<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-77215
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 7, 2000)
$693,789,000(APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I TRUST 2000-LIFE2
as Issuer
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
as Depositor
PRINCIPAL COMMERCIAL FUNDING, LLC
JOHN HANCOCK REAL ESTATE FINANCE, INC.
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
as Mortgage Loan Sellers
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-LIFE2
-----------------------
Morgan Stanley Dean Witter Capital I Inc. is offering selected classes of
its Series 2000-LIFE2 Commercial Mortgage Pass-Through Certificates, which
represent beneficial ownership interests in a trust. The trust's assets will
primarily be 103 mortgage loans secured by liens on commercial and multifamily
properties. The Series 2000-LIFE2 Certificates are not obligations of Morgan
Stanley Dean Witter Capital I Inc., the sellers of the mortgage loans or any of
their affiliates, and neither the certificates nor the underlying mortgage loans
are insured or guaranteed by any governmental agency.
-----------------------
INVESTING IN THE CERTIFICATES OFFERED TO YOU INVOLVES RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE S-21 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 11 OF THE
PROSPECTUS.
-----------------------
Characteristics of the certificates offered to you include:
<TABLE>
<CAPTION>
PASS-THROUGH
APPROXIMATE INITIAL INITIAL PASS-THROUGH RATE RATINGS
CLASS CERTIFICATE BALANCE RATE DESCRIPTION (FITCH/MOODY'S)
----- ------------------- ---- ----------- ---------------
<S> <C> <C> <C> <C>
CLASS A-1 $159,079,000 6.96% FIXED AAA/AAA
CLASS A-2 $479,987,000 7.20% FIXED AAA/AAA
CLASS B $22,961,000 7.35% FIXED AA/AA2
CLASS C $24,874,000 7.50% FIXED A/A2
CLASS D $6,888,000 7.62% FIXED A-/A3
</TABLE>
The certificate balances are approximate and may vary by up to 5%.
-----------------------
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved the certificates offered to you or determined if
this prospectus supplement or the accompanying prospectus are truthful or
complete. Any representation to the contrary is a criminal offense.
-----------------------
Morgan Stanley & Co. Incorporated will act as sole lead manager and
bookrunner with respect to the offered certificates. Morgan Stanley & Co.
Incorporated and Goldman, Sachs & Co. will purchase the certificates offered to
you from Morgan Stanley Dean Witter Capital I Inc. and will offer them to the
public at negotiated prices determined at the time of sale. Morgan Stanley & Co.
Incorporated and Goldman, Sachs & Co. expect to deliver the certificates to
purchasers on or about October 31, 2000. Morgan Stanley Dean Witter Capital I
Inc. expects to receive from this offering approximately $697,000,573, plus
accrued interest from the cut-off date, before deducting expenses payable by
Morgan Stanley Dean Witter Capital I Inc.
-----------------------
MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO.
October 19, 2000
<PAGE>
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
Commercial Mortgage Pass-Through Certificates, Series 2000 LIFE 2
Geographic Overview of Mortgage Pool
NEVADA OHIO
$10,275,542 $14,845,477
1.3% of total 1.9% of total
NORTHERN CALIFORNIA PENNSYLVANIA
$75,370,843 $10,495,882
9.8% of total 1.4% of total
CALIFORNIA NEW YORK
$163,165,152 $56,555,217
21.3% of total 7.4% of total
SOUTHERN CALIFORNIA MASSACHUSETTS
$87,794,309 $7,257,663
11.5% of total 0.9% of total
ARIZONA CONNECTICUT
$31,875,502 $2,865,718
4.2% of total 0.4% of total
COLORADO NEW JERSEY
$22,517,699 $196,723,665
2.9% of total 25.7% of total
TEXAS MARYLAND
$28,217,283 $35,757,411
3.7% of total 4.7% of total
TENNESSEE DISTRICT OF COLUMBIA
$26,049,464 $15,673,161
3.4% of total 2.0% of total
KENTUCKY VIRGINIA
$5,569,938 $4,588,335
0.7% of total 0.6% of total
UTAH NORTH CAROLINA
$18,530,142 $2,044,943
2.4% of total 0.3% of total
NEBRASKA SOUTH CAROLINA
$4,297,464 $31,254,760
0.6% of total 4.1% of total
ILLINOIS GEORGIA
$4,984,001 $14,191,989
0.7% of total 1.9% of total
MICHIGAN FLORIDA
$22,142,604 $35,470,367
2.9% of total 4.6% of total
[ ] less than 1.0% of Cut-Off Date Balance
[ ] 1.0% - 5.0% of Cut-Off Date Balance
[ ] 5.1% - 10.0% of Cut-Off Date Balance
[ ] greater than 10.0% of Cut-Off Date Balance
<PAGE>
The pass-through rates on the Class A-1, Class A-2, Class B, Class C and Class D
Certificates will be fixed at the respective per annum rates set forth on the
cover; provided that in the case of the Class B, Class C and Class D
Certificates such pass-through rate for any distribution date will not exceed
the NWAC Rate for such distribution date. The NWAC rate for a particular
distribution date is, generally, a weighted average of the interest rates on the
mortgage loans minus a weighted average annual administrative cost rate, which
includes the master servicing fee rate, any excess servicing fee rate, the
primary servicing fee rate and the trustee fee rate, calculated as described in
this prospectus supplement. You should read the section entitled "Ratings" in
this prospectus supplement.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the certificates offered to you is contained in two
separate documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to
the certificates offered to you; and (b) this prospectus supplement, which
describes the specific terms of the certificates offered to you.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. Morgan Stanley Dean Witter Capital I
Inc. has not authorized anyone to provide you with information that is different
from that contained in this prospectus supplement and the prospectus.
------------------------------
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The tables of contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
The Series 2000-LIFE2 Certificates are not obligations of Morgan Stanley
Dean Witter Capital I Inc. or any of its affiliates, and neither the
certificates nor the underlying mortgage loans are insured or guaranteed by any
governmental agency.
------------------------------
Morgan Stanley Dean Witter Capital I Inc. will not list the certificates
offered to you on any national securities exchange or any automated quotation
system of any registered securities association such as NASDAQ.
------------------------------
Until ninety days after the date of this prospectus supplement, all dealers
that buy, sell or trade the certificates offered by this prospectus supplement,
whether or not participating in this offering, may be required to deliver a
prospectus supplement and the accompanying prospectus. This is in addition to
the dealers' obligation to deliver a prospectus supplement and the accompanying
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
S-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-4
<PAGE>
TABLE OF CONTENTS
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS..........................................3
Executive Summary...................................6
Summary of Prospectus Supplement....................7
What You Will Own...................................7
Relevant Parties and Dates..........................7
Offered Certificates................................9
Information About the Mortgage Pool................13
Additional Aspects of Certificates.................18
Risk Factors.......................................21
Description Of The Offered Certificates............47
General............................................47
Certificate Balances...............................48
Pass-Through Rates.................................49
Distributions......................................49
Optional Termination...............................54
Advances...........................................55
Reports to Certificateholders; Available
Information........................................57
Example of Distributions...........................60
The Trustee and the Fiscal Agent...................61
Expected Final Distribution Date; Rated Final
Distribution Date..................................61
Yield, Prepayment And Maturity Considerations......62
General............................................62
Pass-Through Rates.................................62
Rate and Timing of Principal Payments..............62
Losses and Shortfalls..............................63
Relevant Factors...................................64
Weighted Average Life..............................64
Description Of The Mortgage Pool...................67
General............................................67
Material Terms and Characteristics of the Mortgage
Loans..............................................67
Assessments of Property Value and Condition........71
Additional Mortgage Loan Information...............72
Standard Hazard Insurance..........................74
The Sellers........................................75
Sale of the Mortgage Loans.........................75
Representations and Warranties.....................75
Repurchases and Other Remedies.....................77
Changes In Mortgage Pool Characteristics...........78
Servicing Of The Mortgage Loans....................79
General............................................79
The Master Servicer and Special Servicer...........80
Master Servicer....................................81
Events of Default..................................81
The Special Servicer...............................82
The Operating Adviser..............................84
Mortgage Loan Modifications........................84
Sale of Defaulted Mortgage Loans and REO
Properties.........................................85
Foreclosures.......................................86
Material Federal Income Tax Consequences...........87
General............................................87
Original Issue Discount and Premium................88
Additional Considerations..........................89
Legal Aspects Of Mortgage Loans....................90
New Jersey.........................................90
California.........................................92
New York...........................................92
ERISA Considerations...............................92
Plan Assets........................................92
Special Exemption Applicable to Class A
Certificates.......................................93
Insurance Company General Accounts.................95
General Investment Considerations..................96
Legal Investment...................................96
Use Of Proceeds....................................96
Plan Of Distribution...............................97
Legal Matters......................................98
Ratings............................................98
Glossary Of Terms..................................99
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
APPENDIX IV - Term Sheet..........................T-1
APPENDIX V - Form of Statement to
Certificateholders..........................V-1
S-5
<PAGE>
EXECUTIVE SUMMARY
This Executive Summary highlights selected information regarding the
certificates offered to you. It does not contain all of the information you need
to consider in making your investment decision. TO UNDERSTAND ALL OF THE TERMS
OF THIS OFFERING AND THE UNDERLYING MORTGAGE LOANS, YOU SHOULD READ THIS ENTIRE
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS CAREFULLY.
CERTIFICATE STRUCTURE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
APPROXIMATE WEIGHTED
APPROXIMATE PERCENT OF AVERAGE PRINCIPAL
APPROXIMATE CERTIFICATE RATINGS TOTAL LIFE WINDOW
CREDIT SUPPORT CLASS BALANCE (FITCH/MOODY'S) CERTIFICATES (YRS.) (MONTHS)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
16.50% CLASS X CLASS A-1 $159,079,000 AAA/Aaa 20.79% 5.70 1-93
$765,349,379
(Approximate
Notional
Amount)
----------------- --------------------------------------------------------------------------------------
16.50% CLASS A-2 $479,987,000 AAA/Aaa 62.71% 9.34 93-119
----------------- --------------------------------------------------------------------------------------
13.50% CLASS B $22,961,000 AA/Aa2 3.00% 9.88 119-119
----------------- --------------------------------------------------------------------------------------
10.25% CLASS C $24,874,000 A/A2 3.25% 9.88 119-119
----------------- --------------------------------------------------------------------------------------
9.35% CLASS D $6,888,000 A-/A3 0.90% 9.88 119-119
----------------- --------------------------------------------------------------------------------------
CLASSES E-P
---------- ---------- --------- ------- ---------- --------
----------------------------------------------------------------------------------------------------------------------
</TABLE>
o The percentages indicated under the column "Approximate Credit Support"
with respect to the Class A-1 and Class A-2 Certificates represent the
approximate credit support for the Class A-1 and Class A-2 Certificates in
the aggregate.
o The initial certificate balance may vary by up to 5%.
o The Class X, Class E, Class F, Class G, Class H, Class J, Class K, Class L,
Class M, Class N, Class O and Class P Certificates are not offered pursuant
to this prospectus supplement.
o The pass-through rates for the Class A-1, Class A-2, Class B, Class C and
Class D Certificates presented in the table are fixed at their respective
per annum rates set forth above, provided that in the case of the Class B,
Class C and Class D Certificates such pass-through rate for any
distribution date will not exceed the NWAC Rate for such distribution date.
With respect to the column entitled "Principal Window," the principal
window is expressed in months following the closing date and reflects the
period during which distributions of principal would be received. The
weighted average life and principal window figures presented above are
based on the assumptions that the mortgage loans suffer no losses and that
they are fully paid on their respective stated maturity dates.
o The Series 2000-LIFE2 Class R-I, R-II and R-III Certificates also represent
ownership interests in the trust. These certificates are not represented in
this table and are not offered pursuant to this prospectus supplement.
[ ] Offered certificates.
[ ] Certificates not offered pursuant to this prospectus supplement.
S-6
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
This summary highlights selected information from this prospectus
supplement. It does not contain all of the information you need to consider in
making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING
OF THE OFFERED CERTIFICATES, YOU SHOULD READ THIS ENTIRE DOCUMENT AND THE
ACCOMPANYING PROSPECTUS CAREFULLY.
<TABLE>
<CAPTION>
WHAT YOU WILL OWN
<S> <C>
GENERAL................................... Your certificates (along with the privately offered
certificates) represent beneficial interests in a trust
created by Morgan Stanley Dean Witter Capital I Inc. on the
Closing Date. All payments to you will come only from the
amounts received in connection with the assets of the trust.
The trust's assets will primarily be 103 mortgage loans
secured by liens on commercial and multifamily properties.
TITLE OF CERTIFICATES..................... Commercial Mortgage Pass-Through Certificates, Series
2000-LIFE2
MORTGAGE POOL............................. The mortgage pool consists of approximately 103 mortgage
loans with an aggregate principal balance of all mortgage
loans as of October 1, 2000, of approximately $765,349,379,
which may vary by up to 5%. For purposes of those mortgage
loans that have a due date on a date other than the first of
the month, we have assumed that those mortgage loans are due
on the first of the month for purposes of determining their
cut-off dates and cut-off date balances.
As of October 1, 2000, the balances of the mortgage loans in
the mortgage pool ranged from approximately $1,198,438 to
approximately $57,039,856 and the mortgage loans had an
approximate average balance of $7,430,576.
RELEVANT PARTIES AND DATES
ISSUER.................................... Morgan Stanley Dean Witter Capital I Trust 2000-LIFE2.
DEPOSITOR................................. Morgan Stanley Dean Witter Capital I Inc.
MASTER SERVICER........................... Wells Fargo Bank, National Association.
SPECIAL SERVICER.......................... GMAC Commercial Mortgage Corporation.
PRIMARY SERVICERS......................... Principal Capital Management, LLC, John Hancock Real Estate
Finance, Inc. and The Northwestern Mutual Life Insurance
Company.
TRUSTEE................................... LaSalle Bank National Association, a national banking
association.
FISCAL AGENT.............................. ABN AMRO Bank N.V., a Netherlands banking corporation and
indirect corporate parent of the trustee.
OPERATING ADVISER......................... The holders of certificates representing more than 50% of
the aggregate certificate balance of the most subordinate
class of certificates, outstanding at any time of
determination, or, if the certificate balance of that class
of certificates is less than 25% of the initial certificate
S-7
<PAGE>
balance of that class, the next most subordinate class of
certificates, may appoint a representative for the purposes
described in this prospectus supplement. The initial
operating adviser will be GMAC Commercial Mortgage
Corporation.
SELLERS................................... Principal Commercial Funding, LLC, as to 78 mortgage loans,
representing 60.3% of the initial outstanding pool balance.
John Hancock Real Estate Finance, Inc., as to 22 mortgage
loans, representing 27.5% of the initial outstanding pool
balance.
The Northwestern Mutual Life Insurance Company, as to 3
mortgage loans, representing 12.2% of the initial
outstanding pool balance.
UNDERWRITERS.............................. Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co.
CUT-OFF DATE.............................. October 1, 2000. For purposes of the information contained
in this prospectus supplement (including the appendices
hereto), scheduled payments due in October 2000 with respect
to mortgage loans not having payment dates on the first of
each month have been deemed received on October 1, 2000, not
the actual day which such scheduled payments were due.
CLOSING DATE.............................. On or about October 31, 2000.
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 November 15, 2000.
RECORD DATE............................... With respect to each distribution date, the close of
business on the last business day of the preceding
calendar month.
-------------------------------------------------------------------
EXPECTED FINAL DISTRIBUTION DATE......... Class A-1 July 15, 2008
-------------------------------------------------------------------
Class A-2 September 15, 2010
-------------------------------------------------------------------
Class B September 15, 2010
-------------------------------------------------------------------
Class C September 15, 2010
-------------------------------------------------------------------
Class D September 15, 2010
-------------------------------------------------------------------
The Expected Final Distribution Date for each class of
certificates is the date on which such class is expected to
be paid in full.
RATED FINAL DISTRIBUTION DATE............. As to each class of offered certificates, October 15, 2033.
S-8
<PAGE>
OFFERED CERTIFICATES
GENERAL................................... Morgan Stanley Dean Witter Capital I Inc. is offering the
following five classes of its Series 2000-LIFE2 Commercial
Mortgage Pass-Through Certificates:
o Class A-1
o Class A-2
o Class B
o Class C
o Class D
The entire series will consist of a total of twenty (20)
classes, the following fifteen (15) of which are not being
offered by this prospectus supplement and the accompanying
prospectus: Class X, Class E, Class F, Class G, Class H,
Class J, Class K, Class L, Class M, Class N, Class O, Class
P, Class R-I, Class R-II and Class R-III.
CERTIFICATE BALANCE....................... Your certificates will have the approximate aggregate
initial certificate balance presented in the chart below and
this balance below may vary by up to 5%:
------------------------------------------------------------------
Class A-1 $159,079,000 Certificate Balance
------------------------------------------------------------------
Class A-2 $479,987,000 Certificate Balance
------------------------------------------------------------------
Class B $22,961,000 Certificate Balance
------------------------------------------------------------------
Class C $24,874,000 Certificate Balance
------------------------------------------------------------------
Class D $6,888,000 Certificate Balance
------------------------------------------------------------------
PASS-THROUGH RATES........................ Your certificates will accrue interest at an annual rate
called a pass-through rate. The following table lists the
initial pass-through rates for each class of offered
certificates:
-------------------------------------------------------------------
Class A-1 6.96% (Fixed)
-------------------------------------------------------------------
Class A-2 7.20% (Fixed)
-------------------------------------------------------------------
Class B 7.35% (Fixed)
-------------------------------------------------------------------
Class C 7.50% (Fixed)
-------------------------------------------------------------------
Class D 7.62% (Fixed)
-------------------------------------------------------------------
Interest on your certificates will be calculated on the
basis of a 360-day year consisting of twelve 30-day months,
also referred to in this prospectus supplement as a 30/360
basis.
S-9
<PAGE>
The weighted average net mortgage rate or NWAC rate for a
particular distribution date is a weighted average of the
interest rates on the mortgage loans minus a weighted
average annual administrative cost rate, which includes the
master servicing fee rate, any excess servicing fee rate,
the primary servicing fee rate and the trustee fee rate. The
relevant weighting is based upon the respective principal
balances of the mortgage loans as in effect immediately
prior to the relevant distribution date. For purposes of
calculating the NWAC rate, the mortgage loan interest rates
will not reflect any default interest rate. The mortgage
loan interest rates will also be determined without regard
to any loan term modifications agreed to by the special
servicer or resulting from any borrower's bankruptcy or
insolvency. 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 will, in
general, 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.
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 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, Class O and
Class P 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.
DISTRIBUTIONS
A. AMOUNT AND ORDER
OF DISTRIBUTIONS.............. On each distribution date, funds available for distribution
from the mortgage loans, net of specified trust expenses,
including all servicing fees, trustee fees and related
compensation, will be distributed in the following amounts
and priority:
Step 1/Class A and Class X: To interest on Classes
A-1, A-2 and X, pro rata, in accordance with their interest
entitlements.
Step 2/Class A: To the extent of amounts then
required to be distributed as principal on the 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 or an appraisal reduction, principal 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 and
X, pro rata, for any previously unreimbursed losses on the
mortgage loans allocable to principal that were previously
borne by those classes, together with interest at the
applicable pass-through rate.
Step 4/Class B: To Class B as follows: (a) to
interest on Class B in the amount of its interest
entitlement; (b) to principal on Class B in the amount of
its principal entitlement until its principal amount is
S-10
<PAGE>
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 at the applicable pass-through
rate.
Step 5/Class C: To Class C in a manner analogous to
the Class B allocations of Step 4.
Step 6/Class D: To Class D in a manner analogous to
the Class B allocations of Step 4.
Step 7/Subordinate Private Certificates: In the
amounts and order of priority described in this prospectus
supplement.
B. INTEREST AND
PRINCIPAL ENTITLEMENTS........ A description of the interest entitlement payable to each
Class can be found in "Description of the Offered
Certificates--Distributions" in this prospectus supplement.
As described in that section, there are circumstances
relating to the timing of prepayments in which your interest
entitlement for a distribution date could be less than one
full month's interest at the pass-through rate on your
certificate's principal amount. In addition, the right of
the master servicer, the trustee and the fiscal agent to
reimbursement or payment for non-recoverable advances will
be prior to your right to receive distributions of principal
or interest.
The Class X Certificates will not be entitled to principal
distributions. The amount of principal required to be
distributed on the classes entitled to principal on a
particular distribution date will, in general, be equal to:
o the principal portion of all scheduled payments, other
than balloon payments, whether or not received, due during
the related collection period;
o all principal prepayments and the principal portion of
balloon payments received during the related collection
period;
o the principal portion of other collections on the
mortgage loans received during the related collection
period, such as liquidation proceeds, condemnation
proceeds, insurance proceeds and income on "real estate
owned"; and
o the principal portion of proceeds of mortgage loan
repurchases received during the related collection
period.
As described herein, the amount actually available for
principal distributions on any distribution date may be less
than the amount required to be distributed on that date.
C. PREPAYMENT
PREMIUMS...................... The manner in which any prepayment premiums received during
a particular collection period will be allocated to the
Class X Certificates, on the one hand, and the classes of
certificates entitled to principal, on the other hand, is
described in "Description of the Offered Certificates--
Distributions" in this prospectus supplement.
S-11
<PAGE>
SUBORDINATION
A. GENERAL.......................... The chart below describes the manner in which the rights of
various classes will be senior to the rights of other
classes. Entitlement to receive principal and interest on
any distribution date is depicted in descending order. The
manner in which mortgage loan losses (including interest)
are allocated is depicted in ascending order.
------------------------------
Class A-1, Class A-2 and
Class X
------------------------------
------------------------------
Class B
------------------------------
------------------------------
Class C
------------------------------
------------------------------
Class D
------------------------------
------------------------------
Classes E-P
------------------------------
NO OTHER FORM OF CREDIT ENHANCEMENT WILL BE AVAILABLE TO YOU
AS A HOLDER OF OFFERED CERTIFICATES.
B. SHORTFALLS IN
AVAILABLE FUNDS............... The following types of shortfalls in available funds will be
allocated in the same manner as mortgage loan losses:
o shortfalls resulting from compensation which the special
servicer is entitled to receive.
o shortfalls resulting from interest on advances made by
the master servicer, the trustee or the fiscal agent, to
the extent not covered by default interest and late
payment charges paid by the borrower.
o shortfalls resulting from a reduction of a mortgage
loan's interest rate by a bankruptcy court or from other
unanticipated, extraordinary or default-related expenses
of the trust.
Shortfalls in mortgage loan interest as a result of the
timing of prepayments (net of certain amounts required to be
used by the master servicer or special servicer to offset
such shortfalls) will be allocated to each class of
certificates, pro rata, in accordance with their respective
interest entitlements.
S-12
<PAGE>
INFORMATION ABOUT THE MORTGAGE POOL
CHARACTERISTICS OF THE MORTGAGE POOL
A. GENERAL.......................... All numerical information in this prospectus supplement
concerning the mortgage loans is approximate. All weighted
average information regarding the mortgage loans reflects
the weighting of the mortgage loans based upon their
outstanding principal balances as of October 1, 2000. With
respect to mortgage loans not having due dates on the first
day of each month, scheduled payments due in October 2000
have been deemed received on October 1, 2000.
B. PRINCIPAL BALANCES............... The trust's primary assets will be 103 mortgage loans with
an aggregate principal balance of all mortgage loans as of
October 1, 2000 of $765,349,379. It is possible that the
mortgage loan balance will vary by up to 5%. As of October
1, 2000, the principal balance of the mortgage loans in the
mortgage pool ranged from approximately $1,198,438 to
approximately $57,039,856 and the mortgage loans had an
approximate average balance of $7,430,576.
C. FEE SIMPLE/LEASEHOLD............. 100 mortgage loans, representing 96.3% of the aggregate
principal balance of the mortgage loans, are secured by a
first mortgage lien on a fee simple estate in an
income-producing real property. In three (3) of those cases,
the borrower's interest in the property consists of a fee
interest in one portion and a ground leasehold interest in
another portion of the property. In each of these cases the
fee owner has subjected its interest to the related
mortgage, and therefore such mortgage loan is disclosed as a
fee loan. We consider the borrower's interest in those
properties to be a fee simple estate for purposes of this
prospectus supplement.
One (1) mortgage loan, representing 0.5% of the aggregate
principal balance of the mortgage loans, is secured by a
first mortgage lien on a leasehold interest in an
income-producing real property.
Two (2) mortgage loans, representing 3.2% of the aggregate
principal balance of the mortgage loans, are secured by
first mortgage liens on both a fee and a leasehold interest
in income-producing real property.
S-13
<PAGE>
D. PROPERTY TYPES................... The following table shows how the mortgage loans are
distributed among different types of properties.
-------------------------------------------------------------------------
Percentage of Aggregate
Principal Balance of Mortgage Number of
Property Type Loans as of the Cut-off Date Mortgage Loans
-------------------------------------------------------------------------
Office 30.0% 27
-------------------------------------------------------------------------
Industrial 25.8% 34
-------------------------------------------------------------------------
Retail 21.5% 26
-------------------------------------------------------------------------
Multifamily 19.5% 12
-------------------------------------------------------------------------
Assisted Living 2.2% 2
-------------------------------------------------------------------------
Hospitality 0.5% 1
-------------------------------------------------------------------------
Self Storage 0.4% 1
-------------------------------------------------------------------------
E. PROPERTY LOCATION................ The number of mortgage loans, and the approximate percentage
of the aggregate principal balance of the mortgage loans
represented by the mortgage loans, that are secured by
mortgaged properties located in the three states with the
highest concentrations of mortgaged properties, are as
described in the table below:
--------------------------------------------------------------------------
Percentage of Aggregate Number of
Principal Balance of Mortgage Mortgage
State Loans as of the Cut-off Date Loans
--------------------------------------------------------------------------
New Jersey 25.7% 18
--------------------------------------------------------------------------
California 21.3% 21
--------------------------------------------------------------------------
New York 7.4% 5
--------------------------------------------------------------------------
The remaining mortgaged properties are located throughout 20
other states and the District of Columbia. None of these
states has a concentration of mortgaged properties that
represents security for more than 5.0% of the aggregate
principal balance of the mortgage loans, as of October 1,
2000.
F. OTHER MORTGAGE
LOAN FEATURES................. As of October 1, 2000, the mortgage loans had the following
characteristics:
o No scheduled payment of principal and interest on any
mortgage loan was thirty days or more past due, and no
mortgage loan had been thirty days or more delinquent in
the past year.
o Five (5) groups of mortgage loans were made to the same
borrower or to borrowers that are affiliated with one
another through partial or complete direct or indirect
common ownership. The three (3) largest of these groups
represent 7.1%, 1.8% and 1.6%, respectively, of the
aggregate principal balance of the mortgage loans. See
Appendix II attached hereto.
o Twenty-seven (27) mortgage loans, representing 19.2% of
the aggregate principal balance of the mortgage loans,
are secured by mortgaged properties that are each 100%
leased to a single tenant.
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<PAGE>
o The mortgage loans bear interest at fixed rates.
o No mortgage loan permits negative amortization or the
deferral of accrued interest.
G. BALLOON LOANS.................... As of October 1, 2000, the mortgage loans had the following
characteristics:
o One hundred-two (102) of the mortgage loans, representing
97.7% of the initial outstanding pool balance, are
"balloon loans." For purposes of this prospectus
supplement, we consider a mortgage loan to be a "balloon
loan" if its principal balance is not scheduled to be
fully or substantially amortized by the loan's maturity
date.
o The remaining one (1) mortgage loan, representing 2.3% of
the initial outstanding pool balance is fully amortizing
and is expected to have no principal balance as of its
stated maturity date.
H. INTEREST ONLY LOANS.............. Two (2) mortgage loans, representing 2.8% of the initial
outstanding pool balance, each provides for monthly payments
of interest only for a portion of its term and then provides
for the monthly payment of principal and interest over its
remaining term.
I. PREPAYMENT/DEFEASANCE
PROVISIONS.................... As of October 1, 2000, all of the mortgage loans restricted
voluntary principal prepayments as follows:
o Seventy-six (76) mortgage loans, representing 57.9% of
the initial outstanding pool balance, prohibit voluntary
principal prepayments for a period ending on a date
determined by the related mortgage note, which period is
referred in this prospectus supplement as a 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 Twenty-four (24) mortgage loans, representing 30.9% of
the initial outstanding pool balance, prohibit voluntary
principal prepayments during a lock-out period, and
following the lock-out period provide for prepayment
premiums calculated on the basis of the greater of a
yield maintenance formula and 1% of the amount prepaid.
See Appendix II attached hereto for specific yield
maintenance provisions.
o One (1) mortgage loan, representing 7.5% of the initial
outstanding pool balance prohibits voluntary principal
prepayments during a lock-out period, and following the
lock-out period, provides for prepayment premiums
calculated on the basis of the greater of a yield
maintenance formula and 0.75% of the amount prepaid. See
Appendix II attached hereto for specific yield
maintenance provisions.
o One (1) mortgage loan, representing 2.3% of the initial
outstanding pool balance, prohibits voluntary principal
prepayments during a lock-out period, and following the
lock-out period provides for a prepayment premium
calculated on the basis of the greater of a yield
maintenance formula and 2% of the amount prepaid for a
specified period of time and the greater of a yield
maintenance
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<PAGE>
formula and 1% thereafter. See Appendix II attached hereto
for specific yield maintenance provisions.
o One (1) mortgage loan, representing 1.5% of the initial
outstanding pool balance, prohibits voluntary principal
prepayments during a lock-out period and following the
lock-out period, provides for a prepayment premium
calculated on the basis of the greater of a yield
maintenance formula and 1% of the amount prepaid, but
also permits the related borrower, after an initial
period of at least two years following the date of the
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 Despite the above, the mortgage loans generally provide
for a maximum period commencing two to six payment dates
prior to and including the maturity date during which the
related borrower may prepay the mortgage loan without
premium or defeasance requirements.
J. MORTGAGE LOAN RANGES
AND WEIGHTED AVERAGES......... As of October 1, 2000, the mortgage loans had the following
additional characteristics:
I. MORTGAGE INTEREST
RATES Mortgage interest rates ranging from 6.720% per annum to
9.250% per annum, and a weighted average mortgage interest
rate of 8.153% per annum;
II. REMAINING TERMS Remaining terms to scheduled maturity ranging from 82 months
to 168 months, and a weighted average remaining term to
scheduled maturity of 115 months;
III. REMAINING
AMORTIZATION TERMS Remaining amortization terms ranging from 132 months to 360
months, and a weighted average remaining amortization term
of 327 months;
IV. LOAN-TO-VALUE RATIOS Loan-to-value ratios ranging from 20.9% to 79.9%, and a
weighted average loan-to-value ratio, calculated as
described in this prospectus supplement, of 60.8%; and
V. DEBT SERVICE
COVERAGE RATIOS Debt service coverage ratios, determined according to the
methodology presented in this prospectus supplement, ranging
from 1.18x to 2.71x and a weighted average debt service
coverage ratio, calculated as described in this prospectus
supplement, of 1.53x.
ADVANCES OF PRINCIPAL AND INTEREST
A. GENERAL.......................... The master servicer is required to advance delinquent
monthly mortgage loan payments. The master servicer will not
be required to advance any additional interest --- accrued
as a result of the imposition of any default rate. The
master servicer also is not required to --- advance
prepayment or yield maintenance premiums, or balloon
payments. With respect to any balloon payment, the master
servicer will instead be required to advance an amount equal
to the scheduled payment that would have been due if the
related balloon payment had not become
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<PAGE>
due. If this type of advance is made, the master servicer
will defer rather than advance its master servicing fee, the
excess servicing fee and the primary servicing fee, but will
advance the trustee fee.
If the master servicer fails to make a required advance, the
trustee will be required to make the advance, and if the
trustee fails to make a required advance, the fiscal agent
will be required to make the advance, each subject to the
same limitations, and with the same rights of the master
servicer.
All advances made by the master servicer, the trustee or the
fiscal agent will accrue interest at a rate equal to the
"prime rate" as reported in The Wall Street Journal.
Neither the master servicer, the trustee nor the fiscal
agent will be obligated to make any advance if it reasonably
determines that such advance would not be recoverable in
accordance with the servicing standard and the trustee and
the fiscal agent may rely on any such determination made by
the master servicer.
B. ADVANCES DURING AN
APPRAISAL REDUCTION EVENT..... The occurrence of certain adverse events affecting a
mortgage loan will require the special servicer to obtain a
new appraisal or other valuation of the related mortgaged
property. In general, if the principal amount of the loan
plus all other amounts due thereunder and interest on
advances made with respect thereto exceeds 90% of the value
of the mortgaged property determined by an appraisal or
other valuation, an appraisal reduction may be created in
the amount of the excess as described in this prospectus
supplement. If there exists an appraisal reduction for any
mortgage loan, the amount required to be advanced on that
mortgage loan will be proportionately reduced to the extent
of that appraisal reduction. This will reduce the funds
available to pay interest and principal on the most
subordinate class or classes of certificates then
outstanding.
S-17
<PAGE>
ADDITIONAL ASPECTS OF CERTIFICATES
RATINGS................................... The certificates offered to you will not be issued unless
each of the classes of certificates being offered by this
prospectus supplement receives the following ratings from
Fitch and Moody's Investors Service, Inc.
-----------------------------------------------------------------------
Ratings
Class Fitch/Moody's
-----------------------------------------------------------------------
Classes A-1 and A-2 AAA/Aaa
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Class B AA/Aa2
-----------------------------------------------------------------------
Class C A/A2
-----------------------------------------------------------------------
Class D A-/A3
-----------------------------------------------------------------------
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 or equal
to 1% of the initial outstanding pool balance, Morgan
Stanley Dean Witter Capital I Inc., the master servicer, the
special servicer and any holder of a majority interest in
the Class R-I Certificates, each in turn, will have the
option to purchase all of the remaining mortgage loans, and
all property acquired through exercise of remedies in
respect of any mortgage loan, at the price specified in this
prospectus supplement. Exercise of this option would
terminate the trust and retire the then outstanding
certificates.
DENOMINATIONS............................. The Class A-1 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 ownership interest,
except in very limited circumstances described in this
prospectus supplement. As a result, you will hold your
certificates only in book-entry form and will not be a
certificateholder of record. You will receive distributions
on your certificates and reports relating to distributions
only through The Depository Trust Company, Clearstream
Banking, societe anonyme or the Euroclear System or through
participants in The Depository Trust Company, Clearstream
Banking or Euroclear.
S-18
<PAGE>
You may hold your certificates through:
o The Depository Trust Company in the United States; or
o Clearstream Banking or Euroclear in Europe.
Transfers within The Depository Trust Company, Clearstream
Banking or Euroclear will be made in accordance with the
usual rules and operating procedures of those systems.
Cross-market transfers between persons holding directly
through The Depository Trust Company, Clearstream Banking or
Euroclear will be effected in The Depository Trust Company
through the relevant depositories of Clearstream Banking or
Euroclear.
Morgan Stanley Dean Witter Capital I Inc. may elect to
terminate the book-entry system through The Depository Trust
Company with respect to all or any portion of any class of
the certificates offered to you.
Morgan Stanley Dean Witter Capital I Inc. expects that the
certificates offered to you will be delivered in book-entry
form through the facilities of The Depository Trust Company,
Clearstream Banking or Euroclear on or about the Closing
Date.
TAX STATUS................................ An election will be made to treat designated portions of the
trust as three separate "real estate mortgage investment
conduits" --REMIC I, REMIC II and REMIC III--for federal
income tax purposes. In the opinion of counsel, the trust
(and each such designated portion of the trust) will qualify
for this treatment and each class of offered certificates
will constitute "regular interests" in REMIC 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 on the certificates in
accordance with the accrual method of accounting.
o The offered certificates will not be issued with original
issue discount.
CONSIDERATIONS RELATED TO TITLE I
OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974............... Subject to the satisfaction of important conditions
described under ERISA Considerations in this prospectus
supplement and in the accompanying prospectus, the Class A-1
and Class A-2 Certificates may be purchased by persons
investing assets of employee benefit plans or individual
retirement accounts.
THE CLASS B, CLASS C AND CLASS D CERTIFICATES MAY NOT BE
PURCHASED BY, OR TRANSFERRED TO, AN EMPLOYEE BENEFIT PLAN OR
INDIVIDUAL RETIREMENT ACCOUNT OR ANY PERSON INVESTING THE
ASSETS OF AN EMPLOYEE BENEFIT PLAN OR INDIVIDUAL RETIREMENT
ACCOUNT, UNLESS SUCH TRANSACTION IS COVERED BY:
S-19
<PAGE>
o a Prohibited Transaction Class Exemption issued by the
U.S. Department of Labor (PTC 95-60, Sections I and II),
or
o the transferee delivers or causes to be delivered to the
trustee and the depositor any opinions of counsel,
officer's certificates or agreements that may be required
by the trustee or the depositor to the effect that the
acquisition and holding of those Certificates will not
(a) result in the assets of the trust being deemed to be
"plan assets" under or subject to the prohibited
transaction provisions of ERISA, the Code or other
similar law or (b) subject the parties to the pooling and
servicing agreement to any obligation in addition to
those set forth in the pooling and servicing agreement.
LEGAL INVESTMENTS......................... The offered certificates will not constitute "mortgage
related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984, as amended.
For purposes of any applicable legal investment
restrictions, regulatory capital requirements or other
similar purposes, neither the prospectus nor this prospectus
supplement makes any representation to you regarding the
proper characterization of the certificates offered by this
prospectus supplement. Regulated entities should consult
with their own advisors regarding these matters.
</TABLE>
S-20
<PAGE>
RISK FACTORS
You should carefully consider the risks involved in owning a certificate
before purchasing a certificate. Among other risks, the timing of payments and
payments you receive on your certificates will depend on payments received on
and other recoveries with respect to the mortgage loans. Therefore, you should
carefully consider both the risk factors relating to the mortgage loans and the
mortgaged properties and the other risks relating to the certificates.
The risks and uncertainties described in this section, together with those
risks described in the prospectus under Risk Factors, summarize the material
risks relating to your certificates. Your investment could be materially and
adversely affected by the actual and potential circumstances that we describe in
such sections.
YOUR INVESTMENT IS NOT INSURED
OR GUARANTEED AND YOUR SOURCE
FOR REPAYMENTS IS LIMITED TO
PAYMENTS UNDER THE MORTGAGE LOANS Payments under the mortgage loans are not
insured or guaranteed by any governmental
entity or mortgage insurer. Accordingly, the
sources for repayment of your certificates
are limited to amounts due with respect to
the mortgage loans.
You should consider all of the mortgage loans
to be nonrecourse loans. Even in those cases
where recourse to a borrower or guarantor is
permitted under the related loan documents,
we have not necessarily undertaken an
evaluation of the financial condition of any
of these persons. If a default occurs, the
lender's remedies generally are limited to
foreclosing against the specific properties
and other assets that have been pledged to
secure the loan. Such remedies may be
insufficient to provide a full return on your
investment. Payment of amounts due under the
mortgage loan prior to maturity is dependent
primarily on the sufficiency of the net
operating income of the mortgaged property.
Payment of those mortgage loans that are
balloon loans at maturity is primarily
dependent upon the borrower's ability to sell
or refinance the property for an amount
sufficient to repay the loan.
In limited circumstances, Principal
Commercial Funding, LLC, John Hancock Real
Estate Finance, Inc. and The Northwestern
Mutual Life Insurance Company, each as
mortgage loan sellers, may be obligated to
repurchase or replace a mortgage loan that it
sold to Morgan Stanley Dean Witter Capital I
Inc. if its representations and warranties
concerning such mortgage loan are breached or
if there are material defects in the
documentation for the mortgage loan. However,
there can be no assurance that any of such
entities will be in a financial position to
effect such repurchase or substitution. The
representations and warranties address the
characteristics of the mortgage loans and
mortgaged properties as of the date of
issuance of the certificates. They do not
relieve you or the trust of the risk of
defaults and losses on the mortgage loans.
THE REPAYMENT OF A COMMERCIAL
MORTGAGE LOAN IS DEPENDENT ON
THE CASH FLOW PRODUCED BY
THE PROPERTY WHICH CAN BE
VOLATILE AND INSUFFICIENT TO
ALLOW TIMELY ON YOUR
CERTIFICATES The mortgage loans are secured by various
types of income-producing commercial
properties. Commercial lending is generally
thought to
S-21
<PAGE>
expose a lender to greater risk than
one-to-four family residential lending
because, among other things, it typically
involves larger loans.
Eighty-seven (87) of the mortgage loans were
originated within twelve (12) months prior to
the cut-off date. Consequently, these
mortgage loans do not have a long-standing
payment history.
The repayment of a commercial mortgage loan
is typically dependent upon the ability of
the applicable property to produce cash flow.
Even the liquidation value of a commercial
property is determined, in substantial part,
by the amount of the property's cash flow (or
its potential to generate cash flow).
However, net operating income and cash flow
can be volatile and may be insufficient to
cover debt service on the loan at any given
time.
The net operating income, cash flow and
property value of the mortgaged properties
may be adversely affected by any one or more
of the following factors:
o the age, design and construction quality
of the property;
o perceptions regarding the safety,
convenience and attractiveness of the
property;
o the proximity and attractiveness of
competing properties;
o the adequacy of the property's management
and maintenance;
o increases in operating expenses at the
property and in relation to competing
properties;
o an increase in the capital expenditures
needed to maintain the property or make
improvements;
o the dependence upon a single tenant, or a
concentration of tenants in a particular
business or industry;
o a decline in the financial condition of a
major tenant;
o an increase in vacancy rates; and
o a decline in rental rates as leases are
renewed or entered into with new tenants.
Other factors are more general in nature,
such as:
o national, regional or local economic
conditions (including plant closings,
military base closings, industry slowdowns
and unemployment rates);
o local real estate conditions (such as an
oversupply of competing properties, rental
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;
S-22
<PAGE>
o the creditworthiness of tenants;
o the level of tenant defaults;
o the rate at which new rentals occur; and
o the property's operating leverage (which
is the percentage of total property
expenses in relation to revenue), the
ratio of fixed operating expenses to those
that vary with revenues, and the level of
capital expenditures required to maintain
the property and to retain or replace
tenants.
A decline in the real estate market or in the
financial condition of a major tenant will
tend to have a more immediate effect on the
net operating income of properties with
short-term revenue sources and may lead to
higher rates of delinquency or defaults under
mortgage loans secured by such properties.
CONVERTING COMMERCIAL
PROPERTIES TO ALTERNATIVE
USES MAY REQUIRE SIGNIFICANT
EXPENSES WHICH COULD REDUCE
PAYMENTS ON YOUR CERTIFICATES Some of the mortgaged properties may not be
readily convertible to alternative uses if
those properties were to become unprofitable
for any reason. This is because:
o converting commercial properties to
alternate uses or converting single-tenant
commercial properties to multi-tenant
properties generally requires substantial
capital expenditures; and
o zoning or other restrictions also may
prevent alternative uses.
The liquidation value of a mortgaged property
not readily convertible to an alternative use
may be substantially less than would be the
case if the mortgaged property were readily
adaptable to other uses. If this type of
mortgage property were liquidated and a lower
liquidation value were obtained, less funds
would be available for distributions on your
certificates.
PROPERTY VALUE MAY BE
ADVERSELY AFFECTED EVEN
WHEN THERE IS NO CHANGE IN
CURRENT OPERATING INCOME Various factors may adversely affect the
value of the mortgaged properties without
affecting the properties' current net
operating income. These factors include,
among others:
o changes in governmental regulations,
fiscal policy, zoning or tax laws;
o potential environmental legislation or
liabilities or other legal liabilities;
o the availability of refinancing; and
o changes in interest rate levels.
S-23
<PAGE>
TENANT CONCENTRATION INCREASES
THE RISK THAT CASH FLOW WILL
BE INTERRUPTED WHICH COULD
REDUCE PAYMENTS ON YOUR
CERTIFICATES A deterioration in the financial condition of
a tenant can be particularly significant if a
mortgaged property is leased to a single
tenant or a small number of tenants, because
rent interruptions by a tenant may cause the
borrower to default on its obligations to the
lender. Twenty-seven (27) mortgage loans,
representing 19.2% of the aggregate principal
balance of all mortgage loans as of October
1, 2000, are secured by mortgaged properties
leased to single tenants and in some cases,
the tenant is related to the borrower.
Mortgaged properties leased to a single
tenant or a small number of tenants also are
more susceptible to interruptions of cash
flow if a tenant fails to renew its lease or
defaults under its lease. This is so because:
o the financial effect of the absence of
rental income may be severe;
o more time may be required to re-lease the
space; and
o substantial capital costs may be incurred
to make the space appropriate for
replacement tenants.
Another factor that you should consider is
that retail, industrial and office properties
also may be adversely affected if there is a
concentration of tenants or of tenants in the
same or similar business or industry.
For further information with respect to
tenant concentrations, see Appendix II.
LEASING MORTGAGED PROPERTIES
TO MULTIPLE TENANTS MAY RESULT
IN HIGHER RE-LEASING COSTS
WHICH COULD REDUCE PAYMENTS
ON YOUR CERTIFICATES If a mortgaged property has multiple tenants,
re-leasing costs may be more frequent than in
the case of mortgaged properties with fewer
tenants, thereby reducing the cash flow
available for debt service payments. These
costs may cause a borrower to default in its
obligations to a lender which could reduce
cash flow available for debt service
payments. Multi-tenanted mortgaged properties
also may experience higher continuing vacancy
rates and greater volatility in rental income
and expenses.
THE CONCENTRATION OF LOANS
WITH THE SAME OR RELATED
BORROWERS INCREASES THE
POSSIBILITY OF LOSS ON THE
LOANS WHICH COULD REDUCE
PAYMENTS ON YOUR CERTIFICATES The effect of mortgage pool loan losses will
be more severe:
o if the pool is comprised of a small number
of loans, each with a relatively large
principal amount; or
o if the losses relate to loans that account
for a disproportionately large percentage
of the pool's aggregate principal balance
of all mortgage loans.
Five (5) groups of mortgage loans, are made
to the same borrower or borrowers related
through common ownership and where, in
general,
S-24
<PAGE>
the related mortgaged properties are commonly
managed. The loans associated with these five
borrower concentrations constitute 13.0% of
the outstanding aggregate principal balance
of all mortgage loans, as of October 1, 2000.
The three largest borrower concentrations
represent 7.1%, 1.8% and 1.6% respectively of
the outstanding aggregate principal balance
of all mortgage loans as of October 1, 2000.
A CONCENTRATION OF LOANS WITH
THE SAME PROPERTY TYPES
INCREASES THE POSSIBILITY OF
LOSS ON THE LOANS WHICH COULD
REDUCE PAYMENTS ON YOUR
CERTIFICATES A concentration of mortgaged property types
also can pose increased risks. The following
property types represent the indicated
percentage of the outstanding aggregate
principal balance of all mortgage loans as of
October 1, 2000:
o office properties represent 30.0%;
o industrial properties represent 25.8%;
o retail properties represent 21.5%;
o multifamily properties represent 19.5%;
o assisted living facilities properties
represent 2.2%;
o hospitality properties represent 0.5%; and
o self storage properties represent 0.4%.
A CONCENTRATION OF MORTGAGED
PROPERTIES IN A LIMITED NUMBER
OF LOCATIONS MAY ADVERSELY
AFFECT PAYMENTS ON YOUR
CERTIFICATES Concentrations of mortgaged properties in
geographic areas may increase the risk that
adverse economic or other developments or a
natural disaster affecting a particular
region of the country could increase the
frequency and severity of losses on mortgage
loans secured by the properties. In recent
periods, several regions of the United States
have experienced significant real estate
downturns. Regional economic declines or
adverse conditions in regional real estate
markets could adversely affect the income
from, and market value of, the mortgaged
properties located in the region. Other
regional factors--e.g., earthquakes, floods
or hurricanes or changes in governmental
rules or fiscal policies--also may adversely
affect those mortgaged properties.
The mortgaged properties are located
throughout 23 states and the District of
Columbia. In particular, investors should
note that approximately 21.3% of the
mortgaged properties, based on the
outstanding aggregate principal balance of
all mortgage loans as of October 1, 2000, are
located in California. Mortgaged properties
located in California may be more susceptible
to some types of special hazards that may not
be covered by insurance (such as earthquakes)
than properties located in other parts of the
country. The mortgage loans generally do not
require any borrowers to maintain earthquake
insurance.
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<PAGE>
In addition, 25.7% and 7.4% of the mortgaged
properties, based on the outstanding
aggregate principal balance of all mortgage
loans as of October 1, 2000, are located in
New Jersey and New York, respectively, and
concentrations of mortgaged properties, in
each case, representing less than 5.0% of the
outstanding aggregate principal balance of
all mortgage loans as of October 1, 2000,
also exist in several other states.
A LARGE CONCENTRATION OF
OFFICE PROPERTIES IN THE
MORTGAGE POOL WILL SUBJECT
YOUR INVESTMENT TO THE
SPECIAL RISK OF OFFICE
PROPERTIES Office properties secure twenty-seven (27) of
the mortgage loans, representing 30.0% of the
outstanding aggregate principal balance of
all mortgage loans, as of October 1, 2000.
A large number of factors affect the value of
these office properties, including:
o the quality of an office building's
tenants;
o the diversity of an office building's
tenants (or reliance on a single or
dominant tenant);
o the physical attributes of the building in
relation to competing buildings, e.g.,
age, condition, design, location, access
to transportation and ability to offer
certain amenities, such as sophisticated
building systems;
o the desirability of the area as a business
location; and
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.
A LARGE CONCENTRATION OF Industrial properties secure thirty-four (34)
INDUSTRIAL PROPERTIES IN THE of the mortgage loans, representing 25.8% of
MORTGAGE POOL WILL SUBJECT the outstanding aggregate principal balance
YOUR INVESTMENT TO THE SPECIAL of all mortgage loans, as of October 1, 2000.
RISKS OF INDUSTRIAL PROPERTIES Various factors may adversely affect the
economic performance of these industrial
properties, which could adversely affect
payments on your certificates, including:
o reduced demand for industrial space
because of a decline in a particular
industry segment;
o a property becoming functionally obsolete;
o insufficient supply of labor to meet
demand;
o changes in access to the property, energy
prices, strikes, relocation of highways or
the construction of additional highways;
o a change in the proximity of supply
sources; and
o environmental hazards.
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<PAGE>
A LARGE CONCENTRATION OF
RETAIL PROPERTIES IN THE
MORTGAGE POOL WILL SUBJECT
YOUR INVESTMENT TO THE
SPECIAL RISKS OF RETAIL PROPERTIES Retail properties secure twenty-six (26) of
the mortgage loans, representing 21.5% of the
outstanding aggregate principal balance of
all mortgage loans, as of October 1, 2000.
The quality and success of a retail
property's tenants significantly affect the
property's value.
The presence or absence of an anchor store in
a shopping center also can be important
because anchor stores play a key role in
generating customer traffic and making a
center desirable for other tenants.
Consequently, the economic performance of an
anchored retail property will be adversely
affected by:
o an anchor store's failure to renew its
lease;
o termination of an anchor store's lease;
o the bankruptcy or economic decline of an
anchor store or self-owned anchor or the
parent company thereof; or
o the cessation of the business of an anchor
store at the shopping center, even if, as
a tenant, it continues to pay rent.
There are retail properties with anchor
stores that are permitted to cease operating
at any time if certain other stores are not
operated at those locations. Furthermore,
there may be non-anchor tenants that are
permitted to terminate their leases if
certain anchor stores are either not operated
or fail to meet certain business objectives.
Retail properties also face competition from
sources outside a given real estate market.
For example, all of the following compete
with more traditional retail properties for
consumer dollars: factory outlet centers,
discount shopping centers and clubs,
catalogue retailers, home shopping networks,
internet web sites and telemarketing.
Continued growth of these alternative retail
outlets, which often have lower operating
costs, could adversely affect the rents
collectible at the retail properties included
in the mortgage pool, as well as the income
from, and market value of, the mortgaged
properties. Moreover, additional competing
retail properties may be built in the areas
where the retail properties are located,
which could adversely affect the rents
collectible at the retail properties included
in the mortgage pool, as well as the income
from, and market value of, the mortgaged
properties.
A LARGE CONCENTRATION OF
MULTIFAMILY PROPERTIES IN THE
MORTGAGE POOL WILL SUBJECT
YOUR INVESTMENT TO THE
SPECIAL RISKS OF MULTIFAMILY
PROPERTIES Multifamily properties secure twelve (12) of
the mortgage loans, representing 19.5% of the
outstanding aggregate principal balance of
all mortgage loans, as of October 1, 2000.
A large number of factors may affect the
value and successful operation of these
multifamily properties, including:
o the physical attributes of the apartment
building, such as its age, appearance and
construction quality;
o the location of the property;
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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.
A LARGE CONCENTRATION OF
ASSISTED LIVING PROPERTIES
IN THE MORTGAGE POOL WILL
SUBJECT YOUR INVESTMENT TO
THE SPECIAL RISKS OF
ASSISTED LIVING FACILITIES Assisted living facilities secure two (2) of
the mortgage loans representing 2.2% of the
outstanding aggregate principal balance of
all mortgage loans as of October 1, 2000.
Providers of long-term nursing care and other
medical services are highly regulated and are
subject to licensing requirements, facility
inspections, rate setting and reimbursement
policies. They are also subject to laws
relating to the adequacy of medical care,
distribution of pharmaceuticals, equipment,
personnel operating policies and maintenance
of and additions to facilities and services.
These factors can increase the cost of
operations, limit growth and in extreme
cases, require or result in suspension or
cessation of operations.
In the event that the trustee or another
party forecloses on an assisted living
facility, it would not generally be entitled
to reimbursements by Social Security,
Medicare and Medicaid for services rendered
prior to such foreclosure, if any. In
addition, such party may have to apply in its
own right for its necessary licenses and
regulatory approvals. There can be no
assurance that a new license could be
obtained or that new approvals would be
granted. This uncertainty may adversely
affect the liquidation value of the facility.
Other factors that may adversely effect the
value and successful operation of a senior
housing facility include:
o increasing governmental regulation and
supervision (as to those facilities not
already subject to it);
o a decline in the financial health, skills
or reputation of the operator;
o increased operational expenses; and
o competing facilities owned by non-profit
organizations or government agencies
supported by endowments, charitable
contributions, tax revenues and other
sources.
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A LARGE CONCENTRATION OF
HOSPITALITY PROPERTIES IN THE
MORTGAGE POOL WILL SUBJECT YOUR
INVESTMENT TO THE SPECIAL
RISKS OF HOSPITALITY PROPERTIES
Hospitality properties secure one (1)
mortgage loan, representing 0.5% of the
outstanding aggregate principal balance of
all mortgage loans as of October 1, 2000.
Various factors may adversely affect the
economic performance of a hospitality
property, 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.
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.
A LARGE CONCENTRATION OF SELF-
STORAGE FACILITIES IN THE
MORTGAGE POOL WILL SUBJECT YOUR
INVESTMENT TO THE SPECIAL
RISKS OF SELF STORAGE FACILITIES Self-storage facilities secure one (1)
mortgage loan, representing 0.4% of the
outstanding aggregate principal balance of
all mortgage loans, as of October 1, 2000.
Various factors may adversely affect the
value and successful operation of a
self-storage facility:
o competition, because both
acquisition and development costs
and break-even occupancy are
relatively low;
o conversion of a self-storage
facility to an alternative use
generally requires substantial
capital expenditures;
o security concerns; and
o user privacy and ease of access to
individual storage space may
increase environmental risks
(although lease agreements
generally prohibit users from
storing hazardous substances in
the units).
The environmental assessments discussed
herein did not include an inspection of the
contents of the self-storage units of the
self-storage properties. Accordingly, there
is no assurance that all of the units
included in the self-storage properties are
free from hazardous substances or will
remain so in the future.
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<PAGE>
TENANT BANKRUPTCY MAY
ADVERSELY AFFECT THE INCOME
PRODUCED BY THE PROPERTY AND
MAY ADVERSELY AFFECT THE
PAYMENTS ON YOUR CERTIFICATES
The bankruptcy or insolvency of a major
tenant, or a number of smaller tenants, in
retail, industrial and office properties
may adversely affect the income produced by
the property. Under the federal bankruptcy
code, a tenant/debtor has the option of
affirming or rejecting any unexpired lease.
If the tenant rejects the lease, the
landlord's claim for breach of the lease
would be a general unsecured claim against
the tenant, absent collateral securing the
claim. The claim would be limited to the
unpaid rent under the lease for the periods
prior to the bankruptcy petition, or
earlier surrender of the leased premises,
plus the rent under the lease for the
greater of one year, or 15%, not to exceed
three years, of the remaining term of such
lease and the actual amount of the recovery
could be less than the amount of the claim.
ENVIRONMENTAL LAWS
ENTAIL RISKS THAT MAY ADVERSELY
PAYMENTS ON YOUR CERTIFICATES Various environmental laws may make a
current or previous owner or operator of
real property liable for the costs of
removal or remediation of hazardous or
toxic substances on, under or adjacent to
such property. Those laws often impose
liability whether or not the owner or
operator knew of, or was responsible for,
the presence of the hazardous or toxic
substances. For example, certain laws
impose liability for release of
asbestos-containing materials into the air
or require the removal or containment of
asbestos-containing materials. In some
states, contamination of a property may
give rise to a lien on the property to
assure payment of the costs of cleanup. In
some states, this lien has priority over
the lien of a pre-existing mortgage.
Additionally, third parties may seek
recovery from owners or operators of real
properties for cleanup costs, property
damage or personal injury associated with
releases of, or other exposure to hazardous
substances related to the properties.
The owner's liability for any required
remediation generally is not limited by law
and could, accordingly, exceed the value of
the property and/or the aggregate assets of
the owner. The presence of hazardous or
toxic substances also may adversely affect
the owner's ability to refinance the
property or to sell the property to a third
party. The presence of, or strong potential
for contamination by, hazardous substances
consequently can have a materially adverse
effect on the value of the property and a
borrower's ability to repay its mortgage
loan.
In addition, under certain circumstances, a
lender (such as the trust) could be liable
for the costs of responding to an
environmental hazard.
ENVIRONMENTAL RISKS RELATING TO
SPECIFIC MORTGAGED PROPERTIES
MAY ADVERSELY AFFECT PAYMENTS
ON YOUR CERTIFICATES All of the mortgaged properties securing
the mortgage loans have been subject to
environmental site assessments, or in some
cases an update of a previous assessment,
in connection with the origination or
securitization of the loans. Environmental
assessments on properties securing nine (9)
of the mortgage loans (representing 13.2%
of the initial outstanding pool balance)
are more than a eighteen months old as
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of October 1, 2000. The applicable mortgage
loan seller has represented that with
respect to the mortgaged properties
securing the mortgage loans that were not
the subject of an environmental site
assessment within eighteen months prior to
the cut-off date (i) no Hazardous Material
is present on such Mortgaged Property and
(ii) such mortgaged property is in material
compliance with all applicable federal,
state and local laws pertaining to
Hazardous Materials or environmental
hazards, in each case subject to
limitations of materiality and the other
qualifications set forth in such
representation. In all cases, the
environmental site assessment was a Phase I
environmental assessment. These reports
generally did not disclose the presence or
risk of environmental contamination that is
considered material and adverse to the
interests of the holders of the
certificates; however, in certain cases,
such assessments did reveal conditions that
resulted in requirements that the related
borrowers establish operations and
maintenance plans, monitor the mortgaged
property, abate or remediate the condition,
and/or provide additional security such as
letters of credit or reserves. Morgan
Stanley Dean Witter Capital I Inc. cannot
assure you, however, that the environmental
assessments revealed all existing or
potential environmental risks or that all
adverse environmental conditions have been
completely abated or remediated. Moreover,
Morgan Stanley Dean Witter Capital I Inc.
cannot assure you that: (i) future laws,
ordinances or regulations will not impose
any material environmental liability; or
(ii) the current environmental condition of
the mortgaged properties will not be
adversely affected by tenants or by the
condition of land or operations in the
vicinity of the mortgaged properties (such
as underground storage tanks).
Portions of some of the mortgaged
properties securing the mortgage loans
include tenants which operate as on-site
dry-cleaners and gasoline stations. Both
types of operations involve the use and
storage of hazardous substances, leading to
an increased risk of liability to the
tenant, the landowner and, under certain
circumstances, a lender (such as the trust)
under environmental laws. Dry-cleaners and
gasoline station operators may be required
to obtain various environmental permits and
licenses in connection with their
operations and activities and comply with
various environmental laws, including those
governing the use and storage of hazardous
substances. These operations incur ongoing
costs to comply with environmental laws
governing, among other things, containment
systems and underground storage tank
systems. In addition, any liability to
borrowers under environmental laws,
including in connection with releases into
the environment of gasoline, dry-cleaning
solvents or other hazardous substances from
underground storage tank systems or
otherwise, could adversely impact the
related borrower's ability to repay the
related mortgage loan.
Before the special servicer acquires title
to a mortgaged property on behalf of the
trust or assumes operation of the property,
it must obtain an environmental assessment
of the property, or rely on a recent
environmental assessment. This requirement
will decrease the likelihood that the trust
will become liable under any environmental
law. However, this requirement may
effectively preclude foreclosure until a
satisfactory environmental assessment is
obtained, or until any required remedial
action is thereafter taken. There is
accordingly some risk that the mortgaged
property will decline in value while this
assessment is being obtained. Moreover,
Morgan Stanley Dean Witter
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<PAGE>
Capital I Inc. cannot assure you that this
requirement will effectively insulate the
trust from potential liability under
environmental laws. Any such potential
liability could reduce or delay payments to
certificateholders.
IF A BORROWER IS UNABLE TO
REPAY ITS LOAN ON ITS MATURITY
DATE, YOU MAY EXPERIENCE A
LOSS One hundred-two (102) of the mortgage
loans, representing 97.7% of the
outstanding aggregate principal balance of
all mortgage loans as of October 1, 2000,
are balloon loans. For purposes of this
prospectus supplement, we consider a
mortgage loan to be a "balloon loan" if its
principal balance is not scheduled to be
fully or substantially amortized by the
loan's maturity date. Morgan Stanley Dean
Witter Capital I Inc. cannot assure you
that each borrower will have the ability to
repay the principal balance outstanding on
the stated maturity dates. Balloon loans
involve greater risk than fully amortizing
loans because borrower's ability to repay
the loan on its stated maturity date
typically will depend upon its ability
either to refinance the loan or to sell the
mortgaged property at a price sufficient to
permit repayment. A borrower's ability to
achieve either of these goals will be
affected by a number of factors, including:
o the availability of, and competition for,
credit for commercial real estate
projects;
o prevailing interest rates;
o the fair market value of the related
mortgaged property;
o the borrower's equity in the related
mortgaged property;
o the borrower's financial condition;
o the operating history and occupancy level
of the mortgaged property;
o tax laws; and
o prevailing general and regional economic
conditions.
The availability of funds in the credit
markets fluctuates over time.
Principal Commercial Funding, LLC, John
Hancock Real Estate Finance, Inc. and The
Northwestern Mutual Life Insurance Company,
each as a mortgage loan seller, and their
respective affiliates are not under any
obligation to refinance any mortgage loan.
A BORROWER'S OTHER LOANS MAY
REDUCE THE CASH FLOW AVAILABLE
TO THE MORTGAGED PROPERTY
WHICH MAY ADVERSELY AFFECT
PAYMENT ON YOUR CERTIFICATES As of October 1, 2000, none of the
mortgaged properties secures any loans
other than the related mortgage loan except
for Loan #6 (Pennsylvania Building), which
has a second mortgage in the amount of
$4,500,000 secured by the mortgaged
property that is subject to a subordination
agreement, and Loan #19 (Woodman Plaza),
which is subject to second mortgages in the
amount of $1,500,000 and $250,000. The
borrower with respect to Loan #70 (Premier
Corporate Center) has obtained additional
financing in the amount of $1,670,000 which
is not secured by the related mortgaged
property.
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Three (3) mortgage loans, which represent
6.0% of the aggregate principal balance of
all the mortgage loans as of October 1,
2000, permit the borrower to engage in
additional financing that is secured by the
mortgaged property.
Loan #1 (Towers at Portside), Loan #8
(Pinnacle at Squaw Peak) and Loan #10
(Cross Creek Retail), collectively
representing 12.2% of the aggregate
principal balance of all the mortgage loans
as of October 1, 2000, each permit the
imposition of liens other than from
mortgage financing, such as judgments,
mechanics liens or the failure to pay
taxes, and the existence of such liens does
not constitute an event of default.
Twelve (12) mortgage loans, which represent
25.0% of the aggregate principal balance of
all the mortgage loans as of October 1,
2000, permit the borrower to engage in
additional financing that is not secured by
the mortgaged property.
Morgan Stanley Dean Witter Capital I Inc.
makes no representation as to whether any
other secured subordinate financing
currently encumbers any mortgaged property
or whether a third-party holds debt secured
by a pledge of equity interest in a related
borrower. Debt that is incurred by the
owner of equity in one or more borrowers
and is secured by a guaranty of the
borrower or by a pledge of the equity
ownership interests in such borrowers
effectively reduces the equity owners'
economic stake in the related mortgaged
property. The existence of such debt may
reduce cash flow on the related borrower's
mortgaged property after the payment of
debt service and may increase the
likelihood that the owner of a borrower
will permit the value or income producing
potential of a mortgaged property to suffer
by not making capital infusions to support
the mortgaged property.
Generally all of the mortgage loans also
permit the related borrower to incur other
unsecured indebtedness, including but not
limited to trade payables, 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 the loans
are subordinated or are mezzanine loans not
directly secured by the mortgaged property,
the trust is subjected to the following
additional risks. For example, the borrower
may have difficulty servicing and repaying
multiple loans. Also, the existence of
another loan generally will make it more
difficult for the borrower to obtain
refinancing of the mortgage loan and may
thus jeopardize the borrower's ability to
repay any balloon payment due under the
mortgage loan at maturity. Moreover, the
need to service additional debt may reduce
the cash flow available to the borrower to
operate and maintain the mortgaged
property.
Additionally, if the borrower, or its
constituent members, are obligated to
another lender, actions taken by other
lenders could impair the security available
to the trust. If a junior lender files an
involuntary bankruptcy petition against the
borrower, or the borrower files a voluntary
bankruptcy petition to stay enforcement by
a junior lender, the trust's ability to
foreclose on the property will be
automatically stayed, and principal and
interest payments might not be made during
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<PAGE>
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.
For further information with respect to
subordinate and other financing, See
Appendix II.
BANKRUPTCY PROCEEDINGS RELATING
TO A BORROWER CAN RESULT IN
DISSOLUTION OF THE BORROWER
AND THE ACCELERATION OF THE
RELATED MORTGAGE LOAN AND CAN
OTHERWISE ADVERSELY IMPACT
REPAYMENT OF THE
RELATED MORTGAGE LOAN Under the federal bankruptcy code, the
filing of a bankruptcy petition by or
against a borrower will stay the
commencement or continuation of a
foreclosure action. In addition, if a court
determines that the value of the mortgaged
property is less than the principal balance
of the mortgage loan it secures, the court
may reduce the amount of secured
indebtedness to the then-current value of
the mortgaged property. Such an action
would make the lender a general unsecured
creditor for the difference between the
then-current value and the amount of its
outstanding mortgage indebtedness. A
bankruptcy court also may:
o grant a debtor a reasonable time to
cure a payment default on a mortgage
loan;
o reduce monthly payments due under a
mortgage loan;
o change the rate of interest due on a
mortgage loan; or
o otherwise alter the mortgage loan's
repayment schedule.
Additionally, the trustee of the borrower's
bankruptcy or the borrower, as debtor in
possession, has special powers to avoid,
subordinate or disallow debts. In some
circumstances, the claims of the mortgage
lender may be subordinated to financing
obtained by a debtor-in-possession
subsequent to its bankruptcy.
The filing of a bankruptcy petition will
also stay the lender from enforcing a
borrower's assignment of rents and leases.
The federal bankruptcy code also may
interfere with the trustee's ability to
enforce any lockbox requirements. The legal
proceedings necessary to resolve these
issues can be time consuming and may
significantly delay the lender's receipt of
rents. A bankruptcy court may also permit
rents otherwise subject to an assignment
and/or lock-box arrangement to be used by
the borrower to maintain the mortgaged
property or for other court authorized
expenses.
As a result of the foregoing, the recovery
with respect to borrowers in bankruptcy
proceedings may be significantly delayed,
and the aggregate amount ultimately
collected may be substantially less than
the amount owed.
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A number of the borrowers under the
mortgage loans are limited or general
partnerships. Under some circumstances, the
bankruptcy of a general partner of the
partnership may result in the dissolution
of that partnership. The dissolution of a
borrower partnership, the winding up of its
affairs and the distribution of its assets
could result in an early repayment of the
related mortgage loan.
BORROWERS THAT ARE NOT
BANKRUPTCY REMOTE ENTITIES
MAY BE MORE LIKELY TO FILE
BANKRUPTCY PETITIONS AND THIS
MAY ADVERSELY AFFECT PAYMENTS
ON YOUR CERTIFICATES While many of the borrowers have
agreed to certain special purpose covenants
to limit the bankruptcy risk arising from
activities unrelated to the operation of
the property, one of the borrowers is an
individual and some borrowers are not
special purpose entities, and the borrowers
and their owners generally do not have an
independent director whose consent would be
required to file a bankruptcy petition on
behalf of such borrower. One of the
purposes of an independent director is to
avoid a bankruptcy petition filing that is
intended solely to benefit a borrower's
affiliate and is not justified by the
borrower's own economic circumstances.
THE OPERATION OF COMMERCIAL
PROPERTIES IS DEPENDENT UPON
SUCCESSFUL MANAGEMENT The successful operation of a real estate
project depends upon the property manager's
performance and viability. The property
manager is generally responsible for:
o responding to changes in the local
market;
o planning and implementing the rental
structure;
o operating the property and providing
building services;
o managing operating expenses; and
o assuring that maintenance and capital
improvements are carried out in a timely
fashion.
Properties deriving revenues primarily from
short-term sources are generally more
management-intensive than properties leased
to creditworthy tenants under long-term
leases.
A property manager, by controlling costs,
providing appropriate service to tenants
and seeing to property maintenance and
general upkeep, can improve cash flow,
reduce vacancy, leasing and repair costs
and preserve building value. On the other
hand, management errors can, in some cases,
impair short-term cash flow and the
long-term viability of an income producing
property.
Morgan Stanley Dean Witter Capital I Inc.
makes no representation or warranty as to
the skills of any present or future
managers. Additionally, Morgan Stanley Dean
Witter Capital I Inc. cannot assure you
that the property managers will be in a
financial condition to fulfill their
management responsibilities throughout the
terms of their respective management
agreements.
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<PAGE>
THE ABSENCE OF LOCKBOXES
ENTAILS RISKS THAT COULD
ADVERSELY AFFECT PAYMENTS
ON YOUR CERTIFICATES The mortgage loans generally do not
require the related borrower to cause rent
and other payments to be made into a lock
box account maintained on behalf of the
mortgagee. If rental payments are not
required to be made directly into a lock
box account, there is a risk that the
borrower will divert such funds for other
purposes.
RESERVES TO FUND CAPITAL
EXPENDITURES MAY BE
INSUFFICIENT AND THIS MAY
ADVERSELY AFFECT PAYMENTS ON
YOUR CERTIFICATES Although many of the mortgage loans
require that funds be put aside for
specific reserves, certain mortgage loans
do not require any reserves. Furthermore,
Morgan Stanley Dean Witter Capital I Inc.
cannot assure you that any reserve amounts
will be sufficient to cover the actual
costs of the items for which the reserves
were established. Morgan Stanley Dean
Witter Capital I Inc. also cannot assure
you that cash flow from the properties will
be sufficient to fully fund the ongoing
monthly reserve requirements.
INADEQUACY OF TITLE INSURERS
MAY ADVERSELY AFFECT PAYMENTS
ON YOUR CERTIFICATES Title insurance for a mortgaged property
generally insures a lender against risks
relating to a lender not having a first
lien with respect to a mortgaged property,
and in some cases can insure a lender
against specific other risks. The
protection afforded by title insurance
depends on the ability of the title insurer
to pay claims made upon it. Morgan Stanley
Dean Witter Capital I Inc. cannot assure
you that o a title insurer will have the
ability to pay title insurance claims made
upon it; o the title insurer will maintain
its present financial strength; or o a
title insurer will not contest claims made
upon it.
MORTGAGED PROPERTIES SECURING
THE MORTGAGE LOANS THAT ARE
NOT IN COMPLIANCE WITH ZONING
AND BUILDING CODE
REQUIREMENTS COULD ADVERSELY
AFFECT PAYMENTS ON YOUR
CERTIFICATES Noncompliance with zoning and building
codes may cause the borrower to experience
cash flow delays and shortfalls that would
reduce or delay the amount of proceeds
available for distributions on your
certificates. The mortgage loan sellers
have taken steps to establish that the use
and operation of the mortgaged properties
securing the mortgage loans are in
compliance in all material respects with
all applicable zoning, land-use and
building ordinances, rules, regulations,
and orders. Evidence of this compliance may
be in the form of legal opinions,
confirmations from government officials,
title policy endorsements and/or
representations by the related borrower in
the related mortgage loan documents. These
steps may not have revealed all possible
violations.
Some violations of zoning, land use and
building regulations may be known to exist
at any particular mortgaged property, but
the mortgage
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<PAGE>
loan sellers generally do not consider
those defects known to them to be material.
In many cases, the use, operation and/or
structure of a mortgaged property
constitutes a permitted nonconforming use
and/or structure and the structure may not
be rebuilt to its current state or be used
for its current purpose if a material
casualty event occurs. Generally, insurance
proceeds would be available for application
to the mortgage loan if a material casualty
event were to occur, or the mortgage
property, as rebuilt for a conforming use,
would generate sufficient income to service
the mortgage loan. If a mortgaged property
could not be rebuilt to its current state
or its current use were no longer permitted
due to building violations or changes in
zoning or other regulations, then the
borrower might experience cash flow delays
and shortfalls that would reduce or delay
the amount of proceeds available for
distributions on your certificates.
CONDEMNATIONS WITH RESPECT TO
MORTGAGED PROPERTIES SECURING
THE MORTGAGE LOANS COULD
ADVERSELY AFFECT PAYMENTS ON
YOUR CERTIFICATES From time to time, there may be
condemnations pending or threatened against
one or more of the mortgaged properties.
There can be no assurance that the proceeds
payable in connection with a total
condemnation will be sufficient to restore
the related mortgaged property or to
satisfy the remaining indebtedness of the
related mortgage loan. The occurrence of a
partial condemnation may have a material
adverse effect on the continued use of the
affected mortgaged property, or on an
affected borrower's ability to meet its
obligations under the related mortgage
loan. Therefore, Morgan Stanley Dean Witter
Capital I Inc. cannot assure you that the
occurrence of any condemnation will not
have a negative impact upon the
distributions on your certificates.
THE ABSENCE OF OR INADEQUACY
OF INSURANCE COVERAGE ON THE
PROPERTY MAY ADVERSELY AFFECT
PAYMENTS ON YOUR CERTIFICATES The mortgaged properties may suffer casualty
losses due to risks that are not covered by
insurance or for which insurance coverage
is not available at commercially reasonable
rates. In addition, some of the mortgaged
properties are located in California and in
coastal areas of Florida, Georgia, North
Carolina, South Carolina and Texas, areas
that have historically been at greater risk
of acts of nature, including earthquakes,
hurricanes and floods. The mortgage loans
generally do not require borrowers to
maintain earthquake, hurricane or flood
insurance and Morgan Stanley Dean Witter
Capital I Inc. cannot assure you that
borrowers will attempt or be able to obtain
adequate insurance against such risks.
Moreover, if reconstruction or major
repairs are required following a casualty,
changes in laws that have occurred since
the time of original construction may
materially impair the borrower's ability to
effect such reconstruction or major repairs
or may materially increase the cost
thereof.
As a result of these factors, the amount
available to make distributions on your
certificates could be reduced.
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CLAIMS UNDER BLANKET
INSURANCE POLICIES MAY
ADVERSELY AFFECT PAYMENTS ON
YOUR CERTIFICATES Some of the mortgaged properties are covered
by blanket insurance policies which also
cover other properties of the related
borrower or its affiliates. In the event
that such policies are drawn on to cover
losses on such other properties, the amount
of insurance coverage available under such
policies may thereby be reduced and could
be insufficient to cover each mortgaged
property's insurable risks.
PROPERTY INSPECTIONS AND
ENGINEERING REPORTS MAY NOT
REFLECT ALL CONDITIONS THAT
REQUIRE REPAIR ON THE
PROPERTY Licensed engineers or consultants inspected
all of the mortgaged properties and
prepared engineering reports in connection
with the origination or securitization 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, Morgan Stanley Dean Witter Capital
I Inc. cannot assure you that all
conditions requiring repair or replacement
were identified. In those cases where a
material condition was disclosed, such
condition has been or is required to be
remedied to the seller's satisfaction, or
funds as deemed necessary by the seller, or
the related engineer or consultant have
been reserved to remedy the material
condition.
APPRAISALS MAY INACCURATELY
REFLECT THE VALUE OF THE
MORTGAGED PROPERTIES A FIRREA appraisal was conducted in respect
of each mortgaged property in connection
with the origination or securitization of
the related mortgage loan. The resulting
estimates of value are the basis of the
October 1, 2000 loan-to-value ratios
referred to in this prospectus supplement.
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. The estimates
of value reflected in the appraisals are
presented for illustrative purposes only in
Appendix I and Appendix II hereto. In each
case the estimate presented is the one set
forth in the most recent appraisal
available to us as of October 1, 2000,
although we generally have not obtained
updates to the appraisals.
THE TIMING OF MORTGAGE LOAN
AMORTIZATION MAY ADVERSELY
AFFECT PAYMENTS ON YOUR
CERTIFICATES As principal payments or prepayments are
made on mortgage loans, the remaining
mortgage pool may be subject to increased
concentrations of property types,
geographic locations and other pool
characteristics of the mortgage loans and
the mortgaged properties, some of which may
be unfavorable. Classes of certificates
that have a lower payment priority are more
likely to be exposed to this concentration
risk than are
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<PAGE>
certificate classes with a higher payment
priority. This occurs because realized
losses are allocated to the class
outstanding at any time with the lowest
payment priority and principal on the
certificates entitled to principal is
generally payable in sequential order or
alphabetical order, with such classes
generally not being entitled to receive
principal until the preceding class or
classes entitled to receive principal have
been retired.
SUBORDINATION OF SOME
CERTIFICATES MAY AFFECT THE
TIMING OF PAYMENTS AND THE
APPLICATION OF LOSSES ON YOUR
CERTIFICATES As described in this prospectus supplement,
the rights of the holders of each class of
subordinate certificates to receive
payments of principal and interest
otherwise payable on their certificates
will be subordinated to such rights of the
holders of the more senior certificates
having an earlier alphabetical class
designation. Losses on the mortgage loans
will be allocated to the Class P, 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, and, solely
with respect to losses of interest, to the
Class X Certificates, in proportion to the
amounts of interest or principal payable
thereon.
THE OPERATION OF THE
MORTGAGED PROPERTY FOLLOWING
FORECLOSURE OF THE MORTGAGE
LOAN MAY AFFECT THE TAX STATUS
OF THE TRUST AND MAY
ADVERSELY AFFECT PAYMENTS
ON YOUR CERTIFICATES If the trust acquires a mortgaged property
as a result of a foreclosure or deed in
lieu of foreclosure, the special servicer
will generally retain an independent
contractor to operate the property. Any net
income from operations other than
qualifying "rents from real property", or
any rental income based on the net profits
of a tenant or sub-tenant or allocable to a
non-customary service, will subject the
trust to a federal tax on such income at
the highest marginal corporate tax rate,
which is currently 35%, and, in addition,
possible state or local tax. In this event,
the net proceeds available for distribution
on your certificates will be reduced. The
special servicer may permit the trust to
earn such above described "net income from
foreclosure property" but only if it
determines that the net after-tax benefit
to certificateholders is greater than under
another method of operating or leasing the
mortgaged property.
STATE LAWS APPLICABLE TO
FORECLOSURE ACTIONS MAY AFFECT
THE TIMING OF PAYMENTS ON
YOUR CERTIFICATES Some states, including California, have
laws prohibiting more than one "judicial
action" to enforce a mortgage obligation.
Some courts have construed the term
"judicial action" broadly. In the case of a
mortgage loan secured by mortgaged
properties located in multiple states, the
master servicer or special servicer may be
required to foreclose first on mortgaged
properties located in states where these
"one action" rules apply (and where
non-judicial foreclosure is permitted)
before foreclosing on properties located in
states where judicial foreclosure is
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<PAGE>
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.
THE BANKRUPTCY OR INSOLVENCY OF
ANY AFFILIATED BORROWERS MAY
ADVERSELY AFFECT PAYMENTS ON
YOUR CERTIFICATES Five (5) groups of mortgage loans, the
largest of which represents 7.1% of the
outstanding aggregate principal balance of
all mortgage loans as of October 1, 2000,
were made to borrowers that are affiliated
through common ownership of partnership or
other equity interests and where, in
general, the related mortgaged properties
are commonly managed.
The bankruptcy or insolvency of any such
borrower or respective affiliate could have
an adverse effect on the operation of all
of the related mortgaged properties and on
the ability of such related mortgaged
properties to produce sufficient cash flow
to make required payments on the related
mortgage loans. For example, if a person
that owns or controls several mortgaged
properties experiences financial difficulty
at one such property, it could defer
maintenance at one or more other mortgaged
properties in order to satisfy current
expenses with respect to the mortgaged
property experiencing financial difficulty,
or it could attempt to avert foreclosure by
filing a bankruptcy petition that might
have the effect of interrupting monthly
payments for an indefinite period on all
the related mortgage loans.
TENANT LEASES MAY HAVE
PROVISIONS THAT COULD ADVERSELY
AFFECT PAYMENTS
ON YOUR CERTIFICATES In certain jurisdictions, if tenant leases
are subordinate to the liens created by the
mortgage and do not contain attornment
provisions which require the tenant to
recognize a successor owner, following
foreclosure, as landlord under the lease,
the leases may terminate upon the transfer
of the property to a foreclosing lender or
purchaser at foreclosure. Not all leases
were reviewed to ascertain the existence of
these provisions. Accordingly, if a
mortgaged property is located in such a
jurisdiction and is leased to one or more
desirable tenants under leases that are
subordinate to the mortgage and do not
contain attornment provisions, such
mortgaged property could experience a
further decline in value if such tenants'
leases were terminated. This is
particularly likely if such tenants were
paying above-market rents or could not be
replaced.
Some of the leases at the mortgaged
properties securing the mortgage loans
included in the trust may not be
subordinate to the related mortgage. If a
lease is not subordinate to a mortgage, the
trust will not possess the right to
dispossess the tenant upon foreclosure of
the mortgaged property unless it has
otherwise agreed with the tenant. If the
lease contains provisions inconsistent with
the mortgage, for example, provisions
relating to application of insurance
proceeds or condemnation awards, or which
could affect the enforcement of the
lender's rights, for example, a right of
first refusal to purchase the property, the
provisions of the lease will take
precedence over the provisions of the
mortgage.
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<PAGE>
LITIGATION ARISING OUT OF
ORDINARY BUSINESS COULD
ADVERSELY AFFECT PAYMENTS ON
YOUR CERTIFICATES There may be pending or threatened legal
proceedings against the borrowers and
managers of the mortgaged properties and
their respective affiliates arising out of
their ordinary business. Morgan Stanley
Dean Witter Capital I Inc. cannot assure
you that any such litigation would not have
a material adverse effect on your
certificates.
RISKS RELATING TO COMPLIANCE
WITH THE AMERICANS WITH
DISABILITIES ACT COULD ADVERSELY
AFFECT PAYMENTS ON YOUR Under the Americans with Disabilities Act of
CERTIFICATES 1990, public accommodations are required to
meet certain federal requirements related
to access and use by disabled persons.
Borrowers may incur costs complying with
the Americans with Disabilities Act. In
addition, noncompliance could result in the
imposition of fines by the federal
government or an award of damages to
private litigants. If a borrower incurs
such costs or fines, the amount available
to pay debt service would be reduced.
CONFLICTS OF INTEREST MAY HAVE
AN ADVERSE EFFECT ON YOUR
CERTIFICATES Conflicts between various
certificateholders. The special servicer is
given considerable latitude in determining
whether and in what manner to liquidate or
modify defaulted mortgage loans. The
operating adviser will have the right to
replace the special servicer upon
satisfaction of certain conditions set
forth in the pooling and servicing
agreement. At any given time, the operating
adviser will be controlled generally by the
holders of the most subordinate, or, if the
certificate principal balance thereof is
less than 25% of its original certificate
balance, the next most subordinate, class
of certificates, that is, the controlling
class, outstanding from time to time, and
such holders may have interests in conflict
with those of the holders of the other
certificates. For instance, the holders of
certificates of the controlling class might
desire to mitigate the potential for loss
to that class from a troubled mortgage loan
by deferring enforcement in the hope of
maximizing future proceeds. However, the
interests of the trust may be better served
by prompt action, since delay followed by a
market downturn could result in less
proceeds to the trust than would have been
realized if earlier action had been taken.
The master servicer, the special servicer
or an affiliate of either of them may
acquire certain of the most subordinated
certificates, including those of the
initial controlling class. Under such
circumstances, the master servicer and the
special servicer may have interests that
conflict with the interests of the other
holders of the certificates. The initial
Operating Adviser will be GMAC Commercial
Mortgage Corporation.
Conflicts between borrowers and property
managers. It is likely that many of the
property managers of the mortgaged
properties, or their affiliates, manage
additional properties, including properties
that may compete with the mortgaged
properties. Affiliates of the managers, and
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.
S-41
<PAGE>
Conflicts between the trust and sellers.
The activities of the sellers may involve
properties which are in the same markets as
the mortgaged properties underlying the
certificates. In such case, the interests
of each of the sellers or such affiliates
may differ from, and compete with, the
interests of the trust, and decisions made
with respect to those assets may adversely
affect the amount and timing of
distributions with respect to the
certificates. Conflicts of interest may
arise between the trust and each of the
sellers or their affiliates that engage in
the acquisition, development, operation,
financing and disposition of real estate if
such sellers acquire any certificates. In
particular, if certificates held by a
seller are part of a class that is or
becomes the controlling class the seller as
part of the holders of the controlling
class would have the ability to influence
certain actions of the special servicer
under circumstances where the interests of
the trust conflict with the interests of
the seller or its affiliates as acquirors,
developers, operators, financers or sellers
of real estate related assets.
Affiliates of the sellers may acquire a
portion of the certificates. Under such
circumstances, they may become the
controlling class, and as such have
interests that may conflict with their
interests as a seller of the mortgage
loans.
PREPAYMENTS MAY REDUCE
THE YIELD ON YOUR CERTIFICATES The yield to maturity on your certificates
will depend, in significant part, upon the
rate and timing of principal payments on
the mortgage loans. For this purpose,
principal payments include both voluntary
prepayments, if permitted, and involuntary
prepayments, such as prepayments resulting
from casualty or condemnation of mortgaged
properties, defaults and liquidations by
borrowers, or repurchases as a result of a
seller's breach of representations and
warranties or material defects in a
mortgage loan's documentation.
The investment performance of your
certificates may vary materially and
adversely from your expectations if the
actual rate of prepayment is higher or
lower than you anticipate.
Voluntary prepayments under some of the
mortgage loans require payment of a
prepayment premium unless the prepayment
occurs within generally two to six payments
prior to and including the stated maturity
date. Nevertheless, Morgan Stanley Dean
Witter Capital I Inc. cannot assure you
that the related borrowers will refrain
from prepaying their mortgage loans due to
the existence of a prepayment premium or
the amount of such premium will be
sufficient to compensate you for shortfalls
in payments on your certificates on account
of such prepayments. Morgan Stanley Dean
Witter Capital I Inc. also cannot assure
you that involuntary prepayments will not
occur. The rate at which voluntary
prepayments occur on the mortgage loans
will be affected by a variety of factors,
including:
o the terms of the mortgage loans;
o the length of any prepayment lockout
period;
o the level of prevailing interest rates;
o the availability of mortgage credit;
o the applicable yield maintenance charges
or prepayment premiums;
S-42
<PAGE>
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.
Also, the description in the mortgage notes
of the method of calculation of prepayment
premiums is complex and subject to legal
interpretation and it is possible that
another person would interpret the
methodology differently from the way we did
in estimating an assumed yield to maturity
on your certificates as described in this
prospectus supplement. See Appendix II
attached hereto for a description of the
various pre-payment provisions.
THE YIELD ON YOUR CERTIFICATE
WILL BE AFFECTED BY THE PRICE AT
WHICH THE CERTIFICATE WAS
PURCHASED AND THE RATE, TIMING
AND AMOUNT OF DISTRIBUTIONS ON
YOUR CERTIFICATE The yield on any certificate will depend on
(1) the price at which such certificate is
purchased by you and (2) the rate, timing
and amount of distributions on your
certificate. The rate, timing and amount of
distributions on any certificate will, in
turn, depend on, among other things:
o the interest rate for such certificate;
o the rate and timing of principal payments
(including principal prepayments) and
other principal collections on or in
respect of the mortgage loans and the
extent to which such amounts are to be
applied or otherwise result in a reduction
of the certificate balance of such
certificate;
o the rate, timing and severity of losses
on or in respect of the mortgage loans or
unanticipated expenses of the trust;
o the timing and severity of any interest
shortfalls resulting from prepayments to
the extent not offset by a reduction in
master servicer compensation as described
in this prospectus supplement;
o the timing and severity of any reductions
in the appraised value of any mortgaged
property in a manner that has an effect on
the amount of advancing required on the
related mortgage loan; and
o the method of calculation of prepayment
premiums and the extent to which
prepayment premiums are collected and,
in turn, distributed on such certificate.
YOU BEAR THE RISK OF
BORROWER DEFAULTS The rate and timing of delinquencies or
defaults on the mortgage loans could affect
the following aspects of the offered
certificates:
o the aggregate amount of distributions on
them;
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<PAGE>
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. Losses on the mortgage loans
will be allocated to the Class P, 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,
Class A-2 and, with respect to interest
losses only, the Class X Certificates based
on their respective entitlements.
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.
If you calculate your anticipated yield
based on assumed rates of default and
losses that are lower than the default rate
and losses actually experienced and such
losses are allocable to your certificates,
your actual yield to maturity will be lower
than the assumed yield. Under extreme
scenarios, such yield could be negative. In
general, the earlier a loss borne by your
certificates occurs, the greater the effect
on your yield to maturity.
Even if losses on the mortgage loans are
not borne by your certificates, those
losses may affect the weighted average life
and yield to maturity of your certificates.
This may be so because those losses cause
your certificates to have a higher
percentage ownership interest in the trust,
and therefore a greater portion of the
related distributions of principal payments
on the mortgage loans, than would otherwise
have been the case. The effect on the
weighted average life and yield to maturity
of your certificates will depend upon the
characteristics of the remaining mortgage
loans.
Additionally, delinquencies and defaults on
the mortgage loans may significantly delay
the receipt of distributions by you on your
certificates, unless advances are made to
cover delinquent payments or the
subordination of another class of
certificates fully offsets the effects of
any such delinquency or default.
COMPENSATION TO THE MASTER
SERVICER, THE SPECIAL SERVICER
AND THE TRUSTEE MAY HAVE AN
ADVERSE EFFECT ON THE PAYMENTS
ON YOUR CERTIFICATES To the extent described in this prospectus
supplement, the master servicer, the
trustee or the fiscal agent will be
entitled to receive interest on
unreimbursed advances they have made with
respect to defaulted monthly payments or
that are made with respect to the
preservation and protection of the related
mortgaged property. This interest will
generally accrue from the date on which the
related advance is made or the related
expense is incurred to the date of
reimbursement. This
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<PAGE>
interest may be offset in part by default
interest and late payment charges paid by
the borrower or by certain other amounts.
In addition, under certain circumstances,
including delinquencies in the payment of
principal and interest, a mortgage loan
will be serviced by the special servicer,
and the special servicer is entitled to
compensation for special servicing
activities. The right to receive interest
on advances and special servicing
compensation is senior to the rights of
certificateholders to receive
distributions.
THE SELLERS OF THE MORTGAGE
LOANS ARE SUBJECT TO BANKRUPTCY
OR INSOLVENCY LAWS THAT MAY
AFFECT THE TRUST'S OWNERSHIP OF
THE MORTGAGE LOANS In the event of the insolvency of any
seller, it is possible the trust's right to
payment from or ownership of the mortgage
loans could be challenged, and if such
challenge were successful, delays or
reductions in payments on your certificates
could occur.
Based upon opinions of counsel that the
conveyance of the mortgage loans would
generally be respected in the event of
insolvency of the sellers, which opinions
are subject to various assumptions and
qualifications, the sellers believe that
such a challenge will be unsuccessful, but
there can be no assurance that a bankruptcy
trustee, if applicable, or other interested
party will not attempt to assert such a
position. Even if actions seeking such
results were not successful, it is possible
that payments on the certificates would be
delayed while a court resolves the claim.
LIMITED LIQUIDITY AND MARKET
VALUE MAY ADVERSELY EFFECT
PAYMENTS ON YOUR CERTIFICATES Your certificates will not be listed on any
securities exchange, and there is currently
no secondary market for the certificates.
While Morgan Stanley & Co. Incorporated and
Goldman, Sachs & Co. each currently intends
to make a secondary market in the
certificates, neither of them is obligated
to do so. Accordingly, you may not have an
active or liquid secondary market for your
certificates, which could result in a
substantial decrease in the market value of
your certificates. The market value of your
certificates also may be affected by many
other factors, including then-prevailing
interest rates. Furthermore, you should be
aware that the market for securities of the
same type as the certificates has in the
past been volatile and offered very limited
liquidity.
INTEREST RATES BASED ON A
WEIGHTED AVERAGE COUPON RATE
ENTAIL RISKS WHICH MAY
ADVERSELY AFFECT PAYMENTS ON
YOUR CERTIFICATES The interest rates on the Class B, Class C
and Class D Certificates are limited by a
weighted average of the mortgage loan
interest rates net of the administrative
cost rate, which is calculated based upon
the respective principal balances of those
mortgage loans. This weighted average rate
is further described in this Prospectus
Supplement under the definition of weighted
average net mortgage rate. All of those
classes of certificates which are either
fully or partially based upon weighted
average rate may be adversely affected by
disproportionate principal payments,
prepayments, defaults and other unscheduled
payments on the mortgage loans. Because
some mortgage loans will
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<PAGE>
amortize their principal more quickly than
others, the rate will fluctuate over the
life of those classes of your certificates.
In general, mortgage loans with relatively
high mortgage interest rates are more
likely to prepay than mortgage loans with
relatively low mortgage interest rates. For
instance, varying rates of unscheduled
principal payments on mortgage loans which
have interest rates above the weighted
average net mortgage rate will have the
effect of reducing the interest rate of
your certificates.
This prospectus supplement also contains forward-looking statements
that involve risks and uncertainties. Actual results could differ materially
from those anticipated in these forward-looking statements as a result of a
variety of factors, including the risks described above in this Risk Factors
section and elsewhere in this prospectus supplement.
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<PAGE>
DESCRIPTION OF THE OFFERED CERTIFICATES
Capitalized terms are defined in the "Glossary of Terms" attached hereto.
GENERAL
The Series 2000-LIFE2 Commercial Mortgage Pass-Through Certificates will
be issued on or about October 31, 2000 pursuant to a Pooling and Servicing
Agreement to be dated as of the Cut-off Date, among Morgan Stanley Dean Witter
Capital I Inc., the master servicer, the special servicer, the fiscal agent and
the trustee.
The certificates will represent in the aggregate the entire beneficial
ownership interest in the trust consisting primarily of:
o the mortgage loans and all payments under and proceeds of the
mortgage loans received after the Cut-off Date, exclusive of principal
prepayments received prior to the Cut-off Date and scheduled payments
of principal and interest due on or before the Cut-off Date;
o any mortgaged property acquired on behalf of the Certificateholders in
respect of a defaulted mortgage loan through foreclosure, deed in lieu
of foreclosure or otherwise; and
o certain rights of Morgan Stanley Dean Witter Capital I Inc. under, or
assigned to Morgan Stanley Dean Witter Capital I Inc. pursuant to,
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 be issued on October 31, 2000 and will only be
entitled to scheduled payments on the mortgage loans that are due (and
unscheduled payments that are received) after October 1, 2000.
The certificates will consist of twenty (20) classes, to be designated
as:
o the Class A-1 Certificates and the Class A-2 Certificates;
o the Class X Certificates;
o 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, the Class O
Certificates and the Class P Certificates; and
o the Class R-I Certificates, the Class R-II Certificates and the Class
R-III Certificates.
The Class A Certificates will be issued in denominations of $25,000
initial Certificate Balance and in any whole dollar denomination in excess of
that amount. The Class B, Class C and Class D Certificates will be issued 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"). Morgan Stanley Dean Witter Capital I Inc. has
been informed by DTC that DTC's nominee initially will be Cede & Co. No person
acquiring an interest in an offered certificate will be entitled to receive a
fully registered physical certificate representing such interest, except as
presented in the prospectus under "Description of the Offered
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.
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<PAGE>
All references herein to payments, notices, reports and statements to
holders of the offered certificates will refer to payments, notices, reports and
statements to DTC or Cede & Co., as the registered holder of the offered
certificates, for distribution to the related Certificate Owners through DTC's
Participants in accordance with DTC procedures. Until definitive certificates
are issued in respect of any Class of offered certificates, interests in such
certificates will be transferred on the book-entry records of DTC and its
Participants. See "Description of the Certificates--Book-Entry Registration and
Definitive Certificates" in the prospectus.
Certificateholders must hold their offered certificates in book-entry
form, and delivery of the offered certificates will be made through the
facilities of DTC, in the United States, and may be made through the facilities
of Clearstream Banking or Euroclear, in Europe. Transfers within DTC,
Clearstream Banking or Euroclear, as the case may be, will be in accordance with
the usual rules and operating procedures of the relevant system. Crossmarket
transfers between persons holding directly or indirectly through DTC, on the one
hand, and counterparties holding directly or indirectly through Clearstream
Banking or Euroclear, on the other, will be effected in DTC through Citibank,
N.A. or The Chase Manhattan Bank, the relevant depositaries of Clearstream
Banking and Euroclear, respectively.
Because of time-zone differences, credits of securities received in
Clearstream Banking or Euroclear as a result of a transaction with a DTC
participant will be made during subsequent securities settlement processing and
dated the business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be reported
to the relevant Euroclear participant or Clearstream Banking customer on such
business day. Cash received in Clearstream Banking or Euroclear as a result of
sales of securities by or through a Clearstream Banking customer or a Euroclear
participant to a DTC participant will be received with value on the DTC
settlement date but will be available in the relevant Clearstream Banking or
Euroclear cash account only as of the business day following settlement in DTC.
CERTIFICATE BALANCES
Upon initial issuance, the Class A-1, Class A-2, Class B, Class C and
Class D Certificates will have the following aggregate Certificate Balances. In
each case, the Certificate Balance may vary by 5%:
<TABLE>
<CAPTION>
APPROXIMATE
INITIAL AGGREGATE PERCENT OF INITIAL RATINGS APPROXIMATE
CLASS CERTIFICATE BALANCE POOL BALANCE (FITCH/MOODY'S) CREDIT SUPPORT
<S> <C> <C> <C> <C> <C>
Class A-1 20.79% 16.50%
$159,079,000 AAA/Aaa
Class A-2 62.71% 16.50%
$479,987,000 AAA/Aaa
Class B 3.00% 13.50%
$22,961,000 AA/Aa2
Class C 3.25% 10.25%
$24,874,000 A/A2
Class D 0.90% 9.35%
$6,888,000 A-/A3
</TABLE>
The percentages indicated under the columns "Approximate Credit
Support" with respect to the Class A-1 and Class A-2 Certificates represent the
approximate credit support for the Class A-1 and Class A-2 Certificates in the
aggregate.
The initial Certificate Balance of each Principal Balance Certificate
will be presented on the face thereof. On each Distribution Date, the
Certificate Balance of each Principal Balance Certificate will be reduced by any
distributions of principal actually made on that certificate on the applicable
Distribution Date, and will be further reduced by any Realized Losses and
Expense Losses allocated to such certificate on such Distribution Date. See
"--Distributions" and "--Distributions--Subordination; Allocation of Losses and
Certain Expenses" below.
The Interest Only Certificates will not have a Certificate Balance.
Such Class of certificates will represent the right to receive distributions of
interest accrued as described herein on a Notional Amount.
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The aggregate Notional Amount of the Interest Only Certificates will
equal 100% of the aggregate Certificate Balance of the Principal Balance
Certificates outstanding from time to time. The Interest Only Certificates will
have an initial aggregate Notional Amount of $765,349,379, subject to a
permitted variance of plus or minus 5%. The Notional Amount of the 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 Pass-Through Rates applicable to the Class A-1, Class A-2, Class B,
Class C and Class D Certificates for each Distribution Date will be equal to
6.96%, 7.20%, 7.35%, 7.50% and 7.62% per annum, respectively; provided, however,
that the Pass-Through Rate for the Class B, Class C and Class D Certificates
will not exceed the Weighted Average Net Mortgage Rate for such Distribution
Date. The Pass-Through Rate applicable to the Class X Certificates for the
initial Distribution Date will equal approximately 1.05% 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:
o the Weighted Average Net Mortgage Rate for such Distribution Date, over
o the weighted average of the Pass-Through Rates applicable to 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, Class O and Class P 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 Administrative Cost Rate for each mortgage loan is presented in
Appendix II. The Administrative Cost Rate will be payable on the Scheduled
Principal Balance of each mortgage loan outstanding from time to time. The
Administrative Cost Rate applicable to a mortgage loan in any month will be
determined using the same interest accrual basis on which interest accrues under
the terms of such mortgage loan.
DISTRIBUTIONS
General
Distributions on or with respect to the certificates will be made by
the trustee, to the extent of available funds, and in accordance with the manner
and priority presented in the Prospectus Supplement, on each Distribution Date,
commencing on November 15, 2000. Except as otherwise described below, all such
distributions will be made to the persons in whose names the certificates are
registered at the close of business on the related Record Date. Every
distribution will be made by wire transfer in immediately available funds to the
account specified by the Certificateholder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder will have provided
the trustee with wiring instructions on or before the related Record Date, or
otherwise by check mailed to such Certificateholder.
The final distribution on any certificate will be determined without
regard to any possible future reimbursement of any Realized Losses or Expense
Losses previously allocated to such certificate. The final distribution will be
made in the same manner as earlier distributions, but only upon presentation and
surrender of such certificate at the location that will be specified in a notice
of the pendency of such final distribution. Any distribution that is to be made
with respect to a certificate in reimbursement of a Realized Loss or Expense
Loss previously allocated thereto, which reimbursement is to occur after the
date on which such certificate is surrendered as contemplated by the preceding
sentence, will be made by check mailed to the Certificateholder that surrendered
such certificate. The likelihood of any such distribution is remote. All
distributions made on or with respect to a Class of certificates will be
allocated pro rata among such certificates based on their respective Percentage
Interests in such Class.
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The Available Distribution Amount
With respect to any Distribution Date, distributions of interest on and
principal of the certificates will be made from the Available Distribution
Amount for that Distribution Date.
With respect to the Distribution Date occurring in each January, other
than a leap year, and each February, the Interest Reserve Amount will be
deposited to the Interest Reserve Account in respect of each Interest Reserve
Loan in an amount equal to one day's interest at the related Net Mortgage Rate
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. The Net Mortgage Rate will be
applied without regard to any adjustment for Interest Reserve Amounts or the
interest accrual basis as described in the definition of "Net Mortgage Rate" in
the Glossary. With respect to the Distribution Date occurring in March of each
year, 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 the
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 trustee will apply the Available Distribution Amount other than
Excess Liquidation Proceeds, if any for such date for the following purposes and
in the following order of priority:
(i) to the holders of the Class A-1, Class A-2 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 until the aggregate Certificate Balance of
the Class A-2 Certificates has been reduced to zero; the
portion of the Principal Distribution Amount distributed
hereunder will be reduced by any portion thereof distributed
to the holders of the Class A-1 Certificates;
(iv) to the holders of the Class A and Class X Certificates, pro
rata in proportion to their respective entitlements to
reimbursement described in this clause, to reimburse them for
any Realized Losses previously allocated to such Classes of
certificates, plus interest on such Realized Losses, 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 until the aggregate Certificate Balance of
the Class B Certificates has been reduced to zero; the
portion of the Principal Distribution Amount distributed
hereunder will be reduced by any portion thereof distributed
to the holders of the Class A Certificates;
(vii) to the holders of the Class B Certificates, to reimburse them
for any Realized Losses previously allocated to such Class of
certificates, plus interest on such Realized Losses, at
one-twelfth the applicable Pass-Through Rate;
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(viii) to the holders of the Class C Certificates, the Distributable
Certificate Interest Amount in respect of such Class of
certificates for such Distribution Date;
(ix) upon payment in full of the aggregate Certificate Balance of
the Class B Certificates, to the holders of the Class C
Certificates, the Principal Distribution Amount for such
Distribution Date until the aggregate Certificate Balance of
the Class C Certificates has been reduced to zero; the
portion of the Principal Distribution Amount distributed
hereunder will be reduced by any portion thereof distributed
to the holders of the Class A and Class B Certificates;
(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, 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 until the aggregate Certificate Balance of
the Class D Certificates has been reduced to zero; the
portion of the Principal Distribution Amount distributed
hereunder will be reduced by any portion thereof distributed
to the holders of the Class A, Class B and Class C
Certificates;
(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, at
one-twelfth the applicable Pass-Through Rate; and
(xiv) to make payments to the holders of the private certificates
as contemplated below.
Notwithstanding the foregoing, on each Distribution Date occurring on
or after the date, if any, upon which the aggregate Certificate Balance of all
Classes of Subordinate Certificates has been reduced to zero or the aggregate
Appraisal Reduction in effect is greater than or equal to the aggregate
Certificate Balance of all Classes of Subordinate Certificates, the Principal
Distribution Amount will be distributed:
o first, to the Class A-1 and Class A-2 Certificates, in proportion to their
respective Certificate Balances, in reduction of their respective
Certificate Balances, until the aggregate Certificate Balance of each such
Class is reduced to zero; and,
o second, to the Class A-1 and Class A-2 Certificates, based on their
respective entitlements to reimbursement, for the unreimbursed amount of
Realized Losses and Expense Losses previously allocated to such Classes.
On each Distribution Date, following the above-described distributions
on the offered certificates and the Class X Certificates, the trustee will apply
the remaining portion, if any, of the Available Distribution Amount for such
date to make payments to the holders of each of the respective Classes of
Private Certificates, other than the Class X Certificates and Residual
Certificates, in alphabetical order of Class designation, in each case for the
following purposes and in the following order of priority, that is, payments
under clauses (1), (2) and (3) below, in that order, to the holders of the Class
E Certificates, then payments under clauses (1), (2), and (3) below, in that
order, to the holders of the Class F, Class G, Class H, Class J, Class K, Class
L, Class M, Class N, Class O and Class P 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
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<PAGE>
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, at
one-twelfth the Pass-Through Rate of such Classes.
Any portion of the Available Distribution Amount for any Distribution
Date that is not otherwise payable to the holders of REMIC Regular Certificates
as contemplated above, will be paid to the holders of the Class R-I
Certificates.
Excess Liquidation Proceeds will be deposited to the Reserve Account.
On each Distribution Date, amounts on deposit in the Reserve Account will be
used, first, to reimburse the holders of the Principal Balance Certificates --
in order of alphabetical Class designation -- for any, and to the extent of,
Realized Losses, including interest on Advances, previously allocated to them;
and second, 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.
Distributions of Prepayment Premiums
Any Prepayment Premium collected with respect to a mortgage loan during
any particular Collection Period will be distributed on the following
Distribution Date as follows: The holders of the Class A, Class B, Class C,
Class D, Class E, Class F and Class G Certificates then entitled to
distributions of principal on such Distribution Date will be entitled to an
aggregate amount, allocable among such Classes, if more than one, as described
below, equal to the lesser of (a) such Prepayment Premium and (b) such
Prepayment Premium multiplied by a fraction, the numerator of which is equal to
the excess, if any, of the Pass-Through Rate applicable to the most senior of
such Classes of Principal Balance Certificates then outstanding, or, in the case
of the two Classes of Class A Certificates, first, the Pass-Through Rate
applicable to the Class A-1 Certificates and second, the Pass-Through Rate
applicable to the Class A-2 Certificates, over the relevant Discount Rate, and
the denominator of which is equal to the excess, if any, of the mortgage rate of
the Mortgage Loan that prepaid, over the relevant Discount Rate. If there is
more than one such Class of Principal Balance Certificates entitled to
distributions of principal on such Distribution Date, the aggregate amount
described in the preceding sentence will be allocated among such Classes on a
pro rata basis in accordance with the relative amounts of entitlement to such
distributions of principal.
Any portion of any Prepayment Premium remaining after any such payment
to the holders of such Principal Balance Certificates as described above will be
distributed to the holders of the Class X Certificates.
Any Prepayment Premiums distributed to the holders of a class of
certificates may not be sufficient to fully compensate such Certificateholders
for any loss in yield attributable to the related Principal Prepayments.
Treatment of REO Properties
Notwithstanding that any mortgaged property may be acquired as part of
the trust through foreclosure, deed in lieu of foreclosure or otherwise, the
related mortgage loan will, for purposes of, among other things, determining
Pass-Through Rates of, distributions on and allocations of Realized Losses and
Expense Losses to the certificates, as well as the amount of Master Servicing
Fees, Primary Servicing Fees, Excess Servicing Fees, Trustee Fees and Special
Servicing Fees payable under the Pooling and Servicing Agreement, be treated as
having remained outstanding until such REO Property is liquidated. In connection
therewith, operating revenues and other proceeds derived from such REO Property,
exclusive of related operating costs, will be "applied" by the master servicer
as principal, interest and other amounts "due" on such mortgage loan; and,
subject to the recoverability determination described under "--Advances" below
and the effect of any Appraisal Reductions described under "--Appraisal
Reductions" below, the master servicer will be required to make P&I Advances in
respect of such mortgage loan, in all cases as if such mortgage loan had
remained outstanding. References to mortgage loan and mortgage loans in the
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definitions of Weighted Average Net Mortgage Rate and Principal Distribution
Amount are intended to include any mortgage loan or mortgage loans as to which
the related mortgaged property has become an REO Property.
Appraisal Reductions
Not later than the earliest Appraisal Event, the special servicer is
required to obtain an MAI appraisal, if the Scheduled Principal Balance of the
mortgage loan is greater than $2,000,000, or an internal valuation, if the
Scheduled Principal Balance of the mortgage loan is equal to or less than
$2,000,000, of the related mortgaged property or REO Property, as the case may
be. However, the special servicer, in accordance with the Servicing Standard,
need not obtain either the MAI appraisal or the internal valuation if such an
appraisal or valuation had been obtained within the prior twelve months.
As a result of such appraisal or internal valuation, an Appraisal
Reduction may be created. An Appraisal Reduction will be reduced to zero as of
the date the related mortgage loan is brought current under the then current
terms of the mortgage loan for at least three consecutive months. No Appraisal
Reduction will exist as to any mortgage loan after it has been paid in full,
liquidated, repurchased or otherwise disposed of. An appraisal for any mortgage
loan that has not been brought current for at least three consecutive months
will be updated annually, with a corresponding adjustment to the amount of the
related Appraisal Reduction. In addition, the Operating Adviser may at any time
request the special servicer to obtain -- at the Operating Adviser's expense --
an updated appraisal, with a corresponding adjustment to the amount of the
Appraisal Reduction.
The existence of an Appraisal Reduction will proportionately reduce the
master servicer's, the trustee's or the fiscal agent's, as the case may be,
obligation to make P&I Advances in respect of the related mortgage loan, which
will generally result in a reduction in current distributions in respect of the
then most subordinate Class or Classes of Principal Balance Certificates. See
"--Advances--P&I Advances" below.
Subordination; Allocation of Losses and Certain Expenses
As and to the extent described herein, the rights of holders of the
Subordinate Certificates to receive distributions of amounts collected or
advanced on the mortgage loans will be subordinated, to the extent described
herein, to the rights of holders of the Senior Certificates, and to the rights
of the holders of each other Class of Subordinate Certificates with an earlier
alphabetical Class designation. This subordination is intended to enhance the
likelihood of timely receipt by the holders of the Senior Certificates of the
full amount of all interest payable in respect of the Senior Certificates on
each Distribution Date, and the ultimate receipt by the holders of each Class of
Class A Certificates of principal in an amount equal to the entire Certificate
Balance of the Class A Certificates.
Similarly, but to decreasing degrees and in alphabetical order of Class
designation, this subordination is also intended to enhance the likelihood of
timely receipt by the holders of the Subordinate Certificates, other than the
Class P Certificates, which do not have the benefit of any effective
subordination, of the full amount of interest payable in respect of such Classes
of certificates on each Distribution Date, and the ultimate receipt by such
holders of principal equal to, in each case, the entire Certificate Balance of
such Class of certificates. This subordination will be accomplished by the
application of the Available Distribution Amount on each Distribution Date in
accordance with the order of priority described above under "--Application of
the Available Distribution Amount" and by the allocation of Realized Losses and
Expense Losses as described below. No other form of credit support will be
available for the benefit of the holders of the certificates.
Allocation to the Class A Certificates, for so long as they are
outstanding, of the entire Principal Distribution Amount for each Distribution
Date will generally have the effect of reducing the Certificate Balance of that
Class at a faster rate than would be the case if principal payments were
allocated pro rata to all Classes of certificates with Certificate Balances.
Thus, as principal is distributed to the holders of the Class A Certificates,
the percentage interest in the trust evidenced by the Class A Certificates will
be decreased, with a corresponding increase in the percentage interest in the
trust evidenced by the Subordinate Certificates, thereby increasing, relative to
their respective Certificate Balances, the subordination afforded the Class A
Certificates by the Subordinate Certificates.
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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 P, 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.
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
To the extent that the aggregate Prepayment Interest Shortfalls on all
mortgage loans other than Specially Serviced Mortgage Loans exceed the aggregate
Prepayment Interest Excesses for such mortgage loans for the Collection Period
related to a Distribution Date, a portion of the Master Servicing Fee equal to
0.03% 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 Net Aggregate Prepayment Interest Shortfall for a Distribution Date
will be allocated to each Class of certificates, pro rata, in each case reducing
interest otherwise payable thereon. The Distributable Certificate Interest
Amount in respect of any Class of certificates will be reduced to the extent any
Net Aggregate Prepayment Interest Shortfalls are allocated to such Class of
certificates. See "Servicing of the Mortgage Loans--Servicing and Other
Compensation and Payment of Expense" in this prospectus supplement.
On any Distribution Date, to the extent that the aggregate Prepayment
Interest Excesses on all mortgage loans other than Specially Serviced Mortgage
Loans exceed the aggregate Prepayment Interest Shortfalls for such mortgage
loans for such Distribution Date, the excess amount will be payable to the
master servicer as additional servicing compensation. Likewise, to the extent
that the aggregate Prepayment Interest Excesses on all Specially Serviced
Mortgage Loans exceed the aggregate Prepayment Interest Shortfalls for such
mortgage loans for such Distribution Date, the excess amount will be payable to
the special servicer as additional servicing compensation.
OPTIONAL TERMINATION
Morgan Stanley Dean Witter Capital I Inc., the master servicer, the
special servicer and the holder of the majority interest in the Class R-I
Certificates, in that order, will have the option to purchase, in whole but not
in part, the mortgage loans and any other property remaining in the trust on any
Distribution Date on or after the Distribution Date on which the aggregate
Certificate Balance of all Classes of Principal Balance Certificates then
outstanding is less than or equal to 1% of the Initial Pool Balance.
The purchase price for any such purchase will be 100% of the aggregate
unpaid principal balances of the mortgage loans, other than any mortgage loans
as to which the master servicer has determined that all payments or recoveries
with respect thereto have been made, plus accrued and unpaid interest at the
mortgage rate--or the mortgage rate less the Master Servicing Fee Rate--if the
master servicer is the purchaser--to the Due Date for each mortgage loan ending
in the Collection Period with respect to which such purchase occurs, plus
unreimbursed Advances, with interest thereon at the Advance Rate, and the fair
market value of any other property remaining in the trust. The optional
termination of the trust must be conducted so as to constitute a "qualified
liquidation" of each REMIC under Section 860F of the Code.
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Upon any such termination, the purchase price for the mortgage loans
and the other property in the trust will be applied to pay accrued and unpaid
interest on and reduce the Certificate Balance of all outstanding Classes to
zero in the manner provided under "Description of the Offered
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.
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 a P&I Advance, but only to the extent that
the master servicer determines, in its sole discretion, exercised in good faith,
that the amount so advanced, plus interest expected to accrue thereon, will be
recoverable from subsequent payments or collections, including Insurance
Proceeds and Liquidation Proceeds, in respect of the related mortgage loan, and
only until the mortgage loan has been liquidated; provided, however, that the
amount of any P&I Advance required to be advanced by the master servicer with
respect to interest on a mortgage loan as to which there has been an Appraisal
Reduction will be an amount equal to the product of:
o the amount required to be advanced by the master servicer without giving
effect to this sentence; and
o a fraction, the numerator of which is the Scheduled Principal Balance of
such mortgage loan as of the immediately preceding Determination Date less
any Appraisal Reduction in effect with respect to such mortgage loan and
the denominator of which is the Scheduled Principal Balance of the mortgage
loan as of such Determination Date.
With respect to any mortgage loan that is delinquent in respect of its
Balloon Payment, including any REO Property as to which the related mortgage
loan provided for a Balloon Payment, P&I Advances will be required in an amount
equal to the Assumed Scheduled Payment, less the related Master Servicing Fee,
the Excess Servicing Fee and Primary Servicing Fee, subject to the same
conditions and limitations, as described above, that apply to P&I Advances of
other Scheduled Payments.
The master servicer will be entitled to interest on P&I Advances, which
interest will accrue at 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.
The right of the master servicer to reimbursement or payment out of
recoveries will be prior to the right of the Certificateholders to receive any
amounts recovered with respect to any mortgage loan. If the master servicer
fails to make a required P&I Advance, the trustee is required to make such P&I
Advance, and if the trustee fails to make a required P&I Advance, the fiscal
agent is required to make such P&I Advance, each subject to the same
limitations, and with the same rights, as described above for the master
servicer.
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Servicing Advances
Servicing Advances, in all cases, will be reimbursable as described
below. The master servicer will be permitted to pay, or to direct the payment
of, certain servicing expenses directly out of the Certificate Account or
Distribution Account and under certain circumstances without regard to the
relationship between the expense and the funds from which it is being paid.
With respect to mortgage loans, the master servicer will be obligated
to make Servicing Advances for real estate taxes and insurance premiums, to the
extent that insurance coverage is available at commercially reasonable rates and
not paid by the related borrower on a timely basis and for collection or
foreclosure costs, including reasonable attorneys fees. With respect to REO
Properties, the master servicer will be obligated to make Servicing Advances, if
necessary and to the extent that funds from the operation of the related REO
Property are unavailable to pay any amounts due and payable, for:
o insurance premiums, to the extent that insurance coverage is available at
commercially reasonable rates;
o items such as real estate taxes and assessments in respect of such REO
Property that may result in the imposition of a lien;
o any ground rents in respect of such REO Property; and
o costs and expenses necessary to maintain, manage or operate such REO
Property.
Notwithstanding the foregoing, the master servicer will be obligated to
make such Servicing Advances only to the extent that the master servicer
determines, as described below, that the amount so advanced will be recoverable
from subsequent payments or collections, including Insurance Proceeds,
Liquidation Proceeds and REO Income, in respect of such Mortgage Loan or REO
Property.
The master servicer may incur certain costs and expenses in connection
with the servicing of a mortgage loan or the administration of REO Property.
Servicing Advances, including interest accrued thereon at the Advance Rate, will
be reimbursable from recoveries or collections on the related mortgage loan or
REO Property. However, if the master servicer determines, as described below,
that any Servicing Advance previously made, and accrued interest thereon at the
Advance Rate, will not be ultimately recoverable from such related recoveries,
such advances will be reimbursable from any amounts on deposit in the
Certificate Account or Distribution Account. If the master servicer fails to
make a required Servicing Advance, the trustee is required to make such
Servicing Advance, and if the trustee fails to make a required Servicing
Advance, the fiscal agent is required to make such Servicing Advance, each
subject to the same limitations, and with the same rights, as described above
for the master servicer.
Nonrecoverable Advances
The determination by the master servicer that any P&I Advance or
Servicing Advance, previously made or proposed to be made, would not be
recoverable will be made in the sole discretion of the master servicer,
exercising good faith, and is required to be accompanied by an officer's
certificate delivered to the trustee, the special servicer, the operating
adviser, the Rating Agencies and Morgan Stanley Dean Witter Capital I Inc. and
setting forth the reasons for such determination, with copies of appraisals or
internal valuations, if any, or other information that supports such
determination. The master servicer's determination of nonrecoverability will be
conclusive and binding upon the Certificateholders, the trustee and the fiscal
agent. The trustee and the fiscal agent will be entitled to rely conclusively on
any determination by the master servicer of nonrecoverability with respect to
such Advance and shall have no obligation, but will be entitled, to make a
separate determination of recoverability.
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REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports
Based solely on information provided in monthly reports prepared by the
master servicer and the special servicer and delivered to the trustee, the
trustee will be required to provide or make available to each Certificateholder
on each Distribution Date:
(a) A statement setting forth, to the extent applicable:
(i) the amount, if any, of such distributions to the
holders of each Class of Principal Balance
Certificates applied to reduce the aggregate
Certificate Balance thereof;
(ii) the amount of such distribution to holders of each
Class of REMIC Regular Certificates allocable to (A)
interest and (B) Prepayment Premiums;
(iii) the number of outstanding mortgage loans and the
aggregate principal balance and Scheduled Principal
Balance of the mortgage loans at the close of
business on the related Determination Date;
(iv) the number and aggregate Scheduled Principal Balance
of mortgage loans:
(A) delinquent 30 to 59 days,
(B) delinquent 60 to 89 days,
(C) delinquent 90 days or more,
(D) as to which foreclosure proceedings have
been commenced, or
(E) as to which bankruptcy proceedings have
been commenced;
(v) with respect to any REO Property included in the
trust, the principal balance of the related mortgage
loan as of the date of acquisition of the REO
Property and the Scheduled Principal Balance of the
mortgage loan;
(vi) as of the related Determination Date:
(A) as to any REO Property sold during the
related Collection Period, the date of the
related determination by the special
servicer that it has recovered all payments
which it expects to be finally recoverable
and the amount of the proceeds of such sale
deposited into the Certificate Account, and
(B) the aggregate amount of other revenues
collected by the special servicer with
respect to each REO Property during the
related Collection Period and credited to
the Certificate Account, in each case
identifying such REO Property by the loan
number of the related mortgage loan;
(vii) the aggregate Certificate Balance or Notional Amount
of each Class of REMIC Regular Certificates before
and after giving effect to the distribution made on
such Distribution Date;
(viii) the aggregate amount of Principal Prepayments made
during the related Collection Period;
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(ix) the Pass-Through Rate applicable to each Class of
REMIC Regular Certificates for such Distribution
Date;
(x) the aggregate amount of servicing fees paid to the
master servicer, the Primary Servicers and the
special servicer and the holders of the rights to
Excess Servicing Fees;
(xi) the amount of Unpaid Interest, Realized Losses or
Expense Losses, if any, incurred with respect to the
mortgage loans, including a break out by type of such
Expense Losses;
(xii) the aggregate amount of Servicing Advances and P&I
Advances outstanding, separately stated, that have
been made by the master servicer, the trustee and the
fiscal agent;
(xiii) the amount of any Appraisal Reductions effected
during the related Collection Period on a
loan-by-loan basis and the total Appraisal Reductions
in effect as of such Distribution Date; and
(xiv) such other information and in such form as will be
specified in the Pooling and Servicing Agreement.
(b) A report containing information regarding the mortgage loans
as of the end of the related Collection Period, which report
will contain substantially the categories of information
regarding the mortgage loans presented in Appendix I and will
be presented in a tabular format substantially similar to the
format utilized in Appendix I.
The reports described in clauses (a) and (b) above may be combined into
one report for purposes of dissemination.
In the case of information furnished pursuant to subclauses (a)(i),
(a)(ii) and (a)(xi) above, the amounts shall be expressed as a dollar amount per
$1,000 of original actual principal amount of the certificates for all
certificates of each applicable Class.
The trustee will make the foregoing reports and certain other
information available each month to any interested party via the trustee's
website, which shall initially be located at www.lnbabs.com. In addition, the
trustee will also make certain other additional reports available via the
trustee's website on a restricted basis to Morgan Stanley Dean Witter Capital I
Inc., the Rating Agencies, parties to the Pooling and Servicing Agreement, the
Underwriters, Certificateholders and any beneficial owners of Certificates who
provide the trustee with an investor certification satisfactory to the trustee.
The trustee will make no representations or warranties as to the accuracy or
completeness of such documents and will assume no responsibility therefor. In
addition, the trustee may disclaim responsibility for any information of which
it is not the original source.
In connection with providing access to the trustee's website, the
trustee may require registration and the acceptance of a disclaimer. The trustee
will not be liable for the dissemination of information in accordance with the
Pooling and Servicing Agreement.
On an annual basis, the master servicer is required to deliver the
Annual Report to the trustee, which will make such report available as described
above to the Underwriters, the Certificateholders, Morgan Stanley Dean Witter
Capital I Inc. and anyone Morgan Stanley Dean Witter Capital I Inc. or either
Underwriter reasonably designates, the special servicer, the Rating Agencies,
and, any Certificateholder.
The trustee shall make available at its corporate trust offices (either
in physical or electronic form), during normal business hours, upon reasonable
advance written notice for review by any certificateholder, any certificate
owner, any prospective investor, the Underwriters, each rating agency, the
special servicer and the depositor, originals or copies of, among other things,
the following items: (i) the most recent property inspection reports in the
possession of the trustee in respect of each Mortgaged Property and REO
Property, (ii) the most recent Mortgaged Property/REO Property annual operating
statement and rent roll, if any, collected or otherwise obtained
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by or on behalf of the master servicer or the special servicer and delivered to
the trustee, (iii) any Phase I Environmental Report or engineering report
prepared or appraisals performed in respect of each Mortgaged Property
provided, however, that the trustee shall be permitted to require payment by
the requesting party (other than either rating agency) of a sum sufficient to
cover the reasonable expenses actually incurred by the trustee of providing
access or copies (including electronic or digital copies) of any such
information reasonably requested in accordance with the preceding sentence.
Special Servicer Reports
On or about each Determination Date, the special servicer will prepare,
or provide the master servicer with the information to prepare, the Special
Servicer Reports with respect to Specially Serviced Mortgage Loans as required
by the Pooling and Servicing Agreement.
Other Information
The Pooling and Servicing Agreement generally requires that the trustee
make available, at its corporate trust offices or at such other office as it may
reasonably designate, during normal business hours, upon reasonable advance
notice for review by any Certificateholder, each Rating Agency or Morgan Stanley
Dean Witter Capital I Inc., originals or copies of, among other things, the
following items, except to the extent not permitted by applicable law or under
any of the mortgage loan documents:
o the Pooling and Servicing Agreement and any amendments thereto;
o all reports or statements delivered to holders of the relevant Class of
certificates since the Closing Date;
o all officer's certificates delivered to the trustee since the Closing Date;
o all accountants' reports delivered to the trustee since the Closing Date;
o the most recent property inspection report prepared by or on behalf of the
master servicer or the special servicer in respect of each mortgaged
property;
o the most recent mortgaged property annual operating statements and rent
rolls, if any, collected by or on behalf of the master servicer or the
special servicer;
o any and all modifications, waivers and amendments of the terms of a
mortgage loan entered into by the master servicer and/or the special
servicer; and
o any and all officer's certificates and other evidence delivered to the
trustee to support the master servicer's determination that any Advance was
not or, if made, would not be, recoverable.
Copies of any and all of the foregoing items and any servicer reports
will be available from the trustee upon request; however, the trustee will be
permitted to require the requesting party to pay a sum sufficient to cover the
reasonable costs and expenses of providing such copies. Recipients of such
information will generally be required to acknowledge that such information may
be used only in connection with an evaluation of the certificates by such
recipient.
Book-Entry Certificates
Until such time, if any, as definitive certificates are issued in
respect of the offered certificates, the foregoing information and access will
be available to the related Certificate Owners only to the extent it is
forwarded by, or otherwise available through, DTC and its Participants or
otherwise made available publicly by the trustee. The manner in which notices
and other communications are conveyed by DTC to its Participants, and by such
Participants to the Certificate Owners, will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
S-59
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The master servicer, the special servicer, the trustee and Morgan
Stanley Dean Witter Capital I Inc. are required to recognize as
Certificateholders only those persons in whose names the certificates are
registered with the Certificate Registrar as of the related Record Date;
however, any Certificate Owner that has delivered to the Certificate Registrar a
written certification, in the form prescribed by the Pooling and Servicing
Agreement, regarding such Certificate Owner's beneficial ownership of offered
certificates will be recognized as a Certificateholder for purposes of obtaining
the foregoing information and access.
EXAMPLE OF DISTRIBUTIONS
The following chart sets forth an example of distributions on the
certificates as if the Certificates had been issued in October 2000:
The close of business on
October 1 (A) Cut-off Date.
October 31 (B) Record Date for all Classes of
Certificates.
October 2 - November 8 (C) The Collection Period. The
master servicer receives
Scheduled Payments due after
the Cut-off Date and any
Principal Prepayments made
after the Cut-off Date and on
or prior to November 8.
November 8 (D) Determination Date.
November 14 (E) Master Servicer Remittance Date.
November 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 the Cut-off Date, after deducting principal payments due on
or before such date, whether or not received. Principal payments due on or
before such date, and the accompanying interest payments, are not part of the
trust.
(B) Distributions on the next Distribution Date will be made to
those persons that are Certificateholders of record on this date. Each
subsequent Record Date will be the last business day of the month preceding the
related Distribution Date.
(C) Any Scheduled Payments due and collected and Principal
Prepayments collected, after the Cut-off Date and on or prior to November 8,
2000 will be deposited in the Certificate Account. Each subsequent Collection
Period will begin on the day after the Determination Date in the month preceding
the month of each Distribution Date and will end on the Determination Date in
the month in which the Distribution Date occurs.
(D) As of the close of business on the Determination Date, the
master servicer will have determined the amounts of principal and interest that
will be remitted with respect to the related Collection Period.
(E) The master servicer will remit to the trustee no later than
the business day prior to the related Distribution Date all amounts held by the
master servicer, and any P&I Advances required to be made by the master
servicer, that together constitute the Available Distribution Amount for such
Distribution Date.
(F) The trustee will make distributions to Certificateholders on
the 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 Bank National Association will act as the trustee. LaSalle Bank
National Association is a subsidiary of LaSalle National Corporation which is a
subsidiary of the fiscal agent. The trustee, is at all times required to be, and
will be required to resign if it fails to be, (i) an institution insured by the
FDIC, (ii) a corporation, national bank or national banking association,
organized and doing business under the laws of the United States of America or
any state thereof, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by federal or state authority and (iii) an
institution whose short-term debt obligations are at all times rated not less
than "Prime-1" by Moody's and whose long-term senior unsecured debt, or that of
its fiscal agent, if applicable, is rated not less than AA by Fitch and Aa2 by
Moody's, or otherwise acceptable to the Rating Agencies as evidenced by a Rating
Agency Confirmation. The corporate trust office of the trustee responsible for
administration of the trust is located at 135 South LaSalle Street, Suite 1625,
Chicago, Illinois 60603, Attention: Asset-Backed Securities Trust Services Group
- Morgan Stanley Dean Witter Capital I Inc., Commercial Mortgage Pass-Through
Certificates, Series 2000-LIFE2. As of December 31, 1999, the trustee had assets
of approximately $30.4 billion. See "Servicing of the Mortgage Loans--Duties of
the Trustee", "Servicing of the Mortgage Loans--Certain Matters Regarding the
Trustee" and "Servicing of the Mortgage Loans--Resignation and Removal of the
"Trustee" in the prospectus.
The trustee will be paid the Trustee Fee as compensation for its duties
under the Pooling and Servicing Agreement.
The Fiscal Agent
ABN AMRO Bank N.V., a Netherlands banking corporation and the indirect
corporate parent of the trustee, will act as fiscal agent for the trust and will
be obligated to make any Advance required to be made, and not made, by the
master servicer and the trustee under the Pooling and Servicing Agreement,
provided that the fiscal agent will not be obligated to make any Advance that it
deems to be a Nonrecoverable Advance. The fiscal agent will be entitled -- but
not obligated -- to rely conclusively on any determination by the master
servicer, the special servicer -- solely in the case of Servicing Advances -- or
the trustee that an Advance, if made, would be a Nonrecoverable Advance. The
fiscal agent will be entitled to reimbursement for each Advance made by it in
the same manner and to the same extent as, but prior to, the master servicer and
the trustee. See "--Advances" above. The fiscal agent will be entitled to
various rights, protections and indemnities similar to those afforded the
trustee. The trustee will be responsible for payment of the compensation of the
fiscal agent. As of December 31, 1999, the fiscal agent had consolidated assets
of approximately $460 billion. In the event that LaSalle Bank National
Association shall, for any reason, cease to act as trustee under the Pooling and
Servicing Agreement, ABN AMRO Bank N.V. likewise shall no longer serve in the
capacity of fiscal agent thereunder.
EXPECTED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The Expected Final Distribution Date for each Class of certificates
presented under "Summary of Prospectus Supplement--Expected Final Distribution
Date" in this prospectus supplement is the date on which such Class is expected
to be paid in full, assuming timely payments and no Principal Prepayments will
be made on the mortgage loans in accordance with their terms and otherwise based
on the Structuring Assumptions.
The Rated Final Distribution Date of each Class of certificates is the
Distribution Date in October 2033.
The ratings assigned by the Rating Agencies to each Class of Principal
Balance Certificates reflects an assessment of the likelihood that the
Certificateholders of such Class will receive, on or before the Rated Final
Distribution Date, all principal distributions to which they are entitled.
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<PAGE>
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
GENERAL
The yield to maturity on the offered certificates will be affected by
the price paid by the Certificateholder, the related Pass-Through Rates and the
rate, timing and amount of distributions on such offered certificates. The rate,
timing and amount of distributions on any such certificate will in turn depend
on, among other things:
o the Pass-Through Rate for such certificate;
o the rate and timing of principal payments, including Principal Prepayments,
and other principal collections on the mortgage loans and the extent to
which such amounts are to be applied in reduction of the Certificate Balance
or Notional Amount of such certificate;
o the rate, timing and severity of Realized Losses and Expense Losses and the
extent to which such losses and expenses are allocable in reduction of the
Certificate Balance or Notional Amount of such certificate; and
o the timing and severity of any Net Aggregate Prepayment Interest Shortfalls
and the extent to which such shortfalls are allocable in reduction of the
Distributable Certificate Interest Amount payable on such certificate.
In addition, the effective yield to holders of the offered certificates
will differ from the yield otherwise produced by the applicable Pass-Through
Rate and purchase prices of such certificates because interest distributions
will not be payable to such holders until at least the 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 B, Class C and Class D Certificates
will be subject to the Weighted Average Net Mortgage Rate. The Pass-Through Rate
for the Class X Certificates will be variable and will generally equal the
excess, if any, of (i) the Weighted Average Net Mortgage Rate for such
Distribution Date, over (ii) the weighted average of the Pass-Through Rates
applicable to 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, Class O
and Class P Certificates for such Distribution Date, the relevant weighting to
be on the basis of the respective aggregate Certificate Balances of such Classes
of Certificates immediately prior to such Distribution Date. Accordingly, the
yields on the Class B, Class C and Class D 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 for such Certificates 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 the Class X Certificates will be extremely
sensitive to, and 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 or
Notional Amount of such Class of certificates. As described herein, the
Principal Distribution Amount for each Distribution Date will be distributable
entirely in respect of the Class A-1 Certificates until the Certificate Balance
thereof is reduced to zero, and will thereafter be distributable entirely in
respect of each other Class of 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,
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including for this purpose, collections made in connection with liquidations of
mortgage loans due to defaults, casualties or condemnations affecting the
mortgaged properties and purchases of mortgage loans out of the trust.
Prepayments and, assuming the respective maturity dates therefor have
not occurred, liquidations of the mortgage loans will result in distributions on
the certificates of amounts that would otherwise be distributed over the
remaining terms of the mortgage loans and will tend to shorten the weighted
average lives of the Principal Balance Certificates. Any early termination of
the trust as described herein under "Description of the Offered
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 or Notional Amounts
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 or Notional Amounts
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, Class F and Class G Certificates, the allocation of a portion of
collected Prepayment Premiums to the certificates as described herein is
intended to mitigate those risks; however, such allocation, if any, may be
insufficient to offset fully the adverse effects on yield that such prepayments
may have. The Prepayment Premium payable, if any, with respect to any Mortgage
Loan, is required to be calculated as presented in "Appendix II - Certain
Characteristics of the Mortgage Loans."
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. 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. Morgan Stanley Dean Witter Capital
I Inc. 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 P 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 O to A -- alphabetical order of Class designation, until the remaining
Certificate Balance of each such Class of certificates has been reduced to zero;
provided that with respect to interest, Realized Losses and Expense Losses of
interest will be allocated to the Class A-1, Class A-2 and Class X Certificates,
pro rata based on interest distributable on such certificates. Net Aggregate
Prepayment Interest Shortfalls will be borne by the holders of each Class of
certificates, pro rata in each case reducing interest otherwise payable thereon.
Shortfalls arising from delinquencies and defaults, to the extent the master
servicer determines that P&I Advances would be nonrecoverable, Appraisal
Reductions, Expense Losses
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and Realized Losses generally will result in, among other things, a shortfall
in current distributions to the most subordinate Class of certificates
outstanding.
RELEVANT FACTORS
The rate and timing of principal payments and defaults and the severity
of losses on the mortgage loans may be affected by a number of factors
including, without limitation, prevailing interest rates, the terms of the
mortgage loans--for example, provisions prohibiting Principal Prepayments for
certain periods and/or requiring the payment of Prepayment Premiums, and
amortization terms that require Balloon Payments--the demographics and relative
economic vitality of the areas in which the mortgaged properties are located and
the general supply and demand for rental units or comparable commercial space,
as applicable, in such areas, the quality of management of the mortgaged
properties, the servicing of the mortgage loans, possible changes in tax laws
and other opportunities for investment. See "Risk Factors" in this prospectus
supplement and "Risk Factors" in the prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
interest rate, the related borrower has an incentive to refinance its mortgage
loan. A requirement that a prepayment be accompanied by a Prepayment Premium may
not provide a sufficient economic disincentive to deter a borrower from
refinancing at a more favorable interest rate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance mortgaged properties in order to realize their equity therein, to meet
cash flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws, which are subject to change, to sell
mortgaged properties prior to the exhaustion of tax depreciation benefits.
Morgan Stanley Dean Witter Capital I Inc. makes no representation as to
the particular factors that will affect the rate and timing of prepayments and
defaults on the mortgage loans, as to the relative importance of such factors,
as to the percentage of the principal balance of the mortgage loans that will be
prepaid or as to whether a default will have occurred as of any date or as to
the overall rate of prepayment or default on the mortgage loans.
WEIGHTED AVERAGE LIFE
Weighted average life refers to the average amount of time from the
date of issuance of a security until each dollar of principal of such security
will be repaid to the investor. The weighted average life of any Principal
Balance Certificate will be influenced by, among other things, the rate at which
principal on the mortgage loans is paid or otherwise collected or advanced and
applied to reduce the Certificate Balance of such certificate.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The prepayment model used in this prospectus
supplement is the Constant Prepayment Rate or CPR model. Morgan Stanley Dean
Witter Capital I Inc. makes no representation as to the appropriateness of using
the CPR model for purposes of analyzing an investment in the offered
certificates.
The following tables indicate the percent of the initial Certificate
Balance of each Class of offered certificates after each of the dates shown and
the corresponding weighted average life of each such Class of the certificates,
if the Mortgage Pool were to prepay at the indicated levels of CPR, and sets
forth the percentage of the initial Certificate Balance or of such certificates
that would be outstanding after each of the dates shown. The tables below have
also been prepared generally on the basis of the Structuring Assumptions.
The mortgage loans do not have all of the characteristics of the
Structuring Assumptions. To the extent that the mortgage loans have
characteristics that differ from those assumed in preparing the tables, the
Classes of Certificates analyzed in the tables may mature earlier or later than
indicated by the tables. Additionally, mortgage loans generally do not prepay at
any constant rate. Accordingly, it is highly unlikely that the mortgage loans
will prepay in a manner consistent with the Structuring Assumptions.
Furthermore, it is unlikely that the mortgage loans will experience no defaults
or losses. In addition, variations in the actual prepayment experience and the
balance of
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the mortgage loans that prepay may increase or decrease the percentages of
initial Certificate Balances, and shorten or extend the weighted average lives,
shown in the following tables. Investors are urged to conduct their own
analyses of the rates at which the mortgage loans may be expected to prepay.
For the purposes of each table, the weighted average life of a
certificate is determined by:
o multiplying the amount of each reduction in the Certificate Balance
thereon by the number of years from the date of issuance of the
certificate to the related Distribution Date;
o summing the results; and
o dividing the sum by the aggregate amount of the reductions in the
Certificate Balance of such certificate.
The characteristics of the mortgage loans differ in substantial
respects from those assumed in preparing the tables below, and the tables are
presented for illustrative purposes only. In particular, it is unlikely that the
Mortgage Pool will not experience any defaults or losses, or that the Mortgage
Pool or any mortgage loan will prepay at any constant rate. Therefore, there can
be no assurance that the mortgage loans will prepay at any particular rate.
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-1 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
---------------------- -------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100% 100%
October 2001 95% 95% 95% 95% 95% 95%
October 2002 89% 89% 89% 89% 89% 89%
October 2003 83% 83% 83% 83% 83% 83%
October 2004 76% 76% 76% 76% 76% 76%
October 2005 69% 69% 69% 69% 69% 69%
October 2006 61% 61% 61% 61% 61% 61%
October 2007 41% 41% 41% 41% 41% 41%
October 2008 0% 0% 0% 0% 0% 0%
Weighted average life (years) 5.70 5.70 5.70 5.70 5.70 5.70
</TABLE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-2 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
---------------------- -------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100% 100%
October 2001 100% 100% 100% 100% 100% 100%
October 2002 100% 100% 100% 100% 100% 100%
October 2003 100% 100% 100% 100% 100% 100%
October 2004 100% 100% 100% 100% 100% 100%
October 2005 100% 100% 100% 100% 100% 100%
October 2006 100% 100% 100% 100% 100% 100%
October 2007 100% 100% 100% 100% 100% 100%
October 2008 97% 96% 96% 96% 96% 96%
October 2009 78% 78% 78% 78% 78% 78%
October 2010 0% 0% 0% 0% 0% 0%
Weighted average life (years) 9.34 9.34 9.34 9.34 9.34 9.33
</TABLE>
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<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS B CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
---------------------- -------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100% 100%
October 2001 100% 100% 100% 100% 100% 100%
October 2002 100% 100% 100% 100% 100% 100%
October 2003 100% 100% 100% 100% 100% 100%
October 2004 100% 100% 100% 100% 100% 100%
October 2005 100% 100% 100% 100% 100% 100%
October 2006 100% 100% 100% 100% 100% 100%
October 2007 100% 100% 100% 100% 100% 100%
October 2008 100% 100% 100% 100% 100% 100%
October 2009 100% 100% 100% 100% 100% 100%
October 2010 0% 0% 0% 0% 0% 0%
Weighted average life (years) 9.88 9.88 9.88 9.88 9.88 9.88
</TABLE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS C CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
---------------------- -------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100% 100%
October 2001 100% 100% 100% 100% 100% 100%
October 2002 100% 100% 100% 100% 100% 100%
October 2003 100% 100% 100% 100% 100% 100%
October 2004 100% 100% 100% 100% 100% 100%
October 2005 100% 100% 100% 100% 100% 100%
October 2006 100% 100% 100% 100% 100% 100%
October 2007 100% 100% 100% 100% 100% 100%
October 2008 100% 100% 100% 100% 100% 100%
October 2009 100% 100% 100% 100% 100% 100%
October 2010 0% 0% 0% 0% 0% 0%
Weighted average life (years) 9.88 9.88 9.88 9.88 9.88 9.88
</TABLE>
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>
Closing Date 100% 100% 100% 100% 100% 100%
October 2001 100% 100% 100% 100% 100% 100%
October 2002 100% 100% 100% 100% 100% 100%
October 2003 100% 100% 100% 100% 100% 100%
October 2004 100% 100% 100% 100% 100% 100%
October 2005 100% 100% 100% 100% 100% 100%
October 2006 100% 100% 100% 100% 100% 100%
October 2007 100% 100% 100% 100% 100% 100%
October 2008 100% 100% 100% 100% 100% 100%
October 2009 100% 100% 100% 100% 100% 100%
October 2010 0% 0% 0% 0% 0% 0%
Weighted average life (years) 9.88 9.88 9.88 9.88 9.88 9.88
</TABLE>
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<PAGE>
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of one hundred three (103) fixed-rate
mortgage loans with an aggregate Cut-off Date Balance of $765,349,379 subject to
a permitted variance of plus or minus 5%. The Cut-off Date Balances of the
mortgage loans range from $1,198,438 to $57,039,856, and the mortgage loans have
an average Cut-off Date Balance of $7,430,576. All numerical information
concerning the mortgage loans contained in this prospectus supplement is
approximate.
The mortgage loans were originated between February 25, 1994 and
September 11, 2000. As of the Cut-off Date, none of the mortgage loans were 30
days or more delinquent, or had been 30 days or more delinquent during the 12
calendar months preceding the Cut-off Date. Brief summaries of the material
terms of the mortgage loans associated with the ten (10) largest borrower
concentrations in the Mortgage Pool are contained in Appendix III attached.
One hundred (100) mortgage loans, representing 96.3% of the Initial
Pool Balance, are evidenced by a mortgage note and secured by a mortgage, deed
of trust or similar security instrument that creates a first mortgage lien on a
fee simple estate in one or more income-producing mortgaged properties. In three
(3) of those cases, representing 1.9% of the Initial Pool Balance, the
borrower's interest in the property consists of a fee interest in one portion
and a ground leasehold interest in another portion of the property. In each of
those cases, the fee owner has subjected its interest to the related mortgage,
therefore, we consider the borrower's interests in those properties to be fee
simple estate for purposes of this prospectus supplement. One (1) mortgage loan,
representing 0.5% of the Initial Pool Balance, is secured by a leasehold
mortgage, deed of trust or similar security instrument that creates a first
mortgage lien in a leasehold interest in one or more income-producing real
properties. Two (2) mortgage loans, representing 3.2% of the Initial Pool
Balance, are secured by a leasehold mortgage, deed of trust or similar security
instrument that creates a first mortgage lien in both a fee and a leasehold
interest in one or more income-producing real properties.
On or prior to the Closing Date, Morgan Stanley Dean Witter Capital I
Inc. will acquire the mortgage loans from the sellers, in each case pursuant to
a Mortgage Loan Purchase Agreement to be entered into between Morgan Stanley
Dean Witter Capital I Inc. and the particular seller. Morgan Stanley Dean Witter
Capital I Inc. will thereupon sell its interests in the mortgage loans, without
recourse, to the trustee for the benefit of the Certificateholders. See "--The
Sellers" and "--Assignment of Mortgage Loans" below.
MATERIAL TERMS AND CHARACTERISTICS OF THE MORTGAGE LOANS
Mortgage Rates; Calculations of Interest
The mortgage loans bear interest at mortgage rates that will remain
fixed for their entire terms. Seventy-one (71) mortgage loans, representing
48.9% of the Initial Pool Balance, accrue interest on the basis of the actual
number of days elapsed each month in a 360-day year. Twenty-nine (29) of the
mortgage loans, representing 38.8% of the Initial Pool Balance, accrue interest
on the basis of a 360-day year consisting of twelve 30-day months. Three (3)
mortgage loans, representing 12.2% of the Initial Pool Balance, accrue interest
on the basis of the actual number of days elapsed each interest accrual period
and the actual number of days in such year.
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<PAGE>
Property Types
The mortgaged properties consist of the following property types:
o Office - Twenty-seven (27) of the mortgage loans, which
represent 30.0% of the Initial Pool Balance, are secured by
office properties;
o Industrial - Thirty-four (34) of the mortgage loans, which
represent 25.8% of the Initial Pool Balance, are secured by
industrial properties;
o Retail - Twenty-six (26) of the mortgage loans, which
represent 21.5% of the Initial Pool Balance, are secured by
retail properties;
o Multifamily - Twelve (12) of the mortgage loans, which
represent 19.5% of the Initial Pool Balance, are secured by
multifamily properties;
o Assisted Living - Two (2) of the mortgage loans, which
represent security for 2.2% of the Initial Pool Balance, are
secured by assisted living properties;
o Hospitality - One (1) of the mortgage loans, which represents
security for 0.5% of the Initial Pool Balance, are secured by
hospitality properties;
o Self-Storage - One (1) of the mortgage loans, which
represents security for 0.4% of the Initial Pool Balance, are
secured by self-storage properties;
Property Location
The following eight states contain the largest concentrations of
mortgaged properties securing the mortgage loans: New Jersey, California, New
York, Maryland, Florida, Arizona, South Carolina and Texas.
o Eighteen (18) mortgage loans, representing 25.7% of the
Initial Pool Balance are secured by mortgaged properties
located in New Jersey;
o Twenty-one (21) mortgage loans, representing 21.3% of the
Initial Pool Balance are secured by mortgaged properties
located in California. Of the mortgaged properties located in
California, ten (10) of such mortgaged properties,
representing 9.8% of the Initial Pool Balance, are located in
Northern California, and eleven (11) mortgaged properties,
representing 11.5% of the Initial Pool Balance, are located
in Southern California.
o Five (5) mortgage loans, representing 7.4% of the Initial
Pool Balance are secured by mortgaged properties located in
New York;
o Six (6) mortgage loans, representing 4.7% of the Initial Pool
Balance are secured by mortgaged properties located in
Maryland;
o Eight (8) mortgage loans, representing 4.6% of the Initial
Pool Balance are secured by mortgaged properties located in
Florida;
o Five (5) mortgage loans, representing 4.2% of the Initial
Pool Balance are secured by mortgaged properties located in
Arizona;
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o Four (4) mortgage loans, representing 4.1% of the Initial
Pool Balance are secured by mortgaged properties located in
South Carolina; and
o Five (5) mortgage loans, representing 3.7% of the Initial
Pool Balance are secured by mortgaged properties located in
Texas.
Due Dates
Ninety-seven (97) of the mortgage loans, representing 94.4% of the
Initial Pool Balance, have Due Dates on the first day of each calendar month,
including one (1) mortgage loan which has a Due Date on the first day of each
calendar month but has a fifteen day grace period. Three (3) of the mortgage
loans, representing 2.4% of the Initial Pool Balance, have Due Dates on the
third day of each calendar month without any grace period for late payments. Two
(2) of the mortgage loans, representing 0.7% of the Initial Pool Balance, have
Due Dates on the fifth day of each calendar month without any grace period for
late payments. One (1) of the mortgage loans, representing 2.5% of the Initial
Pool Balance, has a Due Date on the fifteenth day of each calendar month without
any grace period for late payments.
Amortization
The mortgage loans have the following amortization features:
o One hundred two (102) of the mortgage loans, representing 97.7% of the
Initial Pool Balance, are Balloon Loans. The amount of the Balloon Payments
on those mortgage loans that accrue interest on a basis other than a
360-day year consisting of 30-day months will be greater, and the actual
amortization terms will be longer, than would be the case if such mortgage
loans accrued interest on such basis 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 The remaining mortgage loan, representing 2.3% of the Initial Pool Balance
of the mortgage loans as of October 1, 2000 is fully amortizing and is
expected to have no principal balance as of its respective stated maturity
date.
Prepayment Restrictions
As of the Cut-off Date, the following prepayment restrictions applied
to the mortgage loans:
o Seventy-six (76) mortgage loans, representing 57.9% of the Initial Pool
Balance, prohibit voluntary principal prepayments during 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 Twenty-four (24) mortgage loans, representing 30.9% of the Initial Pool
Balance, prohibit voluntary principal prepayments during a Lock-out Period
and thereafter provide for prepayment premiums calculated on the basis of
the greater of a yield maintenance formula and 1% of the amount prepaid.
o One (1) mortgage loan, representing 7.5% of the Initial Pool Balance,
prohibits voluntary principal prepayments during a Lock-out Period and
thereafter provides for prepayment premiums calculated on the basis of the
greater of a yield maintenance formula and 0.75% of the amount prepaid.
o One (1) mortgage loan, representing 2.3% of the Initial Pool Balance,
prohibits voluntary principal prepayments during a Lock-out Period and
thereafter provides for prepayment premiums calculated on the basis of the
greater of a yield maintenance formula and 2% of the amount prepaid for a
specified period and the greater of a yield maintenance formula and 1%
thereafter.
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<PAGE>
o One (1) mortgage loan, representing 1.5% of the initial outstanding pool
balance prohibits voluntary principal payments during a Lock-out period and
thereafter provides for prepayment premiums calculated on the basis of the
greater of a yield maintenance formula and 1% of the amount prepaid but
permits the related borrower (after an initial period of at least two years
following the date of issuance of the certificates) to defease the mortgage
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 Notwithstanding the foregoing, the mortgage loans generally provide for a
period of two (2) to six (6) payments prior to and including the maturity
date in which the related borrower may prepay the mortgage loan without
premium or defeasance requirements.
The method of calculation of any Prepayment Premium will vary for any
mortgage loan as presented in "Appendix II - Material Characteristics of the
Mortgage Loans."
Non-Recourse Obligations
The mortgage loans are generally non-recourse obligations of the
related borrowers and, upon any such borrower's default in the payment of any
amount due under the related mortgage loan, the holder thereof may look only to
the related mortgaged property for satisfaction of the borrower's obligations.
In those cases where the loan documents permit recourse to the borrower or a
guarantor, Morgan Stanley Dean Witter Capital I Inc. has not evaluated the
financial condition of any such person, and prospective investors should thus
consider all of the mortgage loans to be non-recourse. None of the mortgage
loans is insured or guaranteed by the United States, any government entity or
instrumentality or mortgage insurer.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions
The mortgages generally contain due-on-sale and due-on-encumbrance
clauses that permit the holder of the mortgage to accelerate the maturity of the
related mortgage loan if the borrower sells or otherwise transfers or encumbers
the related mortgaged property or that prohibit the borrower from doing so
without the consent of the holder of the Mortgage. However, the mortgage loans
generally permit transfers of the related mortgaged property, subject to
reasonable approval of the proposed transferee by the holder of the mortgage,
payment of an assumption fee, which may be waived by the master servicer or the
special servicer, as the case may be, or, if collected, will be paid to the
master servicer or the special servicer as additional servicing compensation,
and certain other conditions.
In addition, some of the mortgage loans permit the borrower to transfer
the related mortgaged property to an affiliate or subsidiary of the borrower, or
an entity of which the borrower is the controlling beneficial owner, upon the
satisfaction of certain limited conditions set forth in the applicable mortgage
loan documents and/or as determined by the 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.
Subordinate and Other Financing
As of October 1, 2000, none of the mortgaged properties secures any
loans other than the related mortgage loan except for Loan #6 (Pennsylvania
Building), which has a second mortgage in the amount of $4,500,000 secured by
the mortgaged property that is subject to a subordination agreement, and Loan
#19 (Woodman Plaza), which is subject to second mortgages in the amount of
$1,500,000 and $250,000. The borrower with respect to Loan #70 (Premier
Corporate Center) has obtained additional financing in the amount of $1,670,000
which is not secured by the related mortgaged property.
One hundred (100) mortgage loans, representing 94.0% of the Initial
Pool Balance, either prohibit the respective borrowers from incurring
subordinate indebtedness secured by the mortgaged property or require the
consent of the holder of the mortgage prior to doing so. Three (3) mortgage
loans, representing 6.0% of the Initial Pool Balance permit the respective
borrower to incur subordinate indebtedness secured by the mortgaged property.
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<PAGE>
Loan #1 (Towers at Portside), Loan #8 (Pinnacle at Squaw Peak) and Loan
#10 (Cross Creek Retail), collectively representing 12.2% of the aggregate
principal balance of all the mortgage loans as of October 1, 2000 permit the
imposition of liens other than from mortgage financing, such as judgments,
mechanics liens or the failure to pay taxes, and the existence of such liens
does not constitute an event of default.
Twelve (12) mortgage loans, which represent 25.0% of the aggregate
principal balance of all the mortgage loans as of October 1, 2000, permit the
borrower to engage in additional financing that is not secured by the mortgaged
property.
Morgan Stanley Dean Witter Capital I Inc. makes no representation as to
whether any other secured subordinate financing currently encumbers any
mortgaged property or whether a third-party holds debt secured by a pledge of an
equity interest in a related borrower. See "Certain Legal Aspects of the
Mortgage Loans and the Leases--Subordinate Financing" in the prospectus and
"Risk Factors--Authority to Effect Other Borrowings Entails Risks" in this
prospectus supplement.
Generally all of the mortgage loans also permit the related borrower to
incur other unsecured indebtedness, including but not limited to trade payables,
in the ordinary course of business and to incur indebtedness secured by
equipment or other personal property located at the mortgaged property.
Additional Collateral
Three (3) of the mortgage loans, representing 1.9% of the Initial Pool
Balance, have additional collateral in the form of reserves under which monies
disbursed by the originating lender or letters of credit are reserved for
specified periods which are to be released only upon the satisfaction of certain
conditions by the borrower. If the borrowers do not satisfy conditions for
release of the monies or letters of credit by the outside release date, such
monies or letters of credit may be applied to partially repay the related
mortgage loan, in some cases, without the payment of any prepayment premium, or
may be held by the lender as additional security for the mortgage loans. In
addition, some of the other mortgage loans provide for reserves for items such
as deferred maintenance, environmental remediation, tenant improvements and
leasing commissions and capital improvements. For further information with
respect to additional collateral, see Appendix II.
ASSESSMENTS OF PROPERTY VALUE AND CONDITION
Appraisals
In connection with the origination or securitization of each 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.
Environmental Assessments
An environmental site assessment was performed with respect to each
mortgaged property generally within the twelve-month period preceding the
origination or securitization 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 which, if not undertaken, would have a
material adverse effect on the interests of the certificate holders. However, in
certain cases, the assessment disclosed the existence of or potential for
adverse
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<PAGE>
environmental conditions, generally the result of the activities of identified
tenants, adjacent property owners or previous owners of the mortgaged property.
In certain of such 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 such as letters of
credit or reserves. See "Risk Factors--Environmental Risks Relating to Specific
Mortgaged Properties" in this prospectus supplement.
Property Condition Assessments
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. Engineering reports by licensed engineers or consultants
were prepared, except for newly constructed properties, for all of the mortgaged
properties in connection with the origination or securitization of the related
mortgage loan. See "Risk Factors Risks Relating to Property Inspections" in this
prospectus supplement Environmental Assessments. In certain cases where material
deficiencies were noted in such reports, the related borrower was required to
establish reserves for replacement or repair or remediate the deficiency.
Seismic Review Process
In general, the underwriting guidelines applicable to the origination
of the mortgage loans required that prospective borrowers seeking loans secured
by properties located in California and areas of other states where seismic risk
is deemed material obtain a seismic engineering report of the building and,
based thereon and on certain statistical information, an estimate of probable
maximum loss ("PML"), in an earthquake scenario. Generally, any of the mortgage
loans as to which the property was estimated to have PML in excess of 20% of the
estimated replacement cost would either be subject to a lower loan-to-value
limit at origination, be conditioned on seismic upgrading (or appropriate
reserves or letter of credit for retrofitting), be conditioned on satisfactory
earthquake insurance or be declined.
The Mortgage Pool contains one (1) mortgage loan (Loan #95 -
Coorstek/Tetrafluor), representing 0.3% of the Initial Pool Balance, that has
PML in excess of 20% of the estimated replacement costs of the improvements and
is subject to the above-described mitigants.
Zoning and Building Code Compliance
Each seller took steps to establish that the use and operation of the
mortgaged properties that represent security for its mortgage loans were, at
their respective dates of origination, in compliance in all material respects
with applicable zoning, land-use and similar laws and ordinances, but no
assurance can be given that such steps revealed all possible violations.
Evidence of such compliance may have been in the form of legal opinions,
confirmations from government officials, title insurance endorsements, survey
endorsements and/or representations by the related borrower contained in the
related Mortgage Loan documents. Violations may be known to exist at any
particular mortgaged property, but the related seller has informed Morgan
Stanley Dean Witter Capital I Inc. that it does not consider any such violations
known to it to be material.
ADDITIONAL MORTGAGE LOAN INFORMATION
Each of the tables presented in Appendix I sets forth selected
characteristics of the Mortgage Pool presented, where applicable, as of the
Cut-off Date. For a detailed presentation of certain of the characteristics of
the mortgage loans and the mortgaged properties, on an individual basis, see
Appendix II hereto, and for a brief summary of the mortgage loans associated
with the ten (10) largest borrower concentrations significant mortgage loans in
the Mortgage Pool, see Appendix III hereto. Additional information regarding the
mortgage loans is contained in this prospectus supplement under "Risk Factors"
elsewhere in this "Description of the Mortgage Pool" section and under "Legal
Aspects of Mortgage Loans and the Leases" in the prospectus.
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<PAGE>
For purposes of the tables in Appendix I and for the information
presented in Appendix II and Appendix III:
(1) References to "DSCR" are references to "Debt Service Coverage
Ratios". In general, debt service coverage ratios are used by
income property lenders to measure the ratio of (a) cash
currently generated by a property or expected to be generated
by a property based upon executed leases that is available for
debt service to (b) required debt service payments. However,
debt service coverage ratios only measure the current, or
recent, ability of a property to service mortgage debt. If a
property does not possess a stable operating expectancy (for
instance, if it is subject to material leases that are
scheduled to expire during the loan term and that provide for
above-market rents and/or that may be difficult to replace), a
debt service coverage ratio may not be a reliable indicator of
a property's ability to service the mortgage debt over the
entire remaining loan term. For purposes of this prospectus
supplement, including for the tables in Appendix I and the
information presented in Appendix II and Appendix III, the
"Debt Service Coverage Ratio" or "DSCR" for any mortgage loan
is calculated pursuant to the definition thereof under the
"Glossary of Terms" in this prospectus supplement.
In connection with the calculation of DSCR and loan-to-value
ratios, 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
changes to operating statements and operating information
obtained from the respective borrowers, resulting in either an
increase or decrease in the estimate of Underwritable Cash
Flow derived therefrom, based upon the seller's evaluation of
such operating statements and operating information and the
assumptions applied by the respective borrowers in preparing
such statements and information. In most cases, borrower
supplied "trailing-12 months" income and/or expense
information or the most recent operating statements or rent
rolls were utilized. In some cases, partial year operating
income data was annualized, with certain adjustments for items
deemed not appropriate to be annualized. In some instances,
historical expenses were inflated. For purposes of calculating
Underwritable Cash Flow for mortgage loans where leases have
been executed by one or more affiliates of the borrower, the
rents under some of such leases have been adjusted to reflect
market rents for similar properties.
Historical operating results may not be available for some of
the mortgage loans which are secured by mortgaged properties
with newly constructed improvements, mortgaged properties with
triple net leases, mortgaged properties that have recently
undergone substantial renovations and newly acquired mortgaged
properties. In such cases, items of revenue and expense used
in calculating Underwritable Cash Flow were generally derived
from rent rolls, estimates set forth in the related appraisal,
leases with tenants or from other borrower-supplied
information. No assurance can be given with respect to the
accuracy of the information provided by any borrowers, or the
adequacy of the procedures used by the applicable seller in
determining the presented operating information.
The Debt Service Coverage Ratios are presented herein for
illustrative purposes only and, as discussed above, are
limited in their usefulness in assessing the current, or
predicting the future, ability of a mortgaged property to
generate sufficient cash flow to repay the related mortgage
loan. Accordingly, no assurance can be given, and no
representation is made, that the Debt Service Coverage Ratios
accurately reflect that ability.
(2) References in the tables to "Cut-off Date LTV" are references
to "Cut-off Date Loan-to-Value" and references to "Balloon
LTV" are references to "Balloon Loan-to-Value." For purposes
of this prospectus supplement, including for the tables in
Appendix I and the information presented in Appendix II and
Appendix III, the "Cut-off Date LTV," "Cut-off Date
Loan-to-Value," "Balloon LTV" or "Balloon Loan-to-Value" for
any Mortgage Loan is calculated pursuant to the definition
thereof under the "Glossary of Terms" in this prospectus
supplement.
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<PAGE>
The value of the related mortgaged property or properties for
purposes of determining the Cut-off Date LTV are each based on
the appraisals described above under "--Assessments of
Property Value and Condition--Appraisals".
No representation is made that any such value would
approximate either the value that would be determined in a
current appraisal of the related mortgaged property or the
amount that would be realized upon a sale.
(3) References to "weighted averages" are references to averages
weighted on the basis of the Cut-off Date Balances of the
related mortgage loans.
The sum in any column of any of the tables in Appendix I may not equal
the indicated total due to rounding.
Generally, the loan documents with respect to the mortgage loans
require the borrowers to provide the related lender with quarterly and/or annual
operating statements and rent rolls.
STANDARD HAZARD INSURANCE
The master servicer will, consistent with the Servicing Standard
require each borrower to maintain a fire and hazard insurance policy with
extended coverage in the manner required under the related mortgage loan.
Certain mortgage loans may permit such hazard insurance policy to be maintained
by a tenant at the related mortgaged property, or may permit the related
borrower to self-insure. The coverage of each such policy will be in an amount,
subject to a deductible customary in the related geographic area, that is not
less than the lesser of the full replacement cost of the improvements that
represent security for such mortgage loan, with no deduction for depreciation,
and the outstanding principal balance owing on such mortgage loan, but in any
event, unless 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 portion of the
improvements on a related mortgaged property was in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards (and such flood insurance has been made available), the master
servicer will cause to be maintained a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
in an amount representing coverage of at least the lesser of:
o the outstanding principal balance of the related mortgage loan; and
o the maximum amount of such insurance available for the related
mortgaged property, but only to the extent such mortgage loan permits
the lender to require such coverage and such coverage conforms to the
Servicing Standard.
If a borrower fails to maintain such hazard insurance, the master
servicer will be required to obtain such insurance and the cost thereof will be
a Servicing Advance, subject to a determination of recoverability. The special
servicer will be required to maintain fire insurance with extended coverage and,
if applicable, flood insurance on an REO Property in an amount not less than the
maximum amount obtainable with respect to such REO Property and the cost thereof
will be a Servicing Advance, subject to a determination of recoverability.
In addition, the master servicer may require any borrower to maintain
other forms of insurance as the master servicer may be permitted to require
under the related mortgage, including, but not limited to, loss of rents
endorsements and comprehensive public liability insurance. The master servicer
will not require borrowers to maintain earthquake insurance unless the related
borrower is required under the terms of its mortgage loan to maintain earthquake
insurance. Any losses incurred with respect to mortgage loans due to uninsured
risks, including earthquakes, mudflows and floods, or insufficient hazard
insurance proceeds may adversely affect payments to Certificateholders. The
special servicer will have the right, but not the obligation, at the expense of
the trust, to obtain earthquake insurance on any mortgaged property securing a
Specially Serviced Mortgage Loan and/or any REO Property so long as such
insurance is available at commercially reasonable rates.
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THE SELLERS
Principal Commercial Funding, LLC
PCF is wholly owned subsidiary of Principal Capital Management, LLC
which is a wholly owned subsidiary of Principal Life Insurance Company. PCF was
formed as a Delaware limited liability company to originate and acquire loans
secured by commercial and multi-family real estate. Each of the PCF loans was
originated and underwritten by PCF and/or its affiliates. The offices of PCF are
located at 801 Grand Avenue, Des Moines, IA 50392. PCF's phone number is (515)
248-3944.
John Hancock Real Estate Finance, Inc.
JHREF is a wholly-owned subsidiary of John Hancock Subsidiaries, Inc.
which is a wholly owned subsidiary of John Hancock Life Insurance Company. JHREF
was founded in 1982 and is headquartered in Boston, Massachusetts.
JHREF presently has six offices across the country and a loan servicing
center located in Atlanta, Georgia. Except for eleven (11) mortgage loans which
were underwritten and closed by John Hancock Life Insurance Company, each of the
JHREF Loans was closed by JHREF. Both JHREF and John Hancock Life Insurance
Company underwrote their mortgage loans at their headquarters in Boston,
Massachusetts. The principal offices of JHREF are located at 200 Clarendon
Street, 53rd Floor, Boston, Massachusetts 02117. JHREF's telephone number is
(617) 572-8716.
The Northwestern Mutual Life Insurance Company
Northwestern Mutual is a mutual insurance company founded in 1857 and
is headquartered in Milwaukee, Wisconsin. Northwestern Mutual presently has ten
regional real estate field offices across the country which, along with
Northwestern Mutual's Milwaukee headquarters, originates and services all
mortgage loans. Each of the Northwestern Mutual loans was originated and closed
by Northwestern Mutual. The headquarters of Northwestern Mutual are located at
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. Northwestern Mutual's
telephone number is (414) 271-1444.
SALE OF THE MORTGAGE LOANS
On or prior to the Closing Date, each seller will sell its mortgage
loans, without recourse, to Morgan Stanley Dean Witter Capital I Inc., and
Morgan Stanley Dean Witter Capital I Inc., in turn, will sell all of the
mortgage loans, without recourse, to the trustee for the benefit of the
Certificateholders. In connection with such assignments, each seller is required
in accordance with the related Mortgage Loan Purchase Agreement to deliver the
Mortgage File, with respect to each mortgage loan so assigned by it to the
trustee or its designee.
The trustee will be required to review the documents delivered by each
seller with respect to its mortgage loans within 75 days following the Closing
Date, and the trustee will hold the related documents in trust. Within 45 days
following the Closing Date, pursuant to the Pooling and Servicing Agreement, the
assignments with respect to each mortgage loan and any related assignment of
rents and leases, as described in the "Glossary of Terms" under the term
"Mortgage File", are to be completed in the name of the trustee, if delivered in
blank, and submitted for recording in the real property records of the
appropriate jurisdictions at the expense of the applicable Seller.
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 presented in the schedule of the mortgage loans
attached to the related Mortgage Loan Purchase Agreement is complete, true and
correct in all material respects;
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(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 or securitization 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) the seller has received no notice of the commencement of
any proceeding for the condemnation of all or any material portion of any
mortgaged property;
(10) the related mortgaged property is covered by an American Land
Title Association, or an equivalent form of, lender's title insurance policy
that insures that the related mortgage is a valid, first priority lien on such
mortgaged property, subject only to certain permitted encumbrances;
(11) the proceeds of the mortgage loan have been fully disbursed and
there is no obligation for future advances with respect thereto;
(12) an environmental site assessment was performed with respect to the
mortgaged property in connection with the origination or securitization of the
related mortgage loan, a report of each such assessment (or the most recent
assessment with respect to each mortgaged property) has been delivered to Morgan
Stanley Dean Witter Capital I Inc., and such seller has no knowledge of any
material and adverse environmental condition or circumstance affecting such
mortgaged property that was not disclosed in such report;
(13) each mortgage note, mortgage and other agreement that evidences or
secures the mortgage loan is, subject to certain creditors' rights exceptions
and other exceptions of general application, the legal, valid and binding
obligation of the maker thereof, enforceable in accordance with its terms, and
there is no valid defense, counterclaim or right of offset or rescission
available to the related borrower with respect to such mortgage note, mortgage
or other agreement;
(14) the related mortgaged property is, and is required pursuant to the
related mortgage to be, insured by casualty, business interruption 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;
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(16) the related borrower is not, to the seller's knowledge, a
debtor in any state or federal bankruptcy or insolvency proceeding;
(17) the mortgage loan is not cross-collateralized with any loan
other than one or more other mortgage loans;
(18) no mortgage requires the holder thereof to release all or any
material portion of the related mortgaged property from the lien thereof except
upon payment in full of the mortgage loan or, in certain cases, upon (a) the
satisfaction of certain legal and underwriting requirements and (b) except where
the portion of the related mortgaged property permitted to be released was not
considered by the seller to be material in underwriting the mortgage loan, the
payment of a release price and prepayment consideration in connection therewith;
(19) to 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, other than those defaults that are covered by
certain other of the preceding representations and warranties;
(20) the related mortgaged property consists of a 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 (or the related
estoppel letter or lender protection agreement between the seller and related
lessor) permits the interest of the lessee thereunder to be encumbered by the
related mortgage; (b) the lessee's interest in such ground lease is not subject
to any liens or encumbrances superior to, or of equal priority with, the related
mortgage, other than certain permitted encumbrances; (c) the borrower's interest
in such ground lease is assignable to Morgan Stanley Dean Witter Capital I Inc.
and its successors and assigns upon notice to, but without the consent of, the
lessor thereunder (or if it is required it will have been obtained prior to the
closing date); (d) such ground lease is in full force and effect and the seller
has received no notice that an event of default has occurred thereunder; (e)
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 and the lessor has offered to enter into a new lease
with such holder on the terms that do not materially vary from the economic
terms of the ground lease; (f) the holder of the mortgage is permitted a
reasonable opportunity (including, where necessary, sufficient time to gain
possession of the interest of the lessee under such ground lease) to cure any
default under such ground lease, which is curable after the receipt of notice of
any such default, before the lessor thereunder may terminate such ground lease;
and (g) 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 related mortgage loan; and
(21) the related mortgage loan documents provide that the related
borrower is responsible for the payment of all reasonable costs and expenses of
lender incurred in connection with the defeasance of such mortgage loan and the
release of the related mortgaged property, and the borrower is required to pay
all reasonable costs and expenses of lender associated with the approval of an
assumption of such mortgage loan.
REPURCHASES AND OTHER REMEDIES
If any Mortgage Loan document required to be delivered to the trustee
by a seller with respect to its mortgage loans as described under "--Sale of the
Mortgage Loans" above has a Material Document Defect, or if there is a Material
Breach by a seller regarding the characteristics of any of its mortgage loans
and/or the related mortgaged properties as described under "--Representations
and Warranties" above, then such seller will be obligated to cure such Material
Document Defect or Material Breach in all material respects within the
applicable Permitted Cure Period. Notwithstanding the foregoing, in the event
that the payments described under subparagraph 21 of the preceding paragraph
above are insufficient to pay the expenses associated with such defeasance or
assumption of the related mortgage loan, it shall be the sole obligation of the
related mortgage loan seller to pay an amount sufficient to pay such expenses.
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If any such Material Document Defect or Material Breach cannot be
corrected or cured in all material respects within the applicable Permitted Cure
Period, the seller will be obligated, not later than the last day of such
Permitted Cure Period, to:
o repurchase the affected mortgage loan from the trust at the Purchase
Price; or, at its option,
o if within the two-year period commencing on the Closing Date:
o replace such Mortgage Loan with a Qualifying Substitute Mortgage
Loan; and
o pay an amount generally equal to the excess of the applicable
Purchase Price for the mortgage loan to be replaced (calculated
as if it were to be repurchased instead of replaced), over the
unpaid principal balance of the applicable Qualifying Substitute
Mortgage Loan as of the date of substitution, after application
of all payments due on or before such date, whether or not
received.
The seller must cure any Material Document Defect or the Material
Breach within the Permitted Cure Period, provided, however, that if such
Material Document Defect or Material Breach would cause the mortgage loan to be
other than a "qualified mortgage", as defined in the Code, then the repurchase
or substitution must occur within 85 days from the date the seller was notified
of the defect or breach.
The foregoing obligations of any 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 Morgan Stanley Dean Witter
Capital I Inc., the other sellers or any other person or entity will be
obligated to repurchase or replace the affected mortgage loan if the related
seller defaults on its obligation to do so. Each seller is obligated to cure,
repurchase or replace only mortgage loans that are sold by it, and will have no
obligations with respect to any mortgage loan sold by any other seller.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this prospectus supplement of the Mortgage Pool and
the mortgaged properties is based upon the Mortgage Pool as expected to be
constituted at the time the offered certificates are issued. Prior to the
issuance of the offered certificates, a mortgage loan may be removed from the
Mortgage Pool if Morgan Stanley Dean Witter Capital I Inc. deems such removal
necessary or appropriate or if it is prepaid. A limited number of other mortgage
loans may be included in the Mortgage Pool prior to the issuance of the offered
certificates, unless including such mortgage loans would materially alter the
characteristics of the Mortgage Pool as described herein. The information
presented herein is representative of the characteristics of the Mortgage Pool
as it will be constituted at the time the offered certificates are issued,
although the range of mortgage rates and maturities and certain other
characteristics of the mortgage loans in the Mortgage Pool may vary.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The master servicer and the special servicer, either directly or
through sub-servicers, will be required to service and administer the mortgage
loans in accordance with the Servicing Standard.
Each of the master servicer and the special servicer is required to
adhere to the Servicing Standard without regard to any conflict of interest that
it may have, any fees or other compensation to which it is entitled, any
relationship it may have with any borrower, and the different payment priorities
among the Classes of certificates. Each of the master servicer and the special
servicer may become the owner or pledgee of certificates with the same rights as
each would have if it were not the master servicer or a special servicer, as the
case may be.
Any such interest of the master servicer or the special servicer in the
certificates will not be taken into account when evaluating whether actions of
the master servicer or the special servicer are consistent with their respective
obligations in accordance with the Servicing Standard, regardless of whether
such actions may have the effect of benefiting the Class or Classes of
certificates owned by the master servicer or the special servicer. In addition,
the master servicer or the special servicer may, under limited circumstances,
lend money on an unsecured basis to, accept deposits from, and otherwise
generally engage in any kind of business or dealings with, any borrower as
though the master servicer or the special servicer were not a party to the
transactions contemplated hereby.
On the Closing Date, the master servicer will enter into an agreement
with each of the Primary Servicers under which the Primary Servicers will assume
many of the servicing obligations of the master servicer presented in this
section with respect to mortgage loans sold by it or its affiliates to the
trust. The Primary Servicers are subject to the Servicing Standard. If an Event
of Default occurs in respect of the master servicer and the master servicer is
terminated, such termination will not in and of itself cause the termination of
any Primary Servicers. Notwithstanding the provisions of any primary servicing
agreement or the Pooling and Servicing Agreement, the Master Servicer shall
remain obligated and liable to the trustee and the certificateholders for
servicing and administering of the mortgage loans in accordance with the
provisions of the Pooling and Servicing Agreement to the same extent as if the
Master Servicer was alone servicing and administering the mortgage loans.
Each of the master servicer, the Primary Servicers and the special
servicer is permitted to enter into a sub-servicing agreement and any such
sub-servicer will receive a fee for the services specified in such sub-servicing
agreement. However, any subservicing is subject to various conditions set forth
in the Pooling and Servicing Agreement including the requirement that the master
servicer or the special servicer, as the case may be, will remain liable for its
servicing obligations under the Pooling and Servicing Agreement. The master
servicer or the special servicer, as the case may be, will be required to pay
any servicing compensation due to any sub-servicer out of its own funds.
The master servicer or special servicer may resign from the obligations
and duties imposed on it under the Pooling and Servicing Agreement, upon 30 days
notice to the trustee, provided that:
o a successor master servicer or special servicer is available and
willing to assume the obligations of the master servicer or special
servicer, and accepts appointment as successor master servicer or
special servicer, on substantially the same terms and conditions, and
for not more than equivalent compensation;
o the master servicer or special servicer bears all costs associated
with its resignation and the transfer of servicing; and
o the Rating Agencies have confirmed in writing that such servicing
transfer will not result in a withdrawal, downgrade or qualification
of the then current ratings on the Certificates.
Furthermore, the master servicer or special servicer may resign if it
determines that its duties are no longer permissible under applicable law or are
in material conflict by reason of applicable law with any other activities
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carried on by it. A resignation of the master servicer will not affect the
rights and obligations of the Primary Servicers to continue to act as primary
servicers. If the master servicer ceases to serve as such and shall not have
been replaced by a qualified successor, the trustee or an agent of the trustee
will assume the master servicer's duties and obligations under the Pooling and
Servicing Agreement. If the special servicer shall cease to serve as such and a
qualified successor shall not have been engaged, the trustee or an agent will
assume the duties and obligations of the special servicer.
The relationship of each of the master servicer and the special
servicer to the trustee is intended to be that of an independent contractor and
not that of a joint venturer, partner or agent.
The master servicer will have no responsibility for the performance by
the special servicer, to the extent they are different entities, of its duties
under the Pooling and Servicing Agreement, and the special servicer will have no
responsibility for the performance by the master servicer of its duties under
the Pooling and Servicing Agreement.
The master servicer initially will be responsible for the servicing and
administration of the entire Mortgage Pool. However, the special servicer will
be responsible for servicing and administering any Specially Serviced Mortgage
Loans.
Upon the occurrence of any of the events set forth under the term
"Specially Serviced Mortgage Loan" in the glossary of terms hereto, the master
servicer will be required to transfer its principal servicing responsibilities
with respect thereto to the special servicer in accordance with the procedures
set forth in the Pooling and Servicing Agreement. Notwithstanding such transfer,
the master servicer will continue to receive any payments on such mortgage loan,
including amounts collected by the special servicer, to make selected
calculations with respect to such mortgage loan, and to make remittances to the
trustee and prepare reports for the trustee with respect to such mortgage loan.
If title to the related mortgaged property is acquired by the trust, whether
through foreclosure, deed-in-lieu of foreclosure or otherwise, the special
servicer will be responsible for the operation and management thereof and such
loan will be considered a Specially Serviced Mortgage Loan.
A Specially Serviced Mortgage Loan can become a Rehabilitated Mortgage
Loan to which the master servicer will re-assume all servicing responsibilities.
The 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 Offered
Certificates--Advances--Servicing Advances" in this prospectus supplement.
THE MASTER SERVICER AND SPECIAL SERVICER
Master Servicer
Wells Fargo Bank, National Association ("Wells Fargo") will be
responsible for servicing the mortgage loans as master servicer. Wells Fargo
provides a full range of banking services to individual, agribusiness, real
estate, commercial and small business customers.
Wells Fargo's principal servicing offices are located at 45 Fremont
Street, 2nd Floor, San Francisco, California 94105.
As of June 30, 2000, Wells Fargo was responsible for servicing
approximately 2,168 commercial and multifamily mortgage loans, totaling
approximately $12,510,000,000 in aggregate outstanding principal amounts,
including loans securitized in mortgage-backed securitization transactions.
Wells Fargo & Company is the holding company for Wells Fargo. Wells
Fargo & Company files reports with the Securities and Exchange Commission that
are required under the Securities Exchange Act of 1934. Such
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reports include information regarding the master servicer and may be obtained
at the website maintained by the Securities and Exchange Commission at
http://www.sec.gov.
The information presented herein concerning Wells Fargo has been
provided by Wells Fargo. Accordingly, Morgan Stanley Dean Witter Capital I Inc.
makes no representations or warranty as to the accuracy or completeness of such
information.
SPECIAL SERVICER
GMAC Commercial Mortgage Corporation, a California corporation
("GMACCM"), will initially be appointed as special servicer of the Mortgage
Loans. As of June 30, 2000, GMACCM was responsible for performing certain
special servicing functions with respect to commercial and multifamily loans
with an aggregate principal balance of approximately $43 billion. The principal
executive offices of GMACCM are located at 200 Witmer Road, Horsham,
Pennsylvania 19044.
The information set forth herein concerning the Special Servicer has
been provided by it, and neither the Depositor nor the Underwriters make any
representation or warranty as to the accuracy or completeness of such
information.
MASTER SERVICER
Master Servicer Compensation
The master servicer will be entitled to a Master Servicing Fee equal to
the Master Servicing Fee Rate applied to the outstanding Scheduled Principal
Balance of each mortgage loan, including REO Properties. The master servicer
will be entitled to retain as additional servicing compensation all investment
income earned on amounts on deposit in the Certificate Account and interest on
escrow accounts if permitted by the related loan documents, and--in each case to
the extent not payable to the special servicer or any sub-servicer or Primary
Servicer as provided in the Pooling and Servicing Agreement or any primary or
sub-servicing agreement--late payment charges, assumption fees, modification
fees, extension fees and default interest payable at a rate above the related
mortgage rate.
A portion of the related Master Servicing Fee equal to 0.03% will be
reduced, on each Distribution Date by the amount, if any, of Compensating
Interest Payment made by the master servicer on such Distribution Date. Any Net
Aggregate Prepayment Interest Shortfall will be allocated as presented under
"Description of the Offered Certificates--Distributions--Prepayment Interest
Shortfalls and Prepayment Interest Excesses" in this prospectus supplement. If
Prepayment Interest Excesses for all mortgage loans other than Specially
Serviced Mortgage Loans exceed Prepayment Interest Shortfalls for such mortgage
loans as of any Distribution Date, such excess amount will be payable to the
master servicer as additional servicing compensation.
In the event that Wells Fargo resigns or is no longer master servicer
for any reason, Wells Fargo will continue to have the right to receive its
portion of the Excess Servicing Fee. Any successor servicer will receive the
Master Servicing Fee as compensation. The portion of the Excess Servicing Fee
payable to JHREF shall similarly not be terminated if it resigns or is
terminated as one of the Primary Servicers.
EVENTS OF DEFAULT
If an Event of Default described under the third, fourth, fifth, sixth
or seventh bullet under the definition of "Event of Default" under the "Glossary
of Terms" has occurred, the obligations and responsibilities of the master
servicer under the Pooling and Servicing Agreement will terminate on the date
which is 60 days following the date on which the trustee or Morgan Stanley Dean
Witter Capital I Inc. gives written notice to the master servicer that the
master servicer is terminated. If an event of default described under the first,
second, eighth, ninth or tenth bullet under the definition of "Event of Default"
under the "Glossary of Terms" has occurred, the obligations and responsibilities
of the master servicer under the Pooling and Servicing Agreement will terminate,
immediately upon the date which the trustee or Morgan Stanley Dean Witter
Capital I Inc. give written notice to the master servicer
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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.
Notwithstanding the foregoing, and in accordance with the Pooling and Servicing
Agreement, if the Event of Default occurs solely by reason of the occurrence of
a default of a Primary Servicer under a primary servicing agreement, then the
initial master servicer shall have the right to require that any successor
master servicer enter into a primary servicing agreement with the initial
master servicer with respect to all the mortgage loans as to which the primary
servicing default occurred.
Upon such termination, all authority, power and rights of the master
servicer under the Pooling and Servicing Agreement, whether with respect to the
mortgage loans or otherwise, shall terminate except for any rights related to
unpaid servicing compensation or unreimbursed Advances or the Excess Servicing
Fee, provided that in no event shall the termination of the master servicer be
effective until a successor servicer shall have succeeded the master servicer as
successor servicer, subject to approval by the Rating Agencies, notified the
master servicer of such designation, and such successor servicer shall have
assumed the master servicer's obligations and responsibilities with respect to
the mortgage loans as set forth in the Pooling and Servicing Agreement. The
trustee may not succeed the master servicer as servicer until and unless it has
satisfied the provisions specified in the Pooling and Servicing Agreement.
However, if the master servicer is terminated as a result of an Event of Default
described under the eighth, ninth or tenth bullet under the definition of "Event
of Default" under the "Glossary of Terms", the trustee shall act as successor
servicer immediately and shall use commercially reasonable efforts to either
satisfy the conditions specified in the Pooling and Servicing Agreement or
transfer the duties of the master servicer to a successor servicer who has
satisfied such conditions.
However, if the master servicer is terminated solely due to an Event of
Default described in the fifth, sixth or seventh bullet of the definition
thereof, and prior to being replaced as described in the previous paragraph the
terminated master servicer provides the trustee with the appropriate "request
for proposal" material and the names of potential bidders, the trustee will
solicit good faith bids for the rights to service the mortgage loans in
accordance with the Pooling and Servicing Agreement. The trustee will have
thirty days to sell the rights and obligations of the master servicer under the
Pooling and Servicing Agreement to a successor servicer that meets the
requirements of a master servicer under the Pooling and Servicing Agreement,
provided that the Rating Agencies have confirmed in writing that such servicing
transfer will not result in a withdrawal, downgrade or qualification of the then
current ratings on the certificates. The termination of the master servicer,
will be effective when such servicer has succeeded the master servicer, as
successor servicer and such successor servicer has assumed the master
servicer's, obligations and responsibilities with respect to the mortgage loans,
as set forth in an agreement substantially in the form of the Pooling and
Servicing Agreement. If a successor master servicer is not appointed within
thirty days, the master servicer, will be replaced by the trustee as described
in the previous paragraph.
THE SPECIAL SERVICER
The special servicer will oversee the resolution of Specially Serviced
Mortgage Loans, act as disposition manager of REO Properties acquired on behalf
of the trust through foreclosure or deed in lieu of foreclosure, maintain
insurance with respect to REO Properties and provide monthly reports to the
master servicer and the trustee.
Special Servicer Compensation
The special servicer will be entitled to receive:
o a Special Servicing Fee;
o a Workout Fee; and
o a Liquidation Fee.
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;
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otherwise such fee is paid until maturity. If the special servicer is
terminated for any reason, it will retain the right to receive any Workout Fees
payable on mortgage loans that became Rehabilitated Mortgage Loans while it
acted as special servicer and remained Rehabilitated Mortgage Loans at the time
of such termination until such mortgage loan becomes a Specially Serviced
Mortgage Loan or if the related mortgaged property becomes an REO Property. The
successor special servicer will not be entitled to any portion of such Workout
Fees.
The special servicer is also permitted to retain, in general,
assumption fees, modification fees, default interest 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 and will represent Expense Losses.
The Special Servicer Compensation will be payable in addition to the Master
Servicing Fee payable to the master servicer.
In addition, the special servicer will be entitled to all assumption
fees received in connection with any Specially Serviced Mortgage Loan and 50% of
any other assumption fees. The special servicer will be entitled to approve
assumptions with respect to all mortgage loans. If Prepayment Interest Excesses
for all Specially Serviced Mortgage Loans exceed Prepayment Interest Shortfalls
for such mortgage loans as of any Distribution Date, such excess amount will be
payable to the special servicer as additional servicing compensation.
As described in this prospectus supplement under "--The Operating
Adviser," the Operating Adviser will have the right to receive notification of
actions of the special servicer, subject to the limitations described in this
prospectus supplement.
Termination of Special Servicer
The trustee may terminate the special servicer upon a Special Servicer
Event of Default. However, if the special servicer is terminated solely due to a
Special Servicer Event of Default described in the fifth bullet of the
definition thereof, and prior to being replaced the terminated special servicer
provides the trustee with the appropriate request for proposal material and the
names of potential bidders, the trustee will solicit good faith bids for the
rights to specially service the mortgage loans in accordance with the Pooling
and Servicing Agreement. The trustee will have thirty days to sell the rights
and obligations of the special servicer under the Pooling and Servicing
Agreement to a successor servicer that meets the requirements of a special
servicer under the Pooling and Servicing Agreement, provided that the Rating
Agencies have confirmed in writing that such servicing transfer will not result
in a withdrawal, downgrade or qualification of the then current ratings on the
certificates. The special servicer is required to consult with the Operating
Adviser in connection with such sale of servicing rights. The termination of the
special servicer, will be effective when such servicer has succeeded the special
servicer, as successor servicer and such successor servicer has assumed the
special servicer's, obligations and responsibilities with respect to the
mortgage loans, as set forth in an agreement substantially in the form of the
Pooling and Servicing Agreement. If a successor special servicer is not
appointed within thirty days, the special servicer, will be replaced by the
trustee as described in the previous paragraphs.
In addition to the termination of the special servicer upon a Special
Servicer Event of Default, upon the direction of the Operating Adviser, subject
to the satisfaction of certain conditions, the trustee will remove the 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.
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THE OPERATING ADVISER
An Operating Adviser appointed by the holders of a majority of the
Controlling Class will have the right to receive notification from the special
servicer in regard to certain actions. The special servicer will be required to
notify the Operating Adviser of, among other things:
o any proposed modification of a Money Term of a mortgage loan other than an
extension of the original maturity date for two years or less;
o any foreclosure or comparable conversion of the ownership of a mortgaged
property;
o any proposed sale of a Specially Serviced Mortgage Loan, other than in
connection with the termination of the trust as described in this
prospectus supplement under "Description of the Offered
Certificates--Optional Termination";
o any determination to bring an REO Property into compliance with applicable
environmental laws;
o any acceptance of substitute or additional collateral for a mortgage loan;
o any acceptance of a discounted payoff;
o any waiver of a "due on sale" or "due on encumbrance" clause;
o any acceptance of an assumption agreement releasing a borrower from
liability under a mortgage loan; and
o any release of collateral for a Specially Serviced Mortgage Loan (other than
in accordance with the terms of, or upon satisfaction of, such mortgage
loan).
In addition, subject to the satisfaction of certain conditions, the
Operating Adviser will have the right to direct the trustee to remove the
special servicer at any time, with or without cause, upon the appointment and
acceptance of such appointment by a successor special servicer appointed by the
Operating Adviser; provided that, prior to the effectiveness of any such
appointment the trustee shall have received a letter from each rating agency to
the effect that such appointment would not result in a downgrade or withdrawal
in any rating then assigned to any class of certificates. The Operating Adviser
shall pay costs and expenses incurred in connection with the removal and
appointment of a special servicer (unless such removal is based on certain
events or circumstances specified in the Pooling and Servicing Agreement).
At any time, the holders of a majority of the Controlling Class may
direct the trustee in writing to hold an election for an Operating Adviser,
which election will be held commencing as soon as practicable thereafter.
The Operating Adviser shall be responsible for its own expenses.
MORTGAGE LOAN MODIFICATIONS
Subject to any restrictions applicable to REMICs, and to limitations
imposed by the Pooling and Servicing Agreement, the master servicer may amend
any term, (other than a modification that adds, deletes, or alters a customary
accounting or financial covenant), 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.
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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:
o reduce the amounts owing under any Specially Serviced Mortgage Loan by
forgiving principal, accrued interest and/or any Prepayment Premium;
o reduce the amount of the Scheduled Payment on any Specially Serviced
Mortgage Loan, including by way of a reduction in the related mortgage
rate;
o forbear in the enforcement of any right granted under any mortgage note or
mortgage relating to a Specially Serviced Mortgage Loan;
o extend the maturity date of any Specially Serviced Mortgage Loan; and/or
o accept a Principal Prepayment during any Lock-out Period;
provided in each case that (1) the related borrower is in default with respect
to the Specially Serviced Mortgage Loan or, in the reasonable judgment of the
special servicer, such default is reasonably foreseeable, and (2) in the
reasonable judgment of the special servicer, such modification, waiver or
amendment would increase the recovery to Certificateholders on a net present
value basis, as demonstrated in writing by the special servicer to the trustee.
In no event, however, will the special servicer be permitted to:
o extend the maturity date of a Specially Serviced Mortgage Loan beyond a
date that is two years prior to the Rated Final Distribution Date; and
o if the Specially Serviced Mortgage Loan is secured by a ground lease,
extend the maturity date of such Specially Serviced Mortgage Loan beyond a
date which is ten (10) years prior to the expiration of the term of such
ground lease.
Modifications that forgive principal or interest of a mortgage loan
will result in Realized Losses on such mortgage loan and such Realized Losses
will be allocated among the various Classes of Certificates in the manner
described under "Description of the Offered
Certificates--Distributions--Subordination; Allocation of Losses and Expenses"
in this prospectus supplement.
The modification of a mortgage loan may tend to reduce prepayments by
avoiding liquidations and therefore may extend the weighted average life of the
certificates beyond that which might otherwise be the case. See "Yield,
Prepayment and Maturity Considerations" in this prospectus supplement.
SALE OF DEFAULTED MORTGAGE LOANS AND REO PROPERTIES
The Pooling and Servicing Agreement grants to each of the master
servicer, the special servicer, any holder of certificates evidencing a majority
interest in the Controlling Class and any seller with respect to mortgage loans
it originated a right to purchase from the trust, at the applicable Purchase
Price, those defaulted mortgage loans that are at least 60 days delinquent and
which the special servicer has determined, in its reasonable and good faith
judgment, in accordance with the Servicing Standard, will become the subject of
foreclosure proceedings, other than any such mortgage loan that it determines,
in its reasonable and good faith judgment, in accordance with the Servicing
Standard, is in default to avoid a prepayment restriction.
The special servicer may, upon notice to the Operating Adviser and the
trustee, offer to sell any such defaulted mortgage loan not otherwise purchased
pursuant to the prior paragraph, other than any such mortgage loan that it
determines, in its reasonable and good faith judgment, in accordance with the
Servicing Standard, is in default to avoid a prepayment restriction, if and when
the special servicer determines, consistent with the Servicing Standard, that
such a sale would be in the best economic interests of the trust. Such offer is
to be made in a
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commercially reasonable manner for a period of not less than 30 days. Unless
the special servicer determines that acceptance, in accordance with the
Servicing Standard, of any offer would not be in the best economic interests of
the trust, the special servicer shall accept the highest cash offer received
from any person that constitutes a fair price, which may be less than the
Purchase Price, for such mortgage loan. When an Interested Party is to be the
purchaser of any such defaulted mortgage loan, the trustee is to determine,
with the aid of an independent real estate adviser and an appraisal, what
constitutes a fair price. The trustee is not permitted to purchase any
defaulted mortgage loan.
FORECLOSURES
The special servicer may at any time, with notification to the
Operating Adviser and in accordance with the Pooling and Servicing Agreement,
institute foreclosure proceedings, exercise any power of sale contained in any
mortgage, accept a deed in lieu of foreclosure or otherwise acquire title to a
mortgaged property by operation of law or otherwise, if such action is
consistent with the Servicing Standard and a default on the related mortgage
loan has occurred but subject, in all cases, to limitations concerning
environmental matters and, in specified situations, the receipt of an opinion of
counsel relating to REMIC requirements.
If any mortgaged property is acquired as described in the preceding
paragraph, the special servicer is required to sell the REO Property within
three years after the end of the year in which it was acquired, or any
applicable extension period, unless the special servicer has obtained an
extension from the Internal Revenue Service or has previously delivered to the
trustee an opinion of counsel to the effect that the holding of the REO Property
by the trust subsequent to three years after the end of the year in which it was
acquired, or to the expiration of such extension period, will not result in the
failure of such REO Property to qualify as "foreclosure property" under the
REMIC provisions of the Code. In addition, the special servicer is required to
use its best efforts to sell any REO Property prior to the Rated Final
Distribution Date.
If the trust acquires a mortgaged property by foreclosure or
deed-in-lieu of foreclosure upon a default of a mortgage loan, the Pooling and
Servicing Agreement provides the special servicer, on behalf of the trustee,
must administer such mortgaged property so that it qualifies at all times as
"foreclosure property" within the meaning of Code Section 860G(a)(8). The
Pooling and Servicing Agreement also requires that any such mortgaged property
be managed and operated by an "independent contractor," within the meaning of
applicable Treasury regulations, who furnishes or renders services to the
tenants of such mortgaged property. Generally, REMIC I will not be taxable on
income received with respect to a mortgaged property to the extent that it
constitutes "rents from real property," within the meaning of Code Section
856(c)(3)(A) and Treasury regulations thereunder. "Rents from real property" do
not include the portion of any rental based on the net income or gain of any
tenant or sub-tenant. No determination has been made whether rent on any of the
mortgaged properties meets this requirement. "Rents from real property" include
charges for services customarily furnished or rendered in connection with the
rental of real property, whether or not the charges are separately stated.
Services furnished to the tenants of a particular building will be considered as
customary if, in the geographic market in which the building is located, tenants
in buildings which are of similar class are customarily provided with the
service. No determination has been made whether the services furnished to the
tenants of the mortgaged properties are "customary" within the meaning of
applicable regulations. It is therefore possible that a portion of the rental
income with respect to a mortgaged property owned by a trust, presumably
allocated based on the value of any non-qualifying services, would not
constitute "rents from real property." In addition to the foregoing, any net
income from a trade or business operated or managed by an independent contractor
on a mortgaged property owned by REMIC I, including but not limited to a hotel
or healthcare business, will not constitute "rents from real property." Any of
the foregoing types of income may instead constitute "net income from
foreclosure property," which would be taxable to REMIC I at the highest marginal
federal corporate rate -- currently 35% -- and may also be subject to state or
local taxes. Any such taxes would be chargeable against the related income for
purposes of determining the Net REO Proceeds available for distribution to
holders of certificates. Under the Pooling and Servicing Agreement, the special
servicer is required to determine whether the earning of such income taxable to
REMIC I would result in a greater recovery to Certificateholders on a net
after-tax basis than a different method of operation of such property.
Prospective investors are advised to consult their own tax advisors regarding
the possible imposition of REO Taxes in connection with the operation of
commercial REO Properties by REMICs.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion, when read in conjunction with the discussion
of "Federal Income Tax Consequences" in the prospectus, describes the material
federal income tax considerations for investors in the offered certificates.
However, these two discussions do not purport to deal with all federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules, and do not address state and local tax considerations.
Prospective purchasers should consult their own tax advisers in determining the
federal, state, local and any other tax consequences to them of the purchase,
ownership and disposition of the offered certificates.
GENERAL
For United States federal income tax purposes, the trust will be a
"tiered REMIC structure" described in the prospectus. See "Federal Income Tax
Consequences--REMICs--Tiered REMIC Structures" in the prospectus. Three separate
REMIC elections will be made with respect to designated portions of the trust.
Upon the issuance of the offered certificates, Latham & Watkins, counsel to
Morgan Stanley Dean Witter Capital I Inc., will deliver its opinion generally to
the effect that, assuming:
o the making of proper elections;
o the accuracy of all representations made with respect to the Mortgage
Loans;
o ongoing compliance with all provisions of the Pooling and Servicing
Agreement and no amendments thereof; and
o compliance with applicable provisions of the Code, as it may be
amended from time to time, and applicable Treasury Regulations adopted
thereunder.
For federal income tax purposes, each of REMIC I, REMIC II and REMIC
III will qualify as a REMIC under the Code.
For federal income tax purposes, the Residual Certificates will
represent three separate classes of REMIC residual interests evidencing the sole
class of "residual interests" in each of REMIC I, REMIC II and REMIC III; and
the REMIC Regular Certificates will evidence the "regular interests" in, and
will be treated as debt instruments of, REMIC III. See "Federal Income Tax
Consequences--REMICs" in the prospectus. The offered certificates will be REMIC
Regular Certificates issued by REMIC III. See "Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates" in the
prospectus for a discussion of the principal federal income tax consequences of
the purchase, ownership and disposition of the offered certificates. References
in the prospectus to the Master REMIC should be read as references to REMIC III.
Each of REMIC I and REMIC II will be a Subsidiary REMIC as such term is used in
the prospectus.
The offered certificates will be "real estate assets" within the
meaning of Section 856(c)(4)(A) and 856(c)(5)(B) of the Code in the same
proportion that the assets REMIC would be so treated. In addition, interest,
including original issue discount, if any, on the offered certificates will be
interest described in Section 856(c)(3)(B) of the Code to the extent that such
certificates are treated as "real estate assets" under Section 856(c)(4)(A) of
the Code. However, if 95% or more of the REMIC's assets are real estate assets
within the meaning of Section 856(c)(4)(A), then the entire offered certificates
shall be treated as real estate assets and all interest from the offered
certificates shall be treated as interest described in Section 856(c)(3)(B).
Moreover, the offered certificates will be "qualified mortgages" under
Section 860G(a)(3) of the Code if transferred to another REMIC on its start-up
day in exchange for regular or residual interests therein. Offered certificates
also will qualify for treatment as "permitted assets," within the meaning of
Section 860L(c)(1)(G) of the Code, of a FASIT, and those offered certificates
held by certain financial institutions will constitute "evidence of
indebtedness" within the meaning of Section 582(c)(1) of the Code.
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The offered certificates will be treated as assets described in Section
7701(a)(19)(C)(xi) of the Code generally only in the proportion which the
REMIC's assets consist of property described in 7701(a)(19)(C)(i) through
7701(a)(19)(C)(x). However, if 95% or more of the REMIC's assets are assets
described in 7701(a)(19)(C)(i) through 7701(a)(19)(C)(x), then the entire
offered certificates shall be treated as qualified property under
7701(a)(19)(C). The percentage of such mortgage loans included in the initial
principal balance of the mortgage pool is 21.7%. 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 "Federal Income Tax Consequences--REMICs" in
the prospectus.
ORIGINAL ISSUE DISCOUNT AND PREMIUM
The offered certificates will not be treated as having been issued with
original issue discount for federal income tax reporting purposes. Certain
Classes of offered certificates may be issued with premium depending on the
price at which such Classes of certificates are initially sold. The prepayment
assumption that will be used in determining the rate of accrual of original
issue discount and amortizable premium, if any, for federal income tax purposes
will be a 0% CPR, as described in the prospectus, applied to each mortgage loan
during any period that voluntary principal prepayments may be made thereon
without a Prepayment Premium being required. For a description of CPR, see
"Yield, Prepayment and Maturity Considerations" in this prospectus supplement.
However, Morgan Stanley Dean Witter Capital I Inc. makes no representation that
the mortgage loans will not prepay during any such period or that they will
prepay at any particular rate before or during any such period.
The IRS has issued OID Regulations under Sections 1271 to 1275 of the
Code generally addressing the treatment of debt instruments issued with original
issue discount. See "Federal Income Tax Consequences--REMICs--Taxation of Owners
of REMIC Regular Certificates--Original Issue Discount and Premium" in the
prospectus. Purchasers of the offered certificates should be aware that the OID
Regulations and Section 1272(a)(6) of the Code do not adequately address all of
the issues relevant to accrual of original issue discount on prepayable
securities such as the offered certificates.
Moreover, the OID Regulations include an anti-abuse rule allowing the
IRS to apply or depart from the OID Regulations where necessary or appropriate
to ensure a reasonable tax result in light of 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
with respect to the offered certificates. See "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.
Whether any holder of any Class of certificates will be treated as
holding a certificate with amortizable bond premium will depend on such
Certificateholder's purchase price and the distributions remaining to be made on
such Certificate at the time of its acquisition by such Certificateholder.
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 "Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular
Certificates--Premium" in the prospectus. To the extent that any offered
certificate is
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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
"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 may be able to select a method for recognizing original issue
discount that differs from that used by the trustee in preparing reports to
Certificateholders and the IRS. Prospective purchasers of offered certificates
issued with original issue discount are advised to consult their tax advisors
concerning the treatment of such certificates.
Prepayment Premiums actually collected on the mortgage loans will be
distributed to the holders of each Class of certificates entitled thereto as
described under "Description of the Offered Certificates--Distributions--
Distributions of Prepayment Premiums" in this prospectus supplement. It is not
entirely clear under the Code when the amount of a Prepayment Premium should be
taxed to the holders of a Class of certificates entitled to a Prepayment
Premium. For federal income tax information reporting purposes, Prepayment
Premiums will be treated as income to the holders of a Class of certificates
entitled to Prepayment Premiums only after the master servicer's actual receipt
of a Prepayment Premium to which the holders of such Class of certificates is
entitled under the terms of the Pooling and Servicing Agreement, rather than
including projected Prepayment Premiums in the determination of a
Certificateholder's projected constant yield to maturity. It appears that
Prepayment Premiums are treated as ordinary income rather than capital gain.
However, the timing and characterization of such income is not entirely clear
and Certificateholders should consult their tax advisors concerning the
treatment of Prepayment Premiums.
ADDITIONAL CONSIDERATIONS
The special servicer is authorized, when doing so is consistent with
maximizing the trust's net after-tax proceeds from an REO Property, to incur
taxes on the trust in connection with the operation of such REO Property. Any
such taxes imposed on the trust would reduce the amount distributable to
Certificateholders. See "Servicing of the Mortgage Loans--Foreclosure" in this
prospectus supplement.
Federal income tax information reporting duties with respect to the
offered certificates and REMIC I, REMIC II and REMIC III will be the obligation
of the trustee, and not of the master servicer. See "Federal Income Tax
Consequences REMICs--Information Reporting and Backup Withholding" in the
prospectus.
As explained under "Federal Income Tax Consequences--REMICs--Tax
Related Restrictions on Transfers of REMIC Residual Certificates--Noneconomic
REMIC Residual Certificates" in the prospectus, transfers of a Noneconomic REMIC
Residual Certificate are disregarded for tax purposes if the transferor 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 (1) the transferor conducted, at the time
of the transfer, a reasonable investigation of the financial condition of the
transferee and, as a result of the investigation, the transferor determined that
the transferee had historically paid its debts as they came due and found no
significant evidence that the transferee would not continue to pay its debts as
they come due in the future and (2) the transferee represents to the transferor
that it understands that, as the holder of the Noneconomic REMIC Residual
Certificate, the transferee may incur tax liabilities in excess of cash flows
generated by the interest and that the transferee intends to pay taxes
associated with holding the residual interest as they came due. A recently
proposed Treasury Regulation would, if finalized in its present form, provide
that such a presumption would not apply where the present value of the
anticipated tax liabilities associated with holding the Noneconomic REMIC
Residual Certificate exceeds the sum of (1) the present value of any
consideration given to the transferee to acquire the Noneconomic REMIC Residual
Certificate, (2) the present value of the expected future distributions on the
Noneconomic REMIC Residual Certificate and (3) the present value of the
anticipated tax savings associated with holding the Noneconomic REMIC Residual
Certificate as the REMIC generates losses. For purposes of making this
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calculation, the transferor is assumed to pay tax at the highest corporate rate
and present values are computed using a discount rate equal to the applicable
federal rate, compounded semiannually, unless the transferor can demonstrate
that it regularly borrows substantial funds in the course of its business at a
lower rate. The proposed Treasury Regulation, if finalized in its present form,
would be effective as of February 4, 2000.
For further information regarding the tax consequences of investing in
the offered certificates, see "Federal Income Tax Consequences--REMICs" and
"State Tax Considerations" in the prospectus.
LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion summarizes certain legal aspects of mortgage
loans secured by real property in New Jersey (approximately 25.7% of the initial
pool balance), California (approximately 21.3% of the initial pool balance) and
New York (approximately 7.4% of the initial pool balance) which are general in
nature. This summary does not purport to be complete and is qualified in its
entirety by reference to the applicable federal and state laws governing the
mortgage loans.
NEW JERSEY
New Jersey is considered a "lien theory" jurisdiction; that is to say,
upon the execution, delivery and recording of the mortgage, and although the
instrument contains language of transfer and conveyance, no particular estate is
vested in the mortgagee/lender; rather, the mortgage instrument only vests in
the mortgagee/lender a right of entry in the event of a breach of a condition.
Until the occurrence of any such event, the mortgagor/owner continues to be the
legal owner of the land.
A mortgage must be signed by the mortgagor and the signature of the
mortgagor must be properly acknowledged before a certifying officer. The
certifying officer/notary on the acknowledgment must be satisfied that the
person executing the mortgage instrument is the one mentioned in the instrument.
A mortgage containing a defective certificate of acknowledgment or proof is not
entitled to recording or registration in New Jersey and, if the clerk or
register mistakenly records the instrument, such recordation is not effective
under the New Jersey recording statutes to effectuate lien priority absent the
passage of a "curative"/validating statute.
In New Jersey the priority of rights as among competing mortgagees is
determined by their respective times of recording in the applicable county
registry. Thus, the rights of a holder of an unrecorded mortgage are subordinate
and junior to the rights of the holder of a subsequent mortgagee who takes the
mortgage for value, without notice of the prior unrecorded mortgage, and who
records first.
Real property taxes, if unpaid when due, become a lien on the property
for the satisfaction of which the real property subject to the lien may be sold.
New Jersey tax law establishes municipal tax liens as first liens on property,
paramount to all prior or subsequent liens, mortgages and encumbrances thereon
regardless of their times of recording.
Priority between competing security interest lienholders and mortgagees
in fixtures (generally not incorporated into the structure) is governed by the
provisions of the New Jersey Uniform Commercial Code.
Unless the terms of the mortgage contain contrary provisions, the
interest of a mortgagee in respect of the mortgage is fully transferable and
assignable in New Jersey, and the assignment instrument is recordable. By
recording such an assignment instrument, the assignee of the rights of the
assigning mortgagee are first and prior to the rights of any subsequent
assignees who claim priority as a subsequent holder of the original mortgagee's
rights by assignment.
As discussed above, prior to a mortgagor's default (i.e., prior to the
mortgagor's failure to pay or perform the terms of the mortgage), the mortgagor
is entitled to possession and to the rents, issues and profits from the
mortgaged property. The occurrence of a default gives the mortgagee the right to
possession of the mortgaged property, unless there is a contrary provision in
the mortgage. This right to possession can be enforced by a civil action in
foreclosure for possession, ejectment or other methods.
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If the mortgage or a separate instrument contains a present, absolute,
and unconditional assignment of rents, the mortgagee's rights to the rents under
leases that pre-date the mortgage (or as to leases that are by their terms
subordinate and subject to the mortgage) arise upon the execution and delivery
of the mortgage (typically allowing the mortgagor a license to have the rents
until a default whereupon the license is deemed rescinded). The assignment of
rents must not simply be a pledge/collateral assignment of rents as additional
security for the mortgagor's performance of the mortgage, it must be stated as a
present and absolute assignment of the rents to the mortgagee, evidencing the
intention on the part of the mortgagor to transfer the rights to the rents to
the mortgagee at the time of the execution and the delivery of the rental
assignment instrument. While the absence of language of a present, absolute
assignment of rents is not fatal to effect an assignment of rents, an assignment
of rents that purports to become effective only upon the occurrence of a
subsequent default may run afoul of a bankruptcy action by the mortgagor.
Courts in New Jersey have held that a present, absolute assignment
vests title to the rents in the mortgagee at the time of execution of the
assignment instrument, and may insulate the rents from the reach of any
creditors in the event of a later bankruptcy of the mortgagor. One New Jersey
court has observed that the better practice in New Jersey is to memorialize the
present assignment of rents apart from the mortgage in a separate instrument
that is separately recorded along with the mortgage, because a mortgage is
essentially a security instrument and not a present conveyance.
The mere present, absolute and unconditional assignment of rents may
not result in a tenant's promptly delivering its periodic rental payments to the
mortgagee unless the tenant and the mortgagee are party to a subordination and
attornment agreement. The tenant is in privity with the mortgagor under the
lease, and although the tenant may have been furnished with notice of the
landlord's/mortgagor's assignment of rents at the time of the closing of the
mortgage transaction, the tenant, absent an agreement to the contrary, generally
continues to pay its landlord in accordance with the tenant's payment obligation
in the lease. New Jersey allows the mortgagee to seek the appointment of a rent
receiver in the foreclosure action in order to hold the tenant to the terms of
the lease and to protect the payment of the rents. The appointment of a rent
receiver is within the discretion of the court in all cases. Indeed, if the
mortgagor persuades the court that the mortgage security is more than adequate
to secure the mortgagee, it is unlikely that the court will allow a rent
receivership. While the mortgage may contain a covenant to the effect that the
mortgagee has the immediate right to a rent receiver without any judicial action
upon the occurrence of an event of default, New Jersey courts may not fully
enforce these agreements.
A mortgagor, in defending against a foreclosing mortgagee, will
generally assert as many defenses as possible, including without limitation,
duress, fraud, illegality, mistake, statute of limitations, lack of
consideration, usury, fraudulent conveyance, and the like. There are presently
no New Jersey limitations on the interposition of defenses. Additionally, a
mortgagor has the right to file for protection under the federal bankruptcy
statutes. Such a filing has the immediate effect of "staying" any existing or
future actions by a mortgagee to enforce the provisions of its mortgage and
collateral documents, unless the "automatic stay" is lifted by the bankruptcy
court. There may be other equitable remedies available to a defaulting mortgagor
to enable the mortgagor to work-out the troubled debt that may result in the
mortgagee realizing less than the full principal amount of the debt which the
mortgage secures.
Following a judgment of foreclosure and sale of the property at a
sheriff's auction, and provided that the mortgage loan is not "non-recourse",
the foreclosing mortgagee may pursue a deficiency judgment, i.e., the difference
between the mortgage debt and the lesser amount realized at the sheriff's sale
of the mortgaged property. Certain mortgage loans are "non-recourse." The
holder's/mortgagee's rights in the event of the occurrence of a default
thereunder are strictly limited to foreclosing the mortgage against the
mortgaged property and any other assets that have been pledged to secure the
mortgage loan; and no recourse may be had by the mortgagee to seek personal or
other liability against the mortgagor or to otherwise reach and realize on other
assets of the mortgagor not specifically pledged to the mortgagee.
Many mortgage loans allow the mortgagee to pursue late payment fees
(typically set as a stated percentage of the amount of the monthly debt service
amount that was paid late) and interest rates after a default that exceed the
nominal interest rate set forth in the mortgage and obligation that the mortgage
secures (typically referred to as a "default interest rate"). The Superior Court
in New Jersey recently held that the imposition of any such late payment fees
and default interest rates are unenforceable penalties and could only be
enforced in the event that
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the payments bore a reasonable relationship to the costs and expenses incurred
by the lender in following up with the debtor whose payment was late. This
decision is presently being appealed by the lender involved in that litigation,
but there can be no assurance that the appeal will be successful.
In New Jersey, private property is permitted to be taken for public use
and for "just compensation" by condemnation under the State's eminent domain
statute. If all or a portion of the mortgaged property is condemned, a mortgagee
is typically entitled to so much of the award that is needed to satisfy the
mortgage unless the terms of the mortgage require otherwise. Entitlements to
condemnation (and casualty/fire loss) proceeds are usually agreed to by the
parties to the mortgage.
CALIFORNIA
Under California law a foreclosure may be accomplished either
judicially or non-judicially. Generally, no deficiency judgment is permitted
under California law following a nonjudicial sale under a deed of trust. Other
California statutes, except in certain cases involving environmentally impaired
real property, require the lender to attempt to satisfy the full debt through a
foreclosure against the property before bringing a personal action, if otherwise
permitted, against the borrower for recovery of the debt. California case law
has held that acts such as an offset of an unpledged account or the application
of rents from secured property prior to foreclosure, under some circumstances,
constitute violations of such statutes. Violations of such statutes may result
in the loss of some or all of the security under the loan. Finally, other
statutory provisions in California limit any deficiency judgment (if otherwise
permitted) against the borrower, and possibly any guarantor, following a
judicial sale to the excess to the outstanding debt over the greater (i) the
fair market value of the property at the time of the public sale or (ii) the
amount of the winning bid in the foreclosure. Borrowers also are allowed a
one-year period within which to redeem the property.
NEW YORK
Under New York law, while a foreclosure may be accomplished either
judicially or non-judicially, nonjudicial foreclosures are virtually unused
today. Upon a default, a mortgagee may either proceed in equity to foreclose
upon the mortgaged property or proceed at law and sue on the note. New York law
does not require that the mortgagee bring a foreclosure action before being
entitled to sue on the note. However, once having begun a foreclosure action or
an action to sue on the note or guaranty, a mortgagee is generally not permitted
to initiate the other action without leave of court. New York does not restrict
a mortgagee from seeking a deficiency judgment. In order to obtain a deficiency
judgment, a series of procedural and substantive requirements must be satisfied.
ERISA CONSIDERATIONS
ERISA and the Code impose restrictions on Plans that are subject to
ERISA and/or Section 4975 of the Code and on persons that are Parties in
Interest. ERISA also imposes duties on persons who are fiduciaries of Plans
subject to ERISA and prohibits selected transactions between a Plan and Parties
in Interest with respect to such Plan. Under ERISA, any person who exercises any
authority or control respecting the management or disposition of the assets of a
Plan, and any person who provides investment advice with respect to such assets
for a fee, is a fiduciary of such Plan.
PLAN ASSETS
Neither ERISA nor the Code defines the term "plan assets." However, the
U.S. Department of Labor ("DOL") has issued a final regulation (29 C.F.R.
Section 2510.3-101) concerning the definition of what constitutes the assets of
a Plan. The DOL Regulation provides that, as a general rule, the underlying
assets and properties of corporations, partnerships, trusts and certain other
entities in which a Plan makes an "equity" investment will be deemed for certain
purposes, including the prohibited transaction provisions of ERISA and Section
4975 of the Code, to be assets of the investing Plan unless certain exceptions
apply. Under the terms of the regulation, if the assets of the trust were deemed
to constitute Plan assets by reason of a Plan's investment in certificates, such
Plan asset would include an undivided interest in the mortgage loans and any
other assets of the trust. If the mortgage loans or other trust assets
constitute Plan assets, then any party exercising management or discretionary
control
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regarding those assets may be deemed to be a "fiduciary" with respect to
those assets, and thus subject to the fiduciary requirements and prohibited
transaction provisions of ERISA and Section 4975 of the Code with respect to the
mortgage loans and other trust assets.
Affiliates of Morgan Stanley Dean Witter Capital I, Inc., the
Underwriters, the master servicer, the special servicer and certain of their
respective affiliates might be considered or might become fiduciaries or other
Parties in Interest with respect to investing Plans. Moreover, the trustee, the
fiscal agent, the master servicer, the special servicer, the Operating Adviser,
any insurer, primary insurer or any other issuer of a credit support instrument
relating to the primary assets in the trust or certain of their respective
affiliates might be considered fiduciaries or other Parties in Interest with
respect to investing Plans. In the absence of an applicable exemption,
"prohibited transactions--" within the meaning of ERISA and Section 4975 of the
Code -- could arise if certificates were acquired by, or with "plan assets" of,
a Plan with respect to which any such person is a Party in Interest.
In addition, an insurance company proposing to acquire or hold the
Subordinate Certificates with assets of its general account should consider the
extent to which such acquisition or holding would be subject to the requirements
of ERISA and Section 4975 of the Code under John Hancock Mutual Life Insurance
Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993), and Section 401(c) of
ERISA, as amended by the Small Business Job Protection Act of 1996, Public Law
No. 104-188, and subsequent DOL and judicial guidance. See "--Insurance Company
General Accounts" below.
SPECIAL EXEMPTION APPLICABLE TO CLASS A CERTIFICATES
With respect to the acquisition and holding of Class A Certificates,
the DOL has granted to the Underwriters individual prohibited transaction
exemptions, which generally exempt from certain of the prohibited transaction
rules of ERISA and Section 4975 of the Code transactions relating to:
o the initial purchase, the holding, and the subsequent resale by Plans
of certificates evidencing interests in pass-through trusts; and
o transactions in connection with the servicing, management and
operation of such trusts, provided that the assets of such trusts
consist of certain secured receivables, loans and other obligations
that meet the conditions and requirements of the Exemptions.
The assets covered by the Exemptions include mortgage loans such as the
mortgage loans and fractional undivided interests in such loans.
The Exemptions set forth the following six general conditions which
must be satisfied for exemptive relief:
o the acquisition of the certificates by a Plan must be on terms,
including the price for the certificates, that are at least as
favorable to the Plan as they would be in an arm's-length transaction
with an unrelated party;
o the rights and interests evidenced by the certificates acquired by the Plan
are not subordinated to the rights and interests evidenced by other
certificates of the trust;
o the certificates acquired by the Plan must have received a rating at the
time of such acquisition that is in one of the three highest generic rating
categories from Fitch, Standard & Poor's Ratings Service or Moody's;
o the trustee cannot be an affiliate of any member of the "Restricted Group,"
which consists of the Underwriters, Morgan Stanley Dean Witter Capital I
Inc., the master servicer, the special servicer, each primary servicer and
any mortgagor with respect to mortgage loans constituting more than 5% of
the aggregate unamortized principal balance of the mortgage loans as of the
date of initial issuance of such classes of certificates;
o the sum of all payments made to the Underwriters in connection with the
distribution of the certificates must represent not more than reasonable
compensation for underwriting the certificates; the sum of all payments
made to and retained by Morgan Stanley Dean Witter Capital I Inc. in
consideration of the assignment of the
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mortgage loans to the trust must represent not more than the fair market
value of such mortgage loans; the sum of all payments made to and
retained by the master servicer, the special servicer, and any
sub-servicer must represent not more than reasonable compensation for
such person's services under the Pooling and Servicing Agreement or other
relevant servicing agreement and reimbursement of such person's
reasonable expenses in connection therewith; and
o the Plan investing in the certificates must be an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the 1933 Act.
Because the Class A Certificates are not subordinate to any other class
of certificates, the second general condition set forth above is satisfied with
respect to such certificates. It is a condition of the issuance of Class A
Certificates that they be rated AAA by Fitch and Aaa by Moody's. A fiduciary of
a Plan contemplating purchasing any such class of certificates in the secondary
market must make its own determination that at the time of such acquisition, any
such class of certificates continues to satisfy the third general condition set
forth above. Morgan Stanley Dean Witter Capital I Inc. expects that the fourth
general condition set forth above will be satisfied with respect to each of such
classes of certificates. A fiduciary of a Plan contemplating purchasing any such
class of certificates must make its own determination that the first, third,
fifth and sixth general conditions set forth above will be satisfied with
respect to any such class of certificate.
The Class B, Class C and Class D Certificates do not satisfy the second
condition described above because they are subordinated to the Class A
Certificates.
The U.S. Department of Labor has proposed amendments (the "Proposed
Amendments") to the individual prohibited transaction exemptions described above
that, if adopted as proposed, would among other things:
o modify the second general condition of the exemptions to eliminate the
non-subordination requirement for certain designated types of
certificates (which would include the Class B, Class C and Class D
Certificates); and
o modify the third general condition of the exemptions to require that
certain securities have received a rating in one of the four (rather than
three) highest generic rating categories from Fitch, Standard & Poor's
Ratings Service or Moody's at the time of acquisition by a Plan.
The Proposed Amendments, if adopted as proposed, would be effective as
of August 23, 2000. Thus, it is anticipated that, if the Proposed Amendments are
adopted as proposed, they would permit Plans (subject to the satisfaction of the
terms and conditions of the exemptions as modified) to acquire the Class B,
Class C and Class D, Certificates and, in connection with those classes of
Certificates, afford substantially the same relief as that described above with
respect to the Class A-1 and Class A-2 Certificates.
It is not certain whether or when the Proposed Amendments may be
adopted or whether or to what extent they may be adopted as proposed or, if
adopted, afford the same relief as currently proposed. Plan fiduciaries should,
and other potential investors who may be analyzing the potential liquidity of
their investment may wish to, consult with their advisors regarding the Proposed
Amendments.
Before purchasing any such class of certificates, a fiduciary of a Plan
should itself confirm (a) that such certificates constitute "certificates" for
purposes of the Exemptions and (b) that the specific and general conditions of
the Exemptions and the other requirements set forth in the Exemptions would be
satisfied. In addition to making its own determination as to the availability of
the exemptive relief provided in the Exemptions, the Plan fiduciary should
consider the availability of other prohibited transaction exemptions.
Moreover, the Exemptions provide relief from certain
self-dealing/conflict of interest prohibited transactions, but only if, among
other requirements:
o the investing Plan fiduciary or its affiliates is an obligor with respect
to five percent or less of the fair market value of the obligations
contained in the trust;
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o the Plan's investment in each class of certificates does not exceed 25% of
all of the certificates outstanding of that class at the time of the
acquisition; and
o immediately after the acquisition, no more than 25% of the assets of the
Plan are invested in certificates representing an interest in one or more
trusts containing assets sold or serviced by the same entity.
Morgan Stanley Dean Witter Capital I Inc. believes that the Exemptions
will apply to the acquisition and holding of Class A Certificates by Plans or
persons acting on behalf of or with "plan assets" of Plans, and that all
conditions of the Exemptions, other than those within the control of the
investing Plans or Plan investors, have been met. Upon request, the Underwriters
will deliver to any fiduciary or other person considering investing "plan
assets" of any Plan in the certificates a list identifying each borrower that is
the obligor under each mortgage loan that constitutes more than 5% of the
aggregate principal balance of the assets of the trust.
Because the characteristics of the Class B, Class C and Class D
Certificates do not meet the current 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
and Class D Certificate shall be deemed to have represented and warranted to
Morgan Stanley Dean Witter Capital I Inc., the trustee, the fiscal agent and the
master servicer that it satisfies the foregoing limitation, provided that an
insurance company investing solely assets of its general account may acquire and
hold such certificates subject to the limitations described in "--Insurance
Company General Accounts" below.
INSURANCE COMPANY GENERAL ACCOUNTS
Based on the reasoning of the United States Supreme Court in John
Hancock Life Ins. Co. v. Harris Trust and Savings Bank, an insurance company's
general account may be deemed to include assets of the Plans investing in the
general account (e.g., through the purchase of an annuity contract), and the
insurance company might be treated as a Party in Interest with respect to a Plan
by virtue of such investment. Any investor that is an insurance company using
the assets of an insurance company general account should note that the Small
Business Job Protection Act of 1996 added Section 401(c) of ERISA relating to
the status of the assets of insurance company general accounts under ERISA and
Section 4975 of the Code. Pursuant to Section 401(c), the Department of Labor
issued final regulations effective January 5, 2000 with respect to insurance
policies issued on or before December 31, 1998 that are supported by an
insurer's general account. As a result of these regulations, assets of an
insurance company general account will not be treated as "plan assets" for
purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code to the extent such assets relate to contracts issued to employee
benefit plans on or before December 31, 1998 and the insurer satisfied various
conditions.
Section 401(c) also provides that until the date that is 18 months
after the 401(c) Regulations became final (January 5, 2000), no liability under
the fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code may result on the basis of a claim that the assets of
the general account of an insurance company constitute the "plan assets" of any
such plan, except (a) to prevent avoidance of the 401(c) Regulations, and (b)
actions brought by the Secretary of Labor relating to certain breaches of
fiduciary duties that also constitute breaches of state or federal criminal law.
Any assets of an insurance company general account which support
insurance policies or annuity contracts issued to Plans after December 31, 1998,
or on or before that date for which the insurer does not comply with the 401(c)
Regulations, may be treated as "plan assets" of such Plans. Because Section
401(c) does not relate to insurance company separate accounts, separate account
assets continue to be treated as "plan assets" of any Plan that is invested in
such separate account. Insurance companies contemplating the investment of
general account assets in the Subordinate Certificates should consult with their
legal counsel with respect to the applicability of Section 401(c), including the
general account's ability to continue to hold such Certificates after July 5,
2001, which is the date 18 months after the date the 401(c) Regulations became
final.
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Accordingly, any insurance company that acquires or holds any Class B,
Class C and Class D Certificate shall be deemed to have represented and
warranted to Morgan Stanley Dean Witter Capital I Inc., the trustee, the fiscal
agent and the master servicer that (1) such acquisition and holding is
permissible under applicable law, will not constitute or result in a non-exempt
prohibited transaction under ERISA or Section 4975 of the Code, and will not
subject Morgan Stanley Dean Witter Capital I Inc., the trustee, the fiscal agent
or the master servicer to any obligation in addition to those undertaken in the
Pooling and Servicing Agreement, or (2) the source of funds used to acquire and
hold such certificates is an "insurance company general account", as defined in
DOL Prohibited Transaction Class Exemption 95-60, and the applicable conditions
set forth in PTCE 95-60 have been satisfied.
GENERAL INVESTMENT CONSIDERATIONS
Prospective Plan investors should consult with their legal counsel
concerning the impact of ERISA and Section 4975 of the Code, the applicability
of the Exemptions, or other exemptive relief, and the potential consequences to
their specific circumstances, prior to making an investment in the certificates.
Moreover, each Plan fiduciary should determine whether, under the general
fiduciary standards of ERISA regarding prudent investment procedure and
diversification, an investment in the certificates is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
LEGAL INVESTMENT
The offered certificates will not constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended. The appropriate characterization of the 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 investment laws and regulations, regulatory
capital requirements or review by regulatory authorities should consult their
own legal advisors to determine whether, and to what extent, the offered
certificates will constitute legal investments for them or are subject to
investment, capital or other restrictions.
No representations are made as to the proper characterization of the
offered certificates for legal investment or financial institution regulatory
purposes, or as to the ability of particular investors to purchase the offered
certificates under applicable legal investment or other 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
Morgan Stanley Dean Witter Capital I Inc. will apply the net proceeds
of the offering of the certificates towards the simultaneous purchase of the
mortgage loans from the sellers and to the payment of expenses in connection
with the issuance of the certificates.
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PLAN OF DISTRIBUTION
Morgan Stanley Dean Witter Capital I Inc. has entered into an
Underwriting Agreement with Morgan Stanley & Co., Incorporated, an affiliate of
Morgan Stanley Dean Witter Capital I Inc. and Goldman, Sachs & Co. Subject to
the terms and conditions set forth in the Underwriting Agreement, Morgan Stanley
Dean Witter Capital I Inc. has agreed to sell to each Underwriter, and each
Underwriter has agreed severally to purchase from Morgan Stanley Dean Witter
Capital I Inc. the respective aggregate Certificate Balance of each Class of
offered certificates presented below.
<TABLE>
<CAPTION>
UNDERWRITERS CLASS A-1 CLASS A-2 CLASS B CLASS C CLASS D
--------------------- ------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Morgan Stanley & Co.
Incorporated $119,309,250 $359,990,250 $17,220,750 $18,655,500 $5,166,000
Goldman, Sachs & Co. $ 39,769,750 $119,996,750 $5,740,250 $6,218,500 $1,722,000
Total............. $159,079,000 $479,987,000 $22,961,000 $24,874,000 $6,888,000
</TABLE>
Morgan Stanley & Co. Incorporated will act as sole lead manager and
bookrunner with respect to the offered certificates.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to conditions precedent, and that the Underwriters
severally will be obligated to purchase all of the offered certificates if any
are purchased. In the event of a default by an Underwriter, the Underwriting
Agreement provides that the purchase commitment of the non-defaulting
Underwriter may be increased. Proceeds to Morgan Stanley Dean Witter Capital I
Inc. from the sale of the offered certificates, before deducting expenses
payable by Morgan Stanley Dean Witter Capital I Inc., will be approximately
$697,000,573, plus accrued interest.
The Underwriters have advised Morgan Stanley Dean Witter Capital I Inc.
that they will propose to offer the offered certificates from time to time for
sale in one or more negotiated transactions or otherwise at varying prices to be
determined at the time of sale. The Underwriters may effect such transactions by
selling such Classes of offered certificates to or through dealers and such
dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriters and any purchasers of such
Classes of offered certificates for whom they may act as agent.
The offered certificates are offered by the Underwriters when, as and
if issued by Morgan Stanley Dean Witter Capital I Inc., delivered to and
accepted by the Underwriters and subject to their right to reject orders in
whole or in part. It is expected that delivery of the offered certificates will
be made in book-entry form through the facilities of DTC against payment
therefor on or about October 31, 2000, which is the eighth 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.
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Morgan Stanley Dean Witter Capital I Inc. has agreed to indemnify the
Underwriters against civil liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the Underwriters
may be required to make in respect thereof.
The Underwriters currently intend to make a secondary market in the
offered certificates, but they are not obligated to do so.
LEGAL MATTERS
The legality of the offered certificates and the material federal
income tax consequences of investing in the offered certificates will be passed
upon for Morgan Stanley Dean Witter Capital I Inc. by Latham & Watkins, New
York, New York. Legal matters with respect to the offered certificates will be
passed upon for the Underwriters by Latham & Watkins, New York, New York. Legal
matters will be passed upon for Principal Commercial Funding, LLC by Dechert,
New York, New York, for John Hancock Real Estate Finance, Inc. by Cadwalader,
Wickersham & Taft, New York, New York and for The Northwestern Mutual Life
Insurance Company by Cadwalader, Wickersham & Taft, New York, New York.
RATINGS
It is a condition of the issuance of the offered certificates that they
receive the following credit ratings from Fitch and Moody's.
CLASS FITCH MOODY'S
---------------------- --------- -----------
Class A-1............ AAA Aaa
Class A-2............ AAA Aaa
Class B.............. AA Aa2
Class C.............. A A2
Class D.............. A- A3
The ratings of the offered certificates address the likelihood of the
timely payment of interest and the ultimate payment of principal, if any, due on
the offered certificates by the Rated Final Distribution Date. That date is the
first Distribution Date that follows by at least 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 (1)
the likelihood or frequency of principal prepayments, voluntary or involuntary,
on the mortgage loans, (2) the degree to which such prepayments might differ
from those originally anticipated, (3) whether and to what extent Prepayment
Premiums or default interest will be received or (4) the allocation of Net
Aggregate Prepayment Interest Shortfalls. A security rating does not represent
any assessment of the yield to maturity that investors may experience. In
general, the ratings 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 Morgan
Stanley Dean Witter Capital I Inc. to do so may be lower than the ratings
assigned thereto at the request of Morgan Stanley Dean Witter Capital I Inc.
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GLOSSARY OF TERMS
The certificates will be issued pursuant to the Pooling and Servicing
Agreement. The following Glossary of Terms is not complete. You should also
refer to the prospectus and the Pooling and Servicing Agreement for additional
definitions. If you send a written request to the trustee at its corporate
office, the trustee will provide to you without charge a copy of the Pooling and
Servicing Agreement, without exhibits and schedules.
Unless the context requires otherwise, the definitions contained in
this Glossary of Terms apply only to this series of certificates and will not
necessarily apply to any other series of certificates the Trust may issue.
"Accrued Certificate Interest" means, in respect of each Class of REMIC
Regular Certificates for each Distribution Date, the amount of interest for the
applicable Interest Accrual Period accrued at the applicable Pass-Through Rate
on the aggregate Certificate Balance or Notional Amount, as the case may be, of
such Class of certificates outstanding immediately prior to such Distribution
Date. Accrued Certificate Interest will be calculated on the basis of a 360-day
year consisting of twelve 30-day months.
"Administrative Cost Rate" will equal the sum of the related Master
Servicing Fee, the Excess Servicing Fee, the Primary Servicing Fee and the
Trustee Fee for any month (in each case, expressed as a per annum rate) for any
Mortgage Loan in such month.
"Advance Rate" means a rate equal to the "Prime Rate" as reported in
The Wall Street Journal from time to time.
"Advances" means Servicing Advances and P&I Advances, collectively.
"Annual Report" means a report for each mortgage loan based on the most
recently available year-end financial statements and most recently available
rent rolls of each applicable borrower, to the extent such information is
provided to the master servicer, containing such information and analyses as
required by the Pooling and Servicing Agreement including, without limitation,
Debt Service Coverage Ratios, to the extent available, and in such form as shall
be specified in the Pooling and Servicing Agreement.
"Appraisal Event" means not later than the earliest of the following:
o the date 120 days after the occurrence of any delinquency in payment with
respect to a mortgage loan if such delinquency remains uncured;
o the date 30 days after receipt of notice that the related borrower has
filed a bankruptcy petition, an involuntary bankruptcy has occurred or a
receiver is appointed in respect of the related mortgaged property,
provided that such petition or appointment remains in effect; and
o the date 30 days following the date a mortgaged property becomes an REO
Property.
"Appraisal Reduction" will equal, for any mortgage loan, including a
mortgage loan as to which the related mortgaged property has become an REO
Property, an amount, calculated as of the first Determination Date that is at
least fifteen days after the date on which the appraisal is obtained or the
internal valuation is performed, equal to the excess, if any, of:
o the sum of:
o the Scheduled Principal Balance of such mortgage loan or in the
case of an REO Property, the related REO Mortgage Loan, less the
principal amount of any undrawn letter of credit or debt service
reserve, if applicable, that is then securing such mortgage loan;
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o to the extent not previously advanced by the master servicer,
the trustee or the fiscal agent, all accrued and unpaid interest
on the mortgage loan;
o all related unreimbursed Advances and interest on such Advances at
the Advance Rate; and
o to the extent funds on deposit in any applicable Escrow Accounts
are not sufficient therefor, and to the extent not previously
advanced by the master servicer, the trustee or the fiscal agent,
all currently due and unpaid real estate taxes and assessments,
insurance premiums and, if applicable, ground rents in respect of
the related mortgaged property or REO Property, as the case may
be,
over
o 90% of the value (net of any prior mortgage liens) of such mortgaged
property or REO Property as determined by such appraisal or internal
valuation plus the amount of any escrows held by or on behalf of the
trustee as security for the mortgage loan (less the estimated amount of
obligations anticipated to be payable in the next twelve months to which
such escrows relate).
"Assumed Scheduled Payment" means an amount deemed due in respect of:
o any Balloon Loan that is delinquent in respect of its Balloon Payment
beyond the first Determination Date that follows its original stated
maturity date; or
o any mortgage loan as to which the related mortgaged property has become an
REO Property.
The Assumed Scheduled Payment deemed due on any such Balloon Loan on its
original stated maturity date and on each successive Due Date that it remains or
is deemed to remain outstanding will equal the Scheduled Payment that would have
been due on such date if the related Balloon Payment had not come due, but
rather such mortgage loan had continued to amortize in accordance with its
amortization schedule in effect immediately prior to maturity. With respect to
any mortgage loan as to which the related mortgaged property has become an REO
Property, the Assumed Scheduled Payment deemed due on each Due Date for so long
as the REO Property remains part of the trust, equals the Scheduled Payment (or
Assumed Scheduled Payment) due on the last Due Date prior to the acquisition of
such REO Property.
"Available Distribution Amount" means in general, for any Distribution
Date:
(1) all amounts on deposit in the Certificate Account as of the
business day preceding the related Distribution Date,
exclusive of any portion thereof that represents one or more
of the following:
o Scheduled Payments collected but due on a Due Date
subsequent to the related Collection Period;
o Prepayment Premiums (which are separately distributable
on the certificates as described in this prospectus
supplement);
o amounts that are payable or reimbursable to any person
other than the Certificateholders (including, among other
things, amounts attributable to Expense Losses and
amounts payable to the master servicer, the special
servicer, the Primary Servicers, the trustee and the
fiscal agent as compensation or in reimbursement of
outstanding Advances or as Excess Servicing Fees);
o amounts deposited in the Certificate Account in error;
and
o if such Distribution Date occurs during January, other
than a leap year, or February of any year, the
Interest Reserve Amounts with respect to the
Interest Reserve Loans to be deposited into the
Interest Reserve Account;
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(2) to the extent not already included in clause (1), any P&I
Advances made and any Compensating Interest Payments paid with
respect to such Distribution Date; and
(3) if such Distribution Date occurs during March of any year, the
aggregate of the Interest Reserve Amounts then on deposit in
the Interest Reserve Account in respect of each Interest
Reserve Loan.
"Balloon Loans" means mortgage loans that provide for Scheduled
Payments based on amortization schedules significantly longer than their terms
to maturity and that are expected to have remaining principal balances equal to
or greater than 5% of the original principal balance of those mortgage loans as
of their respective stated maturity date.
"Balloon LTV" - See "Balloon LTV Ratio."
"Balloon LTV Ratio" or "Balloon LTV" means the ratio, expressed as a
percentage, of the principal balance of a Balloon Loan anticipated to be
outstanding on the date on which the related Balloon Payment is scheduled to be
due (calculated based on the Structuring Assumptions and a 0% CPR) to the value
of the related mortgaged property or properties determined as described under
"Description of the Mortgage Pool--Additional Mortgage Loan Information" in this
prospectus supplement.
"Balloon Payment" means, with respect to the Balloon Loans, the
principal payments and scheduled interest due and payable on the relevant
maturity dates.
"Certificate Account" means one or more separate accounts established
and maintained by the master servicer, any Primary Servicer or any sub-servicer
on behalf of the master servicer, pursuant to the Pooling and Servicing
Agreement.
"Certificate Balance" will equal the then maximum amount that the
holder of each Principal Balance Certificate will be entitled to receive in
respect of principal out of future cash flow on the mortgage loans and other
assets included in the trust.
"Certificateholder" or "Holder" means an investor certificateholder, a
Person in whose name a certificate is registered in the Certificate Registrar or
a Person in whose name ownership of an uncertificated certificate is recorded in
the books and records of the Certificate Registrar.
"Certificate Owner" means a Person acquiring an interest in an offered
certificate.
"Certificate Registrar" means the trustee, in its capacity as the
Certificate Registrar.
"Class" means the designation applied to the offered certificates and
the private certificates, pursuant to this prospectus supplement.
"Class A Certificates" means the Class A-1 Certificates and the Class
A-2 Certificates.
"Clearstream Banking" means Clearstream Banking, societe anonyme.
"Closing Date" means October 31, 2000.
"Collection Period" means, with respect to any Distribution Date, the
period beginning with the day after the Determination Date in the month
preceding such Distribution Date (or, in the case of the first Distribution
Date, the Cut-off Date) and ending with the Determination Date occurring in the
month in which such Distribution Date occurs.
"Compensating Interest" means with respect to any Distribution Date, an
amount equal to the excess of (A) Prepayment Interest Shortfalls incurred in
respect of the mortgage loans other than Specially Serviced Mortgage Loans
resulting from Principal Prepayments during the related Collection Period over
(B) Prepayment Interest
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Excesses incurred in respect of such mortgage loans resulting from Principal
Prepayments during the same Collection Period but such Compensating Interest
shall not in any event be more than 0.03% of the aggregate Master Servicing Fee
for the related Collection Period calculated in respect of all the mortgage
loans including REO Properties.
"Compensating Interest Payment" means any payment of Compensating
Interest.
"Constant Prepayment Rate" or "CPR" means a rate that represents an
assumed constant rate of prepayment each month, which is expressed on a per
annum basis, relative to the then outstanding principal balance of a pool of
mortgage loans for the life of such mortgage loans. CPR does not purport to be
either a historical description of the prepayment experience of any pool of
mortgage loans or a prediction of the anticipated rate of prepayment of any
mortgage loans, including the mortgage loans underlying the certificates.
"Controlling Class" means the most subordinate Class of Subordinate
Certificates outstanding at any time of determination; provided, however, that
if the aggregate Certificate Balance of such Class of certificates is less than
25% of the initial aggregate Certificate Balance of such Class as of the Closing
Date, the Controlling Class will be the next most subordinate Class of
certificates.
"CPR" - See "Constant Prepayment Rate" above.
"Cut-off Date" means October 1, 2000. For purposes of the information
contained in this prospectus supplement (including the appendices hereto),
scheduled payments due in October 2000 with respect to mortgage loans not having
payment dates on the first of each month have been deemed received on October 1,
2000, not the actual day which such scheduled payments were due.
"Cut-off Date Balance" means, with respect to any mortgage loan, such
mortgage loan's principal balance outstanding as of its Cut-off Date, after
application of all payments of principal due on or before such date, whether or
not received determined as described under "Description of the Mortgage
Pool--Additional Mortgage Loan Information" in this prospectus supplement. For
purposes of those mortgage loans that have a due date on a date other than the
first of the month, we have assumed that monthly payments on such mortgage loans
are due on the first of the month for purposes of determining their Cut-off Date
Balances.
"Cut-off Date Loan-to-Value" or "Cut-off Date LTV" means a ratio,
expressed as a percentage, of the Cut-off Date Balance of a mortgage loan
determined as described under "Description of the Mortgage Pool--Additional
Mortgage Loan Information" in this prospectus supplement.
"Cut-off Date LTV" - See "Cut-off Date Loan-to-Value."
"Debt Service Coverage Ratio" or "DSCR" means, the ratio of
Underwritable Cash Flow estimated to be produced by the related mortgaged
property or properties to the annualized amount of debt service payable under
that mortgage loan.
"Depositor" means, Morgan Stanley Dean Witter Capital I Inc.
"Determination Date" means, with respect to any Distribution Date, the
earlier of (i) the 10th day of the month in which such Distribution Date occurs,
or, if such day is not a business day, the next preceding business day, and (ii)
the 5th business day prior to the related Distribution Date.
"Discount Rate" means, for the purposes of the distribution of
Prepayment Premiums, the rate which, when compounded monthly, is equivalent to
the Treasury Rate when compounded semi-annually.
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"Distributable Certificate Interest Amount" means, in respect of any
Class of REMIC Regular Certificates for any Distribution Date, the sum of:
o Accrued Certificate Interest in respect of such Class of certificates for
such Distribution Date, reduced (to not less than zero) by:
o any Net Aggregate Prepayment Interest Shortfalls; and
o Realized Losses and Expense Losses, in each case specifically
allocated with respect to such Distribution Date to reduce the
Distributable Certificate Interest Amount payable in respect
of such Class in accordance with the terms of the Pooling and
Servicing Agreement; and
o the portion of the Distributable Certificate Interest Amount for such Class
remaining unpaid as of the close of business on the preceding Distribution
Date, plus the Unpaid Interest.
"Distribution Account" means the distribution account maintained by the
trustee, in accordance with the Pooling and Servicing Agreement.
"Distribution Date" means the 15th day of each month, or if any such
15th day is not a business day, on the next succeeding business day.
"Document Defect" means that a mortgage loan is not delivered as and
when required, is not properly executed or is defective on its face.
"DOL Regulation" means the final regulation, issued by the DOL,
defining the term "plan assets" which provides, generally, that when a Plan
makes an equity investment in another entity, the underlying assets of that
entity may be considered plan assets unless exceptions apply (29 C.F.R.
Section 2510.3-101).
"DSCR" - See "Debt Service Coverage Ratio."
"DTC" means The Depository Trust Company.
"DTC Systems" means those computer applications, systems, and the like
for processing data for DTC.
"Due Dates" means dates upon which the related Scheduled Payments are
due.
"EPA" means the United States Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear" means the Euroclear System.
"Event of Default" means, with respect to the master servicer under the
Pooling and Servicing Agreement, any one of the following events:
o any failure by the master servicer to remit to the trustee any payment
required to be remitted by the master servicer under the terms of the
Pooling and Servicing Agreement, including any required Advances;
o any failure by the master servicer to make a required deposit to the
Certificate Account which continues unremedied for one business day
following the date on which such deposit was first required to be made;
o any failure on the part of the master servicer duly to observe or perform
in any material respect any other of the duties, covenants or agreements on
the part of the master servicer contained in the Pooling and Servicing
Agreement which continues unremedied for a period of 30 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the master servicer by Morgan
Stanley Dean
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Witter Capital I Inc. or the trustee; provided, however, that if the master
servicer certifies to the trustee and Morgan Stanley Dean Witter Capital I
Inc. that the master servicer is in good faith attempting to remedy such
failure, such cure period will be extended to the extent necessary to
permit the master servicer to cure such failure; provided, further that
such cure period may not exceed 90 days;
o any breach of the representations and warranties of the master servicer in
the Pooling and Servicing Agreement that materially and adversely
affects the interest of any holder of any Class of certificates and that
continues unremedied for a period of 30 days after the date on which notice
of such breach, requiring the same to be remedied shall have been given to
the master servicer by Morgan Stanley Dean Witter Capital I Inc. or the
trustee, provided, however, that if the master servicer certifies to the
trustee and Morgan Stanley Dean Witter Capital I Inc. that the master
servicer is in good faith attempting to remedy such breach, such cure
period will be extended to the extent necessary to permit the master
servicer to cure such breach; provided, further that such cure period may
not exceed 90 days;
o the trustee shall receive notice from Fitch or Moody's 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
Fitch or Moody's to any Class of certificates; or
o the master servicer has been downgraded to a servicer rating level below
CMS3, or its then equivalent, by Fitch;
o a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises in an involuntary case under any present or
future federal or state bankruptcy, insolvency or similar law for the
appointment of a conservator, receiver, liquidator, trustee or similar
official in any bankruptcy, insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the master
servicer and such decree or order shall have remained in force undischarged
or unstayed for a period of 60 days;
o the master servicer shall consent to the appointment of a conservator,
receiver, liquidator, trustee or similar official in any bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the master servicer or of or relating
to all or substantially all of its property; or
o the master servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable bankruptcy, insolvency or reorganization statute, make an
assignment for the benefit of its creditors, voluntarily suspend payment of
its obligations, or take any corporate action in furtherance of the
foregoing.
"Excess Liquidation Proceeds" the excess of (i) proceeds from the sale
or liquidation of a mortgage loan or related REO Property, net of expenses and
any related Advances and interest thereon over (ii) the amount that would have
been received if a prepayment in full had been made with respect to such
mortgage loan on the date such proceeds were received.
"Excess Servicing Fee" means an additional fee payable to Wells Fargo
and/or JHREF that accrues at a rate set forth in the Pooling and Servicing
Agreement, which is assignable and non-terminable.
"Exemptions" means the individual prohibited transaction exemptions
granted by the DOL to the Underwriters.
"Expense Losses" means, among other things:
o any interest paid to the master servicer, the trustee or the fiscal agent
in respect of unreimbursed Advances;
o all Special Servicer Compensation payable to the special servicer from
amounts that are part of the trust;
o other expenses of the trust, including, but not limited to, specified
reimbursements and indemnification payments to the trustee and certain
related persons, specified reimbursements and indemnification payments
to
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Morgan Stanley Dean Witter Capital I Inc., the master servicer, the
special servicer, the Primary Servicer and certain related persons,
specified taxes payable from the assets of the trust, the costs and
expenses of any tax audits with respect to the trust and other tax-related
expenses and the cost of various opinions of counsel required to be
obtained in connection with the servicing of the mortgage loans and
administration of the trust; and
o any other expense of the trust not specifically included in the calculation
of Realized Loss for which there is no corresponding collection from the
borrower.
"FASIT" means a financial asset securitization investment trust.
"Fitch" means Fitch, Inc.
"401(c) Regulations" means the final regulations issued by the DOL
under Section 401(c) clarifying the application of ERISA to Insurance Company
General Accounts of ERISA.
"Hazardous Materials" means gasoline, petroleum products, explosives,
radioactive materials, polychlorinated biphenyls or related or similar
materials, and any other substance or material as may be defined as a hazardous
or toxic substance, material or waste by any federal, state or local
environmental law, ordinance, rule, regulation or order, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. (Section) 9601 et seq.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C. (Section) 1801, et
seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C.
(Section) 6901 et seq.), the Federal Water Pollution Control Act, as amended (33
U.S.C. (Section) 1251 et seq.), the Clean Air Act, as amended (42 U.S.C.
(Section) 7401 et seq.), and any regulations promulgated pursuant thereto.
"Initial Pool Balance" means the aggregate Cut-off Date Balance of
$765,349,379.
"Insurance Proceeds" means all amounts paid by an insurer in connection
with a mortgage loan, other than any amounts required to be paid to the related
borrower.
"Interest Accrual Period" means, for each Class of REMIC Regular
Certificates and each Distribution Date, the calendar month immediately
preceding the month in which such Distribution Date occurs.
"Interest Only Certificates" means the Class X Certificates.
"Interest Reserve Account" means an account that the master servicer
has established and will maintain for the benefit of the holders of the
certificates.
"Interest Reserve Amount" means all amounts deposited in the Interest
Reserve Account with respect to Scheduled Payments due in any applicable January
and February.
"Interest Reserve Loan" - See "Non-30/360 Loan" below.
"Interested Party" means the special servicer, the master servicer,
Morgan Stanley Dean Witter Capital I Inc., the holder of any related junior
indebtedness, the Operating Advisor, a holder of 50% or more of the Controlling
Class, any independent contractor engaged by the master servicer or the special
servicer pursuant to the Pooling and Servicing Agreement or any person actually
know to a responsible officer of the trustee to be an affiliate of any of them.
"JHREF" means John Hancock Real Estate Finance Inc.
"JHREF Loans" means the twenty-two (22) mortgage loans that were
originated by JHREF.
"Liquidation Fee" means 1.00% of the related Liquidation Proceeds
and/or any condemnation proceeds received by the trust in connection with a
mortgage loan or related REO Property.
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"Liquidation Proceeds" means proceeds from the sale or liquidation of a
mortgage loan or related REO Property (including a repurchase of a mortgage loan
by a mortgage loan seller due to the breach of a representation and warranty or
document defect), net of expenses and any related Advances and interest thereon
.
"Lock-out Period" means the period during which voluntary principal
prepayments are prohibited.
"Master Servicer Remittance Date" means in each month the business day
preceding the Distribution Date.
"Master Servicing Fee" means the monthly amount, based on the Master
Servicing Fee Rate, to which the master servicer is entitled in compensation for
servicing the mortgage loans.
"Master Servicing Fee Rate" means 0.03% to 0.05% per annum each month
payable with respect to a Mortgage Loan in connection with the Master Servicing
Fee as set forth in the Pooling and Servicing Agreement..
"Material Breach" means a breach of any of the representations and
warranties that (a) materially and adversely affects the interests of the
holders of the certificates in the related mortgage loan, or (b) both (i) the
breach materially and adversely affects the value of the mortgage loan and (ii)
the mortgage loan is a Specially Serviced Mortgage Loan or Rehabilitated
Mortgage Loan.
"Material Document Defect" means a Document Defect that either (a)
materially and adversely affects the interests of the holders of the
certificates in the related mortgage loan, or (b) both (i) the Document Defect
materially and adversely affects the value of the mortgage loan and (ii) the
mortgage loan is a Specially Serviced Mortgage Loan or Rehabilitated Mortgage
Loan.
"Money Term" means, with respect to any mortgage loan, the stated
maturity date, mortgage rate, principal balance, amortization term or payment
frequency thereof or any provision thereof requiring the payment of a Prepayment
Premium (but does not include late fee or default interest provisions).
"Moody's" means Moody's Investors Service, Inc.
"Mortgage File" means the following documents, among others:
o the original mortgage note, endorsed (without recourse) in blank or to the
order of the trustee;
o the original or a copy of the related mortgage(s), together with originals
or copies of any intervening assignments of such document(s), in each case
with evidence of recording thereon (unless such document(s) have not been
returned by the applicable recorder's office);
o the original or a copy of any related assignment(s) of rents and leases (if
any such item is a document separate from the mortgage), together with
originals or copies of any intervening assignments of such document(s), in
each case with evidence of recording thereon (unless such document(s) have
not been returned by the applicable recorder's office);
o an assignment of each related mortgage in blank or in favor of the
trustee, in recordable form;
o an assignment of any related assignment(s) of rents and leases (if any such
item is a document separate from the mortgage) in blank or in favor of the
trustee, in recordable form;
o an original or copy of the related lender's title insurance policy (or, if
a title insurance policy has not yet been issued, a commitment for title
insurance "marked-up" at the closing of such mortgage loan); and
o when relevant, the related ground lease or a copy thereof.
"Mortgage Loan Purchase Agreement" means each of the agreements entered
into between Morgan Stanley Dean Witter Capital I Inc. and the respective
seller, as the case may be.
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"Net Aggregate Prepayment Interest Shortfall" means, for the related
Distribution Date, the aggregate of all Prepayment Interest Shortfalls incurred
in respect of the mortgage loans other than Specially Serviced Mortgage Loans
during any Collection Period that are neither offset by Prepayment Interest
Excesses collected on such mortgage loans during such Collection Period nor
covered by a Compensating Interest Payment paid by the master servicer.
"Net Mortgage Rate" means, in general, with respect to any mortgage
loan, a per annum rate equal to the related mortgage rate minus the related
Administrative Cost Rate; provided that, for purposes of calculating the
Pass-Through Rate for each Class of REMIC Regular Certificates from time to
time, the Net Mortgage Rate for any mortgage loan will be calculated without
regard to any modification, waiver or amendment of the terms of such mortgage
loan subsequent to the Closing Date. In addition, because the certificates
accrue interest on the basis of a 360-day year consisting of twelve 30-day
months, when calculating the Pass-Through Rate for each Class of certificates
for each Distribution Date, the Net Mortgage Rate on a Non-30/360 Loan will be
appropriately adjusted to reflect such difference. However, with respect to each
Non-30/360 Loan:
o the Net Mortgage Rate that would otherwise be 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
o the Net Mortgage Rate that would otherwise be 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 related withdrawal from the Interest
Reserve Account for the preceding January (if applicable) and February.
"Non-30/360 Loan" or "Interest Reserve Loan" means a mortgage loan that
accrues interest other than on the basis of a 360-day year consisting of 12
30-day months.
"Northwestern Mutual" means The Northwestern Mutual Life Insurance
Company.
"Northwestern Mutual Loans" means the three (3) mortgage loans that
were originated by Northwestern Mutual.
"Notional Amount" means the notional principal amount of the Class X
Certificates, which will be based upon the outstanding principal balance of the
Principal Balance Certificates outstanding from time to time.
"NWAC Rate" - See "Weighted Average Net Mortgage Rate."
"OID" means original issue discount.
"Open Period" means the period prior to maturity when voluntary
principal prepayments are permitted without any Prepayment Premiums.
"Operating Adviser" means that entity appointed by the holders of a
majority of the Controlling Class which will have the right to receive
notification from, and in specified cases to direct, the special servicer in
regard to specified actions.
"P&I Advance" means the amount of any Scheduled Payments or Assumed
Schedule Payment (net of the related Master Servicing Fees, Excess Servicing
Fees and Primary Servicing Fees), other than any Balloon Payment, on the
mortgage loans that are delinquent as of the close of business on the preceding
Determination Date.
"Participants" means DTC's participating organizations.
"Parties in Interest" means persons who have specified relationships to
Plans ("parties in interest" under ERISA or "disqualified persons" under Section
4975 of the Code).
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"Pass-Through Rate" means the rate per annum at which any Class of
certificates, other than the Residual Certificates, accrues interest.
"PCF" means Principal Commercial Funding, LLC.
"PCF Loans" means the seventy-eight (78) mortgage loans that were
originated by PCF or its affiliates.
"Percentage Interest" will equal, as evidenced by any REMIC Regular
Certificate in the Class to which it belongs, a fraction, expressed as a
percentage, the numerator of which is equal to the initial Certificate Balance
or Notional Amount, as the case may be, of such certificate as set forth on the
face thereof, and the denominator of which is equal to the initial aggregate
Certificate Balance or Notional Amount, as the case may be, of such Class.
"Permitted Cure Period" means, for the purposes of any Material
Document Defect or Material Breach in respect of any mortgage loan, the 85-day
period immediately following the earlier of the discovery by the 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 85-day period and such Document Defect or breach
would not cause the mortgage loan to be other than a "qualified mortgage", 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 unless, solely in the case of a Material Document Defect, (x) the Mortgage
Loan is then a Specially Serviced Mortgage Loan and a Servicing Transfer Event
has occurred as a result of a monetary default or as described in the second and
fifth bullet points of the definition of Specially Serviced Mortgage Loan and
(y) the Document Defect was identified in a certification delivered to the
related mortgage loan seller by the Trustee in accordance with the Pooling and
Servicing Agreement.
"Plans" means (a) employee benefit plans as defined in Section 3(3) of
ERISA that are subject to Title I of ERISA, (b) plans as defined in Section 4975
of the Code that are subject to Section 4975 of the Code, and (c) entities whose
underlying assets include plan assets by reason of a plan's investment in such
entities.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of October 1, 2000, among Morgan Stanley Dean Witter Capital
I Inc., as depositor, Wells Fargo, as master servicer, GMACCM as special
servicer, LaSalle Bank National Association, as trustee and ABN AMRO Bank N.V.,
as fiscal agent.
"Prepayment Interest Excess" means, in the case of a mortgage loan in
which a full or partial Principal Prepayment or a Balloon Payment is made during
any Collection Period after the Due Date for such mortgage loan, the amount of
interest which accrues on the amount of such Principal Prepayment or Balloon
Payment that exceeds the corresponding amount of interest accruing on the
certificates. The amount of the Prepayment Interest Excess in any such case will
generally equal the interest that accrues on the mortgage loan from such Due
Date to the date such payment was made, net of the Master Servicing Fee, the
Primary Servicing Fee and Excess Servicing Fee or, if the related mortgage loan
is a Specially Serviced Mortgage Loan, the Special Servicing Fee and the Trustee
Fee.
"Prepayment Interest Shortfall" means, for any Distribution Date and
with respect to any mortgage loan as to which the related borrower has made a
full or partial Principal Prepayment or a Balloon Payment during the related
Collection Period, and the date such payment was made (or, in the case of a
Balloon Payment, the date through which interest thereon accrues) occurred prior
to the Due Date for such mortgage loan in such Collection Period. Such a
shortfall arises because the amount of interest (net of the Master Servicing
Fee, the Primary Servicing Fee, the Excess Servicing Fee, the Special Servicing
Fee, if the related mortgage loan is a Specially Serviced Mortgage Loan and the
Trustee Fee) that accrues on the amount of such Principal Prepayment or Balloon
Payment will be less than the corresponding amount of interest accruing on the
Certificates. In such a case, the Prepayment Interest Shortfall will generally
equal the excess of:
o the aggregate amount of interest that would have accrued at the Net
Mortgage Rate (less the Special Servicing Fee, if the related mortgage loan
is a Specially Serviced Mortgage Loan) on the Scheduled Principal Balance
of such mortgage loan for the 30 days ending on such Due Date if such
Principal Prepayment or Balloon Payment had not been made, over
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o the aggregate interest that did so accrue through the date such payment was
made.
"Prepayment Premium" means, with respect to any Distribution Date, the
aggregate of all prepayment premiums, yield maintenance charges and prepayment
charges, if any, received during the related Collection Period in connection
with Principal Prepayments.
"Primary Servicer" means Principal Capital Management, LLC, John
Hancock Real Estate Finance, Inc. and The Northwestern Mutual Life Insurance
Company.
"Primary Servicing Fee" means the monthly amount, based on the Primary
Servicing Fee Rate, to which the Primary Servicers are entitled in compensation
for servicing the mortgage loans.
"Primary Servicing Fee Rate" means an amount per annum set forth in the
Pooling and Servicing Agreement, which is payable each month with respect to a
Mortgage Loan in connection with the Primary Servicing Fee.
"Principal Balance Certificates" means, upon initial issuance, the
Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F, Class G,
Class H, Class J, Class K, Class L, Class M, Class N, Class O and Class P
Certificates.
"Principal Distribution Amount" equals, in general, for any
Distribution Date, the aggregate of the following:
o the principal portions of all Scheduled Payments (other than the principal
portion of Balloon Payments) and any Assumed Scheduled Payments due or
deemed due, as the case may be, in respect of the mortgage loans for their
respective Due Dates occurring during the related Collection Period; and
o all payments (including Principal Prepayments and the principal portion
of Balloon Payments) and other collections (including Liquidation
Proceeds (other than the portion thereof, if any, constituting Excess
Liquidation Proceeds), Condemnation Proceeds, Insurance Proceeds and
REO Income (each as defined herein) and proceeds of Mortgage Loan
repurchases) that were received on or in respect of the mortgage loans
during the related Collection Period and that were identified and
applied by the master servicer as recoveries of principal thereof, in
each case net of any portion of such payment or other collection that
represents a recovery of the principal portion of any Scheduled Payment
(other than a Balloon Payment) due, or the principal portion of any Assumed
Scheduled Payment deemed due, in respect of the related Mortgage Loan on a
Due Date during or prior to the related Collection Period and not
previously recovered.
"Principal Prepayments" means the payments and collections with respect
to principal of the mortgage loans including all voluntary and involuntary
prepayments of principal made prior to their scheduled Due Dates.
"PTCE" means a DOL Prohibited Transaction Class Exemption.
"Purchase Price" means that amount at least equal to the unpaid
principal balance of such mortgage loan, together with accrued but unpaid
interest thereon to but not including the Due Date in the Collection Period in
which the purchase occurs and the amount of any expenses related to such
mortgage loan or REO Property (including any Servicing Advances, Advance
interest related to such mortgage loan and any Special Servicing Fees and
Liquidation Fees) that are reimbursable to the master servicer, the special
servicer, the trustee or the fiscal agent, plus if such mortgage loan is being
repurchased or substituted for by a seller pursuant to the related Mortgage Loan
Purchase Agreement, all expenses reasonably incurred or to be incurred by the
primary servicer, the master servicer, the special servicer, Morgan Stanley Dean
Witter Capital I Inc. or the trustee in respect of the Material Breach or
Material Document Defect giving rise to the repurchase or substitution
obligation (and that are not otherwise included above).
"Qualifying Substitute Mortgage Loan" means a mortgage loan having the
characteristics required in the Pooling and Servicing Agreement and otherwise
satisfying the conditions set forth therein and for which the Rating
S-109
<PAGE>
Agencies have confirmed in writing that such mortgage loan would not result in
a withdrawal, downgrade or qualification of the then current ratings on the
certificates.
"Rated Final Distribution Date" means 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.
"Rating Agencies" means Fitch and Moody's.
"Realized Losses" means losses arising from the inability of the
trustee, master servicer or the special servicer to collect all amounts due and
owing under any defaulted mortgage loan, including by reason of any
modifications to the terms of a mortgage loan, bankruptcy of the related
borrower or a casualty of any nature at the related mortgaged property, to the
extent not covered by insurance. The Realized Loss, if any, in respect of a
liquidated mortgage loan or related REO Property, will generally equal the
excess, if any, of:
o the outstanding principal balance of such mortgage loan as of the date
of liquidation, together with all accrued and unpaid interest thereon at
the related mortgage rate, over
o the aggregate amount of Liquidation Proceeds, if any, recovered in
connection with such liquidation, net of any portion of such liquidation
proceeds that is payable or reimbursable in respect of related liquidation
and other servicing expenses. If the mortgage rate on any mortgage loan is
reduced or a portion of the debt due under any mortgage loan is forgiven,
whether in connection with a modification, waiver or amendment granted or
agreed to by the special servicer or in connection with a bankruptcy or
similar proceeding involving the related borrower, the resulting reduction
in interest paid and the principal amount so forgiven, as the case may be,
also will be treated as a Realized Loss.
"Record Date" means, with respect to each Class of offered certificates
for each Distribution Date, the last business day of the calendar month
immediately preceding the month in which such Distribution Date occurs.
"Rehabilitated Mortgage Loan" means a Specially Serviced Mortgage Loan
for which (a) three consecutive Scheduled Payments have been made, in the case
of any such mortgage loan that was modified, based on the modified terms, (b) no
other Servicing Transfer Event has occurred and is continuing with respect to
such mortgage loan and (c) the trust has been reimbursed for all costs incurred
as a result of the occurrence of the Servicing Transfer Event or such amounts
have been forgiven.
"REMIC Regular Certificates" means the Senior Certificates and the
Subordinate Certificates.
"REO Income" means the income received in connection with the operation
of an REO Property, net of certain expenses specified in the Pooling and
Servicing Agreement.
"REO Property" means any mortgaged property acquired on behalf of the
Certificateholders in respect of a defaulted mortgage loan through foreclosure,
deed in lieu of foreclosure or otherwise.
"REO Tax" means a tax on "net income from foreclosure property" within
the meaning of the REMIC provisions of the Code.
"Reserve Account" means an account in the name of the trustee for the
deposit of any Excess Liquidation Proceeds.
"Residual Certificates" means the Class R-I Certificates, the
Class R-II Certificates and the Class R-III Certificates.
"Scheduled Payment" means, in general, for any mortgage loan on any Due
Date, the amount of the scheduled payment of principal and interest, or interest
only, due thereon on such date, taking into account any waiver, modification or
amendment of the terms of such mortgage loan subsequent to the Closing Date,
whether
S-110
<PAGE>
agreed to by the special servicer or occurring in connection with a bankruptcy
proceeding involving the related borrower.
"Scheduled Principal Balance" of any Mortgage Loan on any Distribution
Date will generally equal the Cut-off Date Balance, as defined above (less any
principal amortization occurring on or prior to the Cut-off Date), thereof,
reduced, to not less than zero, by:
o any payments or other collections of principal, or Advances in lieu
thereof, on such mortgage loan that have been collected or received during
any preceding Collection Period, other than any Scheduled Payments due in
any subsequent Collection Period; and
o the principal portion of any Realized Loss incurred in respect of such
mortgage loan during any preceding Collection Period.
"Senior Certificates" means the Class A Certificates and the Class X
Certificates.
"Servicing Advances" means, in general, customary, reasonable and
necessary "out-of-pocket" costs and expenses required to be incurred by the
master servicer in connection with the servicing of a mortgage loan after a
default, whether or not a payment default, delinquency or other unanticipated
event, or in connection with the administration of any REO Property.
"Servicing Standard" means with respect to the Master Servicer or the
Special Servicer, as the case may be, to service and administer the Mortgage
Loans that it is obligated to service and administer pursuant to the Pooling and
Servicing Agreement on behalf of the Trustee and in the best interests of and
for the benefit of the Certificateholders (as determined by the Master Servicer
or the Special Servicer, as the case may be, in its good faith and reasonable
judgment), in accordance with applicable law, the terms of the Pooling and
Servicing Agreement and the terms of the respective Mortgage Loans and, to the
extent consistent with the foregoing, further as follows:
o with the same care, skill and diligence as is normal and usual in its
general mortgage servicing and REO property management activities on
behalf of third parties or on behalf of itself, whichever is higher, with
respect to mortgage loans and REO properties that are comparable to those
for which it is responsible under the Pooling and Servicing Agreement;
o with a view to the timely collection of all scheduled payments of principal
and interest under the Mortgage Loans or, if a Mortgage Loan comes into and
continues in default and if, in the good faith and reasonable judgment of
the Special Servicer, no satisfactory arrangements can be made for the
collection of the delinquent payments, the maximization of the recovery on
such mortgage loan to the Certificateholders (as a collective whole) on a
present value basis (the relevant discounting of anticipated collections
that will be distributable to Certificateholders to be performed at the
related Net Mortgage Rate); and without regard to:
i. any other relationship that the Master Servicer
or the Special Servicer, as the case may be, or any Affiliate
thereof may have with the related Mortgagor;
ii. the ownership of any Certificate by the Master
Servicer or the Special Servicer, as the case may be, or any
Affiliate thereof;
iii. the Master Servicer's obligation to make
Advances; and
iv. the right of the Master Servicer (or any
Affiliate thereof) or the Special Servicer, as the case may
be, to receive reimbursement of costs, or the sufficiency of
any compensation payable to it, hereunder or with respect to
any particular transaction.
"Servicing Transfer Event" means an instance where an event has
occurred that has caused a mortgage loan to become a Specially Serviced Mortgage
Loan.
S-111
<PAGE>
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
"Specially Serviced Mortgage Loan" means the following:
o any mortgage loan as to which a Balloon Payment is past due, and the master
servicer has determined that payment is unlikely to be made on or before
the 60th day succeeding the date the Balloon Payment was due, or any other
payment is more than 60 days past due or has not been made on or before the
second Due Date following the date such payment was due;
o any mortgage loan as to which, to the master servicer's knowledge, the
borrower has consented to the appointment of a receiver or conservator in
any insolvency or similar proceeding of or relating to such borrower or to
all or substantially all of its property, or the borrower has become the
subject of a decree or order issued under a bankruptcy, insolvency or
similar law and such decree or order shall have remained undischarged or
unstayed for a period of 30 days;
o any mortgage loan as to which the master servicer shall have received
notice of the foreclosure or proposed foreclosure of any other lien on the
mortgaged property;
o any mortgage loan as to which the master servicer has knowledge of a
default (other than a failure by the related borrower to pay principal or
interest) which, in the judgment of the master servicer, materially and
adversely affects the interests of the Certificateholders and which has
occurred and remains unremedied for the applicable grace period specified
in such mortgage loan (or, if no grace period is specified, 60 days);
o any mortgage loan as to which the borrower admits in writing its inability
to pay its debts generally as they become due, files a petition to take
advantage of any applicable insolvency or reorganization statute, makes an
assignment for the benefit of its creditors or voluntarily suspends payment
of its obligations; or
o any mortgage loan as to which, in the judgment of the master servicer, (a)
a payment default is imminent or is likely to occur within 60 days, or (b)
any other default is imminent or is likely to occur within 60 days and such
default, in the judgment of the master servicer is reasonably likely to
materially and adversely affect the interests of the Certificateholders.
"Special Servicer Compensation" means such fees payable to the special
servicer, collectively, the Special Servicing Fee, the Workout Fee and the
Liquidation Fee.
"Special Servicer Event of Default" means, with respect to the special
servicer under the Pooling and Servicing Agreement, any one of the following
events:
o any failure by the special servicer to remit to the trustee or the master
servicer within one business day of the date when due any amount required
to be so remitted under the terms of the Pooling and Servicing Agreement;
o any failure by the special servicer to deposit into any account any amount
required to be so deposited or remitted under the terms of the Pooling and
Servicing Agreement which failure continues unremedied for one business day
following the date on which such deposit or remittance was first required
to be made;
o any failure on the part of the special servicer duly to observe or perform
in any material respect any other of the covenants or agreements on the
part of the special servicer contained in the Pooling and Servicing
Agreement which continues unremedied for a period of 30 days after the date
on which written notice of such failure, requiring the same to be remedied,
shall have been given to the special servicer by Morgan Stanley Dean Witter
Capital I Inc. or the trustee; provided, however, that to the extent that
the special servicer certifies to the trustee and Morgan Stanley Dean
Witter Capital I Inc. that the special servicer is in good faith attempting
to remedy such failure and the Certificateholders shall not be materially
and adversely affected thereby, such cure period will be extended to the
extent necessary to permit the special servicer to cure such failure,
provided that such cure period may not exceed 90 days;
S-112
<PAGE>
o any breach by the special servicer of the representations and warranties
contained in the Pooling and Servicing Agreement that materially and
adversely affects the interests of the holders of any Class of
certificates and that continues unremedied for a period of 30 days after
the date on which notice of such breach, requiring the same to be remedied,
shall have been given to the special servicer by Morgan Stanley Dean Witter
Capital I Inc. or the trustee, provided, however, that to the extent that
the special servicer is in good faith attempting to remedy such breach and
the Certificateholders shall not be materially and adversely affected
thereby, such cure period may be extended to the extent necessary to permit
the special servicer to cure such failure, provided that such cure period
may not exceed 90 days;
o the trustee shall have received written notice from Fitch or Moody's that
the continuation of the special servicer in such capacity would result in
the downgrade, qualification or withdrawal of the then current rating then
assigned by Fitch or Moody's to any Class of Certificates;
o a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises in an involuntary case under any present or
future federal or state bankruptcy, insolvency or similar law for the
appointment of a conservator, receiver, liquidator, trustee or similar
official in any bankruptcy, insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the special
servicer and such decree or order shall have remained in force undischarged
or unstayed for a period of 60 days;
o 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
o 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.
"Special Servicer Report" means, generally, a report showing
loan-by-loan detail on each Specially Serviced Mortgage Loan that is 60 days
delinquent, 90 days delinquent, or in the process of foreclosure, an REO status
report for each REO Property and a modification report showing loan-by-loan
detail for each modification closed on a Specially Serviced Mortgage Loan during
the most recent reporting period.
"Special Servicing Fee" means an amount 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.
"Structuring Assumptions" means the following assumptions:
o the initial Certificate Balances and initial Pass-Through Rates of the
Certificates are as presented herein;
o the closing date for the sale of the certificates is October 31, 2000;
o distributions on the certificates are made on the 15th day of each month,
commencing in November 15, 2000;
o there are no delinquencies, defaults or Realized Losses with respect to
the mortgage loans;
o Scheduled Payments on the mortgage loans are timely received on the first
day of each month;
o the trust does not experience any Expense Losses;
S-113
<PAGE>
o no Principal Prepayment on any mortgage loan is made during its Lock-out
Period, if any, or during any period when Principal Prepayments on such
mortgage loans are required to be accompanied by a Prepayment Premium
or a defeasance requirement, and otherwise Principal Prepayments are
made on the mortgage loans at the indicated levels of CPR,
notwithstanding any limitations in the mortgage loans on partial
prepayments;
o any Prepayment Premiums are allocated as described elsewhere in this
prospectus supplement; o no Prepayment Interest Shortfalls occur; and
o no mortgage loan is the subject of a repurchase or substitution by the
respective seller and no optional termination of the trust occurs.
"Subordinate Certificates" means 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, the Class O Certificates and the Class P
Certificates.
"Treasury Rate" is the yield calculated by the linear interpolation of
the yields, as reported in Federal Reserve Statistical Release H.15-Selected
Interest Rates under the heading "U.S. government securities/Treasury constant
maturities" for the week ending prior to the date of the relevant principal
prepayment, of U.S. Treasury constant maturities with a maturity date, one
longer and one shorter, most nearly approximating the maturity date of the
mortgage loan prepaid. If Release H.15 is no longer published, the master
servicer will select a comparable publication to determine the Treasury Rate.
"Trustee Fee" means a monthly fee as set forth in the Pooling and
Servicing Agreement to be paid from the Distribution Account to the trustee as
compensation for the performance of its duties.
"Underwritable Cash Flow" means an estimate of stabilized cash flow
available for debt service. In general, it is the estimated stabilized revenue
derived from the use and operation of a mortgaged property, consisting primarily
of rental income, less the sum of (a) estimated stabilized operating expenses
(such as utilities, administrative expenses, repairs and maintenance, management
fees and advertising), (b) fixed expenses, such as insurance, real estate taxes
and, if applicable, ground lease payments, and (c) reserves for capital
expenditures, including tenant improvement costs and leasing commissions.
Underwritable Cash Flow generally does not reflect interest expenses and
non-cash items such as depreciation and amortization.
"Underwriting Agreement" means that agreement, dated October 19, 2000,
entered into by Morgan Stanley Dean Witter Capital I Inc., Morgan Stanley & Co.
Incorporated, an affiliate of Morgan Stanley Dean Witter Capital I Inc. and
Goldman, Sachs & Co.
"Underwriters" means Morgan Stanley & Co. Incorporated and Goldman,
Sachs & Co.
"Unpaid Interest" means one month's interest upon the portion of the
Distributable Certificate Interest Amount for such Class remaining unpaid as of
the close of business on the preceding Distribution Date plus one month's
interest thereon at the applicable Pass-Through Rate other than unpaid interest
relating to Net Aggregate Prepayment Interest Shortfalls.
"Weighted Average Net Mortgage Rate" or "NWAC Rate" means, for any
Distribution Date, the weighted average of the Net Mortgage Rates for the
mortgage loans (in the case of each mortgage loan that is a Non-30/360 Mortgage
Loan, adjusted as described under the definition of Net Mortgage Rate), weighted
on the basis of their respective Scheduled Principal Balances as of the close of
business on the preceding Distribution Date.
"Workout Fee" means that fee, payable with respect to any Rehabilitated
Mortgage Loan, equal to 1.00% of the amount of each collection of interest and
principal received on such mortgage loan for so long as it remains a
Rehabilitated Mortgage Loan.
S-114
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
<TABLE>
<CAPTION>
MORTGAGE LOAN SELLERS
----------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED
AGGREGATE AGGREGATE AVERAGE
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE
LOAN SELLER MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PCF 78 461,402,730 60.3 8.398
JHREF 22 210,329,901 27.5 8.101
NM 3 93,616,747 12.2 7.064
---------------------------------------------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0% 8.153%
===================================================================================================
----------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE WEIGHTED AVERAGE AVERAGE
REMAINING AVERAGE CUT-OFF DATE BALLOON
LOAN SELLER TERM (MOS.) DSCR (x) LTV (%) LTV (%)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PCF 117 1.47 63.4 56.2
JHREF 116 1.51 61.7 51.9
NM 102 1.88 45.9 32.9
------------------------------------------------------------------------------------------
TOTAL: 115 1.53x 60.8% 52.2%
==========================================================================================
</TABLE>
<TABLE>
<CAPTION>
CUT-OFF DATE BALANCES
---------------------------------------------------------------------------------------------
PERCENT BY
AGGREGATE AGGREGATE
NUMBER OF CUT-OFF DATE CUT-OFF DATE
CUT-OFF DATE BALANCE ($) MORTGAGE LOANS BALANCE ($) BALANCE (%)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,000,001 - 2,000,000 9 14,784,215 1.9
2,000,001 - 3,000,000 17 43,309,280 5.7
3,000,001 - 4,000,000 17 60,994,167 8.0
4,000,001 - 5,000,000 12 52,991,169 6.9
5,000,001 - 6,000,000 8 42,894,742 5.6
6,000,001 - 7,000,000 3 20,102,136 2.6
7,000,001 - 8,000,000 6 43,930,608 5.7
8,000,001 - 9,000,000 4 34,420,671 4.5
9,000,001 - 10,000,000 3 27,975,249 3.7
10,000,001 - 15,000,000 13 154,229,917 20.2
15,000,001 - 20,000,000 4 70,232,296 9.2
20,000,001 - 25,000,000 5 114,035,627 14.9
25,000,001 >= 2 85,449,302 11.2
---------------------------------------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
=============================================================================================
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED AVERAGE AVERAGE
MORTGAGE REMAINING AVERAGE CUT-OFF DATE BALLOON
CUT-OFF DATE BALANCE ($) RATE (%) TERM (MOS.) DSCR (x) LTV (%) LTV (%)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,000,001 - 2,000,000 8.459 116 1.59 62.3 56.5
2,000,001 - 3,000,000 8.429 115 1.50 62.8 57.0
3,000,001 - 4,000,000 8.444 115 1.43 67.0 59.7
4,000,001 - 5,000,000 8.419 116 1.41 66.5 57.9
5,000,001 - 6,000,000 8.429 116 1.44 64.9 58.2
6,000,001 - 7,000,000 8.034 117 1.62 61.6 53.9
7,000,001 - 8,000,000 8.293 113 1.40 63.4 53.6
8,000,001 - 9,000,000 8.555 118 1.51 60.7 52.8
9,000,001 - 10,000,000 8.203 111 1.36 72.5 63.8
10,000,001 - 15,000,000 7.980 106 1.48 64.0 56.5
15,000,001 - 20,000,000 7.957 115 1.48 58.2 41.9
20,000,001 - 25,000,000 8.504 137 1.59 53.5 43.2
25,000,001 >= 7.235 100 1.90 50.3 44.7
------------------------------------------------------------------------------------------------------------------------------
Total: 8.153% 115 1.53x 60.8% 52.2%
==============================================================================================================================
</TABLE>
Minimum: 1,198,438
Maximum: 57,039,856
Average: 7,430,576
I-1
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
<TABLE>
<CAPTION>
STATES
-----------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE AVERAGE
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE CUT-OFF DATE BALLOON
STATE MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (x) LTV (%) LTV (%)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New Jersey 18 196,723,665 25.7 7.837 109 1.65 58.7 51.8
California 21 163,165,152 21.3 8.304 113 1.48 61.5 53.0
New York 5 56,555,217 7.4 8.568 154 1.67 48.8 36.4
Maryland 6 35,757,411 4.7 7.673 99 1.56 62.9 55.7
Florida 8 35,470,367 4.6 8.339 116 1.49 61.8 56.5
Arizona 5 31,875,502 4.2 8.155 107 1.63 55.6 50.1
South Carolina 4 31,254,760 4.1 8.270 119 1.58 59.0 50.3
Texas 5 28,217,283 3.7 8.710 117 1.39 65.8 59.8
Tennessee 2 26,049,464 3.4 7.610 127 1.38 53.6 18.5
Colorado 3 22,517,699 2.9 8.682 121 1.34 68.4 62.0
Michigan 4 22,142,604 2.9 7.853 110 1.35 72.9 63.8
Utah 2 18,530,142 2.4 8.176 118 1.57 61.3 55.2
District of Columbia 1 15,673,161 2.0 8.200 108 1.41 68.4 60.9
Ohio 2 14,845,477 1.9 8.440 119 1.35 75.4 67.6
Georgia 5 14,191,989 1.9 8.664 117 1.38 73.9 67.3
Pennsylvania 3 10,495,882 1.4 8.234 116 1.54 67.5 59.7
Nevada 1 10,275,542 1.3 8.250 83 1.40 73.9 64.9
Massachusetts 1 7,257,663 0.9 7.460 87 1.44 53.8 46.9
Kentucky 1 5,569,938 0.7 8.270 110 1.34 69.9 63.3
Illinois 1 4,984,001 0.7 8.300 115 1.53 63.9 56.7
Virginia 2 4,588,335 0.6 8.349 113 1.68 53.6 48.7
Nebraska 1 4,297,464 0.6 8.630 119 1.29 60.5 55.0
Connecticut 1 2,865,718 0.4 8.640 113 1.26 71.6 65.4
North Carolina 1 2,044,943 0.3 7.670 116 2.51 39.7 35.4
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0% 8.153% 115 1.53x 60.8% 52.2%
===================================================================================================================================
</TABLE>
I-2
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
<TABLE>
<CAPTION>
PROPERTY TYPES
----------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED
AGGREGATE AGGREGATE AVERAGE
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE
PROPERTY TYPE MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Office
Suburban Office 19 131,509,262 17.2 8.286
Urban Office 7 95,223,114 12.4 8.362
Medical Office 1 3,040,677 0.4 8.410
----------------------------------------------------------------------------------------------------
SUBTOTAL: 27 $229,773,052 30.0% 8.319%
Industrial
Warehouse 18 126,861,462 16.6 8.370
Flex Industrial 9 37,416,693 4.9 8.578
Light Industrial 7 33,479,438 4.4 7.899
----------------------------------------------------------------------------------------------------
SUBTOTAL: 34 $197,757,593 25.8% 8.330%
Retail
Anchored 14 128,318,156 16.8 8.062
Unanchored 6 17,956,816 2.3 8.498
Free Standing 2 5,543,131 0.7 8.728
Shadow Anchored 4 12,398,536 1.6 8.298
----------------------------------------------------------------------------------------------------
SUBTOTAL: 26 $164,216,639 21.5% 8.150%
Multifamily
Garden Apartments 11 92,195,623 12.0 8.163
High Rise 1 57,039,856 7.5 6.720
----------------------------------------------------------------------------------------------------
SUBTOTAL: 12 $149,235,479 19.5% 7.611%
Assisted Living Facility
Assisted Living Facility 2 17,083,696 2.2 8.539
----------------------------------------------------------------------------------------------------
SUBTOTAL: 2 $17,083,696 2.2% 8.539%
Hospitality
Limited Service 1 3,895,626 0.5 7.690
----------------------------------------------------------------------------------------------------
SUBTOTAL: 1 $3,895,626 0.5% 7.690%
Self Storage
Self Storage 1 3,387,294 0.4 9.220
----------------------------------------------------------------------------------------------------
SUBTOTAL: 1 $3,387,294 0.4% 9.220%
----------------------------------------------------------------------------------------------------
Total: 103 $765,349,379 100.0% 8.153%
====================================================================================================
WEIGHTED WEIGHTED WEIGHTED
AVERAGE WEIGHTED AVERAGE AVERAGE
REMAINING AVERAGE CUT-OFF DATE BALLOON
PROPERTY TYPE TERM (MOS.) DSCR (x) LTV (%) LTV (%)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Office
Suburban Office 114 1.46 61.4 52.7
Urban Office 136 1.65 51.1 40.6
Medical Office 114 1.33 66.1 59.9
---------------------------------------------------------------------------------------------------
SUBTOTAL: 123 1.54x 57.2% 47.8%
Industrial
Warehouse 117 1.45 65.3 58.1
Flex Industrial 116 1.33 71.2 63.9
Light Industrial 109 1.39 67.2 60.2
---------------------------------------------------------------------------------------------------
SUBTOTAL: 115 1.42x 66.7% 59.5%
Retail
Anchored 109 1.46 62.3 49.4
Unanchored 117 1.43 67.3 61.0
Free Standing 131 1.53 64.2 57.3
Shadow Anchored 116 1.50 69.5 62.8
---------------------------------------------------------------------------------------------------
SUBTOTAL: 111 1.46x 63.5% 52.0%
Multifamily
Garden Apartments 112 1.57 60.1 54.1
High Rise 93 2.05 45.6 40.0
---------------------------------------------------------------------------------------------------
SUBTOTAL: 105 1.75x 54.6% 48.7%
Assisted Living Facility
Assisted Living Facility 117 1.46 68.7 57.8
---------------------------------------------------------------------------------------------------
SUBTOTAL: 117 1.46x 68.7% 57.8%
Hospitality
Limited Service 96 2.12 55.7 46.8
---------------------------------------------------------------------------------------------------
SUBTOTAL: 96 2.12x 55.7% 46.8%
Self Storage
Self Storage 113 1.31 72.5 65.5
---------------------------------------------------------------------------------------------------
SUBTOTAL: 113 1.31x 72.5% 65.5%
---------------------------------------------------------------------------------------------------
Total: 115 1.53x 60.8% 52.2%
===================================================================================================
</TABLE>
I-3
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED
AGGREGATE AGGREGATE AVERAGE
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE
MORTGAGE RATE (%) MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6.501 - 7.000 2 70,486,872 9.2 6.773
7.001 - 7.500 4 45,069,180 5.9 7.267
7.501 - 8.000 13 96,858,381 12.7 7.812
8.001 - 8.500 47 350,010,330 45.7 8.275
8.501 - 9.000 33 167,773,403 21.9 8.697
9.001 - 9.500 4 35,151,213 4.6 9.189
------------------------------------------------------------------------------------------------------
Total: 103 $765,349,379 100.0% 8.153%
======================================================================================================
Minimum: 6.720
Maximum: 9.250
Weighted Average: 8.153
<CAPTION>
--------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE WEIGHTED AVERAGE AVERAGE
REMAINING AVERAGE CUT-OFF DATE BALLOON
MORTGAGE RATE (%) TERM (MOS.) DSCR (x) LTV (%) LTV (%)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6.501 - 7.000 94 1.93 49.2 43.2
7.001 - 7.500 111 1.44 58.5 34.2
7.501 - 8.000 102 1.73 53.8 46.7
8.001 - 8.500 119 1.47 63.9 55.6
8.501 - 9.000 118 1.33 68.7 61.8
9.001 - 9.500 143 1.88 37.7 28.7
--------------------------------------------------------------------------------------------
Total: 115 1.53x 60.8% 52.2%
============================================================================================
</TABLE>
I-4
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED
AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE
ORIGINAL TERM TO STATED MATURITY (MOS.) MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (x)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
61 - 120 98 679,607,965 88.8 8.147 111 1.51
121 - 180 3 46,664,402 6.1 8.086 138 1.49
181 - 240 2 39,077,013 5.1 8.341 148 1.89
-----------------------------------------------------------------------------------------------------------------------------------
Total: 103 $765,349,379 100.0% 8.153% 115 1.53x
===================================================================================================================================
Minimum: 109
Maximum: 240
Weighted Average: 127
<CAPTION>
--------------------------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF DATE BALLOON
ORIGINAL TERM TO STATED MATURITY (MOS.) LTV (%) LTV (%)
--------------------------------------------------------------------------
<S> <C> <C>
61 - 120 62.6 55.2
121 - 180 58.1 48.0
181 - 240 32.1 5.2
--------------------------------------------------------------------------
Total: 60.8% 52.2%
==========================================================================
</TABLE>
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED
AGGREGATE AGGREGATE AVERAGE AVERAGE
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING
REMAINING TERM TO STATED MATURITY (MOS.) MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
61 - 120 99 698,432,117 91.3 8.141 111
121 - 180 4 66,917,261 8.7 8.279 154
-----------------------------------------------------------------------------------------------------------------------------
Total: 103 $765,349,379 100.0% 8.153% 115
=============================================================================================================================
Minimum: 82
Maximum: 168
Weighted Average: 115
<CAPTION>
--------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE
AVERAGE CUT-OFF DATE BALLOON
REMAINING TERM TO STATED MATURITY (MOS.) DSCR (x) LTV (%) LTV (%)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
61 - 120 1.52 62.2 54.8
121 - 180 1.64 45.9 24.7
--------------------------------------------------------------------------------------------
Total: 1.53x 60.8% 52.2%
============================================================================================
</TABLE>
I-5
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
<TABLE>
<CAPTION>
ORIGINAL AMORTIZATION TERMS
-------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED
AGGREGATE AGGREGATE AVERAGE
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE
ORIGINAL AMORTIZATION TERM (MOS.) MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balloon Loans
Interest Only 2 21,800,000 2.8 8.177
240 3 16,502,737 2.2 8.118
288 1 10,924,486 1.4 7.875
300 15 150,889,512 19.7 8.256
324 1 10,275,542 1.3 8.250
330 1 8,786,970 1.1 8.690
336 2 18,102,069 2.4 7.394
360 77 510,315,323 66.7 8.176
-------------------------------------------------------------------------------------------------------------------
Subtotal: 102 $747,596,641 97.7% 8.175%
Fully Amortizing Loan
178 1 17,752,738 2.3 7.250
-------------------------------------------------------------------------------------------------------------------
Subtotal: 1 $17,752,738 2.3% 7.250%
-------------------------------------------------------------------------------------------------------------------
Total: 103 $765,349,379 100.0% 8.153%
===================================================================================================================
<CAPTION>
-----------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE WEIGHTED AVERAGE AVERAGE
REMAINING AVERAGE CUT-OFF DATE BALLOON
ORIGINAL AMORTIZATION TERM (MOS.) TERM (MOS.) DSCR (x) LTV (%) LTV (%)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balloon Loans
Interest Only 115 1.62 61.9 57.7
240 114 1.57 56.5 40.6
288 82 1.41 54.1 45.8
300 120 1.66 53.5 42.9
324 83 1.40 73.9 64.9
330 118 1.63 66.6 57.4
336 98 1.43 63.5 54.6
360 115 1.50 63.3 56.6
-----------------------------------------------------------------------------------------------------------
Subtotal: 115 1.53x 61.2% 53.4%
Fully Amortizing Loan
178 132 1.43 45.5 0.0
-----------------------------------------------------------------------------------------------------------
Subtotal: 132 1.43x 45.5% 0.0%
-----------------------------------------------------------------------------------------------------------
Total: 115 1.53x 60.8% 52.2%
===========================================================================================================
</TABLE>
Minimum: 178
Maximum: 360
Weighted Average: 338
<TABLE>
<CAPTION>
REMAINING AMORTIZATION TERMS
------------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED
AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE
REMAINING AMORTIZATION TERM (MOS.) MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (x)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Only 2 21,800,000 2.8 8.177 115 1.62
121 - 180 1 17,752,738 2.3 7.250 132 1.43
181 - 240 4 37,827,012 4.9 8.756 140 1.96
241 - 360 96 687,969,629 89.9 8.143 113 1.51
----------------------------------------------------------------------------------------------------------------------------------
Total: 103 $765,349,379 100.0% 8.153% 115 1.53x
==================================================================================================================================
<CAPTION>
-----------------------------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF DATE BALLOON
REMAINING AMORTIZATION TERM (MOS.) LTV (%) LTV (%)
-----------------------------------------------------------------------------
<S> <C> <C>
Interest Only 61.9 57.7
121 - 180 45.5 0.0
181 - 240 36.4 23.1
241 - 360 62.5 55.0
-----------------------------------------------------------------------------
Total: 60.8% 52.2%
=============================================================================
</TABLE>
Minimum: 132
Maximum: 360
Weighted Average: 327
I-6
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
<TABLE>
<CAPTION>
DEBT SERVICE COVERAGE RATIOS
------------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED
AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE
DEBT SERVICE COVERAGE RATIO (x) MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (x)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1.16 - 1.25 14 54,920,160 7.2 8.739 117 1.23
1.26 - 1.35 34 212,321,968 27.7 8.468 122 1.29
1.36 - 1.50 21 180,393,954 23.6 7.943 108 1.42
1.51 - 1.75 20 169,548,929 22.2 8.218 115 1.63
1.76 - 2.00 8 59,469,316 7.8 7.971 111 1.84
2.01 >= 6 88,695,052 11.6 7.465 111 2.13
------------------------------------------------------------------------------------------------------------------------------------
Total: 103 $765,349,379 100.0% 8.153% 115 1.53x
====================================================================================================================================
<CAPTION>
-------------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF DATE BALLOON
DEBT SERVICE COVERAGE RATIO (x) LTV (%) LTV (%)
-------------------------------------------------------------
<S> <C> <C>
1.16 - 1.25 71.1 64.7
1.26 - 1.35 70.5 62.4
1.36 - 1.50 64.0 51.9
1.51 - 1.75 57.7 49.0
1.76 - 2.00 47.8 43.6
2.01 >= 39.4 32.4
------------------------------------------------------------
Total: 60.8% 52.2%
============================================================
</TABLE>
Minimum: 1.18
Maximum: 2.71
Weighted Average: 1.53
I-7
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
<TABLE>
<CAPTION>
LOAN-TO-VALUE RATIOS
-------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED
AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE
LOAN-TO-VALUE RATIO (%) MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (x)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
20.1 - 30.0 1 21,324,274 2.8 9.250 161 2.27
30.1 - 40.0 3 6,435,296 0.8 8.020 116 2.39
40.1 - 50.0 9 118,409,247 15.5 7.290 105 1.87
50.1 - 60.0 22 212,200,384 27.7 8.140 112 1.60
60.1 - 70.0 33 218,464,671 28.5 8.290 119 1.38
70.1 - 80.0 35 188,515,507 24.6 8.433 114 1.31
-------------------------------------------------------------------------------------------------------------------------------
Total: 103 $765,349,379 100.0% 8.153% 115 1.53x
===============================================================================================================================
<CAPTION>
-------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF DATE BALLOON
LOAN-TO-VALUE RATIO (%) LTV (%) LTV (%)
------------------------------------------------------
<S> <C> <C>
20.1 - 30.0 20.9 9.6
30.1 - 40.0 36.2 32.5
40.1 - 50.0 45.7 34.5
50.1 - 60.0 56.0 47.8
60.1 - 70.0 66.8 58.7
70.1 - 80.0 74.1 66.3
------------------------------------------------------
Total: 60.8% 52.2%
======================================================
</TABLE>
Minimum: 20.9
Maximum: 79.9
Weighted Average: 60.8
<TABLE>
<CAPTION>
BALLOON LOAN-TO-VALUE RATIOS
----------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED
AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED
NUMBER OF CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE
BALLOON LOAN-TO-VALUE RATIO (%) MORTGAGE LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (x)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0.0 1 17,752,738 2.3 7.250 132 1.43
0.1 - 10.0 1 21,324,274 2.8 9.250 161 2.27
30.1 - 40.0 8 82,822,318 10.8 7.164 100 1.99
40.1 - 50.0 21 180,100,186 23.5 8.028 109 1.66
50.1 - 60.0 23 184,986,383 24.2 8.116 118 1.46
60.1 - 70.0 45 261,636,789 34.2 8.533 115 1.32
70.1 - 80.0 4 16,726,691 2.2 8.440 117 1.30
----------------------------------------------------------------------------------------------------------------------------------
Total: 103 $765,349,379 100.0% 8.153% 115 1.53x
==================================================================================================================================
<CAPTION>
------------------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF DATE BALLOON
BALLOON LOAN-TO-VALUE RATIO (%) LTV (%) LTV (%)
------------------------------------------------------------------
<S> <C> <C>
0.0 45.5 0.0
0.1 - 10.0 20.9 9.6
30.1 - 40.0 45.9 39.0
40.1 - 50.0 53.3 45.3
50.1 - 60.0 63.9 55.4
60.1 - 70.0 71.6 64.8
70.1 - 80.0 78.1 70.7
------------------------------------------------------------------
Total: 60.8% 52.2%
==================================================================
</TABLE>
Minimum: 0.0
Maximum: 72.1
Weighted Average: 52.2
I-8
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE
LOAN NO. LOAN SELLER(1) PROPERTY NAME STREET ADDRESS
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 NM Towers at Portside 100 Warren Street/155 Washington Street
2 PCF Southridge Woods Apartment Complex Major Road & Northumberland Way
3 PCF Twin County Building(21) 145 Talmadge Road
4 JHREF 825 Seventh Avenue 825 Seventh Avenue
5 PCF Tasman Corporate Center 4980 Great America Parkway
6 JHREF Pennsylvania Building 225 West 34th Street
7 PCF Affinity Office Building(21) 1201 Main Street
8 NM Pinnacle at Squaw Peak 1601 East Highland Avenue
9 PCF Marigold Center(21) 3810-3980 Broad Street
10 NM Cross Creek Retail 3565 Riverdale Road
11 JHREF 1020 19th Street 1020 19th Street
12 PCF The Sugarhouse Center 2201 Highland Drive
13 JHREF Loehmann's Five Points Plaza 18605-18691 Main Street
14 JHREF Laurel 1 & 3 8610 & 8660 Cherry Lane
15 PCF Crossroads I Office Building(21) 9800 Mount Pyramid Court
16 PCF 200 Ludlow Drive 200 Ludlow Drive
17 PCF Technicolor(21) 3001 Mission Oaks Boulevard
18 PCF Latitudes at the Moors 6200 NW 173rd Street
19 JHREF Woodman Plaza 13700-13750 Riverside Drive
20 JHREF Cambridge Center Office Building 38777 Six Mile Road
21 PCF 1667 Plymouth Street 1667 Plymouth Street
22 JHREF Corporate Centre Shepherd 707-767 North Shepherd Drive
23 JHREF Galena Junction Shopping Center 18100-18200 Wedge Parkway
24 JHREF Frederick Shopping Center 1305 W. Seventh Street
25 PCF Covina Marketplace(21) 942-960 West Arrow Highway; 1433-1453 Asusa Avenue
26 JHREF Three Garret Mountain Three Garret Mountain Plaza
27 PCF BRHEBA, Inc. 200 Theodore Conrad Drive
28 PCF Stewart & Stevenson Building(21) 2707 North Loop West
29 JHREF Regent at Summerfield House 1111 Ulatis Drive
30 PCF Southview II Industrial Park(21) 5-9 Nicholas Court; 174,178 & 182 Ridge Road
31 JHREF The Manor at Steeplechase 314 Cool Springs Boulevard
32 JHREF The Woods of Centerville 33 Meeting House Road
33 PCF Sky Park I & II(21) 21000 - 21500 Aerospace Parkway
34 PCF Mar Realty 2, 10, & 17-20 Industrial Road, 114 & 140-42 Clinton Road
35 PCF Informatica 3460 West Bayshore Road
36 JHREF 30 Federal Street 30 Federal Street
37 PCF Viking Freight 6411 Guadalupe Mines Road
38 PCF Simmons Mattress Warehouse(21) 365 South Randolphville Road
39 PCF Jerry Leigh Building(21) 7860 Nelson Road
40 PCF Quail Creek & Quail Ridge Apartments 2097 Dutchmen Drive
41 PCF Moen Building 125 Moen Avenue
42 PCF Spalding Woods Village Shopping Center(21) 4015 Holcomb Bridge Road
43 PCF Quantum Place(21) 10300-10400 Bluegrass Parkway
44 PCF 4590 Patrick Henry Drive 4590 Patrick Henry Drive
45 PCF Southview I Industrial Park(21) 303 Ridge Road; 3-9 Chris Court
46 PCF Wymore Grove Apartments 360 South Wymore Road
47 PCF Stadium Towers Center(21) 2300 East Katella Avenue
48 PCF Meadow View Village(21) 600 South Airport Road
49 PCF Ramfair 111 - 112 Lehigh Drive, 159 Dwight Place
50 PCF American Freightways 900-910 County Line Road
51 JHREF 500 North Woodward Avenue 500 North Woodward Avenue
52 PCF Neptune City Shopping Center(21) Route 35 and 3rd Avenue
53 PCF The Eisner Building(21) 52 - 54 Broad Street
54 PCF Cedar Point West 480 Cedar Crest Boulevard
55 PCF Applied Communications Building(21) 330 South 108th Avenue
56 JHREF Scottsdale Highlands 4821 North Scottsdale Road
57 PCF Greenview Village Phase III 251 Moffitt Boulevard
58 PCF Perimeter Commerce Center 7818 Phillips Highway
59 PCF Room & Board Store(21) 222 Detroit Street
60 JHREF Burton's Run Apartments 7640 Whispering Brook
61 PCF Bryan Dairy Center 10321-10950 72nd Street
62 PCF Warner Bros. Publications Warehouse(21) 15800 NW 48th Avenue
63 PCF Townsend and Townsend Crew 390 Lytton Avenue
64 PCF TUSA Headquarters 4201 International Parkway
65 JHREF Comfort Inn 9020 Baltimore Boulevard
66 PCF 155 Bellwood Drive(21) 155 Bellwood Drive
67 PCF West Bench Plaza 8055 West 3500 South
68 JHREF 801 Hanna Drive 801 Hanna Drive
69 PCF Ocean Office 1800 Ocean Avenue
70 JHREF Premier Corporate Center II 3930 Premier North Drive
71 PCF Courtside Square 140 Allendale Road
72 PCF Hilltop Ridge Corporate Center(21) 70 Hilltop Road
73 PCF Corlund Electronics 2385 East Pleasant Valley Road
74 JHREF Spring Hill Self Storage 150 Spring Hill Drive
75 PCF Woodlands Crossing 2625 South Woodlands Village Boulevard
76 PCF Brookside Station Shopping Center 4075 Old Milton Parkway
77 PCF Benson Medical Center 3421 Benson Avenue
78 PCF East Ana Building 3104 East Ana Street
79 PCF Stanford Telecommunications 45145 Research Place
80 PCF Country Club Plaza Phase II 1120 South Country Club Drive
81 PCF Delivery Point Services 101 Locust Street
82 PCF Brookside Apartments 3661 North Decatur Road
83 PCF Mischer Building(21) 2727 North Loop West
84 PCF Squirrel Hill 1717 - 1731 Murray Avenue
85 PCF Lake Falls Professional Center 6115 Falls Road
86 PCF Lake Center 3700, 3710, 3730, & 3750 Susan Street
87 PCF Federated Warehouse(21) 149 Black Horse Lane
88 PCF Fry's Vineyard Shoppes 542 & 550 West Baseline Road
89 PCF Cloverleaf Business Park Building #5 8229 Cloverleaf Drive
90 PCF Cavalier Manor Apartments 24575 Kelly Road
91 PCF The Crossings Shopping Center 2108-2118 Clemson Road
92 PCF Town Center Shopping Center - Phase II 1001 East W.T. Harris Boulevard
93 PCF Sabal Office Center 3915 & 3919 Riga Boulevard
94 PCF Carolina Commerce Center(21) 2008-2078 Carolina Place Drive
95 PCF Coorstek/Tetrafluor(21) 2051 East Maple Avenue
96 PCF Grand Prairie Tech Center 2302 113th Street
97 PCF Parkside Apartments 1470 Parkside Avenue
98 PCF San Leandro Ventures 905 McLaughlin Avenue
99 PCF Atlee Commerce Center I 9415 Atlee Commerce Boulvard
100 PCF Eckerd Drug Store 400 - 6th Street Northwest
101 PCF Jonesboro Village Shopping Center(21) 1287 Spur Highway 138
102 PCF 295 New Road 295 New Road
103 PCF 755 Holcomb Bridge Road 755 Holcomb Bridge Road
TOTALS/WEIGHTED AVERAGES/PERCENT OF CUT-OFF DATE BALANCE:
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE
LOAN NO. LOAN SELLER(1) CITY STATE ZIP CODE PROPERTY TYPE
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 NM Jersey City NJ 07303 Multifamily
2 PCF South Brunswick NJ 08852 Multifamily
3 PCF Edison NJ 08817 Industrial
4 JHREF New York NY 10019 Office
5 PCF Santa Clara CA 95054 Office
6 JHREF New York NY 10001 Office
7 PCF Columbia SC 29201 Office
8 NM Phoenix AZ 85106 Multifamily
9 PCF San Luis Obispo CA 93401 Retail
10 NM Memphis TN 38115 Retail
11 JHREF Washington DC 20005 Office
12 PCF Salt Lake City UT 84106 Retail
13 JHREF Huntington Beach CA 92648 Retail
14 JHREF Laurel MD 20707 Industrial
15 PCF Englewood CO 80112 Office
16 PCF Ewing Township NJ 08628 Industrial
17 PCF Camarillo CA 93012 Industrial
18 PCF Miami FL 33015 Multifamily
19 JHREF Sherman Oaks CA 91423 Retail
20 JHREF Livonia MI 48152 Office
21 PCF Mountain View CA 94043 Office
22 JHREF Houston TX 77007 Industrial
23 JHREF Reno NV 89511 Retail
24 JHREF Frederick MD 20814 Retail
25 PCF Covina CA 91722 Retail
26 JHREF West Patterson NJ 07424 Office
27 PCF Jersey City NJ 07305 Industrial
28 PCF Houston TX 77008 Office
29 JHREF Vacaville CA 95687 Assisted Living Facility
30 PCF South Brunswick NJ 08810 Industrial
31 JHREF Franklin TN 37067 Assisted Living Facility
32 JHREF Centerville OH 45459 Multifamily
33 PCF Brook Park OH 44142 Industrial
34 PCF Fairfield NJ 07006 Industrial
35 PCF Palo Alto CA 94301 Office
36 JHREF Boston MA 02110 Office
37 PCF San Jose CA 95120 Office
38 PCF Piscataway NJ 08854 Industrial
39 PCF Panorama City CA 91402 Industrial
40 PCF Rock Hill SC 29732 Multifamily
41 PCF Cranford NJ 07016 Industrial
42 PCF Norcross GA 30092 Retail
43 PCF Jeffersontown KY 40299 Industrial
44 PCF Santa Clara CA 95054 Industrial
45 PCF South Brunswick NJ 08810 Industrial
46 PCF Altamonte Springs FL 32714 Multifamily
47 PCF Anaheim CA 92806 Office
48 PCF Longmont CO 80503 Retail
49 PCF Fairfield NJ 07004 Industrial
50 PCF Elmhurst IL 60126 Industrial
51 JHREF Bloomfield Hills MI 48304 Office
52 PCF Neptune City NJ 07753 Retail
53 PCF Red Bank NJ 07701 Office
54 PCF Allentown PA 18103 Retail
55 PCF Omaha NE 68154 Office
56 JHREF Scottsdale AZ 85251 Retail
57 PCF Islip NY 11751 Multifamily
58 PCF Jacksonville FL 32256 Industrial
59 PCF Denver CO 80206 Retail
60 JHREF Portage MI 49024 Multifamily
61 PCF Pinellas Park FL 33777 Industrial
62 PCF Miami FL 33014 Industrial
63 PCF Palo Alto CA 94301 Office
64 PCF Carollton TX 75007 Industrial
65 JHREF College Park MD 20740 Hospitality
66 PCF Greece NY 14606 Office
67 PCF Magna UT 84044 Retail
68 JHREF American Canyon CA 94589 Industrial
69 PCF Ronkonkoma NY 11779 Industrial
70 JHREF Tampa FL 33624 Office
71 PCF Upper Merion Township PA 19406 Retail
72 PCF Ramsey NJ 07446 Office
73 PCF Camarillo CA 93012 Industrial
74 JHREF Grass Valley CA 95945 Self Storage
75 PCF Flagstaff AZ 86001 Retail
76 PCF Alpharetta GA 30005 Retail
77 PCF Baltimore MD 21227 Office
78 PCF Rancho Dominguez CA 90221 Industrial
79 PCF Ashburn VA 22011 Office
80 PCF Mesa AZ 85210 Retail
81 PCF Hartford CT 06114 Industrial
82 PCF Decatur GA 30032 Multifamily
83 PCF Houston TX 77008 Office
84 PCF Pittsburgh PA 15217 Retail
85 PCF Baltimore MD 21209 Office
86 PCF Santa Ana CA 92704 Office
87 PCF South Brunswick NJ 08852 Industrial
88 PCF Mesa AZ 85210 Retail
89 PCF Millersville MD 21108 Industrial
90 PCF Eastpointe MI 48021 Multifamily
91 PCF Columbia SC 29223 Retail
92 PCF Charlotte NC 28262 Retail
93 PCF Tampa FL 33619 Office
94 PCF Fort Mill SC 29715 Industrial
95 PCF El Segundo CA 90245 Industrial
96 PCF Grand Prairie TX 75050 Industrial
97 PCF Ewing NJ 08638 Multifamily
98 PCF San Jose CA 95122 Industrial
99 PCF Ashland VA 23005 Industrial
100 PCF Winter Haven FL 33881 Retail
101 PCF Jonesboro GA 30236 Retail
102 PCF Parsippany NJ 07054 Industrial
103 PCF Roswell GA 30076 Retail
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE
LOAN NO. LOAN SELLER(1) PROPERTY SUB-TYPE UNITS/SF YEAR BUILT
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 NM High Rise 527 1989/1997
2 PCF Garden Apartments 648 1997-1999
3 PCF Warehouse 656,720 1968/1978/1988
4 JHREF Urban Office 164,743 1968
5 PCF Suburban Office 140,935 2000
6 JHREF Urban Office 495,471 1925
7 PCF Urban Office 465,561 1987
8 NM Garden Apartments 350 1998
9 PCF Anchored 174,428 1996-1999
10 NM Anchored 359,951 1996
11 JHREF Urban Office 107,312 1983
12 PCF Anchored 206,579 1950/1971/1992/1994/1996
13 JHREF Anchored 158,848 1961
14 JHREF Light Industrial 568,810 1973/1974
15 PCF Suburban Office 117,792 1999
16 PCF Warehouse 271,074 1999
17 PCF Warehouse 310,736 1969
18 PCF Garden Apartments 358 1990
19 JHREF Anchored 85,470 1964
20 JHREF Suburban Office 115,196 1985
21 PCF Suburban Office 61,364 1987
22 JHREF Flex Industrial 235,467 1999
23 JHREF Anchored 115,228 1996
24 JHREF Anchored 217,527 1956
25 PCF Anchored 105,259 1978-1988
26 JHREF Suburban Office 126,265 1982
27 PCF Warehouse 276,520 1976
28 PCF Suburban Office 176,129 1982-1983
29 JHREF Assisted Living Facility 109 1998
30 PCF Warehouse 455,320 1988/1989/1998
31 JHREF Assisted Living Facility 120 1999
32 JHREF Garden Apartments 265 1973
33 PCF Warehouse 183,560 1999
34 PCF Warehouse 197,754 1969-1975
35 PCF Suburban Office 30,000 1970
36 JHREF Urban Office 45,980 1924
37 PCF Suburban Office 123,000 1984
38 PCF Warehouse 264,908 1971/1974
39 PCF Warehouse 189,919 2000
40 PCF Garden Apartments 202 1975-1977, 1999
41 PCF Light Industrial 139,429 1968
42 PCF Anchored 83,382 1986
43 PCF Warehouse 182,268 1976-1980
44 PCF Flex Industrial 42,826 1990
45 PCF Warehouse 267,600 1975/1985/1986
46 PCF Garden Apartments 200 1973-1974
47 PCF Suburban Office 64,572 1986
48 PCF Unanchored 57,043 1998
49 PCF Warehouse 182,545 1977-1982
50 PCF Warehouse 40,000 1999
51 JHREF Suburban Office 51,762 1981
52 PCF Anchored 115,959 1962/1996
53 PCF Suburban Office 35,695 1911
54 PCF Shadow Anchored 30,121 1999
55 PCF Suburban Office 70,000 1983
56 JHREF Unanchored 22,059 1967
57 PCF Garden Apartments 64 1999
58 PCF Flex Industrial 64,920 1999
59 PCF Free Standing 19,972 1976
60 JHREF Garden Apartments 168 1976
61 PCF Light Industrial 127,908 1982-1987/1995
62 PCF Warehouse 144,000 1985
63 PCF Suburban Office 20,564 1999
64 PCF Flex Industrial 74,900 2000
65 JHREF Limited Service 125 1984
66 PCF Suburban Office 60,000 1995
67 PCF Shadow Anchored 42,249 1999
68 JHREF Warehouse 101,700 1998
69 PCF Flex Industrial 67,500 1986
70 JHREF Urban Office 49,315 1999
71 PCF Anchored 25,275 1992
72 PCF Suburban Office 41,829 1981
73 PCF Flex Industrial 60,000 2000
74 JHREF Self Storage 69,920 1997/1998
75 PCF Anchored 37,926 1997
76 PCF Unanchored 23,866 1999
77 PCF Medical Office 39,677 1986
78 PCF Light Industrial 115,005 1971
79 PCF Suburban Office 39,888 1998
80 PCF Anchored 38,999 1998
81 PCF Light Industrial 73,458 1978/1982/1990
82 PCF Garden Apartments 86 1969
83 PCF Urban Office 120,332 1979-1980
84 PCF Unanchored 37,779 Early 1900's
85 PCF Suburban Office 38,783 1986
86 PCF Suburban Office 60,375 1981/1984
87 PCF Light Industrial 88,356 1977
88 PCF Shadow Anchored 17,500 2000
89 PCF Flex Industrial 40,696 1998
90 PCF Garden Apartments 66 1958
91 PCF Anchored 41,132 1992
92 PCF Shadow Anchored 40,099 1990
93 PCF Suburban Office 26,657 1987/1993/1997
94 PCF Flex Industrial 38,050 1999
95 PCF Light Industrial 30,652 1953
96 PCF Flex Industrial 35,200 1981
97 PCF Garden Apartments 96 1974
98 PCF Warehouse 80,192 1978
99 PCF Warehouse 42,440 1998
100 PCF Free Standing 11,200 1999
101 PCF Unanchored 19,600 1999
102 PCF Warehouse 38,640 1987
103 PCF Unanchored 7,433 1979
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE PERCENT LEASED
LOAN NO. LOAN SELLER(1) YEAR RENOVATED PERCENT LEASED(2) AS OF DATE(2) SECURITY TYPE(3)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 NM 1995 99.4% 07/25/2000 Fee
2 PCF NAP 97.4% 07/01/2000 Fee
3 PCF NAP 95.7% 07/12/2000 Fee
4 JHREF 1998 100.0% 06/01/2000 Fee
5 PCF NAP 100.0% 07/19/2000 Fee
6 JHREF 1985 99.3% 06/01/2000 Fee
7 PCF NAP 88.9% 08/10/2000 Fee
8 NM NAP 96.0% 12/29/1999 Fee
9 PCF NAP 97.1% 06/23/2000 Fee
10 NM NAP 99.0% 03/06/2000 Fee
11 JHREF NAP 95.6% 05/31/2000 Fee
12 PCF 1991-1992/2000 93.3% 07/05/2000 Fee/Leasehold
13 JHREF 1998 98.3% 06/30/2000 Fee
14 JHREF NAP 100.0% 02/16/2000 Fee
15 PCF NAP 96.8% 06/07/2000 Fee
16 PCF NAP 100.0% 07/27/2000 Fee
17 PCF NAP 100.0% 06/26/2000 Fee
18 PCF NAP 96.6% 07/03/2000 Fee
19 JHREF 1998 100.0% 06/26/2000 Fee
20 JHREF NAP 99.3% 04/01/2000 Fee
21 PCF 2000 100.0% 06/28/2000 Fee
22 JHREF NAP 100.0% 04/20/2000 Fee
23 JHREF NAP 100.0% 07/13/2000 Fee
24 JHREF 1989/1995 96.5% 04/03/2000 Fee
25 PCF 1999/2000 98.8% 07/27/2000 Fee/Leasehold
26 JHREF NAP 100.0% 07/20/2000 Fee
27 PCF NAP 100.0% 07/05/2000 Fee
28 PCF NAP 99.6% 07/21/2000 Fee
29 JHREF NAP 99.2% 05/25/2000 Fee
30 PCF NAP 86.3% 09/06/2000 Fee
31 JHREF NAP 95.8% 06/02/2000 Fee
32 JHREF NAP 95.1% 05/31/2000 Fee
33 PCF NAP 100.0% 09/05/2000 Fee
34 PCF 1995 100.0% 07/21/2000 Fee
35 PCF 1988 100.0% 05/31/2000 Fee
36 JHREF 1985 100.0% 03/24/2000 Fee
37 PCF NAP 100.0% 06/28/2000 Fee
38 PCF NAP 100.0% 06/08/2000 Fee
39 PCF NAP 100.0% 08/03/2000 Fee
40 PCF NAP 97.0% 08/14/2000 Fee
41 PCF 2000 96.3% 07/06/2000 Fee
42 PCF NAP 91.4% 07/19/2000 Fee
43 PCF NAP 89.3% 06/30/2000 Fee
44 PCF NAP 100.0% 06/28/2000 Fee
45 PCF NAP 94.6% 08/08/2000 Fee
46 PCF NAP 96.5% 09/11/2000 Fee
47 PCF NAP 97.0% 06/30/2000 Fee
48 PCF NAP 91.4% 08/10/2000 Fee
49 PCF NAP 94.9% 08/15/2000 Fee
50 PCF NAP 100.0% 06/26/2000 Fee
51 JHREF NAP 100.0% 06/30/2000 Fee
52 PCF 1988 95.9% 06/26/2000 Fee
53 PCF 2000 91.9% 07/03/2000 Fee
54 PCF NAP 100.0% 06/26/2000 Fee
55 PCF NAP 100.0% 07/25/2000 Fee
56 JHREF 1998 100.0% 03/13/2000 Fee
57 PCF NAP 98.4% 07/21/2000 Fee
58 PCF NAP 95.2% 07/02/2000 Fee
59 PCF NAP 100.0% 07/13/2000 Fee
60 JHREF 1993/1995 95.8% 02/17/2000 Fee
61 PCF NAP 98.6% 06/14/2000 Fee
62 PCF NAP 100.0% 06/14/2000 Fee
63 PCF NAP 100.0% 06/26/2000 Fee
64 PCF NAP 100.0% 06/30/2000 Fee
65 JHREF 1996 67.4% 12/30/1999 Leasehold
66 PCF 2000 100.0% 07/27/2000 Fee
67 PCF NAP 96.0% 06/20/2000 Fee
68 JHREF NAP 100.0% 06/17/2000 Fee
69 PCF NAP 100.0% 06/02/2000 Fee
70 JHREF NAP 100.0% 05/30/2000 Fee
71 PCF NAP 100.0% 06/27/2000 Fee
72 PCF NAP 100.0% 07/08/2000 Fee
73 PCF NAP 100.0% 06/01/2000 Fee
74 JHREF NAP 88.1% 04/30/2000 Fee
75 PCF NAP 100.0% 06/27/2000 Fee
76 PCF NAP 93.6% 07/20/2000 Fee
77 PCF 1998 92.6% 06/27/2000 Fee
78 PCF 1994-1997 100.0% 06/26/2000 Fee
79 PCF NAP 100.0% 06/28/2000 Fee
80 PCF NAP 100.0% 07/14/2000 Fee
81 PCF 1990/2000 100.0% 06/26/2000 Fee
82 PCF 1996 97.7% 07/12/2000 Fee
83 PCF NAP 100.0% 06/27/2000 Fee
84 PCF Mid 1990's 100.0% 06/30/2000 Fee
85 PCF NAP 100.0% 06/12/2000 Fee
86 PCF NAP 100.0% 06/30/2000 Fee
87 PCF NAP 100.0% 06/30/2000 Fee
88 PCF NAP 100.0% 06/29/2000 Fee
89 PCF NAP 100.0% 06/27/2000 Fee
90 PCF NAP 98.5% 08/15/2000 Fee
91 PCF NAP 100.0% 07/22/2000 Fee
92 PCF NAP 91.3% 09/12/2000 Fee
93 PCF 1999 100.0% 06/01/2000 Fee
94 PCF NAP 100.0% 08/16/2000 Fee
95 PCF NAP 100.0% 06/29/2000 Fee
96 PCF 1997 100.0% 06/29/2000 Fee
97 PCF NAP 99.0% 08/01/2000 Fee
98 PCF NAP 100.0% 07/17/2000 Fee
99 PCF NAP 93.3% 06/29/2000 Fee
100 PCF NAP 100.0% 07/11/2000 Fee
101 PCF NAP 100.0% 06/07/2000 Fee
102 PCF NAP 100.0% 08/10/2000 Fee
103 PCF 1997 100.0% 06/30/2000 Fee
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE ORIGINAL CUT-OFF DATE
LOAN NO. LOAN SELLER(1) RELATED BORROWER LIST BALANCE BALANCE(4)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 NM $58,500,000 $57,039,856
2 PCF $28,500,000 $28,409,446
3 PCF $24,500,000 $24,477,507
4 JHREF $24,000,000 $23,802,280
5 PCF 21, 35, 37 ,44 $23,500,000 $23,453,008
6 JHREF $23,500,000 $21,324,274
7 PCF $21,000,000 $20,978,557
8 NM $19,000,000 $18,824,153
9 PCF $18,000,000 $17,982,244
10 NM $21,500,000 $17,752,738
11 JHREF $15,800,000 $15,673,161
12 PCF $15,000,000 $14,983,784
13 JHREF $15,100,000 $14,715,022
14 JHREF $13,710,000 $13,447,016
15 PCF $13,400,000 $13,382,782
16 PCF $11,500,000 $11,476,933
17 PCF $11,475,000 $11,450,201
18 PCF $11,200,000 $11,200,000
19 JHREF $11,300,000 $10,924,486
20 JHREF $11,000,000 $10,844,406
21 PCF 5, 35, 37 ,44 $10,800,000 $10,745,000
22 JHREF $10,600,000 $10,600,000
23 JHREF $10,650,000 $10,275,542
24 JHREF $10,500,000 $10,184,743
25 PCF $9,575,000 $9,569,748
26 JHREF $9,500,000 $9,214,372
27 PCF $9,200,000 $9,191,129
28 PCF 83 $8,950,000 $8,942,532
29 JHREF $8,800,000 $8,786,970
30 PCF 45 $8,400,000 $8,394,443
31 JHREF $8,330,000 $8,296,726
32 JHREF $7,450,000 $7,445,477
33 PCF $7,400,000 $7,400,000
34 PCF 49 $7,400,000 $7,392,842
35 PCF 5, 21, 37, 44 $7,400,000 $7,375,561
36 JHREF $7,500,000 $7,257,663
37 PCF 5, 21, 35, 44 $7,100,000 $7,059,066
38 PCF $7,000,000 $6,980,349
39 PCF $7,000,000 $6,975,630
40 PCF $6,150,000 $6,146,158
41 PCF $5,600,000 $5,588,321
42 PCF $5,586,260 $5,583,125
43 PCF $5,600,000 $5,569,938
44 PCF 5, 21, 35, 37 $5,400,000 $5,384,062
45 PCF 30 $5,300,000 $5,296,494
46 PCF $5,200,000 $5,200,000
47 PCF 86 $5,200,000 $5,175,854
48 PCF $5,100,000 $5,096,948
49 PCF 34 $5,000,000 $4,991,782
50 PCF $5,000,000 $4,984,001
51 JHREF $5,000,000 $4,977,445
52 PCF $4,500,000 $4,474,521
53 PCF $4,450,000 $4,445,855
54 PCF $4,325,000 $4,312,682
55 PCF $4,300,000 $4,297,464
56 JHREF $4,279,450 $4,269,473
57 PCF $4,200,000 $4,135,395
58 PCF $4,050,000 $4,042,369
59 PCF $4,050,000 $4,037,969
60 JHREF $4,040,000 $4,022,213
61 PCF $4,000,000 $3,994,759
62 PCF $4,000,000 $3,994,708
63 PCF $4,000,000 $3,990,999
64 PCF $3,992,000 $3,981,494
65 JHREF $4,000,000 $3,895,626
66 PCF $3,800,000 $3,797,809
67 PCF $3,550,000 $3,546,358
68 JHREF $3,500,000 $3,495,822
69 PCF $3,500,000 $3,495,458
70 JHREF $3,500,000 $3,489,887
71 PCF $3,500,000 $3,486,201
72 PCF $3,485,000 $3,462,022
73 PCF $3,400,000 $3,392,831
74 JHREF $3,400,000 $3,387,294
75 PCF $3,350,000 $3,345,203
76 PCF $3,200,000 $3,197,019
77 PCF $3,050,000 $3,040,677
78 PCF $3,000,000 $2,993,464
79 PCF $3,000,000 $2,988,825
80 PCF $2,950,000 $2,942,121
81 PCF $2,875,000 $2,865,718
82 PCF $2,725,000 $2,715,469
83 PCF 28 $2,700,000 $2,697,291
84 PCF $2,699,950 $2,696,999
85 PCF $2,700,000 $2,696,205
86 PCF 47 $2,625,000 $2,616,576
87 PCF $2,600,000 $2,591,907
88 PCF $2,500,000 $2,494,553
89 PCF $2,500,000 $2,493,143
90 PCF $2,300,000 $2,298,539
91 PCF $2,100,000 $2,098,677
92 PCF $2,050,000 $2,044,943
93 PCF $2,050,000 $2,043,481
94 PCF $2,032,500 $2,031,369
95 PCF $2,000,000 $1,998,254
96 PCF $2,000,000 $1,995,966
97 PCF $1,800,000 $1,798,772
98 PCF $1,700,000 $1,693,062
99 PCF $1,604,000 $1,599,510
100 PCF $1,510,000 $1,505,163
101 PCF $1,500,000 $1,497,938
102 PCF $1,500,000 $1,497,113
103 PCF $1,200,000 $1,198,438
$776,819,160 $765,349,379
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
CUT-OFF
MORTGAGE MORTGAGE DATE BALANCE
LOAN NO. LOAN SELLER(1) PER UNIT OR SF NOTE DATE FIRST PAYMENT DATE(5) MATURITY DATE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 NM $108,235.02 06/11/1998 08/01/1998 07/01/2008
2 PCF $43,841.74 03/28/2000 05/01/2000 04/01/2010
3 PCF $37.27 07/14/2000 09/01/2000 08/01/2010
4 JHREF $144.48 09/23/1999 11/01/1999 10/01/2014
5 PCF $166.41 07/03/2000 09/01/2000 08/01/2010
6 JHREF $43.04 02/25/1994 04/01/1994 03/01/2014
7 PCF $45.06 08/14/2000 10/01/2000 09/01/2010
8 NM $53,783.29 02/25/1997 10/15/1997 03/15/2009
9 PCF $103.09 06/30/2000 09/01/2000 08/01/2010
10 NM $49.32 03/26/1996 04/01/1996 10/01/2011
11 JHREF $146.05 10/01/1999 11/01/1999 10/01/2009
12 PCF $72.53 07/12/2000 09/01/2000 08/01/2010
13 JHREF $92.64 12/23/1998 02/01/1999 01/01/2009
14 JHREF $23.64 11/23/1998 01/01/1999 12/01/2008
15 PCF $113.61 06/07/2000 08/01/2000 07/01/2010
16 PCF $42.34 05/01/2000 07/01/2000 06/01/2010
17 PCF $36.85 05/12/2000 07/03/2000 06/03/2010
18 PCF $31,284.92 03/17/2000 05/01/2000 04/01/2010
19 JHREF $127.82 07/11/1997 09/01/1997 08/01/2007
20 JHREF $94.14 06/30/1999 08/01/1999 07/01/2009
21 PCF $175.10 04/21/2000 06/01/2000 05/01/2010
22 JHREF $45.02 05/22/2000 07/01/2000 06/01/2010
23 JHREF $89.18 09/02/1997 10/01/1997 09/01/2007
24 JHREF $46.82 01/13/1998 03/01/1998 02/01/2008
25 PCF $90.92 08/03/2000 10/01/2000 09/01/2010
26 JHREF $72.98 10/16/1998 12/01/1998 11/01/2008
27 PCF $33.24 07/05/2000 09/01/2000 08/01/2010
28 PCF $50.77 07/25/2000 09/01/2000 08/01/2010
29 JHREF $80,614.41 07/31/2000 09/01/2000 08/01/2010
30 PCF $18.44 08/15/2000 10/01/2000 09/01/2010
31 JHREF $69,139.38 05/10/2000 07/01/2000 06/01/2010
32 JHREF $28,096.14 08/30/2000 10/01/2000 09/01/2010
33 PCF $40.31 08/24/2000 11/01/2000 10/01/2010
34 PCF $37.38 08/11/2000 10/01/2000 09/01/2010
35 PCF $245.85 05/31/2000 09/01/2000 08/01/2010
36 JHREF $157.84 12/04/1997 02/01/1998 01/01/2008
37 PCF $57.39 03/06/2000 05/01/2000 04/01/2010
38 PCF $26.35 06/08/2000 08/01/2000 07/01/2010
39 PCF $36.73 03/06/2000 05/01/2000 04/01/2010
40 PCF $30,426.52 08/15/2000 10/01/2000 09/01/2010
41 PCF $40.08 05/15/2000 07/01/2000 06/01/2010
42 PCF $66.96 08/03/2000 10/01/2000 09/01/2010
43 PCF $30.56 11/04/1999 01/01/2000 12/01/2009
44 PCF $125.72 05/31/2000 08/01/2000 07/01/2010
45 PCF $19.79 08/15/2000 10/01/2000 09/01/2010
46 PCF $26,000.00 09/11/2000 11/01/2000 10/01/2010
47 PCF $80.16 12/15/1999 02/03/2000 01/03/2010
48 PCF $89.35 08/10/2000 10/01/2000 09/01/2010
49 PCF $27.35 08/11/2000 10/01/2000 09/01/2010
50 PCF $124.60 04/20/2000 06/01/2000 05/01/2010
51 JHREF $96.16 02/09/2000 04/01/2000 03/01/2010
52 PCF $38.59 03/03/2000 05/01/2000 04/01/2010
53 PCF $124.55 07/05/2000 09/01/2000 08/01/2010
54 PCF $143.18 03/13/2000 05/01/2000 04/01/2010
55 PCF $61.39 07/25/2000 10/01/2000 09/01/2010
56 JHREF $193.55 04/14/2000 06/01/2000 05/01/2010
57 PCF $64,615.54 12/22/1999 02/01/2000 02/01/2009
58 PCF $62.27 05/04/2000 07/01/2000 06/01/2010
59 PCF $202.18 02/14/2000 04/01/2000 03/01/2012
60 JHREF $23,941.74 03/01/2000 04/01/2000 03/01/2010
61 PCF $31.23 06/15/2000 08/01/2000 07/01/2010
62 PCF $27.74 06/19/2000 08/01/2000 07/01/2010
63 PCF $194.08 04/26/2000 07/01/2000 06/01/2010
64 PCF $53.16 03/01/2000 05/01/2000 04/01/2010
65 JHREF $31,165.01 09/25/1998 11/01/1998 10/01/2008
66 PCF $63.30 08/11/2000 10/01/2000 09/01/2010
67 PCF $83.94 07/19/2000 09/01/2000 08/01/2010
68 JHREF $34.37 07/27/2000 09/01/2000 08/01/2010
69 PCF $51.78 06/05/2000 08/01/2000 07/01/2010
70 JHREF $70.77 06/07/2000 08/01/2000 07/01/2010
71 PCF $137.93 05/25/2000 07/01/2000 06/01/2010
72 PCF $82.77 09/17/1999 11/01/1999 10/01/2009
73 PCF $56.55 05/18/2000 07/01/2000 06/01/2010
74 JHREF $48.45 02/11/2000 04/01/2000 03/01/2010
75 PCF $88.20 05/24/2000 08/01/2000 07/01/2010
76 PCF $133.96 07/20/2000 09/01/2000 08/01/2010
77 PCF $76.64 03/08/2000 05/01/2000 04/01/2010
78 PCF $26.03 04/07/2000 07/05/2000 06/05/2010
79 PCF $74.93 02/29/2000 04/01/2000 03/01/2010
80 PCF $75.44 03/09/2000 05/01/2000 04/01/2010
81 PCF $39.01 02/23/2000 04/01/2000 03/01/2010
82 PCF $31,575.22 02/26/2000 04/01/2000 03/01/2010
83 PCF $22.42 07/25/2000 09/01/2000 08/01/2010
84 PCF $71.39 06/29/2000 09/01/2000 08/01/2010
85 PCF $69.52 06/12/2000 08/05/2000 07/05/2010
86 PCF $43.34 02/14/2000 04/01/2000 03/01/2010
87 PCF $29.33 02/08/2000 04/01/2000 03/01/2010
88 PCF $142.55 05/18/2000 07/01/2000 06/01/2010
89 PCF $61.26 03/27/2000 05/01/2000 04/01/2010
90 PCF $34,826.35 08/17/2000 10/01/2000 09/01/2010
91 PCF $51.02 08/21/2000 10/01/2000 09/01/2010
92 PCF $51.00 05/26/2000 07/01/2000 06/01/2010
93 PCF $76.66 02/08/2000 04/01/2000 03/01/2010
94 PCF $53.39 08/21/2000 10/01/2000 09/01/2010
95 PCF $65.19 07/11/2000 09/01/2000 08/01/2010
96 PCF $56.70 05/25/2000 07/03/2000 06/03/2010
97 PCF $18,737.21 08/16/2000 10/01/2000 09/01/2010
98 PCF $21.11 01/25/2000 04/01/2000 03/01/2010
99 PCF $37.69 03/10/2000 05/01/2000 04/01/2010
100 PCF $134.39 03/10/2000 05/01/2000 04/01/2010
101 PCF $76.43 06/07/2000 08/01/2000 07/01/2010
102 PCF $38.75 03/20/2000 06/01/2000 05/01/2010
103 PCF $161.23 06/07/2000 08/01/2000 07/01/2010
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE ORIGINAL TERM REMAINING TERM ORIGINAL REMAINING MORTGAGE
LOAN NO. LOAN SELLER(1) TO MATURITY TO MATURITY AMORT. TERM(6) AMORT. TERM RATE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 NM 120 93 360 333 6.720%
2 PCF 120 114 360 354 8.270%
3 PCF 120 118 360 358 8.720%
4 JHREF 180 168 360 348 8.070%
5 PCF 120 118 300 298 8.330%
6 JHREF 240 161 300 221 9.250%
7 PCF 120 119 300 299 8.180%
8 NM 138 101 360 347 7.930%
9 PCF 120 118 360 358 8.470%
10 NM 187 132 178 132 7.250%
11 JHREF 120 108 360 348 8.200%
12 PCF 120 118 360 358 8.140%
13 JHREF 120 99 300 279 7.500%
14 JHREF 120 98 360 338 7.000%
15 PCF 120 117 360 357 8.660%
16 PCF 120 116 360 356 8.440%
17 PCF 120 116 360 356 8.170%
18 PCF 120 114 IO IO 7.890%
19 JHREF 120 82 288 262 7.875%
20 JHREF 120 105 336 321 7.350%
21 PCF 120 115 300 295 8.280%
22 JHREF 120 116 IO IO 8.480%
23 JHREF 120 83 324 287 8.250%
24 JHREF 120 88 360 328 7.875%
25 PCF 120 119 360 359 8.980%
26 JHREF 120 97 300 277 7.050%
27 PCF 120 118 360 358 8.550%
28 PCF 120 118 360 358 9.040%
29 JHREF 120 118 330 328 8.690%
30 PCF 120 119 360 359 8.070%
31 JHREF 120 116 300 296 8.380%
32 JHREF 120 119 360 359 8.490%
33 PCF 120 120 360 360 8.390%
34 PCF 120 119 300 299 8.510%
35 PCF 120 118 240 238 8.250%
36 JHREF 120 87 336 303 7.460%
37 PCF 120 114 300 294 8.660%
38 PCF 120 117 300 297 7.860%
39 PCF 120 114 360 354 7.930%
40 PCF 120 119 360 359 8.350%
41 PCF 120 116 360 356 8.300%
42 PCF 120 119 360 359 8.870%
43 PCF 120 110 360 350 8.270%
44 PCF 120 117 300 297 8.450%
45 PCF 120 119 360 359 8.070%
46 PCF 120 120 360 360 8.410%
47 PCF 120 111 360 351 8.500%
48 PCF 120 119 360 359 8.560%
49 PCF 120 119 240 239 8.260%
50 PCF 120 115 360 355 8.300%
51 JHREF 120 113 360 353 8.300%
52 PCF 120 114 300 294 8.070%
53 PCF 120 118 360 358 8.670%
54 PCF 120 114 360 354 8.660%
55 PCF 120 119 360 359 8.630%
56 JHREF 120 115 360 355 8.530%
57 PCF 109 100 240 231 7.710%
58 PCF 120 116 360 356 8.660%
59 PCF 144 137 360 353 8.910%
60 JHREF 120 113 360 353 8.420%
61 PCF 120 117 360 357 8.600%
62 PCF 120 117 360 357 8.570%
63 PCF 120 116 360 356 8.020%
64 PCF 120 114 360 354 8.930%
65 JHREF 120 96 300 276 7.690%
66 PCF 120 119 360 359 8.740%
67 PCF 120 118 360 358 8.330%
68 JHREF 120 118 360 358 8.590%
69 PCF 120 117 360 357 8.630%
70 JHREF 120 117 300 297 8.580%
71 PCF 120 116 300 296 7.810%
72 PCF 120 108 360 348 8.210%
73 PCF 120 116 360 356 8.260%
74 JHREF 120 113 360 353 9.220%
75 PCF 120 117 360 357 8.320%
76 PCF 120 118 360 358 8.670%
77 PCF 120 114 360 354 8.410%
78 PCF 120 116 360 356 8.140%
79 PCF 120 113 360 353 8.150%
80 PCF 120 114 360 354 8.880%
81 PCF 120 113 360 353 8.640%
82 PCF 120 113 360 353 8.370%
83 PCF 120 118 360 358 8.410%
84 PCF 120 118 360 358 8.100%
85 PCF 120 117 360 357 8.380%
86 PCF 120 113 360 353 8.660%
87 PCF 120 113 360 353 8.760%
88 PCF 120 116 360 356 8.140%
89 PCF 120 114 360 354 8.790%
90 PCF 120 119 360 359 8.270%
91 PCF 120 119 360 359 8.310%
92 PCF 120 116 360 356 7.670%
93 PCF 120 113 360 353 8.690%
94 PCF 120 119 360 359 8.910%
95 PCF 120 118 360 358 8.890%
96 PCF 120 116 360 356 8.420%
97 PCF 120 119 360 359 7.920%
98 PCF 120 113 360 353 7.820%
99 PCF 120 114 360 354 8.720%
100 PCF 120 114 360 354 8.240%
101 PCF 120 117 360 357 8.450%
102 PCF 120 115 360 355 9.130%
103 PCF 120 117 360 357 8.620%
127 115 329 317 8.153%
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE MONTHLY UNDERWRITABLE BALLOON
LOAN NO. LOAN SELLER(1) PAYMENT(7) CASH FLOW DSCR BALLOON BALANCE LTV
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 NM $378,265 $9,302,167 2.05 $49,981,549 40.0%
2 PCF $214,512 $4,101,288 1.59 $25,680,177 54.0%
3 PCF $192,217 $2,946,508 1.28 $22,297,016 62.8%
4 JHREF $177,276 $2,676,210 1.26 $18,524,774 50.3%
5 PCF $186,544 $3,397,231 1.52 $19,189,956 46.8%
6 JHREF $201,250 $5,482,661 2.27 $9,764,429 9.6%
7 PCF $164,593 $3,389,378 1.72 $17,085,503 42.2%
8 NM $138,491 $2,951,131 1.78 $16,839,271 42.2%
9 PCF $138,022 $2,118,866 1.28 $16,291,182 66.5%
10 NM $196,265 $3,368,062 1.43 $0 0.0%
11 JHREF $118,145 $2,000,495 1.41 $13,939,847 60.9%
12 PCF $111,532 $2,188,443 1.64 $13,474,238 52.1%
13 JHREF $111,588 $1,999,711 1.49 $12,073,472 48.3%
14 JHREF $91,213 $1,558,384 1.42 $11,787,332 56.7%
15 PCF $104,558 $1,648,656 1.31 $12,184,691 62.5%
16 PCF $87,937 $1,334,178 1.26 $10,401,747 66.0%
17 PCF $85,563 $1,307,913 1.27 $10,315,419 67.9%
18 PCF $73,640 $1,630,842 1.85 $10,898,690 49.1%
19 JHREF $87,449 $1,480,822 1.41 $9,246,988 45.8%
20 JHREF $77,310 $1,321,489 1.42 $9,267,353 59.8%
21 PCF $85,369 $1,774,996 1.73 $8,808,460 44.0%
22 JHREF $74,907 $1,244,873 1.38 $9,574,073 66.7%
23 JHREF $82,141 $1,375,757 1.40 $9,014,890 64.9%
24 JHREF $76,132 $1,582,480 1.73 $9,098,917 53.8%
25 PCF $76,905 $1,112,896 1.21 $8,760,849 69.3%
26 JHREF $67,447 $1,196,819 1.48 $7,503,997 60.0%
27 PCF $71,066 $1,206,057 1.41 $8,341,477 61.8%
28 PCF $72,271 $1,082,714 1.25 $8,201,368 54.7%
29 JHREF $70,218 $1,372,957 1.63 $7,580,934 57.4%
30 PCF $62,047 $1,410,715 1.89 $7,531,840 40.8%
31 JHREF $66,403 $1,014,488 1.27 $6,810,487 58.2%
32 JHREF $57,231 $969,626 1.41 $6,610,085 64.8%
33 PCF $56,324 $872,804 1.29 $6,686,652 70.4%
34 PCF $59,637 $933,586 1.30 $6,199,470 57.9%
35 PCF $63,053 $1,223,728 1.62 $5,168,288 38.9%
36 JHREF $53,264 $918,749 1.44 $6,335,261 46.9%
37 PCF $57,939 $948,276 1.36 $5,843,783 41.7%
38 PCF $53,380 $1,100,044 1.72 $5,762,317 47.4%
39 PCF $51,022 $1,109,555 1.81 $6,257,606 48.9%
40 PCF $46,636 $713,679 1.28 $5,549,974 67.0%
41 PCF $42,268 $681,687 1.34 $5,049,163 66.4%
42 PCF $44,427 $749,588 1.41 $5,099,303 68.9%
43 PCF $42,150 $678,909 1.34 $5,048,680 63.3%
44 PCF $43,300 $749,769 1.44 $4,422,425 48.6%
45 PCF $39,148 $929,523 1.98 $4,752,231 42.1%
46 PCF $39,652 $585,679 1.23 $4,700,851 60.3%
47 PCF $39,984 $712,646 1.49 $4,710,505 54.1%
48 PCF $39,432 $622,145 1.31 $4,624,105 60.8%
49 PCF $42,635 $784,961 1.53 $3,573,367 38.4%
50 PCF $37,739 $691,700 1.53 $4,420,045 56.7%
51 JHREF $37,739 $629,818 1.39 $4,420,045 66.5%
52 PCF $34,941 $706,737 1.69 $3,725,393 46.0%
53 PCF $34,754 $508,702 1.22 $4,045,438 67.4%
54 PCF $33,747 $534,592 1.32 $3,931,332 70.2%
55 PCF $33,460 $516,014 1.29 $3,904,778 55.0%
56 JHREF $32,996 $604,925 1.53 $3,880,305 58.6%
57 PCF $34,376 $623,600 1.51 $3,108,161 46.4%
58 PCF $31,601 $471,406 1.24 $3,681,181 64.6%
59 PCF $32,325 $562,518 1.45 $3,588,539 61.9%
60 JHREF $30,835 $437,947 1.18 $3,579,725 66.3%
61 PCF $31,040 $526,133 1.41 $3,632,399 60.5%
62 PCF $30,955 $493,899 1.33 $3,629,979 62.6%
63 PCF $29,406 $652,844 1.85 $3,583,234 36.6%
64 PCF $31,920 $480,044 1.25 $3,649,943 68.5%
65 JHREF $30,056 $764,740 2.12 $3,276,949 46.8%
66 PCF $29,868 $451,082 1.26 $3,387,414 65.1%
67 PCF $26,870 $404,273 1.25 $3,202,848 68.1%
68 JHREF $27,136 $410,454 1.26 $3,111,294 59.8%
69 PCF $27,235 $457,424 1.40 $3,180,462 62.4%
70 JHREF $28,372 $460,984 1.35 $2,875,298 57.5%
71 PCF $26,575 $556,893 1.75 $2,875,925 47.1%
72 PCF $26,084 $410,953 1.31 $3,137,686 62.8%
73 PCF $25,567 $385,180 1.26 $3,062,758 67.3%
74 JHREF $27,897 $438,341 1.31 $3,056,863 65.5%
75 PCF $25,332 $434,285 1.43 $3,023,024 63.0%
76 PCF $24,992 $383,618 1.28 $2,909,078 65.7%
77 PCF $23,258 $372,508 1.33 $2,756,990 59.9%
78 PCF $22,306 $418,453 1.56 $2,694,967 51.8%
79 PCF $22,327 $513,979 1.92 $2,698,054 37.5%
80 PCF $23,482 $366,459 1.30 $2,694,342 60.7%
81 PCF $22,392 $337,872 1.26 $2,614,604 65.4%
82 PCF $20,702 $335,359 1.35 $2,463,196 71.4%
83 PCF $20,589 $521,965 2.11 $2,440,385 30.9%
84 PCF $20,000 $391,291 1.63 $2,423,065 59.1%
85 PCF $20,531 $326,242 1.32 $2,439,798 55.4%
86 PCF $20,482 $371,350 1.51 $2,388,301 43.8%
87 PCF $20,473 $327,106 1.33 $2,370,770 65.9%
88 PCF $18,589 $302,056 1.35 $2,245,806 65.1%
89 PCF $19,739 $301,111 1.27 $2,278,907 67.0%
90 PCF $17,311 $254,179 1.22 $2,071,828 72.1%
91 PCF $15,865 $257,781 1.35 $1,893,393 64.2%
92 PCF $14,573 $438,381 2.51 $1,821,082 35.4%
93 PCF $16,040 $235,271 1.22 $1,866,388 59.3%
94 PCF $16,223 $234,662 1.21 $1,856,913 68.4%
95 PCF $15,934 $232,672 1.22 $1,826,870 63.5%
96 PCF $15,265 $247,015 1.35 $1,808,185 68.2%
97 PCF $13,108 $285,105 1.81 $1,608,284 46.0%
98 PCF $12,261 $399,438 2.71 $1,516,971 31.6%
99 PCF $12,584 $185,510 1.23 $1,459,920 69.5%
100 PCF $11,334 $235,069 1.73 $1,359,663 44.9%
101 PCF $11,481 $228,693 1.66 $1,357,591 56.6%
102 PCF $12,210 $189,758 1.30 $1,377,896 61.2%
103 PCF $9,329 $138,348 1.24 $1,090,202 68.1%
1.53X 52.2%
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE CUT-OFF DATE
LOAN NO. LOAN SELLER(1) LTV APPRAISED VALUE VALUATION DATE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 NM 45.6% $125,000,000 08/31/2000
2 PCF 59.7% $47,550,000 03/20/2000
3 PCF 69.0% $35,500,000 06/14/2000
4 JHREF 64.7% $36,800,000 08/18/2000
5 PCF 57.2% $41,000,000 02/04/2000
6 JHREF 20.9% $102,000,000 07/27/2000
7 PCF 51.8% $40,500,000 07/26/2000
8 NM 47.2% $39,900,000 09/08/2000
9 PCF 73.4% $24,500,000 05/23/2000
10 NM 45.5% $39,000,000 08/07/2000
11 JHREF 68.4% $22,900,000 08/11/2000
12 PCF 57.9% $25,870,000 06/22/2000
13 JHREF 58.9% $25,000,000 08/09/2000
14 JHREF 64.6% $20,800,000 08/11/2000
15 PCF 68.6% $19,500,000 05/06/2000
16 PCF 72.9% $15,750,000 04/06/2000
17 PCF 75.3% $15,200,000 05/09/2000
18 PCF 50.5% $22,200,000 01/24/2000
19 JHREF 54.1% $20,200,000 08/10/2000
20 JHREF 70.0% $15,500,000 08/08/2000
21 PCF 53.7% $20,000,000 03/17/2000
22 JHREF 73.9% $14,350,000 04/20/2000
23 JHREF 73.9% $13,900,000 08/14/2000
24 JHREF 60.3% $16,900,000 08/11/2000
25 PCF 75.7% $12,650,000 06/09/2000
26 JHREF 73.7% $12,500,000 08/07/2000
27 PCF 68.1% $13,500,000 03/29/2000
28 PCF 59.6% $15,000,000 06/07/2000
29 JHREF 66.6% $13,200,000 07/12/2000
30 PCF 45.5% $18,450,000 07/12/2000
31 JHREF 70.9% $11,710,000 04/10/2000
32 JHREF 73.0% $10,200,000 06/13/2000
33 PCF 77.9% $9,500,000 07/15/2000
34 PCF 69.1% $10,700,000 07/01/2000
35 PCF 55.5% $13,300,000 04/20/2000
36 JHREF 53.8% $13,500,000 08/11/2000
37 PCF 50.4% $14,000,000 02/07/2000
38 PCF 57.5% $12,150,000 04/04/2000
39 PCF 54.5% $12,800,000 01/14/2000
40 PCF 74.2% $8,286,000 07/20/2000
41 PCF 73.5% $7,600,000 03/10/2000
42 PCF 75.4% $7,400,000 06/21/2000
43 PCF 69.9% $7,970,000 10/29/1999
44 PCF 59.2% $9,100,000 05/25/2000
45 PCF 46.9% $11,300,000 07/12/2000
46 PCF 66.7% $7,800,000 07/31/2000
47 PCF 59.5% $8,700,000 11/30/1999
48 PCF 67.1% $7,600,000 07/12/2000
49 PCF 53.7% $9,300,000 07/01/2000
50 PCF 63.9% $7,800,000 03/24/2000
51 JHREF 74.8% $6,650,000 12/29/2000
52 PCF 55.2% $8,100,000 01/14/2000
53 PCF 74.1% $6,000,000 05/30/2000
54 PCF 77.0% $5,600,000 02/25/2000
55 PCF 60.5% $7,100,000 06/26/2000
56 JHREF 64.5% $6,620,000 03/13/2000
57 PCF 61.7% $6,700,000 11/15/1999
58 PCF 70.9% $5,700,000 04/11/2000
59 PCF 69.6% $5,800,000 01/20/2000
60 JHREF 74.5% $5,400,000 02/24/2000
61 PCF 66.6% $6,000,000 06/15/2000
62 PCF 68.9% $5,800,000 05/25/2000
63 PCF 40.7% $9,800,000 03/20/2000
64 PCF 74.7% $5,330,000 02/29/2000
65 JHREF 55.7% $7,000,000 08/14/2000
66 PCF 73.0% $5,200,000 07/09/2000
67 PCF 75.5% $4,700,000 07/25/2000
68 JHREF 67.2% $5,200,000 06/13/2000
69 PCF 68.5% $5,100,000 04/21/2000
70 JHREF 69.8% $5,000,000 03/20/2000
71 PCF 57.2% $6,100,000 05/05/2000
72 PCF 69.2% $5,000,000 08/04/1999
73 PCF 74.6% $4,550,000 05/23/2000
74 JHREF 72.5% $4,670,000 12/15/2000
75 PCF 69.7% $4,800,000 04/27/2000
76 PCF 72.2% $4,425,000 07/05/2000
77 PCF 66.1% $4,600,000 02/01/2000
78 PCF 57.6% $5,200,000 03/30/2000
79 PCF 41.5% $7,200,000 01/17/2000
80 PCF 66.3% $4,440,000 02/11/2000
81 PCF 71.6% $4,000,000 02/16/2000
82 PCF 78.7% $3,450,000 02/21/2000
83 PCF 34.1% $7,900,000 06/07/2000
84 PCF 65.8% $4,100,000 05/25/2000
85 PCF 61.3% $4,400,000 05/14/2000
86 PCF 48.0% $5,450,000 10/18/1999
87 PCF 72.0% $3,600,000 12/28/1999
88 PCF 72.3% $3,450,000 04/20/2000
89 PCF 73.3% $3,400,000 03/01/2000
90 PCF 79.9% $2,875,000 08/07/2000
91 PCF 71.1% $2,950,000 05/15/2000
92 PCF 39.7% $5,150,000 05/03/2000
93 PCF 64.9% $3,150,000 02/08/2000
94 PCF 74.8% $2,715,000 07/19/2000
95 PCF 69.5% $2,875,000 06/28/2000
96 PCF 75.3% $2,650,000 05/01/2000
97 PCF 51.4% $3,500,000 07/24/2000
98 PCF 35.3% $4,800,000 01/14/2000
99 PCF 76.2% $2,100,000 03/08/2000
100 PCF 49.8% $3,025,000 02/24/2000
101 PCF 62.4% $2,400,000 05/22/2000
102 PCF 66.5% $2,250,000 02/24/2000
103 PCF 74.9% $1,600,000 06/06/2000
60.8%
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE
LOAN NO. LOAN SELLER(1) LARGEST TENANT(8) % NSF SECOND LARGEST TENANT(8)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 NM NAP NAP NAP
2 PCF NAP NAP NAP
3 PCF Triboro, Inc. 36.3% Carrier Logistics, Inc.
4 JHREF Young & Rubicam 64.8% International Merchandising Corp.
5 PCF Brio Technology, Inc. 100.0% NAP
6 JHREF Amcon 5.9% Amcon
7 PCF SC - Budget & Control Board 34.2% SC - Dept. of Commerce
8 NM NAP NAP NAP
9 PCF Vons Companies, Inc. 29.9% Michael's
10 NM Home Depot U.S.A. Inc. 28.8% Kroger
11 JHREF U.S. West, Inc. 20.8% Spectrum Science
12 PCF Cinemark 14.0% Nordstrom Rack
13 JHREF Loehmann's Store 9.4% Old Navy
14 JHREF Government Printing Office 35.5% Government Printing Office
15 PCF Vantas Meridian 27.2% Sun Microsystems, Inc.
16 PCF Epitaxx 36.3% Rhein Chemie Corporation
17 PCF Technicolor 100.0% NAP
18 PCF NAP NAP NAP
19 JHREF Linens 'n Things, Inc. 47.3% Ross Stores, Inc.
20 JHREF Open Text 15.1% Eastern Michigan University
21 PCF Acta, Inc. 100.0% NAP
22 JHREF Enron Communications 77.5% Tommie Vaughn Ford
23 JHREF Raley's 53.4% Shell Oil
24 JHREF Ames Store 28.5% County Market
25 PCF Gigante USA, Inc. 46.7% Office Depot, Inc.
26 JHREF Milliman & Robertson, Inc 21.1% PF Laboratories
27 PCF Polarome International, Inc. 100.0% NAP
28 PCF GE Energy Products, Inc. 45.3% Stewart & Stevenson Services, Inc.
29 JHREF NAP NAP NAP
30 PCF John Wiley and Sons, Inc. 25.3% Cary Compounds, LLC
31 JHREF NAP NAP NAP
32 JHREF NAP NAP NAP
33 PCF Mazella Wire Rope & Sling Company 56.9% The A W Fenton Co, Inc.
34 PCF Specialty Toner Corporation 29.3% Mahaffy & Harder Engineering Company
35 PCF Informatica Corporation 100.0% NAP
36 JHREF Key Corporate Capital Inc. 20.8% Kimball Office Furniture
37 PCF Viking Freight 100.0% NAP
38 PCF Simmons Company 100.0% NAP
39 PCF Jerry Leigh of CA, Inc. 100.0% NAP
40 PCF NAP NAP NAP
41 PCF Kelco Industries, Inc. 65.5% Dover Elevator Company
42 PCF Drug Emporium 28.8% Spalding Steakhouse, Inc.
43 PCF Bamco, LLC 8.8% Globe Furniture Rental, Inc.
44 PCF California Eastern Laboratories, Inc. 100.0% NAP
45 PCF Princeton Storage Specialist, Inc. 28.3% Sunshine Bouquet Co.
46 PCF NAP NAP NAP
47 PCF Contiki US Holdings 11.1% JRS Research Laboratories, Inc.
48 PCF Infineon Technologies North America Corp. 19.8% Trans Martial Arts & Fitness
49 PCF Hoechst Celanese Corporation (Redi-L-Corporalior) 51.1% Delta Cooling Towers, Inc.
50 PCF American Freightways 100.0% NAP
51 JHREF Miro Weiner & Kramer 56.8% Landon Development
52 PCF Super Foodtown/ Francis Markets Ltd. 51.7% Family Dollar Stores of NJ, Inc.
53 PCF Restoration Hardware, Inc. 43.9% Salomon Smith Barney
54 PCF Office Depot 100.0% NAP
55 PCF Applied Communications, Inc 100.0% NAP
56 JHREF Earl's Restaurant Inc. 34.0% ICON Laser Eye
57 PCF NAP NAP NAP
58 PCF Aaron Rents 34.3% Security Link
59 PCF Room & Board 100.0% NAP
60 JHREF NAP NAP NAP
61 PCF Nautical Acquisitions Corporation 28.6% Arguss Communications Group, Inc.
62 PCF Warner Bros. Publications 100.0% NAP
63 PCF Townsend & Townsend & Crew 100.0% NAP
64 PCF TUSA Office Solutions, Inc. 100.0% NAP
65 JHREF NAP NAP NAP
66 PCF Applied Graphics Technologies, Inc. 57.1% The Sutherland Group, Ltd.
67 PCF Tight Bolt, Inc. 21.4% Green Backs, Inc.
68 JHREF Santa Clara Warehouses 100.0% NAP
69 PCF Triangle Electronics 63.1% Clean Room Products
70 JHREF Liberty Mutual 100.0% NAP
71 PCF Pier One Imports 39.6% Sprint PCS
72 PCF Rodman Publishing 37.5% Alexander Hamilton Institute
73 PCF Corlund Electronics, Inc. 100.0% NAP
74 JHREF NAP NAP NAP
75 PCF Staples, Inc. 63.3% Bank of America
76 PCF Atlanta Bread Company 16.5% Tijuana Joe's
77 PCF Orthopedic Associates 25.5% Home Health Services
78 PCF CR Textiles, Inc. 100.0% NAP
79 PCF ITT Industries, Inc. 100.0% NAP
80 PCF Gold's Gym 76.9% Blockbuster Video
81 PCF Delivery Point Services, Inc. 100.0% NAP
82 PCF NAP NAP NAP
83 PCF Enterprise Products Company 89.6% Wheatstone Investments, Inc.
84 PCF Barnes & Noble Booksellers, Inc. 45.6% Stern Altoona Enterprises, Inc.
85 PCF Battelle Memorial Institute 37.6% Maryland Kidney Stone Center
86 PCF Robert E. Bayley Construction 12.6% Proxymed Inc.
87 PCF Federated Distribution Service, Inc. 100.0% NAP
88 PCF Mattress Firm 20.8% Streets of New York
89 PCF Arinc Incorporated 29.1% Joe Blow T's Inc.
90 PCF NAP NAP NAP
91 PCF Food Lion LLC 70.5% Blockbuster, Inc.
92 PCF Kabuto, Inc. 13.2% Factory Mattress & Waterbed
93 PCF Keenan, Hopkins, Schmidt & Stowell Contractors 35.6% Environmental Resources Management,
Southeast, Inc.
94 PCF Adkins Paving & Grading 13.7% Digital Dimension Stone Corporation
95 PCF Coors Ceramicon Designs, Ltd. 100.0% NAP
96 PCF Michaels Stores, Inc. 100.0% NAP
97 PCF NAP NAP NAP
98 PCF Iron Mountain 100.0% NAP
99 PCF NetStar Wire & Cable 28.2% Bleu Water Co.
100 PCF Eckerd Corporation/Eckerd Drug Store 100.0% NAP
101 PCF Dept. of Human Resources/Child Support Enforcement 32.7% Primary Medical Care, PC & Southside
Orthopedic Clinic, PC
102 PCF Rockland Chemical Co. 50.0% Warshauer Electric Supply Co.
103 PCF Atlanta Bread Company International Inc. 52.5% Southtrust Bank, N.A.
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE
LOAN NO. LOAN SELLER(1) % NSF THIRD LARGEST TENANT(8) % NSF
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 NM NAP NAP NAP
2 PCF NAP NAP NAP
3 PCF 29.4% Preferred Freezer Services, Inc. 17.7%
4 JHREF 18.6% ABC Inc. 13.5%
5 PCF NAP NAP NAP
6 JHREF 3.5% Alan Taylor 3.4%
7 PCF 13.9% Affinity Technology 7.0%
8 NM NAP NAP NAP
9 PCF 12.0% American Drug Stores, Inc. 9.7%
10 NM 16.6% Rhodes Furniture 13.6%
11 JHREF 7.6% Abu Dhabi International 6.7%
12 PCF 13.2% Michael's 11.2%
13 JHREF 8.9% Bed Bath & Beyond 7.2%
14 JHREF 31.6% Cortez III Service Corp. 6.3%
15 PCF 27.0% First Sierra Financial, Inc. 13.3%
16 PCF 36.0% Educational Testing Service 27.7%
17 PCF NAP NAP NAP
18 PCF NAP NAP NAP
19 JHREF 35.1% Bank of America 9.3%
20 JHREF 11.2% First Michigan Title 7.9%
21 PCF NAP NAP NAP
22 JHREF 11.9% Gruma Corp. (Mission Foods) 6.8%
23 JHREF 8.7% Bully's Sports Bar & Grill 5.6%
24 JHREF 22.7% Staples 11.1%
25 PCF 24.9% Fashion Bug #3433, Inc. 8.3%
26 JHREF 18.5% First Institute Securities Corp 14.2%
27 PCF NAP NAP NAP
28 PCF 37.8% Amcare Healthplans of Texas, Inc. 8.2%
29 JHREF NAP NAP NAP
30 PCF 14.6% Anixter, Inc. 10.5%
31 JHREF NAP NAP NAP
32 JHREF NAP NAP NAP
33 PCF 43.1% NAP NAP
34 PCF 21.0% Ingersoll-Dresser Pump Company 18.5%
35 PCF NAP NAP NAP
36 JHREF 14.3% Technical Development Corp 14.3%
37 PCF NAP NAP NAP
38 PCF NAP NAP NAP
39 PCF NAP NAP NAP
40 PCF NAP NAP NAP
41 PCF 21.1% The County of Union 5.7%
42 PCF 7.6% Spalding Woods Shoes, Inc. 6.5%
43 PCF 8.1% G.E. Richards Graphics Supply 5.5%
44 PCF NAP NAP NAP
45 PCF 25.1% USCO/Inc. 7.2%
46 PCF NAP NAP NAP
47 PCF 10.5% Accredited Home Lenders 8.7%
48 PCF 11.6% Colorado Restaurant Concepts 9.4%
49 PCF 18.2% Satellite Glass Corp. 14.7%
50 PCF NAP NAP NAP
51 JHREF 14.4% McDonnell, Conley, Arslanian 14.3%
52 PCF 9.0% Eckerd Drug 8.8%
53 PCF 12.0% Content Prose, LLC 11.8%
54 PCF NAP NAP NAP
55 PCF NAP NAP NAP
56 JHREF 25.2% Sacchi 21.9%
57 PCF NAP NAP NAP
58 PCF 28.0% HealthCare Serv 21.1%
59 PCF NAP NAP NAP
60 JHREF NAP NAP NAP
61 PCF 7.9% Southtrust Bank 7.9%
62 PCF NAP NAP NAP
63 PCF NAP NAP NAP
64 PCF NAP NAP NAP
65 JHREF NAP NAP NAP
66 PCF 42.9% NAP NAP
67 PCF 21.2% Hollywood Entertainment Corporation 13.7%
68 JHREF NAP NAP NAP
69 PCF 36.9% NAP NAP
70 JHREF NAP NAP NAP
71 PCF 16.2% Dentalco Modern Dental 15.0%
72 PCF 15.8% Carpenter Environmental 9.1%
73 PCF NAP NAP NAP
74 JHREF NAP NAP NAP
75 PCF 7.4% AllTel Celular One 7.4%
76 PCF 14.7% Papa's Hair & Body Works 10.3%
77 PCF 15.7% Dr. Russell, Healy, & Kuhn 11.2%
78 PCF NAP NAP NAP
79 PCF NAP NAP NAP
80 PCF 13.0% El Polo Loco 6.9%
81 PCF NAP NAP NAP
82 PCF NAP NAP NAP
83 PCF 9.5% NAP NAP
84 PCF 42.1% Iron City Bagels, Inc. 6.1%
85 PCF 12.3% Lake Falls Financial 10.8%
86 PCF 12.6% Anna's Linen Company 12.6%
87 PCF NAP NAP NAP
88 PCF 16.3% Jenny Craig 8.9%
89 PCF 28.3% ASCR -Association of Specialists in Cleaning & Restoration 11.4%
90 PCF NAP NAP NAP
91 PCF 16.3% Mr. Haralambos Ouzounidis 4.4%
92 PCF 7.7% CSJ Incorporated 6.6%
93 PCF 30.9% Clark Construction Group, Inc. 21.2%
94 PCF 13.7% Robert Chappell 10.8%
95 PCF NAP NAP NAP
96 PCF NAP NAP NAP
97 PCF NAP NAP NAP
98 PCF NAP NAP NAP
99 PCF 13.3% McGill Airflow Corp. 13.1%
100 PCF NAP NAP NAP
101 PCF 24.5% Georgia Peachtree Blimpee Leasing Ventures, Inc. 6.1%
102 PCF 50.0% NAP NAP
103 PCF 28.0% Atlanta Batteries, L.L.C. 19.5%
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE INSURANCE TAX CAPITAL EXPENDITURE TI/LC
LOAN NO. LOAN SELLER(1) ESCROW REQUIRED ESCROW REQUIRED ESCROW REQUIRED(9) ESCROW REQUIRED(10)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 NM No No No No
2 PCF No Yes No No
3 PCF No Yes No Yes
4 JHREF No Yes No Yes
5 PCF No No No No
6 JHREF No Yes No No
7 PCF No Yes No Yes
8 NM No No No No
9 PCF No Yes No Yes
10 NM No No No No
11 JHREF No Yes No Yes
12 PCF No No No No
13 JHREF No Yes No Yes
14 JHREF No Yes No No
15 PCF No Yes No Yes
16 PCF Yes Yes No Yes
17 PCF Yes Yes No Yes
18 PCF Yes Yes No No
19 JHREF No Yes No No
20 JHREF No Yes No No
21 PCF No No No No
22 JHREF No Yes No Yes
23 JHREF No Yes No Yes
24 JHREF No Yes No No
25 PCF Yes Yes Yes Yes
26 JHREF No Yes No Yes
27 PCF No Yes Yes No
28 PCF Yes Yes Yes Yes
29 JHREF No Yes Yes No
30 PCF No Yes No No
31 JHREF No Yes Yes No
32 JHREF No Yes Yes No
33 PCF Yes No No Yes
34 PCF No No No Yes
35 PCF No No No No
36 JHREF No Yes No No
37 PCF No No No No
38 PCF No Yes No Yes
39 PCF Yes Yes Yes No
40 PCF Yes Yes No No
41 PCF Yes Yes Yes Yes
42 PCF Yes Yes Yes Yes
43 PCF Yes Yes Yes Yes
44 PCF No No No No
45 PCF No Yes No No
46 PCF Yes Yes Yes No
47 PCF Yes Yes Yes Yes
48 PCF Yes Yes Yes No
49 PCF No No No No
50 PCF No No No Yes
51 JHREF No Yes No Yes
52 PCF No No No No
53 PCF Yes Yes Yes Yes
54 PCF Yes Yes No No
55 PCF Yes Yes Yes Yes
56 JHREF No Yes Yes Yes
57 PCF Yes Yes Yes No
58 PCF Yes Yes No Yes
59 PCF No Yes Yes No
60 JHREF No Yes Yes No
61 PCF Yes Yes Yes Yes
62 PCF Yes Yes Yes Yes
63 PCF Yes Yes No No
64 PCF Yes Yes No Yes
65 JHREF Yes Yes Yes No
66 PCF Yes Yes Yes Yes
67 PCF Yes Yes No Yes
68 JHREF Yes Yes Yes Yes
69 PCF Yes Yes No Yes
70 JHREF No Yes Yes Yes
71 PCF Yes Yes Yes No
72 PCF Yes Yes Yes Yes
73 PCF Yes Yes No No
74 JHREF Yes Yes Yes No
75 PCF Yes Yes Yes No
76 PCF Yes Yes No Yes
77 PCF Yes Yes Yes No
78 PCF No No No No
79 PCF Yes Yes Yes Yes
80 PCF Yes Yes No No
81 PCF No No Yes Yes
82 PCF Yes Yes Yes No
83 PCF Yes Yes Yes No
84 PCF Yes Yes Yes Yes
85 PCF Yes Yes Yes Yes
86 PCF Yes Yes Yes Yes
87 PCF Yes Yes Yes No
88 PCF Yes Yes Yes Yes
89 PCF Yes Yes Yes No
90 PCF Yes Yes Yes No
91 PCF Yes Yes Yes No
92 PCF No Yes No No
93 PCF Yes Yes Yes Yes
94 PCF Yes Yes No Yes
95 PCF No No Yes Yes
96 PCF No Yes No Yes
97 PCF No Yes No No
98 PCF No No No No
99 PCF Yes Yes Yes Yes
100 PCF No No No No
101 PCF Yes Yes No Yes
102 PCF Yes Yes Yes Yes
103 PCF Yes Yes Yes Yes
29.4% 73.5% 25.6% 57.4%
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE INITIAL CAPITAL EXPENDITURE MONTHLY CAPITAL EXPENDITURE CURRENT CAPITAL EXPENDITURE
LOAN NO. LOAN SELLER(1) ESCROW REQUIREMENT(11) ESCROW REQUIREMENT(12) ESCROW BALANCE(13)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 NM $0.00 $0.00 $0.00
2 PCF $0.00 $0.00 $0.00
3 PCF $0.00 $0.00 $0.00
4 JHREF $0.00 $0.00 $0.00
5 PCF $0.00 $0.00 $0.00
6 JHREF $0.00 $0.00 $0.00
7 PCF $0.00 $0.00 $0.00
8 NM $0.00 $0.00 $0.00
9 PCF $0.00 $0.00 $0.00
10 NM $0.00 $0.00 $0.00
11 JHREF $0.00 $0.00 $0.00
12 PCF $0.00 $0.00 $0.00
13 JHREF $0.00 $0.00 $0.00
14 JHREF $0.00 $0.00 $0.00
15 PCF $0.00 $0.00 $0.00
16 PCF $0.00 $0.00 $0.00
17 PCF $0.00 $0.00 $0.00
18 PCF $0.00 $0.00 $0.00
19 JHREF $0.00 $0.00 $0.00
20 JHREF $0.00 $0.00 $0.00
21 PCF $0.00 $0.00 $0.00
22 JHREF $0.00 $0.00 $0.00
23 JHREF $0.00 $0.00 $0.00
24 JHREF $0.00 $0.00 $0.00
25 PCF $0.00 $880.00 $880.00
26 JHREF $0.00 $0.00 $0.00
27 PCF $0.00 $2,304.33 $4,608.66
28 PCF $25,000.00 $2,935.63 $30,871.26
29 JHREF $1,405.00 $1,405.00 $1,405.00
30 PCF $0.00 $0.00 $0.00
31 JHREF $0.00 $2,458.00 $2,458.00
32 JHREF $60,250.00 $10,824.68 $32,474.74
33 PCF $0.00 $0.00 $0.00
34 PCF $0.00 $0.00 $0.00
35 PCF $0.00 $0.00 $0.00
36 JHREF $0.00 $0.00 $0.00
37 PCF $0.00 $0.00 $0.00
38 PCF $0.00 $0.00 $0.00
39 PCF $62,500.00 $0.00 $62,500.00
40 PCF $0.00 $0.00 $0.00
41 PCF $0.00 $1,161.91 $4,674.64
42 PCF $16,187.00 $1,389.70 $17,576.70
43 PCF $2,278.25 $2,278.25 $25,060.75
44 PCF $0.00 $0.00 $0.00
45 PCF $0.00 $0.00 $0.00
46 PCF $0.00 $4,166.00 $0.00
47 PCF $0.00 $1,372.00 $12,389.89
48 PCF $0.00 $713.00 $713.00
49 PCF $0.00 $0.00 $0.00
50 PCF $0.00 $0.00 $0.00
51 JHREF $0.00 $0.00 $0.00
52 PCF $0.00 $0.00 $0.00
53 PCF $49,450.00 $590.23 $50,630.46
54 PCF $0.00 $0.00 $0.00
55 PCF $1,666.67 $1,666.67 $3,333.34
56 JHREF $441.18 $441.18 $1,323.54
57 PCF $0.00 $533.33 $4,816.74
58 PCF $0.00 $0.00 $0.00
59 PCF $70,300.00 $0.00 $70,897.85
60 JHREF $3,700.00 $2,800.00 $11,200.00
61 PCF $0.00 $1,066.00 $3,198.00
62 PCF $0.00 $3,000.00 $9,000.00
63 PCF $0.00 $0.00 $0.00
64 PCF $0.00 $0.00 $0.00
65 JHREF $85,000.00 $0.00 $91,167.19
66 PCF $0.00 $1,000.00 $1,000.00
67 PCF $0.00 $0.00 $0.00
68 JHREF $76,340.00 $840.00 $76,340.00
69 PCF $0.00 $0.00 $0.00
70 JHREF $410.83 $410.83 $410.83
71 PCF $0.00 $316.00 $1,264.00
72 PCF $69,510.00 $689.58 $79,219.76
73 PCF $0.00 $0.00 $0.00
74 JHREF $0.00 $580.00 $2,320.00
75 PCF $0.00 $466.20 $1,398.60
76 PCF $0.00 $0.00 $0.00
77 PCF $0.00 $661.30 $3,967.80
78 PCF $0.00 $0.00 $0.00
79 PCF $0.00 $831.00 $5,817.00
80 PCF $0.00 $0.00 $0.00
81 PCF $0.00 $1,714.02 $12,024.58
82 PCF $0.00 $1,791.67 $4,279.28
83 PCF $451,500.00 $0.00 $451,500.00
84 PCF $314.83 $314.83 $944.49
85 PCF $0.00 $644.90 $1,934.70
86 PCF $0.00 $1,059.00 $7,426.01
87 PCF $70,137.50 $1,104.45 $77,868.65
88 PCF $0.00 $218.00 $872.00
89 PCF $0.00 $508.70 $3,052.20
90 PCF $0.00 $1,375.00 $1,375.00
91 PCF $0.00 $514.15 $514.15
92 PCF $0.00 $0.00 $0.00
93 PCF $0.00 $333.21 $333.21
94 PCF $0.00 $0.00 $0.00
95 PCF $18,686.00 $0.00 $18,686.00
96 PCF $0.00 $0.00 $0.00
97 PCF $0.00 $0.00 $0.00
98 PCF $0.00 $0.00 $0.00
99 PCF $0.00 $530.50 $3,183.00
100 PCF $0.00 $0.00 $0.00
101 PCF $0.00 $0.00 $0.00
102 PCF $0.00 $322.00 $1,610.00
103 PCF $61.94 $61.94 $247.76
$1,065,139.20 $58,273.19 $1,198,768.78
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE INITIAL TI/LC MONTHLY TI/LC CURRENT TI/LC INTEREST
LOAN NO. LOAN SELLER(1) ESCROW REQUIREMENT(14) ESCROW REQUIREMENT(15) ESCROW BALANCE(16) ACCRUAL METHOD
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 NM $0 $0.00 $0 Actual/Actual
2 PCF $0 $0.00 $0 Actual/360
3 PCF $200,000 $5,000.00 $210,000 Actual/360
4 JHREF $2,360,844 $0.00 $0 30/360
5 PCF $0 $0.00 $0 30/360
6 JHREF $0 $0.00 $0 30/360
7 PCF $100,000 $0.00 $100,000 30/360
8 NM $0 $0.00 $0 Actual/Actual
9 PCF $5,900 $5,900.00 $17,700 Actual/360
10 NM $0 $0.00 $0 Actual/Actual
11 JHREF $525,000 $0.00 $0 30/360
12 PCF $0 $0.00 $0 Actual/360
13 JHREF $125,000 $0.00 $125,000 30/360
14 JHREF $0 $0.00 $0 30/360
15 PCF $346,612 $5,000.00 $362,190 Actual/360
16 PCF $0 $2,951.00 $11,804 Actual/360
17 PCF $75,000 $0.00 $75,000 Actual/360
18 PCF $0 $0.00 $0 30/360
19 JHREF $0 $0.00 $0 30/360
20 JHREF $0 $0.00 $0 30/360
21 PCF $0 $0.00 $0 30/360
22 JHREF $1,122,829 $0.00 $1,127,985 30/360
23 JHREF $2,035,000 $0.00 $0 30/360
24 JHREF $0 $0.00 $0 30/360
25 PCF $157,225 $1,400.00 $158,625 Actual/360
26 JHREF $500,000 $0.00 $261,543 30/360
27 PCF $0 $0.00 $0 Actual/360
28 PCF $0 $10,417.00 $20,834 Actual/360
29 JHREF $0 $0.00 $0 30/360
30 PCF $0 $0.00 $0 Actual/360
31 JHREF $0 $0.00 $0 30/360
32 JHREF $0 $0.00 $0 30/360
33 PCF $530,000 $0.00 $0 Actual/360
34 PCF $0 $2,500.00 $2,500 Actual/360
35 PCF $0 $0.00 $0 30/360
36 JHREF $0 $0.00 $0 30/360
37 PCF $0 $0.00 $0 30/360
38 PCF $12,500 $12,500.00 $50,036 Actual/360
39 PCF $0 $0.00 $0 Actual/360
40 PCF $0 $0.00 $0 Actual/360
41 PCF $0 $12,000.00 $0 Actual/360
42 PCF $300,000 $2,500.00 $302,500 Actual/360
43 PCF $4,557 $4,556.50 $50,122 Actual/360
44 PCF $0 $0.00 $0 30/360
45 PCF $0 $0.00 $0 Actual/360
46 PCF $0 $0.00 $0 Actual/360
47 PCF $0 $5,375.00 $48,539 Actual/360
48 PCF $0 $0.00 $0 Actual/360
49 PCF $0 $0.00 $0 Actual/360
50 PCF $0 $16,000.00 $0 30/360
51 JHREF $325,000 $0.00 $0 30/360
52 PCF $0 $0.00 $0 Actual/360
53 PCF $0 $1,250.00 $2,500 Actual/360
54 PCF $0 $0.00 $0 Actual/360
55 PCF $353,000 $3,000.00 $356,000 Actual/360
56 JHREF $1,250 $1,250.00 $1,250 Actual/360
57 PCF $0 $0.00 $0 Actual/360
58 PCF $0 $1,000.00 $4,000 Actual/360
59 PCF $0 $0.00 $0 Actual/360
60 JHREF $0 $0.00 $0 30/360
61 PCF $0 $3,730.00 $11,190 Actual/360
62 PCF $100,000 $20,000.00 $0 Actual/360
63 PCF $0 $0.00 $0 Actual/360
64 PCF $0 $1,500.00 $9,009 Actual/360
65 JHREF $0 $0.00 $0 Actual/360
66 PCF $300,000 $0.00 $0 30/360
67 PCF $0 $2,085.00 $4,170 Actual/360
68 JHREF $0 $4,000.00 $0 30/360
69 PCF $0 $4,200.00 $12,600 Actual/360
70 JHREF $4,126 $4,126.02 $4,126 30/360
71 PCF $0 $0.00 $0 Actual/360
72 PCF $0 $2,200.00 $22,000 Actual/360
73 PCF $0 $0.00 $0 Actual/360
74 JHREF $0 $0.00 $0 30/360
75 PCF $0 $0.00 $0 Actual/360
76 PCF $0 $725.00 $1,450 Actual/360
77 PCF $0 $0.00 $0 Actual/360
78 PCF $0 $0.00 $0 Actual/360
79 PCF $0 $2,500.00 $0 Actual/360
80 PCF $0 $0.00 $0 Actual/360
81 PCF $0 $2,595.00 $18,205 Actual/360
82 PCF $0 $0.00 $0 Actual/360
83 PCF $0 $0.00 $0 Actual/360
84 PCF $787 $787.00 $2,361 Actual/360
85 PCF $0 $2,100.00 $6,300 Actual/360
86 PCF $0 $4,950.00 $34,711 Actual/360
87 PCF $0 $0.00 $0 Actual/360
88 PCF $0 $850.00 $3,400 Actual/360
89 PCF $0 $0.00 $0 Actual/360
90 PCF $0 $0.00 $0 Actual/360
91 PCF $0 $0.00 $0 Actual/360
92 PCF $0 $0.00 $0 Actual/360
93 PCF $0 $777.50 $778 Actual/360
94 PCF $25,300 $1,000.00 $1,000 Actual/360
95 PCF $0 $0.00 $0 Actual/360
96 PCF $0 $2,000.00 $8,000 Actual/360
97 PCF $0 $0.00 $0 Actual/360
98 PCF $0 $0.00 $0 Actual/360
99 PCF $0 $1,300.00 $7,800 Actual/360
100 PCF $0 $0.00 $0 Actual/360
101 PCF $30,000 $0.00 $0 Actual/360
102 PCF $0 $1,500.00 $0 Actual/360
103 PCF $250 $250.00 $1,000 Actual/360
$9,540,179.52 $155,775.02 $3,436,228.01
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT CODE(18)
MORTGAGE MORTGAGE ---------------------------------------------------------------------------------------------------
LOAN NO. LOAN SELLER(1) SEASONING(17) LO DEF DEF/YM1 YM2 YM1 YM0.75 OPEN
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 NM 27 58 58 4
2 PCF 6 30 86 4
3 PCF 2 26 90 4
4 JHREF 12 48 126 6
5 PCF 2 26 90 4
6 JHREF 79 120 117 3
7 PCF 1 25 91 4
8 NM 37 65 70 3
9 PCF 2 26 90 4
10 NM 55 67 60 58 2
11 JHREF 12 60 57 3
12 PCF 2 26 90 4
13 JHREF 21 48 68 4
14 JHREF 22 60 57 3
15 PCF 3 27 89 4
16 PCF 4 28 88 4
17 PCF 4 28 88 4
18 PCF 6 30 86 4
19 JHREF 38 60 57 3
20 JHREF 15 60 57 3
21 PCF 5 29 87 4
22 JHREF 4 36 81 3
23 JHREF 37 60 57 3
24 JHREF 32 60 57 3
25 PCF 1 25 91 4
26 JHREF 23 48 68 4
27 PCF 2 26 90 4
28 PCF 2 26 90 4
29 JHREF 2 60 57 3
30 PCF 1 25 91 4
31 JHREF 4 48 69 3
32 JHREF 1 60 57 3
33 PCF 0 24 92 4
34 PCF 1 25 91 4
35 PCF 2 26 90 4
36 JHREF 33 48 69 3
37 PCF 6 30 86 4
38 PCF 3 27 89 4
39 PCF 6 30 86 4
40 PCF 1 25 91 4
41 PCF 4 28 88 4
42 PCF 1 25 91 4
43 PCF 10 34 82 4
44 PCF 3 27 89 4
45 PCF 1 25 91 4
46 PCF 0 24 92 4
47 PCF 9 33 83 4
48 PCF 1 25 91 4
49 PCF 1 25 91 4
50 PCF 5 29 87 4
51 JHREF 7 60 57 3
52 PCF 6 30 86 4
53 PCF 2 26 90 4
54 PCF 6 30 86 4
55 PCF 1 25 91 4
56 JHREF 5 60 57 3
57 PCF 9 33 72 4
58 PCF 4 28 88 4
59 PCF 7 31 109 4
60 JHREF 7 60 57 3
61 PCF 3 27 89 4
62 PCF 3 27 89 4
63 PCF 4 28 88 4
64 PCF 6 30 86 4
65 JHREF 24 60 57 3
66 PCF 1 25 91 4
67 PCF 2 26 90 4
68 JHREF 2 60 57 3
69 PCF 3 27 89 4
70 JHREF 3 60 56 4
71 PCF 4 28 88 4
72 PCF 12 36 80 4
73 PCF 4 28 88 4
74 JHREF 7 60 57 3
75 PCF 3 27 89 4
76 PCF 2 26 90 4
77 PCF 6 30 86 4
78 PCF 4 28 88 4
79 PCF 7 31 85 4
80 PCF 6 30 86 4
81 PCF 7 31 85 4
82 PCF 7 31 85 4
83 PCF 2 26 90 4
84 PCF 2 26 90 4
85 PCF 3 27 89 4
86 PCF 7 31 85 4
87 PCF 7 31 85 4
88 PCF 4 28 88 4
89 PCF 6 30 86 4
90 PCF 1 25 91 4
91 PCF 1 25 91 4
92 PCF 4 28 88 4
93 PCF 7 31 85 4
94 PCF 1 25 91 4
95 PCF 2 26 90 4
96 PCF 4 28 88 4
97 PCF 1 25 91 4
98 PCF 7 31 85 4
99 PCF 6 30 86 4
100 PCF 6 30 86 4
101 PCF 3 27 89 4
102 PCF 5 29 87 4
103 PCF 3 27 89 4
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERSTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
MORTGAGE MORTGAGE YM ADMINISTRATIVE
LOAN NO. LOAN SELLER(1) FORMULA(19) COST RATE(20)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 NM A 4.27
2 PCF 6.27
3 PCF 6.27
4 JHREF B 11.27
5 PCF 6.27
6 JHREF C 11.27
7 PCF 6.27
8 NM D 4.27
9 PCF 6.27
10 NM E 4.27
11 JHREF B 11.27
12 PCF 6.27
13 JHREF F 11.27
14 JHREF G 11.27
15 PCF 6.27
16 PCF 6.27
17 PCF 6.27
18 PCF H 6.27
19 JHREF I 11.27
20 JHREF J 11.27
21 PCF 6.27
22 JHREF B 11.27
23 JHREF K 11.27
24 JHREF L 11.27
25 PCF 6.27
26 JHREF M 11.27
27 PCF 6.27
28 PCF 6.27
29 JHREF B 11.27
30 PCF 6.27
31 JHREF B 11.27
32 JHREF B 11.27
33 PCF 6.27
34 PCF 6.27
35 PCF 6.27
36 JHREF N 11.27
37 PCF 6.27
38 PCF 6.27
39 PCF H 6.27
40 PCF 6.27
41 PCF 6.27
42 PCF 6.27
43 PCF 6.27
44 PCF 6.27
45 PCF 6.27
46 PCF 6.27
47 PCF 6.27
48 PCF 6.27
49 PCF 6.27
50 PCF 6.27
51 JHREF B 11.27
52 PCF 6.27
53 PCF 6.27
54 PCF 6.27
55 PCF 6.27
56 JHREF B 11.27
57 PCF 6.27
58 PCF 6.27
59 PCF 6.27
60 JHREF B 11.27
61 PCF 6.27
62 PCF 6.27
63 PCF 6.27
64 PCF 6.27
65 JHREF B 11.27
66 PCF 6.27
67 PCF 6.27
68 JHREF B 11.27
69 PCF 6.27
70 JHREF B 11.27
71 PCF 6.27
72 PCF 6.27
73 PCF 6.27
74 JHREF B 11.27
75 PCF 6.27
76 PCF 6.27
77 PCF 6.27
78 PCF 6.27
79 PCF 6.27
80 PCF 6.27
81 PCF 6.27
82 PCF 6.27
83 PCF 6.27
84 PCF 6.27
85 PCF 6.27
86 PCF 6.27
87 PCF 6.27
88 PCF 6.27
89 PCF 6.27
90 PCF 6.27
91 PCF 6.27
92 PCF 6.27
93 PCF 6.27
94 PCF 6.27
95 PCF 6.27
96 PCF 6.27
97 PCF 6.27
98 PCF 6.27
99 PCF 6.27
100 PCF 6.27
101 PCF 6.27
102 PCF 6.27
103 PCF 6.27
</TABLE>
<PAGE>
FOOTNOTES TO APPENDIX II
1 "PCF", "JHREF" and "NM" denote Principal Commercial Funding, LLC, John
Hancock Real Estate Finance, Inc. and The Northwestern Mutual Life
Insurance Company, respectively, as Sellers.
2 In general for each property, "Percent Leased" was determined based on a
rent roll provided by the borrower. For the hospitality property, "Percent
Leased" was determined based on certain Operating Statements provided by
the Borrower. "Percent Leased as of Date" indicates the date as of which
"Percent Leased" was determined based on such information.
3 Mortgage Loan Nos. 38, Simmons Mattress Warehouse, 66, 155 Bellwood Drive
and 70, Premier Corporate Center II, are subject to a ground lease on the
subject properties. However, in each case, as the fee-owner has subjected
its interest to the mortgage, the loans are disclosed as fee loans.
4 The Cut-off Date is October 1, 2000 for any Mortgage Loan that has a due
date on the first day of each month. For purposes of the information
contained in this Term Sheet, we present the loans as if scheduled payments
due in October 2000 were due on October 1, 2000, not the actual day which
such scheduled payments were due. The Mortgage Loans generally have a due
date on the 1st of the month, except Mortgage Loan Nos. 17, Technicolor,
47, Stadium Towers Center and 96, Grand Prairie Tech Center, which are due
on the 3rd of the month, Mortgage Loan Nos. 78, East Ana Building and 85,
Lake Falls Professional Center, which are due on the 5th of the month, and
Mortgage Loan No. 8, Pinnacle at Squaw Peak, which is due on the 15th of
the month.
With respect to Mortgage Loan No. 6, The Pennsylvania Building, the
Borrower currently holds $4,500,000 in subordinate debt. Additionally, the
Borrower has the right to obtain additional secondary financing, secured by
the property, upon the satisfaction of certain conditions, which include
without limitation that upon the placement of the secondary financing the
property will have a combined maximum of $5,000,000 of secondary financing
and a combined minimum DSCR of 1.25x.
With respect to Mortgage Loan No. 19, Woodman Plaza, the borrower has
granted a second mortgage to the Small Business Administration (SBA) in the
original amount of $1.5 million. The terms for this subordinate loan
include an interest rate of 4% per annum, a monthly payment of $9,720 and a
20-year term. In addition, the borrower has granted a subordinate mortgage
to the Community Redevelopment Agency of the City of Los Angeles, CA
securing a loan of $250,000.
With respect to Mortgage Loan No. 70, Premier Corporate Center II, there is
an existing unsecured loan in the amount of $1,670,000 made by Frank L.
Ciminelli to the fee owner of the Mortgaged Property and evidenced by a
promissory note dated June 23, 1999. Frank L. Ciminelli is the guarantor of
the non-recourse carveouts and environmental indemnitor for the mortgage
loan with JHREF. Frank L. Ciminelli entered into a subordination and
standstill agreement with JHREF regarding this unsecured financing.
With respect to Mortgage Loan No. 13, Loehmann's Five Points Plaza, the
Borrower has a one time right to obtain additional secondary financing,
secured by the property, upon the satisfaction of certain conditions, which
include without limitation that upon the placement of the secondary
financing the property will have a combined minimum DSCR of 1.35x.
With respect to Mortgage Loan No. 24, Frederick Shopping Center, the
Borrower has the right to obtain additional secondary financing, secured by
the property, upon the satisfaction of certain conditions, which include
without limitation that upon the placement of the secondary financing the
property will have a combined minimum DSCR of 1.30x.
With respect to Mortgage Loan Nos. 1, Towers at Portside, 4, 825 Seventh
Avenue, 8, Pinnacle at Squaw Peak, 10, Cross Creek Retail, 11, 1020 19th
Street, 14, Laurel 1 & 3, 22, Corporate Centre Shepherd, 23, Galena
Junction Shopping Center, 26, Three Garrett Mountain, 36, 30 Federal
Street, 65, Comfort Inn and 70, Premier Corporate Center II, the Borrower
currently has or has the right in the future to obtain secondary financing,
not secured by the property.
With respect to Mortgage Loan No. 21, 1667 Plymouth Street, the Borrower
has assigned to Lender directly and absolutely the proceeds in the event
Borrower is entitled to draw upon the Cash Deposit of $165,000 or Letter of
Credit of $825,000, in whole or in part, in accordance with the terms of
the ACTA lease. Borrower shall deliver the proceeds to the Lender upon such
receipt.
With respect to Mortgage Loan Nos. 30, Southview II Industrial Park, and
45, Southview I Industrial Park, within 90 days of the closing (which
occurred on August 15, 2000), the borrower may transfer the property to an
entity controlled by the Crow Family Holdings Industrial Limited
Partnership, provided that the purchaser assumes the obligations under the
loan documents, lender approves the purchaser and a 0.25% assumption fee is
paid to the lender.
5 The "First Payment Date" represents the date of the first payment of
principal and interest, except for Mortgage Loan Nos. 8, Pinnacle at Squaw
Peak, 10, Cross Creek Retail, 18, Latitudes at the Moors, 19, Woodman
Plaza, and 22, Corporate Center Shepherd, for which the identified dates
represent the date of the first full payment of interest only for each
Mortgage Loan. However, Mortgage Loan Nos. 8, 10 and 19 since began making
principal and interest payments on 10/15/1999, 1/1/1997 and 9/1/1998,
respectively.
II-1
<PAGE>
FOOTNOTES TO APPENDIX II
6 The "Original Amort. 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 for such loans
will be longer.
7 The following Mortgage Loans currently require monthly payments of
interest-only (I/O) until they begin to amortize according to the below
schedule; the indicated DSCR for such loans reflects current scheduled
payments of interest-only:
<TABLE>
<CAPTION>
Mortgage
Loan
No. Property Name Start Date of P & I Monthly Debt Service Amortization Term Basis
----------- ------------------------------------- ----------------------- ------------------------ ----------------------------
<S> <C> <C> <C> <C>
18 Latitudes at the Moors 5/1/2007 $81,324.41 360
22 Corporate Center Shepherd 7/1/2001 $81,354.63 360
</TABLE>
8 "Largest Tenant" refers to the tenant that represents the greatest
percentage of the total square footage at the subject property, "Second
Largest Tenant" refers to the tenant that represents the second greatest
percentage of the total square footage and "Third Largest Tenant" refers to
the tenant that represents the third greatest percentage of the total
square footage at the subject property.
9 For "Capital Expenditure Escrow Required" identified as "Yes," collections
may occur at one-time or be ongoing. In certain instances, the amount of
the escrow may be capped or collected only for certain periods of such
Mortgage Loan and/or may not be replenished after a release of funds.
10 For "TI/LC Escrow Required" identified as "Yes," collections may occur at
one-time or be ongoing. The weighted average percentage of Mortgaged Loans
disclosed as having TI/LC cash or letter of credit balances in place
considers only Mortgage Loans on commercial-type properties, excluding
multifamily, assisted living, mobile home park, hospitality and self
storage Mortgage Loans.
11 "Initial Capital Expenditures Escrow Requirement" indicates the amount or,
in certain cases, a letter of credit amount, deposited at loan closing.
12 "Monthly Capital Expenditure Escrow Requirement" indicates the monthly
amount designated for Capital Expenditure Escrow in the loan documents for
such Mortgage Loan (see Footnote 11 above). In certain instances, the
amount of the escrow may be capped or collected only for certain periods of
time, including Mortgage Loans Nos. 62, Warner Bros. Publications
Warehouse, and 89, Cloverleaf Business Park Building. With respect to
Mortgage Loan No. 81, Delivery Point Services, the Monthly Capital
Expenditure Escrow Requirement may decrease to $918.23 per month once the
borrower has replaced chillers and cooling towers, as described in the
physical condition report by EMG.
13 "Current Capital Expenditure Escrow Balance" indicates the balance or, in
certain cases, a letter of credit, in place as of the October, 2000 due
dates for PCF-originated Mortgage Loans, and as of August 5, 2000 for
JHREF-originated Mortgage Loans. In certain cases, the balances include
collections for deferred maintenance.
14 "Initial TI/LC Escrow Requirement" indicates the amount or, in certain
cases, a letter of credit balance, deposited at loan closing.
15 "Monthly TI/LC Escrow Requirement" indicates the monthly amount designated
for Tenant Improvements and Leasing Commissions Escrow in the loan
documents for such Mortgage Loan (see Footnote 10 above). In certain
instances, the amount of the escrow may be capped or collected only for
certain periods of time or under certain conditions, including Mortgage
Loan Nos. 3, Southridge Woods Apartment Complex, 9, Marigold Center, 38,
Simmons Mattress Warehouse, 41, Moen Building, 50, American Freightways,
53, The Eisner Building, 61, Bryan Dairy Center, 62, Warner Bros.
Publications Warehouse, 64, TUSA Headquarters, 67, West Bench Plaza, 68,
801 Hanna Drive, 69, Ocean Office, 76, Brookside Station Shopping Center,
79, Stanford Telecommunications, 84, Squirrel Hill, 85, Lake Falls
Professional Center, 86, Lake Center, 88, Fry's Vineyard Shoppes, 96, Grand
Prairie Tech Center and 102, 295 New Road. With respect to Mortgage Loan
No. 28, Stewart & Stevenson Building, the monthly TI/LC escrow may be
reduced from $10,417/month to $6,250/month upon receipt of a fully executed
lease extension from Stewart & Stevenson Services, Inc. at specified terms.
With respect to Mortgage Loan No. 95, Coorstek/Tetrafluor, the Borrower
shall place any Extraordinary Rental Payments in escrow with Lender
immediately upon Borrower's receipt of any such payments, which shall be
used to cover the costs of TI/LCs. With respect to Mortgage Loan No. 99,
Atlee Commerce Center I, the ongoing monthly escrow of $1,300 will be
reduced on 4/1/2005 to $900 on a monthly basis through maturity.
16 "Current TI/LC Escrow Balance" indicates the balance or, in certain cases,
a letter of credit, in place as of the October, 2000 due dates for
PCF-originated Mortgage Loans, and as of August 5, 2000 for
JHREF-originated Mortgage Loans.
17 "Seasoning" represents the number of months elapsed from the "First Payment
Date" to the Cut-off Date.
18 The "Prepayment Code" includes the number of loan payments from the first
Due Date to the stated maturity. "LO" represents the lockout period. "DEF"
represents defeasance. "DEF/YM1" represents either defeasance or the
greater of yield maintenance and 1%. "YM2" represents the greater of yield
maintenance and 2%. "YM1" represents the greater of yield maintenance and
1%. "YM0.75" represents the greater of yield maintenance and 0.75%. "Open"
represents the number of payments, including the maturity date, at which
principal prepayments are permitted without payment of a prepayment
premium. For each Mortgage Loan, the number set forth under a category of
"Prepayment Code" represents the number of payments in the Original Term to
Maturity for which such provision applies. See Footnote 21 for additional
prepayment information.
II-2
<PAGE>
FOOTNOTES TO APPENDIX II
19 Mortgage Loans with associated Yield Maintenance Prepayment Premiums are
categorized according to unique Yield Maintenance formulas. There are 14
different Yield Maintenance formulas represented by the loans in the
subject Mortgage Loan pool. The different formulas are reference by the
letters "A", "B", "C", "D", "E", "F", "G", "H", "I", "J", "K", "L", "M" and
"N". Summaries for the 14 formulas are listed beginning on page II-10.
20 The "Administrative Cost Rate" indicated for each Mortgage Loan will be
calculated based on the same interest accrual method applicable to each
Mortgage Loan.
21 Each of the following Mortgage Loans is structured with a performance
holdback or letter of credit ("LOC") subject to achievement of certain
release conditions. The amount of the holdback was escrowed, or the letter
of credit was established, for each Mortgage Loan at closing. Although
Mortgage Loan Nos. 3, 7, 9, 15, 17, 25, 33, 38, 42, 43, 48, 52, 53, 55, 59,
62, 66, 72 and 101 have certain escrows or LOCs that do not have defined
Outside Dates for Release, their loan balances may be prepaid if the
associated conditions are not achieved per agreement terms, or upon an
event of default. Although generally the Mortgage Loans prohibit voluntary
partial prepayment, the following Mortgage Loans may require partial
prepayments:
<TABLE>
<CAPTION>
Escrowed
Holdback or
Mtg. Letter of Prepayment
Loan Credit Initial Outside Date Premium
No. Property Name Release Conditions Amount for Release Provisions
------- -------------------- ------------------------------------------------ ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
3 Twin County Borrower furnishes to Lender written $200,000 N/A Yield
Building disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has been
completed in accordance with all permits,
bonds, licenses, approvals required by law,
an architect's certificate, a fully executed
lease(s) acceptable to Lender and lessee's
estoppel certificate. Lender has inspected
or waived right to inspection. Borrower will
furnish the agreement with the broker/agent
and an estoppel certificate(s) for Leasing
Commissions.
Borrower shall furnish evidence of case $187,500 N/A Yield
closure by New Jersey Department of Maintenance
Environmental Protection (I.e. No further
Action Letter, Negative Declaration, etc.).
7 Affinity Office Borrower furnishes to Lender written $100,000 N/A Yield
Building disbursement request, lien waivers, Maintenance
title endorsement, evidence that the work
has been completed in accordance with all
permits, bonds, licenses, approvals required
by law, an architect's certificate, a fully
executed lease(s) acceptable to Lender for
the space occupied by Safety Kleen for a
term of not less than 5 years and at a rate
averaging at least $14 per square foot,
lessee's estoppel certificate and
certificate of occupancy. Lender has
inspected or waived right to inspection.
Borrower will furnish the agreement with the
broker/agent and an estoppel certificate(s)
for Leasing Commissions.
II-3
<PAGE>
FOOTNOTES TO APPENDIX II
<CAPTION>
Escrowed
Holdback or
Mtg. Letter of Prepayment
Loan Credit Initial Outside Date Premium
No. Property Name Release Conditions Amount for Release Provisions
------- -------------------- ------------------------------------------------ ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
9 Marigold Center Borrower furnishes to Lender written $5,900 N/A Yield
disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has been
completed in accordance with all permits,
bonds, licenses, approvals required by law,
an architect's certificate, a fully executed
lease(s) acceptable to Lender and lessee's
estoppel certificate. Lender has inspected
or waived right to inspection. Borrower will
furnish the agreement with the broker/agent
and an estoppel certificate(s) for Leasing
Commissions.
15 Crossroads I Borrower furnishes to Lender written $346,612 N/A Yield
Office Building disbursement request, lien waivers, Maintenance
title endorsement, evidence that the work
has been completed in accordance with all
permits, bonds, licenses, approvals required
by law, an architect's certificate, a fully
executed lease(s) acceptable to Lender,
lessee's estoppel certificate and Lucent
Technology has taken occupancy and commenced
paying rent. Lender has inspected or waived
right to inspection. Borrower will furnish
the agreement with the broker/agent and an
estoppel certificate(s) for Leasing
Commissions.
17 Technicolor Borrower furnishes to Lender written $75,000 N/A Yield
disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has been
completed in accordance with all permits,
bonds, licenses, approvals required by law,
an architect's certificate, fully executed
lease(s) acceptable to Lender, lessee's
estoppel certificate and a certificate of
occupancy. Lender has inspected or waived
right to inspection.
25 Covina Marketplace Borrower furnishes to Lender written $71,500 8/1/2001 Yield
disbursement request, lien waivers, title Maintenance
endorsement, evidence that the Remediation
Work has been completed in accordance with
all permits, bonds, licenses, approvals
required by law, and a statement from an
architect, contractor or engineering
consultant as to the cost of the Remediation
Work. Lender has inspected or waived right
to inspection.
II-4
<PAGE>
FOOTNOTES TO APPENDIX II
<CAPTION>
Escrowed
Holdback or
Mtg. Letter of Prepayment
Loan Credit Initial Outside Date Premium
No. Property Name Release Conditions Amount for Release Provisions
------- -------------------- ------------------------------------------------ ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
25 Covina Marketplace Borrower furnishes to Lender written $157,225 N/A Yield
(continued) disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has been
completed in accordance with all permits,
bonds, licenses, approvals required by law,
an architect's certificate, a fully executed
lease(s) acceptable to Lender and lessee's
estoppel certificate. For Improvements over
$25,000 per tenant, Lender has inspected or
waived right to inspection. Borrower will
furnish the agreement with the broker/agent
and an estoppel certificate(s) for Leasing
Commissions.
28 Stewart & Borrower furnishes to Lender written $25,000 12/1/2001 Yield
Stevenson Building disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has
been completed in accordance with all
permits, bonds, licenses, approvals
required by law, and an architect's
certificate. Lender has inspected or waived
right to inspection.
33 Sky Park I & II Letter of Credit can be released all or in $530,000 N/A Yield
part upon inspection and approval of tenant Maintenance
improvements, cost certification from
an architect, contractor or engineering
consultant, title endorsement, lien waivers,
property occupancy equaling 95%, DSCR being
equal to or exceeding 1.20x, approval of
leases by Lender, receipt of certificate of
occupancy, and statement from broker for
leasing commissions.
38 Simmons Mattress Borrower furnishes to Lender written $12,500 N/A Yield
Warehouse disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has
been completed in accordance with all
permits, bonds, licenses, approvals
required by law, an architect's
certificate, a fully executed lease(s)
acceptable to Lender and lessee's estoppel
certificate. Lender has inspected or waived
right to inspection. Borrower will furnish
the agreement with the broker/agent and an
estoppel certificate(s) for Leasing
Commissions.
39 Jerry Leigh Borrower furnishes to Lender written $62,500 11/1/2000 Yield
Building disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has
been completed in accordance with all
permits, bonds, licenses, approvals
required by law, an architect's certificate
and a copy of certificate of occupancy.
Lender has inspected or waived right to
inspection.
II-5
<PAGE>
FOOTNOTES TO APPENDIX II
<CAPTION>
Escrowed
Holdback or
Mtg. Letter of Prepayment
Loan Credit Initial Outside Date Premium
No. Property Name Release Conditions Amount for Release Provisions
------- -------------------- ------------------------------------------------ ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
42 Spalding Woods Borrower furnishes to Lender written $16,187 7/1/2001 Yield
Village Shopping disbursement request, lien waivers, title Maintenance
Center endorsement, evidence that the work has been
completed in accordance with all permits,
bonds, licenses, approvals required by law,
and an architect's certificate. Lender has
inspected or waived right to inspection.
Borrower furnishes to Lender written $300,000 N/A Yield
disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has
been completed in accordance with all
permits, bonds, licenses, approvals
required by law, an architect's
certificate, a fully executed lease(s)
acceptable to Lender and lessee's estoppel
certificate. Lender has inspected or waived
right to inspection. Borrower will furnish
the agreement with the broker/agent and an
estoppel certificate(s) for Leasing
Commissions.
43 Quantum Place In connection to Tenant Improvements, Borrower $4,557 N/A Yield
furnishes to Lender written disbursement Maintenance
request, lien waivers, title endorsement,
evidence that the work has been completed in
accordance with all permits, bonds,
licenses, approvals required by law,
architect's certificate, fully executed
leases, lessee's estoppel certificate(s) and
a certificate of occupancy. Leasing
commissions, require Borrower to furnish
Lender a copy of the agreement with broker
or agent and estoppel certificate. Lender
has inspected or waived right to inspection.
Borrower furnishes to Lender written $2,278 N/A Yield
disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has been
completed in accordance with al permits,
bonds, licenses, approvals required by law,
and an architect's certificate. Lender has
inspected or waived right to inspection.
47 Stadium Towers Borrower furnishes to Lender written $37,383 12/1/2000 Yield
Center disbursement request, lien waivers, title Maintenance
endorsement, estoppel certificate(s),
Lender's receipt of a certificate of
occupancy and proof that consecutive
monthly rental payments have commenced.
48 Meadow View Village Borrower provides proof that the Premises is $200,000 N/A Yield
at least 90% leased by leases approved by the Maintenance
Lender, the annual Net Operating Income
equals or exceeds 1.25 times the annual debt
service, the Lender has received lessee's
estoppels from the tenants, and it is after
June 30, 2005. Escrowed
II-6
<PAGE>
FOOTNOTES TO APPENDIX II
<CAPTION>
Escrowed
Holdback or
Mtg. Letter of Prepayment
Loan Credit Initial Outside Date Premium
No. Property Name Release Conditions Amount for Release Provisions
------- -------------------- ------------------------------------------------ ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
52 Neptune City Borrower furnishes written disbursement $125,000 N/A Yield
Shopping Center request, lien waivers for environmental Maintenance
monitoring, title endorsements, a written
report from Birdsall Engineering, Inc.,
evidence that the work has been completed,
paid invoices and applicable reports, and a
Negative Declaration or a No Further Action
Letter. Lender has inspected or waived
right to inspection.
53 The Eisner Building Borrower furnishes Lender with written $49,450 N/A Yield
disbursement request, lien waivers for Maintenance
completed tenant improvements for Salomon
Smith Barney Inc., lessee's estoppel
certificate for the improved space, the
lessee's unconditional acceptance of the
improvements and commencement of monthly
rental payments.
55 Applied Borrower furnishes to Lender written $3,000 N/A Yield
Communications disbursement request, lien waivers, title Maintenance
Building endorsement, evidence that the work has been
completed in accordance with all permits,
bonds, licenses, approvals required by law,
an architect's certificate, a fully executed
lease(s) acceptable to Lender and lessee's
estoppel certificate. Lender has inspected
or waived right to inspection. Borrower will
furnish the agreement with the broker/agent
and an estoppel certificate(s) for Leasing
Commissions.
Borrower furnishes to Lender written $1,667 N/A Yield
disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has been
completed in accordance with all permits,
bonds, licenses, approvals required by law,
and an architect's certificate. Lender has
inspected or waived right to inspection.
As it relates to Tenant Improvements and $350,000 N/A Yield
Leasing Commissions for Applied Maintenance
Communications, Inc., Borrower furnishes to
Lender written disbursement request, lien
waivers, title endorsement, evidence that
the work has been completed in accordance
with all permits, bonds, licenses, approvals
required by law, an architect's certificate,
a fully executed lease(s) acceptable to
Lender and lessee's estoppel certificate.
Lender has inspected or waived right to
inspection. Borrower will furnish the
agreement with the broker/agent and an
estoppel certificate(s) for Leasing
Commissions.
II-7
<PAGE>
FOOTNOTES TO APPENDIX II
<CAPTION>
Escrowed
Holdback or
Mtg. Letter of Prepayment
Loan Credit Initial Outside Date Premium
No. Property Name Release Conditions Amount for Release Provisions
------- -------------------- ------------------------------------------------ ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
59 Room & Board Store Borrower furnishes to Lender written $70,300 2/1/2001 Yield
disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has been
completed in accordance with all permits,
bonds, licenses, approvals required by law,
and an architect's certificate. Lender has
inspected or waived right to inspection.
Letter of Credit to be held as additional $50,000 N/A Yield
collateral for the term of the mortgage. Maintenance
62 Warner Bros. Borrower furnishes to Lender written $100,000 N/A Yield
Publications disbursement request, lien waivers, title Maintenance
Warehouse endorsement, evidence that the work has been
completed in accordance with all permits,
bonds, licenses, approvals required by law,
an architect's certificate, fully executed
lease(s) acceptable to Lender for the
entire space occupied by Warner Bros.
Publications, lessee's estoppel certificate
and a certificate of occupancy. Lender has
inspected or waived right to inspection.
66 155 Bellwood Drive Letter of Credit to be held as additional $300,000 N/A Yield
collateral for the term of the mortgage for Maintenance
tenant improvements and leasing commissions.
72 Hilltop Ridge Borrower furnishes to Lender written $69,510 N/A Yield
Corporate Center disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has
been completed in accordance with all
permits, bonds, licenses, approvals
required by law, and an architect's
certificate. Lender has inspected or waived
right to inspection.
83 Mischer Building Borrower furnishes to Lender written $451,500 12/1/2001 Yield
disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has
been completed in accordance with all
permits, bonds, licenses, approvals
required by law, and an architect's
certificate. Lender has inspected or waived
right to inspection.
87 Federated Warehouse Borrower furnishes to Lender written $70,138 3/1/2001 Yield
disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has
been completed in accordance with all
permits, bonds, licenses, approvals
required by law, and an architect's
certificate. Lender has inspected or waived
right to inspection.
II-8
<PAGE>
FOOTNOTES TO APPENDIX II
<CAPTION>
Escrowed
Holdback or
Mtg. Letter of Prepayment
Loan Credit Initial Outside Date Premium
No. Property Name Release Conditions Amount for Release Provisions
------- -------------------- ------------------------------------------------ ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
94 Carolina Commerce Borrower furnishes to Lender written $25,300 1/1/2001 Yield
Center disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has
been completed in accordance with all
permits, bonds, licenses, approvals
required by law, an architect's
certificate, and lessee's estoppel
certificate from Adkin's Paving and
Grading. Lender has inspected or waived
right to inspection. Borrower will furnish
the agreement with the broker/agent and an
estoppel certificate(s) for Leasing
Commissions.
95 Coorstek/ Borrower furnishes to Lender written $18,686 7/31/2001 Yield
Tetrafluor disbursement request, lien waivers, title Maintenance
endorsement, evidence that the work has
been completed in accordance with all
permits, bonds, licenses, approvals
required by law, and an architect's
certificate. Lender has inspected or waived
right to inspection.
101 Jonesboro Village Letter of Credit to be held as additional $30,000 N/A Yield
Shopping Center collateral for the term of the mortgage. Maintenance
</TABLE>
Mortgage Loan Nos. 30, Southview II Industrial Park, and 45, Southview I
Industrial Park, allow for a future Letter of Credit ("LOC") if the
Borrower terminates any lease. The amount of each LOC will be dependent
on the respective DSCR excluding the terminated lease. Such LOC may be
released upon the satisfaction of certain conditions, including the
re-leasing of the associated space at market rental rates with a term of
not less than three years, along with receipt of fully executed lease
and estoppel from the tenant. If such conditions are not met, the LOC
may be used to pay down the loan with a yield maintenance premium.
All yield maintenance premiums indicated above are to be paid by the
Borrower.
II-9
<PAGE>
FOOTNOTES TO APPENDIX II
A Borrower shall have the right, upon ten (10) days advance written
notice, beginning June 1, 2003 of paying this note in full with a
prepayment fee. This fee represents consideration to Lender for loss of
yield and reinvestment costs. The fee shall be the greater of Yield
Maintenance or 0.75% of the outstanding principal balance of this note.
As used herein, "Yield Maintenance" means the amount, if any, by which
(i) the present value of the Then Remaining Payments (as hereinafter
defined) calculated using a periodic discount rate (corresponding
to the payment frequency under this note) which, when compounded
for such number of payment periods in a year, equals the sum of
0.25% and the per annum effective yield of the Most Recently
Auctioned United States Treasury Obligation having a maturity
date equal to the Maturity Date (or, if there is no such equal
maturity date, then the linearly interpolated per annum effective
yield of the two Most Recently Auctioned United States Treasury
Obligations having maturity dates most nearly equivalent to the
Maturity Date) as reported by The Wall Street Journal five
business days prior to the date of prepayment; exceeds
(ii) the outstanding principal balance of this note (exclusive of all
accrued interest).
If such United States Treasury obligation yields shall not be reported
as of such time or the yields reported as of such time shall not be
ascertainable, then the periodic discount rate shall be equal to the sum
of 0.25% and the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported, as of
five business days preceding the prepayment date, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded United States Treasury obligations having a constant
maturity most nearly equivalent to the Maturity Date.
As used herein, "Then Remaining Payments" means payments in such amounts
and at such times as would have been payable subsequent to the date of
such prepayment in accordance with the terms of this note.
As used herein, "Most Recently Auctioned United States Treasury
Obligations" means the U.S. Treasury bonds, notes and bills with
maturities of 30 years, 10 years, 5 years, 3 years, 2 years and 1 year
which, as of the date the prepayment fee is calculated, were most
recently auctioned by the United States Treasury.
Upon the occurrence of an Event of Default (as defined in the Lien
Instrument) followed by the acceleration of the whole indebtedness
evidenced by this note, the payment of such indebtedness will constitute
an evasion of the prepayment terms hereunder and be deemed to be a
voluntary prepayment hereof and such payment will, therefore, to the
extent not prohibited by law, include the prepayment fee required under
the prepayment in full privilege recited above or, if such prepayment
occurs prior to June 1, 2003 and results from an Event of Default
followed by an acceleration of the whole indebtedness, then such payment
will, to the extent not prohibited by law, include a prepayment fee
equal to the greater of Yield Maintenance or 6% of the outstanding
principal balance of this note.
Notwithstanding the above, this note may be prepaid in full at any time,
without a prepayment fee, during the last one hundred twenty (120) days
of the term of this note.
II-10
<PAGE>
FOOTNOTES TO APPENDIX II
B
Prepayment. Except as provided below, Maker may not prepay the loan in
whole or in part.
On or after the end of the 5th* Loan Year (as hereinafter defined), on
any scheduled payment date and subject to giving Payee not less than thirty
(30) nor more than ninety (90) days' prior written notice specifying the
scheduled payment date on which prepayment is to be made (the "Prepayment
Date"), Maker may prepay the entire principal amount together with any and
all accrued interest and other sums due under the Loan Documents, and
subject to payment of a prepayment premium equal to the greater of:
(a) the positive amount, if any, equal to (i) the sum of the present
values of all scheduled payments due under the Note from the
Prepayment Date to and including the Maturity Date, minus (ii)
the principal balance of the Note immediately prior to such
prepayment; or
(b) 1% of the principal balance of the Note immediately prior to
such prepayment.
All present values shall be calculated as of the Prepayment Date,
using a discount rate, compounded monthly, equal to the yield rate,
converted to its monthly equivalent, of the United States Treasury Security
having the closest maturity date to the Maturity Date of the Note as
established in the Wall Street Journal or other business publication of
general circulation five (5) business days before the Prepayment Date.
In the event that the yield rate on publicly traded United States
Treasury Securities is not obtainable, then the nearest equivalent issue or
index shall be selected, at Payee's reasonable determination, and used to
calculate the prepayment premium.
The loan will be open to prepayment without premium during the last
90** days of the term of the loan.
If any notice of prepayment is given, the principal balance of the
loan and the other sums required pursuant to this Section 2 shall be due
and payable on the Prepayment Date, unless Maker provides written notice to
Payee that it is revoking said prepayment notice no later than five (5)
business days prior to the Prepayment Date.
Provided no default exists under the Loan Documents, the above premium
shall not be applicable to a prepayment resulting from Payee's election to
require insurance loss proceeds or condemnation awards to be applied to a
payment of principal.
No partial prepayment shall be allowed.***
The Loan Year is defined as any twelve month period commencing with the
date on which the first monthly installment is due or any anniversary
thereof.
* With respect to Mortgage Loan No. 31, Manor at Steeplechase, the
loan year is 4.
With respect to Mortgage Loan No. 22, Corporate Center Shepherd,
the loan year is 3.
** With respect to Mortgage Loan No. 70, Premier Corporate Center,
the loan will be open for 120 days.
*** With respect to Mortgage Loan No. 65, Comfort Inn, no partial
prepayment shall be allowed, except to the extent such partial
prepayment is the result of Payee's election to require insurance
loss proceeds or condemnation awards to be applied to the Debt in
accordance with the terms and provisions of the Deed of Trust.
II-11
<PAGE>
FOOTNOTES TO APPENDIX II
C (A) On any Installment Payment Date on or after April 1, 2004, or on
the first day of any month prior thereto but only as provided in subsection
(y) of section 1.3(A) of the Mortgage, upon not less than 30 nor more than
90 days' prior written notice to the Payee, the Maker may, at its option,
prepay the entire, (but not less than the entire) aggregate principal
amount of this Note and all other notes held by Payee and secured by the
Mortgage (this Note and all such other notes being referred to hereinafter
collectively as the "Notes"), at the principal amount so prepaid, together
with unpaid interest on the Notes accrued to the date fixed for such
prepayment, plus a premium, unless all or any part of the principal of the
Notes has become due and payable by declaration or acceleration following
an Event of Default in which event the premium shall be as provided in
subsection (B), equal to the greater of:
(a) the product obtained by multiplying (x) the difference
obtained by subtracting from 9.4301% the yield rate on publicly traded
United States Treasury Securities having the closest matching maturity
date to the maturity date of the Notes, as such yield rate is reported
in the Wall Street Journal or similar business publication of general
circulation on the fifth business day preceding the prepayment date
or, if no yield rate on publicly traded United States Treasury
Securities is obtainable, at the yield rate of the issue most closely
equivalent to such United States Treasury Securities, as determined by
Payee in its reasonable discretion and (y) the number of years and
fraction thereof remaining between the prepayment date and the
scheduled maturity date of the Notes and (z) the amount of the then
outstanding principal balance of the Notes;. and
(b) 1% of the then outstanding principal balance of the Notes.
In addition, on the first day of any of the final three months before
maturity of the Notes, upon not less than 30 days' prior written notice,
Maker may prepay the entire (but not less than the entire) aggregate
principal amount of the Notes at the time outstanding at the principal
amount so prepaid, together with unpaid interest on the Notes accrued to
the date fixed for such prepayment and together with all other sums due
under the Mortgage and all other documents evidencing or securing the Notes
or otherwise pertaining thereto, without premium, unless Payee has
accelerated following an Event of Default as provided below.
The entire unpaid and outstanding aggregate principal amount of the
Notes shall mature and become due and payable on the date fixed for
prepayment, together with the applicable premium and interest accrued and
unpaid on such date and together with such other sums payable as provided
in the preceding paragraph.
II-12
<PAGE>
FOOTNOTES TO APPENDIX II
D Borrower shall have the right, upon thirty (30) days advance written
notice, beginning March 15, 2003 of paying this note in full with a
prepayment fee. This fee represents consideration to Lender for loss of
yield and reinvestment costs. The fee shall be the greater of Modified
Yield Maintenance or 1% of the outstanding principal balance of this
note.
As used herein, "Modified Yield Maintenance" means the amount, if any,
by which
(i) the present value of the Then Remaining Payments (as hereinafter
defined) calculated using a periodic discount rate (corresponding
to the payment frequency under this note) which, when compounded
for such number of payment periods in a year, equals the sum of
.50% and the per annum effective yield of the Most Recently
Auctioned United States Treasury Obligation having a maturity
date equal to the Maturity Date (or, if there is no such equal
maturity date, then the linearly interpolated per annum effective
yield of the two Most Recently Auctioned United States Treasury
Obligations having maturity dates most nearly equivalent to the
Maturity Date) as reported by The Wall Street Journal five
business days prior to the date of prepayment; exceeds
(ii) the outstanding principal balance of this note (exclusive of all
accrued interest).
If such United States Treasury obligation yields shall not be reported
as of such time or the yields reported as of such time shall not be
ascertainable, then the periodic discount rate shall be equal to the sum
of .50% and the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported, as of
five business days preceding the prepayment date, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded United States Treasury obligations having a constant
maturity most nearly equivalent to the Maturity Date.
As used herein, "Then Remaining Payments" means payments in such amounts
and at such times as would have been payable subsequent to the date of
such prepayment in accordance with the terms of this note.
As used herein, "Most Recently Auctioned United States Treasury
Obligations" means the U.S. Treasury bonds, notes and bills with
maturities of 30 years, 10 years, 5 years, 3 years, 2 years and 1 year
which, as of the date the prepayment fee is calculated, were most
recently auctioned by the United States Treasury.
Upon the occurrence of an Event of Default (as defined in the Lien
Instrument) followed by the acceleration of the whole indebtedness
evidenced by this note, the payment of such indebtedness will constitute
an evasion of the prepayment terms hereunder and be deemed to be a
voluntary prepayment hereof and such payment will, therefore, to the
extent not prohibited by law, include the prepayment fee required under
the prepayment in full privilege recited above or, if such prepayment
occurs prior to March 15, 2003 and results from an Event of Default
followed by an acceleration of the whole indebtedness, then such payment
will, to the extent not prohibited by law, include a prepayment fee
equal to the greater of Modified Yield Maintenance or 6% of the
outstanding principal balance of this note.
Notwithstanding the above and provided Borrower is not in default under
any provision contained in the Loan Documents (as defined in the Lien
Instrument), this note may be prepaid in full at any time, without a
prepayment fee, during the last ninety (90) days of the term of this
note.
II-13
<PAGE>
FOOTNOTES TO APPENDIX II
E Borrower shall have the right, upon thirty (30) days advance written
notice, beginning November 1, 2001 of paying this note in full with a
prepayment fee. This fee represents consideration to Lender for loss of
yield and reinvestment costs. The fee shall be the greater of Yield
Maintenance or 2% of the outstanding principal balance of this note
until November 1, 2006 and shall be the greater of Yield Maintenance or
1% of the outstanding principal balance of this note thereafter.
As used herein, "Yield Maintenance" means the amount, if any, by which
(i) the present value of the Then Remaining Payments (as hereinafter
defined) calculated using a periodic discount rate (corresponding
to the payment frequency under this note) which, when compounded
for such number of payment periods in a year, equals the sum of
.50% and the per annum effective yield of the Most Recently
Auctioned United States Treasury Obligation having a maturity
date equal to the Maturity Date (or, if there is no such equal
maturity date, then the linearly interpolated per annum effective
yield of the two Most Recently Auctioned United States Treasury
Obligations having maturity dates most nearly equivalent to the
Maturity Date) as reported by The Wall Street Journal five
business days prior to the date of prepayment; exceeds
(ii) the outstanding principal balance of this note (exclusive of all
accrued interest).
If such United States Treasury obligation yields shall not be reported as
of such time or the yields reported as of such time shall not be
ascertainable, then the periodic discount rate shall be equal to the sum of
.50% and the Treasury Constant Maturity Series yields reported, for the
latest day for which such yields shall have been so reported, as of five
business days preceding the prepayment date, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for actively
traded United States Treasury obligations having a constant maturity most
nearly equivalent to the Maturity Date.
As used herein, "Then Remaining Payments" means payments in such amounts
and at such times as would have been payable subsequent to the date of such
prepayment in accordance with the terms of this note.
As used herein, "Most Recently Auctioned United States Treasury
Obligations" means the U.S. Treasury bonds, notes and bills with maturities
of 30 years, 10 years, 5 years, 3 years, 2 years and 1 year which, as of
the date the prepayment fee is calculated, were most recently auctioned by
the United States Treasury.
Upon the occurrence of an Event of Default (as defined in the Lien
Instrument) followed by the acceleration of the whole indebtedness
evidenced by this note, or a condemnation or sale under threat of
condemnation of all or substantially all of the Property, the payment of
such indebtedness will constitute an evasion of the prepayment terms
hereunder and be deemed to be a voluntary prepayment hereof and such
payment will, therefore, to the extent not prohibited by law, include a
prepayment fee determined as follows: if such prepayment occurs prior to
November 1, 2001 and results from an Event of Default followed by an
acceleration of the whole indebtedness, such prepayment fee shall be the
greater of Full Yield Maintenance (as hereinafter defined) or 6% of the
outstanding principal balance of this note; if such prepayment occurs prior
to November 1, 2001 and results from a condemnation or sale under threat of
condemnation of all or substantially all of the Property, such prepayment
fee shall be the greater of Yield Maintenance or 2% of the outstanding
principal balance of this note; if such prepayment occurs after November 1,
2006 and results from an Event of Default followed by an acceleration of
the whole indebtedness evidenced by this note or a condemnation or sale
under threat of condemnation of all or substantially all of the Property,
such prepayment fee shall be the greater of Yield Maintenance or 1% of the
outstanding principal balance of this note.
As used herein, "Full Yield Maintenance" means the amount, if any, by which
(i) the present value of the Then Remaining Payments (as hereinafter
defined) calculated using a periodic discount rate (corresponding to the
payment frequency under this note) which, when compounded for such number
of payment periods in a year, equals the per annum effective yield of the
Most Recently Auctioned United States Treasury Obligation having a maturity
date equal to the Maturity Date (or, if there is no such equal maturity
date, then the linearly interpolated per annum effective yield of the two
Most Recently Auctioned United States Treasury Obligations having maturity
dates most nearly equivalent to the Maturity Date) as reported by The Wall
Street Journal five business days prior to the date of prepayment; exceeds
(ii) the outstanding principal balance of this note (exclusive of all
accrued interest).
If such United States Treasury obligation yields shall not be reported as
of such time or the yields reported as of such time shall not be
ascertainable, then the periodic discount rate shall be equal to the
Treasury Constant Maturity Series yields reported, for the latest day for
which such yields shall have been so reported, as of five business days
preceding the prepayment date, in Federal Reserve Statistical Release H.15
(519) (or any comparable successor publication) for actively traded United
States Treasury obligations having a constant maturity most nearly
equivalent to the Maturity Date.
Notwithstanding the above and provided Borrower is not in default under any
provision contained in the Loan Documents (as defined in the Lien
Instrument), this note may be prepaid in full at any time, without a
prepayment fee, during the last 60 days of the term of this note.
II-14
<PAGE>
FOOTNOTES TO APPENDIX II
F There shall be no right to prepay the outstanding principal balance,
except that, provided no default exists, the privilege is hereby granted to
prepay the entire unpaid principal balance, together with any and all
accrued interest due thereon and late charges, on or after January 1, 2003,
subject to giving not less than thirty (30) days nor more than ninety (90)
days prior written notice of the intent to prepay to the holder of this
Note, with the payment of a prepayment premium equal to the greater of (x)
the sum obtained by multiplying (a) the outstanding principal balance of
the Note at the time of prepayment by (b) the difference obtained by
subtracting (i) the current yield on publicly traded United States Treasury
securities having the closest matching maturity to the Maturity Date, as
published five business days prior to the date of said payment in the Wall
Street Journal or other business publication of general circulation
designated by holder at its reasonable determination, from (ii) the
interest rate on the Note adjusted to its semi-annual equivalent interest
rate of seven and six hundred eighteen-one thousandths percent (7.618%)
then (c) multiplying the resulting number by the number of scheduled
monthly payments remaining until the Maturity Date divided by twelve (12);
or (y) an amount equal to one percent (1%) of the principal balance then
outstanding. The loan shall be open to prepayment without premium for the
last one hundred twenty (120) days of the loan term, provided that notice
of such prepayment is given at the time and in the manner specified above.
In the event that the yield rate on publicly traded United States Treasury
securities is not obtainable, then the nearest equivalent issue or index
shall be selected, at holder's reasonable determination, to calculate the
prepayment premium.
G Beginning in the sixth (6th) loan Year (as hereinafter defined) and
thereafter, the Maker shall have the right and privilege of prepaying the
full balance of principal then owing hereunder and accrued interest
thereon, together with all other amounts then owing under the Loan
Documents, on any date subject to giving not less than thirty (30) nor more
than ninety (90) days prior irrevocable written notice to the Noteholder
and to payment of a fee (the "prepayment fee" equal to the greater of:
(i) the product obtained by multiplying (x) the then outstanding
principal balance of this note, times (y) the rate representing the
difference by which 7.1029% exceeds the yield rate on publicly traded U.S.
Treasury Securities having the closest matching maturity date to the
Maturity Date (and if there be more than one such obligation, then the
average of such yield rates), as such yield rate is reported in the Wall
Street Journal five (5) business days prior to the date of said payment (or
if not so reported then as reported in another business publication of
general circulation selected by the Noteholder in Its sole discretion, or
if such yield rate is not so obtainable, then the nearest equivalent rate,
issue or index as selected by the Noteholder in its reasonable discretion),
times (z) one-twelfth (1/12) of the number of monthly payments remaining
until the Maturity Date: or
(ii) One percent (1%) of the then outstanding principal balance of
this note.
No prepayment. shall be permitted prior to the beginning of the sixth
(6th) loan Year and no partial prepayment. shall be permitted at. any time.
The term "loan Year" is defined as the twelve (12) month period
Commencing with the date on which the first monthly payment of principal
and/or interest is due hereunder and each twelve (12) month period
thereafter.
Notwithstanding anything to the contrary contained herein, the Maker
may prepay this note in full without payment of a fee on any date during
the last ninety (90) days of the term of this note.
II-15
<PAGE>
FOOTNOTES TO APPENDIX II
H Loan Prepayment. Borrower may not prepay any principal of the Note prior to
the Maturity Date, except that on any monthly payment due date after the
Lockout Date, but prior to the date which is three (3) months prior to the
Maturity Date, Borrower may prepay the Loan, upon thirty (30) days' prior
written notice to the Lender, in full, but not in part, by paying all
principal and interest to the date of prepayment, along with all other
Indebtedness then due, and (subject to the provisions in the Mortgage
regarding the disposition of casualty and condemnation proceeds) upon the
payment of a "Make Whole Premium." The Make Whole Premium shall be the
greater of one percent (1%) of the principal amount to be prepaid or a
premium calculated as provided in subparagraphs (i) through (iii) below:
(i) Determine the "Reinvestment Yield." The Reinvestment Yield will
be equal to the yield on the applicable* U.S. Treasury Issue
("Primary Issue") published one week prior to the date of
prepayment and converted to an equivalent monthly compounded
nominal yield. In the event there is no market activity involving
the Primary issue at the time of prepayment, the Lender shall
choose a comparable Treasury Bond, Note or Bill ("Secondary
Issue") which the Lender reasonably deems to be similar to the
Primary Issue's characteristics (i.e., rate, remaining time to
maturity, yield)
* At this time there is not a U.S. Treasury Issue for this
prepayment period. At the time of prepayment, Lender shall select
in its sole and absolute discretion a U.S. Treasury Issue with
similar remaining time to maturity as the Note.
(ii) Calculate the "Present Value of the Loan." The Present Value of
the Loan is the present value of the payments to be made in
accordance with the Note (all installment payments and any
remaining payment due on the Maturity Date) discounted at the
Reinvestment Yield for the number of months remaining from the
date of prepayment to the Maturity Date.
(iii) Subtract the amount of the prepaid proceeds from the Present
Value of the Loan as of the date of prepayment. Any resulting
positive differential shall be the premium.
(iv) In the event the loan is prepaid on or after that date which is
three (3) months prior to the Maturity Date, no Make Whole
Premium shall be due.
I There shall be no right to prepay the outstanding principal balance,
except that, provided no default exists, the privilege is hereby granted to
prepay the entire unpaid principal balance, together with any and all
accrued interest due thereon and late charges, on or after September 1,
2002, subject to giving not less than thirty (30) days nor more than ninety
(90) days prior written notice of the intent to prepay to the holder of
this Note, with the payment of a prepayment premium equal to the greater of
(x) the sum obtained by multiplying (a) the outstanding principal balance
of the Note at the time of prepayment by (b) the difference obtained by
subtracting (i) the current yield on publicly traded United States Treasury
securities having the closest matching maturity to the Maturity Date, as
published five business days prior to the date of said payment in the Wall
Street Journal or other business publication of general circulation
designated by holder at its reasonable determination, from (ii) the
interest rate on the Note adjusted to its semi-annual equivalent interest
rate of eight and five one thousandth percent (8.005%) then (c) multiplying
the resulting number by the number of scheduled monthly payments remaining
until the Maturity Date divided by twelve (12), or (y) an amount equal to
one percent (1%) of the principal balance then outstanding. The loan shall
be open to prepayment without premium for the last ninety (90) days of the
loan term, provided that notice of such prepayment is given at the time and
in the manner specified above. In the event that the yield rate on publicly
traded United States Treasury securities is not obtainable, then the
nearest equivalent issue or index shall be selected, at holder's reasonable
determination, to calculate the prepayment premium
II-16
<PAGE>
FOOTNOTES TO APPENDIX II
J Prepayment. Except as provided below, Maker may not prepay the loan in
whole or in part.
On or after the commencement of the 6th Loan Year (as hereinafter
defined), on any scheduled payment date and subject to giving Payee not
less than thirty (30) nor more than ninety (90) days' prior written notice
specifying the scheduled payment date on which prepayment is to be made
(the "Prepayment Date"), Maker may prepay the entire principal amount
together with any and all accrued interest and other sums due under the
Loan Documents, and subject to payment of a prepayment premium equal to the
greater of: (i) one percent (1%); or (ii) the product of the number of
remaining unpaid scheduled monthly payments hereunder between the date of
prepayment and the Maturity Date, divided by twelve (12), and multiplied by
the difference, if any, by which the semi-annual equivalent rate of
interest payable hereunder (i.e., 7.4634%) exceeds the "Yield Rate" of the
publicly traded United States Treasury Bond or Note having a maturity date
(month and year) closest to (but not earlier than) the Maturity Date,
multiplied by the then outstanding principal balance. Maker acknowledges
that no partial prepayment shall be allowed.
The term "Yield Rate" means the yield rate set forth for such publicly
traded United States Treasury Bond or Note five (5) business days prior to
the date of such prepayment in The Wall Street Journal (or, if The Wall
Street Journal for any reason is not published on such date, then any other
equivalent index selected by the holder hereof, at the sole reasonable
determination of the holder hereof). If more than one such Bond or Note is
publicly traded and the respective Yield Rates thereon differ, the highest
Yield Rate shall be controlling.
The loan will be open to prepayment without premium during the last
ninety (90) days of the term of the loan.
If any notice of prepayment is given, the principal balance of the
loan and the other sums required pursuant to this Section 2 shall be due
and payable on the Prepayment Date, unless Maker provides written notice to
Payee that it is revoking said prepayment notice no later than five (5)
business days prior to the Prepayment Date.
Provided no default exists under the Loan Documents, the above premium
shall not be applicable to a prepayment resulting from Payee's election to
require insurance loss proceeds or condemnation awards to be applied to a
payment of principal.
No partial prepayment shall be allowed.
The Loan Year is defined as any twelve month period commencing with
the date on which the first monthly installment is due or any
anniversary thereof.
K Provided Promisor has notified the holder hereof in writing of such
prepayment not less than thirty (30) nor more than ninety (90) days in
advance, Promisor may prepay the principal amount of this Note, together
with any and all accrued interest and other sums due hereunder or under the
Deed of Trust (as hereinafter defined) in full, but not in part, on the
first day of any calendar month on or after October 1, 2002; provided,
however, that in addition to the principal prepaid and the monthly
installment of interest then due, Promisor shall pay a premium equal to the
greater of (a) one percent (1%) of the then outstanding principal balance;
and (b) the product of (i) the then outstanding principal balance, (ii) an
annual rate of interest equal to difference between the Treasury Rate (as
hereinafter defined) and 8.393%, (iii) one-twelfth (1/12), and (iv) the
number of scheduled monthly payments remaining through and including the
Maturity Date. If Promisor prepays this Note pursuant to this paragraph
during the ninety (90) day period immediately preceding the Maturity Date,
Promisor shall not be required to pay the premium set forth in the
preceding sentence. The Treasury Rate shall be the yield rate on publicly
traded securities issued by the United States Treasury having the closest
matching maturity date to the Maturity Date, as reported in the Wall Street
Journal or similar publication of general circulation on the fifth business
day preceding the prepayment date. If the above rate is not obtainable,
then the Treasury Rate shall be determined by the nearest equivalent issue
or index selected by the holder hereof, in its reasonable determination.
Once Promisor has given notice of an intended prepayment, such
election may not be revoked and the entire unpaid balance of this Note
shall be due on the date set forth in Promisor's notice as fully as if such
date had originally been stated herein as the maturity date hereof. The
parties hereto acknowledge that they have agreed on prepayment premiums by
negotiation, both parties being represented by counsel. Promisor expressly
agrees (a) that the prepayment premiums provided for herein are reasonable,
(b) to pay any such premium, even upon acceleration of the obligation
hereunder, (c) that there has been consideration given to Promisor in this
transaction for such agreement to pay such premiums; and (d) that it shall
be estopped hereafter from disputing the validity or reasonableness of the
payment premiums set forth herein.
II-17
<PAGE>
FOOTNOTES TO APPENDIX II
L Beginning in the sixth (6th) Loan Year (as hereinafter defined) and
thereafter, the Maker shall have the right and privilege of prepaying the
full balance of principal then owing hereunder and accrued interest
thereon, together with all other amounts then owing under the Loan
Documents, on any date subject to giving not less than thirty (30) nor more
than ninety (90) days prior irrevocable written notice to the Noteholder
and to payment of a fee (the "Prepayment Fee") equal to the greater of
(i) The positive amount, if any, equal to the sum of the present
values of all scheduled payments due under this note from the date of
prepayment to and including the Maturity Date of the note, minus the
principal balance of the note immeditely prior to the date of
prepayment. It is understood and agreed that all present values shall
be calculated as of the date of prepayment, using a discount rate,
compounded monthly, equal to Lender's semi-annual equivalent yield
rate, converted to its monthly equivalent, of the United States
Treasury Security having the closest maturity date to the Maturity
Date of the note as established in The Wall Street Journal or other
business publication of general circulation five (5) business days
before the date of prepayment; or
(ii) One Percent (1%) of the then outstanding principal balance
of this note
No prepayment shall be permitted prior to the beginning of the sixth
(6th) Loan Year and no partial prepayment shall be permitted at any time
The term "Loan Year" is defined as the twelve (12) month period
commencing with the date on which the first monthly payment of principal
and/or interest is due hereunder and each twelve (12) month period
thereafter
Notwithstanding anything to the contrary contained herein, the Maker
may prepay this note in full without payment of a fee on any date during
the last ninety (90) days of the term of this note
M Prepayment. Maker acknowledges that the loan evidenced by this Note was
made on the basis and assumption that Payee would receive the payments of
principal and interest set forth herein for the full term of this Note.
From the date hereof until November 30, 2002, Maker may not prepay, whether
by voluntary prepayment, involuntary prepayment or otherwise, the principal
sum due hereunder, in whole or in part. On or after December 1, 2002, and
upon giving to Payee not less than thirty (30) days, nor more than ninety
(90) days' prior written notice, Maker may prepay the entire principal
amount of this Note (but not less), together with accrued and unpaid
interest on any scheduled payment date, upon payment of a prepayment
premium ("Pre-Default Prepayment Premium") equal to the greater of:
(A) The sum obtained by (x) multiplying the then outstanding principal
balance due by the difference obtained by subtracting the yield rate on
publicly traded United States Treasury Securities (as published in the Wall
Street Journal, or other business publication of general circulation, 5
business days prior to the date of such prepayment) having the closest
matching maturity date to the maturity date of this Note from the interest
rate on this Note adjusted to its semi-annual equivalent rate (7.l54%)
times the number of scheduled monthly payments remaining until the final
payment date of this Note, divided by 12 and (y) adding an amount equal to
one percent (1%) of the then outstanding principal balance due under this
Note; or
(B) One percent (1%) of the then outstanding principal balance due
under this Note.
In the event that the yield rate on publicly traded United States
Treasury Securities is not obtainable, then the nearest equivalent issue or
index shall be selected, at Payee's reasonable discretion, and used to
calculate the prepayment premium.
No partial prepayment shall be allowed.
Notwithstanding the foregoing, no prepayment premium shall be payable
in connection with a prepayment occurring (i) on or after July 1, 2008,
provided Maker gives Payee the not less than thirty (30) nor more than
ninety (90) day written notice provided for above, or (ii) in the event of
a casualty or condemnation.
Maker warrants and represents that this Note is lawfully executed and
delivered.
II-18
<PAGE>
FOOTNOTES TO APPENDIX II
N Prepayment. The indebtedness evidenced hereby may not be prepaid in
whole or in part before February 1, 2002.
Thereafter, this Note may be prepaid in whole, but not in part,
provided that (a) an Event of Default has not occurred hereunder or is not
continuing; (b) the Maker gives the Holder no less than thirty (30) days
(nor more than ninety (90) days) prior written notice of its intent to
prepay, which notice specifies the exact date of prepayment (the
"Prepayment Date"); and (c) the Maker pays the following on the Prepayment
Date:
(i) the outstanding principal balance;
(ii) accrued interest;
(iii) a prepayment premium equal to the greater of (A) one percent
(1%) of the then outstanding principal balance or (B) the positive
amount, if any, equal to (a) the sum of the present values of all
scheduled payments due under this Note from the date of pre-payment to
and including the maturity date of this Note, minus (b) the principal
balance of this Note. All present values shall be calculated as of the
date of prepayment, using a discount rate, compounded monthly, equal
to the yield rate, converted to its monthly equivalent, of the United
States Treasury Security having the closest maturity date to the
maturity date of the Note as established in The Wall Street Journal or
other business publication of general circulation five (5) business
days before the date of pre-payment; provided, however, in the event
that the yield rate on publicly traded United States Treasury
Securities is not obtainable, then the nearest equivalent issue or
index shall be selected, in the Holder's reasonable determination, and
used to calculate the foregoing prepayment premium.
(iv) all other sums due under this Note or any other instrument
securing the loan.
Notwithstanding the foregoing, this Note may be prepaid in whole, but
not in part, without premium, during the period commencing ninety (90) days
prior to the Maturity Date, through the Maturity Date, provided that (a) an
Event of Default has not occurred hereunder; (b) the Maker gives the Holder
not less than thirty (30) days (nor more than ninety (90) days) prior
written notice of its intent to prepay, which notice specifies the
Prepayment Date; and (c) the Maker pays on the Prepayment Date the
outstanding principal balance, accrued interest and other sums due under
this Note or any other instrument securing the loan.
No partial prepayment shall be allowed
The Maker's failure to pay all amounts due on the Prepayment Date
shall be an Event of Default hereunder unless the Maker notifies the Holder
in writing not less than five business days before the Prepayment Date of
its revocation of the notice of intention to prepay.
No prepayment premium shall be due if the mortgagee under the Mortgage
requires that insurance proceeds or condemnation awards be applied to
payment of the indebtedness evidenced by this Note.
II-19
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
APPENDIX III
SIGNFICANT LOAN SUMMARIES
LOAN NO. 1 - TOWERS AT PORTSIDE LOAN AND PROPERTY
<TABLE>
<CAPTION>
---------------------------------- ------------------------- ------------------------------ --------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $57,039,856 Property Type: Multifamily
Loan Type: Principal & Interest Location: Jersey City, NJ
Balloon Year Built/Renovated: 1989,1997/1995
Origination Date: 06/11/1998 Units: 527
Maturity Date: 07/01/2008 Cut-Off Date Balance/Unit: $108,235
Mortgage Rate: 6.720% Appraisal Value: $125,000,000
Annual Debt Service: $4,539,180 Cut-Off Date LTV: 45.6%
DSCR: 2.05x Balloon LTV: 40.0%
Underwritable Cash Flow: $9,302,167 Percent Leased: 99.4%
Balance at Maturity: $49,981,549 Percent Leased as of Date: 7/25/2000
---------------------------------- ------------------------- ------------------------------ --------------------------
</TABLE>
THE LOAN
The Towers at Portside Loan (the "Towers Loan") is secured by a first
mortgage on a 527-unit high rise apartment complex located in Jersey City, New
Jersey (the "Towers Property"). The Towers Loan was originated by The
Northwestern Mutual Life Insurance Company on June 11, 1998.
THE BORROWER. The borrower is The Towers at Portside Urban Renewal
Company, L.L.C. (the "Towers Borrower"), a New Jersey limited liability company.
So long as the tax abatement described below under the caption "The Property" is
in effect, the formation documents provide that the Towers Borrower can engage
in no business other than owning, operating and managing the Towers Property.
The Tower Borrower's managing member is the ERP Operating Limited Partnership
which owns 99% of the Towers Borrower. The remaining 1% interest of the Towers
Borrower is owned by QRS-Towers at Portside, Inc. The ERP Operating Limited
Partnership is held by the Equity Residential Properties Trust (92% general
partnership interest) and various limited partners (8% interest).
SECURITY. The Towers Loan is secured by a Mortgage, Security Agreement
and Financing Statement, Absolute Assignment of Rents and Leases (With License
Back), UCC Financing Statements and certain additional security documents (the
"Towers Financing Documents"). The Mortgage, Security Agreement and Financing
Statement is a first lien on the Towers Borrower's fee interest in the Towers
Property. The Towers Loan is recourse to the Towers Borrower. The Towers Loan is
non-recourse to ERP Operating Limited Partnership subject to certain limited
exceptions.
PAYMENT TERMS. The mortgage rate is fixed at 6.720% per annum. The
Towers Loan requires monthly payments of principal and interest of $378,265
until its maturity on July 1, 2008, at which time all unpaid principal and
accrued but unpaid interest is due. The Towers Loan accrues interest computed on
the basis of the actual number of days elapsed in each accrual period and the
actual number of days in the related calendar year.
PREPAYMENT. Voluntary prepayment is prohibited until June 1, 2003. No
prepayment premium is due if the Towers Loan is prepaid within 120 days prior to
maturity.
LATE FEES AND DEFAULT INTEREST. The Towers Loan accrues interest at the
mortgage rate plus 5% per annum while the Towers Loan is in default. There are
no late fees.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Towers Loan provides
that it will become immediately due and payable upon the transfer of the Towers
Property or a change in the proportionate ownership of the Towers Borrower,
except if resulting from the death or legal incompetency of any individual. A
"change in the proportionate ownership" of the Towers Borrower means a change in
the ownership of the membership interests in the Towers Borrower.
ESCROW/RESERVES. There are currently no escrows or reserves. The lender
shall have the option in the event of any event of default to require the Towers
Borrower to deposit funds to pay real estate taxes and special assessments as
they become due.
III-1
<PAGE>
SUBORDINATED/OTHER DEBT. All prior liens and all subordinate mortgage
liens are prohibited, other than prior or subordinate liens against personal
property to secure the deferred purchase price of such property (or the lease
payments thereof) in an aggregate amount not exceeding $600,000, provided that
with respect to any such personal property which replaces personal property
constituting secured collateral the aggregate cost of such personal property
must at all times exceed the amount of such liens by $100,000.
THE PROPERTY
The Towers Property consists of a Class A 527-unit multi-family
apartment complex including approximately 5.36 acres of land. The property is
located in Jersey City, New Jersey. Jersey City is located in northern New
Jersey across the Hudson River just west of New York City, and the property is
located on the waterfront and provides an excellent view of Manhattan for its
tenants. Units range in type from studio to three-bedroom apartments, and
amenities include a fitness center, indoor children's playroom and tennis
courts.
Pursuant to the terms of an Amended Financial Agreement, dated
as of March 29, 1996 (the "Financial Agreement"), between the Towers Borrower
and the city of Jersey City, New Jersey ( "Jersey City"), the Towers Borrower is
entitled to a tax abatement, as described below, until September 1, 2007 with
respect to the commercial portion of the Towers Property and until September 1,
2022 with respect to the residential portion of the Towers Property.
So long as the Towers Borrower is in compliance with the terms
of the Financial Agreement and the statute that governs the tax abatement (the
"Abatement Law"), the Towers Borrower is not required to pay property taxes on
the improvements on the Towers Property. In lieu of paying such property taxes
on the Towers Property improvements, the Towers Borrower has agreed to pay
Jersey City an annual service charge for municipal services equal to the greater
of (i) 15.0% of the annual gross revenues obtained from the Towers Property and
(ii) $500,000 (adjusted annually based upon the inflation rate), plus a
surcharge in any year in which the profits related to the Towers Property exceed
a base amount. The amount of any property taxes paid by the Towers Borrower on
the land constituting the Towers Property can be deducted from the amounts that
the Towers Borrower is required to pay to Jersey City under the Financial
Agreement. In the event that the Towers Borrower fails to pay amounts required
under the Financial Agreement, Jersey City has the right to terminate the
Financial Agreement or proceed with a tax lien or tax foreclosure action on the
Towers Property.
The Towers Borrower has the right to terminate the Financial
Agreement at any time without the consent of the lender or Jersey City. In the
event that the Financial Agreement is terminated either by Jersey City or by the
Towers Borrower, (i) the Towers Borrower will be required to pay Jersey City any
amounts owed under the Financial Agreement and pursuant to the Abatement Law and
(ii) the tax abatement will end and the Towers Property will be subject to all
taxes generally applicable to property within Jersey City. Such taxes could be
substantially higher than the amounts that the Towers Borrower is required to
pay under the terms of the Financial Agreement. The requirement to pay higher
taxes may result in the Towers Borrower having less funds available to cover
debt service on the Towers Loan.
Potentially hazardous substances were identified at the property which
required some removal and monitoring. The borrower has submitted reports to the
New Jersey Department of Environmental Protection ("NJDEP") recommending that no
further action is necessary. Although the NJDEP has not yet acted on the
submissions, a technical consultant has expressed the opinion that the NJDEP is
likely to concur that no further action is needed, but that the NJDEP may first
require limited confirmatory sampling and possibly some additional covering of a
portion of the mortgaged property with clean fill, at total costs estimated to
be between $44,600 and $216,680. The related borrower has not been required to
establish reserves for the payment of such amounts. We cannot assure you that
the technical consultant's cost estimates will not be exceeded or that the NJDEP
will concur that no further actions are necessary.
MANAGEMENT
The Equity Residential Properties Trust, an affiliate of the Towers Borrower, or
an affiliate thereof is the management and leasing firm of the Towers Property.
The Equity Residential Properties Trust is the largest owner and manager of
multi-family housing in the United States.
III-2
<PAGE>
LOAN NO. 2 - SOUTHRIDGE WOODS LOAN AND PROPERTY
<TABLE>
<CAPTION>
----------------------------- ---------------------- ------------------------------------- --------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $28,409,446 Property Type: Multifamily
Loan Type: Principal & Interest; Location: South Brunswick, NJ
Balloon
Year Built/Renovated: 1997-1999/NA
Origination Date: 3/28/2000 Units: 648
Maturity Date: 4/1/2010 Cut-Off Date Balance/Unit: $43,842
Mortgage Rate: 8.270% Appraisal Value: $47,550,000
Annual Debt Service: $2,574,142 Cut-Off Date LTV: 59.7%
DSCR: 1.59x Balloon LTV: 54.0%
Underwritten Cash Flow: $4,101,288 Percentage Leased: 97.4%
Balance at Maturity: $25,680,177 Percentage Leased as of Date: 7/1/2000
----------------------------- ---------------------- ------------------------------------- --------------------
</TABLE>
THE LOAN
The Southridge Woods Loan (the "Southridge Woods Loan") is secured by a
first mortgage on a apartment complex comprised of 648 units and 538,200 square
feet located in South Brunswick, New Jersey (the "Southridge Woods Property").
The Southridge Woods Loan was originated for Principal Commercial Funding, LLC
on March 28, 2000.
THE BORROWER. The borrower is Windsor Associates, a New Jersey general
partnership (the "Southridge Woods Borrower"). The four main general partners
are Leonard Wilf, Zygmunt Wilf and Mark Wilf, each of whom owns a 22.3% interest
in the Southridge Woods Borrower, and Mike Roth who owns a 33.0% interest in the
Southridge Woods Borrower.
SECURITY. The Southridge Woods Loan is secured by a Loan Agreement,
Mortgage and Security Agreement, Assignment of Rents and Leases, and certain
additional security documents (the "Southridge Woods Financing Documents"). The
Mortgage and Security Agreement is a first lien on the Southridge Woods
Borrower's fee interest in the Southridge Woods Property. The Southridge Woods
Loan is non-recourse to the Southridge Woods Borrower, subject to certain
limited exceptions. Leonard Wilf, Zygmunt Wilf, Mark Wilf and Mike Roth have
each signed a guaranty of the Southridge Woods Borrower's recourse obligations
with respect to fraud, misrepresentation and environmental.
PAYMENT TERMS. The mortgage rate is fixed at 8.270% per annum. The
Southridge Woods Loan requires monthly payments of principal and interest of
$214,511.83 until April 1, 2010, at which time all unpaid principal and accrued
but unpaid interest is due.
PREPAYMENT/DEFEASANCE. Voluntary prepayment is prohibited until three
(3) months prior to the maturity date. However, defeasance is permitted any time
after the earlier of (i) the date which is two (2) years after the
securitization of the Southridge Woods Loan or (ii) the date which is four (4)
years after the date of the first principal and interest payment, provided
certain conditions in the Southridge Woods Financing Documents are satisfied.
LATE FEES AND DEFAULT INTEREST. There is a 4% late fee on installments
overdue. The Southridge Woods Loan accrues interest at the mortgage rate plus 4%
per annum while the Southridge Woods Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN THE BORROWER. The Southridge Woods
Loan provides that it will become immediately due and payable upon the transfer
of the Southridge Woods Property or any ownership interest in the Southridge
Woods Borrower, except in connection with any permitted transfer.
Permitted transfers include the following:
(A) two transfers of the Southridge Woods Property are permitted provided
the following requirements, among others are satisfied: (i) the lender
reviews and approves of the proposed purchaser, which review and
approval shall include, but not be limited to, satisfaction with the
proposed purchaser's creditworthiness, financial strength and real
estate management and leasing experience as well as the
III-3
<PAGE>
other security for the Southridge Woods Property Loan, (ii) the
lender's receipt of all relevant documentation relating to the
proposed transfer including but not limited to documentation regarding
the proposed purchaser's status as a special purpose entity and (iii)
the lender's receipt of a fee equal to the greater of 1% of the
balance of the Southridge Woods Property Loan or $15,000.00;
(B) transfers of the ownership interests of the Southridge Woods Borrower
are permitted provided the following requirements, among others are
satisfied: (i) the lender reviews and approves of the proposed
transferee, which review and approval shall include, but not be
limited to, satisfaction with the proposed transferee's
creditworthiness, financial strength and real estate management and
leasing experience as well as the other security for the Southridge
Woods Property Loan, (ii) the lender's receipt of all relevant
documentation relating to the proposed transfer including but not
limited to documentation regarding the proposed transferee's status as
a special purpose entity and (iii) the lender's receipt of a fee equal
to the greater of 1% of the balance of the Southridge Woods Property
Loan (which amount is to be prorated based upon the percentage of
ownership interests so transferred) or $15,000.00; and
(C) transfers of existing partnership interests within the Southridge
Woods Borrower to other existing partners of the Southridge Woods
Borrower or immediate family members of such partners is permitted
provided Michael Roth, Leonard Wilf, Zygmunt Wilf and Mark Wilf shall
each retain an ownership interest in the Southridge Woods Borrower.
ESCROW/RESERVES. Monthly escrow deposits for real estate taxes is
required.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and other encumbrances
are prohibited by the Southridge Woods Financing Documents.
THE PROPERTY
The Southridge Woods Property is an apartment complex comprised of 648
units and 538,200 square feet located in South Brunswick, New Jersey along Major
Road, Route 522 and Lawrence Brook approximately 20 miles south of the Newark
Airport. The first phase of 17 buildings was constructed in 1997 and the second
phase of 10 buildings was constructed in 1999. The complex offers 300 one
bedroom units, 320 two bedroom units and 28 three bedroom units. The buildings
are constructed of wood framing with a brick facade and horizontal vinyl siding.
The parking ratio is 2.01 parking spaces per square feet. Amenities include a
playground, an outdoor pool, a tennis court and a one-story clubhouse with an
exercise room. As of July 1, 2000, the Southridge Woods Property was 97.4%
leased.
The Southridge Woods Property contains forty (40) "Mount Laurel" units
which are designated for low to moderate income users and regulated by the
Township of South Brunswick.
The Southridge Woods Property is not a separate tax parcel and is
assessed by the property taxing authorities with other land and improvements. To
mitigate the risks associated with such matters, the Southridge Woods Borrower
must make monthly escrow deposits for real estate taxes with the lender for the
entire tax parcel.
Leonard Wilf, Zygmunt Wilf, Mark Wilf and Mike Roth have provided an
indemnification to the lender for the payment of real estate taxes on the entire
tax parcel. Principal Commercial Funding, LLC also received an opinion from
counsel at the closing of the Southridge Woods Loan opining that a foreclosure
judgment with respect to the Southridge Woods Property would not violate the New
Jersey Municipal Land Use Law (N.J.S.A. 40 55D-1 et seq) provided the
foreclosure action was commenced in good faith. Such opinion, however, does not
address other land use laws and ordinances potentially affecting the Southridge
Woods Property.
MANAGEMENT
Windsor Associates is the management and leasing firm for the
Southridge Woods Property.
III-4
<PAGE>
LOAN NO. 3 - TWIN COUNTY BUILDING LOAN AND PROPERTY
<TABLE>
<CAPTION>
----------------------------- ---------------------- ------------------------------------- ----------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $24,477,507 Property Type: Industrial
Loan Type: Principal & Interest; Location: Edison, NJ
Balloon
Year Built/Renovated: 1968,1978,1988/NA
Origination Date: 7/14/2000 Square Footage: 656,720
Maturity Date: 8/1/2010 Cut-Off Date Balance/Sq. Ft.: $37
Mortgage Rate: 8.720% Appraisal Value: $35,500,000
Annual Debt Service: $2,306,603 Cut-Off Date LTV: 69.0%
DSCR: 1.28x Balloon LTV: 62.8%
Underwritten Cash Flow: $2,946,508 Percentage Leased: 95.7%
Balance at Maturity: $22,297,016 Percentage Leased as of Date: 7/12/2000
----------------------------- ---------------------- ------------------------------------- ----------------------
</TABLE>
THE LOAN
The Twin County Building Loan (the "Twin County Building Loan") is
secured by a first mortgage on a single story warehouse distribution building
comprising 656,720 square feet located in Edison, New Jersey (the "Twin County
Building Property"). The Twin County Building Loan was originated for Principal
Capital Funding, LLC on July 14, 2000.
THE BORROWER. The borrower is 145 Talmadge Road, LLC, a New Jersey
limited liability company (the "Twin County Building Borrower"). Avraham Avidan,
Rosario Coniglo and Donald Schindel each have a 33 1/3% ownership interest in
the Twin County Building Borrower. Avraham Avidan is the managing member. The
Twin County Building Borrower is a special purpose entity and does not have an
independent director in its equity structure.
SECURITY. The Twin County Building Loan is secured by a Loan Agreement,
Mortgage and Security Agreement, Assignment of Rents and Leases, and certain
additional security documents (the "Twin County Building Financing Documents").
The Mortgage and Security Agreement is a first lien on the Twin County Building
Borrower's fee interest in the Twin County Building Property. The Twin County
Building Loan is non-recourse to the Twin County Building Borrower, subject to
certain limited exceptions. Avraham Avidan, Rosario Coniglo and Donald Schindel
each have signed a guaranty for the Twin County Building Borrower's recourse
obligations for fraud, misrepresentation and environmental matters.
PAYMENT TERMS. The mortgage rate is fixed at 8.720% per annum. The Twin
County Building Loan requires monthly payments of principal and interest of
$192,216.89 until August 1, 2010, at which time all unpaid principal and accrued
but unpaid interest is due.
PREPAYMENT/DEFEASANCE. Voluntary prepayment is prohibited until three
(3) months prior to the maturity date. However, defeasance is permitted after
the earlier of (i) the date which is two (2) years from the date of the
securitization of the Twin County Building Loan or (ii) the date which is four
(4) years from the date of the first payment of principal and interest, provided
certain conditions of the Twin County Building Loan are satisfied.
LATE FEES AND DEFAULT INTEREST. There is a 4% late fee on installments
overdue. The Twin County Building Loan accrues interest at the mortgage rate
plus 4% per annum while the Twin County Building Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Twin County Building
Loan provides that it will become immediately due and payable upon the transfer
of the Twin County Building Property or any ownership interest in the Twin
County Building Borrower, except in connection with any permitted transfer.
Permitted transfers include the following:
(A) two transfers of the Twin County Building Property are permitted,
provided (i) the lender reviews and approves the proposed purchaser
which, review and approval shall include, but not be limited to,
satisfaction with the proposed purchaser's creditworthiness, financial
strength and real estate
III-5
<PAGE>
management and leasing experience and (ii) payment to lender of a fee
equal to the greater of 1% of the balance or $15,000.00;
(B) a transfer of ownership interests in the Twin County Building Borrower
is permitted, provided (i) lender reviews and approves the proposed
transferee which review and approval shall include, but not limited
to, satisfaction with the proposed transferee's creditworthiness,
financial strength and real estate management and leasing experience
and (ii) payment to lender of a fee equal to the greater of 1% of the
balance of the Twin County Building Loan (which shall be prorated
based upon the percentage of ownership interests transferred) or
$15,000.00;
(C) a one time transfer of the Twin County Building Property is permitted
provided (i) the purchaser is an entity approved by lender in which
(a) Avraham Avidan, Donald Schindel and Rosario Coniglio collectively
hold a minimum of 51% controlling ownership interests and (b) all
remaining ownership interests are owned by the immediate family
members of Avraham Avidan, Donald Schindel and Rosario Coniglio; (ii)
Avraham Avidan, Donald Schindel and Rosario Coniglio remain members of
such entity's management committee; (iii) Avi Don Management, LLC or a
management company acceptable to lender continues to manage the Twin
County Building Property; and (iv) Avraham Avidan, Donald Schindel and
Rosario Coniglio agree to execute a guaranty for such entity's
recourse obligations with respect to fraud, misrepresentation and
environmental matters; and
(D) a transfer of ownership interests in the Twin County Building Borrower
to the immediate family members of Avraham Avidan, Donald Schindel
and/or Rosario Coniglio or to trusts established for the benefit of
such immediate family members is permitted provided (i) Avraham
Avidan, Donald Schindel and Rosario Coniglio collectively retain no
less than a minimum 51% controlling ownership interest in the Twin
County Building Borrower and remain members of the Twin County
Building Borrower's management committee; (ii) Avi Don Management, LLC
or a management company acceptable to lender continues to manage the
Twin County Building Property; and (iii) Avraham Avidan, Donald
Schindel and Rosario Coniglio execute a guaranty for the Twin County
Building Borrower's recourse obligations with respect to fraud,
misrepresentation and environmental matters.
ESCROW/RESERVES. An escrow in the amount of $200,000 was established at
closing for future tenant improvements and leasing commissions along with an
obligation on the Twin County Building Borrower to make monthly escrow payments
of $5,000.00. When the aggregate escrow balance equals $500,000.00, the Twin
County Building Borrower is not obligated to make additional monthly deposits.
However, if during the term of the Twin County Building Loan, the escrow balance
falls below $500,000.00, additional monthly escrow payments of $5,000.00 must be
made until the escrow balance again becomes $500,000.00.
Monthly escrow payments are required for the payment of real estate
taxes.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited by the Twin County Building Financing Documents.
THE PROPERTY
The Twin County Building Property is a single story warehouse
distribution center comprising 656,720 square feet located in Edison, New Jersey
within the northern section of Edison Township, Middlesex County at the
southeast corner of Talmadge Road and Mack Drive. The Twin County Building
Property was constructed in 1968 and 1978, with a 47,558 square foot freezer
addition built in 1988. The Twin County Building Property is constructed in
steel and concrete with brick exterior and clear heights of 28 to 30 feet. The
improvements have a depth of 670 feet with 160 exterior loading bays with
lifters and steel doors. Truck turnaround ranges from 130 to 150 feet with a
parking ratio of 0.84 parking spaces per 1000 square feet. As of July 12, 2000,
the Twin County Building Property was 95.7% leased. The Twin County Building
Property is 36.3% leased to Triboro, a grocery wholesaler engaged in the sale
and distribution of grocery, dairy and frozen food products with a lease
expiration date of August 31, 2007. The two next largest tenants are Carrier
Logistics, Inc. (29.4%) which is a distributor of clothing items with a lease
expiration date of 9/30/2003, and Preferred Freezer Services, Inc. a grocery
wholesaler engaged in the distribution of frozen foods and seafood with a lease
expiration date of October 31, 2004.
III-6
<PAGE>
Twelve (12) underground storage tanks have been removed from the Twin
County Building Property and all have received a no further action letter from
the New Jersey Department of Environmental Protection Agency ("NJDEP") except
for one (1) waste oil tank. While such waste oil tank has been removed and all
contaminated soils required by NJDEP to be removed have been removed, certain
contaminated groundwater remains unremediated. The estimated cost for the
existing groundwater remediation is approximately $150,000.00. The Twin County
Building Borrower has escrowed $187,500.00 as additional security for this
transaction which shall be released upon receipt of a no further action letter
from NJDEP. The lender purchased a 15 year, $2,000,000.00 environmental
insurance policy from AIG Environmental as additional security for this
transaction. This policy has no deductible.
MANAGEMENT
Avi Don Management is responsible for the management and leasing of the
Twin County Building Property. Avi Don Management is owned in part by Avraham
Avidan.
III-7
<PAGE>
LOAN NO. 4 - 825 SEVENTH AVENUE LOAN AND PROPERTY
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
Cut-off Date Balance: $23,802,280 Property Type: Office
Loan Type: Principal & Interest; Location: New York, NY
Balloon
Origination Date: 9/23/1999 Year Built/Renovated: 1968/1998
Maturity Date: 10/1/2014 Net Rentable Square Feet: 164,743
Mortgage Rate: 8.070% Cut-off Date Balance/SF: $144
Annual Debt Service: $2,127,313 Appraised Value: $36,800,000
DSCR: 1.26x Cut-off Date LTV: 64.7%
Underwritable Cash Flow: $2,676,210 Balloon LTV: 50.3%
Balance at Maturity: $18,524,774 Percent Leased: 100.0%
Percent Leased as of Date: 6/01/2000
---------------------------------- --------------------------- -------------------------------- ----------------------
</TABLE>
THE LOAN
The 825 Seventh Avenue Loan (the "825 Seventh Avenue Loan") is secured
by a first mortgage on a condominium unit consisting of 8 floors of office space
and a storage unit in the basement of a 37 story tower, located in the Borough
of Manhattan in New York, New York (the "825 Seventh Avenue Property"). John
Hancock Mutual Life Insurance Company (which has changed its name to John
Hancock Life Insurance Company) ("JHLICO") originated the 825 Seventh Avenue
Loan on September 23, 1999. The 825 Seventh Avenue Loan was sold to JHREF on
July 20, 2000.
THE BORROWER. The borrower in the 825 Seventh Avenue Loan is T53
Condominium, L.L.C., a New York limited liability company (the "825 Seventh
Avenue Borrower"). The members of the 825 Seventh Avenue Borrower are 825
Seventh Avenue Holding L.L.C. and Edward J. Minskoff. (the "825 Seventh Avenue
Members"). Vornado Realty L.P. is the member of 825 Seventh Avenue Holding
L.L.C., and Vornado Realty Trust is the general partner of Vornado Realty L.P.
SECURITY. The 825 Seventh Avenue Loan is secured by a first mortgage
contained in a Consolidation, Extension and Modification Agreement and certain
additional security documents (the "825 Seventh Avenue Financing Documents").
The mortgage is a first lien on the 825 Seventh Avenue Borrower's fee interest
in the 825 Seventh Avenue Property. The 825 Seventh Avenue Loan is non-recourse,
subject to certain limited exceptions. As units in a condominium, the security
is subject to the terms of the condominium documents, including rights and
obligations relating to casualty loss and condemnation. The 825 Seventh Avenue
Borrower has certain voting rights in the ownership organization of the
condominium. The units encumbered by the mortgage are entitled to less than 50%
of the voting rights in the condominium
PAYMENT TERMS. The mortgage rate is fixed at 8.070%. The 825 Seventh
Avenue Loan requires monthly payments of principal and interest of $177,276.06
until its maturity on October 1, 2014, at which time all unpaid principal and
accrued but unpaid interest is due. The 825 Seventh Avenue Loan accrues interest
computed on the basis of twelve 30-day months and a 360-day year.
PREPAYMENT. The 825 Seventh Avenue Loan may be prepaid in whole, but
not in part, with at least 30 days, but not more than 90 days, prior written
notice on or after November 1, 2003. No Prepayment Premium is due if the 825
Seventh Avenue Loan is prepaid within 180 days prior to maturity.
If there is an event of default on or after November 1, 2003, payment
of a premium calculated in the manner set forth above is required. If there is
an event of default prior to November 1, 2003 and the lender accelerates the 825
Seventh Avenue Loan, the 825 Seventh Avenue Borrower must pay a Prepayment
Premium calculated on the basis of the greater of (i) a yield maintenance
premium calculated by reference to U.S. Treasury obligations plus 50 basis
points and (ii) 10% of the then outstanding principal balance of the note.
LATE FEES AND DEFAULT INTEREST. There is a 4% late fee on overdue
installments if not paid in full within 5 days of the due date. The 825 Seventh
Avenue Loan accrues interest at 12.07% per annum while the 825 Seventh Avenue
Loan is in default.
III-8
<PAGE>
TRANSFER OF PROPERTY OR INTERESTS IN THE BORROWER. The 825 Seventh
Avenue Loan becomes immediately due and payable upon the transfer of the 825
Seventh Avenue Property except for the one time right to transfer the 825
Seventh Avenue Property upon payment of an assumption fee of 1% of the then
unpaid principal balance, if among other things, (i) there is no event of
default; (ii) Lender reasonably approves the transferee's financial capacity,
creditworthiness, experience in owning and managing property similar to the 825
Seventh Avenue Property; and (iii) the transferee assumes The 825 Seventh Avenue
Loan.
The 825 Seventh Avenue Financing Documents permit transfers by the 825
Seventh Avenue Members to other members holding membership interests, if there
are no events of default. Edward J. Minskoff may transfer interests to his (i)
immediate family members, (ii) employees of Edward J. Minskoff Equities, Inc.,
(iii) trusts for the benefit of those family members or employees or (iv)
entities wholly owned and controlled by them ("Minskoff Related Entities"), as
long as Edward J. Minskoff Equities, Inc. or another property management company
reasonably acceptable to lender is managing the 825 Seventh Avenue Property and
there is no event of default. Transfers of certain interests in 825 Seventh
Avenue Holding L.L.C., Vornado Realty Trust or Vornado Realty L.P. are
permitted, as long as either (1) after the transfer, 51% of the interests in the
entity in which interests are transferred is still controlled and owned,
directly or indirectly, by specified related entities of Vornado Realty Trust or
Vornado Realty L.P. or (2) Edward J. Minskoff Equities, Inc. or another property
management company reasonably acceptable to lender is managing the 825 Seventh
Avenue Property.
ESCROW/RESERVES. There is a tax escrow reserve in place for the 825
Seventh Avenue Loan, which requires monthly deposits in an amount sufficient to
pay taxes and other charges when due. There is no requirement for an insurance
reserve unless default has occurred or insurance premiums are not paid in full.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness or encumbrances of the
825 Seventh Avenue Property are prohibited.
THE PROPERTY
The 825 Seventh Avenue Property is a condominium unit consisting of 8
floors of office space and a storage unit in the basement containing 164,743
square feet of net rentable area in a 37 story tower. The upper 28 stories of
the building contain residential units, which are not part of the security for
the 825 Seventh Avenue Loan. The building also has a retail unit and garage
unit. The 825 Seventh Avenue Property was 100% occupied as of June 1, 2000.
Three tenants occupy the security for the 825 Seventh Avenue Loan, the largest
of which is Young & Rubicam occupying 106,832 square feet of office space and
5,000 square feet of the storage space.
Contractual lease expirations during the loan term are as follows:
22,196 square feet (13%) in 2003, 111,832 square feet (68%) in 2010, and 30,715
square feet (19%) in 2013. As of June 1, 2000, the average rent was $29.02 per
square foot.
MANAGEMENT
The 825 Seventh Avenue Property is managed by Edward J. Minskoff
Equities, Inc. (the "825 Seventh Avenue Property Manager"). According to
information supplied by the 825 Seventh Avenue Borrower, the 825 Seventh Avenue
Property Manager is an affiliate of the 825 Seventh Avenue Borrower and manages
approximately 4 million square feet of commercial space.
III-9
<PAGE>
LOAN NO. 5 - TASMAN CORPORATE CENTER LOAN AND PROPERTY
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<CAPTION>
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<S> <C> <C> <C>
Cut-Off Date Balance: $ 23,453,008 Property Type: Office
Loan Type: Principal & Interest; Location: Santa Clara, CA
Balloon
Year Built/Renovated: 2000/NA
Origination Date: 7/3/2000 Square Footage: 140,935
Maturity Date: 8/1/2010 Cut-Off Date Balance/Sq. Ft.: $166
Mortgage Rate: 8.330% Appraisal Value: $41,000,000
Annual Debt Service: $2,238,525 Cut-Off Date LTV: 57.2%
DSCR: 1.52x Balloon LTV: 46.8%
Underwritten Cash Flow: $3,397,231 Percentage Leased: 100.0%
Balance at Maturity: $19,189,956 Percentage Leased as of Date: 7/19/2000
----------------------------- ---------------------- ------------------------------------- --------------------
</TABLE>
THE LOAN
The Tasman Corporate Center Loan (the "Tasman Corporate Center Loan")
is secured by a first mortgage on a five story suburban office building
comprising 140,935 square feet located in Santa Clara, California (the "Tasman
Corporate Center Property"). The Tasman Corporate Center Loan was originated for
Principal Commercial Funding, LLC on July 3, 2000.
THE BORROWER. The borrower is Sobrato Development Company # 961, a
California limited partnership (the "Tasman Corporate Center Borrower"). Sobrato
Interests III, a California limited partnership is the sole general partner and
owns 45% of the Tasman Corporate Center Borrower. The Sobrato 1979 Revocable
Trust, as amended, and Sobrato Interests, a California limited partnership are
both limited partners of the Tasman Corporate Center Borrower and each own
41.25% and 13.75% respectively.
SECURITY. The Tasman Corporate Center Loan is secured by a Loan
Agreement, Deed of Trust, Assignment of Rents and Leases, and certain additional
security documents (the "Tasman Corporate Center Financing Documents"). The Deed
of Trust is a first lien on the Tasman Corporate Center Borrower's fee interest
in the Tasman Corporate Center Property. The Tasman Corporate Center Loan is
non-recourse to the Tasman Corporate Center Borrower, subject to certain limited
exceptions.
PAYMENT TERMS. The mortgage rate is fixed at 8.330% per annum. The
Tasman Corporate Center Loan requires monthly payments of principal and interest
of $186,543.78 until August 1, 2010, at which time all unpaid principal and
accrued but unpaid interest is due.
PREPAYMENT/DEFEASANCE. Voluntary prepayment is prohibited until three
(3) months prior to the maturity date. However, defeasance is permitted any time
after the earlier of (i) the date which is two (2) years after the date of the
securitization of the Tasman Corporate Center Loan or (ii) after August 1, 2004,
provided certain conditions of the Tasman Corporate Center Loan are satisfied.
LATE FEES AND DEFAULT INTEREST. There is a 4% late fee on installments
overdue for a period exceeding five (5) days. The Tasman Corporate Center Loan
accrues interest at the mortgage rate plus 4% per annum while the Tasman
Corporate Center Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Tasman Corporate
Center Loan provides that it will become immediately due and payable upon the
transfer of the Tasman Corporate Center Property or any ownership interest in
the Tasman Corporate Center Borrower, except in connection with any permitted
transfer.
Permitted transfers include the following:
(A) a one time transfer of the Tasman Corporate Center Property is
permitted provided the following requirements, among others are
satisfied: (i) the lender reviews and approves of the proposed
purchaser, which review and approval shall include, but not be limited
to, satisfaction with the proposed purchaser's creditworthiness,
financial strength and real estate management and leasing
III-10
<PAGE>
experience as well as the proposed transaction's effect on the Tasman
Corporate Center Property; (ii) lender's receipt of all relevant
documentation relating to the proposed transfer including but not
limited to evidence that the proposed purchaser is a special purpose
entity; and (iii) payment to lender of an assumption fee equal to the
greater of 1% of the balance of the Tasman Corporate Center Loan or
$15,000.00;
(B) transfers of ownership interests of the Tasman Corporate Center
Borrower are permitted provided the following requirements, among
others are satisfied: (i) the lender reviews and approves of the
proposed transferee, which review and approval shall include, but not
be limited to satisfaction with the proposed transferee's
creditworthiness, financial strength and real estate management and
leasing experience as well as the proposed transaction's effect on the
Tasman Corporate Center Property and (ii) payment to lender of an
assumption fee equal to the greater of 1% of the balance of the Tasman
Corporate Center Loan (which amount is to be prorated based upon the
percentage of ownership interests so transferred) or $15,000.00;
(C) transfers of limited partnership interests of the Tasman Corporate
Center Borrower are permitted provided (i) such transfers are to
trusts that are for the benefit of immediate family members of John A.
Sobrato or John M. Sobrato and (ii) lender receives all necessary
documentation and a reasonable processing fee; and
(D) transfers of (i) the Tasman Corporate Center Property, (ii) the
partnership interests within the Tasman Corporate Center Borrower or
(iii) the deletion or substitution of a trustee of any partner within
the Tasman Corporate Center Borrower are permitted provided (x) the
transferee is John A. Sobrato or John M. Sobrato or a master limited
partnership whose partner interests are held directly or indirectly by
the immediate family members of John A. Sobrato or the new trustee is
John A. Sobrato, John M. Sobrato or an immediate family member of John
A. Sobrato, (y) John A. Sobrato or John M. Sobrato remains managing
general partner (or the trustee thereof) owning a majority interest in
the partnership and (z) lender receives all necessary documentation
and a reasonable processing fee.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and other encumbrances
are prohibited by the Tasman Corporate Center Financing Documents.
THE PROPERTY
The Tasman Corporate Center Property is a five story suburban office
building comprising 140,935 square feet located on the west side of Great
America Parkway between Tasman Drive and Old Glory Lane in the Marriott Business
Park in Santa Clara, California. Parking is provided by a three level parking
structure with an overall parking ratio of 3.65 spaces per 1,000 square feet.
The Tasman Corporate Center Property consists of steel frame construction. The
interior is improved with fourteen feet of space between floors to allow
clearance for HVAC and data communications.
The Tasman Corporate Center Property is 100% leased to Brio Technology,
Inc. with a lease expiration date of June 5, 2010. Brio Technology, Inc.
develops, markets and supports enterprise business intelligence software. During
the second quarter of 2000, Brio Technology, Inc. merged with Sqribe
Technologies.
MANAGEMENT
The Sobrato Development Company provides the management and leasing
services for the Tasman Corporate Center Property.
III-11
<PAGE>
LOAN NO. 6 - PENNSYLVANIA BUILDING LOAN AND PROPERTY
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
Cut-off Date Balance: $21,324,274 Property Type: Office
Loan Type: Principal & Interest; Location: New York, NY
Balloon
Origination Date: 2/25/1994 Year Built/Renovated: 1925/1985
Maturity Date: 3/1/2014 Net Rentable Square Feet: 495,471
Mortgage Rate: 9.250% Cut-off Date Balance/SF: $43
Annual Debt Service: $2,414,997 Appraised Value: $102,000,000
DSCR: 2.27x Cut-off Date LTV: 20.9%
Underwritable Cash Flow: $5,482,661 Balloon LTV: 9.6%
Balance at Maturity: $9,764,429 Percent Leased: 99.3%
Percent Leased as of Date: 6/01/2000
---------------------------------- --------------------------- -------------------------------- ----------------------
</TABLE>
THE LOAN
The Pennsylvania Building Loan (the "Pennsylvania Building Loan") is
secured by a first mortgage on a 495,471 net rentable square foot office
building (the "Pennsylvania Building Property"), located in the Borough of
Manhattan in New York, New York. John Hancock Mutual Life Insurance Company
(which has changed its name to John Hancock Life Insurance Company) ("JHLICO")
has financed this property since 1990. JHLICO refinanced a previous loan on
February 25, 1994 to create the Pennsylvania Building Loan. The Pennsylvania
Building Loan was sold to JHREF on July 20, 2000.
THE BORROWER. The borrower in the Pennsylvania Building Loan is
Pennsylvania Building Company, a New York limited partnership (the "Pennsylvania
Building Borrower"). The general partners of the Pennsylvania Building Borrower
are Charles Borrok, Israel Hoffman and Gertrude Steingart (the "Pennsylvania
Building General Partners").
SECURITY. The Pennsylvania Building Loan is secured by a first mortgage
contained in a Consolidation, Extension and Modification Agreement and certain
additional security documents (the "Pennsylvania Building Financing Documents").
The mortgage is a first lien on the fee interest in the Pennsylvania Building
Property. The Pennsylvania Building Loan is non-recourse, subject to certain
limited exceptions.
PAYMENT TERMS. The mortgage rate is fixed at 9.250%. The Pennsylvania
Building Loan requires monthly payments of principal and interest of $201,249.73
until its maturity on March 1, 2014, at which time all unpaid principal and
accrued but unpaid interest is due. The Pennsylvania Building Loan accrues
interest computed on the basis of twelve 30-day months and a 360-day year.
PREPAYMENT. The Pennsylvania Building Loan may be prepaid in whole, but
not in part, with at least 30 days, but not more than 90 days, prior written
notice on any payment date on or after April 1, 2004. No Prepayment Premium is
due if the Pennsylvania Building Loan is voluntarily prepaid within 90 days
prior to maturity.
If there is an event of default prior to April 1, 2004 and the lender
accelerates the Pennsylvania Building Loan, the Pennsylvania Building Borrower
must pay a Prepayment Premium equal to the greater of (i) a yield maintenance
premium calculated by reference to U.S. Treasury obligations and (ii) 10% of the
then outstanding principal balance of the note.
LATE FEES AND DEFAULT INTEREST. The Pennsylvania Building Loan accrues
interest at 16.25% per annum while the Pennsylvania Building Loan is in default.
There are no late fees.
TRANSFER OF PROPERTY OR INTERESTS IN THE BORROWER. The Pennsylvania
Building Loan becomes immediately due and payable upon the transfer of the
Pennsylvania Building Property except for the one time right to transfer the
Pennsylvania Building Property if, among other things, (i) the lender reasonably
approves the transferee's financial responsibility and managerial
qualifications; (ii) the transferor pays to the mortgagee a fee equal to 1% of
the then outstanding principal balance of the note; and (iii) the transferee
assumes the Pennsylvania Building Loan.
III-12
<PAGE>
If in the 60 days prior to April 1, 2004, (a) the Pennsylvania Building
Borrower requests the right to transfer the Pennsylvania Building Property in
accordance with the terms of the Pennsylvania Building Financing Documents; (b)
the Pennsylvania Building Borrower complies with all of the conditions of
transfer in good faith; and (c) yet the lender withholds its consent to the
transfer in its sole discretion, the Pennsylvania Building Borrower may prepay
the Pennsylvania Building Loan in accordance with the prepayment provisions in
the Pennsylvania Building Financing Documents for prepayments made after April
1, 2004.
The Pennsylvania Building Loan becomes immediately due and payable upon
the transfer of ownership interests in the Pennsylvania Building Borrower,
except that (a) the general partners of the Pennsylvania Building Borrower at
the origination of the Pennsylvania Building Loan may transfer their partnership
interests to (1) then current or former general partners of the Pennsylvania
Building Borrower, (2) the beneficiaries or estate of any present general
partner or former general partner or (3) any family members of the present or
former general partners of Pennsylvania Building Borrower for estate planning
purposes and (b) limited partners may transfer limited partnership interests.
ESCROW/RESERVES. There is a tax reserve in place for the Pennsylvania
Building Loan. There are no other escrows or reserves.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness or encumbrances of the
Pennsylvania Building Property are prohibited except for a right to incur
subordinated debt up to $5,000,000 upon satisfaction of specified conditions
including that the net annual income (the income from the operation of the
Pennsylvania Building Property after deducting all operating expenses,
provisions for taxes and reserves and all other property deductions) in any year
is more than 125% of the combined annual debt service.
The Pennsylvania Building Borrower exercised its rights under the
provisions in the loan documents relating to subordinate indebtedness and
obtained from The SAIKE Group, L.P., financing secured by the Mortgaged Property
in the amount $4,500,000 ("Second Mortgage Loan"). The Pennsylvania Building
Borrower originally placed a second mortgage loan for $3,000,000 on the
Pennsylvania Building Property and then increased the loan amount to $4,500,000.
The Pennsylvania Building Borrower sought and received consent of the first
mortgage holder to the Second Mortgage Loan, both the initial mortgage and the
increase. Among other requirements, the first mortgage holder required the
Subordinate Lender to enter into a subordination agreement subordinating and
regulating the Second Mortgage Loan.
THE PROPERTY
The Pennsylvania Building Property is a 22-story office building with
495,471 square feet of net rentable area. The Pennsylvania Building Property was
99.3% occupied as of June 1, 2000. The first floor of the building is occupied
by retail tenants and the remainder of the building is devoted to office uses.
The first three floors of the building's exterior is a limestone, and the
remaining floors are brick with terra cotta masonry arches at various floors.
The rent roll of the building reveals the Pennsylvania Building
Property primarily serves accountants, advertising firms, lawyers and computer
companies. No tenant occupies more than ten percent (10%) of the net rentable
area of the building. Contractual lease expirations during the loan term are as
follows: 44,509 square feet (9%) in 2000, 93,163 square feet (19%) in 2001,
70,324 square feet (14%) in 2002, 23,681 square feet (5%) in 2003, 52,710 square
feet (11%) in 2004, 34,715 square feet (7%) in 2005, 5,099 square feet (1%) in
2006, 35,444 square feet (7%) in 2007, 35,305 square feet (7%) in 2008, 33,113
square feet (7%) in 2009, 33,723 square feet (7%) in 2010 and 29,260 square feet
(6%) in 2011. As of June 1, 2000, the average rent was $24.88 per square foot.
As part of the closing process, the Pennsylvania Building Borrower
delivered a municipal search report which revealed certain record violations.
The Pennsylvania Building Borrower signed an agreement at closing in which it
confirmed that the violations had been cured and undertook to dismiss the
recorded violations. Certain of the violations have not been removed from the
records of the municipal offices, but Borrower has delivered certifications or
evidence that the work to cure the violations has been performed and so the
impediments to removing the record violations are procedural and non-material
and not substantive.
III-13
<PAGE>
MANAGEMENT
The Pennsylvania Building Property is managed by Pennsylvania Building
Management Corp. (the "Pennsylvania Building Property Manager"). According to
information supplied by the Pennsylvania Building Borrower, the Pennsylvania
Building Property Manager is an affiliated entity with the Pennsylvania Building
Borrower and manages approximately 495,471 square feet of commercial space.
III-14
<PAGE>
LOAN NO. 7 - AFFINITY OFFICE BUILDING LOAN AND PROPERTY
<TABLE>
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<S> <C> <C> <C>
Cut-Off Date Balance: $20,978,557 Property Type: Office
Loan Type: Principal & Interest; Location: Columbia, SC
Balloon
Year Built/Renovated: 1987/NA
Origination Date: 8/14/2000 Square Footage: 465,561
Maturity Date: 9/1/2010 Cut-Off Date Balance/Sq. Ft.: $45
Mortgage Rate: 8.180% Appraisal Value: $40,500,000
Annual Debt Service: $1,975,121 Cut-Off Date LTV: 51.8%
DSCR: 1.72x Balloon LTV: 42.2%
Underwritten Cash Flow: $3,389,378 Percentage Leased: 88.9%
Balance at Maturity: $17,085,503 Percentage Leased as of Date: 8/10/2000
---------------------------- ---------------------- ------------------------------------- --------------------
</TABLE>
THE LOAN
The Affinity Office Building Loan (the "Affinity Office Building Loan")
is secured by a first mortgage on a twenty-six story office building comprising
465,561 square feet located in Columbia, South Carolina (the "Affinity Office
Building Property"). The Affinity Office Building Loan was originated for
Principal Commercial Funding, LLC on August 14, 2000.
THE BORROWER. The borrower is Parkway Capitol Center, LLC, a Delaware
limited liability company (the "Affinity Office Building Borrower"). The
Affinity Office Building Borrower is 100% owned by Parkway Properties, L.P., a
Delaware limited partnership and affiliate of Parkway Properties, Inc., an
office real estate investment trust. The Affinity Office Building Borrower is a
special purpose entity and does not have an independent director in its equity
structure.
SECURITY. The Affinity Office Building Loan is secured by a Loan
Agreement, Mortgage and Security Agreement, and certain additional security
documents (the "Affinity Office Building Financing Documents"). The Mortgage and
Security Agreement is a first lien on the Affinity Office Building Borrower's
fee interest in the Affinity Office Building Property. The Affinity Office
Building Loan is non-recourse to the Affinity Office Building Borrower, subject
to certain limited exceptions. Parkway Properties, L.P. has executed a guaranty
of the Affinity Office Building Borrower's recourse obligations with respect to
fraud, misrepresentation and environmental matters.
PAYMENT TERMS. The mortgage rate is fixed at 8.180% per annum. The
Affinity Office Building Loan requires monthly payments of principal and
interest of $164,593.40 until September 1, 2010, at which time all unpaid
principal and accrued but unpaid interest is due.
PREPAYMENT/DEFEASANCE. Voluntary prepayment is prohibited until three
(3) months prior to the maturity date. However, defeasance is permitted any time
after the earlier of (i) the date which is two (2) years after the
securitization of the Affinity Office Building Loan or (ii) the date which is
four (4) years after the date of the first principal and interest payment,
provided certain conditions in the Affinity Office Building Financing Documents
are satisfied.
LATE FEES AND DEFAULT INTEREST. There is a 4% late fee on installments
overdue. The Affinity Office Building Loan accrues interest at the mortgage rate
plus 4% per annum while the Affinity Office Building Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Affinity Office
Building Loan provides that it will become immediately due and payable upon the
transfer of the Affinity Office Building Property or any ownership interest in
the Affinity Office Building Borrower, except in connection with any permitted
transfer.
Permitted transfers include the following:
(A) two transfers of the Affinity Office Building Property are permitted
provided the following requirements, among others are satisfied: (i)
the lender reviews and approves of the proposed
III-15
<PAGE>
purchaser, which review shall include but not be limited to the
proposed purchaser's creditworthiness, financial strength and real
estate management and leasing experience as well as other security for
the Affinity Office Building Loan and (ii) payment to the lender of
the greater of 1% of the balance of the Affinity Office Building Loan
or $15,000.00; and
(B) transfers of ownership interests in the Affinity Office Building
Borrower are permitted provided the following requirements, among
others are satisfied: (i) the lender reviews and approves of the
proposed transferee, which review and approval shall include, but not
be limited to, satisfaction with the proposed transferee's
creditworthiness, financial strength and real estate management and
leasing experience as well as other security for the Affinity Office
Building Loan and (ii) payment to the lender of a fee equal to the
greater of 1% of the balance of the Affinity Office Building Loan
(which amount is to be prorated based upon the percentage of ownership
interests so transferred) or $15,000.00.
ESCROW/RESERVES. At closing, the Affinity Office Building Borrower
deposited $100,000 into escrow for tenant improvements and leasing commissions
until the Affinity Office Building Loan is paid in full. Monthly escrow deposits
are required for payment of real estate taxes.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and other encumbrances
are prohibited by the Affinity Office Building Financing Documents.
THE PROPERTY
The Affinity Office Building Property is a 26-story office building
comprising 465,561 square feet located in Columbia, South Carolina in the
central business district of the city at the intersection of Gervais Street,
Main Street and Assembly Street. The Affinity Office Building Property features
structural steel framing with insulated glass and metal panel curtain walls.
There are five elevators that service the mezzanine lobby through the 14th floor
and five high rise elevators that service the mezzanine lobby and floors 14-26.
There is also one service elevator that services the entire building. The lobby
and mezzanine level floors and walls are finished with polished marble. The
building has no onsite parking, but there is a 1,500 space public parking garage
directly north of the building with covered access into the mezzanine lobby.
Tenants either contract directly or through the management of the building for
parking. As of August 10, 2000, the Affinity Office Building Property was 88.9%
leased.
The Affinity Office Building Property is 54.3% leased to The State of
South Carolina pursuant to five separate leases that are all subject to yearly
appropriations. The largest lease, comprising 34.2% of the building, is to The
South Carolina Department of Budget and Control ("B&C"). B&C has the right to
cancel the lease every July 1 if state funding is discontinued. B&C is an
original tenant of the building, has recently extended its lease from 2002 until
2005 and pays below market rent.
The State of South Carolina Department of Commerce ("DOC") leases 13.9%
of the building. DOC has the right to cancel the lease every July 1 if state
funding is discontinued. DOC is an original tenant of the building, has recently
spent over $1 million in renovating its space and pays below market rent.
MANAGEMENT
Parkway Properties, Inc. has an onsite management office at the Affinity
Office Building Property. Parkway Realty Services is an affiliate of the
Affinity Office Building Borrower. The leasing firm is Colliers Keenan, a local
firm.
III-16
<PAGE>
LOAN NO. 8 - THE PINNACLE AT SQUAW PEAK LOAN AND PROPERTY
<TABLE>
<CAPTION>
---------------------------------- ------------------------- ------------------------------ --------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $18,824,153 Property Type: Multifamily
Loan Type: Principal & Interest Location: Phoenix, AZ
Balloon Year Built/Renovated: 1998/NAP
Origination Date: 2/25/1997 Units: 350
Maturity Date: 3/15/ 2009 Cut-Off Date Balance/Unit:
$53,783
Mortgage Rate: 7.930% Appraisal Value: $39,900,000
Annual Debt Service: $1,661,892 Cut-Off Date LTV: 47.2%
DSCR: 1.78x Balloon LTV: 42.2%
Underwritable Cash Flow: $2,951,131 Percent Leased: 96.0%
Balance at Maturity: $16,839,271 Percent Leased as of Date: 12/29/1999
---------------------------------- ------------------------- ------------------------------ --------------------------
</TABLE>
THE LOAN
The Pinnacle at Squaw Peak Loan (the "Pinnacle Loan") is secured by a
first lien on 350 units in a garden apartment complex located in Phoenix,
Arizona (the "Pinnacle Property"). The Pinnacle Loan was originated by The
Northwestern Mutual Life Insurance Company on February 25, 1997.
THE BORROWER. The borrower is BRE Property Investors LLC, a Delaware
limited liability company (the "Pinnacle Borrower"), as the successor to TCR
Squaw Peak Limited Partnership, a Texas limited partnership ("TCR") affiliated
with Trammel Crow Residential Company. The 100% member of the Pinnacle Borrower
is BRE Properties, Inc., a Maryland corporation ("BRE"). BRE is a real estate
investment trust that develops, owns and manages apartment communities in the
western United States. The Pinnacle Borrower is not a special purpose vehicle.
SECURITY. The Pinnacle Loan is secured by a Deed of Trust and Security
Agreement, Absolute Assignment of Leases and Rents (with License Back), UCC
Financing Statements and certain additional security documents (the "Pinnacle
Financing Documents"). The Deed of Trust is a first lien on the Pinnacle
Borrower's fee interest in the Pinnacle Property. The Pinnacle Loan is
non-recourse to the Pinnacle Borrower, subject to certain limited exceptions.
Several individuals and entities related to TCR remain liable under certain
guaranties with respect to the period prior to the transfer of the Pinnacle
Property to the Pinnacle Borrower on November 13, 1997.
PAYMENT TERMS. Monthly payments are due on the Pinnacle Loan on the
15th day of each month. The mortgage rate is fixed at 7.930% per annum. The
Pinnacle Loan requires monthly payments of principal and interest of $138,491.00
until its maturity on March 15, 2009, at which time all unpaid principal and
accrued but unpaid interest is due. The Pinnacle Loan accrues interest computed
on the basis of the actual number of days elapsed in each accrual period and the
actual number of days in the related calendar year.
PREPAYMENT. Voluntary prepayment is prohibited until March 15, 2003. No
prepayment premium is due if the Pinnacle Loan is prepaid within ninety (90)
days prior to maturity.
LATE FEES AND DEFAULT INTEREST. The Pinnacle Loan accrues interest at
the mortgage rate plus 5% per annum while the Pinnacle Loan is in default.
There are no late fees.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Pinnacle Loan
provides that it will become immediately due and payable upon the transfer of
the Pinnacle Property by the Pinnacle Borrower or a change in the proportionate
ownership of the Pinnacle Borrower.
ESCROW/RESERVES. There are currently no escrows or reserves In the
event of any default, the lender has the option to require reserves for the
payment of real estate taxes and special assessments.
SUBORDINATED/OTHER DEBT. The Pinnacle Financing Documents do not
prohibit the incurrence of unsecured indebtedness by the Pinnacle Borrower or of
indebtedness secured by the Pinnacle Borrower's other assets. All prior liens
and all subordinate mortgage liens are prohibited by the Pinnacle Financing
Documents.
III-17
<PAGE>
THE PROPERTY
The Pinnacle Property consists of 350 units in 24 three-level buildings
built in 1998 and is located in Phoenix, Arizona. The unit mix includes 132
one-bedroom units with an average unit size of 789 square feet, 208 two-bedroom
units with an average unit size of 1178 square feet and 10 three-bedroom units
with an average unit size of 1353 square feet. The buildings are wood frame with
a stucco exterior. The roof is a pitched wood truss system with concrete tiles.
All units contain refrigerators with ice makers, electric ovens, microwave
ovens, televisions in the kitchens, dishwashers, disposals, intrusion alarms,
blinds and washer/dryers. Some units have fireplaces. Complex amenities include
a gated environment, two swimming pools, two spas, a clubhouse, a leasing
office, a fitness center and a movie room.
As of December 29, 1999, the Pinnacle Property was 96.0% occupied.
MANAGEMENT
BRE is the management and leasing firm of the Pinnacle Property. BRE
owns and manages 86 apartment communities with more than 22,500 units located in
8 states.
III-18
<PAGE>
LOAN NO. 9 - MARIGOLD CENTER LOAN AND PROPERRTY
<TABLE>
<CAPTION>
----------------------------- ---------------------- ------------------------------------- --------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $17,982,244 Property Type: Retail
Loan Type: Principal & Interest; Location: San Luis Obispo, CA
Balloon
Year Built/Renovated: 1996-1999/NA
Origination Date: 6/30/2000 Square Footage: 174,428
Maturity Date: 8/1/2010 Cut-Off Date Balance/Sq. Ft.: $103
Mortgage Rate: 8.470% Appraisal Value: $24,500,000
Annual Debt Service: $1,656,263 Cut-Off Date LTV: 73.4%
DSCR: 1.28x Balloon LTV: 66.5%
Underwritten Cash Flow: $2,118,866 Percentage Leased: 97.1%
Balance at Maturity: $16,291,182 Percentage Leased as of Date: 6/23/2000
----------------------------- ---------------------- ------------------------------------- --------------------
</TABLE>
THE LOAN
The Marigold Center Loan (the "Marigold Center Loan") is secured by a
first mortgage on a single story shopping center comprising 174,428 square feet
located in San Luis Obispo, California (the "Marigold Center Property"). The
Marigold Center Loan was originated for Principal Commercial Funding, LLC on
June 30, 2000.
THE BORROWER. The borrower is Marigold Center, LLC, a California
limited liability company (the "Marigold Center Borrower"). Marigold Management,
LLC, a California limited liability company is the managing member of the
Marigold Center Borrower and owns 1% of the Marigold Center Borrower. GDE
Properties Corporation owns 99% of the Marigold Center Borrower and 100% of
Marigold Management, LLC. GDE Properties Corporation is 100% owned by The J.
David Gladstone Institutes, a charitable trust organized under the laws of
California. The Marigold Center Borrower is a special purpose entity with a
special purpose member. Each of the Marigold Center Borrower and Marigold
Management, LLC has an independent member and a non-consolidation opinion was
obtained at closing.
SECURITY. The Marigold Center Loan is secured by a Loan Agreement, Deed
of Trust, Assignment of Rents and Leases, and certain additional security
documents (the "Marigold Center Financing Documents"). The Deed of Trust is a
first lien on the Marigold Center Borrower's fee interest in the Marigold Center
Property. The Marigold Center Loan is non-recourse to the Marigold Center
Borrower, subject to certain limited exceptions.
PAYMENT TERMS. The mortgage rate is fixed at 8.470% per annum. The
Marigold Center Loan requires monthly payments of principal and interest of
$138,021.90 until August 1, 2010, at which time all unpaid principal and accrued
but unpaid interest is due.
PREPAYMENT/DEFEASANCE. Voluntary prepayment is prohibited until three
(3) months prior to the maturity date. However, defeasance is permitted any time
after the earlier of (i) the date which is two (2) years after the
securitization of the Marigold Center Loan or (ii) the date which is four (4)
years after the date of the first principal and interest payment, provided
certain conditions in the Marigold Center Financing Documents are satisfied.
LATE FEES AND DEFAULT INTEREST. There is a 4% late fee on installments
overdue. The Marigold Center Loan accrues interest at the mortgage rate plus 4%
per annum while the Marigold Center Loan is in default.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Marigold Center Loan
provides that it will become immediately due and payable upon the transfer of
the Marigold Center Property or any ownership interest in the Marigold Center
Borrower, except in connection with any permitted transfer.
Permitted transfers include the following:
(A) two transfers of the Marigold Center Property are permitted provided
the following requirements, among others are satisfied: (i) the lender
reviews and approves of the proposed purchaser, which review and
approval shall include, but not be limited to, satisfaction with the
proposed purchaser's
III-19
<PAGE>
creditworthiness, financial strength and real estate management and
leasing experience as well as other security for the Marigold Center
Loan, (ii) the lender's receipt of all relevant documentation relating
to the proposed transfer including but not limited to evident that the
proposed purchaser is a special purpose entity and (iii) payment to
the lender of a fee equal to the greater of 1% of the balance of the
Marigold Center Loan or $15,000.00;
(B) a single transfer of the Marigold Center Property is permitted within
the first 12 months from the closing date the Marigold Center Loan
provided the following requirements, among others are satisfied: (i)
the lender reviews and approves of the proposed purchaser, which
review and approval shall include, but not be limited to, satisfaction
with the proposed purchaser's creditworthiness, financial strength and
real estate management and leasing experience as well as other
security for the Marigold Center Loan, (ii) the lender's receipt of
all relevant documentation relating to the proposed transfer including
but not limited to evident that the proposed purchaser is a special
purpose entity and (iii) payment to the lender of a $10,000.00
assumption fee and a $5,000.00 processing fee;
(C) transfers of ownership interests in the Marigold Center Borrower are
permitted provided the following requirements, among others are
satisfied: (i) the lender reviews and approves of the proposed
transferee, which review and approval shall include, but not be
limited to, satisfaction with the proposed transferee's
creditworthiness, financial strength and real estate management and
leasing experience as well as other security for the Marigold Center
Loan and (ii) payment to the lender of a fee equal to the greater of
1% of the balance of the Marigold Center Loan (which amount is to be
prorated based upon the percentage of ownership interests so
transferred) or $15,000.00; and
(D) a transfer by GDE Properties Corporation of its membership interests
in the Marigold Center Borrower or Marigold Management, LLC to (i) the
shareholders of GDE Properties Corporation, (ii) any entity controlled
by the shareholders of GDE Properties Corporation or (iii) any entity,
trustee or person controlled by or affiliated with the trustees of the
J. David Gladstone Institute.
ESCROW/RESERVES. Monthly escrow deposits are required in the amount of
$5,900.00 for tenant improvements and leasing commissions; provided, however,
for so long as the escrow balance equals $142,000.00, the Marigold Center
Borrower is not required to deposit monthly sums into escrow. If at any time the
escrow balance drops below $142,000.00, the Marigold Center Borrower must begin
making monthly escrow deposits of $5,900.00 until the escrow balance equals
$142,000.00. Monthly escrow deposits are required for payment of real estate
taxes.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and other encumbrances
are prohibited by the Marigold Center Financing Documents.
THE PROPERTY
The Marigold Center Property is a single story neighborhood shopping
center comprising 174,428 square feet located in San Luis Obispo, California in
the southeastern section of the city between the intersections of Broad Street
and Industrial Way and Broad Street and Tank Farm Road. Parking is provided at a
ratio of 4.43 spaces per 1,000 square feet. The Marigold Center Property
consists predominately of load bearing concrete masonry unit walls with wood
framed roof structures, except for the portion of the Marigold Center Property
leased to The Vons Company which has a steel framed roof structure. As of June
23, 2000, the Marigold Center Property was 97.1% leased.
The Marigold Center Property is 29.9 % leased to The Vons Company, a
grocer retailer owned by Safeway, Inc. with a lease expiration date of
December 31, 2017. Michael's Stores, Inc. occupies 12.0% and American Drug
Stores, Inc. occupies 9.7% of the Marigold Center Property.
MANAGEMENT
The management firm is Quong Enterprises. The leasing firm is Rossetti
Company.
III-20
<PAGE>
LOAN NO. 10 - CROSS CREEK SHOPPING CENTER LOAN AND PROPERTY
<TABLE>
<CAPTION>
---------------------------------- ------------------------- ------------------------------ --------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $17,752,738 Property Type: Retail
Loan Type: Principal & Interest Location: Memphis, TN
No Balloon Year Built/Renovated: 1996/NAP
Origination Date: 3/26/1996 Square Footage: 359,951
Maturity Date: 10/1/2011 Cut-Off Date Balance/SF: $49
Mortgage Rate: 7.250% Appraisal Value: $39,000,000
Annual Debt Service: $2,355,180 Cut-Off Date LTV: 45.5%
DSCR: 1.43x Balloon LTV: 0.0%
Underwritable Cash Flow: $3,368,062 Percent Leased: 99.0%
Balance at Maturity: $0 Percent Leased as of Date: 3/6/2000
---------------------------------- ------------------------- ------------------------------ --------------------------
</TABLE>
THE LOAN
The Cross Creek Shopping Center Loan (the "Cross Creek Loan") is
secured by a first mortgage on a 359,951 square foot retail center located in
Memphis, Tennessee (the "Cross Creek Property"). The Cross Creek Loan was
originated by The Northwestern Mutual Life Insurance Company on March 26, 1996.
THE BORROWER. The borrower is Michael A. Lightman (the "Cross Creek
Borrower"), an individual involved in real estate development in the Memphis
area.
SECURITY. The Cross Creek Loan is secured by a Deed of Trust and
Security Agreement, an Absolute Assignment of Leases and Rents (With License
Back), UCC Financing Statements and certain additional security documents (the
"Cross Creek Financing Documents"). The Deed of Trust is a first lien on the
Cross Creek Borrower's fee interest in the Cross Creek Property. The Cross Creek
Loan is a recourse loan to the Cross Creek Borrower in an amount equal to
$4,000,000 plus certain other amounts, provided that if any of the due on sale
provisions of the Deed of Trust are violated, the Cross Creek Borrower is fully
liable for the Cross Creek Loan.
PAYMENT TERMS. The mortgage rate is fixed at 7.250% per annum. The
Cross Creek Loan requires monthly payments of principal and interest of $
196,265.00 until its maturity on October 1, 2011, at which time all unpaid
principal and accrued but unpaid interest is due. The Cross Creek Loan accrues
interest computed on the basis of the actual number of days elapsed in each
accrual period and the actual number of days in the related calendar year.
PREPAYMENT. Voluntary prepayment is prohibited until November 1, 2001.
No prepayment premium is due if the Cross Creek Loan is prepaid within
sixty (60) days prior to maturity.
LATE FEES AND DEFAULT INTEREST. The Cross Creek Loan accrues interest at
the mortgage rate plus 5% per annum while the Cross Creek Loan is in default.
There are no late fees.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Cross Creek Loan
provides that it will become immediately due any payable upon the transfer of
the Cross Creek Property by the Cross Creek Borrower unless the transfer results
from the death or legal incompetency of the Borrower, except as follows: the
Cross Creek Financing Documents permit the transfer of the Cross Creek
Borrower's ownership interests in the Cross Creek Property to or among Michael
A. Lightman's spouse, his descendants and their spouses, any trusts or estates
for the benefit of such parties and any entities owned and controlled by such
parties; and the Cross Creek Financing Documents also permit the transfer of up
to 49% of the Cross Creek Borrower's ownership interests in the Cross Creek
Property to an unaffiliated third party, provided that the purchaser assumes all
of the obligations of the Cross Creek Borrower under the Cross Creek Financing
Documents.
ESCROW/RESERVES. There are currently no escrows or reserves The lender
has the option to require reserves for the payment of real estate taxes and
special assessments in the event of any default.
III-21
<PAGE>
SUBORDINATED/OTHER DEBT. The Cross Creek Financing Documents do not
prohibit the incurrence of unsecured indebtedness by the Cross Creek Borrower of
indebtedness secured by the Cross Creek Borrower's other assets. All prior liens
and all subordinate mortgage liens are prohibited by the Cross Creek Financing
Documents
THE PROPERTY
The Cross Creek Property consists of 359,951 square feet of anchor and
in-line space in a single-story building, with three outparcels, located in
Memphis, Tennessee. As of March 6, 2000, the Cross Creek Property was 99.0%
leased to 18 tenants. The Cross Creek Property is situated in the city of
Memphis, Tennessee.
The Cross Creek Property is anchored by Home Depot U.S.A, Inc and
Kroger Food Stores. Other tenants include Rhodes Furniture, Baby Superstore,
Bed, Bath & Beyond, Computer City and Old Navy Clothing Inc. Contractual Lease
expirations during the term are as follows: 1,206 square feet (less than 1%) in
2000; 14,000 square feet (4 %) in 2001; 4,826 square feet (1%) in 2002; 12,791
square feet (4 %) in 2003; no expirations in 2004 or 2005; 42,296 square feet
(12 %) in 2006; and 35,000 square feet (10 %) in 2007.
MANAGEMENT
The Cross Creek Property is managed by the Weston Companies, a third
party regional commercial real estate management company.
III-22
<PAGE>
MORGAN STANLEY DEAN WITTER MORGAN STANLEY OCTOBER 19, 2000
SECURITIZED PRODUCTS GROUP DEAN WITTER LOGO
CMBS NEW ISSUE
COLLATERAL TERM SHEET
------------------------------------------
PRICING DATE: OCTOBER 19, 2000
------------------------------------------
$693,789,000
(APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
AS DEPOSITOR
PRINCIPAL COMMERCIAL FUNDING, LLC
JOHN HANCOCK REAL ESTATE FINANCE, INC.
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
AS MORTGAGE LOAN SELLERS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-LIFE2
------------------------------------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, and Goldman,
Sachs & Co. 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>
$693,789,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-LIFE2
TRANSACTION FEATURES
--------------------
> Sellers:
--------------------------------------------------------------------------------
NO. OF CUT-OFF DATE % OF
SELLERS LOANS BALANCE ($) POOL
--------------------------------------------------------------------------------
Principal Commercial Funding, LLC 78 461,402,730 60.3
John Hancock Real Estate Finance, Inc. 22 210,329,901 27.5
The Northwestern Mutual Life Insurance Co. 3 93,616,747 12.2
--------------------------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
--------------------------------------------------------------------------------
> Loan Pool:
o Average Cut-off Date Balance: $7,430,576
o Largest loan by Cut-off Date Balance: $57,039,856 (7.5% of Pool)
o Five largest and ten largest loans: 20.5% and 33.2% of Pool,
respectively
> Credit Statistics:
o Weighted average debt service coverage ratio of 1.53x
o Weighted average current loan-to-value of 60.8%; weighted average
balloon loan-to-value of 52.2%
> Property Types:
o Retail, office, industrial and multifamily properties comprise 96.8% of
Pool
Office 30.0%
Industrial 25.8%
Retail 21.5%
Multifamily 19.5%
Assisted Living 2.2%
Self Storage 0.4%
Hospitality 0.5%
> Call Protection:
o Lockout period ranging from 24 to 120 months, then either defeasance
provisions and/or the greater of yield maintenance and a penalty ranging
from 0.75% to 2.0%: 100.0%
> Collateral Information Updates: Updated loan information is expected to be
part of the monthly Certificateholder Reports available from the Trustee in
addition to detailed payment and delinquency information. Information
provided by the Trustee is expected to be available at www.lnbabs.com.
Updated property operating and occupancy information, to the extent
delivered by borrowers, is expected to be available to Certificateholders
from the Master Servicer at www.wellsfargo.com
> Bond Information: Cash flows are expected to be modeled by TREPP, CONQUEST
and INTEX and are expected to be available on BLOOMBERG
> Lehman Aggregate Bond Index: It is expected that this transaction will be
included in the Lehman Aggregate Bond Index
T-2
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, and Goldman,
Sachs & Co. 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>
$693,789,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-LIFE2
OFFERED CERTIFICATES
--------------------
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
INITIAL EXPECTED FINAL INITIAL
CERTIFICATE SUBORDINATION RATINGS AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH CERTIFICATE
CLASS BALANCE(1) LEVELS (FITCH/MOODY'S) LIFE(2) WINDOW(2)(3) DATE(2) RATE(4) TO VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 $159,079,000 16.50% AAA/Aaa 5.70 1 - 93 7/15/2008 6.96% 50.8%
-----------------------------------------------------------------------------------------------------------------------------------
A-2 $479,987,000 16.50% AAA/Aaa 9.34 93 - 119 9/15/2010 7.20% 50.8%
-----------------------------------------------------------------------------------------------------------------------------------
B $22,961,000 13.50% AA/Aa2 9.88 119 - 119 9/15/2010 7.35% 52.6%
-----------------------------------------------------------------------------------------------------------------------------------
C $24,874,000 10.25% A/A2 9.88 119 - 119 9/15/2010 7.50% 54.6%
-----------------------------------------------------------------------------------------------------------------------------------
D $6,888,000 9.35% A-/A3 9.88 119 - 119 9/15/2010 7.62% 55.1%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PRIVATE CERTIFICATES (5)
--------------------
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
INITIAL
CERTIFICATE EXPECTED FINAL INITIAL
BALANCE OR SUBORDINATION RATINGS AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH CERTIFICATE
CLASS NOTIONAL AMOUNT(1) LEVELS (FITCH/MOODY'S) LIFE(2) WINDOW(2)(3) DATE(2) RATE(4) TO VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
X $765,349,379(6) --- AAA/Aaa --- --- --- Variable Rate(7) ---
-----------------------------------------------------------------------------------------------------------------------------------
E $18,751,000 6.90% BBB/Baa2 9.88 119 - 119 9/15/2010 NWAC - 0.29% 56.6%
-----------------------------------------------------------------------------------------------------------------------------------
F $7,653,000 5.90% BBB-/Baa3 9.95 119 - 120 10/15/2010 NWAC 57.2%
-----------------------------------------------------------------------------------------------------------------------------------
G $3,062,000 5.50% BBB-/NR 9.96 120 - 120 10/15/2010 NWAC 57.5%
-----------------------------------------------------------------------------------------------------------------------------------
H - P $42,094,379 --- --- --- --- --- 6.96% ---
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) As of October 1, 2000. In the case of each such Class, subject to a
permitted variance of plus or minus 5%.
(2) Based on the Structuring Assumptions described in the Prospectus
Supplement.
(3) Principal window is the period (expressed in terms of months and
commencing with the month of November) during which distributions of
principal are expected to be made to the holders of each designated
Class in accordance with the Structuring Assumptions, assuming 0%
CPR.
(4) The Class A-1, A-2, B, C and D Certificates will accrue interest at
a fixed rate. The Class B, C and D Certificates will be subject to a
NWAC cap. The Class E, F, G and X Certificates will accrue interest
at a variable rate.
(5) Certificates to be offered privately pursuant to Rule 144A.
(6) Class X Notional Amount is equal to the sum of all Principal Balance
Certificates outstanding from time to time. (7) The Pass-Through
Rate on the Class X Certificates on each Distribution Date will
equal, in general, the NWAC Rate minus the weighted average of the
Pass-Through Rates of the classes of certificates that have
principal amounts.
T-3
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, and Goldman,
Sachs & Co. 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>
$693,789,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-LIFE2
I. ISSUE CHARACTERISTICS
---------------------
Issue Type: Public: Class A-1, A-2, B, C and D (the "Offered
Certificates")
Private (Rule 144A): Class X, E, F, G, H, J, K, L, M,
N, O and P
Securities Offered: $693,789,000 monthly pay, multi-class sequential pay
commercial mortgage REMIC Pass-Through Certificates,
including five fixed-rate principal and interest
classes (A-1, A-2, B, C and D)
Collateral: The collateral consists of a $765,349,379 pool of 103
fixed-rate commercial and multifamily Mortgage Loans
Sellers: Principal Commercial Funding, LLC, John Hancock Real
Estate Finance, Inc., and The Northwestern Mutual
Life Insurance Company
Lead Manager: Morgan Stanley & Co. Incorporated
Co-Manager: Goldman, Sachs & Co.
Master Servicer: Wells Fargo Bank, National Association
Primary Servicers: Principal Capital Management, LLC, John Hancock Real
Estate Finance, Inc. and The Northwestern Mutual Life
Insurance Company
Special Servicer: GMAC Commercial Mortgage Corporation
Trustee: LaSalle Bank, National Association
Pricing Date: October 19, 2000
Closing Date: October 31, 2000
Distribution Dates: The 15th of each month, commencing November 15, 2000
Cut-off Date: October 1, 2000 for any Mortgage Loan that has a due
date on the first day of each month. For purposes of
the information contained in this Term Sheet, we
present the loans as if their scheduled payments due
in October 2000 were due on October 1, 2000, not the
actual day which such scheduled payments were due.
Minimum Denominations: $25,000 for Class A Certificates; $100,000 for all
other Certificates (other than the Class R
Certificates) and in multiples of $1 thereafter
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"
SECTION OF THE PROSPECTUS SUPPLEMENT AND THE "RISK
FACTORS" SECTION OF THE PROSPECTUS
T-4
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, and Goldman,
Sachs & Co. 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>
$693,789,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-LIFE2
Prepayment Premium Any Prepayment Premiums collected with respect to a
Allocation: Mortgage Loan during any particular Collection Period
will be distributed to the holders of each Class of
Principal Balance Certificates (other than an
excluded Class as defined below) then entitled to
distributions of principal on such distribution date
(allocable on a pro-rata basis based on principal
payments if there is more than one Class of Principal
Balance Certificates entitled to a distribution of
principal) in an amount equal to the lesser of (a)
such Prepayment Premium and (b) 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 H through P
Certificates are the excluded classes.
The following is an example of the Prepayment Premium
Allocation under (b) above based on the information
contained herein and the following assumptions:
o Two Classes of Certificates: Class A-1 and X
o The characteristics of the Mortgage Loan being
prepaid are as follows:
- Loan Balance: $10,000,000
- Mortgage Rate: 8.00%
- Maturity Date: 10 years (October 1, 2010)
o The Discount Rate is equal to 5.75%
o The Class A-1 Pass-Through Rate is equal to 6.96%
CLASS A-1 CLASS X
METHOD CERTIFICATES CERTIFICATES
--------------------------------------------- --------------- ----------------
(Class A-1 Pass Through Rate - Discount Rate) (6.96%-5.75%) (100.00%-53.78%)
--------------------------------------------- ---------------
(Mortgage Rate - Discount Rate) (8.00%-5.75%)
--------------- ----------------
Prepayment Premium Allocation 53.78% 46.22%
THE FOREGOING TERMS AND STRUCTURAL CHARACTERISTICS OF THE CERTIFICATES ARE IN
ALL RESPECTS SUBJECT TO THE MORE DETAILED DESCRIPTION THEREOF IN THE PROSPECTUS,
PROSPECTUS SUPPLEMENT AND POOLING AND SERVICING AGREEMENT.
T-5
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, and Goldman,
Sachs & Co. 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>
$693,789,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-LIFE2
II. SELLERS Principal Commercial Funding, LLC ("PCF")
------- -----------------------------------------
The Mortgage Pool includes 78 Mortgage Loans,
representing 60.3% of the Initial Pool Balance, that
were originated by PCF and/or its affiliates.
PCF is a wholly owned subsidiary of Principal Capital
Management, LLC, which is a wholly owned subsidiary
of Principal Life Insurance Company. PCF was formed
as a Delaware limited liability company to originate
and acquire loans secured by commercial and
multi-family real estate. Each of the PCF loans was
originated and underwritten by PCF and/or its
affiliates. PCF has previously securitized 145 loans
totaling approximately $663 million.
John Hancock Real Estate Finance, Inc. ("JHREF")
------------------------------------------------
The Mortgage Pool includes 22 Mortgage Loans,
representing 27.5% of the Initial Pool Balance, that
were originated by JHREF and/or its affiliates.
JHREF is a wholly owned subsidiary of John Hancock
Subsidiaries, Inc., which, in turn, is a wholly owned
subsidiary of John Hancock Life Insurance Company.
JHREF was founded in 1982 and is headquartered in
Boston, Massachusetts.
JHREF presently has six offices across the country
and a loan servicing center located in Atlanta,
Georgia. Certain of the mortgage loans contributed by
JHREF were closed by John Hancock Life Insurance
Company with the remainder closed by JHREF itself.
Both JHREF and John Hancock Life Insurance Company
underwrote their mortgage loans at their headquarters
in Boston, Massachusetts. JHREF has previously
securitized 81 loans totaling approximately $483
million.
The Northwestern Mutual Life Insurance Company
("Northwestern Mutual")
----------------------------------------------
The Mortgage Pool includes 3 Mortgage Loans,
representing 12.2% of the Initial Pool Balance, that
were originated by Northwestern Mutual.
Northwestern Mutual is a mutual insurance company
founded in 1857 and headquartered in Milwaukee,
Wisconsin. Northwestern Mutual presently has ten
regional real estate field offices across the country
which, along with Northwestern Mutual's Milwaukee
headquarters, originates and services all mortgage
loans. Each of the Northwestern Mutual loans was
originated and closed by Northwestern Mutual.
T-6
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, and Goldman,
Sachs & Co. 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>
$693,789,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-LIFE2
III. COLLATERAL DESCRIPTION
----------------------
TEN LARGEST LOANS
-----------------
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
LOAN CUT-OFF
PROPERTY CUT-OFF UNITS/ PER DATE BALLOON
PROPERTY NAME CITY STATE TYPE DATE BALANCE SF UNIT/SF DSCR LTV LTV
----------------------------------- ---------------- ----- -------------- ------------ -------- ---------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Towers at Portside Jersey City NJ Multifamily $57,039,856 527 $108,235 2.05 45.6% 40.0%
Southridge Woods Apartment Complex South Brunswick NJ Multifamily $28,409,446 648 $43,842 1.59 59.7% 54.0%
Twin County Building Edison NJ Industrial $24,477,507 656,720 $37 1.28 69.0% 62.8%
825 Seventh Avenue New York NY Office $23,802,280 164,743 $144 1.26 64.7% 50.3%
Tasman Corporate Center Santa Clara CA Office $23,453,008 140,935 $166 1.52 57.2% 46.8%
Pennsylvania Building New York NY Office $21,324,274 495,471 $43 2.27 20.9% 9.6%
Affinity Office Building Columbia SC Office $20,978,557 465,561 $45 1.72 51.8% 42.2%
Pinnacle at Squaw Peak Phoenix AZ Multifamily $18,824,153 350 $53,783 1.78 47.2% 42.2%
Marigold Center San Luis Obispo CA Retail $17,982,244 174,428 $103 1.28 73.4% 66.5%
Cross Creek Retail Memphis TN Retail $17,752,738 359,951 $49 1.43 45.5% 0.0%
-----------------------------------------------------------------------------------------------------------------------------------
TOTALS/WEIGHTED AVERAGES $254,044,063 1.67X 52.8% 42.2%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
T-7
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, and Goldman,
Sachs & Co. 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>
$693,789,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-LIFE2
GEOGRAPHIC DISTRIBUTION
CA 21.3% NY 7.4% NV 1.3%
NORTHERN CA 9.8% AZ 4.2% UT 2.4%
SOUTHERN CA 11.5% NE 0.6% TX 3.7%
CO 2.9% MI 2.9% OH 1.9%
IL 0.7% TN 3.4% GA 1.9%
KY 0.7% SC 4.1% NC 0.3%
FL 4.6% VA 0.6% MD 4.7%
D.C. 2.0% NJ 25.7% CT 0.4%
PA 1.4% MA 0.9%
T-8
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, and Goldman,
Sachs & Co. 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>
$693,789,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-LIFE2
CUT-OFF DATE BALANCE ($)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
1,000,001 - 2,000,000 9 14,784,215 1.9
2,000,001 - 3,000,000 17 43,309,280 5.7
3,000,001 - 4,000,000 17 60,994,167 8.0
4,000,001 - 5,000,000 12 52,991,169 6.9
5,000,001 - 6,000,000 8 42,894,742 5.6
6,000,001 - 7,000,000 3 20,102,136 2.6
7,000,001 - 8,000,000 6 43,930,608 5.7
8,000,001 - 9,000,000 4 34,420,671 4.5
9,000,001 - 10,000,000 3 27,975,249 3.7
10,000,001 - 15,000,000 13 154,229,917 20.2
15,000,001 - 20,000,000 4 70,232,296 9.2
20,000,001 - 25,000,000 5 114,035,627 14.9
25,000,001 (greater than) = 2 85,449,302 11.2
------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
------------------------------------------------------------
Min: $ 1,198,438 Max: $57,039,856 Average: $7,430,576
------------------------------------------------------------
STATE
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
New Jersey 18 196,723,665 25.7
California 21 163,165,152 21.3
New York 5 56,555,217 7.4
Maryland 6 35,757,411 4.7
Florida 8 35,470,367 4.6
Arizona 5 31,875,502 4.2
South Carolina 4 31,254,760 4.1
Texas 5 28,217,283 3.7
Tennessee 2 26,049,464 3.4
Colorado 3 22,517,699 2.9
Other 26 137,762,858 18.0
------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
------------------------------------------------------------
PROPERTY TYPE
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
Retail 26 $164,216,639 21.5
Office 27 $229,773,052 30.0
Industrial/Warehouse 34 $197,757,593 25.8
Multifamily 12 $149,235,479 19.5
Assisted Living Facility 2 $17,083,696 2.2
Hospitality 1 $3,895,626 0.5
Self Storage 1 $3,387,294 0.4
------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
------------------------------------------------------------
MORTGAGE RATE (%)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
6.501 - 7.000 2 70,486,872 9.2
7.001 - 7.500 4 45,069,180 5.9
7.501 - 8.000 13 96,858,381 12.7
8.001 - 8.500 47 350,010,330 45.7
8.501 - 9.000 33 167,773,403 21.9
9.001 - 9.500 4 35,151,213 4.6
------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
------------------------------------------------------------
Min: 6.720 Max: 9.250 Wtd Avg: 8.153
------------------------------------------------------------
ORIGINAL TERM TO STATED MATURITY (MOS)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
61 - 120 98 679,607,965 88.8
121 - 180 3 46,664,402 6.1
181 - 240 2 39,077,013 5.1
------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
------------------------------------------------------------
Min: 109 Max: 240 Wtd Avg: 127
------------------------------------------------------------
REMAINING TERM TO STATED MATURITY (MOS)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
61 - 120 99 698,432,117 91.3
121 - 180 4 66,917,261 8.7
------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
------------------------------------------------------------
Min: 82 Max: 168 Wtd Avg: 115
------------------------------------------------------------
CUT-OFF DATE LOAN-TO-VALUE RATIO (%)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
20.1 - 30.0 1 21,324,274 2.8
30.1 - 40.0 3 6,435,296 0.8
40.1 - 50.0 9 118,409,247 15.5
50.1 - 60.0 22 212,200,384 27.7
60.1 - 70.0 33 218,464,671 28.5
70.1 - 80.0 35 188,515,507 24.6
------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
------------------------------------------------------------
Min: 20.9 Max: 79.9 Wtd Avg: 60.8
------------------------------------------------------------
BALLOON LOAN-TO-VALUE RATIO (%)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
0.0 1 17,752,738 2.3
0.1 - 10.0 1 21,324,274 2.8
30.1 - 40.0 8 82,822,318 10.8
40.1 - 50.0 21 180,100,186 23.5
50.1 - 60.0 23 184,986,383 24.2
60.1 - 70.0 45 261,636,789 34.2
70.1 - 75.0 4 16,726,691 2.2
------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
------------------------------------------------------------
Min: 0.0 Max: 72.1 Wtd Avg: 52.2
------------------------------------------------------------
DEBT SERVICE COVERAGE RATIO (x)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
1.16 - 1.25 14 54,920,160 7.2
1.26 - 1.35 34 212,321,968 27.7
1.36 - 1.50 21 180,393,954 23.6
1.51 - 1.75 20 169,548,929 22.2
1.76 - 2.00 8 59,469,316 7.8
2.01 (greater than) = 6 88,695,052 11.6
------------------------------------------------------------
TOTAL: 103 $765,349,379 100.0%
------------------------------------------------------------
Min: 1.18x Max: 2.71x Wtd Avg: 1.53x
------------------------------------------------------------
All numerical information concerning the Mortgage Loans is approximate. All
weighted average information regarding the Mortgage Loans reflects the weighting
of the Mortgage Loans based upon their principal balances as of the Cut-off
Date.
T-9
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, and Goldman,
Sachs & Co. 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>
$693,789,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-LIFE2
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT RESTRICTION (%)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS OCT 00 OCT 01 OCT 02 OCT 03 OCT 04 OCT 05
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Locked Out/Defeasance 100.00% 97.80% 91.84% 72.66% 63.90% 58.85%
Yield Maintenance 0.00% 2.20% 8.16% 27.34% 36.10% 41.15%
Total
Open 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
-----------------------------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $765,349,378.82 $756,998,354.19 $747,901,254.47 $738,046,387.17 $727,462,986.03 $715,901,564.37
of Initial Pool Balance 100.00% 98.91% 97.72% 96.43% 95.05% 93.54%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT RESTRICTION (%) - CONTINUED
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS OCT 06 OCT 07 OCT 08 OCT 09 OCT 10
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out/Defeasance 59.10% 60.99% 67.84% 76.05% 9.05%
Yield Maintenance 40.90% 38.06% 26.29% 21.99% 90.95%
Total
Open 0.00% 0.95% 5.87% 1.96% 0.00%
------------------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
------------------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $703,378,218.22 $671,621,620.10 $589,509,147.45 $499,602,548.83 $40,527,925.99
of Initial Pool Balance 91.90% 87.75% 77.02% 65.28% 5.30%
------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) The above analysis is based on Maturity Assumptions and a 0 CPR as
discussed in the Prospectus Supplement.
(2) See footnote 19 in Appendix II for a description of the Yield
Maintenance.
T-10
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated, and Goldman,
Sachs & Co. 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>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
135 S. LaSalle Street Suite 1625 GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
Chicago, IL 60603 COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
Administrator: Analyst:
REPORTING PACKAGE TABLE OF CONTENTS
====================================================================================================================================
<S> <C> <C>
====================================== ==================================================== ======================================
Page(s)
-------
Issue Id: REMIC Certificate Report Closing Date:
ASAP #: Bond Interest Reconciliation First Payment Date:
Monthly Data File Name: Cash Reconciliation Summary Assumed Final Payment Date:
====================================== 15 Month Historical Loan Status Summary ======================================
15 Month Historical Payoff/Loss Summary
Historical Collateral Level Prepayment Report
Delinquent Loan Detail
Mortgage Loan Characteristics
Loan Level Detail
Specially Serviced Report
Modified Loan Detail
Realized Loss Detail
Appraisal Reduction Detail
====================================================
=============================================================================================
CONTACT INFORMATION
---------------------------------------------------------------------------------------------
ISSUER:
DEPOSITOR:
UNDERWRITER:
MASTER SERVICER:
SPECIAL SERVICER:
RATING AGENCY:
=============================================================================================
==================================================================
INFORMATION IS AVAILABLE FOR THIS ISSUE FROM THE FOLLOWING SOURCES
------------------------------------------------------------------
LaSalle Web Site www.lnbabs.com
LaSalle Bulletin Board (714) 282-3990
LaSalle "ASAP" Fax Back System (714) 282-5518
LaSalle Factor Line (800) 246-5761
==================================================================
====================================================================================================================================
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
====================================================================================================================================
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS FACE VALUE (1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT ADJUSTMENT RATE (2)
CUSIP Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Next Rate (3)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
Total P&I Payment 0.00
==============================
Notes: (1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred Interest equals Accrual
(3) Estimated
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
BOND INTEREST RECONCILIATION
===============================================================================================================================
Deductions Additions
----------------------------------------- ---------------------------------
Accrual Accrued Add. Deferred & Prior Prepay- Other Distributable
------------- Certificate Allocable Trust Accretion Interest Int. Short- ment Interest Certificate
Class Method Days Interest PPIS Expense(1) Interest Losses falls Due Penalties Proceeds(2) Interest
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
===============================================================================================================================
<CAPTION>
====================== ======================
Remaining
Interest Outstanding Credit Support
Payment Interest --------------------
Amount Shortfalls Original Current(3)
---------------------- ----------------------
<S> <C> <C> <C>
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
---------------------- ----------------------
0.00 0.00
====================== ======================
(1) Additional Trust Expenses are fees allocated directly to the bond resulting in a deduction to accrued interest and not carried
as an outstanding shortfall.
(2) Other Interest Proceeds include default interest, PPIE and Recoveries of Interest.
(3) Determined as follows: (A) the ending balance of all the classes less (B) the sum of (i) the ending balance of the class
and (ii) the ending balance of all classes which are not subordinate to the class divided by (A).
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
CASH RECONCILIATION SUMMARY
====================================================================================================================================
<S> <C> <C>
------------------------------------------- ------------------------------------------- ------------------------------------------
INTEREST SUMMARY SERVICING FEE SUMMARY PRINCIPAL SUMMARY
------------------------------------------- ------------------------------------------- ------------------------------------------
Current Scheduled Interest Current Servicing Fees SCHEDULED PRINCIPAL:
Less Deferred Interest Plus Fees Advanced for PPIS Current Scheduled Principal
Plus Advance Interest Less Reduction for PPIS Advanced Scheduled Principal
Plus Unscheduled Interest Plus Unscheduled Servicing Fees ------------------------------------------
PPIS Reducing Scheduled Interest ------------------------------------------- Scheduled Principal Distribution
Less Total Fees Paid To Servicer Total Servicing Fees Paid ------------------------------------------
Plus Fees Advanced for PPIS ------------------------------------------- UNSCHEDULED PRINCIPAL:
Less Fee Strips Paid by Servicer Curtailments
Less Misc. Fees & Expenses ------------------------------------------- Prepayments in Full
Less Non Recoverable Advances PPIS SUMMARY Liquidation Proceeds
------------------------------------------- ------------------------------------------- Repurchase Proceeds
Interest Due Trust Other Principal Proceeds
------------------------------------------- Gross PPIS ------------------------------------------
Less Trustee Fee Reduced by PPIE Unscheduled Principal Distribution
Less Fee Strips Paid by Trust Reduced by Shortfalls in Fees ------------------------------------------
Less Misc. Fees Paid by Trust Reduced by Other Amounts Remittance Principal
------------------------------------------- ------------------------------------------- ------------------------------------------
Remittance Interest PPIS Reducing Scheduled Interest
------------------------------------------- ------------------------------------------- ------------------------------------------
PPIS Reducing Servicing Fee Servicer Wire Amount
------------------------------------------- ------------------------------------------
PPIS Due Certificate
-------------------------------------------
----------------------------------------------------------
POOL BALANCE SUMMARY
----------------------------------------------------------
Balance Count
----------------------------------------------------------
Beginning Pool
Scheduled Principal Distribution
Unscheduled Principal Distribution
Deferred Interest
Liquidations
Repurchases
Ending Pool
----------------------------------------------------------
-------------------------------------------------------------------------------------------------------
ADVANCES
--------
PRIOR OUTSTANDING CURRENT PERIOD RECOVERED ENDING OUTSTANDING
Principal Interest Principal Interest Principal Interest Principal Interest
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
====================================================================================================================================
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
ASSET BACKED FACTS ~ 15 MONTH HISTORICAL LOAN STATUS SUMMARY
============ ============================================================================= =====================================
Delinquency Aging Categories Special Event Categories (1)
----------------------------------------------------------------------------- -------------------------------------
Specially
Delinq 1 Month Delinq 2 Months Delinq 3+ Months Foreclosure REO Modifications Serviced Bankruptcy
Distribution ----------------------------------------------------------------------------- -------------------------------------
Date # Balance # Balance # Balance # Balance # Balance # Balance # Balance # Balance
============ ============================================================================= =====================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
------------ ----------------------------------------------------------------------------- -------------------------------------
============ ============================================================================= =====================================
(1) Note: Modification, Specially Serviced & Bankruptcy Totals are Included in the Appropriate Delinquency Aging Category
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
ASSET BACKED FACTS ~ 15 MONTH HISTORICAL PAYOFF/LOSS SUMMARY
============ ================================================================================== ==================================
Appraisal Realized
Ending Pool (1) Payoffs (2) Penalties Reduct. (2) Liquidations (2) Losses (2) Remaining Term Curr Weighted Avg.
Distribution ---------------------------------------------------------------------------------- ----------------------------------
Date # Balance # Balance # Amount # Balance # Balance # Amount Life Amort. Coupon Remit
============ ================================================================================== ==================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
------------ ---------------------------------------------------------------------------------- ----------------------------------
============ ================================================================================== ==================================
(1) Percentage based on pool as of cutoff. (2) Percentage based on pool as of beginning of period.
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
HISTORICAL COLLATERAL LEVEL PREPAYMENT REPORT
======================== ============================== ==================== =============== =============================
Remaining Term
Disclosure Distribution Initial Payoff Penalty Prepayment Maturity Property ------------------ Note
Control # Date Balance Code Amount Amount Date Date Type State DSCR Life Amort. Rate
======================== ============================== ==================== =============== =============================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
------------------------ ------------------------------ -------------------- --------------- -----------------------------
======================== ============================== ==================== =============== =============================
CUMULATIVE 0 0
===============
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
DELINQUENT LOAN DETAIL
===============================================================================================================================
Paid Outstanding Out. Property Special
Disclosure Doc Thru Current P&I P&I Protection Advance Servicer Foreclosure Bankruptcy REO
Control # Date Advance Advances** Advances Description (1) Transfer Date Date Date Date
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===============================================================================================================================
A. P&I Advance - Loan in Grace Period 1. P&I Advance - Loan delinquent 1 month
B. P&I Advance - Late Payment but (less than) one month delinq 2. P&I Advance - Loan delinquent 2 months
3. P&I Advance - Loan delinquent 3 months or More
4. Matured Balloon/Assumed Scheduled Payment
===============================================================================================================================
** Outstanding P&I Advances include the current period P&I Advance
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
MORTGAGE LOAN CHARACTERISTICS
<S> <C>
DISTRIBUTION OF PRINCIPAL BALANCES DISTRIBUTION OF MORTGAGE INTEREST RATES
================================================================= =================================================================
Weighted Average Weighted Average
Current Scheduled # of Scheduled % of ------------------ Current Mortgage # of Scheduled % of ------------------
Balances Loans Balance Balance Term Coupon DSCR Interest Rate Loans Balance Balance Term Coupon DSCR
================================================================= =================================================================
=================================================================
0 0 0.00%
================================================================= =================================================================
0 0 0.00% Minimum Mortgage Interest Rate 10.0000%
================================================================= Maximum Mortgage Interest Rate 10.0000%
Average Scheduled Balance
Maximum Scheduled Balance DISTRIBUTION OF REMAINING TERM (BALLOON)
Minimum Scheduled Balance =================================================================
Weighted Average
DISTRIBUTION OF REMAINING TERM (FULLY AMORTIZING) Balloon # of Scheduled % of ------------------
================================================================= Mortgage Loans Loans Balance Balance Term Coupon DSCR
Weighted Average =================================================================
Fully Amortizing # of Scheduled % of ------------------ 0 to 60
Mortgage Loans Loans Balance Balance Term Coupon DSCR 61 to 120
================================================================= 121 to 180
181 to 240
241 to 360
================================================================= =================================================================
0 0 0.00% 0 0 0.00%
================================================================= =================================================================
Minimum Remaining Term Minimum Remaining Term 0
Maximum Remaining Term Maximum Remaining Term 0
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
MORTGAGE LOAN CHARACTERISTICS
<S> <C>
DISTRIBUTION OF DSCR (CURRENT) GEOGRAPHIC DISTRIBUTION
================================================================= =================================================================
Debt Service # of Scheduled % of # of Scheduled % of
Coverage Ratio Loans Balance Balance WAMM WAC DSCR State Loans Balance Balance WAMM WAC DSCR
================================================================= =================================================================
=================================================================
0 0 0.00%
=================================================================
Maximum DSCR
Minimum DSCR
DISTRIBUTION OF DSCR (CUTOFF)
=================================================================
Debt Service # of Scheduled % of
Coverage Ratio Loans Balance Balance WAMM WAC DSCR
=================================================================
================================================================= =================================================================
0 0 0.00% 0 0.00%
================================================================= =================================================================
Maximum DSCR 0.00
Minimum DSCR 0.00
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
MORTGAGE LOAN CHARACTERISTICS
<S> <C>
DISTRIBUTION OF PROPERTY TYPES DISTRIBUTION OF LOAN SEASONING
================================================================= =================================================================
# of Scheduled % of # of Scheduled % of
Property Types Loans Balance Balance WAMM WAC DSCR Number of Years Loans Balance Balance WAMM WAC DSCR
================================================================= =================================================================
================================================================= =================================================================
0 0 0.00% 0 0 0.00%
================================================================= =================================================================
DISTRIBUTION OF AMORTIZATION TYPE DISTRIBUTION OF YEAR LOANS MATURING
================================================================= =================================================================
Current Scheduled # of Scheduled % of # of Scheduled % of
Balances Loans Balance Balance WAMM WAC DSCR Year Loans Balance Balance WAMM WAC DSCR
================================================================= =================================================================
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 & Longer
================================================================= =================================================================
0 0 0.00%
================================================================= =================================================================
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
LOAN LEVEL DETAIL
==============================================================================================================================
Operating Ending Spec.
Disclosure Property Statement Maturity Principal Note Scheduled Mod. Serv ASER
Control # Grp Type State DSCR NOI Date Date Balance Rate P&I Flag Flag Flag
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
==============================================================================================================================
W/Avg 0.00 0 0 0
==============================================================================================================================
<CAPTION>
====================================
Loan Prepayment
Status -------------------------
Code(1) Amount Penalty Date
====================================
<S> <C> <C> <C>
====================================
0 0
====================================
* NOI and DSCR, if available and reportable under the terms of the Pooling and Servicing Agreement, are based on information
obtained from the related borrower, and no other party to the agreement shall be held liable for the accuracy or methodology
used to determine such figures.
------------------------------------------------------------------------------------------------------------------------------------
(1) Legend: A. P&I Adv - in Grace Period 1. P&I Adv - delinquent 1 month 7. Foreclosure
B. P&I Adv - (less than) one month delinq 2. P&I Adv - delinquent 2 months 8. Bankruptcy
3. P&I Adv - delinquent 3+ months 9. REO
4. Mat. Balloon/Assumed P&I 10. DPO
5. Prepaid in Full 11. Modification
6. Specially Serviced
====================================================================================================================================
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
SPECIALLY SERVICED (PART I) ~ LOAN DETAIL
===================== =================== ================================= ================================ ================
Balance Remaining Term
Disclosure Transfer ----------------- Note Maturity -------------- Property NOI
Control # Date Scheduled Actual Rate Date Life Amort. Type State NOI DSCR Date
===================== =================== ================================= ================================ ================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================== =================== ================================= ================================ ================
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
SPECIALLY SERVICED LOAN DETAIL (PART II) ~ SERVICER COMMENTS
====================================================================================================================================
Disclosure Resolution
Control # Strategy Comments
====================================================================================================================================
<S> <C> <C>
====================================================================================================================================
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
MODIFIED LOAN DETAIL
====================================================================================================================================
Disclosure Modification Modification Modification
Control # Date Code Description
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
====================================================================================================================================
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000 LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
REALIZED LOSS DETAIL
====================================================================================================================================
Beginning Gross Proceeds Aggregate Net Net Proceeds
Distribution Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation Liquidation as a % of Realized
Period Control # Date Value Balance Proceeds Sched Principal Expenses * Proceeds Sched. Balance Loss
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
CURRENT TOTAL 0.00 0.00 0.00 0.00 0.00
CUMULATIVE 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
* Aggregate liquidation expenses also include outstanding P&I advances and unpaid servicing fees, unpaid trustee fees, etc.
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORGAN STANLEY DEAN WITTER CAPITAL I, INC. Statement Date:
LaSalle Bank N.A. WELLS FARGO BANK AS MASTER SERVICER Payment Date:
GMAC COMMERCIAL MORTGAGE CORPORATION AS SPECIAL SERVICER Prior Payment:
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES Next Payment:
SERIES 2000-LIFE2 Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
APPRAISAL REDUCTION DETAIL
====================== ======================== ====================================== ================ ====== ================
Remaining Term Appraisal
Disclosure Appraisal Scheduled Reduction Note Maturity --------------- Property ---------------
Control # Red. Date Balance Amount Rate Date Life Amort. Type State DSCR Value Date
---------------------- ------------------------ -------------------------------------- ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================== ======================== ====================================== ================ ====== ================
10/10/2000 - 13:15 (MXXX-MXXX) (C) 2000 LaSalle Bank N.A.
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
MORGAN STANLEY DEAN WITTER CAPITAL I INC.,
(FORMERLY KNOWN AS MORGAN STANLEY CAPITAL I INC.)
DEPOSITOR
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES BY SEPARATE TRUSTS)
---------------
Morgan Stanley Dean Witter Capital I Inc. will periodically offer
certificates in one or more series and each series of certificates will
represent beneficial ownership interests in a different trust fund.
EACH TRUST FUND WILL CONSIST PRIMARILY OF ONE OR MORE SEGREGATED POOLS
OF:
1) multifamily or commercial mortgage loans;
2) mortgage participations, mortgage pass-through certificates or
mortgage-backed securities;
3) direct obligations of the United States or other governmental
agencies; or
4) any combination of the 1-3, above, as well as other property
as described in the accompanying prospectus supplement.
The certificates of any series may consist of one or more classes. A
given class may:
o provide for the accrual of interest based on fixed, variable
or adjustable rates;
o be senior or subordinate to one or more other classes in
respect of distributions;
o be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions;
o be entitled to interest distributions, with disproportionately
low, nominal or no principal distributions;
o provide for distributions of accrued interest commencing only
following the occurrence of certain events, such as the
retirement of one or more other classes;
o provide for sequential distributions of principal;
o provide for distributions based on a combination of any of the
foregoing characteristics; or any combination of the above.
INVESTING IN THE CERTIFICATES OFFERED TO YOU INVOLVES RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 11 IN THIS PROSPECTUS AND ON PAGE S-23 OF THE RELATED
PROSPECTUS SUPPLEMENT.
This prospectus may be used to offer and sell any series of
certificates only if accompanied by the prospectus supplement for that series.
The information in this prospectus is not complete and may be changed. This
prospectus is not an offer to sell these securities in any state where the offer
or sale is not permitted.
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved of the certificates to be offered to you or
determined if this prospectus or the accompanying prospectus supplement are
truthful or complete. Any representation to the contrary is a criminal offense.
-------------------------------------------
MORGAN STANLEY DEAN WITTER
The date of this Prospectus is September 7, 2000
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the certificates being offered to you is contained
in two separate documents that progressively provide more detail: (a) this
prospectus, which provides general information, some of which may not apply to a
particular series of certificates; and (b) the accompanying prospectus
supplement, which describes the specific terms of your series of certificates,
including:
o the timing of interest and principal payments;
o applicable interest rates;
o information about the trust fund's assets;
o information about any credit support or cash flow agreement;
o the rating for each class of certificates;
o information regarding the nature of any subordination;
o any circumstance in which the trust fund may be subject to
early termination;
o whether any elections will be made to treat the trust fund or
a designated portion thereof as a "real estate mortgage
investment conduit" for federal income tax purposes;
o the aggregate principal amount of each class of certificates;
o information regarding any master servicer, sub-servicer or
special servicer; and
o whether the certificates will be initially issued in
definitive or book entry form.
IF THE TERMS OF THE CERTIFICATES OFFERED TO YOU VARY BETWEEN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE
INFORMATION IN THE PROSPECTUS SUPPLEMENT. Further, you should rely only on the
information contained in this prospectus and the accompanying prospectus
supplement. Morgan Stanley Dean Witter Capital I Inc. has not authorized anyone
to provide you with information that is different.
Distributions on the certificates will be made only from the assets
of the related trust fund. The certificates of each series will not be an
obligation of Morgan Stanley Dean Witter Capital I Inc. or any of its
affiliates. Neither the certificates nor any assets in the related trust fund
will be insured or guaranteed by any governmental agency or instrumentality or
any other person unless the related prospectus supplement so provides.
This prospectus and the accompanying prospectus supplement include
cross references to sections in these materials where you can find further
related discussions. The tables of contents in this prospectus and the
prospectus supplement identify the pages where these sections are located.
Morgan Stanley Dean Witter Capital I Inc.'s principal executive
office is located at 1585 Broadway, 37th Floor, New York, New York 10036, and
the telephone number is (212) 761-4700.
----------------------------------------
Until 90 days after the date of each prospectus supplement, all
dealers that buy, sell or trade the certificates offered by that prospectus
supplement, whether or not participating in the offering, may be required to
deliver a prospectus supplement and this prospectus. This is in addition to the
dealers' obligation to deliver a prospectus supplement and the accompanying
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Important Notice About Information Presented In This Prospectus And The Accompanying
Prospectus Supplement................................................. .........................2
Summary Of Prospectus.............................................................................1
Risk Factors.....................................................................................11
Assets......................................................................................30
Mortgage Loans..............................................................................30
Mortgage Backed Securities..................................................................37
Government Securities.......................................................................38
Accounts....................................................................................39
Credit Support..............................................................................39
Cash Flow Agreements........................................................................39
Use Of Proceeds..................................................................................39
Yield Considerations.............................................................................40
General.....................................................................................40
Pass-Through Rate...........................................................................40
Timing of Payment of Interest...............................................................40
Payments of Principal; Prepayments..........................................................41
Prepayments--Maturity and Weighted Average Life.............................................42
Other Factors Affecting Weighted Average Life...............................................44
The Depositor....................................................................................45
Description Of The Certificates..................................................................45
General.....................................................................................45
Distributions...............................................................................46
Available Distribution Amount...............................................................46
Distributions of Interest on the Certificates...............................................47
Distributions of Principal of the Certificates..............................................48
Components..................................................................................49
Distributions on the Certificates of Prepayment Premiums or in Respect of Equity
Participations...................................................... .....................49
Allocation of Losses and Shortfalls.........................................................49
Advances in Respect of Delinquencies........................................................49
Reports to Certificateholders...............................................................50
Termination.................................................................................54
Book-Entry Registration and Definitive Certificates.........................................55
Description Of The Agreements....................................................................56
Assignment of Assets; Repurchases...........................................................57
Representations and Warranties; Repurchases.................................................59
Certificate Account and Other Collection Accounts...........................................61
Collection and Other Servicing Procedures...................................................65
Subservicers................................................................................66
Special Servicers...........................................................................67
Realization Upon Defaulted Whole Loans......................................................67
i
<PAGE>
Hazard Insurance Policies...................................................................70
Rental Interruption Insurance Policy........................................................72
Fidelity Bonds and Errors and Omissions Insurance...........................................72
Due-on-Sale and Due-on-Encumbrance Provisions...............................................73
Retained Interest; Servicing Compensation and Payment of Expenses...........................73
Evidence as to Compliance...................................................................74
Matters Regarding a Master Servicer and the Depositor.......................................74
Events of Default...........................................................................76
Rights Upon Event of Default................................................................76
Amendment...................................................................................77
The Trustee.................................................................................78
Duties of the Trustee.......................................................................78
Matters Regarding the Trustee...............................................................79
Resignation and Removal of the Trustee......................................................79
Description Of Credit Support....................................................................80
General.....................................................................................80
Subordinate Certificates....................................................................81
Cross-Support Provisions....................................................................81
Insurance or Guarantees for the Whole Loans.................................................81
Letter of Credit............................................................................81
Insurance Policies and Surety Bonds.........................................................82
Reserve Funds...............................................................................82
Credit Support for MBS......................................................................83
Legal Aspects Of The Mortgage Loans And The Leases...............................................83
General.....................................................................................83
Types of Mortgage Instruments...............................................................84
Interest in Real Property...................................................................84
Leases and Rents............................................................................85
Personality.................................................................................86
Foreclosure.................................................................................86
Bankruptcy Laws.............................................................................92
Junior Mortgages; Rights of Senior Lenders or Beneficiaries.................................95
Environmental Legislation...................................................................97
Due-on-Sale and Due-on-Encumbrance.........................................................100
Subordinate Financing......................................................................101
Default Interest, Prepayment Premiums and Prepayments......................................101
Acceleration on Default....................................................................102
Applicability of Usury Laws................................................................102
Laws and Regulations; Types of Mortgaged Properties........................................103
Americans With Disabilities Act............................................................103
Soldiers' and Sailors' Civil Relief Act of 1940............................................104
Forfeitures in Drug and RICO Proceedings...................................................104
Federal Income Tax Consequences.................................................................105
General....................................................................................105
Grantor Trust Funds........................................................................105
REMICs.....................................................................................117
ii
<PAGE>
Prohibited Transactions and Other Taxes....................................................135
Liquidation and Termination................................................................136
Administrative Matters.....................................................................137
Tax-Exempt Investors.......................................................................137
Residual Certificate Payments--Non-U.S. Persons............................................137
Tax Related Restrictions on Transfers of REMIC Residual Certificates.......................138
State Tax Considerations........................................................................141
ERISA Considerations............................................................................141
General....................................................................................141
Prohibited Transactions....................................................................141
Review by Plan Fiduciaries.................................................................144
Legal Investment................................................................................144
Plan Of Distribution............................................................................147
Legal Matters...................................................................................149
Financial Information...........................................................................149
Rating..........................................................................................149
Incorporation Of Information By Reference.......................................................149
Glossary Of Terms...............................................................................151
</TABLE>
iii
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
SUMMARY OF PROSPECTUS
This summary highlights selected information from this prospectus. It does not
contain all of the information you need to consider in making your investment
decision. TO UNDERSTAND ALL OF THE TERMS OF AN OFFERING OF CERTIFICATES, READ
THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT CAREFULLY.
WHAT YOU WILL OWN
TITLE OF CERTIFICATES... Mortgage Pass-Through Certificates, issuable
in series.
MORTGAGE POOL........... Each trust fund will consist primarily of
one or more segregated pools of:
1) multifamily or commercial mortgage
loans;
2) mortgage participations, mortgage
pass-through certificates or
mortgage-backed securities;
3) direct obligations of the United
States or other governmental
agencies; or
4) any combination of 1-3 above, as
well as other property as described
in the accompanying prospectus
supplement.
5) as to some or all of the mortgage
loans, assignments of the leases of
the related mortgaged properties or
assignments of the rental payments
due under those leases.
Each trust fund for a series of certificates may also
include:
o letters of credit, insurance
policies, guarantees, reserve funds
or other types of credit support;
and
o currency or interest rate exchange
agreements and other financial
assets.
RELEVANT PARTIES AND DATES
ISSUER.................. Morgan Stanley Dean Witter Capital I 199__-__ Trust.
DEPOSITOR............... Morgan Stanley Dean Witter Capital I Inc., a
wholly-owned subsidiary of Morgan Stanley Group Inc.
MASTER SERVICER......... The master servicer, if any, for each series of
certificates will be named in the related prospectus
supplement. The master servicer may be an affiliate
of Morgan Stanley Dean Witter Capital I Inc..
<PAGE>
SPECIAL SERVICER........ The special servicer, if any, for each series of
certificates will be named, or the circumstances in
accordance with which a special servicer will be
appointed will be described, in the related
prospectus supplement. The special servicer may be an
affiliate of Morgan Stanley Dean Witter Capital I
Inc..
TRUSTEE................. The trustee for each series of certificates will be
named in the related prospectus supplement.
ORIGINATOR.............. The originator or originators of the mortgage loans
will be named in the related prospectus supplement.
An originator may be an affiliate of Morgan Stanley
Dean Witter Capital I Inc.. Morgan Stanley Dean
Witter Capital I Inc. will purchase the mortgage
loans or the mortgage backed securities or both, on
or before the issuance of the related series of
certificates.
INFORMATION ABOUT THE MORTGAGE POOL
THE TRUST FUND ASSETS... Each series of certificates will represent in the
aggregate the entire beneficial ownership interest in
a trust fund consisting primarily of:
(a) MORTGAGE ASSETS.. The mortgage loans and the mortgage backed
securities, or one or the other, with respect to each
series of certificates will consist of a pool of:
o multifamily or commercial mortgage
loans or both;
o mortgage participations, mortgage
pass-through certificates or other
mortgage-backed securities
evidencing interests in or secured
by mortgage loans; or
o a combination of mortgage loans and
mortgage backed securities.
The mortgage loans will not be guaranteed or insured
by:
o Morgan Stanley Dean Witter Capital
I Inc. or any of its affiliates; or
o unless the prospectus supplement so
provides, any governmental agency
or instrumentality or other person.
The mortgage loans will be secured by first liens
or junior liens
- 2 -
<PAGE>
on, or security interests in:
o residential properties consisting
of five or more rental or
cooperatively-owned dwelling units;
or
o office buildings, shopping centers,
retail stores, hotels or motels,
nursing homes, hospitals or other
health-care related facilities,
mobile home parks, warehouse
facilities, mini-warehouse
facilities or self-storage
facilities, industrial plants,
congregate care facilities, mixed
use commercial properties or other
types of commercial properties.
Unless otherwise provided in the prospectus
supplement, the mortgage loans:
o will be secured by properties
located in any of the fifty states,
the District of Columbia or the
Commonwealth of Puerto Rico;
o will have individual principal
balances at origination of at least
$25,000;
o will have original terms to
maturity of not more than 40 years;
and
o will be originated by persons other
than Morgan Stanley Dean Witter
Capital I Inc.
Each mortgage loan may provide for the following
payment terms:
o Each mortgage loan may provide for
no accrual of interest or for
accrual of interest at a fixed or
adjustable rate or at a rate that
may be converted from adjustable to
fixed, or vice versa, from time to
time at the borrower's election.
Adjustable mortgage rates may be
based on one or more indices.
o Each mortgage loan may provide for
scheduled payments to maturity or
payments that adjust from time to
time to accommodate changes in the
interest rate or to reflect the
occurrence of certain events.
o Each mortgage loan may provide for
negative
- 3 -
<PAGE>
amortization or accelerated
amortization.
o Each mortgage loan may be fully
amortizing or require a balloon
payment due on the loan's stated
maturity date.
o Each mortgage loan may contain
prohibitions on prepayment or
require payment of a premium or a
yield maintenance penalty in
connection with a prepayment.
o Each mortgage loan may provide for
payments of principal, interest or
both, on due dates that occur
monthly, quarterly, semi-annually
or at another interval as specified
in the related prospectus
supplement.
(b) GOVERNMENT If the related prospectus supplement so specifies,
SECURITIES....... the trust fund may include direct obligations of the
United States, agencies of the United States or
agencies created by government entities which provide
for payment of interest or principal or both.
(c) COLLECTION Each trust fund will include one or more accounts
ACCOUNTS......... established and maintained on behalf of the
certificateholders. The person(s) designated in the
related prospectus supplement will, to the extent
described in this prospectus and the prospectus
supplement, deposit into this account all payments
and collections received or advanced with respect to
the trust fund's assets. The collection account may
be either interest bearing or non-interest bearing,
and funds may be held in the account as cash or
invested in short-term, investment grade obligations.
(d) CREDIT SUPPORT... If the related prospectus supplement so specifies,
one or more classes of certificates may be provided
with partial or full protection against certain
defaults and losses on a trust fund's mortgage loans
and mortgage backed securities.
This protection may be provided by one or more of the
following means:
o subordination of one or more other
classes of certificates,
o letter of credit,
o insurance policy,
o guarantee,
- 4 -
<PAGE>
o reserve fund or
o another type of credit support, or
a combination thereof.
The related prospectus supplement will describe the
amount and types of credit support, the entity
providing the credit support, if applicable, and
related information. If a particular trust fund
includes mortgage backed securities, the related
prospectus supplement will describe any similar forms
of credit support applicable to those mortgage backed
securities.
(e) CASH FLOW If the related prospectus supplement so provides, the
AGREEMENTS....... trust fund may include guaranteed investment
contracts pursuant to which moneys held in the
collection accounts will be invested at a specified
rate. The trust fund also may include agreements
designed to reduce the effects of interest rate or
currency exchange rate fluctuations on the trust
fund's assets or on one or more classes of
certificates.
Agreements of this sort may include:
o interest rate exchange agreements,
o interest rate cap or floor
agreements,
o currency exchange agreements or
similar agreements. Currency
exchange agreements might be
included in a trust fund if some or
all of the mortgage loans or
mortgage backed securities, such as
mortgage loans secured by mortgaged
properties located outside the
United States, are denominated in a
non-United States currency.
The related prospectus supplement will describe the
principal terms of any guaranteed investment contract
or other agreement and provide information with
respect to the obligor. If a particular trust fund
includes mortgage backed securities, the related
prospectus supplement will describe any guaranteed
investment contract or other agreements applicable to
those mortgage backed securities.
DISTRIBUTIONS ON
CERTIFICATES........... Each series of certificates will have the following
characteristics:
o if the certificates evidence an
interest in a trust fund that
includes mortgage loans, the
certificates
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will be issued pursuant to a
pooling agreement;
o if the certificates evidence an
interest in a trust fund that does
not include mortgage loans, the
certificates will be issued
pursuant to a trust agreement;
o each series of certificates will
include one or more classes of
certificates;
o each series of certificates,
including any class or classes not
offered by this prospectus, will
represent, in the aggregate, the
entire beneficial ownership
interest in the related trust fund;
o each class of certificates being
offered to you, other than certain
stripped interest certificates,
will have a stated principal
amount;
o each class of certificates being
offered to you, other than certain
stripped principal certificates,
will accrue interest based on a
fixed, variable or adjustable
interest rate.
The related prospectus supplement will specify the
principal amount, if any, and the interest rate, if
any, for each class of certificates. In the case of a
variable or adjustable interest rate, the related
prospectus supplement will specify the method for
determining the rate.
The certificates will not be guaranteed or insured by
Morgan Stanley Dean Witter Capital I Inc. or any of
its affiliates. The certificates also will not be
guaranteed or insured by any governmental agency or
instrumentality or by any other person, unless the
related prospectus supplement so provides.
(a) INTEREST........ Each class of certificates offered to you, other than
stripped principal certificates and certain classes
of stripped interest certificates, will accrue
interest at the rate indicated in the prospectus
supplement. Interest will be distributed to you as
provided in the related prospectus supplement.
Interest distributions:
o on stripped interest certificates
may be made on the basis of the
notional amount for that class, as
described in the related prospectus
supplement;
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o may be reduced to the extent of
certain delinquencies, losses,
prepayment interest shortfalls, and
other contingencies described in
this prospectus and the related
prospectus supplement.
(b) PRINCIPAL...... The certificates of each series initially will have
an aggregate principal balance no greater than the
outstanding principal balance of the trust fund's
assets as of the close of business on the first day
of the month during which the trust fund is formed,
after application of scheduled payments due on or
before that date, whether or not received. The
related prospectus supplement may provide that the
principal balance of the trust fund's assets will be
determined as of a different date. The principal
balance of a certificate at a given time represents
the maximum amount that the holder is then entitled
to receive of principal from future cash flow on the
assets in the related trust fund.
Unless the prospectus supplement provides otherwise,
distributions of principal:
o will be made on each distribution
date to the holders of the class or
classes of certificates entitled to
principal distributions, until the
principal balances of those
certificates have been reduced to
zero; and
o will be made on a pro rata basis
among all of the certificates of a
given class or by random selection,
as described in the prospectus
supplement or otherwise established
by the trustee.
Stripped interest or interest-only certificates will
not have a principal balance and will not receive
distributions of principal.
ADVANCES.............. Unless the related prospectus supplement otherwise
provides, if a scheduled payment on a mortgage loan
is delinquent and the master servicer determines that
an advance would be recoverable, the master servicer
will, in most cases, be required to advance the
shortfall. Neither Morgan Stanley Dean Witter Capital
I Inc. nor any of its affiliates will have any
responsibility to make those advances.
The master servicer:
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o will be reimbursed for advances
from subsequent recoveries from the
delinquent mortgage loan or from
other sources, as described in this
prospectus and the related
prospectus supplement; and
o will be entitled to interest on
advances, if specified in the
related prospectus supplement.
If a particular trust fund includes mortgage backed
securities, the prospectus supplement will describe
any advance obligations applicable to those mortgage
backed securities.
TERMINATION........... The related prospectus supplement may provide for the
optional early termination of the series of
certificates through repurchase of the trust fund's
assets by a specified party, under specified
circumstances.
The related prospectus supplement may provide for the
early termination of the series of certificates in
various ways including:
o optional early termination where a
party identified in the prospectus
supplement could repurchase the
trust fund assets pursuant to
circumstances specified in the
prospectus supplement;
o termination through the
solicitation of bids for the sale
of all or a portion of the trust
fund assets in the event the
principal amount of a specified
class or classes declines by a
specified percentage amount on or
after a specified date.
REGISTRATION OF
CERTIFICATES......... If the related prospectus supplement so provides, one
or more classes of the certificates being offered to
you will initially be represented by one or more
certificates registered in the name of Cede & Co., as
the nominee of Depository Trust Company. If the
certificate you purchase is registered in the name of
Cede & Co., you will not be entitled to receive a
definitive certificate, except under the limited
circumstances described in this prospectus.
TAX STATUS OF THE
CERTIFICATES.......... The certificates of each series will constitute
either:
o regular interests and residual
interests in a trust treated as a
real estate mortgage investment
conduit--known as a REMIC--under
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Sections 860A through 860G of the
Internal Revenue Code; or
o interests in a trust treated as a
grantor trust under applicable
provisions of the Internal Revenue
Code.
(a) REMIC........... The regular certificates of the REMIC generally will
be treated as debt obligations of the applicable
REMIC for federal income tax purposes. Some of the
regular certificates of the REMIC may be issued with
original issue discount for federal income tax
purposes.
A portion or, in certain cases, all of the income
from REMIC residual certificates:
o may not be offset by any losses
from other activities of the holder
of those certificates;
o may be treated as unrelated
business taxable income for holders
of the residual certificates of the
REMIC that are subject to tax on
unrelated business taxable income,
as defined in Section 511 of the
Internal Revenue Code; and
o may be subject to foreign
withholding rules.
To the extent described in this prospectus and the
related prospectus supplement, the certificates
offered to you will be treated as:
o assets described in section
7701(a)(19)(C) of the Internal
Revenue Code; and
o "real estate assets" within the
meaning of section 856(c)(4)(A) of
the Internal Revenue Code.
(b) GRANTOR TRUST... If no election is made to treat the trust fund
relating to a series of certificates as a REMIC, the
trust fund will be classified as a grantor trust and
not as an association taxable as a corporation for
federal income tax purposes. If the trust fund is a
grantor trust, you will be treated as an owner of an
undivided pro rata interest in the mortgage pool or
pool of securities and any other assets held by the
trust fund.
Investors are advised to consult their tax advisors
and to review "Federal Income Tax Consequences" in
this prospectus and the
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<PAGE>
related prospectus supplement.
ERISA CONSIDERATIONS... If you are subject to Title I of the Employee
Retirement Income Security Act of 1974, as
amended--also known as ERISA, or Section 4975 of the
Internal Revenue Code, you should carefully review
with your legal advisors whether the purchase or
holding of certificates could give rise to a
transaction that is prohibited or is not otherwise
permissible under either statute.
In general, the related prospectus supplement will
specify that some of the classes of certificates may
not be transferred unless the trustee and Morgan
Stanley Dean Witter Capital I Inc. receive a letter
of representations or an opinion of counsel to the
effect that:
o the transfer will not result in a
violation of the prohibited
transaction provisions of ERISA or
the Internal Revenue Code;
o the transfer will not cause the
assets of the trust fund to be
deemed "plan assets" for purposes
of ERISA or the Internal Revenue
Code; and
o the transfer will not subject any
of the trustee, Morgan Stanley Dean
Witter Capital I Inc. or any
servicer to additional obligations.
LEGAL INVESTMENT...... The related prospectus supplement will specify
whether any classes of the offered certificates will
constitute "mortgage related securities" for purposes
of the Secondary Mortgage Market Enhancement Act of
1984, as amended. If your investment authority is
subject to legal restrictions, you should consult
your legal advisors to determine whether any
restrictions apply to an investment in these
certificates.
RATING................ At the date of issuance, each class of certificates
of each series that are offered to you will be rated
not lower than investment grade by one or more
nationally recognized statistical rating agencies.
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RISK FACTORS
You should carefully consider the risks involved in owning a
certificate before purchasing a certificate. In particular, the timing and
payments you receive on your certificates will depend on payments received on
and other recoveries with respect to the mortgage loans. Therefore, you should
carefully consider the risk factors relating to the mortgage loans and the
mortgaged properties.
The risks and uncertainties described below under Risk Factors,
together with those described in the related prospectus supplement under Risk
Factors, summarize the material risks relating to your certificates.
THE LACK OF A SECONDARY
MARKET MAY MAKE IT
DIFFICULT FOR YOU TO
RESELL YOUR CERTIFICATES Secondary market considerations may make your
certificates difficult to resell or less valuable
than you anticipated for a variety of reasons,
including:
o there may not be a secondary market for the
certificates;
o if a secondary market develops, we cannot
assure you that it will continue or will
provide you with the liquidity of investment
you may have anticipated. Lack of liquidity
could result in a substantial decrease in
the market value of your certificates;
o the market value of your certificates will
fluctuate with changes in interest rates;
o the secondary market for certificates backed
by residential mortgages may be more liquid
than the secondary market for certificates
backed by multifamily and commercial
mortgages so if your liquidity assumptions
were based on the secondary market for
certificates backed by residential
mortgages, your assumptions may not be
correct;
o certificateholders have no redemption
rights; and
o secondary market purchasers are limited to
this prospectus, the related prospectus
supplement and to the reports delivered to
certificateholders for information
concerning the certificates.
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<PAGE>
Morgan Stanley & Co. Incorporated currently expects
to make a secondary market in your certificates, but
it has no obligation to do so.
THE TRUST FUND'S ASSETS
MAY BE INSUFFICIENT TO
ALLOW FOR REPAYMENT IN
FULL ON YOUR CERTIFICATES Unless the related prospectus supplement so
specifies, the sole source of payment on your
certificates will be proceeds from the assets
included in the trust fund for each series of
certificates and any form of credit enhancement
specified in the related prospectus supplement. You
will not have any claim against, or security interest
in, the trust fund for any other series. In addition,
in general, there is no recourse to Morgan Stanley
Dean Witter Capital I Inc. or any other entity, and
neither the certificates nor the underlying mortgage
loans are guaranteed or insured by any governmental
agency or instrumentality or any other entity.
Therefore, if the trust fund's assets are
insufficient to pay you your expected return, in most
situations you will not receive payment from any
other source. Exceptions include:
o loan repurchase obligations in connection
with a breach of certain of the
representations and warranties; and
o advances on delinquent loans, to the extent
the master servicer deems the advance will
be recoverable.
Because some of the representations and warranties
with respect to the mortgage loans or mortgage backed
securities may have been made or assigned in
connection with transfers of the mortgage loans or
mortgage backed securities prior to the closing date,
the rights of the trustee and the certificateholders
with respect to those representations or warranties
will be limited to their rights as assignees. Unless
the related prospectus supplement so specifies,
neither Morgan Stanley Dean Witter Capital I Inc.,
the master servicer nor any affiliate thereof will
have any obligation with respect to representations
or warranties made by any other entity.
There may be accounts, as described in the related
prospectus supplement, maintained as credit support.
The amounts in these accounts may be withdrawn, under
conditions described in the related prospectus
supplement. Any withdrawn amounts will not be
available for the future payment of principal or
interest on the certificates.
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<PAGE>
If a series of certificates consists of one or more
classes of subordinate certificates, the amount of
any losses or shortfalls in collections of assets on
any distribution date will be borne first by one or
more classes of the subordinate certificates, as
described in the related prospectus supplement.
Thereafter, those losses or shortfalls will be borne
by the remaining classes of certificates, in the
priority and manner and subject to the limitations
specified in the related prospectus supplement.
PREPAYMENTS AND
REPURCHASES MAY REDUCE
THE YIELD ON YOUR
CERTIFICATES The yield on your certificates may be reduced by
prepayments on the mortgage loans or mortgage backed
securities because prepayments affect the average
life of the certificates. Prepayments can be
voluntary, if permitted, and involuntary, such as
prepayments resulting from casualty or condemnation,
defaults and liquidations or repurchases upon
breaches of representations and warranties. The
investment performance of your certificates may vary
materially and adversely from your expectation if the
actual rate of prepayment is higher or lower than you
anticipated.
Voluntary prepayments may require the payment of a
yield maintenance or prepayment premium.
Nevertheless, we cannot assure you that the existence
of the prepayment premium will cause a borrower to
refrain from prepaying its mortgage loan nor can we
assure you of the rate at which prepayments will
occur. Morgan Stanley Mortgage Capital Inc., under
certain circumstances, may be required to repurchase
a mortgage loan from the trust fund if there has been
a breach of a representation or warranty. The
repurchase price paid will be passed through to you,
as a certificateholder, with the same effect as if
the mortgage loan had been prepaid in part or in
full, except that no prepayment premium or yield
maintenance charge would be payable. Such a
repurchase may therefore adversely affect the yield
to maturity on your certificates.
In a pool of mortgage loans, the rate of prepayment
is unpredictable as it is influenced by a variety of
factors including:
o the terms of the mortgage loans;
o the length of any prepayment lockout period;
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<PAGE>
o the prevailing interest rates;
o the availability of mortgage credit;
o the applicable yield maintenance charges or
prepayment premiums;
o the servicer's ability to enforce those
yield maintenance charges or prepayment
premiums;
o the occurrence of casualties or natural
disasters; and
o economic, demographic, tax, legal or other
factors.
There can be no assurance that the rate of
prepayments will conform to any model described in
this prospectus or in the related prospectus
supplement.
Some of the certificates may be more sensitive to
prepayments than other certificates and in certain
cases, the certificateholder holding these
certificates may fail to recoup its original
investment. You should carefully consider the
specific characteristics of the certificates you
purchase, as well as your investment approach and
strategy. For instance, if you purchase a certificate
at a premium, a prepayment may reduce the stream of
interest payments you are entitled to receive on your
certificate and your actual yield may be lower than
your anticipated yield. Similarly, if you purchase a
certificate which provides for the payment of
interest only, or a certificate which provides for
the payment of interest only after the occurrence of
certain events, such as the retirement of one or more
other classes of certificates of a series, you will
probably be extremely sensitive to prepayments
because a prepayment may reduce the stream of
interest payments you are entitled to receive on your
certificate.
IF PREPAYMENT PREMIUMS
ARE NOT ENFORCED, YOUR
CERTIFICATES MAY BE
ADVERSELY AFFECTED The yield on your certificates may be less than
anticipated because the prepayment premium or yield
maintenance required under certain prepayment
scenarios may not be enforceable in some states or
under federal bankruptcy laws.
o Some courts may consider the prepayment
premium to be usurious.
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<PAGE>
o Even if the prepayment premium is
enforceable, we cannot assure you that
foreclosure proceeds will be sufficient to
pay the prepayment premium.
o Although the collateral substitution
provisions related to defeasance are not
suppose to be treated as a prepayment and
should not affect your certificates, we
cannot assure you that a court will not
interpret the defeasance provisions as
requiring a prepayment premium; nor can we
assure you that if it is treated as a
prepayment premium, the court will find the
defeasance income stream enforceable.
THE TIMING OF MORTGAGE
LOAN AMORTIZATION MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES As principal payments or prepayments are made on a
mortgage loan, the mortgage pool will be exposed to
concentration risks with respect to the diversity of
mortgaged properties, types of mortgaged properties
and number of borrowers. Classes that have a later
sequential designation or a lower payment priority
are more likely to be exposed to these concentration
risks than are classes with an earlier sequential
designation or higher priority. This is so because
principal on the certificates will be payable in
sequential order, and no class entitled to a
distribution of principal will receive its principal
until the principal amount of the preceding class or
classes entitled to receive principal have been
reduced to zero.
RATINGS DO NOT GUARANTY
PAYMENT Any rating assigned by a rating agency to a class of
certificates reflects the rating agency's assessment
of the likelihood that holders of the class of
certificates will receive the payments to which they
are entitled.
o The ratings do not assess the likelihood
that you will receive timely payments on
your certificates.
o The ratings do not assess the likelihood of
prepayments, including those caused by
defaults.
o The ratings do not assess the likelihood of
early optional termination of the
certificates.
Each rating agency rating classes of a particular
series will determine the amount, type and nature of
credit support required for that series. This
determination may be based
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on an actuarial analysis of the behavior of mortgage
loans in a larger group taking into account the
appraised value of the real estate and the commercial
and multifamily real estate market.
o We cannot assure you that the historical
data supporting the actuarial analysis will
accurately reflect or predict the rate of
delinquency, foreclosure or loss that will
be experienced by the mortgage loans in a
particular series.
o We cannot assure you that the appraised
value of any property securing a mortgage
loan in a particular series will remain
stable throughout the life of your
certificate.
o We cannot assure you that the real estate
market will not experience an overall
decline in property values nor can we assure
you that the outstanding balance of any
mortgage loan in a particular series will
always be less than the market value of the
property securing the mortgage loan.
RATINGS DO NOT
GUARANTY VALUE If one or more rating agencies downgrade certificates
of a series, your certificate will decrease in value.
Because none of Morgan Stanley Dean Witter Capital I
Inc., the seller, the master servicer, the trustee or
any affiliate has any obligation to maintain a rating
of a class of certificates, you will have no recourse
if your certificate decreases in value.
CASH FLOW FROM THE
PROPERTIES MAY BE VOLATILE
AND INSUFFICIENT TO ALLOW
TIMELY PAYMENT ON
YOUR CERTIFICATES Repayment of a commercial or multifamily mortgage
loan is dependent on the income produced by the
property. Therefore, the borrower's ability to repay
a mortgage loan depends primarily on the successful
operation of the property and the net operating
income derived from the property. Net operating
income can be volatile and may be adversely affected
by factors such as:
o economic conditions causing plant closings
or industry slowdowns;
o an oversupply of available retail space,
office space or multifamily housing;
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o changes in consumer tastes and preferences;
o decrease in consumer confidence;
o retroactive changes in building codes;
o the age, design and construction quality of
the property, including perceptions
regarding the attractiveness, convenience or
safety of the property;
o the age, design, construction quality and
proximity of competing properties;
o increases in operating expenses due to
external factors such as increases in
heating or electricity costs;
o increases in operating expenses due to
maintenance or improvements required at the
property;
o a decline in the financial condition of a
major tenant;
o a decline in rental rates as leases are
renewed or entered into with new tenants;
o the concentration of a particular business
type in a building;
o the length of tenant leases;
o the creditworthiness of tenants; and
o the property's "operating leverage."
Operating leverage refers to the percentage of total
property expenses in relation to revenue, the ratio
of fixed operating expenses to those that vary with
revenue and the level of capital expenditures
required to maintain the property and retain or
replace tenants.
If a commercial property is designed for a specific
tenant, net operating income may be adversely
affected if that tenant defaults under its
obligations because properties designed for a
specific tenant often require substantial renovation
before it is suitable for a new tenant. As a result,
the proceeds from liquidating this type of property
following foreclosure might be insufficient to cover
the principal and interest due under the loan.
It is anticipated that a substantial portion of the
mortgage loans included in any trust fund will be
nonrecourse loans or loans for which recourse may be
restricted or
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<PAGE>
unenforceable. Therefore, if a borrower defaults,
recourse may be had only against the specific
property and any other assets that have been pledged
to secure the related mortgage loan.
PROPERTY VALUE MAY BE
ADVERSELY AFFECTED EVEN
WHEN THERE IS NO CHANGE
IN CURRENT OPERATING
INCOME Various factors may adversely affect the value of the
mortgaged properties without affecting the
properties' current net operating income. These
factors include among others:
o changes in governmental regulations, fiscal
policy, zoning or tax laws;
o potential environmental legislation or
liabilities or other legal liabilities;
o the availability of refinancing; and
o changes in interest rate levels or yields
required by investors in income producing
commercial properties.
THE OPERATION OF
COMMERCIAL PROPERTIES
IS DEPENDENT UPON
SUCCESSFUL MANAGEMENT The successful operation of a real estate project
depends upon the property manager's performance and
viability. The property manager is responsible for:
o responding to changes in the local market;
o planning and implementing the rental
structure;
o operating the property and providing
building services;
o managing operating expenses; and
o assuring that maintenance and capital
improvements are carried out in a timely
fashion.
A good property manager, by controlling costs,
providing appropriate service to tenants and seeing
to the maintenance of improvements, can improve cash
flow, reduce vacancy, leasing and repair costs and
preserve building value. On the other hand,
management errors can, in some cases, impair
short-term cash flow and the long term viability of
an income producing property. Properties deriving
revenues primarily from short-term sources are
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generally more management intensive than properties
leased to creditworthy tenants under long-term
leases.
Morgan Stanley Dean Witter Capital I Inc. makes no
representation or warranty as to the skills of any
present or future managers. Additionally, Morgan
Stanley Dean Witter Capital I Inc. cannot assure you
that the property managers will be in a financial
condition to fulfill their management
responsibilities throughout the terms of their
respective management agreements.
YOU SHOULD CONSIDER THE
NUMBER OF MORTGAGE
LOANS IN THE POOL Assuming pools of equal aggregate unpaid principal
balances, the concentration of default, foreclosure
and loss in a trust fund containing fewer mortgage
loans will generally be higher than that in trust
fund containing more mortgage loans.
YOUR INVESTMENT IS NOT
INSURED OR GUARANTEED
AND YOUR SOURCE FOR
REPAYMENTS IS LIMITED Payments under the mortgage loans are generally not
insured or guaranteed by any person or entity.
In general, the borrowers under the mortgage loans
will be entities created to own or purchase the
related commercial property. The borrowers are set up
this way, in significant part, to isolate the
property from the debts and liabilities of the person
creating the entity. Unless otherwise specified, the
loan will represent a nonrecourse obligation of the
related borrower secured by the lien of the related
mortgage and the related lease assignments. Even if
the loan is recourse, the borrower generally will not
have any significant assets other than the property
or properties and the related leases, which will be
pledged to the trustee. Therefore, payments on the
loans and, in turn, payments of principal and
interest on your certificates, will depend primarily
or solely on rental payments by the lessees. Those
rental payments will, in turn, depend on continued
occupancy by, or the creditworthiness of, those
lessees. Both continued occupancy and
creditworthiness may be adversely affected by a
general economic downturn or an adverse change in the
lessees' financial conditions.
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BORROWER MAY BE UNABLE
TO REPAY THE REMAINING
PRINCIPAL BALANCE ON ITS
MATURITY DATE WHICH
WOULD ADVERSELY AFFECT
PAYMENT ON YOUR
CERTIFICATES Some of the mortgage loans may not be fully
amortizing over their terms to maturity and will
require substantial principal payments--i.e., balloon
payments--at their stated maturity. Mortgage loans
with balloon payments involve a greater degree of
risk because a borrower's ability to make a balloon
payment typically will depend upon its ability either
to timely refinance the loan or to timely sell the
mortgaged property. However, refinancing a loan or
selling the property will be affected by a number of
factors, including:
o interest rates;
o the borrower's equity in the property;
o the financial condition and operating
history of the borrower and the property;
o tax laws;
o renewability of operating licenses;
o prevailing economic conditions and the
availability of credit for commercial and
multifamily properties;
o with respect to certain multifamily
properties and mobile home parks, rent
control laws; and
o with respect to hospitals, nursing homes and
convalescent homes, reimbursement rates from
private and public coverage providers.
YOUR CERTIFICATES WILL
BEAR LOSSES IF
INSUFFICIENT FUNDS
ARE AVAILABLE TOSATISFY
ANY JUNIOR MORTGAGE
LOANS If the prospectus supplement so specifies, some of
the mortgage loans may be secured primarily by junior
mortgages. In the event of a liquidation,
satisfaction of a mortgage loan secured by a junior
mortgage will be subordinate to the satisfaction of
the related senior mortgage loan. If the proceeds are
insufficient to satisfy the junior mortgage and the
related senior mortgage, the junior mortgage loan in
the trust fund would suffer a loss and the class of
certificate you own may bear that loss.
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<PAGE>
Therefore, any risks of deficiencies associated with
first mortgage loans will be even greater in the case
of junior mortgage loans. See "--Risks Factors."
OBLIGOR DEFAULT MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES If the related prospectus supplement so specifies, a
master servicer, a sub-servicer or a special servicer
will be permitted, within prescribed parameters, to
extend and modify whole loans that are in default or
as to which a payment default is imminent. Any
ability to extend or modify may apply, in particular,
to whole loans with balloon payments. In addition, a
master servicer, a sub-servicer or a special servicer
may receive a workout fee based on receipts from, or
proceeds of, those whole loans. While any entity
granting this type of extension or modification
generally will be required to determine that the
extension or modification is reasonably likely to
produce a greater recovery on a present value basis
than liquidation, there is no assurance this will be
the case. Additionally, if the related prospectus
supplement so specifies, some of the mortgage loans
included in the mortgage pool may have been subject
to workouts or similar arrangements following prior
periods of delinquency and default.
TENANT BANKRUPTCY MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES The bankruptcy or insolvency of a major tenant, or of
a number of smaller tenants may adversely affect the
income produced by a mortgaged property. Under the
Bankruptcy Code, a tenant has the option of assuming
or rejecting any unexpired lease. If the tenant
rejects the lease, the landlord's claim would be a
general unsecured claim against the tenant, absent
collateral securing the claim. The claim would be
limited to the unpaid rent reserved for the periods
prior to the bankruptcy petition or the earlier
surrender of the leased premises, which are unrelated
to the rejection, plus the greater of one year's rent
or 15% of the remaining rent reserved under the
lease, but not more than three years' rent to cover
any rejection related claims.
BORROWER BANKRUPTCY MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES Under the Bankruptcy Code, the filing of a petition
in bankruptcy by or against a borrower will stay the
sale of the real property owned by that borrower, as
well as the
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<PAGE>
commencement or continuation of a foreclosure action.
In addition, if a court determines that the value of
the mortgaged property is less than the principal
balance of the mortgage loan it secures, the court
may prevent a lender from foreclosing on the
mortgaged property, subject to certain protections
available to the lender. As part of a restructuring
plan, a court also may reduce the amount of secured
indebtedness to the then-value of the mortgaged
property. Such an action would make the lender a
general unsecured creditor for the difference between
the then-value and the amount of its outstanding
mortgage indebtedness. A bankruptcy court also may:
o grant a debtor a reasonable time to cure a
payment default on a mortgage loan;
o reduce monthly payments due under a mortgage
loan;
o change the rate of interest due on a
mortgage loan; or
o otherwise alter the mortgage loan's
repayment schedule.
Moreover, the filing of a petition in bankruptcy by,
or on behalf of, a junior lienholder may stay the
senior lienholder from taking action to foreclose on
the mortgaged property in a manner that would
substantially diminish the position of the junior
lien. Additionally, the borrower's trustee or the
borrower, as debtor-in-possession, has certain
special powers to avoid, subordinate or disallow
debts. In certain circumstances, the claims of the
trustee may be subordinated to financing obtained by
a debtor-in-possession subsequent to its bankruptcy.
Under the Bankruptcy Code, the lender will be stayed
from enforcing a borrower's assignment of rents and
leases. The Bankruptcy Code also may interfere with
the lender's ability to enforce lockbox requirements.
The legal proceedings necessary to resolve these
issues can be time consuming and may significantly
delay the receipt of rents. Rents also may escape an
assignment to the extent they are used by the
borrower to maintain the mortgaged property or for
other court authorized expenses.
As a result of the foregoing, the lender's recovery
with respect to borrowers in bankruptcy proceedings
may be significantly delayed, and the aggregate
amount ultimately collected may be substantially less
than the amount owed.
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SOPHISTICATION OF THE
BORROWER MAY ADVERSELY
AFFECT PAYMENT ON YOUR
CERTIFICATES In general, the mortgage loans will be made to
partnerships, corporations or other entities rather
than individuals. This may entail greater risks of
loss from delinquency and foreclosure than do single
family mortgage loans. In addition, the borrowers
under commercial mortgage loans may be more
sophisticated than the average single family home
borrower. This may increase the likelihood of
protracted litigation or the likelihood of bankruptcy
in default situations.
CREDIT SUPPORT MAY NOT
COVER LOSSES OR RISKS
WHICH COULD ADVERSELY
AFFECT PAYMENT ON YOUR
CERTIFICATES Although the prospectus supplement for a series of
certificates will describe the credit support for the
related trust fund, the credit support will be
limited in amount and coverage and may not cover all
potential losses or risks. Use of credit support will
be subject to the conditions and limitations
described in the prospectus and in the related
prospectus supplement. Moreover, any applicable
credit support may not cover all potential losses or
risks. For example, credit support may not cover
fraud or negligence by a mortgage loan originator or
other parties.
A series of certificates may include one or more
classes of subordinate certificates, which may
include certificates being offered to you. Although
subordination is intended to reduce the senior
certificateholders' risk of delinquent distributions
or ultimate losses, the amount of subordination will
be limited and may decline under certain
circumstances. In addition, if principal payments are
made in a specified order of priority, and limits
exist with respect to the aggregate amount of claims
under any related credit support, the credit support
may be exhausted before the principal of the
certificate classes with lower priority has been
repaid. Significant losses and shortfalls on the
assets consequently may fall primarily upon classes
of certificates having a lower payment priority.
Moreover, if a form of credit support covers more
than one series of certificates, holders of
certificates evidencing an interest in a covered
series will be subject to the risk that the credit
support will be exhausted by the claims of other
covered series.
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<PAGE>
The amount of any credit support supporting one or
more classes of certificates being offered to you,
including the subordination of one or more classes
will be determined on the basis of criteria
established by each pertinent rating agency. Those
criteria will be based on an assumed level of
defaults, delinquencies, other losses or other
factors. However, the loss experience on the related
mortgage loans or mortgage backed securities may
exceed the assumed levels. See "Description of Credit
Support."
Regardless of the form of any credit enhancement, the
amount of coverage will be limited and, in most
cases, will be subject to periodic reduction, in
accordance with a schedule or formula. The master
servicer generally will be permitted to reduce,
terminate or substitute all or a portion of the
credit enhancement for any series of certificates, if
the applicable rating agency indicates that the
then-current ratings will not be adversely affected.
A rating agency may lower the ratings of any series
of certificates if the obligations of any credit
support provider are downgraded. The ratings also may
be lowered if losses on the related mortgage loans or
MBS substantially exceed the level contemplated by
the rating agency at the time of its initial rating
analysis. Neither Morgan Stanley Dean Witter Capital
I Inc., the master servicer nor any of their
affiliates will have any obligation to replace or
supplement any credit enhancement, or to take any
other action to maintain any ratings of any series of
certificates.
INVESTORS IN SUBORDINATE
CLASSES OF CERTIFICATES MAY
BE SUBJECT TO DELAYS IN
PAYMENT AND MAY NOT
RECOVER THEIR INITIAL
INVESTMENTS To the extent described in this prospectus, the
subordinate certificateholders' rights to receive
distributions with respect to the assets to which
they would otherwise be entitled will be subordinate
to the rights of the senior certificateholders and of
the master servicer, if the master servicer is paid
its servicing fee, including any unpaid servicing
fees with respect to one or more prior periods, and
is reimbursed for certain unreimbursed advances and
unreimbursed liquidation expenses. As a result,
investors in subordinate certificates must be
prepared to bear the risk that they may be subject to
delays in payment and may not recover their initial
investments.
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<PAGE>
The yields on the subordinate certificates may be
extremely sensitive to the loss experience of the
assets and the timing of any losses. If the actual
rate and amount of losses experienced by the assets
exceed the rate and amount assumed by an investor,
the yields to maturity on the subordinate
certificates may be lower than anticipated.
DIFFICULTIES IN ENFORCEMENT
OF LOAN PROVISIONS MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES The mortgage loans may contain due-on-sale clauses,
which permit a lender to accelerate the maturity of
the mortgage loan if the borrower sells, transfers or
conveys the related mortgaged property or its
interest in the mortgaged property and
debt-acceleration clauses, which permit a lender to
accelerate the loan upon a monetary or non-monetary
default by the borrower. These clauses are generally
enforceable. The courts of all states will enforce
clauses providing for acceleration in the event of a
material payment default. The equity courts, however,
may refuse to enforce these clauses if acceleration
of the indebtedness would be inequitable, unjust or
unconscionable.
If the related prospectus supplement so specifies,
the mortgage loans will be secured by an assignment
of leases and rents. Pursuant to those assignments,
the borrower typically assigns its right, title and
interest as landlord under the leases on the related
mortgaged property and the income derived from the
leases to the lender as further security for the
related mortgage loan, while retaining a license to
collect rents as long as there is no default. If the
borrower defaults, the license terminates and the
lender is entitled to collect rents. These
assignments are typically not perfected as security
interests prior to actual possession of the cash
flows. Some state laws may require that the lender
take possession of the mortgaged property and obtain
judicial appointment of a receiver before becoming
entitled to collect the rents. In addition, if
bankruptcy or similar proceedings are commenced by or
in respect of the borrower, the lender's ability to
collect the rents may be adversely affected. See
"Legal Aspects of the Mortgage Loans and the
Leases--Leases and Rents."
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<PAGE>
ENVIRONMENTAL ISSUES AT
THE MORTGAGED PROPERTIES
MAY ADVERSELY AFFECT
PAYMENT ON YOUR
CERTIFICATES Real property pledged as security for a mortgage loan
may be subject to environmental risks. Under the laws
of certain states, contamination of a property may
give rise to a lien on the property to assure the
costs of cleanup. In several states, this type of
lien has priority over the lien of an existing
mortgage against the property. Moreover, the presence
of hazardous or toxic substances, or the failure to
remediate the property, may adversely affect the
owner or operator's ability to borrow using the
property as collateral. In addition, under the laws
of some states and under CERCLA and other federal
law, a lender may be liable, as an "owner" or
"operator," for costs of addressing releases or
threatened releases of hazardous substances that
require remedy at a property, if agents or employees
of the lender have become sufficiently involved in
the operations of the borrower. Liability may be
imposed even if the environmental damage or threat
was caused by a prior owner.
Under certain circumstances, a lender also risks this
type of liability on foreclosure of the mortgage.
Unless the related prospectus supplement specifies
otherwise, neither the master servicer, the
sub-servicer nor the special servicer may acquire
title to a mortgaged property or take over its
operation unless the master servicer has previously
determined, based upon a report prepared by a person
who regularly conducts environmental audits, that:
o the mortgaged property is in compliance with
applicable environmental laws, and there are
no circumstances present at the mortgaged
property for which investigation, testing,
monitoring, containment, clean-up or
remediation could be required under any
federal, state or local law or regulation;
or
o if the mortgaged property is not in
compliance with applicable environmental
laws or circumstances requiring any of the
foregoing actions are present, that it would
be in the best economic interest of the
trust fund to acquire title to the mortgaged
property and take the actions as would be
necessary and appropriate to effect
compliance or respond to those
circumstances.
See "Legal Aspects of the Mortgage Loans and
Leases--Environmental Legislation."
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<PAGE>
IF YOU ARE SUBJECT TO
ERISA, YOU MAY NOT BE
ELIGIBLE TO PURCHASE
CERTIFICATES Generally, ERISA applies to investments made by
employee benefit plans and transactions involving the
assets of those plans. Due to the complexity of
regulations governing those plans, prospective
investors that are subject to ERISA are urged to
consult their own counsel regarding consequences
under ERISA of acquisition, ownership and disposition
of the offered certificates of any series.
THE INCOME TAX
CONSIDERATIONS SHOULD
IMPACT YOUR DECISION TO
PURCHASE A REMIC
RESIDUAL CERTIFICATE Except as provided in the prospectus supplement,
REMIC residual certificates are anticipated to have
"phantom income" associated with them. That is,
taxable income is anticipated to be allocated to the
REMIC residual certificates in the early years of the
existence of the related REMIC--even if the REMIC
residual certificates receive no distributions from
the related REMIC--with a corresponding amount of
losses allocated to the REMIC residual certificates
in later years. Accordingly, the present value of the
tax detriments associated with the REMIC residual
certificates may significantly exceed the present
value of the tax benefits related thereto, and the
REMIC residual certificates may have a negative
"value."
Moreover, the REMIC residual certificates will, in
effect, be allocated an amount of gross income equal
to the non-interest expenses of the REMIC, but those
expenses will be deductible only as itemized
deductions, and will be subject to all the
limitations applicable to itemized deductions, by
holders of REMIC residual certificates that are
individuals. Accordingly, investment in the REMIC
residual certificates generally will not be suitable
for individuals or for certain pass-through entities,
such as partnerships or S corporations, that have
individuals as partners or shareholders. In addition,
REMIC residual certificates are subject to
restrictions on transfer. Finally, prospective
purchasers of a REMIC residual Certificate should be
aware that final Treasury Department regulations do
not permit certain REMIC residual interests to be
marked to market.
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<PAGE>
REQUIRED CONSENT IN
CONNECTION WITH SERVICING
THE PROPERTIES MAY EFFECT
THE TIMING OF PAYMENTS
ON YOUR CERTIFICATES Under certain circumstances, the consent or approval
of the holders of a specified percentage of the
aggregate principal balance of all outstanding
certificates of a series or a similar means of
allocating decision-making will be required to direct
certain actions. The actions may include directing
the special servicer or the master servicer regarding
measures to be taken with respect to some of the
mortgage loans and real estate owned properties and
amending the relevant pooling agreement or trust
agreement. The consent or approval of these holders
will be sufficient to bind all certificateholders of
the relevant series. See "Description of the
Agreements--Events of Default," "--Rights Upon Event
of Default," and "--Amendment."
LITIGATION ARISING OUT OF
ORDINARY BUSINESS MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES There may be pending or threatened legal proceedings
against the borrowers and managers of the mortgaged
properties and their respective affiliates arising
out of the ordinary business of the borrowers,
managers and affiliates. This litigation could cause
a delay in the payment on your certificates.
Therefore, we cannot assure you that this type of
litigation would not have a material adverse effect
on your certificates.
COMPLIANCE WITH THE
AMERICANS WITH DISABILITIES
ACT OF 1990 MAY BE
EXPENSIVE AND MAY
ADVERSELY AFFECT PAYMENT
ON YOUR CERTIFICATES Under the Americans with Disabilities Act of 1990,
all public accommodations are required to meet
federal requirements related to access and use by
disabled persons. Borrowers may incur costs complying
with the Americans with Disabilities Act of 1990. In
addition, noncompliance could result in the
imposition of fines by the federal government or an
award of damages to private litigants. These costs of
complying with the Americans with Disabilities Act of
1990 and the possible imposition of fines for
noncompliance would result in additional
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<PAGE>
expenses on the mortgaged properties, which could
have an adverse effect on your certificates.
IF YOUR CERTIFICATE IS
BOOK-ENTRY, YOU WILL NOT
BE RECOGNIZED AS A
CERTIFICATEHOLDER BY
THE TRUSTEE If the prospectus supplement so provides, one or more
classes of the certificates offered to you will be
initially represented by one or more certificates for
each class registered in the name of Cede & Co., the
nominee for the Depository Trust Company. If you
purchase this type of certificate:
o your certificate will not be registered in
your name or the name of your nominee;
o you will not be recognized by the trustee as
a certificateholder; and
o you will be able to exercise your right as a
certificateholder only through the
Depository Trust Company and its
participating organizations.
You will be recognized as a certificateholder only if
and when definitive certificates are issued. See
"Description of the Certificates--Book-Entry
Registration and Definitive Certificates."
-------------------------------------------------
This prospectus also contains forward-looking statements that involve risks and
uncertainties. Actual results could differ from those anticipated in these
forward-looking statements as a result of a variety of factors, including the
risks described above under "Risk Factors" and elsewhere in this prospectus.
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<PAGE>
DESCRIPTION OF THE TRUST FUNDS
Capitalized terms are defined in the "Glossary of Terms" beginning
on page 116.
ASSETS
Each series of certificates will represent in the aggregate the
entire beneficial ownership interest in a trust fund. The primary assets of each
trust fund will include:
o multifamily mortgage loans, commercial mortgage loans or both;
o mortgage participations, pass-through certificates or other
mortgage-backed securities evidencing interests in or secured
by one or more mortgage loans or other similar participations,
certificates or securities;
o direct obligations of the United States, agencies of the
United States or agencies created by government entities which
are not subject to redemption prior to maturity at the option
of the issuer and are (a) interest-bearing securities, (b)
non-interest bearing securities, (c) originally
interest-bearing securities from which coupons representing
the right to payment of interest have been removed, or (d)
interest-bearing securities from which the right to payment of
principal has been removed; or
o a combination of mortgage loans, mortgage backed securities
and government securities.
Neither the mortgage loans nor the mortgage backed securities will
be guaranteed or insured by Morgan Stanley Dean Witter Capital I Inc. or any of
its affiliates or, unless otherwise provided in the prospectus supplement, by
any government agency or instrumentality or by any other person. Each asset will
be selected by Morgan Stanley Dean Witter Capital I Inc. for inclusion in a
trust fund from among those purchased, either directly or indirectly, from a
prior holder thereof, which may be an affiliate of Morgan Stanley Dean Witter
Capital I Inc. and, with respect to mortgage loans or mortgage backed
securities, which prior holder may or may not be the originator of the mortgage
loan or the issuer of the mortgage backed securities.
Unless otherwise specified in the related prospectus supplement, the
certificates of any series will be entitled to payment only from the assets of
the related trust fund and will not be entitled to payments in respect of the
assets of any other trust fund established by Morgan Stanley Dean Witter Capital
I Inc. If specified in the related prospectus supplement, the assets of a trust
fund will consist of certificates representing beneficial ownership interests in
another trust fund that contains the assets.
MORTGAGE LOANS
GENERAL
The mortgage loans will be secured by liens on, or security
interests in, mortgaged properties consisting of:
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<PAGE>
o Multifamily Properties which are residential properties
consisting of five or more rental or cooperatively-owned
dwelling units in high-rise, mid-rise or garden apartment
buildings; or
o Commercial Properties which are office buildings, shopping
centers, retail stores, hotels or motels, nursing homes,
hospitals or other health care-related facilities, mobile home
parks, warehouse facilities, mini-warehouse facilities or
self-storage facilities, industrial plants, congregate care
facilities, mixed use or other types of commercial properties.
The mortgaged properties will be located in any one of the fifty states, the
District of Columbia or the Commonwealth of Puerto Rico, or, in another
location, if specified in the related prospectus supplement. The mortgage loans
in the mortgage pool will be evidenced by promissory notes secured by first or
junior mortgages or deeds of trust or other similar security instruments
creating a first or junior lien on the mortgaged property. Multifamily
Properties may include mixed commercial and residential structures and may
include apartment buildings owned by private cooperative housing corporations.
The mortgaged properties may include leasehold interests in properties, the
title to which is held by third party lessors. Unless otherwise specified in the
prospectus supplement, the term of any leasehold will exceed the term of the
related mortgage note by at least five years. Each mortgage loan will have been
originated by a person other than Morgan Stanley Dean Witter Capital I Inc. The
related prospectus supplement will indicate if any originator or a mortgage loan
is an affiliate of Morgan Stanley Dean Witter Capital I Inc., mortgage loans
will generally also be secured by an assignment of leases and rents and
operating or other cash flow guarantees relating to the mortgage loan.
LEASES
If specified in the related prospectus supplement, some or all of
the mortgage loans will include assignments of the leases of the related
mortgaged properties and assignments of the rental payments due from lessee to
lessor under the leases. To the extent specified in the related prospectus
supplement, the commercial properties may be leased to lessees that respectively
occupy all or a portion of the properties. Pursuant to an assignment of a lease,
the related borrower may assign its rights, title and interest as lessor under
each lease and the income derived from the lease to the related lender, while
retaining a license to collect the rents for so long as there is no default. If
the borrower defaults, the license terminates and the lender or its agent is
entitled to collect the rents from the related lessee or lessees for application
to the monetary obligations of the borrower. State law may limit or restrict the
enforcement of the lease assignments by a lender until it takes possession of
the related mortgaged property or a receiver is appointed. See "Legal Aspects of
the Mortgage Loans and the Leases--Leases and Rents". Alternatively, if
specified in the related prospectus supplement, the borrower and the lender may
agree that payments under leases are to be made directly to the master servicer.
If described in the related prospectus supplement, the leases may
require the lessees to pay rent that is sufficient in the aggregate to cover all
scheduled payments of principal and interest on the related mortgage loans. In
some cases, the leases may require the lessees to pay their pro rata share of
the operating expenses, insurance premiums and real estate taxes associated with
the mortgaged properties. Some of the leases may require the borrower to bear
costs associated with structural repairs or the maintenance of the exterior or
other portions of the
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<PAGE>
mortgaged property or provide for certain limits on the aggregate amount of
operating expenses, insurance premiums, taxes and other expenses that the
lessees are required to pay. If so specified in the related prospectus
supplement, under certain circumstances the lessees may be permitted to set off
their rental obligations against the obligations of the borrowers under the
leases. In those cases where payments under the leases, net of any operating
expenses payable by the borrowers are insufficient to pay all of the scheduled
principal and interest on the related mortgage loans, the borrowers must rely on
other income or sources, including security deposits, generated by the related
mortgaged property to make payments on the related mortgage loan.
To the extent specified in the related prospectus supplement, some
commercial properties may be leased entirely to one lessee. In these cases,
absent the availability of other funds, the borrower must rely entirely on rent
paid by the lessee in order for the borrower to pay all of the scheduled
principal and interest on the related mortgage loan. To the extent specified in
the related prospectus supplement, some of the leases may expire prior to the
stated maturity of the related mortgage loan. In these cases, upon expiration of
the leases the borrowers will have to look to alternative sources of income,
including rent payment by any new lessees or proceeds from the sale or
refinancing of the mortgaged property, to cover the payments of principal and
interest due on these mortgage loans unless the lease is renewed. As specified
in the related prospectus supplement, some of the leases may provide that upon
the occurrence of a casualty affecting a mortgaged property, the lessee will
have the right to terminate its lease, unless the borrower, as lessor, is able
to cause the mortgaged property to be restored within a specified period of
time. Some leases may provide that it is the lessor's responsibility, while
other leases provide that it is the lessee's responsibility, to restore the
mortgaged property after a casualty to its original condition. Some leases may
provide a right of termination to the related lessee if a taking of a material
or specified percentage of the leased space in the mortgaged property occurs, or
if the ingress or egress to the leased space has been materially impaired.
DEFAULT AND LOSS CONSIDERATIONS WITH RESPECT TO THE MORTGAGE LOANS
Mortgage loans secured by commercial and multifamily properties are
markedly different from owner-occupied single family mortgage loans. The
repayment of loans secured by commercial or multifamily properties is typically
dependent upon the successful operation of the property rather than upon the
liquidation value of the real estate. Unless otherwise specified in the
prospectus supplement, the mortgage loans will be non-recourse loans, which
means that, absent special facts, the lender may look only to the Net Operating
Income from the property for repayment of the mortgage debt, and not to any
other of the borrower's assets, in the event of the borrower's default. Lenders
typically look to the Debt Service Coverage Ratio of a loan secured by
income-producing property as an important measure of the risk of default on a
loan. The "Debt Service Coverage Ratio" of a mortgage loan at any given time is
the ratio of the Net Operating Income for a twelve-month period to the
annualized scheduled payments on the mortgage loan. "Net Operating Income"
means, for any given period, to the extent set forth in the related prospectus
supplement, the total operating revenues derived from a mortgaged property
during that period, minus the total operating expenses incurred in respect of
the mortgaged property during that period other than:
o non-cash items such as depreciation and amortization;
o capital expenditures; and
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<PAGE>
o debt service on loans secured by the mortgaged property.
The Net Operating Income of a mortgaged property will fluctuate over
time and may be sufficient or insufficient to cover debt service on the related
mortgage loan at any given time.
As the primary component of Net Operating Income, rental income as
well as maintenance payments from tenant-stockholders of a cooperative is
subject to the vagaries of the applicable real estate market or business
climate. Properties typically leased, occupied or used on a short-term basis,
such as health care-related facilities, hotels and motels, and mini-warehouse
and self-storage facilities, tend to be affected more rapidly by changes in
market or business conditions than do properties leased, occupied or used for
longer periods, such as warehouses, retail stores, office buildings and
industrial plants. Commercial loans may be secured by owner-occupied mortgaged
properties or mortgaged properties leased to a single tenant. Accordingly, a
decline in the financial condition of the borrower or single tenant, as
applicable, may have a disproportionately greater effect on the Net Operating
Income from the mortgaged properties than would be the case with respect to
mortgaged properties with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses, including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the risk of default on the related
mortgage loan. As may be further described in the related prospectus supplement,
in some cases leases of mortgaged properties may provide that the lessee, rather
than the borrower, is responsible for payment of some or all of these expenses;
however, because leases are subject to default risks as well when a tenant's
income is insufficient to cover its rent and operating expenses, the existence
of "net of expense" provisions will only temper, not eliminate, the impact of
expense increases on the performance of the related mortgage loan. See
"--Leases" above.
The duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties.
However, that risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities and hospitals,
the income from which and the operating expenses of which are subject to state
and federal regulations, such as Medicare and Medicaid, and multifamily
properties and mobile home parks, which may be subject to state or local rent
control regulation and, in certain cases, restrictions on changes in use of the
property. Low-and moderate-income housing in particular may be subject to legal
limitations and regulations but, because of these regulations, may also be less
sensitive to fluctuations in market rents generally.
The Debt Service Coverage Ratio should not be relied upon as the
sole measure of the risk of default because other factors may outweigh a high
Debt Service Coverage Ratio. For instance, where a mortgage loan requires
substantial principal payments at the stated maturity, the risk of default if
the balloon payment cannot be refinanced at maturity is significant, even though
the related Debt Service Coverage Ratio may be high.
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<PAGE>
The liquidation value of any mortgaged property may be adversely
affected by risks generally incident to interests in real property, including
declines in rental or occupancy rates. Lenders generally use the Loan-to-Value
Ratio of a mortgage loan as a measure of risk of loss if a property must be
liquidated upon a default by the borrower.
Appraised values for income-producing properties may be based on:
o the recent resale value of comparable properties at the date
of the appraisal;
o the cost of replacing the property;
o a projection of value based upon the property's projected net
cash flow; or
o a selection from or interpolation of the values derived from
the methods listed here.
Each of these appraisal methods presents analytical challenges for
the following reasons:
o it is often difficult to find truly comparable properties that
have recently been sold;
o the replacement cost of a property may have little to do with
its current market value;
o income capitalization is inherently based on inexact
projections of income and expense and the selection of an
appropriate capitalization rate;
o more than one of the appraisal methods may be used and each
may produce significantly different results; and
o if a high Loan-to-Value Ratio accompanies a high Debt Service
Coverage Ratio or vice versa, the analysis of default and loss
risks is difficult.
While Morgan Stanley Dean Witter Capital I Inc. believes that the
foregoing considerations are important factors that generally distinguish the
multifamily and commercial loans from single family mortgage loans and provide
insight to the risks associated with income-producing real estate, there is no
assurance that these factors will in fact have been considered by the
originators of the multifamily and commercial loans, or that, for any of the
mortgage loans, they are complete or relevant. See "Risk Factors--Borrower May
Be Unable To Repay The Remaining Principal Balance On Its Maturity Date Which
Would Adversely Affect Payment On Your Certificates," "--Your Certificates Will
Bear Losses If Insufficient Funds Are Available to Satisfy Any Junior Mortgage
Loans," and "--Obligor Default May Adversely Affect Payment on Your
Certificates."
LOAN-TO-VALUE RATIO
The Loan-to-Value Ratio of a mortgage loan at any given time is the
ratio, expressed as a percentage, of the then outstanding principal balance of
the mortgage loan to the Value of the related mortgaged property. The Value of a
mortgaged property, other than with respect to Refinance Loans, is generally the
lesser of
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<PAGE>
o the appraised value determined in an appraisal obtained by the
originator at origination of that loan and
o the sales price for that property.
Refinance Loans are loans made to refinance existing loans. Unless the related
prospectus supplement provides otherwise, the Value of the mortgaged property
securing a Refinance Loan is the appraised value determined in an appraisal
obtained at the time of origination of the Refinance Loan. The Value of a
mortgaged property as of the date of initial issuance of the related series of
certificates may be less than the Value at origination and will fluctuate from
time to time based upon changes in economic conditions and the real estate
market.
MORTGAGE LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS
Each prospectus supplement will contain information, as of the date
of that prospectus supplement or the Cut-off Date, if applicable and
specifically known to Morgan Stanley Dean Witter Capital I Inc., with respect to
the mortgage loans, including:
o the aggregate outstanding principal balance and the largest,
smallest and average outstanding principal balance of the
mortgage loans, unless the related prospectus supplement
provides otherwise, the close of business on the Cut-off Date,
which is a day of the month of formation of the related trust
fund, as designated in the prospectus supplement;
o the type of property securing the mortgage loans, e.g.,
multifamily property or commercial property and the type of
property in each category;
o the weighted average, by principal balance, of the original
and remaining terms to maturity of the mortgage loans;
o the earliest and latest origination date and maturity date of
the mortgage loans;
o the weighted average, by principal balance, of the
Loan-to-Value Ratios at origination of the mortgage loans;
o the mortgage rates or range of mortgage rates and the weighted
average mortgage rate borne by the mortgage loans;
o the state or states in which most of the mortgaged properties
are located;
o information with respect to the prepayment provisions, if any,
of the mortgage loans;
o the weighted average Retained Interest, if any;
o with respect to mortgage loans with adjustable mortgage rates,
the Index, the frequency of the adjustment dates, the highest,
lowest and weighted average note margin and pass-through
margin, and the maximum mortgage rate or monthly payment
variation at the time of any adjustment thereof and over the
life of the adjustable rate loan and the frequency of monthly
payment adjustments;
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o the Debt Service Coverage Ratio either at origination or as of
a more recent date, or both; and
o information regarding the payment characteristics of the
mortgage loans, including without limitation balloon payment
and other amortization provisions.
The related prospectus supplement will also contain certain information
available to Morgan Stanley Dean Witter Capital I Inc. with respect to the
provisions of leases and the nature of tenants of the mortgaged properties and
other information referred to in a general manner under "--Default and Loss
Considerations with Respect to the Mortgage Loans" above. If specific
information respecting the mortgage loans is not known to Morgan Stanley Dean
Witter Capital I Inc. at the time certificates are initially offered, more
general information of the nature described in the bullet points in this section
will be provided in the prospectus supplement, and specific information will be
set forth in a report which will be available to purchasers of the related
certificates at or before the initial issuance thereof and will be filed as part
of a Current Report on Form 8-K with the Securities and Exchange Commission
within fifteen days after the initial issuance.
PAYMENT PROVISIONS OF THE MORTGAGE LOANS
Unless otherwise specified in the related prospectus supplement, all
of the mortgage loans will:
o have individual principal balances at origination of not less
than $25,000;
o have original terms to maturity of not more than 40 years; and
o provide for payments of principal, interest or both, on due
dates that occur monthly, quarterly or semi-annually or at
another interval as specified in the related prospectus
supplement.
Each mortgage loan may provide for no accrual of interest or for
accrual of interest thereon at a mortgage rate. Each mortgage loan may provide
for scheduled payments to maturity or payments that adjust from time to time to
accommodate changes in the mortgage rate or to reflect the occurrence of certain
events, and may provide for negative amortization or accelerated amortization,
in each case as described in the related prospectus supplement. Each mortgage
loan may be fully amortizing or require a balloon payment due on its stated
maturity date, in each case as described in the related prospectus supplement.
Each mortgage loan may contain a Lockout Period and Lockout Date, the date of
expiration of the Lockout Period, or require payment of a prepayment premium in
connection with a prepayment, in each case as described in the related
prospectus supplement.
In the event that holders of any class or classes of the offered
certificates in this prospectus supplement will be entitled to all or a portion
of any prepayment premiums collected in respect of mortgage loans, the related
prospectus supplement will specify the method or methods by which these amounts
will be allocated. A mortgage loan may also contain provisions entitling the
lender to a share of profits realized from the operation or disposition of the
mortgaged property, as described in the related prospectus supplement. In the
event that holders of any class or classes of offered certificates will be
entitled to all or a portion of an
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Equity Participation, the related prospectus supplement will specify the terms
and provisions of the Equity Participation and the method or methods by which
distributions in respect thereof will be allocated among the certificates.
MORTGAGE BACKED SECURITIES
Any MBS will have been issued pursuant to an MBS Agreement. A
seller, the MBS issuer, or the servicer of the underlying mortgage loans or
Underlying MBS, or a combination of those entities, will have entered into the
MBS Agreement with an MBS trustee, if any, or with the original purchaser of the
interest in the underlying mortgage loans or MBS evidenced by the MBS.
Distributions of any principal or interest, as applicable, will be
made on MBS on the dates specified in the related prospectus supplement. The MBS
may be issued in one or more classes with characteristics similar to the classes
of certificates described in this prospectus. Any principal or interest
distributions will be made on the MBS by the MBS trustee or the MBS servicer.
The MBS issuer or the MBS servicer or another person specified in the related
prospectus supplement may have the right or obligation to repurchase or
substitute assets underlying the MBS after a certain date or under other
circumstances specified in the related prospectus supplement.
Enhancement in the form of reserve funds, subordination or other
forms of credit support similar to that described for the certificates under
"Description of Credit Support" may be provided with respect to the MBS. The
type, characteristics and amount of the credit support, if any, will be a
function of certain characteristics of the mortgage loans or Underlying MBS
evidenced by or securing the MBS and other factors and generally will have been
established for the MBS on the basis of requirements of any Rating Agency that
may have assigned a rating to the MBS or the initial purchasers of the MBS.
The prospectus supplement for a series of certificates evidencing
interests in assets that include MBS will specify, to the extent available:
o the aggregate approximate initial and outstanding principal
amount or Notional Amount, as applicable, and type of the MBS
to be included in the trust fund;
o the original and remaining term to stated maturity of the MBS,
if applicable;
o whether the MBS is entitled only to interest payments, only to
principal payments or to both;
o the pass-through or bond rate of the MBS or formula for
determining the rates, if any;
o the applicable payment provisions for the MBS, including, but
not limited to, any priorities, payment schedules and
subordination features;
o the MBS issuer, MBS servicer and MBS trustee, as applicable;
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o characteristics of the credit support, if any, such as
subordination, reserve funds, insurance policies, letters of
credit or guarantees relating to the related Underlying
Mortgage Loans, the Underlying MBS or directly to the MBS;
o the terms on which the MBS or the related Underlying Mortgage
Loans or Underlying MBS may, or are required to, be purchased
prior to their maturity;
o the terms on which mortgage loans or Underlying MBS may be
substituted for those originally underlying the MBS;
o the servicing fees payable under the MBS Agreement;
o the type of information in respect of the Underlying Mortgage
Loans described under "--Mortgage Loans--Mortgage Loan
Information in Prospectus Supplements" above, and the type of
information in respect of the Underlying MBS described in this
paragraph;
o the characteristics of any cash flow agreements that are
included as part of the trust fund evidenced or secured by the
MBS, and
o whether the MBS is in certificated form, book-entry form or
held through a depository such as The Depository Trust Company
or the Participants Trust Company.
If specified in the prospectus supplement for a series of
certificates, a trust fund may contain one or more MBS issued by Morgan Stanley
Dean Witter Capital I Inc. that each represent an interest in one or more
Underlying Mortgage Loans. The prospectus supplement for a series will contain
the disclosure concerning the MBS described in the preceding paragraph and, in
particular, will disclose the Underlying Mortgage Loans appropriately in light
of the percentage of the aggregate principal balance of all assets represented
by the principal balance of the MBS.
GOVERNMENT SECURITIES
The prospectus supplement for a series of certificates evidencing
interests in assets of a trust fund that include government securities will
specify, to the extent available:
o the aggregate approximate initial and outstanding principal
amounts or Notional Amounts, as applicable, and types of the
government securities to be included in the trust fund;
o the original and remaining terms to stated maturity of the
government securities;
o whether the government securities are entitled only to
interest payments, only to principal payments or to both;
o the interest rates of the government securities or the formula
to determine the rates, if any;
o the applicable payment provisions for the government
securities; and
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o to what extent, if any, the obligation evidenced by the
related series of certificates is backed by the full faith and
credit of the United States.
ACCOUNTS
Each trust fund will include one or more accounts established and
maintained on behalf of the certificateholders into which the person or persons
designated in the related prospectus supplement will, to the extent described in
this prospectus and in the related prospectus supplement deposit all payments
and collections received or advanced with respect to the assets and other assets
in the trust fund. Such an account may be maintained as an interest bearing or a
non-interest bearing account, and funds held in that account may be held as cash
or invested in short-term, investment grade obligations, in each case as
described in the related prospectus supplement. See "Description of the
Agreements--Certificate Account and Other Collection Accounts."
CREDIT SUPPORT
If so provided in the related prospectus supplement, partial or full
protection against certain defaults and losses on the assets in the related
trust fund may be provided to one or more classes of certificates in the related
series in the form of subordination of one or more other classes of certificates
in the series or by one or more other types of credit support, such as a letter
of credit, insurance policy, guarantee, reserve fund or another type of credit
support, or a combination thereof. The amount and types of coverage, the
identification of the entity providing the coverage if applicable and related
information with respect to each type of Credit Support, if any, will be
described in the prospectus supplement for a series of certificates. See "Risk
Factors--Credit Support May Not Cover Losses Or Risks Which Could Adversely
Affect Payment On Your Certificates."
CASH FLOW AGREEMENTS
If so provided in the related prospectus supplement, the trust fund
may include guaranteed investment contracts pursuant to which moneys held in the
funds other agreements, such as interest rate exchange agreements, interest rate
cap or floor agreements, currency exchange agreements or similar agreements
provided to reduce the effects of interest rate or currency exchange rate
fluctuations on the assets or on one or more classes of certificates. Currency
exchange agreements might be included in the trust fund if some or all of the
mortgage loans or MBS, such as mortgage loans secured by mortgaged properties
located outside the United States, were denominated in a non-United States
currency. The principal terms of any guaranteed investment contract or other
agreement, including, without limitation, provisions relating to the timing,
manner and amount of payments and provisions relating to termination, will be
described in the prospectus supplement for the related series. In addition, the
related prospectus supplement will provide information with respect to the
obligor under any Cash Flow Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the certificates
will be applied by Morgan Stanley Dean Witter Capital I Inc. to the purchase of
assets and to pay for certain
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expenses incurred in connection with the purchase of assets and sale of
certificates. The depositor expects to sell the certificates from time to time,
but the timing and amount of offerings of certificates will depend on a number
of factors, including the volume of assets acquired by Morgan Stanley Dean
Witter Capital I Inc., prevailing interest rates, availability of funds and
general market conditions.
YIELD CONSIDERATIONS
GENERAL
The yield on any offered certificate will depend on the price paid
by the certificateholder will accrue interest thereon based on a pass-through
rate of the certificate, the receipt and timing of receipt of distributions on
the certificate and the weighted average life of the assets in the related trust
fund, which may be affected by prepayments, defaults, liquidations or
repurchases. See "Risk Factors."
PASS-THROUGH RATE
Certificates of any class within a series may have fixed, variable
or adjustable pass-through rates, which may or may not be based upon the
interest rates borne by the assets in the related trust fund. The prospectus
supplement with respect to any series of certificates will specify
o the pass-through rate for each class of certificates or, in
the case of a variable or adjustable pass-through rate, the
method of determining the pass-through rate;
o the effect, if any, of the prepayment of any mortgage loan or
MBS on the pass-through rate of one or more classes of
certificates; and
o whether the distributions of interest on the certificates of
any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement.
The effective yield to maturity to each holder of certificates
entitled to payments of interest will be below that otherwise produced by the
applicable pass-through rate and purchase price of the certificate because,
while interest may accrue on each asset during a certain period, the
distribution of interest will be made on a day which may be several days, weeks
or months following the period of accrual.
TIMING OF PAYMENT OF INTEREST
Each payment of interest on the certificates will have a stated
principal amount in addition to the certificate Balance of a class of Accrual
Certificates, and will be distributed to certificateholders as provided in the
related prospectus supplement and will include interest accrued during the
Interest Accrual Period for that Distribution Date. As indicated in this
prospectus under "--Pass-Through Rate" above, if the Interest Accrual Period
ends on a date other than a Distribution Date for the related series, the yield
realized by the holders of the certificates may be lower than the yield that
would result if the Interest Accrual Period ended on that Distribution Date. In
addition, if so specified in the related prospectus supplement, interest
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accrued for an Interest Accrual Period for one or more classes of certificates
may be calculated on the assumption that distributions of principal, additions
to the Certificate Balance of Accrual Certificates and allocations of losses on
the assets may be made on the first day of the Interest Accrual Period for a
Distribution Date and not on that Distribution Date. This method would produce a
lower effective yield than if interest were calculated on the basis of the
actual principal amount outstanding during an Interest Accrual Period. The
Interest Accrual Period for any class of offered certificates will be described
in the related prospectus supplement.
PAYMENTS OF PRINCIPAL; PREPAYMENTS
The yield to maturity on the certificates will be affected by the
rate of principal payments on the assets including principal prepayments on
mortgage loans resulting from both voluntary prepayments by the borrowers and
involuntary liquidations. These payments may be directly dependent upon the
payments on leases underlying the mortgage loans. The rate at which principal
prepayments occur on the mortgage loans will be affected by a variety of
factors, including, without limitation, the terms of the mortgage loans, the
level of prevailing interest rates, the availability of mortgage credit and
economic, demographic, geographic, tax, legal and other factors. In general,
however, if prevailing interest rates fall significantly below the mortgage
rates on the mortgage loans comprising or underlying the assets in a particular
trust fund, the mortgage loans are likely to be the subject of higher principal
prepayments than if prevailing rates remain at or above the rates borne by the
mortgage loans. In this regard, it should be noted that assets may consist of
mortgage loans with different mortgage rates and the stated pass-through or
pay-through interest rate of certain MBS may be a number of percentage points
higher or lower than the underlying mortgage loans. The rate of principal
payments on some or all of the classes of certificates of a series
o will correspond to the rate of principal payments on the
assets in the related trust fund;
o is likely to be affected by the existence of Lockout Periods
and Prepayment Premium provisions of the mortgage loans
underlying or comprising the assets; and
o is likely to be affected to the extent the servicer of any
mortgage loan is able to enforce the Lockout Period and
Prepayment Premium provisions.
Mortgage loans with a Lockout Period or a Prepayment Premium provision, to the
extent enforceable, generally would be expected to experience a lower rate of
principal prepayments than otherwise identical mortgage loans without these
provisions, with shorter Lockout Periods or with lower Prepayment Premiums.
If the purchaser of a certificate offered at a discount calculates
its anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the assets, the
actual yield to maturity will be lower than that so calculated. Conversely, if
the purchaser of a certificate offered at a premium calculates its anticipated
yield to maturity based on an assumed rate of distributions of principal that is
slower than that actually experienced on the assets, the actual yield to
maturity will be lower than that so calculated. In either case, if so provided
in the prospectus supplement for a series of certificates, the effect on
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yield on one or more classes of the certificates of the series of prepayments of
the assets in the related trust fund may be mitigated or exacerbated by any
provisions for sequential or selective distribution of principal to these
classes.
When a full prepayment is made on a mortgage loan, the borrower is
charged interest on the principal amount of the mortgage loan so prepaid for the
number of days in the month actually elapsed up to the date of the prepayment.
Unless otherwise specified in the related prospectus supplement, the effect of
prepayments in full will be to reduce the amount of interest paid in the
following month to holders of certificates entitled to payments of interest
because interest on the principal amount of any mortgage loan so prepaid will be
paid only to the date of prepayment rather than for a full month. Unless
otherwise specified in the related prospectus supplement, a partial prepayment
of principal is applied so as to reduce the outstanding principal balance of the
related mortgage loan as of the Due Date in the month in which the partial
prepayment is received. As a result, to the extent set forth in the related
prospectus supplement, the effect of a partial prepayment on a mortgage loan
will be to reduce the amount of interest passed through to holders of
certificates in the month following the receipt of the partial prepayment by an
amount equal to one month's interest at the applicable pass-through rate on the
prepaid amount.
The timing of changes in the rate of principal payments on the
mortgage loans or MBS may significantly affect an investor's actual yield to
maturity, even if the average rate of distributions of principal is consistent
with an investor's expectation. In general, the earlier a principal payment is
received on the mortgage loans or the MBS and distributed on a certificate, the
greater the effect on the investor's yield to maturity. The effect on an
investor's yield of principal payments occurring at a rate higher or lower than
the rate anticipated by the investor during a given period may not be offset by
a subsequent like decrease or increase in the rate of principal payments.
PREPAYMENTS--MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the assets
included in or comprising a trust fund and the rate at which payments are made
from any Credit Support or Cash Flow Agreement for the related series of
certificates may affect the ultimate maturity and the weighted average life of
each class of a series. Prepayments on the mortgage loans comprising or
underlying the mortgage loans or MBS in a particular trust fund will generally
accelerate the rate at which principal is paid on some or all of the classes of
the certificates of the related series.
If so provided in the prospectus supplement for a series of
certificates, one or more classes of certificates may have a final scheduled
Distribution Date, which is the date on or prior to which the certificate
Balance thereof is scheduled to be reduced to zero, calculated on the basis of
the assumptions applicable to that series set forth in the related prospectus
supplement.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
the security will be repaid to the investor. The weighted average life of a
class of certificates of a series will be influenced by the rate at which
principal on the mortgage loans comprising or underlying the mortgage loans or
MBS is
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paid to that class, which may be in the form of scheduled amortization or
prepayments which include prepayments, in whole or in part, and liquidations due
to default.
In addition, the weighted average life of the certificates may be
affected by the varying maturities of the mortgage loans comprising or
underlying the MBS. If any mortgage loans comprising or underlying the assets in
a particular trust fund have actual terms to maturity of less than those assumed
in calculating final scheduled Distribution Dates for the classes of
certificates of the related series, one or more classes of certificates may be
fully paid prior to their respective final scheduled Distribution Dates, even in
the absence of prepayments. Accordingly, the prepayment experience of the assets
will, to some extent, be a function of the mix of mortgage rates and maturities
of the mortgage loans comprising or underlying the assets. See "Description of
the Trust Funds."
Prepayments on loans are also commonly measured relative to a
prepayment standard or model, such as the Constant Prepayment Rate prepayment
model. CPR represents a constant assumed rate of prepayment each month relative
to the then outstanding principal balance of a pool of loans for the life of the
loans.
Neither CPR nor any other prepayment model or assumption purports to
be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the mortgage
loans underlying or comprising the mortgage loans, the MBS or both. Moreover,
CPR was developed based upon historical prepayment experience for single family
loans. Thus, it is likely that prepayment of any mortgage loans comprising or
underlying the mortgage loans or the MBS for any series will not conform to any
particular level of CPR.
Morgan Stanley Dean Witter Capital I Inc. is not aware of any
meaningful publicly available prepayment statistics for multifamily or
commercial mortgage loans.
The prospectus supplement with respect to each series of
certificates will contain tables, if applicable, setting forth the projected
weighted average life of each class of offered certificates of the series and
the percentage of the initial certificate Balance of each class that would be
outstanding on specified Distribution Dates. The information in these tables
will be based on the assumptions stated in the prospectus supplement, including
assumptions that prepayments on the mortgage loans comprising or underlying the
related assets are made at rates corresponding to various percentages of CPR or
at other rates specified in the prospectus supplement. These tables and
assumptions are intended to illustrate the sensitivity of weighted average life
of the certificates to various prepayment rates and will not be intended to
predict or to provide information that will enable investors to predict the
actual weighted average life of the certificates. It is unlikely that prepayment
of any mortgage loans comprising or underlying the mortgage loans or MBS for any
series will conform to any particular level of CPR or any other rate specified
in the related prospectus supplement.
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OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
TYPE OF MORTGAGE ASSET
A number of mortgage loans may have balloon payments due at
maturity. Because the ability of a borrower to make a balloon payment typically
will depend upon its ability either to refinance the loan or to sell the related
mortgaged property, there is a risk that mortgage loans having balloon payments
may default at maturity, or that the servicer may extend the maturity of this
type of mortgage loan in connection with a workout. In the case of defaults,
recovery of proceeds may be delayed by, among other things, bankruptcy of the
borrower or adverse conditions in the market where the property is located. In
order to minimize losses on defaulted mortgage loans, the servicer may, to the
extent and under the circumstances set forth in the related prospectus
supplement, be permitted to modify mortgage loans that are in default or as to
which a payment default is imminent. Any defaulted balloon payment or
modification that extends the maturity of a mortgage loan will tend to extend
the weighted average life of the certificates. This would lengthen the period of
time elapsed from the date of issuance of a certificate until it is retired.
FORECLOSURES AND PAYMENT PLANS
The number of foreclosures and the principal amount of the mortgage
loans comprising or underlying the mortgage loans or MBS that are foreclosed in
relation to the number and principal amount of mortgage loans that are repaid in
accordance with their terms will affect the weighted average life of the
mortgage loans comprising or underlying the mortgage loans or MBS and that of
the related series of certificates. Servicing decisions made with respect to the
mortgage loans, including the use of payment plans prior to a demand for
acceleration and the restructuring of mortgage loans in bankruptcy proceedings,
may also have an effect upon the payment patterns of particular mortgage loans
and thus the weighted average life of the certificates.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE CLAUSES
Acceleration of mortgage payments as a result of transfers of or the
creation of encumbrances upon underlying mortgaged property is another factor
affecting prepayment rates that may not be reflected in the prepayment standards
or models used in the relevant prospectus supplement. A number of the mortgage
loans comprising or underlying the assets may include "due-on-sale" clauses or
"due-on-encumbrance" clauses that allow the holder of the mortgage loans to
demand payment in full of the remaining principal balance of the mortgage loans
upon sale or other transfers of or the creation of encumbrances upon the related
mortgaged property. With respect to any Whole Loans, unless otherwise provided
in the related prospectus supplement, the master servicer, on behalf of the
trust fund, will be required to exercise--or waive its right to exercise--any
rights that the trustee may have as lender to accelerate payment of the Whole
Loan in a manner consistent with the Servicing Standard. See "Legal Aspects of
the Mortgage Loans and the Leases--Due-on-Sale and Due-on-Encumbrance" and
"Description of the Agreements--Due-on-Sale and Due-on-Encumbrance Provisions."
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THE DEPOSITOR
Morgan Stanley Dean Witter Capital I Inc., the depositor, formerly
known as Morgan Stanley Capital I Inc., is a direct wholly-owned subsidiary of
Morgan Stanley Group Inc. and was incorporated in the State of Delaware on
January 28, 1985. The principal executive offices of Morgan Stanley Dean Witter
Capital I Inc. are located at 1585 Broadway, 37th Floor, New York, New York
10036. Its telephone number is (212) 761-4700.
Morgan Stanley Dean Witter Capital I Inc. does not have, nor is it
expected in the future to have, any significant assets.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The certificates of each series, including any class of certificates
not offered by this prospectus, will represent the entire beneficial ownership
interest in the trust fund created pursuant to the related Agreement. Each
series of certificates will consist of one or more classes of certificates that
may:
o provide for the accrual of interest thereon based on fixed,
variable or adjustable rates;
o be senior or subordinate to one or more other classes of
certificates in respect of distributions on the certificates;
o be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions;
o be entitled to interest distributions, with disproportionately
low, nominal or no principal distributions;
o provide for distributions of accrued interest thereon
commencing only following the occurrence of events, such as
the retirement of one or more other classes of certificates of
the series;
o provide for payments of principal sequentially, based on
specified payment schedules, from only a portion of the assets
in the trust fund or based on specified calculations, to the
extent of available funds, in each case as described in the
related prospectus supplement;
o provide for distributions based on a combination of two or
more components thereof with one or more of the
characteristics described in this paragraph including a
Stripped Principal Certificate component and a Stripped
Interest Certificate component; or
o do all or any combination of the above.
Any of the foregoing may be included in the certificates being offered to you.
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Each class of offered certificates of a series will be issued in
minimum denominations corresponding to the Certificate Balances or, in case of
Stripped Interest Certificates, Notional Amounts or percentage interests
specified in the related prospectus supplement. The transfer of any offered
certificates may be registered and these certificates may be exchanged without
the payment of any service charge payable in connection with the registration of
transfer or exchange. However Morgan Stanley Dean Witter Capital I Inc. or the
trustee or any of its agents may require payment of a sum sufficient to cover
any tax or other governmental charge. One or more classes of certificates of a
series may be issued in definitive form or in book-entry form, as provided in
the related prospectus supplement. See "Risk Factors--If Your Certificate Is
Book-Entry, You Will Not Be Recognized As Certificateholder By The Trustee."
Under limited circumstances, definitive certificates will be exchangeable for
other certificates of the same class and series of a like aggregate Certificate
Balance, Notional Amount or percentage interest but of different authorized
denominations.
DISTRIBUTIONS
Distributions on the certificates of each series will be made by or
on behalf of the trustee on each Distribution Date as specified in the related
prospectus supplement from the Available Distribution Amount for the series and
the Distribution Date. Except as otherwise specified in the related prospectus
supplement, distributions other than the final distribution will be made to the
persons in whose names the certificates are registered on the Record Date, and
the amount of each distribution will be determined as of the close of business
on the date specified in the related prospectus supplement. All distributions
with respect to each class of certificates on each Distribution Date will be
allocated pro rata among the outstanding certificates in the class or by random
selection, as described in the related prospectus supplement or otherwise
established by the related trustee.
Payments will be made either by wire transfer in immediately
available funds to the account of a certificateholder at a bank or other entity
having appropriate facilities to receive payments by wire transfer, if the
certificateholder has so notified the trustee or other person required to make
the payments no later than the date specified in the related prospectus
supplement and, if so provided in the related prospectus supplement, holds
certificates in the requisite amount specified in the related prospectus
supplement, or by check mailed to the address of the person entitled to receive
payments as it appears on the Certificate Register. However, the final
distribution in retirement of the certificates, whether definitive certificates
or book-entry certificates, will be made only upon presentation and surrender of
the certificates at the location specified in the notice to certificateholders
of the final distribution.
AVAILABLE DISTRIBUTION AMOUNT
All distributions on the certificates of each series on each
Distribution Date will be made from the Available Distribution Amount described
in this paragraph, in accordance with the terms described in the related
prospectus supplement. Unless provided otherwise in the related prospectus
supplement, the Available Distribution Amount for each Distribution Date equals
the sum of the following amounts:
1. the total amount of all cash on deposit in the related
Certificate Account as of the corresponding Determination
Date, exclusive of:
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o all scheduled payments of principal and interest
collected but due on a date subsequent to the related
Due Period;
o unless the related prospectus supplement provides
otherwise, all prepayments, together with related
payments of the interest thereon and related prepayment
premiums, Liquidation Proceeds, Insurance Proceeds and
other unscheduled recoveries received subsequent to the
related Due Period; and
o all amounts in the Certificate Account that are due or
reimbursable to Morgan Stanley Dean Witter Capital I
Inc., the trustee, an asset seller, a subservicer, a
special servicer, the master servicer or any other
entity as specified in the related prospectus supplement
or that are payable in respect of certain expenses of
the related trust fund;
2. if the related prospectus supplement so provides, interest or
investment income on amounts on deposit in the Certificate
Account, including any net amounts paid under any Cash Flow
Agreements;
3. all advances made by a master servicer or any other entity as
specified in the related prospectus supplement with respect to
the Distribution Date;
4. if and to the extent the related prospectus supplement so
provides, amounts paid by a master servicer or any other
entity as specified in the related prospectus supplement with
respect to interest shortfalls resulting from prepayments
during the related Prepayment Period; and
5. unless the related prospectus supplement provides otherwise,
to the extent not on deposit in the related Certificate
Account as of the corresponding Determination Date, any
amounts collected under, from or in respect of any Credit
Support with respect to the Distribution Date.
The entire Available Distribution Amount will be distributed among
the related certificates, including any certificates not offered hereby, on each
Distribution Date, and accordingly will be released from the trust fund and will
not be available for any future distributions.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of certificates, other than classes of Stripped Principal
Certificates that have no pass-through rate, may have a different pass-through
rate, which will be a fixed, variable or adjustable rate at which interest will
accrue on the class or a component thereof. The related prospectus supplement
will specify the pass-through rate for each class or component or, in the case
of a variable or adjustable pass-through rate, the method for determining the
pass-through rate. Unless otherwise specified in the related prospectus
supplement, interest on the certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
In general, distributions of interest in respect of the certificates
of any class will be made on each Distribution Date based on the Accrued
Certificate Interest for the class and the
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Distribution Date, subject to the sufficiency of the portion of the Available
Distribution Amount allocable to the class on the Distribution Date. Accrual
Certificates, however, will be entitled to distributions of accrued interest
commencing only on the Distribution Date, or under the circumstances, specified
in the related prospectus supplement. In addition, any class of Stripped
Principal Certificates are not entitled to any distributions of interest. Prior
to the time interest is distributable on any class of Accrual Certificates, the
amount of Accrued Certificate Interest otherwise distributable on the class will
be added to the Certificate Balance thereof on each Distribution Date. Unless
otherwise provided in the prospectus supplement, Accrued Certificate Interest on
Stripped Interest Certificates will be equal to interest accrued for a specified
period on the outstanding Notional Amount thereof immediately prior to each
Distribution Date, at the applicable pass-through rate, reduced as described
below in the next paragraph.
The method of determining the Notional Amount for any class of
Stripped Interest Certificates will be described in the related prospectus
supplement. Reference to Notional Amount is solely for convenience in
calculations and does not represent the right to receive any distributions of
principal. Unless otherwise provided in the related prospectus supplement, the
Accrued Certificate Interest on a series of certificates will be reduced in the
event of prepayment interest shortfalls. Prepayment interest shortfalls are
shortfalls in collections of interest for a full accrual period resulting from
prepayments prior to the due date in the accrual period on the mortgage loans
comprising or underlying the mortgage loans or MBS in the trust fund for the
series. The particular manner in which these shortfalls are to be allocated
among some or all of the classes of certificates of that series will be
specified in the related prospectus supplement. The related prospectus
supplement will also describe the extent to which the amount of Accrued
Certificate Interest that is otherwise distributable on a class of offered
certificates may be reduced as a result of any other contingencies, including
delinquencies, losses and deferred interest on or in respect of the mortgage
loans comprising or underlying the mortgage loans or MBS in the related trust
fund. Similarly, with respect to Accrual Certificates, the related prospectus
supplement will describe the extent to which the amount of Accrued Certificate
Interest that may be added to the Certificate Balance of a Class of Offered
Certificates may be reduced. Unless otherwise provided in the related prospectus
supplement, any reduction in the amount of Accrued Certificate Interest
otherwise distributable on a class of certificates by reason of the allocation
to the class of a portion of any deferred interest on the mortgage loans
comprising or underlying the mortgage loans or MBS in the related trust fund
will result in a corresponding increase in the Certificate Balance of the class.
See "Risk Factors--Prepayments And Repurchases May Reduce The Yield On Your
Certificates," and "--If Prepayment Premiums Are Not Enforced, Your Certificates
May Be Adversely Affected," and "Yield Considerations."
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
The certificates of each series, other than certain classes of
Stripped Interest Certificates, will have a Certificate Balance. The Certificate
Balance will equal the maximum principal amount that the holder will be entitled
to receive out of future cash flow on the assets in the trust fund. The
outstanding Certificate Balance of a certificate will be reduced to the extent
of distributions of principal and, if and to the extent so provided in the
related prospectus supplement, by the amount of losses incurred in respect of
the related assets. The outstanding Certificate Balance may be increased in
respect of deferred interest on the related mortgage loans
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to the extent provided in the related prospectus supplement. The outstanding
Certificate Balance may be increased in the case of Accrual Certificates, prior
to the Distribution Date on which distributions of interest are required to
commence, by any related Accrued Certificate Interest. Unless otherwise provided
in the related prospectus supplement, the initial aggregate Certificate Balance
of all classes of certificates of a series will not be greater than the
outstanding aggregate principal balance of the related assets as of the
applicable Cut-off Date. The initial aggregate Certificate Balance of a series
and each class thereof will be specified in the related prospectus supplement.
Unless otherwise provided in the related prospectus supplement, distributions of
principal will be made on each Distribution Date to the class or classes of
certificates entitled thereto in accordance with the provisions described in the
prospectus supplement until the Certificate Balance of that class has been
reduced to zero. Stripped Interest Certificates with no Certificate Balance are
not entitled to any distributions of principal.
COMPONENTS
To the extent specified in the related prospectus supplement,
distribution on a class of certificates may be based on a combination of two or
more different components as described under "--General" above. To the extent,
the descriptions set forth under "--Distributions of Interests on the
Certificates" and "--Distributions of Principal of the Certificates" above also
relate to components of a class of certificates. In this case, references to
Certificate Balance and pass-through rate refer to the principal balance, if
any, of any component and the pass-through rate, if any, on any component,
respectively.
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN RESPECT OF EQUITY
PARTICIPATIONS
If so provided in the related prospectus supplement, prepayment
premiums or payments in respect of Equity Participations that are collected on
the mortgage loans or MBS in the related trust fund will be distributed on each
Distribution Date to the class or classes of certificates entitled thereto in
accordance with the provisions described in the prospectus supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the prospectus supplement for a series of
certificates consisting of one or more classes of Subordinate Certificates, on
any Distribution Date in respect of which losses or shortfalls in collections on
the mortgage loans or MBS or both have been incurred, the amount of losses or
shortfalls will be borne first by a class of Subordinate Certificates in the
priority and manner and subject to the limitations specified in the prospectus
supplement. See "Description of Credit Support" for a description of the types
of protection that may be included in a trust fund against losses and shortfalls
on mortgage loans or MBS comprising the trust fund.
ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any series of certificates evidencing an interest in
a trust fund, unless otherwise provided in the related prospectus supplement,
the master servicer or another entity described in the prospectus supplement
will be required as part of its servicing responsibilities to advance on or
before each Distribution Date its own funds or funds held in the Certificate
Account that are not included in the Available Distribution Amount for the
Distribution Date.
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The master servicer or other entity required to make advances will do so, in an
amount equal to the aggregate of payments of principal, other than any balloon
payments, and interest, net of related servicing fees and Retained Interest,
that were due on the Whole Loans in the trust fund during the related Due Period
and were delinquent on the related Determination Date. The master servicer or
other entity required to make advances will advance, subject to that entity's
good faith determination that the advances will be reimbursable from Related
Proceeds. In the case of a series of certificates that includes one or more
classes of Subordinate Certificates and if so provided in the related prospectus
supplement, the master servicer's or another entity's advance obligation may be
limited only to the portion of the delinquencies necessary to make the required
distributions on one or more classes of Senior Certificates and may be subject
to the master servicer's or another entity's good faith determination that the
advances will be reimbursable not only from Related Proceeds but also from
collections on other assets otherwise distributable on one or more classes of
Subordinate Certificates. See "Description of Credit Support."
Advances are intended to maintain a regular flow of scheduled
interest and principal payments to holders of the class or classes of
certificates. Advances do not guaranty or insure against losses. Unless
otherwise provided in the related prospectus supplement, advances of the master
servicer's or another entity's funds will be reimbursable only out of Related
Proceeds and, if so provided in the prospectus supplement, out of any amounts
otherwise distributable on one or more classes of Subordinate Certificates of
the series. However, advances will be reimbursable from amounts in the
Certificate Account prior to distributions being made on the certificates, to
the extent that the master servicer or another entity shall determine in good
faith that the advance is a Nonrecoverable Advance. If advances have been made
by the master servicer from excess funds in the Certificate Account, the master
servicer is required to replace the funds in the Certificate Account on any
future Distribution Date to the extent that funds in the Certificate Account on
the Distribution Date are less than payments required to be made to
certificateholders on that date. If so specified in the related prospectus
supplement, the obligations of the master servicer or another entity to make
advances may be secured by a cash advance reserve fund, a surety bond, a letter
of credit or another form of limited guaranty. If applicable, information
regarding the characteristics of, and the identity of any obligor on, any surety
bond, will be set forth in the related prospectus supplement.
If and to the extent so provided in the related prospectus
supplement, the master servicer or another entity will be entitled to receive
interest at the rate specified in the prospectus supplement on its outstanding
advances and will be entitled to pay itself interest periodically from general
collections on the assets prior to any payment to certificateholders or as
otherwise provided in the related Agreement and described in the prospectus
supplement.
The prospectus supplement for any series of certificates evidencing
an interest in a trust fund that includes MBS will describe any corresponding
advancing obligation of any person in connection with the MBS.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise provided in the prospectus supplement, with each
distribution to holders of any class of certificates of a series, the master
servicer or the trustee, as provided in the related prospectus supplement, will
forward or cause to be forwarded to each holder, to Morgan Stanley
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Dean Witter Capital I Inc. and to the other parties as may be specified in the
related Agreement, a statement setting forth, in each case to the extent
applicable and available:
(1) the amount of the distribution to holders of certificates of
that class applied to reduce the Certificate Balance thereof;
(2) the amount of the distribution to holders of certificates of
that class allocable to Accrued Certificate Interest;
(3) the amount of the distribution allocable to
(a) prepayment premiums and
(b) payments on account of Equity Participations;
(4) the amount of related servicing compensation received by a
master servicer and, if payable directly out of the related
trust fund, by any special servicer and any subservicer and
any other customary information as that master servicer or
trustee deem necessary or desirable, or that a
certificateholder reasonably requests, to enable
certificateholders to prepare their tax returns;
(5) the aggregate amount of advances included in that
distribution, and the aggregate amount of unreimbursed
advances at the close of business on that Distribution Date;
(6) the aggregate principal balance of the assets at the close of
business on that Distribution Date;
(7) the number and aggregate principal balance of Whole Loans in
respect of which:
o one scheduled payment is delinquent,
o two scheduled payments are delinquent,
o three or more scheduled payments are delinquent and
o foreclosure proceedings have been commenced;
(8) with respect to each Whole Loan that is delinquent two or more
months:
o the loan number thereof,
o the unpaid balance thereof,
o whether the delinquency is in respect of any balloon
payment,
o the aggregate amount of unreimbursed servicing expenses
and unreimbursed advances in respect thereof,
o if applicable, the aggregate amount of any interest
accrued and payable on related servicing expenses and
related advances assuming the mortgage loan is
subsequently liquidated through foreclosure,
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o whether a notice of acceleration has been sent to the
borrower and, if so, the date of the notice,
o whether foreclosure proceedings have been commenced and,
if so, the date so commenced and
o if the mortgage loan is more than three months
delinquent and foreclosure has not been commenced, the
reason therefor;
(9) with respect to any Whole Loan liquidated during the related
Due Period other than by payment in full:
o the loan number thereof,
o the manner in which it was liquidated and
o the aggregate amount of liquidation proceeds received;
(10) with respect to any Whole Loan liquidated during the related
Due Period,
o the portion of the liquidation proceeds payable or
reimbursable to the master servicer, or any other
entity, in respect of the mortgage loan and
o the amount of any loss to certificateholders;
(11) with respect to each REO Property relating to a Whole Loan and
included in the trust fund as of the end of the related Due
Period,
o the loan number of the related mortgage loan and
o the date of acquisition;
(12) with respect to each REO Property relating to a Whole Loan and
included in the trust fund as of the end of the related Due
Period:
o the book value,
o the principal balance of the related mortgage loan
immediately following the Distribution Date, calculated
as if the mortgage loan were still outstanding taking
into account certain limited modifications to the terms
thereof specified in the Agreement,
o the aggregate amount of unreimbursed servicing expenses
and unreimbursed advances in respect thereof and
o if applicable, the aggregate amount of interest accrued
and payable on related servicing expenses and related
advances;
(13) with respect to any REO Property sold during the related Due
Period
o the loan number of the related mortgage loan,
o the aggregate amount of sale proceeds,
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o the portion of sales proceeds payable or reimbursable to
the master servicer or a special servicer in respect of
the REO Property or the related mortgage loan and
o the amount of any loss to certificateholders in respect
of the related mortgage loan;
(14) the aggregate Certificate Balance or Notional Amount, as the
case may be, of each class of certificates including any class
of certificates not offered hereby at the close of business on
the Distribution Date, separately identifying any reduction in
the Certificate Balance due to the allocation of any loss and
increase in the Certificate Balance of a class of Accrual
Certificates in the event that Accrued Certificate Interest
has been added to the balance;
(15) the aggregate amount of principal prepayments made during the
related Due Period;
(16) the amount deposited in the reserve fund, if any, on the
Distribution Date;
(17) the amount remaining in the reserve fund, if any, as of the
close of business on the Distribution Date;
(18) the aggregate unpaid Accrued Certificate Interest, if any, on
each class of certificates at the close of business on the
Distribution Date;
(19) in the case of certificates with a variable pass-through rate,
the pass-through rate applicable to the Distribution Date,
and, if available, the immediately succeeding Distribution
Date, as calculated in accordance with the method specified in
the related prospectus supplement;
(20) in the case of certificates with an adjustable pass-through
rate, for statements to be distributed in any month in which
an adjustment date occurs, the adjustable pass-through rate
applicable to the Distribution Date and the immediately
succeeding Distribution Date as calculated in accordance with
the method specified in the related prospectus supplement;
(21) as to any series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included in the
Series as of the close of business on the Distribution Date;
and
(22) the aggregate amount of payments by the borrowers of:
o default interest,
o late charges and
o assumption and modification fees collected during the
related Due Period.
In the case of information furnished pursuant to subclauses (1)-(4)
above, the amounts generally will be expressed as a dollar amount per minimum
denomination of certificates. In addition, in the case of information furnished
pursuant to subclauses (1), (2), (14), (18) and (19) above, the amounts shall
also be provided with respect to each component, if any, of a class of
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certificates. The master servicer or the trustee, as specified in the related
prospectus supplement, will forward or cause to be forwarded to each holder, to
Morgan Stanley Dean Witter Capital I Inc. and to any other parties as may be
specified in the Agreement, a copy of any statements or reports received by the
master servicer or the trustee, as applicable, with respect to any MBS. The
prospectus supplement for each series of offered certificates will describe any
additional information to be included in reports to the holders of the
certificates.
Within a reasonable period of time after the end of each calendar
year, the master servicer or the trustee, as provided in the related prospectus
supplement, shall furnish to each person who at any time during the calendar
year was a holder of a certificate a statement containing the information set
forth in subclauses (1)-(4) above, aggregated for the calendar year or the
applicable portion thereof during which the person was a certificateholder. This
obligation of the master servicer or the trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the master servicer or the trustee pursuant to any requirements of
the Code as are from time to time in force. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
TERMINATION
The obligations created by the Agreement for each series of
certificates will terminate upon the payment to certificateholders of that
series of all amounts held in the Certificate Account or by the master servicer,
if any, or the trustee and required to be paid to them pursuant to the Agreement
following the earlier of
o the final payment or other liquidation of the last asset
subject thereto or the disposition of all property acquired
upon foreclosure of any Whole Loan subject thereto and
o the purchase of all of the assets of the trust fund by the
party entitled to effect the termination, under the
circumstances and in the manner set forth in the related
prospectus supplement.
In no event, however, will the trust fund created by the Agreement continue
beyond the date specified in the related prospectus supplement. Written notice
of termination of the Agreement will be given to each certificateholder, and the
final distribution will be made only upon presentation and surrender of the
certificates at the location to be specified in the notice of termination.
If so specified in the related prospectus supplement, a series of
certificates may be subject to optional early termination through the repurchase
of the assets in the related trust fund by the party specified in the prospectus
supplement, under the circumstances and in the manner set forth in the
prospectus supplement. If so provided in the related prospectus supplement, upon
the reduction of the Certificate Balance of a specified class or classes of
certificates by a specified percentage or amount, the party specified in the
prospectus supplement will solicit bids for the purchase of all assets of the
trust fund, or of a sufficient portion of the assets to retire the class or
classes or purchase the class or classes at a price set forth in the related
prospectus supplement, in each case, under the circumstances and in the manner
set forth in the prospectus supplement.
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BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related prospectus supplement, one or more
classes of the offered certificates of any series will be issued as book-entry
certificates, and each class will be represented by one or more single
certificates registered in the name of a nominee for the depository, the
Depository Trust Company ("DTC").
DTC is a limited-purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC was created to hold securities for its
Participants and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in their
accounts, eliminating the need for physical movement of certificates.
Participants include Morgan Stanley & Co. Incorporated, securities brokers and
dealers, banks, trust companies and clearing corporations and may include other
organizations. Indirect access to the DTC system also is available to Indirect
Participants.
Unless otherwise provided in the related prospectus supplement,
investors that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
book-entry certificates may do so only through Participants and Indirect
Participants. In addition, these Certificate Owners will receive all
distributions on the book-entry certificates through DTC and its Participants.
Under a book-entry format, Certificate Owners will receive payments after the
related Distribution Date because, while payments are required to be forwarded
to Cede, as nominee for DTC, on each Distribution Date, DTC will forward the
payments to its Participants which thereafter will be required to forward them
to Indirect Participants or Certificate Owners. Unless otherwise provided in the
related prospectus supplement, the only certificateholder will be Cede, as
nominee of DTC, and the Certificate Owners will not be recognized by the trustee
as certificateholders under the Agreement. Certificate Owners will be permitted
to exercise the rights of certificateholders under the related Agreement only
indirectly through the Participants who in turn will exercise their rights
through DTC.
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the book-entry certificates
and is required to receive and transmit distributions of principal of and
interest on the book-entry certificates. Participants and Indirect Participants
with which Certificate Owners have accounts with respect to the book-entry
certificates similarly are required to make book-entry transfers and receive and
transmit the payments on behalf of their respective Certificate Owners.
Because DTC can act only on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge its interest in the book-entry certificates to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of its interest in the book-entry certificates, may be
limited due to the lack of a physical certificate evidencing the interest.
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DTC has advised Morgan Stanley Dean Witter Capital I Inc. that it
will take any action permitted to be taken by a certificateholder under the
Agreement only at the direction of one or more Participants to whose account
with DTC interests in the book-entry certificates are credited.
Unless otherwise specified in the related prospectus supplement,
certificates initially issued in book-entry form will be issued as definitive
certificates, rather than to DTC or its nominee only if
o Morgan Stanley Dean Witter Capital I Inc. advises the trustee
in writing that DTC is no longer willing or able to properly
discharge its responsibilities as depository with respect to
the certificates and Morgan Stanley Dean Witter Capital I Inc.
is unable to locate a qualified successor, or
o Morgan Stanley Dean Witter Capital I Inc., at its option,
elects to terminate the book-entry system through DTC.
Upon the occurrence of either of the events described in the
immediately preceding paragraph, DTC is required to notify all Participants of
the availability through DTC of definitive certificates for the Certificate
Owners. Upon surrender by DTC of the certificate or certificates representing
the book-entry certificates, together with instructions for reregistration, the
trustee will issue, or cause to be issued, to the Certificate Owners identified
in the instructions the definitive certificates to which they are entitled, and
thereafter the trustee will recognize the holders of the definitive certificates
as certificateholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
The certificates will be offered pursuant to a Pooling Agreement or
a Trust Agreement.
o A Pooling Agreement will be used where the trust fund includes
Whole Loans. The parties to a Pooling Agreement will be Morgan
Stanley Dean Witter Capital I Inc., a trustee, a master
servicer and any special servicer appointed as of the date of
the Pooling Agreement. If a master servicer is not appointed,
a servicer, with, generally, the same obligations as described
in this prospectus with respect to the master servicer, unless
otherwise specified in the prospectus supplement, will be
appointed. This servicer will service all or a significant
number of Whole Loans directly without a subservicer.
References in this prospectus to master servicer and its
rights and obligations, to the extent set forth in the related
prospectus supplement, shall be deemed to also be references
to any servicer servicing Whole Loans directly.
o A Trust Agreement will be used where the trust fund does not
include Whole Loans. The parties to a Trust Agreement will be
Morgan Stanley Dean Witter Capital I Inc. and a trustee. A
manager or administrator may be appointed pursuant to the
Trust Agreement for any trust fund to administer the trust
fund.
The provisions of each Agreement will vary depending upon the nature
of the certificates to be issued thereunder and the nature of the related trust
fund. A form of a Pooling Agreement
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has been filed as an exhibit to the Registration Statement of which this
prospectus is a part. Any Trust Agreement will generally conform to the form of
Pooling Agreement filed herewith, but will not contain provisions with respect
to the servicing and maintenance of Whole Loans. The following summaries
describe some of the provisions that may appear in each Agreement. The
prospectus supplement for a series of certificates will describe any provision
of the Agreement relating to a series that materially differs from the
description thereof contained in this prospectus. The summaries do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the Agreement for each trust fund and the
description of the provisions in the related prospectus supplement. Morgan
Stanley Dean Witter Capital I Inc. will provide a copy of the Agreement, without
exhibits, relating to any series of certificates without charge upon written
request of a holder of a certificate of a series addressed to Morgan Stanley
Dean Witter Capital I Inc., c/o Morgan Stanley & Co. Incorporated, 1585
Broadway, 37th Floor, New York, New York 10036, Attention: John E. Westerfield.
ASSIGNMENT OF ASSETS; REPURCHASES
At the time of issuance of any series of certificates, Morgan
Stanley Dean Witter Capital I Inc. will assign or cause to be assigned to the
designated trustee the assets to be included in the related trust fund, together
with all principal and interest to be received on or with respect to the assets
after the Cut-off Date, other than principal and interest due on or before the
Cut-off Date and other than any Retained Interest. The trustee will,
concurrently with the assignment, deliver the certificates to Morgan Stanley
Dean Witter Capital I Inc. in exchange for the assets and the other assets
comprising the trust fund for the series. Each mortgage loan and MBS will be
identified in a schedule appearing as an exhibit to the related Agreement.
Unless otherwise provided in the related prospectus supplement, the schedule
will include detailed information
o in respect of each Whole Loan included in the related trust
fund, including without limitation, the address of the related
mortgaged property and type of the property, the mortgage rate
and, if applicable, the applicable Index, margin, adjustment
date and any rate cap information, the original and remaining
term to maturity, the original and outstanding principal
balance and balloon payment, if any, the Value, Loan-to-Value
Ratio and the Debt Service Coverage Ratio as of the date
indicated and payment and prepayment provisions, if
applicable, and
o in respect of each MBS included in the related trust fund,
including without limitation, the MBS issuer, MBS servicer and
MBS trustee, the pass-through or bond rate or formula for
determining the rate, the issue date and original and
remaining term to maturity, if applicable, the original and
outstanding principal amount and payment provisions, if
applicable.
With respect to each Whole Loan, Morgan Stanley Dean Witter Capital
I Inc. will deliver or cause to be delivered to the trustee or to the custodian,
certain loan documents, which to the extent set forth in the related prospectus
supplement will include the original mortgage note endorsed, without recourse,
in blank or to the order of the trustee, the original mortgage or a certified
copy thereof with evidence of recording indicated thereon and an assignment of
the mortgage to the trustee in recordable form. Notwithstanding the foregoing, a
trust fund may include mortgage loans where the original mortgage note is not
delivered to the trustee if Morgan Stanley Dean Witter Capital I Inc. delivers
to the trustee or the custodian a copy or a duplicate
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original of the mortgage note, together with an affidavit certifying that the
original thereof has been lost or destroyed. With respect to these mortgage
loans, the trustee or its nominee may not be able to enforce the mortgage note
against the related borrower. Unless otherwise specified in the related
prospectus supplement, the asset seller will be required to agree to repurchase,
or substitute for, this type of mortgage loan that is subsequently in default if
the enforcement thereof or of the related mortgage is materially adversely
affected by the absence of the original mortgage note. Unless otherwise provided
in the related prospectus supplement, the related Agreement will require Morgan
Stanley Dean Witter Capital I Inc. or another party specified in the Agreement
to promptly cause each assignment of mortgage to be recorded in the appropriate
public office for real property records. However, in the State of California or
in other states where, in the opinion of counsel acceptable to the trustee,
recording is not required to protect the trustee's interest in the related Whole
Loan against the claim of any subsequent transferee or any successor to or
creditor of Morgan Stanley Dean Witter Capital I Inc., the master servicer, the
relevant asset seller or any other prior holder of the Whole Loan, the
assignment of mortgage for each related Whole Loan may not be recorded.
The trustee or a custodian will review the Whole Loan documents
within a specified period of days after receipt thereof, and the trustee or a
custodian will hold the documents in trust for the benefit of the
certificateholders. Unless otherwise specified in the related prospectus
supplement, if any of these documents are found to be missing or defective in
any material respect, the trustee or custodian shall immediately notify the
master servicer and Morgan Stanley Dean Witter Capital I Inc., and the master
servicer shall immediately notify the relevant asset seller. If the asset seller
cannot cure the omission or defect within a specified number of days after
receipt of notice, then to the extent set forth in the related prospectus
supplement, the asset seller will be obligated, within a specified number of
days of receipt of notice, to repurchase the related Whole Loan from the trustee
at the Purchase Price or substitute the mortgage loan. There can be no assurance
that an asset seller will fulfill this repurchase or substitution obligation,
and neither the master servicer nor Morgan Stanley Dean Witter Capital I Inc.
will be obligated to repurchase or substitute the mortgage loan if the asset
seller defaults on its obligation. Unless otherwise specified in the related
prospectus supplement, this repurchase or substitution obligation constitutes
the sole remedy available to the certificateholders or the trustee for omission
of, or a material defect in, a constituent document. To the extent specified in
the related prospectus supplement, in lieu of curing any omission or defect in
the asset or repurchasing or substituting for the asset, the asset seller may
agree to cover any losses suffered by the trust fund as a result of this type of
breach or defect.
If so provided in the related prospectus supplement, Morgan Stanley
Dean Witter Capital I Inc. will, as to some or all of the mortgage loans, assign
or cause to be assigned to the trustee the related lease assignments. In certain
cases, the trustee, or master servicer, as applicable, may collect all moneys
under the related leases and distribute amounts, if any, required under the
lease for the payment of maintenance, insurance and taxes, to the extent
specified in the related lease agreement. The trustee, or if so specified in the
prospectus supplement, the master servicer, as agent for the trustee, may hold
the lease in trust for the benefit of the certificateholders.
With respect to each Government Security or MBS in certificated
form, Morgan Stanley Dean Witter Capital I Inc. will deliver or cause to be
delivered to the trustee or the custodian the
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original certificate or other definitive evidence of the Government Security or
MBS, as applicable, together with bond power or other instruments,
certifications or documents required to transfer fully the Government Security
or MBS, as applicable, to the trustee for the benefit of the certificateholders.
With respect to each Government Security or MBS in uncertificated or book-entry
form or held through a "clearing corporation" within the meaning of the UCC,
Morgan Stanley Dean Witter Capital I Inc. and the trustee will cause the
Government Security or MBS to be registered directly or on the books of the
clearing corporation or of a financial intermediary in the name of the trustee
for the benefit of the certificateholders. Unless otherwise provided in the
related prospectus supplement, the related Agreement will require that either
Morgan Stanley Dean Witter Capital I Inc. or the trustee promptly cause any MBS
and government securities in certificated form not registered in the name of the
trustee to be re-registered, with the applicable persons, in the name of the
trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related prospectus supplement
Morgan Stanley Dean Witter Capital I Inc. will, with respect to each Whole Loan,
make or assign certain representations and warranties, as of a specified date
covering, by way of example, the following types of matters:
o the accuracy of the information set forth for the Whole Loan
on the schedule of assets appearing as an exhibit to the
related Agreement;
o the existence of title insurance insuring the lien priority of
the Whole Loan;
o the authority of the Warrantying Party to sell the Whole Loan;
o the payment status of the Whole Loan and the status of
payments of taxes, assessments and other charges affecting the
related mortgaged property;
o the existence of customary provisions in the related mortgage
note and mortgage to permit realization against the mortgaged
property of the benefit of the security of the mortgage; and
o the existence of hazard and extended perils insurance coverage
on the mortgaged property.
Any Warrantying Party, if other than Morgan Stanley Dean Witter
Capital I Inc., shall be an asset seller or an affiliate thereof or another
person acceptable to Morgan Stanley Dean Witter Capital I Inc. and shall be
identified in the related prospectus supplement.
Representations and warranties made in respect of a Whole Loan may
have been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between the date on which the representations
are made and the date of initial issuance of the related series of certificates
evidencing an interest in the Whole Loan. Unless otherwise specified in the
related prospectus supplement, in the event of a breach of any representation or
warranty, the Warrantying Party will be obligated to reimburse the trust fund
for losses caused by the breach or either cure the breach or repurchase or
replace the affected Whole Loan as described in the next paragraph. Since the
representations and warranties may not address events that may occur following
the date as of which they were made, the Warrantying Party will have a
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reimbursement, cure, repurchase or substitution obligation in connection with a
breach of a representation and warranty only if the relevant event that causes
such breach occurs prior to the date on which they were made. The Warranting
Party would have no obligations if the relevant event that causes the breach
occurs after that date.
Unless otherwise provided in the related prospectus supplement, each
Agreement will provide that the master servicer or trustee, or both, will be
required to notify promptly the relevant Warrantying Party of any breach of any
representation or warranty made by it in respect of a Whole Loan that materially
and adversely affects the value of the Whole Loan or the interests in the Whole
Loan of the certificateholders. If the Warrantying Party cannot cure the breach
within a specified period following the date on which the party was notified of
the breach, then
o the Warrantying Party will be obligated to repurchase the
Whole Loan from the trustee within a specified period from the
date on which the Warrantying Party was notified of the
breach, at the Purchase Price; or
o if so provided in the prospectus supplement for a series, the
Warrantying Party, will have the option, within a specified
period after initial issuance of such series of certificates,
to cause the Whole Loan to be removed from the trust fund and
substitute in its place one or more other Whole Loans, in
accordance with the standards described in the related
prospectus supplement; or.
o if so provided in the prospectus supplement for a series, the
Warrantying Party, will have the option to reimburse the trust
fund or the certificateholders for any losses caused by the
breach.
Unless otherwise specified in the related prospectus supplement, this
reimbursement, repurchase or substitution obligation will constitute the sole
remedy available to holders of certificates or the trustee for a breach of
representation by a Warrantying Party.
Neither Morgan Stanley Dean Witter Capital I Inc., except to the
extent that it is the Warrantying Party, nor the master servicer will be
obligated to purchase or substitute for a Whole Loan if a Warrantying Party
defaults on its obligation to do so, and no assurance can be given that
Warrantying Parties will carry out their obligations with respect to Whole
Loans.
Unless otherwise provided in the related prospectus supplement the
Warrantying Party will, with respect to a trust fund that includes government
securities or MBS, make or assign certain representations or warranties, as of a
specified date, with respect to the government securities or MBS, covering
o the accuracy of the information set forth therefor on the
schedule of assets appearing as an exhibit to the related
Agreement and
o the authority of the Warrantying Party to sell the assets.
The related prospectus supplement will describe the remedies for a breach
thereof.
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A master servicer will make representations and warranties regarding
its authority to enter into, and its ability to perform its obligations under,
the related Agreement. A breach of any of these representations which materially
and adversely affects the interests of the certificateholders and which
continues unremedied for thirty days after the giving of written notice of the
breach to the master servicer, the trustee or Morgan Stanley Dean Witter Capital
I Inc. will constitute an Event of Default under the Agreement. See "--Events of
Default" and "--Rights Upon Event of Default," below.
CERTIFICATE ACCOUNT AND OTHER COLLECTION ACCOUNTS
GENERAL
The master servicer or the trustee or both will, as to each trust
fund, establish and maintain or cause to be established and maintained, the
Certificate Account, which must be either
o an account or accounts the deposits in which are insured by
the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC, to the limits established by the FDIC, and
the uninsured deposits in which are otherwise secured such
that the certificateholders have a claim with respect to the
funds in the Certificate Account or a perfected first priority
security interest against any collateral securing the funds
that is superior to the claims of any other depositors or
general creditors of the institution with which the
Certificate Account is maintained or
o otherwise maintained with a bank or trust company, and in a
manner, satisfactory to the Rating Agency or Agencies rating
any class of certificates of the series.
The collateral eligible to secure amounts in the Certificate Account is limited
to Permitted Investments. A Certificate Account may be maintained as an interest
bearing or a non-interest bearing account and the funds held in the account may
be invested pending each succeeding Distribution Date in short-term Permitted
Investments. Unless otherwise provided in the related prospectus supplement, any
interest or other income earned on funds in the Certificate Account will be paid
to a master servicer or its designee as additional servicing compensation. The
Certificate Account may be maintained with an institution that is an affiliate
of the master servicer, if applicable, provided that the institution meets the
standards imposed by the Rating Agency or Agencies. If permitted by the Rating
Agency or Agencies and so specified in the related prospectus supplement, a
Certificate Account may contain funds relating to more than one series of
mortgage pass-through certificates and may contain other funds respecting
payments on mortgage loans belonging to the master servicer or serviced or
master serviced by it on behalf of others.
DEPOSITS
A master servicer or the trustee will deposit or cause to be
deposited in the Certificate Account for one or more trust funds on a daily
basis, unless otherwise provided in the related Agreement, the following
payments and collections received, or advances made, by the master servicer or
the trustee or on its behalf subsequent to the Cut-off Date, other than payments
due on
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or before the Cut-off Date, and exclusive of any amounts representing a
Retained Interest, all payments on account of principal, including principal
prepayments, on the assets;
1) all payments on account of interest on the assets, including
any default interest collected, in each case net of any
portion thereof retained by a master servicer, a subservicer
or a special servicer as its servicing compensation and net of
any Retained Interest;
2) all proceeds of the hazard, business interruption and general
liability insurance policies to be maintained in respect of
each mortgaged property securing a Whole Loan in the trust
fund, to the extent the proceeds are not applied to the
restoration of the property or released to the borrower in
accordance with normal servicing procedures and all Insurance
Proceeds and all Liquidation Proceeds, together with the net
proceeds on a monthly basis with respect to any mortgaged
properties acquired for the benefit of certificateholders by
foreclosure or by deed in lieu of foreclosure or otherwise;
3) any amounts paid under any instrument or drawn from any fund
that constitutes Credit Support for the related series of
certificates as described under "Description of Credit
Support";
4) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
5) any amounts representing prepayment premiums;
6) any amounts paid under any Cash Flow Agreement, as described
under "Description of the Trust Funds--Cash Flow Agreements";
7) all proceeds of any asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by Morgan
Stanley Dean Witter Capital I Inc., any asset seller or any
other specified person as described above under "--Assignment
of Assets; Repurchases" and "--Representations and Warranties;
Repurchases," all proceeds of any defaulted mortgage loan
purchased as described below under "--Realization Upon
Defaulted Whole Loans," and all proceeds of any asset
purchased as described above under "Description of the
Certificates--Termination";
8) any amounts paid by a master servicer to cover certain
interest shortfalls arising out of the prepayment of Whole
Loans in the trust fund as described under "Description of the
Agreements--Retained Interest; Servicing Compensation and
Payment of Expenses";
9) to the extent that any item does not constitute additional
servicing compensation to a master servicer, any payments on
account of modification or assumption fees, late payment
charges, prepayment premiums or Equity Participations on the
mortgage loans or MBS or both;
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10) all payments required to be deposited in the Certificate
Account with respect to any deductible clause in any blanket
insurance policy described below under "--Hazard Insurance
Policies";
11) any amount required to be deposited by a master servicer or
the trustee in connection with losses realized on investments
for the benefit of the master servicer or the trustee, as the
case may be, of funds held in the Certificate Account; and
12) any other amounts required to be deposited in the Certificate
Account as provided in the related Agreement and described in
the related prospectus supplement.
WITHDRAWALS
A master servicer or the trustee may, from time to time, unless
otherwise provided in the related Agreement and described in the related
prospectus supplement, make withdrawals from the Certificate Account for each
trust fund for any of the following purposes:
(1) to make distributions to the certificateholders on each
Distribution Date;
(2) to reimburse a master servicer for unreimbursed amounts
advanced as described above under "Description of the
Certificates--Advances in Respect of Delinquencies," the
reimbursement to be made out of amounts received which were
identified and applied by the master servicer as late
collections of interest, net of related servicing fees and
Retained Interest, on and principal of the particular Whole
Loans with respect to which the advances were made or out of
amounts drawn under any form of Credit Support with respect to
those Whole Loans;
(3) to reimburse a master servicer for unpaid servicing fees
earned and certain unreimbursed servicing expenses incurred
with respect to Whole Loans and properties acquired in respect
thereof, such reimbursement to be made out of amounts that
represent Liquidation Proceeds and Insurance Proceeds
collected on the particular Whole Loans and properties, and
net income collected on the particular properties, with
respect to which the fees were earned or the expenses were
incurred or out of amounts drawn under any form of Credit
Support with respect to such Whole Loans and properties;
(4) to reimburse a master servicer for any advances described in
clause (2) above and any servicing expenses described in
clause (3) above which, in the master servicer's good faith
judgment, will not be recoverable from the amounts described
in clauses (2) and (3), respectively, the reimbursement to be
made from amounts collected on other assets or, if and to the
extent so provided by the related Agreement and described in
the related prospectus supplement, just from that portion of
amounts collected on other assets that is otherwise
distributable on one or more classes of Subordinate
Certificates, if any, remain outstanding, and otherwise any
outstanding class of certificates, of the related series;
(5) if and to the extent described in the related prospectus
supplement, to pay a master servicer interest accrued on the
advances described in clause (2) above and the
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servicing expenses described in clause (3) above while these
amounts remain outstanding and unreimbursed;
(6) to pay for costs and expenses incurred by the trust fund for
environmental site assessments with respect to, and for
containment, clean-up or remediation of hazardous wastes,
substances and materials on, mortgaged properties securing
defaulted Whole Loans as described below under "--Realization
Upon Defaulted Whole Loans";
(7) to reimburse a master servicer, Morgan Stanley Dean Witter
Capital I Inc., or any of their respective directors,
officers, employees and agents, as the case may be, for
certain expenses, costs and liabilities incurred thereby, as
and to the extent described below under "--Matters Regarding a
Master Servicer and the Depositor";
(8) if and to the extent described in the related prospectus
supplement, to pay or to transfer to a separate account for
purposes of escrowing for the payment of the trustee's fees;
(9) to reimburse the trustee or any of its directors, officers,
employees and agents, as the case may be, for certain
expenses, costs and liabilities incurred thereby, as and to
the extent described below under "--Matters Regarding the
Trustee";
(10) unless otherwise provided in the related prospectus
supplement, to pay a master servicer, as additional servicing
compensation, interest and investment income earned in respect
of amounts held in the Certificate Account;
(11) to pay the person entitled thereto any amounts deposited in
the Certificate Account that were identified and applied by
the master servicer as recoveries of Retained Interest;
(12) to pay for costs reasonably incurred in connection with the
proper operation, management and maintenance of any mortgaged
property acquired for the benefit of certificateholders by
foreclosure or by deed in lieu of foreclosure or otherwise,
these payments to be made out of income received on this type
of property;
(13) if one or more elections have been made to treat the trust
fund or designated portions thereof as a REMIC, to pay any
federal, state or local taxes imposed on the trust fund or its
assets or transactions, as and to the extent described below
under "Federal Income Tax Consequences--REMICs--Prohibited
Transactions Tax and Other Taxes";
(14) to pay for the cost of an independent appraiser or other
expert in real estate matters retained to determine a fair
sale price for a defaulted Whole Loan or a property acquired
in respect thereof in connection with the liquidation of the
defaulted Whole Loan or property;
(15) to pay for the cost of various opinions of counsel obtained
pursuant to the related Agreement for the benefit of
certificateholders;
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(16) to pay for the costs of recording the related Agreement if
recordation materially and beneficially affects the interests
of certificateholders, provided that the payment shall not
constitute a waiver with respect to the obligation of the
Warrantying Party to remedy any breach of representation or
warranty under the Agreement;
(17) to pay the person entitled thereto any amounts deposited in
the Certificate Account in error, including amounts received
on any asset after its removal from the trust fund whether by
reason of purchase or substitution as contemplated by
"--Assignment of Assets; Repurchase" and "--Representations
and Warranties; Repurchases" or otherwise;
(18) to make any other withdrawals permitted by the related
Agreement and described in the related prospectus supplement;
and
(19) to clear and terminate the Certificate Account at the
termination of the trust fund.
OTHER COLLECTION ACCOUNTS
Notwithstanding the foregoing, if so specified in the related
prospectus supplement, the Agreement for any series of certificates may provide
for the establishment and maintenance of a separate collection account into
which the master servicer or any related subservicer or special servicer will
deposit on a daily basis the amounts described under "--Deposits" above for one
or more series of certificates. Any amounts on deposit in any collection account
will be withdrawn therefrom and deposited into the appropriate Certificate
Account by a time specified in the related prospectus supplement. To the extent
specified in the related prospectus supplement, any amounts which could be
withdrawn from the Certificate Account as described under "--Withdrawals" above,
may also be withdrawn from any collection account. The prospectus supplement
will set forth any restrictions with respect to any collection account,
including investment restrictions and any restrictions with respect to financial
institutions with which any collection account may be maintained.
COLLECTION AND OTHER SERVICING PROCEDURES
The master servicer, directly or through subservicers, is required
to make reasonable efforts to collect all scheduled payments under the Whole
Loans and will follow or cause to be followed the collection procedures as it
would follow with respect to mortgage loans that are comparable to the Whole
Loans and held for its own account, provided the procedures are consistent with
the Servicing Standard. In connection therewith, the master servicer will be
permitted in its discretion to waive any late payment charge or penalty interest
in respect of a late Whole Loan payment.
Each master servicer will also be required to perform other
customary functions of a servicer of comparable loans, including the following:
o maintaining, or causing the borrower or lessee on each
mortgage or lease to maintain, hazard, business interruption
and general liability insurance policies and, if applicable,
rental interruption policies as described in this prospectus
and in any related prospectus supplement, and filing and
settling claims thereunder;
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o maintaining escrow or impoundment accounts of borrowers for
payment of taxes, insurance and other items required to be
paid by any borrower pursuant to the Whole Loan;
o processing assumptions or substitutions in those cases where
the master servicer has determined not to enforce any
applicable due-on-sale clause; attempting to cure
delinquencies;
o supervising foreclosures;
o inspecting and managing mortgaged properties under certain
circumstances; and
o maintaining accounting records relating to the Whole Loans.
Unless otherwise specified in the related prospectus
supplement, the master servicer will be responsible for filing
and settling claims in respect of particular Whole Loans under
any applicable instrument of Credit Support. See "Description
of Credit Support."
The master servicer may agree to modify, waive or amend any term of
any Whole Loan in a manner consistent with the Servicing Standard so long as the
modification, waiver or amendment will not
o affect the amount or timing of any scheduled payments of
principal or interest on the Whole Loan or
o in its judgment, materially impair the security for the Whole
Loan or reduce the likelihood of timely payment of amounts due
thereon.
The master servicer also may agree to any modification, waiver or amendment that
would so affect or impair the payments on, or the security for, a Whole Loan if,
unless otherwise provided in the related prospectus supplement,
o in its judgment, a material default on the Whole Loan has
occurred or a payment default is imminent and
o in its judgment, that modification, waiver or amendment is
reasonably likely to produce a greater recovery with respect
to the Whole Loan on a present value basis than would
liquidation.
The master servicer is required to notify the trustee in the event of any
modification, waiver or amendment of any Whole Loan.
SUBSERVICERS
A master servicer may delegate its servicing obligations in respect
of the Whole Loans to subservicer, but the master servicer will remain obligated
under the related Agreement. Each subservicing agreement must be consistent with
the terms of the related Agreement and must provide that, if for any reason the
master servicer for the related series of certificates is no longer acting in
the capacity of master servicer, the trustee or any successor master servicer
may assume the master servicer's rights and obligations under the subservicing
agreement.
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Unless otherwise provided in the related prospectus supplement, the
master servicer will be solely liable for all fees owed by it to any
subservicer, irrespective of whether the master servicer's compensation pursuant
to the related Agreement is sufficient to pay those fees. However, a subservicer
may be entitled to a Retained Interest in certain Whole Loans. Each subservicer
will be reimbursed by the master servicer for certain expenditures which it
makes, generally to the same extent the master servicer would be reimbursed
under an Agreement. See "--Retained Interest; Servicing Compensation and Payment
of Expenses" below.
SPECIAL SERVICERS
To the extent so specified in the related prospectus supplement, a
special servicer may be appointed. The related prospectus supplement will
describe the rights, obligations and compensation of a special servicer. The
master servicer will only be responsible for the duties and obligations of a
special servicer to the extent set forth in the prospectus supplement.
REALIZATION UPON DEFAULTED WHOLE LOANS
A borrower's failure to make required payments may reflect
inadequate income or the diversion of that income from the service of payments
due under the mortgage loan, and may call into question the borrower's ability
to make timely payment of taxes and to pay for necessary maintenance of the
related mortgaged property. Unless otherwise provided in the related prospectus
supplement, the master servicer is required to:
o monitor any Whole Loan which is in default,
o contact the borrower concerning the default,
o evaluate whether the causes of the default can be cured over a
reasonable period without significant impairment of the value
of the mortgaged property,
o initiate corrective action in cooperation with the borrower if
cure is likely,
o inspect the mortgaged property, and
o take any other actions as are consistent with the Servicing
Standard.
A significant period of time may elapse before the master servicer is able to
assess the success of the corrective action or the need for additional
initiatives.
The time within which the master servicer makes the initial
determination of appropriate action, evaluates the success of corrective action,
develops additional initiatives, institutes foreclosure proceedings and actually
forecloses or takes a deed to a mortgaged property in lieu of foreclosure on
behalf of the certificateholders, may vary considerably depending on the
particular Whole Loan, the mortgaged property, the borrower, the presence of an
acceptable party to assume the Whole Loan and the laws of the jurisdiction in
which the mortgaged property is located. Under federal bankruptcy law, the
master servicer in certain cases may not be permitted to accelerate a Whole Loan
or to foreclose on a mortgaged property for a considerable period of time. See
"Legal Aspects of the Mortgage Loans and the Leases."
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Any Agreement relating to a trust fund that includes Whole Loans may
grant to the master servicer or the holder or holders of certain classes of
certificates, or both, a right of first refusal to purchase from the trust fund
at a predetermined purchase price any Whole Loan as to which a specified number
of scheduled payments thereunder are delinquent. Any such right granted to the
holder of an offered certificate will be described in the related prospectus
supplement. The related prospectus supplement will also describe any such right
granted to any person if the predetermined purchase price is less than the
Purchase Price described under "--Representations and Warranties; Repurchases."
Unless otherwise specified in the related prospectus supplement, the
master servicer may offer to sell any defaulted Whole Loan described in the
preceding paragraph and not otherwise purchased by any person having a right of
first refusal with respect thereto, if and when the master servicer determines,
consistent with the Servicing Standard, that this sale would produce a greater
recovery on a present value basis than would liquidation through foreclosure or
similar proceeding. The related Agreement will provide that any sale of this
type be made in a commercially reasonable manner for a specified period and that
the master servicer accept the highest cash bid received from any person
including itself, an affiliate of the master servicer or any certificateholder
that constitutes a fair price for the defaulted Whole Loan. In the absence of
any bid determined in accordance with the related Agreement to be fair, the
master servicer shall proceed with respect to the defaulted mortgage loan as
described in the paragraphs below. Any bid in an amount at least equal to the
Purchase Price described under "--Representations and Warranties; Repurchases"
will in all cases be deemed fair.
If a default on a Whole Loan has occurred or, in the master
servicer's judgment is imminent, and the action is consistent with the servicing
standard, the master servicer, on behalf of the trustee, may at any time:
o institute foreclosure proceedings,
o exercise any power of sale contained in any mortgage,
o obtain a deed in lieu of foreclosure, or
o otherwise acquire title to a mortgaged property securing the
Whole Loan.
Unless otherwise specified in the related prospectus supplement, the master
servicer may not acquire title to any related mortgaged property or take any
other action that would cause the trustee, for the benefit of
certificateholders, or any other specified person to be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or an "operator"
of that mortgaged property within the meaning of federal environmental laws,
unless the master servicer has previously determined, based on a report prepared
by a person who regularly conducts environmental audits, which report will be an
expense of the trust fund, that either:
o the mortgaged property is in compliance with applicable
environmental laws, and there are no circumstances present at
the mortgaged property relating to the use, management or
disposal of any hazardous substances, hazardous materials,
wastes, or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation; or
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o if the mortgaged property is not so in compliance or such
circumstances are so present, then it would be in the best
economic interest of the trust fund to acquire title to the
mortgaged property and further to take the actions as would be
necessary and appropriate to effect the compliance and respond
to the circumstances, the cost of which actions will be an
expense of the trust fund.
Unless otherwise provided in the related prospectus supplement, if
title to any mortgaged property is acquired by a trust fund as to which a REMIC
election has been made, the master servicer, on behalf of the trust fund, will
be required to sell the mortgaged property prior to the close of the third
calendar year following the year of acquisition of the mortgaged property by the
trust fund, unless
o the Internal Revenue Service grants an extension of time to
sell the property or
o the trustee receives an opinion of independent counsel to the
effect that the holding of the property by the trust fund
subsequent to that period will not result in the imposition of
a tax on the trust fund or cause the trust fund to fail to
qualify as a REMIC under the Code at any time that any
certificate is outstanding.
Subject to the foregoing, the master servicer will be required to
o solicit bids for any mortgaged property so acquired by the
trust fund as will be reasonably likely to realize a fair
price for the property and
o accept the first and, if multiple bids are contemporaneously
received, the highest cash bid received from any person that
constitutes a fair price.
If the trust fund acquires title to any mortgaged property, the
master servicer, on behalf of the trust fund, may retain an independent
contractor to manage and operate the property. The retention of an independent
contractor, however, will not relieve the master servicer of any of its
obligations with respect to the management and operation of that property.
Unless otherwise specified in the related prospectus supplement, any property
acquired by the trust fund will be managed in a manner consistent with the
management and operation of similar property by a prudent lending institution.
The limitations imposed by the related Agreement and the REMIC
Provisions of the Code, if a REMIC election has been made with respect to the
related trust fund, on the operations and ownership of any mortgaged property
acquired on behalf of the trust fund may result in the recovery of an amount
less than the amount that would otherwise be recovered. See "Legal Aspects of
the Mortgage Loans and the Leases--Foreclosure."
If recovery on a defaulted Whole Loan under any related instrument
of Credit Support is not available, the master servicer nevertheless will be
obligated to follow or cause to be followed normal practices and procedures as
it deems necessary or advisable to realize upon the defaulted Whole Loan. If the
proceeds of any liquidation of the property securing the defaulted Whole Loan
are less than the outstanding principal balance of the defaulted Whole Loan plus
interest accrued thereon at the mortgage rate plus the aggregate amount of
expenses incurred by the master servicer in connection with such proceedings and
which are reimbursable under the Agreement, the trust fund will realize a loss
in the amount of that difference. The master
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servicer will be entitled to withdraw or cause to be withdrawn from the
Certificate Account out of the Liquidation Proceeds recovered on any defaulted
Whole Loan, prior to the distribution of the Liquidation Proceeds to
certificateholders, amounts representing its normal servicing compensation on
the Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan.
If any property securing a defaulted Whole Loan is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient to
restore the damaged property to a condition sufficient to permit recovery under
the related instrument of Credit Support, if any, the master servicer is not
required to expend its own funds to restore the damaged property unless it
determines
o that the restoration will increase the proceeds to
certificateholders on liquidation of the Whole Loan after
reimbursement of the master servicer for its expenses and
o that the expenses will be recoverable by it from related
Insurance Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans, a master servicer, on behalf of
itself, the trustee and the certificateholders, will present claims to the
obligor under each instrument of Credit Support, and will take reasonable steps
as are necessary to receive payment or to permit recovery thereunder with
respect to defaulted Whole Loans.
If a master servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan, the
master servicer will be entitled to withdraw or cause to be withdrawn from the
Certificate Account out of those proceeds, prior to distribution thereof to
certificateholders, amounts representing its normal servicing compensation on
the Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan. See "--Hazard Insurance Policies" and "Description of
Credit Support."
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related prospectus supplement,
each Agreement for a trust fund that includes Whole Loans will require the
master servicer to cause the borrower on each Whole Loan to maintain a hazard
insurance policy providing for the coverage required under the related mortgage
or, if any mortgage permits the holder thereof to dictate to the borrower the
insurance coverage to be maintained on the related mortgaged property, then the
coverage that is consistent with the Servicing Standard. Unless otherwise
specified in the related prospectus supplement, the coverage will be in general
in an amount equal to the lesser of the principal balance owing on the Whole
Loan and the amount necessary to fully compensate for any damage or loss to the
improvements on the mortgaged property on a replacement cost basis, but in
either case not less than the amount necessary to avoid the application of any
co-insurance clause contained in the hazard insurance policy. The ability of the
master servicer to assure that hazard insurance proceeds are appropriately
applied may be dependent upon its being named as an additional insured under any
hazard insurance policy and under any other insurance policy referred to below
in this section, or upon the extent to which information in this regard is
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furnished by borrowers. All amounts collected by the master servicer under any
policy, except for amounts to be applied to the restoration or repair of the
mortgaged property or released to the borrower in accordance with the master
servicer's normal servicing procedures, subject to the terms and conditions of
the related mortgage and mortgage note, will be deposited in the Certificate
Account. The Agreement will provide that the master servicer may satisfy its
obligation to cause each borrower to maintain a hazard insurance policy by the
master servicer's maintaining a blanket policy insuring against hazard losses on
the Whole Loans. If the blanket policy contains a deductible clause, the master
servicer will be required to deposit in the Certificate Account all sums that
would have been deposited in the Certificate Account but for that clause.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements of the property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions specified in each
policy. Although the policies relating to the Whole Loans will be underwritten
by different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most of these policies typically do not cover any physical damage resulting from
war, revolution, governmental actions, floods and other water-related causes,
earth movement, including earthquakes, landslides and mudflows, wet or dry rot,
vermin, domestic animals and other kinds of uninsured risks.
The hazard insurance policies covering the mortgaged properties
securing the Whole Loans will typically contain a co-insurance clause that in
effect requires the insured at all times to carry insurance of a specified
percentage, generally 80% to 90%, of the full replacement value of the
improvements on the property in order to recover the full amount of any partial
loss. If the insured's coverage falls below this specified percentage, the
co-insurance clause generally provides that the insurer's liability in the event
of partial loss does not exceed the lesser of
o the replacement cost of the improvements less physical
depreciation and
o the proportion of the loss as the amount of insurance carried
bears to the specified percentage of the full replacement cost
of the improvements.
Each Agreement for a trust fund that includes Whole Loans will
require the master servicer to cause the borrower on each Whole Loan, or, in
certain cases, the related lessee, to maintain all other insurance coverage with
respect to the related mortgaged property as is consistent with the terms of the
related mortgage and the Servicing Standard, which insurance may typically
include flood insurance if the related mortgaged property was located at the
time of origination in a federally designated flood area.
In addition, to the extent required by the related mortgage, the
master servicer may require the borrower or related lessee to maintain other
forms of insurance including, but not limited to, loss of rent endorsements,
business interruption insurance and comprehensive public liability insurance,
and the related Agreement may require the master servicer, subservicer or
special servicer to maintain public liability insurance with respect to any REO
Properties. Any cost incurred by the master servicer in maintaining any
insurance policy will be added to the amount owing under the mortgage loan where
the terms of the mortgage loan so permit;
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provided, however, that the addition of this cost will not be taken into account
for purposes of calculating the distribution to be made to certificateholders.
These costs may be recovered by the master servicer, subservicer or special
servicer, as the case may be, from the Collection Account, with interest
thereon, as provided by the Agreement.
Under the terms of the Whole Loans, borrowers will generally be
required to present claims to insurers under hazard insurance policies
maintained on the related mortgaged properties. The master servicer, on behalf
of the trustee and certificateholders, is obligated to present or cause to be
presented claims under any blanket insurance policy insuring against hazard
losses on mortgaged properties securing the Whole Loans. However, the ability of
the master servicer to present or cause to be presented these claims is
dependent upon the extent to which information in this regard is furnished to
the master servicer by borrowers.
RENTAL INTERRUPTION INSURANCE POLICY
If so specified in the related prospectus supplement, the master
servicer or the borrowers will maintain rental interruption insurance policies
in full force and effect with respect to some or all of the leases. Although the
terms of these policies vary to some degree, a rental interruption insurance
policy typically provides that, to the extent that a lessee fails to make timely
rental payments under the related lease due to a casualty event, the losses will
be reimbursed to the insured. If so specified in the related prospectus
supplement, the master servicer will be required to pay from its servicing
compensation the premiums on the rental interruption policy on a timely basis.
If so specified in the prospectus supplement, if the rental interruption policy
is canceled or terminated for any reason other than the exhaustion of total
policy coverage, the master servicer will exercise its best reasonable efforts
to obtain from another insurer a replacement policy comparable to the rental
interruption policy with a total coverage that is equal to the then existing
coverage of the terminated rental interruption policy. However, if the cost of
any replacement policy is greater than the cost of the terminated rental
interruption policy, the amount of coverage under the replacement policy will,
to the extent set forth in the related prospectus supplement, be reduced to a
level such that the applicable premium does not exceed, by a percentage that may
be set forth in the related prospectus supplement, the cost of the rental
interruption policy that was replaced. Any amounts collected by the master
servicer under the rental interruption policy in the nature of insurance
proceeds will be deposited in the Certificate Account.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Unless otherwise specified in the related prospectus supplement,
each Agreement will require that the master servicer and any special servicer
obtain and maintain in effect a fidelity bond or similar form of insurance
coverage which may provide blanket coverage or any combination thereof insuring
against loss occasioned by fraud, theft or other intentional misconduct of the
officers, employees and agents of the master servicer or the special servicer,
as applicable. The related Agreement will allow the master servicer and any
special servicer to self-insure against loss occasioned by the errors and
omissions of the officers, employees and agents of the master servicer or the
special servicer so long as criteria set forth in the Agreement are met.
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DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Some of the Whole Loans may contain clauses requiring the consent of
the lender to any sale or other transfer of the related mortgaged property, or
due-on-sale clauses entitling the lender to accelerate payment of the Whole Loan
upon any sale or other transfer of the related mortgaged property. Some of the
Whole Loans may contain clauses requiring the consent of the lender to the
creation of any other lien or encumbrance on the mortgaged property or
due-on-encumbrance clauses entitling the lender to accelerate payment of the
Whole Loan upon the creation of any other lien or encumbrance upon the mortgaged
property. Unless otherwise provided in the related prospectus supplement, the
master servicer, on behalf of the trust fund, will exercise any right the
trustee may have as lender to accelerate payment of the Whole Loan or to
withhold its consent to any transfer or further encumbrance in a manner
consistent with the Servicing Standard. Unless otherwise specified in the
related prospectus supplement, any fee collected by or on behalf of the master
servicer for entering into an assumption agreement will be retained by or on
behalf of the master servicer as additional servicing compensation. See "Legal
Aspects of the Mortgage Loans and the Leases--Due-on-Sale and
Due-on-Encumbrance."
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The prospectus supplement for a series of certificates will specify
whether there will be any Retained Interest in the assets, and, if so, the
initial owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related Agreement.
Unless otherwise specified in the related prospectus supplement, the
master servicer's and a subservicer's primary servicing compensation with
respect to a series of certificates will come from the periodic payment to it of
a portion of the interest payment on each asset. Since any Retained Interest and
a master servicer's primary compensation are percentages of the principal
balance of each asset, these amounts will decrease in accordance with the
amortization of the assets. The prospectus supplement with respect to a series
of certificates evidencing interests in a trust fund that includes Whole Loans
may provide that, as additional compensation, the master servicer or the
subservicers may retain all or a portion of assumption fees, modification fees,
late payment charges or prepayment premiums collected from borrowers and any
interest or other income which may be earned on funds held in the Certificate
Account or any account established by a subservicer pursuant to the Agreement.
The master servicer may, to the extent provided in the related
prospectus supplement, pay from its servicing compensation certain expenses
incurred in connection with its servicing and managing of the assets, including,
without limitation, payment of the fees and disbursements of the trustee and
independent accountants, payment of expenses incurred in connection with
distributions and reports to certificateholders, and payment of any other
expenses described in the related prospectus supplement. Certain other expenses,
including certain expenses relating to defaults and liquidations on the Whole
Loans and, to the extent so provided in the related prospectus supplement,
interest thereon at the rate specified in the related prospectus supplement, and
the fees of any special servicer, may be borne by the trust fund.
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EVIDENCE AS TO COMPLIANCE
Each Agreement relating to assets which include Whole Loans will
provide that on or before a specified date in each year, beginning with the
first date at least six months after the related Cut-off Date, a firm of
independent public accountants will furnish a statement to the trustee to the
effect that, on the basis of the examination by that firm conducted
substantially in compliance with either the Uniform Single Attestation Program
for Mortgage Bankers or the Audit Program for Mortgages Serviced for the Federal
Home Loan Mortgage Corporation, the servicing by or on behalf of the master
servicer of mortgage loans under pooling agreements substantially similar to
each other, including the related Agreement, was conducted in compliance with
the terms of such agreements except for any significant exceptions or errors in
records that, in the opinion of the firm, either the Audit Program for Mortgages
serviced for FHLMC, or paragraph 4 of the Uniform Single Attestation Program for
Mortgage Bankers, requires it to report. In rendering its statement that firm
may rely, as to matters relating to the direct servicing of mortgage loans by
subservicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, rendered
within one year of that statement, of firms of independent public accountants
with respect to the related subservicer.
Each Agreement will also provide for delivery to the trustee, on or
before a specified date in each year, of an annual statement signed by two
officers of the master servicer to the effect that the master servicer has
fulfilled its obligations under the Agreement throughout the preceding calendar
year or other specified twelve-month period.
Unless otherwise provided in the related prospectus supplement,
copies of annual accountants' statement and statements of officers will be
obtainable by certificateholders without charge upon written request to the
master servicer at the address set forth in the related prospectus supplement.
MATTERS REGARDING A MASTER SERVICER AND THE DEPOSITOR
The master servicer, if any, or a servicer for substantially all the
Whole Loans under each Agreement will be named in the related prospectus
supplement. The entity serving as master servicer or as servicer may be an
affiliate of Morgan Stanley Dean Witter Capital I Inc. and may have other normal
business relationships with Morgan Stanley Dean Witter Capital I Inc. or Morgan
Stanley Dean Witter Capital I Inc.'s affiliates. Reference to the master
servicer shall be deemed to be to the servicer of substantially all of the Whole
Loans, if applicable.
Unless otherwise specified in the related prospectus supplement, the
related Agreement will provide that the master servicer may resign from its
obligations and duties only upon a determination that its duties under the
Agreement are no longer permissible under applicable law or are in material
conflict by reason of applicable law with another activity carried on by it that
was performed by the master servicer on the date of the Agreement. No
resignation will become effective until the trustee or a successor servicer has
assumed the master servicer's obligations and duties under the Agreement.
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Unless otherwise specified in the related prospectus supplement,
each Agreement will further provide that neither any master servicer, Morgan
Stanley Dean Witter Capital I Inc. nor any director, officer, employee, or agent
of a master servicer or Morgan Stanley Dean Witter Capital I Inc. will be under
any liability to the related trust fund or certificateholders for any action
taken, or for refraining from the taking of any action, in good faith pursuant
to the Agreement. However, neither a master servicer, Morgan Stanley Dean Witter
Capital I Inc. nor any director, officer, employee, or agent of a master
servicer or Morgan Stanley Dean Witter Capital I Inc. will be protected against
any breach of a representation, warranty or covenant made in the Agreement, or
against any liability specifically imposed by the Agreement, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of obligations or duties thereunder
or by reason of reckless disregard of obligations and duties thereunder. Unless
otherwise specified in the related prospectus supplement, each Agreement will
further provide that any master servicer, Morgan Stanley Dean Witter Capital I
Inc. and any director, officer, employee or agent of a master servicer or Morgan
Stanley Dean Witter Capital I Inc. will be entitled to indemnification by the
related trust fund and will be held harmless against any loss, liability or
expense incurred in connection with any legal action relating to the Agreement
or the certificates; provided, however, that the indemnification will not extend
to any loss, liability or expense:
o specifically imposed by the Agreement or otherwise incidental
to the performance of obligations and duties thereunder,
including, in the case of a master servicer, the prosecution
of an enforcement action in respect of any specific Whole Loan
or Whole Loans, except as any loss, liability or expense shall
be otherwise reimbursable pursuant to the Agreement;
o incurred in connection with any breach of a representation,
warranty or covenant made in the Agreement;
o incurred by reason of misfeasance, bad faith or gross
negligence in the performance of obligations or duties
thereunder, or by reason of reckless disregard of its
obligations or duties;
o incurred in connection with any violation of any state or
federal securities law; or
o imposed by any taxing authority if the loss, liability or
expense is not specifically reimbursable pursuant to the terms
of the related Agreement.
In addition, each Agreement will provide that neither any master servicer nor
Morgan Stanley Dean Witter Capital I Inc. will be under any obligation to appear
in, prosecute or defend any legal action which is not incidental to its
respective responsibilities under the Agreement and which in its opinion may
involve it in any expense or liability. The master servicer or Morgan Stanley
Dean Witter Capital I Inc. may, however, in its discretion undertake any action
which it may deem necessary or desirable with respect to the Agreement and the
rights and duties of the parties thereto and the interests of the
certificateholders thereunder. In this event, the legal expenses and costs of
the action and any liability resulting therefrom will be expenses, costs and
liabilities of the certificateholders, and the master servicer or Morgan Stanley
Dean Witter Capital I Inc., as the case may be, will be entitled to be
reimbursed therefor and to charge the Certificate Account.
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Any person into which the master servicer or Morgan Stanley Dean
Witter Capital I Inc. may be merged or consolidated, or any person resulting
from any merger or consolidation to which the master servicer or Morgan Stanley
Dean Witter Capital I Inc. is a party, or any person succeeding to the business
of the master servicer or Morgan Stanley Dean Witter Capital I Inc., will be the
successor of the master servicer or Morgan Stanley Dean Witter Capital I Inc.,
as the case may be, under the related Agreement.
EVENTS OF DEFAULT
Unless otherwise provided in the related prospectus supplement for a
trust fund that includes Whole Loans, Events of Default under the related
Agreement will include:
(1) any failure by the master servicer to distribute or cause to
be distributed to certificateholders, or to remit to the
trustee for distribution to certificateholders, any required
payment;
(2) any failure by the master servicer duly to observe or perform
in any material respect any of its other covenants or
obligations under the Agreement which continues unremedied for
thirty days after written notice of the failure has been given
to the master servicer by the trustee or Morgan Stanley Dean
Witter Capital I Inc., or to the master servicer, Morgan
Stanley Dean Witter Capital I Inc. and the trustee by the
holders of certificates evidencing not less than 25% of the
Voting Rights;
(3) any breach of a representation or warranty made by the master
servicer under the Agreement which materially and adversely
affects the interests of certificateholders and which
continues unremedied for thirty days after written notice of
that breach has been given to the master servicer by the
trustee or Morgan Stanley Dean Witter Capital I Inc., or to
the master servicer, Morgan Stanley Dean Witter Capital I Inc.
and the trustee by the holders of certificates evidencing not
less than 25% of the Voting Rights; and
(4) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings
and certain actions by or on behalf of the master servicer
indicating its insolvency or inability to pay its obligations.
Material variations to the foregoing Events of Default--other than to shorten
cure periods or eliminate notice requirements--will be specified in the related
prospectus supplement. Unless otherwise specified in the related prospectus
supplement, the trustee shall, not later than the later of 60 days after the
occurrence of any event which constitutes or, with notice or lapse of time or
both, would constitute an Event of Default and five days after certain officers
of the trustee become aware of the occurrence of such an event, transmit by mail
to Morgan Stanley Dean Witter Capital I Inc. and all certificateholders of the
applicable series notice of the occurrence, unless the default shall have been
cured or waived.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under an Agreement remains
unremedied, Morgan Stanley Dean Witter Capital I Inc. or the trustee may, and at
the direction of holders of certificates evidencing not less than 51% of the
Voting Rights, the trustee shall, terminate all of the rights
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and obligations of the master servicer under the Agreement and in and to the
mortgage loans, other than as a certificateholder or as the owner of any
Retained Interest, whereupon the trustee will succeed to all of the
responsibilities, duties and liabilities of the master servicer under the
Agreement, except that if the trustee is prohibited by law from obligating
itself to make advances regarding delinquent mortgage loans, or if the related
prospectus supplement so specifies, then the trustee will not be obligated to
make the advances, and will be entitled to similar compensation arrangements.
Unless otherwise specified in the related prospectus supplement, in the event
that the trustee is unwilling or unable so to act, it may or, at the written
request of the holders of certificates entitled to at least 51% of the Voting
Rights, it shall appoint, or petition a court of competent jurisdiction for the
appointment of, a loan servicing institution acceptable to the Rating Agency
with a net worth at the time of appointment of at least $15,000,000 to act as
successor to the master servicer under the Agreement. Pending appointment, the
trustee is obligated to act in the capacity of master servicer. The trustee and
any successor may agree upon the servicing compensation to be paid, which in no
event may be greater than the compensation payable to the master servicer under
the Agreement.
Unless otherwise described in the related prospectus supplement, the
holders of certificates representing at least 66 2/3% of the Voting Rights
allocated to the respective classes of certificates affected by any Event of
Default will be entitled to waive that Event of Default; provided, however, that
an Event of Default involving a failure to distribute a required payment to
certificateholders described in clause (1) under "--Events of Default" may be
waived only by all of the certificateholders. Upon any waiver of an Event of
Default, the Event of Default shall cease to exist and shall be deemed to have
been remedied for every purpose under the Agreement.
No certificateholder will have the right under any Agreement to
institute any proceeding with respect thereto unless the holder previously has
given to the trustee written notice of default and unless the holders of
certificates evidencing not less than 25% of the Voting Rights have made written
request upon the trustee to institute the proceeding in its own name as trustee
thereunder and have offered to the trustee reasonable indemnity, and the trustee
for sixty days has neglected or refused to institute any proceeding. The
trustee, however, is under no obligation to
o exercise any of the powers vested in it by any Agreement;
o make any investigation of matters arising under any Agreement;
or
o institute, conduct or defend any litigation under any
Agreement or related to any Agreement.
If any of the holders of certificates request, order or direct the trustee to
take any action, the trustee may require reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred.
AMENDMENT
Each Agreement may be amended by the parties to the Agreement
without the consent of any of the holders of certificates covered by the
Agreement:
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(1) to cure any ambiguity;
(2) to correct, modify or supplement any provision in the
Agreement which may be inconsistent with any other provision
in the Agreement;
(3) to make any other provisions with respect to matters or
questions arising under the Agreement which are not
inconsistent with the provisions thereof; or
(4) to comply with any requirements imposed by the Code;
provided that the amendment--other than an amendment for the purpose specified
in clause (4) above--will not, as evidenced by an opinion of counsel to that
effect, adversely affect in any material respect the interests of any holder of
certificates covered by the Agreement.
Unless otherwise specified in the related prospectus supplement,
each Agreement may also be amended by Morgan Stanley Dean Witter Capital I Inc.,
the master servicer, if any, and the trustee, with the consent of the holders of
certificates affected evidencing not less than 51% of the Voting Rights, for any
purpose. However, to the extent set forth in the related prospectus supplement,
no amendment may:
(1) reduce in any manner the amount of or delay the timing of,
payments received or advanced on mortgage loans which are
required to be distributed on any certificate without the
consent of the holder of that certificate;
(2) adversely affect in any material respect the interests of the
holders of any class of certificates in a manner other than as
described in (1), without the consent of the holders of all
certificates of that class; or
(3) modify the provisions of the Agreement described in this
paragraph without the consent of the holders of all
certificates covered by the Agreement then outstanding.
However, with respect to any series of certificates as to which a REMIC election
is to be made, the trustee will not consent to any amendment of the Agreement
unless it shall first have received an opinion of counsel to the effect that the
amendment will not result in the imposition of a tax on the related trust fund
or cause the related trust fund to fail to qualify as a REMIC at any time that
the related certificates are outstanding.
THE TRUSTEE
The trustee under each Agreement will be named in the related
prospectus supplement. The commercial bank, national banking association,
banking corporation or trust company serving as trustee may have a banking
relationship with Morgan Stanley Dean Witter Capital I Inc. and its affiliates
and with any master servicer and its affiliates.
DUTIES OF THE TRUSTEE
The trustee will make no representations as to the validity or
sufficiency of any Agreement, the certificates or any asset or related document
and is not accountable for the use or application by or on behalf of any master
servicer of any funds paid to the master servicer or its
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designee or any special servicer in respect of the certificates or the assets,
or deposited into or withdrawn from the Certificate Account or any other account
by or on behalf of the master servicer or any special servicer. If no Event of
Default has occurred and is continuing, the trustee is required to perform only
those duties specifically required under the related Agreement. However, upon
receipt of the various certificates, reports or other instruments required to be
furnished to it, the trustee is required to examine the documents and to
determine whether they conform to the requirements of the Agreement.
MATTERS REGARDING THE TRUSTEE
Unless otherwise specified in the related prospectus supplement, the
trustee and any director, officer, employee or agent of the trustee shall be
entitled to indemnification out of the Certificate Account for any loss,
liability or expense, including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in settlement,
incurred in connection with the trustee's:
o enforcing its rights and remedies and protecting the
interests, and enforcing the rights and remedies, of the
certificateholders during the continuance of an Event of
Default;
o defending or prosecuting any legal action in respect of the
related Agreement or series of certificates;
o being the lender of record with respect to the mortgage loans
in a trust fund and the owner of record with respect to any
mortgaged property acquired in respect thereof for the benefit
of certificateholders; or
o acting or refraining from acting in good faith at the
direction of the holders of the related series of certificates
entitled to not less than 25% or a higher percentage as is
specified in the related Agreement with respect to any
particular matter of the Voting Rights for the series.
However, the indemnification will not extend to any loss,
liability or expense that constitutes a specific liability of
the trustee pursuant to the related Agreement, or to any loss,
liability or expense incurred by reason of willful
misfeasance, bad faith or negligence on the part of the
trustee in the performance of its obligations and duties
thereunder, or by reason of its reckless disregard of the
obligations or duties, or as may arise from a breach of any
representation, warranty or covenant of the trustee made in
the related Agreement.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The trustee may at any time resign from its obligations and duties
under an Agreement by giving written notice thereof to Morgan Stanley Dean
Witter Capital I Inc., the master servicer, if any, and all certificateholders.
Upon receiving the notice of resignation, Morgan Stanley Dean Witter Capital I
Inc. is required promptly to appoint a successor trustee acceptable to the
master servicer, if any. If no successor trustee shall have been so appointed
and have accepted appointment within 30 days after the giving of the notice of
resignation, the resigning trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
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If at any time the trustee shall cease to be eligible to continue as
trustee under the related Agreement, or if at any time the trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the trustee or of its property shall be appointed, or any public officer
shall take charge or control of the trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then Morgan Stanley
Dean Witter Capital I Inc. may remove the trustee and appoint a successor
trustee acceptable to the master servicer, if any. Holders of the certificates
of any series entitled to at least 51% of the Voting Rights for that series may
at any time remove the trustee without cause and appoint a successor trustee.
Any resignation or removal of the trustee and appointment of a
successor trustee shall not become effective until acceptance of appointment by
the successor trustee.
DESCRIPTION OF CREDIT SUPPORT
GENERAL
For any series of certificates, Credit Support may be provided with
respect to one or more classes thereof or the related assets. Credit Support may
be in the form of the subordination of one or more classes of certificates,
letters of credit, insurance policies, guarantees, the establishment of one or
more reserve funds or another method of Credit Support described in the related
prospectus supplement, or any combination of the foregoing. If so provided in
the related prospectus supplement, any form of Credit Support may be structured
so as to be drawn upon by more than one series to the extent described in the
prospectus supplement.
Unless otherwise provided in the related prospectus supplement for a
series of certificates, the Credit Support will not provide protection against
all risks of loss and will not guarantee repayment of the entire Certificate
Balance of the certificates and interest thereon. If losses or shortfalls occur
that exceed the amount covered by Credit Support or that are not covered by
Credit Support, certificateholders will bear their allocable share of
deficiencies. Moreover, if a form of Credit Support covers more than one series
of certificates, holders of certificates evidencing interests in any of the
trusts will be subject to the risk that the Credit Support will be exhausted by
the claims of other trusts prior to the trust fund receiving any of its intended
share of coverage.
If Credit Support is provided with respect to one or more classes of
certificates of a series, or the related assets, the related prospectus
supplement will include a description of:
(1) the nature and amount of coverage under the Credit Support;
(2) any conditions to payment thereunder not otherwise described
in this prospectus;
(3) the conditions, if any, under which the amount of coverage
under the Credit Support may be reduced and under which the
Credit Support may be terminated or replaced;
(4) the material provisions relating to the Credit Support; and
(5) information regarding the obligor under any instrument of
Credit Support, including:
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o a brief description of its principal business
activities;
o its principal place of business, place of incorporation
and the jurisdiction under which it is chartered or
licensed to do business;
o if applicable, the identity of regulatory agencies that
exercise primary jurisdiction over the conduct of its
business; and
o its total assets, and its stockholders' or
policyholders' surplus, if applicable, as of the date
specified in the prospectus supplement.
See "Risk Factors--Credit Support May Not Cover Losses or Risks Which Could
Adversely Affect Payment On Your Certificates."
SUBORDINATE CERTIFICATES
If so specified in the related prospectus supplement, one or more
classes of certificates of a series may be Subordinate Certificates. To the
extent specified in the related prospectus supplement, the rights of the holders
of Subordinate Certificates to receive distributions of principal and interest
from the Certificate Account on any Distribution Date will be subordinated to
the rights of the holders of Senior Certificates. If so provided in the related
prospectus supplement, the subordination of a class may apply only in the event
of or may be limited to certain types of losses or shortfalls. The related
prospectus supplement will set forth information concerning the amount of
subordination of a class or classes of Subordinate Certificates in a series, the
circumstances in which the subordination will be applicable and the manner, if
any, in which the amount of subordination will be effected.
CROSS-SUPPORT PROVISIONS
If the assets for a series are divided into separate groups, each
supporting a separate class or classes of certificates of a series, credit
support may be provided by cross-support provisions requiring that distributions
be made on Senior Certificates evidencing interests in one group of mortgage
loans or MBS prior to distributions on Subordinate Certificates evidencing
interests in a different group of mortgage loans or MBS within the trust fund.
The prospectus supplement for a series that includes a cross-support provision
will describe the manner and conditions for applying these provisions.
INSURANCE OR GUARANTEES FOR THE WHOLE LOANS
If so provided in the prospectus supplement for a series of
certificates, the Whole Loans in the related trust fund will be covered for
various default risks by insurance policies or guarantees. A copy of any
material instrument for a series will be filed with the Commission as an exhibit
to a Current Report on Form 8-K to be filed within 15 days of issuance of the
certificates of the related series.
LETTER OF CREDIT
If so provided in the prospectus supplement for a series of
certificates, deficiencies in amounts otherwise payable on the certificates or
certain classes thereof will be covered by one or
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more letters of credit, issued by the letter of credit bank. Under a letter of
credit, the letter of credit bank will be obligated to honor draws thereunder in
an aggregate fixed dollar amount, net of unreimbursed payments thereunder,
generally equal to a percentage specified in the related prospectus supplement
of the aggregate principal balance of the mortgage loans or MBS or both on the
related Cut-off Date or of the initial aggregate Certificate Balance of one or
more classes of certificates. If so specified in the related prospectus
supplement, the letter of credit may permit draws in the event of only certain
types of losses and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments
thereunder and may otherwise be reduced as described in the related prospectus
supplement. The obligations of the letter of credit bank under the letter of
credit for each series of certificates will expire at the earlier of the date
specified in the related prospectus supplement or the termination of the trust
fund. A copy of any letter of credit for a series will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed within 15
days of issuance of the certificates of the related series.
INSURANCE POLICIES AND SURETY BONDS
If so provided in the prospectus supplement for a series of
certificates, deficiencies in amounts otherwise payable on the certificates or
certain classes thereof will be covered by insurance policies or surety bonds
provided by one or more insurance companies or sureties. The instruments may
cover, with respect to one or more classes of certificates of the related
series, timely distributions of interest or full distributions of principal on
the basis of a schedule of principal distributions set forth in or determined in
the manner specified in the related prospectus supplement. A copy of any such
instrument for a series will be filed with the Commission as an exhibit to a
Current Report on Form 8-K to be filed with the Commission within 15 days of
issuance of the certificates of the related series.
RESERVE FUNDS
If so provided in the prospectus supplement for a series of
certificates, deficiencies in amounts otherwise payable on the certificates or
certain classes thereof will be covered by one or more reserve funds in which
cash, a letter of credit, Permitted Investments, a demand note or a combination
thereof will be deposited, in the amounts so specified in the prospectus
supplement. The reserve funds for a series may also be funded over time by
depositing in the reserve funds a specified amount of the distributions received
on the related assets as specified in the related prospectus supplement.
Amounts on deposit in any reserve fund for a series, together with
the reinvestment income thereon, if any, will be applied for the purposes, in
the manner, and to the extent specified in the related prospectus supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the certificates. If so specified in the related
prospectus supplement, reserve funds may be established to provide limited
protection against only certain types of losses and shortfalls. Following each
Distribution Date amounts in a reserve fund in excess of any amount required to
be maintained in the reserve fund may be released from the reserve fund under
the conditions and to the extent specified in the related prospectus supplement
and will not be available for further application to the certificates.
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Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related prospectus supplement.
Unless otherwise specified in the related prospectus supplement, any
reinvestment income or other gain from these investments will be credited to the
related Reserve Fund for the series, and any loss resulting from the investments
will be charged to the Reserve Fund. However, the income may be payable to any
related master servicer or another service provider as additional compensation.
The Reserve Fund, if any, for a series will not be a part of the trust fund to
the extent set forth in the related prospectus supplement.
Additional information concerning any Reserve Fund will be set forth
in the related prospectus supplement, including the initial balance of the
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which the required balance will decrease over time, the manner of
funding the Reserve Fund, the purposes for which funds in the Reserve Fund may
be applied to make distributions to certificateholders and use of investment
earnings from the Reserve Fund, if any.
CREDIT SUPPORT FOR MBS
If so provided in the prospectus supplement for a series of
certificates, the MBS in the related trust fund or the mortgage loans underlying
the MBS may be covered by one or more of the types of Credit Support described
in this prospectus. The related prospectus supplement will specify as to each
form of Credit Support the information indicated above under "Description of
Credit Support--General," to the extent the information is material and
available.
LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. The legal aspects are governed by applicable state
law, which laws may differ substantially. As such, the summaries DO NOT:
o purport to be complete;
o purport to reflect the laws of any particular state; or
o purport to encompass the laws of all states in which the
security for the mortgage loans is situated.
The summaries are qualified in their entirety by reference to the applicable
federal and state laws governing the mortgage loans. See "Description of the
Trust Funds--Assets."
GENERAL
All of the mortgage loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property. The
instrument granting a security interest may be a mortgage, deed of trust,
security deed or deed to secure debt, depending upon the prevailing practice and
law in the state in which the mortgaged property is located. Any of the
foregoing types of mortgages will create a lien upon, or grant a title interest
in, the subject property. The priority of the mortgage will depend on the terms
of the particular security
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instrument, as well as separate, recorded, contractual arrangements with others
holding interests in the mortgaged property, the knowledge of the parties to the
instrument as well as the order of recordation of the instrument in the
appropriate public recording office. However, recording does not generally
establish priority over governmental claims for real estate taxes and
assessments and other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance
of real property between two parties--
o a borrower--the borrower and usually the owner of the subject
property, and
o a mortgagee--the lender.
In contrast, a deed of trust is a three-party instrument, among
o a trustor--the equivalent of a mortgagor or borrower,
o a trustee to whom the mortgaged property is conveyed, and
o a beneficiary--the lender--for whose benefit the conveyance is
made.
Under a deed of trust, the borrower grants the property, irrevocably until the
debt is paid, in trust, generally with a power of sale as security for the
indebtedness evidenced by the related note. A deed to secure debt typically has
two parties.
By executing a deed to secure debt, the grantor conveys title to, as
opposed to merely creating a lien upon, the subject property to the grantee
until the time that the underlying debt is repaid, generally with a power of
sale as security for the indebtedness evidenced by the related mortgage note. If
a borrower under a mortgage is a land trust, there would be an additional party
because legal title to the property is held by a land trustee under a land trust
agreement for the benefit of the borrower. At origination of a mortgage loan
involving a land trust, the borrower executes a separate undertaking to make
payments on the mortgage note. The lender's authority under a mortgage, the
trustee's authority under a deed of trust and the grantee's authority under a
deed to secure debt are governed by the express provisions of the mortgage, the
law of the state in which the real property is located, certain federal laws
including, without limitation, the Soldiers' and Sailors' Civil Relief Act of
1940 and, in some cases, in deed of trust transactions, the directions of the
beneficiary.
INTEREST IN REAL PROPERTY
The real property covered by a mortgage, deed of trust, security
deed or deed to secure debt is most often the fee estate in land and
improvements. However, the mortgage, or other instrument, may encumber other
interests in real property such as:
o a tenant's interest in a lease of land or improvements, or
both, and
o the leasehold estate created by the lease.
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A mortgage, or other instrument, covering an interest in real property other
than the fee estate requires special provisions in the instrument creating the
interest to protect the lender against termination of the interest before the
note secured by the mortgage, deed of trust, security deed or deed to secure
debt is paid. Unless otherwise specified in the prospectus supplement, Morgan
Stanley Dean Witter Capital I Inc. or the asset seller will make representations
and warranties in the Agreement with respect to the mortgage loans which are
secured by an interest in a leasehold estate. The representations and warranties
will be set forth in the prospectus supplement if applicable.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases. Typically, under an assignment of rents and
leases:
o the borrower assigns its right, title and interest as landlord
under each lease and the income derived from each lease to the
lender, and
o the borrower retains a revocable license to collect the rents
for so long as there is no default under the loan documents.
The manner of perfecting the lender's interest in rents may depend on whether
the borrower's assignment was absolute or one granted as security for the loan.
Failure to properly perfect the lender's interest in rents may result in the
loss of substantial pool of funds, which could otherwise serve as a source of
repayment for the loan. If the borrower defaults, the license terminates and the
lender is entitled to collect the rents. Local law may require that the lender
take possession of the property and obtain a court-appointed receiver before
becoming entitled to collect the rents. In most states, hotel and motel room
revenues are considered accounts receivable under the UCC; generally these
revenues are either assigned by the borrower, which remains entitled to collect
the revenues absent a default, or pledged by the borrower, as security for the
loan. In general, the lender must file financing statements in order to perfect
its security interest in the revenues and must file continuation statements,
generally every five years, to maintain perfection of the security interest.
Even if the lender's security interest in room revenues is perfected under the
UCC, the lender will generally be required to commence a foreclosure or
otherwise take possession of the property in order to collect the room revenues
after a default.
Even after a foreclosure, the potential rent payments from the
property may be less than the periodic payments that had been due under the
mortgage. For instance, the net income that would otherwise be generated from
the property may be less than the amount that would have been needed to service
the mortgage debt if the leases on the property are at below-market rents, or as
the result of excessive maintenance, repair or other obligations which a lender
succeeds to as landlord.
Lenders that actually take possession of the property, however, may
incur potentially substantial risks attendant to being a mortgagee in
possession. The risks include liability for environmental clean-up costs and
other risks inherent in property ownership. See "--Environmental Legislation"
below.
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PERSONALITY
Certain types of mortgaged properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value from
personal property which does not constitute "fixtures" under applicable state
real property law and, hence, would not be subject to the lien of a mortgage.
The property is generally pledged or assigned as security to the lender under
the UCC. In order to perfect its security interest in the property, the lender
generally must file UCC financing statements and, to maintain perfection of the
security interest, file continuation statements generally every five years.
FORECLOSURE
GENERAL
Foreclosure is a legal procedure that allows the lender to recover
its mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the borrower defaults in payment or performance of its obligations
under the note or mortgage, the lender has the right to institute foreclosure
proceedings to sell the mortgaged property at public auction to satisfy the
indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage
vary from state to state. Two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage instrument. There are several other foreclosure
procedures available in some states that are either infrequently used or
available only in certain limited circumstances, such as strict foreclosure.
JUDICIAL FORECLOSURE
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated by
the service of legal pleadings upon all parties having a subordinate interest of
record in the real property and all parties in possession of the property, under
leases or otherwise, whose interests are subordinate to the mortgage. Delays in
completion of the foreclosure may occasionally result from difficulties in
locating defendants. When the lender's right to foreclose is contested, the
legal proceedings can be time-consuming. Upon successful completion of a
judicial foreclosure proceeding, the court generally issues a judgment of
foreclosure and appoints a referee or other officer to conduct a public sale of
the mortgaged property, the proceeds of which are used to satisfy the judgment.
The sales are made in accordance with procedures that vary from state to state.
EQUITABLE LIMITATIONS ON ENFORCEABILITY OF CERTAIN PROVISIONS
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a lender in connection with
foreclosure. These equitable principles are generally designed to relieve the
borrower from the legal effect of mortgage defaults, to the extent that the
effect is perceived as harsh or unfair. Relying on these principles, a court may
alter the specific terms of a loan to the extent it considers necessary to
prevent or remedy an injustice, undue oppression or overreaching, or may require
the lender to undertake affirmative and expensive actions to determine the cause
of the borrower's default and the likelihood that the
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borrower will be able to reinstate the loan. In some cases, courts have
substituted their judgment for the lender's and have required that lenders
reinstate loans or recast payment schedules in order to accommodate borrowers
who are suffering from a temporary financial disability. In other cases, courts
have limited the right of the lender to foreclose if the default under the
mortgage is not monetary, e.g., the borrower failed to maintain the mortgaged
property adequately or the borrower executed a junior mortgage on the mortgaged
property. The exercise by the court of its equity powers will depend on the
individual circumstances of each case presented to it. Finally, some courts have
been faced with the issue of whether federal or state constitutional provisions
reflecting due process concerns for adequate notice require that a borrower
receive notice in addition to statutorily-prescribed minimum notice. For the
most part, these cases have upheld the reasonableness of the notice provisions
or have found that a public sale under a mortgage providing for a power of sale
does not involve sufficient state action to afford constitutional protections to
the borrower.
A foreclosure action is subject to most of the delays and expenses
of other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes require several years to complete. Moreover, a non-collusive,
regularly conducted foreclosure sale may be challenged as a fraudulent
conveyance, regardless of the parties' intent, if a court determines that the
sale was for less than fair consideration and that the sale occurred while the
borrower was insolvent or the borrower was rendered insolvent as a result of the
sale and within one year -- or within the state statute of limitations if the
trustee in bankruptcy elects to proceed under state fraudulent conveyance law --
of the filing of bankruptcy.
NON-JUDICIAL FORECLOSURE/POWER OF SALE
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale pursuant to the power of sale granted in the deed of
trust. A power of sale is typically granted in a deed of trust. It may also be
contained in any other type of mortgage instrument. A power of sale allows a
non-judicial public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
borrower under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to such sale,
the trustee under a deed of trust must record a notice of default and notice of
sale and send a copy to the borrower and to any other party who has recorded a
request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record in the real property, including junior lienholders. A notice
of sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. The borrower or junior
lienholder may then have the right, during a reinstatement period required in
some states, to cure the default by paying the entire actual amount in arrears,
without acceleration, plus the expenses incurred in enforcing the obligation. In
other states, the borrower or the junior lienholder is not provided a period to
reinstate the loan, but has only the right to pay off the entire debt to prevent
the foreclosure sale. Generally, the procedure for public sale, the parties
entitled to notice, the method of giving notice and the applicable time periods
are governed by state law and vary among the states. Foreclosure of a deed to
secure debt is also generally accomplished by a non-judicial sale similar to
that required by a deed of trust, except that the lender or its agent,
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rather than a trustee, is typically empowered to perform the sale in accordance
with the terms of the deed to secure debt and applicable law.
PUBLIC SALE
A third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of the property
at the time of sale, due to, among other things, redemption rights which may
exist and the possibility of physical deterioration of the property during the
foreclosure proceedings. For these reasons, it is common for the lender to
purchase the mortgaged property for an amount equal to or less than the
underlying debt and accrued and unpaid interest plus the expenses of
foreclosure. Generally, state law controls the amount of foreclosure costs and
expenses which may be recovered by a lender. Thereafter, subject to the
borrower's right in some states to remain in possession during a redemption
period, if applicable, the lender will become the owner of the property and have
both the benefits and burdens of ownership of the mortgaged property. For
example, the lender will have the obligation to pay debt service on any senior
mortgages, to pay taxes, obtain casualty insurance and to make the repairs at
its own expense as are necessary to render the property suitable for sale.
Frequently, the lender employs a third party management company to manage and
operate the property. The costs of operating and maintaining a commercial or
multifamily residential property may be significant and may be greater than the
income derived from that property. The costs of management and operation of
those mortgaged properties which are hotels, motels, restaurants, nursing or
convalescent homes or hospitals may be particularly significant because of the
expertise, knowledge and, with respect to nursing or convalescent homes or
hospitals, regulatory compliance, required to run the operations and the effect
which foreclosure and a change in ownership may have on the public's and the
industry's, including franchisors', perception of the quality of the operations.
The lender will commonly obtain the services of a real estate broker and pay the
broker's commission in connection with the sale of the property. Depending upon
market conditions, the ultimate proceeds of the sale of the property may not
equal the lender's investment in the property. Moreover, a lender commonly
incurs substantial legal fees and court costs in acquiring a mortgaged property
through contested foreclosure or bankruptcy proceedings. Furthermore, a few
states require that any environmental contamination at certain types of
properties be cleaned up before a property may be resold. In addition, a lender
may be responsible under federal or state law for the cost of cleaning up a
mortgaged property that is environmentally contaminated. See "--Environmental
Legislation." Generally state law controls the amount of foreclosure expenses
and costs, including attorneys' fees, that may be recovered by a lender.
A junior lender may not foreclose on the property securing the
junior mortgage unless it forecloses subject to senior mortgages and any other
prior liens, in which case it may be obliged to make payments on the senior
mortgages to avoid their foreclosure. In addition, in the event that the
foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale"
clause contained in a senior mortgage, the junior lender may be required to pay
the full amount of the senior mortgage to avoid its foreclosure. Accordingly,
with respect to those mortgage loans, if any, that are junior mortgage loans, if
the lender purchases the property, the lender's title will be subject to all
senior mortgages, prior liens and certain governmental liens.
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The proceeds received by the referee or trustee from the sale are
applied first to the costs, fees and expenses of sale and then in satisfaction
of the indebtedness secured by the mortgage under which the sale was conducted.
Any proceeds remaining after satisfaction of senior mortgage debt are generally
payable to the holders of junior mortgages and other liens and claims in order
of their priority, whether or not the borrower is in default. Any additional
proceeds are generally payable to the borrower. The payment of the proceeds to
the holders of junior mortgages may occur in the foreclosure action of the
senior mortgage or a subsequent ancillary proceeding or may require the
institution of separate legal proceedings by these holders.
REO PROPERTIES
If title to any mortgaged property is acquired by the trustee on
behalf of the certificateholders, the master servicer or any related subservicer
or the special servicer, on behalf of the holders, will be required to sell the
mortgaged property prior to the close of the third calendar year following the
year of acquisition of such mortgaged property by the trust fund, unless:
o the Internal Revenue Service grants an REO Extension, or
o it obtains an opinion of counsel generally to the effect that
the holding of the property beyond the close of the third
calendar year after its acquisition will not result in the
imposition of a tax on the trust fund or cause any REMIC
created pursuant to the Agreement to fail to qualify as a
REMIC under the Code.
Subject to the foregoing, the master servicer or any related subservicer or the
special servicer will generally be required to solicit bids for any mortgaged
property so acquired in a manner as will be reasonably likely to realize a fair
price for the property. The master servicer or any related subservicer or the
special servicer may retain an independent contractor to operate and manage any
REO Property; however, the retention of an independent contractor will not
relieve the master servicer or any related subservicer or the special servicer
of its obligations with respect to the REO Property.
In general, the master servicer or any related subservicer or the
special servicer or an independent contractor employed by the master servicer or
any related subservicer or the special servicer at the expense of the trust fund
will be obligated to operate and manage any mortgaged property acquired as REO
Property in a manner that would, to the extent commercially feasible, maximize
the trust fund's net after-tax proceeds from the property. After the master
servicer or any related subservicer or the special servicer reviews the
operation of the property and consults with the trustee to determine the trust
fund's federal income tax reporting position with respect to the income it is
anticipated that the trust fund would derive from the property, the master
servicer or any related subservicer or the special servicer could determine,
particularly in the case of an REO Property that is a hospitality or residential
health care facility, that it would not be commercially feasible to manage and
operate the property in a manner that would avoid the imposition of an REO Tax
at the highest marginal corporate tax rate--currently 35%. The determination as
to whether income from an REO Property would be subject to an REO Tax will
depend on the specific facts and circumstances relating to the management and
operation of each REO Property. Any REO Tax imposed on the trust fund's income
from an REO Property would reduce the amount available for distribution to
certificateholders. Certificateholders are advised
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to consult their tax advisors regarding the possible imposition of REO Taxes in
connection with the operation of commercial REO Properties by REMICs. See
"Federal Income Tax Consequences" in this prospectus and "Federal Income Tax
Consequences" in the prospectus supplement.
RIGHTS OF REDEMPTION
The purposes of a foreclosure action are to enable the lender to
realize upon its security and to bar the borrower, and all persons who have an
interest in the property which is subordinate to the mortgage being foreclosed,
from exercise of their "equity of redemption." The doctrine of equity of
redemption provides that, until the property covered by a mortgage has been sold
in accordance with a properly conducted foreclosure and foreclosure sale, those
having an interest which is subordinate to that of the foreclosing lender have
an equity of redemption and may redeem the property by paying the entire debt
with interest. In addition, in some states, when a foreclosure action has been
commenced, the redeeming party must pay certain costs of the action. Those
having an equity of redemption must generally be made parties and joined in the
foreclosure proceeding in order for their equity of redemption to be cut off and
terminated.
The equity of redemption is a common-law or non-statutory right
which exists prior to completion of the foreclosure, is not waivable by the
borrower, must be exercised prior to foreclosure sale and should be
distinguished from the post-sale statutory rights of redemption. In some states,
after sale pursuant to a deed of trust or foreclosure of a mortgage, the
borrower and foreclosed junior lienors are given a statutory period in which to
redeem the property from the foreclosure sale. In some states, statutory
redemption may occur only upon payment of the foreclosure sale price. In other
states, redemption may be authorized if the former borrower pays only a portion
of the sums due. The effect of a statutory right of redemption is to diminish
the ability of the lender to sell the foreclosed property. The exercise of a
right of redemption would defeat the title of any purchaser from a foreclosure
sale or sale under a deed of trust. Consequently, the practical effect of the
redemption right is to force the lender to maintain the property and pay the
expenses of ownership until the redemption period has expired. In some states, a
post-sale statutory right of redemption may exist following a judicial
foreclosure, but not following a trustee's sale under a deed of trust.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held beyond the close of the third calendar
year following the year of acquisition. Unless otherwise provided in the related
prospectus supplement, with respect to a series of certificates for which an
election is made to qualify the trust fund or a part thereof as a REMIC, the
Agreement will permit foreclosed property to be held beyond the close of the
third calendar year following the year of acquisition if the Internal Revenue
Service grants an extension of time within which to sell the property or
independent counsel renders an opinion to the effect that holding the property
for such additional period is permissible under the REMIC Provisions.
ANTI-DEFICIENCY LEGISLATION
Some or all of the mortgage loans may be nonrecourse loans, as to
which recourse may be had only against the specific property securing the
related mortgage loan and a personal money judgment may not be obtained against
the borrower. Even if a mortgage loan by its terms
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provides for recourse to the borrower, some states impose prohibitions or
limitations on recourse to the borrower. For example, statutes in some states
limit the right of the lender to obtain a deficiency judgment against the
borrower following foreclosure or sale under a deed of trust. A deficiency
judgment would be a personal judgment against the former borrower equal to the
difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Some states require the lender to
exhaust the security afforded under a mortgage by foreclosure in an attempt to
satisfy the full debt before bringing a personal action against the borrower. In
certain other states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting the security; however,
in some of these states, the lender, following judgment on a personal action,
may be deemed to have elected a remedy and may be precluded from exercising
remedies with respect to the security. In some cases, a lender will be precluded
from exercising any additional rights under the note or mortgage if it has taken
any prior enforcement action. Consequently, the practical effect of the election
requirement, in those states permitting such election, is that lenders will
usually proceed against the security first rather than bringing a personal
action against the borrower. Finally, other statutory provisions limit any
deficiency judgment against the former borrower following a judicial sale to the
excess of the outstanding debt over the fair market value of the property at the
time of the public sale. The purpose of these statutes is generally to prevent a
lender from obtaining a large deficiency judgment against the former borrower as
a result of low or no bids at the judicial sale.
LEASEHOLD RISKS
Mortgage loans may be secured by a mortgage on a ground lease.
Leasehold mortgages are subject to certain risks not associated with mortgage
loans secured by the fee estate of the borrower. The most significant of these
risks is that the ground lease creating the leasehold estate could terminate,
leaving the leasehold lender without its security. The ground lease may
terminate if, among other reasons, the ground lessee breaches or defaults in its
obligations under the ground lease or there is a bankruptcy of the ground lessee
or the ground lessor. This risk may be minimized if the ground lease contains
certain provisions protective of the lender, but the ground leases that secure
mortgage loans may not contain some of these protective provisions, and
mortgages may not contain the other protections discussed in the next paragraph.
Protective ground lease provisions include:
(1) the right of the leasehold lender to receive notices from the
ground lessor of any defaults by the borrower;
(2) the right to cure those defaults, with adequate cure periods;
(3) if a default is not susceptible of cure by the leasehold
lender, the right to acquire the leasehold estate through
foreclosure or otherwise;
(4) the ability of the ground lease to be assigned to and by the
leasehold lender or purchaser at a foreclosure sale and for
the concomitant release of the ground lessee's liabilities
thereunder;
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(5) the right of the leasehold lender to enter into a new ground
lease with the ground lessor on the same terms and conditions
as the old ground lease in the event of a termination thereof;
(6) a ground lease or leasehold mortgage that prohibits the ground
lessee from treating the ground lease as terminated in the
event of the ground lessor's bankruptcy and rejection of the
ground lease by the trustee for the debtor-ground lessor; and
(7) a leasehold mortgage that provides for the assignment of the
debtor-ground lessee's right to reject a lease pursuant to
Section 365 of the Bankruptcy Code.
Without the protections described in (1) - (7) above, a leasehold
lender may lose the collateral securing its leasehold mortgage. However, the
enforceability of clause (7) has not been established. In addition, terms and
conditions of a leasehold mortgage are subject to the terms and conditions of
the ground lease. Although certain rights given to a ground lessee can be
limited by the terms of a leasehold mortgage, the rights of a ground lessee or a
leasehold lender with respect to, among other things, insurance, casualty and
condemnation will be governed by the provisions of the ground lease.
BANKRUPTCY LAWS
The Bankruptcy Code and related state laws may interfere with or
affect the ability of a lender to realize upon collateral and to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions, including foreclosure actions and deficiency judgment proceedings, are
automatically stayed upon the filing of the bankruptcy petition, and, usually,
no interest or principal payments are made during the course of the bankruptcy
case. The delay and the consequences thereof caused by an automatic stay can be
significant. Also, under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a junior lienor may stay the senior lender from
taking action to foreclose out the junior lien.
Under the Bankruptcy Code, provided certain substantive and
procedural safeguards for the lender are met, the amount and terms of a mortgage
secured by property of the debtor may be modified under certain circumstances.
In many jurisdictions, the outstanding amount of the loan secured by the real
property may be reduced to the then-current value of the property, with a
corresponding partial reduction of the amount of lender's security interest
pursuant to a confirmed plan or lien avoidance proceeding, thus leaving the
lender a general unsecured creditor for the difference between such value and
the outstanding balance of the loan. Other modifications may include the
reduction in the amount of each scheduled payment, which reduction may result
from a reduction in the rate of interest or the alteration of the repayment
schedule with or without affecting the unpaid principal balance of the loan, or
an extension or reduction of the final maturity date. Some courts with federal
bankruptcy jurisdiction have approved plans, based on the particular facts of
the reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years. Also, under federal bankruptcy law, a
bankruptcy court may permit a debtor through its rehabilitative plan to
de-accelerate a secured loan and to reinstate the loan even though the lender
accelerated the mortgage loan and final judgment of foreclosure had been entered
in state court provided no sale of the property had yet occurred, prior to the
filing of the debtor's petition. This may be done even if the full amount due
under the original loan is never repaid.
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Federal bankruptcy law provides generally that rights and obligation
under an unexpired lease of the debtor/lessee may not be terminated or modified
at any time after the commencement of a case under the Bankruptcy Code solely on
the basis of a provision in the lease to such effect or because of certain other
similar events. This prohibition on so-called "ipso facto clauses" could limit
the ability of the trustee for a series of certificates to exercise certain
contractual remedies with respect to the leases. In addition, Section 362 of the
Bankruptcy Code operates as an automatic stay of, among other things, any act to
obtain possession of property from a debtor's estate, which may delay a
trustee's exercise of remedies for a related series of certificates in the event
that a related lessee or a related borrower becomes the subject of a proceeding
under the Bankruptcy Code. For example, a lender would be stayed from enforcing
a lease assignment by a borrower related to a mortgaged property if the related
borrower was in a bankruptcy proceeding. The legal proceedings necessary to
resolve the issues could be time-consuming and might result in significant
delays in the receipt of the assigned rents. Similarly, the filing of a petition
in bankruptcy by or on behalf of a lessee of a mortgaged property would result
in a stay against the commencement or continuation of any state court proceeding
for past due rent, for accelerated rent, for damages or for a summary eviction
order with respect to a default under the lease that occurred prior to the
filing of the lessee's petition. Rents and other proceeds of a mortgage loan may
also escape an assignment thereof if the assignment is not fully perfected under
state law prior to commencement of the bankruptcy proceeding. See "--Leases and
Rents" above.
In addition, the Bankruptcy Code generally provides that a trustee
or debtor-in-possession may, subject to approval of the court,
o assume the lease and retain it or assign it to a third party
or
o reject the lease.
If the lease is assumed, the trustee in bankruptcy on behalf of the lessee, or
the lessee as debtor-in-possession, or the assignee, if applicable, must cure
any defaults under the lease, compensate the lessor for its losses and provide
the lessor with "adequate assurance" of future performance. These remedies may
be insufficient, however, as the lessor may be forced to continue under the
lease with a lessee that is a poor credit risk or an unfamiliar tenant if the
lease was assigned, and any assurances provided to the lessor may, in fact, be
inadequate. If the lease is rejected, the rejection generally constitutes a
breach of the executory contract or unexpired lease immediately before the date
of filing the petition. As a consequence, the other party or parties to the
rejected lease, such as the borrower, as lessor under a lease, would have only
an unsecured claim against the debtor for damages resulting from the breach,
which could adversely affect the security for the related mortgage loan. In
addition, pursuant to Section 502(b)(6) of the Bankruptcy Code, a lessor's
damages for lease rejection in respect of future rent installments are limited
to the rent reserved by the lease, without acceleration, for the greater of one
year or 15%, not to exceed three years, of the remaining term of the lease.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat the lease as terminated by the rejection or, in the alternative, the
lessee may remain in possession of the leasehold for the balance of the term and
for any renewal or extension of the term that is enforceable by the lessee under
applicable nonbankruptcy law. The Bankruptcy Code provides that if a lessee
elects to remain in
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possession after a rejection of a lease, the lessee may offset against rents
reserved under the lease for the balance of the term after the date of rejection
of the lease, and any renewal or extension thereof, any damages occurring after
such date caused by the nonperformance of any obligation of the lessor under the
lease after such date. To the extent provided in the related prospectus
supplement, the lessee will agree under certain leases to pay all amounts owing
thereunder to the master servicer without offset. To the extent that a
contractual obligation remains enforceable against the lessee, the lessee would
not be able to avail itself of the rights of offset generally afforded to
lessees of real property under the Bankruptcy Code.
In a bankruptcy or similar proceeding of a borrower, action may be
taken seeking the recovery, as a preferential transfer or on other grounds, of
any payments made by the borrower, or made directly by the related lessee, under
the related mortgage loan to the trust fund. Payments on long-term debt may be
protected from recovery as preferences if they are payments in the ordinary
course of business made on debts incurred in the ordinary course of business.
Whether any particular payment would be protected depends upon the facts
specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect
its costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may have
the power to grant liens senior to the lien of a mortgage, and analogous state
statutes and general principles of equity may also provide a borrower with means
to halt a foreclosure proceeding or sale and to force a restructuring of a
mortgage loan on terms a lender would not otherwise accept. Moreover, the laws
of some states also give priority to certain tax liens over the lien of a
mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that
actions of the lender have been unreasonable, the lien of the related mortgage
may be subordinated to the claims of unsecured creditors.
To the extent described in the related prospectus supplement, some
of the Borrowers may be partnerships. The laws governing limited partnerships in
some states provide that the commencement of a case under the Bankruptcy Code
with respect to a general partner will cause a person to cease to be a general
partner of the limited partnership, unless otherwise provided in writing in the
limited partnership agreement. This provision may be construed as an "ipso
facto" clause and, in the event of the general partner's bankruptcy, may not be
enforceable. To the extent described in the related prospectus supplement, some
of the limited partnership agreements of the Borrowers may provide that the
commencement of a case under the Bankruptcy Code with respect to the related
general partner constitutes an event of withdrawal--assuming the enforceability
of the clause is not challenged in bankruptcy proceedings or, if challenged, is
upheld--that might trigger the dissolution of the limited partnership, the
winding up of its affairs and the distribution of its assets, unless
o at the time there was at least one other general partner and
the written provisions of the limited partnership permit the
business of the limited partnership to be carried on by the
remaining general partner and that general partner does so or
o the written provisions of the limited partnership agreement
permit the limited partner to agree within a specified time
frame -- often 60 days -- after such withdrawal to continue
the business of the limited partnership and to the appointment
of one or more general partners and the limited partners do
so.
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In addition, the laws governing general partnerships in some states provide that
the commencement of a case under the Bankruptcy Code or state bankruptcy laws
with respect to a general partner of such partnerships triggers the dissolution
of the partnership, the winding up of its affairs and the distribution of its
assets. The state laws, however, may not be enforceable or effective in a
bankruptcy case. The dissolution of a Borrower, the winding up of its affairs
and the distribution of its assets could result in an acceleration of its
payment obligation under a related mortgage loan, which may reduce the yield on
the related series of certificates in the same manner as a principal prepayment.
In addition, the bankruptcy of the general partner of a Borrower
that is a partnership may provide the opportunity for a trustee in bankruptcy
for the general partner, such general partner as a debtor-in-possession, or a
creditor of the general partner to obtain an order from a court consolidating
the assets and liabilities of the general partner with those of the Borrower
pursuant to the doctrines of substantive consolidation or piercing the corporate
veil. In such a case, the respective mortgaged property, for example, would
become property of the estate of the bankrupt general partner. Not only would
the mortgaged property be available to satisfy the claims of creditors of the
general partner, but an automatic stay would apply to any attempt by the trustee
to exercise remedies with respect to the mortgaged property. However, such an
occurrence should not affect the trustee's status as a secured creditor with
respect to the Borrower or its security interest in the mortgaged property.
JUNIOR MORTGAGES; RIGHTS OF SENIOR LENDERS OR BENEFICIARIES
To the extent specified in the related prospectus supplement, some
of the mortgage loans for a series will be secured by junior mortgages or deeds
of trust which are subordinated to senior mortgages or deeds of trust held by
other lenders or institutional investors. The rights of the trust fund, and
therefore the related certificateholders, as beneficiary under a junior deed of
trust or as lender under a junior mortgage, are subordinate to those of the
lender or beneficiary under the senior mortgage or deed of trust, including the
prior rights of the senior lender or beneficiary:
o to receive rents, hazard insurance and condemnation proceeds,
and
o to cause the mortgaged property securing the mortgage loan to
be sold upon default of the Borrower or trustor. This would
extinguish the junior lender's or junior beneficiary's lien.
However, the master servicer or special servicer, as
applicable, could assert its subordinate interest in the
mortgaged property in foreclosure litigation or satisfy the
defaulted senior loan.
In many states a junior lender or beneficiary may satisfy a defaulted senior
loan in full, or may cure such default and bring the senior loan current, in
either event adding the amounts expended to the balance due on the junior loan.
Absent a provision in the senior mortgage, no notice of default is required to
be given to the junior lender unless otherwise required by law.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the lender or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply the proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in
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such order as the lender or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other casualty,
or in the event the property is taken by condemnation, the lender or beneficiary
under the senior mortgage or deed of trust will have the prior right to collect
any insurance proceeds payable under the hazard insurance policy and any award
of damages in connection with the condemnation and to apply the same to the
indebtedness secured by the senior mortgage or deed of trust. Proceeds in excess
of the amount of senior mortgage indebtedness will, in most cases, be applied to
the indebtedness of a junior mortgage or trust deed. The laws of some states may
limit the ability of lenders to apply the proceeds of hazard insurance and
partial condemnation awards to the secured indebtedness. In these states, the
borrower must be allowed to use the proceeds of hazard insurance to repair the
damage unless the security of the lender has been impaired. Similarly, in
certain states, the lender is entitled to the award for a partial condemnation
of the real property security only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional
lenders typically contains a "future advance" clause, which provides in essence,
that additional amounts advanced to or on behalf of the borrower by the lender
are to be secured by the mortgage or deed of trust. While this type of clause is
valid under the laws of most states, the priority of any advance made under the
clause depends, in some states, on whether the advance was an "obligatory" or
"optional" advance. If the lender is obligated to advance the additional
amounts, the advance may be entitled to receive the same priority as amounts
initially made under the mortgage or deed of trust, notwithstanding that there
may be intervening junior mortgages or deeds of trust and other liens between
the date of recording of the mortgage or deed of trust and the date of the
future advance, and notwithstanding that the lender or beneficiary had actual
knowledge of the intervening junior mortgages or deeds of trust and other liens
at the time of the advance. Where the lender is not obligated to advance the
additional amounts and has actual knowledge of the intervening junior mortgages
or deeds of trust and other liens, the advance may be subordinated to such
intervening junior mortgages or deeds of trust and other liens. Priority of
advances under a "future advance" clause rests, in many other states, on state
law giving priority to all advances made under the loan agreement up to a
"credit limit" amount stated in the recorded mortgage.
Another provision typically found in the form of the mortgage or
deed of trust used by many institutional lenders obligates the borrower or
trustor to pay before delinquency all taxes and assessments on the property and,
when due, all encumbrances, charges and liens on the property which appear prior
to the mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the lender or beneficiary under the
mortgage or deed of trust. Upon a failure of the borrower to perform any of
these obligations, the lender or beneficiary is given the right under the
mortgage or deed of trust to perform the obligation itself, at its election,
with the borrower agreeing to reimburse the lender on behalf of the borrower.
All sums so expended by the lender become part of the indebtedness secured by
the mortgage or deed of trust.
The form of mortgage or deed of trust used by many institutional
lenders typically requires the borrower to obtain the consent of the lender in
respect of actions affecting the mortgaged property, including, without
limitation, leasing activities, including new leases and termination or
modification of existing leases, alterations and improvements to buildings
forming
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a part of the mortgaged property and management and leasing agreements for the
mortgaged property. Tenants will often refuse to execute a lease unless the
lender or beneficiary executes a written agreement with the tenant not to
disturb the tenant's possession of its premises in the event of a foreclosure. A
senior lender or beneficiary may refuse to consent to matters approved by a
junior lender or beneficiary with the result that the value of the security for
the junior mortgage or deed of trust is diminished. For example, a senior lender
or beneficiary may decide not to approve the lease or to refuse to grant a
tenant a non-disturbance agreement. If, as a result, the lease is not executed,
the value of the mortgaged property may be diminished.
ENVIRONMENTAL LEGISLATION
Real property pledged as security to a lender may be subject to
unforeseen environmental liabilities. Of particular concern may be those
mortgaged properties which are, or have been, the site of manufacturing,
industrial or disposal activity. These environmental liabilities may give rise
to:
o a diminution in value of property securing any mortgage loan;
o limitation on the ability to foreclose against the property;
or
o in certain circumstances, liability for clean-up costs or
other remedial actions, which liability could exceed the value
of the principal balance of the related mortgage loan or of
the mortgaged property.
Under the laws of many states, contamination on a property may give
rise to a lien on the property for cleanup costs. In several states, the a lien
has priority over all existing liens (a "superlien") including those of existing
mortgages; in these states, the lien of a mortgage contemplated by this
transaction may lose its priority to a superlien.
The presence of hazardous or toxic substances, or the failure to
remediate the property properly, may adversely affect the market value of the
property, as well as the owner's ability to sell or use the real estate or to
borrow using the real estate as collateral. In addition, certain environmental
laws and common law principles govern the responsibility for the removal,
encapsulation or disturbance of asbestos containing materials when these
asbestos containing materials are in poor condition or when a property with
asbestos containing materials is undergoing repair, renovation or demolition.
These laws could also be used to impose liability upon owners and operators of
real properties for release of asbestos containing materials into the air that
cause personal injury or other damage. In addition to cleanup and natural
resource damages actions brought by federal, state, and local agencies and
private parties, the presence of hazardous substances on a property may lead to
claims of personal injury, property damage, or other claims by private
plaintiffs.
Under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 and under other federal law and the law of some
states, a secured party which takes a deed-in-lieu of foreclosure, purchases a
mortgaged property at a foreclosure sale, or operates a mortgaged property may
become liable in some circumstances either to the government or to private
parties for cleanup costs, even if the lender does not cause or contribute to
the contamination. Liability under some federal or state statutes may not be
limited to the original or
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unamortized principal balance of a loan or to the value of the property securing
a loan. CERCLA imposes strict, as well as joint and several, liability on
several classes of potentially responsible parties, including current owners and
operators of the property, regardless of whether they caused or contributed to
the contamination. Many states have laws similar to CERCLA.
Lenders may be held liable under CERCLA as owners or operators.
Excluded from CERCLA's definition of "owner or operator," however, is a person
"who without participating in the management of the facility, holds indicia of
ownership primarily to protect his security interest." This exemption for
holders of a security interest such as a secured lender applies only in
circumstances where the lender acts to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities encroach on
the actual management of the facility or property, the lender faces potential
liability as an "owner or operator" under CERCLA. Similarly, when a lender
forecloses and takes title to a contaminated facility or property -- whether it
holds the facility or property as an investment or leases it to a third party --
the lender may incur potential CERCLA liability.
Whether actions taken by a lender would constitute an encroachment
on the actual management of a facility or property, so as to render the secured
creditor exemption unavailable to the lender has been a matter of judicial
interpretation of the statutory language, and court decisions have historically
been inconsistent.
This scope of the secured creditor exemption has been clarified by
the enactment of the Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996, which was signed into law by President Clinton on
September 30, 1996, and which lists permissible actions that may be undertaken
by a lender holding security in a contaminated facility without exceeding the
bounds of the secured creditor exemption, subject to certain conditions and
limitations. The Asset Conservation Act provides that in order to be deemed to
have participated in the management of a secured property, a lender must
actually participate in the operational affairs of the property or the borrower.
The Asset Conservation Act also provides that a lender will continue to have the
benefit of the secured creditor exemption even if it forecloses on a mortgaged
property, purchases it at a foreclosure sale or accepts a deed-in-lieu of
foreclosure provided that the lender seeks to sell the mortgaged property at the
earliest practicable commercially reasonable time on commercially reasonable
terms. The protections afforded lenders under the Asset Conservation Act are
subject to terms and conditions that have not been clarified by the courts.
The secured creditor exemption does not protect a lender from
liability under CERCLA in cases where the lender arranges for disposal of
hazardous substances or for transportation of hazardous substances. In addition,
the secured creditor exemption does not govern liability for cleanup costs under
federal laws other than CERCLA or under state law. CERCLA's jurisdiction extends
to the investigation and remediation of releases of "hazardous substances." The
definition of "hazardous substances" under CERCLA specifically excludes
petroleum products. Therefore, a federal statute of particular significance is
Subtitle I of the Resource Conservation and Recovery Act, which governs the
operation and management of underground petroleum storage tanks. Under the Asset
Conservation Act, the holders of security interests in underground storage tanks
or properties containing these tanks are accorded protections similar to the
protections accorded to lenders under CERCLA. It should be noted, however, that
liability
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for cleanup of petroleum contamination may be governed by state law, which may
not provide for any specific protection for secured creditors.
In a few states, transfer of some types of properties is conditioned
upon clean up of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed-in-lieu of foreclosure
or otherwise, may be required to cleanup the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law
causes of action--for example, actions based on nuisance or on toxic tort
resulting in death, personal injury or damage to property--related to hazardous
environmental conditions on a property. While it may be more difficult to hold a
lender liable in these cases, unanticipated or uninsurable liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
If a lender is or becomes liable, it may bring an action for
contribution against the owner or operator who created the environmental hazard,
but that person or entity may be bankrupt or otherwise judgment proof. It is
possible that cleanup costs could become a liability of the trust fund and
occasion a loss to certificateholders in certain circumstances if such remedial
costs were incurred.
Unless otherwise provided in the related prospectus supplement, the
Warrantying Party with respect to any Whole Loan included in a trust fund for a
particular series of certificates will represent that a "Phase I Assessment" as
described in and meeting the requirements of the then current version of Chapter
5 of the Federal National Mortgage Association Multifamily Guide has been
received and reviewed. In addition, unless otherwise provided in the related
prospectus supplement, the related Agreement will provide that the master
servicer, acting on behalf of the trustee, may not acquire title to a mortgaged
property or take over its operation unless the master servicer has previously
determined, based on a report prepared by a person who regularly conducts
environmental audits, that:
o the mortgaged property is in compliance with applicable
environmental laws, and there are no circumstances present at
the mortgaged property relating to the use, management or
disposal of any hazardous substances, hazardous materials,
wastes, or petroleum based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation; or
o if the mortgaged property is not so in compliance or such
circumstances are so present, then it would be in the best
economic interest of the trust fund to acquire title to the
mortgaged property and further to take actions as would be
necessary and appropriate to effect compliance or respond to
such circumstances.
This requirement effectively precludes enforcement of the security for the
related mortgage note until a satisfactory environmental inquiry is undertaken
or any required remedial action is provided for, reducing the likelihood that a
given trust fund will become liable for an Environmental Hazard Condition
affecting a mortgaged property, but making it more difficult to realize on the
security for the mortgage loan. However, there can be no assurance that any
environmental assessment obtained by the master servicer or a special servicer,
as the case may
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be, will detect all possible Environmental Hazard Conditions or that the other
requirements of the Agreement, even if fully observed by the master servicer or
special servicer, as the case may be, will in fact insulate a given trust fund
from liability for Environmental Hazard Conditions. See "Description of the
Agreements--Realization Upon Defaulted Whole Loans."
Unless otherwise specified in the related prospectus supplement,
Morgan Stanley Dean Witter Capital I Inc. generally will not have determined
whether environmental assessments have been conducted with respect to the
mortgaged properties relating to the mortgage loans included in the pool of
mortgage loans for a series, and it is likely that any environmental assessments
which would have been conducted with respect to any of the mortgaged properties
would have been conducted at the time of the origination of the related mortgage
loans and not thereafter. If specified in the related prospectus supplement, a
Warrantying Party will represent and warrant that, as of the date of initial
issuance of the certificates of a series or as of another specified date, no
related mortgaged property is affected by a Disqualifying Condition. In the
event that, following a default in payment on a mortgage loan that continues for
60 days,
o the environmental inquiry conducted by the master servicer or
special servicer, as the case may be, prior to any foreclosure
indicates the presence of a Disqualifying Condition that arose
prior to the date of initial issuance of the certificates of a
series and
o the master servicer or the special servicer certify that it
has acted in compliance with the Servicing Standard and has
not, by any action, created, caused or contributed to a
Disqualifying Condition the Warrantying Party, at its option,
will reimburse the trust fund, cure the Disqualifying
Condition or repurchase or substitute the affected Whole Loan,
as described under "Description of the
Agreements--Representations and Warranties; Repurchases."
No such person will however, be responsible for any Disqualifying Condition
which may arise on a mortgaged property after the date of initial issuance of
the certificates of the related series, whether due to actions of the Borrower,
the master servicer, the special servicer or any other person. It may not always
be possible to determine whether a Disqualifying Condition arose prior or
subsequent to the date of the initial issuance of the certificates of a series.
"Hazardous Materials" are generally defined under several federal
and state statutes, and include dangerous toxic or hazardous pollutants,
chemicals, wastes or substances, including, without limitation, those so
identified pursuant to CERCLA and RCRA, and specifically including, asbestos and
asbestos containing materials, polychlorinated biphenyls, radon gas, petroleum
and petroleum products, urea formaldehyde and any substances classified as being
"in inventory," "usable work in process" or similar classification which would,
if classified as unusable, be included in the foregoing definition.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Some of the mortgage loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender may
accelerate the maturity of the loan if the borrower sells or otherwise transfers
or encumbers the related mortgaged property. Some of these clauses may provide
that, upon an attempted sale, transfer or encumbrance of the related
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mortgaged property by the borrower of an otherwise non-recourse loan, the
borrower becomes personally liable for the mortgage debt. The enforceability of
due-on-sale clauses has been the subject of legislation or litigation in many
states and, in some cases, the enforceability of these clauses was limited or
denied. However, with respect to some of the loans, the Garn-St Germain
Depository Institutions Act of 1982 preempts state constitutional, statutory and
case law that prohibits the enforcement of due-on-sale clauses and permits
lenders to enforce these clauses in accordance with their terms subject to
limited exceptions. Unless otherwise provided in the related prospectus
supplement, a master servicer, on behalf of the trust fund, will determine
whether to exercise any right the trustee may have as lender to accelerate
payment of any mortgage loan or to withhold its consent to any transfer or
further encumbrance in a manner consistent with the Servicing Standard.
In addition, under federal bankruptcy laws, due-on-sale clauses may
not be enforceable in bankruptcy proceedings and may, under certain
circumstances, be eliminated in any modified mortgage resulting from a
bankruptcy proceeding.
SUBORDINATE FINANCING
Where a borrower encumbers mortgaged property with one or more
junior liens, the senior lender is subjected to additional risks including:
o the borrower may have difficulty servicing and repaying
multiple loans;
o if the junior loan permits recourse to the borrower--as junior
loans often do--and the senior loan does not, a borrower may
be more likely to repay sums due on the junior loan than those
on the senior loan.
o acts of the senior lender that prejudice the junior lender or
impair the junior lender's security may create a superior
equity in favor of the junior lender. For example, if the
borrower and the senior lender agree to an increase in the
principal amount of or the interest rate payable on the senior
loan, the senior lender may lose its priority to the extent
any existing junior lender is harmed or the borrower is
additionally burdened;
o if the borrower defaults on the senior loan or any junior loan
or loans, the existence of junior loans and actions taken by
junior lenders can impair the security available to the senior
lender and can interfere with or delay the taking of action by
the senior lender; and
o the bankruptcy of a junior lender may operate to stay
foreclosure or similar proceedings by the senior lender.
DEFAULT INTEREST, PREPAYMENT PREMIUMS AND PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the borrower to pay a late charge or additional interest if payments
are not timely made, and in some circumstances may provide for prepayment fees
or yield maintenance penalties if the obligation is paid prior to maturity or
prohibit prepayment for a specified period. In certain states, there are
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or may be specific limitations upon the late charges which a lender may collect
from a borrower for delinquent payments. Certain states also limit the amounts
that a lender may collect from a borrower as an additional charge if the loan is
prepaid. The enforceability, under the laws of a number of states of provisions
providing for prepayment fees or penalties upon, or prohibition of, an
involuntary prepayment is unclear, and no assurance can be given that, at the
time a prepayment premium is required to be made on a mortgage loan in
connection with an involuntary prepayment, the obligation to make the payment,
or the provisions of any such prohibition, will be enforceable under applicable
state law. The absence of a restraint on prepayment, particularly with respect
to mortgage loans having higher mortgage rates, may increase the likelihood of
refinancing or other early retirements of the mortgage loans.
ACCELERATION ON DEFAULT
Unless otherwise specified in the related prospectus supplement,
some of the mortgage loans included in the pool of mortgage loans for a series
will include a "debt-acceleration" clause, which permits the lender to
accelerate the full debt upon a monetary or nonmonetary default of the Borrower.
The courts of all states will enforce clauses providing for acceleration in the
event of a material payment default--as long as appropriate notices are given.
The equity courts of the state, however, may refuse to foreclose a mortgage or
deed of trust when an acceleration of the indebtedness would be inequitable or
unjust or the circumstances would render the acceleration unconscionable.
Furthermore, in some states, the borrower may avoid foreclosure and reinstate an
accelerated loan by paying only the defaulted amounts and the costs and
attorneys' fees incurred by the lender in collecting the defaulted payments.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, enacted in March 1980, provides that state usury
limitations shall not apply to certain types of residential, including
multifamily but not other commercial, first mortgage loans originated by certain
lenders after March 31, 1980. A similar federal statute was in effect with
respect to mortgage loans made during the first three months of 1980. The
statute authorized any state to reimpose interest rate limits by adopting,
before April 1, 1983, a law or constitutional provision that expressly rejects
application of the federal law. In addition, even where Title V is not so
rejected, any state is authorized by the law to adopt a provision limiting
discount points or other charges on mortgage loans covered by Title V. Certain
states have taken action to reimpose interest rate limits or to limit discount
points or other charges.
Morgan Stanley Dean Witter Capital I Inc. has been advised by
counsel that a court interpreting Title V would hold that residential first
mortgage loans that are originated on or after January 1, 1980 are subject to
federal preemption. Therefore, in a state that has not taken the requisite
action to reject application of Title V or to adopt a provision limiting
discount points or other charges prior to origination of mortgage loans, any
such limitation under the state's usury law would not apply to the mortgage
loans.
In any state in which application of Title V has been expressly
rejected or a provision limiting discount points or other charges is adopted, no
mortgage loan originated after the date of the state action will be eligible for
inclusion in a trust fund unless the mortgage loan provides:
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o for the interest rate, discount points and charges as are
permitted in that state, or
o that the terms of the loan shall be construed in accordance
with the laws of another state under which the interest rate,
discount points and charges would not be usurious, and the
borrower's counsel has rendered an opinion that the choice of
law provision would be given effect.
Statutes differ in their provisions as to the consequences of a
usurious loan. One group of statutes requires the lender to forfeit the interest
due above the applicable limit or impose a specified penalty. Under this
statutory scheme, the borrower may cancel the recorded mortgage or deed of trust
upon paying its debt with lawful interest, and the lender may foreclose, but
only for the debt plus lawful interest. A second group of statutes is more
severe. A violation of this type of usury law results in the invalidation of the
transaction, permitting the borrower to cancel the recorded mortgage or deed of
trust without any payment or prohibiting the lender from foreclosing.
LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTIES
The mortgaged properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply together
with an inability to remedy a failure could result in a material decrease in the
value of a mortgaged property which could, together with the possibility of
limited alternative uses for a particular mortgaged property--e.g., a nursing or
convalescent home or hospital--result in a failure to realize the full principal
amount of the related mortgage loan. Mortgages on mortgaged properties which are
owned by the borrower under a condominium form of ownership are subject to the
declaration, by-laws and other rules and regulations of the condominium
association. Mortgaged properties which are hotels or motels may present
additional risk. Hotels and motels are typically operated pursuant to franchise,
management and operating agreements which may be terminable by the operator. In
addition, the transferability of the hotel's operating, liquor and other
licenses to the entity acquiring the hotel either through purchases or
foreclosure is subject to the vagaries of local law requirements. Moreover,
mortgaged properties which are multifamily residential properties may be subject
to rent control laws, which could impact the future cash flows of these
properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and
rules promulgated thereunder, in order to protect individuals with disabilities,
public accommodations such as hotels, restaurants, shopping centers, hospitals,
schools and social service center establishments must remove architectural and
communication barriers which are structural in nature from existing places of
public accommodation to the extent "readily achievable." In addition, under the
ADA, alterations to a place of public accommodation or a commercial facility are
to be made so that, to the maximum extent feasible, the altered portions are
readily accessible to and usable by disabled individuals. The "readily
achievable" standard takes into account, among other factors, the financial
resources of the affected site, owner, landlord or other applicable person. In
addition to imposing a possible financial burden on the Borrower in its capacity
as owner or landlord, the ADA may also impose these types of requirements on a
foreclosing lender who succeeds to the interest of the Borrower as owner of
landlord. Furthermore, since the "readily achievable" standard may vary
depending on the financial condition of the owner or landlord, a
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foreclosing lender who is financially more capable than the Borrower of
complying with the requirements of the ADA may be subject to more stringent
requirements than those to which the Borrower is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended, a borrower who enters military service after the origination
of a mortgage loan, including a borrower who was in reserve status and is called
to active duty after origination of the mortgage loan, may not be charged
interest, including fees and charges, above an annual rate of 6% during the
period of the borrower's active duty status, unless a court orders otherwise
upon application of the lender. The Relief Act applies to borrowers who are
members of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast
Guard and officers of the U.S. Public Health Service assigned to duty with the
military. Because the Relief Act applies to borrowers who enter military
service, including reservists who are called to active duty, after origination
of the related mortgage loan, no information can be provided as to the number of
loans that may be affected by the Relief Act. Application of the Relief Act
would adversely affect, for an indeterminate period of time, the ability of any
servicer to collect full amounts of interest on certain of the mortgage loans.
Any shortfalls in interest collections resulting from the application of the
Relief Act would result in a reduction of the amounts distributable to the
holders of the related series of certificates, and would not be covered by
advances or, to the extent set forth in the related prospectus supplement, any
form of Credit Support provided in connection with the certificates. In
addition, the Relief Act imposes limitations that would impair the ability of
the servicer to foreclose on an affected mortgage loan during the borrower's
period of active duty status, and, under certain circumstances, during an
additional three month period thereafter. Thus, in the event that an affected
mortgage loan goes into default, there may be delays and losses occasioned as a
result of the Relief Act.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations statute can be seized by the government if the property
was used in, or purchased with the proceeds of, such crimes. Under procedures
contained in the Comprehensive Crime Control Act of 1984, the government may
seize the property even before conviction. The government must publish notice of
the forfeiture proceeding and may give notice to all parties "known to have an
alleged interest in the property," including the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that:
o its mortgage was executed and recorded before commission of
the crime upon which the forfeiture is based, or
o the lender was, at the time of execution of the mortgage,
"reasonably without cause to believe" that the property was
used in, or purchased with the proceeds of, illegal drug or
RICO activities.
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FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of offered certificates
is based on the advice of Brown & Wood LLP or Cadwalader, Wickersham & Taft or
Latham & Watkins or such other counsel as may be specified in the related
prospectus supplement, counsel to Morgan Stanley Dean Witter Capital I Inc..
This summary is based on laws, regulations, including REMIC Regulations, rulings
and decisions now in effect or, with respect to regulations, proposed, all of
which are subject to change either prospectively or retroactively. This summary
does not address the federal income tax consequences of an investment in
certificates applicable to all categories of investors, some of which -- for
example, banks and insurance companies -- may be subject to special rules.
Prospective investors should consult their tax advisors regarding the federal,
state, local and any other tax consequences to them of the purchase, ownership
and disposition of certificates.
GENERAL
The federal income tax consequences to certificateholders will vary
depending on whether an election is made to treat the trust fund relating to a
particular series of certificates as a REMIC under the Code. The prospectus
supplement for each series of certificates will specify whether one or more
REMIC elections will be made.
GRANTOR TRUST FUNDS
If a REMIC election is not made, Brown & Wood LLP or Cadwalader,
Wickersham & Taft or Latham & Watkins or such other counsel as may be specified
in the related prospectus supplement will deliver its opinion that the trust
fund will not be classified as an association taxable as a corporation and that
the trust fund will be classified as a grantor trust under subpart E, Part I of
subchapter J of Chapter 1 of Subtitle A of the Code. In this case, owners of
certificates will be treated for federal income tax purposes as owners of a
portion of the trust fund's assets as described in this section of the
prospectus.
a. SINGLE CLASS OF GRANTOR TRUST CERTIFICATES
Characterization. The trust fund may be created with one class of
grantor trust certificates. In this case, each grantor trust certificateholder
will be treated as the owner of a pro rata undivided interest in the interest
and principal portions of the trust fund represented by the grantor trust
certificates and will be considered the equitable owner of a pro rata undivided
interest in each of the mortgage loans and MBS in the pool. Any amounts received
by a grantor trust certificateholder in lieu of amounts due with respect to any
mortgage loan or MBS because of a default or delinquency in payment will be
treated for federal income tax purposes as having the same character as the
payments they replace.
Each grantor trust certificateholder will be required to report on
its federal income tax return in accordance with the grantor trust
certificateholder's method of accounting its pro rata share of the entire income
from the mortgage loans in the trust fund represented by grantor trust
certificates, including interest, OID, if any, prepayment fees, assumption fees,
any gain recognized upon an assumption and late payment charges received by the
master servicer. Under
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Code Sections 162 or 212 each grantor trust certificateholder will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and late payment charges retained
by the master servicer, provided that the amounts are reasonable compensation
for services rendered to the trust fund. Grantor trust certificateholders that
are individuals, estates or trusts will be entitled to deduct their share of
expenses as itemized deductions only to the extent these expenses plus all other
Code Section 212 expenses exceed two percent of its adjusted gross income. In
addition, the amount of itemized deductions otherwise allowable for the taxable
year for an individual whose adjusted gross income exceeds the applicable amount
under Code Section 68(b)--which amount will be adjusted for inflation--will be
reduced by the lesser of
o 3% of the excess of adjusted gross income over the applicable
amount and
o 80% of the amount of itemized deductions otherwise allowable
for such taxable year.
In general, a grantor trust certificateholder using the CASH METHOD
OF ACCOUNTING must take into account its pro rata share of income as and
deductions as and when collected by or paid to the master servicer or, with
respect to original issue discount or certain other income items for which the
certificateholder has made an election, as the amounts are accrued by the trust
fund on a constant interest basis, and will be entitled to claim its pro rata
share of deductions, subject to the foregoing limitations, when the amounts are
paid or the certificateholder would otherwise be entitled to claim the
deductions had it held the mortgage loans or MBS directly. A grantor trust
certificateholder using an ACCRUAL METHOD OF ACCOUNTING must take into account
its pro rata share of income as payment becomes due or is made to the master
servicer, whichever is earlier and may deduct its pro rata share of expense
items, subject to the foregoing limitations, when the amounts are paid or the
certificateholder otherwise would be entitled to claim the deductions had it
held the mortgage loans or MBS directly. If the servicing fees paid to the
master servicer are deemed to exceed reasonable servicing compensation, the
amount of the excess could be considered as an ownership interest retained by
the master servicer or any person to whom the master servicer assigned for value
all or a portion of the servicing fees in a portion of the interest payments on
the mortgage loans and MBS. The mortgage loans and MBS would then be subject to
the "coupon stripping" rules of the Code discussed below under "--Stripped Bonds
and Coupons."
Unless otherwise specified in the related prospectus supplement or
otherwise provided below in this section of the prospectus, as to each series of
certificates, counsel to Morgan Stanley Dean Witter Capital I Inc. will have
advised Morgan Stanley Dean Witter Capital I Inc. that:
o a grantor trust certificate owned by a "domestic building and
loan association" within the meaning of Code Section
7701(a)(19) representing principal and interest payments on
mortgage loans or MBS will be considered to represent "loans
. . . secured by an interest in real property which is . . .
residential property" within the meaning of Code Section
7701(a)(19)(C)(v), to the extent that the mortgage loans or
MBS represented by that grantor trust certificate are of a
type described in that Code section;
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o a grantor trust certificate owned by a real estate investment
trust representing an interest in mortgage loans or MBS will
be considered to represent "real estate assets" within the
meaning of Code Section 856(c)(4)(A), and interest income on
the mortgage loans or MBS will be considered "interest on
obligations secured by mortgages on real property" within the
meaning of Code Section 856(c)(3)(B), to the extent that the
mortgage loans or MBS represented by that grantor trust
certificate are of a type described in that Code section; and
o a grantor trust certificate owned by a REMIC will represent
"obligation[s] . . . which [are] principally secured by an
interest in real property" within the meaning of Code Section
860G(a)(3).
The Small Business Job Protection Act of 1996, as part of the repeal
of the bad debt reserve method for thrift institutions, repealed the application
of Code Section 593(d) to any taxable year beginning after December 31, 1995.
Stripped Bonds and Coupons. Certain trust funds may consist of
government securities that constitute "stripped bonds" or "stripped coupons" as
those terms are defined in section 1286 of the Code, and, as a result, these
assets would be subject to the stripped bond provisions of the Code. Under these
rules, these government securities are treated as having original issue discount
based on the purchase price and the stated redemption price at maturity of each
Security. As such, grantor trust certificateholders would be required to include
in income their pro rata share of the original issue discount on each Government
Security recognized in any given year on an economic accrual basis even if the
grantor trust certificateholder is a cash method taxpayer. Accordingly, the sum
of the income includible to the grantor trust certificateholder in any taxable
year may exceed amounts actually received during such year.
Premium. The price paid for a grantor trust certificate by a holder
will be allocated to the holder's undivided interest in each mortgage loan or
MBS based on each asset's relative fair market value, so that the holder's
undivided interest in each asset will have its own tax basis. A grantor trust
certificateholder that acquires an interest in mortgage loans or MBS at a
premium may elect to amortize the premium under a constant interest method,
provided that the underlying mortgage loans with respect to the mortgage loans
or MBS were originated after September 27, 1985. Premium allocable to mortgage
loans originated on or before September 27, 1985 should be allocated among the
principal payments on such mortgage loans and allowed as an ordinary deduction
as principal payments are made. Amortizable bond premium will be treated as an
offset to interest income on such grantor trust certificate. The basis for such
grantor trust certificate will be reduced to the extent that amortizable premium
is applied to offset interest payments. It is not clear whether a reasonable
prepayment assumption should be used in computing amortization of premium
allowable under Code Section 171. A certificateholder that makes this election
for a mortgage loan or MBS or any other debt instrument that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
certificateholder acquires during the year of the election or thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a grantor trust certificate representing an
interest in a mortgage loan or MBS acquired at a premium should recognize a loss
if a mortgage loan or an Underlying Mortgage
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Loan with respect to an asset prepays in full, equal to the difference between
the portion of the prepaid principal amount of such mortgage loan or underlying
mortgage loan that is allocable to the certificate and the portion of the
adjusted basis of the certificate that is allocable to such mortgage loan or
underlying mortgage loan. If a reasonable prepayment assumption is used to
amortize the premium, it appears that such a loss would be available, if at all,
only if prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be required
to reflect differences between an assumed prepayment rate and the actual rate of
prepayments.
The Internal Revenue Service has issued Amortizable Bond Premium
Regulations. The Amortizable Bond Premium Regulations specifically do not apply
to prepayable debt instruments or any pool of debt instruments the yield on
which may be affected by prepayments, such as the trust fund, which are subject
to Section 1272(a)(6) of the Code. Absent further guidance from the IRS and to
the extent set forth in the related prospectus supplement, the trustee will
account for amortizable bond premium in the manner described in this section.
Prospective purchasers should consult their tax advisors regarding amortizable
bond premium and the Amortizable Bond Premium Regulations.
Original Issue Discount. The IRS has stated in published rulings
that, in circumstances similar to those described in this prospectus, the OID
Regulations will be applicable to a grantor trust certificateholder's interest
in those mortgage loans or MBS meeting the conditions necessary for these
sections to apply. Rules regarding periodic inclusion of OID income are
applicable to mortgages of corporations originated after May 27, 1969, mortgages
of noncorporate borrowers other than individuals originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Such OID could
arise by the financing of points or other charges by the originator of the
mortgages in an amount greater than a statutory de minimis exception to the
extent that the points are not currently deductible under applicable Code
provisions or are not for services provided by the lender. OID generally must be
reported as ordinary gross income as it accrues under a constant interest
method. See "--Multiple Classes of Grantor Trust Certificates--Accrual of
Original Issue Discount" below.
Market Discount. A grantor trust certificateholder that acquires an
undivided interest in mortgage loans or MBS may be subject to the market
discount rules of Code Sections 1276 through 1278 to the extent an undivided
interest in the asset is considered to have been purchased at a "market
discount." Generally, the amount of market discount is equal to the excess of
the portion of the principal amount of the mortgage loan or MBS allocable to the
holder's undivided interest over the holder's tax basis in such interest. Market
discount with respect to a grantor trust certificate will be considered to be
zero if the amount allocable to the grantor trust certificate is less than 0.25%
of the grantor trust certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment, whether a scheduled
payment or a prepayment, or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986 shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at the
time of such payment. The amount of accrued market discount
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for purposes of determining the tax treatment of subsequent principal payments
or dispositions of the market discount bond is to be reduced by the amount so
treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
grantor trust certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of
o the total remaining market discount and
o a fraction, the numerator of which is the OID accruing during
the period and the denominator of which is the total remaining
OID at the beginning of the accrual period.
For grantor trust certificates issued without OID, the amount of market discount
that accrues during a period is equal to the product of
o the total remaining market discount and
o a fraction, the numerator of which is the amount of stated
interest paid during the accrual period and the denominator of
which is the total amount of stated interest remaining to be
paid at the beginning of the accrual period.
For purposes of calculating market discount under any of the above methods in
the case of instruments, such as the grantor trust certificates, that provide
for payments that may be accelerated by reason of prepayments of other
obligations securing such instruments, the same prepayment assumption applicable
to calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a grantor trust certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a grantor trust certificate at a market
discount also may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry the grantor trust certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which the market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Election to Treat All Interest as OID. The OID Regulations permit a
certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method for certificates acquired on or after April 4,
1994. If this election were to be made with respect to a grantor trust
certificate
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with market discount, the certificateholder would be deemed to have made an
election to include in income currently market discount with respect to all
other debt instruments having market discount that such certificateholder
acquires during the year of the election or thereafter. Similarly, a
certificateholder that makes this election for a certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
certificateholder owns or acquires. See "--Premium" in this prospectus. The
election to accrue interest, discount and premium on a constant yield method
with respect to a certificate is irrevocable without consent of the IRS.
Anti-Abuse Rule. The IRS can apply or depart from the rules
contained in the OID Regulations as necessary or appropriate to achieve a
reasonable result where a principal purpose in structuring a mortgage loan, MBS,
or grantor trust certificate or applying the otherwise applicable rules is to
achieve a result that is unreasonable in light of the purposes of the applicable
statutes, which generally are intended to achieve the clear reflection of income
for both issuers and holders of debt instruments.
b. MULTIPLE CLASSES OF GRANTOR TRUST CERTIFICATES
1. Stripped Bonds and Stripped Coupons
Pursuant to Code Section 1286, the separation of ownership of the
right to receive some or all of the interest payments on an obligation from
ownership of the right to receive some or all of the principal payments results
in the creation of "stripped bonds" with respect to principal payments and
"stripped coupons" with respect to interest payments. For purposes of Code
Sections 1271 through 1288, Code Section 1286 treats a stripped bond or a
stripped coupon as an obligation issued on the date that such stripped interest
is created.
Excess Servicing will be Treated Under the Stripped Bond Rules. If
the Excess Servicing fee is less than 100 basis points, i.e., 1% interest on the
principal balance of the assets in the trust fund, or the certificates are
initially sold with a de minimis discount, assuming no prepayment assumption is
required, any non-de minimis discount arising from a subsequent transfer of the
certificates should be treated as market discount. The IRS appears to require
that reasonable servicing fees be calculated on an asset by asset basis, which
could result in some mortgage loans or MBS being treated as having more than 100
basis points of interest stripped off. See "--Non-REMIC Certificates" and
"Multiple Classes of Grantor Trust Certificates--Stripped Bonds and Stripped
Coupons".
Although not entirely clear, a Stripped Bond Certificate generally
should be treated as an interest in mortgage loans or MBS issued on the day the
certificate is purchased for purposes of calculating any OID. Generally, if the
discount on a mortgage loan or MBS is larger than a de minimis amount, as
calculated for purposes of the OID rules, a purchaser of such a certificate will
be required to accrue the discount under the OID rules of the Code. See
"--Non-REMIC Certificates" and "--Single Class of Grantor Trust
Certificates--Original Issue Discount". However, a purchaser of a Stripped Bond
Certificate will be required to account for any discount on the mortgage loans
or MBS as market discount rather than OID if either
o the amount of OID with respect to the mortgage loans or MBS is
treated as zero under the OID de minimis rule when the
certificate was stripped or
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o no more than 100 basis points, including any Excess Servicing,
is stripped off of the trust fund's mortgage loans or MBS.
Pursuant to Revenue Procedure 91-49, issued on August 8, 1991, purchasers of
Stripped Bond Certificates using an inconsistent method of accounting must
change their method of accounting and request the consent of the IRS to the
change in their accounting method on a statement attached to their first timely
tax return filed after August 8, 1991.
The precise tax treatment of Stripped Coupon Certificates is
substantially uncertain. The Code could be read literally to require that OID
computations be made for each payment from each mortgage loan or MBS. Unless
otherwise specified in the related prospectus supplement, all payments from a
mortgage loan or MBS underlying a Stripped Coupon Certificate will be treated as
a single installment obligation subject to the OID rules of the Code, in which
case, all payments from the mortgage loan or MBS would be included in the stated
redemption price at maturity for the mortgage loan or MBS for purposes of
calculating income on the certificate under the OID rules of the Code.
It is unclear under what circumstances, if any, the prepayment of
mortgage loans or MBS will give rise to a loss to the holder of a Stripped Bond
Certificate purchased at a premium or a Stripped Coupon Certificate. If the
certificate is treated as a single instrument rather than an interest in
discrete mortgage loans and the effect of prepayments is taken into account in
computing yield with respect to the grantor trust certificate, it appears that
no loss will be available as a result of any particular prepayment unless
prepayments occur at a rate sufficiently faster than the assumed prepayment rate
so that the certificateholder will not recover its investment. However, if the
certificate is treated as an interest in discrete mortgage loans or MBS, or if
no prepayment assumption is used, then when a mortgage loan or MBS is prepaid,
the holder of the certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of the certificate that is allocable to the
mortgage loan or MBS.
Holders of Stripped Bond Certificates and Stripped Coupon
Certificates are urged to consult with their own tax advisors regarding the
proper treatment of these certificates for federal income tax purposes.
Treatment of Certain Owners. Several Code sections provide
beneficial treatment to certain taxpayers that invest in mortgage loans or MBS
of the type that make up the trust fund. With respect to these Code sections, no
specific legal authority exists regarding whether the character of the grantor
trust certificates, for federal income tax purposes, will be the same as that of
the underlying mortgage loans or MBS. While Code Section 1286 treats a stripped
obligation as a separate obligation for purposes of the Code provisions
addressing OID, it is not clear whether such characterization would apply with
regard to these other Code sections. Although the issue is not free from doubt,
each class of grantor trust certificates, to the extent set forth in the related
prospectus supplement, should be considered to represent "real estate assets"
within the meaning of Code Section 856(c)(4)(A) and "loans . . . secured by, an
interest in real property which is . . . residential real property" within the
meaning of Code Section 7701(a)(19)(C)(v), and interest income attributable to
grantor trust certificates should be considered to represent "interest on
obligations secured by mortgages on real property" within the meaning of Code
Section 856(c)(3)(B), provided that in each case the underlying mortgage loans
or MBS and interest on such mortgage loans or MBS qualify for such treatment.
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Prospective purchasers to which such characterization of an investment in
certificates is material should consult their own tax advisors regarding the
characterization of the grantor trust certificates and the income therefrom.
Unless otherwise specified in the related prospectus supplement, grantor trust
certificates will be "obligation[s] . . . which [are] principally secured by an
interest in real property" within the meaning of Code Section 860G(a)(3)(A) and
"permitted assets" within the meaning of Code Section 860L(c).
2. Grantor Trust Certificates Representing Interests in Loans
Other Than Adjustable Rate Loans
The original issue discount rules of Code Sections 1271 through 1275
will be applicable to a certificateholder's interest in those mortgage loans or
MBS as to which the conditions for the application of those sections are met.
Rules regarding periodic inclusion of original issue discount in income are
applicable to mortgages of corporations originated after May 27, 1969, mortgages
of noncorporate borrowers -- other than individuals -- originated after July 1,
1982, and mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, such original issue discount could arise by the charging of points
by the originator of the mortgage in an amount greater than the statutory de
minimis exception, including a payment of points that is currently deductible by
the borrower under applicable Code provisions, or under certain circumstances,
by the presence of "teaser" rates on the mortgage loans or MBS. OID on each
grantor trust certificate must be included in the owner's ordinary income for
federal income tax purposes as it accrues, in accordance with a constant
interest method that takes into account the compounding of interest, in advance
of receipt of the cash attributable to such income. The amount of OID required
to be included in an owner's income in any taxable year with respect to a
grantor trust certificate representing an interest in mortgage loans or MBS
other than adjustable rate loans likely will be computed as described below
under "--Accrual of Original Issue Discount." The following discussion is based
in part on the OID Regulations and in part on the provisions of the Tax Reform
Act of 1986. The OID Regulations generally are effective for debt instruments
issued on or after April 4, 1994, but may be relied upon as authority with
respect to debt instruments, such as the grantor trust certificates, issued
after December 21, 1992. Alternatively, proposed Treasury regulations issued
December 21, 1992 may be treated as authority for debt instruments issued after
December 21, 1992 and prior to April 4, 1994, and proposed Treasury regulations
issued in 1986 and 1991 may be treated as authority for instruments issued
before December 21, 1992. In applying these dates, the issue date of the
mortgage loans or MBS should be used, or, in the case of Stripped Bond
Certificates or Stripped Coupon Certificates, the date such certificates are
first acquired. The holder of a certificate should be aware, however, that
neither the proposed OID Regulations nor the OID Regulations adequately address
certain issues relevant to prepayable securities.
Under the Code, the mortgage loans or MBS underlying the grantor
trust certificate will be treated as having been issued on the date they were
originated with an amount of OID equal to the excess of such mortgage asset's
stated redemption price at maturity over its issue price. The issue price of a
mortgage loan or MBS is generally the amount lent to the borrower, which may be
adjusted to take into account certain loan origination fees. The stated
redemption price at maturity of a mortgage loan or MBS is the sum of all
payments to be made on these assets other than payments that are treated as
qualified stated interest payments. The accrual of this OID, as described below
under "--Accrual of Original Issue Discount," will, to the extent set forth in
the
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related prospectus supplement, utilize the Prepayment Assumption on the issue
date of such grantor trust certificate, and will take into account events that
occur during the calculation period. The Prepayment Assumption will be
determined in the manner prescribed by regulations that have not yet been
issued. In the absence of such regulations, the Prepayment Assumption used will
be the prepayment assumption that is used in determining the offering price of
such certificate. No representation is made that any certificate will prepay at
the Prepayment Assumption or at any other rate.
Accrual of Original Issue Discount. Generally, the owner of a
grantor trust certificate must include in gross income the sum of the "daily
portions," as defined below in this section, of the OID on the grantor trust
certificate for each day on which it owns the certificate, including the date of
purchase but excluding the date of disposition. In the case of an original
owner, the daily portions of OID with respect to each component generally will
be determined as set forth under the OID Regulations. A calculation will be made
by the master servicer or other entity specified in the related prospectus
supplement of the portion of OID that accrues during each successive monthly
accrual period, or shorter period from the date of original issue, that ends on
the day in the calendar year corresponding to each of the Distribution Dates on
the grantor trust certificates, or the day prior to each such date. This will be
done, in the case of each full month accrual period, by
o adding (1) the present value at the end of the accrual
period--determined by using as a discount factor the original
yield to maturity of the respective component under the
Prepayment Assumption--of all remaining payments to be
received under the Prepayment Assumption on the respective
component and (2) any payments included in the stated
redemption price at maturity received during such accrual
period, and
o subtracting from that total the "adjusted issue price" of the
respective component at the beginning of such accrual period.
The adjusted issue price of a grantor trust certificate at the beginning of the
first accrual period is its issue price; the adjusted issue price of a grantor
trust certificate at the beginning of a subsequent accrual period is the
adjusted issue price at the beginning of the immediately preceding accrual
period plus the amount of OID allocable to that accrual period reduced by the
amount of any payment other than a payment of qualified stated interest made at
the end of or during that accrual period. The OID accruing during such accrual
period will then be divided by the number of days in the period to determine the
daily portion of OID for each day in the period. With respect to an initial
accrual period shorter than a full monthly accrual period, the daily portions of
OID must be determined according to an appropriate allocation under any
reasonable method.
Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest as it accrues rather than when received. However,
the amount of original issue discount includible in the income of a holder of an
obligation is reduced when the obligation is acquired after its initial issuance
at a price greater than the sum of the original issue price and the previously
accrued original issue discount, less prior payments of principal. Accordingly,
if the mortgage loans or MBS acquired by a certificateholder are purchased at a
price equal to the then unpaid principal
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amount of the asset, no original issue discount attributable to the difference
between the issue price and the original principal amount of the asset--i.e.,
points--will be includible by the holder. Other original issue discount on the
mortgage loans or MBS--e.g., that arising from a "teaser" rate--would still need
to be accrued.
3. Grantor Trust Certificates Representing Interests in
Adjustable Rate Loans
The OID Regulations do not address the treatment of instruments,
such as the grantor trust certificates, which represent interests in adjustable
rate loans. Additionally, the IRS has not issued guidance under the Code's
coupon stripping rules with respect to such instruments. In the absence of any
authority, the master servicer will report Stripped ARM Obligations to holders
in a manner it believes is consistent with the rules described above under the
heading "--Grantor Trust Certificates Representing Interests in Loans Other Than
Adjustable Rate Loans" and with the OID Regulations. In general, application of
these rules may require inclusion of income on a Stripped ARM Obligation in
advance of the receipt of cash attributable to such income. Further, the
addition of Deferred Interest to the principal balance of an adjustable rate
loan may require the inclusion of the amount in the income of the grantor trust
certificateholder when the amount accrues. Furthermore, the addition of Deferred
Interest to the grantor trust certificate's principal balance will result in
additional income, including possibly OID income, to the grantor trust
certificateholder over the remaining life of such grantor trust certificates.
Because the treatment of Stripped ARM Obligations is uncertain,
investors are urged to consult their tax advisors regarding how income will be
includible with respect to such certificates.
c. SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE
Sale or exchange of a grantor trust certificate prior to its
maturity will result in gain or loss equal to the difference, if any, between
the amount received and the owner's adjusted basis in the grantor trust
certificate. Such adjusted basis generally will equal the seller's purchase
price for the grantor trust certificate, increased by the OID included in the
seller's gross income with respect to the grantor trust certificate, and reduced
by principal payments on the grantor trust certificate previously received by
the seller. Such gain or loss will be capital gain or loss to an owner for which
a grantor trust certificate is a "capital asset" within the meaning of Code
Section 1221, except to the extent described above with respect to market
discount, and will generally be long-term capital gain if the grantor trust
certificate has been owned for more than one year. Long-term capital gains of
individuals are subject to reduced maximum tax rates while capital gains
recognized by individuals on capital assets held twelve months or less are
generally subject to ordinary income tax rates. The use of capital losses is
limited.
It is possible that capital gain realized by holders of one or more
classes of grantor trust certificates could be considered gain realized upon the
disposition of property that was part of a "conversion transaction." A sale of a
grantor trust certificate will be part of a conversion transaction if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and:
o the holder entered the contract to sell the grantor trust
certificate substantially contemporaneously with acquiring the
grantor trust certificate;
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o the grantor trust certificate is part of a straddle;
o the grantor trust certificate is marketed or sold as producing
capital gain; or
o other transactions to be specified in Treasury regulations
that have not yet been issued.
If the sale or other disposition of a grantor trust certificate is part of a
conversion transaction, all or any portion of the gain realized upon the sale or
other disposition would be treated as ordinary income instead of capital gain.
Grantor trust certificates will be "evidences of indebtedness"
within the meaning of Code Section 582(c)(1), so that gain or loss recognized
from the sale of a grantor trust certificate by a bank or a thrift institution
to which such section applies will be treated as ordinary income or loss.
d. NON-U.S. PERSONS
Generally, to the extent that a grantor trust certificate evidences
ownership in underlying mortgage loans or MBS that were issued on or before July
18, 1984, interest or OID paid by the person required to withhold tax under Code
Section 1441 or 1442 to
o an owner that is not a U.S. Person or
o a grantor trust certificateholder holding on behalf of an
owner that is not a U.S. Person
will be subject to federal income tax, collected by withholding, at a rate of
30% or such lower rate as may be provided for interest by an applicable tax
treaty, unless such income is effectively connected with a U.S. trade or
business of such owner or beneficial owner.
Accrued OID recognized by the owner on the sale or exchange of such a grantor
trust certificate also will be subject to federal income tax at the same rate.
Generally, such payments would not be subject to withholding to the extent that
a grantor trust certificate evidences ownership in mortgage loans or MBS issued
after July 18, 1984, by natural persons if such grantor trust certificateholder
complies with certain identification requirements, including delivery of a
statement, signed by the grantor trust certificateholder under penalties of
perjury, certifying that the grantor trust certificateholder is not a U.S.
Person and providing the name and address of the grantor trust
certificateholder. To the extent payments to grantor trust certificateholders
that are not U.S. Persons are payments of "contingent interest" on the
underlying mortgage loans or MBS, or the grantor trust certificateholder is
ineligible for the exemption described in the preceding sentence, the 30%
withholding tax will apply unless such withholding taxes are reduced or
eliminated by an applicable tax treaty and such holder meets the eligibility and
certification requirements necessary to obtain the benefits of such treaty.
Additional restrictions apply to mortgage loans or MBS where the borrower is not
a natural person in order to qualify for the exemption from withholding. If
capital gain derived from the sale, retirement or other disposition of a grantor
trust certificate is effectively connected with a U.S. trade or business of a
grantor trust certificateholder that is not a U.S. Person, the certificateholder
will be taxed on the net gain under the graduated U.S. federal income tax rates
applicable to U.S. Persons and, with
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respect to grantor trust certificates held by or on behalf of corporations, also
may be subject to branch profits tax. In addition, if the trust fund acquires a
United States real property interest through foreclosure, deed in lieu of
foreclosure or otherwise on a mortgage loan or MBS secured by such an interest,
which for this purpose includes real property located in the United States and
the Virgin Islands, a grantor trust certificateholder that is not a U.S. Person
will potentially be subject to federal income tax on any gain attributable to
such real property interest that is allocable to such holder. Non-U.S. Persons
should consult their tax advisors regarding the application to them of the
foregoing rules.
e. INFORMATION REPORTING AND BACKUP WITHHOLDING
The master servicer will furnish or make available, within a
reasonable time after the end of each calendar year, to each person who was a
certificateholder at any time during such year, the information as may be deemed
necessary or desirable to assist certificateholders in preparing their federal
income tax returns, or to enable holders to make the information available to
beneficial owners or financial intermediaries that hold such certificates as
nominees on behalf of beneficial owners. If a holder, beneficial owner,
financial intermediary or other recipient of a payment on behalf of a beneficial
owner fails to supply a certified taxpayer identification number or if the
Secretary of the Treasury determines that such person has not reported all
interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be required with respect to any payments to
registered owners who are not "exempt recipients." In addition, upon the sale of
a grantor trust certificate to, or through, a broker, the broker must withhold
31% of the entire purchase price, unless either
o the broker determines that the seller is a corporation or
other exempt recipient, or
o the seller provides, in the required manner, certain
identifying information and, in the case of a non-U.S. Person,
certifies that the seller is a Non-U.S. Person, and other
conditions are met.
Such a sale must also be reported by the broker to the IRS, unless either
o the broker determines that the seller is an exempt recipient
or
o the seller certifies its non-U.S. Person status and other
conditions are met.
Certification of the registered owner's non-U.S. Person status normally would be
made on IRS Form W-8 under penalties of perjury, although in some cases it may
be possible to submit other documentary evidence. Any amounts deducted and
withheld from a distribution to a recipient would be allowed as a credit against
the recipient's federal income tax liability.
On October 6, 1997, the Treasury Department issued new regulations
which make certain modifications to the withholding, backup withholding and
information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
2000, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
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REMICs
The trust fund relating to a series of certificates may elect to be
treated as a REMIC. Qualification as a REMIC requires ongoing compliance with
certain conditions. Although a REMIC is not generally subject to federal income
tax (see, however "--Taxation of Owners of REMIC Residual Certificates" and
"--Prohibited Transactions and Other Taxes" below), if a trust fund with respect
to which a REMIC election is made fails to comply with one or more of the
ongoing requirements of the Code for REMIC status during any taxable year,
including the implementation of restrictions on the purchase and transfer of the
residual interests in a REMIC as described below under "--Taxation of Owners of
REMIC Residual Certificates," the Code provides that a trust fund will not be
treated as a REMIC for the year and thereafter. In that event, the entity may be
taxable as a separate corporation, and the REMIC Certificates may not be
accorded the status or given the tax treatment described below in this section.
While the Code authorizes the Treasury Department to issue regulations providing
relief in the event of an inadvertent termination of the status of a trust fund
as a REMIC, no the regulations have been issued. Any relief, moreover, may be
accompanied by sanctions, such as the imposition of a corporate tax on all or a
portion of the REMIC's income for the period in which the requirements for such
status are not satisfied. With respect to each trust fund that elects REMIC
status, Brown & Wood LLP or Cadwalader, Wickersham & Taft or Latham & Watkins or
such other counsel as may be specified in the related prospectus supplement will
deliver its opinion generally to the effect that, under then existing law and
assuming compliance with all provisions of the related Agreement, the trust fund
will qualify as a REMIC, and the related certificates will be considered to be
REMIC Regular Certificates or a sole class of REMIC Residual Certificates. The
related prospectus supplement for each series of Certificates will indicate
whether the trust fund will make a REMIC election and whether a class of
certificates will be treated as a regular or residual interest in the REMIC.
A "qualified mortgage" for REMIC purposes includes any obligation,
including certificates of participation in such an obligation and any "regular
interest" in another REMIC, that is principally secured by an interest in real
property and that is transferred to the REMIC within a prescribed time period in
exchange for regular or residual interests in the REMIC.
In general, with respect to each series of certificates for which a
REMIC election is made,
o certificates held by a thrift institution taxed as a "domestic
building and loan association" will constitute assets
described in Code Section 7701(a)(19)(C);
o certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Code
Section 856(c)(4)(A); and
o interest on certificates held by a real estate investment
trust will be considered "interest on obligations secured by
mortgages on real property" within the meaning of Code Section
856(c)(3)(B).
If less than 95% of the REMIC's assets are assets qualifying under any of the
foregoing Code sections, the certificates will be qualifying assets only to the
extent that the REMIC's assets are qualifying assets.
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Tiered REMIC Structures. For certain series of certificates, two or
more separate elections may be made to treat designated portions of the related
trust fund as REMICs for federal income tax purposes. Upon the issuance of any
such series of certificates, Brown & Wood LLP or Cadwalader, Wickersham & Taft
or Latham & Watkins or such other counsel as may be specified in the related
prospectus supplement, counsel to Morgan Stanley Dean Witter Capital I Inc.,
will deliver its opinion generally to the effect that, assuming compliance with
all provisions of the related Agreement, the Master REMIC as well as any
Subsidiary REMIC will each qualify as a REMIC, and the REMIC Certificates issued
by the Master REMIC and the Subsidiary REMIC or REMICs, respectively, will be
considered REMIC Regular Certificates or REMIC Residual Certificates in the
related REMIC within the meaning of the REMIC Provisions.
Other than the residual interest in a Subsidiary REMIC, only REMIC
Certificates issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC or REMICs and the Master REMIC will be treated as one REMIC
solely for purposes of determining whether the REMIC Certificates will be:
o "real estate assets" within the meaning of Section
856(c)(4)(A) of the Code;
o "loans secured by an interest in real property" under Section
7701(a)(19)(C) of the Code; and
o whether the income on the certificates is interest described
in Section 856(c)(3)(B) of the Code.
a. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC
Regular Certificates will be treated for federal income tax purposes as debt
instruments issued by the REMIC and not as ownership interests in the REMIC or
its assets. Moreover, holders of REMIC Regular Certificates that otherwise
report income under a cash method of accounting will be required to report
income with respect to REMIC Regular Certificates under an accrual method.
Original Issue Discount and Premium. The REMIC Regular Certificates
may be issued with OID. Generally, the OID, if any, will equal the difference
between the "stated redemption price at maturity" of a REMIC Regular Certificate
and its "issue price." Holders of any class of certificates issued with OID will
be required to include the OID in gross income for federal income tax purposes
as it accrues, in accordance with a constant interest method based on the
compounding of interest as it accrues rather than in accordance with receipt of
the interest payments. The following discussion is based in part on the OID
Regulations and in part on the provisions of the Tax Reform Act of 1986. Holders
of REMIC Regular Certificates should be aware, however, that the OID Regulations
do not adequately address certain issues relevant to prepayable securities, such
as the REMIC Regular Certificates.
Rules governing OID are set forth in Code Sections 1271 through 1273
and 1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated reinvestment
rate, if any, relating to the REMIC Regular Certificates and prescribe a method
for adjusting the amount and rate of accrual of the discount where the actual
prepayment rate differs from the Prepayment Assumption. Under the Code, the
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Prepayment Assumption must be determined in the manner prescribed by
regulations, which regulations have not yet been issued. The legislative history
provides, however, that Congress intended the regulations to require that the
Prepayment Assumption be the prepayment assumption that is used in determining
the initial offering price of such REMIC Regular Certificates. The prospectus
supplement for each series of REMIC Regular Certificates will specify the
Prepayment Assumption to be used for the purpose of determining the amount and
rate of accrual of OID. No representation is made that the REMIC Regular
Certificates will prepay at the Prepayment Assumption or at any other rate.
In general, each REMIC Regular Certificate will be treated as a
single installment obligation issued with an amount of OID equal to the excess
of its "stated redemption price at maturity" over its "issue price." The issue
price of a REMIC Regular Certificate is the first price at which a substantial
amount of REMIC Regular Certificates of that class are first sold to the public
(excluding bond houses, brokers, underwriters or wholesalers). If less than a
substantial amount of a particular class of REMIC Regular Certificates is sold
for cash on or prior to the Closing Date, the issue price for that class will be
treated as the fair market value of that class on the Closing Date. The issue
price of a REMIC Regular Certificate also includes the amount paid by an initial
certificateholder for accrued interest that relates to a period prior to the
issue date of the REMIC Regular Certificate. The stated redemption price at
maturity of a REMIC Regular Certificate includes the original principal amount
of the REMIC Regular Certificate, but generally will not include distributions
of interest if the distributions constitute "qualified stated interest."
Qualified stated interest generally means interest payable at a single fixed
rate or qualified variable rate provided that the interest payments are
unconditionally payable at intervals of one year or less during the entire term
of the REMIC Regular Certificate. Interest is payable at a single fixed rate
only if the rate appropriately takes into account the length of the interval
between payments. Distributions of interest on REMIC Regular Certificates with
respect to which Deferred Interest will accrue will not constitute qualified
stated interest payments, and the stated redemption price at maturity of the
REMIC Regular Certificates includes all distributions of interest as well as
principal thereon.
Where the interval between the issue date and the first Distribution
Date on a REMIC Regular Certificate is longer than the interval between
subsequent Distribution Dates, the greater of any original issue discount,
disregarding the rate in the first period, and any interest foregone during the
first period is treated as the amount by which the stated redemption price at
maturity of the certificate exceeds its issue price for purposes of the de
minimis rule described below in this section. The OID Regulations suggest that
all interest on a long first period REMIC Regular Certificate that is issued
with non-de minimis OID, as determined under the foregoing rule, will be treated
as OID. Where the interval between the issue date and the first Distribution
Date on a REMIC Regular Certificate is shorter than the interval between
subsequent Distribution Dates, interest due on the first Distribution Date in
excess of the amount that accrued during the first period would be added to the
certificate's stated redemption price at maturity. REMIC Regular Certificates
should consult their own tax advisors to determine the issue price and stated
redemption price at maturity of a REMIC Regular Certificate.
Under the de minimis rule, OID on a REMIC Regular Certificate will
be considered to be zero if the OID is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average maturity of the REMIC Regular
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Certificate. For this purpose, the weighted average maturity of the REMIC
Regular Certificate is computed as the sum of the amounts determined by
multiplying the number of full years, i.e., rounding down partial years, from
the issue date until each distribution in reduction of stated redemption price
at maturity is scheduled to be made by a fraction, the numerator of which is the
amount of each distribution included in the stated redemption price at maturity
of the REMIC Regular Certificate and the denominator of which is the stated
redemption price at maturity of the REMIC Regular Certificate. Although
currently unclear, it appears that the schedule of the distributions should be
determined in accordance with the Prepayment Assumption. The Prepayment
Assumption with respect to a series of REMIC Regular Certificates will be set
forth in the related prospectus supplement. Holders generally must report de
minimis OID pro rata as principal payments are received, and the income will be
capital gain if the REMIC Regular Certificate is held as a capital asset.
However, accrual method holders may elect to accrue all de minimis OID as well
as market discount under a constant interest method.
The prospectus supplement with respect to a trust fund may provide
for Super-Premium Certificates. The income tax treatment of such REMIC Regular
Certificates is not entirely certain. For information reporting purposes, the
trust fund intends to take the position that the stated redemption price at
maturity of such REMIC Regular Certificates, including interest-only REMIC
Regular Certificates, is the sum of all payments to be made on such REMIC
Regular Certificates determined under the Prepayment Assumption, with the result
that such REMIC Regular Certificates would be issued with OID. The calculation
of income in this manner could result in negative original issue discount, which
delays future accruals of OID rather than being immediately deductible when
prepayments on the mortgage loans or MBS exceed those estimated under the
Prepayment Assumption. The IRS might contend, however, that certain contingent
payment rules contained in final regulations issued on June 11, 1996, with
respect to original issue discount, should apply to such certificates. Although
such rules are not applicable to instruments governed by Code Section
1272(a)(6), they represent the only guidance regarding the current views of the
IRS with respect to contingent payment instruments. These proposed regulations,
if applicable, generally would require holders of Regular Interest Certificates
to take the payments considered contingent interest payments into income on a
yield to maturity basis in accordance with a schedule of projected payments
provided by Morgan Stanley Dean Witter Capital I Inc. and to make annual
adjustments to income to account for the difference between actual payments
received and projected payment amounts accrued. In the alternative, the IRS
could assert that the stated redemption price at maturity of such REMIC Regular
Certificates (other than interest-only REMIC Regular Certificates) should be
limited to their principal amount, subject to the discussion below under
"--Accrued Interest Certificates", so that such REMIC Regular Certificates would
be considered for federal income tax purposes to be issued at a premium. If such
a position were to prevail, the rules described below under "--Premium" would
apply. It is unclear when a loss may be claimed for any unrecovered basis for a
Super-Premium Certificate. It is possible that a holder of a Super-Premium
Certificate may only claim a loss when its remaining basis exceeds the maximum
amount of future payments, assuming no further prepayments or when the final
payment is received with respect to such Super-Premium Certificate.
Under the REMIC Regulations, if the issue price of a REMIC Regular
Certificate, other than REMIC Regular Certificate based on a Notional Amount,
does not exceed 125% of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly,
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such REMIC Regular Certificate generally should not be treated as a
Super-Premium Certificate and the rules described below under "--Premium" should
apply. However, it is possible that holders of REMIC Regular Certificates issued
at a premium, even if the premium is less than 25% of such certificate's actual
principal balance, will be required to amortize the premium under an original
issue discount method or contingent interest method even though no election
under Code Section 171 is made to amortize such premium.
Generally, a REMIC Regular Certificateholder must include in gross
income the "daily portions" of the OID that accrues on a REMIC Regular
Certificate for each day a certificateholder holds the REMIC Regular
Certificate, including the purchase date but excluding the disposition date. In
the case of an original holder of a REMIC Regular Certificate, a calculation
will be made of the portion of the OID that accrues during each successive
period--"an accrual period"--that ends on the day in the calendar year
corresponding to a Distribution Date, or if Distribution Dates are on the first
day or first business day of the immediately preceding month, interest may be
treated as payable on the last day of the immediately preceding month, and
begins on the day after the end of the immediately preceding accrual period or
on the issue date in the case of the first accrual period. This will be done, in
the case of each full accrual period, by
o adding (1) the present value at the end of the accrual period
-- determined by using as a discount factor the original yield
to maturity of the REMIC Regular Certificates as calculated
under the Prepayment Assumption -- of all remaining payments
to be received on the REMIC Regular Certificates under the
Prepayment Assumption and (2) any payments included in the
stated redemption price at maturity received during such
accrual period, and
o subtracting from that total the adjusted issue price of the
REMIC Regular Certificates at the beginning of such accrual
period.
The adjusted issue price of a REMIC Regular Certificate at the beginning of the
first accrual period is its issue price; the adjusted issue price of a REMIC
Regular Certificate at the beginning of a subsequent accrual period is the
adjusted issue price at the beginning of the immediately preceding accrual
period plus the amount of OID allocable to that accrual period and reduced by
the amount of any payment other than a payment of qualified stated interest made
at the end of or during that accrual period. The OID accrued during an accrual
period will then be divided by the number of days in the period to determine the
daily portion of OID for each day in the accrual period. The calculation of OID
under the method described above will cause the accrual of OID to either
increase or decrease -- but never below zero -- in a given accrual period to
reflect the fact that prepayments are occurring faster or slower than under the
Prepayment Assumption. With respect to an initial accrual period shorter than a
full accrual period, the "daily portions" of OID may be determined according to
an appropriate allocation under any reasonable method.
A subsequent purchaser of a REMIC Regular Certificate issued with
OID who purchases the REMIC Regular Certificate at a cost less than the
remaining stated redemption price at maturity will also be required to include
in gross income the sum of the daily portions of OID on that REMIC Regular
Certificate. In computing the daily portions of OID for such a purchaser, as
well as an initial purchaser that purchases at a price higher than the adjusted
issue price but less than the stated redemption price at maturity, however, the
daily portion is reduced by the amount
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that would be the daily portion for such day, computed in accordance with the
rules set forth above, multiplied by a fraction, the numerator of which is the
amount, if any, by which the price paid by such holder for that REMIC Regular
Certificate exceeds the following amount:
(1) the sum of the issue price plus the aggregate amount of OID
that would have been includible in the gross income of an
original REMIC Regular Certificateholder, who purchased the
REMIC Regular Certificate at its issue price, less
(2) any prior payments included in the stated redemption price at
maturity, and the denominator of which is the sum of the daily
portions for that REMIC Regular Certificate for all days
beginning on the date after the purchase date and ending on
the maturity date computed under the Prepayment Assumption.
A holder who pays an acquisition premium instead may elect to accrue OID by
treating the purchase as a purchase at original issue.
Variable Rate REMIC Regular Certificates. REMIC Regular Certificates
may provide for interest based on a qualifying variable rate. Interest based on
a variable rate will constitute qualified stated interest and not contingent
interest for OID purposes if, generally:
o the interest is unconditionally payable at least annually;
o the issue price of the debt instrument does not exceed the
total noncontingent principal payments; and
o interest is based on a "qualified floating rate," an
"objective rate," a combination of a single fixed rate and one
or more "qualified floating rates," one "qualified inverse
floating rate," or a combination of "qualified floating rates"
that do not operate in a manner that significantly accelerates
or defers interest payments on the REMIC Regular Certificates.
The amount of OID with respect to a REMIC Regular Certificate
bearing a variable rate of interest will accrue in the manner described above
under "--Original Issue Discount and Premium" by assuming generally that the
Index used for the variable rate will remain fixed throughout the term of the
certificate at the rate applicable on the date they are issued. Appropriate
adjustments are made for the actual variable rate.
Although unclear at present, Morgan Stanley Dean Witter Capital I
Inc. intends to treat interest on a REMIC Regular Certificate that is a weighted
average of the net interest rates on mortgage loans as qualified stated
interest. In such case, the weighted average rate used to compute the initial
pass-through rate on the REMIC Regular Certificates will be deemed to be the
Index in effect through the life of the REMIC Regular Certificates. It is
possible, however, that the IRS may treat some or all of the interest on REMIC
Regular Certificates with a weighted average rate as taxable under the rules
relating to obligations providing for contingent payments. No guidance is
currently available as to how OID would be determined for debt instruments
subject to Code Section 1272(a)(6) that provide for contingent interest. The
treatment of REMIC Regular Certificates as contingent payment debt instruments
may affect the timing of income accruals on the REMIC Regular Certificates.
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Election to Treat All Interest as OID. The OID Regulations permit a
certificateholder to elect to accrue all interest, discount (including de
minimis market discount or original issue discount) and premium in income as
interest, based on a constant yield method. If such an election were to be made
with respect to a REMIC Regular Certificate with market discount, the
certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such certificateholder acquires during the year of the
election or thereafter. Similarly, a certificateholder that makes this election
for a certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such certificateholder owns or acquires. See
"--Premium" below. The election to accrue interest, discount and premium on a
constant yield method with respect to a certificate is irrevocable without the
consent of the IRS.
Market Discount. A purchaser of a REMIC Regular Certificate may also
be subject to the market discount provisions of Code Sections 1276 through 1278.
Under these provisions and the OID Regulations, "market discount" equals the
excess, if any, of (1) the REMIC Regular Certificate's stated principal amount
or, in the case of a REMIC Regular Certificate with OID, the adjusted issue
price, determined for this purpose as if the purchaser had purchased such REMIC
Regular Certificate from an original holder, over (2) the price for such REMIC
Regular Certificate paid by the purchaser. A certificateholder that purchases a
REMIC Regular Certificate at a market discount will recognize income upon
receipt of each distribution representing amounts included in such certificate's
stated redemption price at maturity. In particular, under Section 1276 of the
Code such a holder generally will be required to allocate each such distribution
first to accrued market discount not previously included in income, and to
recognize ordinary income to that extent. A certificateholder may elect to
include market discount in income currently as it accrues rather than including
it on a deferred basis in accordance with the foregoing. If made, the election
will apply to all market discount bonds acquired by the certificateholder on or
after the first day of the first taxable year to which the election applies.
Market discount with respect to a REMIC Regular Certificate will be
considered to be zero if the amount allocable to the REMIC Regular Certificate
is less than 0.25% of the REMIC Regular Certificate's stated redemption price at
maturity multiplied by the REMIC Regular Certificate's weighted average maturity
remaining after the date of purchase. If market discount on a REMIC Regular
Certificate is considered to be zero under this rule, the actual amount of
market discount must be allocated to the remaining principal payments on the
REMIC Regular Certificate, and gain equal to the allocated amount will be
recognized when the corresponding principal payment is made. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment, whether a scheduled
payment or a prepayment, or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986, shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at the
time of the payment. The amount of accrued market discount for
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purposes of determining the tax treatment of subsequent principal payments or
dispositions of the market discount bond is to be reduced by the amount so
treated as ordinary income.
The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury, rules described in
the legislative history will apply. Under those rules, the holder of a market
discount bond may elect to accrue market discount either on the basis of a
constant interest method rate or according to one of the following methods. For
REMIC Regular Certificates issued with OID, the amount of market discount that
accrues during a period is equal to the product of
1) the total remaining market discount and
2) a fraction, the numerator of which is the OID accruing during
the period and the denominator of which is the total remaining
OID at the beginning of the period.
For REMIC Regular Certificates issued without OID, the amount of market discount
that accrues during a period is equal to the product of
1) the total remaining market discount and
2) a fraction, the numerator of which is the amount of stated
interest paid during the accrual period and the denominator of
which is the total amount of stated interest remaining to be
paid at the beginning of the period.
For purposes of calculating market discount under any of the above methods in
the case of instruments such as the REMIC Regular Certificates that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same Prepayment Assumption applicable to
calculating the accrual of OID will apply.
A holder who acquired a REMIC Regular Certificate at a market
discount also may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry the certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Premium. A purchaser of a REMIC Regular Certificate that purchases
the REMIC Regular Certificate at a cost, not including accrued qualified stated
interest, greater than its remaining stated redemption price at maturity will be
considered to have purchased the REMIC Regular Certificate at a premium and may
elect to amortize the premium under a constant yield method. A certificateholder
that makes this election for a Certificate that is acquired at a premium will be
deemed to have made an election to amortize bond premium with respect to all
debt instruments having amortizable bond premium that such certificateholder
acquires during the year of the election or thereafter. It is not clear whether
the Prepayment Assumption would
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be taken into account in determining the life of the REMIC Regular Certificate
for this purpose. However, the legislative history states that the same rules
that apply to accrual of market discount, which rules require use of a
Prepayment Assumption in accruing market discount with respect to REMIC Regular
Certificates without regard to whether such certificates have OID, will also
apply in amortizing bond premium under Code Section 171. The Code provides that
amortizable bond premium will be allocated among the interest payments on such
REMIC Regular Certificates and will be applied as an offset against the interest
payment. The Amortizable Bond Premium Regulations do not apply to prepayable
securities described in Section 1272(a)(6) of the Code, such as the REMIC
Regular Certificates. Certificateholders should consult their tax advisors
regarding the possibility of making an election to amortize any such bond
premium.
Deferred Interest. Certain classes of REMIC Regular Certificates may
provide for the accrual of Deferred Interest with respect to one or more
adjustable rate loans. Any Deferred Interest that accrues with respect to a
class of REMIC Regular Certificates will constitute income to the holders of
such certificates prior to the time distributions of cash with respect to such
Deferred Interest are made. It is unclear, under the OID Regulations, whether
any of the interest on such certificates will constitute qualified stated
interest or whether all or a portion of the interest payable on such
certificates must be included in the stated redemption price at maturity of the
certificates and accounted for as OID, which could accelerate such inclusion.
Interest on REMIC Regular Certificates must in any event be accounted for under
an accrual method by the holders of such certificates and, therefore, applying
the latter analysis may result only in a slight difference in the timing of the
inclusion in income of interest on such REMIC Regular Certificates.
Sale, Exchange or Redemption. If a REMIC Regular Certificate is
sold, exchanged, redeemed or retired, the seller will recognize gain or loss
equal to the difference between the amount realized on the sale, exchange,
redemption, or retirement and the seller's adjusted basis in the REMIC Regular
Certificate. Such adjusted basis generally will equal the cost of the REMIC
Regular Certificate to the seller, increased by any OID and market discount
included in the seller's gross income with respect to the REMIC Regular
Certificate, and reduced, but not below zero, by payments included in the stated
redemption price at maturity previously received by the seller and by any
amortized premium. Similarly, a holder who receives a payment that is part of
the stated redemption price at maturity of a REMIC Regular Certificate will
recognize gain equal to the excess, if any, of the amount of the payment over an
allocable portion of the holder's adjusted basis in the REMIC Regular
Certificate. A REMIC Regular certificateholder who receives a final payment that
is less than the holder's adjusted basis in the REMIC Regular Certificate will
generally recognize a loss. Except as provided in the following paragraph and as
provided under "--Market Discount" above, any such gain or loss will be capital
gain or loss, provided that the REMIC Regular Certificate is held as a "capital
asset" (generally, property held for investment) within the meaning of Code
Section 1221.
Such capital gain or loss will generally be long-term capital gain
or loss if the REMIC Regular Certificate was held for more than one year.
Long-term capital gains of individuals are subject to reduced maximum tax rates
while capital gains recognized by individual on capital assets held less than
twelve months are generally subject to ordinary income tax rates. The use of
capital losses is limited.
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Gain from the sale or other disposition of a REMIC Regular
Certificate that might otherwise be capital gain will be treated as ordinary
income to the extent that the gain does not exceed the excess, if any, of
o the amount that would have been includible in the holder's
income with respect to the REMIC Regular Certificate had
income accrued thereon at a rate equal to 110% of the AFR as
defined in Code Section 1274(d) determined as of the date of
purchase of such REMIC Regular Certificate, over
o the amount actually includible in such holder's income.
Gain from the sale or other disposition of a REMIC Regular
Certificate that might otherwise be capital gain will be treated as ordinary
income if the REMIC Regular Certificate is held as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on the REMIC Regular certificateholder's net investment
in the conversion transaction at 120% of the appropriate applicable federal rate
under Code Section 1274(d) in effect at the time the taxpayer entered into the
transaction minus any amount previously treated as ordinary income with respect
to any prior disposition of property that was held as part of such transaction,
or if the REMIC Regular Certificate is held as part of a straddle. A sale of a
REMIC Regular Certificate will be part of a "conversion transaction" if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and: the holder entered the contract to
sell the REMIC Regular Certificate substantially contemporaneously with
acquiring the REMIC Regular Certificate; the REMIC Regular Certificate is part
of a straddle; the REMIC Regular Certificate is marketed or sold as producing
capital gains; or other transactions to be specified in Treasury regulations
that have not yet been issued. Potential investors should consult their tax
advisors with respect to tax consequences of ownership and disposition of an
investment in REMIC Regular Certificates in their particular circumstances.
The certificates will be "evidences of indebtedness" within the
meaning of Code Section 582(c)(1), so that gain or loss recognized from the sale
of a REMIC Regular Certificate by a bank or a thrift institution to which this
section applies will be ordinary income or loss.
The REMIC Regular Certificate information reports will include a
statement of the adjusted issue price of the REMIC Regular Certificate at the
beginning of each accrual period. In addition, the reports will include
information necessary to compute the accrual of any market discount that may
arise upon secondary trading of REMIC Regular Certificates. Because exact
computation of the accrual of market discount on a constant yield method would
require information relating to the holder's purchase price which the REMIC may
not have, it appears that the information reports will only provide information
pertaining to the appropriate proportionate method of accruing market discount.
Accrued Interest Certificates. Payment Lag Certificates may provide
for payments of interest based on a period that corresponds to the interval
between Distribution Dates but that ends prior to each Distribution Date. The
period between the Closing Date for Payment Lag Certificates and their first
Distribution Date may or may not exceed the interval. Purchasers of Payment Lag
Certificates for which the period between the Closing Date and the first
Distribution Date does not exceed the interval could pay upon purchase of the
REMIC Regular
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Certificates accrued interest in excess of the accrued interest that would be
paid if the interest paid on the Distribution Date were interest accrued from
Distribution Date to Distribution Date. If a portion of the initial purchase
price of a REMIC Regular Certificate is allocable to pre-issuance accrued
interest and the REMIC Regular Certificate provides for a payment of stated
interest on the first payment date and the first payment date is within one year
of the issue date that equals or exceeds the amount of the pre-issuance accrued
interest, then the REMIC Regular Certificate's issue price may be computed by
subtracting from the issue price the amount of pre-issuance accrued interest,
rather than as an amount payable on the REMIC Regular Certificate. However, it
is unclear under this method how the OID Regulations treat interest on Payment
Lag Certificates. Therefore, in the case of a Payment Lag Certificate, the trust
fund intends to include accrued interest in the issue price and report interest
payments made on the first Distribution Date as interest to the extent such
payments represent interest for the number of days that the certificateholder
has held the Payment Lag Certificate during the first accrual period.
Investors should consult their own tax advisors concerning the
treatment for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury
regulations, if the REMIC is considered to be a "single-class REMIC," a portion
of the REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those REMIC Regular Certificates that are
"pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of these
rules on an investment in the REMIC Regular Certificates. See "Pass-Through of
Non-Interest Expenses of the REMIC" under "Taxation of Owners of REMIC Residual
Certificates" below.
Effects of Defaults, Delinquencies and Losses. Certain series of
certificates may contain one or more classes of Subordinated Certificates, and
in the event there are defaults or delinquencies on the mortgage loans or MBS,
amounts that would otherwise be distributed on the Subordinated Certificates may
instead be distributed on the Senior Certificates. Subordinated
certificateholders nevertheless will be required to report income with respect
to such certificates under an accrual method without giving effect to delays and
reductions in distributions on the Subordinated Certificates attributable to
defaults and delinquencies on the mortgage loans or MBS, except to the extent
that it can be established that the amounts are uncollectible. As a result, the
amount of income reported by a Subordinated certificateholder in any period
could significantly exceed the amount of cash distributed to the holder in that
period. The holder will eventually be allowed a loss (or will be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Subordinated Certificate is reduced as a result of defaults
and delinquencies on the mortgage loans or MBS.
Although not entirely clear, it appears that holders of REMIC
Regular Certificates that are corporations should in general be allowed to
deduct as an ordinary loss any loss sustained during the taxable year on account
of any such certificates becoming wholly or partially worthless, and that, in
general, holders of certificates that are not corporations should be allowed to
deduct as a short-term capital loss any loss sustained during the taxable year
on account of any such certificates becoming wholly worthless. Potential
investors and holders of the certificates are urged to consult their own tax
advisors regarding the appropriate timing, amount and character of any loss
sustained with respect to such certificates, including any loss resulting from
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the failure to recover previously accrued interest or discount income. Special
loss rules are applicable to banks and thrift institutions, including rules
regarding reserves for bad debts. These taxpayers are advised to consult their
tax advisors regarding the treatment of losses on certificates.
Non-U.S. Persons. Generally, payments of interest on the REMIC
Regular Certificates, including any payment with respect to accrued OID, to a
REMIC Regular Certificateholder who is not a U.S. Person and is not engaged in a
trade or business within the United States will not be subject to federal
withholding tax if:
o the REMIC Regular Certificateholder does not actually or
constructively own 10 percent or more of the combined voting
power of all classes of equity in the issuer;
o the REMIC Regular Certificateholder is not a controlled
foreign corporation, within the meaning of Code Section 957,
related to the issuer; and
o the REMIC Regular Certificateholder complies with
identification requirements, including delivery of a
statement, signed by the REMIC Regular certificateholder under
penalties of perjury, certifying that the REMIC Regular
certificateholder is a foreign person and providing the name
and address of the REMIC Regular certificateholder.
If a REMIC Regular Certificateholder is not exempt from withholding,
distributions of interest to the holder, including distributions in respect of
accrued OID, may be subject to a 30% withholding tax, subject to reduction under
any applicable tax treaty. If the interest on a REMIC Regular Certificate is
effectively connected with the conduct by the Non-U.S. REMIC Regular
Certificateholder of a trade or business within the United States, then the
Non-U.S. REMIC Regular Certificateholder will be subject to U.S. income tax at
regular graduated rates. Such a Non-U.S. REMIC Regular Certificateholder also
may be subject to the branch profits tax.
Further, a REMIC Regular Certificate will not be included in the
estate of a non-resident alien individual that does not actually or
constructively own 10% or more of the combined voting power of all classes of
equity in the Issuer and will not be subject to United States estate taxes.
However, certificateholders who are non-resident alien individuals should
consult their tax advisors concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons and
persons related to such holders should not acquire any REMIC Residual
Certificates and REMIC Residual Certificateholders who are not U.S. Persons and
persons related to such holders should not acquire any REMIC Regular
Certificates without consulting their tax advisors as to the possible adverse
tax consequences of doing so. In addition, the IRS may assert that non-U.S.
Persons that own directly or indirectly, a greater than 10% interest in any
Borrower, and foreign corporations that are "controlled foreign corporations" as
to the United States of which such a Borrower is a "United States shareholder"
within the meaning of Section 951(b) of the Code, are subject to United States
withholding tax on interest distributed to them to the extent of interest
concurrently paid by the related Borrower.
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Information Reporting and Backup Withholding. The master servicer
will furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at any
time during that year, the information as may be deemed necessary or desirable
to assist REMIC Regular Certificateholders in preparing their federal income tax
returns, or to enable holders to make the information available to beneficial
owners or financial intermediaries that hold the REMIC Regular Certificates on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments with respect to
any payments to registered owners who are not "exempt recipients." In addition,
upon the sale of a REMIC Regular Certificate to, or through, a broker, the
broker must withhold 31% of the entire purchase price, unless either:
o the broker determines that the seller is a corporation or
other exempt recipient, or
o the seller provides, in the required manner, identifying
information and, in the case of a non-U.S. Person, certifies
that such seller is a Non-U.S. Person, and other conditions
are met.
o A sale of a REMIC Regular Certificate to, or through, a broker
must also be reported by the broker to the IRS, unless either:
o the broker determines that the seller is an exempt recipient,
or
o the seller certifies its non-U.S. Person status and other
conditions are met.
Certification of the registered owner's non-U.S. Person status normally would be
made on IRS Form W-8 under penalties of perjury, although in certain cases it
may be possible to submit other documentary evidence. Any amounts deducted and
withheld from a distribution to a recipient would be allowed as a credit against
such recipient's federal income tax liability.
On October 6, 1997, the Treasury Department issued the New
Regulations, which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
2000, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
b. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
Allocation of the Income of the REMIC to the REMIC Residual
Certificates. The REMIC will not be subject to federal income tax except with
respect to income from prohibited transactions and certain other transactions.
See "--Prohibited Transactions and Other Taxes" below. Instead, each original
holder of a REMIC Residual Certificate will report on its federal income tax
return, as ordinary income, its share of the taxable income of the REMIC for
each day during the taxable year on which the holder owns any REMIC Residual
Certificates. The taxable income of the REMIC for each day will be determined by
allocating the taxable income of the REMIC for each calendar quarter ratably to
each day in the quarter. Such a holder's share
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of the taxable income of the REMIC for each day will be based on the portion of
the outstanding REMIC Residual Certificates that the holder owns on that day.
The taxable income of the REMIC will be determined under an accrual method and
will be taxable to the holders of REMIC Residual Certificates without regard to
the timing or amounts of cash distributions by the REMIC. Ordinary income
derived from REMIC Residual Certificates will be "portfolio income" for purposes
of the taxation of taxpayers subject to the limitations on the deductibility of
"passive losses." As residual interests, the REMIC Residual Certificates will be
subject to tax rules, described below, that differ from those that would apply
if the REMIC Residual Certificates were treated for federal income tax purposes
as direct ownership interests in the certificates or as debt instruments issued
by the REMIC.
A REMIC Residual Certificateholder may be required to include
taxable income from the REMIC Residual Certificate in excess of the cash
distributed. For example, a structure where principal distributions are made
serially on regular interests, that is, a fast-pay, slow-pay structure, may
generate such a mismatching of income and cash distributions --that is, "phantom
income". This mismatching may be caused by the use of certain required tax
accounting methods by the REMIC, variations in the prepayment rate of the
underlying mortgage loans or MBS and certain other factors. Depending upon the
structure of a particular transaction, the aforementioned factors may
significantly reduce the after-tax yield of a REMIC Residual Certificate to a
REMIC Residual Certificateholder or cause the REMIC Residual Certificate to have
negative "value." Investors should consult their own tax advisors concerning the
federal income tax treatment of a REMIC Residual Certificate and the impact of
the tax treatment on the after-tax yield of a REMIC Residual Certificate.
A subsequent REMIC Residual Certificateholder also will report on
its federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that the REMIC Residual Certificateholder owns
the REMIC Residual Certificate. Those daily amounts generally would equal the
amounts that would have been reported for the same days by an original REMIC
Residual Certificateholder, as described above. The legislative history
indicates that certain adjustments may be appropriate to reduce or increase the
income of a subsequent holder of a REMIC Residual Certificate that purchased the
REMIC Residual Certificate at a price greater than or less than the adjusted
basis the REMIC Residual Certificate would have in the hands of an original
REMIC Residual Certificateholder. See "--Sale or Exchange of REMIC Residual
Certificates" below. It is not clear, however, whether the adjustments will in
fact be permitted or required and, if so, how they would be made. The REMIC
Regulations do not provide for any such adjustments.
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of
o the income from the mortgage loans or MBS and the REMIC's
other assets and
o the deductions allowed to the REMIC for interest and OID on
the REMIC Regular Certificates and, except as described above
under "--Taxation of Owners of REMIC Regular
Certificates--Non-Interest Expenses of the REMIC," other
expenses.
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REMIC taxable income is generally determined in the same manner as the taxable
income of an individual using the accrual method of accounting, except that:
o the limitations on deductibility of investment interest
expense and expenses for the production of income do not
apply;
o all bad loans will be deductible as business bad debts; and
o the limitation on the deductibility of interest and expenses
related to tax-exempt income will apply.
The REMIC's gross income includes interest, original issue discount income, and
market discount income, if any, on the mortgage loans, reduced by amortization
of any premium on the mortgage loans, plus income on reinvestment of cash flows
and reserve assets, plus any cancellation of indebtedness income upon allocation
of realized losses to the REMIC Regular Certificates. Note that the timing of
cancellation of indebtedness income recognized by REMIC Residual
Certificateholders resulting from defaults and delinquencies on mortgage loans
or MBS may differ from the time of the actual loss on the assets. The REMIC's
deductions include interest and original issue discount expense on the REMIC
Regular Certificates, servicing fees on the mortgage loans, other administrative
expenses of the REMIC and realized losses on the mortgage loans. The requirement
that REMIC Residual Certificateholders report their pro rata share of taxable
income or net loss of the REMIC will continue until there are no certificates of
any class of the related series outstanding.
For purposes of determining its taxable income, the REMIC will have
an initial aggregate tax basis in its assets equal to the sum of the issue
prices of the REMIC Regular Certificates and the REMIC Residual Certificates,
or, if a class of certificates is not sold initially, its fair market value. The
aggregate basis will be allocated among the mortgage loans or MBS and other
assets of the REMIC in proportion to their respective fair market value. A
mortgage loan or MBS will be deemed to have been acquired with discount or
premium to the extent that the REMIC's basis in the mortgage loan or MBS is less
than or greater than its principal balance, respectively. Any such discount,
whether market discount or OID, will be includible in the income of the REMIC as
it accrues, in advance of receipt of the cash attributable to the income, under
a method similar to the method described above for accruing OID on the REMIC
Regular Certificates. The REMIC may elect under Code Section 171 to amortize any
premium on the mortgage loans or MBS. Premium on any mortgage loan or MBS to
which the election applies would be amortized under a constant yield method. It
is not clear whether the yield of a mortgage loan or MBS would be calculated for
this purpose based on scheduled payments or taking account of the Prepayment
Assumption. Additionally, such an election would not apply to the yield with
respect to any underlying mortgage loan originated on or before September 27,
1985. Instead, premium with respect to such a mortgage loan would be allocated
among the principal payments thereon and would be deductible by the REMIC as
those payments become due.
The REMIC will be allowed a deduction for interest and OID on the
REMIC Regular Certificates. The amount and method of accrual of OID will be
calculated for this purpose in the same manner as described above with respect
to REMIC Regular Certificates except that the 0.25% per annum de minimis rule
and adjustments for subsequent holders described therein will not apply.
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A REMIC Residual Certificateholder will not be permitted to amortize
the cost of the REMIC Residual Certificate as an offset to its share of the
REMIC's taxable income. However, REMIC taxable income will not include cash
received by the REMIC that represents a recovery of the REMIC's basis in its
assets, and, as described above, the issue price of the REMIC Residual
Certificates will be added to the issue price of the REMIC Regular Certificates
in determining the REMIC's initial basis in its assets. See "--Sale or Exchange
of REMIC Residual Certificates" below. For a discussion of possible adjustments
to income of a subsequent holder of a REMIC Residual Certificate to reflect any
difference between the actual cost of the REMIC Residual Certificate to the
holder and the adjusted basis the REMIC Residual Certificate would have in the
hands of an original REMIC Residual Certificateholder, see "--Allocation of the
Income of the REMIC to the REMIC Residual Certificates" above.
Net Losses of the REMIC. The REMIC will have a net loss for any
calendar quarter in which its deductions exceed its gross income. The net loss
would be allocated among the REMIC Residual Certificateholders in the same
manner as the REMIC's taxable income. The net loss allocable to any REMIC
Residual Certificate will not be deductible by the holder to the extent that the
net loss exceeds the holder's adjusted basis in the REMIC Residual Certificate.
Any net loss that is not currently deductible by reason of this limitation may
only be used by the REMIC Residual Certificateholder to offset its share of the
REMIC's taxable income in future periods (but not otherwise). The ability of
REMIC Residual Certificateholders that are individuals or closely held
corporations to deduct net losses may be subject to additional limitations under
the Code.
Mark-to-Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that the IRS has finalized Mark-to-Market
Regulations which provide that a REMIC Residual Certificate acquired after
January 3, 1995 cannot be marked to market. The Mark-to-Market Regulations
replaced the temporary regulations which allowed a Residual Certificate to be
marked to market provided that it was not a "negative value" residual interest
and did not have the same economic effect as a "negative value" residual
interest.
Pass-Through of Non-Interest Expenses of the REMIC. As a general
rule, all of the fees and expenses of a REMIC will be taken into account by
holders of the REMIC Residual Certificates. In the case of a single class REMIC,
however, the expenses and a matching amount of additional income will be
allocated, under temporary Treasury regulations, among the REMIC Regular
Certificateholders and the REMIC Residual Certificateholders on a daily basis in
proportion to the relative amounts of income accruing to each certificateholder
on that day. In general terms, a single class REMIC is one that either:
o would qualify, under existing Treasury regulations, as a
grantor trust if it were not a REMIC, treating all interests
as ownership interests, even if they would be classified as
debt for federal income tax purposes, or
o is similar to such a trust and is structured with the
principal purpose of avoiding the single class REMIC rules.
Unless otherwise stated in the applicable prospectus supplement, the expenses of
the REMIC will be allocated to holders of the related REMIC Residual
Certificates in their entirety and not to holders of the related REMIC Regular
Certificates.
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In the case of individuals or trusts, estates or other persons that
compute their income in the same manner as individuals, who own an interest in a
REMIC Regular Certificate or a REMIC Residual Certificate directly or through a
pass-through interest holder that is required to pass miscellaneous itemized
deductions through to its owners or beneficiaries, e.g., a partnership, an S
corporation or a grantor trust, such expenses will be deductible under Code
Section 67 only to the extent that such expenses, plus other "miscellaneous
itemized deductions" of the individual, exceed 2% of such individual's adjusted
gross income. In addition, Code Section 68 provides that the applicable amount
will be reduced by the lesser of
o 3% of the excess of the individual's adjusted gross income
over the applicable amount or
o 80% of the amount of itemized deductions otherwise allowable
for the taxable year.
The amount of additional taxable income recognized by REMIC Residual
Certificateholders who are subject to the limitations of either Code Section 67
or Code Section 68 may be substantial. Further, holders subject to the
alternative minimum tax other than corporations may not deduct miscellaneous
itemized deductions in determining such holders' alternative minimum taxable
income. The REMIC is required to report to each pass-through interest holder and
to the IRS such holder's allocable share, if any, of the REMIC's non-interest
expenses. The term "pass-through interest holder" generally refers to
individuals, entities taxed as individuals and certain pass-through entities,
but does not include real estate investment trusts. Accordingly, investment in
REMIC Residual Certificates will in general not be suitable for individuals or
for certain pass-through entities, such as partnerships and S corporations, that
have individuals as partners or shareholders.
Excess Inclusions. A portion of the income on a REMIC Residual
Certificate, referred to in the Code as an "excess inclusion", for any calendar
quarter will be subject to federal income tax in all events. Thus, for example,
an excess inclusion:
o may not, except as described below, be offset by any unrelated
losses, deductions or loss carryovers of a REMIC Residual
Certificateholder;
o will be treated as "unrelated business taxable income" within
the meaning of Code Section 512 if the REMIC Residual
Certificateholder is a pension fund or any other organization
that is subject to tax only on its unrelated business taxable
income, as discussed under "--Tax-Exempt Investors" below; and
o is not eligible for any reduction in the rate of withholding
tax in the case of a REMIC Residual Certificateholder that is
a foreign investor, as discussed under "--Residual Certificate
Payments--Non-U.S. Persons" below.
Except as discussed in the following paragraph, with respect to any
REMIC Residual Certificateholder, the excess inclusions for any calendar quarter
is the excess, if any, of (1) the income of such REMIC Residual
Certificateholder for that calendar quarter from its REMIC Residual Certificate
over (2) the sum of the "daily accruals" for all days during the calendar
quarter on which the REMIC Residual Certificateholder holds a REMIC Residual
Certificate. For this purpose, the daily accruals with respect to a REMIC
Residual Certificate are determined
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by allocating to each day in the calendar quarter its ratable portion of the
product of the "adjusted issue price" of the REMIC Residual Certificate at the
beginning of the calendar quarter and 120 percent of the "Federal long-term
rate" in effect at the time the REMIC Residual Certificate is issued. For this
purpose, the "adjusted issue price" of a REMIC Residual Certificate at the
beginning of any calendar quarter equals the issue price of the REMIC Residual
Certificate, increased by the amount of daily accruals for all prior quarters,
and decreased--but not below zero--by the aggregate amount of payments made on
the REMIC Residual Certificate before the beginning of the quarter. The "federal
long-term rate" is an average of current yields on Treasury securities with a
remaining term of greater than nine years, computed and published monthly by the
IRS.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to the REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Code Section 857(b)(2),
excluding any net capital gain), will be allocated among the shareholders of
such trust in proportion to the dividends received by the shareholders from such
trust, and any amount so allocated will be treated as an excess inclusion with
respect to a REMIC Residual Certificate as if held directly by the shareholder.
Regulated investment companies, common trust funds and certain cooperatives are
subject to similar rules.
The Small Business Job Protection Act of 1996 has eliminated the
special rule permitting Section 593 institutions ("thrift institutions") to use
net operating losses and other allowable deductions to offset their excess
inclusion income from REMIC residual certificates that have "significant value"
within the meaning of the REMIC Regulations, effective for taxable years
beginning after December 31, 1995, except with respect to residual certificates
continuously held by a thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides
three rules for determining the effect on excess inclusions on the alternative
minimum taxable income of a residual holder. First, alternative minimum taxable
income for the residual holder is determined without regard to the special rule
that taxable income cannot be less than excess inclusions. Second, the amount of
any alternative minimum tax net operating loss deductions must be computed
without regard to any excess inclusions. Third, a residual holder's alternative
minimum taxable income for a tax year cannot be less than excess inclusions for
the year. The effect of this last statutory amendment is to prevent the use of
nonrefundable tax credits to reduce a taxpayer's income tax below its tentative
minimum tax computed only on excess inclusions. These rules are effective for
tax years beginning after December 31, 1986, unless a residual holder elects to
have such rules apply only to tax years beginning after August 20, 1996.
Payments. Any distribution made on a REMIC Residual Certificate to a
REMIC Residual Certificateholder will be treated as a non-taxable return of
capital to the extent it does not exceed the REMIC Residual Certificateholder's
adjusted basis in the REMIC Residual Certificate. To the extent a distribution
exceeds the adjusted basis, it will be treated as gain from the sale of the
REMIC Residual Certificate.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale or exchange
and its adjusted basis in the REMIC Residual
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Certificate except that the recognition of loss may be limited under the "wash
sale" rules described in the next paragraph. A holder's adjusted basis in a
REMIC Residual Certificate generally equals the cost of the REMIC Residual
Certificate to the REMIC Residual Certificateholder, increased by the taxable
income of the REMIC that was included in the income of the REMIC Residual
Certificateholder with respect to the REMIC Residual Certificate, and decreased
-- but not below zero -- by the net losses that have been allowed as deductions
to the REMIC Residual Certificateholder with respect to the REMIC Residual
Certificate and by the distributions received thereon by the REMIC Residual
Certificateholder. In general, any the gain or loss will be capital gain or loss
provided the REMIC Residual Certificate is held as a capital asset. The capital
gain or loss will generally be long-term capital gain or loss if the REMIC
Regular Certificate was held for more than one year. Long-term capital gains of
individuals are subject to reduced maximum tax rates while capital gains
recognized by individuals on capital assets held less than twelve months are
generally subject to ordinary income tax rates. The use of capital losses is
limited. However, REMIC Residual Certificates will be "evidences of
indebtedness" within the meaning of Code Section 582(c)(1), so that gain or loss
recognized from sale of a REMIC Residual Certificate by a bank or thrift
institution to which such section applies would be ordinary income or loss. In
addition, a transfer of a REMIC Residual Certificate that is a "noneconomic
residual interest" may be subject to different rules. See "--Tax Related
Restrictions on Transfers of REMIC Residual Certificates--Noneconomic REMIC
Residual Certificates" below.
Except as provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires such REMIC Residual
Certificate, or acquires any other REMIC Residual Certificate, any residual
interest in another REMIC or similar interest in a "taxable mortgage pool", as
defined in Code Section 7701(i), during the period beginning six months before,
and ending six months after, the date of such sale, such sale will be subject to
the "wash sale" rules of Code Section 1091. In that event, any loss realized by
the REMIC Residual Certificateholder on the sale will not be deductible, but,
instead, will increase such REMIC Residual Certificateholder's adjusted basis in
the newly acquired asset.
PROHIBITED TRANSACTIONS AND OTHER TAXES
The Code imposes a tax on REMICs equal to 100% of the net income
derived from "prohibited transactions". In general, subject to certain specified
exceptions, a prohibited transaction means:
o the disposition of a mortgage loan or MBS,
o the receipt of income from a source other than a mortgage loan
or MBS or certain other permitted investments,
o the receipt of compensation for services, or
o gain from the disposition of an asset purchased with the
payments on the mortgage loans or MBS for temporary investment
pending distribution on the certificates.
It is not anticipated that the trust fund for any series of certificates will
engage in any prohibited transactions in which it would recognize a material
amount of net income.
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In addition, certain contributions to a trust fund as to which an
election has been made to treat the trust fund as a REMIC made after the day on
which the trust fund issues all of its interests could result in the imposition
of the Contributions Tax. No trust fund for any series of certificates will
accept contributions that would subject it to such tax.
In addition, a trust fund as to which an election has been made to
treat the trust fund as a REMIC may also be subject to federal income tax at the
highest corporate rate on "net income from foreclosure property," determined by
reference to the rules applicable to real estate investment trusts. "Net income
from foreclosure property" generally means income from foreclosure property
other than qualifying income for a real estate investment trust.
Where any Prohibited Transactions Tax, Contributions Tax, [tax on
net income from foreclosure property] or state or local income or franchise tax
that may be imposed on a REMIC relating to any series of certificates arises out
of or results from
o a breach of the related servicer's, trustee's or depositor's
obligations, as the case may be, under the related Agreement
for such series, such tax will be borne by such servicer,
trustee or depositor, as the case may be, out of its own funds
or
o Morgan Stanley Dean Witter Capital I Inc.'s obligation to
repurchase a mortgage loan,
such tax will be borne by Morgan Stanley Dean Witter Capital I Inc.
In the event that the servicer, trustee or depositor, as the case may be, fails
to pay or is not required to pay any Prohibited Transactions Tax, Contributions
Tax, tax on net income from foreclosure property or state or local income or
franchise tax, the tax will be payable out of the trust fund for the series and
will result in a reduction in amounts available to be distributed to the
certificateholders of the series.
LIQUIDATION AND TERMINATION
If the REMIC adopts a plan of complete liquidation, within the
meaning of Code Section 860F(a)(4)(A)(i), which may be accomplished by
designating in the REMIC's final tax return a date on which such adoption is
deemed to occur, and sells all of its assets other than cash within a 90-day
period beginning on such date, the REMIC will not be subject to any Prohibited
Transaction Tax, provided that the REMIC credits or distributes in liquidation
all of the sale proceeds plus its cash, other than the amounts retained to meet
claims, to holders of Regular and REMIC Residual Certificates within the 90-day
period.
The REMIC will terminate shortly following the retirement of the
REMIC Regular Certificates. If a REMIC Residual Certificateholder's adjusted
basis in the REMIC Residual Certificate exceeds the amount of cash distributed
to such REMIC Residual Certificateholder in final liquidation of its interest,
then it would appear that the REMIC Residual Certificateholder would be entitled
to a loss equal to the amount of such excess. It is unclear whether such a loss,
if allowed, will be a capital loss or an ordinary loss.
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ADMINISTRATIVE MATTERS
Solely for the purpose of the administrative provisions of the Code,
the REMIC generally will be treated as a partnership and the REMIC Residual
Certificateholders will be treated as the partners. Information will be
furnished quarterly to each REMIC Residual Certificateholder who held a REMIC
Residual Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat items on
its return consistently with their treatment on the REMIC's return, unless the
REMIC Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency resulting
from a failure to comply with the consistency requirement without instituting an
administrative proceeding at the REMIC level. The REMIC does not intend to
register as a tax shelter pursuant to Code Section 6111 because it is not
anticipated that the REMIC will have a net loss for any of the first five
taxable years of its existence. Any person that holds a REMIC Residual
Certificate as a nominee for another person may be required to furnish the
REMIC, in a manner to be provided in Treasury regulations, with the name and
address of such person and other information.
TAX-EXEMPT INVESTORS
Any REMIC Residual Certificateholder that is a pension fund or other
entity that is subject to federal income taxation only on its "unrelated
business taxable income" within the meaning of Code Section 512 will be subject
to such tax on that portion of the distributions received on a REMIC Residual
Certificate that is considered an excess inclusion. See "--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions" above.
RESIDUAL CERTIFICATE PAYMENTS--NON-U.S. PERSONS
Amounts paid to REMIC Residual Certificateholders who are not U.S.
Persons (see "--Taxation of Owners of REMIC Regular Certificates--Non-U.S.
Persons" above) are treated as interest for purposes of the 30%, or lower treaty
rate, United States withholding tax. Amounts distributed to holders of REMIC
Residual Certificates should qualify as "portfolio interest," subject to the
conditions described in "--Taxation of Owners of REMIC Regular Certificates"
above, but only to the extent that the underlying mortgage loans were originated
after July 18, 1984. Furthermore, the rate of withholding on any income on a
REMIC Residual Certificate that is excess inclusion income will not be subject
to reduction under any applicable tax treaties. See "--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions" above. If the portfolio interest
exemption is unavailable, such amount will be subject to United States
withholding tax when paid or otherwise distributed, or when the REMIC Residual
Certificate is disposed of, under rules similar to those for withholding upon
disposition of debt instruments that have OID. The Code, however, grants the
Treasury Department authority to issue regulations requiring that those amounts
be taken into account earlier than otherwise provided where necessary to prevent
avoidance of tax, for example, where the REMIC Residual Certificates do not have
significant value. See "--Taxation of Owners of REMIC Residual
Certificates--Excess Inclusions" above. If the amounts paid to REMIC Residual
Certificateholders that are not U.S. Persons are effectively connected with
their conduct of a trade or business within the United States, the 30%, or lower
treaty rate, withholding will not
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apply. Instead, the amounts paid to such non-U.S. Person will be subject to U.S.
federal income taxation at regular graduated rates. For special restrictions on
the transfer of REMIC Residual Certificates, see "--Tax Related Restrictions on
Transfers of REMIC Residual Certificates" below.
REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.
TAX RELATED RESTRICTIONS ON TRANSFERS OF REMIC RESIDUAL CERTIFICATES
Disqualified Organizations. An entity may not qualify as a REMIC
unless there are reasonable arrangements designed to ensure that residual
interests in the entity are not held by "disqualified organizations". Further, a
tax is imposed on the transfer of a residual interest in a REMIC to a
"disqualified organization." The amount of the tax equals the product of (A) an
amount, as determined under the REMIC Regulations, equal to the present value of
the total anticipated "excess inclusions" with respect to such interest for
periods after the transfer and (B) the highest marginal federal income tax rate
applicable to corporations. The tax is imposed on the transferor unless the
transfer is through an agent, including a broker or other middleman, for a
disqualified organization, in which event the tax is imposed on the agent. The
person otherwise liable for the tax shall be relieved of liability for the tax
if the transferee furnished to such person an affidavit that the transferee is
not a disqualified organization and, at the time of the transfer, such person
does not have actual knowledge that the affidavit is false. A "disqualified
organization" means:
(A) the United States, any State, possession or political
subdivision thereof, any foreign government, any international
organization or any agency or instrumentality of any of the
foregoing (provided that such term does not include an
instrumentality if all its activities are subject to tax and,
except for FHLMC, a majority of its board of directors is not
selected by any such governmental agency);
(B) any organization, other than certain farmers' cooperatives,
generally exempt from federal income taxes unless such
organization is subject to the tax on "unrelated business
taxable income"; and
(C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" holding a residual
interest in a REMIC if at any time during the taxable year of the pass-through
entity a disqualified organization is the record holder of an interest in such
entity, provided that all partners of an "electing large partnership" as defined
in Section 775 of the Code, are deemed to be disqualified organizations. The
amount of the tax is equal to the product of (A) the amount of excess inclusions
for the taxable year allocable to the interest held by the disqualified
organization and (B) the highest marginal federal income tax rate applicable to
corporations. The pass-through entity otherwise liable for the tax, for any
period during which the disqualified organization is the record holder of an
interest in such entity, will be relieved of liability for the tax if such
record holder furnishes
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to such entity an affidavit that such record holder is not a disqualified
organization and, for such period, the pass-through entity does not have actual
knowledge that the affidavit is false. For this purpose, a "pass-through entity"
means:
o a regulated investment company, real estate investment trust
or common trust fund;
o a partnership, trust or estate; and
o certain cooperatives.
Except as may be provided in Treasury regulations not yet issued, any person
holding an interest in a pass-through entity as a nominee for another will, with
respect to such interest, be treated as a pass-through entity. Electing large
partnerships -- generally, non-service partnerships with 100 or more members
electing to be subject to simplified IRS reporting provisions under Code
sections 771 through 777 -- will be taxable on excess inclusion income as if all
partners were disqualified organizations.
In order to comply with these rules, the Agreement will provide that
no record or beneficial ownership interest in a REMIC Residual Certificate may
be purchased, transferred or sold, directly or indirectly, without the express
written consent of the master servicer. The master servicer will grant consent
to a proposed transfer only if it receives the following:
o an affidavit from the proposed transferee to the effect that
it is not a disqualified organization and is not acquiring the
REMIC Residual Certificate as a nominee or agent for a
disqualified organization, and
o a covenant by the proposed transferee to the effect that the
proposed transferee agrees to be bound by and to abide by the
transfer restrictions applicable to the REMIC Residual
Certificate.
Noneconomic REMIC Residual Certificates. The REMIC Regulations
disregard, for federal income tax purposes, any transfer of a Noneconomic REMIC
Residual Certificate to a U.S. Person unless no significant purpose of the
transfer is to enable the transferor to impede the assessment or collection of
tax. A Noneconomic REMIC Residual Certificate is any REMIC Residual Certificate,
including a REMIC Residual Certificate with a positive value at issuance,
unless, at the time of transfer, taking into account the Prepayment Assumption
and any required or permitted clean up calls or required liquidation provided
for in the REMIC's organizational documents,
o the present value of the expected future distributions on the
REMIC Residual Certificate at least equals the product of the
present value of the anticipated excess inclusions and the
highest corporate income tax rate in effect for the year in
which the transfer occurs and
o the transferor reasonably expects that the transferee will
receive distributions from the REMIC at or after the time at
which taxes accrue on the anticipated excess inclusions in an
amount sufficient to satisfy the accrued taxes.
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A significant purpose to impede the assessment or collection of tax exists if
the transferor, at the time of the transfer, either knew or should have known
that the transferee would be unwilling or unable to pay taxes due on its share
of the taxable income of the REMIC. A transferor is presumed not to have such
knowledge if:
o the transferor conducted a reasonable investigation of the
transferee, and
o the transferee acknowledges to the transferor that the
residual interest may generate tax liabilities in excess of
the cash flow and the transferee represents that it intends to
pay such taxes associated with the residual interest as they
become due.
Under Regulations proposed by the IRS on February 4, 2000, which, if
finalized are effective as of that date, a transferor will be presumed not to
have such knowledge only if the above two conditions are satisfied, and the
present value of the anticipated tax liability of the transferee associated with
holding the residual interest does not exceed the sum of the consideration paid
to the transferee to acquire the interest, the present value of expected future
distributions from the interest, and the present value of anticipated future tax
losses from the interest. In making this determination, it will be assumed that
the transferee is subject to tax at the highest corporate rate, and the discount
rate to be used will be the applicable federal rate under Code Section 1274
(compounded semiannually) unless the transferee demonstrates a lower cost of
funds.
If a transfer of a Noneconomic REMIC Residual Certificate is disregarded, the
transferor would continue to be treated as the owner of the REMIC Residual
Certificate and would continue to be subject to tax on its allocable portion of
the net income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the transfer
of a REMIC Residual Certificate that has a "tax avoidance potential" to a
"foreign person" will be disregarded for federal income tax purposes. This rule
appears to apply to a transferee who is not a U.S. Person unless the
transferee's income in respect of the REMIC Residual Certificate is effectively
connected with the conduct of a United Sates trade or business. A REMIC Residual
Certificate is deemed to have a tax avoidance potential unless, at the time of
transfer, the transferor reasonably expects that the REMIC will distribute to
the transferee amounts that will equal at least 30 percent of each excess
inclusion, and that such amounts will be distributed at or after the time the
excess inclusion accrues and not later than the end of the calendar year
following the year of accrual. If the non-U.S. Person transfers the REMIC
Residual Certificate to a U.S. Person, the transfer will be disregarded, and the
foreign transferor will continue to be treated as the owner, if the transfer has
the effect of allowing the transferor to avoid tax on accrued excess inclusions.
The provisions in the REMIC Regulations regarding transfers of REMIC Residual
Certificates that have tax avoidance potential to foreign persons are effective
for all transfers after June 30, 1992. The Agreement will provide that no record
or beneficial ownership interest in a REMIC Residual Certificate may be
transferred, directly or indirectly, to a non-U.S. Person unless the person
provides the trustee with a duly completed IRS Form 4224 or applicable successor
form adopted by the IRS for such purpose and the trustee consents to the
transfer in writing.
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Any attempted transfer or pledge in violation of the transfer
restrictions shall be absolutely null and void and shall vest no rights in any
purported transferee. Investors in REMIC Residual Certificates are advised to
consult their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax which may be imposed on a
pass-through entity.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in
"Federal Income Tax Consequences," potential investors should consider the state
income tax consequences of the acquisition, ownership, and disposition of the
offered certificates. State income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state. Therefore, potential investors
should consult their own tax advisors with respect to the various tax
consequences of investments in the offered certificates.
ERISA CONSIDERATIONS
GENERAL
Title I of ERISA and Section 4975 of the Code impose restrictions on
ERISA Plans, certain other Plans and on persons who are parties in interest or
disqualified persons with respect to ERISA Plans. Employee benefit plans, such
as governmental plans and church plans (if no election has been made under
Section 410(d) of the Code), are not subject to the restrictions of ERISA, and
assets of those plans may be invested in the certificates without regard to the
ERISA considerations described in this section, subject to other applicable
federal, state or local law. However, any such governmental or church plan which
is qualified under Section 401(a) of the Code and exempt from taxation under
Section 501(a) of the Code is subject to the prohibited transaction rules set
forth in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in
accordance with the documents governing the ERISA Plan.
PROHIBITED TRANSACTIONS
GENERAL
Section 406 of ERISA prohibits parties in interest with respect to
an ERISA Plan from engaging in certain transactions involving such Plan and its
assets unless a statutory, regulatory or administrative exemption applies to the
transaction. In some cases, a civil penalty may be assessed on non-exempt
prohibited transactions pursuant to Section 502(i) of ERISA. Section 4975 of the
Code imposes excise taxes on similar transactions between Plans, subject thereto
and disqualified persons with respect to such.
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The United States Department of Department of Labor has issued a
final regulation (29 C.F.R. Section 2510.3-101) containing rules for determining
what constitutes the assets of a Plan. This regulation provides that, as a
general rule, the underlying assets and properties of corporations,
partnerships, trusts and some other entities in which a Plan makes an "equity
investment" will be deemed for purposes of ERISA and Section 4975 of the Code to
be assets of the Plan unless exceptions apply.
Under the terms of the regulation, the trust fund may be deemed to
hold plan assets by reason of a Plan's investment in a certificate; such plan
assets would include an undivided interest in the mortgage loans and any other
assets held by the trust fund. In such an event, Morgan Stanley Dean Witter
Capital I Inc., the master servicer, any subservicer, the trustee, any insurer
of the mortgage loans or MBS and other persons, in providing services with
respect to the assets of the trust fund, may become fiduciaries subject to the
fiduciary responsibility provisions of Title I of ERISA, or may otherwise become
parties in interest or disqualified persons, with respect to such Plan. In
addition, transactions involving such assets could constitute or result in
prohibited transactions under Section 406 of ERISA or Section 4975 of the Code
unless such transactions are subject to a statutory, regulatory or
administrative exemption.
The regulations contain a de minimis safe-harbor rule that exempts
the assets of an entity from plan assets status as long as the aggregate equity
investment in such entity by plans is not significant. For this purpose, equity
participation in the entity will be significant if immediately after any
acquisition of any equity interest in the entity, "benefit plan investors" in
the aggregate, own 25% or more of the value of any class of equity interest,
excluding from the calculation, the value of equity interests held by persons
who have discretionary authority or control with respect to the assets of the
entity or held by affiliates of such persons. "Benefit plan investors" are
defined as Plans as well as employee benefit plans not subject to Title I of
ERISA, e.g., governmental plans and foreign plans and entities whose underlying
assets include plan assets by reason of plan investment in such entities. To fit
within the safe harbor benefit plan, investors must own less than 25% of each
class of equity interests, regardless of the portion of total equity value
represented by such class, on an ongoing basis.
AVAILABILITY OF UNDERWRITER'S EXEMPTION FOR CERTIFICATES
DOL has granted to Morgan Stanley & Co. Incorporated Prohibited
Transaction Exemption 90-24, Exemption Application No. D-8019, 55 Fed. Reg.
20548 (1990) (the "Exemption") which exempts from the application of the
prohibited transaction rules transactions relating to:
o the acquisition, sale and holding by Plans of certain
certificates representing an undivided interest in certain
asset-backed pass-through trusts, with respect to which Morgan
Stanley & Co. Incorporated or any of its affiliates is the
sole underwriter or the manager or co-manager of the
underwriting syndicate; and
o the servicing, operation and management of such asset-backed
pass-through trusts, provided that the general conditions and
certain other conditions set forth in the Exemption are
satisfied.
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The Exemption sets forth the following general conditions which must
be satisfied before a transaction involving the acquisition, sale and holding of
the certificates or a transaction in connection with the servicing, operation
and management of the trust fund may be eligible for exemptive relief
thereunder:
(1) The acquisition of the certificates by a Plan is on terms--
including the price for such certificates--that are at least
as favorable to the investing Plan as they would be in an
arm's-length transaction with an unrelated party;
(2) The rights and interests evidenced by the certificates
acquired by the Plan are not subordinated to the rights and
interests evidenced by other certificates of the trust fund
with respect to the right to receive payment in the event of
default or delinquencies in the underlying assets of the trust
fund;
(3) The certificates acquired by the Plan have received a rating
at the time of the acquisition that is in one of the three
highest generic rating categories from any of Fitch, Inc.,
Moody's Investors Service, Inc. and Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc.;
(4) The trustee is not an affiliate of the Restricted Group;
(5) The sum of all payments made to and retained by the
underwriter in connection with the distribution of the
certificates represents not more than reasonable compensation
for underwriting the certificates; the sum of all payments
made to and retained by the Asset Seller pursuant to the sale
of the mortgage loans to the trust fund represents not more
than the fair market value of the mortgage loans; the sum of
all payments made to and retained by any servicer represent
not more than reasonable compensation for the servicer's
services under the Agreement and reimbursement of the
servicer's reasonable expenses in connection therewith; and
(6) The Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of
1933 as amended.
The trust fund must also meet the following requirements:
o the corpus of the trust fund must consist solely of assets of
the type that have been included in other investment pools;
o certificates evidencing interests in other investment pools
must have been rated in one of the three highest rating
categories of a Rating Agency for at least one year prior to
the Plan's acquisition of the Securities; and
o certificates evidencing interests in other investment pools
must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of the
Securities.
Moreover, the Exemption provides relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
any person who has discretionary authority or
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renders investment advice with respect to the investment of plan assets causes a
Plan to acquire certificates in a trust fund, provided that, among other
requirements:
o the person or its affiliate is an obligor with respect to five
percent or less of the fair market value of the obligations or
receivables contained in the trust fund;
o the Plan is not a plan with respect to which any member of the
Restricted Group is the "plan sponsor" as defined in Section
3(16)(B) of ERISA;
o in the case of an acquisition in connection with the initial
issuance of certificates, at least fifty percent of each class
of certificates in which Plans have invested is acquired by
persons independent of the Restricted Group and at least fifty
percent of the aggregate interest in the trust fund is
acquired by persons independent of the Restricted Group;
o a Plan's investment in certificates of any class does not
exceed twenty-five percent of all of the certificates of that
class outstanding at the time of the acquisition; and
o immediately after the acquisition, no more than twenty-five
percent of the assets of any Plan with respect to which the
person has discretionary authority or renders investment
advice are invested in certificates representing an interest
in one or more trusts containing assets sold or serviced by
the same entity.
The Exemption does not apply to Plans sponsored by the Restricted Group
Before purchasing a certificate in reliance on the Exemption, a
fiduciary of a Plan should itself confirm
o that the certificates constitute "certificates" for purposes
of the Exemption and
o that the general conditions and other requirements set forth
in the Exemption would be satisfied.
REVIEW BY PLAN FIDUCIARIES
Any Plan fiduciary considering whether to purchase any certificates
on behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of ERISA
and the Code to such investment. Among other things, before purchasing any
certificates, a fiduciary of a Plan should make its own determination as to the
availability of the exemptive relief provided in the Exemption, and also
consider the availability of any other prohibited transaction exemptions. In
this regard, purchasers that are insurance companies should determine the extent
to which Prohibited Transaction Class Exemption 95-60 -- for certain
transactions involving insurance company general accounts -- may be available.
The prospectus supplement with respect to a series of certificates may contain
additional information regarding the application of the Exemption, Prohibited
Transaction Class Exemption 83-1 for certain transactions involving mortgage
pool investment trusts, or any other exemption, with respect to the certificates
offered by the related prospectus supplement.
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LEGAL INVESTMENT
The prospectus supplement for each series of offered certificates
will identify those classes of offered certificates, if any, which constitute
"mortgage related securities" for purposes of the SMMEA. Generally, only those
classes of offered certificates that
o are rated in one of the two highest rating categories by one
or more Rating Agencies and
o are part of a series representing interests in a trust fund
consisting of mortgage loans or MBS, provided that the
mortgage loans or the mortgage loans underlying the MBS are
secured by first liens on mortgaged property and were
originated by certain types of originators as specified in
SMMEA, will be the SMMEA Certificates.
As "mortgage related securities," the SMMEA Certificates will constitute legal
investments for persons, trusts, corporations, partnerships, associations,
business trusts and business entities, including, but not limited to, depository
institutions, insurance companies, trustees and pension funds created pursuant
to or existing under the laws of the United States or of any state, including
the District of Columbia and Puerto Rico, whose authorized investments are
subject to state regulation to the same extent that, under applicable law,
obligations issued by or guaranteed as to principal and interest by the United
States or any agency or instrumentality thereof constitute legal investments for
such entities. Pursuant to SMMEA, a number of states enacted legislation, on or
before the October 3, 1991 cut off, for such enactments, limiting to varying
extents the ability of certain entities, in particular, insurance companies, to
invest in mortgage related securities, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Riegle Community Development and Regulatory Improvement Act
of 1994, which amended the definition of "mortgage related security" to include,
in relevant part, offered certificates satisfying the rating, first lien and
qualified originator requirements for "mortgage related securities," but
representing interests in a trust fund consisting, in whole or in part, of first
liens on one or more parcels of real estate upon which are located one or more
commercial structures, states were authorized to enact legislation, on or before
September 23, 2001, specifically referring to Section 347 and prohibiting or
restricting the purchase, holding or investment by state-regulated entities in
such types of offered certificates. Section 347 also provides that the enactment
by a state of any such legislative restrictions shall not affect the validity of
any contractual commitment to purchase, hold or invest in securities qualifying
as "mortgage related securities" solely by reason of Section 347 that was made,
and shall not require the sale or disposition of any securities acquired, prior
to the enactment of such state legislation. Accordingly, investors affected by
such legislation, when and if enacted, will be authorized to invest in SMMEA
Certificates only to the extent provided in such legislation.
SMMEA also amended the legal investment authority of
federally-chartered depository institutions as follows: federal savings and loan
associations and federal savings banks may invest in, sell or otherwise deal in
"mortgage related securities" without limitation as to the percentage of their
assets represented thereby, federal credit unions may invest in such securities,
and national banks may purchase such securities for their own account without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. ss. 24 (Seventh),
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subject in each case to such regulations as the applicable federal regulatory
authority may prescribe. In this connection, the OCC has amended 12 C.F.R. Part
1 to authorize national banks to purchase and sell for their own account,
without limitation as to a percentage of the bank's capital and surplus (but
subject to compliance with certain general standards in 12 C.F.R. ss. 1.5
concerning "safety and soundness" and retention of credit information, certain
"Type IV securities," defined in 12 C.F.R. ss. 1.2(1) to include certain
"commercial mortgage-related securities" and "residential mortgage-related
securities." As so defined, "commercial mortgage-related security" and
"residential mortgage-related security" mean, in relevant part,
"mortgage-related security" within the meaning of SMMEA, provided that, in the
case of a "commercial mortgage-related security," it "represents ownership of a
promissory note or certificate of interest or participation that is directly
secured by a first lien on one or more parcels of real estate upon which one or
more commercial structures are located and that is fully secured by interests in
a pool of loans to numerous obligors." In the absence of any rule or
administrative interpretation by the OCC defining the term "numerous obligors,"
no representation is made as to whether any class of offered certificates will
qualify as "commercial mortgage-related securities," and thus as "Type IV
securities," for investment by national banks. The NCUA has adopted rules,
codified at 12 C.F.R. Part 703, which permit federal credit unions to invest in
"mortgage related securities" under certain limited circumstances, other than
stripped mortgage related securities, residual interests in mortgage related
securities, and commercial mortgage related securities, unless the credit union
has obtained written approval from the NCUA to participate in the "investment
pilot program" described in 12 C.F.R. ss. 703.140. The OTS has issued Thrift
Bulletin 13a (December 1, 1998), "Management of Interest Rate Risk, Investment
Securities, and Derivative Activities," which thrift institutions subject to the
jurisdiction of the OTS should consider before investing in any of the offered
certificates.
All depository institutions considering an investment in the offered
certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of
the Federal Financial Institutions Examination Council, which has been adopted
by the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the OCC and the OTS effective May 26, 1998, and by the
NCUA, effective October 1, 1998. The 1998 Policy Statement sets forth general
guidelines which depository institutions must follow in managing risks,
including market, credit, liquidity, operational (transaction), and legal risks,
applicable to all securities, including mortgage pass-through securities and
mortgage-derivative products, used for investment purposes.
Institutions whose investment activities are subject to regulation
by federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any offered
certificates, as certain series or classes may be deemed to be unsuitable
investments, or may otherwise be restricted, under such rules, policies or
guidelines, in certain instances irrespective of SMMEA.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," and, with regard to any offered certificates
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issued in book-entry form, provisions which may restrict or prohibit investments
in securities which are issued in book-entry form.
If specified in the related prospectus supplement, other classes of
offered certificates offered pursuant to this prospectus will not constitute
"mortgage related securities" under SMMEA. The appropriate characterization of
such offered certificates under various legal investment restrictions, and thus
the ability of investors subject to these restrictions to purchase such offered
certificates, may be subject to significant interpretive uncertainties.
Except as to the status of the classes of offered certificates
identified in the prospectus supplement for a series as "mortgage related
securities" under SMMEA, no representations are made as to the proper
characterization of the offered certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase any offered certificates under
applicable legal investment restrictions. The uncertainties described in this
section and any unfavorable future determinations concerning legal investment or
financial institution regulatory characteristics of the offered certificates may
adversely affect the liquidity of the offered certificates. Accordingly, all
investors whose investment activities are subject to legal investment laws and
regulations, regulatory capital requirements, or review by regulatory
authorities should consult with their own legal advisors in determining whether
and to what extent the offered certificates of any class constitute legal
investments or are subject to investment, capital or other restrictions, and, if
applicable, whether SMMEA has been overridden in any jurisdiction relevant to
such investor.
PLAN OF DISTRIBUTION
The offered certificates offered hereby and by the Supplements to
this prospectus will be offered in series. The distribution of the certificates
may be effected from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
to be determined at the time of sale or at the time of commitment therefor. If
so specified in the related prospectus supplement, the offered certificates will
be distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by Morgan Stanley & Co. Incorporated
acting as underwriter with other underwriters, if any, named in the prospectus
supplement. In such event, the prospectus supplement may also specify that the
underwriters will not be obligated to pay for any offered certificates agreed to
be purchased by purchasers pursuant to purchase agreements acceptable to Morgan
Stanley Dean Witter Capital I Inc.. In connection with the sale of offered
certificates, underwriters may receive compensation from Morgan Stanley Dean
Witter Capital I Inc. or from purchasers of offered certificates in the form of
discounts, concessions or commissions. The prospectus supplement will describe
any such compensation paid by Morgan Stanley Dean Witter Capital I Inc..
Alternatively, the prospectus supplement may specify that offered
certificates will be distributed by Morgan Stanley & Co. Incorporated acting as
agent or in some cases as principal with respect to offered certificates that it
has previously purchased or agreed to purchase. If Morgan Stanley & Co.
Incorporated acts as agent in the sale of offered certificates, Morgan Stanley &
Co. Incorporated will receive a selling commission with respect to such offered
certificates, depending on market conditions, expressed as a percentage of the
aggregate certificate Balance or Notional Amount of such offered certificates as
of the Cut-off Date. The
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exact percentage for each series of certificates will be disclosed in the
related prospectus supplement. To the extent that Morgan Stanley & Co.
Incorporated elects to purchase offered certificates as principal, Morgan
Stanley & Co. Incorporated may realize losses or profits based upon the
difference between its purchase price and the sales price. The prospectus
supplement with respect to any series offered other than through underwriters
will contain information regarding the nature of such offering and any
agreements to be entered into between Morgan Stanley Dean Witter Capital I Inc.
and purchasers of offered certificates of such series.
Morgan Stanley Dean Witter Capital I Inc. will indemnify Morgan
Stanley & Co. Incorporated and any underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933, or will
contribute to payments Morgan Stanley & Co. Incorporated and any underwriters
may be required to make.
In the ordinary course of business, Morgan Stanley & Co.
Incorporated and Morgan Stanley Dean Witter Capital I Inc. may engage in various
securities and financing transactions, including repurchase agreements to
provide interim financing of Morgan Stanley Dean Witter Capital I Inc.'s
mortgage loans pending the sale of such mortgage loans or interests in the
mortgage loans, including the certificates.
Offered certificates will be sold primarily to institutional
investors. Purchasers of offered certificates, including dealers, may, depending
on the facts and circumstances of the purchases, be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 in connection with reoffers and
sales by them of offered certificates. Certificateholders should consult with
their legal advisors in this regard prior to any such reoffer or sale.
If specified in the prospectus supplement relating to certificates
of a particular series offered hereby, Morgan Stanley Dean Witter Capital I
Inc., any affiliate thereof or any other person or persons specified in the
prospectus supplement may purchase some or all of the certificates of any series
from Morgan Stanley & Co. Incorporated and any other underwriters thereof. This
purchaser may thereafter from time to time offer and sell, pursuant to this
prospectus and the related prospectus supplement, some or all of the
certificates so purchased, directly, through one or more underwriters to be
designated at the time of the offering of the certificates, through dealers
acting as agent or principal or in such other manner as may be specified in the
related prospectus supplement. The offering may be restricted in the manner
specified in the prospectus supplement. The transactions may be effected at
market prices prevailing at the time of sale, at negotiated prices or at fixed
prices. Any underwriters and dealers participating in the purchaser's offering
of the certificates may receive compensation in the form of underwriting
discounts or commissions from such purchaser and such dealers may receive
commissions from the investors purchasing the certificates for whom they may act
as agent (which discounts or commissions will not exceed those customary in
those types of transactions involved). Any dealer that participates in the
distribution of the certificates may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any commissions and discounts received by
such dealer and any profit on the resale or such certificates by such dealer
might be deemed to be underwriting discounts and commissions under the
Securities Act.
All or part of any Class of certificates may be reacquired by Morgan
Stanley Dean Witter Capital I Inc. or acquired by an affiliate of Morgan Stanley
Dean Witter Capital I Inc. in a secondary market transaction or from an
affiliate, including Morgan Stanley & Co. Incorporated.
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Such certificates may then be included in a trust fund, the beneficial ownership
of which will be evidenced by one or more classes of mortgage-backed
certificates, including subsequent series of certificates offered pursuant to
this prospectus and a prospectus supplement.
As to each series of certificates, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any non-investment-grade class may be initially retained by Morgan Stanley Dean
Witter Capital I Inc., and may be sold by Morgan Stanley Dean Witter Capital I
Inc. at any time in private transactions.
LEGAL MATTERS
Certain legal matters in connection with the certificates, including
certain federal income tax consequences, will be passed upon for Morgan Stanley
Dean Witter Capital I Inc. by Cadwalader, Wickersham & Taft or Latham & Watkins,
or Brown & Wood LLP or such other counsel as may be specified in the related
prospectus supplement.
FINANCIAL INFORMATION
A new trust fund will be formed with respect to each series of
certificates and no trust fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
certificates. Accordingly, no financial statements with respect to any trust
fund will be included in this prospectus or in the related prospectus
supplement.
RATING
It is a condition to the issuance of any class of offered
certificates that they shall have been rated not lower than investment grade,
that is, in one of the four highest rating categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood
of receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by borrowers or of the degree by which such prepayments
might differ from those originally anticipated. As a result, certificateholders
might suffer a lower than anticipated yield, and, in addition, holders of
stripped interest certificates in extreme cases might fail to recoup their
initial investments.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each security rating should be evaluated
independently of any other security rating.
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INCORPORATION OF INFORMATION BY REFERENCE
Morgan Stanley Dean Witter Capital I Inc., as depositor, will file,
or cause to be filed, with the Commission, the periodic reports with respect to
each trust fund required under the Exchange Act and the rules and regulations of
the Commission.
All documents and reports filed, or caused to be filed, by Morgan
Stanley Dean Witter Capital I Inc. with respect to a trust fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of an offering of certificates are incorporated in this prospectus by reference.
Each person to whom this prospectus is delivered may obtain, without charge,
from Morgan Stanley Dean Witter Capital I Inc. a copy of any documents or
reports relating to the certificates being offered. (Exhibits to those documents
may only be obtained if they are specifically incorporated by reference in those
documents.) Requests for this information should be directed in writing to
Morgan Stanley Dean Witter Capital I Inc., c/o Morgan Stanley & Co.
Incorporated, 1585 Broadway, 37th Floor, New York, New York 10036, Attention:
John E. Westerfield, or by telephone at (212) 761-4700. Morgan Stanley Dean
Witter Capital I Inc. has determined that its financial statements are not
material to the offering of any certificates.
Morgan Stanley Dean Witter Capital I Inc. has filed with the
Securities and Exchange Commission a registration statement (of which this
prospectus forms a part) under the Securities Act of 1933, as amended, with
respect to the offered certificates. This prospectus and the accompanying
prospectus supplement do not contain all of the information set forth in the
registration statement. For further information regarding the documents referred
to in this prospectus and the accompanying prospectus supplement, you should
refer to the registration statement and the exhibits thereto. The registration
statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its regional
offices located as follows: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661; and New York Regional Office, Seven
World Trade Center, New York, New York 10048.
If some or all of the mortgage loans owned by a trust fund are
secured by an assignment of lessors' rights in one or more leases, rental
payments due from the lessees may be a significant source (or even the sole
source) of distributions on the certificates. In these circumstances, reference
should be made to the related prospectus supplement for information concerning
the lessees and whether any of those lessees are subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, as amended.
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GLOSSARY OF TERMS
The certificates will be issued pursuant to the Agreement. The
following Glossary of Terms is not complete. You should also refer to the
prospectus supplement and the Agreement for additional or more complete
definitions. If you send a written request to the trustee at its corporate
office, the trustee will provide to you without charge a copy of the Agreement
(without exhibits and schedules).
Unless the context requires otherwise, the definitions contained in
this Glossary of Terms apply only to this series of certificates.
"Accrual Certificates" means certificates which provide for
distributions of accrued interest commencing only following the occurrence of
certain events, such as the retirement of one or more other classes of
certificates of such series.
"Accrued Certificate Interest" means, with respect to each class of
certificates and each Distribution Date, other than certain classes of Stripped
Interest Certificates, the amount equal to the interest accrued for a specified
period on the outstanding Certificate Balance immediately prior to the
Distribution Date, at the applicable pass-through rate, as described in
"Distributions of Interest on the Certificates" in this prospectus.
"Agreement" means the Pooling Agreement or the Trust Agreement, as
applicable.
"Amortizable Bond Premium Regulations" means final regulations
issued by the IRS which deal with the amortizable bond premium.
"Assets" means the primary assets included in a trust fund.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended (Title 11 of the United States Code).
"Book-Entry Certificates" means Certificates which are in book-entry
form.
"Cash Flow Agreements" means guaranteed investment contracts or
other agreements, such as interest rate exchange agreements, interest rate cap
or floor agreements, currency exchange agreements or similar agreements provided
to reduce the effects of interest rate or currency exchange rate fluctuations on
the assets or on one or more classes of certificates.
"Cede" means Cede & Company.
"CERCLA" means Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Certificate Account" means one or more separate accounts for the
collection of payments on the related assets.
"Certificate Balance" equals the maximum amount that a holder of a
certificate will be entitled to receive in respect of principal out of future
cash flow on the mortgage loans and other assets included in the trust fund.
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"Certificate Owners" means, with respect to a book-entry
certificate, the person who is the beneficial owner of such book-entry
certificate, as may be reflected on the books of the clearing agency, or on the
books of a Person maintaining an account with such clearing agency, directly or
as an indirect participant, in accordance with the rules of such clearing
agency.
"Certificateholder" means, unless otherwise provided in the related
prospectus supplement, Cede, as nominee of DTC.
"Certificates" means any of the certificates issued, in one or more
series, by Morgan Stanley Dean Witter Capital I Inc.
"Closing Date" means the date the REMIC Regular Certificates were
initially issued.
"Commercial Loans" means the loans relating to the Commercial
Properties.
"Commercial Properties" means office buildings, shopping centers,
retail stores, hotels or motels, nursing homes, hospitals or other health
care-related facilities, mobile home parks, warehouse facilities, mini-warehouse
facilities or self-storage facilities, industrial plants, congregate care
facilities, mixed use or other types of commercial properties.
"Constant Prepayment Rate" or "CPR" means a rate that represents an
assumed constant rate of prepayment each month (which is expressed on a per
annum basis) relative to the then outstanding principal balance of a pool of
mortgage loans for the life of such mortgage loans. CPR does not purport to be
either a historical description of the prepayment experience of any pool of
mortgage loans or a prediction of the anticipated rate of prepayment of any
mortgage loans.
"Contributions Tax" means a tax on the trust fund equal to 100% of
the value of the contributed property.
"Credit Support" means subordination of one or more other classes of
certificates in a series or by one or more other types of credit support, such
as a letter of credit, insurance policy, guarantee, reserve fund or another type
of credit support, or a combination thereof.
"Crime Control Act" means the Comprehensive Crime Control Act of
1984.
"Cut-off Date" means a day in the month of formation of the related
trust fund, as defined in the prospectus supplement.
"Debt Service Coverage Ratio" means, with respect to a mortgage loan
at any given time, the ratio of the Net Operating Income for a twelve-month
period to the annualized scheduled payments on the mortgage loan.
"Deferred Interest" means interest deferred by reason of negative
amortization.
"Definitive Certificate" means a fully registered physical
certificate.
"Depositor" means Morgan Stanley Dean Witter Capital I Inc.
"Determination Date" means the close of business on the date
specified in the related prospectus supplement.
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"Disqualifying Condition" means a condition, existing as a result
of, or arising from, the presence of Hazardous Materials on a mortgaged
property, such that the mortgage loan secured by the affected mortgaged property
would be ineligible, solely by reason of such condition, for purchase by FNMA
under the relevant provisions of FNMA's Multifamily Seller/Servicer Guide in
effect as of the date of initial issuance of the certificates of such series,
including a condition that would constitute a material violation of applicable
federal state or local law in effect as of their date of initial issuance of the
certificates of such series.
"Distribution Date" means each of the dates on which distributions
to certificateholders are to be made.
"DOL" means the United States Department of Department of Labor.
"DTC" means the Depository Trust Company.
"Due Period" means the period which will commence on the second day
of the month in which the immediately preceding Distribution Date occurs, or the
day after the Cut-off Date in the case of the first Due Period, and will end on
the first day of the month of the related Distribution Date.
"Environmental Hazard Condition" means any condition or circumstance
that may give rise to an environmental claim.
"Equity Participations" means provisions entitling the lender to a
share of profits realized from the operation or disposition of a mortgaged
property, as described in the related prospectus supplement.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Plans" means employee benefit plans subject to ERISA.
"Events of Default" means, with respect to the master servicer under
the Pooling Agreement, any one of the following events:
o any failure by the master servicer to distribute or cause to
be distributed to certificateholders, or to remit to the
trustee for distribution to certificateholders, any required
payment;
o any failure by the master servicer duly to observe or perform
in any material respect any of its other covenants or
obligations under the Pooling Agreement which continues
unremedied for thirty days after written notice of such
failure has been given to the master servicer by the trustee
or Morgan Stanley Dean Witter Capital I Inc., or to the master
servicer, Morgan Stanley Dean Witter Capital I Inc. and the
trustee by the holders of certificates evidencing not less
than 25% of the Voting Rights;
o any breach of a representation or warranty made by the master
servicer under the Pooling Agreement which materially and
adversely affects the interests of certificateholders and
which continues unremedied for thirty days after written
notice of such breach has been given to the master servicer by
the trustee or
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Morgan Stanley Dean Witter Capital I Inc., or to the master
servicer, Morgan Stanley Dean Witter Capital I Inc. and the
trustee by the holders of certificates evidencing not less
than 25% of the Voting Rights; and
o certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings
and certain actions by or on behalf of the master servicer
indicating its insolvency or inability to pay its obligations.
"Excess Servicing" means servicing fees in excess of reasonable
servicing fees.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"FNMA" means the Federal National Mortgage Association.
"Government Securities" means direct obligations of the United
States, agencies thereof or agencies created thereby which are not subject to
redemption prior to maturity at the option of the issuer and are:
(a) interest-bearing securities;
(b) non-interest-bearing securities;
(c) originally interest-bearing securities from which coupons
representing the right to payment of interest have been removed; or
(d) interest-bearing securities from which the right to payment of
principal has been removed.
"Index" means the source for determination of an interest rate, to
be defined, if applicable, in the related prospectus supplement.
"Indirect Participants" means entities, such as banks, brokers,
dealers and trust companies, that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly.
"Insurance Proceeds" means proceeds of rental interruption policies,
if any, insuring against losses arising from the failure of lessees under a
lease to make timely rental payments because of casualty events.
"Liquidation Proceeds" means all other amounts received and retained
in connection with the liquidation of defaulted mortgage loans in the trust
fund, by foreclosure or otherwise.
"Loan to Value Ratio" or "LTV" means
"Lockout Date" means the expiration of the Lockout Period.
"Lockout Period" means a period during which prepayments on a
mortgage loan are prohibited.
"Market-to-Market Regulations" means the finalized IRS regulations
which provide that a REMIC Residual Certificate acquired after January 3, 1995
cannot be marked to market.
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"Master Servicer" means an entity as named in the prospectus
supplement.
"MBS" means mortgage participations, pass-through certificates or
other mortgage-backed securities evidencing interests in or secured by one or
more mortgage loans or other similar participations, certificates or securities.
"MBS Agreement" means any participation and servicing agreement,
pooling agreement, trust agreement, an indenture or similar agreement with
respect to the MBS.
"Mortgage" means a mortgage, deed of trust or other similar security
instrument.
"Mortgage Loans" means the multifamily mortgage loans or the
commercial mortgage loans or both included in a trust fund. As used in this
prospectus, mortgage loans refers to both whole mortgage loans and mortgage
loans underlying MBS.
"Mortgage Note" means a promissory note evidencing a respective
mortgage loan.
"Mortgage Rate" means the interest rate for a mortgage loan which
provides for no accrual of interest or for accrual of interest thereon at an
interest rate that is fixed over its term or that adjusts from time to time, or
that may be converted from an adjustable to a fixed mortgage rate, or from a
fixed to an adjustable mortgage rate, from time to time pursuant to an election
or as otherwise specified on the related mortgage note, in each case as
described in the related prospectus supplement.
"Multifamily Loans" means the loans relating to the Multifamily
Properties.
"Multifamily Properties" means residential properties consisting of
five or more rental or cooperatively-owned dwelling units in high-rise, mid-rise
or garden apartment buildings.
"NCUA" means the National Credit Union Administration.
"Net Operating Income" means, for any given period, to the extent
set forth in the related prospectus supplement, the total operating revenues
derived from a mortgaged property during that period, minus the total operating
expenses incurred in respect of the mortgaged property during that period other
than:
o non-cash items such as depreciation and amortization;
o capital expenditures; and
o debt service on loans secured by the mortgaged property.
"New Regulations" means the regulations issued by the Treasury
Department on October 6, 1997.
"Nonrecoverable Advance" means an advance that is not ultimately
recoverable from Related Proceeds or from collections on other assets otherwise
distributable on Subordinate Certificates.
"Notional Amount" means [the aggregate Certificate Balance of each
of the Class [ ], Class [ ], Class [ ] and Class [ ] Certificates outstanding
from time to time, plus the amount of
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any unpaid interest shortfall on these classes] or [the sum of the balance of
components which correspond to the Certificate Balance of the Class [ ], Class
[ ], Class [ ] and Class [ ] Certificates].
"OCC" means the Office of the Comptroller of the Currency.
"OID" means original issue discount.
"OID Regulations" means the special rules of the Code relating to
OID (currently Code Sections 1271 through 1273 and 1275) and Treasury
regulations issued on January 27, 1994.
"OTS" means the Office of Thrift Supervision.
"Participants" means the participating organizations of DTC.
"Pass-Through Rate" means the fixed, variable or adjustable rate per
annum at which any class of certificates accrues interest.
"Payment Lag Certificates" means certain of the REMIC Regular
Certificates.
"Permitted Investments" means United States government securities
and other investment grade obligations specified in the Pooling Agreement.
"Plans" means ERISA Plans and other relevant plans and consequences,
including but not limited to individual retirement accounts and annuities.
"Pooling Agreement" means the Agreement under which certificates of
a series evidencing interests in a trust fund including Whole Loans will be
issued.
"Pre-Issuance Accrued Interest" means interest that has accrued
prior to the issue date.
"Prepayment Assumption" means the original yield to maturity of the
grantor trust certificate calculated based on a reasonable assumed prepayment
rate for the mortgage loans underlying the grantor trust certificates.
"Prepayment Premium" means with respect to any Distribution Date,
the aggregate of all Yield Maintenance Payments, or Percentage Premiums, if any,
received during the related Collection Period in connection with Principal
Prepayments.
"Prohibited Transactions Tax" means the tax the Code imposes on
REMICs equal to 100% of the net income derived from "prohibited transactions."
"Purchase Price" means, with respect to any Whole Loan and to the
extent set forth in the related prospectus supplement, the amount that is equal
to the sum of the unpaid principal balance, plus unpaid accrued interest at the
mortgage rate from the date as to which interest was last paid to the due date
in the Due Period in which the relevant purchase is to occur, plus certain
servicing expenses that are reimbursable to the master servicer.
"Rating Agency" means any of Duff & Phelps Credit Rating Co., Fitch
IBCA, Inc., Moody's Investors Service, Inc. and Standard & Poor's Ratings
Services.
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"RCRA" means the Resource Conservation and Recovery Act.
"Record Date" means the last business day of the month immediately
preceding the month in which the Distribution Date for a class of certificates
occurs.
"Refinance Loans" means mortgage loans made to refinance existing
loans.
"Related Proceeds" means related recoveries on the mortgage loans,
including amounts received under any form of Credit Support, for which advances
were made.
"Relief Act" means the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"REMIC Certificates" means a certificate issued by a trust fund
relating to a series of certificate where an election is made to treat the trust
fund as a REMIC.
"REMIC Provisions" means provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of Subchapter M of Chapter 1 of the Internal Revenue Code of
1986, as amended from time to time, and related provisions, and regulations
(including any proposed regulations) and rulings promulgated thereunder, as the
foregoing may be in effect from time to time.
"REMIC Regular Certificates" means REMIC Certificates issued by the
trust fund that qualify as REMIC Certificates and are considered to be regular
interests.
"REMIC Regular Certificateholders" means holders of REMIC Regular
Certificates.
"REMIC Regulations" means the REMIC regulations promulgated by the
Treasury Department.
"REMIC Residual Certificates" means the sole class of residual
interests in the REMIC.
"REMIC Residual Certificateholders" means holders of REMIC Regular
Certificates.
"REO Extension" means the extension of time the IRS grants to sell
the mortgaged property.
"REO Tax" means a tax on "net income from foreclosure property,"
within the meaning of Section 857(b)(4)(B) of the Code.
"Restricted Group" means the Seller, depositor, any underwriter, any
servicer, the trustee, any insurer of the mortgage loans or MBS, any borrower
whose obligations under one or more mortgage loans constitute more than 5% of
the aggregate unamortized principal balance of the assets in the trust fund, or
any of their respective affiliates.
"Retained Interest" means an interest in an asset which represents a
specified portion of the interest payable. The Retained Interest will be
deducted from borrower payments as received and will not be part of the related
trust fund.
"RICO" means the Racketeer Influenced and Corrupt Organizations
statute.
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"Senior Certificates" means certificates which are senior to one or
more other classes of certificates in respect of certain distributions on the
certificates.
"Servicing Standard" means:
A. the standard for servicing the servicer must follow as defined
by the terms of the related Pooling Agreement and any related
hazard, business interruption, rental interruption or general
liability insurance policy or instrument of Credit Support
included in the related trust fund as described in this
prospectus under "Description of Credit Support" and in the
prospectus supplement;
B. applicable law; and
C. the general servicing standard specified in the related
prospectus supplement or, if no such standard is so specified,
its normal servicing practices.
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984,
as amended.
"SMMEA Certificates" means "mortgage related securities" for
purposes of SMMEA.
"Special Servicer" means an entity as named in the prospectus
supplement.
"Stripped ARM Obligations" means OID on grantor trust certificates
attributable to adjustable rate loans
"Stripped Bond Certificates" means a class of grantor trust
certificates that represents the right to principal and interest, or principal
only, on all or a portion of the mortgage loans or MBS, if a trust fund is
created with two classes of grantor trust certificates.
"Stripped Coupon Certificates" means a class of grantor trust
certificates that represents the right to some or all of the interest on a
portion of the mortgage loans or MBS, if a trust fund is created with two
classes of grantor trust certificates.
"Stripped Interest Certificates" means certificates which are
entitled to interest distributions with disproportionately low, nominal or no
principal distributions.
"Stripped Principal Certificates" means certificates which are
entitled to principal distributions with disproportionately low, nominal or no
interest distributions.
"Subordinate Certificates" means certificates which are subordinate
to one or more other classes of certificates in respect of certain distributions
on the certificates.
"Subservicer" means third-party servicers.
"Subservicing Agreement" means a sub-servicing agreement between a
master servicer and a Subservicer.
"Super-Premium Certificates" means certain REMIC Regular
Certificates to be issued at prices significantly exceeding their principal
amounts or based on notional principal balances.
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"Title V" means Title V of the depository Institutions Deregulation
and Monetary Control Act of 1980.
"Trust Agreement" means the Agreement under certificates of a series
evidencing interests in a trust fund not including Whole Loans will be issued.
"Trust Fund" means the trust fund created by the Agreement
consisting primarily of:
o mortgage Loans
o MBS
o direct obligations of the United States, agencies thereof or
agencies created thereby which are not subject to redemption
prior to maturity at the option of the issuer and are (a)
interest-bearing securities, (b) non-interest-bearing
securities, (c) originally interest-bearing securities from
which coupons representing the right to payment of interest
have been removed, or (d) government securities, or
o a combination of mortgage loans, MBS and government
securities.
"Underlying MBS" means any mortgage participations, pass-through
certificates or other asset-backed certificates in which an MBS evidences an
interest or which secure an MBS.
"Underlying Mortgage Loans" means the mortgage loans that secure, or
the interests in which are evidenced by, MBS.
"U.S. Person" means a citizen or resident of the United States, a
corporation or a partnership organized in or under the laws of the United States
or any political subdivision thereof (other than a partnership that is not
treated as a U.S. Person under any applicable Treasury regulations), an estate
the income of which from sources outside the United States is included in gross
income for federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States or a trust if a court
within the United States is able to exercise primary supervision of the
administration of the trust and one or more U.S. Persons have the authority to
control all substantial decisions of the trust. In addition, certain trusts
treated as U.S. Persons before August 20, 1996 may elect to continue to be so
treated to the extent provided in regulations.
"Value" means,
(a) with respect to any mortgaged property other than a mortgaged
property securing a Refinance Loan, generally the lesser of
o the appraised value determined in an appraisal obtained by the
originator at origination of that loan, and
o the sales price for that property; and
(b) with respect to any Refinance Loan, unless otherwise specified
in the related prospectus supplement, the appraised value determined in an
appraisal obtained at the time of origination of the Refinance Loan.
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"Warranting Party" means the person making representations and
warranties.
"Whole Loans" means the mortgage loans that are not Underlying
Mortgage Loans.
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