into a
new ground lease with the ground lessor on the same terms and conditions as the
old ground lease in the event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground lessee
from treating the ground lease as terminated in the event of the ground lessor's
bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor. As further protection, a leasehold mortgage may provide
for the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (Title
11 of the United States Code) (the "Bankruptcy Code"), although the
enforceability of such clause has not been established. Without the protections
described above, a leasehold mortgagee may lose the collateral securing its
leasehold mortgage. In addition, terms and conditions of a leasehold mortgage
are subject to the terms and conditions of the ground lease. Although certain
rights given to a ground lessee can be limited by the terms of a leasehold
mortgage, the rights of a ground lessee or a leasehold mortgagee with respect
to, among other things, insurance, casualty and condemnation will be governed by
the provisions of the ground lease.
BANKRUPTCY LAWS
The Bankruptcy Code and related state laws may interfere with or affect
the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) are
automatically stayed upon the filing 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
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loan), and/or an extension (or reduction) of the final maturity date. Some
courts with federal bankruptcy jurisdiction have approved plans, based on the
particular facts of the reorganization case, that effected the curing of a
mortgage loan default by paying arrearages over a number of years. Also, under
federal bankruptcy law, a bankruptcy court may permit a debtor through its
rehabilitative plan to de-accelerate a secured loan and to reinstate the loan
even though the lender accelerated the mortgage loan and final judgment of
foreclosure had been entered in state court (provided no sale of the property
had yet occurred) prior to the filing of the debtor's petition. This may be done
even if the full amount due under the original loan is never repaid.
Federal bankruptcy law provides generally that rights and obligation
under an unexpired lease of the debtor/lessee may not be terminated or modified
at any time after the commencement of a case under the Bankruptcy Code solely on
the basis of a provision in the lease to such effect or because of certain other
similar events. This prohibition on so-called "ipso facto clauses" could limit
the ability of the Trustee for a series of Certificates to exercise certain
contractual remedies with respect to the Leases. In addition, Section 362 of the
Bankruptcy Code operates as an automatic stay of, among other things, any act to
obtain possession of property from a debtor's estate, which may delay a
Trustee's exercise of such remedies for a related series of Certificates in the
event that a related Lessee or a related mortgagor becomes the subject of a
proceeding under the Bankruptcy Code. For example, a mortgagee would be stayed
from enforcing a Lease Assignment by a mortgagor related to a Mortgaged Property
if the related mortgagor was in a bankruptcy proceeding. The legal proceedings
necessary to resolve the issues could be time-consuming and might result in
significant delays in the receipt of the assigned rents. Similarly, the filing
of a petition in bankruptcy by or on behalf of a Lessee of a Mortgaged Property
would result in a stay against the commencement or continuation of any state
court proceeding for past due rent, for accelerated rent, for damages or for a
summary eviction order with respect to a default under the Lease that occurred
prior to the filing of the Lessee's petition. Rents and other proceeds of a
Mortgage Loan may also escape an assignment thereof if the assignment is not
fully perfected under state law prior to commencement of the bankruptcy
proceeding. See "--Leases and Rents" above.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the lease
and retain it or assign it to a third party or (b) reject the lease. If the
lease is assumed, the trustee in bankruptcy on behalf of the lessee, or the
lessee as debtor-in-possession, or the assignee, if applicable, must cure any
defaults under the lease, compensate the lessor for its losses and provide the
lessor with "adequate assurance" of future performance. Such remedies may be
insufficient, however, as the lessor may be forced to continue under the lease
with a lessee that is a poor credit risk or an unfamiliar tenant if the lease
was assigned, and any assurances provided to the lessor may, in fact, be
inadequate. If the lease is rejected, such rejection generally constitutes a
breach of the executory contract or unexpired lease immediately before the date
of filing the petition. As a consequence, the other party or parties to such
lease, such as the mortgagor, as lessor under a Lease, would have only an
unsecured claim against the debtor for damages resulting from such breach, which
could adversely affect the security for the related Mortgage Loan. In addition,
pursuant to Section 502(b)(6) of the Bankruptcy Code, a lessor's damages for
lease rejection in respect of future rent installments are limited to the rent
reserved by the lease, without acceleration, for the greater of one year or 15%,
not to exceed three years, of the remaining term of the lease.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat such lease as terminated by such rejection or, in the alternative, the
lessee 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
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Lessee, under the related Mortgage Loan to the Trust Fund. Payments on long-term
debt may be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may have
the power to grant liens senior to the lien of a mortgage, and analogous state
statutes and general principles of equity may also provide a mortgagor with
means to halt a foreclosure proceeding or sale and to force a restructuring of a
mortgage loan on terms a lender would not otherwise accept. Moreover, the laws
of certain states also give priority to certain tax liens over the lien of a
mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that
actions of the mortgagee have been unreasonable, the lien of the related
mortgage may be subordinated to the claims of unsecured creditors.
To the extent described in the related Prospectus Supplement, certain
of the Mortgagors may be partnerships. The laws governing limited partnerships
in certain states provide that the commencement of a case under the Bankruptcy
Code with respect to a general partner will cause a person to cease to be a
general partner of the limited partnership, unless otherwise provided in writing
in the limited partnership agreement. This provision may be construed as an
"ipso facto" clause and, in the event of the general partner's bankruptcy, may
not be enforceable. To the extent described in the related Prospectus
Supplement, certain limited partnership agreements of the Mortgagors may provide
that the commencement of a case under the Bankruptcy Code with respect to the
related general partner constitutes an event of withdrawal (assuming the
enforceability of the clause is not challenged in bankruptcy proceedings or, if
challenged, is upheld) that might trigger the dissolution of the limited
partnership, the winding up of its affairs and the distribution of its assets,
unless (i) at the time there was at least one other general partner and the
written provisions of the limited partnership permit the business of the limited
partnership to be carried on by the remaining general partner and that general
partner does so or (ii) the written provisions of the limited partnership
agreement permit the limited partner to agree within a specified time frame
(often 60 days) after such withdrawal to continue the business of the limited
partnership and to the appointment of one or more general partners and the
limited partners do so. In addition, the laws governing general partnerships in
certain states provide that the commencement of a case under the Bankruptcy Code
or state bankruptcy laws with respect to a general partner of such partnerships
triggers the dissolution of such partnership, the winding up of its affairs and
the distribution of its assets. Such state laws, however, may not be enforceable
or effective in a bankruptcy case. The dissolution of a Mortgagor, the winding
up of its affairs and the distribution of its assets could result in an
acceleration of its payment obligation under a related Mortgage Loan, which may
reduce the yield on the related series of Certificates in the same manner as a
principal prepayment.
In addition, the bankruptcy of the general partner of a Mortgagor that
is a partnership may provide the opportunity for a trustee in bankruptcy for
such general partner, such general partner as a debtor-in-possession, or a
creditor of such general partner to obtain an order from a court consolidating
the assets and liabilities of the general partner with those of the Mortgagor
pursuant to the doctrines of substantive consolidation or piercing the corporate
veil. In such a case, the respective Mortgaged Property, for example, would
become property of the estate of such bankrupt general partner. Not only would
the Mortgaged Property be available to satisfy the claims of creditors of such
general partner, but an automatic stay would apply to any attempt by the Trustee
to exercise remedies with 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
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junior mortgagee's or junior beneficiary's lien unless the Master Servicer or
Special Servicer, as applicable, asserts its subordinate interest in a Mortgaged
Property in foreclosure litigation or satisfies the defaulted senior loan. As
discussed more fully below, in many states a junior mortgagee or beneficiary may
satisfy a defaulted senior loan in full, or may cure such default and bring the
senior loan current, in either event adding the amounts expended to the balance
due on the junior loan. Absent a provision in the senior mortgage, no notice of
default is required to be given to the junior mortgagee unless otherwise
required by law.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgagee or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other casualty,
or in the event the property is taken by condemnation, the mortgagee or
beneficiary under the senior mortgage or deed of trust will have the prior right
to collect any insurance proceeds payable under the hazard insurance policy and
any award of damages in connection with the condemnation and to apply the same
to the indebtedness secured by the senior mortgage or deed of trust. Proceeds in
excess of the amount of senior mortgage indebtedness will, in most cases, be
applied to the indebtedness of a junior mortgage or trust deed. The laws of
certain states may limit the ability of mortgagees or beneficiaries to apply the
proceeds of hazard insurance and partial condemnation awards to the secured
indebtedness. In such states, the mortgagor or trustor must be allowed to use
the proceeds of hazard insurance to repair the damage unless the security of the
mortgagee or beneficiary has been impaired. Similarly, in certain states, the
mortgagee or beneficiary is entitled to the award for a partial condemnation of
the real property security only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional
lenders typically contains a "future advance" clause, which provides in essence,
that additional amounts advanced to or on behalf of the mortgagor or trustor by
the mortgagee or beneficiary are to be secured by the mortgage or deed of trust.
While such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or "optional" advance. If the mortgagee or beneficiary is
obligated to advance the additional amounts, the advance may be entitled to
receive the same priority as amounts initially made under the mortgage or deed
of trust, notwithstanding that there may be intervening junior mortgages or
deeds of trust and other liens between the date of recording of the mortgage or
deed of trust and the date of the future advance, and notwithstanding that the
mortgagee or beneficiary had actual knowledge of such intervening junior
mortgages or deeds of trust and other liens at the time of the advance. Where
the mortgagee or beneficiary is not obligated to advance the additional amounts
and has actual knowledge of the intervening junior mortgages or deeds of trust
and other liens, the advance may be subordinated to such intervening junior
mortgages or deeds of trust and other liens. Priority of advances under a
"future advance" clause rests, in many other states, on state law giving
priority to all advances made under the loan agreement up to a "credit limit"
amount stated in the recorded mortgage.
Another provision typically found in the form of the mortgage or deed
of trust used by many institutional lenders obligates the mortgagor or trustor
to pay before delinquency all taxes and assessments on the property and, when
due, all encumbrances, charges and liens on the property which appear prior to
the mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee or beneficiary under the
mortgage or deed of trust. Upon a failure of the mortgagor or 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
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event of a foreclosure. A senior mortgagee or beneficiary may refuse to consent
to matters approved by a junior mortgagee or beneficiary with the result that
the value of the security for the junior mortgage or deed of trust is
diminished. For example, a senior mortgagee or beneficiary may decide not to
approve the lease or to refuse to grant a tenant a non-disturbance agreement.
If, as a result, the lease is not executed, the value of the mortgaged property
may be diminished.
ENVIRONMENTAL LEGISLATION
Real property pledged as security to a lender may be subject to
unforeseen environmental liabilities. Of particular concern may be those
Mortgaged Properties which are, or have been, the site of manufacturing,
industrial or disposal activity. Such environmental liabilities may give rise to
(i) a diminution in value of property securing any Mortgage Loan, (ii)
limitation on the ability to foreclose against such property or (iii) in certain
circumstances, as more fully described below, liability for clean-up costs or
other remedial actions, which liability could exceed the value of the principal
balance of the related Mortgage Loan or of such Mortgaged Property.
Under the laws of many states, contamination on a property may give
rise to a lien on the property for cleanup costs. In several states, such a lien
has priority over all existing liens (a "superlien") including those of existing
mortgages; in these states, the lien of a mortgage contemplated by this
transaction may lose its priority to such a superlien.
The presence of hazardous or toxic substances, or the failure to
remediate such property properly, may adversely affect the market value of the
property, as well as the owner's ability to sell or use the real estate or to
borrow using the real estate as collateral. In addition, certain environmental
laws and common law principles govern the responsibility for the removal,
encapsulation or disturbance of asbestos containing materials ("ACMs") when
these ACMs are in poor condition or when a property with ACMs is undergoing
repair, renovation or demolition. Such laws could also be used to impose
liability upon owners and operators of real properties for release of ACMs into
the air that cause personal injury or other damage. In addition to cleanup and
natural resource damages actions brought by federal, state, and local agencies
and private parties, the presence of hazardous substances on a property may lead
to claims of personal injury, property damage, or other claims by private
plaintiffs.
Under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), and under other federal law
and the law of certain states, a secured party which takes a deed-in-lieu of
foreclosure, purchases a mortgaged property at a foreclosure sale, or operates a
Mortgaged Property may become liable in some circumstances either to the
government or to private parties for cleanup costs, even if the lender does not
cause or contribute to the contamination. Liability under some federal or state
statutes may not be limited to the original or unamortized principal balance of
a loan or to the value of the property securing a loan. CERCLA imposes strict,
as well as joint and several, liability on several classes of potentially
responsible parties, including current owners and operators of the property,
regardless of whether they caused or contributed to the contamination. Many
states have laws similar to CERCLA.
Lenders may be held liable under CERCLA as owners or operators.
Excluded from CERCLA's definition of "owner or operator," however, is a person
"who without participating in the management of the facility, holds indicia of
ownership primarily to protect his security interest." This exemption for
holders of a security interest such as a secured lender applies only in
circumstances where the lender acts to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities encroach on
the actual management of such facility 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.
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This scope of the secured creditor exemption has been clarified by the
enactment of the Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Asset Conservation Act"), which was signed into law
by President Clinton on September 30, 1996, and which lists permissible actions
that may be undertaken by a lender holding security in a contaminated facility
without exceeding the bounds of the secured creditor exemption, subject to
certain conditions and limitations. The Asset Conservation Act provides that in
order to be deemed to have participated in the management of a secured property,
a lender must actually participate in the operational affairs of the property or
the borrower. The Asset Conservation Act also provides that a lender will
continue to have the benefit of the secured creditor exemption even if it
forecloses on a mortgaged property, purchases it at a foreclosure sale or
accepts a deed-in-lieu of foreclosure provided that the lender seeks to sell the
mortgaged property at the earliest practicable commercially reasonable time on
commercially reasonable terms. The protections afforded lenders under the Asset
Conversion Act are subject to terms and conditions that have not been clarified
by the courts.
The secured creditor exemption does not protect a lender from liability
under CERCLA in cases where the lender arranges for disposal of hazardous
substances or for transportation of hazardous substances. In addition, the
secured creditor exemption does not govern liability for cleanup costs under
federal laws other than CERCLA or under state law. CERCLA's jurisdiction extends
to the investigation and remediation of releases of "hazardous substances." The
definition of "hazardous substances" under CERCLA specifically excludes
petroleum products. Therefore, a federal statute of particular significance is
Subtitle I of the Resource Conservation and Recovery Act ("RCRA"), which governs
the operation and management of underground petroleum storage tanks. Under the
Asset Conservation Act, the holders of security interests in underground storage
tanks or properties containing such tanks are accorded protections similar to
the protections accorded to lenders under CERCLA. It should be noted, however,
that liability for cleanup of petroleum contamination may be governed by state
law, which may not provide for any specific protection for secured creditors.
In a few states, transfer of some types of properties is conditioned
upon clean up of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed-in-lieu of foreclosure
or otherwise, may be required to cleanup the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law
causes of action (for example, actions based on nuisance or on toxic tort
resulting in death, personal injury or damage to property) related to hazardous
environmental conditions on a property. While it may be more difficult to hold a
lender liable in such cases, unanticipated or uninsurable liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
If a lender is or becomes liable, it may bring an action for
contribution against the owner or operator who created the environmental hazard,
but that person or entity may be bankrupt or otherwise judgment proof. It is
possible that cleanup costs could become a liability of the Trust Fund and
occasion a loss to Certificateholders in certain circumstances described above
if such remedial costs were incurred.
Unless otherwise provided in the related Prospectus Supplement, the
Warrantying Party with respect to any Whole Loan included in a Trust Fund for a
particular series of Certificates will represent that a "Phase I Assessment" as
described in and meeting the requirements of the then current version of Chapter
5 of the Federal National Mortgage Association ("FNMA") Multifamily Guide has
been received and reviewed. In addition, unless otherwise provided in the
related Prospectus Supplement, the related Agreement will provide that the
Master Servicer, acting on behalf of the Trustee, may not acquire title to a
Mortgaged Property or take over its operation unless the Master Servicer has
previously determined, based on a report prepared by a person who regularly
conducts environmental audits, that: (i) such Mortgaged Property is in
compliance with applicable environmental 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
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environmental inquiry is undertaken or any required remedial action is provided
for, reducing the likelihood that a given Trust Fund will become liable for any
condition or circumstance that may give rise to any environmental claim (an
"Environmental Hazard Condition") affecting a Mortgaged Property, but making it
more difficult to realize on the security for the Mortgage Loan. However, there
can be no assurance that any environmental assessment obtained by the Master
Servicer or a Special Servicer, as the case may be, will detect all possible
Environmental Hazard Conditions or that the other requirements of the Agreement,
even if fully observed by the Master Servicer or Special Servicer, as the case
may be, will in fact insulate a given Trust Fund from liability for
Environmental Hazard Conditions. See "Description of the Agreements--Realization
Upon Defaulted Whole Loans."
Unless otherwise specified in the related Prospectus Supplement, the
Depositor generally will not have determined whether environmental assessments
have been conducted with respect to the Mortgaged Properties relating to the
Mortgage Loans included in the Mortgage Pool for a Series, and it is likely that
any environmental assessments which would have been conducted with respect to
any of the Mortgaged Properties would have been conducted at the time of the
origination of the related Mortgage Loans and not thereafter. If specified in
the related Prospectus Supplement, a Warrantying Party will represent and
warrant that, as of the date of initial issuance of the Certificates of a Series
or as of another specified date, no related Mortgaged Property is affected by a
Disqualifying Condition (as defined below). In the event that, following a
default in payment on a Mortgage Loan that continues for 60 days, (i) the
environmental inquiry conducted by the Master Servicer or Special Servicer, as
the case may be, prior to any foreclosure indicates the presence of a
Disqualifying Condition that arose prior to the date of initial issuance of the
Certificates of a Series and (ii) the Master Servicer or the Special Servicer
certify that it has acted in compliance with the Servicing Standard and has not,
by any action, created, caused or contributed to a Disqualifying Condition the
Warrantying Party, at its option, will reimburse the Trust Fund, cure such
Disqualifying Condition or repurchase or substitute the affected Whole Loan, as
described under "Description of the Agreements--Representations and Warranties;
Repurchases." No such person will however, be responsible for any Disqualifying
Condition which may arise on a Mortgaged Property after the date of initial
issuance of the Certificates of the related Series, whether due to actions of
the Mortgagor, the Master Servicer, the Special Servicer or any other person. It
may not always be possible to determine whether a Disqualifying Condition arose
prior or subsequent to the date of the initial issuance of the Certificates of a
Series.
A "Disqualifying Condition" is defined generally as a condition,
existing as a result of, or arising from, the presence of Hazardous Materials
(as defined below) on a Mortgaged Property, such that the Mortgage Loan secured
by the affected Mortgaged Property would be ineligible, solely by reason of such
condition, for purchase by FNMA under the relevant provisions of FNMA's
Multifamily Seller/Servicer Guide in effect as of the date of initial issuance
of the Certificates of such series, including a condition that would constitute
a material violation of applicable federal state or local law in effect as of
their date of initial issuance of the Certificates of such series.
"Hazardous Materials" are generally defined under several federal and
state statutes, and include dangerous toxic or hazardous pollutants, chemicals,
wastes or substances, including, without limitation, those so identified
pursuant to CERCLA and RCRA, and specifically including, asbestos and asbestos
containing materials, polychlorinated biphenyls, radon gas, petroleum and
petroleum products, urea formaldehyde and any substances classified as being "in
inventory," "usable work in process" or similar classification which would, if
classified as unusable, be included in the foregoing definition.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender may
accelerate the maturity of the loan if the mortgagor sells or otherwise
transfers or encumbers the related Mortgaged Property. Certain of these clauses
may provide that, upon an attempted breach 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
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mortgagee to accelerate payment of any such Mortgage Loan or to withhold its
consent to any transfer or further encumbrance in a manner consistent with the
Servicing Standard.
In addition, under federal bankruptcy laws, due-on-sale clauses may not
be enforceable in bankruptcy proceedings and may, under certain circumstances,
be eliminated in any modified mortgage resulting from such bankruptcy
proceeding.
SUBORDINATE FINANCING
Where a mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the mortgagor
may have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the mortgagor (as junior loans often do) and the
senior loan does not, a mortgagor may be more likely to repay sums due on the
junior loan than those on the senior loan. Second, acts of the senior lender
that prejudice the junior lender or impair the junior lender's security may
create a superior equity in favor of the junior lender. For example, if the
mortgagor and the senior lender agree to an increase in the principal amount of
or the interest rate payable on the senior loan, the senior lender may lose its
priority to the extent any existing junior lender is harmed or the mortgagor is
additionally burdened. Third, if the mortgagor defaults on the senior loan
and/or any junior loan or loans, the existence of junior loans and actions taken
by junior lenders can impair the security available to the senior lender and can
interfere with or delay the taking of action by the senior lender. Moreover, the
bankruptcy of a junior lender may operate to stay foreclosure or similar
proceedings by the senior lender.
DEFAULT INTEREST, PREPAYMENT CHARGES AND PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if payments
are not timely made, and in some circumstances may provide for prepayment fees
or yield maintenance penalties if the obligation is paid prior to maturity or
prohibit such prepayment for a specified period. In certain states, there are or
may be specific limitations upon the late charges which a lender may collect
from a mortgagor for delinquent payments. Certain states also limit the amounts
that a lender may collect from a mortgagor as an additional charge if the loan
is prepaid. The enforceability, under the laws of a number of states of
provisions providing for prepayment fees or penalties upon, or prohibition of,
an involuntary prepayment is unclear, and no assurance can be given that, at the
time a Prepayment Premium is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, the obligation to make such payment,
or the provisions of any such prohibition, will be enforceable under applicable
state law. The absence of a restraint on prepayment, particularly with respect
to Mortgage Loans having higher Mortgage Rates, may increase the likelihood of
refinancing or other early retirements of the Mortgage Loans.
ACCELERATION ON DEFAULT
Unless otherwise specified in the related prospectus Supplement, some
of the Mortgage Loans included in the Mortgage Pool for a Series will include a
"debt-acceleration" clause, which permits the lender to accelerate the full debt
upon a monetary or nonmonetary default of the Mortgagor. The courts of all
states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices. The
equity courts of the state, however, may refuse to foreclose a mortgage or deed
of trust when an acceleration of the indebtedness would be inequitable or unjust
or the circumstances would render the acceleration unconscionable. Furthermore,
in some states, the mortgagor may avoid foreclosure and reinstate an accelerated
loan by paying only the defaulted amounts and the costs and attorneys' fees
incurred by the lender in collecting such defaulted payments.
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
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statute authorized any state to reimpose interest rate limits by adopting,
before April 1, 1983, a law or constitutional provision that expressly rejects
application of the federal law. In addition, even where Title V is not so
rejected, any state is authorized by the law to adopt a provision limiting
discount points or other charges on mortgage loans covered by Title V. Certain
states have taken action to reimpose interest rate limits and/or to limit
discount points or other charges.
The Depositor has been advised by counsel that a court interpreting
Title V would hold that residential first mortgage loans that are originated on
or after January 1, 1980 are subject to federal preemption. Therefore, in a
state that has not taken the requisite action to reject application of Title V
or to adopt a provision limiting discount points or other charges prior to
origination of such mortgage loans, any such limitation under such state's usury
law would not apply to such mortgage loans.
In any state in which application of Title V has been expressly
rejected or a provision limiting discount points or other charges is adopted, no
Mortgage Loan originated after the date of such state action will be eligible
for inclusion in a Trust Fund unless (i) such Mortgage Loan provides for such
interest rate, discount points and charges as are permitted in such state or
(ii) such Mortgage Loan provides that the terms thereof shall be construed in
accordance with the laws of another state under which such interest rate,
discount points and charges would not be usurious and the mortgagor's counsel
has rendered an opinion that such choice of law provision would be given effect.
Statutes differ in their provisions as to the consequences of a
usurious loan. One group of statutes requires the lender to forfeit the interest
due above the applicable limit or impose a specified penalty. Under this
statutory scheme, the mortgagor may cancel the recorded mortgage or deed of
trust upon paying its debt with lawful interest, and the lender may foreclose,
but only for the debt plus lawful interest. A second group of statutes is more
severe. A violation of this type of usury law results in the invalidation of the
transaction, thereby permitting the mortgagor to cancel the recorded mortgage or
deed of trust without any payment or prohibiting the lender from foreclosing.
CERTAIN LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTIES
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a Mortgage Property which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(e.g., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related Mortgage Loan. Mortgages on
Mortgaged Properties which are owned by the Mortgagor under a condominium form
of ownership are subject to the declaration, by-laws and other rules and
regulations of the condominium association. Mortgaged Properties which are
hotels or motels may present additional risk in that hotels and motels are
typically operated pursuant to franchise, management and operating agreements
which may be terminable by the operator, and the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchases or foreclosure is subject to the vagaries of local law
requirements. In addition, Mortgaged Properties which are multifamily
residential properties may be subject to rent control laws, which could impact
the future cash flows of such properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and
rules promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
"readily achievable." In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The "readily achievable" standard takes into
account, among other 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
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landlord. Furthermore, since the "readily achievable" standard may vary
depending on the financial condition of the owner or landlord, a foreclosing
lender who is financially more capable than the Mortgagor of complying with the
requirements of the ADA may be subject to more stringent requirements than those
to which the Mortgagor is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such mortgagor's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
mortgagors who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to mortgagors
who enter military service (including reservists who are called to active duty)
after origination of the related Mortgage Loan, no information can be provided
as to the number of loans that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of any servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfalls in interest collections resulting from the
application of the Relief Act would result in a reduction of the amounts
distributable to the holders of the related series of Certificates, and would
not be covered by advances or, unless otherwise specified in the related
Prospectus Supplement, any form of Credit Support provided in connection with
such Certificates. In addition, the Relief Act imposes limitations that would
impair the ability of the servicer to foreclose on an affected Mortgage Loan
during the mortgagor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in the
event that such a Mortgage Loan goes into default, there may be delays and
losses occasioned thereby.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties "known to have an alleged interest in the property," including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
is based on the advice of Brown & Wood LLP or Cadwalader, Wickersham & Taft or
Latham & Watkins or such other counsel as may be specified in the related
Prospectus Supplement, counsel to the Depositor. This summary is based on laws,
regulations, including the REMIC regulations promulgated by the Treasury
Department (the "REMIC Regulations"), rulings and decisions now in effect or
(with respect to regulations) proposed, all of which are subject to change
either prospectively or retroactively. This summary does not address the federal
income tax consequences of an investment in Certificates applicable to all
categories of investors, some of which (for example, banks and insurance
companies) may be subject to special rules. Prospective investors should consult
their tax advisors regarding the federal, state, local and any other tax
consequences to them of the purchase, ownership and disposition of Certificates.
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GENERAL
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust Fund relating to a
particular Series of Certificates as a REMIC under the Code. The Prospectus
Supplement for each Series of Certificates will specify whether a REMIC election
will be made.
GRANTOR TRUST FUNDS
If a REMIC election is not made, Brown & Wood LLP or Cadwalader,
Wickersham & Taft or Latham & Watkins or such other counsel as may be specified
in the related Prospectus Supplement will deliver its opinion that the Trust
Fund will not be classified as an association taxable as a corporation and that
each such Trust Fund will be classified as a grantor trust under subpart E, Part
I of subchapter J of Chapter 1 of Subtitle A of the Code. In this case, owners
of Certificates will be treated for federal income tax purposes as owners of a
portion of the Trust Fund's assets as described below.
a. SINGLE CLASS OF GRANTOR TRUST CERTIFICATES
Characterization. The Trust Fund may be created with one class of
Grantor Trust Certificates. In this case, each Grantor Trust Certificateholder
will be treated as the owner of a pro rata undivided interest in the interest
and principal portions of the Trust Fund represented by the Grantor Trust
Certificates and will be considered the equitable owner of a pro rata undivided
interest in each of the Mortgage Assets in the Pool. Any amounts received by a
Grantor Trust Certificateholder in lieu of amounts due with respect to any
Mortgage Asset because of a default or delinquency in payment will be treated
for federal income tax purposes as having the same character as the payments
they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Mortgage Loans in the Trust Fund represented by Grantor Trust
Certificates, including interest, original issue discount ("OID"), if any,
prepayment fees, assumption fees, any gain recognized upon an assumption and
late payment charges received by the Master Servicer. Under Code Sections 162 or
212 each Grantor Trust Certificateholder will be entitled to deduct its pro rata
share of servicing fees, prepayment fees, assumption fees, any loss recognized
upon an assumption and late payment charges retained by the Master Servicer,
provided that such amounts are reasonable compensation for services rendered to
the Trust Fund. Grantor Trust Certificateholders that are individuals, estates
or trusts will be entitled to deduct their share of expenses as itemized
deductions only to the extent such expenses plus all other Code Section 212
expenses exceed two percent of its adjusted gross income. In addition, the
amount of itemized deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the applicable amount under Code
Section 68(b) (which amount will be adjusted for inflation) will be reduced by
the lesser of (i) 3% of the excess of adjusted gross income over the applicable
amount and (ii) 80% of the amount of itemized deductions otherwise allowable for
such taxable year. In general, a Grantor Trust Certificateholder using the cash
method of accounting must take into account its pro rata share of income as and
deductions as and when collected by or paid to the Master Servicer or, with
respect to original issue discount or certain other income items for which the
Certificateholder has made an election, as such amounts are accrued by the Trust
Fund on a constant interest basis, and will be entitled to claim its pro rata
share of deductions (subject to the foregoing limitations) when such amounts are
paid or such Certificateholder would otherwise be entitled to claim such
deductions had it held the Mortgage Assets directly. A Grantor Trust
Certificateholder using an accrual method of accounting must take into account
its pro rata share of income as payment becomes due or is made to the Master
Servicer, whichever is earlier and may deduct its pro rata share of expense
items (subject to the foregoing limitations) when such amounts are paid or such
Certificateholder otherwise would be entitled to claim such deductions had it
held the Mortgage Assets directly. If the servicing fees paid to the Master
Servicer are deemed to exceed reasonable servicing compensation, the amount of
such excess could be considered as an ownership interest retained by the Master
Servicer (or any person to whom the Master Servicer assigned for value all or a
portion of the servicing fees) in a portion of the interest payments on the
Mortgage Assets. The Mortgage Assets would then be subject to the "coupon
stripping" rules of the Code discussed below.
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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;
(iii) a Grantor Trust Certificate owned by a REMIC will represent
"obligation[s] . . . which [are] principally secured by an interest in real
property" within the meaning of Code Section 860G(a)(3); and
(iv) a Grantor Trust Certificate owned by a financial asset
securitization investment trust will represent "permitted assets" with the
meaning of Code Section 860L(c).
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application of
Code Section 593(d) to any taxable year beginning after December 31, 1995.
Stripped Bonds and Coupons. Certain Trust Funds may consist of
Government Securities that constitute "stripped bonds" or "stripped coupons" as
those terms are defined in section 1286 of the Code, and, as a result, such
assets would be subject to the stripped bond provisions of the Code. Under these
rules, such Government Securities are treated as having original issue discount
based on the purchase price and the stated redemption price at maturity of each
Security. As such, Grantor Trust Certificateholders would be required to include
in income their pro rata share of the original issue discount on each Government
Security recognized in any given year on an economic accrual basis even if the
Grantor Trust Certificateholder is a cash method taxpayer. Accordingly, the sum
of the income includible to the Grantor Trust Certificateholder in any taxable
year may exceed amounts actually received during such year.
Premium. The price paid for a Grantor Trust Certificate by a holder
will be allocated to such holder's undivided interest in each Mortgage Asset
based on each Mortgage Asset's relative fair market value, so that such holder's
undivided interest in each Mortgage Asset will have its own tax basis. A Grantor
Trust Certificateholder that acquires an interest in Mortgage Assets at a
premium may elect to amortize such premium under a constant interest method,
provided that the underlying mortgage loans with respect to such Mortgage Assets
were originated after September 27, 1985. Premium allocable to mortgage loans
originated on or before September 27, 1985 should be allocated among the
principal payments on such mortgage loans and allowed as an ordinary deduction
as principal payments are made. Amortizable bond premium will be treated as an
offset to interest income on such Grantor Trust Certificate. The basis for such
Grantor Trust Certificate will be reduced to the extent that amortizable premium
is applied to offset interest payments. It is not clear whether a reasonable
prepayment assumption should be used in computing amortization of premium
allowable under Code Section 171. A Certificateholder that makes this election
for a Mortgage Asset or any other debt instrument that is acquired at a premium
will be deemed to have made an election to amortize bond premium with respect to
all debt instruments having amortizable bond premium that such Certificateholder
acquires during the year of the election or thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a Grantor Trust Certificate representing an
interest in a Mortgage Asset or Mortgage Loan acquired at a premium should
recognize a loss if a Mortgage Loan (or an underlying mortgage loan with respect
to a Mortgage Asset) prepays in full, equal to the difference between the
portion of the prepaid principal amount of such Mortgage Loan
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(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 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
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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).
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
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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.
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
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property" within the meaning of Code Section 860G(a)(3)(A) and "permitted
assets" within the meaning of Code Section 860L(c).
2. Grantor Trust Certificates Representing Interests in Loans Other
Than ARM Loans
The original issue discount rules of Code Sections 1271 through 1275
will be applicable to a Certificateholder's interest in those Mortgage Assets as
to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount in income are applicable
to mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors (other than individuals) originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, such original issue discount could arise by the charging of points
by the originator of the mortgage in an amount greater than the statutory de
minimis exception, including a payment of points that is currently deductible by
the borrower under applicable Code provisions, or under certain circumstances,
by the presence of "teaser" rates on the Mortgage Assets. OID on each Grantor
Trust Certificate must be included in the owner's ordinary income for federal
income tax purposes as it accrues, in accordance with a constant interest method
that takes into account the compounding of interest, in advance of receipt of
the cash attributable to such income. The amount of OID required to be included
in an owner's income in any taxable year with respect to a Grantor Trust
Certificate representing an interest in Mortgage Assets other than Mortgage
Assets with interest rates that adjust periodically ("ARM Loans") likely will be
computed as described below under "--Accrual of Original Issue Discount." The
following discussion is based in part on the OID Regulations and in part on the
provisions of the Tax Reform Act of 1986 (the "1986 Act"). The OID Regulations
generally are effective for debt instruments issued on or after April 4, 1994,
but may be relied upon as authority with respect to debt instruments, such as
the Grantor Trust Certificates, issued after December 21, 1992. Alternatively,
proposed Treasury regulations issued December 21, 1992 may be treated as
authority for debt instruments issued after December 21, 1992 and prior to April
4, 1994, and proposed Treasury regulations issued in 1986 and 1991 may be
treated as authority for instruments issued before December 21, 1992. In
applying these dates, the issue date of the Mortgage Assets should be used, or,
in the case of Stripped Bond Certificates or Stripped Coupon Certificates, the
date such Certificates are acquired. The holder of a Certificate should be
aware, however, that neither the proposed OID Regulations nor the OID
Regulations adequately address certain issues relevant to prepayable securities.
Under the Code, the Mortgage Assets underlying the Grantor Trust
Certificate will be treated as having been issued on the date they were
originated with an amount of OID equal to the excess of such Mortgage Asset's
stated redemption price at maturity over its issue price. The issue price of a
Mortgage Asset is generally the amount lent to the mortgagee, which may be
adjusted to take into account certain loan origination fees. The stated
redemption price at maturity of a Mortgage Asset is the sum of all payments to
be made on such Mortgage Asset other than payments that are treated as qualified
stated interest payments. The accrual of this OID, as described below under
"--Accrual of Original Issue Discount," will, unless otherwise specified in the
related Prospectus Supplement, utilize the original yield to maturity of the
Grantor Trust Certificate calculated based on a reasonable assumed prepayment
rate for the mortgage loans underlying the Grantor Trust Certificates (the
"Prepayment Assumption") on the issue date of such Grantor Trust Certificate,
and will take into account events that occur during the calculation period. The
Prepayment Assumption will be determined in the manner prescribed by regulations
that have not yet been issued. In the absence of such regulations, the
Prepayment Assumption used will be the prepayment assumption that is used in
determining the offering price of such Certificate. No representation is made
that any Certificate will prepay at the Prepayment Assumption or at any other
rate. The prepayment assumption contained in the Code literally only applies to
debt instruments collateralized by other debt instruments that are subject to
prepayment rather than direct ownership interests in such debt instruments, such
as the Certificates represent. However, no other legal authority provides
guidance with regard to the proper method for accruing OID on obligations that
are subject to prepayment, and, until further guidance is issued, the Master
Servicer intends to calculate and report OID under the method described below.
Accrual of Original Issue Discount. Generally, the owner of a Grantor
Trust Certificate must include in gross income the sum of the "daily portions,"
as defined below, of the OID on such Grantor Trust Certificate for each day on
which it owns such Certificate, including the date of purchase but excluding the
date of disposition. In the case of an original owner, the daily portions of OID
with respect to each component generally will be determined as set forth under
the OID Regulations. A calculation will be made by the Master Servicer or such
other entity
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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 principal balance
of an ARM Loan may require the inclusion of such amount in the income of the
Grantor Trust Certificateholder when such amount accrues. Furthermore, the
addition of Deferred Interest to the Grantor Trust Certificate's principal
balance will result in additional income (including possibly OID income) to the
Grantor Trust Certificateholder over the remaining life of such Grantor Trust
Certificates.
Because the treatment of Stripped ARM Obligations is uncertain,
investors are urged to consult their tax advisors regarding how income will be
includible with respect to such Certificates.
c. SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE
Sale or exchange of a Grantor Trust Certificate prior to its maturity
will result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the seller's purchase price for the Grantor
Trust Certificate, increased by the OID included in the seller's gross income
with respect to the Grantor Trust Certificate, and reduced by principal payments
on the Grantor Trust Certificate previously received by the seller. Such gain or
loss will be capital gain or loss to an owner for which a Grantor Trust
Certificate is a "capital asset" within the meaning of Code Section 1221, and
will generally be long-term capital gain if the Grantor Trust Certificate has
been owned for more than one year. Long-
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term capital gains of individuals are subject to reduced maximum tax rates while
capital gains recognized by individuals on capital assets held less than twelve
months are generally subject to ordinary income tax rates. The use of capital
losses is limited.
It is possible that capital gain realized by holders of one or more
classes of Grantor Trust Certificates could be considered gain realized upon the
disposition of property that was part of a "conversion transaction." A sale of a
Grantor Trust Certificate will be part of a conversion transaction if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract to
sell the Grantor Trust Certificate substantially contemporaneously with
acquiring the Grantor Trust Certificate, (ii) the Grantor Trust Certificate is
part of a straddle, (iii) the Grantor Trust Certificate is marketed or sold as
producing capital gain, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of a
Grantor Trust Certificate is part of a conversion transaction, all or any
portion of the gain realized upon the sale or other disposition would be treated
as ordinary income instead of capital gain.
Grantor Trust Certificates will be "evidences of indebtedness" within
the meaning of Code Section 582(c)(1), so that gain or loss recognized from the
sale of a Grantor Trust Certificate by a bank or a thrift institution to which
such section applies will be treated as ordinary income or loss.
d. NON-U.S. PERSONS
Generally, to the extent that a Grantor Trust Certificate evidences
ownership in underlying Mortgage Assets that were issued on or before July 18,
1984, interest or OID paid by the person required to withhold tax under Code
Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as defined
below) or (ii) a Grantor Trust Certificateholder holding on behalf of an owner
that is not a U.S. Person will be subject to federal income tax, collected by
withholding, at a rate of 30% or such lower rate as may be provided for interest
by an applicable tax treaty, unless such income is effectively connected with a
U.S. trade or business of such owner or beneficial owner. Accrued OID recognized
by the owner on the sale or exchange of such a Grantor Trust Certificate also
will be subject to federal income tax at the same rate. Generally, such payments
would not be subject to withholding to the extent that a Grantor Trust
Certificate evidences ownership in Mortgage Assets issued after July 18, 1984,
by natural persons if such Grantor Trust Certificateholder complies with certain
identification requirements (including delivery of a statement, signed by the
Grantor Trust Certificateholder under penalties of perjury, certifying that such
Grantor Trust Certificateholder is not a U.S. Person and providing the name and
address of such Grantor Trust Certificateholder). To the extent payments to
Grantor Trust Certificateholders that are not U.S. Persons are payments of
"contingent interest" on the underlying Mortgage Assets, or such Grantor Trust
Certificateholder is ineligible for the exemption described in the preceding
sentence, the 30% withholding tax will apply unless such withholding taxes are
reduced or eliminated by an applicable tax treaty and such holder meets the
eligibility and certification requirements necessary to obtain the benefits of
such treaty. Additional restrictions apply to Mortgage Assets where the
mortgagor is not a natural person in order to qualify for the exemption from
withholding. If capital gain derived from the sale, retirement or other
disposition of a Grantor Trust Certificate is effectively connected with a U.S.
trade or business of a Grantor Trust Certificateholder that is not a U.S.
Person, such Certificateholder will be taxed on the net gain under the graduated
U.S. federal income tax rates applicable to U.S. Persons (and, with respect to
Grantor Trust Certificates held by or on behalf of corporations, also may be
subject to branch profits tax). In addition, if the Trust Fund acquires a United
States real property interest through foreclosure, deed in lieu of foreclosure
or otherwise on a Mortgage Asset secured by such an interest (which for this
purpose includes real property located in the United States and the Virgin
Islands), a Grantor Trust Certificateholder that is not a U.S. Person will
potentially be subject to federal income tax on any gain attributable to such
real property interest that is allocable to such holder. Non-U.S. Persons should
consult their tax advisors regarding the application to them of the foregoing
rules.
As used herein, a "U.S. Person" means a citizen or resident of the
United States, a corporation or a partnership organized in or under the laws of
the United States or any political subdivision thereof (other than a partnership
that is not treated as a U.S. Person under any applicable Treasury regulations),
an estate the income of which from sources outside the United States is
includible in gross income for federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States or a
trust if a court within the United States is able to exercise primary
supervision of the administration of the trust and one or more U.S.
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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,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
REMICS
The Trust Fund relating to a Series of Certificates may elect to be
treated as a REMIC. Qualification as a REMIC requires ongoing compliance with
certain conditions. Although a REMIC is not generally subject to federal income
tax (see, however "--Taxation of Owners of REMIC Residual Certificates" and
"--Prohibited Transactions" below), if a Trust Fund with respect to which a
REMIC election is made fails to comply with one or more of the ongoing
requirements of the Code for REMIC status during any taxable year, including the
implementation of restrictions on the purchase and transfer of the residual
interests in a REMIC as described below under "Taxation of Owners of REMIC
Residual Certificates," the Code provides that a Trust Fund will not be treated
as a REMIC for such year and thereafter. In that event, such entity may be
taxable as a separate corporation, and the related Certificates (the "REMIC
Certificates") may not be accorded the status or given the tax treatment
described below. While the Code authorizes the Treasury Department to issue
regulations providing relief in the event of an inadvertent termination of the
status of a trust fund as a REMIC, no such regulations have been issued. Any
such relief, moreover, may be accompanied by sanctions, such as the imposition
of a corporate tax on all or a portion of the REMIC's income for the period in
which the requirements for such status are not satisfied. With respect to each
Trust Fund that elects REMIC status, Brown & Wood LLP or Cadwalader, Wickersham
& Taft or Latham & Watkins or such other counsel as may be specified in the
related Prospectus Supplement will deliver its opinion generally to the effect
that, under then existing law and assuming compliance with all provisions of the
related Pooling and Servicing Agreement, such Trust Fund will qualify as a
REMIC, and the related Certificates will be considered to be regular interests
("REMIC Regular Certificates") or a sole class of residual interests ("REMIC
Residual Certificates") in the REMIC. The related Prospectus Supplement for each
Series of Certificates will indicate whether the Trust Fund will make a REMIC
election and whether a class of Certificates will be treated as a regular or
residual interest in the REMIC.
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A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in such an obligation and any "regular interest"
in another REMIC) that is principally secured by an interest in real property
and that is transferred to the REMIC within a prescribed time period in exchange
for regular or residual interests in the REMIC.
In general, with respect to each Series of Certificates for which a
REMIC election is made, (i) Certificates held by a thrift institution taxed as a
"domestic building and loan association" will constitute assets described in
Code Section 7701(a)(19)(C); (ii) Certificates held by a real estate investment
trust will constitute "real estate assets" within the meaning of Code Section
856(c)(4)(A); and (iii) interest on Certificates held by a real estate
investment trust will be considered "interest on obligations secured by
mortgages on real property" within the meaning of Code Section 856(c)(3)(B). If
less than 95% of the REMIC's assets are assets qualifying under any of the
foregoing Code sections, the Certificates will be qualifying assets only to the
extent that the REMIC's assets are qualifying assets.
Tiered REMIC Structures. For certain Series of Certificates, two or
more separate elections may be made to treat designated portions of the related
Trust Fund as REMICs (respectively, the "Subsidiary REMIC" and the "Master
REMIC") for federal income tax purposes. Upon the issuance of any such Series of
Certificates, Brown & Wood LLP or Cadwalader, Wickersham & Taft or Latham &
Watkins or such other counsel as may be specified in the related Prospectus
Supplement, counsel to the Depositor, will deliver its opinion generally to the
effect that, assuming compliance with all provisions of the related Agreement,
the Master REMIC as well as any Subsidiary REMIC will each qualify as a REMIC,
and the REMIC Certificates issued by the Master REMIC and the Subsidiary REMIC
or REMICs, respectively, will be considered to evidence ownership of regular
interests ("REMIC Regular Certificates") or residual interests ("REMIC Residual
Certificates") in the related REMIC within the meaning of the REMIC provisions.
Other than the residual interest in a Subsidiary REMIC, only REMIC
Certificates issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC or REMICs and the Master REMIC will be treated as one REMIC
solely for purposes of determining whether the REMIC Certificates will be (i)
"real estate assets" within the meaning of Section 856(c)(4)(A) of the Code;
(ii) "loans secured by an interest in real property" under Section
7701(a)(19)(C) of the Code; and (iii) whether the income on such Certificates is
interest described in Section 856(c)(3)(B) of the Code.
a. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Moreover, holders of REMIC Regular Certificates that otherwise report income
under a cash method of accounting will be required to report income with respect
to REMIC Regular Certificates under an accrual method.
Original Issue Discount and Premium. The REMIC Regular Certificates may
be issued with OID. Generally, such OID, if any, will equal the difference
between the "stated redemption price at maturity" of a REMIC Regular Certificate
and its "issue price." Holders of any class of Certificates issued with OID will
be required to include such OID in gross income for federal income tax purposes
as it accrues, in accordance with a constant interest method based on the
compounding of interest as it accrues rather than in accordance with receipt of
the interest payments. The following discussion is based in part on the OID
Regulations and in part on the provisions of the Tax Reform Act of 1986 (the
"1986 Act"). Holders of REMIC Regular Certificates (the "REMIC Regular
Certificateholders") should be aware, however, that the OID Regulations do not
adequately address certain issues relevant to prepayable securities, such as the
REMIC Regular Certificates.
Rules governing OID are set forth in Code Sections 1271 through 1273
and 1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated reinvestment
rate, if any, relating to the REMIC Regular Certificates and prescribe a method
for adjusting the amount and rate of accrual of such discount where the actual
prepayment rate differs from the Prepayment Assumption. Under the Code, the
Prepayment Assumption must be determined in the manner prescribed by
regulations, which regulations have not yet been issued. The legislative history
of the 1986 Act (the "Legislative
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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 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
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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 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.
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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
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
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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.
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
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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 Regular Certificate is held as a "capital asset" (generally,
property held for investment) within the meaning of Code Section 1221.
Such capital gain or loss will generally be long-term capital gain or
loss if the REMIC Regular Certificate was held for more than one year. Long-term
capital gains of individuals are subject to reduced maximum tax rates while
capital gains recognized by individual on capital assets held less than twelve
months are generally subject to ordinary income tax rates. The use of capital
losses is limited.
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
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ordinary income with respect to any prior disposition of property that was held
as part of such transaction, or if the REMIC Regular Certificate is held as part
of a straddle. Potential investors should consult their tax advisors with
respect to tax consequences of ownership and disposition of an investment in
REMIC Regular Certificates in their particular circumstances.
It is possible that capital gain realized by holders of one or more
classes of REMIC Regular Certificates could be considered gain realized upon the
disposition of property that was part of a "conversion transaction." A sale of a
REMIC Regular Certificate will be part of a "conversion transaction" if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract to
sell the REMIC Regular Certificate substantially contemporaneously with
acquiring the REMIC Regular Certificate, (ii) the REMIC Regular Certificate is
part of a straddle, (iii) the REMIC Regular Certificate is marketed or sold as
producing capital gains, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of a
REMIC Regular Certificate is part of a conversion transaction, all or a portion
of the gain realized upon the sale or other disposition of the REMIC Regular
Certificate would be treated as ordinary income instead of capital gain.
The Certificates will be "evidences of indebtedness" within the meaning
of Code Section 582(c)(1), so that gain or loss recognized from the sale of a
REMIC Regular Certificate by a bank or a thrift institution to which such
section applies will be ordinary income or loss.
The REMIC Regular Certificate information reports will include a
statement of the adjusted issue price of the REMIC Regular Certificate at the
beginning of each accrual period. In addition, the reports will include
information necessary to compute the accrual of any market discount that may
arise upon secondary trading of REMIC Regular Certificates. Because exact
computation of the accrual of market discount on a constant yield method would
require information relating to the holder's purchase price which the REMIC may
not have, it appears that the information reports will only provide information
pertaining to the appropriate proportionate method of accruing market discount.
Accrued Interest Certificates. Certain of the REMIC Regular
Certificates ("Payment Lag Certificates") may provide for payments of interest
based on a period that corresponds to the interval between Distribution Dates
but that ends prior to each such Distribution Date. The period between the
Closing Date for Payment Lag Certificates and their first Distribution Date may
or may not exceed such interval. Purchasers of Payment Lag Certificates for
which the period between the Closing Date and the first Distribution Date does
not exceed such interval could pay upon purchase of the REMIC Regular
Certificates accrued interest in excess of the accrued interest that would be
paid if the interest paid on the Distribution Date were interest accrued from
Distribution Date to Distribution Date. If a portion of the initial purchase
price of a REMIC Regular Certificate is allocable to interest that has accrued
prior to the issue date ("pre-issuance accrued interest") and the REMIC Regular
Certificate provides for a payment of stated interest on the first payment date
(and the first payment date is within one year of the issue date) that equals or
exceeds the amount of the pre-issuance accrued interest, then the REMIC Regular
Certificate's issue price may be computed by subtracting from the issue price
the amount of pre-issuance accrued interest, rather than as an amount payable on
the REMIC Regular Certificate. However, it is unclear under this method how the
OID Regulations treat interest on Payment Lag Certificates. Therefore, in the
case of a Payment Lag Certificate, the Trust Fund intends to include accrued
interest in the issue price and report interest payments made on the first
Distribution Date as interest to the extent such payments represent interest for
the number of days that the Certificateholder has held such Payment Lag
Certificate during the first accrual period.
Investors should consult their own tax advisors concerning the
treatment for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury
regulations, if the REMIC is considered to be a "single-class REMIC," a portion
of the REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those REMIC Regular Certificateholders that are
"pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the
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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 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
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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,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
b. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
Allocation of the Income of the REMIC to the REMIC Residual
Certificates. The REMIC will not be subject to federal income tax except with
respect to income from prohibited transactions and certain other transactions.
See "--Prohibited Transactions and Other Taxes" below. Instead, each original
holder of a REMIC Residual Certificate will report on its federal income tax
return, as ordinary income, its share of the taxable income of the REMIC for
each day during the taxable year on which such holder owns any REMIC Residual
Certificates. The taxable income of the REMIC for each day will be determined by
allocating the taxable income of the REMIC for each calendar quarter ratably to
each day in the quarter. Such a holder's share of the taxable income of the
REMIC for each day will be based on the portion of the outstanding REMIC
Residual Certificates that such holder owns on that day. The taxable income of
the REMIC will be determined under an accrual method and will be taxable to the
holders of REMIC Residual Certificates without regard to the timing or amounts
of cash distributions by the REMIC. Ordinary income derived from REMIC Residual
Certificates will be "portfolio income" for purposes of the taxation of
taxpayers subject to the limitations on the deductibility of "passive losses."
As residual interests, the REMIC Residual Certificates will be subject to tax
rules, described below, that differ from those that would apply if the REMIC
Residual Certificates were treated for federal income tax purposes as direct
ownership interests in the Certificates or as debt instruments issued by the
REMIC.
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A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests (that is, a fast-pay, slow-pay structure) may generate such a
mismatching of income and cash distributions (that is, "phantom income"). This
mismatching may be caused by the use of certain required tax accounting methods
by the REMIC, variations in the prepayment rate of the underlying Mortgage
Assets and certain other factors. Depending upon the structure of a particular
transaction, the aforementioned factors may significantly reduce the after-tax
yield of a REMIC Residual Certificate to a REMIC Residual Certificateholder or
cause the REMIC Residual Certificate to have negative "value." Investors should
consult their own tax advisors concerning the federal income tax treatment of a
REMIC Residual Certificate and the impact of such tax treatment on the after-tax
yield of a REMIC Residual Certificate.
A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that such REMIC Residual Certificateholder owns
such REMIC Residual Certificate. Those daily amounts generally would equal the
amounts that would have been reported for the same days by an original REMIC
Residual Certificateholder, as described above. The Legislative History
indicates that certain adjustments may be appropriate to reduce (or increase)
the income of a subsequent holder of a REMIC Residual Certificate that purchased
such REMIC Residual Certificate at a price greater than (or less than) the
adjusted basis such REMIC Residual Certificate would have in the hands of an
original REMIC Residual Certificateholder. See "--Sale or Exchange of REMIC
Residual Certificates" below. It is not clear, however, whether such adjustments
will in fact be permitted or required and, if so, how they would be made. The
REMIC Regulations do not provide for any such adjustments.
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed to
the REMIC for interest and OID on the REMIC Regular Certificates and, except as
described above under "--Taxation of Owners of REMIC Regular
Certificates--Non-Interest Expenses of the REMIC," other expenses. REMIC taxable
income is generally determined in the same manner as the taxable income of an
individual using the accrual method of accounting, except that (i) the
limitations on deductibility of investment interest expense and expenses for the
production of income do not apply, (ii) all bad loans will be deductible as
business bad debts, and (iii) the limitation on the deductibility of interest
and expenses related to tax-exempt income will apply. The REMIC's gross income
includes interest, original issue discount income, and market discount income,
if any, on the Mortgage Loans, reduced by amortization of any premium on the
Mortgage Loans, plus income on reinvestment of cash flows and reserve assets,
plus any cancellation of indebtedness income upon allocation of realized losses
to the REMIC Regular Certificates. Note that the timing of cancellation of
indebtedness income recognized by REMIC Residual Certificateholders resulting
from defaults and delinquencies on Mortgage Assets may differ from the time of
the actual loss on the Mortgage Asset. The REMIC's deductions include interest
and original issue discount expense on the REMIC Regular Certificates, servicing
fees on the Mortgage Loans, other administrative expenses of the REMIC and
realized losses on the Mortgage Loans. The requirement that REMIC 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
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mortgage loan would be allocated among the principal payments thereon and would
be deductible by the REMIC as those payments become due.
The REMIC will be allowed a deduction for interest and OID on the REMIC
Regular Certificates. The amount and method of accrual of OID will be calculated
for this purpose in the same manner as described above with respect to REMIC
Regular Certificates except that the 0.25% per annum de minimis rule and
adjustments for subsequent holders described therein will not apply.
A REMIC Residual Certificateholder will not be permitted to amortize
the cost of the REMIC Residual Certificate as an offset to its share of the
REMIC's taxable income. However, REMIC taxable income will not include cash
received by the REMIC that represents a recovery of the REMIC's basis in its
assets, and, as described above, the issue price of the REMIC Residual
Certificates will be added to the issue price of the REMIC Regular Certificates
in determining the REMIC's initial basis in its assets. See "--Sale or Exchange
of REMIC Residual Certificates" below. For a discussion of possible adjustments
to income of a subsequent holder of a REMIC Residual Certificate to reflect any
difference between the actual cost of such REMIC Residual Certificate to such
holder and the adjusted basis such REMIC Residual Certificate would have in the
hands of an original REMIC Residual Certificateholder, see "--Allocation of the
Income of the REMIC to the REMIC Residual Certificates" above.
Net Losses of the REMIC. The REMIC will have a net loss for any
calendar quarter in which its deductions exceed its gross income. Such net loss
would be allocated among the REMIC Residual Certificateholders in the same
manner as the REMIC's taxable income. The net loss allocable to any REMIC
Residual Certificate will not be deductible by the holder to the extent that
such net loss exceeds such holder's adjusted basis in such REMIC Residual
Certificate. Any net loss that is not currently deductible by reason of this
limitation may only be used by such REMIC Residual Certificateholder to offset
its share of the REMIC's taxable income in future periods (but not otherwise).
The ability of REMIC Residual Certificateholders that are individuals or closely
held corporations to deduct net losses may be subject to additional limitations
under the Code.
Mark to Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that the IRS has finalized regulations (the
"Mark-to-Market Regulations") which provide that a REMIC Residual Certificate
acquired after January 3, 1995 cannot be marked to market. The Mark-to-Market
Regulations replaced the temporary regulations which allowed a Residual
Certificate to be marked to market provided that it was not a "negative value"
residual interest and did not have the same economic effect as a "negative
value" residual interest.
Pass-Through of Non-Interest Expenses of the REMIC. As a general rule,
all of the fees and expenses of a REMIC will be taken into account by holders of
the REMIC Residual Certificates. In the case of a single class REMIC, however,
the expenses and a matching amount of additional income will be allocated, under
temporary Treasury regulations, among the REMIC Regular Certificateholders and
the REMIC Residual Certificateholders on a daily basis in proportion to the
relative amounts of income accruing to each Certificateholder on that day. In
general terms, a single class REMIC is one that either (i) would qualify, under
existing Treasury regulations, as a grantor trust if it were not a REMIC
(treating all interests as ownership interests, even if they would be classified
as 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
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the taxable year. The amount of additional taxable income recognized by REMIC
Residual Certificateholders who are subject to the limitations of either Code
Section 67 or Code Section 68 may be substantial. Further, holders (other than
corporations) subject to the alternative minimum tax may not deduct
miscellaneous itemized deductions in determining such holders' alternative
minimum taxable income. The REMIC is required to report to each pass-through
interest holder and to the IRS such holder's allocable share, if any, of the
REMIC's non-interest expenses. The term "pass-through interest holder" generally
refers to individuals, entities taxed as individuals and certain pass-through
entities, but does not include real estate investment trusts. Accordingly,
investment in REMIC Residual Certificates will in general not be suitable for
individuals or for certain pass-through entities, such as partnerships and S
corporations, that have individuals as partners or shareholders.
Excess Inclusions. A portion of the income on a REMIC Residual
Certificate (referred to in the Code as an "excess inclusion") for any calendar
quarter will be subject to federal income tax in all events. Thus, for example,
an excess inclusion (i) may not, except as described below, be offset by any
unrelated losses, deductions or loss carryovers of a REMIC Residual
Certificateholder; (ii) will be treated as "unrelated business taxable income"
within the meaning of Code Section 512 if the REMIC Residual Certificateholder
is a pension fund or any other organization that is subject to tax only on its
unrelated business taxable income (see "--Tax-Exempt Investors" below); and
(iii) is not eligible for any reduction in the rate of withholding tax in the
case of a REMIC Residual Certificateholder that is a foreign investor. See
"--Non-U.S. Persons" below.
Except as discussed in the following paragraph, with respect to any
REMIC Residual Certificateholder, the excess inclusions for any calendar quarter
is the excess, if any, of (i) the income of such REMIC Residual
Certificateholder for that calendar quarter from its REMIC Residual Certificate
over (ii) the sum of the "daily accruals" (as defined below) for all days during
the calendar quarter on which the REMIC Residual Certificateholder holds such
REMIC Residual Certificate. For this purpose, the daily accruals with respect to
a REMIC Residual Certificate are determined by allocating to each day in the
calendar quarter its ratable portion of the product of the "adjusted issue
price" (as defined below) of the REMIC Residual Certificate at the beginning of
the calendar quarter and 120 percent of the "Federal long-term rate" in effect
at the time the REMIC Residual Certificate is issued. For this purpose, the
"adjusted issue price" of a REMIC Residual Certificate at the beginning of any
calendar quarter equals the issue price of the REMIC Residual Certificate,
increased by the amount of daily accruals for all prior quarters, and decreased
(but not below zero) by the aggregate amount of payments made on the REMIC
Residual Certificate before the beginning of such quarter. The "federal
long-term rate" is an average of current yields on Treasury securities with a
remaining term of greater than nine years, computed and published monthly by the
IRS.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Code Section 857(b)(2),
excluding any net capital gain), will be allocated among the shareholders of
such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Regulated investment companies, common trust funds and certain
cooperatives are subject to similar rules.
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
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computed only on excess inclusions. These rules are effective for tax years
beginning after December 31, 1986, unless a residual holder elects to have such
rules apply only to tax years beginning after August 20, 1996.
Payments. Any distribution made on a REMIC Residual Certificate to a
REMIC Residual Certificateholder will be treated as a non-taxable return of
capital to the extent it does not exceed the REMIC Residual Certificateholder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
exceeds such adjusted basis, it will be treated as gain from the sale of the
REMIC Residual Certificate.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale or exchange
and its adjusted basis in the REMIC Residual Certificate (except that the
recognition of loss may be limited under the "wash sale" rules described below).
A holder's adjusted basis in a REMIC Residual Certificate generally equals the
cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder, increased by the taxable income of the REMIC that was
included in the income of such REMIC Residual Certificateholder with respect to
such REMIC Residual Certificate, and decreased (but not below zero) by the net
losses that have been allowed as deductions to such REMIC Residual
Certificateholder with respect to such REMIC Residual Certificate and by the
distributions received thereon by such REMIC Residual Certificateholder. In
general, any such gain or loss will be capital gain or loss provided the REMIC
Residual Certificate is held as a capital asset. Such capital gain or loss will
generally be long-term capital gain or loss if the REMIC Regular Certificate was
held for more than one year. Long-term capital gains of individuals are subject
to reduced maximum tax rates while capital gains recognized by individuals on
capital assets held less than twelve months are generally subject to ordinary
income tax rates. The use of capital losses is limited. However, REMIC Residual
Certificates will be "evidences of indebtedness" within the meaning of Code
Section 582(c)(1), so that gain or loss recognized from sale of a REMIC Residual
Certificate by a bank or thrift institution to which such section applies would
be ordinary income or loss. In addition, a transfer of a REMIC Residual
Certificate that is a "noneconomic residual interest" may be subject to
different rules. See "--Tax Related Restrictions on Transfers of REMIC Residual
Certificates--Noneconomic REMIC Residual Certificates" below.
Except as provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires such REMIC Residual
Certificate, or acquires any other REMIC Residual Certificate, any residual
interest in another REMIC or similar interest in a "taxable mortgage pool" (as
defined in Code Section 7701(i)) during the period beginning six months before,
and ending six months after, the date of such sale, such sale will be subject to
the "wash sale" rules of Code Section 1091. In that event, any loss realized by
the REMIC Residual Certificateholder on the sale will not be deductible, but,
instead, will increase such REMIC Residual Certificateholder's adjusted basis in
the newly acquired asset.
PROHIBITED TRANSACTIONS AND OTHER TAXES
The Code imposes a tax on REMICs equal to 100% of the net income
derived from "prohibited transactions" (the "Prohibited Transactions Tax"). In
general, subject to certain specified exceptions, a prohibited transaction means
the disposition of a Mortgage Asset, the receipt of income from a source other
than a Mortgage Asset or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the Mortgage Assets for temporary investment pending
distribution on 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
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property" generally means income from foreclosure property other than qualifying
income for a real estate investment trust.
Where any Prohibited Transactions Tax, Contributions Tax, tax on net
income from foreclosure property or state or local income or franchise tax that
may be imposed on a REMIC relating to any Series of Certificates arises out of
or results from (i) a breach of the related Servicer's, Trustee's or Depositor's
obligations, as the case may be, under the related Agreement for such Series,
such tax will be borne by such Servicer, Trustee or Depositor, as the case may
be, out of its own funds or (ii) the Depositor's obligation to repurchase a
Mortgage Loan, such tax will be borne by the Depositor. In the event that such
Servicer, Trustee or Depositor, as the case may be, fails to pay or is not
required to pay any such tax as provided above, such tax will be payable out of
the Trust Fund for such Series and will result in a reduction in amounts
available to be distributed to the Certificateholders of such Series.
LIQUIDATION AND TERMINATION
If the REMIC adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC's final tax return a date on which such adoption is deemed to occur,
and sells all of its assets (other than cash) within a 90-day period beginning
on such date, the REMIC will not be subject to any Prohibited Transaction Tax,
provided that the REMIC credits or distributes in liquidation all of the sale
proceeds plus its cash (other than the amounts retained to meet claims) to
holders of Regular and REMIC Residual Certificates within the 90-day period.
The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis in
the REMIC Residual Certificate exceeds the amount of cash distributed to such
REMIC Residual Certificateholder in final liquidation of its interest, then it
would appear that the REMIC Residual Certificateholder would be entitled to a
loss equal to the amount of such excess. It is unclear whether such a loss, if
allowed, will be a capital loss or an ordinary loss.
ADMINISTRATIVE MATTERS
Solely for the purpose of the administrative provisions of the Code,
the REMIC generally will be treated as a partnership and the REMIC Residual
Certificateholders will be treated as the partners. Certain information will be
furnished quarterly to each REMIC Residual Certificateholder who held a REMIC
Residual Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat items on its
return consistently with their treatment on the REMIC's return, unless the REMIC
Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency resulting
from a failure to comply with the consistency requirement without instituting an
administrative proceeding at the REMIC level. The REMIC does not intend to
register as a tax shelter pursuant to Code Section 6111 because it is not
anticipated that the REMIC will have a net loss for any of the first five
taxable years of its existence. Any person that holds a REMIC Residual
Certificate as a nominee for another person may be required to furnish the
REMIC, in a manner to be provided in Treasury regulations, with the name and
address of such person and other information.
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.
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RESIDUAL CERTIFICATE PAYMENTS--NON-U.S. PERSONS
Amounts paid to REMIC Residual Certificateholders who are not U.S.
Persons (see "--Taxation of Owners of REMIC Regular Certificates--Non-U.S.
Persons" above) are treated as interest for purposes of the 30% (or lower treaty
rate) United States withholding tax. Amounts distributed to holders of REMIC
Residual Certificates should qualify as "portfolio interest," subject to the
conditions described in "--Taxation of Owners of REMIC Regular Certificates"
above, but only to the extent that the underlying mortgage loans were originated
after July 18, 1984. Furthermore, the rate of withholding on any income on a
REMIC Residual Certificate that is excess inclusion income will not be subject
to reduction under any applicable tax treaties. See "--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions" above. If the portfolio interest
exemption is unavailable, such amount will be subject to United States
withholding tax when paid or otherwise distributed (or when the REMIC Residual
Certificate is disposed of) under rules similar to those for withholding upon
disposition of debt instruments that have OID. The Code, however, grants the
Treasury Department authority to issue regulations requiring that those amounts
be taken into account earlier than otherwise provided where necessary to prevent
avoidance of tax (for example, where the REMIC Residual Certificates do not have
significant value). See "--Taxation of Owners of REMIC Residual
Certificates--Excess Inclusions" above. If the amounts paid to REMIC Residual
Certificateholders that are not U.S. Persons are effectively connected with
their conduct of a trade or business within the United States, the 30% (or lower
treaty rate) withholding will not apply. Instead, the amounts paid to such
non-U.S. Person will be subject to U.S. federal income taxation at regular
graduated rates. For special restrictions on the transfer of REMIC Residual
Certificates, see "--Tax-Related Restrictions on Transfers of REMIC Residual
Certificates" below.
REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.
TAX-RELATED RESTRICTIONS ON TRANSFERS OF REMIC RESIDUAL CERTIFICATES
Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests in
such entity are not held by "disqualified organizations" (as defined below).
Further, a tax is imposed on the transfer of a residual interest in a REMIC to a
"disqualified organization." The amount of the tax equals the product of (A) an
amount (as determined under the REMIC Regulations) equal to the present value of
the total anticipated "excess inclusions" with respect to such interest for
periods after the transfer and (ii) the highest marginal federal income tax rate
applicable to corporations. The tax is imposed on the transferor unless the
transfer is through an agent (including a broker or other middleman) for a
disqualified organization, in which event the tax is imposed on the agent. The
person otherwise liable for the tax shall be relieved of liability for the tax
if the transferee furnished to such person an affidavit that the transferee is
not a disqualified organization and, at the time of the transfer, such person
does not have actual knowledge that the affidavit is false. A "disqualified
organization" means (A) the United States, any State, possession or political
subdivision thereof, any foreign government, any international organization or
any agency or instrumentality of any of the foregoing (provided that such term
does not include an instrumentality if all its activities are subject to tax
and, except for FHLMC, a majority of its board of directors is not selected by
any such governmental agency), (B) any organization (other than certain farmers'
cooperatives) generally exempt from federal income taxes unless such
organization is subject to the tax on "unrelated business taxable income" and
(C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding
a residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity, provided that all partners of an "electing large
partnership" as defined in Section 775 of the Code, are deemed to be
disqualified organizations. The amount of the tax is equal to the product of (A)
the amount of excess inclusions for the taxable year allocable to the interest
held by the disqualified organization and (B) the highest marginal federal
income tax rate applicable to corporations. The pass-through entity otherwise
liable for the tax, for any period during which the disqualified organization is
the record holder of an interest in such entity, will be relieved of liability
for the tax if such record holder furnishes to such entity an affidavit that
such record holder is not a disqualified organization and, for such period, the
pass-through entity does not have actual knowledge that the affidavit is false.
For this purpose, a "pass-through entity" means (i) a regulated investment
company, real estate
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investment trust or common trust fund, (ii) a partnership, trust or estate and
(iii) certain cooperatives. Except as may be provided in Treasury regulations
not yet issued, any person holding an interest in a pass-through entity as a
nominee for another will, with respect to such interest, be treated as a
pass-through entity. Electing large partnerships (generally, non-service
partnerships with 100 or more members electing to be subject to simplified IRS
reporting provisions under Code sections 771 through 777) will be taxable on
excess inclusion income as if all partners were disqualified organizations.
In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a REMIC Residual Certificate may be
purchased, transferred or sold, directly or indirectly, without the express
written consent of the Master Servicer. The Master Servicer will grant such
consent to a proposed transfer only if it receives the following: (i) an
affidavit from the proposed transferee to the effect that it is not a
disqualified organization and is not acquiring the REMIC Residual Certificate as
a nominee or agent for a disqualified organization and (ii) a covenant by the
proposed transferee to the effect that the proposed transferee agrees to be
bound by and to abide by the transfer restrictions applicable to the REMIC
Residual Certificate.
Noneconomic REMIC Residual Certificates. The REMIC Regulations
disregard, for federal income tax purposes, any transfer of a Noneconomic REMIC
Residual Certificate to a "U.S. Person," as defined above, unless no significant
purpose of the transfer is to enable the transferor to impede the assessment or
collection of tax. A Noneconomic REMIC Residual Certificate is any REMIC
Residual Certificate (including a REMIC Residual Certificate with a positive
value at issuance) unless, at the time of transfer, taking into account the
Prepayment Assumption and any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents, (i) the
present value of the expected future distributions on the REMIC Residual
Certificate at least equals the product of the present value of the anticipated
excess inclusions and the highest corporate income tax rate in effect for the
year in which the transfer occurs and (ii) the transferor reasonably expects
that the transferee will receive distributions from the REMIC at or after the
time at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. A significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of the
transfer, either knew or should have known that the transferee would be
unwilling or unable to pay taxes due on its share of the taxable income of the
REMIC. A transferor is presumed not to have such knowledge if (i) the transferor
conducted a reasonable investigation of the transferee and (ii) the transferee
acknowledges to the transferor that the residual interest may generate tax
liabilities in excess of the cash flow and the transferee represents that it
intends to pay such taxes associated with the residual interest as they become
due. If a transfer of a Noneconomic REMIC Residual Certificate is disregarded,
the transferor would continue to be treated as the owner of the REMIC Residual
Certificate and would continue to be subject to tax on its allocable portion of
the net income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the transfer of a
REMIC Residual Certificate that has a "tax avoidance potential" to a "foreign
person" will be disregarded for federal income tax purposes. This rule appears
to apply to a transferee who is not a U.S. Person unless such transferee's
income in respect of the REMIC Residual Certificate is effectively connected
with the conduct of a United Sates trade or business. A REMIC Residual
Certificate is deemed to have a tax avoidance potential unless, at the time of
transfer, the transferor reasonably expect that the REMIC will distribute to the
transferee amounts that will equal at least 30 percent of each excess inclusion,
and that such amounts will be distributed at or after the time the excess
inclusion accrues and not later than the end of the calendar year following the
year of accrual. If the non-U.S. Person transfers the REMIC Residual Certificate
to a U.S. Person, the transfer will be disregarded, and the foreign transferor
will continue to be treated as the owner, if the transfer has the effect of
allowing the transferor to avoid tax on accrued excess inclusions. The
provisions in the REMIC Regulations regarding transfers of REMIC Residual
Certificates that have tax avoidance potential to foreign persons are effective
for all transfers after June 30, 1992. The Pooling and Servicing Agreement will
provide that no record or beneficial ownership interest in a REMIC Residual
Certificate 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
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entities are advised to consult their own tax advisors with respect to any tax
which may be imposed on a pass-through entity.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in
"Certain Federal Income Tax Consequences," potential investors should consider
the state income tax consequences of the acquisition, ownership, and disposition
of the Offered Certificates. State income tax law may differ substantially from
the corresponding federal law, and this discussion does not purport to describe
any aspect of the income tax laws of any state. Therefore, potential investors
should consult their own tax advisors with respect to the various tax
consequences of investments in the Offered Certificates.
CERTAIN ERISA CONSIDERATIONS
GENERAL
Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), imposes certain restrictions on employee benefit plans
subject thereto ("ERISA Plans") and on persons who are parties in interest or
disqualified persons ("parties in interest") with respect to such ERISA Plans.
Certain employee benefit plans, such as governmental plans and church plans (if
no election has been made under Section 410(d) of the Code), are not subject to
the restrictions of ERISA, and assets of such plans may be invested in the
Certificates without regard to the ERISA considerations described below, subject
to other applicable federal, state or local law. However, any such governmental
or church plan which is qualified under Section 401(a) of the Code and exempt
from taxation under Section 501(a) of the Code is subject to the prohibited
transaction rules set forth in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in
accordance with the documents governing the ERISA Plan.
PROHIBITED TRANSACTIONS
GENERAL
Section 406 of ERISA prohibits parties in interest with respect to an
ERISA Plan from engaging in certain transactions involving such Plan and its
assets unless a statutory or administrative exemption applies to the
transaction. In some cases, a civil penalty may be assessed on non-exempt
prohibited transactions pursuant to Section 502(i) of ERISA. Section 4975 of the
Code imposes certain excise taxes on similar transactions between employee
benefit plans and certain other retirement plans and arrangements, subject
thereto including individual retirement accounts or annuities and Keogh plans,
subject thereto and disqualified persons with respect to such plans and
arrangements (together with ERISA Plans, "Plans").
The United States Department of Labor ("Labor") has issued a final
regulation (29 C.F.R. Section 2510.3-101) containing rules for determining what
constitutes the assets of a Plan. This regulation provides that, as a general
rule, the underlying assets and properties of corporations, partnerships, trusts
and certain other entities in which a Plan makes an "equity investment" will be
deemed for purposes of ERISA and Section 4975 of the Code to be assets of the
Plan unless certain exceptions apply.
Under the terms of the regulation, the Trust may be deemed to hold plan
assets by reason of a Plan's investment in a Certificate; such plan assets would
include an undivided interest in the Mortgage Loans and any other assets held by
the Trust. In such an event, the Depositor, the Master Servicer, any
Sub-Servicer, the Trustee, any insurer of the Mortgage Assets and other persons,
in providing services with respect to the assets of the Trust, may become
fiduciaries subject to the fiduciary responsibility provisions of Title I of
ERISA, or may otherwise
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become parties in interest or disqualified persons, with respect to such Plan.
In addition, transactions involving such assets could constitute or result in
prohibited transactions under Section 406 of ERISA or Section 4975 of the Code
unless such transactions are subject to a statutory or administrative exemption.
The regulations contain a de minimis safe-harbor rule that exempts the
assets of an entity from plan assets status as long as the aggregate equity
investment in such entity by plans is not significant. For this purpose, equity
participation in the entity will be significant if immediately after any
acquisition of any equity interest in the entity, "benefit plan investors" in
the aggregate, own at least 25% of the value of any class of equity interest
(excluding equity interests held by persons who have discretionary authority or
control with respect to the assets of the entity (or held by affiliates of such
persons)). "Benefit plan investors" are defined as Plans as well as employee
benefit plans not subject to Title I of ERISA (e.g., governmental plans and
foreign plans) and entities whose underlying assets include plan assets by
reason of plan investment in such entities. The 25% limitation must be met with
respect to each class of equity interests, regardless of the portion of total
equity value represented by such class, on an ongoing basis.
AVAILABILITY OF UNDERWRITER'S EXEMPTION FOR CERTIFICATES
Labor has granted to Morgan Stanley & Co. Incorporated Prohibited
Transaction Exemption 90-24, Exemption Application No. D-8019, 55 Fed. Reg.
20548 (1990) (the "Exemption") which exempts from the application of the
prohibited transaction rules transactions relating to: (1) the acquisition, sale
and holding by Plans of certain certificates representing an undivided interest
in certain asset-backed pass-through trusts, with respect to which Morgan
Stanley & Co. Incorporated or any of its affiliates is the sole underwriter or
the manager or co-manager of the underwriting syndicate; and (2) the servicing,
operation and management of such asset-backed pass-through trusts, provided that
the general conditions and certain other conditions set forth in the Exemption
are satisfied.
General Conditions of the Exemption. Section II of the Exemption sets
forth the following general conditions which must be satisfied before a
transaction involving the acquisition, sale and holding of the Certificates or a
transaction in connection with the servicing, operation and management of the
Trust may be eligible for exemptive relief thereunder:
(1) The acquisition of the Certificates by a Plan is on terms
(including the price for such Certificates) that are at least as favorable to
the investing Plan as they would be in an arm's-length transaction with an
unrelated party;
(2) The rights and interests evidenced by the Certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by other
certificates of the Trust with respect to the right to receive payment in the
event of default or delinquencies in the underlying assets of the Trust;
(3) The Certificates acquired by the Plan have received a rating at the
time of such acquisition that is in one of the three highest generic rating
categories from any of Duff & Phelps Credit Rating Co., Fitch Investors Service,
L.P., Moody's Investors Service, Inc. and Standard & Poor's Ratings Services;
(4) The Trustee is not an affiliate of the Depositor, any Underwriter,
the Master Servicer, any insurer of the Mortgage Assets, any borrower whose
obligations under one or more Mortgage Loans constitute more than 5% of the
aggregate unamortized principal balance of the assets in the Trust, or any of
their respective affiliates (the "Restricted Group");
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of the Certificates represents not more than
reasonable compensation for underwriting such Certificates; the sum of all
payments made to and retained by the Asset Seller pursuant to the sale of the
Mortgage Loans to the Trust represents not more than the fair market value of
such Mortgage Loans; the sum of all payments made to and retained by the Master
Servicer represent not more than reasonable compensation for the Master
Servicer's services under the Pooling Agreement and reimbursement of the Master
Servicer's reasonable expenses in connection therewith; and
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(6) The Plan investing in the Certificates is an "accredited investor"
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933 as amended.
Before purchasing a Certificate in reliance on the Exemption, a
fiduciary of a Plan should itself confirm (a) that the Certificates constitute
"certificates" for purposes of the Exemption and (b) that the general conditions
and other requirements set forth in the Exemption would be satisfied.
REVIEW BY PLAN FIDUCIARIES
Any Plan fiduciary considering whether to purchase any Certificates on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Code to such investment. Among other things, before purchasing any
Certificates, a fiduciary of a Plan should make its own determination as to the
availability of the exemptive relief provided in the Exemption, and also
consider the availability of any other prohibited transaction exemptions. In
this regard, purchasers that are insurance companies should determine the extent
to which Prohibited Transaction Class Exemption 95-60 (for certain transactions
involving insurance company general accounts) may be available. The Prospectus
Supplement with respect to a series of Certificates may contain additional
information regarding the application of the Exemption, Prohibited Transaction
Class Exemption 83-1 (for certain transactions involving mortgage pool
investment trusts), or any other exemption, with respect to the Certificates
offered thereby.
LEGAL INVESTMENT
The Prospectus Supplement for each series of Offered Certificates will
identify those classes of Offered Certificates, if any, which constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"). Generally, only those classes of
Offered Certificates that (i) are rated in one of the two highest rating
categories by one or more Rating Agencies and (ii) are part of a series
representing interests in a Trust Fund consisting of Mortgage Loans or MBS,
provided that such Mortgage Loans (or the Mortgage Loans underlying the MBS) are
secured by first liens on Mortgaged Property and were originated by certain
types of originators as specified in SMMEA, will be "mortgage related
securities" for purposes of SMMEA (the "SMMEA Certificates"). As "mortgage
related securities," the SMMEA Certificates will constitute legal investments
for persons, trusts, corporations, partnerships, associations, business trusts
and business entities (including, but not limited to, depository insitutions,
insurance companies, trustees and pension funds) created pursuant to or existing
under the laws of the United States or of any state (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for such entities. Pursuant
to SMMEA, a number of states enacted legislation, on or before the October 3,
1991 cutoff established by SMMEA for such enactments, limiting to varying
extents the ability of certain entities (in particular, insurance companies) to
invest in mortgage related securities, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Riegle Community Development and Regulatory Improvement Act
of 1994, which amended the definition of "mortgage related security" (effective
December 31, 1996) to include, in relevant part, Offered Certificates satisfying
the rating, first lien and qualified originator requirements for "mortgage
related securities," but representing interests in a Trust Fund consisting, in
whole or in part, of first liens on one or more parcels of real estate upon
which are located one or more commercial structures, states were authorized to
enact legislation, on or before September 23, 2001, specifically referring to
Section 347 and prohibiting or restricting the purchase, holding or investment
by state-regulated entities in such types of Offered Certificates. Accordingly,
investors affected by such legislation, when and if enacted, will be authorized
to invest in SMMEA Certificates only to the extent provided in such legislation.
SMMEA also amended the legal investment authority of
federally-chartered depository institutions as follows: federal savings and loan
associations and federal savings banks may invest in, sell or otherwise deal in
"mortgage related securities" without limitation as to the percentage of their
assets represented thereby, federal credit unions may invest in such securities,
and national banks may purchase such securities for their own account without
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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. The National Credit Union
Administration ("NCUA") has adopted rules, codified at 12 C.F.R. Section 703,
which permit federal credit unions to invest in "mortgage related securities"
under certain limited circumstances, other than stripped mortgage related
securities, residual interests in mortgage related securities, and commercial
mortgage related securities, unless the credit union has obtained written
approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. Section 703.140.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of
the Federal Financial Institutions Examination Council (the "FFIEC"), 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 effective May 26, 1998, and by the NCUA, effective October 1, 1998.
The 1998 Policy Statement sets forth general guidelines which depository
institutions must follow in managing risks (including market, credit, liquidity,
operational (transaction), and legal risks) applicable to all securities
(including mortgage pass-through securities and mortgage-derivative products)
used for investment purposes. Until October 1, 1998, federal credit unions will
still be subject to the FFIEC's now-superseded "Supervisory Policy Statement on
Securities Activities" dated January 28, 1992, as adopted by the NCUA with
certain modifications, which prohibited depository institutions from investing
in certain "high-risk mortgage securities," 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 to be unsuitable
investments, or may otherwise be restricted, under such rules, policies or
guidelines (in certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," and, with regard to any Offered Certificates issued
in book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
If specified in the related Prospectus Supplement, other classes of
Offered Certificates offered pursuant to this Prospectus will not constitute
"mortgage related securities" under SMMEA. The appropriate characterization of
such Offered Certificates under various legal investment restrictions, and thus
the ability of investors subject to these restrictions to purchase such Offered
Certificates, may be subject to significant interpretive uncertainties.
Except as to the status of certain classes of Offered Certificates
identified in the Prospectus Supplement for a series as "mortgage related
securities" under SMMEA, no representations are made as to the proper
characterization of the Offered Certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase any Offered Certificates under
applicable
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legal investment restrictions. The uncertainties described above (and any
unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the Offered Certificates) may
adversely affect the liquidity of the Offered Certificates.
Accordingly, all investors whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or review
by regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Offered Certificates of any class
constitute legal investments or are subject to investment, capital or other
restrictions, and, if applicable, whether SMMEA has been overridden in any
jurisdiction relevant to such investor.
PLAN OF DISTRIBUTION
The Offered Certificates offered hereby and by the Supplements to this
Prospectus will be offered in series. The distribution of the Certificates may
be effected from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment therefor. If so
specified in the related Prospectus Supplement, the Offered Certificates will be
distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by Morgan Stanley & Co. Incorporated
("Morgan Stanley") acting as underwriter with other underwriters, if any, named
therein. In such event, the Prospectus Supplement may also specify that the
underwriters will not be obligated to pay for any Offered Certificates agreed to
be purchased by purchasers pursuant to purchase agreements acceptable to the
Depositor. In connection with the sale of Offered Certificates, underwriters may
receive compensation from the Depositor or from purchasers of Offered
Certificates in the form of discounts, concessions or commissions. The
Prospectus Supplement will describe any such compensation paid by the Depositor.
Alternatively, the Prospectus Supplement may specify that Offered
Certificates will be distributed by Morgan Stanley acting as agent or in some
cases as principal with respect to Offered Certificates that it has previously
purchased or agreed to purchase. If Morgan Stanley acts as agent in the sale of
Offered Certificates, Morgan Stanley will receive a selling commission with
respect to such Offered Certificates, depending on market conditions, expressed
as a percentage of the aggregate Certificate Balance or notional amount of such
Offered Certificates as of the Cut-off Date. The exact percentage for each
series of Certificates will be disclosed in the related Prospectus Supplement.
To the extent that Morgan Stanley elects to purchase Offered Certificates as
principal, Morgan Stanley may realize losses or profits based upon the
difference between its purchase price and the sales price. The Prospectus
Supplement with respect to any series offered other than through underwriters
will contain information regarding the nature of such offering and any
agreements to be entered into between the Depositor and purchasers of Offered
Certificates of such series.
The Depositor will indemnify Morgan Stanley and any underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, or will contribute to payments Morgan Stanley and any underwriters
may be required to make in respect thereof.
In the ordinary course of business, Morgan Stanley and the Depositor
may engage in various securities and financing transactions, including
repurchase agreements to provide interim financing of the Depositor's mortgage
loans pending the sale of such mortgage loans or interests therein, including
the Certificates.
Offered Certificates will be sold primarily to institutional investors.
Purchasers of Offered Certificates, including dealers, may, depending on the
facts and circumstances of such purchases, be deemed to be "underwriters" within
the meaning of the Securities Act of 1933 in connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
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As to each series of Certificates, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any non-investment-grade class may be initially retained by the Depositor, and
may be sold by the Depositor at any time in private transactions.
LEGAL MATTERS
Certain legal matters in connection with the Certificates, including
certain federal income tax consequences, will be passed upon for the Depositor
by Cadwalader, Wickersham & Taft or Latham & Watkins, 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......................................................10
ADA.......................................................................72
Applicable Amount.........................................................93
ARM Loans.............................................................25, 79
Asset Conservation Act....................................................67
Asset Seller..............................................................22
Assets.....................................................................1
Balloon Mortgage Loans....................................................18
Bankruptcy Code...........................................................63
Book-Entry Certificates...................................................32
Cash Flow Agreement........................................................9
Cash Flow Agreements.......................................................1
Cede...................................................................3, 38
CERCLA................................................................20, 67
Certificate Account.......................................................42
Certificate Balance.......................................................10
Certificate Owners........................................................38
Certificateholders.........................................................3
Closing Date..............................................................82
Commercial Loans..........................................................22
Commercial Properties......................................................7
Commission.................................................................2
Contributions Tax.........................................................94
Cooperatives..............................................................22
Covered Trust.............................................................56
CPR.......................................................................30
Credit Support......................................................1, 8, 27
Crime Control Act.........................................................72
Deferred Interest.........................................................79
Definitive Certificates...............................................32, 39
Depositor.................................................................22
Determination Date........................................................32
DTC....................................................................3, 38
Due Period................................................................32
Environmental Hazard Condition............................................69
Equity Participations.....................................................26
ERISA.....................................................................97
Exchange Act...............................................................3
Exemption.................................................................98
FDIC......................................................................42
FHLMC.....................................................................51
FNMA......................................................................68
Government Securities...............................................1, 8, 22
Indirect Participants.....................................................38
Insurance Proceeds........................................................43
IRS.......................................................................74
L/C Bank..................................................................56
Labor.....................................................................98
105
<PAGE> 305
Lease......................................................................3
Lease Assignment...........................................................1
Legislative History.......................................................82
Lessee.....................................................................3
Liquidation Proceeds......................................................43
Lock-out Date.............................................................26
Lock-out Period...........................................................26
Mark-to-Market Regulations................................................92
Master REMIC..............................................................81
MBS.................................................................1, 6, 21
MBS Agreement.............................................................26
MBS Issuer................................................................26
MBS Servicer..............................................................26
MBS Trustee...............................................................26
Morgan Stanley...........................................................101
Mortgage Loans......................................................1, 6, 21
Mortgage Notes............................................................22
Mortgage Rate..........................................................7, 25
Mortgages.................................................................22
Multifamily Loans.........................................................22
Multifamily Properties.................................................7, 22
NCUA.....................................................................100
Nonrecoverable Advance....................................................35
OID...................................................................73, 75
OID Regulations...........................................................75
Originator................................................................22
Participants..............................................................38
Pass-Through Rate.....................................................10, 33
Payment Lag Certificates..................................................88
Permitted Investments.....................................................42
Plans.....................................................................98
Prepayment Assumption.....................................................78
Prepayment Premium........................................................26
Prohibited Transactions Tax...............................................94
RCRA......................................................................68
Record Date...............................................................32
Related Proceeds..........................................................35
Relief Act................................................................72
REMIC Certificates........................................................81
REMIC Regular Certificateholders..........................................82
REMIC Regular Certificates............................................13, 81
REMIC Regulations.........................................................72
REMIC Residual Certificateholder..........................................89
REMIC Residual Certificates...........................................81, 90
REO Extension.............................................................61
REO Tax...................................................................62
Restricted Group..........................................................99
RICO......................................................................72
Senior Certificates...................................................10, 31
Servicing Standard........................................................46
SMMEA.....................................................................99
SMMEA Certificates........................................................99
Special Servicer.......................................................6, 46
Stripped ARM Obligations..................................................79
Stripped Bond Certificates................................................76
Stripped Coupon Certificates..............................................76
106
<PAGE> 306
Stripped Interest Certificates........................................10, 31
Stripped Principal Certificates.......................................10, 31
Subordinate Certificates..............................................10, 31
Sub-Servicer..............................................................46
Sub-Servicing Agreement...................................................46
Subsidiary REMIC..........................................................81
Super-Premium Certificates................................................83
Title V...................................................................70
Trust Assets...............................................................2
Trust Fund.................................................................1
UCC.......................................................................38
Voting Rights.............................................................21
Warrantying Party.........................................................41
107
